W. Brian Arthur is an economist and complexity thinker. He is best known for his work on network effects locking markets in to the domination of a single player. He is also one of the pioneers of the science of complexity—the science of how patterns and structures self-organize. He is a member of the Founders Society of the Santa Fe Institute and in 1988 ran its first research program. He has served on SFI’s Science Board for 18 years and its Board of Trustees for 10 years, and is currently External Professor at SFI.
Arthur held the Morrison Chair of Economics and Population Studies at Stanford from 1983 to 1996. He has degrees in operations research, economics, mathematics, and electrical engineering. Arthur is a well-known keynote speaker.
Sean DeLaney: Brian, welcome to What Got You There. How are you doing today?
W. Brian Arthur: I’m doing very well here.
Sean: This is the one I’ve really spend a lot of time researching studying, your works fascinated me. So this is gonna be a wide-ranging complex conversation but let’s get started actually with something I’ve never heard you discuss and I’m just interested about your day, some of the routine strategies, things that you’ve done throughout your career, that you found success in?
Brian: My idea of a very good day is to get a cup of coffee, and a pretty large cup of coffee. Sit down, sometimes with a book, often learning something, studying something, or quite often writing or maybe just chewing the end of a pencil and trying to think… And I think what seems to motivate me as I come up with questions, observations, observed the world, and then I wonder how it could be that way, or why it has to be that way, and for better or worse rather than look for answers on the internet, or academically, I tend to try to puzzle about more for myself, so my day is typically wondering about something.
Sean: The magic of questions, the ability of ourselves to observe and think about those thoughts, I’m intrigued you mentioned about picking up a book, how do you decide which book you might pick up and what ideas you might even spend the time on to explore?
Brian: I think things just come to me. Why should something be this way, or that way.
Then I wonder, for example, I’m wondering, I sort of wondered what artificial intelligence really is. And fundamentally what it is, I’m wondering what that’s going to do to the economy of jobs. And I tend not to pick up books and start because I find that’s a short circuit. I would rather play things through my imagination and see what I can explore into. Let me give you an example, I’ve noticed lately that science is shifting from expressing itself and equations, much more to expressing its self in algorithms. Why should that be? And so, I start off as what appears to be a stupid question because very often these questions have answers, as well as, why shouldn’t be that way? It’s like asking “Why is the sky blue?” But very often it starts me in a train of thought and I asked that question about three years ago, that’s taking me three years of really figuring out what’s going on in science or in algorithms.
I’m curious about how systems involved and unfold over time and curious how things change over time. But not just more of this, and less of that, I’m very interested in how things form and change, and I think that’s the main thing that’s motivated my career.
Sean: Is there a particular system, the evolution of that system that you’re most intrigued by, and have been throughout your entire career?
Brian: Not really, I think I’m just fascinated by how systems change over time. I mean in history or archaeology, I just mean in principle. If dinosaurs get wiped out, how does the overall system reassert itself? Without dinosaurs necessarily, what sort of new regime are you in? So, I guess I’m interested in how things form and how structures form, and how patterns form, and how patterns chang.
It’s not a mystery. You drive cars. If cars are dense enough on a freeway or a highway, we call that traffic, but traffic can pile up. Traffic can get into traffic jams, and traffic can redirect what the cars are doing if it tends for traffic to slow down.
I’m interested in the economy, I’m interested in technology. How does the whole collection of technologies chang?
Sean: How does a kid from Northern Ireland, Belfast, how do you become intrigued with this and spend your life work doing this?
Brian: Well, I can give you a smart aleck answer, but… I grew up in Northern Ireland in Belfast, and that itself was an education, because there was so very little change, at least when I grew up and, I don’t know, is my main answer. I think that what I learned in Northern Ireland was to observe. I grew up on the wrong side politically, I grew up as Catholic which wasn’t a popular thing at the time in Northern Ireland.
So you learned to keep a low profile and just observe and things like army patrols, police patrols, that sort of thing, and also, from day one I think I just had a sense of wonder. I think that was built in.
I met someone a few years ago who knew me when I was age four. She said I used to sit on her knee, the family friend, she said I was to sit on her knee and point to something and say, “Isn’t it amazing?”
I think I just had a wonder all my life, it’s… Some people are born that way. My hero in science was Charles Darwin. Someone asked Darwin late in life, “Are you very intelligent, Mr. Darwin?” And he had no real answer to that, you know he was probably quite smart. “So are you very wise, are you brilliant?” And finally they said, “You’ve been very successful, to what do you attribute that? And he just, Darwin simply answered, “I’m a man of enlarged curiosity.”
I think I would love to be able to claim that myself. I think that I just wonder what keeps airplane in the sky? Why doesn’t it fall down? Why should the Earth be round? These are questions that we all ask ourselves. Maybe at age 10 or age 8 or frustrate our teachers, but I was very fortunate to come back to Belfast. I had a first rate education.
There is a tradition in Ireland, and especially in Northern Ireland and in Scotland. There’s a real tradition of education, and it’s down-to-earth education. It’s a lot of science and engineering, and that tradition goes on today. Oddly enough, it’s not a corner of the world you’d expect to have a lot of scientists, but we were very well trained in rigorously trained and perhaps not with great imagination, but certainly technically trained.
Sean: So then with this background, I’m intrigued what led you to the States. and I know you stopped off in Michigan first, how did that come to be?
Brian: I think most people growing up in Ireland at the time, and this was in the 1960s, quite a long time ago, or the late 60s, I was very well aware that I needed to go abroad. It just wasn’t that much happening in Northern Ireland or for that matter in the Republic of Ireland either…
So I went for a year to England, and that was an unusual either to do a master’s degree. But I found I couldn’t quite take too England. I liked everybody I met but I just felt it was quite a different culture, and it was quite formal, people were very smart, but for some reason I just thought like many people growing up, I grew up, I thought I’d go to Canada. And I remember being in Canada as an undergraduate, age 19 my great-uncle took me to the tallest building in Toronto and up to the top floor looking out over Lake Ontario and he said, pointing across to Lake Ontario he said, suddenly said, “Over there is Yankee Doodle land,” he said, “Never go near it.”
When I was in England, I asked my professor to list down some universities that I ought to go and he was very methodical. So the first university he listed was Ann Arbor which is where the University of Michigan is and then the second one might have been Berkley and then Caltech. But I was lazy so I only went to the top one. I went to Ann Arbor for two years, I quite liked it, and it was refreshing because in the 1960s America was very much, very energetic and very positive. And this is just before they managed to put a man on the moon and science was king. I started to study mathematics seriously, and I found that the weather was terribly harsh in the Midwest, at least a bit too warm in the summer and humid, and too cold in the winter. So I transferred to Berkley in 1969, basically on a large account to the weather. I went to the west coast and with a few intervals I’ve been in California ever since, that’s now over 50 years.
Sean: Did you view going into the states and then even going from Michigan to Berkeley, did you view that as a risk at all?
Brian: Not really. I think I belong to a generation where in the mid-60s, just about everything that was happening culturally, not everything, but a lot that was happening was coming out of the United States and including rock ‘n’ roll, and all the things that happen. California Beach Boys. There’s a real cultural admiration for the US and clearly in terms of ideas and especially in terms of science, and education and science, it was very clear to me that at the time it was the best in the world and possibly still is, and there two universities right at the top, and one was Harvard, and the other was Berkely. It was hard to choose between them, but Berkely was one of the top two universities at that time. I feel very, very lucky to get to Berkeley to do a PhD.
Sean: You felt lucky to be there. How did you differentiate yourself while you’re there?
Brian: From?
Sean: From the other students? I even know, because you end up at Kinsey so you must have been doing something right. So when you got a young college a listener, I’m wondering what they could take away from this.
Brian: I went to McKinsey actually from Ann Arbor, Michigan, because one of my professors there knew one of the senior partners at McKinsey and I was very much directed to go there and I thoroughly enjoyed my time with McKinsey. I was there for two summers.
I learned a huge amount because in business the problems really mattered. It wasn’t academic. You could rethink something and save millions or I’d even say billions of dollars if you did things right. So that was intriguing.
Berkeley was sort of funny place in contrast to that. It was full of street people at the time, called these hippies, Hare Krishna people, people high on drugs. “Can you tell me where the free clinic is?” And it was very left wing.
I found that when I live Belfast in 1969, the British army had just moved in, and I couldn’t wait to get out of there, and so when I went to Berkeley about two months later, I thought “this is freedom.” I don’t have to put up with the Army and soldiers, but actually Berkeley was in upheaval over the Vietnam War and Ronald Reagan had sent in the National Guard and the Alameda County Sheriff’s Department was there too. So I was going from one, I don’t know if I’d call it a war zone, but one zone of chaos in Belfast, to another one, Berkeley, where there wasn’t that much difference. I found I wasn’t caught up in politics, not because I don’t care, but I… I wanted to get away from that sort of thinking. I wasn’t looking to discover some ism, I wasn’t looking to be arrested, I had had my brush with politics ’cause it was in your face all the time in Northern Ireland, and I was just glad to get some peace and quiet but that wasn’t exactly in Berkeley.
I was there in 1970 and a few months after I arrived, Nixon invaded Cambodia and if I recall the University of Berkeley partly shut down for five months in protest. The university closed, the classes, there was no treating, and I didn’t go to Berkeley to be political, I went to Berkeley to get away from all of that, so… And I can’t recall what I did, but I think I spent a lot of time studying.
Sean: I’m sure plenty of the Berkeley students can’t recall what they did during those five months, but I’m sure… Plenty weren’t studying.
Brian: There’s a saying, “If you can recall the 60’s, you were a part of it.”
Sean: So I’m intrigued to know a little bit more about the two years you spent with McKinsey and just… Is this the first time you saw complex situations and being able to observe that in the real world?
Brian: Yes. It was an interesting time as 1969-70. So again, decades ago McKinsey, the background was that Americans were not just pre-eminent in science, but also in business. There had been a lot of thought about business, a of new ideas with Alfred P. Sloan, General Motors, different ways of doing things.
The Americans had come to Europe and been decisive and winning the second World War. The Americans at the time we’re putting a man on the moon. So America had enormous prestige.
McKinsey and company were coming into Europe at the time. They just opened an office Dusseldorf, one and only office in Germany. I was sent there because I could speak some German, or quite a bit of German, and so McKinsey was interested in bringing ideas of rationalizing business, of sorting out business, of getting things better organized. German companies had got large after the war, and so this is 25 years or so after the war, Germany had bounced back. They had very large companies, like Deutsche Bank or Basf, huge companies, and there was an opening for McKinsey to help these companies think strategically, help break them possibly into profit centers like what had been done in the United States, with General Motors. And so I was very much part of that, or at least I was there observing and overseeing all of that.
What I liked about McKinsey, and I think it’s been pivotal in my approach later, was what McKinsey was doing at the time, was to go into really complicated situations, and they… At the time, and certainly they were not offering cookie cutter solutions, or trying to show harm companies into specific types of solutions. They were looking at the company they might spend months and trying to figure out here’s how the company really operates, here’s where the profits are really coming from … And they take quite a long time to get a really good grasp of that. And then, after they had done that, they interviewed, and interview of course, all along the way, but the solution, or set of solutions, more like set of strategies to move forward, would if you understood enough about the company, would become fairly obvious. And rather than impose out of the company, McKinsey was able to present those ideas as perfectly logical way of thinking about how to move in the future. So when I learned from McKinsey was a taste for going into complicated situations, learning enough about them until I was confident I know how to work in great detail, and then seeing what was obvious but needed to be done.
And then I think that I developed a taste to looking at complicated problems and try to not see them academically, or not see them as simple, but opening up in a way to the complicated-ness of something and then allowing yourself were to move forward when it became obvious what to do.
Sean: Yeah, it seems like a reoccurring theme, or almost buzzword here is “observation and observe,” and it seems like you are really stepping back, observing, and instead of implementing a set strategy or framework on top, you let it emerge through time and exploring. Is that what you were doing these?
Brian: Yes. So I’m not sure I learned that at McKinsey but I certainly learned the value of it at McKinsey.
Yeah, there’s no sort of sitting around on the edge of desks, a small team and people throwing in ideas, and debating, “Well, if this has happened, then that we would expect to see that.” And somebody would say, “Oh, let’s go out and check that.” It was more like the approach of a really good detective squad, than trying to impose something.
I don’t want to overclaim here, but that’s what I got out of it. And yes, I think that if I have a method in research it’s to observe and enquire… Yeah, and then allow something to operate.
I wanna skip forward here and some of the thoughts I’ll come back to it, but just as a footnote, I don’t know if you’ve ever heard of anything called the U-process, U-process?
Sean: I don’t think I have, no.
Brian: Okay, well, you might want to Google it, but capital “U” process. But it’s popular these days in business, and so around 1998, 99 I was asked by Fast Company Magazine, it was fairly new at the time, Fast Company, how managers should make decisions and I said, “Well it’s not that important, the decision, if it’s highly qualified, you can use logistics, or mathematics, or logic.” But it’s highly, very complicated, interwoven, thorny, knotted set of things. Back away a bit and then just observe like crazy and observe, observe, observe, and then give your time, your subconscious time to sort that out and then you can allow some thing that you need to do about it to surface. But if you force that, you will come prematurely to a rather simplistic solution that may not be appropriate. Once you see what needs to be done, you can re-surface fairly quickly and implement that. So I think, again, it’s another expression.
By the way, that… By a guy named Otto Schmarmer, and Joseph Jaworski. They refine that set of ideas in their own words and in their own terms, and that’s become very popular in business with tens of thousands of people in many, many countries following this thing. I did not initiate that. The answer I gave in Fast Company Magazine, as I said, if the decision is complicated, fundamental, and important, then observe everything you can about it and then back away and allow the conclusion to arise, then it can implement it pretty quickly. And Jaworski saw this little piece in Fast Company and wanted to meet me and so that’s where they got this idea and they acknowledge that. I’m not trying to over-claim anything. I’m just saying that I think this observing things is terribly important.
One of the things in business, or there’s two approaches that I don’t particularly like one is an emphasis on quick decision-making. I’m a CEO, come to me, what should we do? Should we expand into China? … Something quite important. It’s not a good idea to probe quick decisions, it is a good idea to just draw back and do a lot of observing and thinking consulting about it.
The other is KPIs or whatever you want to call them, key performance indicators.
Yeah, you know I’ll give that one cheer out of three.
Maybe it works here and there, but it’s not… I tend to think if something’s truly important you can’t solve it by quick decisions, it has to just emerge.
Yeah, think If I do a method I never thought much about any method is, it’s more to think about things, observe them, and go really slow and then see what presents itself.
I think my method of doing research is basically sleuthing, gathering evidence, trying to figure out why things ought to be, and then coming to a conclusion. Once you’ve come to a conclusion, then you can very quickly follow up the implications.
Sean: I would love to just get inside your head for a second. When you’re spending 12 years thinking through this, what does that process look like for you internally? Are you mapping things out in your head are you just putting things down on paper, what is that actual process like?
Brian: I think I was just generally, generally curious about technology. I’d studied engineering for four years, I did very well in the exams and so on, but at the end of four years, I wasn’t sure I know what engineering was or technology. I mean this sort of half philosophically and I could fascinat it, I’ve been fascinated all my life about technology, that’s why study engineering.
And I sort of wondered where new technology, like the jet engine, come from. And I don’t think that any researcher, or now I see myself as a researcher and more than a teacher, or a scientist or whatever, I’m trying to figure out things usually.
So I was wondering where… Where the radical new technologies come from. They say it comes from genius, but that doesn’t explain anything. And so, you don’t take up projects like that unless you start with one or two ideas. And it had become obvious to me that new technologies were put together from existing ones, so combinations and technologies that went before.
So if I looked inside any technology, like a jet engine for that matter or an early computer, I’d be seeing pieces that already existed. Jet engines have compressors to pump up the pressure and the air they take in, the combustors all those things already existed, and the turbines to drive the compressor to pump up the pressure. And so, all these things were well-known. What was new about the jet engine was putting them together in a different way. If that seems very deep, it’s not very deep because the only way to solve the problem is to construct an answer from the pieces that you have on hand.
So I began to see this pattern again, and again, and I got curious about technology, then I decided, pretty formally, that I would if I was gonna write a book on this, I would study about 20 to 30 technologies and know them really, really well. And of those, I would know about a dozen extremely well.
So like the coming of the computer, possibly vacuum, tune radio. I’ve been trained as an electrical engineer, radar’s another one, the pulverized chain reaction in molecular biology, and so I started to really study these things. I thought it would take me two or three years and it took 12 years, but at the end of it, it was like someone decided around 1800-1820 that they wanted to know how biology operated. And so they started to study animals, particular animals, and figure out what do they have in common, and how did they operate and where did they come from, and how did they differ?
So at the end of the 12 years, I wouldn’t say I knew everything about technology, but I knew an awful lot more than when I started and I started notice common patterns that all technologies used, sort of phenomena. And I noticed also that most of the things I was observing hadn’t been observed or this hadn’t been written down and so it was a thrill. I decided I would write down what I was seeing, again, again… So what I was really seeing was repeating patterns and then trying to describe those and how they operated and eventually how new technologies came about were constructed and they brought the book out in 19… Sorry, in 2009, I started in 1997, so it did take about 12 years, but I have no regrets. I thoroughly enjoyed it.
Sean: So this was one of those moments of intense intellectual excitement, right, for you?
Brian: Yeah, I think it’s extremely, if you’re lucky in research, you can observe certain things and then you get these moments where you say, “Oh, okay, so that’s how that works. Wow,” and then you noticed that nobody else has observed that. And then, generally speaking, I can’t solve problems on the spot, and maybe some people can. If I can cook up a problem, how does this operate or how does that operate? I can’t generally solve that, it takes me two, three years. So my metaphor is that if there’s a medieval city I’m trying to occupy, to solve the problem I just camp outside it. And then a couple years later, the drawbridge comes down, people bring out tea and sandwiches, and say, “Come on in, it’s all yours.”
So there are other people could go in with sure tank, or whatever, they could go in with a battalion and flatten the walls. But I’m not one to… I think that you need to wait and figure those sorts of things out slowly.
Sean: You mentioned a lot about patterns, and I know you know that I’m very intrigued by this and fascinated and I even know when you were younger and you’d be on an airplane, you’d sit at the window just to observe the patterns that you’d fly over. So is this just an inherent trait? You’ve always had your ability to pick up on patterns?
Brian: Yes, I think so, I’m fascinated by any sorts of patterns visually especially, and it doesn’t mean I can always understand how they operate, or how they come into being, but yeah, I’m interested in observing things and the most interesting things to observe are ones that are not that simple, but not too complicated or chaotic. It’s like landing from Mars and you wonder, “Wow there’s mountains. How did that happen?” And so you might think about that for a long time, geologists did. I’m interested in how things come into being, how they form and how patterns form. Sometimes we’d say how they self-organize. And I was lucky that science is turning more to that rather than say, how things are, as we did more than 200 years ago, how does this organism work? How does the bones of hippopotamus differ from say that of a, whatever, rhinoceros or something? Science has come to ask how did things form? Where did whales come from? They’re clearly, as far as I know, they’re mammals and they swim in the ocean, they can from the land. How did that happen?
So science is much more interested in these days than before in how did things come to be, and that’s really what’s fascinated me.
Sean: So how things came to be… I would love for you to dive deep on 1979, and just the impact that had what that timing looked like for you and I’d love if you could even set the framework about just how you started reading up on molecular biology at the time and just the overall excitement, and what was going on in your life at that time.
Brian: So I was working in the International Institute for Applied Systems Analysis in Vienna, it was the US-Soviet thinktank and I kept getting sent to what was then thee Soviet Union, but also elsewhere in Europe. There was a book that came out in 1979 called The Eighth Day of Creation by Horace Freeland Judson, and he was documenting and how molecular biology in the 1950s had gotten self-organized and how characters like Francis Crick, and Jim Watson, and others, Sydney Brenner, had a major hand in figuring that out over one or two decades and long into the 70s. Much later, in fact more recently I got to know Sydney Brenner really well because he lived in Singapore. And so that was like touching the creation himself. Brenner had been part of this in the 1950s and 60s. He was in his 90s, so I was very interested. I think the main effect that the book had on me in 1979 was that I realized that biology… I had a very impoverished educational when it came to biology, it just seemed to me to be collections of species, and here’s how this operated and here’s how that operated, here’s how dragonflies can fly, two sets of wings, that kind of stuff.
But what molecular biology was showing me was an incredibly complicated, but highly mechanistic world at the molecular or atomic level where things were playing out in conjunction with other things and structures for being created, and it was recent. It was only in the previous 30 years or so that 1979 that people had begun to understand the mechanism of molecular biology and… This was all still very fresh, many of the protagonists were still alive and I was reading about this and just seemed very dramatic to me.
So contrast that with economics, when I’d been at McKinsey, I’d be interested in how economies work, and went back to Berkeley, and what was presented to me at Berkeley was that economies are basically represented by equations and if you wanted to get an economy working better, you need to understand the equations was like a gigantic power station. If you knew how to adjust this, then that would follow. And it didn’t show that much inside.
Now it seemed to me that as I read biology, and biology was full of these mechanisms that would switch each other on and off, many mechanisms. So in the sunlight, for example, in springtime I’d fall on some bug and that might cause some molecular reactions for the bug to open up and temperature would have to be right, and sunlight would have to be right etc… So what I was seeing in biology was complicated mechanism highly interacted. In the economy, it was presented to us at least in graduate school, that the economy was just collection of firms or companies. They weren’t so much interacting, we were just producing things and then what was produced, whether it would be beer, or trampolines or something, somehow came to some kind of an equilibrium where the demand for them at the prices they were getting charged, equalled supply. A bit like a spider web everything, all the forces held in tension, but in an equilibrium.
Yeah, here in Silicon Valley, I wasn’t yet in Silicon Valley in ‘79, but the economy, it seemed to me was much more like an ecology. Firms weren’t coming in, and they hadn’t existed forever, everything wasn’t an equilibrium, new things would happen, and the new technologies would come along, and there wasn’t so much a fight for survival, that was part of it, but it was things coming and going and might be quite a complicated set of interactions. So biology seemed to me to be a better metaphor for the economy or ecology was a good metaphor and… As opposed to just seeing this as an application of 19th century physics that were all these forces that were held in equilibrium.
So biology, reading that had a huge effect on me. I’d become very interested anyway in Berkeley, so well before 1979, on what happened when we had positive feedbacks in the economy or increase in terms, and that was the early work I did from, I suppose more of biological point of view.
Sean: Is it true on November 5th, 1979 in your notebook on the top of the page, You wrote, “Economics old and new.”?
Brian: Yes, it’s true. I still have the notebook.
Sean: Do you really?
Brian: Yeah, I have the notebook. It exists and it’s absolutely true.
I was in Vienna at the time and I’ve been studying Economics very hard. That was 1979 November.
Sean: Yeah, November 5, I think.
Brian: What happened was that, I, I read an article by Ilya Prigogine in June 1979, where he was talking about positive feedback, so he was talking about a merge of patterns. So if you have a bunch of not very smart individual insects, termites, for some reason they have built in rules of interaction where they can build elaborate termites nest. So that would be an instance of patterns forming from rather simple rules and I read that, I was quite mesmerized and I started to realize that, I can’t remember now what I wrote in the notebook but it’s easy enough to find out. I noticed when I went back and looked at that recently, by the way, there was a lot of population and demography in that because at the time I was a demographer, and I complained that there wasn’t age, the age dimension wasn’t included in the economy.
But yeah, so… So in November, I just sat down quite impatiently and I remember a pencil drawing the line saying, “Old economics, new economics,” and I just wrote down in two columns how they were different, for example, the old economics would be based largely on physics and on standard mechanisms, fairly simple ones. The new economics, in my opinion, would be based more on a biological concept and it will be more organic as supposed to just purely mechanistic organic, meaning that what was there already could affect what was happening.
There would be equilibrating forces or negative feedback in the old econmics, but the new economics would allow positive feedbacks. The larger, originally, that Facebook gets the more you need to be on Facebook as opposed to MySpace. Whenever that was… 2005 or something.
So it seemed to me there were a lot of contrast. The remarkable thing was that I didn’t think this up. I’d be happy, by the way, to find that notebook and Xerox a few pages if you’re curious.
Sean: Yeah, please do that. And if you’re ever gonna throw it out, please do not. You could send it to my house, please never throw that notebook out.
Brian: I’m old enough now to wonder what’s gonna happen when I die. I think I find history of economic thoughts…
Sean: Yeah.
Brian: So I absolutely… But the interesting thing was… What was strange about that was nearly all that I noted down there actually came to pass in economics, that is economics now is much more biological, it embraces the idea of an ecology.
There were things I didn’t foresee, like the massive role of computing, but to a large degree, I wouldn’t say nailed it but I came about as close as anyone could be. In ‘79, I just didn’t see how to make all of this work. You know it’s easy to envisage a kind of promised land but hard to see how you would fully get there. And that’s really been a quest for a lot of the rest of my life since then.
Sean: Yeah, I’d love to your take with regards to feedback loops, and how smaller companies seem to last longer than these big companies. What’s the reasoning for that?
Brian: What I became fascinated with actually, originally in grad school in Berkeley when I was studying economics, everything happened on a diminishing return. So if something gets ahead in the economy, there’s more, more and more coal mined, and if you’re mining into veins where it’s harder to reach coal, eventually things get more costly or… And similarly if there’s more and more hydroelectric sites used, then you come into downsides that aren’t as advantageous. All the good ones have been taken, and so there’s diminishing returns. So sort of negative feedback, the more you push something, the harder it gets. And this gives you a balance normally, if you want that more mundane terms, the more movies you see in the theatre, you exhaust all the good ones, you’ll start to run into the ones you haven’t seen. Similarly with television shows that you’re watching. And so eventually there’s a balance to going out to the movies and watching things on television.
That’s what economists had taken for granted, it happened all over the economy.
But I began to observe that occasionally there were positive feedbacks if something got ahead, it could further ahead. So it was pretty clear to me that if everybody was using Microsoft products, this was about 1980, or ‘83, ‘84, then I would have to do the same if everybody was using IBM and DOS as a system, I would have to do the same. So I began to realize that if there were say five, or six, or 20 alternatives, one alternative might just get more users, it would benefit from what we now call network effects.
So, something might arise just serendipitously for no particular reason. But if it takes off, it’ll get more adherence, get more adherence and pretty soon it dominates and shuts out anything else.
And I wrote that up and developed the theory of that in 19… In the very early 80s. I wrote a paper on in Vienna, actually sent it to many journals. It was not publishable. It didn’t get published for six years. Finally it got published in a top journal in 1989, but people were saying, “That’s not economics.” So I was basically saying that if search engines start off like Alta Vista, or whatever else, Google and others, start off all at the same time, if one gets ahead, if everybody is using that, you would be more kind to use that. You’d know how to use it, you’d know how to operate, your friends would be using it. And so, it could lock in dominate. And by the way, that paper was turned down by four top journals and finally published in a top journal, and maybe people were hoping it would be forgotten, but it’s gone to over 10,000 citations which makes it a classic.
Sean: It certainly does.
Brian: My additure to that is sort of… I’m turning my nose at the reviewers, and…
Sean: I mean, you’ve been through it all in terms of tech, so I’m intrigued to hear about which companies throughout history have you been most impressed with?
Brian: I don’t have an easy answer for that because… I would interpret your question almost as which do you think are the best strategists? And that I think that over time, in terms of locking in markets, Amazon and Microsoft might be excellent. In terms of rail technology and caring about the technology, in the old days at least then I would say at the end, Apple and Hewlett Packard, possibly a decade or two ago, Boeing and companies like that.
There’s a difference. Some tech companies care a lot about the actual technology, some care about grabbing users. The genius of Steve Jobs was that Jobs basically, not so much an engineer but a designer, and he understood how to get superb products into the hands of consumers who wanted them, but he also understood how to get the engineers to choose those, and that’s a tough thing to do and I don’t think that’s often replicated in tech, but the genius of Silicon Valley is it kept reinventing itself every couple of decades.
Sean: Yeah, I appreciate you taking that question and running with it and just walking through almost your thought process, it’s very cool to hear you discuss that being there for so many different things. But what about right now, what’s really capturing your attention the most?
Brian: When I wrote that book on technology, it fascinated me that every so often a new set of technologies would come along, not a new single technology, but sets of technologies might come along… And what fascinates me is that if a set of technologies is deep enough, meaning if it’s going to make an enormous change it’s not just like that one technology comes along and the company adopts that, it’s not. It’s that you can say the overall economy, every company, every entrepreneur, or every small firm or large firm, doesn’t adopt the technology, it encounters it.
So there’s a massive encounter between the new technology, but the bottom line, I would say in this is that we’re moving into a new era, and as with climate change, we’re not spending anywhere near enough attention and thinking about what lies in our future. It may be wonderful, it may be bad, but one where the other, we was human beings, have created artificial intelligence, machine learning, all these new technologies, and we’re not thinking too much about how they affect us, and we should be.
Sean: So I’d love to get your take, maybe here’s a final part, if you got advice for someone young listening to this, how do they understand what’s coming and how can they best prepare for that type of environment?
Brian: Well, the best… As you can see I’m stumped, the best I can do is come up with one or two cliches, and say… I think the best defense against rapidly changing environments is to get a really good education, and if possible a technical one. But knowing that whatever you learn, an engineering or even medicine, may be outdated quite rapidly. So only just stay flexible.
I think a lot of institutions are going to change. I think it’s highly likely that… We now have university, a university-type education in our early 20s or late teens, that need that not being the case later on. So I think to stay adaptive and flexible would be my first thought.
But I don’t have any advice except to stay vigilant and just watch what’s coming.
I sense that that’s a lame answer. What I would like to see is, and when things like that are… When things are coming on that are going to change the economy, that will change society to… And I wouldn’t want to say any job is immune. It’s not just that jobs will change the overall structure of everything is likely to change. How we fit in is yet to be determined. I think that we’re moving rapidly from an economy that has dominated by the whole idea of producing more, to an economy where what really counts is to get who gets what? Who gets the ability?
Sean: It’s funny where we started is with how you start your day and the questions you’ll sit down and wrestle with. And I really just looking at my notes right now, I feel like myself and the listeners are gonna have a lot of questions that we need to think through and can help understand, and then something I just need to highlight is just how much you talked about the ability to sit back and observe and not make such quick decisions. I think that’s a lasting takeaway for me. So I appreciate you bringing those up. If you want the listeners staying more connected with you, we’re gonna have your books linked up, your research papers as well, anywhere else you think they should be going to just stay connected with you.
Brian: My home base is SantaFe Institute. At the moment I’m in Stanford, spending the year at the Center for Advanced Study in the Behavioral Sciences, that’s literally where I am. Looking down on the Stanford Campus up the hill, a little bit here.
No, for better or worse, I don’t produce a blog. It should be pretty clear that what I like to do is just chew the end of a pencil or something, as opposed to trying to keep followers happy. I don’t have Twitter or a blog. I’m not against that, it’s just not my personality.
I do have a website, and I’m sure you’ve taken a look at it or you could take a look at it. I’d be happy to have feedback on it, but I noticed I don’t spend that much time on that and I’m looking for an analogy here. I’m like a hunter, I think, who likes to be out there hunting game, not putting it on the wall. I don’t know if that makes any sense to you.
Sean: It makes perfect sense and I’m happy you actually do do that because then you get to concentrate on the things that bring the most value to the most amount of people. This has been a lot of fun, so I really do appreciate you spending this amount of time. Both of myself and the listeners, so W. Brian Arthur, it’s been an absolute pleasure to feature you on What Got You There. Thanks so much.
Brian: Well, thank you. I’ve enormously enjoyed it. Good luck to your listeners.