0:02
Hi, I'm Jim O'Shaughnessy and welcome to Infinite Loops.
Search this video
0:02
Sometimes we get caught up in what feel like infinite loops when trying to figure things out.
0:07
Markets go up and down, research is presented and then refuted, and we find ourselves right back where we started.
0:13
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.
0:35
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.
0:49
And through these discussions help you not only become a better investor, but also become a more nuanced thinker.
0:56
With each episode we hope to bring you along with us as we learn together.
1:02
Thanks for joining us, now please enjoy this episode of Infinite Loops.
1:11
Disclaimer: Jim O'Shaughnessy is chairman and Co-Chief Investment Officer of O'Shaughnessy Asset Management, where Jamie Catherwood is an associate.
1:17
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.
1:26
This podcast is for informational purposes only, and should not be relied upon as a basis for investment decisions.
1:31
Clients of O'Shaughnessy Asset Management may maintain positions in the securities discussed in this podcast.
1:39
Jim O'Shaughnessy: Well, hello everyone.
1:39
It's Jim O'Shaughnessy with another episode of Infinite Loops and I cannot tell you how excited I am for today's guest.
1:50
I think he is one of the brightest new lights sharing, sharing, sharing through the attention span, things that I think we really need to be talking about because the world is changing and changing rapidly.
2:03
My guest today is Tom Morgan, the director of content and communications for the [KCP Group]. Welcome Tom. Tom Morgan: Hello.
2:13
I'm looking forward to being your least successful, least interesting, and most mediocre podcast yet. Big fan of the show.
2:22
Jim O'Shaughnessy: Thank you. I don't know.
2:22
As long as you've got me as competition, I don't know anyone that's ever going to be able to take that title.
2:29
So tell us a little bit about yourself.
2:29
We were doing it before the recording, and it's just really fascinating.
2:34
So I think our audience will be interested.
2:37
Tom Morgan: I think maybe it's interesting.
2:37
My story, as I think we're probably going to get into, is only as interesting as what other people can learn from it perhaps, because I feel like I've made all of the mistakes.
2:46
And so from that perspective, I can show people what pitfalls not to fall down.
2:50
I spent about 15 years on Wall Street in research and data sales.
2:56
The 32nd version of that job is essentially you go through an enormous amount of research content, particularly if you worked at [inaudible] bank where I did, and you try and pluck out insights that are relevant to your audience and that they'll care about.
3:12
And then you call people or email people that get too much information and fundamentally don't care about anything that you have to say.
3:21
So it's this hard training, easy combat for you to try and really extract things that are insightful.
3:26
And I wrote a newsletter on Wall Street for over a decade where I did what started as an itemized rundown of things that you should know about in the market.
3:38
And over the years, it became more me in terms of things that I thought people should be interested in.
3:43
And I evolved, I think, into what the wonderful Maria Popova at a Brain Pickings called a curiosity Sherpa.
3:49
Where I have never generated a single original insight in my life, but what I think I've become reasonable at is finding other insights and then linking them to each other.
4:00
And then, as we were just talking about, I spent a good three years in the professional desert making mistake after mistake, and getting stuck in infinite loops, which is your topic.
4:10
And then the guy's at KCP where I now work saw something in the content that I produce and they manage money for a pretty sophisticated audience of families, endowments, foundations.
4:23
And they realized that in an age of information overload, you need to be getting stuff in front of people that is either perennial or it's applicable across a wide range of end markets, I guess.
4:34
Like business investing, thriving, life itself, all of those different areas.
4:43
And what's crazy is that the deeper you go down these different rabbit holes, the more different themes come up.
4:48
And essentially I became obsessed with mythology, the hero's journey, a little bit of neurology in there, and what that can teach us.
5:01
And it took me through to [inaudible] where I think you and I have got an enormous amount of combined interest. But that's [crosstalk]. Jim O'Shaughnessy: Yeah.
5:08
I think that's why you were catnip to me because I share all of those interests. I love the term Sherpa.
5:11
My son, who is the podcast king, he uses the term scout, which I also think is applicable here, because what you do is you march ahead, you find some interesting stuff that even dedicated rabbit hole divers like myself haven't seen yet, and then you put it out there.
5:32
And that leads me to the one that I want to start with, which is the whole story about Genghis Khan and the Mongolian [inaudible]. Tell me about that.
5:43
Tom Morgan: Again, none of these insights are my own.
5:47
That was from a podcast with [Yen Yo] who works for Arab Global.
5:52
And he talked about Genghis Khan and the Making of the Modern World by Jack Weatherford being the best business and investing book that he'd ever read.
5:56
And I love that statement because it's like, "All right, you're not telling me some sort of CFA book that is rote MBA style learning, you're giving me something from a completely different source."
6:10
So I followed the rabbit hole.
6:10
And my boss, Tom Pence who's a phenomenal curator himself of these things, he was like, "You've really got to listen to this podcast."
6:18
And I listened to the podcast with Yen on capital allocators.
6:22
And I was like, "I've never heard anyone describe the various different sources of investing [inaudible] this well."
6:26
So I put those two things together and I followed the hole.
6:26
And it was basically about the structure of organizational science, that you have to have these incredibly mobile individual business units that are cohesive enough to stick together and competitive enough to produce results.
6:46
And I realized that if you're getting good information from the edge of your network, from mobile business units to this centralized executive team, you're going to be able to react faster, both as an investor and as someone who's running a business, as a lot of our clients are.
7:03
Jim O'Shaughnessy: So it also brings in the Dunbar number, which is very famous at 150.
7:05
Basically for people who don't understand the Dunbar number, if we try to know and interact with more than 150 people, it all kind of goes to shit.
7:17
Tom Morgan: Mm-hmm (affirmative).
7:19
I think the way that I understand it, and like everything else with these things I like being debunked and re-debunked, but I think the reason why this is endured is because it's not necessarily about how many friends you can have.
7:26
It's about how many people can know each other.
7:30
And if I pair you off in a room with someone else, I know how you're going to behave with them.
7:35
And it's about the whole group being cohesive.
7:40
And that's what's really important is that when you're going into battle with a guy next to you, you can trust him, but you can also all trust each other.
7:44
And I think that's something that a lot of modern organizations lack because there isn't enough intra-communication across the people in the different business units.
7:55
And I think it's also a fairly obvious deficiency of social media networks.
7:59
So basically people can have a thousand friends, but there's no cohesiveness within the network. Jim O'Shaughnessy: Yeah.
8:06
I think that that is critical and I've done some posts on it in terms of, really curation has to be your most important thing, because attention is your most valuable resource right now, in my opinion.
8:19
But I was thinking when you were talking about, you'll know how that person behaves, you might know I'm a big fan of the author, Robert Anton Wilson, I've read all of his work, I think he was way ahead of his time.
8:30
And so he talks about Shannon limits, which I'd like to get into with you in a minute, but he also had an interesting theory that I'd like your take on. And his theory is this.
8:39
As a traditional organization, as one rises to the top of that organization, be it a corporation, be it military, be it a government, et cetera, the quality of the information one receives goes to essentially zero.
9:02
And the reason he maintains that is that you are affecting so many other people's outcomes, their mortgages, their kids' tuition, et cetera, that nobody to be the bearer of bad news.
9:14
And so what happens is they become, maybe against their will, yes men.
9:21
And I was thinking about this yesterday, when I was listening to something, I can't remember what I was listening to right now, I dive down a lot of rabbit holes, but it was a really good thought about Robert McNamara and the travesty of the Vietnam war and why the United States lost.
9:37
And I found myself thinking about Wilson here.
9:43
Because McNamara, everything had to be measured.
9:43
And we joked before we started recording that if it gets measured, it gets managed.
9:49
And so everything that can be measured numeric gets aggregated, and then the very bright McNamara takes a look at it.
10:02
And he's like, "Wow, these numbers are great.
10:02
We killed a thousand BC and we only lost a hundred soldiers, a hundred US soldiers."
10:07
Well, so problem number one, that number was probably a lie.
10:14
So you're getting bad information that's being massaged.
10:14
And they're going to massage it to make it look the best as they perceive you will want to see it.
10:20
But the thing that I like, because I'm all about reminding people that second order, third order effects are vastly more important sometimes than the first order effect.
10:34
And that is what McNamara didn't see, didn't even contemplate, because of the way the information was arranged was one civilian death creates 10 newbie BCs.
10:47
And so they weren't even thinking about it because they didn't have the information on it.
10:54
So it's one of these very subtle and yet incredibly important things. What are your thoughts?
11:04
Tom Morgan: Okay, let's get ready for the first rabbit hole here.
11:07
So the best book I've ever read, and the only one that has materially changed my understanding of reality, is The Master and His Emissary by Iain Mcgilchrist.
11:15
Jim O'Shaughnessy: Great book.
11:16
Tom Morgan: I read it last year, and it's one of those things where even if it proves to be completely debunked brain science, which is such a dodgy category in and of itself, the metaphor that he creates is so incredibly resonant with my own lived experience that I don't care.
11:28
And I think the universal principle, there's five or six that I think are all life changing in their magnitude, but the universal principles that I think is applicable across organizations and investing is closing the distance between map and territory.
11:45
And if you're talking about an incredibly inefficient organization where you've got all these different redundant layers of middle management, they are representing distance between map and territory.
11:54
And that means your model and reality are getting distorted as much as possible.
12:00
And I think that to relate it back to the McGilchrist's work, the way I interpret a lot of it is that consciousness exists on the spectrum between maximum engagement and maximum abstraction.
12:08
At maximum engagement, you're one with everything in this undifferentiated mass.
12:14
And maximum abstraction, you're completely isolated from the world with enormous power over it, but completely disconnected from it.
12:26
And I think that a lot of people get into real trouble in life when they become maximally abstracted.
12:32
So if you're living completely in the map and not in the territory, that's actually one of the descriptions of major depression.
12:37
It's basically where your map doesn't get updated by new territory.
12:42
And your network is completely closed to new information and there's no connectivity whatsoever.
12:47
So basically people in the executive suite, when no one wants to bring bad news to them, they're almost like a completely disconnected left hemisphere of the brain that's in this intellectual world where nothing's ever going to penetrate and the world is going to pass them by.
13:03
And you see this over and over again.
13:08
Jim O'Shaughnessy: Absolutely.
13:08
And I love the way you put it, the map and territory, because this has been one of my obsessions for a long time.
13:12
I have written down that I wanted to talk about the user illusion with you as well, because that covers this, not maybe as well as the book you're referring to, but this idea between the model and reality has always fascinated me, because first, in my opinion, one needs to understand that your reality goggles and my reality goggles are different.
13:38
And rather than argue about that, it's my position at least that you should avoid coming to premature certainty, because if I come to premature certainty and my map isn't even contiguous with your map, I'm going to get zero benefit out of interacting with you.
14:01
And that's the worst outcome, in my opinion.
14:07
If you avoid premature certainty, if you keep the questioning mind open, that's how you learn about these sorts of things, and that's how you learn about the critical importance of error correction.
14:19
I was saying before we came on that I work with a lot of various people, not just in finance.
14:25
And in one of the things that I've been trying to do is not use the term belief, because what I find happens is a firewall goes up.
14:37
Because what happens with many people who don't even realize they're doing is they conflate their beliefs with their personalities.
14:43
And I know you're not very much on social media, but if you look at social media, you'll see these common refrains that this is a hill I will die on.
14:56
And the way I always answer that is I prefer general George S.
15:02
Patton's maxim of, make the poor other dumb bastard die on his hill.
15:10
And so I think that with this comes the understanding that the universe in which we find ourselves is a highly subjective one.
15:19
And the idea that there is some sort of objective truth.
15:19
Like Douglas Adams, a big favorite of mine, the computer 42, way off, took millions of years.
15:34
Because I'm challenged by this.
15:34
How do you keep your mind...
15:34
Because you have an incredibly flexible mind with the stuff that you post. It's amazing.
15:39
How do you keep your mind so flexible.
15:44
And what you're really good at, and what I really read you for is your ability to synthesize.
15:50
I think that's the new intelligence that's going to be rewarded. So tell me about that.
15:56
Tom Morgan: It'll probably require a quick digression.
15:57
So [Michael Moverson] did a podcast a few weeks ago where talked about ants.
16:02
And ants when they find a new food source lay a pheromone trail to it, so that other ants from the ant hill can find it.
16:07
And then every so often other ants peel off that trail, seemingly at random.
16:12
And the rest of the hive, when they go along that trail, they reinforce it, it gets stronger and stronger.
16:17
And it reminds me of the neurons that fire together, wire together, the way the neural pathways get formed in the brain.
16:25
The really unbelievably elegant thing that Moverson talked about was that the more uncertain the environments, the more amps would peel off the trail, linearly.
16:37
And that was a staggering insight.
16:37
And I think that you can stop there and be like, "All right, they were peeling off at random."
16:41
And I actually disagree with that.
16:41
I don't think the process is random, I think the process might be driven by something else.
16:46
And I don't want to have premature certainty on this, I reserve the right to change my mind in a month or even a week.
16:55
But I think a really helpful framework that came out from Iain Mcgilchrist was that your brain has a calculator and a compass in it.
17:01
And the calculator is the best calculator in the known universe.
17:06
It solves problems, it's hyper rational, it's got access to language and linearity and logic, and it's this wonderful, wonderful thing.
17:14
But the compass needs to be driving.
17:14
And the compass is our right hemisphere, and it has access, in terms of the user analogy, to a million times more information.
17:19
And the bit of this that I think is almost the most mindblowing is that the right hemisphere has access to what Mcgilchrist calls exploratory attention, and the left hemisphere has focused attention.
17:37
And the implication being that all the other ants are saying to Steve as he peals off, "What the hell are you doing, man?
17:43
You're doing something crazy.
17:43
The food's right over here, can't you see?"
17:46
And everybody looks irrational to everyone else, but he might just be following his interests.
17:50
He's following his attention.
17:50
And I think that is where the hero's journey and the nature of attention come together in that Iain had this crazy life changing idea that if you followed your attention and you followed your interests, it would lead you to a path of personal growth that you couldn't anticipate, because you didn't have access to all the information, because your left hemisphere and your consciousness is so limited.
18:15
And Joseph Campbell had the same insight as well with The Hero's Journey, which is follow your bliss and doors will open where previously there were only walls.
18:22
And so when everyone comes to the same conclusion, and it takes an enormous amount of courage to do that.
18:26
But I think to answer your question in a very long-winded way, is that people ask, "Aren't you reading all the time," and, "How do you come onto these different sources?"
18:33
If I'm like, "I really don't.
18:33
I don't even read that much relative to what other people I know."
18:39
But when something grabs me, I really, really respect that impulse.
18:44
And it may not even be clear for years afterwards what I'm getting from that.
18:48
But suddenly, particularly over the last few months, things have come together, now that I'm in a much more creative role, in a way that I couldn't ever have expressed.
18:58
In that now that I can synthesize it, all I do is follow that thread, and it leads me to unbelievably spectacular places. Jim O'Shaughnessy: Yeah.
19:05
And that is the thing that I think people often confuse raw information with knowledge.
19:13
And they're very different things.
19:13
So for example, the Shannon limit.
19:13
Claude Shannon, who is a big hero of mine.
19:18
He's the reason we have these little bad boys and why we're doing this on Zoom.
19:24
And I think he should be as famous as Einstein, but he's not.
19:24
He's a wonderful character.
19:30
And he invented information theory.
19:30
And he has a very novel definition of information.
19:36
So he's often quoted as saying, "A political speech contains zero information."
19:42
In other words, you're not hearing anything from that politician that you haven't already heard millions of other times before.
19:48
Well, that's intentional, of course, because one of the hallmarks of propaganda is repetition, repetition, repetition.
19:58
And then he goes on to say, "A poem, that could be nothing but information."
19:58
So the idea that we can only get just so many bits.
20:05
I think we hit 11 million bits, hit our perception filters, and we got to try to narrow that down to 60.
20:12
The good news is these quantum computers in our head do that automatically.
20:17
It's not like we're consciously trying to say, "Hmm, 11 million bits, I want to get it down to 60, this is going to take all day."
20:28
The brain does that automatically.
20:28
And I think that the reason I'm bringing this up is that feeds into the model that you just outlined.
20:33
What happens, and now we'll talk about neurons is, "Oh, this is something new."
20:39
And all of a sudden what might've been just a couple of neurons becomes a huge branch of neurons.
20:44
And I don't think, at least I haven't read anyone, who's developed the neuroscience of this yet. Have you? Tom Morgan: No.
20:59
But I think what's super interesting is a lot of the guys that are on the fringes of this are really weird and interesting because they're on the fringes.
21:06
So to go back to the compass analogy, we all know how a compass works.
21:13
It's invisible magnetic builds in the Earth.
21:13
And you wouldn't sound like a crazy person for saying that's how a compass works.
21:19
And yet when you think about the 11 million bits going down to 60 in our consciousness, or even a trillion, which is the stock that we can't even know that we can't see.
21:30
The idea that there wouldn't be forces acting on us that we're not aware of goes presumably to close to a certainty.
21:35
And what really, really, really interests me just in general is that the left hemisphere is apparently fundamentally competitive in that it doesn't relinquish control.
21:48
That may be something we can talk about in a bit, saying that's why it's the drag, that's why the hero's journey is so difficult.
21:57
But what's really interesting is how that manifests in modern society, which is this extremely immediate denigration and rejection of any kind of external form of intelligence.
22:09
Like gut brain, heart brain, animal intelligence, plant intelligence, or even the intelligence of the environment around us.
22:14
Which other supposedly less developed societies were all over and structured their entire belief systems around, and we've thrown it all out.
22:26
And maybe it is all nonsense.
22:26
But the fact is that I have a belief, oh, I've used that word.
22:31
I have a theory that's subject to bolster vacation, but that has played out within my own life.
22:37
That if you follow subtle signals controlled by your own exploratory attention, your life will work out better than if you don't.
22:44
And that implies to me that there's stuff outside the Shannon limit that you can bring into it through higher awareness, and that's the kind of information that I want to cultivate.
23:02
Which is that if I read the User Illusion, because you recommend that book to me, and my awareness increases or Anthony de Mello, or any of these guys that I know you like as well, my awareness increases.
23:11
And that's a different quality of information than just telling me something like the capital of the country or some sort of generic data.
23:19
Jim O'Shaughnessy: Right.
23:19
And spot on with my own viewpoint about how you do this.
23:22
I think that it's a challenge because we have been, frankly, mis-trained by most of our education.
23:30
It conforms to the correct answer machine, and not to the better question which is, ask a better question and seek out and understand things outside.
23:37
So for example, you bring up the idea of let's not read all of the CFA journals.
23:43
Not to disparage the CFA, they do great work, but I must say that almost everything where I've gained true insight into how to better think about the way I invest, I can't think.
23:56
There is one book dedicated to it and it would be Mandelbrot's The Misbehavior of Markets.
24:02
All of the rest of them are the Dao de Jing, The Beginning of Infinity, the scientific explorations, the types of books that we're talking about here.
24:15
And the reason for that, I think, is that the standard texts create this desire for uniformity.
24:20
Now we're getting into ingroup and outgroup loyalties.
24:28
And to understand that you need to understand evolutionary psychology because we are basically domesticated primates.
24:35
I talked about human operating system earlier.
24:41
The thing that most people really don't like to hear is "We're all operating human OS."
24:49
Everyone thinks that they are the only exception. You're not. I'm not, you're not.
24:49
As long as we're operating human OS, we have to pay attention to these things and we have to try to learn from them.
25:01
And, from my way of thinking, look, I always preface things with saying "I'm probably wrong," because I read a lot of history and I look back in history and I see the brightest people in history, guess what?
25:13
They were wrong about 99% of their beliefs.
25:13
The process is what becomes more important, the process and movement towards a better understanding that our error correction.
25:26
That's why I like books like The Beginning of Infinity.
25:30
He does such a great job explaining why this whole idea of an abundance of caution is a terrible thing to do.
25:38
Which planet do you want to live on?
25:38
Do you want to live on the planet that says, "Oh, no, no, no, no, no.
25:43
The gods are responsible for that. What's that thing?
25:47
Oh, it's probably the gods sending us a gift." It's a comet.
25:47
Or do you want to live on the planet where the scientists have said, "No, no, no, no, that's a comet.
25:53
We have developed these high frequency sound weapons to break it up and it's not going to disturb your day."
26:02
Well, I know which one I want to be on.
26:05
Tom Morgan: I think you've really hit on something.
26:05
One of the many reasons I love your podcast and I love you in general is that you emphasize repeatedly the nature of uncertainty which, again, makes you receptive to being able to update your model to match reality which, again, as we've discussed, is like one of those absolutely mandatory character traits for a world that's moving this fast.
26:22
But there's also this sort of habitual error that I see being made on a lot of other, on the podcast pro circuit or in the advice industry, which is, "If you just follow these six steps, you too will be a billionaire."
26:40
It's almost become a kind of a cliche genre of its own.
26:44
And a lot of these guys just might be the wide tail of a distribution, or a lot of these guys might actually have become billionaires because of the approach that they've followed, but it's not yours, or it's not necessarily yours.
26:54
They might be giving you a good recipe to get ads, but they probably aren't going to be giving you a recipe that's the way that you unfold into your own genius.
27:04
And I don't mean that in the high IQ sense, I mean not in the Taoest best creative version of you.
27:09
And I think that, rather than being critical, I think the way to frame this as something positive is to lay down the foundation of something that you love.
27:20
So you're going to be able to get a sense very early on that there's something that you're drawn to, but you've then got to put the work in.
27:24
I think that telling a 16-year old to follow their dreams may work, it may not, but I think you've got to lay this foundation and all of the great geniuses and thinkers and scientists said this, that fortune favors the prepared mind.
27:41
If you've spent 10 years thinking about something, you're going to get an insight on it.
27:41
It's not like I'm suddenly going to get an insight into astrophysics if I've never picked up a book on astrophysics.
27:51
So it's like there's something about doing the work that makes our brains practically receptive to new answers, but following someone else's path isn't necessarily going to help us in any way at all.
28:04
Jim O'Shaughnessy: I could not agree more and, actually, that was something I was very wrong on in my early career. I was a proselytizer.
28:12
I believed 100% in the efficacy of following a dispassionate investment path based on historically-supported evidence and base rates and all of that kind of stuff.
28:27
Do I still believe in that? Yes, I do.
28:27
Do I think that that is the correct path for everyone? No, it's not.
28:33
Some people simply can't process their world that way and that's okay.
28:41
What I've come to understand.
28:41
My mom used to say, "Too soon old, too late smart."
28:47
And what I've come to understand after getting this wrong so often is that there is no one size fits all in investing.
28:55
It simply does not exist.
28:55
That's why I am so much in favor of like introducing the Toms of the world to a larger audience.
29:11
One of the things that I think is great about what I'm calling the great reshuffle is this movement from the physical universe to the digital universe.
29:17
I know you have thoughts on this.
29:21
And and one of them is a quote that is like, "Is this going to be all tails?
29:21
Is this going to be just flat tails and is it going to be winner take all?"
29:26
I don't think it's going to be winner take all.
29:30
I want to explain why, but I want your opinion first.
29:34
But you said something really, really good and I'd like to just repeat it.
29:34
You said, "It's not a question of, 'Is this priced in,' it's a question of, 'Will this ever be able to be priced in?'" Elaborate on that.
29:47
Tom Morgan: I think it's a cognitive error that goes back to the Greeks.
29:50
I read this fabulous, blindingly difficult book recently that was recommended to me by a very smart dude called The Treatise on Efficacy.
30:01
It's basically an attempt to combine Eastern and Western thought.
30:01
And I happen to be of the belief that we all need a bit more Eastern thought in our lives.
30:11
Jim O'Shaughnessy: Here, here.
30:13
Tom Morgan: The analogy that he uses right at the end of the book, which I think is helpful, is Hercules versus You the Great.
30:15
And Hercules basically is the Greek hero that sets him up himself up against these imposing forces and prevails due to brute strength.
30:25
And then there's You the Great, the Chinese hero, that emerges in this period of the great flood and he digs out riverbeds to make the water flow, due to its natural propensity, down to the sea.
30:39
That's the difference in Eastern and Western strategy.
30:39
So to relate it back to your question, we're still in this world where people look at complex adaptive systems, and they're like, "If I put A in one end, I'm going to get B out the other end."
30:48
And how many times do you want to see that fail before you understand that that's not the way that complex systems work?
30:57
It's not the way they work at all.
30:57
And we're still on this very kind of Greek cause-and-effect process where, now that we've linked everything together, we're basically seeing a ship turned sideways in the Suez Canal and global trade stops.
31:10
A cyber attack hits the entire east coast of America.
31:15
A coronavirus shuts down the entire world for 18 months.
31:20
We're seeing these butterfly effects and still people aren't twigging that that's how the world has always worked.
31:26
The wonderful Morgan Hausel has this example of the drone, or whatever you would call it, the satellite that went to Pluto, arriving to within a millionth of a second of when it was originally planned.
31:37
It's a billion miles journey and it's arrived about three seconds late.
31:43
It's like, "That's how physics works."
31:43
And you can have that kind of precision in a completely closed system, but we don't live in one of those.
31:53
And I think there are really interesting laterals where the Western approach is typically to throw up its hands and be like, " Well, everything's a thunderstorm. Can't predict anything."
31:57
I actually think there's a few different places you can go beyond that that are really interesting.
32:06
But I think that we first have to admit, and it's still proving quite difficult, perhaps for control reasons perhaps and perhaps for identity reasons, but it's just not how most of the world has ever worked. Jim O'Shaughnessy: Yeah.
32:18
And it's funny because when I was thinking about what I want to talk to you about, I pulled out the first thing I ever wrote.
32:22
I got much better at titles.
32:22
This was called Quantitative Models as an Offset. Oh, sorry.
32:27
Quantitative Models as an Aid in Offsetting Systematic Errors in Decision Making.
32:29
But one of the things that I noted in here is the stock market is a complex adaptive system.
32:36
So most of the reasons, or things that you think are going to work, won't work because you cannot manage a complex adaptive system from down.
32:48
Emergence takes place in a complex adaptive system.
32:48
I know you know all this.
32:55
But why is that so hard for people to get?
32:55
It seems pretty straightforward to me.
33:01
Tom Morgan: It always makes me think of the quote from Bob Mercer at Renaissance, which is that basically "We don't trade anything that's obvious because, if it's obvious, someone else would have found it."
33:07
I have this vision of them basically being like, "Okay, it's rainy in Chicago today.
33:11
That means the Nikkei is going to go up 0. 2 of a percent."
33:15
Not because it's a spurious correlation, but basically because they found a butterfly and their astrophysicists have managed to determine that that is actually the causal link, it's just that we haven't found it yet.
33:26
Jim O'Shaughnessy: Right.
33:27
Tom Morgan: I think the reason why people find it so difficult is it goes back, again, it's these universal principles.
33:30
I think it goes back to the defensiveness of the intellect that basically in order to successfully navigate the complex adaptive systems, you have to do what Donella Meadows talks about when she talks about dancing with systems, which is where basically you have to get the most accurate view of reality possible.
33:51
That's really, really, really bloody hard.
33:51
Particularly today, because it means you have to strip out all the nonsense opinion in the middle.
33:55
So if you can get a really accurate view of reality and then calibrate your model to it incredibly rapidly, you can probably outperform or beat your competitors.
34:06
The problem with that is that your model, as we talked about, is often your ego.
34:12
It's everything you want to keep you safe.
34:12
It's all your public identity.
34:16
It's everything you've committed to.
34:19
And for you to keep destroying that is enormously cognitively difficult.
34:19
But if you look at some of the best traders of all time, they'll just change their mind instantaneously with absolutely no compunction.
34:29
And that is something that obviously you've got to be careful because you can be a day trader going in and changing your mind every 30 seconds and you're not going to beat the market, but these guys that have the ability to trust their intuition, and I think in this case intuition means external embodied nonintellectual signals, that allows people to update their models.
34:50
Or it sometimes just means that the quantitative models they're using can strip out the biases that are keeping them sort of rigidly held in place. It's one or the other. Jim O'Shaughnessy: Yeah.
35:01
I agree with that and I think that the latter is probably one of the reasons why the empirically-derived algorithmic models, like my firm uses, generally have a pretty decent base rate over long periods of time.
35:12
But just listening to you talk about it gets tied to the ego, Adam Grant in his great new book, How to Rethink, I'm getting the title wrong. I'll fix it. Tom Morgan: Think Again.
35:22
Jim O'Shaughnessy: Think Again. Thank you.
35:23
Talks about the totalitarian ego.
35:23
That really struck me because I've realized that I have spent literally decades trying to minimize that in myself because what it maximizes is my ability to say, "Oh, that's really interesting."
35:37
And I don't have any sort of preconceived idea.
35:43
I might spend a whole day and get nothing but I also might spend a couple hours and get a really, really great connection.
35:54
But I honestly believe, and this gets me into the great reshuffle, I think that we are going into a world that is both incredible, in other words, we are moving from a world of scarcity to one of abundance, and I'll explain why in a minute, but we are also moving into a world where logic and "if A, then B" gets superseded by a comfort with chaos.
36:22
I know from studying this very, very deeply that there's going to...
36:29
For example, I changed my opinion about universal basic income.
36:33
I used to be opposed to it. I'm now in favor of it.
36:38
And I'm in favor of it because as I have studied this, I realized that there is a whole group of people in the world who, through no fault of their own, have not been trained up on how to take advantage of these various things.
36:57
Now, obviously there's lots of tools, reading you, following certain people on social media, reading very broadly, but we've got to give them a chance to come up to speed, I think.
37:08
But it gets back to this idea that I want your opinion on, which is I often hear, and you said it in the thing that I read that you wrote, "The winner take all."
37:13
I don't think that the new digital, the metaverse, as everyone is calling it, I don't think it's winner take all.
37:24
I think that there are going to be a host of things that people can do.
37:29
The easiest that I can think of is Substack.
37:29
I'm watching a lot of the most popular journalists just abandon the prestigious posts that they used to occupied, being the lead writer for the Rolling Stone or The New Yorker magazine, et cetera. And they're loving it.
37:46
And I don't think it's just writing.
37:46
I think, for example, Jesse Livermore, O'Shaughnessy Asset Management's first research partner, is a genius and he has two papers.
38:00
I got a call from a friend who's a PhD at a well-known university and he's like, "Will you tell them just to submit that and we'll give them a PhD for it?"
38:08
But the point is an important one.
38:08
You have to understand how to curate, I think. That's a give.
38:15
But you can find resources on the internet where, honestly, I've heard some research reports written by people I've never heard of that are 10 times as good as sell-side stuff that I've read, 10 times as deep.
38:30
And this process of discovery.
38:36
I think we're in the middle here.
38:36
We're not even close to the end game.
38:43
But the more people understand that the leverage that the digital universe gives you is enormous.
38:53
And it's no longer your CV.
38:53
One of the things I would say is in the old world, my CV suggested competence.
39:00
In the new world, your CV is the newsletter you put out every day and it isn't suggesting competence, it is demonstrating competence week after week after week.
39:10
So I think that this new world gives people who understand that the ability to essentially live their CV. What do you think?
39:27
Tom Morgan: I think there's a lot of directions to go.
39:29
I think I'll start by saying that I completely agree with the power of things like social networks, and the internet in general, to facilitate the following of your bliss.
39:42
It's just, you need to be following your bliss.
39:46
So if the search algorithm or whatever it is, the YouTube algorithm is telling you what video to watch next, that is going to take you down some kind of unpleasant, emotionally engaging rabbit holes.
39:56
So you've got to curate, to exactly your point, you've got to have your filters set up because if your filters aren't set up, you're going to waste all of your attention, which is literally the only asset that matters in your life, just on nonsense and motiveless crap that is just trying to hold you in for as long as possible.
40:15
So that I think is sort of a balanced yes/no.
40:15
I think, on the creativity economy, I think if we can get to the Kevin Kelly 1,000 True Fans model, then you can actually make a living from finding your tribe, I'm going to be more bullish on the creative economy.
40:25
Otherwise I certainly think it just ends up with T Swift on Spotify being 90% of the plays and everyone else being this long tail that is in their basement, not making any money.
40:36
I think it remains a tail distribution until the monetization system gets sorted out.
40:40
A lot of people think blockchain's going to do that.
40:46
Sam did a great podcast with Chris Dickson on that topic.
40:50
I remain open-minded and optimistic about that.
40:53
I listened to your podcast with Alex Danko earlier this week, and I'm going to go the other way on it.
40:56
I'm really scared about the emersion of future generations in the digital world wholesale.
41:03
world wholesale. To give an example, if we're missing, if we don't know what we're really missing in terms of the informational nourishment that's being served to our consciousness through
41:13
the real world, if there really is a million times more information out there than we're aware of, if we're putting ourselves into a digital environment, either through a headset or through a screen, we don't know what nutrition we're missing and there might be things that we get. We all know from four hours of Doom scrolling
41:26
We all know from four hours of Doom scrolling that we feel like crap at the end of it.
41:29
There's something about the ersatz nature of the digital world that is insufficient.
41:34
The positive lateral is that the digital worlds that are being created are increasingly infinite games.
41:41
And a lot of them are doing it just to engage you, just to keep you there for longer.
41:46
So they're going to make the game easier so that you play it for longer but a lot of it is...
41:48
There's a great quote, which is "The other world is this world, rightly seen."
41:53
And I do feel like the younger generation is creating the world that they want to live in online because the consequences of the world that they are living in, in meet space, are punitively high for a bunch of different reasons.
42:05
And so people are going on Minecraft and Roadblocks and Fortnite and creating these worlds that they want to inhabit.
42:16
And if the real world can take a cue from that digital world and calibrate itself to provide meaning and flow and woo way in whatever you want to call it, I think that that's how we get through this transition period hugely positively, but putting more meet space in cyberspace, at the end of the day, just scares the crap out of me. Jim O'Shaughnessy: Wow.
42:37
That is incredibly insightful.
42:37
I'm going to be stealing almost all of that from you.
42:39
And it's funny because I look down at the page and one of the things that I wanted to ask you about, which you've just answered, but I want to see if you want to elaborate.
42:50
I noticed that one of the downsides of, if you're sort of Uber-looking at the meta game set, one of the things that I notice are these petite obsessions.
43:03
So trading cards, TV shows, sports, politics, celebrities.
43:10
Now, I know that this gives other people great pleasure, but if you're occupying even a fraction of your brain space with what celebrity did what over the weekend, I think you need to recalibrate.
43:23
It's not like I'm saying that everyone's just going to instantly figure this out. I agree with you.
43:28
Do you think that there is a way that we can... Is there a course?
43:34
Is there somebody who could make some money on this, doing a Substack and teaching people how to make this change?
43:39
Because it's not an easy change.
43:43
Tom Morgan: I think there's two things and I'm actually going to go ahead and disagree with the first statement.
43:46
My wife is dramatically more successful and accomplished and magnificent in every way, relative to me.
43:51
And she was in so much pain that one day she went to an acupuncturist and the acupuncturist was like, "What do you do that's just for you?"
44:01
And she ran down a whole list of things like, "I tidy the apartment, I do this, I do that."
44:06
And the acupuncturist dismissed every single one of them with, "These are all productivity hats."
44:11
And then she was like, "What do you do?"
44:11
and she's like, "I watch Real Housewives." And she was like, "That. That's the thing. That's your slack."
44:19
I know we both have a mad love affair with Rory Sutherland and he's like, "You need a certain amount of slack in the system."
44:24
And if it's Magic the Gathering, if it's Dungeons and Dragons, if it's Real Housewives, if it's complete crap, but that still gives you either an energy positive feeling or enough time to be unproductive.
44:34
I think that's actually really pretty positive.
44:39
So I'm going to go ahead and shelve that on one side and each to their own.
44:43
I think that, in terms of teaching this, I think that the most important lateral, so Tom Pence, he gave me...
44:50
It told me to read a book by Stefan Zweig called The World of Yesterday.
44:53
And I'd never heard of Stefan Zweig at all and didn't know who he was.
44:53
And he was basically one of the greatest writers of like the twenties and thirties.
44:57
And he made his life a study of geniuses.
45:00
And the bit of the book that grabbed my attention is where he talks about watching Rodin work, the sculptor.
45:04
And he says that he basically stood in a room and watched him sculpt for an hour.
45:09
And at the end of the hour, Rodin turns round and is like "Shit, you're still there!" .
45:12
He had completely forgotten time and space.
45:16
And he was completely absorbed.
45:16
And I think that Maria Popova going back to her.
45:21
She describes it as this mix of intention and attention, which is taken from Buddhism.
45:25
And if you can find something that grabs your attention so much, that you can concentrate on it for hours at a time, that's how you lay down the foundation that provides meaning for the rest of your life.
45:38
And this doesn't have to be all day every day.
45:38
But I think that that signal, but it's that combination of exploratory attention and focused attention that puts you exactly on your beam.
45:47
And I think the signal that you're on your beam is that whatever you're doing feels meaningful. Jim O'Shaughnessy: Yeah.
45:54
I actually agree with you there. I do that all the time.
45:54
So the slack and the system is...
46:00
I just had Rory on the podcast, I adore him.
46:00
And he was talking about for people to...
46:07
And by the way, this impacts this whole digital world versus physical world because in the old world, and he used a very archaic example of the in-tray.
46:13
And I said to him, after the podcast "Rory, nobody listening to this knows what an in-tray is".
46:19
It was the old offices where all of your work piled up.
46:24
If you watch Mad Men you'll know what an in-tray is.
46:24
And his point was, we feel that we are being productive.
46:29
If we are working our way through this in-tray.
46:38
You could say emails, for example, are we being productive?
46:42
And he said, not really what's happening is you might feel as an individual that you're being productive and feel really good about the effort that you made.
46:48
But what's happened is the overall organization has suffered because if everyone's doing this, it's a bit of make-work. Right?
47:00
One of the things that is a bit scary, I think about this new, what I'm calling the great reshuffle is middle management is not going to like the results of this because I think of the movie Office Space with the guy, "have you finished the TTP reports?
47:20
What would you say you do here?" .
47:25
I think that there are a lot of people who, and we've seen it for example, in universities who are all these facilitators and what are they facilitating?
47:36
And then you look at Vermont Royster who was the legendary editor of the Wall Street Journal showing his grade school, his public grade school curriculum.
47:41
And it has Latin, Greek, Logic.
47:50
And do you think that there's a way...
47:50
Since this is all going on, right?
47:50
The way I look at this is, we are in a time of what I think is great change.
47:55
Why not throw a couple more irons on the fire?
48:02
Why not say, "you know what, we might have to redesign the way we educate people?" . What do you think?
48:09
Tom Morgan: I think it's become probably overly fashionable to knock education.
48:12
And I felt like I had a strong education and it gives people a menu of things to choose from before they know what they're interested in.
48:17
And I think that's a really good thing.
48:22
And it helps people lay down the foundation.
48:26
I think the danger is when you assume their menu is the only thing to choose from, right?
48:31
And as you get older, you get stuck in this rut.
48:31
And I think it links to your previous point, which is that...
48:35
So what happens in my experience, having been in a lot of institutions, particularly around middle management is that people don't want slack in their day because it will leave them time to think about their choices.
48:45
And I was that person, so I'm not looking down on anyone else.
48:52
But you want to be distracted from that increasingly uncomfortable sense of dissonance that maybe it's time for you to go and do something else.
49:03
And I think all the time, are you familiar with the concept of fitness landscapes? Jim O'Shaughnessy: Yes. Tom Morgan: All right.
49:09
So maybe for the sake of [business], the 15 second version is that basically you have a three-dimensional stock chart that has lots of hills and valleys on it.
49:15
And the chart for Manhattan would look like this crazy, bumpy, hilly environment.
49:21
And the chart for Maui would be like lush, rolling hills.
49:26
And when I think about people in Manhattan who were my contemporaries, I look at them with their two kids in private school, their extraordinarily high-quality lifestyles and they're at a very, very steep local optimum.
49:37
In order for them to experiment with going to become a photographer or something that really is calling their attention, the bliss that is calling with them, they have to give up so much fitness and they have to sacrifice so much, not just for them, but for their families.
49:54
This is not a straightforward decision that cannot experiment with anything new that's going to change their lives.
49:59
But they're still getting these signals from the outside world, from their right hemisphere if you will saying, "Dude, you're going to burn out here".
50:09
And I think that that's what a lot of the psychosomatic conditions that people get afflicted with are about.
50:13
Which is you're getting signals from your body and being like "If you stay here, you're going to die" either literally or figuratively.
50:17
And I'm like, well, I'm just going to drink my way through this because if I can dull those pains, I can sacrifice myself or whatever God I feel is worth it. Jim O'Shaughnessy: Wow.
50:31
I mean, we are so simpatico on that belief and I love the Alan Watts quote, "the menu is not the meal".
50:37
And so these are such nuanced ways to try to understand things that I always try to...
50:47
I hate people who make things unnecessarily complicated.
50:53
But by the same token, it's attributed to Einstein, but we attribute everything to him.
50:58
So the objective should be to make it as simple as possible, but not simplistic.
50:58
And I love your thought there.
51:06
That how is one who is in a way...
51:06
A line that I love is "It's hard to come up with an escape plan.
51:15
If you don't know you're in a prison".
51:19
And so what you've just outlined is there are some people in prisons and they're pretty nice prisons, right?
51:23
They have their kids in private schools.
51:23
They might summer on Nantucket.
51:29
And that builds up this edifice of a golden cage.
51:29
And so you yourself have escaped that.
51:38
Tell us how that happened.
51:38
Tom Morgan: Well, that's a very long story.
51:41
I had to be completely broken and rebuild.
51:41
Personally I went through an unbelievably difficult three years, that I would not have got through were it not for the support of my family, the support of my wife, everyone around me.
51:51
It was the full archetypal, definitely.
51:57
But if any of your listeners wants to talk about it, I talk to a lot of people about these certain situations.
52:00
But it's only relevant, I think in terms of what other people can take away from it, which is that...
52:05
There's a wonderful, wonderful line in Robert Johnson book where he's a young [analyst].
52:11
And he talks about people not being willing to accept their gold.
52:20
Young's much more famous for people acknowledging their shadow, the bits of your character that are crappy and you see in others in reject.
52:24
And he talks about the dark night of the soul often being people, not willing to accept their own creativity.
52:29
Because I think to accept your own creativity, whatever that means for you.
52:34
I don't mean writing poetry.
52:34
It's literally different for everyone.
52:38
You have to surrender control intellectually.
52:38
And I don't quite know what that means, but it means something.
52:44
And it means you need to relinquish the direction of your life from the ego.
52:50
The ego basically says, here are all these things that I want, and it perpetuates this present scenario.
52:55
And every time you achieve these goals, they're completely empty because they're not putting you in clothes.
53:01
They're putting you in destinations.
53:05
Happiness is not a destination.
53:05
It's not something you can define.
53:05
It's something that's an experience, an experience of being alive as Joseph Campbell put it.
53:13
And so I think that if your egos are being set by the small soul, you're going to end up probably in real trouble.
53:18
And I think the mistake that I made, which is probably not applicable to a bunch of other people.
53:23
But it was when I tried to reinvent myself in midlife, through a midlife crisis.
53:26
I was like, my next role needs to be incredibly meaningful.
53:31
It needs to be the second mountain.
53:31
I need to be a social worker or a psychoanalyst and all of these things.
53:36
And no job was meaningful and not, and nothing actually really meshed with my character.
53:42
And to go back to Young again, Mary Lewis from France who I think was one of his sort of first disciples.
53:45
She talks about this situation that people come up against in life when the ego finds itself in a situation, it can't get out of.
53:55
Where every move it makes is [foiled].
53:55
And the purpose of that is for it to just withdraw and give up.
54:01
And I think in our egoic society, that withdrawal is often associated with a desire for death and people can plate one for the other.
54:08
And we'll often make sad and tragic decisions based on that.
54:13
Whereas it's about a shift of focus from the ego to the self, as Young called it.
54:19
In fact, he said, he thought that was the meaning of life.
54:23
Which is basically, you start off as a child completely engaged in the world.
54:23
You get more and more powerful and more and more abstracted as the ego takes more and more control.
54:32
And then you need to relinquish your power back again.
54:32
And it's that second relinquishment, where you become a co-creator, you become the Tower Saint that is really like the last act of life.
54:41
But if you're in a steep fitness landscape environment where you've accumulated all this wonderful stuff, the amount of safety that you have to give up to get there is absolutely paralyzing.
54:48
And I don't mean to diminish it.
54:53
It will be the most awful experience in your life, or it could be the most awful experience of your life.
54:57
I don't think it's easy, but often the alternative is dying [inaudible].
55:01
Jim O'Shaughnessy: And of course this gets us right into Jed McKenna, territory.
55:04
And interestingly enough, so for those who don't know, my love of Jed is...
55:10
What I think is a fictional character telling us we're all fictional characters controlled by these crazy egos that are really doing us a disservice as opposed to a service.
55:22
But one of the things that a friend of mine, Dan Jeffreys, this guy who turned me on to Jed, and Dan is an amazing guy.
55:27
He's an elite programmer and a really great thinker.
55:27
And one of the things in one of his essays, he brings in Rick and Morty, which I love.
55:34
Didn't know I would love, and I don't watch a lot of TV.
55:39
And so I was reading a Jed book and my middle daughter happened to be here.
55:45
And she looks at me and she goes, "Oh, you must love that because of the Rick and Morty".
55:49
And I look at her, I'm like "What's Rick and Morty?" .
55:52
Well, one weekend later I had watched it like twice and I just thought it was hysterical.
55:58
But he does a great essay that I suggest people read before, because if they're not going to make it through that essay, Jed is not for them.
56:08
And I'm the first to say, Jed is not for everyone.
56:11
But one of the things that Dan points out, which I find really interesting is who gets this stuff like immediately? And you know who it is?
56:18
Good traders, special forces and ER docs.
56:24
And when you think about it, these are people who are making decisions in the present in real time that could be fatal.
56:32
Now the trader, obviously it's not fatal as it is with special forces or ER docs, but I was really taken by that thought because it's not easy.
56:48
It's not easy to like completely reoriented yourself unless you have a passion. And so I was lucky.
56:56
I was born with this insatiable curiosity. And one of the things...
56:56
And you just seem you have so many wonderful go-tos here.
57:04
So I'm going to ask you for a go-to here.
57:08
One of the things that I've had a really hard time with is some people just flat out tell me, "You know, I'm just not that curious about it".
57:17
What do you think is, is there, is there something they could read?
57:17
Is there something they could engage in that would ignite that sense of curiosity?
57:26
Because by the way, I believe there is no hierarchy here.
57:26
I think if you're operating Human OS, you've got curiosity in there somewhere.
57:31
And do you have a method that you would recommend?
57:38
Tom Morgan: No, I think I have zero insights to offer on that process.
57:41
I think what I would say, which is a crap answer, is that I don't think very many people are lazy.
57:48
Because I defined myself as lazy for a very long time.
57:48
And now I'm in a role that, it brings immense meaning to my life.
57:53
And I literally have no division between work and play because that's what [crosstalk].
58:02
Jim O'Shaughnessy: Sorry, sorry.
58:03
But that's my definition of an owner.
58:03
So I have no division between work and play either. Tom Morgan: Right.
58:08
Jim O'Shaughnessy: But I've been a...
58:08
With the exception of one small stint when I was at Bear Stearns.
58:09
I've been an entrepreneur my entire life, so. Tom Morgan: Yeah.
58:12
And maybe that is the answer, and it's a bit of a trite answer, which is find things that feel like play.
58:15
I know [inaudible] says that a lot.
58:19
It's really, really, really, really, really hard.
58:19
And I think also again, denigrate it, but I think your subtle attention is always going to be the guise.
58:25
In that there will always be something.
58:33
I fail to believe that anyone is enough of a husk of human being, that there is literally nothing that interest them.
58:41
I think the danger might be that there are now so many wonderful competing flow generating experiences, particularly in terms of video games, which have been AB tested.
58:46
But literally maximum crack, like dopamine generation.
58:52
You're so involved in those things, you can't...
58:58
I imagine that the kind of attentional exploration that we're used to from an evolutionary perspective is really, really soft, right? It's a subtle force.
59:04
And if it's being overwhelmed by all these other things, it's never going to be loud enough.
59:12
And in the Gilchrist old formulation is that the right industry, it doesn't really have access to language.
59:15
It's the still, small voice of calm.
59:15
It's the voice of Jimminy Cricket.
59:20
It's the voice of your conscience.
59:20
You'll know when you're doing the wrong thing, but you won't always be getting a positive affirmation that you're going in the right direction. And so I just think...
59:27
Again, I've very specifically not answered your question because I don't have a good answer.
59:32
I think the answer would be pay attention. Jim O'Shaughnessy: Yeah.
59:35
That's so hard because we were talking earlier about the five traits of the billionaires. I hate those.
59:38
I hate them because, why I hate them so much is they're so obviously click bait.
59:46
They're so obviously there to get people's dopamine running and they do a disservice, in my opinion, to people who are genuinely and truly trying to find a better way to make their way in the world.
1:00:10
And again, well, what book reminds me of that -Siddhartha, The Story of Buddha.
1:00:10
What he did was very interesting. He was like, oh, okay.
1:00:15
So these guys are out in the woods and I'm going to learn how to do this, and I'm going to learn how to do that.
1:00:21
And, and they have these prescriptions for me. Well, okay. I did that.
1:00:25
I haven't learned anything new, so I'm going to move on. And so that's hard.
1:00:29
And I never ever want to in any way, diminish that my friend Trent Griffin, who I've had on the podcast, a couple of times, he got me to see this.
1:00:45
I didn't see this before.
1:00:45
And Trent was very good at explaining to me, "Jim, to enter the arena takes courage".
1:00:52
And I'd never thought about it that way.
1:00:59
And so of course our mutual hero, Joseph Campbell, he knows that the way that works.
1:01:06
I think we both have spent a ton of time thinking about this.
1:01:10
I would love to find a way that allowed for people to figure out...
1:01:10
And like you, unfortunately, I don't have the answer.
1:01:21
It's not that I'm still not looking for it. I am.
1:01:24
But I just think that there is, for example, the educational system needs to be revamped.
1:01:31
People don't understand this, but do you know why the US public education system is the way it is?
1:01:37
It was because we had an industrial revolution and the industrialist said, we want people to be able to calmly sit in a room for seven hours doing the same thing. So that doesn't... it worked for...
1:01:49
And that brought us $5 a day jobs from Henry Ford that created the middle-class.
1:01:52
I'm not saying it was all bad.
1:01:57
It wasn't, but now it seems that there is this reticence on, and I hate using this term because it's so trite, but elites in society.
1:02:05
Listen, I have a theory about that.
1:02:14
The elites are going crazy because all of the old structures are crumbling. And they're like, whoa.
1:02:21
So like journalists, they used to make a real bargain.
1:02:26
The bargain was, I understand I'm going to get paid a lot less than these people I'm covering, but I'm going to have access to these people.
1:02:32
I'm going to be able to influence these people and that's going away.
1:02:37
I mean, just from the imperator of the New York Times or the Wall Street Journal.
1:02:44
So maybe it is just, again, we're talking about a complex adaptive system here.
1:02:51
Maybe there will be something that emergence and it's something that we can't predict.
1:02:57
What do you think about that?
1:03:00
Tom Morgan: Let's flip the question a little bit.
1:03:00
You talked about the exhausting morning routine of a billionaire, right?
1:03:02
If we want a new model that isn't the 200 year old educational system.
1:03:06
I think we need to ask the question, who needs to be famous?
1:03:11
I'm going to hopefully make you deeply uncomfortable now, because I think you exemplify a lot of the traits online that people should seek to emulate.
1:03:21
You never tweet fortune cookies of synthesize wisdom.
1:03:21
You always point other people to things that you think are interesting in the hope that they will also find them interesting. You're playful.
1:03:34
And as far as I can tell, you're never actively seeking crowds.
1:03:39
And I think that I look at the concept of the [Tower Sage], which is the person that's just exploring their own curiosity.
1:03:45
That is being the most uniquely themselves that they can be within the system is the person that we should seek to emulate.
1:03:57
The problem being is that you probably don't know who that person is because they are the butterfly in the thunderstorm. They're so small.
1:04:02
And they're so congruent with the system that you can't see them doing anything, which is the whole point is that they seem like they're doing nothing, but they're doing something.
1:04:10
And the example I kept thinking of, and it was one of those moments where I read an article and I didn't understand what the article was about for months and months later.
1:04:17
And it's this Seminole Michael Lewis article.
1:04:17
And I don't if I'm going to pronounce this guy's name right, but Shane Battier.
1:04:25
Jim O'Shaughnessy: Yeah, that was a great...
1:04:25
and by the way, I read that article because of you.
1:04:27
Tom Morgan: So for those who aren't aware of this guy, and I'm only a medium NBA fan, so I'd never heard of him.
1:04:33
But basically the guy had literally no standout stats of any kind.
1:04:33
He mostly wouldn't score any points in the game, but they called him Lego because whenever he got on court, everyone else played better in all these other subtle, imperceivable ways.
1:04:44
And because he knew exactly where to force Coby on the court to minimize his shooting percentages and exactly how to control the rest of the swarm.
1:04:57
So like the [Tower Sage], this guy had bound the heart of the system and worked out how to make all the parts work together in this unbelievably awesome congruent way.
1:05:06
And that's like a really unhelpful analogy because it doesn't give anyone guidance.
1:05:10
I suppose the thing that I would say that was specific would be seek out really good synthesizers because they're people who are operating in the middle of the information ecosystem, and if you trust them, they're going to be magnificent.
1:05:22
So Maria Popova, I brought up her name maybe three times.
1:05:27
She has this site called [crosstalk].
1:05:30
Jim O'Shaughnessy: I love her. I love her.
1:05:32
Tom Morgan: I could spend...
1:05:32
I kind of do spend hours on her site following the rabbit holes that she's created for me.
1:05:37
Kyle Kowalski at Sloww synthesizing all the world's best spiritual information.
1:05:37
The Last Moral, the Latticework, all of these guys.
1:05:42
They're helping curate content for you and they're trusted filters.
1:05:47
They're almost like a proxy for your consciousness, if you think that they're good enough.
1:05:52
And the synthesizer is to your point that all of these remarkable geniuses have said that the synthesizing mind is the mind of the 21st century.
1:05:57
Find a good synthesizer and they will be able to direct your attention to a good spot.
1:06:02
Probably a lot better than the search algorithm.
1:06:07
Jim O'Shaughnessy: That's really interesting, because one of the things that I've done...
1:06:08
And by the way, thank you for your kind words.
1:06:12
I am hardly any of those things, but I appreciate you saying them.
1:06:16
But one of the things that I learned very young was document things.
1:06:16
Because there's nothing like being called a liar in your own handwriting.
1:06:24
And so it actually came up and I wrote a piece about it, because I started life as an options trader, but a formula trader.
1:06:36
I wasn't trading people, I was trading a mathematical formula that I had come up with.
1:06:41
And note to anyone who does that, if an academic actually writes an article spelling out that formula, it's going to stop working, because it is not a human anomaly.
1:06:48
It is a mathematical anomaly.
1:06:54
Anyway, I was at some event and they were saying, "Hey, you were around during the crash of 1987, right?"
1:06:58
And I'm like, "Yes, I was."
1:07:04
And they said, "Did you call it?"
1:07:04
And I went, "Yes, I did."
1:07:04
And they're like, "Really?"
1:07:09
And I'm like, "Yeah, I got the biggest put position ever before the crash."
1:07:09
And I was driving home, and this might be the genie that you're talking about inside of us, was saying, "Read your journal, read your journal."
1:07:25
I read my journal and I'd forgotten something conveniently.
1:07:26
I sold all of those puts the day before the crash.
1:07:26
So the part of me that wanted to be a hero in the Campbell journey was reminded about the real guy who had the sense to write it down.
1:07:47
And then I actually wrote a piece about it because it actually was a gift.
1:07:52
The gift that that gave me was understanding that, a lot of things all at the same time because...
1:07:59
By the way I started reading Lao Tzu when I was 18, and all of this stuff is starting to kind of come together.
1:08:03
And what it taught me was, our memories are unreliable narrators.
1:08:09
By the way I think, this is just my opinion, which is probably wrong, but I think that...
1:08:15
the brain or the mind, because there's a big difference and there's a lot of debate about that...
1:08:21
Is thinking it's doing us a kindness, by literally rewriting our memory over the old memory.
1:08:29
And I think that that feeds into the need for the illusion of control.
1:08:35
We talked about Shannon limits.
1:08:35
I have a theory that I've actually seen is a speculative theory out there, that schizophrenia, for example, might just be filter failure.
1:08:47
It might be that our brains are filtering all but 60 bits out. Maybe these...
1:08:47
And because by the way, there's this common idea that all schizophrenics are geniuses.
1:08:55
Not true, but many of them are, and so that's something worth exploring.
1:09:07
But I guess the idea that you hit on, I became obsessed with synthesis, as opposed to just information. I still believe...
1:09:15
When I was a kid I memorized a lot of poems, and I still use that to this day.
1:09:21
So I use a lot of GIFs on Twitter young people would be like, "This is not right. You are a baby boomer. You can't do this."
1:09:28
And I remind them of two things.
1:09:34
Number one, I have 30 years of cultural experience, more than they do.
1:09:34
And so, young Frankenstein, where I use Gene Wilder, that goes without saying, they probably don't even know about that movie. And so let's be fair.
1:09:46
But I think that the thing that I want to say here is document things, because the thing out of the corner of your eye is going to show up.
1:10:01
And if you are open to this idea, and by the way there's no way you can be closed to it when your own memory is saying, "Liar, liar, liar."
1:10:07
You remember the princess bride, "Have fun storming the castle."
1:10:13
But the point is that this is, I don't think you...
1:10:13
You certainly are not minimizing what has to go on here.
1:10:19
And I would hate for people to listen to this podcast and think that, "Oh, okay.
1:10:26
So all I have to do is read Tom and everything's going to work out right for me."
1:10:31
I mean, I would highly recommend it.
1:10:31
I think the number of times I quote you has gone up...
1:10:36
Well, it got me to the point where, "I got to get him on my podcast."
1:10:40
But how would you go about looking for other people, who are kind of, I guess, in that liminal space of working between the information and the knowledge.
1:10:55
Tom Morgan: It's a really great question.
1:10:55
It's literally my personal obsession, because I'm always trying to find people on the edge.
1:10:57
I'm not even sure this is the definition of a paradox, but I don't think it is.
1:11:00
But the problem is, is that you don't typically get on a podcast unless you're an articulate intellectual.
1:11:10
And I have a feeling that the people with the solutions to the next iteration of society's problems, are not going to be articulate intellectuals.
1:11:18
They're going to be closer to Rory Sutherland, who is extraordinarily articulate and also intellectual, but also in a way that is fundamentally behaviorist and irrational.
1:11:30
In that, he tells effective stories and he has an acknowledgement of the failures of profitability and rationality in a way that is highly unusual.
1:11:37
And I'm always like, "I'm gravitating towards this person because he's articulate and his words are being beamed directly into my brain with no critical filter."
1:11:50
There's a great podcast series called Decoding the Gurus, that takes all of the most wonderful articulate people on Twitter and deconstructs things that they say and whether they actually make any sense at all.
1:12:00
And I really enjoy that, because it puts some critical distance between me and the people that I idolize.
1:12:04
There's another great podcast series called Rebel Wisdom.
1:12:08
They're kind of variable in quality, but they get guys on the edge of the culture wars, but without all the sort of tedious mudslinging.
1:12:16
Jim O'Shaughnessy: Right.
1:12:17
Tom Morgan: There's a guy that they have on very regularly called Daniel Schmachtenberger, who has this sort of hippie that swallowed a dictionary vibe to him, where he's a mix of intrinsically spiritual, but also systems theory.
1:12:23
And he's given me some of the best insights in terms of what's happening at the meta level right now, that's really, really important.
1:12:38
Jim O'Shaughnessy: So I'm going to ask you to introduce me to him so I can have him on the podcast.
1:12:44
Tom Morgan: Oh yeah, he's fantastic. Yeah.
1:12:45
Jim O'Shaughnessy: So it's like everything, right?
1:12:45
It's a bit of hit and miss. It's a bit of...
1:12:48
The other thing, when people say, "Well, what is one of the things that you really like about being a quant?"
1:12:52
One of the answers that I give, it kind of surprises people, and that is I go into a purchase knowing I'm going to be wrong about X percent of whatever I'm buying. And they're like, "Wait.
1:13:01
So why don't you eliminate that?"
1:13:09
I said, "Because that's impossible."
1:13:09
And that's how I sometimes try to introduce the idea of comfort with an error factor.
1:13:14
So I know the base rates, and I know how horrible things can get.
1:13:22
There are artists in our field, and so I'm not, I follow more of the scientific method.
1:13:27
Nullius in verba, take no one's word for it, you know the drill.
1:13:32
But listen, there are artists too, and I respect that.
1:13:32
The problem is, but this also kind of gets at it...
1:13:39
I can respect that, but I don't think there's anything that I can do, at least with the current wetware that I have right now.
1:13:44
Because a lot of that I find to be unfalsifiable and, hmm.
1:13:55
So it's like, "God bless. That's fantastic."
1:13:55
But I think that what's emerging as I'm listening to you and kind of synthesizing what you've been saying in my mind, is if you need to at first force yourself, try something...
1:14:08
And correct me by the way, Tom, if I'm wrong here...
1:14:13
Try something that feels a little uncomfortable.
1:14:13
And by that I mean, maybe, let's say that your point of view about the market is X, whatever X happens to be.
1:14:21
Try reading about Y and Z.
1:14:27
Try saying, "Let me see what these guys say." You might reject it.
1:14:34
It might give you an example of your totalitarian ego saying, "No."
1:14:34
But, am I on the right trail here?
1:14:40
Tom Morgan: I think you totally are.
1:14:41
And I think that a lot of people see quant and trading and stock picking as incompatible, but having been hyper fortunate to be exposed to some of the most extraordinary investors and traders, there is...
1:14:53
And everyone does it in their own different way, but there is...
1:14:58
If I was to isolate kind of a uniform trait, and it's the ability to basically to again, see the entire landscape as accurately as they possibly can at a single moment in time.
1:15:09
To probabilistically work out what all the outcomes are, and then to dynamically adjust those probabilities as new information comes in.
1:15:16
That's exactly the drape of Phil Tetlock's superforecasters that destroy expert predictions on everything.
1:15:28
Because what they're doing is they're effectively destroying their ego every 15 seconds, because everything's a hypothesis to be tested.
1:15:33
But basically rather than saying...
1:15:33
Going back to what we were saying earlier, the older I get, the more I realize there's almost no issue on earth that's binary.
1:15:42
Everything is a shade of gray.
1:15:42
And it's to Bob Kegan's thing about the self-transforming mind, is the moment you start transcending systems, you can basically see that the answer to everything is it's more complicated than that.
1:15:56
And the aim of having a dialogue with someone is that, to use the Indian parable, they may be holding the trunk and you may be holding the tail, there's still an elephant then.
1:16:05
Jim O'Shaughnessy: Right.
1:16:06
Tom Morgan: Because they completely disagree with you, and they're like, "No, it's a trunk," and you're like, "No, it's a tail."
1:16:09
If you don't listen to them, you're never going to find out that it's an elephant.
1:16:13
And in the same way that the very best guides put the whole picture together and then work out what the probabilities are.
1:16:17
And the really big trades are where the guys have put the whole picture together.
1:16:22
And then they bet really, really big on that outcome because they've achieved something close to certainty.
1:16:26
But it's that dynamic updating that, nothing is universal, but it's an incredibly consistent trait. Jim O'Shaughnessy: Yeah.
1:16:36
And again, it's like preaching to the choir here.
1:16:38
That's been one of my big things is, this binary, yes/no, zero/100.
1:16:38
That isn't the way the world works.
1:16:46
Goethe, I'm going to screw this quote up, but it's like, "Everything is gray, but the green tree of knowledge is green." Something like that.
1:16:52
But the challenge there is, then I have other friends.
1:16:57
So I had a friend on the podcast.
1:16:57
He is anonymous on Twitter.
1:17:03
He's a radiologist in the city, and he's quite an amazing entrepreneur.
1:17:03
He goes by the name, Max Arbitrage.
1:17:09
And so he started lecturing me during our call, because one of my things is I always say, "Do not be a deterministic thinker in a probabilistic world, because mayhem often results.
1:17:22
Hilarity or tragedy ensue."
1:17:27
And so Max on it goes, "It's Jim.
1:17:27
You got to understand something."
1:17:27
He goes, "You need to be a probabilistic thinker, but do you want a bunch of probabilistic thinkers thinking, working for you?"
1:17:37
And then he goes like, "So you say you're..."
1:17:37
And now we're coming full circle because he goes, "You're Genghis Khan sitting on your elephant, and you're surveying the entire game space and updating the probabilities.
1:17:48
And you go down to the spear checker and you say, 'You need to throw those spears that way,' and he's like, 'I don't think I'm going to do that.
1:17:58
I think the probabilities are much better for me to run away into the forest.'"
1:18:03
And he had a second insight, which I think is, I don't know how, and I've really been thinking a lot about it.
1:18:07
And obviously it made an impression.
1:18:07
He's like, "There is a fundamental disproportion in human OS for people who are long ball, versus people who are short ball."
1:18:22
And you know what that means.
1:18:22
Basically, he says we have people who are long ball, and I am one of those people. So is he.
1:18:26
People who are long ball, he believes account for about 5% of the population.
1:18:31
People who are short ball, who want certainty, sell ball ridiculously cheaply, to those of us who go long ball.
1:18:43
And he's sort of like, "I mean, you want to explain Jeff Bezos and Steve Jobs and all these guys?
1:18:50
There's your explanation."
1:18:50
Because then he goes into...
1:18:50
And I know we're running a little long here so this is going to be a long episode.
1:18:55
His explanation is, imagine a world where it's 50/50.
1:19:00
50% of the people want to be long ball.
1:19:00
50% of the people want to be short ball.
1:19:08
Well, that's kind of the definition of an efficient market.
1:19:08
But is a Jeff Bezos possible, if you're 50/50?
1:19:14
Tom Morgan: I'll give you another non-answer.
1:19:19
But I think it's a lateral, which is that, Fight Club.
1:19:24
You're only free to do anything once you've lost everything, right?
1:19:27
Jim O'Shaughnessy: Mm (affirmative).
1:19:28
Tom Morgan: And it's a rare man that can approach life with a long ball attitude.
1:19:32
What I find typically happens, if you look at the lives of these super successful people, not all of them, but a great deal.
1:19:37
They've lost everything at one point.
1:19:41
Or they've had some sort of crazy nervous breakdown, and they've realized that they may as well just have some fun in the matrix.
1:19:46
They may as well just eat the steak, because the consequences of not having fun are considerably worse.
1:19:50
But I think only once you've gone through that transition, are you free to experiment.
1:19:57
Because otherwise it's the fitness landscaping again.
1:20:03
What you have to give up is so great that you're not willing to roll those dice.
1:20:09
Jim O'Shaughnessy: That's the perfect answer. Well listen, Tom.
1:20:11
I'm going to have you on again, because I think we just touched the surface.
1:20:16
I didn't even get to half the notes that I made to ask you questions about.
1:20:20
I think everybody should read Tom's weekly summation of incredible readings that he is finding.
1:20:28
I have gained a huge amount of information from you, and so I thank you for that.
1:20:34
On this podcast, which you might know, because apparently you've listened to it.
1:20:38
I have a lot of people on the podcast who don't listen to it.
1:20:38
And anyway, what we like to say is, you know the movie Inception, right?
1:20:43
We're going to make you the emperor of the world for a day. You can't kill anyone.
1:20:47
You can't put anyone in a reeducation camp, but you can incept them with two ideas that they wake up the next day thinking it's their idea.
1:21:00
And what two things would you want to incept in people that you think would make the world a vastly better place?
1:21:06
Tom Morgan: Well, I can't sign off first without saying that this conversation with you and the joy that I have in interacting with you in general, is a highlight of my life.
1:21:15
And that is not hyperbole.
1:21:19
I've actually been thinking about this question for a long time, and I've got three answers, and you're just going to have to accept I've got three answers.
1:21:23
Because- Jim O'Shaughnessy: I'll give you three, I'll give you three.
1:21:28
Tom Morgan: And the first one is maybe the only actual thing that I'm going to say on this podcast.
1:21:30
And I want people to listen to it and do it, and as much as they can, which is record your parents' memories.
1:21:34
Find a service that does it for you, email them a bunch of questions.
1:21:39
However you want to do it, do it.
1:21:39
My father's memoirs, recorded by my much more prescient half sister, are the most precious thing that I have.
1:21:49
Because he died before my son is alive, and I would have no other way of telling him what my father was like.
1:21:56
And we live in this age of information abundance, where we just assume we can recall every memory that's ever available to us. And that's bullshit.
1:22:00
When they're gone, they're gone.
1:22:05
And if you don't do something now, you don't know what's going to happen tomorrow.
1:22:09
So I would just implore everyone to do that. So that's point one. Point two.
1:22:12
I read in a Robert Johnson book that was recommended to me, that apparently the Indians have 96 words for love.
1:22:16
And I love that idea, that basically we have this enormously, emotionally backward way of relating to our relationships.
1:22:22
That I want to tell you that I love you, Jim, but in a very specific way that relates to the way that you interact with the world.
1:22:34
But instead, I'm going to have to use the same word that I would use to someone I want to have sex with.
1:22:38
And that's just fundamentally uncomfortable.
1:22:38
That's why guys, when they're like, "I love you, bro."
1:22:43
It's always so insanely awkward.
1:22:48
Jim O'Shaughnessy: Right.
1:22:49
Tom Morgan: But if we have 96 words, the depth of our relationships would be transformed overnight, because we could tell people how we love them without waiting for them to die, or waiting for us to be blind drunk.
1:22:58
And I think that that would be an extremely small, but extremely beneficial development for society.
1:23:04
And then I think the third thing is the shortest and vaguest the least useful, but it's just pay attention.
1:23:14
Pay attention to the little cues around you because they might change your life.
1:23:18
Jim O'Shaughnessy: Those are fantastic.
1:23:19
I love the one about love, because "The limits of my language are the limits of my understanding," I guess that was Wittgenstein.
1:23:23
But we use language often to conceal as opposed to inform.
1:23:30
And I think that I love that notion, because we would get the right word and then we could say those things.
1:23:37
And as to your first one, huge believer in that.
1:23:43
I wrote letters to all of my kids, and my wife who's a wonderful street photographer, put them all together in books with pictures.
1:23:51
And I have fun reading them, and I know that my kids have said that they're, wow.
1:23:57
Being able to look at what 24-year-old you was writing to my first child, Patrick, was kind of cool.
1:24:02
So I could not agree more.
1:24:08
Charles Jaffe, who is a newspaperman, but he also has a service where he actually does this.
1:24:15
He started it as writing obituaries, because people get very uncomfortable, they're in a very emotional time obviously.
1:24:21
But then what he found, and I'll have to ping him and see if he's still doing that, what he found was what people really wanted was not an obituary. They wanted a history.
1:24:33
They wanted, tell me about your life.
1:24:33
And we're doing it with my wife's mother who lives here in Connecticut with us.
1:24:39
And the stories are just fantastic, so I could not second that more. Well, Tom.
1:24:45
Listen, this has been absolutely fantastic.
1:24:51
I can't wait to have you back on, but for now I must bid you adieu. Tom Morgan: Thank you.
1:24:52
Thank you so much for having me.