Intro. [Recording date: October 23, 2023.]
Russ Roberts: Today is October 23rd, 2023, and my guest is Andrew McAfee, a Principal Research Scientist at MIT’s [Massachusetts Institute of Technology’s] Sloan School of Management and the Inaugural Visiting Fellow in the Technology and Society group at Google. This is Andrew’s third appearance on EconTalk. He was last here in October of 2019 talking about his book More From Less.
Our topic for today is his latest book, The Geek Way: The Radical Mindset That Drives Extraordinary Results. Andy, welcome back to EconTalk.
Andrew McAfee: Russ, it is a pleasure to be back. Thanks for having me.
1:13
Russ Roberts: The Geek Way is, as you describe it, a set of solutions for thriving in this faster-moving world. They’re cultural solutions, not technological ones. And I want you to talk about the two parts of that.
Let’s start with actually the last part. It’s not a technological claim. You’re not saying that the tech companies of America have figured out something special. The second claim you’re making is that what’s special is the cultural impact of these companies you’re looking at. Let’s take those two parts together. Tell us about both parts.
Andrew McAfee: Yeah. Correct and correct. So, Russ, if you had told me, I think even five years ago, that I would ever write a book about corporate culture, I would have laughed in your face. I couldn’t imagine a universe in which that would feel like something I would want to do.
I got a little bit jaundiced about discussions around corporate culture, because they seem to me to be either some kind of virtue signaling or scolding about how you should be behaving and how you should be managing your company. Or if the CEO [Chief Executive Officer] wrote their book, it was autohagiography–it was just kind of self-praise for the tough calls they made as they led the company through. I wasn’t getting anything out of discussions about corporate culture.
I want to be clear: There are people doing amazing work on corporate culture. Amy Edmondson, my former colleague at Harvard Business School, comes to mind because she stressed one very concrete aspect of a corporate culture, which is psychological safety. So, there were people doing amazing work, but I wasn’t part of it, and I didn’t want to be part of it.
But, as I kept trying to understand why companies based in a very small piece of real estate in Northern California kept on accomplishing amazing things, and as I tried to pattern-match or pattern-contrast what those companies were doing, and how they felt, and how they ran versus companies in the rest of the economy. Because for my entire career, I’ve had the good fortune of having one foot in both economies–even though I hate that distinction, new economy versus the old economy.
And so, I was trying to figure out what was different about these companies that were just accomplishing amazing things. And I lit on a set of things that, as you point out, they’re not technological. It’s not that they have cooler AI [artificial intelligence] than the rest of us, and that accounts for their success. They do things differently, fundamentally. And they look at their company, and they look at how to get things done differently. The best label I can hang on that is culture.
And then, as you see in the book, I finally found a body of research that really solidified, and made super concrete and pragmatic, this notion of culture, and gave me a better way to look at the topic.
3:56
Russ Roberts: And I found that way extremely provocative. We’re going to talk about it. It isn’t what I thought it was going to be. Like you, I’m allergic to books on corporate culture. When I first entered business school ages ago–about 30 years ago–there were all these books about building a good corporate corporate culture: ‘Here’s the secret.’ And, I never could figure those books out. I’m sure I still would struggle to understand them.
But, you have an overarching way of looking at the cultural differences between successful companies and unsuccessful companies that I found deeply appealing and helpful. And I think it goes way beyond how to run a better company. It actually helps us think about the world around us in lots of different ways.
Let’s start by talking about what one might mean by a corporate culture.
Andrew McAfee: Yeah. And, I relied on a definition that comes from the anthropologist, Joe Henrich, who has been a pioneer in this field that–I hope we’re going to talk a fair bit about–called cultural evolution.
And, this is my spin on the whole discipline. The founding question of this discipline of Cultural Evolution to me is something like, ‘Wait a minute. Why are we human beings the only species on the planet that launches spacecraft?’ Nothing else is even close, right? You and I have probably seen sci-fi where the monkeys figure out–the chimpanzees figure out–how to launch a spaceship. Or, someday, there will be the octopuses that figure it out, or a bunch of ants will figure it out. That’s sci-fi. We all know nothing else on the planet is anywhere close to launching a spaceship. And, it brings up this fairly deep question: What is it about us? Right?
And, I talk in the book a bit about how the answer is not our intelligence. We are super-intelligent compared to other species, but that doesn’t really get us there. What we humans do is not just create cultures. Chimpanzees have cultures. We are the only species that has incredibly fast-evolving cultures. Our cultures change with lightning speed compared to any other living thing on the planet.
And so, the name of the discipline is the signal of what makes us unique: Cultural Evolution. And, I started to say: Wait a minute. That not only makes the notion of culture very, very concrete.
It also gives me a way to think about what these companies–that I call Geek Companies–are doing differently. They have just figured out how to evolve their cultures faster in directions that they want than the old-fashioned companies that I’m used to studying.
But, you asked about a definition of culture, and Joe Henrich has this one that I love because it’s extraordinarily concrete. And, I’m going to flub the exact quote from the book. But, he said, ‘Culture is the set of beliefs, techniques, practices, heuristics that you acquire over time from the people around you.’ In other words, it’s a group-level phenomenon. And, the heart of it is not–it’s not even so much your rituals, your belief, or your worldview. It’s how you get stuff done. It’s this very, very pragmatic definition of culture.
So, I love that and I use that definition in the book. It’s how you get things done. It’s nuts and bolts of a group of people, and it is transmitted and enhanced by group-level activity. It’s not given to you by the boss, or the priest, or anything. Culture is a peer phenomenon.
7:24
Russ Roberts: Which raises a question. At one point you talked–I really like this–the power of imitation. And, having a 15-month-old granddaughter and watching her acquire consciousness and language hand-in-hand, she’s a very crude imitator. A huge portion of what she does is just doing what I do, or her parents do, or what my wife does, or what she sees other kids do. And, in a certain sense, there’s no learning. It’s not learning. Something magical is happening inside her cranium, obviously.
But, the question that you raise, which is a deep question, is: if much of what human beings do is imitate those around them–certainly as they mature from infancy–how is there any progress?
Russ Roberts: Right? Give your answer.
Andrew McAfee: Yeah. First of all, congratulations on your beautiful granddaughter. Second of all, you’ve got this wonderful front row seat for watching the core of what human beings so special, what makes us so special. And, like, you’re watching–your granddaughter was born with an innate tendency to imitate the people around her and start doing what they do. And, you’re probably watching her get better at that. She’s going to continue to get better at that.
And, at some point, she’s going to figure out who to imitate. And she’s going to look around at successful people–older people, because throughout our history, if you lived a long time that meant you were doing some things right–and then prestigious people. And, what we mean by that is your granddaughter is going to look at who gets looked at by human beings. She’s going to especially imitate them.
And, what our brains appear to be really good at is creating some kind of subconscious–this is not usually a conscious activity–a weighted average of the things that she sees going on around her. Weighted by skill, age, and prestige. And, she’s going to double down on those things.
Now that sounds great. But, you bring up the fundamental question: Well then, how do we get better? Because, we humans are imperfect imitators. And, if she just kind of imitates with a little bit of loss built in, everything is going to degrade, right? We’re going to get worse at everything over time.
And, the phenomenon appears to be that most of us imitate imperfectly, but some of us are better than our models than our teachers at various aspects of things that we do.
If you think about a musical prodigy who is better than their piano teacher, or a kid who is clearly a better baseball player even than his coach, even if he’s not old enough yet. Those are the standouts.
And then, the next generation, or people who use them as a model, overweight them. As they should: they weight them heavily. And the blended average kind of goes up.
And, you can do these very simple mathematical simulations, and you can find out that if you have in every generation–think about learning as a process that goes through generation. If there are these standouts who are just a few percent better than their models–not crazy good, but few percent better–then, over time, the evolution, it accumulates. And, you wind up with the entire group who are all learning from each other better than the first initial teacher or the first initial model. When you do the math, you realize that culture can evolve remarkably quickly.
Russ Roberts: And of course, that’s how innovation takes place. That’s how knowledge accumulates instead of being–we don’t have to reinvent the wheel. We just start with a wheel and then turn it into the wing of an airplane, and then we’re soon in space.
Andrew McAfee: And you and I are lucky enough to be born in this era of scientific approaches and scientific progress. So, the rate of learning has gone up like crazy over the past few hundred years. But that is a very recent add-on to the ancient human module of imitative learning and cultural evolution via that progress.
So, I think about The Geek Way: As far as I can tell, it’s the first applied book of cultural evolution. It’s the first book of kind of like, ‘Now that we can think about the world this way, let’s direct that to the task of running an organization over time.’
11:40
Russ Roberts: And, you don’t have to understand the theory to apply it, because some of it is going to come naturally to certain types of people. But, my way of thinking–it’s not quite the way I think you say it, and you can react to it. But, my way of understanding and simplifying what you’re saying on this topic is: we stand on the shoulders of giants, but not just giants. Some normal people. So anything–any kinds of knowledge that accumulate can get passed on; or the better ones can get passed on because we can imitate them, and then copy them, and add our own twists to them, and improve them. And that, of course, is special about human beings.
You point out that many animals use tools; they do many things. I would add they tend not to exchange. We exchange–
Andrew McAfee: Good point–
Russ Roberts: We interface economically and commercially, which adds to the wisdom of the crowd that we’re talking about.
Andrew McAfee: Which is literally just models for you to learn from. It’s increasing the number of options you have to go pick up some knowledge or go blend stuff in.
So, yeah, I think you make a really interesting point. The field of cultural evolution might not have emphasized trade as much as they should. I think that’s interesting.
12:56
Russ Roberts: Yeah. But, the other part of this that we haven’t really gotten to yet is norms. And so, it’s not just about what I know that I can share with you using the gift of language in your large brain. We can have expectations of each–what I would call social expectations of each other–how we interact, how we treat each other. And, that’s the other, I think, key part of culture that you’re talking about. Correct?
Andrew McAfee: Yeah. It’s absolutely fundamental. And I find it hard to overemphasize how important norms are, because as every human group grows over time, and as they get bigger over time, there are these tensions that are going to come up.
Russ, you have enough experience to know that people don’t like it when economists talk about free-riding, because it just sounds like it’s a cynical view of human nature. Well, we’ve learned from watching other species: Free-riding is a very common thing in the animal kingdom, and a more pleasant term for it is: you want more benefits while paying lower costs. Of course we do.
In a human group, that turns into, you know, slacking off, or coasting, or free-riding, or letting the group do most of the work. So, every human group has to solve that challenge. How are we going to keep people in line? How are we going to make sure that they remain productive members, even when the group gets so big that we can’t physically watch them all the time?
If you watch hunter-gatherer bands out there, it’s relatively easy to keep everybody in line and doing things that benefit the group, because you can watch them all the time. They’re small groups of nomadic people with no fixed structures. Observation is really easy. But, the fundamental problem is that as groups get big, you have to figure out ways to keep people in line and keep them doing what the group wants and needs.
And, I think one of the main tools we have to do that are norms: these expected standards of behavior.
And, Russ, one of the things you’re going to notice is that your granddaughter is going to start to become aware of norms. And, she is going to want to punish people who violate norms. She’s going to value people who punish people who violate norms. And she’s even going to punish people who don’t punish people who violate norms. This is called higher-order punishment. And so, you can start to see that it just gets kind of fractal over time.
But, I think in addition to the learning module–the innate learning module that we have–we all have the kind of norm-compliance module and the third-party punishment.
When you talk about free-riding and punishment, it just sounds like this scoldy, very, very dark view of human nature. But, I don’t think it is. It’s: How are we going to keep members of the group in line with what the group wants to accomplish? And, I think the crown jewel tool for that are norms and norm enforcement.
And Adam Smith–as listeners maybe we have already thought about–Adam Smith believes we are hardwired to care about that. He says famously, at least for EconTalk listeners, ‘Man naturally desire not only to be loved but to be lovely.’ We want the approval of people around us. Complying with norms are one of the ways that we show that we’re lovely. We do what you expect us to do. We behave according to the expectations of those around us, and we’re honored when we do so. And when we fail to do so, we are treated with dishonor.
Andrew McAfee: And, that dishonor hurts. Physically. It’s so painful to us that we will do a lot to avoid that feeling of social exclusion, or ostracism, or being shunned, or whatever.
So, I completely agree. All of us human beings have standing in our groups, and high standing feels really, really, really good. And, low standing or falling standing feels deeply, deeply bad.
I came across a great book called Social written by Matthew Lieberman, and he makes the point that mammals in general, because most mammals are social, and we humans in particular, we hijack the mammalian pain system for social purposes. And, I think that’s a deep insight. It just teaches me a lot.
Russ Roberts: And you also emphasize our desire for prestige, which is, again, very related to Smith’s idea of wanting to be loved. That we want to matter, we want people to think highly of us. And, every organization has a status of some kind, and prestige, and all these non-monetary incentives that are at play.
Andrew McAfee: Yeah. People think that economists have too narrow a view of things because they talk about incentives all the time. And, the instant you realize that some of the most powerful incentives for us human beings are social, then I think that that economic framework for looking at things makes a ton of sense. Your social incentives matter hugely to you.
You use this word ‘prestige,’ which is fascinating, and I learned a ton about it when I was writing the book. Every social mammal has one kind of status. It’s called Dominance Status. Who is the alpha chimp–which is a matter of basically physical formidability? Who can stay on top? Who is going to win the fights? So, we humans have dominance status hardwired into us.
As far as we can tell, we’re the only species that also has Prestige–which is not, ‘Can you beat me up?’ It’s: ‘Are you the person that I want to learn from? Are you clearly good at these things that our group wants to do? If so, not only am I going to learn from you, I’m going to accord you a great deal of status.’
So, we humans have two different ladders we can climb to achieve status and standing in our communities, and it’s a big part of why we have the rich, fast-evolving cultures.
18:50
Russ Roberts: Yeah, Smith said you can either be rich, famous, and powerful–that’s one way you can be loved–and the other is to be wise and virtuous. That’s a kind of prestige. There are multiple kinds, of course. But, all of those mean that people pay attention to us.
So, the puzzle then is–if listeners out there wonder–‘Well, what does this have to do with corporations?’ So, it does. And, more importantly, I think it has to do with how we organize ourselves for social activity, whether it’s corporations, nonprofits, and anything we do as a group.
And of course, underlying this, one last factor that underlies it is our social nature. Talk about why that’s important.
Andrew McAfee: Yeah, there are plenty of social animals out there. Lots of birds are social, lots of mammals are social. The social insects are some of the most successful beings on the planet. So, if you carry that forward one more step, there is one species on the planet that gets the label ultra-social. And, guess who that is? That’s us.
And, the reason we need a label even beyond ‘social’; or we use the phrase ‘eusocial’ to talk about the ants, bees, and termites. We get a different prefix, because we are the only species on the planet that cooperates intensely and does division of labor with large numbers of other individuals who we are not related to.
Nothing else does that. An ant colony is literally one big family. A beehive is one big family. They’re all weirdly closely genetically related.
We human beings get together with complete strangers. And, instead of just automatically waging war, which is what most social species would do, we get together and we build cities. And we found and we advance religions. And we create these things called corporations where we spend as much time as we do asleep inside this thing called a company. If you’re in America, you spend about as much time in your job as you do asleep. You spend more time at your job than you do with your partner. Almost as much time as you do with your children.
These big groups of strangers are bizarrely important to us, and we’re the only species on the planet that has that feature.
So, when you combine our fast learning with this ability to form huge networks of intensely-cooperating strangers, that helps me understand why we are the spaceship species and nothing else is. It takes a lot of people to build a spaceship, and you have to do a lot of very rapid learning.
21:25
Russ Roberts: Now, let’s get to some of the applications. You talk about four norms that you think are crucial for successful companies in our current time: Speed, ownership, science, and openness. Give us a quick thumbnail for each one of those.
Andrew McAfee: Yeah. And, when we start to think about this discipline of cultural evolution and how to apply it to the work of running and growing a company, I think it’s actually a short walk. I think it’s a really easy lift. Because we all know that companies have cultures, and we have this endless discussion about corporate culture. And then, I said to myself at some point writing the book, ‘Wait a minute, this is the way to talk about running an excellent company and improving it over time.’ We humans have cultural evolution. The job of somebody trying to run and design an organization should be to make that evolution as fast as possible in the desired direction.
And that in-the-desired-direction part is actually kind of important, because every company has a deep, dense culture. It just might not be the one that the boss wants. If you think about a culture of silence and undiscussable topics, we hear about toxic corporate cultures all the time. We talk about cultures where we just expect what the CEO says to have nothing to do with what goes on on the ground. Those are lousy cultures, and those cultures evolved over time, very often for reasons that I hope we talk about. Cultures evolve into a sclerotic bureaucracy–these kind of dispiriting places where you can’t get anything done, you can’t even figure out what you would change to be able to start getting something done. That’s cultural evolution, too. It’s just not in the desired direction.
So, what I tried to figure out is what the business geeks–these people who are obsessed with the idea of running a company, willing to be unconventional about it, and largely concentrated in Northern California–what do they do differently to try to have cultural evolution be A) fast, and B) in the right direction–in the direction that a boss or a shareholder or an employee would want?
And, like you point out, I homed in on four norms–and we talked about norms and how important they are–that the business geeks are obsessed with, and they really don’t want to let go of them. And, my labels for them, as you point out, are speed, which is speed of iteration. Ownership, a culture of a fairly decentralized high responsibility, high autonomy culture. Science: Are we making decisions based on evidence and are we debating and arguing a lot as we make those decisions? And then, finally, openness, which is kind of the opposite of defensiveness, and very close to this concept of psychological safety that we talked about earlier, that my colleague Amy Edmondson has been so sharp about.
So, I look for these norms of speed, ownership, science, and openness. The geeks seem obsessed about them, and they really don’t want to let go of those or deemphasize those norms.
Russ Roberts: And as an economist, I think of things being either top down or bottom up. Certainly the ownership and openness part are part of the bottom-up successful nature of many of the companies that you studied. Rather than the boss imagining that he or she can control the troops with directives, you empower the troops to use their local knowledge the way an economy motivates that and uses that knowledge through a decentralized process.
Which on the surface should be an utter failure. There’s no one coordinating it. There’s no one on the top; there’s no oversight.
But, the openness can provide the oversight, if you give people enough autonomy and give them the incentives or responsibility where they prosper if they make good decisions and don’t prosper if they make bad decisions. And then, you give them the incentive then to do things quickly and recover from mistakes. You’re leveraging a lot of things that economists have been talking about when they talk about the virtues of the marketplace.
Andrew McAfee: Yeah, exactly. And so, one way to think about it is that what the business geeks are doing is bringing some of that market energy inside the firm. And I think there’s a lot of truth to that, in particular, like you point out: decentralization to an extent that’s uncomfortable for a lot of bosses that grew up in the industrial era, where you do have–the whole point of the hierarchy–is to do command and control. The geeks are, like, ‘That’s actually not the point of the org chart at all,’ and a comparatively huge amount of responsibility and autonomy to go do the things that you want.
The market, Russ, like you know, punishes failure sometimes very, very quickly and sternly. One of the things that the business geeks have done to kind of soften the harshness of the market and that’s inside their companies is to say, ‘Look, if you fail at this project, that is okay as long as you learn. Sometimes our experiments are going to fail. And, you as the person responsible, as long as you learn, and as long as you were trying to do the right thing, that’s actually good news.’
And, one of the things that geeks have learned to do is publicly celebrate failure in a way that I just didn’t see back in the industrial era when Jack Welch was writing books called Winning. That was just the thing that you had to do. That makes the corporation defensive. It just makes a very defensive culture. And so the geeks want a lot less of that.
The last thing I would say is that, as you well know, the coordinating mechanism for market activity is usually the price system, and the geeks go a bit farther than that. They think that the job of the leadership is to say: ‘This is what the company is going to try to accomplish. These are our aspirations over a–pick it[?]–you know, 10, five, one year. And your job–my job as the boss is to make sure that what you are telling me you’re going to do over the next year is nicely aligned with what I want to have this company accomplish. Once we get that alignment and we both agree on that, great: knock yourself out. I’m not here to tell you how to do your job, but I am here to make sure that what you’re doing is aligned with what we, the leadership of this company, want to accomplish.’
Russ Roberts: You still have the issue of shirking. People accomplishing great things requires great work, and intense work, and commitment, and less time hanging around doing nothing. And that’s–
Andrew McAfee: But, that’s a big part of the reason why the geeks love openness. Right? The geeks want to work in the open. They want somebody to call you out if you are shirking. That’s this egalitarian nature of the company, that–it’s a guard against shirking.
In addition to which, as I talk about in the book, the point of the geek norm of speed–which is not just velocity, it’s iteration, it’s cadence, it’s clock cycle–I think the genius of speed and these agile approaches that we hear about is that it limits the amount of time–it limits how far behind you can slip before the rest of the organization knows about it.
In other words, if you have a cadence where every couple of weeks you are expected to show something new that works, that your customer will give you a thumbs up on, the maximum you can really be late is two weeks. And, for me, that helps me understand why geeks are able to accomplish big, complicated efforts in a way that industrial-era companies are just, I think, completely unable to do.
28:47
Russ Roberts: And of course, this approach has a very unexpected and unintuitive set of expectations for the leader of the organization. So, I think a lot of people–I’ve spoken about this before–a lot of people think that to have a great restaurant, you need a great cook, a great chef, a great person who really understands food.
And, of course, that’s true about the chef, but it’s not true about the owner of the restaurant or the person who runs the restaurant. Running a successful restaurant is as much about logistics, motivating employees, creating that open environment, and building the norms.
And, it basically says that–and of course then across every kind of company, restaurants just one that we easily find unintuitive–the best energy company is not the one with the best petroleum engineer if it’s an oil company. It’s going to be somebody who has got a very different set of skills.
Think about my own job as a college president. I think in most colleges, the president was a great researcher. But that isn’t necessarily a characteristic of a great college president. But, it is the way often what comes to pass.
And the strange, I think, implication of your book is that a great leader of an organization is one who understands how to create a great culture. That is not easily measured or identified in a human being, but it certainly is not the goal to have a leader who is really good, necessarily, at the core activity of the organization. And, that is so unintuitive, I think, for most people.
Andrew McAfee: It’s hugely unintuitive, because we look at Steve Jobs and think that is the model for modern leadership in this technologically sophisticated world. And, Jobs was a visionary. We overused the word ‘genius.’ He was probably a genius at knowing what digital products people actually wanted, and how you could change the world with them. Yeah, he was absolutely that.
In a lot of ways, he appeared to be a terrible leader and a manager. He had no control over his temper. He swore at his people. He did engender a lot of loyalty for reasons that I don’t completely understand. Maybe working with a genius is exhilarating in some ways. But that’s the model that we have.
And, Russ, I’m with you. I think that is one model–it’s extraordinarily rare. The number of people I’ve met who think they’re the next Steve Jobs is way bigger than the number of people who were the next Steve Jobs.
And, in particular, I look at his successor. I look at Tim Cook, who has created unreal amounts of value, just unbelievable amounts of value at Apple. Made it, is it the most valuable company in the world? If not, it’s very, very close.
And, no one thinks that he is Steve Jobs, but he has realized how to take that momentum and that ability that Apple had, and keep scaling it up to just ridiculous degrees.
One of the most interesting stories I learned when I was researching The Geek Way was the fact that early in its history, Amazon was a classic top-heavy, top-down direction from the top bureaucracy. To the point that if you had an idea for an innovation, you submitted it to the Amazon innovation bureaucracy, and they vetted it, and then they told you you could go ahead and innovate or not.
And the only reason Amazon still doesn’t do that is, I think as early as the late 1990s, Bezos and his colleagues at the top realized it wasn’t working. It was slowing the company down.
And, Bezos, as far as I understand, had to overcome one of his deepest-seated tendencies as a manager. Somebody who worked at Amazon wrote these really lively blog posts about it and he said, ‘You have to understand: Jeff Bezos makes an ordinary control freak look like a stoned hippie–this guy.’ And, he thought the way to realize his big ambitions was to control. And then, he realized, ‘Nope, that’s actually dead flat wrong. I got to get out of the way.’
And, Amazon executed this 180-pivot, not only in its leadership and its management philosophy, but in its technology infrastructure. It decentralized it–that gave us Amazon Web Services and the cloud–and in its organizational practices where they worked incredibly hard to reduce the number of dependencies, and sign-off loops, and approvals and everything, that somebody inside Amazon has to accomplish.
And, when you look at what Amazon’s employees say, even today when they’re a gigantic company, they completely stand out for the levels of actual autonomy and responsibility that people have there. That was deliberate. It was not in the DNA [Deoxyribonucleic acid] of the company from the start. [More to come, 33:24]