Pod Insights Michael Covel's Trend Following Ep. 1358: Scott D. Anthony with Michael Covel on Trend Following Radio About this episode My guest today is Scott Anthony. Scott is a clinical professor at the Tuck School of Business at Dartmouth, where his research and teaching focuses on the adaptive challenges of disruptive change. He previously spent more than 20 years at Innosight, a growth strategy consultancy founded by Harvard Business School professor Clayton Christensen. The topic is his book Epic Disruptions: 11 Innovations That Shaped Our Modern World. In this episode of Trend Following Radio we discuss: Evolution and meaning of disruption in business Technology companies adapting to disruption (Amazon, Meta, Microsoft, Apple) McDonald's business model and Ray Kroc's entrepreneurial mindset Impact of education, AI, and universities on future disruption Jump in! --- I'm MICHAEL COVEL, the host of TREND FOLLOWING RADIO, and I'm proud to have delivered 10+ million podcast listens since 2012. Investments, economics, psychology, politics, decision-making, human behavior, entrepreneurship and trend following are all passionately explored and debated on my show. To start? I'd like to give you a great piece of advice you can use in your life and trading journey… cut your losses! You will find much more about that philosophy here: https://www.trendfollowing.com/trend/ You can watch a free video here: https://www.trendfollowing.com/video/ Can't get enough of this episode? You can choose from my thousand plus episodes here: https://www.trendfollowing.com/podcast My social media platforms: Twitter: @covel Facebook: @trendfollowing LinkedIn: @covel Instagram: @mikecovel Hope you enjoy my never-ending podcast conversation!
Transcript 11,113 words · 3 speakers
0:00 Speaker 00 My guest today is Scott Anthony. He's a professor at Dartmouth at the Tuck School of Business. Today, the topic epic disruptions, 11 innovations that shaped our modern world. Scott is an acolyte of the Professor Clayton Christensen behind Innovator's Dilemma. And we go into all kinds of disruptions and banter. And I enjoyed this conversation a lot. And guess what? I hope you enjoy it too. Well, without any further delay from me, let's jump right into my conversation with Scott Anthony.
0:48 Speaker 00 Before we get into some of the great examples that you have in your work about disruption, you got me thinking in advance of this conversation about maybe ones that aren't in your book. Even for me, I felt some of these are even possibly controversial. And it maybe even gets us into the discussion of disruption. But I got to say for me, there was two, and they're very social. They're very men and women that really jumped out at me in terms of disruption. And one was probably a 60s or 70s innovation, which would have been birth control. And number two, kind of the follow on post the dot com era would be dating apps and social media. I was thinking of those two because all the ones you have obviously changed the world.
1:33 Speaker 00 But I was thinking those are right there in that headspace, a touch more controversial perhaps, but right there in the headspace of disrupting. And to add one more caveat here, which your subtitle, you're saying shaped. But shape, there's not all good and not all bad here, right?
1:49 Speaker 01 You picked up on that. It's interesting. This is something that I probably won't say on camera when we're recording. Oh, we're already recording, so I can get in control if I say this hot mic moment. We just taught a class yesterday and we were doing a compare and contrast between the students at the Tuck School of Business and students at the Harvard Business School. I said, "The mission of the Tuck School of Business is wise, decisive leaders that better the world through business." The word better is importantly emphasized. Harvard, it's leaders that make a difference in the world. And you can make a difference in a lot of ways. It can be good and it can be bad.
2:18 Speaker 00 The people involved with these institutions are very bright. Everyone knows what words mean. One is taking a more careful, idealistic perspective. And the other is saying, that's not our position. At least that's what it sounds like in the words.
2:32 Speaker 01 Institutional neutrality, and you could argue that's up to the individual person to do what they're going to do and all that. The other examples, you had birth control and dating apps. I've not deeply studied either of them. I'm happy to talk about them, but it's not an area where I can provide fun facts and extra things and all that. But I think they are interesting things to explore for sure.
2:50 Speaker 00 When I watch what's happening in the world these days and you see the statistics of, especially in the West and places like Korea, Japan, you see the fertility rates dropping. There seems to be a men and women kind of thing happening. And I'm Gen X, so I didn't really see this frankly, until the last five, six, seven years. But it's definitely a shift. It's definitely a change. To me, it's a disruption for sure. It's not my parents or my grandparents' style of relationship. Those days are gone.
3:22 Speaker 01 That is definitely for sure. I've got four kids, just watching the patterns that they follow. It's a very different world. As you said, to the discussion about shape, sometimes for better and sometimes arguably for worse.
3:33 Speaker 00 So you've got an interesting background, which I was not aware of at first, especially one of your big mentors who we will discuss. But let's discuss just out of the gate, the word disruption. It is a great word, right? You probably wish that you had disruption.com. It's the best. It's one of those words that you hear it. It's like for me, I love the word serendipity, but it's like disruption. You just, you feel like something's about to happen.
3:58 Speaker 01 I agree. You have to spit the word out, disruption, and you can feel your mouth move when you say it. Clay Christensen would say that he regretted choosing that word because it is so laden with meaning. And he had a very particular meaning when he used it. That might be true. On the other hand, I think it is one reason why the idea spread as much as it did, because it just had a super sticky name. There are pros and cons to everything.
4:21 Speaker 00 To me, it feels like a fighting word. It feels like something's about to go down.
4:26 Speaker 01 And that, I think, is one of the things that have to correct executives' perceptions around it. Because, yeah, of course, the original research was about competitive dynamics and competitive battles. And it showed that attackers would win when they were armed with disruptive innovations and all that. And that's an important thing to remember. But the more important thing to remember is the power of disruption to create new markets and transform existing ones. So it's not a bad thing. It's net a good thing. But if you're on the wrong side of it, of course, it can feel really bad.
4:53 Speaker 00 It's not something that can be stopped.
4:55 Speaker 01 For sure. And the question for organizational leader is, are you going to use it to your advantage? Or are you going to fail in the face of it? Trying to stop it or control it, that's nigh impossible, I would argue.
5:06 Speaker 00 A big picture thought that I had in thinking about your work. So many of the tech companies, and I guess if you look back to the IBMs and the General Electrics and all that kind of stuff, you would say, well, how did these early pioneers, why were they not able to keep leveling up? This is the crux of the matter. But from my observation, a lot of the modern tech companies, it seems like they either have been wise enough to have internal, and Bezos would be a great example of this, an internal approach to being ahead of disruption, trying many experiments, seeing what works. Or if I look at the case of Mark Zuckerberg, he said, we can't innovate Instagram or WhatsApp, so let's buy them.
5:51 Speaker 00 Both strategies seem to be different than some of the older, quote, tech companies, where they seem to have lost their footing. Places like Kodak or something, where they lost their footing. Where some of the newer shops seem to be well aware of this, we must stay disruptive.
6:07 Speaker 01 This is one of the things that's really changed in the world. So Clay Christensen's research doctoral thesis comes out more than 30 years ago. The first mass market article is 30 years ago, 1995. His first book is 1997. So the ideas have spread. And now no one can blame themselves or blame anyone for missing disruption other than themselves. Because you have the great tools, you have the great ability to do it. And certainly, as you've described, you have examples of organizations that in a previous generation might have failed to make an industry transition that either built it or bought it. And I'm even more personally interested by Microsoft. In Amazon's case and in Meta's case, there's the role of a very strong-willed founder during the big moves. Amazon's now transitioning, of course, to Aunt Jessie.
6:52 Speaker 01 But in Microsoft, you have a third leader. So Gates to Bomber, company gets a bit lost, the Della comes in and really seems to have recaptured its disruptive mojo through moves to the cloud and artificial intelligence and so on. That, to me, is really interesting. And it'll be interesting to see. Apple is under professional management and, of course, trying to replicate the iPhones is impossible because it is a once-in-a-lifetime sort of thing. But is Tim Cook able and his team able to do something with augmented reality that at least echoes off of it? I don't know. It's an open question. But certainly, people are more aware, and that changes the way that disruption plays out, for sure.
7:30 Speaker 00 Microsoft's really interesting in the sense that you're right. It felt like for a very long time, still can't profess to being a big user of their products, except for something like Word. Look, they've got a built-in base that just spends off cash like no tomorrow. So even if there were lulls, eventually, when they land on a CEO who says, "Gosh, we've got this great cash flow that just never stops, let's go ahead and right the ship." Some folks, some companies, don't have such a built-in cash flow.
7:58 Speaker 01 Now, a few companies do. You know, of course, Microsoft, having that lifeline, if you want to call it that, makes it look a lot different competitively than someone who's got to sell something every single year and fight for every inch. Of course, Microsoft is selling every year, but essentially, we're all buying and using Microsoft's products without even being conscious about it. That is the power of the franchise that they built, and that gives them lots of opportunities. Of course, nothing is preordained. You still could have a company that is stagnating its way into oblivion and losing all the good talent and still is producing cash flow but looks essentially like an electric utility that also produces really good cash flow because we all need electricity. No one is saying that their electrical utility is doing really inventive, innovative things.
8:43 Speaker 01 And that could have been Microsoft's endpoint.
8:45 Speaker 00 I don't want to take you down the path of each and every interesting disruption in terms of a company that you have that you have put forward, since you just brought something up with Apple. And I've shared this experience before recently on the podcast, but I was in Singapore and I was at their Apple Store and I had never put on the Vision Pro. And I put on the Vision Pro and I was blown away. I immediately realized it's not ready for primetime, it's too heavy, but it was a technology where I was like, wow, if this existed on the Ray-Bans that I'm currently wearing, it'd be the most popular product on the planet, hands down, everybody would have it. Because, look, when you put something on and you're like, you don't know what to expect. And I was just messing around, hanging out, and
9:30 Speaker 00 I just walked in the Apple Store and people were demoing it. I said, well, can I? But you put it on and you're like, you're not expecting to have a dinosaur, you know, one inch from your face that looks like that if you move, it's going to eat you. And I literally kept saying to myself, I hope it doesn't jump at me because I'm going to jump, you know? That's my setup in the sense that, as you say, hey, there's never going to be another iPhone. But if they could take that heavy damn headgear and put it to these Ray-Bans, they would have something.
10:01 Speaker 01 And I think the thing you always have to remember is the snapshot, when you're looking at an innovation can sometimes mislead you. And it's the movie that you really have to pay attention to. We forget this, but when the iPhone first came out in 2007, it was not an immediate overnight success. Of course, there were those who hailed the Jesus phone, who waited in line to get it, et cetera. But sales were actually reasonably slow because the first version of the iPhone did not have the App Store. There were 16 apps on it. Apple fiercely controlled it. It was 2.5G technology. There wasn't that much that you could do with it. It takes a couple of things to happen afterwards before you really have something that is fully disruptive. And I think in Vision Pro, you
10:44 Speaker 01 have the same possibility. You know it's going to get smaller, it's going to get simpler, you know it's going to get cheaper. Can they get the technology to be good enough where it really disappears into glasses or something? Something like that. I don't know, but you can bet they're working like crazy on it. And you can bet the next generation is better than the last generation and so on. And one thing Apple has always been really good at is being willing to be patient for long periods of time. We forget this. The iPhone was not the first time Apple had gone into the device space. There was the, what it did with the Apple Newton 10 years before that. And that didn't work, but that didn't mean that Apple stopped working on a powerful computer you could have in your hand. It kept working at it, just in different forms.
11:27 Speaker 01 And I think ultimately something will happen with our eyes, glasses, implants, contacts, whatever. And there's no reason why Apple can't get there. Of course, Meta is trying really hard with its glasses as well. It'll be interesting to see what happens.
11:40 Speaker 00 You mentioned, I think you said 2007 for the iPhone?
11:44 Speaker 01 2007, generation one, yeah.
11:45 Speaker 00 I did not buy it till 2012, so for that four or five years, I was still using a Motorola flip phone where you would still have to type the alphabet, like type three times or whatever, that whole nonsense. I can't remember what, and I was a big Apple user for a long time, probably 15 years up until that point. And maybe the same feeling why I didn't put on the Vision Pro until just the last month. That feeling of there's no way this is ready for prime time yet. So why should I even lift a finger? It's not ready for prime time.
12:16 Speaker 01 No, and you see this, of course, with many innovations. Everett Rogers in 1962 wrote diffusions of innovation and said, there are some people who will pick up any random new thing that exists, that they'll try anything. There are some people who are early adopters who will put up with something with limitations because they like novelty. And then you get the vast majority of people that are going to wait until some of the bugs are ironed out, until more features are added and so on. So again, in the early days of something, when it really is the people who are experimenting with things, we can make very bad predictions because we can't see what's going to happen next. I think the thing that's again, important to remember for all of this, we know the technology that exists today is what was worked on in the labs years ago.
13:01 Speaker 01 And what is being worked on in the labs right now are the things we're going to see. One, two, three, sometimes 10 years down the road, it's going to be really different. If we see the pattern of something taking things that were complicated and expensive, making them simple and affordable, bringing new things to new contexts, that rings a bell. That is disruptive innovation. We can bet there's going to be big changes. Exactly how, exactly what form, exactly when? That's really hard to know. That's why I say in the book disruption is predictably unpredictable. There are patterns, but it is not and cannot be Newtonian physics.
13:38 Speaker 00 Wasn't it Steve Jobs who was at the Xerox labs in Palo Alto? And saw the graphical user interface and the mouse? And obviously that's where he got the idea from.
13:49 Speaker 01 For sure. And he was a big fan of the Pablo Picasso line, good artist copy, great artist steal. And he had no shame at all in stealing great ideas wherever they might be. Not breaking any laws or anything, just drawing inspiration from the outside. And there's a great quote he had. He said once, if you ask a creative person how they did it, they actually feel a little guilty because creativity is nothing but connecting things. And he was a truly masterful connector. He studied calligraphy when he went to Reed College. That helped him think about the original Mac interface and how to make it beautiful and his design aesthetics and so on. And it's a thing that I generally advise students and executives to do. Out of your comfort zone, go to different spaces, get different inspiration. Because if you've got an innovation problem on the brain,
14:34 Speaker 01 you're going to see a connection in a place where you don't expect it. And Steve Jobs illustrates that beautifully.
14:40 Speaker 00 I think the first Mac I purchased was either 89 or 90. And I recall friends, and perhaps even my father at that time, who were still embedded in the DOS world. And there was this, you know, look at you and that's a toy. What do you need that toy for? We're over here on DOS. DOS is the powerhouse. What are you doing with that toy? And I just remember thinking like, how can you not see? You're like on a command line interface. What are you talking about? How can you not? I mean, there's no real internet connection. The applications were not great, but for me, it was just that whole Wow, I can play with it. I can see, I can move things. I don't know, it just seemed very obvious to me. However, even though it seemed very obvious, not being a fundamental investor,
15:26 Speaker 00 I did not own the Apple stock then and then hold it for the duration.
15:29 Speaker 01 Of course, you would have to have gone through some pretty dark times if you bought it in the late 1980s, because you still have to go through Steve Jobs getting booted out of the company and then going and starting his next act at Next and coming back to the company having a near-death moment. And the thing we forget in the Steve Jobs story, we remember Steve Jobs, the creator, the iPod and the iPhone and the iPad and all those things. But when he came back in the late 1990s, he was Jobs the destroyer. His Apple was lost and he shut down everything except for four products. Four products. That was all that they were focused on. So there was the space to innovate and grow. And again, you look at the long movie, yeah, absolutely, you should have bought stock in the late 1980s. But you had to be able to see things that really looked unexpected.
16:14 Speaker 01 And that's just the way things go sometimes. My first Mac experience, it was Dr. J versus Larry Bird, one-on-one. So that was my silly game that I would play on a Mac in the mid 1980s.
16:24 Speaker 00 Is there a first moment where Jobs admitted that the music player was gonna get the browser and get the phone and it was gonna be this all-in-one device? Is there a moment where he ever admitted that he knew this was all gonna be one thing?
16:40 Speaker 01 When the iPhone is launched in 2007, that was the way he pitched it. He said, "We're launching three revolutionary devices. We're going to have a next-generation music player. We're gonna have an internet-connected device and we're going to have something that enables you to make phone calls." And he keeps saying, "Three revolution states." And then it becomes clear he's talking about one thing, bringing all three of those together. If you look at the history of it, it's a couple of years before it where it begins to become clear that Apple really is going to make this move to integrate everything and go into the mobile space. They had a failed effort with Motorola, the rocker phone, that was just an abomination for a company that loved design, where Steve Jobs said, "We're just not very good at working through orifices, working through third parties to do this." And one interpretation of that would be-
17:25 Speaker 01 Apple would never do a phone. The actual interpretation is Apple had to do its own phone, not working with a third party. Thing that you have to give a lot of credit for, in another universe, you have someone at Apple say, hey, we can't do this because we've got these really profitable laptop and desktop computers. We've got this booming business in iPod MP3 players. We're going to cannibalize these product lines if we introduce a phone. And who knows if we're going to succeed. To the credit of Jobs and their leadership team, they said, there is massive potential to grow here. Let's go and do it. It ultimately killed the iPod business, but net of course, that was very good for Apple.
18:04 Speaker 00 It's a huge risk, but in a sense, I guess if you have this classical feel of being larger than life, which I think Jobs had, I think anybody that watched him is envious of it. He didn't want to be known for just some guy at a small company that was cranking out the latest whatever. He was looking for the Messiah type rise up lead, a charge. It's just an amazing story. We all talk about it so much, but it probably will never get old.
18:31 Speaker 01 I agree. I learned new things when I was researching it for the book. And of course I lived through it and I've written other things about Apple before, but still, any story you pick up and look at from different perspectives, you're going to see new things in it. And there was one version of the book, it didn't make it into the final version. But one version of the book where the book ended with the Apple Think Different campaign from the late 1990s, part of Jobs's effort to reignite the company. And the campaign goes, here's to the crazy ones. It is the ones who will see what others don't that will actually go and change the world. And that certainly was what Steve Jobs tried to do. Put his ding in the universe by saying, how can I do what would seem to be impossible? And you need people like that to make the world a different and better place.
19:15 Speaker 00 Let me shift you to the place that serves more burgers than anywhere. There was a film a couple of years ago with Michael Keaton and it didn't get a lot of play. I can't remember if it was right before COVID or during COVID, but it didn't get a lot of love. But it's one of the great films. And in terms of a business film, it's a fantastic business film that just got buried. Maybe Hollywood didn't like the politics of Ray Kroc. I don't know what the story was on how that particular film got buried. Because even from an acting perspective, it's quite nice. You really get into the characters and stuff. I don't know how much of it is fiction, but it really tells a nice McDonald's story.
19:53 Speaker 01 Very little of it is fiction, as best I can tell. It is part of the research for the McDonald's chapter. I read Ray Kroc's biography. I read a third-party book about the history of McDonald's. I watched the movie. And those three all corroborate, that they all fit together. And the things about Ray Kroc coming to sell milkshakes and then turning into the master franchiser, the things about the McDonald's brothers running the prototype on their tennis courts to figure out what they called the speedy service system, that really was one of the keys to McDonald's becoming McDonald's. All is reality. And I agree, it is a great business movie because it shows you rapid prototyping. It shows you how to experiment. It shows you the power of a business model. And that's the thing that is the most important thing about the McDonald's story.
20:38 Speaker 01 What allowed McDonald's to serve billions of people profitably, to really scale fast food to the masses, wasn't just that people liked their food. It was because it figured out a really unique way to create value through standardization, to deliver that value through a franchise system that all worked together. And then to capture value, the McDonald's Corporation made most of its money in its early days, actually not through hamburgers, but through real estate. And it needed that to be able to fund further expansion. And the companies today that are thinking about how do we drive disruptive growth with artificial intelligence should learn a lesson from McDonald's. If you want to drive that kind of growth,
21:20 Speaker 01 you need to figure out unique ways to create, deliver, and capture value. I worry a lot about labs, OpenAI, Claude, et cetera. Is their business models are pretty banal and pretty boring. And if they don't figure that out, they're not going to make it. They're just going to keep needing to get more and more money. And until they trip on that business model, that's what the end will be.
21:41 Speaker 00 There was an infomercial that used to run late-night TV in the 90s by a fraudster-type guy named Don Lapri. And he would tell people, this is pre-internet, I think, if you just place tiny little classified ads in the back of the magazines, you can then sell whatever through these tiny little classified ads, which essentially made Google. As you say that about the AI companies, I don't know, like, what's the big innovation in terms of they're just going to want to capture that advertising revenue that Google has captured? And Google's done it so well, it just feels, are they just going to try to replicate what Google's done in some sense?
22:19 Speaker 01 And history shows if you just try to replicate what the market leader does, Google, Alphabet, has very deep pockets, has invested heavily in its Gemini solution. It can do the exact same thing. I don't know what the answer is for Anthropic or for OpenAI or any of the large labs that are working on models. I know it is the question they need to answer, though.
22:43 Speaker 00 Let me take you back to Ray Kroc, though, because you were laying out, once McDonald's started to take off, all these things happened. Going back to the movie even, to have this man, essentially one man, making these observations and making these bets on himself, on the McDonald's brothers, later in life, he wasn't a spring chicken. The disruptive mindset that he had, can you speak to that? Since you've done a little more homework than I've done, can you speak to his mindset and his kind of personal faith on taking such a risk?
23:20 Speaker 01 He noted when Ray Kroc runs into the McDonald's brothers, 1954, he's not a spring chicken. He's on, as best I can tell, his fourth major job, fourth major career. He's done a bunch of things, including being an ambulance driver along with Walt Disney way back in his youth. So that was a small world moment that I learned about. So he has a wealth of different experiences. He is selling equipment that gets used to make milkshakes. That ends up being really helpful because that's what draws him to McDonald's. Because there's this small hamburger stand in San Bernardino that has these ridiculous sales and is buying all these milkshake machines and equipment. So the fact that he was in the space allowed him to see things that he would otherwise miss. So that's one thing that's really important.
24:05 Speaker 01 His accumulated experience allowed him to say, hey, there is something happening here that is bigger than the people realize. That's point number one. Point number two, then, like any entrepreneur, the drive to go and try different things and try different things and try different things and not give up even when there are struggles and setbacks. The first six years. Where he essentially is the master franchiser of McDonald's. The business is booming, but the McDonald's Corporation only makes $160,000 in aggregate profits over six years. But the willingness to keep pushing and persist, that's a very clear thing in entrepreneurs.
24:47 Speaker 01 And then the third thing I would say, while he is clearly the hero of the story, there's also Fred Turner, who is his operations guy who comes up with the manual that you use to follow the speedy service system. There's Henry Sonnenbaum, who comes up with the real estate model. There is other people in the story who come up with the way that they cook french fries and franchises that come up with ideas. And one thing that was pretty striking is for as entrepreneurial as Ray Kroc was, he was horrible at coming up with specific menu concepts. One of his ideas was the Hula Burger, which was pineapple and cheese on a bun, which I have not tried, I will admit. And I don't think I ever will try. It was a commercial flop.
25:29 Speaker 01 It took the franchise owners to come up with the Big Mac and the Filet-O-Fish and Chicken Nuggets and the Egg McMuffin and all that. So credit to him for creating a system where other people could do magic. It wasn't just him, and it never is. There's always again a hero, but there are lots of people involved anytime you see a big success story.
25:50 Speaker 00 You mentioned that Hula Burger in the last handful of years, and I actually took a picture of it. I'm in Ho Chi Minh City, Vietnam, and within the last two or three years, they launched a pho burger.
26:02 Speaker 01 I don't even know how you do that. Do they fry it or what? How do you even make that? How does that work?
26:07 Speaker 00 There was some kind of a gelatinous something that would have mimicked noodles and a burger to mimic meat and some flavoring. I actually bought one and the damn thing tasted like pho. I don't think it was very popular. I haven't seen it again.
26:21 Speaker 01 I've never run across that one. I've spent a little bit of time in Vietnam. I do always like to go to McDonald's just to see what it's like in different places. And I've missed the Thud Burger. Maybe next time.
26:31 Speaker 00 I had a conversation with some friends today and it got a little heated and it was the classic topic, nature versus nurture, nurture versus nature. The good professor Watson came up, the behaviorist. I tend to see things through his lens. Look, you're a smart university, smart kids, you gotta have some basic horsepower. But then, once you got the basic horsepower, then there are other things that have to happen. And I think that's what's interesting about Ray Kroc, is somebody could sit back and they could say, he had the IQ, but hold on, he had to put himself in motion. He had to be gathering experiences. There are plenty of people, and you know this, that will attend Ivy League schools with the best SATs. And at the end
27:14 Speaker 00 of four years, at the end of 10 years, they might not be up to set the world on fire type stuff. So it's interesting about this Ray in the sense that the drive, the desire, and that perhaps even came from what you were describing, which is when you are on the inside of something, and you're seeing information that other people are not seeing, you're like, oh, wow. Okay, then the adrenaline starts. And then you're like, game on.
27:39 Speaker 01 There's a bunch of interesting areas you could go into here. I'll just make a couple comments. Number one, of course, you do have to have the horsepower and all that. But as you say, millions of people do. What really separates is people who go seek out and then seize the opportunity when it comes. And a lot of it is showing up. So Ray Kroc shows up in San Bernardino. If he doesn't show up there, then nothing happens. Ray Kroc says to the McDonald's brothers, I want to strike a deal with you. I want to go and do something with this. If he doesn't say that, nothing happens. These things require being there. It requires taking that leap or step or whatever a faith to go and do it. I think that's one thing that's important. Other thing that I think then connects to this, there's some research that shows if you want to see some of the explanatory factors that lead people
28:22 Speaker 01 to be great entrepreneurs, there are a disproportionate number that went to Montessori schools in their youth. And Montessori schooling is something that encourages Encourages intellectual curiosity that encourages people to love learning for no reason other than learning is intrinsically interesting. So I think you will see this pattern that the people who are great innovators and entrepreneurs, they just want to understand. They want to be there. They want to see. They want to touch. They want to feel. And that sometimes will create opportunities for them to do different things. And then finally, you will see a pattern where a lot of people who are great business leaders, they came from tough backgrounds. So they came from broken families. They came from places where they didn't have a stable environment.
29:05 Speaker 01 And there's a little bit where they're trying to prove to the world that they've got the ability to do it. I've not seen that in large sample research, but certainly you see that in some of the stories.
29:13 Speaker 00 It's interesting. My father is still a practicing dentist, and he has been doing this for over 50 years. He built his practice up to a very large practice from a one-chair, small, tiny little office. But he was a Montessori school guy. Now, I've gone down the entrepreneurial path too, but I was the Catholic school, one through 12. In my opinion, from what I experienced, that was less about the inquisitive and being a skeptic. That was more about, hey, here are the rules. Accept them and don't ask questions.
29:45 Speaker 01 I lived in Singapore for 12 years. So I certainly associate with a generation of Singaporeans who grew up in a schooling system that was the antithesis of encouraging curiosity, questioning the status quo and exploring. It really was. There is a test that has right or wrong answers, and you really want to get the right answers and do what authority figures tell you. And I think one of the things that you give credit to Singapore for is it recognized that while that was good in one era, that would be something that would constrain growth in another era. So lots of changes in what happens in primary education and how you make sure that design, thinking and creativity is taught more widely. You don't change a society like that. Singapore
30:26 Speaker 01 is still Singapore, but it is now a much more vibrant entrepreneurial ecosystem than it was before. And it all started with the schooling. I think that's a really important thing.
30:35 Speaker 00 You raise a good point, too, for people that have never been to Singapore or don't know anything about it. I do recommend, and I I'm not trying to say he's all that, but he was a pretty interesting and achieving type individual. It would be Lee Kwan Yu. And so I would highly recommend to check out some of the clips of Lee Kwan Yu from back in the day, just talking, because sometimes in the modern age today, we don't hear people talking like he talked. We hear people holding back or people a little afraid to say too much. And he wasn't that type of guy.
31:05 Speaker 01 Not at all. A very clear communicator. You might not always agree with him or like the messages that he was sharing, but you knew exactly where he stood on things. And he had very sophisticated understanding of geopolitics. You look at what was done at a place that in 1965, when it declared independence or became independent of Malaysia, $800 GDP per capita. And you look at where it is now, it is really a miraculous story.
31:31 Speaker 00 What's funny too is Malaysia is a very prosperous country. But the reason that Singapore exists is because, and I'm reducing here a little bit, Malaysia decided they wanted to have a particular type of government, a particular type of, let's call it constitution. And Lee Kwan Yu wanted one that was quite different. And the world said, you know what? We like what this guy Lee Kwan Yu was saying, and we're going to put a lot more money behind what he's doing. In a way, a very big loss for Malaysia.
32:06 Speaker 01 Lee Kwan Yu famously cried when ultimately the separation happened between Singapore and Malaysia. So it was not the outcome he was seeking. But as you say, history showed that a lot of good happened to the people of Singapore because of it. It's an interesting story for sure. And a lot of innovation in a, innovation in a different way. Innovation in how you structure a country and very innovative ways to think about home ownership and think about retirement savings and how you go and ensure that you have a rich mix of ethnicities that are able to get along harmoniously. And not a perfect place, but a place that has a lot to show the world.
32:43 Speaker 00 Do you know what I think there had not been there for three years and I just popped in there less than a month ago. I think the next innovation and maybe Singapore friends are going to hate me for saying this. It appears that all of Singapore will eventually be a mall.
32:57 Speaker 01 Pretty close to that now, but yeah.
32:59 Speaker 00 And everything is just going to be a mall of entertainment and shopping and it's all going to be connected. And maybe you land at the airport and the airport is just connected to the mall on Orchard Road. There's no break.
33:10 Speaker 01 Kind of Las Vegas, but a little bit less seedy perhaps.
33:14 Speaker 00 That's actually a good way to think about it. It's a little more spread out. Let me ask you a question. Why are you fascinated by this disruption topic? Where's the start for you? What got you going down this path?
33:28 Speaker 01 It's easy for me to answer this question. There is a date. I can give you a specific date. It's October 21st, 2000. I'm a second year student at the Harvard Business School. I'm taking this class called Building and Sustaining a Successful Enterprise by Clay Christensen. I'm loving the class. I'm flying out to Phoenix. I'm going to meet my friend, Chris. We're going to go see Pearl Jam. It's going to be the fourth time I see the band. And I bring with me Clay's book, The Innovator's Dilemma, When New Technologies Cause Great Firms to Fail. And I read the book and it's the moment. I read the book and I understand my own history in a different way. I understand my consulting days before I went to business school in a different way. I understand all my other classes in a different way. It's like, all of a sudden, I can see things that I couldn't see. And as I look back, it was
34:11 Speaker 01 in that moment where I say, I just want to keep exploring this idea. And the more I explored the idea, I did an independent study with Clay the next term. I then started doing research with him, spent two years doing that. We wrote a book together. The more I explored it, the more fascinated that I got by it. So it really was this moment where I said disruptive innovation explains things that were hard for me to explain before that led me down this path. It's 25 years ago now.
34:38 Speaker 00 To get you to unpack a little bit about university life today, because you're in a topic area where you're fully prepared for students to challenge you, to be skeptics, to dive in. And this topic is open in the sense that The objective is for all of us to learn more and to find what the truth might be, to find some insights and then to be prepared for the next disruption. But in the modern age, like, okay, in your discipline, we've got this attitude. But a lot of university these days doesn't seem like it has that. There's a lot of topics and classwork on universities where this kind of mentality,
35:21 Speaker 00 and I know I've had the professors on the podcast sometimes where you get into some of these controversial subjects and it's more dogma, it's more, don't question. It reminds me of going back to second grade or something. What's your perspective on this when you're in such an open kind of search for the truth perspective? And look, okay, there's always politics out there, but what is your perspective of university life these days and young people in general in terms of their desire for the truth?
35:47 Speaker 01 That's a nice, easy question. So let me reflect for a minute. I joined the faculty here three years ago after spending more than 20 years as a strategy consultant. And part of me is great. I can exhale, I can relax. Strategy consulting, it's just day to day battles all the time. You're fighting with a client or a problem, sometimes your own team, whatever. I'm like, okay, I'm going to a school, it's nice and quiet, not much happens there. And then three months later, ChatGPT comes out. And then a couple of years later, Donald Trump is elected and just the world inside universities is a lot different than it was three years ago. And there's lots and lots of open questions, things that appeared to be settled that are now unsettled. To me, that's exciting and interesting, but it also means that there's constant questioning
36:32 Speaker 01 about how are universities going to continue to work? This is what I experience and see at least. It is a time where things that were treated as facts are being exposed as assumptions. Universities have had tenure for a thousand years and that's just the way it works. You get tenure, you can do whatever you want. Doesn't have to be that way. There was a certain way to do things. There was a certain way that knowledge was imparted. Doesn't have to be done that way. ChatGPT and other forms of large language models can enable completely different forms of instruction. I see among the students, real differences in different groups. You have some groups that want to question everything, that are picking up new technologies and pushing frontiers and can teach you more than you can teach them
37:16 Speaker 01 because they are learning so rapidly. You have other groups that are in defensive crouches that say, I don't know what's going on and I don't like it. It's too much change for me to handle. Can you please make it easier and safer? Can you just teach me something? So it's a really interesting time because I don't know which way it's going to go, but you really see different tracks emerging. And again, to me, these moments in the middle, when it's unclear how things are going to play out and we don't know what the next model is going to be, those are the really fun ones.
37:47 Speaker 00 We've stumbled into, not a planned question for me, but it's like disruption at the university level. And then you've got the AI disruption. And obviously, they're going to meet head on.
37:59 Speaker 01 No question about it. As one, just a little tiny example. I started teaching in 2022. I would have an end of class assignment where people had to write a paper using some of the ideas from the class. And the first time that I had the assignment, the quality of writing was a major component of the grade. Now it's 0% of the grade because quality of writing is table stakes. Everybody can write something that at least superficially is good. I also added on the option, if you wanted to, instead of doing the paper, use AI to come up with a way to teach a leader of your choice something from class. And the thing I learned from that is I cannot look at the outputs students produce. I have to have them show me the work, the way that they've interacted with their LLM of choice to understand their thought process.
38:43 Speaker 01 Just one small example of how rapidly things are changing. I met with an old economics professor of mine, and he said, we have gone back to the Stone Age in terms of final exams. The final exam, I give people a blue book and a pen. I give them a calculator that has been deprogrammed so it can only do certain things. And he said, the thing that's interesting is in my class itself, nobody ever gets up in the middle of the class to go to the bathroom. But during the exams, interestingly, more people have reason to go to the bathroom. He said, I don't know exactly what to make of it, but I make something of it. So again, no one knows what the answer is, but you can see lots of signs of things changing.
39:20 Speaker 00 That is fascinating. If you had to advise a young person, if you and I were just sitting around in a pub and we were talking to some young people and they were saying, hey, should we spend 60 grand a year to go to Dartmouth when we have all of these assorted large language models to work with that we are going to use at university already, or should we just go build something?
39:43 Speaker 01 First, I would say it doesn't have to be either or. You can do both of those things. So, you know, not necessarily a choice between them. The advice I would give is it really depends on what you're going to do if you go to a school like Dartmouth. If you're going to go here and you're going to use AI to answer all your quiz sets and you're not going to actually engage your brain, don't waste your time. You'll get a degree stamp at the end, but you're not going to come out looking any different. If you come to an environment like this and say, I can really learn how to learn. I can learn about different disciplines. I can learn about different modes of thinking. I can learn about different modes of interaction. I can go and try a bunch of different things. I can be in an environment that really will ferment and grow and develop me in unique ways. It can be an incredible developmental
40:26 Speaker 01 opportunity. The risk I see with young people now, and I get it, back in our day, we can get Cliff Notes if we wanted to, that would give us the answer for a book that we're reading. Or you can go to the men's bathroom and in the next stall, someone might give you the answer key to the test. Those things existed, but you felt a little guilty using
40:43 Speaker 00 them. I don't remember that life. You had a more interesting life than me.
40:45 Speaker 01 Yeah, not much. I said, the possibility was there. Now it's so easy. But I read this paper that had a great metaphor. So if you want to lift a lot of weight in the gym, you can go get a forklift. You can lift as much weight as you want, but that's not why people lift weights at gyms. They lift weights at gyms because they are developing their muscle. They are strengthening their muscle. So think about that the next time you go and enter in something into ChatGPT. Are you trying to actually learn something? Or are you just trying to forklift as much weight as you can? And again, done in the right way, large language models can be amazing learning tools. I even, as I was getting ready to talk about things for the book, I dumped a lot of the book into ChatGPT. I turned it into education mode
41:28 Speaker 01 and I said, quiz me. Quiz me about the facts in the book, throw random questions at me, give me grades on the questions, are the answers that I give. And some of it was silly, but it was a great way to just practice talking about things and responding to things. Really powerful things that you can do if you do it in the right way.
41:44 Speaker 00 As we somewhat wind down, I'll keep you for around an hour. This gets me thinking about, and again, I don't want to go down every interesting topic. I might ask you about Julia Child here at the end, but you've got so many different areas that you go into, again, McDonald's, Apple, Big Steel, Pampers, gunpowder, all kinds of topics people can dig into. The disruption that I'm imagining, as I sit here and we talk for the first time and I look at you, is that how far away are we from, and I'm not asking you to predict, I can see it happening, where at some stage of the game, instead of me and you having a personal human conversation, it will be my AI talking to your AI, because we've got enough that
42:27 Speaker 00 our AIs could be trained on, and then the average person will not know. We're going to reach that point, I don't know when. It'll come first in audio, video is going to be something harder. I've got a lot more audio training that my AI can be built around than I do have video. AI is opening up so many cans of worms. As you say, some people are probably just, oh my gosh, push it away, I don't want to have to think about it. I'm not like that, I'm more like, wow, bring it on, let's go.
42:54 Speaker 01 And that is my nature as well, to try and say, okay, when that happens, what are the new cool things that you can do? You can reach much broader audiences, you're able to not be limited by time zones, calendars, other sorts of things. You can explore infinite topics, and when you explore infinite topics, who knows the combinatorial power of that, where you just trip across something? And if you're then overseeing all your streams, you say, oh, a stream 736, actually, there's a really good insight there that I can apply to this thing over here. Now, the question is, how do we make sure that we don't get overwhelmed by that? Because that just has so much information that it could lead to system shutdown. It's one of the things that I teach my students, this is something I learned from a degree
43:36 Speaker 01 that I did in a kind of quirky field called system psychodynamics. John Keats, the poet in 1817 or thereabouts, wrote a letter saying that the superpower of a poet is what he called negative capability, the ability to be in uncertainty, mysteries, and doubts without irritable reaching after fact and reason. The ability to be calm and chaos, to step back, to not get overwhelmed by things. To me, that will be one of the superpowers of the years ahead because there will be so much stuff. If we don't have a way to pause, to sense make, to find the signal in a lot of noise, it's just going to be overwhelming to us. So if you haven't gotten into mindfulness, now's the time to do it. And if you're thinking about a new trade to do, mindfulness will be a very good one, I think.
44:20 Speaker 00 Personal brand is going to be huge because as a Gen X guy doing this for a long time, a lot of books, a lot of content in my world, it's going to be, I tell my family, don't let me die because why would I die? There's going to be the ability to use a model of me and produce content into the future in this niche, as long as it remains a niche, which is fascinating. Who could have ever imagined, maybe there were some science fiction folks thinking about that with the Outer Limits and the Twilight Zone. I feel now that for some of the young people, it's a little unfair in the sense of where the AI disruption is happening on the timeline.
45:02 Speaker 00 Because if you happen to have been a person who's been around for a little while and you've got some brand identity, you've built up something, that's of huge value. But if you happen to be 10 years old today, yeah, okay, there's going to be some of those kids that are 10 when they're 25, they're going to break through with some innovation, some disruption, but it's going to be harder and harder because the people ahead of them are never going to go away. They're going to be there forever.
45:26 Speaker 01 It is a fascinating time. And even for me personally, one of my strengths historically has been not the best writer, but generally one of the faster ones. But that is no longer comparative advantage because I cannot write faster than a large language model can write, not even remotely close. These things are humbling in different ways for all of us. The thing that I believe is that new opportunities that none of us can completely predict open up. I've got a nine-year-old, you mentioned a 10-year-old, I've got a nine-year-old and I think about what future possibilities could exist for him. I don't know what they are, but I think they're going to be super cool because I think he's going to be able to do things that I would only dream about doing when I was his age. I guess there'll be some downsides and some losses, there's always a shadow, disruption
46:10 Speaker 01 always casts one, but there's going to be some really cool things that happen too. And I can't wait to watch to see what they are.
46:16 Speaker 00 I have one last question for you, and I did not get a chance to dig into it deep, but it struck me, the headline, the chapter with Julia Child. And why don't I let you give a quick summary about why she was such a disruptor? I can guess some things, but let me let you have the floor.
46:33 Speaker 01 I truly love the Julia Child chapter. It was the last full one that I wrote and I lost control at one point. It was up to almost 10,000 words and then I pared it back because that was too long, but I could have kept going. The reason why I love it is, one, I can explain disruption very simply with it. So disruption takes things that were complicated and expensive and makes them simple and affordable. Before Julia Child and her co-authors write Mastering the Art of French Cooking, if you lived in the US and you wanted great French food, what did you do? You couldn't go to a restaurant because they didn't exist. You'd have to get on a plane and go to France. So Julia Child made it simple and accessible for broader populations to create great food in their own home. And she did it again when she went on television and democratized cooking.
47:16 Speaker 01 That as a headline demonstrates what disruptive innovation is. The second thing that I really love about Julia Child is the behaviors that she followed illustrate what it takes to succeed with disruption. She was not born a great chef. No one is born a great chef. She actually was a mediocre chef when she got started. The first meal she cooked for her husband, Paul Child, was brains simmered in red wine sauce. I don't know who would think that is a great first choice, and it was a disaster of a meal. She was persistent. She went to get trained, she practiced, and she got better. So it demonstrates the persistence and perseverance and curiosity and willingness to experiment that drives disruptive success.
47:57 Speaker 01 And finally, it reminds us that success with disruption requires patience and perseverance. Mastering the Art of French Cooking came out in 1961. The book effort started in 1951. 10 years, three different publishers, two near-death experiences where the book seemingly was dead, required help from other people in order to succeed. And it just reminds us that there are no overnight successes, that you have To be able to handle setbacks, stumbles, false steps and failures on the path to success. There's more, but those are the three big things I love about the Julia Child chapter.
48:34 Speaker 00 You get me thinking, of course, without her, the celebrity chef stuff never existed. I had a blog from 1996 until 2004, a lot of trading content, a quant style of trading content. And I started to get some critics in the 2002 time period. So I said to myself, with my political science background, no writing background, I'm going to put a book out, right? I was supposed to be published by Oxford University Press and at the last minute, and that was through an introduction through the Chair of Finance at University of Southern California. And then at the last minute, Oxford pulled and I got so ticked off, I was like, you better give me another publisher. And they gave me Pearson Financial Times and they published the book, which came out in April of 2004.
49:18 Speaker 00 And I was a no name author. My name was not on the internet. I remember the publisher called me up and he said, Hey Mike, did you see your Amazon rank? And I was like, no. And he's like, well, it's in the top 500 of all books in print. That wasn't overnight because it was eight years of writing a blog. The interesting thing that happened with these things you can't predict and whatnot, but there were so many people that either, I'm not sure if they disliked me or they disliked the content, a real stab in the eye at the efficient market hypothesis. And they were writing at that time on Amazon, you didn't have to buy the book to write a review. So there was a couple of nut jobs that were going in there and writing hundreds of reviews per day. And I think I was the only person dealing with this, perhaps hundreds of reviews per day,
50:03 Speaker 00 ripping the hell out of the book, out of me, et cetera, et cetera. But I think all of that energy was in a weird way, helped everything. Now, at the time, you don't think this is a great thing. You don't think your first book comes out. You don't think people writing just awful things about me personally, about the content. You don't think this is a good thing, right? But in this crazy age of disruption, I guess if you believe in yourself, if you believe in your content, which is what we've talked about with a lot of people today, from Steve Jobs to Ray Kroc, then just keep marching forward and strange things happen on the unpredictable path to wherever we're headed next.
50:40 Speaker 01 I agree. A lot of it comes down to a mindset. Carol Dweck's research around growth versus fixed mindset always comes to mind. And fixed mindset, when there's criticism, you say, this proves that I'm not very good. A growth mindset, when there's criticism, says, either I'm going to prove them wrong, or says, what can I do to use this criticism to my benefit? Hey, look, people are talking about my book. They're not talking about this book over here. That must mean something. It's a signal of something. I've written enough stuff that you get enough people who, even though I'm in a pretty narrow niche of the business world, you get people who just have a different point of view. That's fine. Clay Christensen taught me that you welcome the anomalies. You welcome the people who look at things in different ways. You try to learn from them. There's something to learn from everyone, that he said, and rather that they talk about you than they ignore you.
51:22 Speaker 00 Did you and Clayton fight back, though? Did you fight back strongly, or did you just let the critics say what they wanted to say?
51:28 Speaker 01 If you go and look at the lineage of disruptive innovation, 2006, there was a special issue of some reasonably arcane academic publication that had just a bunch of arrows slinging at Clay. And he wrote one of the best academic pieces he ever wrote, which is basically, "I hear all of you, but let me tell you why you're wrong." And he, quite forceful language for an academic paper, and it really was a strong view from him about what was the underpinning of his work. So he was very willing to engage with. The thing he always tried to do is he always said, "I've got a model, a theory. If you've got a different theory or model, let's talk about it. Let's have these theories and models fight. So it's not that I, Clay Christensen, I'm going to fight with you,
52:13 Speaker 01 but rather, I want the theories and models to have their fights." And I think that's an important distinction. It's not the people fighting, it's the ideas fighting. And those can be very vibrant things that we all learn from.
52:23 Speaker 00 That was actually what I tried to do when I stumbled into this particular style of quant trading, which was, look, it's not about me personally. I'm representing something that's been around, but just under the radar. You might think you're beating me up, but you're really beating up something that's grounded in a lot of proof and a lot of performance over the decades. So, Scott, great stuff. We could probably talk for a long time about all kinds of topics.
52:45 Speaker 01 We haven't even talked about the efficient market hypothesis and the limit therein, and heuristics and the benefits therein, which is... Not my swim lane, but I read enough about it to be mildly dangerous. But that's been a great conversation, Mike. Really appreciate it.
52:56 Speaker 00 Think the efficient market hypothesis, look, there's a lot of professors out there, Eugene Fama, brighter than probably both of us combined, but very bright people get things wrong. And I think I would probably side with, I just had Richard Thaler on the podcast, Thaler and Kahneman, I think this kind of perspective, Benoit Mendelbrot, these guys really had a perspective on how things operate. And look, at the end of the day, even Warren Buffett doesn't make all this money because markets are efficient.
53:24 Speaker 01 You can't, I mean, by definition, Warren Buffett cannot exist if markets are efficient. There are no cigar butts to smoke in an efficient market. It's a whole separate conversation. I wasn't economics major undergraduate and I appreciate the education, but you get into the real world and you recognize that humans are weird. And because humans are weird, stuff happens. This is true for the field of innovation as well and trying to do strategy and all that. When you take the humans out of the equation, everything looks nice and neat, but that's not the world in which we live.
53:51 Speaker 00 Humans are weird, stuff happens. If people just accept that and then they try to build models around that or a thinking around that or a philosophy around that, it's probably a much easier life if you just accept people are weird, stuff happens. It's an easier life than trying to look for perfection.
54:08 Speaker 01 I could not agree more. It's one of the things I try and teach my students. See, there's a lot I learned in an academic program I did. Everyone's normal until you get to know them. And once you understand that, which is one level deeper, you say, each individually, we're a little bit weird. And if we get together in groups and that just bounces off, then you get together in organizations and that's what makes life fun.
54:27 Speaker 00 The book Epic Disruptions, 11 innovations that shaped our modern world. Scott, where can we direct people to? A website, X, LinkedIn, where do you want to send people?
54:38 Speaker 01 Epic disruptions.com is where I'm collecting everything related to the book and you can find companion material and all that. And LinkedIn is the social network on which I live. So Scott Anthony Tuck is the easiest way to find me since there are a few other Scott Anthony's. You put Tuck for the school at which I teach, you'll get to the right one.
54:55 Speaker 00 Tuck at Dartmouth for those of you out there that are not paying attention.
54:59 Speaker 01 That is correct. T U C K. The T is important. There are other words you could say, but tuck with the T.
55:05 Speaker 00 Scott, cool stuff. I appreciate it.
55:06 Speaker 01 Yeah, take care. Bye bye.
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