Seeing into the Future with Author Taylor Pearson
Taylor Pearson is one of the most prescient and prolific futurists on the internet. Taylor is the author of The End of Jobs, a book about our entrepreneurial future. He is currently writing a book about the cascading effects of blockchain technology. Taylor is also a principal at Mutiny Fund, a long-volatility and tail-risk focused hedge fund, and is the operator of a SaaS private equity fund.
For Lunch Hour #7, Taylor joins Chris to discuss how we can become more accurate predictors of the future and best position ourselves to be antifragile to an uncertain world.
See below for the audio recording, resources mentioned, topics, and conversation transcript.
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Resources and links mentioned:
The Forcing Function links:
Experiment Without Limits (peak performance workbook, free download)
Performance Assessment (quiz to reveal your greatest opportunity for growth)
To check out our previous Forcing Function Hour episodes, click here.
Topics:
(08:17) Transaction costs
(13:28) Moving from the curb
(23:32) Thinking about extrapolation
(32:50) Low effort, high upside optionalities
(38:55) Bitcoin subculture and compounding growth
(45:38) Q&A
Podcast Transcript:
Note: transcript edited slightly for clarity.
Chris (00:05): Welcome to Forcing Function Hour, a conversation series exploring the boundaries of peak performance. Join me, Chris Sparks, as I interview elite performers to reveal principles, systems, and strategies for achieving a competitive edge in business. If you are an executive or investor ready to take yourself to the next level, download my workbook at experimentwithoutlimits.com. For all episodes and show notes, go to forcingfunctionhour.com.
I wanna introduce our guest, Taylor. Many of you guys are well familiar with his work, but those who aren't, Taylor is an author-investor. And I think this term is overused, but very apt in his case: he's definitely a futurist. Taylor is the author of the book End of Jobs, which talks about our entrepreneurial future, and he's working on a new book about the cascading effects of Bitcoin and Blockchaining. Taylor is the principal of Mutiny Fund, which is a tail-risk hedge fund talking about how you can benefit from volatility, and he also invests directly in internet software businesses.
Some of you guys know Taylor from his excellent writing online, at taylorpearson.me, and Taylor shares mental models for thinking better about productivity, marketing, and investing. He was incredibly valuable in the early creation of the Experiment Without Limits curriculum, and I like to think that his superpower is Taylor thinks very deeply. So many people see things that are happening, but Taylor goes the extra mile as far as, what are the implications of what is happening? We've both done a little bit of improv, and one of my favorite concepts from improv is, "If this is true, what else is true?" I think Taylor is one of the best at taking this next step about implications.
Some of you guys might be curious how Taylor and I met. I believe it was through the Dynamite Circle. We met up in New York Circle. The Dynamite Circle is one of these subcultures that we'll talk about that gives you a unique lens into entrepreneurship and where business is heading. And Taylor did an annual retreat, it was on a lake in Alabama, and if I trace back some of the most interesting people that I know, you know, all roads lead through Taylor, so I owe him a debt of gratitude for bringing those people together.
What to expect for today? Today our goal is to show you how to both recognize present trends and then extrapolate them into the future. And what is the goal of that? The goal is for you to become more anti-fragile. What does that mean? That uncertainty goes from a threat to an opportunity. The world is dynamic. Things are constantly in flux. But this does not need to be something that you are afraid of. In fact, if you are able to position yourself correctly, all changes become opportunities.
So, the timeline for today: Taylor and I are going to be having a fireside chat conversation for about forty minutes, and then we're going to hand it off for Q&A, so we're going to be wrapping at fifteen minutes past the hour. If you're on Eastern, that'll be 1:15 PM ET. If you have something to say, you know, chat is open. I encourage you to switch that to "all attendees" if you'd like everyone to see that. For the Q&A portion, I'm going to be asking questions on your behalf, and we are only taking questions through the Q&A function. So you can see that on the bottom bar. You can click on that, you can submit a question, you can also upvote questions. And so I'm going to be asking the questions which are most upvoted, so if you see something interesting to you, upvote it so that question can get to the top.
Everyone's favorite question, "Hey, I have to leave early, is this going to be recorded?" Absolutely. I wouldn't let this conversation go to waste. You're going to be getting the recording as well as the full transcript in an email on Tuesday, so keep an eye out for that.
With all that being said, I wanted to hand things off to Taylor and kick off today his conversation. Taylor, so many ways we could get started, but I think talking about your book, End of Jobs, is a great place to get started. You know, End of Jobs is really about the future of work, how typical organization, corporate work, is going to be gradually replaced by freelancing and entrepreneurship. And I would love to know, what were the experiences that allowed you to get that insight?
Taylor (03:39): Yeah. I mean, first, thanks for having me. After that introduction, I expect everything I say will be pretty disappointing, so it's all downhill from here, but that's good. Keep expectations down. Yeah. You know, I guess shorter to start . . . We were talking before about themes and how things come about. I think one of the ideas I find very interesting and impactful on me has been this idea of kind of optimizing for interesting. You know, thinking about . . . There's a paper, I believe the guy's an MIT professor or some sort of AI research person, named Juergen Schmidhuber, and he has this paper called "Driven by Compression Progress," and it's a very speculative paper, but basically speculates that the emotion 'interesting' is an emotion that evolved to indicate where humans have compression progress. Right? Where you can compress information in an efficient way. So, e=MC^2 is a compression of information in an efficient way, right? You can explain a vast amount of physical phenomena with Einstein's relativity kind of thing.
And you know, that's sort of an extreme example, but I think that general idea has always been interesting to me. So coming back to The End of Jobs and how that happened, I was working—I was a translator, I was a medical interpreter about a year after college, and then I taught English in Brazil, and while I was teaching I was listening to these like at the time very weird, niche things called 'podcasts,' and there were all these people doing podcasts who were talking about how you could sell stuff to people on the internet, and like that was a thing now— And obviously, Amazon was around, but e-commerce was a very small thing, and the idea that a career path was you know, to sell people things on the internet or leverage it in some way was really something I was exposed to. Because I didn't have any friends in high school or college who worked in tech or finance or anything like that. I had friends who were writers and doctors and worked in banks and that kind of stuff.
And I just thought that was such an interesting idea, and I started listening to all these podcasts, and I bought some books on how search engine optimization worked at the time, and that was a big—People were kind of nerds. And I guess it still is a big thing. And I started building websites, and taught myself WordPress, and was sort of mucking around with that stuff, and that ended up turning into a job. I worked for an e-commerce company, basically, in California for a couple years, and as you mentioned the Dynamite Circle that we met through—that was their other business. And it was basically a forum, a subculture. They had an event we still do, at least in COVID times, about how people selling stuff on the internet. Sort of internet-based businesses will come together and they'll talk about what they were doing and sort of tips or tricks and all that kind of stuff.
And you know, I had the idea for the book, I was at the annual conference and I was having breakfast with a few different people and it just occurred to me, it just seemed very obvious to me, all these things we were talking about, this is how the world . . . Like, relatively few people sort of understood that like this was how things work now. It just seemed very apparent to me that there was this huge trend, it was driven by this technological change that wasn't gonna reverse itself. And then if you . . . you kind of solve for the equilibrium point, right? We have this new change, and we haven't seen the effect of the change, but at some point, there's an equilibrium, and like what does an equilibrium look like?
So kind of the idea behind The End of Jobs is like, what is that equilibrium point, out into the future? Right? If you take this sort of trend, like what the internet—what people can do with their careers, and how it changes careers, you just follow it to the logical conclusion. You know, you're not taking anything new, you're just sort of taking what you already see in and just, yeah, drawing it out as far as it will sort of logically go. You know, that was kind of the impetus for that book.
Chris (08:07): What do you think you were seeing that others were missing because you were a part of these subcultures and kind of exploring things on the internet independently?
Taylor (08:17):I mean, I think the thing that sort of like made the idea click in my head was this idea of . . . You call it the long tail, or transaction costs. So long tails are the easiest way to talk about this. This is a concept, a guy, Chris Anderson, who's an editor at Wired Magazine, and he wrote this book, it was like the mid-2000s, basically, but the idea was basically on the internet, you know, a few sites to collect music, as an example. If you went into Tower Records, when like CD stores were still a thing, like Tower Records maybe had twenty thousand CDs. I don't know what their . . . Twenty thousand, thirty thousand CDs. But you know, there were ten million CDs you could possibly buy. But the nature of, if you sell, you have a physical resale space, is there's a marginal cost to stacking additional product. Right? Like you have to make the store physically bigger, you have to pay for someone to maintain it. So there's a transaction cost involved with that. And there's also like search cost. Like you would go and it took a while to find the CD you wanted. Right? Like you have to go, and is it in the rock section or pop section, or like, how is it categorized?
And sort of what he did was, once you have the internet, there was effectively zero marginal cost to like, stocking additional product. You know, Amazon has, I dunno, a hundred million books available right now or something like that. Barnes and Noble can't have a hundred million books. And I think the other interesting thing was the number of Amazon third-party sellers. 'Cause this isn't . . . You know, part of Amazon's business looks kind of like Walmart's business. Right? They just go out to Tide and then cut a deal with Tide and they sell Tide on their website and people get their Tide and it's like, okay. That's fine. But you also end up with these sort of weird niche, you know, laundry detergent for people that have gluten insensitivity within low-light climates, you can do something with a laundry detergent that's different, or whatever. And those folks with businesses work on the internet, these sort of very niche things, because you have this relatively low transaction cost. You've sort of removed this tyranny of geography, if you will. All of a sudden you can, if you have enough market . . . You don't have to enough market locally, you just have to have enough market globally for whatever it is you're doing.
And so I think that was sort of the main idea, and then it was just like, oh well . . . I think like music was picking up, the first places we saw that happen. Books. Like, media to some extent. And it was kind of like, okay, but let's just assume . . . You know, the underlying thing there is the same. Right? Like it's not any different. Like one recent iteration is this newsletter, a paid newsletter trend. Right? It's like if you write a paid newsletter on corporate earnings where you analyze companies' S-1s, or you know, public filings or whatever, it doesn't really work as a newspaper. There's not enough people in, you know, even like New York City, you know, certainly not like Duluth, Minnesota, who are ever gonna . . . I don't actually know where Duluth is. It might not be in Minnesota. But you know, it doesn't work geographically, but it totally works on the internet. Right? Like there's a thousand or two thousand people that would pay a hundred or two hundred dollars a year because they're really interested in that sort of material.
And so in terms of how people approach their careers, the big thing is sort of working independently of a large corporation. Right? You could take that, if you were really good at marketing yourself to public companies, or had some alternative Tide competitor for people with celiac, or whatever, all of a sudden that was a viable career path. It just wasn't broadly appreciated.
Chris (12:26): Yeah, I wanna pull on that thread a little bit where just the recognition of one secular trend, like the long tail, the ability to reach these increasingly narrow niches and not only to build businesses and subcultures around them, but almost to create a beachhead from which to expand. Right? Amazon starting out with books and expanding to being the everything store. Would you see these niches starting to build . . . Let's say something like a blockchain, where, in the beginning, it's just a small subset of people who are able to congregate together on the internet, share information, collaborate on open-source projects. What do you see as that next step for an early subculture like that to start to get momentum?
Taylor (13:24): Momentum in sort of broader, more people knowing about it, or?
Chris (13:28): Right. Moving in from the curb. You have the super-early adopters to the late-early adopters. Right? How does it start to move up that curve?
Taylor (13:36): Right. I mean, now that we're all amateur epidemiologists, we can do the infectious disease corollary, right? It's stable. Everyone knows the R0 . . . Right? If one person gets COVID or whatever, you infect an average, you know, X number of people. So if the R is greater than one, it's an exponential trend. Right? Or like . . . This is like Dropbox and PayPal's early acquisition thing, it was like you signed up and you got twenty dollars for free. Or if you referred a friend, I think like you got twenty dollars and they got twenty dollars. And so like on average, one person referred one and a half people, and so like that just keeps compounding, it's gonna go to infi—It's not gonna go to infinity, 'cause it's gonna hit some asymptote. So I think that's the way . . . If you have to take the internet business example or the blockchain or crypto example, like, you can just see . . . You know, I saw many times, you know, for myself, but I've been talking to other people, but people have like . . . "Oh." It would click. It was infectious, to some extent. Right? It's like people would hear about it and start doing it, and it just sort of made sense.
And I think you know, it was this idea of information asymmetry. It's like, what you know that other people don't know, what your subculture knows that other people don't know. It's not like you've analyzed it in some brilliant novel way. It's just the world is a really big place, and time and whatever is limited, and so not everyone knows everything all the time. And you have these things start small and slowly compound, so if you see something that has that sort of compounded growth rate where it's spreading, you can kind of infer, you know, this is gonna keep growing.
Chris (15:22): I wanna ask about that phenomenon because I find it so interesting that everyone lives in a different reality. We all are in our bubbles, and so things just feel so normal for us and sometimes can feel even overplayed. Right? I remember talking about Bitcoin like, 2010, 2011, and then 2013 comes around and I'm like, "Everyone already knows it at this point and it hasn't gotten big. All right. It's over."
Taylor (15:47): Right.
Chris (15:48): And here we are like, 2020, and we're still talking about, you know, when full adoption comes. And when you're immersed in something, it seems very easy to take for granted. I'm curious, does this bring something to mind for you, where everyone around you is pursuing something where it just becomes normal and you just sort of underestimate how big this niche thing could become?
Taylor (16:16): Yeah. I mean one for me was definitely Amazon. Like I remember going to this conference like, 2014, 2015, and it was like, "Oh, you like Amazon?" They had already the big opening up their third-party seller party program where you could like sell stuff on Amazon, and people were like, "Oh, I even sourced these products from China and put them on Amazon." Like, everyone I knew was doing this, and I was like, "This is so played out. Who's going to do this? It's really dumb." And the growth industry is massive over the last five years. You know, it's like up 5000x or something insane. Not that, but a lot.
So yeah, I don't know. I mean I think that's tricky, and you know, the whole industry was podcast. Like, I was a podcast producer in 2012, and I remember thinking like, "Oh, this is kind of . . . These are cool." You know, everyone kind of redoes some of the stuff, and how popular is this going to be? And you know, the answer was, "Way more popular." You know, now Joe Rogan has a gajillion listeners, and This American Life, and all that kind of stuff. So yeah. I think it's . . . You have to have some sort of broader . . . Like if maybe, what helped me with that is, you have to get out of the bubble to some extent. Right? You know, it's like when you're in the same bubble with the same people all the time you just assume that that's all there is. With the . . . Daniel Kahneman has the WYSIATI, "What You See Is All There Is." Right? That's sort of the core of all the economy of biases, you just assume that what's sort of most visible to you is all that's out there.
So people use like, friends from college or friends from high school or you know, people that just . . . We live in different worlds now, kind of thing. You know, just different subcultures to interact with, and they're just kind of using them as like a rough proxy for like . . . "What if you were not involved in this at all? Think about it." Right? You know, with Bitcoin, it's like, "Scam, or I wonder if I could get rich really quick buying this kind of thing?" Right? That's the general thinking. So.
Chris (18:28): Yeah. I love that. Realizing that we already have secrets. You refer to them as an information asymmetry. Things that we just dismiss as normal because the bubble we find ourselves in, they are normal. And I said, one of my favorite quotes is the William Gibson, "The future is already here, it's just not evenly distributed." That in some sense we are already living in a subset of the future, and seeing the things that we think are normal, could those become normal for more people?
It seems like a big part of your success is your ability to optimize for interestingness. If I remember correctly, your first URL was something like "Frontier Living." Right? It's like you're living on the frontier, exploring all of these edges. I would love to hear you talk about that, but that seems kind of key to the canary in the coal mine. Seeing some of these things early on. How do you manage to live on the frontier?
Taylor (19:34): Yeah. I always think Heart of Darkness, the Joseph Conrad novel. He has this . . . In the prologue, there's this idea of like, he wanted to go where the map wasn't filled in, and Africa was this fascinating place because at that time the center of the continent, you know, no one from—no Europeans, at least—there was just sort of a blank map. And yeah. I think that to some extent just philosophically, that's always been an interesting idea. So yeah, my first blog was called frontierlivin.com. There's no 'g,' because I made a mistake and didn't want to buy another domain. So it wasn't the best URL choice, but yeah. I think to some extent it's always like a really interesting idea, and I think it's just like . . . I think to some extent I've always had the attitude of . . . You know, I go back to initial career . . . I was planning to go to law school. I was studying for the LSAT and I was going to do this stuff. I was just not interested in it, and I was like . . . "I do something else, and I make much less money and much less prestige but it's more interesting and fun? That's cool with me. I'm fine with that."
Tradeoff? You know, I think the thing is . . . I like the idea, 'cause not only is it more fun, it's also more profitable and like a better way of approaching things, and hopefully that's true, and certainly it would be nice if it was. And I think it is. Which I think, you know, that's part of that. And I think another thing is this idea of going back to the R0 analogy, of something growing, it's just . . . We're really bad. Humans are just really bad at exponential trends. I think there's a great . . . Like, AT&T or someone commissioned, you know, one of the big management consulting firms, McKinsey or Deloitte or someone to do a big study in like 1995. Or maybe it was like 1980. I'll mess the dates up or something. But it was like, "How many kids are gonna have cell phones?" And it probably would have been like 1980. And they were like, "In 2020 or something there will be like ten thousand cell phones." Because right now there's fifty or whatever. And they were off by like 100x. They were off by like this massive, massive factor.
Chris (22:02): It's like the CEO of IBM said, "Hey, there's a maximum of five computers. There's gonna be five supercomputers and no other need for it."
Taylor (22:14): Right. And that idea, that's another good example. So like . . . You see something and it seems to be growing quickly, even if it's really small, that's a big advantage. It's like Peter Thiel has this idea of like, what are the secrets, right? And like the secret of PayPal was like . . . At the time it was like people wouldn't . . . They didn't want to put their credit cards on the internet. It was crazy. It was like, "I'm not gonna put my credit card on this freaking internet thing. This is insane." But like people were doing the—eBay was already a thing. Like, people were already like putting credit cards and sending money and stuff on the internet. Like, not many people, but a few people, and it was like growing really quickly. Right? Like I think . . . I don't know if it's . . . You know, one of the TR beta tests, I'm sure they just looked at the growth rate. Right? They looked at like internet users, '93, '94, '95, and it was going up you know, 10x every year, and it was like, "Oh. If you extrapolate this out for like ten more years, this is the most impactful technology of our generation."
But I think people don't tend to work that out. And I think yeah, you have to like play the math out to some extent for it to make sense.
Chris (23:32): Yeah. I think that's a really good transition to thinking about extrapolation. So recognizing something that is still small in an absolute sense but is growing very quickly, and being able to guess at a potential future, where it's going. I think this year being a great example of something that was ignored to the point that it no longer can't be ignored. And I'm curious, you know, why are we so bad at extrapolating exponentially? Why is that something that as a culture, as a society, we have so much difficulty with?
Taylor (24:12): Yeah. I mean that . . . What makes the most sense to me is like the evolutionary biology, right? If you go back . . . You know, whatever you want to call modernity. The last two thousand years in evolutionary history is a very tiny blip. Right? Like there's no meaningful . . . Like, humans aren't biologically meaningfully different than they were two thousand years ago, but I would say civilization is. And yeah, you wanna go back and you'd look at homo sapiens or homo sapien ancestors, the environments they were living in were you know, you can see this in the city of Mediocristan versus Extremistan, that sort of the evolutionary environment for humans was Mediocristan, right? You never . . . You know, the herd of wildebeest didn't like 10x month over month. Right? It doesn't work that way, that sort of thing kind of never happened. And there's just not natural phenomena, you don't see these extreme events. It tends to be civilizational things, human things. You know, the internet or you know, if you had like an infectious disease in 5,000 BC that killed the tribe, killed the fifty people in the tribe, they were like there and they're all dead. That was the end of it. There was none of . . . This hyper-connected sort of thing never existed.
So I think most of it's just like, you know, the elements in biology is just like, we're just bad at it because we've never had to do it. I think even . . . You know, it's interesting, using sort of like COVID as an example, you know, most professions, most careers, most people still don't have to do that in any capacity. I was talking with a friend of mine that's a doctor in New York, and he was like . . . He'd previously been an options trader. He came out of finance and he went back to medical school, and he was telling me basically he'd had to have this serious conversation with his procurement person in like January, it's like, "I need you to order twenty thousand N95 masks right now because they're all going to be out of stock in two weeks," kind of thing. And he had to have this big fight with the procurement guy. It was like, "No, this is stupid. Like, no. We're gonna order more later."
And you know, he was saying all these conversations he'd had similar with doctors . . . He had a math background. It's like, if you know a few doctors who had just done science but not done math, they'd all thought the COVID thing was kind of done, and all the ones who had done math were like, "Oh, this is gonna be a huge deal." There was this huge bifurcation based on like, "Does this person have professional or some sort of meaningful experience of playing with these numbers so they know their intuition is bad about it and they're self-aware that they need to know that?"
So I think it is like trainable. It is fixable. You can sort of like develop an intuition around how that works, but I think the natural bias is very bad, right? It's like if you go out and you swing a golf club and you've never swung a golf club before, like, your swing sucks. But then . . . You know, it's not a natural movement, it doesn't feel natural, you have to go through training. I think it's sort of the same thing.
Chris (27:26): It reminds me a lot of a post you did about attracting luck. And the implication being that everything that matters occurs in the fat tails. That there are low-probability but high-impact events, and so you know, I think in a sense this is the exposure to positive convexity, where . . . Or another way of thinking of it is optimizing for optionality, where many times the outcome is if it's bad, it's not so bad. Right? It's a risk of a very small loss, or no loss at all, but the potential for a very large upside. How do you think about those implications for us, maybe in career terms? If all of the action is happening on the fat tails, how do we position ourselves?
Taylor (28:29): Yeah. I mean I think the idea of the fat tail is one of those . . . There's two kinds of distributions. You know, there's the commonality distributions and the fat-tail distributions. And you said, like, the idea of the fat-tail distribution is basically unexpected events are more expected than most people think.
And you know, they call these the "black swans," right? You have these low probability but extremely high impact events. I mean, I think part of that, the example I give in the post, I think you mentioned, you know, one way of thinking about it is people tend to focus too much on the middle. People . . . I give the example of how Taylor Swift prices concert tickets. So it's like . . . Most people . . . I don't know. If you asked me how much they'd be willing to pay to go to a Taylor Swift concert, it's like . . . "I like Taylor Swift, but I'm not super into it. I don't know, I'd pay fifty bucks or something." But there's some group of people that like would pay ten thousand dollars or twenty for the super-premium, "I wanna meet Taylor before the show, I wanna get in a box, I wanna like have a recording, I wanna do all this stuff."
So the interesting math here, for me at least, is it becomes the idea of the 80/20 principle, which I think most people are familiar with. You know, eighty percent of your results is a result of twenty percent of your actions. And Perry Marshall has a great book called 80/20 Sales and Marketing, and actually, the appendix is the best chapter of the book. And he goes into this idea that the 80/20 principle is fractal. So there are different scales. You have the 80/20, but then also you have the 80/20 of the 80/20, which is the 4/64. So you have four percent of your actions that are worth sixty-four percent, and then you have the 80/20 of the 4/64, which is like 1.2, or .8 and 52 . . . But roughly it's like one percent is responsible for fifty percent. And like, that's frequently true if you look at a business. Like often one percent of their customer base will be responsible for fifty percent of their revenue. That's probably true in . . . Taylor Swift could like price her concert tickets kind of following this power-law distribution.
So I think one way in general for business owners or freelance-type people is to think about how can you sort of better serve that one percent. Right? Like I think people spend too much time . . . And this is a common thing, like salespeople will spend all this time prospecting for new clients and very little time doing account management, interacting with their existing clients. When almost always, it's much more profitable to just like be doing relationship stuff. If you're a car salesman, if someone's already bought a car from you, they're much more likely to buy a car from you again, than you gotta find some random person that you have no relationship with, no rapport, and sort of bubble up from scratch.
And I think the other thing is just like, you know, try to think about . . . I think it's personal to everyone, like what are those like one percent activities that lead to, you know, fifty percent results. If you look back over the last five years of your life, can you point to specific things? Like this was a relatively low-effort thing that had very high impact results.
You know, blogging for me was one of those things early. I started doing that in like 2011, 2012. And it was like two hours a week, but it was wildly interesting people . . . I was just like, "Oh, I should keep doing this thing. It's relatively low effort, and it's relatively high upside." And so I think just using that process for that, I try to do a quarterly or annual thing where I like look back and try and look at like, "Okay, over the last ninety days, the last year, what are the few activities that have disproportionately important results?" And, "How can I double down on that in some capacity?"
Chris (32:50): I love that. It's such an interesting framing to realize, "Hey, one percent of the things that I'm doing are driving fifty percent of the returns." And so there's a two-part question there. What are the few things that you're doing that are having the greatest impact, and then that double-down decision, which is, "I'm going to stop doing some of these other things which are not valuable, stop treating everything I'm doing as equal, and find ways to fractally dig deeper into the things that are driving the most return."
It's that . . . I love the way of thinking about the way we invest in terms of a power law, and I think the biggest investments we make are always where we spend our time. And so if you think about time as a power law, the most important thing that we could be doing is more important than everything else we could be doing combined. And so that leads to things like reflecting and planning become very, very high-leverage activities because they help to reveal that most important thing, but also that a lot of the things that we're doing that we backwards-rationalize as high-impact really are negative-impact because they get in the way of doing this one percent of things that really matter.
Taylor (34:08): Totally.
Chris (34:10): Taylor, I love this sharing of blogging as something that has low effort, high upside. I would love to know, what other types of optionality are you currently exploring? What's on . . . I think you had mentioned, "Hey, when you see something that you think might be a trend, your approach is just to . . . You know, only the autodidacts are free. Just to become completely immersed in that." What types of optionality are you immersing yourself in right now?
Taylor (34:47): So, one of the big ones, I think I am trying to do this, do a better job now, and I feel like I've been trying to double down on this in some capacity for ten years, and I still feel like I could invest more, is just investing in relationships in different ways, whether that's hosting events . . . You know, both on like a social and a professional level. You know, on a social level just having really good friends just makes . . . at that point, you’re kinda winning, there's not a lot of margin to improve on that point. And I think also like on a professional level. At least my in-built tendency is just to stick my—go head down and just work on stuff and not go up and interact much.
And I noticed, some of the most effective people I know like write really long e-mails. Like I'll ask them, "Hey, what do you think about this thing?" And they'll send me this really robust five-paragraph thing where they've thought through it, and I'm like, "Ah, they're great at that." You know what I mean? Like I know Chris is really good planning stuff or whatever. Because I've read your blog posts, you've sent me a long e-mail about it, so I can evaluate that expertise. So I think that's sort of . . . Establishing relationships has been another sort of big one.
I guess for right now, I'm really interested in the sort you know, Bitcoin, Blockchain, crypto-space, or public Blockchain space, in general, is still very interesting to me, and most people I talk to still think it's dumb, which makes me think there's a lot of room left to have something play out there over the next you know, twenty years. I think that's a long-term thing.
I run a hedge fund now that focuses on tail-risk and lots of other strategies. That sort of an aspect of the investing world is really interesting to me right now, and I'm trying to do more with and learn more about. I think those are maybe the big ones for me this moment.
Chris (36:59): If I can identify a commonality there, I think this investment metaphor really hits home, is these are long-term investments, and it's not clear which part of the portfolio is going to pay off. I remember the story you were telling about marketing your book, where you suspected that fifty percent of your book sales came back to two emails that you had sent out. And we were talking about relationships and how, you know, relationships are very much a long-term investment in that many of our opportunities or you know, amazing experiences can be traced back to a couple of interactions, and the things that no one is asking from us generally become the most important. They're very self-guided kind of long-term actions. And it strikes me of the commonality there, it goes back to your superpower of being able to invest and go deep, and being willing to have a long time horizon, that these investments pay off in kind of unexpected ways. And you can be in that niche for a long time before it becomes normal. Right? It's the, hey, the overnight success that was really ten years of gym time ahead of time.
I'm curious about that. It's like we live in a world that rewards short-term results. You know, everything gets reduced down to two-hundred-eighty characters. You know, "What have you done for me lately? What's the sales numbers at?" How do you feel about prioritizing these long-term time scales? It's like you said: in terms of exponential growth, you need to have a long time scale in order for things to go vertical.
Taylor (38:55): Yeah. You know, there's a really interesting idea . . . One of the parts of the Bitcoin subculture is Austrian Economics, which is sort of one of the least academically accepted, or sort of least academically popular schools of economic thoughts, and they have some really interesting ideas, and one of them is this idea of what they call 'time preference.' They do these experiments with people, but if you have a savings account that earns five percent a year, you know, the question is would you rather have a hundred dollars now, or a hundred and five dollars a year from now?
And so I think it's demonstrating most people have too high a time preference. Like they want to have the thing sooner, and I guess when you're dealing with something that compounds, the future potential is so vast compared to sort of what it is and presently available. I'm sure you know, there's a . . . I'll slightly butcher the numbers, but if you started filling up the Yankee Stadium with water . . . you know, you start with one drop, and then the next minute you do two drops, and then you do four drops of water, it starts doubling . . . But then the end of it is at fifty minutes, basically, just like the whole infield is damp. It looks like somebody sprinkled the infield. And at sixty minutes the stadium is like overflowing with water. And so you have . . . That back end of that exponential curve is so steep. And so I think that's . . . Once I kind of started to understand that idea in some way, that just seemed like such a big opportunity. You know, sort of the grain of rice that doubles every day and eventually the king has to give the whole kingdom to the person after thirty days kind of thing.
Chris (40:55): Mm-hmm.
Taylor (40:56): You know, that's another great example of that. But yeah, I think that's right. I think in a lot of . . . I try to approach things . . . Bitcoin is a good example, it's like, can this make a ton of money in the next six months, and wouldn't that be awesome? I'm like, "Yeah, it would be awesome, but the potential future rewards, right, the compound growth rate of that is very really high."
And I think you know, like the game theory idea of the iterated prisoner's dilemma, that when like you're cooperating with other people, you're enhancing the future wealth, however you calculate wealth in those terms, of both individuals. And that compounds over time.
Chris (41:36): Yeah. Thanks. It's so hard to overestimate compounding. And it's all a function of time. So I love thinking about, hey, what are the things that are interesting enough for you that you're willing to spend a lot of your time on it with no promise of return. Because sometimes it might not go anywhere, but if you . . . Needing to stick with something for long enough to see things play out.
Taylor (42:20): Yeah. I think that's always my heuristic. I have like a project heuristic, like, "Should I take on this project?" And one of them is like, "Could I see myself spending at least five years on this?" All of the poor decisions I've made, they're all from, "Oh, this is a great opportunity, I'll just do this for six months even though it's not the thing I'm that excited about." And then I like go do the other thing that I'm like actually excited about. That's never worked. At least for me, that's never worked.
Chris (42:49): It's advice I give a lot, when I talk about the difference between productivity and performance, is that productivity is moving as fast as you can along the path, and performance is just taking the most direct path, the closest to the straight line. And we put these brick walls between ourselves and the things that we want. It's, "Okay, I'm going to go work for McKinsey for two years, then I'm going to go do the MBA, and I'm gonna do the investment banking, and then I can finally do the thing that I really want to do," rather than finding a way to just go at it directly that all of these prerequisites are really just ways of delaying.
I want to make sure we have enough time for Q&A today, so if any of you guys have questions you'd like to ask Taylor, be sure to add those into the Q&A, and upvote any questions that you find interesting. One last question for you, Taylor, before we switch it over to Q&A, what recommendation would you have to someone who wants to create more upside in their career? Some of these low-effort but potentially high-impact things that we could be doing. What comes to mind?
Taylor (44:09): I think optimize for interesting, which is one of the views I've been bringing back up. That's a big one. I think you have kind of corollary to that, or sort of adjacent to that, is this idea of, you know, you have to be willing to work on small things, or things that seem to be trivial. Like . . . Once fifty percent of people are doing it, it can only double. Right? That's it. That's the maximum sort of thing. But if you know, one one-hundred-thousandth of one percent of people are into it, then the potential growth rate from there is very, very high. So I think part of it's . . . Yeah. Optimize for interesting, and also sort of like what is some, as you said, the Thielian secret idea, you know, what is something that you or your subculture think about that doesn't seem broadly applicable. And then I think beyond that, the other things that have been impactful for me is taking time to try and not just get interested in those things and learn those things, but like share that in some capacity, you know, whether that's, you know . . . Blogging and Twitter has been most of the ways that I've done that, but YouTube, Podcast, hosting events, there's a jillion ways to share that kind of stuff.
So I think that balance between sort of sharing what you're learning and then trying to learn new and interesting things, you can create sort of a very positive feedback loop.
Chris (45:38): Awesome. Thanks, Taylor. First question is from Sueneil. Taylor, in these crazy times, how does one live with uncertainty? What are your go-to mental models which are valuable in dealing with uncertainty?
Taylor (45:55):Yeah. I mean I think, if from a mental model perspective, I really like the OODA Loop from work industry, and like John Boyd's work in general. He's the guy that came up with the OODA Loop idea, that OODA is, it stands for . . . It's an acronym for "Observe, Orient, Decide, Act," and the ideas that this is a process which everyone does intuitively. You know, it's like, "I observe that I am hungry, I orient by going to Yelp, I decide that I want to eat Chik-fil-A, I get in my car and drive to Chik-fil-A” or whatever. And you're also making this on—at many different levels at many different times. Right? I observe that I don't like my job, I orient by trying to talk to people in my network about other jobs that could be more interesting or fulfilling or whatever, and I decide to change, and I act on that change. I think that's one sort of way that's helpful for me of thinking about it.
I guess more practically for me, when I get in everything just feels super uncertain and out of control, a lot of times you just need like a break. You know, you just need to take three days off and go to the lake, or like just go play video games or something and let everything simmer.
For me, I think like a lot of people, you just lose the forest for the trees, kind of thing, where everything feels sort of uncertain. It's actually not that uncertain, you're just really lost in the weeds of it, and you can take a step back. You get a lot of space. One thing that's always helpful for me, I try to do once a quarter, I'll take like a day or two and do kind of a not respond to email, not do much with messages, but just do a kind of big picture kind of view and think about things and try and sort of reorient myself, if you will, in the OODA Loop example.
And almost invariably I find after I take two or three days and just sort of like chill out, do some thinking, do some planning, that a lot of the uncertainty was perceived uncertainty and not sort of actual underlying uncertainty.
Chris (48:20): Yeah. Those of you who know me know how much I love meditation metaphors, and one of my favorites, you know, the teacher is saying, "Hey, make sure you sit down thirty minutes every day no matter what is going on, and if you don't have thirty minutes, do it for two hours." Which is another way of saying, "They less sure you are of what you're doing or the more busy and frantic things feel, the more important it is to get away and to reorient yourself." And this is something that's always counterintuitive, and it's a surprisingly difficult assignment that I often give my clients who have many things flying at them and are just too busy to think or plan, is to just take a day off and don't touch their computer or phone. It's really surprising how powerful it can be to restore that sense of perspective.
It also reminds me, I love the OODA Loop so much, and we've nerded out about it quite a bit, and so when I talk about in a poker sense, that I am trying to get inside of my opponent's loop, that they are acting on an outdated model of the world, that I can anticipate their response, the decision and action that they make, based off of a shared mental model, and thus I can have their observations out of concordance with reality. And this was one of John Boyd's key observations when he was looking at fighter pilots and which fighter pilot would win in a dogfight: it was the fighter pilot who was able to reorient both more accurately to what was happening, but also faster, in that the tightness of this feedback loop that we find ourselves in is proportional to our speed for progress.
So I can't help but ask a follow-up, is what strategies do you have to reorient to reality faster?
Taylor (50:34): Yeah. I have one John Boyd story that I thought would be interesting, as you were thinking of . . . He was also a big proponent of, there was a big trend in the US Military was just these bigger planes, you know, like Top Gun and F-14s and stuff. There's a scene in Top Gun, they're talking about why Top Gun was started, but basically the Soviet MIGs, which are like much smaller, much cheaper, much quote/unquote "worse" planes than the F-14s were—I think they calculate the ratio of who's shooting down who—but the MIGs were just much more effective. And so everyone was sort of upset, but the key was they're just more maneuverable. So even though they had less firepower and less missiles and weaker engines and everything else, they were just smaller and more maneuverable. And Boyd was really influential, he was one of the—I think it's called the Warthog airplane. It looks ugly. It's just the ugliest looking plane you'll ever seen in your life. It's got like two big turbines, I think mostly the marines use them. But it's really effective. And so I think there's an analogy there to these things that look dumb or silly or ugly or whatever are often really effective.
We sort of, to go to your question about what are the sort of things that I do to orient . . . And I think the biggest thing for me is I have a regular just kind of weekly and quarterly review process. Like, I kind of try to schedule in times deliberately for when I'm going to do that kind of stuff, so usually every Saturday morning I'll take like two hours, and just look through my calendar for the past week, look through my call list for the past week, and kind of do a . . . Like, what went unexpectedly well? Like this call that I thought was going to be a waste of time was actually super interesting and I learned a ton from this person, and you know, I'll . . . Where did I meet them? Is there any way I . . . Maybe I should shove in another call with them, or whatever it is. So yeah, I think it was having those built-in stops or just built-in barriers or breaks or whatever you want to call them, I think is probably the most helpful thing for me.
Chris (53:00): Yeah. It's really critical to close the loop, and it's something that I see a lot of resistance from, especially those who consider themselves 'creatives.' So this could be writing, this could be design, any type of pursuit where you see your role to go from zero on to create things that didn't exist. But looking at many of the most creative people throughout history, you know, those who came up with scientific theorems or you know, wrote the posts that became the concepts that we all reference, they were incredibly systematic about their creativity, that having this structure to regularly review, what they were doing was leading to the results that they wanted. Those are the ones who went on to have the greatest impact. That creativity, having new and interesting ideas, is not only not counter to having this structure, but in my opinion, the structure becomes essential for the creativity that happens in the space in between.
Taylor (54:15): For sure, yeah. Personally true for me.
Chris (54:20): Question from Jason. So we have a specific example of the secular trend of psychedelics that's happening right now. So we see mental health really coming to the forefront, we've seen this recently with meditation and yoga having a resurgence, and it seems like that the cultural opinion of things as not only not-harmful but potentially very beneficial. There's been studies recently in psychedelics as far as being useful for addiction and depression when conducted in correct setting, clinical settings. Jason's curious, you know, what's your opinion on some of the consequences that you predict from this current societal change?
Taylor (55:14): Yeah, I don't know a lot about psychedelics. You know, I've read the same few blog posts everyone else read, that kind of thing is my level of knowledge. But yeah, it seems like an issue of going back . . . We're talking about, thinking about what trends, or whatever . . . Everyone that's into it is like really into it. Right? You know what I mean? Like no one's like, "Meh" about it, for the most part. Like you know, everyone's like, "Yeah, you gotta do this, it's gonna change your life forever." That makes me think it's probably a good trend to bet on, like the legalization thing seems to be moving along. I'm not paying close attention to that, but I know they're going stage three or stage four of a trial level is increasing, and all that kind of stuff, and it does seem to have that characteristic of like everyone that's into it is like really . . . You know what I mean? The ROI is like greater than one. Right? Like everyone that does it convinces at least two other people to do it, and so you keep playing out that growth rate, and it ends up being big.
Chris (56:20): Yeah. Virality is everything and it's the difference between mercenaries and missionaries, is you're looking at those who are into it. Are they really into it? Is it the thing that they talk to everyone about? It's like how long are you in a conversation with them before it comes up? These are pretty good proxies to look out for. And I'm curious, it seems like Bitcoin falls into that camp. You know, we've been talking about Paleo a little bit, it's like, "How long are you talking to this person before they bring up that they're doing Paleo right now?" Are there any other examples that you can think of where it's almost cult-like in the fanaticism, where that speed to someone bringing something up in conversation seems to be that biggest factor for word of mouth virality?
Taylor (57:20): Yeah, that's essentially one of the . . . So what's the, there's some line that the difference between a cult and religion is like adoption percentage. Like you cross some threshold and now it's not a cult, it's a religion. Yeah. That's an interesting question. What else are people really into? I would like . . . The AI, people that are into AI are like really into it, kind of stuff. So I think Bitcoin is certainly like that, where it borders and goes into religion I think for a lot of people. Psychedelics is a good one. What else do people really . . . Oh. Like other health . . . It seems like the vegetable crusade seems to be like picking up steam.
Chris (58:18): Yeah.
Taylor (58:19): That's a . . . People are like militant about you can't have vegetable kind of thing, in some of those communities, it's like, "Oh, why can't I go to Kroger and buy sweet potato fries?" And I was like, "Oh man, that's a business right there.” You know what I mean? I don't know how the economics of that business are, but in ten years that's gonna be a huge thing. Consumer preferences seem to be changing there.
What else? That's a good question. If I had other . . . I guess the city-state people, the like, start your . . . You know, the city-setting and that whole movement, like those people are like really passionate about it, and very sort of like evangelical. That's another interesting trend. And yeah, I dunno, that's the . . . They call them secrets because they're hard to think of.
Chris (59:20): Yeah.
Taylor (59:21): If I knew a lot of 'em it wouldn't be very secret, almost by definition.
Chris (59:27): Yeah, question from Jason. So I think this is a good continuation of the theme around living with uncertainty. So there's one approach to uncertainty, which is trying to reduce the uncertainty. Can we identify what the crux of it is and find some way of measuring and tracking it, so that we can better predict? But it seems like an unexplored angle from today, is the anti-fragile notion. Admitting, "Hey, the world is at least somewhat undeterministic, and uncertainty is inevitable, and some aspects of the future are unknowable." And I think one of your key insights that led to the creation of Mutiny Fund is that most of us are as you put it short volatility, where you know, Taleb gives the image of a glass jar sitting on the edge of a table, where anything occurring is bad for the glass jar, where many of our systems are set up so that any change is bad for us unless we become very resistant to change, and this notion that we can become long volatility, that change and especially large unpredictable change can actually benefit us . . . We'd love to hear how you think about that, and how it's led to your thinking on creating the Fund.
Taylor (01:01:08): Yeah, I mean I think part of one of the ideas that Taleb has in general, and particularly applies to markets, is that if you have something which is . . . It applies to markets, but this is more general. If you reduce the short-term volatility, you increase the long-term volatility. So like, what we would expect if that's happening is you'd expect sort of black swan or high-power risk be less frequent but more severe. And in particular, like there's a non-linearity to this very . . . Like, a losing eighty percent of your portfolio is more than twice as bad as losing forty percent, and losing ninety percent is more than ten percent worse than losing eighty percent. Right? There's a non-linearity to how that all plays out. You know, and in the case specifically, that has a huge impact on being able to compound wealth over time. Right? If you have a fifty percent drawdown in your portfolio, you have to make a hundred percent just to get back to where you started. And so if you're able to reduce those sorts of drawdowns, your long-term compounded growth rate is much higher.
I guess it gets back to what we were talking about, that . . . Back into the exponential curve being very steep, and that's sort of underestimated. So yeah, I think that would sort of be an impetus that got me interested, and that's not the area . . . That's a very niche area, but people who are like into that, sort of theory of investment stuff are really into it, and you know, most people aren't. And so to me it seems like it's an interesting bet to take in that regard.
Chris (01:03:12): Well, especially because in investing you need to be both right and contrarian. If everyone was into it, it probably wouldn't be as good of a trade.
Taylor (01:03:22): Yeah. I try to get crazy excited about, you know, everyone does the . . . You do the good trade and it works and then the consultants get ahold of it and the consultants go to the pension funds and they pitch the pensions funds on it, and the pension funds do it, and right then it stops working. And that's the cycle, right?
Chris (01:03:42): Well Taylor, awesome. Thank you so much for being here, and guys, really appreciate the great questions, all the fun chatter. Hopefully, you came away from today with a little bit better of an understanding on how you can recognize how some of your normals might become future normals for larger groups of people. Maybe ways that you can become more anti-fragile or create more optionality in your life and career. Taylor, any final thoughts to leave the audience with today?
Taylor (01:04:20): No. Thank you for having me. This was fun.
Chris (01:04:24): Succinct and direct. I love it. So quick reminder, guys, this is going to be . . . Well, this was recorded, and this is going to be sent out in an email on Tuesday and posted on the Forcing Function website with the full transcript and show notes, everything that was mentioned or discussed today, if you want to go find that. Quick reminder that the next lunch hour we're going to be hosting is on October 15th, with Spencer Greenberg. And if you want to check out the previous Lunch Hour conversations that we've done, you can also find that at forcingfunction.com/lunch-hour. With that, thank you guys so much for being here, and we'll see you guys again on the 15th. Thanks, Taylor.
Taylor (01:04:53): Thanks, guys.
Tasha (01:04:55): Thank you for listening to the Forcing Function Hour. At Forcing Function, we teach performance architecture. We work with a select group of twelve executives and investors to teach them how to multiply their output, perform at their peak, and design a life of freedom and purpose. Make sure to subscribe to Forcing Function Hour for more great episodes, or go to forcingfunctionhour.com to sign up for our newsletter so you can join us live.