Rethinking the Value of a Business Major

Melissa Korn reporting in the Wall Street Journal:

“The biggest complaint,” writes Korn is that “undergraduate degrees focus too much on the nuts and bolts of finance and accounting and don’t develop enough critical thinking and problem-solving skills through long essays, in-class debates and other hallmarks of liberal-arts courses. Companies say they need flexible thinkers with innovative ideas and a broad knowledge base derived from exposure to multiple disciplines.”

That gap in my own knowledge was one of the reasons I started Farnam Street.

Robert Hagstrom, author of Investing: The Last Liberal Art, adds: comments

At first, you might think the “art of achieving worldly wisdom” is an elective you can do without. After all, there is simply not enough time to read all that is required before the next day’s opening bell, and besides, what passes for reading today is more about adding information and less about gaining knowledge. But don’t despair. In the words of Charlie Munger, “we don’t have to raise everyone’s skill in celestial mechanics to that of Laplace and also ask everyone to achieve a similar level in all other knowledge.” Remember, as he explains, “it turns out that the truly big ideas in each discipline, learned only in essence, carry most of the freight.” Furthermore, attaining broad multidisciplinary skills does not require us to lengthen the already-expensive commitment to college education. We all know individuals who achieved a massive multidisciplinary synthesis of knowledge without having to sign up for another four-year college degree.

According to Munger, the key to true learning and lasting success is learning to think based on a “latticework” of mental models. Building the latticework can be difficult, but once done, it can be applied to a wide range of problems. “Worldly wisdom is mostly very, very simple,” Munger told the Harvard audience. “There are a relatively small number of disciplines and a relatively small number of truly big ideas. And it’s a lot of fun to figure out. Even better, the fun never stops. Furthermore, there’s a lot of money in it, as I can testify from my own personal experience.”

Building Blocks and Innovation

Most innovation comes from combining well-known, well-established, building blocks in new ways.

light_bulb

John Holland, a professor of two vastly different fields—psychology and engineering—at the University of Michigan, lectures frequently on innovative thinking.

According to Holland there are two steps to innovation. The first step is to try and find the right building blocks—the basic knowledge. Second, is the use of metaphors to relate understanding.

Holland is focused on innovation, but many readers of Farnam Street will recognize the first step—acquiring the building blocks—as the process for acquiring worldly wisdom.

Like us, Holland wants to connect well-known and well-established ideas from multiple disciplines in new ways to solve problems.

In our case, the basic building blocks are the big ideas in each major discipline. While this seems daunting, luckily, according to Charlie Munger “80 or 90 important models will carry about 90% of the freight in making you a worldly wise person.”

Domain Dependence and Linking
It’s important that you can link these models together and recognize them outside of the domain they are presented. Many people, for instance, don’t link the supply and demand from economics and equilibrium from physics. Yet in many ways they are the same thing. If you can’t recognize the forces at play outside of the system in which you learned about them, you are domain dependent.

In Antifragile, Nassim Taleb writes:

We are all, in a way, similarly handicapped, unable to recognize the same idea when it is presented in a different context. It is as if we are doomed to be deceived by the most superficial part of things, the packaging, the gift wrapping.

If you don’t have a basic understanding of each of the major models you won’t be able to link them together. And if you can’t link them together, you’re going to go through life like a one-legged man in an ass-kicking contest.

Construction of a Model
According to Holland, “the construction of a mental model … closely resembles the construction of a metaphor:”

  1. There is a source system with an established aura of facts, interpretation and practice.
  2. There is a target system with a collection of observed phenomena that are difficult to interpret or explain.
  3. There is a translation from source to target that suggests a means of transferring inferences for the source into inferences for the target.

Seeing new connections requires models and metaphors. Holland continues:

For most who are heavily engaged in creative activities, be it in literature or the sciences, metaphor and model lie at the center of their activities. In the sciences, both the source and the target are best characterized as systems rather than isolated objects. … In the sciences, decisions about which properties of the source system are central for understanding the target, and which are incidental, are resolved by careful testing against the world. As a result of testing and deduction, a well-established model in the sciences accumulates a complicated aura of technique, interpretation, and consequences, much of it unwritten. One physicist will say to another “this is a conservation of mass problem” and immediately both will have in mind a whole array of knowledge associated with problems modeled in this way.

“The essence of metaphor,” write Mark Johnson and George Lakoff in their book Metaphors We Live By, “is understanding and experiencing one kind of thing in terms of another.”

Holland posits that metaphors help us translate ideas into models, which form the building blocks of innovative thinking.

“In the same way that a metaphor helps communicate one concept by comparing it to another concept that is widely understood,” Robert Hagstrom writes in Investing: The Last Liberal Art, “using a simple model to describe one idea can help us grasp the complexities of a similar idea. In both cases we are using one concept (the source) to better understand another (the target). Used this way, metaphors not only express existing ideas, they stimulate new ones.”

Metaphor and Innovation
From the Credit Suisse Thought Leader Forum:

To understand the problems in any discipline, it is necessary to have deep knowledge in that discipline. To resolve those problems, it is often necessary to look at the problem through the filters of a different and often distant discipline. The simplest analogy to the phenomenon is simply perspective. It is very difficult to understand, say, the traffic patterns of a city if you are stuck in your car at rush hour. With the distance provided by a traffic helicopter, however, it is much easier to see the major thoroughfares, the bottlenecks and the overall dynamics of the traffic system. The shift in vantage point offers better understanding and new insights for your strategy. For more abstract challenges, the use of metaphor serves the same purpose as distance in the traffic example. If we are stuck on the challenge of distribution in a global manufacturing company, for example, it may be useful to apply models from other disciplines as metaphors. The model that we have developed and used for our distribution system has been quite effective over the years, but we just cannot seem to resolve some particular challenge. Perhaps we can learn something from other kinds of distribution systems. How does an ant colony collect and distribute its resources? How does the human body manage its circulation and processing of nutrients and wastes?

Three Keys to effectively applying metaphors

There are three keys to effectively applying metaphors to achieve insight and innovation. First, you must develop a deep understanding of the metaphorical system. You will gain no new insights if you look at the human circulatory system and say, “Aha! The brain tells the rest of the body where to send things!” If you draw conclusions too quickly, then more than likely you have only recreated your existing model of distribution systems – you are seeing the human body’s circulation system as if it were the distribution system of a global manufacturing firm. If you invest the time and effort to understand this complex new system on its own merits, then you might discover something interesting about your own discipline. For instance, the human circulatory system is one of several overlapping hierarchical systems that allow the human body to grow, heal, change and yet maintain homeostatic balance. How do those systems overlap? How are the priorities of those different systems balanced? What overlapping systems exist in our global manufacturing firm, and how do they interact? An in-depth study of a new complex system should force you to ask new questions about your own, seemingly familiar system.

The second key to applying metaphors is to recognize the value of the cognitive leap. As you map the models from one system onto another, the fit will never be perfect. Our global manufacturing firm is not a human body. Therefore the solution to our challenge will not lie in our suddenly believing this to be true. Instead, the solution will lie one or two steps away. As we look at the human circulatory system, we will encounter questions and tangential thoughts. “What performs the function of ‘hormones’ in our organization?” We will not, of course, implement a system of complex chemical exchanges in our organization, but this might lead us to think about our communication systems or decision-making metrics in a new way.

The final key is often the most frustrating for managers — only a very few of the ideas that this process produces will be highly valuable. Some of the ideas will be useless. Many of the ideas will be interesting but impractical or irrelevant. Other ideas will serve as useful, incremental improvements to your system. But only a rare few of these ideas will be truly revolutionary. The secret is the same in any game of statistics – you have to try large numbers of these metaphors for the big ideas to hit. These ideas are the outliers, not the norm, and while metaphor can push your thinking towards the innovative, no process can guarantee that your new ideas will be both different and effective. Many managers are willing to try this approach once or twice, and give up when it does not immediately return impressive results. … In order to discover great innovations, you must engage regularly in the search and recognize that most of your discoveries will have either marginal or moderate value. Creative combination is a process that increases your odds of discovering breakthrough innovations, but it cannot guarantee success. This is a tool, not a silver bullet.

While the audio quality leaves much to be desired, Holland gives an interesting TEDx talk introducing a lot of these ideas:

Metaphors

“The greatest thing by far is to be a master of metaphor; it is the one thing that cannot be learnt from others; and it is also a sign of genius, since a good metaphor implies an intuitive perception of the similarity in the dissimilar.”
Aristotle, De Poetica

what is a metaphor?

For most people a metaphor is a matter of extraordinary rather than ordinary language. “For this reason,” write Mark Johnson and George Lakoff in their book Metaphors We Live By, “most people think they can get along perfectly well without a metaphor.”

We have found, on the contrary, that metaphor is pervasive in everyday life, not just in language but in thought and action. Our ordinary conceptual system, in terms of which we both think and act, is fundamentally metaphorical in nature.

What governs our thought governs our functioning. “Our concepts (even something as simple as the word we use) structure what we perceive, how we get around in the world, and how we relate to other people.”

Since communication is based on the same conceptual system that we use in thinking and acting, language is an important source of evidence for what the system is like.

Most of our ordinary conceptual system is metaphorical in nature.

To give some idea of what it could mean for a concept to be metaphorical and for such a concept to structure an everyday activity, let us start with the concept ARGUMENT and the conceptual metaphor ARGUMENT IS WAR. This metaphor is reflected in our everyday language by a wide variety of expressions:

ARGUMENT IS WAR

Your claims are indefensible.
He attacked every weak point in my argument.
His criticisms were right on target.
I demolished his argument.
I’ve never won an argument with him.
You disagree? Okay, shoot!
If you use that strategy, he’ll wipe you out.
He shot down all of my arguments.

It is important to see that we don’t just talk about arguments in terms of war. We can actually win or lose arguments. We see the person we are arguing with as an opponent. We attack his positions and we defend our own. We gain and lose ground. We plan and use strategies. If we find a position indefensible, we can abandon it and take a new line of attack. Many of the things we do in arguing are partially structured by the concept of war. Though there is no physical battle, there is a verbal battle, and the structure of an argument—attack, defense, counter-attack, etc.—reflects this. It is in this sense that the ARGUMENT IS WAR metaphor is one that we live by in this culture; its structures the actions we perform in arguing.

Try to imagine a culture where arguments are not viewed in terms of war, where no one wins or loses, where there is no sense of attacking or defending, gaining or losing ground. Imagine a culture where an argument is viewed as a dance, the participants are seen as performers, and the goal is to perform in a balanced and aesthetically pleasing way. In such a culture, people would view arguments differently, experience them differently, carry them out differently, and talk about them differently. But we would probably not view them as arguing at all: they would simply be doing something different. It would seem strange even to call what they were doing “arguing.” In perhaps the most neutral way of describing this difference between their culture and ours would be to say that we have a discourse form structured in terms of battle and they have one structured in terms of dance.

This is an example of what it means for a metaphorical concept, namely, ARGUMENT IS WAR, to structure (at least in part) what we do and how we understand what we are doing when we argue. The essence of metaphor is understanding and experiencing one kind of thing in terms of another. It is not that arguments are a subspecies of war. Arguments and wars are different kinds of things–verbal discourse and armed conflict–and the actions performed are different kinds of actions. But ARGUMENT is partially structured, understood, performed, and talked about in terms of WAR. The concept is metaphorically structured, the activity is metaphorically structured, and, consequently, the language is metaphorically structured.

In the Investing: The Last Liberal Art, Robert Hagstrom writes:

At the simplest level, a metaphor is a way to convey meaning using out-of-ordinary, nonliteral language. When we say that “work was a living hell,” we don’t really mean to say that we spent the day beating back fire and shoveling ashes, but rather we want to communicate, in no uncertain terms, that it was a hard day at the office. Used this way, a metaphor is a concise, memorable, and often colorful way to express emotions. In a deeper sense, metaphors represent not only language but also thought and action.

Metaphors are much more than a poetic imagination or rhetorical flourish. They can help us translate ideas into mental models and those models form the basis of worldly wisdom.

Many people contend that metaphors are necessary to stimulate new ideas. Hagstrom continues:

In the same way that a metaphor helps communicate one concept by comparing it to another concept that is widely understood, using a simple model to describe one idea can help us grasp the complexities of a similar idea. In both cases we are using one concept (the source) to better understand another (the target). Used this way, metaphors not only express existing ideas, they stimulate new ones.

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Reality is shaped by the words we use

ludwig wittgenstein

“Philosophy is a battle against the bewitchment of our intelligence by means of our language.” — Wittgenstein

Philosopher Bertrand Russel described Ludwig Josef Johann Wittgenstein as “the most perfect example I have ever known of genius as traditionally conceived, passionate, profound, intense, and dominating.”

Wittgenstein, an Austrian philosopher, worked primarily in logic, mathematics, and the philosophy of language. He published one very short book: Tractatus Logico-Philosophicus.

The book’s aim was to identify the relationship between language and reality. Interestingly, he spent the last twenty-two years of his life disputing the conclusions he wrote in Tractatus. “I have been forced,” he wrote, “to recognize the grave mistakes in what I wrote in that first book.” He started over but his life was cut short before he could publish his new conclusions.

After his death these works were assembled in a book titled Philosophical Investigations, which many people consider one of the most important books of the twentieth century.

“Wittgenstein came to believe,” writes Robert Hagstrom in The Last Liberal Art, “that the meaning of words is constituted by the very function they perform within any language-game. Instead of believing there was some kind of omnipotent and separate logic to the world independent of what we observe, Wittgenstein took a step back and argued instead that the world we see is defined and given meaning by the words we choose. In short, the world is what we make of it.

To help us understand, Wittgenstein drew a very simple three-sided figure.

Wittgenstein's Triangle

Wittgenstein then writes:

Take as an example the aspects of a triangle. This triangle can be seen as a triangular hole, as a solid, as a geometrical drawing, as standing on its base, as hanging from its apex; as a mountain, as a wedge, as an arrow or pointer, as an overturned object, which is meant to stand on the shorter side of the right angle, as a half parallelogram, and as various other things … You can think now of this now of this as you look at it, can regard it now as this now as this, and then you will see it now this way, now this.

In essence, reality is shaped by the words we use.

“The words we choose,” Hagstorm continues, “give meaning (description) to what we observe.”

In order to further explain and/or defend our description, we in turn develop a story about what we believe is true. There is nothing wrong with storytelling. In fact, it is a very effective way of transferring ideas. If you stop and think, the way we communicate with each other is basically through a series of stories. Stories are open-ended and metaphorical rather than determinate.

(Updated) This video (h/t @acazsouza) explains how langage affects how we see color. Do we all see the same color? Is your perception of red the same as mine? It turns out, color is made from the language you speak and is one of natures greatest illusions.

We all use narratives but we must be careful doing so because they shape the way we see a problem.
Wittgenstein

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