This week I was lucky enough to be invited back onto Infinite Loops. The first nineteen minutes of the podcast is my attempt to briefly synthesize twenty ideas that have changed my life. I hope it makes some sense!
I’m reasonably sure I’ve never had an original insight in my life. But what I think I am occasionally good at is finding the kinds of people who can consistently produce them. There is one specific kind of thinker that is especially important right now. They have also been stunningly profitable recently.
I was asked in a recent interview for all the people that had most influenced me. I only realized afterwards that they overwhelmingly had one thing in common. They are hybrid thinkers. As we accelerate towards a global phase change, people who can straddle both worlds will be critical. The three overlapping spheres of most focus have been Left/Right hemisphere thinking, Eastern/Western thought, and Inner/Outer worlds. There is a golden thread that runs through all of them.
“Indiana Jones and the Hybrid Heroes.”
[14 minute read]
Source: Getty Images
In the all-time-classic Steven Spielberg movie Indiana Jones and the Raiders of the Lost Ark, there’s a scene where Indy uses an ancient medallion to find the burial place of the Ark of the Covenant.
The bad guys only have access to one side of the medallion’s engravings, thus they start digging for the Ark in the wrong place.
The vast majority of us work in roles where anticipating the future is important. Every time we look to experts for predictions, it strikes me that we are only using one side of the medallion. Experts have a generally appalling track record of predictive accuracy. We’re digging in the wrong place.
The two stages of elite strategic thought are the ability to see the present clearly, then react rapidly to changes in circumstances. Although it sounds obvious, it’s clearly incredibly difficult to do! The intellect is at its best when telling us what is happening right now, or explaining what has just happened. This is obviously critically important, but it repeatedly fails to forecast non-linear changes. Understanding the propensity of the situation means having an intuition for how things flow. “Hybrid thinking” is both/and thinking. This is because it requires an intuitive understanding of both the individual parts, and the way they flow together.
Left and Right Hemisphere Thinking.
Starting with the example that will surprise absolutely none of my readers, I believe Dr. Iain McGilchrist’s The Master and His Emissary is a challenging but uniquely good book for understanding the world. The left hemisphere divides things into categories, and the right sees how they flow together.
“To the left hemisphere, you find the truth about something by building it up from bits. But, as the right hemisphere is aware, to understand it you need to experience it as a whole, since the whole reveals as much about the nature of the parts as the parts do about the nature of the whole.”
Hence the perfect balance is hybrid both/and thinking, but Dr. McGilchrist believes our cognition and culture has become dangerously dominated by the left hemisphere. Mirroring the optimal balance he advocates for, Dr. McGilchrist has a highly unusual genius-level background in both arts and sciences. I am currently tearing through his 1,400 page opus, The Matter with Things, which was released this week. I’m about 10% through and I’m making an early claim that it might be one of the most consequential works of our era. If you want to hear why I’m so passionate, we’re hosting a live call with him on December 8.
In terms of the application of Dr. McGilchrist’s ideas specifically to markets, Duncan Austin has done some remarkable work over the last few months. As a hybrid thinker, he’s had a 25-year career as an environmental economist and sustainable investor. His recent pieces explain McGilchrist’s work staggeringly well in the context of ESG investing specifically, and capitalism in general. He suggests that the market-centric world we have created is possibly the most consequential manifestation of left-brain thinking today. We are effectively, if unwittingly, living in the “Matrix of the Emissary.” The market model accounts more for the pieces, rather than the whole.
Categories and objects, vs the flow of the world. Source: Duncan Austin
Our problem has been that the definition of “market” has been too narrow. It has excluded too many people and too much of the natural world. So it’s incredibly curious that we’re now in what Stan Druckenmiller last week called a “bubble in everything, every asset on the planet.” It seems like we’re seeing an emergent, “irrational” expansion of the entire market. In terms of the natural environment specifically, as I argued in our White Paper, ESG is just a flawed symptom of the nascent shift in this direction. This is bottoms-up, driven primarily by investor demand, but the shift is also happening from the top-down. By far the clearest demonstration of this is the “Race to Zero” paradigm. The pandemic accelerated direct government intervention in “green” initiatives globally, and the proposed scale is now absolutely absurd. It reminds me of this deliberately hyperbolic chart from The Clocktower Group, on their “investment theme of the decade.” As they wrote in an excellent recent report:
“We cannot emphasize enough just how aligned geopolitics, politics, and technological innovation are at the moment behind Green initiatives, sustainability, and efficiency writ large. The momentum dwarfs some of the greatest infrastructural projects and technological advances in human history. In a way [the chart below] crushes any silly comparisons between today’s Green bubble – and an epic bubble it is sure to become – and the Dot Com era. We do not remember the world’s governments spending trillions of U.S. dollars on Microsoft Excel!”
In terms of applying hybrid thinking to business strategy, phase transitions are rarely linear. This is one of many reasons I adore Rory Sutherland’s business Zen. He’s a man who works within a traditional advertising agency, but has a deep understanding of non-linear strategy and “irrational” behavioural innovation. He believes “the biggest progress in the next 50 years may come not from improvements in technology, but in psychology and design thinking.” Rory also appeared on Jim O’Shaughnessy’s Infinite Loops last week, where he extolled the virtues of…. Iain McGilchrist. He believes right hemisphere thinking allows you to see hidden truths, and that’s a very big idea indeed.
“It always strikes me that the job of creative people, of artists, of entrepreneurs to an extent, is different to the job of scientists… The job of the artist or the creative person, or I would argue the comedian by the way, is to see things which nobody else has noticed. They may be known once you draw attention to them, but they're just nowhere there in consciousness at all.”
Artists can show you the future long before the experts can see it. If something intriguing doesn’t explicitly seem “work related,” that might actually be a good sign, as well as a potential competitive advantage.
The broader application of this balance to both life and investing is what really stood out from my last piece on Julia Galef’s “Scout Mindset.” She stresses the importance of rationality combined with values. Rationality first allows us to see the present clearly, but then we need to align ourselves with the world around us. Parts then the whole. This requires renewing our neglected relationship with the body and the outside world. We can then synchronize with the flow around us in a harmonious way. As it’s dramatically more connected to the body, this requires the cultivation of right-hemispheric traits: it’s about how to become a hybrid thinker yourself.
Eastern and Western Thought
The other foundational balance for today’s world is between Eastern and Western thought. Again- it’s about studying the way things flow; an intrinsically Taoist, Eastern way of thinking. A Treatise on Efficacy (the focus of a prior piece) is a synthesis of Eastern and Western strategy and is a challenging but essential read. I’d also recommend Trying Not To Try by Edward Slingerland, a fun Western-friendly explanation of Taoism.
Joshua Cooper Ramo has been hailed as “one of China’s leading foreign-born scholars.” He’s written two books (The Seventh Sense and The Age of the Unthinkable) about the way complex systems pulse and flow in real life. I didn’t really “get it” at first, but now I think he’s just superb. In my piece “Mongolian Horse Swarms” I discussed how to apply his ideas to modern organizational structure.
In macroeconomics, Michael Pettis is a professor of finance at Peking University. He has had a staggeringly international background and has been based in China for the last 18 years. Along with Matthew Klein, their theory of international flows in his book Trade Wars are Class Wars remains one of the most interesting and counterintuitive theories I’ve ever encountered. The key insight is that our left-hemispheric tendency to see countries and economies in isolation can blind us to the way capital flows between them influences asset prices. Simplistic categorizations like “efficient Germans” and “lazy Greeks” fail to account for the necessities of the flow of the global balance sheet.
The interplay between East and West was also the genesis of a defining investment theme of 2021, and one of the best pieces of work I’ve seen in my career. Dan Wang of Gavekal studied philosophy in the U.S. and worked in Silicon Valley. Now based in China, he spent the pandemic meticulously reading government propaganda. This allowed him to detect of the shift in tone away from support of the consumer internet earlier than most others. He assembled the parts and saw the whole. His work was published in January, we hosted a call with him in February. By August, Chinese tech companies had lost $1.5 trillion in value. He thinks U.S. sanctions have helped trigger an internal Manhattan Project for China to build its own hard tech sector. Chinese heavy industry should be a secular beneficiary, with Dan highlighting areas largely outside the main competence of the internet companies: semis, high-end manufacturing, and life sciences. As Silicon Valley scrambles to build the metaverse, it’s extremely interesting to me that the Chinese government is trying to aggressively pivot their economy away from the abstract, digital left-hemispheric worlds of social media and video games.
Inner vs Outer Worlds
Finally, I believe the richest source of predictive power is often found within myth. The artist can anticipate the future, the intellectual can explain the present. The mythologist bridges the worlds by explaining the artist’s meaning to the intellectual.
The legendary mythologist Joseph Campbell was one of the most important thinkers in the world. He wasn’t really a classic “intellectual,” but something much more important. It probably seems like a weird choice to pick a man who’s dead as one of the world’s best forecasters. But myths remain consistent across eras and cultures because humans tend to stay the same. Myths are concentrated wisdom. The man that has read, analyzed, and synthesized all the myths has even more distilled wisdom. The Power of Myth is a top-three-all-time book for me.
Myths are designed to be bridges between worlds, between inner and outer. As Campbell put it:
“The ancient myths were designed to harmonize the mind and the body. The mind can ramble off in strange ways and want things that the body does not want. The myths and rites were means of putting the mind in accord with the body and the way of life in accord with the way that nature dictates.”
It has taken me a really long time to work out what that means. But one way to interpret it is that, when stories deeply resonate with us, it realigns us with the world. As Dr. McGilchrist puts it, metaphors are what links language to life, and myths are extended metaphors.
The critic dissects things; they can tell you that Christopher Nolan’s movie Interstellar has weird sound mixing and a bloated running time. But a mythologist like Campbell can reassemble the pieces and tell you what it means. Even though he died 27 years before it was released, Campbell’s framework allows you to understand that Interstellar is a metaphor for how societies and individuals rejuvenate themselves. It’s what I tried to explain in my podcast this week, as well as why Campbell’s famous and ubiquitous Hero’s Journey is the most important story in the world right now.
The critic, intellectual, and scientist can examine a cow and dissect it into a pile of beef. It takes creative magic to put it back together and make it a living cow again. This requires an intuitive sense for emergence. The combination of both sides of our brains working together, together but in tension. These hybrid thinkers are the heroes, prophets, jesters, heretics, and healers. They all have an ability to see outside the abstracted pieces of our existing stale paradigm. Then they disrupt it and rejuvenate it by speaking the truth. They are the butterflies in the typhoon.
- Listen: My podcast with Jim O’Shaughnessy on Infinite Loops (1 hour 23 minute listen).
- Why Listen: This podcast is a longer explanation of the meaning of Campbell’s “Monomyth” or Hero’s Journey, as well as why it aligns with my global phase change thesis. I hope it makes sense, and I’m excited to discuss it with anyone who has questions or criticism.
Have a great weekend!