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Hi, I'm Jim O'Shaughnessy and welcome to Infinite Loops.
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Sometimes we get caught up in what feel like infinite loops when trying to figure things out.
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Markets go up and down, research is presented and then refuted, and we find ourselves right back where we started.
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The goal of this podcast is to learn how we can reset our thinking on issues that hopefully leaves us with a better understanding as to why we think the way we think and how we might be able to change that to avoid going in infinite loops of thought.
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We hope to offer our listeners a fresh perspective on a variety of issues and look at them through a multifaceted lens — including history, philosophy, art, science, linguistics, and yes, also through quantitative analysis.
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And through these discussions help you not only become a better investor, but also become a more nuanced thinker.
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With each e¯pisode we hope to bring you along with us as we learn together.
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Thanks for joining us, now please enjoy this episode of Infinite Loops.
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Disclaimer: Jim O'Shaughnessy is chairman and Co-Chief Investment Officer of O'Shaughnessy Asset Management, where Jamie Catherwood is an¯¸ associate.
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All opinions expressed by Jim, Jamie and podcast guests are solely their own opinions and do not reflect the opinions of O'Shaughnessy Asset Management.
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This podcast is for informational purposes only, and should not be relied upon as a basis for investment decisions.
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Clients of O'Shaughnessy Asset Management may maintain positions in the securities discussed in this podcast.
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Jim O'Shaughnessy: Well, hello, everyone.
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It's Jim O'Shaughnessy with another episode of Infinite Loops.
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I was chatting with my guest, Jimmy Soni, before we came on air.
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Our interests are so aligned that I don't know.
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Maybe if I was a bad boy 36 years ago or 35 years ago... Just kidding. Just kidding.
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But literally we love all the same things.
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Jimmy has written this amazing book, The Founders on PayPal, which we'll be talking quite a bit about, but he also wrote a book called A Mind at Play about one of my heroes, Claude Shannon, who literally invented the Information Age.
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It kills me that he is not as well-known as Einstein.
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I think, as Jimmy noted in his book, maybe it was because the father of information theory and communication theory was very uncommunicative himself, and therefore wasn't as well-known as Elon Musk.
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We're going to talk all about that.
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One of the things, Jimmy, first welcome.
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Jimmy Soni: Well, thank you. Jim, this is a pleasure.
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It's interesting because you and I have gotten to know each other through people we know mutually on Twitter, but every part of what I just said is dependent on many of the people that I've written about and that you've talked about and that you admire.
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The number of overlapping circles in the Venn diagram here actually gets funny mathematically.
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If we were to depict this, we're having a Zoom meeting, thanks to Claude Shannon's compression algorithm, where we're going to talk about Claude Shannon, and talk about Elon who had a whole meditation with me about Claude Shannon.
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It's just spectacularly self-reinforcing.
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Jim O'Shaughnessy: I love it, and the quant in me, of course, would say, those are bad odds. We need new odds.
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But you know, as I was getting ready, I wander over to your site, which is great.
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One of the things that you say on it, which I was just like...
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My wife is looking at me and she goes, "Okay, so you're obviously excited.
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Tell me about the guy you're having on."
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You write you love exploring innovation, endurance, curiosity, and creativity. Boom, boom, boom, boom.
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All of those things are literally the things that changed our world.
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Without them, we would be in a horrible alternate universe where the precautionary principle ruled and no new ideas were ever investigated because they were suppressed.
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I love that that is what drives you and sort of drove you to the books you've written and everything you've done.
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But I also like the tagline you're interested in interesting things, theories, carousels, corporations, talk a little bit about that.
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Jimmy Soni: I feel like I'm going to be...
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Talking to you, it is very much a case of preaching to the converted, right?
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You're the OG generally curious person.
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And so I think for me, I find real joy, real thrill, and it's probably just like a series of dopamine hits in learning new things.
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But what I think has led me to the projects that I've done and the fact that you like...
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It's like that Winston Churchill line, "This pudding has no theme," right?
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You sort of have to like make up a theme for my body of work.
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I like exploring things where there feels like there's still room for more research, more work, more writing.
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I get a kick out of discovering new things even within those people or those concepts or those ideas.
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For me, I guess it's a long way of saying I don't think that I could say like people are like, "Oh, what's your next book?
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Surely it's going to be a tech book."
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And I was like, "Well, I don't know.
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I've got to get excited enough about something to spend years of my life trying to understand it." I don't have a formula.
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I don't have a, "Here's the to-do list."
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I am waiting for that idea where I can just go nuts and dig and dig and dig and dig and dig.
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It sounds faintly irrational, and it probably is faintly irrational.
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But I think that like you, I just get such a joy out of it that even if there weren't books, I think this is what I would be doing.
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I would wake up and do this.
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I had a friend described to me.
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They said, "You're the only people I know who really gets a kick out of doing homework." I love it.
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And so for me, I had to come up with a website because the book was launching.
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My website is a little sparse, as you can tell.
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I had to think about broadly what are the things I'm interested, and to me, innovation, curiosity, creativity, and whatever the last one was, those are the things that engage me the most.
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It does extend from Jane's Carousel, which is in Brooklyn, which I've written about to Claude Shannon and information theory to Elon Musk, Peter Thiel, Max Levchin, and the group that founded PayPal.
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I actually think of these as entirely consistent in my mind even if they seem totally ridiculous to other people.
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Jim O'Shaughnessy: I totally agree with that.
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That's one of the things I love about your work is finding new things.
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I was thinking about Claude Shannon and a remark you made.
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It was kind of along the lines of geniuses have a unique way of engaging with the world.
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There's a lot that we non-geniuses can learn from them.
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Out of context, Shannon once said that meaning is irrelevant and a lot of people freak out at that, but the deeper meaning of that I think is enormously profound.
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Wittgenstein also said, "Don't look for meaning, look for use."
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And so I have this theory that we tend to find what we're looking for in that if we're not constantly unlearning things that might have used to work well, but no longer work well, and then relearning the things that work well, we were talking about memes, for example, earlier before we started the recording.
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And so the idea of a meme for people today is some sort of visual thing.
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Well, if you read Dawkins book, if you read The Viruses of the Mind, which was one of the first books to come out on memes, memes are not just visual. They can be anything.
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They can be four score and seven years ago.
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They can be, "We hold these truths to be self-evident."
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They can be a variety of things that transfer from human mind to human mind and are sticky. Most memes fail.
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I was talking earlier with a friend and they were asking me seriously about...
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I heard you say something along the lines that Christianity is one of the world's largest religions because of memes.
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And they're like, "What the fuck?
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What do you mean by that?"
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I'm like, "Well, Saul fell off his horse, hit his head and woke up Paul.
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But one of the things that Paul did was he basically created a series of memes.
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So by the way, did Martin Luther, the precepts nailed on the church door.
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What the genius of Paul was, was his memes were basically, "Hey, you know what?
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You are all used to worshiping your tribal gods.
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You don't have to do that anymore.
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It doesn't matter who your tribal gods were.
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It doesn't matter whether you're a man or a woman.
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It doesn't matter what color you are.
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It doesn't matter what country you came from. You can be a Christian."
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And so like through this memes and the repetition, and so like ear worms, right?
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They stick in the human mind.
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And so- Jimmy Soni: One of the things that I so appreciate like, A, the disposition on memes is just fantastic.
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I feel like I could just listen to you talk about this for endlessly, but to me, it actually makes me think of, one, talk about underrated creators.
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It actually takes a fair amount of talent for humor and an act for humor to make memes work, right?
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A lot of the meme creators, the originals, are completely anonymous, right?
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The only way we know them is through this internet graffiti, right?
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What others might regard as that kind of inter...
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It's almost like you could liken it to a [Basquiat], right?
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Maybe in 50 years or something, the meme creators, their memes will be NFTs worth $10 million, right?
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Or there will be art that's hanging in MoMA.
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It's like the meme will become this icon.
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But let's talk about how underrated, and in some cases, unknown they are minus probably a few of the kind of leading figures, and I'm not any expert in this.
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But the other cool thing, how cool is it that the internet, with all its difficulties, what the internet has done is it's actually given somebody the ability to create that and then have it encircle the world in five seconds if it's successful.
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I know that we're in a period in which it's very cool to bash on everything wrong with the internet.
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But to sound a note of defense, Thomas Paine had the right common sense and then had to go viral.
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It was probably endlessly difficult, and it had to come at the right cultural moment, and you had to have a million different ways and tools and printing presses and people riding on horseback to get things from point A to point B.
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I really think it's very cool that someone funny in Brazil or in some corner of the world with probably a slower, inconsistent internet connection could do something and stick a series of words on a T-Rex and have it just blow up in people's minds.
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I think of that as very cool.
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I would say that if we lose our wonderment about something like that, I actually think we've given up something essential about how technology has changed our lives.
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You had posted that quote from Mary Oliver, "Pay attention, see wonder or tell about it."
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I do think we have this really easy way of forgetting how incredible it is that the dancing baby can be a fixture in our minds, even 30 years after its creation, and that it is a series of pixels on the internet.
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I know it's not everybody's cup of tea. I get that.
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But I also think it's amazing.
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In the truest sense of the word, it amazes me that people can read my words in other languages halfway around the world for a book. You know what I mean?
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I just think that's incredible.
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I think we shouldn't lose sight of our wonderment about things like that.
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Jim O'Shaughnessy: Could not agree...
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I mean, this is basically going to be me agreeing with you, I think.
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The thing that is fascinating to me is my friend, Matt Clifford, who runs a company in London, I had him on the podcast.
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He has this idea that historically, at least for the memory of people living today, every institution was designed around that fat middle of the distribution curve, that 68%, right?
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Essentially everything was done to dampen variance, right?
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Suddenly, we have the world's greatest variance amplifier in history, the internet.
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What's happening as we're talking, this is going on, I call it the Great Reshuffle.
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We're doing a series on it.
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That distribution is moving to a chaotic normal distribution, which has a very narrow peak up here and super long tails.
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I am massively excited about the right side of that because it allows for all the things you just said.
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I also am worried about the left side of that.
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I think that we have to throw every new idea that we can against helping the people whose outcomes are not going to be amazing because of the variants.
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I mean, old people, people who for whatever reason...
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And this is the other thing I always append to this, through no fault of their own, this world becomes much more difficult for them.
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I changed my mind on universal basic income.
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I changed my mind on doing success dividends.
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Every child at birth gets an index fund of every company that exists in that country they were born in.
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See that's limited, right?
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The world is now able to create as you well point out.
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I just think that we are living in my opinion through possibly the most exciting time to be alive. I know. I read all of the old...
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like the first Sumerian- Jimmy Soni: All the doom and gloom.
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Historically, you read all that. Jim O'Shaughnessy: Yeah.
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But then the first Sumerian tablet that they found was essentially a poet complaining that all the good poems had been written.
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Jimmy Soni: That's hilarious.
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Let me something to it though.
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There was a time when the sum total of the world's information was stored in the library of Alexandria.
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It was seen in this place where that was where you went if you wanted to find the world's knowledge. Okay, cool.
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No disrespect to the Egyptians. That's great.
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What a triumph in that era.
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But I think that one of the things that is unheralded about the internet is that I have now gotten comments about the founders from people who live in, I think, seven different countries, right?
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Whether it's through LinkedIn, email, Twitter, whatever.
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I'm able to press translate tweet when there are Turkish bloggers, reading the book and thinking about it and writing about it and pontificating on it and disagreeing with parts of it.
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I look back, even in my generation, to my parents who came to the United States by way of India to communicate with their relatives back home, they would've to do these aerograms.
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There were these like little blue envelopes.
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You would stick up metric ton of stamps on them.
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You'd fold them up four ways. It was like origami.
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It was like really expensive origami, and then you would send it off and you'd hope that it got there, right?
17:29
The idea that now that we can short circuit all of that, and that education can be universalized in this way, it doesn't take anything away from fixing some of the issues as you identified, like the difficulties.
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It doesn't take anything away from that to just pause, to appreciate how incredible that is.
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What it has done is it has removed location specificity from learning, meaning you don't have any excuse anymore, right?
18:00
The number of things you can read on scholar. google.
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com or free books that are downloadable through Kindle.
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Or if you're really hard up, you could find all these weird forms or they'll just take PDFs of books and put them up.
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Now, I used to be upset about that, but I actually started to realize when someone's pirating something you've done, that's a pretty good signal, right?
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It means that there are people who are going to go through the trouble of pirating it, so they're going to pay for it.
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To my mind, I actually think of this as a net positive.
18:28
It does mean that people who do not have means, with the right pluck with, with some access, with a sterling signal in the middle of the savanna, you can have more information at your fingertips than ever.
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What you do with that information, there's a thousand questions that emerge from that, but it is pretty amazing for somebody like me who grew up going to libraries to get information to now not have to do that.
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By the way, this is not like I've been living with this forever.
19:00
This are pretty recent trend. Even audio books, right?
19:03
Audio books and Kindle are probably the two biggest, two big changes in my life.
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That is a relatively recent transformation.
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When I first got started in publishing, I would have people in the industry say to me, "Oh, audiobooks, aren't a thing."
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I remember thinking, "You're out of your minds.
19:15
This is going to be the only growth sector in the book publishing industry," and it turned out that's one of the big ones.
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I think that we undervalue these things.
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There's that the Lou CK thing where he gets upset about the guy with the wifi.
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He's like, "Got the wifi on the plane, and he's ungrateful when it goes out for five seconds," and Lou CK's thing is like, "Did you just soar through the air like a bird majestically?
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Did you experience the magic of flight?
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Let's learn to appreciate some of these things."
19:48
But I also don't want to say this and then run afoul of literally every person who's like, "No, technology is terrible.
19:54
It's doing all these terrible things."
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Jim O'Shaughnessy: Well, yeah.
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I think again, like I said, people tend to find what they're looking for. Motivated reasoning.
20:06
Let's switch gears and talk a little bit about PayPal because, A, the book is amazing, just a great read.
20:16
One of the first things I wanted to ask you was about the path, what was originally called Confinity took to become PayPal.
20:28
Apparently, from your book, at least you say that they were flirting with the idea of a universal digital currency, free from government shackles.
20:40
That sounds a lot like Bitcoin to me. What do you think? Jimmy Soni: Yeah.
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There's a ton of echoes of modern cryptocurrency in the PayPal story in the early days.
20:52
By the way, it shouldn't surprise anybody, right?
20:54
You look back at the mid '90s, and Neil Stephenson's Cryptonomicon is in the shelves of a whole generation of engineers.
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The internet is beginning to come into its own.
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Netscape has gone public.
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There are fortunes to be made.
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Naturally, there's a whole host of people who are thinking about, "We're upgrading pet food delivery. We're upgrading love.
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How are we going to upgrade money?" "Oh, I got it. Let's digitize it."
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It's very Shannonesque, but also it isn't...
21:27
It's radical, but it's really not if you're thinking about the context of that era, where the internet was seen as a force that was going to, and by the way, did affect everything.
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In this group in particular, you have people like Peter Thiel and Max Levchin, and Elon Musk, who there's the name for it today, is first principles thinking but they are reasoning if you were going to begin from zero and use technology as a lever for whatever you're trying to do, what would you do?
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And in the case of money, what they had thought is what a lot of contemporary crypto people think.
22:03
This is like, we're printing this on paper?
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We can print endless amounts of it?
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Wait, what, how much copper is actually in a penny?
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How much does this cost the U. S. spend?
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Where can these things actually be used?
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They're beginning from that place.
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And one of the early ideas is that PayPal could be the thing that actually supplants traditional currencies.
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There's another reason for this, which is actually the Asian financial crisis.
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We tend to have this America-specific view, but the Asian financial crisis is a huge deal.
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I mean, you know better than I do, this is in the minds of the people creating PayPal because what they're thinking is, wait, hold on, these governments can devalue a currency, and all of a sudden everybody who lives there is worse off for it?
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So, why couldn't we just have a borderless, cashless mobile-based encrypted currency of some kind, or a security system of some kind, so that if I wanted to move my Rubles to dollars, I could do that with ease if the government suddenly decides that it's going to change policy?
23:01
Now, if this sounds vaguely familiar, I think it's because history rhymes.
23:05
But this is in the minds that the people are creating PayPal.
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Now, the important second part of that story is it ends up that they create a different product, which we know of as PayPal, which becomes another rail, another way for people to pay one another through traditional established currencies.
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So, they abandon overthrowing currencies and overthrowing the global financial order in favor of being able, for me to send Jim an email with 10 bucks in it because that's what we need to do to reconcile our eBay auction.
23:35
But those echoes are there and I don't think they can be ignored.
23:38
In fact, I'll tell you a great story.
23:39
The reason I'm telling you is because it's buried in the footnotes, it's one of my favorite little tiny nuggets.
23:44
I always buried these little things in the book.
23:47
What's buried in the footnotes is Peter Thiel's meditation that at a conference that he was at with Max Levchin, that Satoshi may well have been in the room.
23:56
There were conferences held on the island of Anguilla in 1999 and 2000 called the International Financial Cryptography Association Conference, and Peter Thiel hypothesizes, he has done
24:06
this in other places, but what it means, I bet Satoshi was there, and he's like because in that room were the people working on digital cash efforts, digital cash beams, flux, bunch of academic cryptography people, he said, I would bet that somebody there is Satoshi. And I remember just thinking what a tantalizing mystery to bury in my footnotes.
24:23
And I remember just thinking what a tantalizing mystery to bury in my footnotes.
24:27
Jim O'Shaughnessy: I love that and I did see that.
24:31
I always joke that the truth seems to love the footnotes.
24:34
Jimmy Soni: That's funny.
24:36
Jim O'Shaughnessy: I did read that and I thought it was really cool.
24:40
And by the way, in that same context, The Sovereign Individual was out in the '90s.
24:47
And I have this theory that the reason that the pivot to PayPal being what it is worked and maybe the confinity idea of digital currency was too early, is because we have to always remember that the people using this, us humans, are running human OS, Human Operating system, and it's better in the case of like PayPal if you can steal some real estate that is already firmly in somebody's brain.
25:22
When you can do that and then point it at the way you want it to go, reframing.
25:29
So people were like, ugh, I don't know what digital currency is, that scares me, I want my dollars, or I want my Rubles or my Euros.
25:40
But oh, an app that I can just join and click pay? Oh, I love that.
25:45
So, it's really interesting to me to watch these innovations grow.
25:54
They were early, they were smart by pivoting, to a hallucination that the majority of humans believed in.
26:07
That's the other thing, everything comes out of the minds of human beings And essentially, I always say that ground state reality, is the reality that most sentient beings believe in at any given time.
26:26
There's all ways to get away from ground state reality and to think about things differently, and so sometimes people are going to think you're nuts or crazy, sometimes you're Elon Musk.
26:40
And so one of the things- Jimmy Soni: It's interesting that you say that we're talking about this intersection of Claude Shannon and Info Theory, and money, and some of these protocrypto ideas.
26:55
Because this it's actually, it's not funny, it's totally in keeping with the things you and I can riff on.
27:02
But my last conversation with Elon, we talked about this, we talked about some of the protocrypto ideas that were at the heart of what he wanted to do, because one of the ways to understand him is as maybe the world's foremost first principles' thinker.
27:18
Meaning, he is not bound by current convention, he is not bound by the way things have been done, these are things he's actively trying to overcome, and he has this line, we talked about Claude Shannon, and he's actually very well versed information theory and one of the things he said is, his line was Money is an information system.
27:37
Most people think that money has power in and of itself, but it's really just an information system so that we don't have to engage in barter or we can time-shift in value.
27:50
To some people, that's going to be, well, of course, he would say that because he's worth $300 billion and only somebody who has that money would say money doesn't have power in and of itself, but in fact, what he's making is an argument about money as an expression of information and thus, money could be digitized into bits.
28:08
And if you are digitizing money into bits, it's a worthwhile question to ask yourself, wait, why am I paying a transfer fee for an ACH transaction?
28:18
Or wait, if these bits are able to be transmitted across borders at almost no cost, then what is the deal with currency exchange?
28:27
He's asking foundational questions about money that then lead you to interesting call it thought experiments, which can result in interesting actual experiments, which can result in interesting companies.
28:38
I don't think it's too much of a stretch to make the connections I just made because he's the guy making them, and this is what he does time and again.
28:47
He asked himself, I believe this is the way that part of the origin story of SpaceX is he asked himself, well, hold on, Boeing and all these other big contractors have all these contracts with NASA, but the cost-plus model, meaning where they're getting a premium on
29:05
top of the cost of materials actually makes it really expensive for the US taxpayer to go to space, why is that when the cost of the materials is so low, and if we built reasonable rockets, it could be even lower? That sounds radical to somebody who's an executive at Boeing.
29:17
That sounds radical to somebody who's an executive at Boeing.
29:20
If you were to explain it in relatively plain-spoken terms to somebody that makes a lot of sense, why is it so expensive to do this?
29:29
The outgrowth of that series of questions is a company that today is one of the foremost providers of space logistics.
29:36
And PayPal veered away from the direction that you and I discussed, where it really didn't go in the crypto direction.
29:42
I will say, I think the biggest reason is we have to put ourselves back in the shoes of the average consumer in 1998 and 1999, they are just getting started shopping online.
29:53
So, it's a bit of a leap to go from ATMs to putting your credit card on the internet, this place where when I was using Dial-up modems if somebody picked up the phone in my house, the download stopped.
30:08
It's a huge leap to go from ATMs and pulling cash out of an ATM to entering in my credit card on the internet, but then to make a further jump to cryptocurrencies?
30:17
I mean the trust factor there, the human factor, meaning our level of comfort with things that we have never seen before, we are rightly skeptical of those things.
30:27
So, it's not a knock against them that they didn't go in the crypto direction, or that they didn't go far enough in that revolutionary mission, it was entirely in keeping with the realities of building a company that started at the end of the .
30:36
com boom and was built in the .
30:42
com bust because they had to survive.
30:45
You had to let's say trim some of the ideals, trim the sales on some of the ideals so that you could get to a company that was going to be successful so that everybody didn't get laid off and lose all the investor money.
30:56
It strikes me as actually a feather in their cap that they said, we've got this world-historic mission we want to do, but got to make payroll and we're going to design great products and services for people so that can happen.
31:11
That tension is literally the story of every successful company or product, is the tension between big visionary ideals, and the exigencies of the moment.
31:22
And I don't think it's a knock on any company when they have to take an idea and then abandon it.
31:29
It's why people will knock experiments like Google Glass or the thing that Snapchat did earlier.
31:34
Actually, I think of those stories as those stories should deserve more appreciation than they get.
31:42
We laugh at them too quickly because they will pave the way for the subsequent idea.
31:47
A good example is General Magic, General Magic invented the iPhone before there was an iPhone.
31:51
They had the schematics, they had the designs, they had the team, they had Tony Fadell, and the timing was maybe what, 10 years too early?
32:02
Something along those lines and there were some issues that to make it work.
32:06
But I'm glad there was a big documentary done about General Magic because I think those stories should be celebrated, that is how we get the iPhone, it is how we get to the thing that we want.
32:18
And I don't know, again, this is the optimist in me, but I think those stories which sound "crazy", or "ludicrous", we shouldn't be too quick to laugh those out of the room.
32:29
PayPal itself was called one of the 10 worst business ideas of 1999.
32:33
So, to anybody listening, take any criticism you get with a massive grain of salt. Jim O'Shaughnessy: Wow.
32:41
You've just covered so much area that I think is just fertile ground for our discussion.
32:49
One area is this built in to our base code, fear of failure.
33:00
I just put off a Seneca quote, something along the lines of things are difficult, not because we do not dare, they're difficult because we do not dare to do them.
33:17
So, one of the things that I like to root for things as opposed to against things.
33:23
And I just think that one of the things I'm trying to root for now, especially, is for the younger people coming up, failure is something almost to be proud of in my opinion, because it means that you're going to keep trying, you're going to get knocked down, you're going to get back up, you're going to know more.
33:45
I don't think I've ever met in my career, and I've had the luxury and honor of meeting some really intensely successful people, I don't think that there is a single one that did not have some large failure somewhere in their past.
34:02
The difference was they learned from it, they modified what they were doing, and they course-corrected, like you just said about PayPal, and went forward.
34:13
Those stories, like knocking General Magic, or knocking Xerox when Jobs comes along and sees the first mouse and he is like, what's this thing?
34:24
And they're like, ah, it's just something we're playing with. Could I use this?
34:29
But the point is another book Will Storr, who I just happened on because our family keeps a library together, and I found his book on scientific storytelling, and I'm like, I didn't buy this.
34:44
And so I was having dinner with Patrick and I'm like, did you buy that book? And he's like, yeah.
34:49
And I went, okay, did you read it?
34:50
And he goes, I got busy with other things.
34:52
So, I read it and I loved it so much that I went on to the status game, which I'm having him on the podcast to discuss both, brilliant insights.
35:01
And one of the things back to Jobs and the iPhone was his wife was really good friends with the woman who was the wife of a guy at Microsoft.
35:16
And so Jobs, mercurial character, I mean, in the kindness light, was forced to endure this guide who he thought was this massive bore, which always reminds me of the Oscar Wilde; people are neither good nor bad, they are either charming or tedious.
35:35
And so Jobs dreaded these dinners, and one of them, the guy brings along a prototype for a tablet.
35:51
And the guy is just pouring it on, he was obviously an obtuse asshole, whose name shall be remained anonymous, but so Jobs got so worked up about it, according to the store book that he went in the next day and he goes, we're fucking doing computers and tablets.
36:10
It was a status thing, there's no way that guy is beating me.
36:18
It might be an apocryphal tale, but the reason I love it is because we often forget that at the center of all this stuff is us, right? Jimmy Soni: Yeah.
36:29
Jim O'Shaughnessy: And all of our strengths and weaknesses, and all of our foibles, and you will always see some of the creator in the creation.
36:38
Jimmy Soni: I know, there's a lot we agree on, but I think there's a reason that we agree on it.
36:44
And I would actually say that there're some observations about Silicon Valley.
36:48
So, I was an outsider to Silicon Valley when I wrote this book, I'm not like somebody who covers tech.
36:53
And so it was actually really great because I had no fear of asking a ton of stupid questions.
36:59
Reasonably well-informed questions, but also the kinds of questions that some of these people at this level are not necessarily going to get all the time.
37:07
And so to somebody who's writing about tech, it might seem natural to do an IPO, I remember being in the room with Peter Thiel, and I would say, so why did you take the company public?
37:19
You are a BRAS tech, really walk me through, what was the rationale? What was the reasoning?
37:21
And what you discover is that many of these things are not clinical strategic decisions, he said, he's like, well, I was also a little competitive with Wall Street.
37:30
They had written off FinTech, and I wanted to prove we were just as good as one of these marque blue-chip names.
37:37
And he even caveated by saying, I try not to be this competitive, but competition was definitely part of it.
37:43
And so you discover that there's a weeder of motives.
37:45
I don't think that's a bad thing.
37:49
We act like if someone is out to build the biggest car manufacturer in the world and happens to make it about electric cars, and he believes, or she believes that it could shift the entire industry and what they want to do is win, we act like that's a defect.
38:03
No, that's a great thing.
38:05
Why wouldn't you want to invest in somebody that sees it as a struggle?
38:10
Seeing it as a struggle is not a bad thing, you don't have to be a pure missionary, this doesn't have to be like Gandhi in the C-suite, it can be somebody who wants to win and wants to put in the time and the energy and the elbow grease and take the risk and do that.
38:27
I think of those things fundamentally as things we're celebrating.
38:30
We're talking at actually a super interesting cultural moment because one of the interesting responses to my book has been from people who are within tech, people who don't talk to the media, and people who just privately will send me messages saying, thank you for not doing what many people have done with like Uber, WeWork, or Theranos, where it's like, oh look at how big bad everything is here.
38:56
I was far more interested in what does it take to turn a pixel into a button, and a button to go viral?
39:03
And what is the engineering and business development and strategic know-how that is baked into that?
39:08
Because those are real, really interesting problems, they are really, really fascinating.
39:14
When you and I finish this discussion, we're going to press the button, Leave, in the bottom right corner of this zoom box.
39:20
There is thought that went into that decision, where to put the button? What color should it be?
39:26
What should the font size be? Why is it red? Why is it not orange? How does it work? Is it one click? Is it two?
39:33
Should there be a dialogue box?
39:34
Should there be no dialogue box?
39:35
Is there a way to prompt somebody if they're in the middle of a medical zoom meeting where it has some warning signs or something?
39:41
There is so much baked into these things that we take for granted.
39:45
And to me one of the challenges right now is, it's not just that we take them for granted, we flat-out criticize them.
39:51
One of the funniest things to me is the amount of criticism that is leveled at Tesla's self-driving.
39:56
I think of this by the way as hilarious.
39:58
It is the distillation of that Louis C. K.
40:01
bit because it's like the car's driving itself and people are like, well, it didn't drive itself fast enough.
40:05
I remember I test drove one, and I had my daughter in the back seat, and I turned on the autopilot, whatever it is, and I remember it was doing its thing, and I turned around to her and I said, Venice, you have no idea how amazing this is.
40:22
And she did not, at least in my estimation have the requisite level of wonder, she's just like, okay, shrub your shoulders because she's six, and she has never driven a car before, but I remember thinking to myself, like you are never, ever going to appreciate this as much as I will.
40:35
In the same way she will never appreciate watching cartoons without commercials in the way that I will.
40:40
And I'm being a little glib, but I think that there's something about appreciating these micro-level decisions.
40:50
And what I tried to do with the book was I tried to find the people that made those decisions and tried to get them as excited 20 years later as they were then.
41:01
And to their credit, many of them did.
41:03
And if there's enthusiasm in the book, it's not because I'm enthusiastic, though I am, it's because the people telling me the stories like Max, and like Elon, but down the line, they were all enthusiastic about the work they did there.
41:15
They saw it as important and as meaningful, and I think we need to do more of that.
41:20
Jim O'Shaughnessy: Again, I could just have an AI sit in for me saying, I agree, I agree with that, Jimmy.
41:29
That's a really good point.
41:31
Let's shift that to Elon himself, Elon Musk.
41:36
So, I don't really have a dog in the hunt with Elon.
41:40
In that we're quants, and so if any of his companies go into our portfolio, we buy it, if they don't, we don't own it.
41:49
If they go against the algorithm, we sell it.
41:55
And so for the most part because of valuations and other things that we find to be valid in directionally overtime being correct in the majority of cases.
42:07
But I am fascinated by Elon Musk because I just watch in awe of his ability at persuasion.
42:19
And he's in my opinion, and I cannot imagine how many of Elon haters are going to put when this goes off on Twitter or in the comments for our home infinite loops page, but I think that's part of the magic actually.
42:36
Elon understands, that's the way I look at him, he knows how to phrase things, do things, et cetera, that capture the public's imagination.
42:49
Because as you point out the x.
42:49
com, it had the press eating out of its hands while it's hemorrhaging employees, Salon writes the famous article saying that Elon Musk is poised to be the next big thing in Silicon Valley. What do you think? Jimmy Soni: Yeah.
43:14
I mean, look, there's lots to unpack there, and the asterisk I need to attach to any discussions about him is simply that I had the best view you could get, which is I was able to speak to him about something that happened 20 years ago in his life.
43:37
When we started our discussions, he actually made fun of me for caring about this thing that happened 20 years ago in his life, and he gave me a little good-natured grief for it, but it was fine.
43:46
But I wasn't there to talk to him about the contemporary goings-on.
43:51
And in some ways that was wonderful, I didn't want to do it because there's so much there and it's noisy, and it's messy.
44:00
What I had was this really rich set of discussions and interactions and research around what was he like when he was in college?
44:07
What did he do right after college?
44:08
And then what did it take to build his half of what became PayPal, which was called x. com.?
44:13
And I got to ask him about everything; where'd the name come from?
44:16
How'd you think about the business? How'd you hire? How'd you recruit?
44:19
What was product development like?
44:20
So, my very narrow frame is that frame.
44:23
And I think it's important because the number of people I see talking about him who don't know anything, is in the millions now.
44:31
But I'm at least admitting my ignorance that I don't keep up with all the day-to-day Elon-Alia, there's too much to do in my life.
44:40
But here's what I would offer a couple of observations that maybe are often missed about him because I think in the spirit of the element of surprise and Claude Shannon, let's provide new information for people.
44:52
So, I'll offer three pieces of what might be new information.
44:55
And I actually haven't thought about this until you and I had this conversation, so this is new stuff.
44:59
The first is this in the years 1999 to 2002, during which I'm writing about him, he is almost ousted as the CEO once, he's actually ousted later.
45:12
He almost dies of malaria and meningitis; he almost dies in a car accident and he loses a child due to SIDS.
45:20
Any one of those events would be enough, like to the pain and hardship for a lifetime.
45:27
Certainly the final one, losing a child, I can't imagine.
45:29
I don't even like to think about it, because I don't want to think about it.
45:33
He, in those four years, isn't just somebody who, and these are also true, builds a successful internet company in Zip2, builds another successful company in X.
45:39
com PayPal and then begins the process of building SpaceX.
45:46
Those are also true, but the period I'm writing about his life is the period where he's also experiencing just setback after setback.
45:52
Including, by the way, almost dying twice to the point that he's in the hospital, became really close within a hair's breadth.
45:58
And so I think that that's discounted in some of the contemporary writing about him, that this is somebody who...
46:04
I find that people who know that kind of pain actually have a different engagement with the world.
46:08
And I think that's true broadly.
46:10
It's true irrespective of gender, politics, anything.
46:12
Once you've been through what I just described, you just have a different view of the world.
46:16
There was this moment when I guess, one of the Tesla vehicles killed someone and it was a self-driving.
46:22
It may have been, may not have been due to driver error or car error.
46:25
And he wrote a note to the family that lost the... I believe it was a son.
46:31
And he said, "Look, I know what this feels like and I'm deeply sorry." That's how he started.
46:37
I don't know anything about that case, again, but I just think it's important to recognize this is not somebody who's had sort of a glide path to success.
46:45
That there's been a fair amount of difficulty, setbacks, failures, grief, et cetera.
46:49
The second fact that people often miss, there's this strain of thinking right now that because Richard Branson is involved in space and Jeff Bezos is involved in space and Elon Musk is involved in space, that it's somehow this kind of billionaires boys club.
47:04
I don't know about the Branson and Bezos backs stories, but I can tell you that in my research about Elon, I found this gem of an essay that he wrote when he was in his 20s.
47:13
Long lost thing, I mean, from forever ago.
47:16
And he outlines where the interest in space comes from, this is way before he ever launched SpaceX.
47:23
I mean, it might have been around the time he launched it, but it was certainly not what it is today.
47:27
This is a passion from his childhood that he has carried with him until the age of now, his early 50s.
47:36
So to write him off as somebody who simply, quote unquote, had a lot of money and then decided to do space is just profoundly wrong.
47:43
There's a great book called Liftoff by Eric Berger that covers the early days of SpaceX and how tenuous it was.
47:49
This is not somebody who...
47:50
He basically put his entire fortune on the line to try to make the company successful.
47:55
And it was, I mean, literal inches could have been the difference between success and failure, because that's how expensive it is to do test firings of rockets.
48:02
The last thought I have, and this is just...
48:05
I mean, I'm not on Twitter as much as you, because you are made of sturdier stuff than I am in this way.
48:12
But I really think we have a lot of what he says backwards.
48:16
We don't take seriously the stuff that is serious and we take too seriously the jokes he's telling.
48:22
So we've inverted our lens, it's like a funhouse mirror.
48:26
So a great example, he'll tweet some meme and the entire world will go crazy and talk about how terrible it is.
48:32
And he's quite literally joking and he will tell people that he is joking.
48:37
Then he gets elected to the National Academy of Engineering, one of the most prestigious honors that an engineer can win in the world.
48:43
It is a list that includes many people that are household named scientists.
48:48
And you scarcely hear a word about it.
48:50
He wrote a Tesla Master Plan in 2006, that laid out exactly how he wanted to bring Tesla to scale and push the industry toward electric vehicles.
48:59
It's a very cogent document, it's really funny, it says like, "Tesla's secret plan, but don't tell anybody."
49:04
But it is a distillation of what it will take to make cars with electric vehicles at scale and affordable for people.
49:14
That document, I don't know how many people have...
49:16
I read it, I thought it was interesting.
49:18
I'm sure other people who are in the business have read it.
49:21
But it seems to me that we miss the things that he's doing where he is deadly serious, and we take too seriously the things where he's just quite obviously joking.
49:28
This is somebody with a sense of humor and we all need to lighten up a little about it, because he's trying to be funny.
49:35
And I will say, even when he was with me, he was cracking jokes left and right.
49:39
And I take that to be a sign of a... It's a good sign.
49:42
It's good that there's not four people in the room with him telling him what he can and can't say.
49:47
That, "Oh, that joke, you can't..." No.
49:49
I actually appreciate that he's willing to crack a joke and that he knows he's subject to misinterpretation, but that I think the humor is a good thing.
49:57
And by the way, I'm not pro or anti, I don't have any reason to be pro or anti.
50:01
I'm a relatively neutral observer and someone who wrote about a specific period in his life.
50:05
But I think we've got to flip the script on it and take some of the things that he is saying that are serious more seriously.
50:11
And by the way, let's extend it a little further, I'll give another observation that I've seen.
50:16
I have this gray vantage point of life, because I don't engage in the day to day stuff.
50:21
I turned down all these random like, "What do you think Elon thinks about X?"
50:23
I'm like, "I have no idea.
50:24
You should find somebody who's willing to pontificate, because I have no clue."
50:27
I have these two neighbors, one is 10 and one is 13, they play with my daughter a fair bit, Dan and Joey.
50:34
If he has done nothing else for the world, he's made an entire generation of kids get excited about rocket engineering.
50:41
Because Dan and Joey can't stop mainlining things that he's doing, that have nothing to do with valuations or fundraising or a series this or series that.
50:50
It's about getting to space and making really cool cars.
50:53
And I think that there was some survey that someone ran where there was some crazy percentage of young people want to be entrepreneurs and somebody labeled it, the Elon Effect.
51:03
Whatever else you may think of him, I think of it as a net positive that a bunch of kids are excited about STEM, are excited about rockets, are excited about engineering and code writing and building things.
51:17
Why would we ever see that as a negative?
51:19
There's no universe in which someone could make a case for me that Dan and Joey being excited about SpaceX is a bad thing. It's a great thing.
51:27
My daughter's excited about it.
51:28
I remember I was supposed to talk to him and she said to me...
51:31
She looks at me and she goes, "I want you to tell him that he should make a clear Tesla."
51:36
The mere fact that this six year old knows what it is and then has product design suggestions is pretty great.
51:42
And I think that's pretty great, because you know who we aren't saying that about?
51:46
The CEO of GM, could anybody even...
51:49
Is that level of enthusiasm emanating for children about the CEO of Toyota? No.
51:53
I mean, maybe it is in Japan, I don't know.
51:55
But it strikes me as a good thing that kids see engineering in the same way that an earlier generation looked up to NASA engineers and was like, "Wow, what they're doing is super cool.
52:07
Whatever part of that I can be a part of, I want to be a part of."
52:11
I think that that's a good thing.
52:13
Set aside whatever your politics are, whatever your views on his companies are.
52:17
It is a net positive for the world that more kids are excited about engineering and entrepreneurship because of him.
52:23
And that argument is made, like he could die right now and you'd be able to make the same argument. Jim O'Shaughnessy: Yeah.
52:30
And I'll just push my AI recording, I agree with you, Jimmy.
52:36
And by the way, that's something like if you're a student of history, I think history is amazing because it doesn't repeat, it rhymes and all that.
52:45
But that's the way these things progress.
52:50
The people or groups that make a huge difference are those that engage and animate a large section or sector of the population and get them just really excited, enthusiastic.
53:11
And it's like one of the things I joke with people that like, "If I still owned OSAM, I would open source all of our models and algorithms, because they'd be better. They'd be much better."
53:25
And this old school idea of "no, that's proprietary."
53:28
Well, that's mostly bullshit. I mean, come on.
53:33
I wrote What Works on Wall Street, and a big financial company thought about buying O'Shaughnessy Capital Management, my first company that I started, before the book was published, and their only thing was, "You cannot publish What Works on Wall Street." And I'm like, "What?"
53:49
And they're like, "No, no, no.
53:51
We're going to use it, and all of the information is going to be proprietary."
53:55
And I'm like, "Guys, that's so shortsighted."
54:00
I believe, I passionately believe that you could scream from the rooftops truths and things that no one has yet thought about.
54:12
And the vast majority of people would just look, "He's nuts. That guy's crazy."
54:18
And it's like, my pal Morgan Housel wrote...
54:21
Very good at framing these things.
54:24
Like Kitty Hawk, man's first flight, when that happened, nobody was interested in it. Jimmy Soni: Right. That's right.
54:32
Jim O'Shaughnessy: One of the other things when I was thinking about Elon's ability to create his own image or frame, I stumbled across the George Lakoff quote which is, "Unless you frame yourself, others will frame you."
54:50
I'm going to continue the quote in a minute.
54:52
So they try to reframe you, but it's often very difficult if you're good at framing.
54:57
So Lakoff is urging people, "Frame yourselves, because if you don't, you are going to be framed by the media, by your enemies, by your competitors."
55:08
And I love the last line of the quote, "Even by your well-meaning friends."
55:15
And so what I think, like Tesla, what's its marketing budget, like- Jimmy Soni: Zero. Jim O'Shaughnessy: ... close to zero. Jimmy Soni: Yeah. Close to zero.
55:24
Jim O'Shaughnessy: And I do not know, I could be... I love travel.
55:28
And I bet if I was in Bhutan and I was talking to a little kid in one of the villages that still doesn't have electricity over there.
55:36
Bhutan, if you ever get a chance, I highly recommend going there, the people are amazing.
55:40
But my guess is, if I said Tesla to that little kid, that little kid whether it's a he or a she, is going to say, "Oh yeah, I know that."
55:49
That's really, really remarkable. And so God bless him.
55:56
Again, the challenge about talking about a lightning rod because my guess is...
56:02
And obviously I'm always happy to be wrong and I'm usually wrong.
56:06
But my guess is that went into his thinking about, like how do I really maintain center stage?
56:16
And when you do that, you are very distinctive and you are highly individuated.
56:23
And for whatever reason, there's going to be a huge group of people who hate that particular thing.
56:30
And they're going to scream, but there's going to be...
56:34
You have to calculate the benefits here.
56:37
Would it be better for you to have 60% of the world think you're great, 40% hate your guts?
56:43
If that could move forward, what you believe in, like what he believed in since his childhood, I'd say those are good odds.
56:49
Jimmy Soni: Look, there's a lot to unpack.
56:53
I think if I were to think about it at the broadest level, and again, I'm not an Elon whisperer by any stretch.
57:03
I have, again, a pretty particular vantage point.
57:08
What I would say is let's not dismiss that the lightning rod piece doesn't work without successful Starlink launches, without the design features of the Tesla, without having the number 1, 2, 3, and I think 6 spots when it comes to which electric vehicle models are best-selling in the world, without the SolarCity, without...
57:35
Yes, he says some things on Twitter and occasionally puts out dinosaur memes with the AirPods in, which by the way I thought was hilarious.
57:43
Where the meteor's about to hit them, but they have the AirPods in, so they don't know.
57:46
I just thought that was funny.
57:48
But also let's not divorce it too much from the substance of the fact that there are hundreds of people at each of his companies who are remarkable and doing remarkable engineering work.
58:00
So if you are just tweeting things, without those achievements, you sort of miss...
58:06
It's like, again, we're seeing sort of like one to 5% of the time.
58:10
We're not seeing the meeting where he's talking about valve design or where they're talking about whether the handles on the door should be recessed or not, or paying attention to what's happening with the boring company when it's trying to change infrastructure in Las Vegas, like the boring stuff...
58:23
I mean, this and [inaudible] be boring, I guess.
58:25
The boring stuff we don't see is the reason that the tweeting matters at all.
58:31
The fact that this is somebody who's simultaneously the CEO of one public and one private company, who has innovated across these fields, taken on very big challenges.
58:41
We miss all that if all we see is the lightning rod piece.
58:45
I would point people in particular to the history of early SpaceX is the place, I think, if you were trying to really understand where the passion comes from and where the risk tolerance comes from.
58:58
Because that's the other piece of this that people miss is that it wasn't as though he was playing with house money in many cases, like he was playing with enormous parts of his fortune.
59:08
When he starts PayPal, he has a 20-ish million dollar payday from his prior startup. He puts 13.
59:12
5 million of that into PayPal, and by almost any...
59:17
Even by his coworkers estimations, when I was writing about it, they said, "That was risk. That was nuts. We thought it was crazy.
59:24
And that was a great selling point."
59:25
But that's how much self-belief it took to do the things he's done.
59:29
Again, I'm not really strongly pro or anti.
59:32
I enjoy watching and understanding the things that he's doing and I think he's done some remarkable things in the world.
59:38
But what I don't want people to do is sort of get upset about a 5% drop in Tesla's stock price and miss the fact that the entire industry has had to catch up to where Tesla is now.
59:50
You have the leading auto manufacturers in the world who have had to basically run a foot race to try to get to where Tesla is now.
59:57
And they don't have the miles logged on their own experiments around self-driving because Tesla is so far ahead.
1:00:04
So you could tweet all you want, there are plenty of people who do, but a lot of those people have not started auto companies and space logistics firms as well.
1:00:15
So I think that sometimes the anger comes from a place of missing the substance of doing this work.
1:00:25
That's in the world of atoms, not in the world of bits, and where it makes it looks like, I don't even know how many X harder, a 100 X harder, 1000 X harder, maybe.
1:00:35
I know that he is the kind of figure that will provoke, that there will be strong sentiments for and strong sentiments against.
1:00:42
For the people, for all the both sides, it sort of...
1:00:45
I come back to look at what the delivery has been on some of these creations and that is sort of the place to start for me because...
1:00:55
And by the way, it's not based on my opinion of the situation, it's based on...
1:00:58
He had this great quote that's in the middle of the PayPal Book where he says, "The point of a company is to add value."
1:01:05
Like what you're doing is you begin with an idea, it's mostly wrong and you have a process of recursive self-improvement and you find an idea that can be mostly right.
1:01:13
But what you're really looking for is an idea that adds value in the lives of other people.
1:01:17
There's no amount of tweeting that would make up for bad cars.
1:01:20
Let's just put it that way.
1:01:21
That's the simple way to put it.
1:01:23
There is no amount of retweeting that would make up for rockets that crashed.
1:01:29
So when we're talking about brass tax, there's hype involved in all Silicon Valley companies.
1:01:34
And maybe for some people Musk's version of storytelling, test the tensile strength of their tolerance.
1:01:42
But if there wasn't substance there, the hype would just be tweets and that's it. But there is.
1:01:48
And what I would challenge people to look at is...
1:01:52
That's the thing to study is like, "Whoa, how is it that this company there's been not another auto manufacturer made in the United States in how many years? How did they succeed?" There is a story.
1:02:06
But I would say again, part of the virtue of my discussions is that I didn't have to touch any of this.
1:02:12
I got to talk about PayPal where the discussion was about the early days of the internet, when it was as heady as crypto is now.
1:02:21
And there were going to be big winners and big losers.
1:02:24
But I think that people will come to appreciate the ways in which his gumption forced industries to move forward.
1:02:33
And I think they will come to appreciate that there's a whole cast of people who are going to be inspired by what he is done. Jim O'Shaughnessy: Wow.
1:02:40
Again, I'm going to hit the AI, I'm going to go have a coffee or something.
1:02:45
Because I think that you've just surfaced in me something, one of the reasons why I'm a bit in awe of him, is that in all the companies that I've started, I've done exactly the same thing and I do not recommend it for other people.
1:03:00
But I'm a huge believer in pushing it all in and burning the ships and having no plan B.
1:03:08
You do have a plan, you do have a plan B, but that's in the plan of plan A.
1:03:16
You said it perfectly, you're mostly wrong, but you iterate recursively until you get better.
1:03:23
And the answer that I often give when I'm on the other side of the mic and the guest is like...
1:03:29
Somebody asked me, "What do you think it... What's your why?"
1:03:36
And I always answer, "I would like to be useful."
1:03:42
So totally, that resonates with me so much.
1:03:48
By the way, you're absolutely also right.
1:03:52
I wouldn't be able to have this podcast, I wouldn't be able to have people listen to me if I had a litter of failures behind me, in all the things that I started.
1:04:02
Jimmy Soni: That's right.
1:04:03
Jim O'Shaughnessy: And again, I don't advocate this for a lot of people.
1:04:08
My poor wife, we're having our 40th anniversary in August.
1:04:11
It's like she once looked at me after Netfolio didn't work out, which ultimately my son turned around and called Canvas, much better of mind real estate.
1:04:21
He was very good at reframing that.
1:04:25
But the point was like she said, "Will you..."
1:04:28
There was a cartoonist at The New Yorker that we both loved.
1:04:31
And she goes, "Okay, when this is all over, would you please engage that cartoonist in a cartoon that you're going to have just for me.
1:04:40
And it's me and you on a raft.
1:04:41
And behind us are the most treacherous rapids you've ever seen in your life."
1:04:47
This is my wife speaking.
1:04:49
"And I am splayed on the raft like this, barely able to pull my head up.
1:04:54
And you're sitting on the edge of the raft with a really big smile."
1:04:59
Because I have an unusual appetite for risk.
1:05:03
And I have an unusual appetite for skin in the game.
1:05:08
And I'm not saying that this is my philosophy or anything, people are going to find out what's right for them.
1:05:14
Actually, sorry to restate that, it is my philosophy, but I'm not advocating it for other people, and it's like Musk.
1:05:23
But then that also leads into an interesting observation.
1:05:27
Whereas one of the things that I think is cool about you is that most of these tech stories get whittled down, whittled down, whittled down until it's like Apple, Steve Jobs, Microsoft, Bill Gates, Amazon, Jeff Bezos.
1:05:44
They do not give enough credit in my opinion, something you have addressed I think, to the...
1:05:50
Man, nobody does anything by themselves.
1:05:53
Although I do believe that I will still be alive when the first multi-billion dollar company has one employee, because of the leverage of the internet.
1:06:01
Jimmy Soni: That's interesting.
1:06:02
Jim O'Shaughnessy: But for everybody else, man, you've got to have those characteristics that attract really smart people.
1:06:11
You've got to give them a ton of credit, you've got to give them a ton of all of that.
1:06:16
And sometimes they're going to get mad at you because the world does this funnel.
1:06:20
And it funnels, like I just said, Apple, Steve Jobs, Bill Gates, Microsoft.
1:06:28
You talked to those people- Jimmy Soni: Yeah. Jim O'Shaughnessy: ... are any of them pissed?
1:06:33
Jimmy Soni: No, not at all.
1:06:36
I mean, look I definitely...
1:06:38
So I cast a wide net, for this exact reason.
1:06:41
First of all, you can't distill the PayPal story down to like one to three people, it's impossible.
1:06:47
The other is, I always thought these books missed the great stories, which were hundreds of people who came together, who were inspired by a vision and who did a lot of work to make that vision a reality.
1:06:58
So for me, it was actually a chance to just have these great chats with people who never have people reach out to them.
1:07:05
I did a lot of interviews for the PayPal Book, where someone would tell me, "You know this is the first time somebody's asked me about PayPal, in this capacity."
1:07:11
I'm thinking to myself, that's amazing.
1:07:13
I mean, it's really disappointing in some ways, but it's really amazing because I hit pay dirt.
1:07:17
I'm getting these stories for the first time.
1:07:18
What I would say is it would be like two observations.
1:07:22
One is, there are so many employees who work at these companies who, for a variety of reasons, don't want press.
1:07:30
In the same way Claude Shannon didn't want press.
1:07:32
They want to do their work and they want to do it well, and then they want do whatever it is that they want to do with their lives.
1:07:38
And their names are not going to be in lights, and that's okay. That's their goal.
1:07:42
That's not a bug, it's a feature.
1:07:44
They're happy to not have their name in lights.
1:07:46
So that's an interesting thing, but it forces someone like me to go...
1:07:50
I mean, I had to go really deep, I was filling out questionnaires and having one person email another to vouch for me, and emailing hundreds of people, I mean, the number of cold emails.
1:08:01
But the rich stories came from that work.
1:08:04
That's kind of one thought is there's always a story beneath the story.
1:08:08
And sometimes the people who are in the best position to actually tell you something, aren't going to say a word.
1:08:13
Because they don't want to be quoted or misquoted or whatever.
1:08:16
The second thing that's interesting that you mentioned, I'm betting that if you were to interview the decades of people that you've hired or worked with, one of the things they would say is, "It was really inspiring to come to work for Jim."
1:08:29
Because I'm betting that what they would say is, "He had a really big vision and he had tons of energy, and he would throw a bunch of ideas out and then we would have to see what sticks, and oh this was... I mean, but he had..."
1:08:39
That is the exact description that I imagined that those closest to Steve Jobs would actually give of him, which is that he brought out their best work.
1:08:49
Or that someone might say of Sara Blakely at Spanx.
1:08:52
I'm imagining the people around her are like, "Wow you know, she really built this into a billion dollar plus company. I can't believe it. It was such a thrill.
1:08:59
It was the hardest I've ever worked, but it was a real thrill to go to work for her."
1:09:02
I don't know if that's true, but I'm betting its true, because I heard it from enough people who are at PayPal.
1:09:07
They all have their various stories and various good, bad, ugly situations.
1:09:12
But the thing that I found was that working for somebody who was willing, in the case of let's say Max Leger or Peter Teal, or David Sachs or Elon, they could have bumps and bruises with them.
1:09:22
But they also, to a person, would say things like, "They brought out the best in us, because we just had to actually step up to their level and bring our A game. Right?
1:09:31
You can use whatever collegiate you want.
1:09:33
I promise you that there's an entire generation of engineers that are going to emerge as alumni of Tesla and SpaceX, will have that same story to tell, which is, "I've never worked harder in my life, but boy, did we get a lot done."
1:09:46
And I think that that is a part of what we miss in these stories, is we miss the people behind the scenes who actually make these companies work, who are just fucking remarkable.
1:09:55
Pardon the French, but they are just remarkable.
1:09:57
Jim O'Shaughnessy: Oh no, this is a swearing podcast.
1:09:59
You don't have to worry about that.
1:10:00
Jimmy Soni: The people I interviewed were some of the smartest people that I've ever been in contact with, and they are never going to be the subject of Wall Street Journal stories.
1:10:08
And they were remarkable.
1:10:09
And I hope that the book celebrate some of their contributions as well, because it was cool stuff, right.
1:10:15
It was really, a good example is the invention of the CAPTCHA.
1:10:18
This might not be so cool, because people can get annoyed by the CAPTCHA.
1:10:20
But the CAPTCHA was invented at PayPal.
1:10:22
The first commercial application of the CAPTCHA was at PayPal.
1:10:24
And one of the engineers who worked on it is Max Levchin, who many people know.
1:10:28
Another engineer who worked on it, is David Gausebeck, who not as many people know, right, but who is equally as important. Jim O'Shaughnessy: Yeah.
1:10:38
And we could do this all day.
1:10:42
So I'm mindful of time here, and so I want to ask you a couple more questions and then the final question. This has been awesome.
1:10:49
I actually, this is one, I had very high expectations for this and it has exceeded them.
1:10:55
I want to go back to Elon Musk, looking at money as an information system.
1:11:02
That's the way I look at money.
1:11:04
And I think that, by the way, there's over all history, there're all sorts of people who look at it the same way, right?
1:11:14
Robert Anton Wilson, who I admire and have read all of his work.
1:11:19
He talks about money as fun coupons, but he's meaning the same thing, right, that money is, basically should be something that allows you to exchange one thing for another, without having to try to barter it or what else.
1:11:37
And we've attached all of these other things to it, that really shouldn't be attached to it.
1:11:44
People will say to me, "Well, the love of money" or no, "Money is the root of all evil."
1:11:48
And then I'll go, "Well, the real quote is, the love of money is the root of all evil."
1:11:53
Jimmy Soni: That does make a difference. Jim O'Shaughnessy: Yeah.
1:11:55
It makes a huge difference.
1:11:57
Money is a great servant and it's a horrible master.
1:12:00
So I love the idea of money as information.
1:12:03
I think it advances the stripping it of all of these emotional taboos that get connected to it.
1:12:14
But what I wanted to ask you, because I found it really interesting.
1:12:18
In the book on Shannon you're talking about the idea that he wasn't the greatest communicator in the world, right.
1:12:25
Even though his talks at MIT were standing room only, but you talk about a talk of that he gave, that is particularly interesting to me, because of what it's about, but that it was flowing out the door.
1:12:42
And that was a talk that Shannon gave about the stock market.
1:12:46
So, spill for our audience, what did he say?
1:12:48
Jimmy Soni: I think I lost the last little bit of what you, of the meditation there, but I got 90% of it, right, so. Jim O'Shaughnessy: Good.
1:12:51
Jimmy Soni: And from an error correction perspective, I think we're in decent enough territory, because it's an interesting reflection.
1:12:53
There's a whole lot that you said there that resonates with me.
1:12:55
Shannon, Claude Shannon, is this iconic figure who avoided iconic status, right?
1:13:02
And he was, he ended up in his life becoming wealthy, somewhat.
1:13:07
Interestingly, a lot of his theories around finance are being rediscovered now.
1:13:12
Shannon's demon is having its moment in the sun, right.
1:13:16
But when you go back to some of his investing, one of the nice things about learning his investing is, we're all searching for some secret formula that Claude Shannon himself invented.
1:13:25
And his explanation was, he said, "Well, I looked for good companies that were run by great people.
1:13:32
So my wife and I put money there.
1:13:34
And I guess at one point somebody was like, "Well go deeper."
1:13:36
And he said, "Well, when we wanted to invest in Kentucky Fried Chicken, we ordered a bucket of the chicken."
1:13:42
The other thing that happened to him that was fortunate is, he was on the ground and friendly with people who began some of these tech companies and he was appointed to boards.
1:13:50
And so he had the ability to get equity, but the most interesting thing is, he just held.
1:13:56
When I looked at his portfolio, some of his financial work is in the Library of Congress archive.
1:14:02
They sent all his papers to there.
1:14:03
And he, a lot of it is, he held onto Teledyne for 35 years, held onto it forever.
1:14:10
And I'm the last, particularly given some of the other very knowledgeable voices you've had on your podcast, I am not the person to take any of this kind of guidance from.
1:14:19
The thing that you hit on that's important, [character logically] is, like you, I've had the fortune now of meeting these people who are in rarefied financial, who at a rarefied financial level, right.
1:14:33
And on a metric of the Forbes list, right. They rank up there.
1:14:37
Not one of them has spent time really talking to me about wealth building.
1:14:43
What they have spent time talking to me about, is innovation and both the human and the technological components that make that possible.
1:14:51
So I spent time with Reid Hoffman and I don't think, I think if you put a gun to his head right now, he couldn't tell you how much he's...
1:14:58
I don't think it's something that he really thinks about, because he's moving in a million directions and trying to make change in the world through all the things that he's doing about books and about this and about that.
1:15:06
And he's doing podcasts and he's doing conferences and he's on the board of everything.
1:15:12
And I think you are right, that there's a great many people who are at the top of that list for whom wealth is the side effect of doing the thing that they feel called to do.
1:15:21
It's not always a perfect formula.
1:15:23
Certainly we want to expand the universe of people who could have that happen.
1:15:27
But I tend to find that those people at that level, the money is something of an afterthought, right.
1:15:37
That it is actually this vision.
1:15:38
They are bothered enough.
1:15:41
Shannon had this great speech on creative thinking.
1:15:43
That is one of my favorite reads.
1:15:45
But one of the things that he says is that he basically would become bothered by a problem until he was moved to solve it, right.
1:15:51
And so in the book, the way Rob and I wrote about it was he said, "A genius is someone who's usefully irritated." Right?
1:15:57
And I think that a lot of the greatest, not even the greatest, just people I know who start things, right.
1:16:03
And some were successful and some were not, are usefully irritated.
1:16:06
They are bothered to the point that they want to take action about something, because they ask themselves the question, "Wait, shouldn't someone do this, this and this?"
1:16:15
And instead of tweeting about it, they just go and they build it, or maybe in some cases they build and tweet. I don't know.
1:16:21
But my thought is, I have seen what you have described, which is...
1:16:26
I did this book, actually it's good, it's a great story.
1:16:29
I never really talked about this before, but I did this book.
1:16:31
My daughter came of age in Brooklyn.
1:16:34
She spent 30 years to the 'now' in Brooklyn.
1:16:37
And there's this great carousel there and I wrote it so many times, that I wrote to the person who helped to restore it.
1:16:42
And it’s this beautiful carousel, Jane's Carousel.
1:16:44
It's right on the Brooklyn waterfront.
1:16:47
And I became fascinated by the story, because basically Jane Malentis spent 30 years of her life restoring this carousel. She came from means.
1:16:56
Her family owns the big, they basically bought up Dumbo.
1:17:01
They created Dumbo out of scratch.
1:17:02
Dumbo used to be warehouses in a rundown community.
1:17:04
They built it up into one of New York's most illustrious places to live.
1:17:10
They had the ability to outsource this carousel project, but Jane actually spent 30 years hand restoring it.
1:17:15
So she kept and showed me the Exacto knives that she used to scrape away the carousel to restore this thing, right, to build this thing that she was really passionate about, because she wanted a historically faithful restoration.
1:17:33
What her husband said to me is, he said, "I started because I had a vision about Dumbo and I had a vision about what this land could be.
1:17:44
It was like a swamp and it was rundown and nobody was building there."
1:17:48
And I'll never forget, and he looked at me and said, "And then one day I woke up and I was a billionaire.
1:17:54
But whatever, that doesn't matter, I want to talk to you about Dumbo." Right?
1:17:56
Because he was so invested in every part of that process.
1:18:01
I don't know if that's a generalizable principle, but I bet if you were to look at the wealthiest people in the world, who didn't inherit their wealth, who earned their wealth through entrepreneurship.
1:18:11
My bet is that the wealth was a side effect of building something they felt passionate about.
1:18:19
And I think that's a pretty good guide.
1:18:22
It's not a bad thing, because by the way, what's nice about that is if you're iterating in that direction, you're still going to be doing stuff that you really like. Right?
1:18:32
And so you kind of can't lose in some ways.
1:18:34
It would seem to me that, for example, Jeff Bezos' insights about the internet and what the internet could do, like he had other ways he could have become wealthy.
1:18:47
He was at a hedge fund before he started Amazon, right.
1:18:50
So it seems to me that, again I'm not sure that he woke up every day and was like, "Here's how I get to 10 billion."
1:18:55
I don't think that's what he is doing.
1:18:56
I think he thought about that with respect to the company, but not his own personal wealth. Jim O'Shaughnessy: Yeah.
1:19:06
As I'm listening to you and I've had this thought before, but you're doing a great job of making it crystallized more.
1:19:14
And that is that, it's almost ironic and somewhat tragic that two of the things that the majority of people desire, wealth and happiness, are both byproducts.
1:19:32
They are not things that you can go directly at.
1:19:37
And that to me is just like, wow, all of the wasted energy, right, that people have in terms of 'I want happiness.'
1:19:50
Darren Brown, the magician, the UK illusionist, wrote a great book about happiness.
1:19:59
It brings you back to the pre Socratic, Greek philosophers and it just seems to be one of those things where it seems so painfully obvious that you can't go, "My goal is happiness." No, it's not, right.
1:20:17
My goal is to be useful and add something to the world before I shuffle off this mortal coil.
1:20:25
Jimmy Soni: And you know the other, let's take it out of also, we are having a discussion where I don't want to make it seem like the commerce part of it and the creative part of it are divorced. Right?
1:20:35
Because they're actually very intimately tied together, but let's take it out of the world of business and into the world of sports.
1:20:40
What our discussion reminded me of, is this great moment in the last dance, where they're talking about Michael Jordan's deal with Nike and the Air Jordan's and stuff, right.
1:20:50
And he makes this, I think it's the easiest observation in the whole thing to overlook, but it's so important.
1:20:56
They're asking about it and I could almost sense a bit of frustration in his responding to it, because I think Michael Jordan, at this point, is a multi-hundred millionaire, if not a billionaire, right?
1:21:06
And a lot of that is due to the products that have his name attached and he continues to make money from them in futurity and whatever.
1:21:12
He has this great moment where he says, "Look, all this stuff, McDonald's and Wheaty's and Air Jordans, it came about because I played well." Right?
1:21:22
He has to point out this obvious spec.
1:21:24
He says, "If I were scoring five points a game, none of this would've actually happened.
1:21:30
So what this is a reflection of, is my dedication to the craft, my dedication to the game.
1:21:35
And then the other stuff, it follows that."
1:21:38
I think we have this tendency to look at wealthy people and think, oh, do you ever watch Ducktails, or any of your kids watch Ducktails, where- Jim O'Shaughnessy: Yeah, my grandkids. Yeah, yeah, yep.
1:21:47
Jimmy Soni: We have this cartoon version of wealth, where we're like, "Oh, it's like Scrooge McDuck.
1:21:50
And they have this big vault and there's a bunch of gold coins and they swim in it every day and they take a daily swim in their vault."
1:21:55
No, in point of fact, I actually think that, A: that's not true.
1:21:59
B: a lot of that wealth is tied up in equity and things like that. Right?
1:22:03
So we sort of have this view of it that's that's wrong.
1:22:05
And then C: I think the Jordan line about, all of these things happened because I was good at the craft, right.
1:22:12
Because I was in the gym more than others, because I was more competitive than others, because I had more drive, because I had more discipline and whatever else, right.
1:22:18
I'm not a sports person, not a sports analyst, so I can't tell you why he succeeded, where others failed, but I can tell you that his observation in that moment is really 'pressure.'
1:22:27
That like, "McDonald's isn't coming to the guy who's sitting on the bench, putting up two points a night."
1:22:33
They're coming to Michael Jordan and the wealth is a byproduct of that devotion to the craft.
1:22:38
I think that's very useful if someone's listening who is irrationally passionate about one thing and one thing alone.
1:22:49
I think we need more defending of that. Right?
1:22:52
I actually think that one of the lessons that I learned doing the PayPal book is, it is okay to be peculiarly interested in something really specific and to want to make that really specific thing the best in the world.
1:23:03
If you are the next Jiro and you are dreaming of sushi, well dream on, because you could be the best, in a good way, a Aerosmith way.
1:23:11
Be that, be that good at sushi that people will fly around the world into a subway station to eat your sushi.
1:23:19
That to me is different than a, 'how do I most quickly amass one billion dollars?'
1:23:26
Because that seems to me to ask that question, is actually to miss how the vast majority of billionaires become billionaires. Jim O'Shaughnessy: Yep.
1:23:32
It's the wrong map of reality.
1:23:35
So Jimmy, this has been amazingly fun.
1:23:38
I'll probably have you on again, because there're all sorts of stuff that is in my notes that we didn't get to.
1:23:44
But we need to be less indulgent of me, because one of my senior producers, Vatsal, was like, "Jim, I'm seeing this sort of turning into a five hour discussion and nobody will listen, man." Jimmy Soni: Yeah.
1:24:03
I was going to say, we've only scratched the surface, Jim.
1:24:05
This is like, we could go all day with this.
1:24:07
Jim O'Shaughnessy: Totally, totally.
1:24:09
So that's why I'm really interested in your answer to our final question, which is: we're going to wave a wand and we're going to make Jimmy the emperor of the world for one day, can't kill anyone, can't put anyone in a camp, but you can incept people.
1:24:28
You can whisper something into a magical microphone that goes into everyone alive's head.
1:24:36
They wake up in the morning and they think that the ideal was theirs and they act on it.
1:24:42
What two things are you going to incept in the world's population?
1:24:45
Jimmy Soni: Oh boy, by the way, if I ever become emperor of the world, I'm resigning.
1:24:53
My first act is going to be to resign.
1:24:54
Jim O'Shaughnessy: I love you. Mine would be too.
1:24:56
Jimmy Soni: Somebody else should take that job.
1:24:59
It's a, that's a big job, right? Marcus Aurelius had it.
1:25:03
And there's a reason his meditations are as good as they are, but I don't want to have the raw material to write the meditations.
1:25:08
Let's just put it that way.
1:25:11
So I think it's hard to, and I'm sure other guests have struggled with this...
1:25:17
Two things come to mind on the basis of our conversation.
1:25:21
And it's kind of in this order, they don't have to be incepted in this order, but they are two separate messages.
1:25:25
The first is: make things, and the second is: be playful. Right?
1:25:34
The 'make things' part is self-evident.
1:25:36
Like we, there is so much that is still to be made and we look up to justifiably admire those who do make things.
1:25:49
And I think that the more of that instinct and that impulse that we celebrate and honor, the better off we'll all be.
1:25:59
By the way, it's not that we don't have it. We're born with it.
1:26:02
Kids do this all the time.
1:26:05
My daughter this morning woke up and we made a shell necklace, right.
1:26:08
I didn't even know we had shells in the house. She found them.
1:26:11
And then commanded that I cut the rope the right length.
1:26:15
Kids have a maker instinct.
1:26:16
We edited it out of them.
1:26:18
We need to do less of that. Right?
1:26:21
And I guess that's a perfect bridge to my second comment, which is be playful.
1:26:27
Claude Shannon's genius, sure it was information theory and it was working for 10 years on a paper that would light the world on fire.
1:26:34
It was also the fact that after that, he didn't feel the need to be a famous scientist who wore ties and suits and went to the right conferences.
1:26:41
He juggled, he played with unicycles.
1:26:44
He developed the world's first chess playing machine.
1:26:47
He never lost the instinct that led him to play.
1:26:51
There's this great story where he has a big oversized tree on his property.
1:26:56
And the thing to do is to cut the tree down, it could cause real damage.
1:26:59
He had the people out to cut the tree and he says, "Could you instead carve this into a pole and I'm going to fly a jolly Roger at the top of it?"
1:27:09
There's like no purpose to this, he's just doing it to see if he can do it and see if it's funny.
1:27:14
I suspect that playfulness is part of what makes some products delightful and others not. Right?
1:27:24
Some lives delightful and others not.
1:27:25
I think it's why people listen and follow you, Jim, right?
1:27:28
You are playful, in the best way.
1:27:30
On Twitter and in other places you encourage people to laugh and to not take themselves so seriously.
1:27:36
And I suspect that if I only have two messages, it's, "Make things and be playful."
1:27:40
Jim O'Shaughnessy: Listen, I love that last one.
1:27:43
And it has bothered me enormously as I've gone through life, that we beat playfulness out of children.
1:27:54
I think it's a crime, because that's how we learn.
1:27:58
That's how, I mean, I do all these deep dives, because I'm a lunatic.
1:28:02
But what is the one thing that all mammals share and many other species as well, they learn by playing and it is a massive part of non-humans' learning curve.
1:28:21
Again, back in Africa, right, watching the cubs play and that's all they do.
1:28:27
And then I always joke about why I'm so lazy.
1:28:30
I'm like, "If you watch a lion man, there's where you should get some inspiration, because when they're not playing, they're lying around sleeping or they're hunting to eat," but playfulness, if you can engage it, and not, by the way just with kids...
1:28:46
I'm lucky enough to have three grandchildren.
1:28:49
I have my youngest here, Langdon, who's 18 months I think.
1:28:54
I just love watching her, because everything she does, she's learning, but the whole thing is just so wonderfully playful.
1:29:05
And she's so engaged in the moment and you know, that's beginner's mind, right?
1:29:10
And if you can stay in beginner's mind, it'll force you to be playful.
1:29:16
And I also love to make things, right, because again, be useful.
1:29:20
Don't take yourself so God-damn seriously, engage with other people on a rooting for, as opposed to rooting against them, I think you might have a pretty good life. Listen, man. I love both of those. Fantastic.
1:29:35
And what a delight to have you on and I will have you on again.
1:29:44
I know that everyone probably does know how to get in touch, but where should they find you, if they want to go deeper? Jimmy Soni: Yeah.
1:29:55
Sadly I'm not as a prolific a tweeter as you, but I engage with the platform.
1:29:59
I also use it, it's a good place, sort of like a PO Box.
1:30:02
I actually use Twitter as a PO Box, not a soapbox. Right?
1:30:07
I'm not as courageous as you in that regard, but I'm on Twitter. I'm just @jimmysoni. My website is www. jimmysoni. com.
1:30:14
And I love hearing from readers. It's the best, right? I really enjoy it. I get a kick out of it.
1:30:19
I like when people find things that I haven't found, or can send me, can sort of respond.
1:30:24
It's always good to see what signal comes back from the noise that I'm admitting into the world. Right?
1:30:30
And so those are the ways to get in touch with me.
1:30:33
But I'm just, look I'm appreciative that you are doing this, right, that you take such time to read books, engage with authors, bring them on, and then have conversations, that I think we talked through the book for five seconds, which is great. Exactly.
1:30:47
These things are supposed to be soil for other conversations.
1:30:50
And so I am very thankful to you for having me, for doing this.