Uncertainty and Enterprise: A conversation with Amar Bhidé

Speaker A: It's such a pleasure to have Aymar Bieder here and we're going to have a wide ranging conversation vaguely associated with the book that he's just.

Speaker B: You have it upside down I think.

Speaker A: Oh, that's terrible. I can still read. That's good. But um, Aimar Beedy was a professor of mine for entrepreneurship at HBS, uh, almost 30 years ago now. But I feel there's such strong connections that, that have developed over the years and sort of serendipities. Uh, so I'm going to just explain some of those before I give, give Aimer a, a uh, chance to respond. First of all, uh, in our class we were invited to write a write up of an entrepreneur that we knew. And I wrote up my father and uh, the business that I potentially would have gone into and that was included in the references on Amar Bidet's first book. And the only reason why I knew that because it came out a while after I'd been at business school is that um, it came up in the references and I was googling something and then it showed up and I was like, oh my God, he wrote about me in his book. That's so nice. Um, but Amar, um, uh, you were at IIT of India. You were an MBA student at Harvard Business School, you're a Baker Scholar, you were a, a um, McKinsey engagement manager, but then you went back into an academia and uh, I feel like in some ways my career was sort of similar to yours. But I did not go back into academia then. You spent the last 30 years in academia and I have not had the background reading to really understand fully, uh, the in depth knowledge of what's going on in this book. But, but I feel so close to it anyway, so that's a little bit from me. I'm not going to give you a chance to introduce yourself and to respond to whatever I've put out there. Go ahead Amar.

Speaker B: So first off, uh, you missed a uh, small detour. I was a proprietary trader at EF Hutton and I was also once upon a time, uh, a sub hedge fund manager. So I have had some. And I was on the um, uh, commission, the staff of the commission that investigated the 1987 crash which nobody remembers. And so what this Rolling Stone career does. I mean yes, I've been in academia for 30 years, but all the highways and byways I have traveled have all been a difficulty for my academic career. But there also uh, have been the bedrock of the book that you have very so kindly read. And so I tend to connect a ton of dots. Perhaps I have adhd and one of the advantages or disadvantages of having ADHD is that your mind strays and you can't concentrate on any one thing for, for any, for much too long. But you then get to see a ton of connections. And so in retrospect a bunch of themes have emerged in uh, through, through my reading, through my teaching, through my research, through my experiences in the world. And they are all, they've been all mashed together in the book for better or for worse. And I also been disappointed in my academic career, uh, uh, or ah, disappointed in the direction in which academia has gone. And the book is in some sense a cry of anguish without explicit, making that explicit, as is my current research on medical innovation. So my two great regrets about what has gone wrong with academia is one, the increasing distance from the practical world and particularly in business schools, particularly in the social sciences and therefore the privileging of things which are abstract and which are general and which are timeless. And that's fine. But a lot of how one deals with the world has to do with the here and the now, with a particular circumstance. And we also have to deal with the world, with the world which at least in the, in the world of human affairs but not in the natural world, is constantly changing. And so we just wipe all that away. And I think uncertainty, at least the way I've construed it is a good lens, it's a good door to open uh, to have a look inside and see all the various things that are going on. And my second regret are uh, all these battles over what one could call wokeness. And uh, I will keep my political views in this matter to myself. But it seems to me that in the struggle of wokeness one has omitted what is, what is a crucial part of the human experience which is progress. And progress involves venturing in beyond the known, which is the subtitle of my book as it happens. And I want to redirect attention to this aspect of the human experience. And for that I think providing some kind of structure, some kind of intellectual framework, uh, is important. That's another thing that I've tried to do in my book and that's another thing which I'm doing in my current teaching uh, and case writing project.

Speaker A: So that provides me with a great segue to sort of like connect to what I think are normally my audience. And so I'm holding it up the right way around and uh, to ground us a little bit. So um, I can honestly say that, uh, 10 or 20 years after graduating business school, uh, I did not have clear in my mind a fundamental distinction that is made in this book, and this is the basis of this book, which is basically the distinction between risk and uncertainty. Uh, risk being everything for, uh, viewers of my audience. Everything that is modelable, everything that can be defined in terms of means and variances and other statistical analysis, uh, and uncertainty, which is where we do not have data. That would seem to me to be a pretty profound distinction for a business school graduate to have in his mind. Um, uh, the book, just for you know, we're not going to summarize the book, but the book goes into all the ways in which academia has attempted to blur that distinction. But various different brilliant academics who have really just ignored it in one way or another. And Aimar Beda takes us through all the different ways it's been ignored. And, um, in a certain way I could come back, uh, Aymar and I would consider us friends of many interconnections between us. But in a sense, why did academia fail me so badly in being able to make that distinction?

Speaker B: Because academia, first of all, may I slightly amend what you just said?

Speaker A: You can tell me that I've made complete mistakes.

Speaker B: No, no, no, go ahead. Yeah, so I think it is true that I'm borrowing from Frank Knight's distinction between risk and uncertainty, where he is defining risk as, uh, the space in which one has a large collection of numerical data on similar past instances and where one has reasonable confidence that the past is a good predictor of the future. But where I think what Knight omitted and what I have tried to emphasize is that's not the only possible distinction. And indeed, when you say the absence of risk does not mean the absence of data, there may be, in fact, quite a large amount of data. Um, but the question is that that data may be contextual. It may pertain to a specific place in a specific time. It may pertain to whether X committed a crime or not, and whether there's forensic evidence or not, rather than whether X comes from a socioeconomic background from which you can predict that X, someone of that socioeconomic background, uh, will commit a crime or not. So I think much of what one deals with in the world is not the absence of data. It is the presence of data which is necessarily incomplete but nonetheless exists. Because if one had absolutely no data, there would be no way of making a reasonable projection about what one can or should do. If you ask why. Now, let's get to the question that he actually asked.

Speaker A: No, no, this is all fun and interesting because for the audience, um, people like me have inchoate thoughts, uh, and it's fun to bring them up to people like professor, uh, Bidet. And Bidet can take them and he can set them into a landscape, uh, that he has thought about far longer than we would ever have time. And that's the beautiful joy of talking to somebody, uh, who's explored the landscape that I'm bringing up in greater detail. So feel free, you're totally fine. You don't have to be respectful. Go ahead.

Speaker B: Let me try and relate the distinction that I was making to your business. Right. So you are a value manager. Clearly no one would accuse you of ignoring the evidence. And I would hope that you sort of, I assume you delve very deeply into the particular circumstances of the businesses that you are investing in. It is certainly not data free, but the data that you use is of a different sort than the data that a quant manager might use. The quant manager is going to rely on statistical data where the specifics of time and place have been abstracted away, whereby running a statistical model, he or she hopes that, uh, the world is not going to change so much that the prediction based on the past is going to be negated.

Speaker A: So

Speaker B: it's data all right, but it's of a different sort. Now there are, ah, I am at the School of Public Health and we are into epidemiology. And in epidemiology we are really relying on statistical data. However, if you are going to see a physician for a diagnosis, uh, you would hope that that physician would take your particular circumstances and your case history into account and would rely a little bit on historical patterns pertaining to, to your condition. But would also, if the physician is any good, would in, in his or. Uh-huh. Her diagnosis or in his or her own treatment would be looking at what you do. The problem. Getting back to the question that he had asked before and which I ducked,

Speaker A: um,

Speaker B: academia outside the humanities, uh, and possibly outside some professional schools, medical and engineering has become very science oriented. And by science I mean a body of knowledge which privileges knowledge which is as general and as context free as possible. And so particularly, particularly in economics, it is accused of having physics envy. But I, I don't think it is just economics. It is, uh, it's a variety of other disciplines. Interestingly, history, economic history, is also trying very hard to rely on bean counting, shall we say, to come up with reload. What, sorry, Bean counting.

Speaker A: Bean counting, yes.

Speaker B: Uh, to demonstrate a general statistical pattern or Not. And trying to explain things in what Jerome Bruner, who I've now come to become, uh, a great fan of.

Speaker A: Not that I've read it, but I

Speaker B: go, not that you've read it, uh, calls the narrative mode of thought and the narrative mode of communication. So in Jerome Bruno's words, academia and the social sciences privileges logic or scientific thought. The real world, by necessity, must rely on narrative mode thought, where we ask for what is plausible, not what is verifiably true, because there's never any counterfactual

Speaker A: and m. So, um, just for your interest, when you get the book, because you're all going to get the book, um, the second half of the book goes, uh, into detail and kind of provides any reader with an understanding of so much that is business journalism, business history, business storytelling, why people tell the stories that they do, how we should interpret those stories, which are extraordinarily helpful. Um, one chapter is titled, ah, Stories as Side Dishes. And, uh, actually, what I pause and Amar, again, uh, you can expand much better than me. Explain that stories as side dishes and explain give it. Give a flavor of that narrative side of things that's been so missed out, uh, in the kind of business school education that I was given. Uh, and I'm not that bad because I was given narrative. In Harvard Business School cases, some people have it way worse than me. But take us into the second half of the book.

Speaker B: So let me make a distinction between stories and narratives, because outside of academia, storytelling has become so glorified that we are told. The only way we communicate is through a story. And that makes me uncomfortable as well. I think of narrative mode communication as being broader than mere storytelling and storytelling. If you ask, well, what is a story? A story needs to have a beginning, a middle and an end. And it also needs an element of surprise, uh, a reversal of fortune which, uh, occurs in the middle. And if you go to see a company that you are thinking of investing in, when you ask, uh, why is this person going to continue in the trajectory that you claim it will continue on? That person's not going to tell you a story in the sense of a sequence of imagined events in which, um, something's going to go wrong and then miraculously, our hero is going to turn it around, or perhaps, unfortunately, our hero is going to crumble and like the protagonist of, uh, a Greek tragedy. But there will be elements in that conversation which are story like and prominent in these elements is the use of simile and metaphor, uh, because we are. We do not know what is going to happen in the future. We can only imagine what is going to happen in the future. Sometimes our imagination works on impulse, instinct you might call it, uh, and one doesn't need to explain it, but frequently you have to explain your imagination to other people. And that process of explanation and of persuasive explanation requires language, which is not precise in a mathematical sense, but which is metaphorical. So we use simile, we use analogy. And we can only know about the future, as Frank Knight says, based on what we know in the past. And to project into the future we rely on analogies and metaphors and myths, uh, sometimes, but sometimes real, which we have encountered and which we project now. In addition to my story like discourse about why my business is going to be a success and you should invest in it, I may also tell you side stories and um, I may tell you a story about how in the past I was confronted with a surprise that I had not anticipated. And miraculously, ah, stupid me, I didn't, I didn't anticipate this. And stupid me, I, um, I managed to recover. And that's a side dish, what I call a side dish story. It's not necessarily telling me why this business is going to encounter a nasty surprise because I'm also going to try to persuade you that I've thought of every possible thing that will go wrong in, in this particular business. But the value of my telling you the story about how I recovered from something which, which went wrong is that I'm also trying to persuade you that yes, you know and I know that neither of us has a crystal ball which is going to really tell you what is going to happen in the future. At that point, what you will be betting on as an investor is do I have the right stuff in being able to imagine my way around this unexpected problem and the nerve to work myself around this particular problem. And it's a very subtle but yet important way of signaling that I'm the kind of person you should invest in over and beyond my business plan and my business model and, and the industry structure and my intellectual property and so forth. Another valuable kind of side story is, uh, a, uh, stories which stick in your head. Uh, so the classic story which sticks in your head is the Clay Christensen disruptive technology story. Now it turns out that about half of the, uh, at least the innovation that I've studied absolutely do not conform to the Clay Christensen model, as it were, of disruptive innovation. Clay Christensen.

Speaker A: And why don't you just lay that out for those people who haven't Heard it.

Speaker B: So in Clay Christensen's story, uh, the poor deprived entrepreneur confronts this ferocious incumbent who's well entrenched. And there is no way that the entrepreneur could take on the incumbent in his or her lair, as it were. So the entrepreneur then concocts a little product which is not as good as the incumbent's product. Uh, it's less functional, but it is cheaper. And for some peripheral users that trade off between not being as good enough, but the lower price is good enough. And that gives the quote, unquote disruptive innovator a foothold, then sort of from that foothold grows from strength to strength and then becomes, then overthrows the, uh, incumbent. Now it's a marvelous story because it also evokes in some subliminal way, uh, to historical studies, the David and Golat story, obviously.

Speaker A: Yes.

Speaker B: And it also evokes the Greek tragedy, the hero who through hubris neglects to. Yes. And so it has such a resonance.

Speaker A: Yeah. And by the way, one example, if you want a specific example, would have been Microsoft taking on IBM with the PC. IBM was focused on mainframes. They weren't interested in PCs that's were willing to give it away. And eventually Microsoft came to dominate. IBM would be a specific example, but go back to your.

Speaker B: But you know, there are many examples where this is not true. Uh, where, uh, Clay Christensen had predicted that the iPhone would fail.

Speaker A: Right.

Speaker B: And he said it would fail because it was more expensive, it had more features, uh, video cameras, the first video cameras were more expensive than, than existing cameras. Nonetheless, it is such a nice story that if your project is remotely like that, you get instant resonance in your audience. M. Alternatively, you say I'm the Uber of this or I'm the Airbnb of that. That again, without having to get into too much whys and wherefores, creates the idea that you have some kind of platform technology, uh, however far fetched it may be. So the story becomes a grand metaphor which is both persuasive. Aha. It has happened before, so it may happen again. And um, I now understand whether I really fully understand or not what it is that this person is trying to do. And there's no math in it. There are no statistics in, uh, is not the absence of data. In fact, the narrative mode that you would use will have a ton of data in it, but it's a different kind of data and it's a different use of data and you are tackling a different kind of psychological problem in your list.

Speaker A: Just, just a riff on that briefly before I'm going to come in with some uh, stories of my own. Is um, we are far better all of us including those of us who have real world careers being aware that of the story landscape that is that are we in. And I can't recall the name of the company but I can remember visiting the German warehouse of uh, with. With a friend who didn't been very successfully invested in Amazon and we were, this was going to be the Amazon of um, uh, refrigerators, washing machines. They were, they were distributing all over Europe. But, but so just you know for your fun and I guess you're aware of that because you've had plenty of business school students. This is not just some story that we're telling people is telling each other in a bar. We're visiting companies, we're entering into a whole reality and the company itself starts to believe that reality. And there are so many elements of their sort of like large distribution, big warehouses, purchasing power, economies uh, of scale that they start to believe in the story. They're kind of living that in themselves. So these narratives become um, so become so like a created co. Created reality by a whole bunch of the people inside the business, the investors outside the business, other people. And my point to the listener is that we're better off being aware that that exists and being aware of what role we might be playing in the co creation of that unreality if you like. And I'll pause to let you to respond to that before I go to

Speaker B: kind of a really I mean I think there are two things that the listener should be aware of. One is this mania for quote unquote follow the evidence where the evidence is implicitly statistical evidence and it's implicitly assuming that the past is going to be the future is going to be like the past. And we see this in finance, we see this in uh, we just spoke earlier about quant investing. We see this in spades on the debt side of the business, uh, particularly in consumer debt. And so the idea is that we don't really care about whether such and such borrower is credit worthy or not. Let's run it through a model and if the model tells us that the odds are it's going to work then we'll extend credit, otherwise not. We see this in hiring increasingly where people run uh, your resume on LinkedIn through a model and they use that to uh, winnow down the candidates that they would look at. And so my first uh caution is do not try to shoehorn problems and issues which really should be treated as One offs. And Friedrich Hayek had a lot to say about this, incidentally, when he talked about specific knowledge. Uh, secondly, and closely relatedly, do not downplay the role of imagination. Your imagination, particularly in business and in most practical aspects of real life, as opposed to serial painting or literature, maybe have to be well grounded in whatever it is that you're attempting or evaluating. But it is imagination and never forget that.

Speaker A: So, so I'm going to, uh, as usual, in most conversations are like three places I want to go. I'm going to go.

Speaker B: Let's go to all three.

Speaker A: Well, why don't I. I'll give you two options and then we'll decide which one you go on. So option one is so, you know, the quant analysis versus the situation one finds oneself in. We should never forget that the perspective of the general commanding his division is very, very different to the individual soldier. The general knows that X percent of his soldiers will be killed and he will take decisions based on, uh, greater, uh, considerations. That doesn't help the individual soldier who has a very different perspective of the particular risks that he's taking. And, and it doesn't help the particular soldier to take the general's perspective. So, and I'm, I'm reaching for a concept that I don't understand well enough, but it's called egodicity. And, uh, you probably understand more of it than mine.

Speaker B: I do not understand it. I've struggled with it for years.

Speaker A: But. So that's one thing that I wanted to go down and. Because it seems to me that what you're talking about, uh, relates to that. Well, I don't, why don't I stop there and let you address that.

Speaker B: Okay, so let me respond, um, to the general question, the general question about the general as well. So it is absolutely true that the individual soldier is going to be much more concerned about the very specifics of the terrain around him and his physical condition, the condition of his platoon, his uh, experience with the person on the other side. And the general might look at this at a campaign in terms of numbers, but even so, uh, the general, if he's a good general, will treat each campaign as a one off. And so the general will not say what percentage of him fails amphibious landings have worked. And can I distill the model for the invasion of Normandy from the statistical patterns of the amphibious landings that have worked and because that would be absolute nonsense if. So if you're, if you're planning, uh, the invasion of Normandy on D Day, you might bring, uh, have in the back of your mind, the invasions of the Normans coming the other way into England. But it's a completely different game, as it were. And so even the general has to pay close attention to the circumstances at hand. The general may have a broader historical, uh, perspective. The general may be willing to say, if I move this regiment here, I expect to lose these many people. But even that general should not be indifferent. In fact, should be very attentive to the specifics of the campaign. I was reading recently, yesterday, as a matter of fact, listening to this horrible, uh, case of this woman who was convicted in the UK for being responsible for child deaths. And it was entirely based on statistical evidence. And as far as I can tell, it was a severe miscarriage of justice. You couldn't simply say, oh, the odds that someone, so many children would die when so and so was the attending nurse could not and should not be a sufficient basis for convicting anyone. And it turns out that when they actually did an analysis of every single case, they found that there was a good explanation for why the child might have died and, um, a more plausible explanation, in fact, for why the child may have died without any malice or criminal act on the part of the nurse. And there was no forensic evidence connecting the nurse to the. You know, likewise, if you were the CEO of the National Health Service, which would be the opponent of your general, you cannot be make decisions based simply on historical patterns. Although, of course, statistics will matter. You have to think about the particular circumstances of me, perhaps the particular statistics that you confront.

Speaker A: Just going back, I mean, I didn't realize we'd bring up the Normandy invasions. But, uh, before we potentially go on to, um, this nurse case, um, I would imagine that if you or I were in the room of people planning the Normandy and Normandy invasions, it would make sense, even though there's not a lot of evidence to analyze every single invasion. Agincourt, I don't know what others they were. The Norman invasions of the north of France and that Hastings tensions. You'd want to analyze all of that and see if there's any insight that we can gain as to what succeeds and what doesn't in an invasion, wouldn't one?

Speaker B: Absolutely. So, uh, one would want to. One would want to examine what happened in previous invasions, but one would want to interpret the lessons, uh, from those invasions in an imaginative way. And so one must exercise one's faculty for.

Speaker A: Hm.

Speaker B: What is similar, uh, between the invasions when the invaders arrived in sailboats.

Speaker A: Yeah.

Speaker B: And not so clearly Henry Ford's idea that history is bunk is Untenable in my view. But a straight line statistical extrapolation from history is also ridiculous.

Speaker A: So I'll go to a different place and it's in like my Twitter feed a lot. Uh, there's this, the extraordinary success of Elon Musk. And it's attributed to something that I think he's talked about, this idea of thinking, uh, from first principles. And he's an engineer and thinking of past principles, my understanding is he'll say, well, what is the, um, energy that one can get out of a certain weight of battery? And then he says, what can we do to improve that? That would be an example what is technologically possible. And he distinguishes between that and what I think he would accuse you and me of doing a lot, which is reasoning by analogy. Um, and so how would you set what we're talking about right now into the context of that first principles thinking?

Speaker B: So the example that used of first principles thinking works when you are dealing with natural phenomena. And it's important when you are dealing with natural phenomena where you can reasonably believe that Newton's laws of gravity have operated before and will continue to operate in the future. And therefore you can actually calculate what is possible and what is not possible. However, since my degree was in engineering, you cannot rely merely on calculations from physics. The engineering mindset is a much more imaginative mindset. And the engineering mindset is also informed by artifacts which have been produced before. It's uh, the shape and much of what the Tesla has, is informed by the, by the historical emergence of the designs of an automobile. So he did not design the Tesla from first principles. A lot of first principles went into the Tesla, but the visual image of

Speaker A: the existing, it's rooted in physical reality, which, which makes an enormous amount of sense. And you know, uh, one of the problems, problems we have with we, I can't say we, the academic world has with the social sciences is that this physics envy idea, which is just, uh, uh, hard to reconcile, uh, I lost my train of thought.

Speaker B: I was going to go, let's stay with physical reality. Even when one is dealing with physical reality, one is making imaginative leaps. So the first CTs were developed by a guy who did not have it, who did not have a proper university degree. He had been working on radar, uh, in the Second World War. And then he used his imagination to sort of think, can I use some of what happened in radar to create images of the human body? I'll give you another example. This ophthalmologist who was sitting in a dentist's chair said, M the dentist is using a high speed drill to pulverize my tooth. And uh, why can't I do this? To pulverize the lens which I need to extract from before, uh, I put in an artificial lens. So there any number of examples coming from the natural world where one uses a combination of numerical calculation calculations based in physics, where one also uses and extends imaginations which have been exercised in the past and it's even more acute in human affairs.

Speaker A: Both of those examples are, I mean they're profound leaps A ah, profound leap from radar to imaging a brain or a drill. Pulverizing a tooth to polarizing a lens are ah, both extraordinary leaps of imagination that I didn't even think about. And of course there's the famous Einstein example of uh, sitting on the edge of a photon as it hurtles at the speed of light through space. IIT I know something about it. Those who don't know, um, it is the MIT to the power of MIT of India. It's an extraordinarily difficult place to get into. People uh, who go in there have to be extraordinarily numerate and capable. But you didn't pursue engineering after that. I'm really curious and if you may, I mean it's biographical but I don't know anything about your time before IIT Bombay because then it kind of your life turned American. I'm very curious about that transition and why you turned your back in a way on a pure science, engineering look uh, at the world.

Speaker B: So my father was quite a character. He was a revolutionary when Brits ruled India. Fuel, uh, not necessarily nonviolent, uh, and he could invent things. He was also a PhD and was uh, also doing a PhD in physics while he was doing all this other stuff. But he is fundamentally a brilliant inventor and he had created this business and therefore I was kind of expected to go into his business and take it over as young men in India at the time were, were expected to do. Additionally, in my high school class there were three categories. There were um, the girls and the children of film stars, uh, who didn't necessarily have to go to college or if they went to college they went into the liberal arts. There were the bright people with uh, sticky memories. They went to medicine and then there were the smart kids who took the IIT entrance exam and I. So the combination of having a father was an inventor and the expectation that I was, I was going to take over the family business so meant that I would go into, would take the, the entrance exam to my great Astonishment. I did well, well, I went in and I absolutely hated it. And I hated it with an abiding passion. So I tried to figure out what can I do to escape from this. And there was someone, uh, in my dormitory, what would be called a hostel in India, who had gotten to Harvard Business School. And I said, if that dummy can get into Harvard Business School, so can I. That's how I ended up at Harvard Business School. And I went to Harvard Business School. And I found this is what I really loved, that engineering had not taken. But I will also say this in retrospect. Uh, our engineering education, bright as the students were, was, uh, misguided. And I would say even the MIT education does not necessarily serve, uh, the students well, because both at IIT and MIT there's the privileging of the sciences and there's the privileging of the math. And so for, I went to a five year college and for the first two and a half to three years all our education were science and science and mathematics. So we did not confront anything real for two and a half to three years. So there was no, uh, there was nothing we were doing that was practical.

Speaker A: I mean, just staying with that, uh, because that divide between. So take an MIT or an IIT and I take the perspective of the maths faculty, and I know it here at Zurich University, in many ways the math faculty is kind of the most respected because it's as the hardest of all the sciences, especially pure mathematics. But then you say, well, what should we privilege? As in the soft sciences or in the soft subjects in the arts with the pattern of respectability of the university. And it's very, very hard to get some kind of an agreement because we would all agree, for example, that history should be privileged, but maybe gender studies not. But then somebody says, no, history is bunk and gender studies should be privileged.

Speaker B: Yes.

Speaker A: So, you know, I understand your kind of. That the reality is not just, uh, the hard reality of the physical sciences. But then we have a really hard time deciding what should be privileged. I'm curious how you see it.

Speaker B: Oh, you put your finger on it. And if I could add to that the strongest faculties, uh, and the faculties who have either the most standing or the most money and other faculties which can provide a united front to the world. And so that means faculties who have a paradigm which tells them this is what you do, this is what you don't do. These are your assumptions that you will accept, these are the assumptions that you will reject. And that accounts, for example, for the Great strength of economics vis a visa. The humanities subjects, because economics settled on a paradigm half a century ago and the humanities necessarily argue about whether gender studies should be privileged or uh, whether the Marxist view of the world assumptions are right or whether the great man theories right and so forth. So, so necessarily the narrow view of the world.

Speaker A: So I'll give you the. So I, I was. So I did high, uh, school sciences, I did law for a couple of years. Undergraduate, Oxford, switched to PPE and then 10 years later you might know him, he's. He, he deceased during COVID a guy called Peter Sinclair was my mentor. And I. And I've discovered kind of the world of value investing. But the economics that I studied at university was all rational expectations and general uh, equilibrium and neoclassical economics and everything's beautiful. And I said to Peter Sinclair, you know this, uh, you know, I came to him this idea, Brian Arthur economics is a complex adaptive system. And I said, you know this. And he just. Peter Sinclair looked at me wistfully and he said yes, but you know we can't find any good mathematical models to represent that and we can't come to any equilibrium. So it just becomes narrative. Therefore we can't write about it. Therefore it doesn't exist.

Speaker B: But there's one, one, One more, one more step behind it. So uh, I recently been reading a book called uh, Thinking in Cases, uh, written by a deceased uh, Cambridge philosopher of science. And there I ran into this reference, uh, about six modes of scientific thinking and the statistics, the, the, the deduction, the, the historical. And uh. And so there are styles of science.

Speaker A: Right.

Speaker B: And there. Styles of thinking. And uh. The problem with uh, both the success of economics and the limitations of economics is that it has settled on a few styles. And so it's the deductive style which is top of the heap. There's the second, the statistical style which is the next, uh, best level of econometrics. Yes.

Speaker A: For example.

Speaker B: For example.

Speaker A: Ah.

Speaker B: And what has been squeezed out is what one would call the Adam Smith style, which is the narrative style, which would be Jerome Bruner style.

Speaker A: And the second half of the book.

Speaker B: Yes, book, effectively. Yeah. And so there is. Now it is harder to set standards for the narrative mode. And then. And the narrative mode has a tendency to fragment and therefore to undermine the solidarity that gets you power within the uh, within the university system.

Speaker A: I'll make it more explicit. The um, competition for funds and resources.

Speaker B: Exactly, yes, absolutely. And Nobel Prizes. Ah, which is not. I mean it's interesting that the Nobel Prize in economics is an afterthought. And it's called the Nobel Prize is in economic. In the economic sciences.

Speaker A: Yeah.

Speaker B: Not in economics. Economic sciences. So already you are bounding the kind of economics that is acceptable within the respectable part of, of the profession and the economics, which is not.

Speaker A: Uh, I mean, but yeah, um, so so many places that we can go. I mean I, I was thinking why doesn't. And look, I'm here in Zurich right now and Zurich has ETH which is like MIT and it has University of Zurich. The probability that a reasonable number of academics would agree to have a business school in Zurich in the mode of Harvard Business School is like so remote to be. And the fact of the matter is Harvard and you kind of. I was reading a chapter where you talk about, um, Harvard Business Review and how that could never be an academic journal. And many of the assumptions or many of the claims are made are unsourced and unverifiable. It's a kind of a non scientific mode of discourse which has certainly its place at Harvard, but not many other universities and certainly not at the Nobel committee.

Speaker B: Uh, the cases I wrote in the 80s and 90s still sell in entrepreneurship. And why the hell do they sell? Because they were well written is the only explanation that I have. Concurrently, and it is whispered into my ear, uh, that there was a scandal of made up facts in some of these cases and as a result of which, to avoid trouble on that front, HBS then went into, uh, went into serious damage control mode. And fact checking in cases is extremely rigorous. M far more rigorous than it was in my time. And certainly infinitely more rigorous than fact checking for the Harvard Business Review, which is basically zero. Yeah, um, as far as the hagiography,

Speaker A: um,

Speaker B: It's only in my mind half a problem. If I want to learn to become a good pianist. I do not want to go listen to someone who's a bad pianist. And if my neighbor child plays the piano badly, I put my fingers in my ears. I'd rather go listen to a virtuoso if I want to improve my tennis. Uh, I would want to go see Federer. I would not want to see myself. Yes, there is some advantage to looking at duffer tennis players and bad pianist because that puts into relief what really what the virtuoso is doing. You also have to exercise your imagination when you are presented with the virtuoso and say what aspects of what this person's doing are really contributing to his or uh, her success and what aspects are relevant to what I can do. And that's where I think a good case teacher really comes into it.

Speaker A: And I connect in the moment where you're talking about it. Numerous, uh, cases, uh, where sometimes the subject was a live person came into class, maybe he didn't, but the number of. In a class of 90 people, there'd have been a good 10% who are utterly inspired by that story and would have taken different decisions as a result. And so you're absolutely right, now that I think about it, and so be it. It may be a hagiography, and in a sense, I didn't do it at Harvard Business School, but I spent a good three, three or four years of my life studying Warren Buffett inside out. And, um, going through my mind was, yes, he's got 40 IQ points on me, but if he can do it, then maybe I can have 10% of the success that he has. And 10% is just fine for me. And it did inspire me and did get me to, uh, take different decisions. And I'm actually going to follow, rather than let you respond, I want to go somewhere else, which, um, I'm curious to see how you respond. Um, and that's the capacity of the story not to evaluate, um, reality, but to change the person's own actions, their own evaluation of themselves, their own decision making. I want to give you a couple of examples from my life recently. It came up for me. Um, one is the story of Jonah and the whale. And, you know, the whole story there is Jonah ignores the call of God. And, um, you know, and just.

Speaker B: I did study the Old Testament. It's good.

Speaker A: Yeah. But just to be clear, I am probably an atheist. I treat that as mythology. Uh, and I think there's an interesting case to be made is if you live your life assuming that God exists, a bit like assuming that negative one exists, your life is better. And so the bottom line of that Jonah and the whale story is if you hear the call of, call it God, destiny, whatever it is, you're probably better off showing up to that than trying to run away from it. Another biblical story is, um, Moses leads these Jews running away from Egypt to the Red Sea. And they've got the Egyptian pharaoh soldiers behind them. You've got the sea in front of them. And Moses says, what? What Now? You know we're about to drown or we're about to be killed. And you know that. And the Jews take a step into the sea, and hey, presto, by miracle, the sea parts and a way is found that is a metaphor for any individual who wants to kind of like Tell that story about how often when you don't see a way forward in your life, there is a way forward. And my point is that is a kind of a story. And so I'm coming to the question. Uh, it's got nothing to do with reality. Those are stories that are made up, or we can't point to any evidence that they existed, unlike the many entrepreneurial and other stories that we're talking about. But the people who believe those stories live their lives differently. And, uh, where would that fit into this latter half of this book? Or the way you think about stories or way you think about academics?

Speaker B: So, I mean, I already mentioned the two examples, uh, which help make Clay Christensen's disruptive innovation model so attractive. And they're both myths. David and Goliath is a myth, right? The hubris claim not to know the

Speaker A: New Testament, but you know, David and Goliath, so there we are.

Speaker B: No, I said no, I said I know both the Old Testament. I went to a Scottish school, so I was required to do both Bible studies.

Speaker A: How about the Mahabharata? M and the, um.

Speaker B: So there was no Mahabharata in the Scottish school I went to. Of course, I know it. Yes, it's a Presbyterian. It was a Presbyterian school. Uh, so the, the power of fiction in framing our view of the world is extremely powerful. And the fact that at some level we know, um, that it's really a story does not in any way undermine its power. So if you read the other, the Jerome Bruno book, they talk about Howard Beecher's story and the profound influence it had on debates about desegregation. He talks about how even the Supreme Court was affected by the literature as it had evolved in the time, uh, which depicted the internal lives of people who are subjected to segregation and the harm that was done. So simply providing people their own coach but not allowing them to get into white people's coach, what that did to their self image. There's no way that you could proved this scientifically, but it had a profound impact on the way people lived. And they claim on Supreme Court decisions it's pervasive.

Speaker A: And so it's pervasive. It's like what MIT M&IIT and others try to do is they assume away the water. And in a sense what I find you trying to do or doing is saying, no, the fish doesn't know that it's surrounded by water, but the fish is much better off knowing that he's surrounded by water. And there's Amar to point it out to us. And we're better off knowing what it looks like, the currents, whether it's salty or sweet, all of those things, and becoming aware of it. We're bathed in it in a way. We've been hypnotized by certain people not to think about it.

Speaker B: So you mentioned earlier the paper that you wrote on your father.

Speaker A: Yeah, yeah. I don't have a copy of that anymore. Maybe you do.

Speaker B: I think I might be able to find it. I might. Uh. The reason why I had you guys write what I called case histories, tales of a Successful Entrepreneur, hagiography, if you don't mind, was, uh.

Speaker A: No, no. When it comes to my father, it's true.

Speaker B: It's true. Of course, yes.

Speaker A: It's not a hagiography.

Speaker B: No, no, no. But the idea was that there is a certain learning, Uh, that one acquires by studying and even more so by actually writing a story yourself. So my current course in which I'm teaching about medical innovation are just 15 stories, and I make no bones about it, about transformative medical innovations, because there's both practical, concrete stuff that you can get out of the stories, but equally there's the romance of progress, the adventure of confronting the unknown, which I think all professional schools, in fact, all schools should try to advance. And we. Even engineering was never romanticized in. In iit. It's not romanticized at mit. At mit, fortunately, there's so much extracurricular stuff like the robotics competition, uh, which engage people in. In actually doing things that it

Speaker A: kind

Speaker B: of solves to some degree the problem that. That the teaching may be excessively theoretical, too much of what musk would call first principles. And there are a group of people who were unhappy with the way engineering was started at mit, and they spun out and they created the school called the Olin School, which is next door, which done the teaching model on its head and said, let's get people engaged in practical problems and see what they learn from trying to solve practical problems.

Speaker A: Interesting. So, okay, I'm going to go. We could go on for hours, but I'm going to go to, uh, two final places. And I'm just, like, picking these out of nowhere because, uh, I could keep going down multiple pathways. So one is just a complete, uh, question out of nowhere. But I happened, uh, to see Amar in New York. I'd been in Mumbai for a very intense week of a series of meetings organized by a friend, Girish Baku, who's a fantastic investor. I don't know if you know him, but, um, Girish, who lives in New York, has a Theory that, um, there's a group of business people that he introduced me to who are all into vipassana meditation. Uh, they're people who, on the one hand are completely practical, but at the same time completely removed from, um, the. The outward circumstances of success. And he has a belief that in the future many of the world's great businesses will be led by Indians of that mindset. And, uh, he would point to Satya Nadella and Sundar Pichai. And I had the experience this time in India of meeting with a number of former and current members of the management team of Kotak Mahindra. And it was really fascinating the way in which they talked about the business. And they kind of like distanced their own personal. Their egos were not there. And the success and failure of their business actions was somehow divorced from the personality and the individual's desire for success. And I was curious if that hits pay dirt, uh, with you in any way, or whether you can provide any insights.

Speaker B: So I'm. In spite of my Presbyterian education, uh, I'm certainly deeply steeped in the Indian spiritual, uh, tradition. And, uh, so I've read not just the Mahabharata. I've actually read the Upanishads, which is. Which is really rough going. And. And of course the Gita and so forth.

Speaker A: Sanskrit?

Speaker B: No, no, no. I wish. I wish. Yeah, I. I read them in English translation by. Mainly by a guy who was, uh, a Fellow of All Souls, if you would believe S. Radhakrishnan, and later became the president of India. So it's, uh. So that appealed to the. To my desire to read the Gita and the Upanishads through the eye of someone who's acceptably well trained in the Western tradition. Um, and yeah, so one just. I think one lives one's life. Many of us can live one's life at multiple levels. And perhaps that's the ideal which. All these levels are unified. And then one deals with business in the same way as one deals with one's inner life. Perhaps not. And so I'm, uh, a great fan of the idea of Nishkama Karma, which is duty without expectation of reward.

Speaker A: Beautiful.

Speaker B: It's beautiful, but extremely hard. And then if you try to, uh, get into it, then you say, but why should I? Then you say, oh, there must be some reward for this. And they have already negated the. The idea of. Of doing things without any expectation of reward. But one struggles in one's individual or spiritual life as best one can. And I think there is room for everyone in the world that there is room for, for world class jerks running

Speaker A: companies as president as well. May I

Speaker B: again? Robert Skidelsky, one of your fellow Oxford, uh, chaps, said, uh, to me some months ago that sometimes it needs evil men to do God's work.

Speaker A: And yeah, I'll bear that in mind when I'm surveying world affairs these days.

Speaker B: Yes. Because, uh, so I, I don't know. I mean, I wish, uh, there were m. There are many aspects. Someone who knows, uh, Donald Trump for the last 40 years and was at his inauguration describes him as the most narcissistic, uh, and egotistical person he's ever met.

Speaker A: And that's an understatement.

Speaker B: That's an understatement. But he also has sympathy for some of the things that Trump is trying to achieve. And it is terribly unfortunate that those of us who believe in some of those things have to put up with, with this standard bearer.

Speaker A: Yeah.

Speaker B: And furthermore, I think the backlash against this is going to be so great that we may be worse off than not having had the standard bearer. Or maybe it does have produced irreversible change. I don't know. There's profound uncertainty, to coin a phrase, about this.

Speaker A: You know, I was going along with the Trump presidency and uh, you know, my, um, my allegiances, uh, when it comes to the Middle East. And so I was enjoying a lot of that. And then, you know, this podcast has been recorded days after this m Most awful moment in the Oval Office between the United States and one of its allies that, that um, has got me. And you know, who knows one point that I. This is not my final question, but you can riff on this. I mean, you know, uh, in, um, War and Peace, Lera Tolstoy goes into the description of so many of the machinations of the generals and of different individuals in different parts of Russian society and, you know, the goals of the French invading army. And the book ends and it's just like happy family life. And basically the message that I took away from it is, you know, what forces, uh, of history are too great. Just have it, have a happy wife and try to have family comedy at home. And that's all you can hope for. Uh, and maybe that's my approach to what I see going on on the world stage. I don't know if you want to riff at that in any way.

Speaker B: So that's the Sanskrit, uh, phrase again, which is called alpa santoshta, which is to be Santos happy, satisfied with small ticks.

Speaker A: Right, right. Well, and before I get to my final question, um, A great hero of mine, uh, this guy called Joseph Campbell who used to teach at Sarah Lawrence Cottage. I don't remember exactly how it went, but I think he spent a number of years in India still studying Sanskrit.

Speaker B: This is not the Catch 22 guy, was it?

Speaker A: No, no, that's Joseph Heller. No, this. Okay, so Joseph Campbell.

Speaker B: I. I hope I'm not making the hero's journey. I think.

Speaker A: Yes, yes. And you know, somebody who's. I wouldn't say steeped, but have some familiarity with Jewish writings. I think that. And I have very little knowledge of the, uh, Sanskrit writings. But, you know, that there's enormous depth and there. That needs to be explored, that should be explored. And there's an. There's a. I think that's. One view of Kabbalah in. In Jewish writings is that these were basically people who'd studied the. The works that you've talked about. And he brought remnants back into kind of our culture. It's surprising to me, again, this is a whole, uh, side alley. But I discovered recently that Alexander the Great invaded parts of India. So that's how far the, uh, empire of Alexander the Great was. But somehow he didn't retrieve any of those Indian thinkers for Western thought. And that's surprising to me, actually.

Speaker B: I don't know why or to the contrary. I mean, there's a great intermingling of Greek and Indian philosophical thought. The Neoplatonists, for example.

Speaker A: So you've used a word that I've seen written in a lot of the things I've written, read recently. But I don't really know what Neoplatonism really means. So why don't you explain it?

Speaker B: So, I mean, of course one knows Plato, right. And Plato talks about transcendental truths, um, that. That what one sees, one gets deceived by one senses. They may have shadows on the wall and. And so forth. And. And then this view of the world got displaced and there was a sort of like a renaissance of Platonism before Christianity took over.

Speaker A: Yeah.

Speaker B: And it. It had, uh. It was not necessarily a cogent philosophy. So it's kind of impossible to, um. But. But it. It tried to revive the, uh, Platonic idea that ultimate realities are transcendent and cannot be apprehended through the senses. And it is said that this is very close to the Upanishadic ideas, that these Upa dick ideas had informed Neoplatonism. So, uh, no, it's, uh. There was quite a lot of intellectual traffic, philosophical traffic between Greece and, uh. And I mean, again, we are straying Far afield. I mean, it was Thomas Aquinas's sort of Christianization of Aristotle, which tried to scrub out all the other Eastern mystical influences right from Greek thought that let it impoverished.

Speaker A: I think I'm going to, uh. Before we open up another few hours of conversation, I'm going to end with. So one of the things that comes through your book is you reference throughout the book many works of fiction and you clearly read voraciously, not just what we've talked about, but, um, many works of literature, fiction, uh, um, throughout different periods. And you can't enumerate them here, and I'm pretty sure that many of them are in the, um, uh, in the sources in the back. But, um, I'm curious for somebody who's an omnivore intellectually and you can only read one thing at a time. You can only take in one thing at a time. Um, what you use as your guides and sources to what to read next, what to stop what you're reading to go to something else. Uh, and maybe we should leave aside what you're kind of. You might be working to something professionally where you're required to read something, but when you're just inventing and wondering, pursuing your interests, which are how do you decide whether to learn Sanskrit and read some Sanskrit works in the original, or whether you're going to go into some decision making of the American government during the Cuban Missile crisis, or whether you're going to read a bit more Somerset Maugham. Um, yeah, I'm just really curious how you decide to do that. Because at the end of the day, you can only have your attention at one thing on one time. Then also, when you've decided what to read, how you decide to read it, is it the sitting back mode of just taking it in, or is it the sitting, the forward of taking notes? Uh, go ahead, have fun with that.

Speaker B: Oh, so I do, sadly, too little reading anymore, just for fun. So Somerset Maugham I read when I was in college because I hated engineering and I wanted any, uh, and I should do much more of pure literary reading just for fun. And I've gotten into the sad stage where I simply say I have about 10 years of life ahead of me, of active life, and therefore I'm only going to read stuff, including literature, which I can see pertains to things which I am working on. And so there I'm guided by two things. One is if your podcast is of course brilliant, uh, I would add to that, I would add, um, um, Melvin Braggs in our Time podcast. Uh, and that has been an amazing source of things. I mean, he's now done more than a thousand podcasts and they range all over the map from literature to history to philosophy. I mean, they're actually at least 10 or so podcasts on Indian philosophy in there and Greek philosophy and science. I listen to those and I, um, I take those and I enjoy them as frequently I say, I really need to know more about this, right? And that's when I would start digging up more about, more about this. But it's a little peep show, as it were, into, into the possibilities. And he has exquisite taste.

Speaker A: You know, I find myself wanting to close it down, but also wanting to continue to talk. So, you know, uh, you don't know this. Maybe you don't know this. So, uh, a couple of years ago I decided that life was not fun if I wasn't doing another degree. And I opened up, uh, the local newspaper here and they were doing applied history degree part time. So I started going to weekends at the University of Zurich, and I've never studied history in my life. And, um, one of the guys, uh, who's a professor at the University of Zurich is a guy called Berndrock who's written a history of the Renaissance. Uh, it's like 1400 pages. It's a Magnus Namopus. It took him a decade to write. Now, I don't know much European history. I know a lot more now. I'm about two thirds of the way through. One of the reasons why I so enjoy reading that book is because I really fell in love with his mind and who he is. And he's not a perfect individual. He's a guy who actually just loves humanism in all its forms. So I'm kind of determined and I will finish it. Uh, I've been reading it for a year and a half right now. I kind of get through a dozen pages or so every week, however it is. So I guess the question for you is there's researching a topic, but there's also just finding a mind that you actually want to get to know really well. Because ultimately any book or series of books by somebody actually, you're getting to know the individual behind the individual who wrote the book. Are, uh, there minds like that where you kind of like gotten to know them or, uh, I don't know, have you had a similar experience? Maybe, is what I'm trying to say.

Speaker B: So I had a very similar experience with Edwin Phelps, who won the Nobel Prize in Economics in 2006. And he was by Far the broadest minded economist I've ever met. I mean he is really a wannabe philosopher and everything he had studied in philosophy in college stuck with him. And so he opened uh, and he could somehow connect the dots in his mind. He was also an incredibly good technical economist, uh, which is why he won the Nobel Prize. Not, not for his broad minded thinking. He won it for.

Speaker A: Yeah, because it's the economic sciences, you know, narrow it down.

Speaker B: Yes. Uh, and we used to have lunch

Speaker A: uh,

Speaker B: once, uh, a week for this in my first 10 year stint uh, at Columbia. And for example he organized a conference on Kierkegaard.

Speaker A: Right.

Speaker B: And he kind of demanded that I speak at it. And it was worlds Kikagat scholars and the department of Religion. I said what the hell do I know about this? Uh, but it was a command performance. So that, that forced me to read some of Kierkegaard and it suddenly opened a new world to me. And that followed the bouncing ball that led me to read some of the existentialists who had been influenced by Kierkegaard and, and, and, and in fact I think Melvin Bragg's one of his uh, podcasts is on Kierkegaard. So yes, absolutely, sort of. And meeting people who are interesting to talk to. There's no, there's no substitute for that.

Speaker A: So for the audience, for your interest, you know I, I talked about burned rock. But that little story that Amar Beat has just told me, I mean I've got it written down now. I've taken some of like scrolly notes here. I'll now pay attention to Ed Phelps and I'll also potentially pay attention to Soren Kierkegaard because I now have words from Amar, uh, who's said how it means to him and there's this kind of like meta knowledge that uh, helps me focus my attention and what's truly interesting, which is fascinating, which is why no matter how much there's perplexity and chatgpt and instant access to the state of knowledge, that motivation that comes from human interaction mirror Norans, um, storytelling. Uh, I would tell you that one of the great joys about reading this book is that it connects me up to. Well, you've done more. You mentioned Ed Phelps in the book. But you've given a little more now. But there's snippets on people like um, um, I mean one I'll just end. God, I keep saying I'm going to end. I'm going to top of the hour. I'm definitely ending. Um, so Knightian uncertainty is kind of like the uncertainty of when we don't know anything. We have no statistics. And there's a sidebar in the book about how this guy Frank Nike absolutely hated John Maynard Keynes, who was the absolute opposite of everything that Frank Knight was. Frank Knight grew up in the middle Midwest as a farmer. John Maynard Keynes was the elite of the elite of the elite of the elite of the uk. That meta knowledge is so interesting to me, and that is kind of a benefit of the book is that there's like sort of hundreds of stories like that. And in a way you're displaying to your reader, uh, what you think of all those different people in a way and how you.

Speaker B: But I'm also doing subtly something else. I am trying to make a claim for the value of narrative mode, discourse. And I'm walking the, I'm walking the walk, as it were.

Speaker A: Yes, yes, that's right, that's right. Uh, and so, yes, uh, I'm going to say thank you and then you're going to say thank you or you're going to say goodbye. So it's such a pleasure for you to spend almost two hours with me. Thank you for following the meanderings of my mind and thank you for writing the book. I expect every single friend of mine to have a copy and when I went on your shelves. You cannot be a good investor without having this on your shelves. And um, thank you for coming on the podcast, Amar.

Speaker B: Such a, ah, pleasure. Such an absolute pleasure. And I hope this is not our last long conversation. I hope to see you in person not so long from now.

Speaker A: Thank you.

Speaker B: I really enjoyed the conversation. I like these wide ranging conversations where one is not tied to one's trying to make a particular point in a particular, uh, points in a particular sequence. So that is lovely, thank you.