#47 Adam Robinson: Winning at the Great Game (Part 1)

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

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:00Speaker 00

  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.

• 0:29Shane Parrish?

  Hello and 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/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 Fischer as a teenager. And now he's got a life title.

• 1:14Shane Parrish?

  Adam also cracked the SAT using data to write tests as one of the co-founders of The Princeton Review. After selling his interests, 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.

• 2:00Shane Parrish?

  Adam, I'm so glad to be sitting here talking to you today. I'm really looking forward to our conversation.

• 2:05Speaker 00

  I'm delighted to be here.

• 2:08Shane Parrish?

  You invited me to The Great Game. Can you explain that?

• 2:13Speaker 00

  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.

• 2:32Shane Parrish?

  What is The Great Game?

• 2:34Speaker 00

  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.

• 3:18Speaker 00

  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."

• 3:33Speaker 00

  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.

• 3:57Speaker 00

  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.

• 4:37Shane Parrish?

  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.

• 4:44Speaker 00

  Yes, so, so 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, 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 Waitzkin and Ramit Sethi did a live podcast from the 92nd Street Y. And I don't think he'll, he'll mind my saying this. He started off the, the podcast by directing the first question at me, saying, what New Year's resolutions have you made? This was in December of 2016.

• 5:28Speaker 00

  And I said, I, 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 onstage, 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, 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, now I have like Tourette's syndrome. So the words pop out of my mouth. I learned three things this year.

• 6:12Speaker 00

  Really, I have no idea why I said three. And 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 on to the other guests, right? Josh and Ramit. And, um, but out spills, 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, mind you, 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.

• 6:55Speaker 00

  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.

• 7:37Speaker 00

  And so I said those things and that formed the kernel of an invitation to the great game.

• 7:44Shane Parrish?

  So you walk away from the 92nd Street Y and you start. You're conscious of these lessons and you start implementing them.

• 7:51Speaker 00

  I'm, I'm, yes, I'm, I'm deeply conscious of them. Much the same way that I said to Tim, I, I make an effort to apply the lessons that I've learned. And since then, the last eighteen months has been a, um, an odyssey of sorts of playing the great game. And I wrote that book, the first draft, which you have a copy of, in ten days, the first draft. And then I put it aside for a few months and I wrote the second draft in another ten days. So essentially three weeks I spent writing the book. It's a short book, uh, those of you listening. And, um, 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.

• 8:36Shane Parrish?

  Right.

• 8:37Speaker 00

  And.

• 8:38Shane Parrish?

  It's a doing book very much. It's 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, uh, you probably interpret the world happening to you or with you.

• 8:49Speaker 00

  Yes. And, you know, the, um, the revelatory aspect of that, Shane, was that I've lived my life in the world of ideas. Right? My success in the world, um, 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 twenty sixteen into twenty seventeen and now twenty eighteen has been that the real magic is connecting with others. That if you want to do anything in the world, and this is as true personally as well as professionally,

• 9:30Speaker 00

  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.

• 9:49Speaker 00

  A possible future that other people or a special someone says, yeah, I want a piece of 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 anti. And the anger level is rising. And one of the reasons I wrote an invitation to the great game was in response to that, to try to change the tenor of the global conversation.

• 10:26Shane Parrish?

  Why do you think the global conversation is? I mean, if you look at 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?

• 10:41Speaker 00

  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 US,

• 11:24Speaker 00

  but I would argue there's a global loneliness epidemic. It's very, very serious. The, there's a...

• 11:35Shane Parrish?

  Do you think that's fed by technology?

• 11:37Speaker 00

  It's hugely fed. It's hugely accelerated by technology.

• 11:43Speaker 00

  Think about the damage that technology, which is designed to hijack your attention. Right? 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 cellphone down, that's engineered. That's not just like a random like, wow, I can't seem to put my cellphone down. All of that's engineered. And it's resulted in a hijacking of attention. And if there's one thing

• 12:25Speaker 00

  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,

• 12:43Speaker 00

  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.

• 13:25Speaker 00

  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

• 13:43Speaker 00

  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-

• 13:56Shane Parrish?

  Because now we have tunnel vision almost. We're not being exposed to-

• 13:59Speaker 00

  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.

• 14:24Shane Parrish?

  Outrage, almost.

• 14:25Speaker 00

  Right? So if I get you excited or if I get you angry, you're gonna click. And so, 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 gonna tell you something that just blow your mind, Shane. So a few weeks ago, I wanted to tweet, on a Sunday morning, I wanted to tweet about how people are always getting ready, right?

• 15:09Speaker 00

  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 autofill. And this is gonna 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.

• 15:53Speaker 00

  Interestingly, of the top 10 responses, Chinese did not make the list. The, 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?

• 16:20Speaker 00

  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, right? 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 mind blower. It was, how can I learn to love myself?

• 16:52Shane Parrish?

  Really?

• 16:53Speaker 00

  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. You couldn't ask your parents, how can I learn to love myself?

• 17:14Shane Parrish?

  It's a very private question.

• 17:16Speaker 00

  It's so private, you, 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, I immediately texted several friends. I said, can you type in, how can I learn into Google? And let it autofill. Cause I thought, maybe this is just Adam Robinson's.

• 17:40Shane Parrish?

  Version of Google.

• 17:42Speaker 00

  Right, of Google. Maybe, let's, Google think I'm a loser, like, right? Like, how can Adam Robinson learn to love himself?

• 17:49Shane Parrish?

  Based on your search history, we think you need to learn to love yourself.

• 17:52Speaker 00

  Exactly. And everyone had exactly the same results. Everyone had English first, then Spanish, then three, four, or five was to sing, to code, and learn to love myself.

• 18:04Shane Parrish?

  Wow.

• 18:06Speaker 00

  Just, it would interchangeably depending on the friend, like little tweaks.

• 18:11Speaker 00

  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. Uh, it means that it's an immense problem that no one has anywhere to turn to. And ironically, we have this loneliness epidemic going on. And by the way, this is manifested. You mentioned statistics before Shane. There is a, a suicide epidemic among teenagers in the United States, which is very serious. I know you have children, right? So there is a, a serious suicide epidemic in the United States.

• 18:53Speaker 00

  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, uh, 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.

• 19:26Shane Parrish?

  Right.

• 19:26Speaker 00

  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.

• 19:39Shane Parrish?

  Mm hmm.

• 19:40Speaker 00

  And yet.

• 19:41Shane Parrish?

  We're not happy.

• 19:42Speaker 00

  We're not happy.

• 19:43Shane Parrish?

  Clearly money is probably not the.

• 19:45Speaker 00

  Oh, that's not the answer at all.

• 19:47Shane Parrish?

  That begs the question. I want to unpack a few things here, but what is the key to happiness then?

• 19:52Speaker 00

  Well, I'll tell you one key to happiness is not to look for it. The, 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 a 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? Viktor Frankl wrote about that in his book, Man's Search for Meaning.

• 20:34Shane Parrish?

  And Frankl was the Auschwitz survivor?

• 20:37Speaker 00

  Yes, yes. And so, think about the life lessons learned there, in that cauldron, in that hell. And, and, and yet, his message was optimistic and life-affirming, as, 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,

• 21:20Speaker 00

  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, 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, the, the great religious traditions, and the, the great philosophers,

• 22:01Speaker 00

  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.

• 22:35Shane Parrish?

  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.

• 22:50Speaker 00

  Right, no, it's not. And the... 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, and the more I thought about it, the more I realized that that was truth. Truth for me. Mind you, I'm not, I'm not trying to convince anyone of, of those truths. I just offer them.

• 23:29Shane Parrish?

  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...

• 23:42Speaker 00

  Right. So I think it's, it's... Well, that's a, 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, it's, uh, 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.

• 24:27Speaker 00

  I can't wait to get outside. Like, I couldn't wait to meet you for the magic that would occur here and now. And, and will 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 a lot, most how-to books and self-help, they're, 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.

• 25:09Speaker 00

  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, the only people who've got my book so far are friends and a few close relations to get their feedback. And everyone says the same thing. I think it just, I, 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.

• 25:47Shane Parrish?

  In the book, you said, the questions that you ask of the world shape what you see.

• 25:52Speaker 00

  Yes.

• 25:52Shane Parrish?

  I'm paraphrasing. What are the questions we should be asking of the world?

• 25:58Speaker 00

  Ah, well, hmm, I have to think about that one.

• 26:03Speaker 00

  Well.

• 26:03Shane Parrish?

  Or what are the most powerful questions we can be asking?

• 26:06Speaker 00

  Sure. Well, one question is, how can I create fun and delight for this person right now? And, 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 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 ask myself, how can I create more, 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.

• 26:51Speaker 00

  And, 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 gonna wanna be around you. And assuming you have the qualifications, you've just immeasurably improved the odds that you're gonna get a job offer.

• 27:36Speaker 00

  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?

• 27:49Shane Parrish?

  What do you mean by that? Who do I need to be?

• 27:52Speaker 00

  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 gonna 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 nother track, which I know we'll get to before the end of today. But let's circle back for that.

• 28:22Shane Parrish?

  I wanna 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?

• 28:31Speaker 00

  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?

• 29:15Speaker 00

  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 that 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.

• 29:59Speaker 00

  You can either change the questions that person asks, or you can provide them with more inspired answers. Those are your 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's, it sounds like it's a horrific question, but actually, it's the only the

• 30:44Speaker 00

  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, 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.

• 31:26Speaker 00

  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.

• 31:39Shane Parrish?

  A lot of the questions seem like questions we've been asking for centuries.

• 31:42Speaker 00

  Absolutely. I would argue that civilization as we see it now is an answer to a primal question, which is gonna take us a little deep now, but the pain of human existence. I think that's what civilization is in all its forms. It's 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.

• 32:27Speaker 00

  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, 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, 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.

• 33:11Speaker 00

  Technology is, has us doing, I'm reminded of a, of a funny plaque I have in my apartment. There's a woman drinking a cup of coffee with a cheery expression on her face, and she says, "Mmm, coffee. Do stupid things faster with more energy." And that's what, 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.

• 33:51Speaker 00

  And I understand the anger, I really do, but it's not helpful. So, yeah.

• 33:57Shane Parrish?

  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?

• 34:04Speaker 00

  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. The, 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.

• 34:47Speaker 00

  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 of modern history.

• 35:32Speaker 00

  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.

• 35:50Speaker 00

  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.

• 36:33Speaker 00

  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 little, 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, and they said, oh, my gosh, this is going to change the world, right?

• 37:02Shane Parrish?

  The homebrew kits.

• 37:03Speaker 00

  Right, those homebrew kits, right?

• 37:04Shane Parrish?

  Yeah.

• 37:05Speaker 00

  Right, that you could just make on your own. And so, notice that Stephen Jobs didn't, what, 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.

• 37:22Shane Parrish?

  Yep.

• 37:22Speaker 00

  And I think that the great insights happen like that. They come not from logical thought. Now, of course, you're going to have to apply logic at a certain point. But I think one thing that, 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.

• 37:44Shane Parrish?

  How do we learn to do that? What does that mean?

• 37:48Speaker 00

  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, that I can offer a...

• 38:13Speaker 00

  An easy rule for how do I, how do, 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, 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 extraversion. And, and as I was saying it, it surprised me. I had no idea where that came from. So, yeah.

• 38:54Shane Parrish?

  Talk to me about the power of things that don't make sense or surprise us. What does that mean? It means our, our expectation of the world is different or off?

• 39:02Speaker 00

  Yes, well, it, you know, Sherlock Holmes once said, it's a capital mistake to theorize before you have all the facts. And I think it's, that's silly advice with respect, Sherlock. We, we can't help but theorize beforehand, 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.

• 39:47Speaker 00

  When things 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, US 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.

• 40:09Speaker 00

  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

• 40:44Shane Parrish?

  What they think should

• 40:45Speaker 00

  What they think should 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,

• 41:30Speaker 00

  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 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. You know, 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.

• 42:12Shane Parrish?

  Instead of diving in and exploring

• 42:14Speaker 00

  Instead of diving in 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.

• 42:29Shane Parrish?

  It's probably gonna go lower.

• 42:30Speaker 00

  It's gonna 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 gold go?

• 42:39Shane Parrish?

  Right.

• 42:40Speaker 00

  They're all permutations of the same thing, a person in denial, instead of seeing what's actually going on in front of them.

• 42:47Shane Parrish?

  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 and...

• 43:01Speaker 00

  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, 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 700 pages long. And in it, he coins a phrase, intrinsic value. And I, I know I'm gonna get a lot of hate for saying this, but intrinsic value is a fraud, and I can demonstrate that.

• 43:46Speaker 00

  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, he knows if he used the phrase, true value of something, that people would gay, 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 700 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 do we, how justified? By which facts?

• 44:31Speaker 00

  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, uh, nth power, rather, um, 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.

• 45:15Speaker 00

  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, the true value of Amazon is $122.47, I can't use that information.

• 45:38Shane Parrish?

  Why?

• 45:39Speaker 00

  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, like 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,

• 46:20Speaker 00

  C, that everyone else is one day gonna wake up and realize that the true, what the true value is in a reasonable timeframe.

• 46:29Shane Parrish?

  Okay, but hasn't Warren Buffett become like one of the richest people in the world off that very algorithm?

• 46:34Speaker 00

  Yeah, well, Warren Buffett is, is, is a genius, right? Warren and Charlie Munger, right? Two of the smartest guys on the planet. They could do anything and be successful.

• 46:44Shane Parrish?

  But is that their approach, this fundamental analysis?

• 46:46Speaker 00

  Certainly.

• 46:47Shane Parrish?

  As you understand it?

• 46:47Speaker 00

  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 on to them forever. That's his investment approach. Whether that, I don't believe that fundamental analysts

• 47:27Speaker 00

  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 Munger, are pretty unique, right, in their investment results. I mean, there may be a handful of other investors in the world who have beaten the market to that degree by that length of 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, so here's the other problem with fundamental analysis. It's one of hubris.

• 48:10Speaker 00

  Every fundamental analyst believes he or she, using exactly the same tools that every other.

• 48:17Shane Parrish?

  And information.

• 48:17Speaker 00

  And, and information that every other MBA, former MBA student has acquired, reading security analysis is going to discover something no one else has discovered.

• 48:29Shane Parrish?

  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 than anybody else.

• 48:37Speaker 00

  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. Let's say you do your fundamental analysis and decide, you know what, the price of gold should be. Two thousand dollars. Well, good luck with that. Everyone else thinks it's worth one thousand two hundred and twenty one dollars, 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 going to realize what you now think that gold should be worth two thousand dollars an ounce.

• 49:12Shane Parrish?

  And that's the fundamental sort of view of investing.

• 49:15Speaker 00

  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 has 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?

• 49:40Speaker 00

  If you find a value that no one else has found, what makes you think? If people are rational 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.

• 50:00Shane Parrish?

  So how do you get an edge in investing then?

• 50:02Speaker 00

  Right, so, so.

• 50:04Shane Parrish?

  Or sorry, we can come back. There's fundamental analysis. There's other ways to look at this.

• 50:08Speaker 00

  There are other ways to look at the market, right? 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, 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.

• 50:53Speaker 00

  And you can.

• 50:54Shane Parrish?

  But those technical indicators are trends, are they not?

• 50:57Speaker 00

  Well, they're 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 timeframe? Statistically speaking, when a stock reaches its 200-day moving average, approaching it from the upside going down, when it penetrates to the downside, its 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.

• 51:43Speaker 00

  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 Keynes 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,

• 52:25Speaker 00

  and it was up three or fourfold during the Depression and World War II. He was a great investor. And so, how do we anticipate the anticipation of others? That's very clever as a formulation. 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.

• 52:58Speaker 00

  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 a 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 is about to change. So, right now, 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.

• 53:40Speaker 00

  However, I do know that if the barometric pressure falls by more than three millibars or whatever, in a 15 minute timeframe, 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, or, or

• 54:24Speaker 00

  short US 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 US 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, I'm going to buy restaurant stocks. Right? 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.

• 55:08Speaker 00

  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. It's the spread of an idea.

• 55:49Speaker 00

  And it doesn't matter whether the trend is gluten-free food or...

• 55:54Shane Parrish?

  Raw milk.

• 55:55Speaker 00

  Or raw milk or Facebook. A trend is merely the expression of an idea. So for example, buying Tesla stock could be the expression of an idea. The future of batteries.

• 56:11Shane Parrish?

  Wasn't that Peter Lynch's book, One Up on Wall Street? It was basically catching on to these trends early and then...

• 56:17Speaker 00

  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 of what ways to take your lunch money, right?

• 57:02Speaker 00

  So my concern is that it gives a false sense of...

• 57:06Shane Parrish?

  Not only can you do that, you can do it part-time while you work a job and...

• 57:10Speaker 00

  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

• 57:49Speaker 00

  the people who buy books like that, they are patsies for Wall Street. So you, 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.

• 58:23Shane Parrish?

  So they like books like that?

• 58:24Speaker 00

  They love books like that. Good. Lets 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, not a nice one.

• 58:38Shane Parrish?

  So a trend is an expression of an idea?

• 58:41Speaker 00

  Idea. So

• 58:43Shane Parrish?

  Or spread of an idea?

• 58:44Speaker 00

  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

• 58:59Shane Parrish?

  Only because you mentioned it to me.

• 59:00Speaker 00

  Oh, okay. That's funny. So The Diffusion of Innovation 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.

• 59:42Speaker 00

  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, 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 Chopin R. once said, all truth passes through three stages. First, it is ridiculed. Second, it is violently opposed. Third, it is accepted as self-evident.

• 1:00:26Speaker 00

  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-

• 1:00:55Shane Parrish?

  And this applies not only to financial markets, but all-

• 1:00:58Speaker 00

  It applies to all trends. But you'll see it most clearly in financial markets.

• 1:01:02Shane Parrish?

  Right.

• 1:01:03Speaker 00

  So if people can visualize the price of, of a, of a stock going up for many years.

• 1:01:10Shane Parrish?

  Berkshire Hathaway.

• 1:01:11Speaker 00

  Berkshire Hathaway. Well, I don't want to-

• 1:01:13Shane Parrish?

  We don't want to name a company.

• 1:01:14Speaker 00

  I don't want to name a company. Stocks, StockX, X-Stock. Well, careful, that's a symbol.

• 1:01:20Shane Parrish?

  A company that looks like a hockey stadium.

• 1:01:22Speaker 00

  Right, okay. The stock is just going up and to the right, 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, it's going to keep going up.

• 1:01:37Shane Parrish?

  Yep.

• 1:01:37Speaker 00

  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.

• 1:01:52Shane Parrish?

  Okay.

• 1:01:53Speaker 00

  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.

• 1:02:22Shane Parrish?

  Right. Which is a common Wall Street term, meaning.

• 1:02:25Speaker 00

  Right. Oversold means, well, again, oversold assumes that there's some true value where it ought to be. Right? And it should bounce back, right? Oversold means.

• 1:02:36Shane Parrish?

  It dropped really quick and.

• 1:02:37Speaker 00

  Right. It shouldn't be down there. Yesterday was a hundred, today it's eighty five. That's oversold. Take a look at Facebook, right? Facebook dropped what? Nineteen percent in a day. Well, 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.

• 1:03:22Speaker 00

  Because the sharp and the, the far sighted individuals, and we'll come back to who they are. It's not, by the way, there's a 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 a hundred dollars yesterday. Now it's only eighty five. 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.

• 1:04:02Speaker 00

  And right before it gets back to a hundred, those far sighted individuals go, great, time to sell again.

• 1:04:10Speaker 00

  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.

• 1:04:23Shane Parrish?

  And this is just how it manifests itself in a stock price.

• 1:04:26Speaker 00

  In a stock price, you will see first a sharp decline. And everyone else will go, that's ridiculous. And they'll let, 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.

• 1:04:40Shane Parrish?

  Okay.

• 1:04:41Speaker 00

  And that's when the, so it doesn't matter any timeframe, any timeframe. 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. Cause 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 a price trend changes, you don't get a bounce back if the price has gone parabolic.

• 1:05:20Speaker 00

  Right? 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.

• 1:05:35Shane Parrish?

  Okay.

• 1:05:35Speaker 00

  Parabolic moves, you see, you don't see them often in markets. You, you see them more often on the decline than on the rise.

• 1:05:42Shane Parrish?

  Parabolic is like a step change, basically. You go from like 100 to 120.

• 1:05:47Speaker 00

  Right. So parabolic means as opposed to a straight line, it starts to, it just goes exponential. Right? Bitcoin, right? The crypto coins went, went parabolic after going nowhere for years.

• 1:06:00Shane Parrish?

  All of a sudden.

• 1:06:01Speaker 00

  All of a sudden, right? So the third way prices change is a protracted period 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. Cause 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. Oh, no, plenty's been going on. As it were, the weak hands have been shaken out. Everyone who's bored with that stock is gone.

• 1:06:45Speaker 00

  The only people who've bought it are strong hands with strong conviction. So when that begins to take off, it's gonna

• 1:06:53Shane Parrish?

  Really take off.

• 1:06:54Speaker 00

  Really take off. And again, if, just look at the price of Bitcoin, which went nowhere for, for years. And then all of a sudden it blipped up. It went up like, I don't know, from 10 to 100. Everyone went, what the heck was that about? And then you had this sleeping giant that's, that took off from, from 10 to 100 to 19,000.

• 1:07:15Shane Parrish?

  Yeah.

• 1:07:15Speaker 00

  Right?

• 1:07:15Shane Parrish?

  I think we're down like six or seven now.

• 1:07:17Speaker 00

  We're, we, it went to about six and then it bounced to, let me see, recently to 8,200. And I have a, a corlet for Bitcoin, for the crypto coins. And, and the corlet is still flatlined. By corlet, 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, that it's woken up yet. Again, it's, yeah. I'll, I'll come back to that, what a corlet is. Yeah.

• 1:07:48Shane Parrish?

  And then what was the third way? That was

• 1:07:50Speaker 00

  That was the third way. So the first way is essentially a, a, a long-term uptrend.

• 1:07:56Shane Parrish?

  Yep.

• 1:07:57Speaker 00

  Or downtrend, but I was just using

• 1:07:58Shane Parrish?

  A trend that, that has a blip.

• 1:08:00Speaker 00

  That has a, that has a sharp blip, sharp, unexpected.

• 1:08:04Shane Parrish?

  Okay.

• 1:08:05Speaker 00

  Very sharp.

• 1:08:06Shane Parrish?

  The second is parabolic.

• 1:08:07Speaker 00

  The 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 patience are selling to people who have patience and have strong conviction.

• 1:08:33Shane Parrish?

  And so who are these far-sighted individuals? And it sounds like I would like to become one.

• 1:08:38Speaker 00

  Well, well, it's, it's, so let's look at the market, right? So the, the market, I'm using air quotes, comprises many individuals, um, 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.

• 1:09:19Shane Parrish?

  So you have these groups of people all expressing views.

• 1:09:22Speaker 00

  Of the future.

• 1:09:23Shane Parrish?

  Of the future.

• 1:09:24Speaker 00

  Right.

• 1:09:24Shane Parrish?

  Through their, their bets or their investments.

• 1:09:26Speaker 00

  Exactly right. They're all expressing views of the future. They're all studying the world, expressing a view of that world out there.

• 1:09:33Shane Parrish?

  So which is the smartest group to follow and win?

• 1:09:36Speaker 00

  Right, I'm gonna tell you. Right, so, so, so, so yeah, I'm revealing some secrets here. Yeah, cool stuff. So listen up. Um, so let's look at stock traders. If stock traders are bullish on the world, bullish on the economy, they 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, right? They can be more granular than that. They can buy cyclical stocks and maybe sell non-cyclical 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.

• 1:10:18Speaker 00

  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's, 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 gonna do. He's gonna buy industrial metals, right? Copper, iron, palladium, right? But he's simultaneously gonna sell precious metals because who needs gold or silver really? Or platinum if the economy is doing well? So he's simultaneously gonna sell those, right? Buy copper, sell gold, right?

• 1:11:03Speaker 00

  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 gonna 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,

• 1:11:48Speaker 00

  when those two groups disagree, the bond traders are right and early. They are right and early. And 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 gonna be in trouble, follow the corporate bonds of that company. Again, the corporate bonds relative to US treasuries.

• 1:12:07Shane Parrish?

  Right.

• 1:12:07Speaker 00

  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.

• 1:12:22Shane Parrish?

  Right.

• 1:12:23Speaker 00

  Right? They'd have to do both.

• 1:12:24Shane Parrish?

  To capture the spread.

• 1:12:25Speaker 00

  To capture the spread, right? And when those two disagree, I'm, 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 US 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 in early.

• 1:13:08Shane Parrish?

  So, what you're really establishing is almost a behavioral edge.

• 1:13:12Speaker 00

  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. But I will 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, hmm, three times out of four. Not always. It's not like the bond trader edge. The most far-sided group of traders, and accurate, are the metal traders.

• 1:13:53Shane Parrish?

  And why?

• 1:13:54Speaker 00

  Why? Three reasons. The first is, they are the Forrest Gump's 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 the 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,

• 1:14:38Speaker 00

  it's something tangible. It's actually used in the world. And third, is timeframe. 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 earth, it's going to take years to open that mine, right? It's going to take a while to open the mine. And whereas currency traders, they're looking second to second.

• 1:15:01Shane Parrish?

  Right.

• 1:15:03Speaker 00

  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.

• 1:15:17Shane Parrish?

  Every second, there's always a currency trade.

• 1:15:19Speaker 00

  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, my, my Hall of Fame ranking of traders. In, 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

• 1:16:02Speaker 00

  or the economy at all and have complex, multi varied calculus models of the economy. And they can't predict interest rates, something as simple as that.

• 1:16:13Shane Parrish?

  But the, the central banks have all this information. Why, why can't they?

• 1:16:17Speaker 00

  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, of weather patterns, it's so cool. And you'd go, yeah, but you're consistently wrong. You're always wrong.

• 1:16:52Shane Parrish?

  Right.

• 1:16:52Speaker 00

  And, 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, and central bankers are worse than that. They don't, 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.

• 1:17:23Shane Parrish?

  And this podcast recorded August 2nd, just in case people.

• 1:17:27Speaker 00

  Right, so August 2nd, and I would tell you that US 10-year yields are near one-year highs. They're roughly at 3%, 2.997, something like that, 3% US 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 US 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

• 1:18:12Speaker 00

  interest rates, the metal traders are right and early. Now, I'm not telling you.

• 1:18:17Shane Parrish?

  They're probabilistic.

• 1:18:18Speaker 00

  That it's a probabilistic thing. I'm not, 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.

• 1:18:41Shane Parrish?

  And if you go back and look at the last century, what does that look like?

• 1:18:44Speaker 00

  Okay, metal traders were not as good about the global economy as they are now. They were still good.

• 1:18:50Shane Parrish?

  Were they still the best group?

• 1:18:52Speaker 00

  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 then.

• 1:19:10Shane Parrish?

  It doesn't, okay.

• 1:19:11Speaker 00

  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 been batting a thousand since 2000. Interestingly, that's when emerging markets started to make their ascent 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.

• 1:19:56Speaker 00

  There's the price of oil itself. Then there's your Canadian chain. The Canadian dollar is the best. The Canadian dollar versus the US dollar is the best foreign exchange expression of the price of oil. Of crude.

• 1:20:08Shane Parrish?

  Because we're such an oil-rich nation.

• 1:20:10Speaker 00

  Oil-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 and P 500 as a hedge, right? And I would 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 nations. So the sovereign nations that control the supply of oil also trade it, right?

• 1:20:48Speaker 00

  So you can be sure that when Russia 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.

• 1:21:01Shane Parrish?

  There's always somebody on the other side of a trade. I mean, isn't a trade then an expression of hubris? Like you think you're right and somebody else is wrong?

• 1:21:10Speaker 00

  Absolutely, absolutely. And so you need an edge, right? Steve Cullen, one of the great traders of all time, said, that was his favorite question. What's your edge? You need an edge and you need to know 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.

• 1:21:37Shane Parrish?

  Definable and repeatable?

• 1:21:39Speaker 00

  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?

• 1:21:48Shane Parrish?

  Right.

• 1:21:49Speaker 00

  Maybe some discretion involved, but there should be some way to 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.

• 1:22:15Shane Parrish?

  And you can't improve it, really?

• 1:22:16Speaker 00

  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 in the Princeton Review and everything I did there. And that was, everything had to be tested. So, so, yeah, I know we haven't left investing yet, but but you need a repeatable process and you need some objective way to measure is, does that process need to be tweaked?

• 1:22:56Shane Parrish?

  And so going back to John Maynard Keynes.

• 1:22:59Speaker 00

  Sure.

• 1:23:00Shane Parrish?

  Your, 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.

• 1:23:12Speaker 00

  Exactly right. Yeah, 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.

• 1:23:24Shane Parrish?

  Who else is consistently good at anticipating the anticipation of others? Or what other ways are there?

• 1:23:30Speaker 00

  Metal traders. 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 and 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.

• 1:23:57Shane Parrish?

  Right.

• 1:23:57Speaker 00

  I can trade gold.

• 1:23:58Shane Parrish?

  Right.

• 1:23:59Speaker 00

  I can trade Bitcoin. I can trade, you know, there are other things I can trade. I can't trade GDP.

• 1:24:05Shane Parrish?

  Right.

• 1:24:06Speaker 00

  Good luck.

• 1:24:06Shane Parrish?

  Yeah.

• 1:24:07Speaker 00

  That's why I don't follow statistics.

• 1:24:08Shane Parrish?

  Well, let's come out of investing and talk a little bit about education.

• 1:24:13Speaker 00

  Sure.

• 1:24:14Shane Parrish?

  You cracked the SAT. How did you do that?

• 1:24:17Speaker 00

  Ah, well, we're switching gears here. So I went to Wharton undergrad and then I got a law degree at 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, if I do that, it's, I'm going to have to support myself somehow. Cause it's going to be years before, right? I can make a living as an author. And, um, 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?

• 1:25:03Speaker 00

  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.

• 1:25:18Shane Parrish?

  Like it is today.

• 1:25:19Speaker 00

  Right, like it is today. Right? Today, everyone gets tutored for an edge.

• 1:25:23Shane Parrish?

  And the Princeton Review, which is the company you co-founded, has largely, I mean, popularized this.

• 1:25:30Speaker 00

  Right, right. And so, so, well, they're all, and, 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. 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 thirty one, because I had to type the same letter thirty one times. And in the process of this, this mass mailing, I got a single student, I still remember her name, Joanne,

• 1:26:10Speaker 00

  from one of the private schools in New York. And, 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 book at 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 we'll, 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, 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.

• 1:26:55Speaker 00

  Because on every section of the test, the questions are arranged in 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 batting zero. So what was interesting to me was that she would cross off, say, choices A, B, and C. And 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 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're getting it down to two choices,

• 1:27:40Speaker 00

  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, right? You're guessing and batting zero. So whatever you're doing is moving you away from the answer.

• 1:27:57Shane Parrish?

  Right.

• 1:27:58Speaker 00

  So she said, well, I, 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 blurred 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 medium ones, and then the ones at the end. You know that whatever anybody does has to be wrong.

• 1:28:29Shane Parrish?

  Right.

• 1:28:29Speaker 00

  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's not going to be 50, because everyone is going to get 50, right? But you know it's got to be around 50. Like, so you already have a really big clue about the answer to the question. And, and back then, so I created a mythical character, Joe Blogs. And I said, if you're not sure what to do on a question, you ask yourself, what would Joe Blogs do? And if it's a hard question, you do the opposite. Sometimes you're stuck on an easy question, right? And, and if that's the case, you ask yourself, what would Joe Blogs do?

• 1:29:14Speaker 00

  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, 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.

• 1:29:43Shane Parrish?

  Right.

• 1:29:43Speaker 00

  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...

• 1:30:20Shane Parrish?

  You can't guess whether it's a hard question.

• 1:30:22Speaker 00

  Exactly right. So that piece of information is gone. So a lot of...

• 1:30:26Shane Parrish?

  And that's all in response to the system you created.

• 1:30:28Speaker 00

  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 ruthlessly unforgiving domain because you can measure how good a job the tutor has done down to the decimal. You know exactly whether he's done a good job or not. And so...

• 1:30:55Shane Parrish?

  That's based on the score coming in and the score leaving.

• 1:30:58Speaker 00

  Right, exactly. Score coming in, score, right. And then you can use statistics to figure out what would, what should the, what was the expected improvement?

• 1:31:05Shane Parrish?

  What would an average?

• 1:31:06Speaker 00

  What would an average student do? And then, and you can, you can get even a little more nuanced than that. What would a male student?

• 1:31:15Shane Parrish?

  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?

• 1:31:22Speaker 00

  Right.

• 1:31:23Shane Parrish?

  Over a series of students, we can start to...

• 1:31:26Speaker 00

  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, 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 in a car accident, but we'd know collectively 0.03% of them are going to get into accidents in any given calendar year, right? And so we had statistics like that. And then, then everything we did, we tested. So, for example, let's say Shane, the question were a geometry question on a test, and it

• 1:32:07Speaker 00

  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 understands circles just fine, and he misread the question because he wrote down the circumference.

• 1:32:25Shane Parrish?

  Right.

• 1:32:26Speaker 00

  So we had a program. We tagged every question and every choice. So we knew...

• 1:32:31Shane Parrish?

  If you're making this mistake.

• 1:32:33Speaker 00

  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.

• 1:32:45Shane Parrish?

  So this became a bit of a game.

• 1:32:46Speaker 00

  Well, it was a total game, but it was also using big data way back then, you know, right? This is the early eighties, 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? Cause we could measure whether the cartoon's presence or not influenced scores. And not just that, we knew on a class level. So let's say every, 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.

• 1:33:31Speaker 00

  And then we had it on the site level. So maybe all teachers at that particular site in Los Angeles say, we're 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.

• 1:33:48Shane Parrish?

  Data to pinpoint where the problems are. Why don't we use that today in classrooms more than we do?

• 1:33:53Speaker 00

  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, and I think for, 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.

• 1:34:25Shane Parrish?

  Right.

• 1:34:25Speaker 00

  Because the US education system allows each teacher to kind of do what he or she wants to do. There's no experimenting, there's no improving.

• 1:34:33Shane Parrish?

  But, but if we go back to what we just talked about, whereas like, 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, wouldn't, would we not start to get a better sense of which teachers are better than others?

• 1:34:50Speaker 00

  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

• 1:35:35Speaker 00

  some indication of the- Indication of perhaps poverty. Income, exactly. Right. You knew the, the, the, um, 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% of the variation in, in, in fifth grade math and reading scores was attributable to the socioeconomics

• 1:36:14Speaker 00

  of the school, not the teachers. 80% of it. So if students are doing well, yeah, 80% of that variation is, is attributable to their socio-economic status. And, and I did some interesting work along those lines about 25 years ago. In fact, this is gonna blow your mind when I tell you this. And I, 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 gonna start a program to prepare inner-city students for what was known as the Stuyvesant test. For those of you outside New York, Stuyvesant

• 1:36:55Speaker 00

  is arguably the most competitive high school in, in the country. Uh, 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. Their 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.

• 1:37:40Speaker 00

  And by Asian, I include all of Asia, India, you know, not just China and. So Asia, about 25% was was white. And of the white, most of those were Russian immigrants. Oh, really? Yeah. And 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, wait till we get to the punchline. And then 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.

• 1:38:25Speaker 00

  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 300 students. And and 2/3 of them got into one of the three specialized high schools. Stuyvesant, Bronx Science, or Brooklyn Tech. And 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 I'm I'm always testing and researching. So I created a super long questionnaire, like 150 questions, that the following year's students were asked to complete.

• 1:39:09Speaker 00

  And so the questions were like this. Are you male or female? Because sometimes from the names, you couldn't quite tell. 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?

• 1:39:25Speaker 00

  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 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. Hmm. You want a father born in another country, a mother born in the United States. That student improved twice as much as the reverse. Mother born in another country, father born here.

• 1:40:09Speaker 00

  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.

• 1:40:54Speaker 00

  Education is important. And your mother's the one who gives you your language skills.

• 1:40:59Shane Parrish?

  Huh.

• 1:41:00Speaker 00

  So you needed a mother fluent in English.

• 1:41:02Shane Parrish?

  Right.

• 1:41:03Speaker 00

  Which is why the mother born in the United States was so important.

• 1:41:06Shane Parrish?

  So the big, the big impediment was then language?

• 1:41:09Speaker 00

  Well, was partly language, but.

• 1:41:13Shane Parrish?

  And work ethic.

• 1:41:13Speaker 00

  And, 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 twenties, 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.

• 1:41:38Shane Parrish?

  Yeah, that's insane.

• 1:41:39Speaker 00

  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. Were startling, the improvements, when I said that they improved twice as much as the next most 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 sorry, 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.

• 1:42:24Speaker 00

  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.

• 1:42:37Shane Parrish?

  Right.

• 1:42:37Speaker 00

  And you wanted a kid who thought, well, I'm, there's no way I'm going to do it.

• 1:42:41Shane Parrish?

  Somebody believes in you.

• 1:42:42Speaker 00

  Somebody believes in you, and it's your teacher.

• 1:42:44Shane Parrish?

  You're scared enough that that gives you drive.

• 1:42:46Speaker 00

  Exactly right. Drive and because obviously on some level, you think you've got a chance. After all, that's why you're in the program.

• 1:42:54Shane Parrish?

  Right.

• 1:42:54Speaker 00

  Compare two kids playing pickup basketball. And I, I stop and I ask them, are you going to make the NBA? And one of them says, there's no way.

• 1:43:04Shane Parrish?

  Yeah.

• 1:43:04Speaker 00

  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.

• 1:43:12Shane Parrish?

  What the actual statistics would be.

• 1:43:13Speaker 00

  Right. And so you wanted someone with drive and some belief, but, 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.

• 1:43:36Shane Parrish?

  What happened with these kids psychologically when they go from a 29 to scoring 65 or higher? Do they start to believe in themselves?

• 1:43:44Speaker 00

  Well, you know, 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.

• 1:43:59Shane Parrish?

  And I know that I improved.

• 1:44:01Speaker 00

  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, and it's been years, 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 there'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

• 1:44:45Speaker 00

  improve. And that's really, 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 gonna 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

• 1:45:28Speaker 00

  Kipling quote, "If you haven't gotten what you wanted, it's a sign either that you didn't really want it, or you tried to negotiate over the price."

• 1:45:36Shane Parrish?

  That's one of the four quotes you live your life by.

• 1:45:38Speaker 00

  Oh, yeah, yeah, yeah, yeah, yeah. I mentioned that one to Tim.

• 1:45:43Shane Parrish?

  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.

• 1:45:55Speaker 00

  Well, I, 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, 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. It's 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.

• 1:46:39Speaker 00

  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.

• 1:47:09Shane Parrish?

  Not giving up.

• 1:47:10Speaker 00

  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, 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. Cause 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, and they, it's, 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.

• 1:47:52Shane Parrish?

  They don't even let kids think almost.

• 1:47:53Speaker 00

  Yeah, they don't let, not almost, they don't let them think full stop. They just don't let them think. And so I think that's a crucial skill for, for parents to teach their, to, not teach, to model for their children.

• 1:48:09Shane Parrish?

  And is that why the kid with the father immigrant who likely, I'm

• 1:48:15Speaker 00

  Sure.

• 1:48:16Shane Parrish?

  hypothesizing worked either one or two jobs, super hard.

• 1:48:20Speaker 00

  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.

• 1:48:34Shane Parrish?

  Right.

• 1:48:34Speaker 00

  And 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, 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.

• 1:49:18Shane Parrish?

  Why do you think most people don't do that, though? We like double down and work harder or?

• 1:49:23Speaker 00

  Right. Because we think that's the answer, right? We think that what we're doing, we're not try, 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 till you find something that does. It goes back to the Rudyard Kipling quote, right? I mean, don't negotiate over the price, just keep trying, trying to find something that works. I love that about stand-up comedians, right? Stand-up comedians, they have an idea about what'll work, right?

• 1:50:06Speaker 00

  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, gotta 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, let's change the name from Tim to Bob, see if that gets more laughs, right? And they're very

• 1:50:31Shane Parrish?

  Methodical.

• 1:50:32Speaker 00

  Methodical and scientific about it and detached and ruthless. If the audience laughs, great. If they don't, edit the joke or cut it.

• 1:50:40Shane Parrish?

  Right.

• 1:50:40Speaker 00

  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.

• 1:50:59Shane Parrish?

  Right.

• 1:50:59Speaker 00

  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, and so whatever you're doing, and this is true even at a corporate level, try different things. It was so sad. I, last summer in New York, I was walking down the street with a friend, and I saw three young people, I'm gonna say they're late teens, early twenties,

• 1:51:25Shane Parrish?

  Okay.

• 1:51:25Speaker 00

  um, for savethechildren.org, right? 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 gonna 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,

• 1:51:51Speaker 00

  Do 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, 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 all that day, right? And I said, um, 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 till you find something that works?

• 1:52:35Speaker 00

  And then, once you find that, call up 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 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?

• 1:53:17Speaker 00

  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 till 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, I don't know whether those three kids, I mean, you know, I gave them $500 and,

• 1:54:02Speaker 00

  but it's not like I went back the next day and watched to see whether they had changed their routine. I, I kind of doubt it. You know, but you take a shot. It was still a worthy donation, right? To a worthy cause, save the children.org.

• 1:54:13Shane Parrish?

  It's interesting. I mean, you mentioned 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.

• 1:54:26Speaker 00

  Right. And, and, 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, 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.

• 1:54:58Shane Parrish?

  Is there, or what is the difference between passing a test and understanding and applying?

• 1:55:05Speaker 00

  Oh, well, see, the problem in school is that, is that your goal is ultimately to pass the test, right? And 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

• 1:55:46Speaker 00

  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.

• 1:55:56Shane Parrish?

  Right.

• 1:55:57Speaker 00

  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.

• 1:56:05Shane Parrish?

  Right.

• 1:56:05Speaker 00

  Right?

• 1:56:06Shane Parrish?

  I'd never thought about that before. That's really interesting.

• 1:56:08Speaker 00

  Right? And law school especially, you wouldn't want someone to do that. By the way, the GMAT for business school.

• 1:56:16Speaker 00

  Actually, it's 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.

• 1:56:37Shane Parrish?

  Right.

• 1:56:37Speaker 00

  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.

• 1:57:22Speaker 00

  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.

• 1:57:55Shane Parrish?

  Right.

• 1:57:56Speaker 00

  And the goal is actually to fail at the highest level. That should be your goal.

• 1:57:59Shane Parrish?

  Right.

• 1:58:00Speaker 00

  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 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.

• 1:58:25Shane Parrish?

  Oh, that's interesting.

• 1:58:27Speaker 00

  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's C. What's the next question?

• 1:58:40Shane Parrish?

  Hey guys, this is Shane again. Just a few more things before we wrap up. You can find show notes at farnamstreetblog.com/podcast. That's F-A-R-N-A-M-S-T-R-E-E-T-B-L-O-G.com/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 farnamstreetblog.com/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.