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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 episode 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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Today I have, after trying to get in touch with him, I don't know, maybe three or four, five months.
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The only person that I have designated as my recurring guest. Isn't that weird?
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That the only guy I can't get to is my recurring guest, Alex Danco, bon vivant, polymath Renaissance man, and a general glitch in the matrix. Welcome.
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Alex Danco: Hey, everybody.
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Jim, thank you for allowing me back after being MIA for so long. No. You're right though.
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It's like, that is very sort of...
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I don't know how you put it.
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One of those realizations of the recurring guest is the one person you can't reach.
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Like the anti X is always the X.
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Jim O'Shaughnessy: I love it. Alex Danco: No, it is.
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Jim O'Shaughnessy: Actually- Alex Danco: Here. I'm alive. Jim O'Shaughnessy: ...
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It is so perfect because just for shits and giggles, I was going through the transcripts of our discussions and two things emerge immediately.
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The first thing is at the top of every episode, up until this one, we talk about what we're going to talk about, right?
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Alex Danco: That's Jim O'Shaughnessy: And so we kind of do a list.
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This is what we're going to talk about.
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We then proceed to never talk about any of those things.
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Alex Danco: You can't talk about the things you say you're going to talk about.
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Then it wouldn't be a podcast, then it would be actually something useful.
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Jim O'Shaughnessy: Exactly.
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That's just amateur shit, as far as I'm concerned.
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Alex Danco: That's not what we're here to do.
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Jim O'Shaughnessy: We're pros, man. We are pros.
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Alex Danco: That's Jim O'Shaughnessy: However, the other thing is that it is an example of something you and I like to speculate about, complex adaptive systems with emergence coming from the bottom.
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Because Alex, when you read these podcasts in order, it appears like we planned them.
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And not just planned them, but that we really thought, "Okay, yeah, no, this can't go here.
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We got to move this here."
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Alex Danco: Heavily edited.
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Jim O'Shaughnessy: So we have a complete, I'm going to publish it as a book.
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I'll cut you in on the royalties too.
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I think it's pretty cool. Why do you think that?
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Why do you think that happens?
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Alex Danco: Well, before we talk about what happens if you read them forwards, I have the obvious question, which is what if you read the backwards? Does it play...
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It plays Dark Side of the Moon and says, "Hail Satan."
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Jim O'Shaughnessy: Yes, it does.
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It says, says, "Hail Satan.
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Paul was the walrus and Paul is dead. And Paul is dead." Alex Danco: Yes.
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Jim O'Shaughnessy: And...
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But works really nicely with Wizard of Oz.
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By the way, I just watched a documentary on Dark Side of the Moon, one of my favorite albums of all time.
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Alex Danco: One of the greats.
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Jim O'Shaughnessy: And the stuff that they were doing when you put it in its proper sequence of time when they were doing it, I'm convinced, and I've advanced this argument in other forums, but that Pink Floyd, 150 years ago, Pink Floyd, would've all been dons of philosophy at Oxbridge. Alex Danco: Sure.
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Jim O'Shaughnessy: And Nas and Damien Marley and those guys, they would've all been Walt Whitman style poets.
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And we've just upgraded the conveyance of these interesting videos.
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Alex Danco: Now there's a soundtrack.
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So Pink Floyd on their own is really interesting.
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I mean, didn't Roger Waters go to Oxford or something?
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Jim O'Shaughnessy: Yes, absolutely.
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They're all a bunch of Oxbridge guys to begin with.
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Alex Danco: That's what I thought.
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I thought they were British rich kids who then decided to do what rich kids do, which is go generally say, "Fuck the man."
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And then one out of a hundred of them produces art.
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It's been a while since I've listened to Pink Floyd, actually.
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I grew up listening to Pink Floyd because my parents were really into Pink Floyd because I had the incredible privilege of having parents who in their formative years lived in America and England respectively.
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And so their vinyl collections were really, really superimposed beautifully together, which I now have here sitting right next to me.
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So there is some pretty incredible stuff in there that just happened to have been brought along by them.
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And so that was a very fortunate set of circumstances that led me to having good vinyl.
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So that's awesome stuff in there.
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Jim O'Shaughnessy: Let me ask you a question. Is Adam Ant in there? Alex Danco: No.
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Jim O'Shaughnessy: Adam Ant is not in there?
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Alex Danco: No, must have been in the left behind category.
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Jim O'Shaughnessy: That disappoints me, man. Alex Danco: Sorry.
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Jim O'Shaughnessy: There is a great book by my favorite literary fiction author, David Mitchell. It's his most recent.
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It's called Utopia Avenue.
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I think you might like it. Check it out.
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Alex Danco: I should do that. Yeah. Okay.
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So do you realize what we just did, by the way?
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Which was we launched into an intro topic of, we're going to talk about how all of these episodes are immaculately planned.
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Why do you think that is?
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And within 15 seconds, we were talking about Pink Floyd.
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Jim O'Shaughnessy: Exactly.
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Alex Danco: Complete and total ADHD, on effect.
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Jim O'Shaughnessy: Which is- Alex Danco: This is how the episodes work.
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Jim O'Shaughnessy: No, but what you're missing here is the emergence.
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Because we're going to get to some questions that question the best way to make discoveries.
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But in the meantime- Alex Danco: I'm here for it. Jim O'Shaughnessy: Yeah. As am I.
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And as my favorite, highly adaptable thinker, I was just thinking about these things and I'm just going to kind of ask you in order to get your thoughts.
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Heraclitus, who I'm sure you know.
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Pre-Socratic, Greek philosopher. Alex Danco: Yeah.
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We went to college together. Jim O'Shaughnessy: Yeah.
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No, the joke works a lot better if it's me who went to college with him.
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Pre-Socratic, Greek philosopher in the sixth century, BC.
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He's running around basically saying to everything, "Hey guys, listen, man, you think that these rocks and streams are real? No, everything is one. Everything is just one."
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And a little later, a couple of centuries later, you got Lao Tsu, saying, "The Dao that can be named, that ain't the real Dao."
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Alex Danco: That's not the real Dao. Jim O'Shaughnessy: Yeah.
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The real Dao- Alex Danco: People who learn the word beautiful immediately think something else, un-beautiful. Isn't that the line? Jim O'Shaughnessy: Yes. That is.
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And then you've got the Gita basically saying, "Hey bro, listen, whatever happened in the past, that was good.
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Whatever's happening right now. That's good too.
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Whatever's going to happen in the future? You got it. Good too."
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Then let's fast forward- Alex Danco: The Dude abides.
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Jim O'Shaughnessy: Hang on. Yes. But hang on.
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We're going to fast forward.
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Erwin Schrodinger, of cat fame, said that the total number of minds in the universe is one and that the idea of individual minds are an illusion.
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And then we're going to top it off with one of my favorite authors, David Deutsch who wrote The Beginning of Infinity. He is...
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A pull quote that I just love.
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"All fiction that does not violate the laws of physics is fact." My question to you, Mr.
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Alex Danco- Alex Danco: All fiction that does not violate the laws of physics is fact. Got it. Okay. Jim O'Shaughnessy: Yeah. Is fact, okay.
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Alex Danco: I don't know that book. That's a good quote.
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Jim O'Shaughnessy: My question to you, what the fuck is going on? Is it... This just the circle?
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Are we kind of at one of those places where the circle is starting to start again or end? What do you got?
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Alex Danco: First of all, you're going to have to go into much greater detail about there being a point where the circle starts and ends. Man.
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I have some topography questions about that.
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Jim O'Shaughnessy: I was wondering how quickly you would make fun of me about that.
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Alex Danco: Yeah, I was told- Jim O'Shaughnessy: I took under two seconds, so I win.
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Alex Danco: Okay, well, so first of all, an aspect of this that I have been thinking about a lot in my day to day job of trying to get groups of people to make decisions, coherently.
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And then the general problem of how do groups of people produce thought?
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And how do groups of people produce cognitive direction?
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There's this useful rule of thumb, which I believe, I don't know if the first person to articulate this, but probably the most forceful person to articulate this was Freud.
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Which is, individual people and groups of people are the same.
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They are the same because the pattern of thought of an individual person or a group of people is the same thing, which we now kind of understand has a deeply correct basis in neurological fact, in terms of what is a synapse and what is synaptic strength.
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And how does synaptic strength develop between two pairs of concepts that...
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There's a term from neuroscience called nerves that fire together, wire together.
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Which is basically, if you produce a thought pattern repeatedly, it will reinforce.
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And then that thought pattern will happen more easily.
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And that's how you get thought patterns that carve themselves like rivers going through a river valley.
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It's like, does the river flow through the valley?
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It's like, which causes which?
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Well, one made the other easier and the other being easier caused the first one to happen.
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So this aspect of where does decision making come from?
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It's like, well, I mean, it comes from a certain set of upfront things that are present and then much, much deeper, more powerful, scary repressed feelings and guilts and desires and things that are causing us to act and project in a certain way.
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So you say, "Why is this person behaving that way?"
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And you can talk about this basic idea of projection, So projection 101, what is projection?
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An example of projection is like, if you are feeling super bad at your job at work, you will come home and then scream at your spouse for not being helpful and not emptying the dishwasher.
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"I can't believe I have to do everything around here."
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It's like, what is going on?
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Well, what happens is you are feeling guilty about being unproductive, and so what you therefore do is you need that reassurance of, no, I am productive.
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You make someone else the unproductive person so that you can be the productive person.
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So you go find someone and then you project that feeling of guilt, of being unproductive onto your poor wife or your someone.
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So it's called projection 101, which is like, we feel guilty about something.
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So we project that thing onto somebody else because it gives us that reassurance.
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So you can say, why do individuals do this?
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And then why do groups do this?
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And this is where you get into Freud, which is like, well, the main things that we're feeling guilty about are probably things that happened to us in our childhood.
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And that probably has to do with our parents.
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And it probably has to do with blah, blah, blah.
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You go down that whole line of thinking, but then you say, "Well, let's actually take this towards how organizations behave."
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Where it's like, well, it's probably the same thing is basically true, which is the things that the organization feels most deeply insecure about probably have to do with things that happened at its founding.
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It has to do with who was around at the founding.
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And what were the emotions of the founding that have been unconsciously carried through in how the organization feels that it does things and feel as though what its purpose is.
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And so the organization also will act in a way that projects these anxieties and these neuroses externally onto other groups of people.
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So then when it makes decisions or when it carries itself in a certain way, and you're like, why on earth is that organization behaving in that way? Well, this is why.
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This is all the same thing.
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There is just, there is one.
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So now I'm extrapolating from one person to a group of people to, everyone.
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Well, maybe everybody just is one, in that very same way.
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We get right back to where we started.
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Jim O'Shaughnessy: So that's interesting.
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And it already gives me the example of, this is going to sound like we rehearsed it.
13:50
Because the next question...
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Well, first off, the observation.
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So you'd love the books of Will Storr, The Scientific Method of Storytelling and his most recent one, The Status Game, because basically his thesis is what you've just described.
14:05
It is that we can find a lot of our human behaviors by studying our evolutionary process.
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And that we are essentially...
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This now, I guess I'm shifting to Darren Brown here who wrote a great book about happiness, but we are essentially the stories we tell ourselves about ourselves.
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But one of the interesting observations of Storr I'm reading.
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The poor guy, he had to move up his podcast, which gave me the opportunity to read all of his back catalog.
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So now I'm reading Selfie and he makes a really interesting point about perfectionists, basically being people who are obsessed with not what other people actually think about them, but what they think that other people think about them.
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They intuit that they can read people's minds.
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And then we jump back to Gladwell.
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Well, they showed the research and, not true.
15:00
You can't read anyone's mind.
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And that seems to be one of the central causes of much of the misery in human communication. Alex Danco: Well, yeah.
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I mean this whole idea of can you versus can't you read people's mind?
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I think that the pure way of expressing that is to be like, people don't hear what you tell them, people hear what they're listening for.
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And that applies not only in communication from me to you, but also in my interpretation of what I think you're thinking.
15:27
I don't think what you're thinking, or even what I'm reading you're thinking.
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I'm thinking what I am willing to hear about what I think you're thinking.
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Jim O'Shaughnessy: Totally.
15:38
Robert Wilson captured that with, you can convince anyone of anything provided that they're sufficiently eager to believe it.
15:47
Alex Danco: Oh, hundred percent.
15:49
When you're ready to hear something, you will hear it.
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Even if it's not being said, you'll hear it.
15:53
Jim O'Shaughnessy: You'll totally hear it.
15:55
So- Alex Danco: The meaning of the communication is the behavior that results. Jim O'Shaughnessy: Yes. Exactly.
16:02
And so when you piece all these books together, it's a fascinating journey because what we find is that we see behaviors that adapt it basically from, when we crawled onto the shore. And they repeat.
16:19
But that kind of brings me to the question that I know you'll have an opinion on, which is phylogenetic inertia. Alex Danco: What?
16:27
Jim O'Shaughnessy: Essentially... Phylogenetic inertia. Come on, man.
16:32
I tell people you're this brilliant, incredible thinker.
16:35
Alex Danco: Pylogenetic inertia.
16:38
Jim O'Shaughnessy: Phylogenetic inertia.
16:40
And I'll admit that I had to re-look it up.
16:42
I subscribe to a newsletter put out by a guy, K Pass.
16:46
And it was his- Alex Danco: Oh, I know that guy. Jim O'Shaughnessy: Yeah. It was his lead thing.
16:52
And I'm like, oh, I have notes on that.
16:54
And so, anyway, I thought, I know what I'll do.
16:56
I'm going to get Alex's thoughts here.
16:59
Basically what it is it says, that there is a constraint or limitations on future evolutionary pathways that have been imposed by previous adaptations. What do you think?
17:11
Alex Danco: I mean, if that's a fancy way of saying path dependence is a thing, then yeah. I agree with it. Of course it's a thing.
17:16
Path dependence, it's most of the thing.
17:18
It's like, rivers don't...
17:19
The Mississippi River doesn't randomly hop two miles over because it feels like it.
17:24
The Mississippi river has carved out a fairly significant river valley for itself. And it does move.
17:30
There is such a thing as what they call oxbow lakes.
17:33
Is that when the river moves and it leaves the thing. It does move.
17:37
This does happen, but not very often.
17:40
Most of the time it sticks where it is.
17:42
Because of this idea, inertia generally, is these things are quite they're quite self-reinforcing in nature. It's a loop.
17:50
Jim O'Shaughnessy: A recursive loop, basically. Alex Danco: Yeah.
17:53
And I guess to the extent to which, if when we think about this in terms of...
17:56
Well, so tell me about this idea of phylogenetic.
17:58
What does phylogenetic mean? First of all.
18:00
Jim O'Shaughnessy: I'd have to look at the Greek. It basically means that. What I just gave you.
18:05
It says, "Constraints on limitations of future pathways."
18:10
Alex Danco: It just is the definition.
18:12
Jim O'Shaughnessy: It's the definition. Yeah.
18:18
Alex Danco: I really like thinking in terms of...
18:21
The Selfish Gene was really such a remarkable book.
18:24
Especially in the context of non-genetics.
18:26
Just defining what is a meme?
18:29
What is this thing called a meme?
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It's information that self-propagates.
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And it harnesses other things to self-propagate. That is the goal.
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There's no such thing as a gene that is a good trait.
18:42
There's just a gene that is successful at replicating.
18:45
I forget who said this on Twitter, it was probably Swift on Security, for all things [inaudible].
18:50
But it's like, the most successful...
18:52
The apex predator in the world is actually corn.
18:55
They successfully hijacked us who think we're the apex predators into turning it into the chemical food stock supply for all our food.
19:05
And then eventually all our oil, all our plastics, all our, everything. Yeah.
19:10
Corn is absolutely the apex predator mind virus.
19:13
Most successful evolving species on earth by hijacking us, with a mind virus called farm subsidies.
19:20
Jim O'Shaughnessy: I love mind viruses and I love memes, as you know.
19:26
And I think that the test of a meme in...
19:29
And actually you are going to believe this because you know me, but that's actually a question on here.
19:35
It was like, basically, I'm going to read you the question.
19:37
It was, Camus compares our need for meaning with Sisyphus having to roll the ball up the hill all the time, which freezes our me.
19:47
And so my question was, right now, just by people I'm interviewing and things I'm seeing, Rene Girard is having his moment, man.
19:58
And it's like, everybody's talking about mimetic theory.
20:01
Everybody's talking about mimetic theory.
20:03
And so the question is, did mimetic theory cause everyone to talk about mimetic theory?
20:08
Alex Danco: No, my article three years ago caused everyone to talk about the mimetic theory. Everyone knows that.
20:13
Jim O'Shaughnessy: I actually brought that up on many occasions and many people were nonplussed by my bringing that up. Alex Danco: Well, okay.
20:21
Going back to your rolling the ball up the hill thing, here's a joke.
20:24
Tell me, I don't know if you've heard this joke before. So let see if...
20:27
I need to make sure I told this joke correctly.
20:34
So the mouse laments, "Boy, life is really harder than I thought it was.
20:40
At first I was running around in this wide open room, but just seems like as life goes on, I find myself narrower and narrower and narrow into these walls closing in, until now there's nowhere left for me to go."
20:51
To which the cat says, smiling, "All you had to do is go in any other direction," before he eats him. Jim O'Shaughnessy: Yeah. I have heard that.
21:00
I've heard variations on that.
21:01
Alex Danco: What's the joke. Let's unpack the joke.
21:04
The joke is really a variation on the Kafka theme, which is, the great joke of human nature is that we spend all our life struggling and struggling and struggling to create a person of ourselves, only to find that our person is that struggle. That is the grand joke.
21:27
And this is like the poor mouse.
21:30
The mouse spends his whole life struggling and struggling and struggling to do this thing that ultimately results in him being eaten by the cat.
21:38
To which the cat replies that, you could have literally done anything else.
21:40
All you had to do was go in any different direction.
21:44
It's like, well, that's the human condition, isn't it?
21:46
Jim O'Shaughnessy: It really is. Alex Danco: Yeah.
21:48
You carved this river valley... Carved itself, man. This is the grand joke.
21:52
And I think, yes, if you want to layer in your standard issue Girard layer on top of this, this idea of this struggle for meaning in terms of you having an idea about yourself that only renders in it being an interpersonal rendering of that self.
22:10
It's like, people don't want things.
22:13
They want to be the person who has the thing.
22:15
And the way that you are the person that has the thing is because other people see you being the person who has the thing. It only becomes...
22:21
It's like, the mirror is more real than real life.
22:24
It's like, it's only real if you can see it in the mirror.
22:27
And then the mirror becomes the real thing and what's in real life starts being subservient to what's in the mirror.
22:31
Jim O'Shaughnessy: I just have to interject.
22:32
That is the topic that Storr is writing about right now, the mirror philosophy of why humans are the way they are.
22:41
So again, we have synchronicities everywhere.
22:43
Maybe we all are one thing.
22:44
And I'm just talking to myself here, but continue, please.
22:47
Alex Danco: That's again, the way that you would take this back to your Freud observation that groups of people are the same as individual groups of people is because the concept of you patterning behavior into something that reinforces based on what you see in the mirror, or worry about, based on what you see in the other person, is something that will strengthen over time in a particular way.
23:06
In a way that is remarkably similar to how a neuron strengthens when it gets a response out of the other thing from which it is trying to produce the outcome.
23:14
These are very, very similar motifs here.
23:16
Jim O'Shaughnessy: So, a couple of things.
23:20
We were talking before we started recording about you having been the beneficiary of your parents living both in America and in the UK for the vinyl collection that you now have.
23:31
I'm envious, I will tell you, but there is another notion that I've been thinking a lot about when you were talking about that.
23:38
I thought about the British pop hit from, I don't know, 1985, '86 called Mirror in the Bathroom.
23:45
Have you heard that song? Alex Danco: Yeah. By The Specials. Jim O'Shaughnessy: Yeah. By the Specials.
23:50
So if you watch the video for it too, it's just fascinating.
23:53
And I have this theory that the tip of the sphere in a lot of these changes...
23:59
Watch the creators is basically what I say.
24:01
And I have a broad definition of creators.
24:04
Alex Danco: I would love hear it. What is a creator? Jim O'Shaughnessy: Yeah. What is a creator?
24:10
Is somebody who recombines ideas, synthesizes them into something that appears new in whatever the genre that we're talking about.
24:20
So I used to believe that there was the great genius who had the original idea.
24:27
And I've really come to terms with the idea that, if you're thinking something...
24:33
I mean, back to your neurons. And the way we group up.
24:37
If I'm thinking something, there's got to be, unless I'm physically or mentally insane, ie, have physical reasons that I'm insane, or I just have emotional problems or filter failure, one of the things that Claude Shannon speculated, and actually some psychiatrists are now speculating, might be one of the causes of schizophrenia- Alex Danco: We should talk about Gregory Bateson sometime. But that's a... Yeah.
25:00
Well, so Gregory Bateson is the link between Claude Shannon and information theory versus all of the people doing this interesting work on schizophrenia.
25:05
Do you know who Gregory Bateson was?
25:06
Jim O'Shaughnessy: I actually don't. Alex Danco: Oh, my God. Okay.
25:10
So I actually happen to have this right here.
25:11
So Gregory Bateson was a close friend of Shannon's and was in that whole crew and lived in Palo Alto in the '50s and '60s, and was a psychiatrist.
25:19
The main way that he came out...
25:21
His big thing is communication theory, which is basically taking information theory and then basically applying it to how people work.
25:28
So the book to get is called Steps to an Ecology of Mind.
25:30
Jim O'Shaughnessy: Oh, perfect.
25:31
Alex Danco: Yeah, yeah, yeah. Read this.
25:34
You'll love it, but sorry to derail you. What's a creator?
25:37
Jim O'Shaughnessy: You didn't derail me.
25:39
So I basically think that what has been lessening in my probability, the probabilities that I assign is this idea of the genius lone thinker.
25:50
I think that most ideas, I mean, classically, Leibniz was doing calculus at exactly the same time as Newton was.
26:00
And there were other ideas.
26:01
So what we might perceive as a new thing, is somebody who has been able to recombine other things to make a thing that appears new.
26:17
And I'm still struggling.
26:18
This is still a work in progress, but like, so that includes entrepreneurs, for sure. It includes musicians. It includes artists. It includes...
26:28
It has a very wide group of acceptable, but my idea is that, and of course, because I'm a quant, I'm always trying to build algorithms or AI systems that can take advantage of this.
26:39
If you watch what I call the tip of the spear, the most out there creatives.
26:45
And that's why I brought up Mirror in the Bathroom because you weren't around then, but I was.
26:49
And I was 25 and I'm like, oh my God, this is really cool.
26:53
Keeping in mind- Alex Danco: Music is really cool.
26:55
And then you're like, oh this, all music is from Jamaica.
26:57
Jim O'Shaughnessy: Yes, exactly.
26:59
Well, and yeah, but you know that was my formative years.
27:03
All I did was listen to Bob Marley, The Wailers, Peter Tosh, et cetera.
27:09
So Bucky Fuller had a really interesting observation, which was, it's not necessarily that people are dumb or stupid, although that's something you have to consider, but he basically says that there is tuned in and not tuned in.
27:27
And the example that he gives is the microscopic world.
27:32
So most people before the invention of the microscope were not tuned in to the microscopic world.
27:39
They look through it and they're like, "Oh my God."
27:41
And so the original guy who put his eye in there got tuned in now what does the establishment do?
27:48
Is they get very angry at him.
27:52
Because he is questioning everything that their reputations are basically...
27:56
You know Max Planck, "One funeral at a time."
28:00
And so I joined that theory up with, some people are just much more tuned in.
28:08
Which, I can't believe how this is actually progressing, because what I also have on here to ask you about is, the podcast that Patrick just had with Ken Stanley, which is basically explaining why greatness cannot be planned.
28:23
And the paradoxical way of achieving something, greatness, is to have no objective at all and to follow all these stepping stones.
28:30
And so basically, the more open minded, the more you seek novelty and strangeness, the greater you will become.
28:40
Let's come back to my tip of the spear artists.
28:43
I think that by watching them, you can get an early preview of what the next big thing is going to be. Do you disagree?
28:52
Alex Danco: I mean, so I certainly don't disagree with the notion that what artists do...
28:58
Well, I don't disagree with the concept of gentrification, if that's how I could succinctly describe. It's like, yes.
29:06
As a matter of fact, the yuppies do in fact move into the artist neighborhoods, and then the artists move somewhere else.
29:13
That is a replicable pattern of behavior across all kinds of walks of life.
29:17
But on this idea of, what ideas are actually new?
29:20
Ideas that are actually new are unknown because the people are not ready to hear them. They fall on deaf ears.
29:26
It is entirely possible that somebody also discovered calculus 200 years before Newton and Leibniz, but we don't know about it because we weren't ready to hear it.
29:34
Maybe they didn't discover it at the same time.
29:35
Maybe we heard it at the same time.
29:38
And in fact, we didn't hear the 2, 3, 5 other people who discovered calculus.
29:41
Jim O'Shaughnessy: I love that idea.
29:44
And it's consistent with Jed McKenna, the guy I like to read who himself is a fictional character telling us we're fictional characters.
29:50
But he's got a passage in his book, which is, the fact that this book has found its way into your hands means that you are finally ready to learn this lesson.
30:02
When the student is ready, the teacher appears.
30:05
But when the teacher is ready, sometimes the student appears as well.
30:11
I think that's a fun and great idea, but I'm... I think more...
30:17
Not, I'm thinking less about yuppification, which is absolutely true.
30:21
I years ago, did this basically meta a look at studies of, how can you tell when someplace is going to really catch on?
30:30
And one of the single best variables was watch where gay men, in particular, gay men move to, that when they moved there, it is not a place that you might like.
30:44
It just keeps happening and happening.
30:46
After five years, all the houses look perfect.
30:49
They have the shops, all of the...
30:51
Then, the yuppies are like, "Let's move there."
30:57
So I think, it's like, I don't know.
31:00
Is there a patient zero here? Or am I wrong?
31:03
Alex Danco: Well again, the idea of... How do I put this?
31:11
Everything that becomes a self-stable perpetuating thing can always be traced back to a certain set of circumstances that led to something starting to faithfully replicate.
31:22
And there's this whole idea of...
31:24
Do you know the idea of the founding murderer, which is all things that are stable must have originated in an act of violence? Jim O'Shaughnessy: Yes.
31:30
Alex Danco: And there's the Girardian way to look at this, which is that things that are stable are stable because the differentiation is correct.
31:35
And it's like, you have to destroy the undifferentiated-ness in order to restore.
31:40
So the classic, the mythical version of this is Romulus and Remus, where one brother has to kill the other to create the conditions that led to the start of Rome.
31:50
You have the crisis of un-differentiation is resolved in the moment of the founding murderer.
31:55
Fast us forward to Silicon Valley really was found...
31:58
Modern Silicon Valley was founded in the crash of 2000.
32:01
You had a crisis of similarity, which is ended in an act of violence called the crash.
32:07
That restores differentiation, that leads to this actually very, very healthy self-perpetuating thing that then went, going for 20 years.
32:13
Similarly, it's like, if you look at all things that end up being enduring and last always have their origin in, depending on how literally you want to take the concept of violence, you can...
32:25
It's kind of interesting.
32:26
But I wonder around these ideas, where do people live?
32:28
Where do these artistic tastes come from?
32:29
Where do ideas that actually propagate successfully in a way that actually is sustainable over time come from? Which is interesting.
32:37
There's for sure some tension between these two ideas, which is on the one hand, ideas that propagate is an instance of similarity that self-propagates.
32:43
But on the other hand, you would say if something is propagating stably for a very long time, it must be like...
32:49
If it's stable, it must be because there is some greater sense of non-sameness holding that stability together.
32:55
So this is a, sometimes, you know, Michael Scott meme.
32:58
Sometimes you start a sentence and don't really know where it's going.
33:01
Jim O'Shaughnessy: Well, what's great about that though is, so the death and rebirth seems to me to be part of every cult or religion or spiritual quest that I've been able to study.
33:15
All of them, you go to the Isises and Osiruses, and you go even further back.
33:21
And there's a great book about, the goddess is back, and boy is she ever pissed.
33:26
And her beginning story was about death and rebirth.
33:30
Your idea about speculating about, well, the violent thing is, is a market crash death?
33:36
Well, I think maybe yeah, because- Alex Danco: It's an act of violence.
33:40
It's an act of restoration of non-similarity. Jim O'Shaughnessy: Yes.
33:43
Alex Danco: By killing one of the two brothers. Jim O'Shaughnessy: Yes.
33:47
But then I get into the, what's up with that?
33:50
And I want your opinion on this as well.
33:52
So I've been heavily into Joseph Campbell and the hero's journey and all that kind of stuff, and the idea of the mono myth.
34:00
So my question is, what the fuck is going on when the mono myth for, say, Christianity is that Adam and Eve get thrown out of paradise, what was their crime?
34:13
Their crime was wanting knowledge. What's up with that?
34:18
Alex Danco: We can talk about this if you want.
34:21
Again, if you talk about the tree of knowledge for a second, it's like ...
34:21
First of all, it's knowledge of what?
34:32
It's like, what's the first thing that happens when Eve eats from the tree of knowledge?
34:36
She becomes aware that she's aware.
34:38
Jim O'Shaughnessy: Exactly.
34:39
Alex Danco: She was aware of something that she was not aware of before, which is being aware of an external point of view called peers being aware of you, and you being aware of peers.
34:47
Peers, as in anybody that is other than God.
34:50
It's like, okay, well, that's the thing that the knowledge...
34:52
And you realize, it is an awareness of other, as the consequence of the fruit of the tree of knowledge as the source of all the things is a fairly powerful self-propagating idea.
35:04
Jim O'Shaughnessy: Oh yeah.
35:05
Alex Danco: Because again, not to make this the Christian podcast, which we could do if we wanted to do sometimes, but if you look at the concept of sin, where this is the thing.
35:14
The sin is the kind of behavior that you learn.
35:16
Kids don't have it, but they acquire it.
35:18
And then you become an adult.
35:19
And then when you're adult, you are sinful. What is this thing?
35:22
How do you understand what it is?
35:23
Well, you can understand it as being the odd, what is sin?
35:26
And what is its opposite? What is grace?
35:29
What are these two opposing concepts? And where are they?
35:32
What is this kind of behavior that fundamentally is all the same?
35:35
That fundamentally has to do with a sense of self and awareness of others, awareness of other perspective that ultimately creates really the concept of pride?
35:44
Basically everything comes from that.
35:45
Comes from this idea of having a point of view that is self-centered around your pride as the basis for doing this act that is called sin.
35:54
Ultimately it's like, well, what is the apple that you ate that caused yourself to get this idea into your head that resulted in you being prideful?
36:04
And also is learned by other people when they see you do that.
36:12
Whether you are a person of faith or not, whether it's the Christian faith or not, it's this idea of there being a concept called original sin is actually a fairly sticky idea.
36:22
Jim O'Shaughnessy: Very sticky.
36:24
And again, that brings us back to Storr.
36:26
I think you'd really like his books because he's an excellent researcher.
36:31
And one of the things that he looks at is, how these external ideals influence people of the time.
36:40
So he looks at the ancient Greek ideal, which gave us individualism and [inaudible], and all of those.
36:48
He looks at the Christian, which is, purity of self.
36:51
"I am a sinner, mia culpa, mia culpa, mia maxima culpa."
36:55
And then we had the Renaissance with the rediscovery.
37:00
But his point is, you can bring it all down really to, what do we do?
37:06
We come into this brand new world, the reason we have all those extra neurons when we're a kid is because evolution is that, we're not sure what world you're going to be in, so we're going to give you this backlog just in case they all die when that doesn't happen.
37:20
So what he says is essentially you can look at each one of these shifts in the way people look at what is a way to be a fulfilled, quotes, self?
37:33
He keeps going back to our tribal heritage, which goes back to the question about, are these adaptations that happened in the past limiting us in the future?
37:44
But he's got this great single line, which is, "First, you got to get along before you can stand out."
37:49
Alex Danco: You got to fit in and then stand out.
37:52
If you stand out first, then no one hears you.
37:59
Jim O'Shaughnessy: The other thing that I've been thinking a lot about recently is, it's the parable of the fish and the water who doesn't understand what water is.
38:11
And I just wonder, how much of our conditioning, is essentially just the visible...
38:19
Invisible, excuse me, forces of the family we're born into, the time we're born into, the country where we're born, the sex that we are.
38:28
The prevalent Overton window, all of those things. How much of it is that?
38:36
How much of it is our own striving? What do you think? I mean, is there a mix? Is there?
38:41
I don't think there's a formula, but I'm interested in your thoughts.
38:43
Alex Danco: I mean, does the Mississippi River conform to the Mississippi River Valley?
38:48
Does the river wake up one day and say, "I actually want to flow through Colorado."
38:54
Jim O'Shaughnessy: It did. You know what? It did in 1927.
38:57
There's a great book by Bill Bryson called One Summer, America, 1927.
39:02
And you know that I pride myself on knowing a lot about history, especially American history. I know nothing.
39:08
I mean, and what's great about Bryson is that he tells it in such an engaging style.
39:15
It always reminded me of the Oscar Wilde quote, "People are not good or bad.
39:20
They're either charming or tedious."
39:22
Alex Danco: That's right.
39:23
I use that quote so much. Jim O'Shaughnessy: Yeah.
39:25
So Bill Bryson is charming.
39:27
Alex Danco: He's charming. Bill Bryson is charming. Oh my God, yeah.
39:30
Jim O'Shaughnessy: I mean, with a capital C. Alex Danco: Absolutely.
39:34
Jim O'Shaughnessy: It's a pleasure to read his books. I've read most of them.
39:37
I hadn't heard about this one, but I went out with a friend and he told me to read it.
39:41
So- Alex Danco: Bill Bryson is one of those people where it's like, is that book true? It's like, who cares?
39:46
Jim O'Shaughnessy: Exactly. Alex Danco: Who cares? I love it. Jim O'Shaughnessy: Yeah.
39:51
And it's kind of like, well, that brings to, it's like, Churchill.
39:54
"I know that history shall be kind to me because I shall write the history."
40:01
But back to this idea of, yes, the Mississippi does do that, but we also have these kind of quantum jumps.
40:11
I didn't know that this natural disaster of the weather patterns in 1927 was the worst that had ever happened, in America from that point backward, but also from that point forward.
40:27
I worry about, and this isn't original with me.
40:30
I read this, I think in a David Perell piece.
40:33
It was a small thought, but it was on recency bias.
40:37
He was talking about, all of his friends were on this party bus and they were all looking at their phones and he had the thought that like, "Everything they're consuming right now was created in the last 24 hours."
40:51
And so like, this is yet another reason for me to get on my soapbox.
40:57
People should know who Heraclitus is.
40:59
They should know that people have been thinking this for a long time.
41:03
And that ideal selfs have changed, dramatically changed based on history.
41:13
Is there an underlying function there that you...
41:17
If I said, Alex, I'm going to tempt you away from Spotify.
41:24
And I know you're not at Spotify.
41:26
And what I want you to do- Alex Danco: That's my...
41:28
I'm chief cook and bottle washer at Spotify. Jim O'Shaughnessy: Yes. I love it. Yes. Okay.
41:33
Alex Danco: You introduced me in the very first episode. Jim O'Shaughnessy: Yes.
41:35
I will make you chief cook and bottle washer too.
41:37
In the center, in this- Alex Danco: We're a music streaming service.
41:43
Jim O'Shaughnessy: But the point is- Alex Danco: You're luring me away from Spotify to do what?
41:48
Jim O'Shaughnessy: What you're going to do is you're going to build a series of prediction models for me.
41:53
And you're going to base a lot of them on these discussions that we have are having today and we've had in the past.
42:01
Is there something like, is...
42:04
Do you think that's something that might happen? 25, 30?
42:07
I mean, it's the Harry Seldon Psycho history.
42:12
Alex Danco: You know the Elon quote about this?
42:14
Which is, "The most entertaining outcome is the most likely."
42:17
Which is like, actually, the more you think about it, the more you're like, it's right.
42:21
Because it's like the most entertaining outcome will gravitate reactions to it that then reinforce the thing.
42:27
And that's how we got from a three month reversal of Elon doing a hostile takeover of Twitter to three months later, Twitter forcing Elon to buy them, when he doesn't want to anymore.
42:38
It's like, yes, that's...
42:40
The most entertaining outcome is the one that happened really, which is Twitter forces Elon to buy.
42:45
Jim O'Shaughnessy: Which I love.
42:47
I wanted to put out a tweet that basically said, number one, how you frame something is almost the whole game.
42:54
Death insurance doesn't have any sales.
42:56
Life insurance, billions.
42:57
Number two, that- Alex Danco: I never heard that before. That's perfect.
43:03
Death insurance doesn't sell. Life insurance does.
43:07
Jim O'Shaughnessy: Entertaining, entertaining. Are you not entertained?
43:11
Alex Danco: You have so many kinds.
43:14
You have whole death insurance, you have universal death insurance.
43:18
Jim O'Shaughnessy: Which death are you interested in today?
43:23
I can't figure out why we're not selling here. What do you think?
43:27
So everything- Alex Danco: Death insurance, it's all just a tax avoidant scheme.
43:32
Jim O'Shaughnessy: And the in group and the out group would form.
43:37
The pro-death people and the anti-death people.
43:40
And So everything is how you frame it.
43:44
If you can reframe, you can succeed death insurance, life insurance, everything is essentially a marketing game.
43:49
When you look at the founding of Christianity, and we're back to memes man, because Saul fell off his horse and hit his head, became Paul, and came up with, I don't know, 133 memes that essentially were the first meme-able religion.
44:06
In the respect that basically Paul said, it doesn't matter where you grew up, who your home gods were.
44:12
Doesn't matter what color you are, your sex. No. Didn't matter. Doesn't matter.
44:17
You can become a Christian.
44:18
I mean, talk about an open tent policy. Brilliant.
44:22
But the last thing that I had on that tweet is everybody is in the entertainment business, whether they realize it or not.
44:34
I've stunned you into silence.
44:36
Alex Danco: That was a- Jim O'Shaughnessy: You're still thinking about that. Alex Danco: ...
44:41
That was a whole paragraph.
44:44
Jim O'Shaughnessy: You're still thinking about all of the jokes you're going to be able to make on the death and life insurance thing, I think.
44:50
Alex Danco: Yeah, exactly.
44:51
I mean, this idea of everybody everybody's in the entertainment business, it's like, well, ain't that the truth? Do you ever read... What was that book? I know I have it here. God, this is dead air. This is bad radio. Really strong book.
45:07
Jim O'Shaughnessy: While you think about it, I'm going to fill the air time because- Alex Danco: Well, I don't remember what the book was.
45:13
But I'm going to pretend that I'm talking about Marshall McLuhan. Jim O'Shaughnessy: Yeah. We both know that guy.
45:17
Alex Danco: I had an unbelievable moment at work about a month ago that was the, like, the Marshall McLuhan in the Woody Allen, "You know nothing of my work."
45:27
Jim O'Shaughnessy: One of my favorite scenes of all time.
45:31
Woody Allen breaks the fourth wall.
45:33
Has the actual Marshall McLuhan.
45:34
Alex Danco: I'm not going to say who it was, but it was an important person.
45:39
An important person at Shopify was trying to explain to me hot and cold media and was explaining it absolutely wrong.
45:46
He was like, hot media is really emotional and cool media is really rational.
45:50
It's like, that has nothing to do with what this is.
45:53
Jim O'Shaughnessy: Nothing at all.
45:54
Alex Danco: But was very convinced that he was right, and that he was the authority on the philosopher or whatever.
46:04
And then I could see, there was a third person in this converse...
46:07
And then, and I was like, "No, it's not.
46:09
Actually, it's this thing."
46:10
And there was a third person in this meeting who, over the course of this was like, "Oh, I've miscalculated about person number one."
46:16
And I'm not going to say who the three people are in case people listening to this show, from work.
46:23
But if you want to know who these people were and you work at Shopify, send you Slack message.
46:28
Anyway, it was unbelievably Woody Allen. I loved it. Anyway.
46:32
What were we talking about?
46:33
Jim O'Shaughnessy: We were talking about essentially before you hijacked it with hot and cold media, which I think is a great subject by the way...
46:42
And what McLuhan actually meant by that.
46:46
Here's a question- Alex Danco: It's hot and cold media. Jim O'Shaughnessy: Yeah.
46:51
What is hot and cold media? No, no.
46:55
My question is, so one of the areas that, where I continually fuck things up, is I cannot restrain myself when I hear a conversation like that.
47:06
I'll go over immediately and just say... Remember Princess Bride?
47:09
"You keep using that word."
47:11
I do not think you know what it means. Do you do that?
47:16
Or do you bite your tongue?
47:19
Alex Danco: It's situational. Sometimes I'll speak up.
47:23
Jim O'Shaughnessy: See, I have this image of you that I cannot imagine you letting that continue.
47:30
That it would just, like- Alex Danco: I thought you were going with, I cannot imagine you being so ungracious as to interrupt.
47:38
Jim O'Shaughnessy: Well, it's just like, both of us have a little bit of our obstreperous nature. We're noisy.
47:51
We're the kid that if they're not, don't have other traits as well, which I luckily did when I was in high school, which all relate one back to one single thing that I did...
48:01
Speaking of, the beginning was a murderer.
48:02
I didn't kill him but I picked the fight with the- Alex Danco: The biggest kid?
48:07
Jim O'Shaughnessy: Who was also the bully. Joe Conley.
48:11
And when I got there, I asked around.
48:12
I'm like, "Who's the bully?"
48:13
Oh man stay away- Alex Danco: Did you go to high school in prison? Jim O'Shaughnessy: Yeah. I shanked him, man.
48:20
I shanked him and the guards. First day. Yeah.
48:24
The guards looked the other way, man.
48:25
They're like, there is a new king.
48:26
Alex Danco: The guards know how it works.
48:29
Jim O'Shaughnessy: This is why shows like The Wire... Have you seen The Wire?
48:34
Alex Danco: Yeah, of course.
48:36
Jim O'Shaughnessy: I mean like, so these...
48:39
There's so many great dramatic series that, instead of reading the entire Will and Ariel Durant, I don't know, 14 book collection on history, watch the- Alex Danco: Do you guys know there is like a 90-page William Durant summary?
48:52
Jim O'Shaughnessy: Of course.
48:53
Alex Danco: That's written by them.
48:55
Jim O'Shaughnessy: Oh no. I know.
48:57
Alex Danco: It's way better.
48:59
Jim O'Shaughnessy: I've read all of the actual books. They too are charming. And they're not tedious.
49:07
They make history interesting.
49:08
But the book that I end up always recommending is The Lessons of History, which is the summary that you're referring to. Alex Danco: Yes.
49:15
Jim O'Shaughnessy: So, but yeah, we're a little off course here.
49:17
So let's course- Alex Danco: It's not off course, because you know why?
49:20
You were about to talk about The Wire and how The Wire is a show about institutional behavior.
49:24
And how institutions fundamentally make decisions in a repeatable way that is rather like how people make decisions.
49:29
Jim O'Shaughnessy: Exactly.
49:32
And my interest is in how do you build new institutions that make decisions in very different ways, based on new information?
49:44
I think it can be done, but you've got to be willing... You, again.
49:49
Now we're into skin in the game.
49:51
So I'm doing this series about the great reshuffle, you'll show up as a guest, because you always say something clever.
49:57
But I was talking to somebody about it the other day and, you know the Annie Duke thing?
50:04
Where she says that if you really want to get people to start thinking probabilistically, interrupt.
50:10
Do a hard interrupt with them when they're stating that they absolutely 100% know something is true.
50:15
All you got to do is look at them and say, "Want to bet?" And guess what happens?
50:22
So this person, basically I was pontificating about a particular thing that I think is definitely going to happen.
50:29
And so my conversant was like, "Yeah, man, I think you're wrong."
50:34
And I said, "You want to bet?"
50:36
And he's like, "No, actually I don't."
50:39
And I said, "I'm not only going to bet, I'm going to put actual money in.
50:44
Because I also believe heavily in skin in the game."
50:47
But institutions seem to change very, very slowly.
50:55
Big companies, governments, all of these things, which I think obviously provides this massive hole that you can drive a truck through for the Shopifys of the world, for the Spotifys of the world.
51:09
For all of these things- Alex Danco: Slipped up there.
51:12
Jim O'Shaughnessy: Oh did I actually say where you really work?
51:14
Alex Danco: I've been doxed.
51:17
Jim O'Shaughnessy: Take that one out.
51:20
Alex Danco: Now you have to Google Alex Danco to find out where I work.
51:24
Jim O'Shaughnessy: Which would be great, but let's make this a more interesting question for our listeners.
51:30
How much of human behavior, the function and roles of institutions that we're, that we have in our world, how much of that is like...
51:41
Can you really grock by just watching like, The Wire, or Mad Men, et cetera?
51:47
And if you can, which ones other than The Wire, which I think we both recommend, which ones would you recommend people watch?
51:57
Alex Danco: For specifically the question of how does institutional behavior work?
52:07
Jim O'Shaughnessy: No- Alex Danco: People make decisions within the context of an institution?
52:11
Jim O'Shaughnessy: Well, yeah.
52:12
I mean, so we are on decision making and I think that's useful for our listener. So yeah.
52:16
Keep it there for the minute.
52:17
Alex Danco: So first of all, I would say that like, you're probably going to have a better time...
52:23
Or not a better time, but you're probably going to get more outcome reading rather than watching.
52:29
Because books, like fiction books, give you the ability to actually articulate things that are very hard to show in a way where you're just seeing on a stage or seeing on a screen.
52:40
You're able to get that different dimension of seeing what's in people's heads and how they're thinking through things.
52:45
I would say like, look, if you want to read, first of all, it's like, if you want to understand how people make decisions and behave in the context of groups and how that changes over time, it's just, go read the greatest soap opera ever written, War and Peace.
52:58
Jim O'Shaughnessy: Fabulous. Alex Danco: Here we go.
53:00
Jim O'Shaughnessy: Great, fabulous example.
53:02
Alex Danco: Here are all these people and all their complicated social situations and all the tea they have on each other.
53:08
And by the way, when there's peace time, everybody's miserable.
53:10
When there's war time, everybody's happy. Here's why that is. But no, I mean...
53:16
I'm going to guess, sadly, that more listeners to your show have seen The Wire than have read Tolstoy, although you should do both of them.
53:22
Jim O'Shaughnessy: Hey, let me just stick up for my listeners and viewers here.
53:25
We have an off the charts...
53:28
Like, you know my basic premise that I don't want to know how episodes do and any of that, because it would...
53:34
I'm a competitive person.
53:35
And if I saw that a particular episode or person did poorly, I probably wouldn't have them back.
53:40
And I don't want to be manipulated by my own competitiveness.
53:43
So all the kids who work for me though, do know.
53:47
And so one of them blurted out, for example, we got to a million downloads. I didn't know.
53:52
The first time I learned of it, when I saw on Twitter.
53:55
Because they were all happy.
53:56
But so we were doing a call and one of them blurted out, "Jim, man, you should see our audience profile."
54:05
How did you miss the part that I don't want to know about that because it's going to influence my thinking?
54:14
But all I'll tell you is we got a lot of very smarty pants out there listening and watching us.
54:20
So my guess is that if we use this as a subset.
54:26
If we contrast it to the general podcast listening population and then we do it with Infinite Loops listeners, the percentage of people who've read War and Peace is going to be higher in our group.
54:37
Alex Danco: I believe that. Okay.
54:39
But still let's stick to The Wire just because The Wire is just fun to talk about.
54:43
So I think- Jim O'Shaughnessy: Love it. Alex Danco: ...
54:45
Anytime you have these great works of art, they tend to produce their effect, not by telling you what it is you're going to realize, but by revealing a whole bunch of things that cause the discovery of what you will understand to suddenly all come crashing into you all at once through your own understanding.
55:06
The highest form of this is a joke.
55:09
A well-crafted joke does not spell out the things that you understand going through the punchline.
55:15
It causes you to suddenly realize what the punchline of the joke is at the moment when that punchline is rendered.
55:21
That's a really good example.
55:23
And that sudden realization is how you come to the discovery of what the grand theme is and what the grand joke of it is.
55:31
And so a good way to look at this is like, what are the incredibly well-crafted jokes in The Wire?
55:38
And one of them, probably my favorite go-to joke, is this...
55:43
In The incredible reveal of Stringer Bell is actually dumb. Jim O'Shaughnessy: Yeah.
55:50
Alex Danco: It's revealed incredibly over the course of these three seasons when he's alive.
55:57
Spoiler alert, Stringer dies. Sorry.
56:04
But so you have this person who's presented, so it's framed in this awesome way.
56:08
It's like, you have the cops and then you have the family, the drug family and the gang and run by...
56:15
So you have Avon and then you have Stringer.
56:18
Where it's like, Avon is the guy who's actually, he's the running run, running it as number one.
56:24
But then just the whole he's like, "Oh, Stringer is the brains.
56:26
Stringer is the guy who's so smart. He's so whatever."
56:28
And then the camera pans back at first towards it being like, oh, he's actually taking economics courses at night.
56:36
And he's actually reading, he's reading all these books.
56:40
He's actually has these really sophisticated ideas. Oh my God.
56:43
The joke of this must be that the cops are so stupid and the drug dealers are so smart.
56:48
They understand economics better than everybody.
56:50
They understand organizational behavior than anybody.
56:52
But then the cam pulls back a little more and you start seeing...
56:56
Or sorry, it goes up close again.
56:57
You start seeing the first big clue was Stringer talking about, well, remember when the...
57:02
This great scene where they're talking about the burner cell phones, and he's like, "How many phones you have?"
57:06
He's like, "Oh, I have two phones.
57:07
Everybody has two phones."
57:08
And he's like, "Call my broker, tell them to short Nokia. Market's saturated."
57:13
It's like, yeah, that's not very good analysis, man.
57:15
Jim O'Shaughnessy: Truly, really bad.
57:17
Alex Danco: That's actually a pretty bad way of thinking about this and you're wrong.
57:21
But it's presented in its way where it's like, it's this very smart thing to say.
57:25
And then you realize, you start seeing him make worse and worse decisions until at some point, he ends up making the series of catastrophically bad decisions that end up as him dying.
57:36
Where it's like, ultimately you actually were the biggest idiot of the family.
57:39
That's what's really funny, but- Jim O'Shaughnessy: Yeah. But, but go on.
57:45
Alex Danco: But then the last Stringer scene of that season is where, and this is where the joke actually becomes truly escapes the boundaries of the show and becomes meta, which is the last scene is when McNulty and the other cops, they're in Stringer's house.
58:02
And they're looking around and they see his bookshelf and it's all these very fancy books and someone picks up a copy of The Wealth of Nations.
58:09
And they're like, oh my God, who are we dealing with?
58:13
And then it realizes the meta joke, which is maybe didn't...
58:16
David Simon didn't understand that actually Stringer is dumb?
58:19
Because you make art and you're not an economist.
58:22
And you're not a business person.
58:24
Maybe you didn't realize that actually he was dumber than you thought.
58:29
And that obviously can never get resolved because we don't actually know what David Simon was thinking there.
58:34
Jim O'Shaughnessy: On that theme. I totally agree. I love it.
58:40
There is another scene where that starts to...
58:45
Where they start, saying to the audience, "Come on, guys, look over here. Don't you get it? Don't you get it?"
58:51
Where Barksdale is sitting at a bar and he's having a scotch, and Bell is going on and on about how he's bettering himself with all these community college bullshit, and Barksdale looks at him and goes, with a, he shrugs.
59:05
And he goes, "I'm just a gangster, I suppose."
59:08
Alex Danco: That's right. I know what I am. Yeah, no. Yeah.
59:13
So again, it's like, what can we say about this in the form of organizational behaviors?
59:22
That is, it's a remarkable joke about revealed and true differences between...
59:29
Differences between perception and reality in terms of how decisions are being made and whether they're good ones.
59:34
That suddenly can snap into very different kinds of focus. Jim O'Shaughnessy: Yeah.
59:39
Which is absolutely true.
59:41
And the difference between perceived way things progress and the actual way.
59:47
It's like I'm always reminding people that anybody who's running around a business...
59:53
But this works universally.
59:55
Anybody who's consistently telling you, "I'm in charge here, I'm in charge here," ain't in charge there.
1:00:02
And so like, it's the easiest tell in the world.
1:00:08
But I love this idea that actually I didn't plan for it, which is why this is emergence.
1:00:13
This is a complex adaptive system emerging.
1:00:17
I love this idea of essentially a lot of these shows, which are incredibly fun to watch, again, back to our entertainment thesis.
1:00:27
They're incredibly fun to watch, and books.
1:00:30
I personally loved War and Peace, incredibly fun to read, but that they teach such better lessons. But I love your notion.
1:00:41
And I'd like to pick up on it. Are we...
1:00:44
This situation that, and this meta joke, are we in a situation where this truth that Stringer Bell is really kind of a dummy that even the creator who did all of this, he doesn't even know this- Alex Danco: Well, we don't. Yeah. Might not be aware. Jim O'Shaughnessy: Yeah.
1:01:05
Alex Danco: I mean, look, I think there's an 80% likelihood that David Simon did in fact understand the joke, but there's a 20% likelihood he didn't, and that is the perfect amount of doubt. That's the ideal amount. That's very, very WWE. Jim O'Shaughnessy: Yeah.
1:01:18
Which is, I mean, that is so perfect.
1:01:22
Alex Danco: There's a 90% chance that behavior was scripted, but a 10% chance that it was actually real. The perfect amount. Jim O'Shaughnessy: Yeah. Which is great.
1:01:33
And so, I often think that, we just have people...
1:01:39
Like, I don't have a CFA.
1:01:41
And I'm not going to bag on CFAs.
1:01:43
I'm only going to say, they did a really, really great job marketing the CFA and in fact when I was coming up, it was brand new and it was kind of like, "We really want to give you one," or "We'll just give it to you. Your book is great."
1:01:58
And I'm like, "Yeah, no, I don't need that. I don't want that."
1:02:00
I'm wondering about accreditation and I have a specific view about where this goes.
1:02:09
I wanted to get your view because A, I respect it.
1:02:14
But B, that you also have pursued or have already numerous advanced degrees.
1:02:22
Do you think that accreditation?
1:02:24
I have a BA in economics, worthless, worthless.
1:02:29
But in the old world, that degree suggested that I was capable.
1:02:36
I think we've moved into a world where, what I do is far more accurate about people's perceptions of me.
1:02:45
Do they want to invest in a company that I've started, et cetera?
1:02:47
What do you think's going on with accreditation and where do you...
1:02:51
Does it reach an end state?
1:02:53
Alex Danco: It's interesting.
1:02:54
So it's interesting that you bring up the CFA Institute because Mark Franklin, the CEO of CFA Institute is actually my neighbor.
1:02:59
We hang out and talk about this sometimes.
1:03:03
What is it that they're trying to do?
1:03:04
What is their purpose in this world of abundant things that appear like credentialing?
1:03:10
What is the point of a lot of this?
1:03:11
How do they think about... The job, like.
1:03:13
One way to think about what a CFA is, is that it is somewhat like a luxury good.
1:03:17
It is a little bit like a Louis Vuitton bag in the sense that, well, you want a one that's the real thing, because it is costly to acquire and it signals a certain kind of thing.
1:03:29
And it only comes, and it has very specific providence.
1:03:32
And it signals that you have done the work to obtain this thing, however it might be. Jim O'Shaughnessy: Yeah. And no question.
1:03:41
I have massive respect for the...
1:03:44
They hit virtually every Cialdini persuasion technique. Yes.
1:03:49
And I think it's brilliant. But. Keep going.
1:03:52
Alex Danco: So there's this really interesting challenge, which is the challenge of luxury good manufacturers.
1:03:58
Whatever they might be, whether they be handbags or CFA level twos is, how do you bring something to a mass market while it's still being scarce?
1:04:10
How do you grow a luxury brand while maintaining its value?
1:04:14
This is, the person most uniquely qualified to answer this question in the world is certainly Bernard Arnault, but how do you solve this challenge of?
1:04:22
Again, if you think about, for the CFA Institute specifically, it's like, you want to go take this?
1:04:27
How do you go take the CFA program to a place, like all these other countries in the world without diluting something for your charter holders and having them be mad and all this stuff?
1:04:36
It's like everybody, these are the...
1:04:37
How do you maintain this thing?
1:04:40
Well, one way that you can think of it is like, there's no upper...
1:04:45
There's no something, that there's no upper bound on how much meaning can get created in things that have a sufficient degree of, that can be subdivided in interesting ways.
1:04:55
So long as they have meaning to people.
1:04:57
So an example is like, there is no upper bound on how big the wine industry can get. It will never plateau.
1:05:04
The reason why it will never plateau is because you can always manufacture more meaning out of it, because it is sufficiently complex.
1:05:11
And it is sufficiently developed to have these years of storylines in them.
1:05:15
But most importantly, because there is sufficient mystery in them.
1:05:18
The power of mystery is massively important in anything that has this hard to obtain component of it, which is like, if it's perfectly transparent, it loses a lot of its value.
1:05:27
And I think anything that is a credential of any kind has to navigate this tension between, well, you want to be very clear about what the credentials are, but you also want to be very clear about what the mystery contained within it is.
1:05:41
In the case of something having, getting your CFA.
1:05:44
Actually, and an MBA is probably an even cleaner example, which is like, same thing.
1:05:49
Not much difference in these two.
1:05:52
they have to simultaneously be very clear about what was done in order to obtain this certification.
1:05:59
No different than like, what is the process by which I am showing you that this ground crude Bordeaux came from this row, in this vineyard, with this QR code that you can scan?
1:06:07
And show that this is a real thing and not a counterfeit wine or something like that.
1:06:11
While at the same time, doing that work in order to present the mystery of it, which in the case of a credentialing for employment is like, this person might be the person who does $30 million worth of work for you. You don't know.
1:06:25
You don't know until you hire them whether they're actually that person.
1:06:29
But this credential will get them to the point where you can make that bet.
1:06:32
Similarly, you don't know if this bottle of wine is going to be good. You're making a bet.
1:06:35
Every time you open a bottle of wine, you're making a bet.
1:06:39
But there is all this work that the industry does in order to create a rarity around that bet that is desirable and good for everybody involved.
1:06:47
Similarly, if you look at all these kinds of credentialing, it's like, there is a lot of useful work that can be done for the benefit of everybody, for creating that kind of greater transparency, such that greater mystery may reveal itself. That can summarize it.
1:07:02
Jim O'Shaughnessy: I love that line.
1:07:05
This is another thing that I've been thinking a lot about.
1:07:08
And that is just spot on for a thought that I was trying to convey to someone I'm working with.
1:07:15
As you know, I'm leaving OSAM at the end of this year and I'm starting some new companies.
1:07:18
And so we're kind of gearing them up now.
1:07:21
And you just solved one of my problems.
1:07:23
Thank you very, very much because you put it in exactly the right language for me.
1:07:30
And this idea of the mixture of transparency and mystery.
1:07:36
I think you're absolutely right about the mystery part.
1:07:40
And I think that the significance of that part I was aware of, I think you just really underlined for me that I was underestimating the value of that mystery part.
1:07:55
Alex Danco: Oh, bring it out there. Jim O'Shaughnessy: Yeah. I mean, because it's... Well, yeah.
1:08:01
Ted, when I was coming out of Bear Stearns, the guy who is and was at the time, the president of my company, his great thing was he wanted to get me a Ted Talk. And that just shows you.
1:08:15
At that time, a Ted Talk was like, the thing.
1:08:19
And then, they, absolutely, this is just my opinion of course.
1:08:23
But then they extended their brand willy-nilly and ruined their brand.
1:08:28
Alex Danco: Yeah, yeah, totally.
1:08:29
Jim O'Shaughnessy: Totally.
1:08:30
They absolutely torpedoed it.
1:08:33
And in a very short period of time, they went from one of the most prestigious speeches somebody could give, to it's a punchline.
1:08:42
Alex Danco: Do a Ted talk on it. Yeah, yeah.
1:08:46
Jim O'Shaughnessy: Yeah, yeah. This is my Ted talk.
1:08:48
Alex Danco: There was a two year period in there where a Ted talk was an object of great reverence.
1:08:52
Jim O'Shaughnessy: Oh, absolutely.
1:08:54
Alex Danco: Great reverence.
1:08:55
Jim O'Shaughnessy: And we were in that zone when I was leaving, when I was creating O'Shaughnessy Asset Management.
1:09:02
And how quickly they blew that by the line extension.
1:09:07
And then you just start thinking about it.
1:09:09
I like to think of these things as kind of like...
1:09:12
Well, this is a great example that applies to a whole shitload of other things too.
1:09:19
And I think the idea that...
1:09:20
Are you familiar with Rob Henderson's work?
1:09:22
Alex Danco: Rob Henderson, remind me.
1:09:24
Jim O'Shaughnessy: He's a young kid.
1:09:26
He grew up in foster care in Cal. Yeah.
1:09:29
So he's- Alex Danco: He was on your show. Jim O'Shaughnessy: Yeah. He was on the show.
1:09:33
Alex Danco: That's why I know him. Yeah.
1:09:35
Jim O'Shaughnessy: He's a very bright guy and I blurbed his book. I read it.
1:09:37
It's coming out in January. It's really good.
1:09:39
But one of his ideas that kind of complicates this idea, is that veblen goods...
1:09:43
You're talking about luxury goods, so that's veblen good, are usually bought to signal your status to other people.
1:09:54
And the problem is that the people who have the really deep status right now, that the effect of having whatever the fancy car of today might be, I don't even know what it is. But that's gone. A lot of that's gone. Alex Danco: Right.
1:10:12
Jim O'Shaughnessy: And so, but I just let me finish the thought.
1:10:15
Rob has this idea that we've shifted to luxury beliefs and he thinks that luxury beliefs are not good for society.
1:10:24
But I'm wondering, is that?
1:10:27
I want to look at it more as a meta thing, lens, which we can look through, because I think your comments will be very, will pertain well here.
1:10:36
But the question is, as we abstract this, is that just another way that people acquire this good? Scarcity.
1:10:48
So we're going into an age of abundance.
1:10:51
Scarcity's going to be harder and harder to manufacture.
1:10:54
Do you think luxury beliefs are a real thing?
1:10:57
And if they are, are they big enough to work properly when you're trying to market something like an MBA or a CFA or the failed example of a Ted talk? Alex Danco: Okay. This is really... There are a few parts.
1:11:14
So before we get to luxury beliefs, I'll tell you something interesting about the sub idea of, what do people show off that is expensive to acquire?
1:11:23
So first of all, you're absolutely right in that things are easy to acquire because we have consumer credit.
1:11:30
Showing off a car does not really have the effect that you think it does anymore.
1:11:34
Showing off a thing does not really have that effect.
1:11:36
Whereas there are some things that are way more expensive to acquire, that even if people are not acquiring them for status purposes, have the effect of being a status thing.
1:11:49
An example of, I mean the big example in my life around me right now is childcare.
1:11:57
How does your household run?
1:11:59
These are things where it's like, if you look at how this household runs, versus how that household run, it is very easy to tell which one is more expensive.
1:12:07
People are not running...
1:12:08
People are not getting nannies versus doing this daycare versus doing this thing versus doing that thing.
1:12:13
People are not doing that for status reasons, but it has the effect of being way stronger as a status symbol for that exact reason.
1:12:19
So, first of all, I'll say, that being said, but getting into this idea of what are actually the things that people...
1:12:24
What do people brag about and show off as a way of demonstrating this?
1:12:28
It's like, well, look, if you are a person who is above a certain socioeconomic status line or whatever, you're a busy professional, The most expensive thing you can have is free time.
1:12:39
And the ability to waste that free time on stupid pursuits, really.
1:12:45
An example is really, really knowing pop culture.
1:12:49
Having a masterful command of pop culture is a status symbol.
1:12:55
If you have already established yourself as being rich and important.
1:13:00
But it's not, if you have not done that, because it means I have time on my hands. So think about this.
1:13:09
Being unbelievably fluent in TV, pop culture, it's this double edged status sword.
1:13:15
Because what it symbolizes is I've spent a ton of time on this, which either means I'm not important, or I'm so important that I've made my time free again.
1:13:25
But you have to establish which side of that line you're on in order for the effect to have its landing.
1:13:29
This is very, very important which one you do.
1:13:32
Because it is parsed differently depending on what came before in this sentence.
1:13:37
And when it comes time to these beliefs.
1:13:40
And it's like, hey, what is this thing that I think by having this certificate or this credential or this whatever, it's like, well, I wonder how much of this ultimately just comes down to parsing.
1:13:50
And it comes down to the path dependence of where you were coming from.
1:13:54
Then, [inaudible] matters here in terms of how these things are interpreted.
1:13:58
And it's not about what, again, it's not about what you say.
1:14:01
It's about what people hear.
1:14:02
What do people hear when they hear you, obviously knowing about?
1:14:07
It's like, there's a far less verbose and much funnier way of articulating the idea that I just described, which is that meme on Twitter of like, what's trashy if you're poor but classy, if you're rich.
1:14:19
There are all these, great examples of this.
1:14:22
It's like, someone else raising your children, speaking multiple languages, getting checks from the government.
1:14:32
There's a wealth of things like this, that are just a riot and they are also, you look into it and you're like, oh.
1:14:39
Jim O'Shaughnessy: That's fantastic.
1:14:40
Alex Danco: It's pretty brutal. I got to go in a minute.
1:14:43
So let's actually wrap on that.
1:14:46
That idea though, of saying, look, this path dependence is kind of everything, in terms of what gets understood by other people and what is the story that you're telling that gets heard by other people that then reinforces, what becomes your story?
1:14:59
Jim O'Shaughnessy: I love it. I love it.
1:15:02
And this will conform to my...
1:15:06
What I inferred from reading them all together.
1:15:09
Man, this is going to be one hell of a book that we're going to publish.
1:15:13
And these random thoughts, we're...
1:15:15
Even Stanley would be happy with us because we're just looking at stepping stones, man.
1:15:21
And one thing leads to the other and we've got this awesome book that's coming up. Bam. All right. As always, thank you.
1:15:29
And let's make our recurring actually a little more recurring in the future?
1:15:33
Alex Danco: All right, all right.
1:15:34
Jim O'Shaughnessy: I got you on tape.
1:15:35
Alex Danco: Always appreciate it. I'll talk to you soon.
1:15:37
Thanks so much for having me on.
1:15:38
Jim O'Shaughnessy: My friend. See ya.