The Knowledge Project with Shane Parrish - #47 Adam Robinson: Winning at the Great Game (Part 1)

Episode Date: December 11, 2018

Author, educator, and hedge fund advisor, Adam Robinson shares powerful lessons on winning the game of life. He teaches us how to learn, how to fail, and his three secrets of happiness and success. �� Go Premium: Members get early access, ad-free episodes, hand-edited transcripts, searchable transcripts, member-only episodes, and more. Sign up at: https://fs.blog/membership/   Every Sunday our newsletter shares timeless insights and ideas that you can use at work and home. Add it to your inbox: https://fs.blog/newsletter/   Follow Shane on Twitter at: https://twitter.com/ShaneAParrish   Learn more about your ad choices. Visit megaphone.fm/adchoices

Again, technology is designed to get us to respond, and the way to do that is to heighten emotions and hijack attention, and it does so with ferocious efficiency, and it's unrelenting. There's no escaping it, and so there's right now a loneliness epidemic in the United States. Welcome. I'm Shane Parrish, and this is The Knowledge Project, a podcast exploring the ideas, methods, and mental models that help you learn from the best of what other people have already figured out. To learn more about the show and our past guests, go to fs.blog slash podcast. My guest today is Adam Robinson. Here's a story that will tell you a lot about Adam. When he was a kid, he showed up at school one day and by chance played a game of chess

with another fellow in his class. Adam lost the game in only a few moves. The next day he wanted a rematch and the same thing happened again. Adam made a goal of beating the kid before the end of the year. And not only did he accomplish that, he went on to become a rated chess master and was mentored by Bobby Fisher as a teenager. And now he's got a life title. Adam also cracked the SAT using data to write tests as one of the co-founders of the Princeton Review. After selling his interest, he got pretty heavily into AI in the 90s and focused on developing statistical trading models for investing. Now he's an independent advisor to a select group of the best investors. I was only joking when I told Adam we'd need 12 hours to talk about all the stuff I wanted to

ask him in this interview. I wasn't as far off as you'd think, though. I'm going to warn you in advance, this interview is long, and it's amazing. Adam has an exceptional mind. This interview, though, is so long and so wide-ranging that we're going to break it up into two episodes. Without further ado, let's dive into part one. Adam, I'm so glad to be sitting here talking to you today. I'm really looking forward to our conversation. I'm delighted to be here. You invited me to The Great Game.

Can you explain that? Ah, well, The Great Game is a book, I wrote, an invitation to The Great Game. And so it's my first work of fiction. It's not out yet. So I gave you an advance galley, and I'm thrilled to be offering it to the world soon. What is the great game? The great game is life, and we play many games in life, the game of job or career, or starting a business, or the politics game, or the education game. Everything is a game.

And games suggest something that's not serious, but of course, games are intensely serious. If you want to find someone who is ferociously intense and focused, watch someone playing a game, especially something competitive. And so the great game of life is a win-win game. Democracy is a game. Capitalism is a game. and many of these games have played themselves out

Churchill once said democracy is the worst form of government except for all the others that we've tried and I think the same thing could be said of capitalism and it's the worst form of economic arrangement except for all the others and it is clear that the world

civilization is at an inflection point Buckminster Fuller wrote a book some 50 years ago called Utopia or Oblivion and I think that's the choice that we're presented with right now we can create a utopia or we can lead the world to oblivion and I don't think it takes much

reading between the lines of the headlines to know that the world is in trouble right now and is flying apart. So I wrote an invitation of the Great Game to be a beacon to offer an alternative game to the games that, the win-lose games that have currently played themselves out. And I think this was based on your learnings in,

was it 2016 or 2017, and you had come up with sort of three rules. Yes. So, so, so, I, I never know what I'm going to say until I say it, even here today. So I'm as excited as you are, Shane, and I hope the listeners are because I don't know what's going to come out of my mouth. So Tim Ferriss and I and Josh Waitskin and Rameet Sethi did a live podcast from the 92nd Street

Y. And I don't think he'll mind my saying this. he started off the podcast by directing the first question at me, saying what New Year's resolutions have you made? This was in December of 2016. And I said, I don't make New Year's resolutions. And he said, well, then how do you mark the end of the year? And I'm thinking to myself on stage, right, a thousand people standing room only thinking, I didn't know I was supposed to mark the end of the year. I'm thinking to myself. So I said something that off the top of my head that I thought sounded reasonable. I said, I think of the lessons that I've learned in the past year. And I make

an effort to apply them mindfully in the coming year. And he said, great, what lessons did you learn? And so now I'm on the spot. And now I have like Tourette's syndrome. So the words pop out of my mouth. I learned three things this year. Really. I have no idea why I said three. You'd think I would have said something like, you know, some platitude, like I learned the importance of the golden rule or something, you know, just to kind of pass the baton onto the other guess, right? Josh and Rameet.

But outspills, I learned three things this year. And now I'm thinking to myself, I'm really on the spot because now I have to come up with three things. And I said, the first thing I learned is the importance of connecting with others. first and foremost. And as I'm saying this, my Joe, I'm just making this up on the fly, I'm thinking, wow, that's really good.

In fact, I think that's what I have learned this year. And then I said, the second thing I've learned is the importance of creating fun and delight for the other, no matter what you're doing in any situation. And the third thing I learned was the importance of leaning into each moment and every encounter expecting magic or miracles and really i made all of that up on the fly it's

something i'd never given any thought to but as i'm saying it i'm thinking wow that's really what i did learn this year and i forget which author once said i never know what i'm thinking until i say it and that's pretty much me as well i never know what i'm thinking and so i said those things and that formed the kernel of an invitation to the great game. So you walk away from the 98 Second Street Y and you start, you're conscious of these lessons and you start implementing them. Yes, I'm deeply conscious of them, much the same way that I said to Tim,

I make an effort to apply the lessons that I've learned. And since then, the last 18 months has been an odyssey of sorts of playing the great game. And I wrote that book, the first draft, which you have a copy of, in 10 days, the first draft. And then I put it aside for a few months. And I wrote the second draft in another 10 days. So essentially three weeks. I spent writing the book.

It's a short book, those of you listening. And so it's meant to be read in an hour or two and reflected on. And actually not reflected on too much. It's meant to be implemented. Right. And it's a doing book very much. Like you're playing this game, whether you're aware of it or not, here are some rules that will change the way you see the world

and the way you probably interpret the world happening to you or with you. Yes. And, you know, the revelatory aspect of that, Shane, was that I've lived my life in the world of ideas, right? My success in the world, in terms of career and the businesses I've started and the books I've written, have come through the world of ideas. and constitutionally, I'm an introvert.

And so the revelation of 2016 into 2017 and now 2018 has been that the real magic is connecting with others. If you want to do anything in the world, and this is as true personally as well as professionally, it's all about creating a vision for others to join. And I don't care whether you're starting a business, or a relationship, you yourself are offering by your presence and by your imagination and by your vision a possible future that other people or a special someone says, yeah, I want a piece of that

that with you. And that's how businesses are started. That's how movements are started. And one of my concerns about the world right now is the lack of positive visions, a lot of negative visions, a lot of negative visions, a lot of anti, and the anger level is rising. And one of the reasons I wrote an invitation of the great game was in response to that to try to change the tenor of the global conversation. Reading, playing, learning. Stellist lenses do more than just correct your child's vision. They slow down the progression of myopia. So your child can continue to discover all the world has to offer through their own eyes. Light the path to a brighter future with stellar lenses for myopia control.

Learn more at SLR.com. And ask your family eye care professional for SLOR Stellist lenses at your child's next visit. Why do you think the global conversation is, I mean, if you look at the, this based on statistics, we're living better lives, longer lives, or at least longer, maybe not better? How do we define better? Why are we getting so negative? Well, it's a good question. You know, speaking of the statistics that you refer to, an economist, Lomborg, forget his first name, wrote a book called The Skeptical Environmentalist, right, about 20 years ago. and this was an environmentalist who set out to describe the ways in which the world had eroded.

And he discovered, to his surprise, that by most metrics, the world was improving, right? But these are quantitative measures. And right now, there is a global, certainly a U.S., but I would argue there's a global, loneliness epidemic. It's very, very serious. There's a... Do you think that's fed by technology?

It's hugely fed. It's hugely accelerated by technology. Think about the damage that technology, which is designed to hijack your attention. That's what technology is designed to do. and when I say technology, I mean Google or Facebook or your email, all of that is designed to hijack your attention, literally hijack your attention. So when you find it difficult to put your cell phone down, that's engineered. That's not just like a random like, wow, I can't seem to put

my cell phone down. All of that's engineered. And it's resulted in a hijacking of attention. And if there's one thing human beings need to know how to do is control their attention. But technology has hijacked attention and has created a world, if you think about it, technology is monetized. Once your attention is hijacked, that attention is monetized by making you click on links, right? That's how the Googles and the Facebooks and arguably even Netflix, right, it's designed to make you respond in a certain way. And again, it's all engineered. And so the problem with that is think about what I would need to do to you, Shane, to make you click on things. And I will tell you, there are only two ways.

One is to reflect the world that you think. And so Google does that, right? If you think the world is a scary place, then Google is going to reflect that back to you. If you think that the left or the right is politically benighted, then Google and Facebook and the entire Internet is going to reflect that back to you. So you, Shane, all individuals are reflected back. their views of the world are reflected back to themselves by the internet. So we become more hardened in our own views, right? We think... Because now we have tunnel vision almost. We're not being exposed to you. We're not being exposed to anything. In fact, all we see is exactly what we expect to

see. So the internet and technology is one big confirmation bias engine. And so the first way is to reflect back what you think, but there's another way I can get you, Shane, to click on things, and that's by presenting what you don't like. Outrage, almost. Right? So if I get you excited or if I get you angry, you're going to click. And so the, again, technology is designed to get us to respond. And the way to do that is to heighten emotions and hijack attention. And it does so with ferocious efficiency. and it's unrelenting, there's no escaping it. And so there's right now a loneliness epidemic in the United States. So I'm going to tell you something that just blow your mind chain.

So a few weeks ago, I wanted to tweet on a Sunday morning, I wanted to tweet about how people are always getting ready. They're always getting ready to start their training for the marathon, or they're always getting ready to ask that woman out on a date or they're always getting ready to ask for a raise or start a business or start the novel. So I go to Google. I wanted to see what activities people are always getting ready for.

So I type in, how can I learn? And I let it auto fill. Now, this is going to blow your mind. The top response was English. And that makes sense. How can I learn English, right? Number two of the top 10 was Spanish, which is interesting, right? It's a global language.

Interestingly, of the top 10 responses, Chinese did not make the list. The next language was Russian, oddly enough. Go figure, which was in like seventh or eighth place, Japanese right behind it. So of the top 10, how can I learn English, Spanish, Russian and Japanese were the languages that made How Can I Learn? Then, this is what's going to blow your mind.

Of the top five, number three, four or five, were interchangeable, depending on the person. Number three was, how can I learn to sing, which is kind of cute. How can I learn English?

How can I learn Spanish? How can I learn to sing? Right? Number four was, how can I learn to code? again makes perfect sense but number five was the mindblower it was how can i learn to love myself really yes now i was so stunned by that mind you what that means is lots and lots of people in the united states are looking up the question how can i learn to love myself notice the shame

involved in the question it's not something you can ask your best friend right you You couldn't ask your parents, how can I learn to love myself? It's a very private question. It's so private. It would be hard to ask your best friend. And I'll come back to best friends in a second. I was so stunned by this that I immediately texted several friends. I said, can you type in how can I learn into Google and let it auto fill? because I thought maybe this is just Adam Robinson's version of Google. Right, of Google. Maybe Google think I'm a loser, right?

Like, how can Adam Robinson learn to love himself? Based on your search history, we think you need to learn to love yourself. Yes, exactly. And everyone had exactly the same results. Everyone had English first, then Spanish, then 3, 4, 5 was to sing, to code, and learn to love myself. Wow. just it would interchangeably depending on the friend like little tweaks I'm sure if you were a teenage girl probably how can I learn to sing if you were into science and technology maybe code was up there

but how can I learn to love myself is startling it's really mind-blowing it means that it's an immense problem that no one has anywhere to turn to and ironically we have this loneliness up going on. And by the way, this is manifested. You mentioned statistics before, Shane. There is a suicide epidemic among teenagers in the United States, which is very serious. I know you have children, right? So there is a serious suicide epidemic in the United States, and it may surprise you the epicenter of that suicide epidemic. Of all the cities in the United States, the one with the highest teenage suicide rate is Palo Alto. which is tech central, right? And so the statistics you cited, you know, GDP, average, you know,

wages earned, life expectancy. The question is the quality of that life, right? By quantitative measures, people should be happier and yet they're not. Right. It's the exact opposite, right? You would think the irony is that we have material wealth undreamt of. The average person today lives better than the average king a couple of centuries ago. Mm-hmm. And yet... We're not happy. We're not happy.

So clearly money is probably not the... Oh, not the answer at all. That begs the question. I want to unpack a few things here, but what is the key to happiness then? Well, I'll tell you one key to happiness is not to look for it. The paradox of the most important things in life, happiness, love, success. is that you can't look for it. If you're looking for happiness, you're not doing what you need to do to be happy. If you're looking for love, you're not being lovable, right? If you're looking for

success, you're not doing whatever it is you need to do to be successful. So one lesson with happiness is not to look for it, right? Victor Frankel wrote about that in his book, Mansearch for Meaning. And Franco was the Auschwitz survivor. Yes, yes. And so think about the life lessons learned there in that cauldron, in that hell. And yet his message was optimistic and life-affirming, as we would expect from someone who was able to survive, right, those horrors. And so I believe the secret to happiness is to be fully engaged in your life. happiness is something that catches us by surprise. It's a byproduct, right? If someone were to ask me right now,

if you were to ask me right now, Adam, are you happy? I would say, I don't know. I'm so engaged in this interview that I have no idea actually how I'm feeling. I mentioned before the importance of directing your attention. There are only two places your attention should be, either on the task at hand or on others. So if you're feeling any negative emotion, you feel, whether it's doubt or fear or frustration or loneliness, it's a sign to redirect your attention. And for me, one of the problems with self-help books is they rivet your attention on exactly the one thing it ought not to be focused on yourself. So you look at any of the great religious traditions and the great philosophers and the great poets. They all

have the same message of focusing on others and being of service to others. And that sounds like one is abdicating oneself in that. But in fact, that's the way to find yourself is through others. And I think the people who are going on search, I'm using air quotes now, to find themselves will never find themselves. You find yourself only in the midst of others. And again, that was my great revelation of 2016. Were you always like that? Was this a conscious change? Like, how did you actually go about change?

Like, what are the mechanics behind I need to divert my attention to others or I need to focus on the task at hand? Like, that does not sound common. Right, no, it's not. And it's so funny that you should ask that question, Shane. It's not funny because, of course, I knew you would ask all the pertinent questions.

But it's a question I've gotten a lot in the last year and a half. Like, what happened? Was it an event or a moment or something? And no, it happened up on that stage. And it was dot connecting, and it was my subconscious just saying, this is what is. And the more I thought about it, the more I realized that that was truth. Truth for me. Mind you, I'm not trying to convince anyone of those truths.

I just offer them. But it's one thing to verbalize it. It's another thing to bring it from your subconscious to your conscious. Like, how do you put that into action in terms of your next task, your next interaction with someone, your next? Right. So I think it's, well, that's a layered question. So I think it's best viewed in terms of biological rhythms of inhaling and exhaling. So when I'm alone, I am inhaling.

and I am focused only in my world of ideas. And once I leave my home and I go out into the world, my attention is solely focused on others. And think of how a young child feels when he or she it's birthday morning. And they wake up and they're so excited because they know there are going to be lots of presents and delights and surprises.

I wake up every day like that. can't wait to get outside. Like, I couldn't wait to meet you for the magic that would occur here and now. And we'll continue to unfold throughout this interview, throughout our interaction, right? There's magic happening here. And so the task at hand is the focus on what do I need to do to accomplish my goals. One of my problems with self-help books is they're so thick and they're Most how-to books and self-help, they're not really how-to books. They're what-to books. They tell you what to do, but they don't actually show you how to do it. And so the rules that I came up with, connect with others, create fun and delight, lean in to each moment, expecting magic or miracles, are things that you can actually put into everyday practice. And I can't tell you, the only people who have got my book so far are friends and a few close relations to get their feedback. And everyone says the same thing. I look at the world differently right now. And in fact, when you look at the world

differently, you look at yourself differently. And so that's another reason I wrote the book, to change the way people view themselves. In the book, you said the questions that you ask of the world shape what you see. I'm paraphrasing. What are the questions we should be asking of the world. Ah, well, hmm, I have to think about that one. Well, or one of the most powerful questions we can be asking. Sure. Well, one question is, how can I create fun and delight for this person right now? And engage the person in play. I think much of life would be improved if we reversed the seriousness that we apply to work, we should be applying to game. We should be applying to games, and by games I include sports, all kinds of games, and to be more playful about the

serious things in life. And so that's a question I asked myself, how can I create more play in this situation? And again, for others, which is exciting and playful and fun for me. And why do I do it? Because it's fun, because it feels good. And I don't know of any higher pleasure than that. So that's one question I ask. I think the questions you ask will vary from situation to situation. So for example, say someone goes on a job interview, right? They're probably thinking, oh, how can I, I'm using air quotes now, impress this person or make this person want to hire me. And instead, if your question is simply, how can I create fun and delight for this person? Then it's not an interview anymore. Then it's a game. And if you truly create

fun and delight for the other person, that person's going to want to be around you. And assuming you have the qualifications, you've just immeasurably improved the odds that you're going to get a job offer. I think often a question that I ask myself is, who do I need to be in any situation, as opposed to what do I need to do? There's a lot of doing and not enough being, right? What do you mean by that? Who do I need to be? who do I need to be in any situation? Who am I? Who am I in the world? Who am I in this relationship? Who am I in this job as opposed to what do I need to do? And I'm going to start going off on tangents here in a second if I begin to answer that question. But I think that comes back to life mission. You know,

what are you here to do, which will move us down a whole other track, which I know we'll get to before the end of today. But let's circle back for that. I want to come back to one of the questions you mentioned earlier was, what do I need to do to accomplish my goals? How do you answer that? Well, by planning at that point, for example, I have a book coming out, right? So, and I need to do a lot of things to promote that book.

So I need to create a website. I need to have a higher public profile. I need to engage friends and other influencers to start talking about my book, to start a conversation around it. And so I know these are practical things that I need to do over the following X months to get a message out, right? So again, it comes back to, you know what it comes down to? Actually, I think these are core questions is what vision do I have for the world, for myself, or for this person, if it's a relationship, a friend, or something romantic, what vision do I have for people in the world? And it could be a subset of people. It could be for young children or for

adults or women or whatever it is for America. And then how can I enroll others in that vision? Einstein said that to change the world, which is the result of our thinking, we have to change the thinking behind the world, which is great, Albert, thanks so much, but he didn't offer any guidance for doing that. So the world, and I have an algorithm for changing the world, and there are really only two ways you can change someone's thinking. You can either change the questions that person asks, or you can provide them with more inspired answers. Those are you really only two levers, change the questions the person asks, or offer more inspired answers for that question. And all human institutions, all human creations, are answers to questions.

Democracy is the answer to a question, right? How can everyone have a say in his or her political, economic, social affairs? Slavery is the answer to a question. Slavery is an answer to a question. How can I extract economic value from others without compensating them? Now, it sounds like it's a horrific question. But actually, it's only the answer that's horrific. After all, there are more inspired solutions for extracting economic value without compensating people. For example, Wikipedia, right? Wikipedia extracts economic value from people without compensating them. It offers them the opportunity to extract intrinsic value, intrinsic worth from the activity. So even something as horrific as the institution of slavery, it's not the question that people have asked,

it's the answer people have come up with. And so what's needed in the world right now is more imagination to come up with more inspired answers to the questions people are already asking. And either that or you offer them new questions. It's usually easier to offer more inspired answers because once a person asks a question, it's hard to displace that question, right? They want an answer. A lot of the questions seem like questions we've been asking for centuries. Absolutely. I would argue that civilization, as we see it now, is an answer to a primal question, which is going to take us a little deep now, but the pain of human existence. I think that's what civilization is in all its forms, is an effort to address the pain of human existence. We are

born, and at some point soon after birth, we realize, or at least we perceive ourselves to be separate, which means we're alone. We acquire a sense of mortality, which creates fear and isolation, and I would argue, anger. And so modern civilization is an attempt to deal with that. And, you know, the founding of America, you know, it's all about the pursuit of happiness. I'm using air quotes now. But I think happiness has to do with the escape from pain, the pain of human existence. And yet there's, I don't believe it can be escaped. I think it can be embraced. And there's freedom in embracing it and accepting it.

And so, yeah, I think that's what modern life has come down to, is we've realized that civilization, such as we see it, isn't answering that fundamental question. Gandhi once said there's more to life than making it faster and that's what we've done we've sped things up technology has us doing I'm reminded of a

funny plaque I have in my apartment is a woman drinking a cup of coffee with a cheery expression on her face and she says hmm coffee do stupid things faster with more energy and that's what technology and civilization enables us to do

stupid things faster with more energy. And we need to, as a civilization, certainly as a country, ask ourselves, what positive things are we trying to build? And let's move towards that. There's a lot of anti, anti-this, anti-that. And I understand the anger. I really do. But it's not helpful. So, yeah. I want to come back to something you said about thinking and how we learn to think better. How do we learn to think better? Huh. You know, that reminds me of a great quote by the physicist, Niels Bohr, who chastised one of his colleagues. And he said, no, no, you're not thinking. You're just being logical. And there are limits to logic. And I think that the thing about thinking is it's a relentless asking of questions, that one question will suggest, will offer an answer,

which will suggest another question. And so, part of thinking, at least logical thinking, is the relentless asking of questions. My greatest insights, such as they are, the meager insights I've had in the world, always come to me spontaneously out of the blue. And I know you wanted to ask me about the Princeton Review and other things and my work in investing and my insights. And they all came out of the blue. They weren't a logical chain of deductions, and therefore, this is the answer. The answer pops into my head, and then I work backwards to what steps should have gotten me there. But I never know beforehand, really.

So thinking, I think part of it is listening to your unconscious. Modern thought, logic, is the creation of the ancient Greeks, perhaps. a civilization or two earlier than that, but relatively recent, a few millennia, a modern history, and logic only takes us so far. The essay, as G. K. Chesterton once said, you can discover truth by logic only if you've discovered it first without it. And I think that's true. The great truths can't be reached by logic. I can prove that logically. If you think about it, we've had many billions of people on this planet who've devoted a lot of their lives to thinking about the world, using logic, and I'm using air quotes now,

common sense. And yet, they haven't answered all the questions. So if logic could get us to the answers we seek as beings, as human beings, to the real questions, the real insights, the great truths with a capital T, then logic would have given them to us centuries ago. We'd have all be a little book, in fact, a booklet. Here, here are all the. answers. But no. And the great insights come from our unconscious, somehow, unbidden. They just out of the blue. And so yeah, I don't think any of the great, I don't think, for example, Stephen Jobs was walking around, what, 40 years ago thinking, how can I change the world? Right? He and Wozniak had those little Atari mini computers or something. I think they were, it wasn't Atari,

but it was something like that, right? You look Packard little things, and they said, oh my gosh, this is going to change the world, right? The homebrew kits. Right, those homebrew kits, right, that you could just make on your own. And so notice that Stephen Jobs didn't, I don't even think whenever he first saw that kit, he was asking himself, how can I change the world?

He saw it, and then he realized, oh, my gosh, this is just going to change everything. Yeah. And I think the great insights happen like, that. They come not from logical thought. Now, because you're going to have to apply logic at a certain point. But I think one thing that should be taught is, certainly in schools, to the extent that it can be, is allowing students to get in touch with their unconscious and to listen to that voice. How do we learn to do that? What does that mean? Gee, you know, it's a bit like asking

Bob Bowman, who is Michael Phelps coach, how do you get, you know, Michael to, you know, extend his arm reach, you know, and he's going to go, well, I don't know. It's just the inspiration of the moment. So I'm not sure that I can offer an easy rule for how do I, how would I teach someone to get in touch with his unconscious? I think it would start with just allowing themselves some time. Here's a clue that you've tapped into truth with a capital T

and that your unconscious is speaking, is that the answer will surprise you. You'll be startled by it. In the same way that I was startled by what I said up on stage, that was something I had never thought about. I'd been an introvert my entire life. And so here I was up on stage talking about the delights of extroversion. And as I was saying it, it surprised me.

I had no idea where that came from. So, yeah. Talk to me about the power of things that don't make sense or surprise us. What does that mean? It means our expectation of the world is different or off? Yes. Well, you know, Sherlock Holmes once said, it's a capital mistake to theorize before you have all the facts.

And I think it's silly advice with respect, Sherlock. We can't help but theorize beforehand. hand, before we have all the facts, it's not clear what all the facts, I'm using air quotes, constitutes. But it's more important to have expectations about the world and then look for anomalies. Surprise is always, what surprise is telling you, Shane, is this. Your model of the world is incorrect, which is fantastic. It's a learning opportunity. That's what surprise is. And so I know when people talk about surprise, that's surprise is an investing algorithm for me. When things do, you know, don't make sense. When people say things don't make sense, all that tells me is they're not

thinking about the world correctly. So when someone says, for example, it makes no sense why 10-year yields, U.S. 10-year yields remain below 3%. After all, the Fed's talking about how well the economy is doing. And by historical standards, 3% is pretty darn low. So I don't understand. It makes no sense why 10-year yields aren't going higher. And when someone says that, I know that 10-year yields are going to stay below 3% for quite a while because that person's model of the world is in conflict with what that person is seeing. That person is in denial.

So when someone says it makes no sense why gold keeps going higher or Tesla stock doesn't sell off or, by the way, I'm not offering investment advice, but when people say those things, I know that they're experiencing confirmation bias, that the world is conflicting with what they think should have.

happen. And really, when someone says, it makes no sense that, really what they're saying is this, I have a dozen logical reasons why gold should be going higher, but it keeps going lower. Therefore, that makes no sense. But really, what makes no sense is their model of the world, right? So I know when that happens, that there's some other very powerful reason why gold keeps going lower, that trumps all the logical reasons, I'm using air quotes, the logical reasons, the case, as it were, their argument for why it should be going higher. So I know once I hear that, whether it's from an individual or some talking head on Bloomberg or CNBC, that there are a lot of traders out there, investors who are still on the wrong side of the trade, staring in disbelief

about what is going on right in front of their eyes. And that's true, not just in the the investing sphere. It's true in the political sphere. It's true in any sphere. If you want to find gold, it's where things don't make sense. I spoke at length with Tim about that, things that don't make sense. But that's an algorithm for finding opportunities. The question is, where do we get our good ideas? And one way to get good ideas is to look where no one looks. And I'll tell you one place that no one looks where things that don't make sense because they dismiss them. They go, well, that doesn't make any sense. And they shake their head and they move on. Instead of diving in and exploring it. Instead of diving and going, yeah, let's find out why that's true.

I mean, you could almost lay it out as an algorithm. I'm not offering investment advice that when somebody says it doesn't make any sense that X keeps going lower, get in the trade. It's got a lot lower to go. It's probably going to go lower. It's going to go lower. Yeah, for sure. And the more people that say that, and they'll say things like this. They'll say, or they'll say permutations of that. They'll say, after all, how much lower can go, go? Right. They're all permutations of the same thing, a person in denial, instead of seeing what's actually going on in front of them.

So let's get into investing a little bit. I want to talk about the metaphysics of investing. I just want to preface, this is not investing advice, and maybe give a bit of your background and your day-to-day for people listening so they have a better understanding of your view of the market. Sure, sure. So, well, I'll give my view of the investing process, and I'll contrast that with fundamental analysis. So the most common form of investment approach is called fundamental analysis. And fundamental analysis was invented by Benjamin Graham and his co-author, Dodd. Back in 1934, he wrote a book called Security Analysis, and it's now in the seventh edition. And it's a book

many hundreds of pages long, six or seven hundred pages long. And in it, he coins a phrase intrinsic value. And I know I'm going to get a lot of hate for saying this, but intrinsic value is a fraud. And I can demonstrate that. It's a fraud for several reasons. First, I'm using air quotes. What he really meant by intrinsic value is true value. But he knows if he used the phrase true value of something that people would say, hey, wait a second, what's the true value of Facebook stock or the true value of gold, right? How do you, would you even determine that? So he creates a phrase called intrinsic value. Nowhere in the book, several hundred, sorry, six or seven hundred pages long, does he define it? Not once. That's not true. I think on page

29, he defines intrinsic value as that value justified by the facts. Well, that's not a definition. That's like saying gravity is when things go down. Like, okay, well, how justified, by which facts? There are many numbers in the book, right? Receivables and various metrics by which one might determine, I'm using air quotes now, the intrinsic value, but there's not one formula. There's no intrinsic value equals X plus Y, raised to the nth root,

endth power, rather, plus this factor times 27. So Benjamin Graham, with respect, offers not a single definition of the phrase he coins, nor any formula for determining it. And the reason he can't define it is there's no such thing as true value. And notice the implicit premises of fundamental analysis, that there's some, I'm using air quotes now, a true value that exists out there. Let's say you and I decide the true value for Amazon stock is $122.47. Even if God were to whisper into my ear, the true value of Amazon is $122.47. I can't use that information. Why? Because nobody in the world thinks it's

$122.47. The world thinks it's worth, I don't know what the price of Amazon stock is now. a thousand bucks or something. It's pretty darn high. So the fundamental premise of fundamental analysis is this. There's a true value that human beings, because they suffer various behavioral biases, drive the price of away from that. Again, I'm using air quotes, the true value. And I believe, as the fundamental analyst, A, that I can determine that true value, B, that I will have good reason to know that I've determined that true value, and it's not a guess. C, that everyone else is one day going to wake up and realize what the true value is in a reasonable time frame. Okay, but hasn't Warren Buffett become like one of the richest people in the world off that very algorithm?

Yeah, well, Warren Buffett is a genius, right? Warren and Charlie Munger, right, two of the smartest guys on the planet, they could do anything and be successful. But is that their approach, this fundamental analysis as you understand it? Certainly, well, I'm not sure. I'm not sure. I know that Buffett, Benjamin Graham, not to take anything away. Benjamin Graham was brilliant. However, as an investing approach, notice that what Buffett does is he buys a company and intends to hold it forever, which is different from what most, the way most people invest is they buy a stock and at a certain point they intend to sell that stock. That's not what Buffett has done. Buffett has acquired companies, right? He will acquire

good companies at good prices and hold onto them forever. That's his investment approach, whether that I don't believe that fundamental analysts who are looking at quarter to quarter earnings and trying to predict what the PE is going to be X months from now are doing what Buffett does, right? I mean, it's interesting that you should cite Buffett because Buffett is, and by Buffett, Buffett and Charlie are pretty unique, right, in their investment results. I mean, there may be a handful of other investors in the world who've beaten the market to that degree by that length of the time. So if fundamental analysis works, the question is, why is Buffett the only person who can do it? Clearly, he's doing something else. I don't know what the something else is. So here's the other

problem with fundamental analysis. It's one of eubris. Every fundamental analyst believes he or she using exactly the same tools that every other and information and information that every other MBA former MBA student has acquired reading security analysis is going to discover something no one else is discovered but isn't that what we're taught we're taught that you know you have to look at the information differently you have to connect it differently you have to work harder to get more information well if you connect for sure but if you connect it differently and you get a price that's, I don't know, twice, let's say you work out, what's gold trading for now, $1,221. This is you do your fundamental analysis and decide, you know what, the price of gold

should be $2,000. Well, good luck with that. Everyone else thinks it's worth $1,221, right? So if you buy gold, expecting it to go up, you are, in fact, it's an article of faith. You believe that other people are going to wake up and sooner or later are going to realize what you now think. that gold should be worth $2,000 an ounce. And that's the fundamental sort of view of investing. Right, that's right. The fundamental view of investing is that you can figure out something about the world that no one else has figured out.

It's a bit like prospecting, right? Gold prospecting. You can go out with your pan and find something that no one else is found. Well, you know, the difference between investing and gold prospecting is that gold prospecting, you actually find gold that you can actually go sell, right? if you find a value that no one else is found, what makes you think, if people are irrational enough to believe that the price of gold is different from what you think it is, or should be, what makes you think they're going to become rational tomorrow, right? There's a great quote

by John Maynard Keynes, markets can stay irrational longer than you can stay solvent. Good luck with that. So how do you get an edge in investing that? Right. So, so. We're sorry, we can come back. There's fundamental analysis. There's other ways to look at this. There are other ways to look at the market, right? The technical analysis. So the technical analyst says, I agree with everything Adam just said. There's no way you can figure out the true value. It doesn't really exist.

And after all, there are millions of people out there in the world. What makes me think I can do it any better than they can, right? So the technical analyst says, just show me the price charts. And by the patterns of those price charts, I will be able to project where the price will be tomorrow. or X weeks or months from now, right? The problem with technical analysis is one of confirmation bias. The technical analyst has literally

hundreds of technical indicators, and each indicator has literally limitless parameter settings. And you can... But those technical indicators are trends, are they not? Well, their attempts to quantify trends, but there's no statistical proof that any of them work.

So, for example, you will hear someone say, the price of general motors just crossed its 200-day moving average. Well, okay, what does that mean? Like, okay, does that mean it's going to go up? Does that mean it's going to go down? Over what time frame? Statistically speaking, when a stock reaches its 200-day moving average, approaching it from the upside going down,

when it penetrates to the downside, it's 200-day moving average, statistically, what can we expect going forward? And you never find those statistics. ever. And so the problem for the technical analyst is one of confirmation bias. Since there are literally limitless parameter settings to hundreds of technical indicators, you can find an indicator and a parameter setting that will argue for pretty much any position you want to argue, right? There's something out there, right? So there's a third way. And John Maynard

Kane said, successful investing is anticipating the anticipation of others. And that's fascinating, right? John Maynard Keynes, who was not just one of the great economists of all time. And by the way, the one economist Warren Buffett ever cites. He was also a great investor. So during the Depression, John Maynard Keynes ran one of the Cambridge College portfolios, and it was up three or fourfold during the Depression in World War II. He was a great investor. And so how do we anticipate the anticipation of others? That's very clever as a but how do we do that? And we can do that using game theory. So my approach to markets is simply this, to wait for different groups of investors to express different views of the future and to figure out which group is right. I look for differences of opinion, strongly expressed, and decide which one is right. It's a bit like this. Imagine a flock of birds. Imagine a murmuration of starlings, hundreds of thousands of starlings. And Shane, you say, which way is that flock going to turn? I would say to you, I'm not sure, but I'll tell you, follow that one bird over

there. I would single out of bird and say, follow that bird. Whichever way that bird flies, the entire flock is going to fly, right? So I don't, I can't predict the future, but I know what I need to see that will tell me the future's about to change. So right now, I'm a lot. I'm you and I are in New York City and it's sunny outside. Suppose you said to me, Adam, when is it going to rain? I might say, I don't know. However, I do know that if the barometric pressure falls by more than three millibars or whatever, in a 15-minute time frame, it's going to rain within 15 minutes. So let's just wait for that. Until then, it's sunny. Right. Right. So Ray Dalio views the market and the economy as a machine. And I think he's brilliant. But it's a machine created by the mind

of individuals. So whatever else you may think about the world, the world is the product of our thinking. So is the economy. So are investments. If you think about it, an investment is nothing more than the expression of a view of the future. So when you, Shane, buy Facebook, or you short the dollar yen, or you buy gold or short U.S. treasuries, you are expressing a view of the future. Your view of the future can be right or wrong, and your means of expression can be right or wrong. but that's what you're attempting to do, right? So, for example, you may believe the U.S. economy is improving. So I think that people will start eating in restaurants more frequently.

So therefore, restaurant stocks are probably undervalued to use the fundamental. So I'm going to buy restaurant stocks, right? And you might get more granular than that. You might buy McDonald's versus some higher price point restaurant chain, right? But nonetheless, that's what you're attempting to do. So all markets are is the means by which people express views of the future. Now, I'm going to share one of my favorite investment books of all time, and it's not an investment book.

So if you and I were to go to Columbia Business School or Harvard Business School right now and ask the assembled MBA students, what is a trend? They wouldn't be able to define it at all. In fact, I don't know that any investor in the world can define a trend. They can define it simplistically like this. A trend is the continuation of a price series. Yeah. Well, that's great.

What's causing the continuation, right? And I'll tell you what a trend is. This is an investment trend. Actually, it's true for all trends. A trend is the spread of an idea. That's all a trend is. That's the spread of an idea. And it doesn't matter whether the trend is gluten-free food or raw milk.

Raw milk or Facebook. A trend is merely the experience. of an idea. So, for example, buying Tesla stock could be the expression of an idea, the future of batteries. Wasn't that Peter Lynch's book one up on Wall Street? It was basically catching on to these trends early and then... Yeah, you know what? We have to be careful with that. Tim asked me exactly the same question and asked me about the same book. And I said, my problem with books like that, and Peter Lynch was a great investor, right? He ran Fidelity in the 1980s and 90s, like a legendary investor, a legendary investor who happened to

invest during, you know, two of the biggest bull markets of all time. So maybe some luck was involved there. And the problem with a book like One Up on Wall Street is it tells the man and woman on the street, you can beat professionals at their game. Well, those professionals are there, they're 24-7 thinking about ways to take your lunch money, right? So my concern is that it gives a false sense of... Not only can you do that, you can do it part-time while you work a job and... Right, that you walk into Starbucks and you see a long line and you go, wow, Starbucks is... People are drinking a lot of Starbucks.

I should buy Starbucks stock, right? Like, no. There are people who spend all their hours, all their time thinking about nothing but Starbucks stock or Facebook or Berkshire Hathaway or gold, whatever it is. And they're professionals. And investing is a gladiatorial pit. And if you think that you can compete with professionals at that game, well, good luck. You know, reminds me of something Buffett once said,

if you're in a poker game for 30 minutes and you don't know who the Patsy is, you're the Patsy. So the people who buy books like that, they are Patsy's for Wall Street. So you asked me earlier, what is your edge? You need to have an edge and you need to know what that edge is, right? And I don't care. By the way, you could be, you could work in a restaurant and think, I know everything there is to know about restaurants. That doesn't mean you're going to be a good investor of restaurant stocks, right?

So I have concerns about how to books like that because they're inviting the public to compete with Wall Street. And by the way, Wall Street, that's how they make their money. So they like books like that. They love books like that. Good. Let's lots of people think that they can compete with us. Well, good luck, right? And it's an ecosystem, and it's clear, it's a predatory ecosystem, and not a nice one.

So a trend is an expression of an idea. Idea. So my spread of an idea. The spread of an idea. So one of the genius books written in investing, but it's not seen as an investment book, was written in 1962 by a guy named Everett Rogers, and the book is called The Diffusion of Innovation. right you know that book Shane and so only because you mentioned it to me oh okay that's funny so the

diffusion of innovation um i is a poorly named book because really what he the diffusion of innovation is the spread of ideas right innovation in rogers framework was an idea a new idea right so what he meant by innovation wasn't technology he just meant a new idea so the diffusion of innovation was really a book on the spread of ideas. And so I'm sure you're familiar with the phrase early adopters that was coined by Everett Rogers in his book. So Everett Rogers said all ideas pass through the following stages. You have an innovator who comes up with an idea. And then you have early adopters who go, yeah, that's a good idea. Yeah, I agree with that. Now, most people aren't yet convinced. Most people need social proof.

So the majority doesn't come in, and the first part of the majority is the early majority. They go, yeah, you know, there seems to be something to this new trend. I think I'm, yeah, I think it's, I think I'm going to buy that stock too, or I'm going to buy that clothing line or whatever it is, or I'm going to go see that movie, right? Then the late majority, and then the laggards. The philosopher Chopinard once said, all truth passes through three stages. First, it is ridiculed. Second, it is violently opposed. Third, it is accepted as self-evident. And trends start like that, by the way. Trends start because a new idea has formed in the marketplace. And this is a podcast, so I wish I could show charts, but I'm going to step through a way to spot trends as they're happening. There are only three ways a trend can start. And I'm going to describe all three. So this is, this is the benefit of many, many years of studying markets.

There are only three ways a trend can begin. The first is... And this applies not only to financial markets, but all trends. But you'll see it most clearly in financial markets. Right. So if people can visualize the price of a stock going up for many years. Berkshire Hathaway. Well, I don't want to...

We don't want to name a company. I'm going to name a company. Stock X. X stock. Well, careful, that's a symbol. a company that looks like a hockey state right okay the stock is just going up into the right on a chart everyone will assume that it's going to keep going up in that direction right it's just going to continue right they'll extrapolate and they'll go it's been going up for 10 years going to keep

going up yeah right certain far-sighted individuals and we'll get to who they are in a sec i'm going to reveal lots of secrets here so certain far-sighted individuals will realize that that's not the future. That in fact, the stock is not going to be higher six months from now. It's going to be lower. Okay. And we'll get to who those individuals are. So what do those individuals knowing this do? I'll tell you what they do. They get out of their longs and go massively short. So you will see a sudden drop in the price, like an air pocket drop in the price of the stock. Now those far-sighted individuals, they've placed their bets. They now step aside. And everyone else looks at the price of the stock going, what the hell was that about?

So they start to buy, because it's, I'm using air quotes now, oversold. Right. Which is a common Wall Street term meaning. Right. Oversold means, well, again, oversold assumes that there's some true value where it ought to be. Okay. Right. And it should bounce back, right?

Oversold means it dropped really quick. Right. It shouldn't be down there. Yesterday it was 100. Today it's 85. That's oversold. Take a look at Facebook, right? Facebook drop, what, 19% in a day?

You could say that's oversold, and yet the price didn't bounce, interestingly, right? Here's an investment truth. I'm not offering investment advice, but think about a football player who's knocked down to the ground, American football. We expect the football player to get right back up. If he doesn't get up, it means he's injured. Or if he gets up slowly, it means he's injured. Same thing is true with the stock. If it gets knocked down, we expect it to bounce back.

And if it doesn't bounce back, something's wrong. So to go back, stock's been going up. You have a sudden sharp decline because the far-sighted individuals and will come back to who they are. It's not, by the way, there's sort of a mythical group of people, the smart money, right? Doesn't exist. But I will show you how we can get to the same result. So stock declines sharply.

Everyone else looks at the decline going, wow, that's oversold. It's a good bargain. It was $100 yesterday. Now it's only $85. Great. I can buy it. The far-sighted individuals who are sitting on the sidelines now, massively short the stock,

are only too happy to let that happen. And the stock price starts to climb back towards where it was before the sell-off. And right before it gets back to 100, those far-sided individuals go great. Time to sell again. We got a good price to sell it. And that's when it begins in earnest. That's when the, again, it's the same Schopenhauer three stages of truth.

First, it's ridiculed, then it's violently opposed, then it's accepted as self-evident. And this is just how it manifests itself in a stock price. In a stock price. You will see first a sharp decline, and everyone else will go, that's ridiculous. And they'll bid it right back up, and then it's going to decline again. And that's when the far-sighted individuals come back and short it again. Okay. And that's when the, so it doesn't matter any time frame, any time frame, you need a long enough time period for people to form strong opinions about the continued direction of the trend.

So months, maybe even years, and then all of a sudden one day, out of the blue, sharp decline. And you will always see that, always see that followed by a retracement. Because everyone else will go, that's oversold. That's a bargain. I'm going to buy that. The same thing works in reverse. The second way of price trend changes, you don't get a bounce back

if the price has gone parabolic. Sometimes prices rise so sharply that no one expects them to keep rising at that rate. So the second way price trends change is you just get a sudden decline from a parabolic move. Parabolic moves, you don't see them often in markets. you see them more often on the decline than on the rise.

Parabolic is like a step change basically. You go from like 100 to 120. Right. So parabolic means as opposed to a straight line, it starts to, it just goes exponential, right? Bitcoin, right? The crypto coins went parabolic after going nowhere for years. All of a sudden. Right?

So the third way prices change is a protracted period of, of nothing going on. In other words, a stock just moving sideways for months or years. And I'm using air quotes, nothing going on because something really strong is going on, something really powerful. And that is, the stock is changing hands from people who get bored to people who are patient. That's what's going on there. So on the surface, it looks like, again, air quotes, nothing's happening. The stock price was 10. It's been 10 for the last year. Nothing's going on. No, plenty has been going on. As it were, the weak hands have been shaken out.

Everyone who's bored with that stock is gone. The only people who have bought it are strong hands with strong conviction. So when that begins to take off, it's going to really take off. Really take off. And again, just look at the price of Bitcoin, which went nowhere for years. And then all of a sudden it blipped up. It went up like, I don't know, from 10 to 100. And everyone went, what the heck was that about?

And then you had this sleeping giant that took off from 10 to 100 to 19,000. Yeah. Right? I think we're down to like six or seven now. We went to about six and then it bounced to, let me see, recently to 8200. And I have a correlate for Bitcoin for the crypto coins and the correlate is still flatlined. By correlate, I mean other ways of expressing the same view as Bitcoin. and again, I'm not offering investment advice,

but there's no sign that it's woken up yet again. It's, yeah, I'll come back to that, what a correlate is, yeah. And then what was the third way? That was the third way. So the first way is essentially a long-term up-trend or downtrend, but I was just using a trend that has a blip. That has a sharp blip, sharp, unexpected, very sharp. The second is parabolic.

Same thing, but now parabolic. Then you don't get the bounce back. And the third is something just go inside, doing nothing for a long period of time. And again, I'm using the doing nothing I'm using air quotes because something very powerful is going on. It seems like it's doing nothing. But in fact, the stock or the asset is being the weekends, those people who are bored and don't have patients are selling to people who have patience and have strong conviction.

And so who are these first-lettered individual? and it sounds like I would like to become one. Well, well, it's, it's, so let's look at the market, right? So the market, I'm using air quotes, comprises many individuals, different classes of traders. So you have stock traders and bond traders and currency traders, oil traders, oil energy traders, and metal traders, right? And that's pretty much it. stock traders, bond traders, currency traders, metal traders, and energy traders, right? Metal energy, currency, bond, and stock.

There are other commodities out there like wheat and sugar, but those aren't really economic variables. So you have these groups of people all expressing views of the future? Of the future. Right. Through their bets or their investments. Exactly right. They're all expressing views of the future.

They're all studying the world, expressing a view of the future. a view of that world out there. So which is the smartest group to follow and win? Right. I'm going to tell you. Right. So yeah, I'm revealing some secrets here. Yeah.

Cool stuff. So listen up. So let's look at stock traders. If stock traders are bullish on the world, bullish on the economy, that think the economy is improving, they will express that view, right? That's all an investment is, the expression of a view of the future.

Stock traders will express that view by buying stocks. stocks, right? They can be more granular than that. They can buy cyclical stocks and maybe sell non-cyclicals as a hedge, but that's what they'll do, right? They'll buy stocks. What would a bond trader do who is bullish on the economy? He has exactly the same view as the stock trader today. How would he or she express that view? I will tell you, he will buy corporate bonds, but that exposes the bond trader to interest rate risk, right? So if interest rates rose, that bond investment would go down in value. So the bond trader will do two things. If he or she is bullish on the economy, he will buy corporate bonds and sell treasuries as a hedge. How would a metal trader express his

view of the future? And he's bullish on the economy. I know what he's going to do. He's going to buy industrial metals, right? Copper, iron, palladium, right? But he's simultaneously going to sell precious metals because who needs gold or silver, really, or platinum if the economy is doing well? So he's simultaneously going to sell those, buy copper, sell gold, right? These are all different ways that different groups of investors express their view of the future their lens on the world, right? It's not to say that anyone is smarter than the others. In fact, when I tell you who the smartest group is, you'll see that that group is the smartest

because they're the dumbest. And we're going to come back to that in a sec, right? So these are all different ways, different groups of traders, express their view of the future. So suppose bond traders are pessimistic about the world, about the economy, right? They start selling corporate bonds and buying treasuries. So bond traders are pessimistic about the economy, and stock traders are optimistic. They're bidding up stock prices. I would tell you that 19 times out of 20, when those two groups disagree, the bond traders are right and early. They are right and early. When I say 19 times out of 20, really I mean 99 times out of 100.

If you want to find out when a stock is going to be in trouble, follow the corporate bonds of that company. Again, the corporate bonds relative to U.S. treasuries. Right. Right. So if I have a company, company X, there are two ways investors could express their view of that company. They could buy the stock, right, if they're bullish on that company, or they could buy the corporate bonds and sell treasuries against it. Right. Right.

They'd have to do both. To capture the spread. To capture the spread, right? And when those two disagree, I jump on opportunities when those two disagree because I know that the bond traders are right and early. So, for example, the ETFs for that, if people follow this, the best ETFs for that are LQD and IEF. So LQD is the investment grade corporate bond ETF, and IEF is the U.S. Treasury 10-year ETF. So you just take a ratio of that and follow that ratio. And that'll tell you what bond traders think of the economy. And when they disagree seriously with equity traders, the bond traders are right

and early. So what you're really establishing is almost a behavioral edge. Exactly right, a behavioral edge. And that's all that matters, ultimately. I don't know what exists out there in the world. I have no view on the world. I am what's known as agnostic. I present no views of the world. tell you how different asset classes view the world and which ones tend to be right and which ones tend to be wrong. So, for example, when currency traders and equity traders disagree about the direction of currencies, the equity traders are going to be right on the currencies three times out of four, not always. It's not like the bond trader to edge. The most far-sided group of traders and accurate are the metal traders. And why? Why? Three reasons. The first is they are the

forced gumps of the investing world. Their view of the world is very simplistic. Are people buying copper? And if they are, thumbs up, all's good in the world economy. Great. I guess interest rates are going higher. That's the way metal traders view the world. And if people are buying less copper, they go, oh, that's bad. Economic slowdown. So the first is their view of world is very simple. Second, they're actually in touch with the world, right? People buy and sell copper. It's used. It's a thing. It's not like a number on a screen, which is all currency traders look at, right? And the third, so first simplicity of model. Second, it's something tangible. It's actually used in the world. And third is time frame. Metal traders look, at least the commercial

metal traders, they look months to years ahead. Because if you want to take copper out of the out of the earth, it's going to take years to open that mind, right? It's going to take a while to open the mind. And whereas currency traders, they're looking second to second. I knew a big name currency trader who had a, even when he went home, he had a monitor, computer monitor in every room in the house with currency prices, including the bathrooms. So even if he went into the bathroom. Every second, there's always a currency trade. There's always a trade. He was like glued to that, right? And he was a good trader, really good trader. So metal traders are the most far-sighted. They have the simplest model of the world, and they are actually in touch with

the world economy, as opposed to economists. So I'm going to give you my Hall of Fame ranking of traders. In third place, are equity traders. In third place, are equity traders. In second place bond traders, in first place metal traders, in fourth place oil traders, and in fifth, currency traders. And below currency traders are economists, and below economists are central bankers, who are not in touch with the environment or the economy at all, and have complex, multivariate calculus models of the economy, and they can't predict interest rates. Something as simple as that. But the central banks have all this information. Why can't they...

Well, huh, it's so funny. You would think if at least economists, and they're in sixth place, mind you, at least economists have the conviction of their economic model, their econometric model. At least they have that, even though their models are always wrong. Imagine I were a meteorologist, and every day you asked me, is it going to rain or be sunny? And I was consistently wrong. After a while, you'd say, Adam, maybe you should switch careers. And I go, yeah, but my model of weather patterns.

It's so cool. And you go, yeah, but you're consistently wrong. You're always wrong. Right. And economists are literally always wrong. If you get a group of economists and they're in 100% consensus about the direction of interest rates, I'm going to take the other side of the trade, for sure. And central bankers are worse than that.

They rely on economists for their input. So, yes, they have hundreds of variables, thousands that they look at. and they can't get anything right. So, for example, I'll tell you a divergence right now that I've been watching very carefully. And this podcast recorded August 2nd, just in case people... Right, so August 2nd, and I would tell you that U.S. 10-year yields are near one-year highs.

They're roughly at 3%, 2.997, something like that, 3% U.S. 10-year yields. Copper divided by gold, which is the way metal traders express their view of interest rates, the price of copper divided by the price of gold, is pretty close to one-year lows. In fact, in the last 18 years this century, metal traders haven't been wrong once about the direction of interest rates, either to the upside or the downside. And right now, metal traders are firmly convinced that interest rates, and by interest rates, I mean U.S. 10-year yields, should be near one-year lows. They're not. They're near one-year highs. And I know that when metal traders and bond traders

disagree about the direction of interest rates, the metal traders are right and early. I'm not telling you. They're probabilistic. It's a probabilistic thing. I'm not saying go out and expect interest rates to plunge to one-year lows. I'm just telling you metal traders. Fact, metal traders have not been wrong once in the last 18 years about the direction of interest rates this century, either to the upside or the downside.

And they believe interest rates are headed lower. And if you go back and look at the last century, what does that look like? Okay. Metal traders were not as good about the global economy as they are now. They were still good. Were they still the best group? I'd have to check. The thing is the world is so different now that it's when you go back into the 1990s, the problem is the world is very different. We have the emerging markets. We have the European Union, right? The world is just very different. So if you go back too far, the world was just different than. It doesn't hold up. So that relationship, copper,

divided by gold was pretty good in the 1990s and 1980s, but nowhere near. It's batting a thousand since 2000. Interestingly, that's when emerging markets started to make their assent in the global economy, right? China and the others. And so what I do is I look for these different groups to express strongly different views of the future. And then I assess probabilistically in the past, who tends to be right when these groups disagree? Sometimes you can't tell. For example, the hardest commodity to predict is oil. Now, there are three ways to predict the price of oil. There's the price of oil itself. Then there's your Canadian chain. The Canadian dollar is the best, the Canadian dollar versus the U.S. dollar is the best foreign exchange expression of the

price of oil. Because we're such an oil rich nation. Or a rich nation. Right. And that's the way currency traders express their view, right? So if currency traders believe oil is going up, they will buy the Canadian dollar, right? Equity traders, what will equity traders do when they believe the price of oil is going higher? They will buy energy stocks and sell the S&P 500 as a hedge, right? And I will tell you that no, there is no consistent leader of those three groups. And I believe the reason for that is that oil is traded by the sovereign nation. nations. So the sovereign nations that control the supply of oil also trade it. So you can be sure that when Russia or or some other country decides to increase their supply of oil in the global markets, they're trading it. And you're taking the other side of the trade. So you've got to be. There's always somebody on the other side of a trade. I mean, isn't a trade than an expression of hubris? Like you think you're right and somebody else is wrong? Absolutely. Absolutely. And so you need an edge, right?

Steve Cullen, one of the great traders of all times, said that was his favorite question. What's your edge? You need an edge and you need to know it, it's a good edge. You can't just say, well, my edge for investing in restaurant stocks is I worked in a restaurant one summer. Well, okay, that's not an edge. You need to, here's an edge, a definable process, right? Here's an edge. Defendable and repeatable?

Well, any process is, right, that's what I meant. you're exactly right, of course. A process is something repeatable. It's something you could create an algorithm around, right? It may be some discretion involved, but there should be some way to formalize it in rules. When this happens, I will do this, right? And so if you don't have a process, it's not something that can be improved, right? Our goal is always to improve ourselves. And if we don't, if we're not conscious of what we're doing, if we, as it were kind of, if I said, Shane, why did you buy that stock? And you say, well, Adam, I just had a kind of gut feel about it. Well, that's not a repeatable process. And you can't improve it really. You can't improve

that. Like, right? I mean, even if 10 out of 10, all your gut instincts were right at the end of the day, like, you could have just been lucky, right? So you need a process that you can articulate and and try to formalize and one that you can test, test everything. And I know you wanted to ask me questions about education and the Princeton Review and everything I did there. And that was, everything had to be tested. So, yeah, I know we haven't left investing yet, but you need a repeatable process and you need some objective way to measure

does that process need to be tweaked. And so going back to John Maynard Keynes, the way that you try to anticipate the anticipation of others is through the expression of these different groups of people and their bets and figuring out which one is probabilistically more right than the others. Exactly right.

So when bond traders go to the left and stock traders go to the right, I know the bond traders are going to be right and early. So I know sooner or later the equity traders are going to turn around and follow the bond traders. Who else is consistently good at anticipating the anticipation of others or what other ways are there? I know of no other way. Now, you could argue you could use statistics, but statistics aren't the expression of an idea, Right? I'm interested in the expression of ideas because what I want to know is when are stock

traders going to change their view on Facebook or change their view on the S&P 500 or change or metal traders are going to change their view on the price of gold. That's what I want to know because I can't trade a statistic. Right. I can trade gold. Right. I can trade Bitcoin. I can trade, you know, there are other things I can trade GDP. Right. Good luck. Yeah. That's why I don't follow statistics. Let's come out of investing and talk a little bit about education. Sure. You cracked the SAT. How did you do that? Ah, well, we're switching gears here. So I went to Wharton, undergrad, and then I got a law degree to Oxford, and I came to New York, and I thought that what I wanted to do was write novels and screenplays. That's what I thought. And I thought, well, if I do that, I'm going to have to

support myself somehow because it's going to be years before right i can make a living as an author and and i knew if i went to wall street or or worked in a law firm i'd never find the time to write i'd just get caught up in that world so i thought how can i support myself like i'm all at 25 right and and i thought i know what i'll do i'll tutor students and i'm dating myself now but back then the only people getting tutored were people who were failing right tutoring then wasn't what it is now because of what I did, right? But back then, it was just, if you were in trouble, if you were floundering, like if you were in danger of failing, then you would get, your parents would pay for a tutor, right? It wasn't for an edge, and it was remedial. Like it is today. Right,

like it is today, right? Today, everyone gets tutored for an edge. And the Princeton Review, which is the company you co-founded, has largely, I mean, popularized this. Right, right. And so, so well they're all and all the competitors are just essentially just using the stuff that we developed you know several decades ago so I I thought how do I support myself and I thought tutoring would be easy because I could tutor two or three students a day this was my thinking and then the rest of the time I would write my novel or my screenplay this is what I thought and so I wrote to every private high school in New York and I remember at the time there were 31 because I had to type the same letter 31 times. And in the process of this mass mailing,

I got a single student, I still remember her name, Joanne, from one of the private schools in New York. And I gave her a booklet of sample SATs that had just been published by the educational testing service. And I said, Joanne, you take this booklet home and you do a practice test, get your mom or your dad to time you. And then let's meet and go over the test and will, I'll tutor you. And I had zero experience, right? I'd never tutored anyone. I had no idea whether I was any good at it or not. I just thought means to an end, right? Like, it didn't occur to me that I would be bad at it, but it didn't occur to me that I would be good. It's not like I had any expectations. Really just a means to an end. And then she, so she comes for our second session,

the first time I'm going through her test. And I am astonished at what I see because on every section of the test, the questions are arranged in an order of difficulty. At least they were back then. They're not so much now anymore because of what I developed. Anyway, so she gets all the easy questions right, and she gets all the medium questions right, but she missed every single hard question. Like she was betting zero. So what was interesting to me was that she would cross off say choices A, B, and C. She gets it down to D and E, and whichever one she chose, the answer was the other one. So I said, Joanne, this just puzzled me, right? And it's one of my personal algorithms is anomaly detection, right?

Like this is just like, Bing, like something's going on here, right? And I just said, I'm puzzled. Could you just, Joanne, you should be getting, you get it down to two choices, two or three choices. And every time you pick one on the hard questions, it's wrong. Could you just step me through your thought process? Because you should be getting a half to a third of these, right? Just closing your eyes and guessing.

Yeah. Right? You're guessing and batting zero. So whatever you're doing is moving you away. from the answer. Right. So she said, well, I cross off the ones that I know are wrong. And I said, good. Then what do you do? She said, well, then I pick the one that I think is right. So I blurt it out. Oh, well, then you should pick the one you think is wrong. And then I realized, oh, yeah, of course. The only reason a hard question is hard is that whatever anyone does, seemingly plausible, leads them away from

the answer. And the test was constructed. So you have easy questions at the beginning, then the medium ones. and then the ones at the end, you know that whatever anybody does has to be wrong. Right. So, for example, if the last math question said, Shane drives from Toronto to New York at 60 miles an hour and turns around and returns home at 40 miles an hour and they say, what's his average speed? You know, the answer is not going to be 50, because everyone is going to get 50, right? But you know it's got to be around 50.

So you already have a really big clue about the answer to the question. And back then, so I created a mythical character, Joe Bloggs, and I said, if you're not sure what to do on a question, you ask yourself, what would Joe Bloggs do? And if it's a hard question, you do the opposite. Sometimes you're stuck on an easy question, right? And if that's the case, you ask yourself, what would Joe Bloggs do, and you do that. He'll always choose something that seems right. And so the algorithm was anything that's obviously right is obviously wrong on a hard question

because it's not obvious. That's why the questions are arranged like that. So that was the first insight. And then they used to have a vocabulary section of antonyms where they would ask you like what's the opposite of. And you would think that there'd be hundreds of thousands of words in the English language that could show up. They could ask you anything.

Right. But in fact, I proved statistically there are only a few hundred words that could really show up to test you. So I would put that in our manual. It was really only a few hundred words. If you know these, basically you can answer any vocabulary question. So they had that, they deleted that section from the test. There was another question type, analogy questions like cat is the feline, right?

Well, what happens if you don't know what the word feline means? Well, I figured out a way that students could reverse engineer what the answer had to be, even if they didn't know what the words meant. So they deleted that section from the test too. And they changed a lot about the test. They changed the order of the questions now, so it's more randomized. You can't guess whether it's a... Hard question. Exactly right. So that piece of information is gone. And that's all in response to the

system you created. To the system I created, yeah. And the really important thing about test prep is it's the hardest, I believe it to be the hardest domain. There's that old funny saying, dying is easy. Comedy is hard. Well, test prep is a lot harder than comedy. Test prep is a is a ruthlessly unforgiving domain because you can measure how good a job the tutor is done down to the decimal. You know exactly whether he's done a good job or not. And so... That's based on the score coming in and the score leaving. Right, exactly.

Score coming in, score, right. And then you can use statistics to figure out what was the expected improvement. What would an average? What would an average student do? And then you can get a leave in a little more nuance than that. What would a male student? Right. Or what would an average teacher bring this student, bring in this score, get them to?

and how do I know you're above average or below average? Right. Over a series of students, we can start to. Right. You can certainly determine how good a job you did over all the students. In other words, it was difficult in the beginning, say we had a thousand students. It was difficult to determine whether any given student how much that student would go up. But we'd know how much the collective would go up.

Like we'd kind of like insurance, right? We wouldn't know which person was going to get into a car accident, but we know collectively 0.03% of them are going to get into accents in any given calendar year, right? And so we had statistics like that, and then everything we did, we tested. So, for example, let's say, Shane,

the question were a geometry question on a test, and it said, what is the area of a circle with radius five? And you wrote down 10 pi. You'd get the question wrong. And you would assume, on a superficial level, the student doesn't understand circles but maybe the student

understand circles just fine and he misread the question because he wrote down the circumference so we had a program we tagged every question and every choice so we knew if you're making this mistake right which techniques aren't you using

we would know why you made the mistake not just that you made a mistake we would know why you made the mistake and we'd know which techniques you weren't using that we taught you last week so this became a bit of a game Well, it was a total game, but it was also using big data way back then, you know, right? This is the early 80s, right?

And so we were using big data because we had to measure everything. So we knew, we would know, for example, should we put a cartoon on that page of the manual because we could measure whether the cartoon's presence or not influence scores. And not just that, we knew on a class level. So let's say, not every student, but the students in that class, that Shane was in, misread that same question. We would know there's something, maybe there's a problem with the teacher. Maybe the teacher isn't teaching students correctly, right? So we had collective feedback on how well each teacher was doing. And then we had it on the site level.

So maybe all teachers at that particular site in Los Angeles say were having trouble with that geometry question. Then the problem wasn't the teachers, and it wasn't the students. It was the site manager. He wasn't training the teachers correctly. And you could use data to pinpoint where the problems are. Why don't we use that today in classrooms more than we do? Okay, that's a really good question. And it comes back to the core curriculum concept, right? So there's a notion that we should have a core curriculum in the United States, like a core curriculum that we all use. And I think for basic subjects, like reading and writing and math basic subjects, it should be core. And the reason we were able to do what we were able to do

and get these dramatic score improvements was we could test everything relentlessly. Because the U.S. education system allows each teacher to kind of do what he or she wants to do, there's no experimenting, there's no improving. But if we go back to what we just talked about, whereas what if the marker for a teacher was the average child's entering score and their average exiting score even graded towards that core curriculum within that, would we not start to get a better sense of which teachers are better than others? Right. Now, so, but let's go back to measuring how good the incoming score and the outgoing score. So you'll get a kick out of this one day, one Saturday. I don't know, this is like 10, 15 years ago. I had a free Saturday, not free,

free-ish, I'm using air quotes. And I thought, hmm, let's look at the statistics of New York City schools. And New York City, to its credit, offers statistics on fifth grade math and reading scores and average attendance in a school, plus a slew of other statistics for each school in the city. Right. So you would know, for example, the average experience of the teachers at that school. You would know what percentage of the students had free lunches. So give you some indication of the of perhaps poverty income exactly right you knew the the the race background uh you'd have stats on each school right the percentage of each race um you had the average age of the uh the plant and equipment so you know was it a new school or an old school you knew the average class size i fed all these

statistics into a computer into a stat program and um 80 percent of the variation in fifth grade math and reading scores was attributable to the socioeconomics of the school, not the teachers, 80% of it. So if students are doing well, yeah, 80% of that variation is attributable to their socioeconomic status. And I did some interesting work along those lines about 25 years ago. In fact, this is going to blow your mind when I tell you this. And I should have published these results. I don't know why I didn't. So this is really groundbreaking stuff I'm about to share.

So in 1995, New York City announced that it was going to start a program to prepare inner city students for what was known as the Stuyvesant test. For those of you outside New York, Stuyvesant is arguably the most competitive high school in the country. You have to take a single test to get in on a Saturday. It's like the SAT. and some 35,000 students take the test for 700 spots. And to put this in perspective, Stuyvesant's average SAT is higher than Harvard's.

That's how competitive it is. This is 25 years ago, Shane, the principal of Stuyvesant told me that there are prep courses for Stuyvesant. This is a high school in New York. There are prep courses in Hong Kong, not Chinatown, New York, I mean Hong Kong. So students were prepping there, coming here to take the test. That's incredible. Yeah, that's how competitive it was.

So the high school was roughly 70% Asian, and by Asian I include all of Asia, India, you know, not just China and so Asia, about 25% was white, and of the white, most of those were Russian immigrants. Oh, really? Yeah. And there's a reason for that in a sec. we're going to get that. It's going to be, I haven't gotten to the punchline. Wait till we get to the punchline. And this may sound boring to everyone, but the punchline is very cool. So, and I'll get to it in about three minutes. So, and about 5% black and Hispanic. So the board of ed announced a program, we're going to prepare inner city kids. It's not fair that wealthier kids get prep courses

to get into this school. We'd like to boost our minority enrollment. And knowing that the board of ed knew nothing about doing this, I volunteered pro bono. I said, I'll create a program for you. And at the end of the first year, we had a 300 students, and two-thirds of them got into one of the three specialized high school, Stuyvesant, Bronx Science, or Brooklyn Tech. But I was dismayed. And I was dismayed because at comparable starting scores, a white or an Asian improved significantly more than a black or Hispanic. And this bummed me out. Yeah. And I'm always testing and researching. So I created a super long. questionnaire like 150 questions that the following year students were asked to

complete and so the questions were like this are you male or female because sometimes from the names you couldn't quite tell yes how many how old are you how many brothers and sisters do you have where are you in the pecking order where was your mother born where was your father born where were your grandparents born also questions that were psychological like this when in doubt on a question true or false you should go with your first hunch how do you You rate your chances to get into Stuyvesant, right, to pass the test, which is the most competitive test in the country, right, for high schools.

And so I fed all of these in, and then a year later I had the results, and I was astonished at the following. The number one positive factor for improvement was a father born in another country, mother born here. You wanted a father born in another country, a mother born in the United States. student improved twice as much as the reverse, mother born in another country, father born here. And that student improved twice as much as both parents born in another country, and that they improved a bit more than both parents born in the United States.

Now, this is what was astonishing. If your father was born in another country and your mother was born in the United States, that student improved the same regardless of race. race dropped out as a factor. It didn't matter whether you were Asian or white or black or Hispanic. It had to do with where your father was born and where your mother was born. And you might ask, why was it so important that the father be born in another country and mother born here? By the way, think Barack Obama. It was important because the father was the one that gave you the immigrant drive, right? I worked hard to get here. Education is important. And your mother's the one who gives you your language skills.

So you needed a mother fluent in English, which is why the mother born in the United States was so important. So the big impediment was then language? Well, was partly language. And work ethic. And work ethic, right. And the average student in our course, it's 100 questions on the test. The starting score of the students in our program were in the 20s, like 29 or 30. And to get into Stuyvesant, you needed an 85.

And then the other two high schools, Bronx Science and Brooklyn Tech, were 75 and 65. But that's still a huge leap from an average of 29. Yeah, that's insane. Insane. We got two-thirds of our students above 65, so into one of the three high schools, which was a huge improvement. So those numbers were startling, the improvements. When I said that they improved twice as much as the next group, I'm not talking about 1% versus half a percent. I mean, they were incredible leaps. And it had to do with the father born

in another country and where the father was born and where the mother was born. Incidentally, and this is important, improvement was inversely related to perceived chances of success, inversely related. So you wanted a kid who said the following, I don't think I'm going to pass the test. That kid improved a lot more than a kid who said, I'm definitely going to pass the test. So you wanted a kid who had the following characteristics. A kid who said, I don't think I'm going to pass the test. My parents don't think I'm going to pass the test, but my teacher does. I'd asked all three questions. Right. And you wanted a kid who thought, well, there's no way I'm going to do it. Somebody believes in you. Somebody believes in you. And it's your teacher. You're scared enough

that that gives you drive. Exactly right. Drive. Because obviously on some level, you think you've got a chance. After all, that's why you're in the program. Compare two kids playing pickup basketball, and I stop and I ask them, are you going to make the MBA? And one of them says, there's no way. Well, maybe that kid will. The kid who says, yeah, I'm going to make the NBA, has no clue about how hard the road is to get there. Right. The actual statistics would be. Right. And so you wanted someone would drive and some belief, but actually a little pessimistic. And that's, you know, so parents who want to raise, I'm using air quotes now, the self-esteem of their kids for academic performance. In fact, it's academic performance is inversely related to self-esteem. Inversely.

What happened with these kids psychologically when they go from a 29 to scoring 65 or higher? Do they start to believe in themselves? Well, you know, you. You wanted, the real takeaway lesson is, the important lesson is not that you went from 29 to 65. The life lesson is this. I worked at something and I changed. I improved. That's the real takeaway. So I know that I improved. Right. I got feedback and I know I improved. That's the real life lesson. The real life lesson is you can apply yourself, you can work and you can improve. That's way more important than a test score, right? I mean, the life lesson is, I can do better.

I often, over the years, students would say to me, it's been a year, decades since I've worked with students, but they'd say something like, I'm no good at math, or I'm no good at learning languages. And I'd say, yet, because it's always a yet. And it's not that you're no good at math. It's whatever techniques you're using are no good, right? So the ethos that I always inculcated with students, and they knew this from the get-go, was

you can improve. And that's the real takeaway lesson, is that if you want something, work at it. In America, we've deified intelligence. I'm using air quotes now. And the problem with intelligence is, or the belief in intelligence, is that it works against you. If you're intelligent, you shouldn't have to work too hard. Things should come pretty quickly. And if you aren't intelligent what's the point you're never going to get anywhere and that's you know that's a fairly widely held belief in the united states the better belief is that your success is determined by how hard you work and then it's just a matter of choice if you want something work for it and you will if you want it there's a great Rudyard kipling quote if you haven't gotten what you wanted

it's a sign either that you didn't really want it or you try to negotiate over the price that's one of the four quotes you live your life by oh yeah yeah yeah yeah i mentioned that one did so i like that a lot in terms of like you're not willing to pay the price what can parents do to instill that in their kids or maybe even in themselves if they find themselves in a situation where well like right i think it's important that parents let their children know just to talk about parents for a sec that learning is hard. You need to know that learning is hard. It's not easy, right? And the reason you need to know it's hard is that if you think it's easy, as soon as you encounter difficulty, you're going to think the problem is you. So you need to know it's hard going in. For sure, it's hard. And so

the difficulty you have is inherent in the material and not your process, right? I think it's also important for parents to model what it means to struggle for their children. Especially today, I'm so worried about the under 25 generation. We spoke about this earlier, right? Their brains have been hijacked by technology. It's really serious. So kids today don't know what it means to actually work at something and to persist, and they don't see it modeled anywhere, right? So, for example, something that parents can do that I think would be a great lesson for their young children

is to model struggling with something, to model struggle, and to model staying with the struggle and not giving up. Like, you have to model that for kids. You can't expect them to just, as it were, I'm using air quotes now, get that, right? And no one ever teaches them that.

It's not so much teaching. It's not like you can learn that in school. You have to model it. And teachers are certainly unwilling to do that. Because you need to have a teacher in front of a class struggling going, I don't get this, and just sticking with it until you get it. And that's not modeled in schools. In fact, students are made to feel bad if they can't get something quickly, right?

Teacher asks a question and expects a quick answer. And if you don't give the answer quickly, the teacher moves on, okay, next, and points to someone else. Don't even let kids think almost. Yeah, they don't let, not almost. They don't let them think full stop. just don't let them think. And so I think that's a crucial skill for for parents to teach their, not teach, to model for their children. And is that why the kid with the father immigrant who likely, I'm sure hypothesizing worked either one or two jobs super hard? Modeling. Exactly. Models

hard work. After all, how did they get there? By working hard. How did they come from wherever they came to the United States working hard. It's not easy moving, you know, picking up your family and moving to another country. Right. By the way, it's not to say it's all hard on the father. The mother's also doing really hard work, of course. But it's, it's by and large, the father that instills those values and models, especially outside the United States. But either parent can model that. It's not to say that's the father's role. I'm using air quotes now. The mother can also model that. Model persistence and staying with something, and it's okay not to get the answer. Because when you do, there's, it's incredibly rewarding, right? And that's not taught at schools. It's not modeled at

schools, not modeled anywhere. And for adults, if you're having trouble with what you're doing, if you're not getting the results you want, change what you're doing. It's as simple as that. Why do you think most people don't do that, though? We like double down and work harder or... Right. Because we think that's the answer, right? We think that what we're doing, we're not trying, as I'm using air quotes now, trying hard enough, or we'll invest some more money. And that's not changing what you're doing. That's just doing more of the same. And the goal is to be detached and experimental, right? Ralph Waldo Emerson said, all life is an experiment. Well, if you conduct it like one, and so you see what works. And if something's not working, keep changing to you, find something that does. It goes back to the Rudyard Kipling quote, right? I mean, don't negotiate over the part. Just keep trying to find something that works. I love that about stand-up comedians, right?

Stand-up comedians, they have an idea about what will work, right? They develop a routine. But then they've got to try it out on an audience, right? They've got to get out in front of people. And if the audience doesn't laugh, okay, got to edit that joke. I read an interview once of Chris Rock. And it's true, by the way, of all great comedians. they'll tweak one line from one joke in a night, right?

They'll just, let's change the name from Tim to Bob, see if that gets more laughs, right? And they're very methodical and scientific about it and detached and ruthless. If the audience laughs, great. If they don't edit the joke or cut it. It's real simple. And so I think one thing all individuals can do is take a more detached experimental approach to what they're doing. you need a process, right, that you can articulate, like Chris Rock saying, I changed one line

from a joke in a night, okay, that's pretty specific. Right. Like, he's really scientific about it. And I've heard other comedians, Jay Leno once said the same thing. Like, they're very scientific about it. And so whatever you're doing, and this is true even at a corporate level, try different things. It was so sad.

Last summer in New York, I was walking down the street with a friend. And I saw three young people, I'm going to say they're late teens, early 20s, for savethechildren.org. They were out there asking, trying to stop people walking by. And so, and they, I could tell because I watched them for a few seconds. I asked my friend to stop and I wanted to watch this. I said, watch this. They're all going to say the same thing. And sure enough, each one of the teenagers was saying exactly the same thing to everyone

who walked by and said, you have a few minutes for Save the Children? And of course, New Yorkers just said, no, don't, goodbye, and just kept walking on, right? And yet they kept saying the same thing. So I stopped one of the teenagers and said, I will give you $500, if the three of you, if I can have your time for two minutes.

So they gather around because I was going to give them more money than they got them all that day, right? And I said, you guys are saying exactly the same thing to everyone who walks by. Have you noticed that you get the same response from everyone, which is ignoring you? Like maybe a polite, sorry, I don't have the time, or I've already given, right? I said, why aren't you guys trying different lines?

Like, why don't you experiment to find something that works? And then once you find that, call it the main organization, say, hey, we've got a really cool line. It seems to work in New York City. Let's test this in other cities. Right. Right? If you go to a McDonald's, they will ask you pretty much regardless of what you, whatever you buy, would you like some fries with that? That's because, I believe it was a 17-year-old girl

in Cleveland or in one of the franchises discovered one day that when she asked people, would you like some fries with that? One person in six said, sure, what the heck? Right. So that one person who came up with the idea, which was just an experiment, she noticed, wow, people say yes. So imagine an organization that experimented like that, right? And had all of its people experimenting like that till you find something that works. We did that at the Princeton Review. We found something that worked. It once took me two years, two years, mind you, of experimenting every single day several times with different students to find a way to express a certain concept. And it took me two years of continual experimenting until finally one day I figured out a way. And then once you find

that way, then stick with the script. Just don't deviate, right? Find out what works and then stick with that. But until then, you're experimenting. And we can do that as individuals. Certainly corporations should be set up to do that. By the way, I don't know whether those three kids, I mean, you know, I gave them $500. But it's not like I went back the next day and watched to see whether they had changed their routine. I kind of doubt it, you know, but you take a shot. It was still a worthy donation, right, to a worthy cause, save thechildren.org. It's interesting. I mean, you mention kids, but we see adults like that all the time in organizations at work. around us, colleagues ourselves. We have a harder time seeing in that, but it's easier to see other

people that are doing the same thing and not getting the results they want. Right. And all you need to do is just change what you're doing. Not more of it, not more of the same, do something different. And a good first step is in the opposite direction. Right. If you don't know how to change what you're doing, start off in the opposite direction. Let's say you're training for a 10K and your times aren't improving and you keep increasing your mileage every week. Well, maybe decrease it now. See what happens with that. And just try different variations. But a step in the opposite direction is usually a good starting point. Is there or what is the difference between passing a test and understanding and applying? Oh, well, see, the problem in school is that is that your goal is

ultimately to pass the test, right? Because that's how you're judged. And sometimes what you need to do to pass a test is different from what you would need to do to really learn the material, right? And because often to learn the material, you have to be willing to go through a process of confusion and not really understanding and groping. And yet that would interfere with test performance. So schools encourage a kind of rote learning. Think about the law school admission test, right? The law school admissions test, which future lawyers have to take in the United States, right, to get to law school, the LSAT, well, the LSAT asks you a question. It gives you five choices. And to do well on that test, you need to be able to pick an answer quickly, an answer, not argue for two choices.

Right. Which means that the LSAT self-selects for people who are really good at selecting an answer, but not seeing both sides of a question. Right. Right. I'd never thought about that before. That's really interesting. Right. And law school, especially, You wouldn't want someone to do that. By the way, the GMAT for business school actually has its clever test, actually. It's a clever test because the only way to do super well on the math part of it is by estimating and not trying to calculate things exactly.

So you estimate an answer is often good enough to know the answer's got to be choice D. Right. But if you tried to solve it exactly, you'd run out of time. Right. So in fact, what the test measures is your facility, with numbers, like do you have a good sense with numbers? Because life is like that, right? I mean, life when you're a bond trader or whatever else you're doing in business, you want someone with a good intuitive feel for numbers. And the GMAT test is actually pretty good at doing that. It's a

clever test. Because if you use your intuition about numbers and you have a good intuition, you'll do well on the test. But if you try to calculate things exactly, you're going to run into trouble. Oh, by the way, this is worth knowing. You know, there's a male-female difference in test taking. Men outscore women, which is to say boys outscore girls, not just on the math part of tests, but on the verbal part. Like, people think, oh, well, of course with the math section. Well, yeah, boys are also better on the verbal side of standardized tests. And the reason for that is this, and I'm stereotyping here in a good way. Most women, most girls in school, most female students are more conscientious than most boys. They do their homework. They're prepared. They feel

themselves to be prepared. But most standardized tests are designed to make you fail. The way a high jump contest is designed to make you fail or a seeing eye chart, right? They keep making it progressively harder until you fail. Right. And the goal is actually to fail at the highest level. That should be your goal. Right. I'm going to fail. I want to fail at the very highest level. After all, you win the Olympic gold medal in high jump, right, by doing that, right? Or the pole vault, or there are many other contests where you, the goal is to fail at the highest level. And boys who tend to be unprepared, more unprepared than girls, do better on standardized tests, precisely because when they run into difficulty, they expect it to. Oh, that's interesting. Yeah. When a girl runs

into a hard problem, she goes, oh, I thought I was prepared. The boy knows he wasn't. So he goes, maybe the answer C. What's the next question? Hey, guys. This is Shane again. Just a few more things before we wrap up. You can find show notes at farnumstreetblog.com slash podcast. That's F-A-R-N-A-M-S-T-R-E-E-T-B-L-O-G.com slash podcast. You can also find information there on how to get a transcript.

And if you'd like to receive a weekly email from me filled with all sorts of brain food, go to fernhamstreetblog.com slash newsletter. This is all the good stuff I've found on the web that week that I've read and shared with close friends, books I'm reading, and so much more. Thank you for listening. Thank you.