Ben Johnson (4:02)

And Jim, when you found that all important question, how did you begin to pull on that thread? Did you go back to the library? Did you engage with different market participants, your own family and your foundation? How did you begin to give oxygen to that spark, that fire?

Jim O'Shaughnessy (4:20)

Yeah. So Ben, good question. I was a bit different in that I read the standard texts, right? I read Ben Graham, I read all of the various books that were available at the time. But what really fascinated me was it seemed to me that it was the underlying characteristics of a stock, things that, like the factors I just mentioned that were going to be the really important part. So yes, I did go back to the library. This will indicate my age and your younger listeners won't know what I'm talking about. But I had one of those big paper spreadsheets, the really long ones, and what I did was look up what 30 stocks were in the Dow every year. A lot of people don't know that the editors at the Wall Street Journal and Barron's can change what goes into the Dow Jones Industrial average and do one aside, that's quite interesting is in 1939, IBM had been in the Dow Jones Industrial Average, but they threw it out in favor of at&t. And I noted that just that one switch would have seen the Dow vastly higher had they simply left IBM. Because in the subsequent period, IBM went up something like 50 fold and at and t just doubled. But I meticulously noted which stocks were in the Dow for which year ran across the top of the spreadsheet, all of the Various numbers like PE earnings, all of that, just to see, is there a pattern there? And I indeed did find the pattern. So then I was able to get a computer version of the Value Line Investment Survey, and then I was really feeling good about it because it also had back data and I didn't have to write down all 30 names every year. And so literally, I had the thesis that if you look at the sort of the X ray of the stock, right, See what's underneath, you would be much better served by investing based on those numbers and what historically stocks with those types of valuations did going forward. You know, simple example, when you separated. I haven't updated this in a long time, so this is old information, but I think it's still directionally true. When you separated the Dow Jones Industrial Average simply by PE ratio, and once a year you would buy the 10 stocks with the lowest PEs versus the 10 stocks with the highest PEs. From the 1930s, kind of forward to when I was doing this research in the 1980s, the differences were staggering. The investment in the 10 high PE stocks basically did maybe a little bit better than T bills, whereas the stocks with the lowest PEs significantly outperformed the market. So, you know, talking about it today, it sounds kind of obvious, right? But back then, really, it was only academics who were doing this kind of factor work. I discovered the work of French and Fama, which was very famous, where they took price to book back to the 1920s. But practitioners weren't really looking at the market this way. And so I thought, well, maybe I'm onto something here.

Christine Benz (7:48)

Well, that's what I wanted to ask about. Jim, it seems to me that you were a quant before quants were really a thing in terms of investing. Right. And so what were investors looking at mainly? Were they thinking about the story behind a company? What sorts of things were they analyzing and using to decide what would go into a portfolio?

Jim O'Shaughnessy (8:08)

Yeah, in that period, like late 1970s, early 1980s, there were not many quants and most people were basically still using brokers and whatnot on a stock by stock basis. They would say, you've got to buy GE and here's why. And it was always. That's very insightful on your part, Christine. It was always a story, always like, you know, new CEO or new product line or, you know, I remember talking or actually listening in to a broker giving my dad and uncle's recommendations, and literally you've nailed it. It was one story after another. And it was one story after another about the individual names And I always thought, well, okay, it would be great if, you know, IBM or GE did incredibly well in the portfolio. But shouldn't we be talking about the overall portfolio? And what does that snapshot look like? What defines the full portfolio that you're investing in as opposed to any individual name in it? And again, the broker was a bit like, what the heck is this kid doing on the call? Because it was. Was like, I just wanted to know about, you know, the overall portfolio. And so, yeah, it was stories for the most part. It was when the stories were particularly good, they were often backed by research that that broker's company had done on the individual company, but never kind of a holistic approach about the overall portfolio and simple things. Like, when I started o' Shaughnessy Capital Management, it was actually as a consultant to large pension plans because I'd shown my work to some of my colleagues. I was on the board of the St. Paul Chamber Orchestra, and I'd shown my work to a senior executive at Control Data, which is no more. But they were a conglomerate that had bought many, many different companies, and as a result, they had a slew of money managers for their defined benefit plan. That's something you don't hear very much about anymore. No, but so I said, you know, I could come in and do an analysis for you of the overall portfolio of each individual member. You know, this person says they're a growth manager. Are they really? This person says that they love small cap stocks, what's the median market capitalization of their portfolio, et cetera. And so I ended up building what were called at the time normal portfolios, as you know. And you guys killed it with the style box. I mean, most people don't understand how revolutionary that was, what you did, because prior to that, people, like, even when I went in to Control Data, they're like, so wait a minute, there's a difference between somebody who loves small cap growth versus large cap value? And I'm like, yeah, a very, very big difference. And so Morningstar really codified that, and I think that that really significantly helped not only individual investors, but institutional ones as well, because they weren't really thinking about stocks in that way anyway. The normal portfolio took that one step further. What we did was we would take the manager that we were analyzing, we would go historically and look at all of their portfolios, and we would build a factor profile for that manager. So, for example, if it's a small cap fund that loves growth, we would look at the median market cap, the projected growth rates, the previous growth rates, et cetera. And, and what you would see is if it was a really good manager, there were a lot of significant differences from just the Russell 2000, for example. And so we would then use those factors to create this normal portfolio that had very, very similar factors to the manager we were analyzing the net net of it was are they adding any significant value with all of their trading year in or day in, day out? And we got a much better look at how they were doing against on implementing that particular style of investing.

Ben Johnson (12:51)

Jim, I'm curious now that we're at this moment where we have these various frameworks, many of which that you alluded to, like simply something that seems commonplace but at some point in time was novel, like let's sort of companies based on their price to earnings ratios. I would argue many others might agree that we're at one of these moments in the market where thinking about traditional valuation measures almost seems quaint and a variety of different narratives are really ruling the day. I'm curious from your perspective, what you think of this ongoing tug of war between price and narrative where we sit today, what we see today, how much of it rhymes with what we've seen in the past and how much of it is just fundamentally different?

Jim O'Shaughnessy (13:42)

Yeah, that's the perennial question, Ben. I believe that price precedes narrative, not the other way around. That when stocks are doing particularly well or poorly, it builds the narrative after the fact rather than before. And at least historically, with all of the research that I have done and certainly confirmed by my own career, when we get into markets where narrative appears to be driving the entire thing, sort of valuations be damned, all of this, we don't need to worry about that. That's usually not a good sign for the next, call it three to five years in the market. A couple of examples, just to show you how old this is. Isaac Newton, of course, the famous physicist, lost a fortune in the South Sea Trading Company, which was the hottest stock of his lifetime. And it was completely driven by narrative and human behavior, Right? Everybody and their brothers and sisters was buying the South Sea Trading Company. There were ads for, you know, similar speculative companies that went so far as to say they would take ads in newspapers and say, we, you know, we are trying to fund an enterprise of great importance, which we will determine later and.

Ben Johnson (15:12)

Sounds like a smack.

Jim O'Shaughnessy (15:14)

It does indeed. What is old is new again, Ben. But so Newton got caught up in the hoopla and he went and bought a lot of the South Sea Trading Company and he made some money and then he decided, okay, I've got to get out. And he did. The lesser known story is that it was so intense, the narrative around the South Sea, that he just couldn't help himself. And he bought back in very close to the top and rode the crash all the way down. It caused him to say that he could measure the motion of heavenly bodies, but not the madness of men. And that's a really key statement in the way I look at markets. I think, look, markets as you both know, change millisecond to millisecond, but human nature barely budges millennia by millennia. So if you really want to do well in the stock market, I am of the opinion that the last sustainable edge is human nature arbitraging human nature. Because while we have all of these incidents historically and we start with Newton, but we can go up through the dot com, we can go to CDOs, we can go to any kind of frenzy that people get all wrapped up in. And the behaviors are remarkably the same. I've often said that the four horsemen of the investment apocalypse are fear, greed, hope and ignorance. And if you look at those four, only one, Ignorance is not an emotion. Fear, greed and hope have, you know, wiped out more portfolio value than any bear market.

Christine Benz (17:10)

So is part of the idea of being a quant that you can sort of take a dispassionate look at what's going on and make your decisions based on the data so you're not swept up in say, AI related mania? Is that a key crux of the thesis?

Jim O'Shaughnessy (17:26)

Yeah, absolutely. And I had an experience that really taught me that and it was a great lesson, even though at the time I was still a little upset by what happened. Going into the 1987 crash in October, I had been using a quantitative system that looked at valuations a variety of measures. And I'd figured out a way to sort of distill that into a series of numbers that directionally said whether the market was over or undervalued or fairly valued. Well, going into the crash, I had numbers that I had never seen and I did back tests on this particular strategy. And the numbers were essentially saying, this market is in the red zone, it is so overvalued. And so back then I was trading mostly in options. And so I had acquired the largest put position of my young lifetime on the oex, which kind of mimics the S and P. And I was biting my nails because they were closing in on expiration. I wasn't losing money, but I wasn't really making money that Good old time value of the option. And right before the actual crash, there was a very volatile day prior, and the market went down. I think it was 100 points. But that was a big percentage back then. And I got a bunch of calls from fellow investors, friends, brokers, et cetera. And they were like, man, you can get out of those options now. They're in the money, and you're making some money yourself. Sell, sell, sell. That was it. We're back to fair valuations, et cetera. And the numbers did not say that that was true. But I was so overwhelmed by all of the people that I admired and had been working with and their conviction that that was it, that was the market downturn everyone was kind of anticipating. And so I sold them all. I sold the biggest put position I'd ever had, basically a day before the crash. And I would have made considerably more money had I held them for that one extra day. But I'm a big journal keeper, so I'm lucky that I can literally go back and revisit what I wrote in 1987. And it was like, there was a very famous cartoon called Pogo. I remember it. Walt Kelly. Yeah, you've gotta be of a certain vintage to remember Pogo. But there was a classic one panel scene of Pogo in which he says, we have met the enemy and it is us. And that's what I wrote. Like, I've met the enemy and it's me. I let my emotions trump the numbers and I missed out on this big move. And really, it was that event that turned me into, I guess, what you'd call a pure quant.

Christine Benz (20:35)

Right. So when you think about the whole of your career, what factors do you think investors can kind of take to the bank in terms of how they might construct their portfolios, whether they're individual stock investors or using funds which do you think have some predictive power and could carry them forward to better results.

Jim O'Shaughnessy (20:56)

So my advice in this regard tends to be really boring because I think that the vast majority of investors would be well served to think of their future selves. We really tend to be hyperbolic discounters, and that really skews our ability to think about, let's say you're 45 or you're 50, right? And you want to retire from your job at the traditional age of 65, you've still got another 15 years. Right. And when I see it happen with young people, that really kills me, because young people are time billionaires. Right. And so the simplest advice, I think, is also the best and that is understand why you're investing in the first place. It's not to have a blast, it's not to have fun. Certainly there is an area for speculation if you have a very small amount of your account dedicated to that. But the best advice that I can give is have the patience to just understand that markets go up and markets go down. If you're saving for the long term, you, you should love bear markets because they allow you to add significantly more in terms of the number of shares, be it a fund or a stock that you can add to your portfolio if you have a long term perspective. Again, it sounds so simple and yet it is not easy because we're all buffeted by whatever's happening today, right? We read the headlines, we oh my goodness, this is going to be horrible or this is going to be great. So my advice is really, really simple. Have in your savings for your retirement or for whatever you're saving for your kids, education, et cetera, a very long term view. And be real, keep it simple, sweetheart. Like, if I was Talking to a 22 year old today and they were saying, hey, what should I buy here? I would say, you know, you're probably going to be best with a diversified kind of world equity portfolio. You might have some additional investments in bonds or whatnot. I'm not a huge bond fan though, so if you're young, I definitely would not load up on bonds. But again, simplicity wins the day. We are just bombarded by all the various. You were talking about narratives a moment ago. We are bombarded by all of the competing narratives, by everyone's opinion, by all of the various chatter about what markets are doing and why. And my friend Nick Magiulli wrote a book called Just Keep Buying and I teased him about the title. I'm like, that's very bold. But I kind of think he's right. If you're young and you look at the history of America, at least since the founding of the New York Stock Exchange under the buttonwood tree back in the late 1700s, US stock prices have been positive about 74% of the time in any given year. That's a really great base rate. And so let's put it this way, I would never short the United States of America. It comes back from every calamity, every potential misfiring. And yet when you look at history, that's exactly what happens, right? Even Eisenhower, when he was president, he had a heart attack and the market swooned because the President had a heart attack. And if you're able To I often say really successful investors unstick the themselves from time. They look at what has been, they look at what's going on now, what they could reasonably anticipate is a good bet on the future, right? And yet it's so hard to do. We become addicted to what's happening right this minute and most people don't understand. I mentioned human nature a moment ago that refocuses our brain to such an extent that it makes it really, really hard for us to imagine ourselves five or ten years from now. And we are only thinking about now. It's kind of like the fight or flight, right? And these are very real powerful emotions and unless you learn how to deal with them successfully, you're going to get sucked in and kind of be like me selling your puts the day before the biggest bear market in a long time.

Ben Johnson (25:56)

Jim, I wanted to back up for a second to the remark you made regarding bonds. It strikes me as somewhat contrarian, especially in this moment where at long last, after years of people making off the cuff jokes about return free risk in the context of many fixed income securities, risk free return and risk free return in some instances in real terms is back. And then I think in combination with that there's a real secular bid for bonds if you just look at where the most money is with most investors and where those investors are in their life cycle. So if you could unpack that a bit. Is there anything to like about bonds? And what specifically do you not like about bonds?

Jim O'Shaughnessy (26:41)

Sure, let's have some disclosures first. I am a real risk on kind of guy and when you look at the historical returns for bonds versus stocks versus other asset classes, the long term data is rather definitive. Now I don't universally hate bonds, so for example in the 80s my father was looking for a much more risk free type portfolio and I was living in Minnesota at the time and I was finding Minnesota revenue bonds. And for those who don't know the difference, those are bonds that are backed by not the full faith and credit of the municipality but by the revenue from the project that those municipal bonds are financing that were 30 year double digit coupons and non callable there. I love bonds Ben, but my basic feeling about bonds is certainly as you mentioned, I think the bond market is what, four or five times the size of the stock market. And in terms of liquidity and lack of volatility of course bonds can play a very key and important part in your portfolio. It's just if you're a long term investor, the results are rather definitive. There I think the 30 year treasury beat the S&P 500 over the prior 30 year period. Like four times from 1900 forward, 1944 and 1945, and then the Lollapalooza we had ending in 2009. Long term bonds actually outperformed over a 30 year period the S&P 500, but there are only four. All of the others, hundreds of those rolling 30 year periods, stocks did significantly better. So my approach is basically predicated on the idea what are you trying to do here? Are you trying to maximize your portfolio value for a terminal date? Then you're going to, depending of course on your age and your objectives, probably should be favoring stocks. If on the other hand you want to take that volatility off the table, then absolutely bonds have a place in your portfolio. I would suggest if you're doing it yourself, I would suggest using a laddered style which is buying varying expiration dates and then you can continually just roll that money forward on your ladder. But there's also a ton of great bond funds. If it were me, I'd probably be focusing on government bonds because again, if you're making the trade to reduce volatility and variability, that's what you're going to see there. But I would also caution that a lot of people think bond equals safe. And if you look at the historical inflation adjusted rates of return, even on US Treasuries and bonds, they've had some massive drawdowns. And so I think it's very important that people understand, yes, they're considerably less risky than stocks, but they're not riskless.

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Christine Benz (30:50)

Wanted to segue into a discussion about your current activities, Jim, but first I just wanted to assess or hear from you about where you are with respect to portfolio management today. So you handed the reins at O' Shaughnessy Asset Management to your son Patrick in 2018, and then you sold the firm to Franklin Templeton in 2021. So are you involved in managing portfolios today, whether for your family, yourself or anyone else?

Jim O'Shaughnessy (31:17)

Yes, we have a family office. O' Shaughnessy Family Partners And I am the managing member there. So the mix has changed a little bit. We still have quite a bit in public equities, but I outsource that. Even though we've sold osam, I outsource my public equities to. I mean, I pick the portfolio, but I let OSAM do all of the investing and trading primarily because I know those strategies pretty well, having come up with most of them. And we also have added a significant venture piece to our portfolio. I am concentrating mostly on pre seed and seed primarily because that's where I seem to have the most fun and impact. My son Patrick is running a venture firm called Positive Sum, which is more traditional in that it's doing a lot more Series A and Series B. And so I just outsource that version of venture capital to Patrick and I concentrate on the pre seed seed where, you know, wow, that's a crazy and great idea. Let's see if we can build a company out of it. But yes, I'm still very, very active in all of the investment side of o' Shaughnessy family Partners.

Ben Johnson (32:41)

Jim, I'm curious, in that sphere, you seed precede opportunities. What pieces of frameworks that you applied in public markets are applicable? What new, effectively muscle groups have you had to develop when you're looking at investment opportunities in that space where prior frameworks are maybe inapplicable or at a minimum, less useful?

Jim O'Shaughnessy (33:08)

Very incisive and intuitive posture, Ben. I've had to work on making those muscles much stronger because you are absolutely correct. I'm looking at companies that don't have histories that I can't analyze. And so what is applicable though, I think is the human psychology piece that I mentioned earlier, sort of the behavioral aspects of markets that since I did very deep dives on those during my public market only days, those are still really, really useful. And I'll give you a couple of examples. It's very difficult for me to have a conversation with a potential founder where they already have an answer to everything. I much prefer those who are like, wow, good question, haven't thought about that yet, but. And then, you know, they note it down and they're like, that's really worth thinking about. And deeply, what I found with judging potential founders and companies at those early, early stages is, you know, number one, if they think they already have all the answers, that generally leads to very bad things. I just had Ken Stanley on my podcast, the author of Greatness can't be Planned. And one of the things that he makes a very strong case for is that usually success comes through multiple iterations. And in many respects, sometimes you start with the original idea A, but the idea that you implement and find the product to market fit for is actually idea D or E. You have to have somebody who has the agility to understand that you don't know everything. You're going to learn a lot as you launch this company into the world. And so the agility of mind and of action married to the understanding that, hey, we're learning and we're going to lean into the things that we're learning that seem to be very, very important in this particular market and we're going to correct our behavior from what we came in with, our priors. So the manner of investigation and due diligence is significantly different than when you were a quant. I joked to some of my family that, gosh, this seems to be a lot harder than just looking at the numbers, but it's also a completely different aspect that I've really enjoyed making lots of mistakes in and learning from those mistakes. And yeah, they're completely different ways of looking at the world. Having said that, there definitely are some good quant markers and guess what? They come across as Valuation. Valuation. Valuation. If you're looking at a company that you think has just got a great future, right, you think it's, oh, they are going to nail it, but it's already priced to the stratosphere. We just pass. Even a great idea that is overvalued could be the best idea in the world. If you already in your initial fundraising have gotten it up to unicorn status, you probably built in a lot of the market that you have to then go and capture. And so putting the cart before the horse in valuation generally leads to not great things. Are there exceptions? Of course, there always are. But I don't think I'm smart enough to be able to identify those very rare exceptions. So valuation becomes very, very important. Auction markets, generally speaking, auction markets really engage the emotional side of our brain and we kind of have a thesis on why. But when you're in a market where everybody and their brother and sister is bidding generally, maybe sit that one out, because the short back to narratives, right, the narrative about that particular company or that particular innovation or product or service, if it's really finely tuned and everybody thinks it's going to be the next greatest, you know, it's going to be the next Nvidia, generally speaking, the odds suggest that they're wrong.

Christine Benz (37:56)

I'm curious, Jim, and I know you approach this on a company by company basis. But like over your career, analyzing these venture opportunities, where do valuations stand today on the, you know, spectrum from very cheap to eye wateringly expensive.

Jim O'Shaughnessy (38:16)

It's not a classic two tier market, but they're expensive right now. Christine, I've been trying to have constructive talks with young founders who really, really believe and of course being passionate about what you're building is a requirement, but they really believe that their little new company that doesn't have much market penetration, nevertheless that should be priced at 500 million post money. And it's funny because I haven't been terribly successful, let's put it that way, with younger founders who really want these outsized valuations. The market will take care of that though, as it usually does when people, even if they got a great idea, they also have to have the great entry price for the people who are going to back them. And if you are trying to price a great idea but with no execution behind it yet at $500 million, I'm going to say good luck and pass. So yes, today valuations even in the seed and pre seed stage are pretty rich. But again markets are self correcting and that will go away as well. Because what doesn't go away, what doesn't go away is the passion of those founders, right? They really, really the best founders. At least it's not about like oh I'm going to be so rich, like obviously that's an aspect of it. But the real ones, the ones that we've had great success with, they're not fascinated by that at all. They're fascinated about, oh, I've got a new book reading app that I think is demonstrably better than Goodreads and I love books and I put my heart and soul in this. I'm actually talking about one of our portfolio companies called Margins and the valuations will sort themselves out. So see passion for what's being created. See the founder and the founding team absolutely dedicating to delivering the very, very best version of what they're trying to build and not thinking about, no, I need this to be 100 or $500 million valuation. That's a much better way, at least historically for myself and our team. We've done far better with those types of founders and far less well with the ones that are richly valued. And every other venture firm also wants in. Generally speaking, we're willing to sit those out.

Ben Johnson (41:09)

Jim, I wanted to spend some time talking about your latest book. I think many of our listeners would probably be familiar with perhaps your most well known work. What works On Wall street earlier this year, you published Two Thoughts, a timeless collection of infinite wisdom. You managed to fit that infinite wisdom into 277 pages in print. So I think Mark Twain would be proud of that effort. What was the genesis for this book?

Jim O'Shaughnessy (41:41)

So I've always loved quotes. I've always collected them from when I was a teenager. Whenever I came across a quote that really resonated with me, I would write it down in one of my journals. And I think that great quotes can compress a lot of knowledge or wisdom into that quote. And so I had a friend over right before I started putting those up on social media, and he was going through one of my notebooks, which was mostly quotes, and he's like, you know, you should, like, do something with this. And I'm like, what? And he goes, just put them out there on social media. I think people will love it. And so I did. I just started. I started on Twitter, and then they made their way onto other platforms as well. And I think they worked because, you know, given the medium, social media, it's a fast medium, and just kind of two thoughts from a thinker I admire. Seemed like it was the product market fit going back to vc, and I was actually surprised by the number of people who either texted me, emailed me, DM'd me, et cetera, you know, kind of five, six months in. I do them every day, and they're like, I love this. I look forward to this. I love the fact that you do the newsletter that shows them all for the week. You really should do a book of these. That would be great. And so I'm like, you know what? That would be great. So obviously you caught the naming convention there. The first volume that we published, it was agonizing, actually, to go through, because obviously we have thousands and thousands of these quotes. But that itself also was fun and kind of a learning adventure as well, because other team members would opine on, like, whether we should put a particular author or thinker in or the way they interpret it, a particular quote. One of the things that I really loved was even though there they are, the words on the page, right? The interpretations of those quotes were really varied by the, you know, person, personality, circumstances with the person reading it. And so I basically thought, you know what? People really do seem to love this. Let's do it in book form. And I've been absolutely delighted with the response. I think that there's just something. I love Maxims too. And we don't have many Maxim writers anymore, like, they did historically and again, to me, it's kind of a compression algorithm where you're taking something that could be, you know, 50 pages or it could be a line. And that takes a tremendous amount of skill, in my opinion. One that I'm not terribly great at, honestly. But I just thought that would be a useful and fun book. And when I hear from readers, it's exactly the reaction I've gotten. I had a friend for lunch the other day, and he was saying, literally, I start my day with just randomly opening the book and reading the two pages I alight on. And he goes. And I love it. He goes. Because many times I'll use the quote later in the day because it's perfect for conversation I'm having. Or just as kind of a, hey, do you ever think about things this way?

Christine Benz (45:35)

It's also a physically very lovely book with beautiful sketches. Who did the sketches for you?

Jim O'Shaughnessy (45:41)

We have a relationship with a group called Otterpine, and they're artists at Otterpine did those. We had a lot of conversation about those as well, though. Should they be color? Should they be black and white? Should they, you know, and so they had very talented artists at Audipine, and so they showed us a variety. We saw them in color. We saw them by different artists that were on staff there, and the ones that ended up in the book were from one of their staff artists you mentioned. The book is beautiful. Thank you. I appreciate that. And that was really important to me. A lot of younger people aren't familiar with the idea that books used to be incredibly beautiful. And the Print on demand and all of that. The covers have become, in my opinion, not all of them, clearly, but many of them have a certain sameness to them, and I didn't want that for the book at all. And so we retained both outside designers, but the Audupine designers ended up winning. But we really took the COVID itself very seriously. But then also the quality of the book. We had the book printed in Italy on a beautiful paper stock. I think that especially for younger people, books, almost as artifacts, as just a beautiful thing to hold in your hand, is relatively unusual for them if they're used to buying things that are print on demand. And the response, especially from younger people, has really been extraordinary. It's been, you know, like, I'll get notes, I'll get other communications that, like, I love the quotes, but, oh, my goodness, this book is so beautiful, I just love holding it. And we were kind of aiming for that response.

Ben Johnson (47:45)

I love that, Jim. And as you're describing that, I'm Already, like, picking up on memories of the aroma of my local bookseller in my hometown in childhood. And, yeah, it's a visceral experience.

Jim O'Shaughnessy (47:58)

It really is. I spent a lot of time in libraries and in bookstores, and, yeah, I. Ben, exactly when I first opened the first box of them, that was the first thing I did, was smell. And it's just like, there's nothing quite like a new book. It's very different than a book that's been through many different hands. But, yeah, viscerally, I was like, you incredibly pleased.

Ben Johnson (48:28)

Jim. One of your other outlets where you're prolific is your Infinite Loops podcast. You've interviewed a whole range of different guests from different disciplines. I'm curious how you think about that outlet, kind of key themes or messages you look to convey and how that ultimately feeds into who you bring along for the ride, for these conversations that you're featuring there.

Jim O'Shaughnessy (48:56)

So, as you both know, my son Patrick is really the podcast king. And while I was still at osam, a young staff member named Jamie Catherwood kept bugging me. To be really brutally honest about it, he was like, you should have a podcast, too. And I'm like, no, no, no. That's Patrick's thing. I don't know. I don't want a podcast. And he's like, come on, come on. You could have great conversations. You love talking to interesting people. I'm like, I do. I, I. You're right. But I'm also like, maybe the world's laziest human being. And, like, it just seems like a lot of work. And so he just kept. He was persistent. He just kept coming back into my office saying, okay, how about I'll do all the research. You don't have to do anything. All you have to do is read the research. Or if you're already familiar with it, you know, all you got to do is show up, Jim. Oh, that's all you got to do. And I'm like, yeah, but who's going to book the guests? You know, what, the equipment? And he was like, I will take care of the equipment. I will book the guests. And so my final gambit with him was, well, I don't want it to be like a regular podcast. And he goes, what do you mean? And I said, well, I would rather it be like, the movie My Dinner with Andre. And he was like, I've never heard of that movie.

Christine Benz (50:24)

I love that movie.

Jim O'Shaughnessy (50:27)

I do, too. And it's Wallace Shawn, and it's two very bright people having a fascinating conversation about a variety of topics over a dinner. And I said, so that's what I want. And so he dutifully went and rented the movie, came back, and he goes, I can work with that. And so what I really am interested in there is the ideas and the people. I have been really, really lucky that I can usually get people really a lot smarter than me to come on and chat with me. And so that's the aspect of it that I really love doing. I also think that there are a lot of people that we've had as guests while they were still under the radar, and in a small way, we helped move them above the radar. And that's really what I enjoy. I enjoy listening to super smart people explain their view on things that where they have a lot of domain expertise. I don't always agree with them. So I'm not having just me too. Honestly, it's just a privilege for me to be able to talk with these incredibly bright people and get those ideas out there. I think another thing that is really part of my mission is we have become unnecessarily pessimistic in my view as a culture. And while I am not Panglossian in my optimism, I guess I would call myself a rational optimist. Meaning that yes, of course we will always continue to have problems, but as we advance, as we have better explanations, as we have better insights into the way the world and universe and everything else works, the problems that we end up having to grapple with become better problems. And so I do have a tendency to go toward the guest who is not on to tell me why the world is horrible and why we're never going to make it. And I just, I think that adding voices that are like, yeah, there are a lot of problems in the world, but look at all of these incredibly great things and all these interesting innovations. So that's kind of my mission there. Interesting conversations with people who are not, you know, sort of me too, and. Or just there to talk about what's wrong. It's really easy to talk about what's wrong. Right. You really don't have to invest much time or effort or thought because they sort of present themselves, they smack you in the face. It gets a lot harder to talk about what's right. And another example, there is so much young talent in the world today and this idea that, you know, oh, today's you. It's like the classic get off my lawn, right? I want to highlight the fact that we have incredible talent in the ranks of the young and we have incredible ideas across all age ranges. Let's highlight them, let's talk about them. Let's more importantly, have people hear them. Maybe they will think, wow, okay, so even though all this other stuff is rotten, this seems pretty good.

Christine Benz (54:12)

Jim. I wrote down. I can't remember if you wrote it in the book or somewhere else. You wrote, stasis is death, movement is life. And that seems to neatly summarize your ongoing quest for knowledge and kind of your approach to the world. Can you talk about keeping that fire alive and not just falling back on things you know or think you know? How do you keep yourself engaged in acquiring knowledge all the time?

Jim O'Shaughnessy (54:36)

Well, it's kind of. It's an obsession really, Christine. And I guess I'm just lucky that that obsession caught me. I just love learning about things. I also know how little I know.

Ben Johnson (54:53)

And.

Jim O'Shaughnessy (54:55)

It'S exhilarating to learn something new. That almost surprises you on many levels, right? A lot of people get caught up in their priors and their old mental models and way of looking at the. And that's where that line comes in. That's stasis to me. Right? And stasis is death, life is movement, life is change. And I don't think that that's a scary or bad thing. I think it's a marvelous thing. Now, the change in movement is not always great. Again, not Panglossian. But if you continually sort of test your own beliefs, test your own priors, you often will come up with all the areas where what you used to believe is, you know, you learn wrong. It's like one of the things that I love about the large language models out there is they let you steel man your own arguments, but also the arguments of the opposition. And I've gotten in the habit of doing that on virtually everything. I take a position that I might believe in. If we kept it to the market, it would be. I believe that when narrative leads price, it generally leads to bad things. Price, narrative should follow price, et cetera. And then you make it a more fulsome statement to the large language model. And then you say, steel man, the argument against this point of view. And guess what? A lot of stuff you really didn't think about comes up and you gotta think, huh, I never thought about that. That's actually a pretty good argument. And conversely, like, if I'm not drawn or not convinced by an argument in any area of thought, I will always have the large language model make a steel man for that argument. Because what I find is there are a lot of things that, you know, confirmation bias if you want to know the one bias that rules them all, I think it is confirmation bias. We tend to say we're looking for evidence. What we're looking for is confirmation of something we already believe. And not all of us, of course, but many, many people. And so I always try to game against my own confirmation bias because I realize, you know, I'm running human OS too. And yeah, I am not the only exception. So I'm probably just as guilty of confirmation bias and all those other pitfalls that one has when trying to upgrade or update their thinking process or their mental models. And so it's sort of a self feeding loop with me in terms of, I think it was Dorothy Parker who said curiosity is the solution to boredom. There is no solution to curiosity because once you get down, once you're curious. And another one which was a little pithier was curiosity is a shit starter. And it is. And I kind of love that. And I kind of love the idea of just like learning something new. It's just fun. And it might not remain forever, but yeah, to me it's the only way to stay out of stasis is, you know, life is a verb, it's not a noun. And if you really want to enjoy and have that great life, that's the direction you've got to go. You don't want to become. I'm a big fan of daoism and there's a great metaphor in that about stiffness, stasis, et cetera. And they use tree branches to explain it. They say a very, very old tree is brittle and when the snow piles up on it, the branch often breaks and falls dead to the ground. Contrast that with saplings and young trees. When the snow lands on them, they bend and then the snow goes off and they snap back. And so I think you can learn a lot from that attitude. If you are stiff of opinion, you often will be in the wrong. And the other thing that I always try to emphasize for my, again, for myself, because I fall into patterns just like anyone else and that is, you know, I think it was Edison who said, we don't know 1/100th about anything, right? Like we have so much to learn and that is what animates me and kind of keeps me going.

Christine Benz (60:05)

Well, that seems like a beautiful note to end on, Jim. Ben and I so appreciated you taking the time to be with us. This has been a wonderful conversation. Thank you so much.

Jim O'Shaughnessy (60:14)

Well, thank you very much for having me on. I really enjoyed it.

Ben Johnson (60:18)

Thank you, Jim.

Christine Benz (60:25)

Thank you for joining us. On the long view. If you could please take a moment to subscribe to and rate the podcast on Apple, Spotify or wherever you get your podcasts. You can follow me on social Media, hristinebenz on LinkedIn or hristinebenz on X&@BenJohnson.

Ben Johnson (60:45)

CFA on LinkedIn or at mstarbenjohnsonx.

Christine Benz (60:50)

George Cassidy is our engineer for the podcast. Jessica Bebel produces the show Notes each week and Jennifer Garrett copy edits our transcripts. Finally, we'd love to get your feedback. If you have a comment or a guest idea, please email us@thelongvieworningstar.com until next time. Thanks for joining us.

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