AI Summary #
The host discusses their theory on why people struggle to imagine a better future, calling it “Compounding Optimism.” They argue that our perception of the past is often rosier than reality, while the present may be more challenging to envision as an improvement over the past. However, they believe this pessimism can be overcome by understanding the power of compound growth and how small ideas can combine and compound into something remarkable.
The host references a theory called Mueller’s Ratchet, which explains why few species reproduce asexually because it allows for genetic diversity and prevents “bad stuff” from sticking around. They also highlight the importance of learning from and building upon the ideas of others, as exemplified by Steve Jobs’ admiration for Edward Land and other entrepreneurs.
The host notes that many successful individuals have been influenced by others, often without realizing it themselves. For example, Thomas Edison was influenced by Michael Faraday’s work on electricity, and Warren Buffett learned from Benjamin Graham’s finance class. This concept is echoed in the idea that a book can be more than just what the author wrote, but also the ideas and inspiration it sparks in readers.
The host concludes that compound growth and the power of small ideas combining to create something remarkable are often underestimated due to their counterintuitive nature. By viewing progress as a result of incremental innovation and idea-sharing, rather than relying on individual genius, people can begin to imagine a more optimistic future.
Key points discussed:
- The importance of understanding compound growth and how small ideas can combine to create something remarkable.
- Mueller’s Ratchet theory explains why few species reproduce asexually due to the lack of genetic diversity.
- The value of learning from and building upon the ideas of others, as exemplified by Steve Jobs’ admiration for Edward Land.
- Many successful individuals have been influenced by others without realizing it themselves.
- Compound growth can be underestimated due to its counterintuitive nature.
Notable quotes:
- “A book is far more than what the author wrote. It’s everything that you can imagine and read into it as well.”
- “Ideas compound, inventions compound, education compounds… a trivial thing today can go on to create something or influence something that becomes massive.” - Matt Ridley
- “If microbes had not become swapping genes a few billion years ago, and animals had not continued doing so through sex, all the genes that make eyes could never have got together in one animal…” - Matt Ridley
AI Transcription #
Welcome back.
Thanks again for being here.
One of my long-term beliefs about the economy and the psychology of how people think about the economy is the general idea that the past was not as good as you remember.
The present is not as bad as you think, and the future will be better than you anticipate.
It’s just this idea that people have a very hard time imagining a future that is much better than it is today.
They understand when they look back that we had a lot of progress and growth and improvement in the past.
If you compare today’s economy with what it was 100 years ago, they understand how much growth you can have.
But going forward, that seems so hard to imagine a world in which the economy of our grandchildren is going to be, you know, five times greater than it is today.
That seems crazy to think about.
Optimism is very hard to imagine in the future, even if you understand how powerful it was in the past.
I have a little theory about why this is.
It’s why I call today’s episode Compounding Optimism.
Let me share with you my little theory that I have about why progress is so easy to underestimate.
I’m going to try to explain it in four different parts.
Last year, a crocodile in Costa Rica was found pregnant, and she did it all by herself, with no help from a male.
The baby crocodile that she gave birth to is 99.99% genetically identical to her, the mother.
It is the first documented case of a crocodile reproducing asexually.
There are a few other animals that have been known to do this.
Some birds and snakes can do it.
But it’s extremely rare for any animal, any species, to be able to reproduce asexually.
And there’s a very good reason why.
Just a hundred years ago, an evolutionary biologist named Herman Mueller came up with this theory that eventually became known as Mueller’s Ratchet.
It says that dangerous mutations tend to pile up when there is no genetic recombination, which can ultimately lead to a species extinction.
Basically what it says is this.
In the absence of variety, like a male and a female mixing their genes, dangerous mutations tend to stick around because there are no new or better variations to compete the bad stuff out of the gene pool.
Bad stuff happens when you are not mixing new ideas together.
That is why so few species reproduce asexually.
Now keep that in mind while I introduce the second part to you.
My friend David Sennra, of the wonderful podcast Founders, he told the story last year about Steve Jobs.
He said when Steve Jobs was in his 20s, he went to meet Polaroid Founder Edward Land.
And Steve Jobs said that visiting Edward Land was like visiting a shrine, Edward Land with Steve Jobs’ hero.
And so Steve Jobs was there to meet Edward Land, to learn from.
And in fact copy.
The ideas and the genius that Edward Land had found over his life.
And you see that idea of one entrepreneur learning from and copying the ideas of another entrepreneur all over the place.
Jeff Bezos took a lot of ideas from Sam Walton.
Both Steve Jobs and Jeff Bezos took a lot of ideas from Sony.
And so David said look, you always find these people where you are like, oh I thought this is the iPhone, I thought that was a Steve Jobs idea.
And David says no no no, it was actually a Sony idea that Steve picked up from Sony Founder Akyo Marita.
Or it were from Edward Land.
They are all kind of stealing ideas from each other.
So David says go back and watch the presentations that Steve Jobs gives where he says we are building at the intersection of technology and liberal arts.
Steve Jobs used to say that.
And David points out, Edward Land said those exact words.
David says you are never going to find anybody who gets to the top of their profession without studying the people who came before them and learning from them and admiring them and even copying their ideas.
And that is so true and so timeless that you see across the entire history of technology and innovation.
Thomas Edison stole or took, if you want to say, a lot of ideas from another inventor named Michael Faraday.
Bill Gates took a lot of ideas from a early computer inventor named Henry Edward Roberts.
Warren Buffett of course learned a lot was everything you know from Benjamin Graham and Phil Fisher.
Edwin Land himself, the guy who influenced Steve Jobs, was massively influenced by a Harvard physics professor named George Wheelwright who eventually became a Polaroid co-founder.
So the question is did George Wheelwright know that he would influence Edward Land, who would then influence Steve Jobs, who would then design the iPhone that now 2.5 billion people around the world use?
Or you could ask did Michael Faraday, who died in 1867, did he know that his ideas would directly influence Thomas Edison and therefore directly influence the creation of the light bulb, which effectively went on to lead to the creation of everything from the modern power grid to nightlife in general?
Do you think Benjamin Graham knew that his 1950s finance class would go on to influence Warren Buffett, create Warren Buffett, which would lead to today in this year 45,000 people trekking to Omaha, Nebraska to hear Benjamin Graham’s former student Warren Buffett speak?
I think the answer is of course not.
It is so hard to know what idea or invention or new philosophy will go on to influence.
And what a person who was influenced by those new ideas will go on to create.
Dehawk, who is a founder of Visa, he once said, he said quote, a book is far more than what the author wrote.
It is everything that you can imagine and read into it as well.
I think that’s so important to point out.
An author might write something that is dull or obvious, but it could inspire a reader to go out and do something incredible.
To look, ideas compound, inventions compound, education compounds, a trivial thing today can go on to create something or influence something that becomes massive.
Science writer Matt Ridley has this great saying, this great idea.
He says if you look historically, most innovation, most new technology happens when several different ideas quote have sex.
Most new ideas and inventions are pretty bland on their own, but when you mix several of them together, you can get magic.
So plastic is a great invention and electronics are a neat invention.
Metal is a special invention, but if you mix all of those things together in the right way, you get an iPhone, which is pure magic.
It’s ideas combining and joining and merging that create the modern world.
And it’s the opposite process of what our crocodile friend recently pulled off.
Matt Ridley explained this in his book The Rational Optimist about the benefits of recombination.
He says quote, a mutation that occurs in one creature can join forces with a mutation that occurs in another.
If microbes had not become swapping genes a few billion years ago, and animals had not continued doing so through sex, all the genes that make eyes could never have got together in one animal, nor the genes to make legs or nerves or brains.
Each mutation would have remained isolated in its own lineage, unable to discover the joys of synergy.
He went on in a different talk one time to explain this further, he said quote, I’m not interested in the debate about whether some groups have higher IQs than others.
It’s completely irrelevant.
What’s relevant to a society is how well people are at communicating their ideas and how well they are cooperating, not how clever any individual is.
Same idea here.
Small ideas mixing and compounding into big ones.
That is what really drives the world.
And that brings me to the fourth part here today.
Part of the reason I think that pessimism is so much easier and more common than optimism is that compound growth is not intuitive.
It is hard to imagine, say, our incomes doubling over the next generation.
That seems like such a massive leap.
It seems like you’d have to boil the ocean to get that done.
But doubling the average income over 30 years works out to about 2.3% growth per year.
It’s not crazy at all.
It’s actually quite achievable.
What made it seem so ambitious to begin with is that compounding is easy to underestimate.
If you look at the end result of a long period of compounding, it’s astonishing.
But all that took to get it done was little bits of incremental growth strung together for a long period of time.
And all progress is like that.
Technological progress is easy to underestimate because it’s so counterintuitive to see how, for example, the philosophies of a guy who invented Polaroid film would go on to inspire the iPhone.
Or how an 18th century physicist would write a notebook that would set the foundation for the entire modern electrical system.
If you view progress as being driven by the genius of individuals, then of course it’s hard to imagine a future where things are dramatically better.
Because no individual is order of magnitude smarter than average.
But when you view it as one person coming up with a small idea, and another person copying that idea and tweaking a little bit, and then another person taking that insight and manipulating it in their own way a little bit.
And another person taking that product and combining it with something else, like incremental, tiny bits, little ideas mixing and joining and blending and mutating and compounding together.
Then suddenly the idea of progress and growth, even a lot of progress and growth, is much more conceivable.
That’s all for this week.
Thanks again for listening and we’ll see you next time.