The Big Picture

10 Weekend Reads

The weekend is here! Pour yourself a mug of Colombia Tolima Los Brasiles Peaberry Organic coffee, grab a seat outside, and get ready for our longer-form weekend reads:

Tim Cook Wants Apple to Literally Save Your Life: Much as the CEO seems awestruck by AI and his just-released Apple Intelligence, he’s more convinced that the tech giant’s health apps will define the company’s legacy. (Wired)

The AI We Deserve:: Critiques of artificial intelligence abound. Where’s the utopian vision for what it could be? (Boston Review) see also The world of tomorrow: When the future arrived, it felt… ordinary. What happened to the glamour of tomorrow? (Works in Progress)

Asleep at the Wheel in the Headlight Brightness Wars: The crusade against bright headlights has picked up speed in recent years, in large part due to a couple of Reddit nerds. Could they know what’s best for the auto industry better than the auto industry itself? (The Ringer)

The New Business of Breakups: After getting dumped (by text), a writer investigates the feverish boom in heartbreak apps, breakup coaches, and get-over-him getaways. (New Yorker)

The Great Grocery Squeeze: How a federal policy change in the 1980s created the modern food desert. (The Atlantic)

He Was One of New York’s Busiest Shoplifters. His Mother Was a Cop. Drug addiction fueled David Andino’s need to steal. Every day, he hit the same Target in Manhattan. His mother, a retired police officer, hadn’t seen him in years. (New York Times)

Why did Silicon Valley turn right? The “pounded progressive ally” thesis has limits. (Programmable Mutter)

Who can claim Aristotle? The endless battle over his legacy testifies to his great authority – and the power of his thought to make the world better. (Aeon)

The Deeper Reasons Democrats Lost: It wasn’t just that Trump got more votes. It wasn’t just that Harris had lower turnout. A deep dive into the psychological, existential, and systemic reasons Harris and Democrats didn’t win in 2024. (Elad Nehorai’s Newsletter) see also Why They Lost: The Harris-campaign leadership believes that the Democrats narrowed the gap on Trump that Biden left—but not by enough. (The Atlantic)

How B-mesons are threatening to break the Standard Model: We have very specific predictions for how particles ought to decay. When we look at B-mesons all together, something vital doesn’t add up. (Big Think)

Be sure to check out our Masters in Business this week with David Roux, Executive Chairman of BayPine, a private equity firm focused on digital transformation. Previously he co-founded Silver Lake Partners and served as the chairman and co-CEO. David has also held leadership positions at Oracle, Central Point and Lotus Development

 

A $105 Trillion Inheritance Windfall Is On the Way for US Heirs

Source: Bloomberg

 

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MiB: David Roux, BayPine, Silver Lake Partners

 

 

This week, we speak with David Roux, Executive Chairman of BayPine, a private equity firm focused on digital transformation. Previously he co-founded Silver Lake Partners and served as the chairman and co-CEO. David has also held leadership positions at Oracle, Central Point and Lotus Development. He currently serves on the boards of Bristol Seafoods and The Institute for Health Metrics and Evaluation at the University of Washington.

Roux credits a lot of his success to being an operator before he was an investor. He worked with Larry Ellison during his days at Lotus, Michael Dell of Dell, as well as other technology legends including his partners at Silver Lake: Glenn Hutchins, Jim Davidson, and Roger McNamee.

We discuss the tech start-up landscape, AI’s future development, and sectors of opportunity for “digital transformation capital.”

A list of his favorite books is here; A transcript of our conversation is available here Tuesday.

You can stream and download our full conversation, including any podcast extras, on Apple Podcasts, SpotifyYouTube, and Bloomberg. All of our earlier podcasts on your favorite pod hosts can be found here.

Be sure to check out our Masters in Business next week with Tony Kim, Head of Technology Investing, Fundamental Active Equity at Blackrock. Kim’s funds have beaten their benchmark over the past decade; his new AI-focused fund, the iShares A.I. Innovation and Tech Active ETF, just began trading.

 

 

Favorite Books

 

 

 

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Remembering Art Cashin

 

We lost one of the greats this week: Art Cashin passed away Sunday at the age of 83.

CNBC’s Bob Pisani did a wonderful remembrance of Art: “In the intensely competitive and often vicious world of stock market commentary, Cashin was that rarest of creatures: a man respected by all, bulls and bears, liberals and conservatives alike.”

It made me want to share a few of my favorite Art Cashin stories…

I first met Art when I was a newbie strategist in the 2000s. He had been on the NYSE floor for longer than I had been alive. He knew things, had seen things, and, during his tenure, was able to apply those experiences to markets. His insights were unique, and I always received them with gratitude. He was always very generous with me, allowing many of his unique works to be republished on this blog (despite the usual concerns from compliance).

My buddy Mark Lehman had been at UBS in Switzerland for nearly his entire career. He had been part of the UBS Wednesday calls with Art since 1997 (when he transferred to the NY office, he was still technically a Geneva employee.) Mark introduced me to Art sometime in the mid-2000s, pre-GFC. He recalls, “There always was a Dewar’s and ice ready for when Arthur arrived at Bobby Vans.”

At the time, I had been writing about subprime mortgages, derivatives, and other elements of risk that had been widely ignored by The Street. Art wanted his crew to at least consider these risks, which so many were overlooking. He invited me to present to that audience on his morning call to the firm—around 2008(?). The fact that Cashin had brought me on gave me needed credibility, and a very respectful audience peppered me with questions.

I would occasionally sneak down to the Bobby Vans across from the NYSE after the close, where the FOF crew – Friends of Fermentation – perfected the art of marinating ice cubes. Any chance you could get to spend time with him was always well spent.

He had me back to UBS discuss Bailout Nation (was it in ‘09 or ‘10?). He generously introduced me to that crew, reminding them of my prior visit. A few years later, he was the keynote Fireside chat at the Big Picture conference.

Cashin announced he would be speaking at the TBP conference with his usual understated humility: “He invited me to end the conference with a somewhat informal fireside chat—just a few anecdotes from 50 years in the game. I hope they frisk the audience for spoiled fruit or hard rolls. It should be fun—for me at least.”

Never one to stand between a crowd and Happy Hour, he began the final session of the day by saying, “The New York State Liquor Authority and the New York Bartenders Association have asked me to be brief.”

A few other stories stand out from that event:

Art the Musician: “It was the beginning of the age of folk music, I figure if I’m going to make $39 a week [at the NYSE] I can do better than this… so I put together a group. I talked my way into an audition… with the Chairman of ABC/Paramount Records. We performed some songs and the execs said that if the guy they had just seen didn’t work out, they would sign us to a record deal. The guy they had just seen, however, was Ray Charles. So I went back to Wall Street,” Cashin told the laughing crowd.

Price discovery: Louis Tiffany knew JP Morgan loved diamond stick pens. He delivered one to JPM with a note: “The pen is $5,000. If you choose to accept it, you can send your man over to my office with the $5,000; if you choose not to, you can send your man over with the pen.”

The next day, JPM’s man went to Tiffany with a note and the pen box. The note said, “$5,000 was too much; enclosed is a check for $4,000.” JPM’s note said that if Tiffany didn’t want the deal, he could send back the $4,000 check and keep the pen.

Tiffany knew he had the right price for the pen, so he decided to send the check back. When he opened the pen box, though, he didn’t find the pen! Instead, there was a check for $5,000 with a note from JPM: “Just checking the price.”

End of the World: “Most of what I learned came from sitting in saloons that had encyclopedias behind the bar – usually to settle bets. The things I learned in the saloons were not the same things you learn in places like the Sloan School of Management – usually they were better.

For example, there was the lesson I learned during the Cuban Missile Crisis. At the time I was studying with “Professor Jack” under a Moosehead, in a saloon called “Eberlin’s” down the block from the exchange. The tuition was paid in scotch “old fashions.” Classes lasted until either you ran out of money to buy drinks or Jack ran out of the ability to stand. Jack was actually a 62 year-old trader in silver stocks but he had more in his head than is in most university libraries.

Anyway, it was the Cuban Missile Crisis and there were rumors that Russia had launched rockets and the Dow took a dive near the bell. I cleaned up my desk and raced to the Moosehead, as animated as only an 18 year-old can be. Jack was already there and as I burst through the door, I shouted: “Jack! Jack, there was a strong rumor that the missiles were flying and I tried to sell the market but failed.”

Jack said “Calm down kid! First buy me a drink and then sit down and listen to me.” I ordered the drink and meekly sat down.

Jack said – “Look kid, if you hear the missiles are flying, you buy them. You don’t sell them.”

“You buy them?” I said, somewhat puzzled.

“Sure you buy them!” said Jack. “Cause if you’re wrong, the trade will never clear. We’ll all be dead.”

That’s a lesson you won’t learn in the Wharton School.”

 

Art was one of a kind. He will be deeply missed.

 

Sources:
Art Cashin, New York Stock Exchange fixture for decades, dies at age 83
Bob Pisani
CNBC, Dec 2 2024

Cashin on the Cuban Missile Crisis / North Korea (August 14, 2017)

The World Is Ending? Invest as If It Won’t.
Bloomberg, October 9, 2015

Art Cashin’s Tis the day before New Year’s (December 31, 2014)

Art Cashin Just Gave A Hilarious Wall Street History Lesson Going Back To The 1950s
by Linette Lopez
Business Inside, Oct 8, 2013

TBP 2013: Fireside Chat with Trading Legend Art Cashin (October 3, 2013)

Art Cashin: Black Monday, An Unforgettable Single Day (October 19, 2012)

 

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At the Money: Meb Faber on Tax Aware ETFs

 

 

At the Money: Deferring Capital Gains on Appreciated Equity. (December 4, 2024)

Are you holding large, concentrated equity positions that have accrued big gains? Would you like to diversify but also defer paying big capital gains taxes? Meb Faber, founder and chief investment officer of Cambria Investments, speaks about a new ETF that may be the solution to the challenge of concentrated equity positions.

Full transcript below.

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About this week’s guest:

Meb Faber is co-Founder and CIO at Cambria Investment Management, as well as research firm Idea Farm.

For more info, see:

Personal site

Cambria and The Idea Farm

Masters in Business

LinkedIn

Twitter

~~~

 

Find all of the previous At the Money episodes here, and in the MiB feed on Apple Podcasts, YouTube, Spotify, and Bloomberg. And find the entire musical playlist of At the Money on Spotify

 

 

 

 

Barry Ritholtz: Some investors have big, concentrated equity positions that have accrued big gains. Maybe it’s due to employee stock option plans. Perhaps they have some founder stock from a startup. Maybe there was an IPO or a takeover.

But suddenly they find themselves sitting on an uncomfortably large percentage of their portfolio in a single name. The challenge for investors is how can they diversify when selling shares leads to owing big capital gains? What’s an investor to do?

I’m Barry Ritholtz and on today’s edition of at the money we’re going to discuss how to manage concentrated equity positions with an eye towards diversification and managing big capital gains taxes.

To help us unpack all of this and what it means for your portfolio Let’s bring in Meb Faber He’s the founder and chief investment officer of Cambria. The fund runs 15 ETFs and manages nearly 3 billion in assets. Their new ETF is coming out in December 2024: The Cambria TaxAware ETF – symbol TAX – is a solution to address just these challenges of concentrated positions.

So Meb, let’s just start with a basic question. Tell us what a concentrated position is.

Meb Faber: Well, it’s a romping, stomping bull market. I know most investors don’t feel like it, but a lot of people have had stocks go up a lot. Listeners think to  2009, the bottom, at the bottom, um, stocks have almost been a 10 bagger. And that’s the broad market. So individual stocks like NVIDIA or Apple or others probably have gone up much more.

And the way math works, you end up with a stock that goes up a bunch. It gets to be a bigger, bigger percentage of your portfolio. And that becomes a problem because you’re no longer diversified. But so many investors, their response to that is, I can’t sell it because Uncle Sam is going to kill me, the IRS is going to kill me.

Warren Buffett, you know, talks about this all the time on concentrated positions, um, and it becomes a problem. You get lopsided in your portfolio, and then many investors simply feel stuck.

Barry Ritholtz: So let’s, let’s talk a little bit about what the historical solutions have been. First, you could pay for a collar that sort of locks your stock price in. It doesn’t mean you’re not gonna pay capital gains tax. It just tells you if this stock collapses, well, the expensive put you bought will cover it, but you’re still going to end up owing capital gains taxes.

Or some people write covered calls as a way to offset some of, uh, that risk. You still have the risk that the stock could drop, um, or you have the risk the stock could get called away if it runs up and you’re paying the gains either way. None of these solutions are optimal. Tell us a little bit about the thinking behind the tax aware ETF.

Meb Faber: If you go back almost a hundred years and talk to any real estate investor, One of the ways they’ve built generational wealth is the famous 1031 exchange where you buy a building, you buy a hotel, and you’re able to sell it, swap it for a new property, and that is not a taxable transaction. Amazing, right?

Now in stocks, there’s been something not too dissimilar called the exchange fund, been around really, since the 1970s Eaton Vance, Goldman Sachs, Merrill Lynch has been putting out a lot of these. The problem with those, you got to be accredited or qualified (that means rich) You got to hold it for seven years and usually they’re just loaded with fees. They’re set up fees They’re usually gonna charge you a percent and half a year and you end up with a portfolio of just whatever people have contributed.

So it’s still problematic not a great solution. And there’s another Acronym, another term, 351, which has been in the tax code for almost a hundred years, but really hasn’t seen a lot of development until the last ten years, and then increasingly so with the ETF rule.

And really this concept has been a lot of prior art. There’s been over a hundred of these. First one maybe about a decade ago, but you’ve really seen it with mutual fund ETF conversions, separate account ETF conversions, and what we’re announcing is an open enrollment. Seeding of an ETF with this 351 conversion.

Barry Ritholtz: Let’s discuss how this works. I’m sitting on a load of Nvidia or Microsoft or some other highly appreciated stock, and I want to get diversified rather than sell and pay the 23 percent long-term capital gains tax. I could tender these shares to Cambria and they will use it in part of a broader ETF.

So I’m not selling it and I’m getting diversification without paying the tax. Explain how that works.

Meb Faber: Let’s say Barry’s got 10 million NVIDIA. You can’t just chuck all this NVIDIA into the fund and see the ETF. What happens is there’s two main rules to qualify. The first is no position can be above 25% of your portfolio.

Second is anything that’s over 5% has to be less than 50%. So you could put in your Nvidia, your Apple, but really you probably gotta have a somewhat diversified portfolio. Let’s say you could do 11 stocks, maybe. What’s nice is ETFs are look through, or pass through, so you could contribute  SPY,  or another ETF, the Q’s, 100 percent of that, because it’s a look through into the underlying companies.

So the concept that we’ve come to put together is we’re going to gather up all these investors, so individuals, financial advisors, who have clients with highly appreciated stock portfolios, cobble them all together. Put them into this seed up to the new ETF and after the ETF launches, you then have that ETF running it’s actually the first of three funds and it’s going to be sort of a consistent timeline of open enrollment.

You have to contribute to get the tax benefits, when the fund launches, uh, and then you get an ETF in return and the benefit is a tax deferral. It’s not a trans, uh, taxable transaction  from seeding the fund to getting the ETF in return.

Barry Ritholtz: To clarify this, you’re not escaping the taxes. You’re just not paying them until you sell that ETF. So your cost basis, all those other things. Just get transferred to the ETF and on a dollar for dollar basis. Is that is that accurate?

Meb Faber: Yeah. And it’s clear that the ETF structure up and running So even if you just go buy an ETF is a vastly superior structure than a mutual fund Merrill this summer It was saying that just the structure alone in a taxable account is probably a one percentage point advantage in an equity fund, uh, because you’re not paying consistent capital gains.

SPY hasn’t paid a capital gain since it’s launched in the 1990s. And on average, the average ETF won’t be paying any capital gains because of that in-kind creation/redemption mechanism.

So this combines the best features of, Hey, seeding a fund tax efficiently and then running it tax efficiently as well.

Barry Ritholtz: So does it matter if I’m tendering to you? A large cap growth stock like NVIDIA or a small cap biotech or a mid-cap retailer. Are you thinking about putting together different types of funds, different types of sectors for this?

Meb Faber: Yeah, so the first fund is also a unique fund, and it’s a U. S. stock fund. And we did a paper about a decade ago. I don’t think anyone read it, but it was about tax optimization with the ETF structure.

Academic literature. There’s actually not that much that targets tax optimization that acknowledges the ETF structure. Most of it just assumes you’re in a separate account. And so the ETF structure allows you to do certain things.

And so this fund will actually target us stocks that are value or quality stocks, but that do not pay high dividends and said differently We want the dividend yield on this fund to be as close or at zero Because if you’re a taxable investor in my home state of California your home state NY, chances are if you’re taxable, you don’t want 4, 6, 8, 10% dividend yields You have to pay those every year.

So ideally being able to defer the dividend turn those into capital gains and defer them is also a huge benefit. So that’s the first one us stock fund  Second fund will be a diversified ETFs portfolio third fund will be a global stock fund and then 4, 5, 6 will be whatever barrier requests.

Barry Ritholtz: So when you say diversified ETF, instead of tending you my NVIDIA, I can tender my Q’s, and what I get back in exchange will be a fund of ETFs, an ETF of ETFs?

Yeah, so the cool part is this has been done, you know, we’re partnering with the good crew at ETF Architect, it’s a bunch of Marines, they have that military efficiency. The last one of these they did for an asset manager had 5, 000 accounts. So incredible ability to herd cats, put all this together.

And so yes, for the first fund, ideally it’s, it’s a mid/large cap U. S. stocks. But you could do ETFs because they’re pass through. So if you contribute SPY, that’s fine, because it owns the underlying securities. If you contribute the Q’s, I know you still got a bunch of GameStop, , you could contribute that, right?

But on the second fund, it’ll be more of a global portfolio. You can’t contribute private assets, you can’t contribute Your Doge coin, you can’t contribute futures, options, things like that. But in general, stocks, ETFs are A-OK.

Barry Ritholtz: So let’s talk a little bit about the management of the actual ETF when it’s US stocks. How do you figure out what of the tendered stocks you want to keep and what you want to get rid of? It’s not just going to be random, what everybody happens to present to you. You’re going to organize this around some key investing principles, I assume.

Meb Faber: Everything we do at Cambria is systematic rules-based. We like to call it in house indexing. And so, this fund will be a quarterly rebalance, 100 stocks. And again, it’s targeting, value quality companies that pay low to no dividend. And you’re going to see a big sea change in the next three to five years of asset managers and RIAs optimizing taxable tax, and then non-taxable retirement accounts for various type of investments.

Look, they’ve always done this, we’ve always done this, but even to a higher extreme. We’ve done the math on some of these high-yield portfolios and taxable accounts. And if you can invest in something like a high-dividend yield fund or a REIT strategy, something with a lot of yield and a taxable count, but not pay any yield, you can outperform on an after-tax basis by multiple percentage points. In some cases it’s as high as three. And so with all this focus on expense ratio, with all this focus on that, that just headline, what is the cost of my fund? Most people ignore taxes, which can be order of magnitude bigger than a decision to pay something like an expense ratio.

So this fund targeting no-to-low yielding stocks, maybe not the most marketable idea on the planet, but something that on an after tax basis makes a lot of sense.

Barry Ritholtz: And so when someone tenders either an ETF or stocks to you, they may or may not end up in the final ETF. You have the ability to do, in kind exchange, so if you decide to sell it and replace it with something else, there are no taxes to either the person that contributed that or the ETF, you’re just swapping Microsoft for Amazon, whatever it happens to be, that’s also a tax-free transaction.

Meb Faber: And this is why so many mutual funds have converted to ETFs. So there was a hundred billion of conversions last year. The most famous probably is DFA. They did about 50 billion of mutual fund conversions because mutual funds, if you have turnover, you’re going to have to pay out those capital gains. And so every year about. the end of the year, you get these notices: Here’s my expected capital gains in this mutual fund. And then you look over at the ETF landscape and you see across the board, almost always zero.

This is why we say to borrow a phrase from Mark Andreessen, ETFs are eating the asset management industry. It’s simply a better structure. Because of this creation, redemption mechanism, these funds can be managed and run tax efficiently. with no capital gains, , distributions.

Barry Ritholtz: Yeah, our preference in the office is the 401Ks and 403Bs. If they want to own mutual funds, they’re welcome, but the taxable account, the preference, anytime there’s a choice, we always pick the ETF over the mutual fund. Those phantom gains are pretty amazing.

One of the things I’m aware of is that accredited investors, wealthy investors, have been able to do this with separately managed accounts, where they’re essentially exchanging highly appreciated stock for a broader diversified portfolio without incurring capital gains tax.

How are they able to do that all these years? I know that this is not very uncommon, but it’s taken place for quite a while.

Meb Faber: The main tool is the exchange fund, which has really been around since the 1970s. Eaton Vance, Goldman Sachs, Merrill Lynch, have been doing this for their accredited and qualified clients.

You got a hundred million of Tesla. You can submit it to this fund. You get a hundred of your buddies to submit their stocks. You end up a portfolio of what everyone submitted. But the rules are you have to hold it for seven years. You end up with just whatever these people have contributed. Usually it reflects the S&P or the, the QQQs or something like that.

But the biggest problem, and across the board, there are massive fees. There’s fees to set up the fund. There’s usually the management fee is a 1.5% or 2% per year on average. And then at the end of it, you get distributed those stocks. So not the most ideal situation may be better than sitting on a concentrated portfolio, but the exchange fund has, has been around for a long time for these accredited qualified investors. And we’re trying to bring this to the masses and make it hopefully available for anyone.

Barry Ritholtz: So last question. It’s a fascinating idea. I know your colleagues over at ETF Architect, Wes Gray and others. How on earth did you guys come up with this?

Meb Faber: So, Wes works with a lawyer named Bob Elwood. We did a podcast with Wes and Bob in February this year that did a deep dive on 351 transactions.

Because, like yourself, I wasn’t that deeply knowledgeable about this phrase. I’d never really heard it before. But it turns out he did the first one a decade ago. And he’s done about a hundred since. I was chatting with folks at Nasdaq. They said there’s been multiple hundreds of these. But usually it’s a closed door, or, hey, I have a fund, or I have a couple counts here.

It’s going to be my clients. Our innovation that I said to Wes, I said, Wes. Why can’t we do this? Why can’t we open this up, open enrollment to everyone to contribute? And he says, I think we can, man. But again, you need that military efficiency of all these Marines at ETF Architect to be able to cobble together thousands of accounts and keep this available to everyone, which should be the first of many funds.

Barry Ritholtz: So to wrap up investors with concentrated equity positions that have appreciated a great deal should consider a form of. diversification that doesn’t force them into Uncle Sam’s arms. That’s any form of 351 exchange. So perhaps the Cambria TaxAware ETF, ticker TAX, might be a solution to address the challenge of your concentrated position.

I’m Barry Ritholtz and this is Bloomberg’s At The Money.

 

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Hoover Withdraws Discredited Article

 

You may have missed this little brouhaha over the Thanksgiving weekend. We posted an analysis of a deeply flawed (dare I say fabricated?) data analysis from the Hoover Institution.

Dated August 7th, it seemed to have been overlooked during the Summer; it went viral recently.

Something about it seemed off — California’s economy is fairly robust, the largest in the country (If it were a standalone nation, it would be a top 5 economy). How could they be lagging national job creation so much? A little digging by @TBPInvictus here (he does amazing work) led to some very obvious analytical errors.

Not that these mistakes stopped many politicos and even journalists from blindly repeating the mistake. “Rip & Read” journalism still lives.

Michael Hiltzik of the L.A. Times did a very thorough follow-up. Hoover has retracted the published article. Its author, Lee Ohanian, deleted his Twitter account. This is the second such time a basic ECON101 error appeared from this author and this source. (We may have to dive deeper into the archive to see what else was wrong).

Journalists are advised to stop parroting hired guns for the Fast Food industry or other partisan players.

 

 

Previously:
Never Mix Payroll and Household Survey Data (November 29, 2024)

Misunderstanding Seasonal Adjustments (June 10, 2024)

 

Sources:
The Hoover Institution says all recent California job growth has been in government jobs. That’s completely wrong.
By Michael Hiltzik
La Times,  Dec. 3, 2024

California’s Businesses Stop Hiring
by Lee Ohanian
Hoover, August 7, 2024

 

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Transcript: Michael Morris on Tribalism

 

 

The transcript from this week’s, MiB: Michael Morris on Tribalism, is below.

You can stream and download our full conversation, including any podcast extras, on Apple Podcasts, Spotify, YouTube, and Bloomberg. All of our earlier podcasts on your favorite pod hosts can be found here.

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This is Masters in business with Barry Ritholtz on Bloomberg Radio.

Barry Ritholtz:  This week on the podcast, I have another extra special guest. Professor Michael Morris is a fascinating instructor of social psychology and the way tribalism affects us and the way we affect tribes. His book Tribal, how the Cultural Instincts That Divide Us Can Help Bring Us Together is really a fascinating discussion of various ways that tribes are not etched in stone, they’re not part of our DNA tribes vary from culture to culture, from company to company, and that using tribes can be a very effective way to turn a company around that’s struggling to change a country that’s facing all sorts of challenges and essentially to become the best organization we can be. Full disclosure, the professor has consulted for Bloomberg lp, that’s the parent company of Bloomberg Radio, where he led classes teaching corporate culture and tribalism. I, I thought the book was really interesting and I found our conversation to be absolutely fascinating and I think you will also, with no further ado, my conversation with Professor Michael Morris, author of Tribal.

Michael Morris: Thank you so much for having me here.

Barry Ritholtz:  Well, thanks for coming. Let’s start out with your background, undergraduate cognitive science and English literature at Brown, and then a PhD in psychology at the University of Michigan. Go blue. What was the original career plan? Well,

Michael Morris: The original career plan was I wanted to stay in school for a little while, right. I went to do a PhD. I had actually gone to four different, three different universities in my four years as an undergraduate. And so I, my feet had been moving and I thought I could benefit from going to graduate school. And I chose something sort of in the middle of the two topics that I studied as an undergraduate. You know, cognitive science is a computer science and sort of Noam Chomsky style linguistics. It’s sort of a more mathy formal approach to the mind. And then comparative literature is obviously all about tradition and the collective, the collective representations that shape the discourse in, in a, in a community over over the centuries. And so I think it was kind of natural for me to be interested in how the received culture shapes the, the thought processes that a group of people have.

And I had grown up, you know, around people from different parts of the world and didn’t seem to me like everybody thought the same way that this, everybody didn’t seem to have the same common sense. So, so I, I started working with people who were rebuilding a field called cultural psychology, which had had existed briefly in Moscow in the twenties, but then kind of got shot down by Stalin. And, you know, it, it resurfaced in the mid nineties as people were trying to understand the rise of the four Tigers and China and Japan. And how was it that you could have multiple modernities, you know, not everyone was becoming Western. And that’s, that’s sort of the time and place in which my career started.

Barry Ritholtz: It sounds like, based on exactly how you’re describing this, it was almost inevitable that you would end up focusing on psychology tribes and management. Tell us a little bit about, you know, how you came to focus on, on this area.

Michael Morris: I started doing work that you can think of as sort of east west comparisons. You know, often it was comparing college students in China to college students in the US or bank employees in Hong Kong to bank employees in New York. When I was doing that, it was considered to be sort of fringe, fringe research in psychology because psychologists at the time like to think of themselves as natural scientists, you know, part of the natural sciences. And they, they thought that most of the biases they observed were, you know, rooted in, in a brain structure in, in one way or another. And they were part of universal human nature. And so what I was doing was a little bit considered to be critical of that. But at the same time, the business schools of the world, at least the top business schools of the world, were becoming very, very interested in cultural differences and in particular interested in research on cultural differences that was somewhat objective, you know, that used, you know, precise measurements rather than anthropological field work, which has a more subjective feeling, although it, it’s valuable in many ways to the, to the economists, you know, running the top business schools, it felt a little vague and impressionistic.

And so I was running experiments and precise surveys comparing, you know, professionals and, and students in these different parts of the world and observing regular differences in some of the cognitive biases. And that led three of the top business schools in the world to all make me job offers. And so I had not foreseen that this research would carry me into the world of business schools. You know, brown is not a place that has a business school. You don’t, you don’t have much exposure to it. It seemed like the universe was telling me that what I was doing was of great interest to people in business school. So my career turned a corner at that point. And then I started at Stanford Business School at age 26, you know, before I’d even finished my dissertation. And it was a learning experience, you know, I wasn’t the, I wasn’t the greatest teacher in my first couple years, but you learn, you know, you learn from teaching.

And then I did well there and got promoted early there and then decided to come back to New York where I, I grew up in the New York area and that brought me to Columbia. I came back to Columbia in 2001. My first day of teaching at Columbia University was actually nine 11. Oh, geez. So that was an, that was an interesting introduction. But, you know, I’ve enjoyed living and working in New York quite a lot. I never thought I would still be living here because I had been in a pattern of moving every five years, you know? Right. But it’s an easy solution to life. I take a lot of sabbatical years in China, Singapore, Hong Kong, so I, I sustain deep collaborations and laboratories there as well as in some other parts of the world, like India and sometimes in Europe.

Barry Ritholtz: So you are not the first person, both academic and, and people working in finance who have said my original research was thought of as fringe 20 years ago, and then suddenly not, not fringe. So it, it just goes to show you that if you’re outside of the mainstream, outside of the consensus, that’s where, you know, all of the undiscovered veins of gold are. Yeah. Or so it seems, you talk about the difference between how Chinese students behave versus American students. And even when Chinese students are in the US when they’re speaking Chinese, it’s a different set of culture, a different set of behaviors versus when they’re same group of people speaking English. It seems like the norms change and the various behaviors change. You’ve published 200 articles on behavioral science. Tell us what your research finds about these various behavioral, I don’t even wanna call ’em ticks, behavioral or just behaviors switches, the, the switches when, when a cultural factor is impacting people’s thinking.

Michael Morris: Right. Well, let me start by saying this, this touches on the core theme of the book, which is that culture changes. There’s this myth out there that culture is unchanging and unchangeable, that the cultures of the world are permanent fixtures, and that the Americans of two centuries ago were the same as us. And that’s, that’s an illusion that we kind of enjoy. But it’s a, it’s an illusion. You know, what the founding fathers meant by the pursuit of happiness is not what you and I think of as the pursuit of happiness and what we know today in the pop culture as code switching it, it sort of came into the popular discourse when Obama was president. And we’ve seen, seen it again this year as Kamala Harris campaigned, is this notion that people who’ve grown up in more than one ethnic subculture that have corresponding dialects, will make switches depending on the audience that they’re in front of. You have

Barry Ritholtz: A reference to Korean pilots, south Korean pilots, where there is a history and a culture of deference to seniority. And it reminded me, and that leads to problems and airplane crashes. And it reminds me of, I wanna say it was Matthew Sed, the book Black Box Thinking, who talked about a similar cultural phenomenon with South American pilots. Yeah. And it ultimately led to them changing the ways pilots interact. ’cause literally, planes were flying into mountains because the copilot didn’t want to disrespect the senior pilot and say, Hey, we’re all about to die. Like, it’s amazing cultural norms are so strong that rather than risk offending the pilot, you lose the plane. It, it seems bananas, but apparently that’s how important culture is. Well,

Michael Morris: A lot of this is unconscious automatic behavior. Right. I mean, I’m, I, I’m a copilot socialize my whole life to speak in a deferential way to those of senior rank. And so I am speaking that way. I’m not calculating that if I spoke more assertively, that might change the, the pilot’s comprehension of the, of the urgency of the situation. Yeah. So I think that a lot of accidents are caused by automatic behavior and a lot of, you know, cultural behaviors. The, the situation with Korean pilots, it was something that was discovered first by Boeing, Boeing researchers, you know, who made the 7 47 class jet, which requires equal collaboration among copilots and pilots, which wasn’t the case with smaller jets. They noticed that there, there was enormous variance across the world’s flagship airlines in safety rates. And the, and the countries that were having the most problems were not the ones that you might think they were.

Taiwan and South Korea, those were the countries with the worst safety record. And those are not poor countries in particular, or countries with particularly bad weather, but they are countries that are among the highest in the world. When you look at hierarchical values, what, what researchers called power distance. And in those societies, if someone is of senior rank, you’re not supposed to equally, you’re not supposed to interact with them equally. And it, it was sufficiently worrying that Boeing actually considered designing a different plane Wow. For, for those parts of the world. But then at the same time, this study of cockpit black boxes that are recovered after accidents and have recordings of the cockpit dialogue that came out around the same time and pointed to a very similar conclusion. And Malcolm Gladwell in his book Outliers, you know, wrote about the confluence of these, these two things.

And I think brought it to a lot of people’s attention at that time. But what I found even more interesting than the paradox that, you know, a country like South Korea, which is high in technology, high in wealth, et cetera, was having problems, was that they managed to get rid of the problems. They, they made some very simple changes in Korean airlines, and they haven’t crashed since. So they went from the world’s worst safety record to an unblemished safety record. And the change they made was not firing a bunch of people. It was not changing all their procedures. It was changing the official language of the country and the official language of the cockpit from Korean to English. Now, all pilots already spoke English, ’cause it’s a language of air traffic control around the world. But when people were speaking to the same colleagues in English, they weren’t queued to be deferential.

Because in, just like in Japan where you have to call your boss, you know, Satan or something, you know, you have to use certain suffixes in Korean, there are these complex honorific decension that you have to use that are constant reminders of the status rel relative status level. And of course, in English, we don’t have those things. So it’s a remarkable story about the, you know, that cul cultural patterns are not essentialist or inherent. You know, sometimes if you can just change the environment slightly so that they’re not triggered, the same people are totally unencumbered by THEM.

Barry Ritholtz: Them. And that’s fascinating that they went from the worst safety record to one of the best simply by changing the language in the cockpit. That, that’s just amazing.

Michael Morris: It is, it, it is striking and it, it, it really goes against this notion of cultures as permanent fixtures or people, you know, there are ways of talking about culture, like this is in our cultural DNA, you know, and it’s this equation of culture with, with genetics in a way that I think, you know, is a bit of a fallacy because it leads us to think of culture as a set of traits. Whereas culture is a set of lenses that we look through, but the lenses are shifting and the lenses change over time.

Barry Ritholtz: I wanna stay with this topic ’cause it’s so fascinating. You’ve been researching this area for decades. You’ve been at Columbia almost 25 years. What led you to say, Hey, I can triangulate on all these different aspects and turn it into a, a comprehensive book on humanity and tribalism. What led you to that path?

Michael Morris: Well, as a, as a business school professor, I do a lot of teaching to executives. I, I also do a lot of consulting, as you mentioned. I, I consult to political campaigns every election season doesn’t always work out the way I wish, you know, but I also consult to companies. So 10 years ago, I, I ran a course for a couple of years at Bloomberg about decision making, biases, culture and leadership to the top executives here. And through that process, I’ve developed a, a playbook or a toolkit for thinking about how to lead through culture, how to use what I know about the malleability of culture and the manageability of culture. So that as a leader, you’re not thinking of culture as an obstacle to what you want to get done, but as a force that you can harness, that you can dial up or dial down.

And that you can mount slow campaigns to evolve the culture in a way that you think will support the needed strategy in the future. So I started to write a book, sharing that playbook, but then over the course of the last five years, and I’ve been writing the book for about five years, there have been a series of conflicts in the world that have evoked people to start using the word tribal and tribalism much more than they ever did before. And I’m talking about the, the red blue rift, the, you know, the record racial protests in the streets and the religious strife, you know, both at, at home and around the world where you start to hear this new discourse about tribalism as a, a curse, you know, an evolutionary curse that we are somehow genetically predisposed to hate or to fear and loathing of some other group.

And that this will always hinder us and hold us back from the nice things that we would like to have, like international cooperation or, you know, ethnic harmony, harmony, you know, political functioning. So I think that this way of talking about tribalism is part right, but part wrong. It is the case that our tribal psychology plays a role in these escalating conflicts. But where the pundits get it wrong is that we don’t have a tribal instinct to hate other groups. That wouldn’t have been a particularly adaptive instinct. Right. Like a, a warring instinct. You know, there was a archaic human species called Neanderthals that kind of did have that sort of orientation towards neighboring tribes. They, they practiced cannibalism and warfare, and they went extinct in part because our kind, you know, had a different foreign policy. We, we made it and traded with other groups and formed these larger networks called tribes that proved to be a lot more adaptive, proved to be a more winning strategy over time.

So there’s this kind of fallacy that just because these conflicts involve hostility, that somehow they start from a, a drive for hostility. And that’s just a false diagnosis that doesn’t, it doesn’t help us understand ways to ameliorate these conflicts. It makes for riveting articles about how we’re doomed, you know? Right. And, and the end times are here, but it doesn’t make for good policies. And so I, as a secondary purpose of the book, I’ve tried to argue that, hey, we really need a, if we wanna talk about tribal psychology and tribalism, let’s have a science informed view of what tribal instincts are and understand how they do figure in conflicts, but not in a way that curses us to eternal ign conflict. It’s, it’s, you know, it’s a manageable side of human nature that wise leaders have always found their way around

Barry Ritholtz: The neanderthal approach versus the homosapiens approach. I believe, and correct me if I’m getting this wrong, our DNA is about one to 2% Neanderthal. So the idea of trade and cooperation and, and mating was obviously, well, a little hindsight bias, but we are the survivors. Yeah. So that seems to have been the approach that worked. But before I read the book, I was under the assumption that humans were very similar from culture to culture, country to country. And that DNA was determinative. But what the book really shows you is we really vary from region to region, from country to country. Cultures are very different and very malleable, and they have a big impact on society. Fair statement,

Michael Morris: Fair statement. Yeah. It’s, it’s a, it’s a position that kind of falls in between the traditional nature versus nurture framework that, you know, people of our age, you know, got in school what the new consensus is. And, and there’s a field of evolutionary anthropology that has had a lot of the key insights is that human nature is nurture. That we are the species that became wired by evolution to internalize the patterns of communities that nurture us. And what that means is that we can operate as a coordinated group that functions seamlessly, and that meshes together based on cultural patterns, because we all internalize them unconsciously, and we are motivated to follow them. And hence we can have large organizations and cities and things like that, that other primates would be completely incapable of. But it’s not like we’re ants or bees who are wired by their DNA to behave socially in a, in a particular way. If you go around the world, anthills are always conical and beehives are always hexagonal because that’s genetically programmed. We’re not genetically programmed to build our shelters in any particular style, but we do learn culturally, you know, to build a yurt if we’re in Kyrgyzstan, or to build a teepee if we’re in a plains Native American. Huh.

Barry Ritholtz: Really, really fascinating. So let’s get a little basic and, and delve into some fundamentals of your research. And I wanna start with what is a TRIBE?

Michael Morris: Tribe from the broad evolutionary anthropology perspective is the distinctively human form of social organization. Our nearest neighbors chimpanzees, they can form troops of up to about 50, 60 individuals. If it gets any larger, it breaks apart into clashing factions and bloodshed. We obviously can form much larger groups and collaborate in much more sophisticated and adaptive ways. And the the way that we can do that is that we can form groups that transcend K and kin. We can form groups where we are connected to total strangers who share the same cultural heritage as us. So culture is a glue that holds together large human groups and enables us to trust each other in a way that no other animal can. And that was the Rubicon that we crossed as a species, that after that we left the rest of the primate pack in our, in our dust. Because once we were forming these rich cultures that were shared by large groups, it was like a collective brain. It was this pool of knowledge that started accumulating across the generations and that individuals could tap into to become more capable than the individuals from prior generations because the cultures became richer and

00:22:49 [Speaker Changed] Richer. One, one of the things I I was kind of fascinated by in the book, and you, you mentioned chimps, is that if you take a, a human toddler and a adult chimp and an adult orangutan, and you use a tool or show them a te technique to get something, the 5-year-old figures it out pretty quickly, can imitate it. But the chimps and orangutans, you know, not so much. Why is that? So the, the exposition in the book about just being able to follow each other’s gaze because our eye eyes are, are white and our, our cornea and irises are dark, which primate other primates don’t have. Tell us a little bit about just some of these evolutionary differences.

00:23:37 [Speaker Changed] Yeah. Well, you know, evolution works in funny ways. Evolution is kind of a tinkerer. And one of the things that evolution came up with, or a mutation came up with that then became harnessed by our social intelligence is the whites of our eyes. Other primates don’t have white sclera, and so they can’t track each other’s gaze as easily. And that means they can’t read each other’s minds as easily. You know, there’s this old idea, the eyes of the window to the soul. And the research on this has found a, a, a new scientific understanding of what that means. And so our ability to mind read enables us to imitate each other’s behavior at a much richer level than other primates can do. It’s more like mimicry when, when one chi chimps are very inventive, but not very collaborative. So if one of them develops a new way to use a stick to get termites or to use a stick to get fruit from a tree, others may see it and they may, you know, they may do something that’s crudely similar to it, but they don’t catch what the method is and what the intention is.

00:24:49 Whereas humans, you know, if somebody invents something new, the people around them immediately can replicate it and start doing it. And innovations spread very, you know, we all know about fads, right? You know, innovation spread really rapidly. And it’s funny because we, we say monkey see, monkey dew, we have this notion from going to the zoo, that, that, that they are this, that they are such copycats, such such imitative, but we are far more imitative than they are. And there’s this psychologist named Michael Ello, who’s done this wonderful work. ’cause he’s a, he’s one of the world’s experts at child cognition, but he’s also one of the world’s experts at primate cognition. So he can kind of do these comparative experiments between children and, and orangutans and chimpanzees. And what he’s found is that if you teach a child how to solve a puzzle to get a treat, you know, through one method, say pushing the yellow button, and you get some m and ms, but then you show that child for other children who all work with the same puzzle and hit the red button and get m and ms, then you let the first child go again, they’ll push the red button, they, they’ll conform to what they see the peers are doing.

00:26:07 When you put a a chimp through that same procedure, they stick to what works for them. You know, they, they can see that other chimps are doing the red button. They, they stick to what works for them. So we are more imitative, we are quicker to join the consensus than than other primates. And we tend to derive that side of us. I call it the peer instinct. It’s this, it’s this impulse to mesh with what the others around us are doing. And we tend to deride it as a herd instinct or as conformity. And of course it does limit our independent thinking sometimes and sometimes tragically. But we forget that that is the cornerstone of human culture and human collaboration because it allows us to meld minds and mesh actions. And when we are with people who are part of the same in-group or part of the same culture, we can finish each other’s sentences.

00:27:02 We can, you know, help each other without even a request in a way that no other species can because we’re, we have this just strong impulse to mesh and almost everything important that humans have accomplished, it’s not the work of one lone genius. You know, even Newton said, you know, if I’ve seen farther than others, it’s because I stood on the shoulders of giants. Right. So it’s our, it’s our ability to work with and build on the ideas of others that really responsible for everything that we’ve accomplished. And it’s this peer instinct, this conformative instinct, this conformist instinct that is largely responsible for that.

00:27:42 [Speaker Changed] So I wanna stay with the idea of cooperation and collaboration and the white sclera of the eyes you use in the book. An example going back 2 million years ago of homoerectus, one of our predecessor species, and the, some of the most recent fossil locations, and some of the more recent findings suggest that this was a cooperative species far and both with hunting and, and cooking game much earlier than we had previously believed, even though there wasn’t a spoken language. Tell us a little bit about ho how Homoerectus was able to hunt 2 million years ago, cooperatively, and, and why that was such a evolutionary advantage.

00:28:34 [Speaker Changed] Somewhat jokingly in the book suggests that the field of archeology owes a very sincere apology to homoerectus, because for the longest time, archeology was pretty much the science of stones and bones. You know, it’s, it’s what has survived, but it’s not necessarily the only tools that these archaic humans had. It’s kind of a selective, you know, survivor bias, right? So we, we, we tend to think of them as the Flintstones, but of course they had lots of wooden tools and other tools that just aren’t around for us to see. But archeologists have become much, much more clever. They, they use these CSI worthy techniques to learn a lot more from, you know, often microscopic traces of things of soil in these sites that they identify as living sites. And one thing that has become clear is that Homoerectus only invented one tool, the hand axe, which is a, a sort of teardrop shaped piece of flint that they used to, they used to chop, they used to grind, they used to this.

00:29:37 And so they were always kind of portrayed as this single tool simpleton, you know, that was around for a million years and only invented this one tool portrayed as more intellectually more ape than human. But what has become evident from footprints that have been discovered in Kenya in the footprints that ossified in the mud, is that groups of erectus, you know, a million and a half years ago engaged in coordinated hunting of antelopes. And it’s long been known that there were antelope bones in erectus sites. But it was thought that, oh, they must have been scavengers. You know, because how could, you know, us antelopes can run 50 miles an hour. Not even ussein bolt could come near them. So how could Homoerectus with just a hand ax stand a chance of getting an antelope? Well, today there are some African peoples who engage in what’s called persistence hunting, which is, say you and I are, are hunters in, in a group that doesn’t really have many weapons.

00:30:43 So we watch an antelope herd, and then we see maybe one antelope on the margin of the herd. And then you go chase it, and you kind of separate it from the herd, and then you’re tired and it’s tired. But then I start chasing it, coordinating with you on the same antelope. It does no good to chase different antelopes around all afternoon. But if we can chase the same antelope, you know, evolution designed antelopes to be sprinters, not marathoners, right? A lions only charge once. And so if you and I and someone else can take turns chasing this antelope in a coordinated way and keeping it separated from the herd, eventually it just keels over from exhaustion and dehydration. And we have an antelope. And so it’s become evident from fossilized footprints that even a million and a half years ago, homoerectus was capable of that sort of thing.

00:31:37 And it’s also become evident from other kinds of microscopic particles of burnt stone that they were cooking. And so they were coordinating both with regard to hunting and with regard to gathering. And that suggests that they were sophisticated with regard to social intelligence in ways that that goes way beyond the picture of them that archeology presented. You know, in prior generations, the first evidence for stone tipped spears is about a half a million years ago, I think, because the technology for building spears is that you have to first straighten, if it’s a throne spear, you have to straighten the shaft of it, and then you have to sharpen the point of it into a needle sharp point, and then you have to somehow halt the, the spear tip onto the thing. So there’s, there’s a pretty elaborate process of making a spear, but that is one of the hallmark innovations of the next big wave of human social evolution, which happened about a half a million years ago.

00:32:45 And that involves what I call the hero instinct, which is if the peer instinct was an instinct to be normal, to do what most people are doing, the hero instinct was this new impulse to be normative, to, to be exemplary, to go beyond what other people are doing, to be a key contributor and gain the status and the tribute that the community accords to those who are the key contributors. And it was a interesting thing to evolve because it, it was rewarding for the individuals who had the ambition to be a contributor. They got socially rewarded, but it, it also was very adaptive for the group because it incentivized individuals to build tools that required toiling alone for a long period of time. It’s also around this, the time when, when archeologists start to see the skeletons of people with congenital deformities that survived to the age of adulthood. And that suggests that someone was taking care of a person in their group who probably couldn’t reciprocate. And so, you know, I’m, I’m doing something pro-social, I’m not gonna get paid back by the person that I’m helping, but I’m gonna get paid back by the group because I’m doing something noble or something good, or something exemplary. I, I’m a hero. So

00:34:11 [Speaker Changed] Let’s put this into historical context, peer instinct, hero instinct, and ancestor instinct, peer instinct 2 million years ago, that begins to develop. And it, it is useful because conformity and coordination allows smooth social interaction and collaboration. Yep. And that leads to a more successful group. Yeah. As a, as a

00:34:33 [Speaker Changed] Species working as a united front. And there’s all these economic analyses of foraging, you know, both by biologists and by and foraging collectively is more efficient and risk reducing than each individual for themself. Right. If, if we’re working as a group, there’s less likelihood of any of us starving.

00:34:55 [Speaker Changed] And and you mentioned the hero instinct, and that was about half a million years ago. Tell us about the ancestor instinct.

00:35:02 [Speaker Changed] Well, the ancestor instinct to a lot of people, when I describe it, it sounds like the most primitive of all of these instincts, but it’s actually the crowning touch that enabled us to live in tribes and accrue all the advantages of it. And the ancestor instinct, just like the other two, we can still recognize it in ourselves today. The peer instinct corresponds to the sideways glances at our neighbors and our coworkers and the impulse to do what they’re doing. The hero instinct corresponds to our, our upward curiosity about MVPs and CEOs and celebrities and the, and the weird impulse we have to, to emulate their quirks, you know, to kind of eat what a LeBron James eats for breakfast or to, you know, use the same hand gestures that Barack Obama uses. The ancestor instinct corresponds to the curiosity that we feel about past generations.

00:36:01 You know, when we hear about the founder, you know, when I used to teach at Bloomberg, I would tell them, you know, when Mike Bloomberg started the company on the, the first terminal they leased, he put it in the trunk of his car and he drove down to Wall Street, and people just hang on every word. When you’re talking about those formative legends, you know, what the founder did at the beginning of the organization, people are very curious to hear about prior generations of their family. They’re curious about the original family recipe, and they take a deep satisfaction. And following those recipes on a, on a holiday, we fetishize antiques, you know, these artifacts from the past. And so all of this is this the psychology of nostalgia for the past, or sentimentality for the past. And it, it comes with it a capacity for rote learning.

00:36:49 You know, so when we’re learning religious things from our, our grandparents, we’re not supposed to ask questions. You know, we’re, we’re, we’re we’re supposed to repeat the Seder dinner exactly the way the Seder dinner was done, you know, by prior generations. And that is what I call the ancestor instinct, is this impulse to learn by rote about things that the past generations did, and then replicate almost compulsively those things in exactly the way that we’ve learned them. And it can lead to superstitious learning and hanging on to ways of the past that are no longer adaptive. But it was very adaptive for our evolutionary forebearers because it contributed to memory, both as an individual, I could, I could learn some technique like a spear making technique that might go beyond my understanding. You know, I don’t understand why this way of straightening wood by soaking it in water works, but it works.

00:37:51 So if I, if I just trust and, you know, take it on faith and learn, learn by rote, then I can continue that expertise and pass it on to the next generations. And for the group, it created a kind of tribal memory before that, in the archeological record, what you’d see is that a, a a group in a particular area would develop, you know, the throwing spear and have it for 10 generations and then lose it for 30 generations, and then someone would invent it again. So they were, they were reinventing the wheel a lot. And, and af after the ancestor instinct was also in place, then you had these three instincts. You had the ancestor instinct, which allowed you to hang on to the lessons of the past. You had the hero instinct, which made people want to go beyond what’s already in place.

00:38:38 So it turned into building on the, on the expertise of the past. And then the peer instinct was this mechanism, this engine, for kind of spreading and distributing the knowledge we wanna conform to what the others around us are doing. And the end result of this was cumulative cultural evolution that the, the shared knowledge in a group became richer and more tuned to what works in the environment with each generation. And that collective level, learning more than anything about our brains as individuals, is what enabled our species to become the dominant species of the, of the planet. And it, it’s still a very powerful resource for us today.

00:39:21 [Speaker Changed] So let’s talk a little bit about some of the examples you use of corporate America adapting some of the strategies and, and full disclosure, you consult for a lot of these companies. You’ve been consulted for Bloomberg and, and other entities. So there’s all sorts of fascinating examples of, of how companies either use or, or don’t use the lessons of tribalism. But I have to start again, in South Korea, talking about their terrible soccer team. Tell us a little bit about the Hiddink syndrome. Who was Coach Hiddink and why did the South Koreans bring him to fix their soccer team?

00:40:06 [Speaker Changed] Well, South Korea is a country that had a very, you know, difficult 20th century, you know, of, of civil war and colonization and political turmoil. And then everything was finally coming together in the nineties when they reached the elite tier of nations. And they successfully bid on hosting the World Cup with their Archrival Japan. And it really looked like they were ascendant. And then the Asia crisis in I think 98, you know, brought down their politicians, brought down some of their banks, brought embarrassing bailouts from the west and accusations of crony capitalism. And at the same time, their national soccer team, the Reds, was starting to flounder. They’re usually a regional power, but in the 2000 Asia Cup, they, they couldn’t even beat Kuwait, which is a fairly small country, not known for its soccer prowess. And so this was a moment of panic for the soccer overlords of South Korea, because they were about to co-host the World Cup.

00:41:22 And the soccer odds makers were betting that they would be the first ever host nation to not advance from group play to tournament rounds. Not a distinction that they were hoping would be associated with their country being the first host, not to advance. So they made a, a gamble, which is that they called, made a long distance call to the Netherlands and called a fellow named Hus Hiddink, who was a football or soccer coach in the Netherlands, who had found a lot of success turning teams around and doing so despite, you know, what might be considered an obstacle, which is cultural differences. So he,

00:42:11 [Speaker Changed] And let me jump in right here, because in the book you describe a very similar set of deferral, like copilot to pilot, where you would have rookies or young teammates who would have open shots and defer to the more senior experienced players and pass on taking the good shot instead forward the ball to, to the senior player. How did hitting ink resolve this? How did he deal with this?

00:42:40 [Speaker Changed] Well, he was a very down to earth egalitarian dutchman, and also not terribly knowledgeable about the legends of South Korean soccer. He didn’t know who their beckham and who their messy were. And he had watched the game tapes and noticed that their style of play was a little bit slower and more predictable than what was needed to play with the world’s best at this time. And so he, he thought, okay, I’m gonna have to just change the way things are done there. So he held open tryouts, which was a first way of ruffling feathers because, you know, the, the custom there had been that the legends of, of Korean soccer would automatically be given their standard positions on the team. And he then started noticing that when they would scrimmage that, that the players were not taking every shot or passing as fluidly as he would like.

00:43:46 And so he announced a set of a set of changed policies that were a bit mysterious to the players. He said, okay, the next phase of our training camp is not gonna be here in South Korea. It’s going to be in the United Arab Emirates at an international soccer facility. And the honorific detentions of Korean, which he had heard from his assistant coaches were being used on the field, are henceforth band. He justified it as the need for speed. But it was obvious that some of these things were also changing the cultural cues around the players. He also didn’t allow the South Korean sports press to follow them to the Emirates so that players wouldn’t be interviewed by their compatriots after every scrimmage about what they did wrong and what they did. Right. And what he was trying to do was sort of remove the daily reminders of these Korean cultural habits that he, that he suspected were getting in the way of learning what he was trying to teach was, which was this Dutch style of football where players swap positions on the field to throw off defenders.

00:45:08 But it means that a a 20-year-old rookie who is playing next to the legendary midfielder, would take that person’s position and then that person takes the, the winger position or whatever the other position is. And that just felt wrong to players when they were thinking through the lens of their Korean social habits. But when they were in the Emirates surrounded by professional football players from various countries, their identity as professional football players came to the fore of their minds rather than their identity as Koreans. And they became more open both the rookies and the veterans, to learning this new tactical system, which was necessary to raise their game to the level where they could compete against the

00:46:00 [Speaker Changed] World sport. And, and spoiler alert, how did the South Koreans do as the host country in the World Cup?

00:46:06 [Speaker Changed] Well, amazingly, they made it out of the group rounds to tournament play. And then in tournament play, they were paired with the teams like Italy and Spain, who were, you know, sort of defending champions powers powerhouse. Yeah. And they made it all the way to the semifinals. And it was one of the few times that a, a team that was not either from South America or Europe, made it to the semifinals. It was the first Asian team to ever make it to the semifinals. And it was not just an unlikely run for a soccer team, but it, it set off a, a jubilation that was nationwide, a celebration of what South Korea was capable of if they opened themselves up to, you know, to outside influences and outside ideas. And I think it’s partly responsible for the South Korea that we know today, which is a, you know, cultural exporter and a much more open society than what was the case then.

00:47:11 They, they even changed their citizenship law so that they could make who’s hit Inc. An honorary citizen. It was and had been for all time immemorial, a, a blood standard of citizenship where you had to prove that you were Korean to be a citizen. And instead they changed it to one where if you had lived there and done work there, you could become a Korean citizen. So literally and figuratively, they opened themselves up to the world and the South Korea, we know today with k-pop bands topping the charts and, you know, movies that are winning Oscars and, you know, soap operas that are played all around the world. That’s the South Korea that has come from the openness that this event helped to create.

00:47:55 [Speaker Changed] So, so I want to temporarily leave Asia and talk a little bit about Microsoft and, and a little bit about Bank America, Merrill Lynch, let’s start with Saudi Nadella and Microsoft. So long thought of as a monopoly for good reason. They come out of a decade where their stock went nowhere Mm. When all of their peers Yeah, apple, Amazon, go down the list. Nvidia am all did really well. Microsoft kind of wandered in the desert for a decade under their prior CEO Nadella comes in, does a listening tour you describe in the book and essentially completely changes the culture of Microsoft from a take it or leave it ideology to more we’re listening. Tell, tell us a little bit about what made Nadella special and what changes did he affect?

00:48:46 [Speaker Changed] Yeah, well the first two CEOs, bill Gates and Steve Ballmer were strong personalities and, you know, sort of intellectually dominant sort of figures and sort of the smartest guy in the room type people and led that way. And then that worked really well when, you know, Microsoft had a virtual monopoly and, and could just load more and more technical features on each generation of its software. And people didn’t really have a choice because the switching costs were high. But then we enter the cloud computing era where switching costs are much lower, and there’s this new norm of just paying for the features that you use. And that created a premium on knowing your customer, knowing what your customer needed, which was not, you know, Microsoft wasn’t an extroverted organization. It was, it was introverted, it was, it was a cult of technical expertise. And Satya Nadella had been succeeding in the cloud division, but that was a relatively small division within Microsoft.

00:49:53 And he was tapped to be CEO and he realized that what he had to do was to use the hero instinct, the tendency to follow role models as a way of reshaping the culture. But it was tricky because he couldn’t use his bully pulpit as CEO to, you know, shout at people to become better listeners. You know, that would be an oxymoron, right? He had to instead lead by example and show people what were the set of behaviors that the organization needed and that would carry prestige in the new era. And so he embarked on a listening tour, you know, words that had never been uttered by the prior CEOs and went all through the Microsoft ecosystem, you know, to their, to their developers, to their salespeople, to their customers. And, you know, listened, listened and made a few changes based on what they said.

00:50:57 So one of the things that Microsoft was famous for was a stack rank performance evaluation system where everybody, you know, you have a fixed curve and the lower 10 or 20% are, are fired each year. And that was considered to be something that was inhibiting the collaboration that was needed in the new era. And the employees were quite vocal about that, and he made that change. So listening works better if you are also taking some actions that shows that you’ve heard what was said. And then one particular event, I think very notable, he went to a conference on women in technology, I think it’s called the Grace Hopper conference, you know, after one of the founders of computer scientists who was a woman who was under recognized, you know, until recently. And in it he was asked during a q and a about gender differences in tech salaries, you know, and we know that these gender differences are in part caused by the fact that companies don’t regard it as a credible threat when women get an outside offer because they don’t think the woman’s husband and family will move, you know, to another city in the way that they do when a man gets an outside.

00:52:17 So women don’t get the same raises, you know, when you have a star system, it happens in academia, it happens in tech companies. And, but Nadella, you know, was tired and he had answered a lot of questions and he got the question and he said, well, he said a lot of these inequalities, they even out over time. And so maybe it’s just a good idea to let the pro trust the process and let the process make its corrections, which, you know, might be the right answer if a junior employee is asking whether he should negotiate hard or, you know, but it wasn’t considered to be the best answer about this is, you know, sort of a structural issue related to gender. And so there was some, some chatter in the blogosphere about this. And instead of ignoring it, which he could have easily done, he actively publicized the fact that he made this error and then actively went to meet with women in technology groups and labor economists and people who are experts on this issue, and actively showed that he was taking steps to avoid this structural problem at Microsoft.

00:53:31 And by sort of enthusiastically owning his mistake and apologizing for it, he was role modeling this set of behaviors, which is, you know, okay, you are a customer and Microsoft hasn’t been listening to you very well and is trying to sell you software with a lot of features that you don’t need. So let’s instead apologize for not knowing better. And, and let’s take corrective steps of let’s send a salesperson to, you know, shadow your people, you know, for a, a few weeks and really get to know the day to day at your company. And then we’ll come up with, you know, a cloud product that really dovetails with your needs instead of, you know, the way that we’ve been doing it. And it’s considered to be, you know, the, the, the instrumental, you know, the, the, the critical behaviors that changed Microsoft’s culture from a know it all culture to a, a learn it all culture.

00:54:29 You know, Satya Nadella is also very taken by the research and psychology by Carol Dweck and others about learning orientations and growth orientations opposed, you know, there are some orientations of, you know, thinking I’m smart, you know, and I have high intelligence as a fixed entity. And then other people have this mindset that I have the ability to get smarter. And such a nadela is a big advocate of trying to create this growth mindset rather than a, you know, fixed mindset about ability. And Microsoft has really resumed its position on the top of the technology hierarchy. It’s made really adaptive moves in the AI space, and it’s, it’s become a very happening place and quantum computing as well. So it’s, it’s not just in the cloud computing area, you know, the, the organization got its mojo back and I think it got its mojo back by leaving behind an organizational culture that worked in the early era of the industry, but didn’t work once you, you’re competing with lots of very adaptive organizations and you need to partner better and you need to know your customers better. Hmm.

00:55:47 [Speaker Changed] Really interesting. So NA is able to change the culture of a single organization. How difficult is it to merge the culture of, of two different organizations? And I’m thinking about the financial crisis, shotgun wedding of Bank of America and Merrill Lynch. Tell us a little bit about how that merger worked out.

00:56:10 [Speaker Changed] Well, that’s a, a fascinating case. It’s a case that we, you know, we teach at Columbia to our students in their very first weeks. You have, as a background, Peter Lewis, you know, who had built Bank of America, starting from a very small regional North Carolina bank and swallowing up banks even larger than itself to become this bank that had one in five Americans as a customer. It was the, you know, the, the largest consumer bank. But he wanted one more victory at the end of his career, which was, you know, to, to acquire a Wall Street bank, a, an investment bank, and move into the fast lane of finance. And the financial crisis presented an opportunity because these investment banks had really troubled balance sheets. And a consumer bank was considered to be something that could balance that

00:57:05 [Speaker Changed] FDIC regulated plenty of reserve capital. Yep, yep. And, and not in the same risk category that all the Wall Street banks were in during the financial crisis.

00:57:14 [Speaker Changed] And he, he actually came up to New York and started talking to other, other banks, I think maybe banks that were too far gone. And partially through government intervention, he became, you know, in conversation with Merrill Lynch. And Merrill Lynch was this century old, you know, esteemed brand. It was in the Amer in the collective imagination synonymous with Wall Street. It had the most famous logo in banking, you know, the, the charging bull and slogans like, you know, Merrill Lynch’s bullish on America. So very strong culture, very strong brand, and it needed a rescuer. So it looked like a master stroke of strategy where Merrill was saving itself and Bank of America had gotten a prize at discount, but then the full depth of the troubles related to the financial crisis became apparent, you know, with each quarter where there were lots of bad loans on the books at Merrill.

00:58:25 And then Bank of America’s acquisition of countrywide in LA brought it into the problematic mortgage crisis. And as a result, there were a lot, there was a lot of strain. There was, there was some resentment of the Bank of America, you know, the more plebeian consumer bankers who weren’t getting a bonus because of the expensive investment bank that had been purchased. And what Lewis and others at Bank of America tried to do was to assimilate Merrill into its Bank of America culture. They, they regarded some of the Merrill culture as the problem that created the crisis, this excessive risk taking. And, and so they would hold workshops to try to bank of Americanize the Merrill bankers. But you, you probably know a lot of former Merrill bankers as I do. They, they were people who didn’t think they had that much in common with the, the person at the bank branch on the corner.

00:59:36 You know, they thought they were in a very different industry. And that the Bank of America culture had very few lessons relevant to them. Even the, so-called Thundering herd of Merrill Investment Advisors, you know, at offices around the country and abroad, didn’t think that it served their business to suddenly have a sign in front saying Bank of America that looked the same as, as the, the standard bank branch or to, or to call themselves Bank of America. You can imagine a, a career Merrill person in Paris or Tokyo suddenly having to, you know, call themselves Bank of America. It’s not the brand that worked, you know, particularly well in those environments. And so it was failing and you had a hemorrhaging of talent where, you know, brokers can often take their whole portfolio of clients and go across the street to another, to the competition. And so, and

01:00:34 [Speaker Changed] Just to put a little flesh on, on how bad this merger was, one banking analyst called it, the merger from hell. So were they able to realign the cultures in any positive way?

01:00:47 [Speaker Changed] Well, what Lewis did, that was a saving, a saving grace, was that he hired a person named Sally Crotch, who was already a, a sort of legend on Wall Street at a young age because she, she called out some conflicts of interests at Bernstein when she was freshly out of her Columbia MBA and got fired in the process, but became a, a bit of a hero. The journal called her the Last Honest Analyst on Wall Street, and then she was hired at Citibank when they had some problems in their private wealth division. And she stood up for the rights of investors who had been sold certain products that she thought, you know, I had some hidden problems and got fired again, but was lauded once again as being a person with integrity. And so she was brought in to restore trust as somebody that, you know, had Wall Street credentials and didn’t seem like she was just this consumer bank person who didn’t get what, what a Merrill broker or a Merrill investment banker needed.

01:01:55 And fortunately, she was also from North Carolina, so she could be a, a translator, a natural bicultural person who could go down to Charlotte and talk to the Bank of America executives and explain to them what the Wall Street people did. And they ultimately, after a lot of negotiation, allowed her to do the largest ever rebranding, which was called The Bull Is Back. And they, they brought back the Merrill Lynch name and they brought back the bull logo for the private wealth division, so that it was once again Merrill Lynch, and almost immediately it restored confidence and it restored collaboration and, and citizenship within an organization that had always been, you know, it was called Mother Merrill. Right? It had always been a very communitarian organization, but when, when its name was taken away and people were told, you’re just a Bank of America employee and nobody identified with Bank of America, it all just kind of fell apart.

01:02:54 And then you see the, the most successful people leaving for the, the competition, it was very demoralizing. But when she gave them their group boundary back and she gave them their symbol, the bull back, and she gave them their name and their tradition, Merrill Lynch back suddenly you had this just renaissance of collaboration and people working overtime to help each other succeed and to convince investors that, you know, the post crash era was a buying opportunity. And, and, and suddenly Merrill Lynch was the bright spot on Bank of America’s books. And that, that went on for a few years. Now, ultimately, Sally got removed in a political shift. I think that she is widely regarded as having saved the private wealth division through cultural leadership, through understanding how important this sense of group identity and, you know, these logos and these slogans, these are, these are very important conduits for collaboration. And when you take them away, people are alienated and anomic and they don’t know how to collaborate.

01:04:03 [Speaker Changed] We’re about to head into Thanksgiving. What should family members keep in mind about their tribe and tribalism in order to have a peaceful Thanksgiving dinner?

01:04:17 [Speaker Changed] Well, there’s a, there’s an economist at UCLA named Keith Chen who works with cell phone location data. So he has these massive data sets that’s basically just tracking the location of everyone’s cell phone and what he has been able to discover through very complex statistics is that in the last election season, you know, two, 2020 2016, families that, that are politically divided have cut short their Thanksgiving dinners, you know, during these election years, amazing ’cause of the conversations that start to happen, you know, after the second glass of wine. So I wish Americans not just peaceful, but lengthy Thanksgiving celebrations. And one of the things I would suggest is to not believe the hype that Americans are more divided now than they ever have been. In 1860, Abraham Lincoln became president with less than 40% of the popular vote. Seven states seceded from the union before his inauguration, the Civil War broke out, you know, a week or so afterwards.

01:05:31 That’s what I would call a real rift. That’s what I would call a challenge, a legitimacy challenge. Right. And so what’s interesting is what did Lincoln think was the solution to that In his first inaugural, he said, the mystic chords of memory will yet swell the chorus of the union. Now, that’s a bit poetic and cryptic, but what he was suggesting is that collective memory, you know, thinking of our common ancestors and the gratitude and the obligation that we, that we feel and the reverence that we feel when we think of ancestors can get us beyond our current differences. Our current differences seem large, but when we think in terms of the hundreds of years of the American experiment since the first settlers, you know, on these shores, we can think of this disagreement between the north and the South as one that we can possibly get beyond.

01:06:30 And right around the same time as his more famous Gettysburg address, when he talked about our fathers came to this land, you know, he made reference to ancestors. He did something that he’s not often given credit for, which was the proclamation of the Thanksgiving holiday. We LI learned in school that Americans have celebrated Thanksgiving holidays since 1621. In an unbroken tradition, that’s not true, but a lot of the national folklore of every country is fake lore. It’s created retrospectively and, and projected onto the past. So the, the pilgrims did not have a thanksgiving in 1621. They had a, a feast that they called a rejoicing where they shot guns in the air and drank whiskey. And thanksgiving for them was a religious ceremony. So it was something very different. But there were, there was a concept of thanksgiving among the Puritans, this kind of religious ceremony.

01:07:24 And George Washington held one of those religious ceremonies after the Revolutionary War. And Lincoln was influenced by some of the thought leaders of the era who thought a national holiday, a sort of autumn harvest feast that we all do at the same time would be a unifying thing at a time when the country is sort of divided. And Lincoln thought, oh, that makes sense, but how can I get people to accept a new holiday? Well, I can portray it as something that’s already a time honored American tradition. So he, he described it with reference to the Puritan themes and customs, and he made reference to George Washington’s Thanksgiving, a one-off event that wasn’t meant to be a holiday. And within a few years, Americans had embraced it as a sacred national tradition. So amazing Thanksgiving itself is an example of how culture is mutable. It’s not, you know, the, the differences that we have now are not set in stone. They’re not necessarily gonna last forever. And we can use our cultural capacities for ritual to move beyond differences. And so by celebrating Thanksgiving, we should remember that we can get beyond much worse political crises than the one we have today.

01:08:42 [Speaker Changed] Really fascinating. Alright, so let’s go back to Asia. You, you describe Singapore at one point in time as a, a poor backwards, very corrupt, impoverished islands. How did they manage to turn that around? Singapore is now thought of as one of the most successful countries in the world.

01:09:01 [Speaker Changed] Yeah. Singapore is healthier, wealthier, and less corrupt than the United States by a substantial margin. That’s not to say everything about it is great. I’ve, I lived there a couple of years ago for a year and it’s got many virtues, but you know, the

01:09:17 [Speaker Changed] Very strict right.

01:09:18 [Speaker Changed] New York has its virtues as

01:09:19 [Speaker Changed] Well, right? Yeah, no, no. The famously spitting gum on the caning and, and that sort of stuff. But by and large, a very successful society.

01:09:29 [Speaker Changed] Yeah. And it was a, it was a British colony. And then during World War ii, the, the Japanese occupied it and shut down the port, which, you know, the, the British had a tradition there of a free port. So it was a, a free port for a, a trading, open trading zone. And the Japanese kind of shut that down. And that led to a sort of a darker period in Singapore where you had black markets and you had a lot of corruption instead of a, an open port that was, you know, treating everyone the same and, and prospering due to the high traffic of business Singapore after getting, after getting free of the Japanese, it, it joined the Federation of Malaysia with its northern neighbors. It continued to be less of a free port than it had been under, under British rule. And some of the local traditions of sort of relationship based business where you do business with my family.

01:10:37 So I give you preferential access to somebody else. That’s kind of how business works in that area. There are lots of words for it, guanxi, you know, sort of network based business. And that was the dominant mode of how the port operated. But then a leader named Qua Yu, who was Singaporean but who studied law in the UK, returned to Singapore to kind of try to help its government during the Malaysian period. But then in the mid sixties, Singapore gained its independence by being ejected from the Malaysian Federation, in part because of the ethnic strife between the primarily Chinese Singaporeans and the Malaysians At the time it had no source of drinking water. It had a very high unemployment rate, it had a huge malaria problem. And its port had been completely dysfunctional for decades since the Japanese occupation during World War ii, a young leader named Lee Quan Yu, who had grown up in Singapore, but then studied law and practiced law in the UK for a while before returning, became elected as the first prime minister and knew that he needed to do something special in order to help Singapore survive as an independent country.

01:12:13 And what he did was largely opposite to what most independence leaders do. Independence leaders tend to eliminate any trace of the prior colonial influence. They pull down statues and they change the names of things back to the local language and they eliminate western dress and put on the, the ethnic garb. Laqua Yu did largely the opposite of that. He, his political party adopted white uniforms reminiscent of the British Navy that had, you know, insured the operation of the port for many decades in Singapore, he made English the official language rather than melee or Chinese or many of the other dialects spoken in the area. He thought a lingua franca that was not connected to any of the local ethnicities and that was associated with this prior period in history when the port was functioning in an adaptive way, would be the right kind of cultural cue.

01:13:25 He even put up a statue of Sir Raffles, who was the British founder of the Singaporean colony, sir Thomas Raffles, in case somebody didn’t get the point. So he didn’t try to eliminate all of the traces of the sort of British paradigms for running the port. He tried to restore that by creating an environment that reminded people of that time and brought those habits to the surface. And it was in combination with a few other procedures, like very strong anti-graft laws and sort of role modeling the, the austerity and the uncorrupt ability that he wanted through role modeling. And through these legal changes and through this cultural queuing, he set in motion a new culture of Singapore that proved to be very successful in attracting trade to Singapore rather than to other local ports. And snowballed to become the culture, not just of the port in Singapore, but of all of its industries and created the, the Singapore that we know today.

01:14:48 [Speaker Changed] So using cultural cues and the right approach to tribal norms, you can affect change in countries, in companies, in sports teams. Am I missing anything there? ’cause the book really covers a wide range of ways that tribalism influences organizations.

01:15:13 [Speaker Changed] Yes. All of those are tribes in the sense that they are communities with an enduring identity across generations. What, what a generation means is different in a sports team than in a society, but there’s transmission of culture across generations and the culture is a kind of glue that enables people to coordinate, cooperate, and have a sense of continuity. But we also have levers for activating cultures and we have levers for altering cultures and leaders like Lee Quan Yu are adept at this. He didn’t regard culture as sacred. He was a bit of a cultural engineer at a time when that was regarded as, you know, an impossible thing to do. That you can’t change the culture of a nation. You can’t create a new culture. You can’t ask a newly liberated people to appropriate aspects of the culture from the former colonial era. But he is somebody who felt like people are a little bit more flexible than they’ve been given credit for. And he knew that he himself personally was bicultural. He was very much Chinese, but also very much English. And he thought that a lot of the Singaporeans of his generation were also bicultural. And that was a, a resource that he could draw upon to shape the new culture of independent Singapore. Huh.

01:16:43 [Speaker Changed] So fascinatingly, the former president of Singapore was, had both a Chinese and an English identity. How do babies cognitively develop an identity? What is their focus? Do they see family members? Do they see race? What, what affects babies’ cultural identities?

01:17:06 [Speaker Changed] Well, race is very salient in this country because race happens to map on to cultural communities that are, that are different from each other. But that’s not the case in most of the world. You know, in Russia and the Ukraine, you can’t tell from somebody’s face which side they’re on in, in Gaza. You can’t tell who’s Israeli and who’s, who’s Palestinian based on faces necessarily. And our evolutionary ancestors rarely encountered anybody who was economically different from themselves. So we are not wired to use race as the basis of categorization. It’s something that even in this culture, children only learn later at like age six to pay attention to race. But there are certain cues that we seem to be wired to pay attention to in order to recognize who’s in what group and in order to recognize when we’re around tribe mates and thus should engage in our tribal norms as a way of coordinating with them.

01:18:13 And the number one thing is language. Babies learn not only their mother’s language, but even their mother’s dialect when they’re in the womb, really. So when they’re born, they will already, if you play tape recordings to newborns of their mother’s language or another language, they will turn to look at their mother’s language. They don’t speak yet, they can’t understand anything, but they know the patterns of the language. Even dialect is that way. They will, they will turn to a dialect. And the same kinds of experiments are done where you, you have two adult strangers in front of a baby and both of them are offering a toy to the baby. Which, which toy does the baby take? Well, they will preferentially interact and, and take a toy from a stranger who speaks with their mother’s language or even their mother’s dialect, as opposed to a stranger who speaks with a different language or a different dialect.

01:19:21 So their, their brains have recognized languages and dialects as markers of ingroup and they preferentially interact with those people and learn from those people. What’s fascinating is that babies also seem to be wired to expect that food choices or cuisines will also be aligned with languages. So if you put babies in an experiment where there is one adult stranger who is speaking one language, say English, and another one who is speaking another language, let’s say Hindi, and then they see the person who’s speaking English eating one kind of food, and they see the person who’s speaking Hindi eating a different kind of food. And then a third person comes in, say speaking English and is starts eating the, the food that the Hindi speaking person has been eating. The baby will be startled and look like, oh my God, what’s going on here? You’re eating the wrong food. You know? So what this tells us is that babies are not wired to be racist, but they are already judging us based on how we speak and what we eat.

01:20:35 [Speaker Changed] Who, who knew babies were foodies. I would never have guessed that. That’s fascinating. Alright, so our speed round. Tell us what you’re keeping you entertained, what are you either listening or, or watching?

01:20:45 [Speaker Changed] Well, ironically enough, what I’m watching is Ken Burns Civil War series, which I never saw the first time and must be great. I’d written about the Civil War in the book and then I wanted to watch it.

01:20:59 [Speaker Changed] Let’s talk about mentors who helped shape your career.

01:21:02 [Speaker Changed] Yeah, as an undergraduate I had a mentor named Michael Harper who was a African American poet at Brown. And he sort of, I wasn’t African American obviously, but I liked poetry and, and kind of came from a background similar to his and unlike most of the people at Brown and you know, he was a great mentor, a warm figure, and someone who, you know, paid attention to me when I needed it. And then when I went to graduate school, a guy named Richard nsbe, who’s a leading social psychologist. And then when I started at Stanford, I had a colleague named Hazel Marcus, who was a, a wonderful guide to, you know, understanding a profession that I had not much introduction to and helped me, you know, avoid making lots of mistakes.

01:21:47 [Speaker Changed] Let, let’s talk about books. What are some of your favorites? What are you reading right now?

01:21:51 [Speaker Changed] I just got yesterday a book called Co Intelligence by Ethan Molik. It’s a book about AI but not, not a dystopian book about AI taking over, but it’s about how to use AI as your co-pilot. How to recognize what AI is good at and what you’re good at and how to use it, which I think I need to start teaching my students because I think it’s the new reality. And,

01:22:12 [Speaker Changed] And our final question, what sort of advice would you give to a college grad interested in a career in either academia, social psychology, or an anything related?

01:22:24 [Speaker Changed] Well, I say this to my nephews who are that age, learn what AI is good at and also learn AI’s limitations. ’cause I think that the facility in using AI well and not using it poorly is really gonna be a distinguishing factor in the knowledge economy careers going forward.

01:22:45 [Speaker Changed] Thank you Professor for being so generous with your time. This has really been absolutely intriguing. We have been speaking with Professor Michael Morris of Columbia Graduate School of Business, and author of the book Tribal, how the Cultural Instincts That Divide Us can help bring us Together. If you enjoy this conversation, well check in any of the previous 550 we’ve done over the past 10 plus years. You can find those at iTunes, Spotify, YouTube, wherever you find your favorite podcast. And check out my new podcast at the Money Short, 10 minute conversations with experts about issues that affect your money, earning it, spending it, and most importantly, investing it at the money wherever you find your favorite podcasts. And in the Masters in Business Feed, I would be remiss if I did not thank the correct team that helps put these conversations together each week. My audio engineer is Steve Gonzalez. My producer is Anna Luke Sage Bauman is the head of podcast at Bloomberg. Sean Russo is my researcher. I’m Barry Riol. You’ve been listening to Masters in Business on Bloomberg Radio.

 

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10 Monday AM Reads

My back-to-work morning train WFH reads:

The Asset of the Millennium Isn’t What You Think: Here’s a real Y2K surprise — 25 years later, its Gold. The third millennium (assuming it started in January 2000; remember Y2K?) is almost 25 years old. And it makes a sensible landmark on many levels for anyone trying to understand financial history. Vladimir Putin came to power in Russia, nearly to the day. The euro had been initiated a year earlier. China joined the World Trade Organization a year later. The twin towers of the World Trade Center would stand for only another 20 months. And in today’s polarized environment in the US, it’s handy that Democrats have been in power for 13 of the years and the Republicans for 12, so generalizations aren’t making a political point. (Bloomberg)

These batteries could harness the wind and sun to replace coal and gas: After decades of development, the world has figured out how to make wind turbines and solar panels cheaply and at massive scale. They’re starting to make a dent in energy production, accounting for 15 percent of electricity globally, according to the International Energy Agency. But now, a few of the regions that have adopted wind and solar most aggressively are finding some of that energy goes to waste because they can’t store it. (Washington Post)

Boomers say it takes $100k a year to be financially successful, Gen Z says it takes $600k: Salaries Americans say they consider the minimum to be “financially successful” (Axios)

Chinese Carmakers Are Trouncing Once-Unbeatable Japanese Rivals: Brands including Toyota, Honda and Nissan are losing share at a worrying rate. (Bloomberg)

Inside the Booming ‘AI Pimping’ Industry: AI-generated influencers based on stolen images of real-life adult content creators are flooding social media. (Wired)

How Did You Do On The AI Art Turing Test? Turing Test? How meaningful is this? I tried to make the test as fair as possible by including only the best works from each category; on the human side, that meant taking prestigious works that had survived the test of time; on the AI side, it meant tossing the many submissions that had garbled text, misshapen hands, or some similar deformity. But this makes it unrepresentative of a world where many AI images will have these errors. (Astral Codex Ten)

How to give a good speech: The art of good public speaking is often to say less, giving each idea time to breathe, and time to be absorbed by the audience. But the anxiety of the speaker pushes in the other direction, more facts, more notes, more words, all in the service of ensuring they don’t dry up on stage. It’s true that speaking in public is difficult, even risky. But the best way to view it is as an opportunity to define yourself and your ideas. If you are being handed a microphone and placed at the centre of an audience’s attention for 20 minutes, you’re much more likely to flourish if you aim to seize that opportunity. Everyone is watching; you’re there for a reason. So . . . what is it that you really want to say?  (Tim Harford)

A brief ode to shorter days and longer nights: Because mornings are nice, but to me there is something very reassuring about evenings. An acknowledgment, perhaps, that we’ve made it through another day and can now ease into the next, with whatever hope and expectation we might have for it. Days are, by design, draining. I find it difficult to relax in the daytime. Night’s arrival tells me I’ve survived, that an end can be a kind of beginning, too. (Hmm That’s Interesting)

Could dark matter be the same thing as dark energy? Two parts of our Universe that seem to be unavoidable are dark matter and dark energy. Could they really be two aspects of the same thing? (Big Think)

Teen Mathematicians Tie Knots Through a Mind-Blowing Fractal: Three high schoolers and their mentor revisited a century-old theorem to prove that all knots can be found in a fractal called the Menger sponge. (Quanta Magazine)

Be sure to check out our Masters in Business next week with Michael Morris, cultural psychologist at Columbia Grad School of Business and Psychology Department. His research focuses on cultural influences on styles of cognition, communication & collaboration. He advises corporations, government agencies, NGOs, and political campaigns about culture-related issues. His new book is “Tribal: How the Cultural Instincts That Divide Us Can Help Bring Us Together.”

 

Chinese Carmakers Are Trouncing Once-Unbeatable Japanese Rivals

Source: Bloomberg

 

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10 Sunday Reads

Avert your eyes! My Sunday morning look at incompetency, corruption and policy failures:

There’s a real math problem with MicroStrategy’s obscene valuation premium: MicroStrategy is worth around 3x as much as its bitcoin holdings. Let’s talk about the implications of that. (Sherwood)

Feds: Tether Has Become a Massive Money Laundering Tool for Mexican Drug Traffickers: Tether is being used on a massive scale by large scale drug traffickers, to the point where Tether is sold cheaper in Mexico due to its links to drugs, according to court records reviewed by 404 Media. (404)

How America Got Mean: In a culture devoid of moral education, generations are growing up in a morally inarticulate, self-referential world. (The Atlantic)

Crony Capitalism Is Coming to America: The term “crony capitalism” was invented to describe how things worked in the Philippines under the dictatorship of Ferdinand Marcos, who ruled from 1965 to 1986. It describes an economy in which business success depends less on good management than on having the right connections — often purchased by doing political or financial favors for those in power. (New York Times)

Trump’s Oil and Gas Donors Don’t Really Want to ‘Drill, Baby, Drill’ Fossil-fuel tycoons helped return the president-elect to Washington. Now, they are seeking to lock in use of their products for years to come. (Wall Street Journal)

RFK Jr. wants fluoride out of drinking water. Oregon shows what’s coming. Pro-fluoride Oregon dentists say they can easily spot whether patients grew up with fluoride when they lie back and open their mouths; those with the most cavities often grew up in Portland or other communities without fluoridated water. (Washington Post)

Google Will Survive AI and Breakup Calls. Why Alphabet Stock Could Gain 50%.  The company is facing pressure on two fronts—the government and a host of new AI-powered search rivals. It has the capacity to meet both challenges and continue to prosper. (Barron’s)

An I.V.F. Mix-Up, a Shocking Discovery and an Unbearable Choice: Two couples in California discovered they were raising each other’s genetic children. Should they switch their girls? (New York Times)

Anyone Can Buy Data Tracking US Soldiers and Spies to Nuclear Vaults and Brothels in Germany: More than 3 billion phone coordinates collected by a US data broker expose the detailed movements of US military and intelligence workers in Germany—and the Pentagon is powerless to stop it. (Wired)

Tulsi Gabbard’s history with Russia is even more concerning than you think: One expert says her views are ‘so wildly fringe that her potential appointment as DNI is genuinely alarming. (Independent)

Be sure to check out our Masters in Business next week with Michael Morris, cultural psychologist at Columbia Grad School of Business and Psychology Department. His research focuses on cultural influences on styles of cognition, communication & collaboration. He advises corporations, government agencies, NGOs, and political campaigns about culture-related issues. His new book is “Tribal: How the Cultural Instincts That Divide Us Can Help Bring Us Together.”

 

The US exports $165B a year more to Mexico than it imports – starting a trade war with them would be bad for US exporters.

Source: @SteveRattner

 

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To learn how these reads are assembled each day, please see this.

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