Invest Like the Best with Patrick O'Shaughnessy
· Wolfgang Hammer
[00:00:00] S1: The way I think of it is story works in three layers. One, there's the external mechanics of how the character interacts in the world, and you can substitute character for product. That's a requirement. And in the case of technology, it's technical. You gotta have something that works. And then there are two more layers, which is a subjective layer of why is this series of events important to me and what does it mean to me personally? And then there is a philosophical layer. And on a philosophical level, it's probably where you try to find out, and you have to steelman this—and it's very easy to strawman it, but you got to steelman it—how you believe the world works today and what people believe makes a good world, because everyone most of the time believes they're doing what is the right thing. It needs to be done the way it's done for a reason. They're mostly not wrong. So there's a sort of almost intractable philosophical belief of how the world works and why that's a good thing. And then you juxtapose that with your own personal philosophy of how the dominant worldview is actually wrong. And you supplant that with your own personal philosophy. And ideally you do this—it's four or five points—and you do it on a direct refutational basis. So each one, you say, everyone believes this. I believe that. When this is steelmanned, this is really helpful. And then you do the same. So this is on a sort of global level about how the world—and when we talk about world, it's probably specific to whatever it is you're building or running. And then you do that for the personal as well. So you can do it for a customer. You can do it for a person you're selling to. How do they believe things should be done? And you juxtapose that with what you think should be done. So there's three layers, and you want to hit each one of them.
· Patrick O'Shaughnessy, Wolfgang Hammer
[00:00:00] S0: I want to just drill on these three layers of the story and try to turn it into a device that someone could take away from this and try to apply to themselves. If I'm listening and I'm curious about—I'll just keep it grounded in business—the story of my business at these three levels, is there a good question that I could ask, prompt myself with, to get at the external, the emotional, and the philosophical? Can you think of a question for each? [00:00:00] S1: I think the external would be, what are we doing? What are we making? What are we selling? What are we buying? Whatever it may be as a core function of the company. The philosophical is the why. So you believe in certain ideals, a certain way. You believe that the world should be on an abstract level. It's an abstract why. And emotional is a personal why. In the founder's case, it's very often why they are doing it. [00:00:00] S0: So maybe to rebuild it in the other direction, the questions are something like, how should the world be in a general sense? [00:00:00] S1: How do we believe? How do I believe? [00:00:00] S0: How do I believe the world should be? [00:00:00] S1: —life.
· Wolfgang Hammer, Patrick O'Shaughnessy
[00:00:00] S1: —life. [00:00:00] S0: Yep. The second layer is, why am I doing this? What is it about my specific story that maps back onto that? And the third is, what are we doing about it? And if you tell the company's story in that way, what does it galvanize that makes it worth pursuing in the first place? Because it seems the thing that I encounter over and over again is even companies making something really great don't know how to talk about themselves for whatever reason. I'm curious why you think that is. Why companies struggle with that and then why there's such a payoff to doing the work to figure it out.
· Wolfgang Hammer
[00:00:00] S1: I think sometimes it's because doing the thing is so difficult and complex that the idea of having to frame this now on top of everything else in some sort of philosophical way is overwhelming and doesn't even seem necessary at times. Of course, it's always present and people just are not conscious of it. So when the predicate understanding of what is actually happening is made conscious and it's communicated in a way that doesn't quite name the thing, but is able to metaphorically describe it, it can be extremely inspiring because it simply—it seems that these three elements of the external, the internal, and the philosophical combined unlock something that moves people very deeply. I was at Stanford when the turnaround for Apple in its second inning—I should not be using baseball metaphors because I have no idea what they are—but this was a man who had a philosophy, a personal worldview, and knew exactly what he was fighting against at all times and then acted accordingly with unbelievable discipline and courage and created something that was a work of art in many ways. He literally wanted to make business art, and he kind of did. Every one of these instances is completely unique, obviously, but I think that is what's possible. It also makes it just more interesting in general. It's very easy to be conformist in some sense because you know what's expected, but there's a lot left on the table too. At the same time, espousing a new narrative or finding a predicate understanding just unlocks a ton. It doesn't need to be this life-changing. Sometimes it can be incremental and just unlock a whole new world of potential that is very easily implemented. And in many ways, stories are very good at creating symbols which represent some sort of transcendental belief that people participate in. So in the sense that everyone has an ultimate concern, something that they're in absolute ways concerned about, we'll talk about it. But it can be many different kinds of things. It can be money, it can be a deity, it can be truth. And to be able to present an ultimate concern around a business organization that makes a product of some kind, I think fulfills personal life picture for the people you're communicating it to. So it just feels more important, it feels truer, and it feels more meaningful and worthwhile.
· Patrick O'Shaughnessy
[00:00:00] S0: We're going to talk a lot about applying some of these principles to the world of building companies or making things. One of the very first things I can remember you teaching me is something to the effect of everyone focuses on the new when trying to tell you about their thing, but that the right approach is maybe only 20% new and 80% familiar or something like that. Can you say more about this principle of storytelling or of delivering a message or conveying something to people, that the trap we fall in of trying to just focus on the exciting new thing?
· Wolfgang Hammer
[00:00:00] S1: The interesting thing about this whole world is that there are no rules to it. Everyone gleans and tries to come up with rules for themselves sometimes that seem to work more often than they don't work. But there's no book on this, really. Raymond Loewy, the designer, had a similar rule around 80/20. The most tolerable amount of ‘new’ before the human mind rejects it as incomprehensible. With the idea of originality and creativity, there's a sort of tension. Even that of itself is a story. There's this tension, especially now. Originality is highly prized. And there's sort of this belief that only the very new is truly novel. And with storytelling especially, but I even think, maybe this is confirmation bias, but I even think in business or in innovation, the new is really just the obvious uncovered through systematic trial and error over a certain period of time. So that by striving to stay within the obvious and trying to find a variation on the obvious, I think you have a higher chance, at least in storytelling, of discovering something novel that will still feel intelligible enough to categorize in the world. Some people have an ability to see something truly new and immediately categorize it. Those people tend to be very successful investors, for instance. But generally speaking, I think the idea of original is overrated. And the great filmmakers know this, great novelists know this, that you can begin with something very familiar and make it feel totally new incrementally.