by Andrew Lynn
The man did as he was told. Lo and behold, within minutes he had been carried down to the base of the mountain just beneath Longevity Bridge. Hold on, thought the man. Isn’t this old woodcutter an immortal? How else could he have managed to get me back down the mountain? Hunger and exhaustion all but forgotten, the man started back up the trail as fast as his aching body would carry him.
When he got there the old woodcutter had disappeared, and in his place was an old man with grey hair and silver beard. The old man had a basket over his shoulder and a small hoe in his hands, and was gathering medicinal herbs.
‘Grandpa, did you see an old woodcutter just now?’ he asked.
‘Which one are you talking about?’ asked the old herb-gatherer. ‘There are several old woodcutters on the mountain.’
‘The one who is an immortal!’
‘Ho, ho!’ laughed the old herbalist. ‘All the old woodcutters on the mountain are immortals! They scale the mountain to earn a living cutting firewood, seeking neither power nor wealth. Don’t you think they deserve to be called immortals?’
‘Where do you live, Grandpa?’ asked the man.
‘I live in the depths of the white clouds.’
‘The depths of the white clouds? Isn’t that where the immortals live?’
‘I dwell with many immortal sages and we are each of the same age.’
‘So you are one of the immortals?’
‘Though like an immortal I am not what I seem, but more than the immortals is the joy that I glean,’ said the old herb-gatherer.
The man was overjoyed to have finally found one of the immortals. He threw himself to the ground before the old man.
‘I now know you to be a true immortal. I’ve travelled many a mile to find you. Please,’ he begged, ‘teach me how to obtain immortality.’
‘I’ll read a verse to you,’ answered the old man. ‘If you understand it, you will become an immortal.’
Then he spoke:
Seeking immortals the heights you did scale,
But such a quest is doomed to fail.
For while you sought the saints’ domain,
Dearest to them is the world of men.
When he had finished chanting the verse, the old herbalist offered the man a herb from his basket to ease his hunger and sent him off back home. The herbalist then disappeared into the depths of the mountain forest.
As he made his way back down the mountain, the man pondered the words of the old herbalist. Even the immortals love this mortal world! he thought. Then why should I strive so hard to become an immortal? With that thought, he decided to begin the long journey home.
He would never again seek immortality.
* * *
What the old tale teaches us is something very profound: that enlightenment and transcendence are not necessarily to be found ‘up there’ or ‘out there’ but in this very world in which we live. The secret of immortality for the Buddhist and Daoist sages was to find the point at which the illusion of self was extinguished by a deep engagement with the here and now.
The man in the story searched high and low for the secret of immortality, but could never find it. Why? By thinking of immortality as something outside and beyond himself – some elixir, perhaps, or some magic spell – he was condemned to lose touch with the immediacy of his experience. Every footstep on the mountain, every heavenly sunrise or sunset, every glorious snowbound crag – all these experiences would be contaminated by extraneous thoughts (‘How close am I to immortality?’)
The woodcutter, on the other hand, sought for nothing unrelated to the task in hand. No thoughts of power, or wealth, or even immortality for him – just the sensation of axe in hand, just the sound of sharpened metal cutting through wood, just the weight of the pole across his shoulders as he bore the wood down the mountain. In those moments of complete focus he found the immortality that comes when ‘self’ merges with task and object.
* * *
That’s why immortals look like this:
It’s a painting (now housed in the National Palace Museum in Taipei) by Liang Kai (‘The Madman’) of an immortal.18 Sketched out using lighter and then darker washes of ink, the figure seems to be emerging from an aery nothingness into this world, before heading back into the nothingness from whence he came. The boundaries between himself and the world around him have dissolved entirely.
* * *
True, this is not immortality in the traditional sense of infinite life span. What it is, though, is a continuity of experience that transcends ego. It’s what the Buddhists call ‘one-pointedness’ and what Csíkszentmihályi called flow. It’s the focus of mind on the task at hand.
And it’s what makes us great.
5
Thinking Differently
Harvard Bull
How do our most generative individuals think? Is there a style or manner of thinking that increases our overall effectiveness? How far does intellect matter anyway?
Let’s begin to answer that by taking a journey back to Harvard University in the 1940s. The story begins one rainy November day in the lobby of Memorial Hall, where a certain mathematics junior (‘Mr. Metzger’) stood waiting to take part in a drama rehearsal.1 For some reason, Metzger was the only student there that day; nobody else seemed to have turned up for the rehearsal. Pondering for a few moments whether the rehearsal could have been cancelled without his knowledge, Metzger was intrigued by students filing into the Great Hall opposite and taking seats at the tables within. They were about to sit for one of the University’s many assessments.
Among the students crossing the lobby to enter the Great Hall was a familiar face – one of Metzger’s friends. Metzger approached him and asked him what exam it was they were about to take. ‘Oh, Soc. Sci. something-or-other,’ replied the friend as he ambled towards the Hall. ‘It’s about Modern Perspectives on Man and Society and All That.’ Metzger expressed an interest and wanted to know what books they had read. They chatted for a while about the course. Before they knew it, they were both in the Great Hall. ‘Take your seats, please,’ came a stern voice from beside them. Metzger’s friend, naturally, obeyed; on an impulse Metzger (who should not, of course, have been there in the first place) sat down too. The proctor put blue answer books before them. Another proctor then presented them with copies of the test.
Metzger found himself seated in a social science examination, the substance of which he knew nothing. Now, most of us in this situation would shyly raise up a hand, notify the proctor that a mistake had been made, and ask to be excused. But Metzger didn’t do that. Instead, overwhelmed with curiosity and glee, he invented the name ‘George Smith’ for himself, scribbled it on the blue book, and addressed the first question.
As a mathematics major with no knowledge of the social sciences, Metzger admittedly struggled a bit with the ‘objective’ or ‘spot’ questions of the test: he would later find himself awarded with only a D for this component. The essay question was a different matter. Candidates were offered a choice of two books: Margaret Mead’s And Keep Your Powder Dry or Geoffrey Gorer’s The American People. Two critical comments (one positive and one negative) were offered on each book, and students were required – as they so often are – to ‘discuss’. Metzger had read neither of the books, but plumped for the latter option ‘because the title gave me some notion as to what the book might be about’. He set to work.
Metzger started with the author’s name ‘Geoffrey’, and proceeded on the basis that Gorer was born into an ‘Anglo-Saxon’ culture, probably English, but without doubt English-speaking. Having heard that the second author, Margaret Mead, was a social anthropologist, Metzger then inferred that Gorer was most likely the same. These simple assumptions allowed him to formulate the central question that he would address in his essay: ‘What are the problems inherent in an anthropologist’s observation of a culture that is his own, or nearly his own?’ Metzger spun out his analysis of this problem with reference to cultural relativity and the re
lation of observer to observed, assessing as he did so the kind of objectivity that might accrue as a result of an anthropologist’s training. It was an outrageous attempt to spin an essay out of virtually nothing.
It is Metzger’s conclusion that really displays his talent. Gorer’s The American People did indeed, according to our mathematician-cum-anthropologist Metzger, offer a range of ‘objective’ and even ‘fresh’ insights into the nature of American culture. ‘At the same time,’ he somberly warned, ‘these observations must be understood within the context of their generation by a person only partly freed from his embeddedness in the culture he is observing, and limited in his capacity to transcend those particular tendencies and biases which he himself has developed as a personality in his interaction with his culture since his birth.’ You can tell that Metzger is really going for it now. His pen is flowing; his mind is racing ahead of itself; he feels the inspiration. ‘In this sense the book portrays as much the character of Geoffrey Gorer as it analyzes that of the American people.’ We almost want Metzger to give us an encore. And he does not disappoint, adding these final few words: ‘We are thus much the richer.’ You can almost picture the look of glee on his face as he scribbled his conclusion and handed his paper to the unknowing proctors.
We are thus much the richer.
Who knows what Metzger hoped to achieve that day in Harvard’s Great Hall? He had quite unnecessarily decided to compete against students in a field of which he knew nothing. He didn’t stand a chance.
Or did he?
Metzger’s friend went to pick up his blue book a few days later. Like many of his classmates, the friend had scored an unimpressive C . When he picked up the blue book completed by a certain ‘George Smith’ (that’s Metzger), however, he noticed that the grade awarded for the essay was a much more impressive A–. In the margin of Metzger’s book was a note written by the assessor. ‘Excellent work,’ it read. ‘Could you have pinned down these observations a bit more closely? Compare in . . . .’ Metzger had aced the assessment.
Of course, it was never going to be as straightforward as all that. News got out, as it inevitably would, and Metzger was brought to the attention of the University authorities. He had broken the rule, among others, that no student may attend an examination in a course in which he is not enrolled. Metzger stood in danger of probation. Disciplinary proceedings were commenced, and the Administrative Board of Harvard College was required to rule on the issue.
How was the Board to deal with the Metzger problem? At best, we would think, they would have looked on the episode as childish pranksterism and admonish Metzger accordingly. At worst they may have taken serious affront: here was a student who had challenged the system and thrown up serious questions about the accuracy and integrity of their assessments. However it was looked upon, things were not likely to come out well for Metzger.
In fact, nothing of the sort occurred. The members of the Board were not only not affronted by Metzger’s exploit, they were ‘delighted’ by it. So when one of the more legalistic members of the Board noticed that the rule applied only to ‘examinations’ – and that Metzger had not intruded on an examination at all, merely a one-hour ‘test’ – the prankster was home and dry. Metzger was off the hook.
Why had the University come to Metzger’s aid? This was addressed years later by another Harvard staff member, William Perry. The Harvard people had, Perry revealed, correctly identified Metzger’s essay as ‘bull’. But ‘bull’, as it turns out, was something of which they approved. It showed the ability to reflect and expand upon the (admittedly limited) information at hand. What the Harvard professors were more concerned about was not ‘bull’ but rather its uncreative opposite – what Perry calls cow. ‘Cow’ is ‘data, however relevant, without relevancies’. It is hypothesis understood as certain fact; answers sought where questions should first be asked; multiple perspectives rejected in favour of dogma.
Cow may be careful and diligent, so it probably seems a little unfair to prefer bull. But there is one key difference that gives bull the legitimate edge: bull acknowledges its own fallibility. In cow thinking, for example, a statistic becomes a fact. Bull, on the other hand, shows a healthy skepticism towards ‘facts’ in general. For the producer of cow, knowledge is a prison, and additional knowledge can only make the bars of that prison stronger. For proponents of bull, all knowledge takes form as hypothesis – and refutable hypothesis at that.
Einstein once said that imagination is more important than knowledge. Harvard, in its dealing with Mr. Metzger, showed that it agreed.
In this chapter, we find out why Harvard may have been right.
Why Contrarians Do Better
Original thinking is something we may approve of in principle and yet recoil from in practice. It’s potentially disruptive. It challenges the status quo. It’s incompatible with the ‘just get it done’ attitude that we take with us to the workplace and beyond. Can we start, then, by pointing to occasions when it has demonstrably led to better practical outcomes?
* * *
Let’s cast our minds back to the financial crisis of 2007-2008. This was an event that took by surprise so many people that it has famously been called a ‘black swan’ event. And yet not all were caught off guard. During the same short period, a man called John Paulson pulled off the greatest and perhaps most controversial trade in financial history. That year Paulson’s firm, Paulson & Co., made a heart-stopping $15 billion. Of that $15 billion, Paulson personally was able to take a cut of nearly $4 billion. That has been calculated, according to one observer, to exceed the gross domestic products of several nations. It amounts to an income of more than $10 million a day.2
There wasn’t anything in Paulson’s background that spoke of success of anything other than the conventional kind. After graduation, Paulson went from Boston Consulting Group to Odyssey Partners to Bear Stearns to Gruss & Co. before starting his own firm, Paulson & Co., to focus on merger arbitrage. Using the skills he had honed in his years at Bear, he figured he could bet upon companies that he thought were likely to be acquired or benefit from competing take-over offers; he also learned to bet against companies set to be taken over when it appeared to him the take-over would fall through. It was what Paulson knew and what he was good at – his fund delivered respectable returns – but it would not be enough to get him into the big time. That would take something more.
When the time came, however, Paulson was ready.
Wall Street’s great gift to Paulson was mortgage securitization. Financial firms, riding the wave of year-on-year increases in house prices, bought up home mortgages and other kinds of debt. They then repackaged the debt and sold it on to investors hungry for more and more exposure. Investors who were hungry but not that hungry could buy into the higher-rated slices or ‘tranches’ of the debt; those who were really hungry could buy into the lower-rated tranches offering higher returns.
Paulson did something that seems – in retrospect – very simple. He bought insurance (credit default swaps) on these investments – so, when the housing market collapsed, his insurance would rise in value. Paulson then followed through on his logic, looking for other institutions tarnished by the rash spate of mortgage lending. And when he worked out that the banks and financial firms had held on to a substantial portion of this toxic debt, he bought insurance covering their failure too.
He bought just about as much as he and his firm could afford.
When the housing market tanked, Paulson became an exceptionally rich man.
* * *
In retrospect, Paulson’s trade seems obvious. Who would not want to buy insurance on toxic debt and the zombie banks that held it?
What they did at Paulson & Co. in fact shows just how obvious it really should have been. Paulson and his team began by working out a trend line for the housing data they had gathered. Next, they ordered data on real estate going back all the way to 1975. They discounted for inflation. Finally, they performed a regression analysis to
get their trend line for the whole period.
And here’s what they discovered. From 1975 to 2000, house prices had climbed a mere 1.4 percent per year after taking into account inflation. From 2000 to 2005, however, prices had soared at a rate of over 7 percent per year. House prices were 40 percent over where they should have been according to historic trends. What was more, each time housing had taken a hit in the past, it had fallen down through the trend line. The inevitable conclusion: there would be a brutal correction on its way.
So it should have been obvious. But it wasn’t.
The traders from Goldman Sachs weren’t convinced by Paulson’s analysis. Josh Birnbaum, Goldman’s top trader of CDS protection, asked to come to Paulson’s office. ‘If you want to keep selling, I’ll keep buying,’ he said. ‘Look, we’ve done the work and we don’t see them taking losses.’ The experts at Bear Stearns were also unimpressed. ‘You guys are good customers and we’re concerned about you. You guys need to do more research on historical price appreciation,’ they told Paulson. When Paulson wanted to know how they had come to their conclusions, he was stonewalled by the Bear Stearns team. ‘Our models are fine,’ said one. ‘We’ve been doing this for twenty years.’
The illusion of endlessly increasing house prices went right to the heart of the system. This less-than-prescient analysis was typical: ‘Fundamental factors – including solid growth in incomes and relatively low mortgage rates – should ultimately support demand for housing. We will follow developments in the subprime market closely. However, at this point, the troubles in the subprime sector seem unlikely to spill over to the broader economy or the financial system.’ That was as late in the day as June 2007. And the speaker of those words was none other than the chairman of the Federal Reserve, Mr. Ben Bernanke.
