Outliers: Why Some People Succeed and Some Don't

0:01 each year Microsoft research hosts hundreds of influential speakers from around the world including leading scientists renowned experts in technology book authors and leading academics and makes videos of these lectures freely [Music] available okay so Mr Gladwell is here today to discuss his new book outliers outliers is a book about success it's starts with a very simple question what is the difference between those who do something special with their lives and everyone else the book explores this question by examining the lives of the remarkable Among Us the brilliant the exceptional and the unusual through his book we learn that the way we think

0:47 about success is all wrong Malcolm Gladwell is a staff writer for the New Yorker and the author of two bestselling books The Tipping Point and blink please join me in welcoming Malcolm Gladwell to Microsoft thank you it's a real pleasure to be here um you know I don't work in a office I work at home and I I forget what offices are like and I was around the corner and I uh I saw this big open refrigerator with all kinds of softs I was like how cool is that um I um I uh so I'm going to talk about my new book which um you know there are

1:32 many things in it and I can say all kinds of um things about it but I I thought I would talk about an idea that is actually not in the book but um that I've been thinking about a lot uh since writing it and which um encapsulates a lot of what the book is about and it's um it's this idea that's called uh capitalization and it um is a a concept that a a very brilliant psychologist named James Flynn has written a lot about those of you who know something about IQ research will have heard of the Flynn effect that's James Flynn's idea and he's written a lot about this concept of of capitalization which is um what is the rate at which a society capitalizes on its potential other words what percentage of people who are capable of doing something actually end

2:20 up doing that thing right how efficiently do we make use of uh the talents within a given group of people so let me give you an example um don't know how many of you read Michael Lewis's book uh The Blind Side which is this extraordinary book about a young man um in East Memphis a teenager who's 6 fo six and 350 pounds and he's discovered by and adopted by a wealthy white family and they realize that he's an extraordinary athlete and they um they work with him until he becomes um uh one of the finest offensive um lineman in the country and in fact he's about to be drafted into the NFLs as many years later and make a kajillion dollars and um they um it's this extraordinary story but the part of it

3:06 that I always um stayed with me when I read it was right at the very end the kid whose name is Michael oer says he's from the slums of Memphis east Memphis and he says if everyone um who I grew up with um who was who was into football who had real ability in football actually ended up playing football um they need to have two national football leagues and what he was saying was that um that East Memphis did not do a very good job of capitalizing on its athletic ability right and so Lewis actually follows up on this and he he does this he talks to some people in the East Memphis school system and he asked them what percentage of kids in East Memphis who get a uh college athletic scholarship um actually end up going to

3:51 college and the answer was one and six which absolutely floored me because I would have thought that when it comes if there was one thing in America that we were really good at doing it would be exploiting the athletic ability of our youth in particular of our of our African-American youth I would have thought that in an inner city area the capitalization rate for sports would have been 90% but in fact what we learn in East Memphis is that the capitalization rate is 1 in six it's 16% right so now think about it if in something that we care about as much as sports right something we there's possibly nothing in American society that we devote more time and attention intellectual resources to than

4:37 the maximization of the professional sporting experience in something that we care that much about our cap rate is 16% so how high must it be in things that we don't care that much about right that's a very sobering notion and it says that as a society we have an awful lot long way to go uh towards properly maximizing um the human potential of our members and so I realized when I thought about that book that outliers is really about that question it's about identifying sources of constraints on capitalization rates and figuring out how um how to remove them so what I thought i' do was just sort of talk about a variety of these constraints what are the kinds of things that lower cap rates in any number of different areas of human

5:24 endeavor um so one obvious one is poverty um when that kid Michael oer who grows up in East Memphis um talks about um what a tiny fraction of the kids he grew up with who had athletic ability actually end up going to college what he's talking about is poverty East Memphis is one of the poorest neighborhoods in the United States and we know that um that that kind of poverty makes it very very difficult for those who have an ability to do something to actually end up doing that very thing and um that's sort of an obvious constraint on capitalization but one of the things I think um is uh uh is true of poverty is that we tend even as we acknowledge its importance in

6:10 constraining capitalization we underestimate just what a powerful constraint it is and let me give you an example in the book I talk about um the famous terman study that was done in California this is a study done in the 20s began in the 20s in California and terman who is a psychologist at Stanford in fact the terman um who uh was the first dean of engineering at Stanford in fact isn't there a hall called terman Hall at Stanford how many you go to Stanford that's this guy's son anyway little side fact for those of you who went to Stanford um uh he does this thing where he he gives an IQ test to 250,000 uh California school children and he basically identifies the top one top .1% so kids with IQs of 140 plus

6:57 genius level essentially um um and he tracks those kids for the rest of their lives for 50 years and he's trying to figure out um what happens to them and it's his notion starting out that he's ident he thinks because he he's so invested in the notion that IQ is the single most determinant of Life success he thinks what he's done is identified the cohort who will turn out to be the leaders in Academia in in Academia in industry in the people who will end up you know running all the organizations and being the top politicians and the top intellectuals right so he follows them and follows them for over the course of 20 and 30 years and 20 and 30 years in he realizes actually it's not true at all and that these kids turn out as when they turn out to be adults they have a variety of uh strikingly different Fates there is a small group

7:45 that does um very well the top uh 15% do actually occupy positions of real prominence in society then there's a big group in the middle who have pretty average lives um and remember these are kids with adults with genius level IQs and the majority of them do they're kind of like have moderately successful professional lives and then there is a chunk at the bottom who have who are by any measure um failures who have whose lives turn out by um by any kind of Occupational yard stick to be um massively disappointing who make do who do do not seem to make use of their extraordinary human potential at all and the question that terman has to wrestle with is why did that group fail what's

8:32 the difference between this group who did beautifully well and this group who did so poorly at the bottom and he runs through I mean this question obviously obsesses him and he runs through every conceivable explanation for that difference and he says is it their personalities and it's not he says is it their um is it uh their their habits is it their and it goes on and on down the list and he realizes in the end that the answer is really really simple and that is that the kids who did best these genius kids who ended up succeeding in the world were the ones who came from wealthy households and that the genius level kids who ended up utter failures in life were the ones who were born into poor families right Born Into families where parents hadn't gone to college where there weren't books in the home where there wasn't the kind of cultural and institutional support for a habit of

9:18 learning and a habit of intellectual activity what he was saying in other words that even if you endow a child with a brain that is a one a billion brain that is not sufficient to ensure the success of that child that poverty is such a powerful constraint on capitalization that it can reduce that genius child to a lifetime of worse than mediocrity a lifetime of really profound um disappointment so that's the that's the first constraint like I say it's the obvious constraint but I think it's important to impress on on for all of us to understand um that poverty is probably a bigger con straint than we think um particularly those of us who are not intimately connected with it we

10:04 may tend to underestimate um what an extraordinary impact that has on on limiting people's ability to do well so let's talk about some other constraints that are maybe less obvious um I got really interested in this book in looking at the composition of elite sports teams and um and if you do that you find all kind find out all kinds of strange things so at one point um I looked at the roster of the 2007 Junior check hockey team now I did not pick that team for any I picked that team at random I just was interested in that's an elite team it was the second or third best junior hockey team in the world after of course the Canadians I'm Canadian um and so it's a it's a really elite team these are the kind of kids who go on to play in the NHL or in the elite um uh adult leagues in in um in

10:52 Europe so I'm going to read to you the birth dates of the members of that National Check team 2007 January 3rd January 3rd January 12th February 8th February 10th February 17th February 20th February 24th March 5th March 10th March 26th April 22nd May 5th June 6th July 2nd July 19th July 20th August 15th August 25th August 31st November 29th and December 31st um now what's strange about that list did you notice 11 of the 20 names are born in January February and March it is a massively skewed distribution of birth dates towards the first three

11:37 months of the year now that is not something idiosyncratic to the 19 to the 2007 Czech junior hockey team in fact if you look at any Elite hockey team anywhere in the world and for that matter any elite soccer team anywhere in the world you will see the same skewed distribution you will see that an overwhelming number of the members of those teams are born in January February and March now why is that uh the answer is that the eligibility cuto offs for age-class hockey and soccer uh throughout the world is January 1st and in both those Sports we very very aggressively recruit the best and the brightest kids at a very early age so we go and we look at a at a at a group of 10-year-olds and we watch them

12:23 play hockey or soccer and we pick the best right and we select them out we put them on all-star teams and we give special coaching and extra practice time and more games and encourage them and encourage them right thinking that is the best way to capitalize on the talent pool in that particular sport but think about it when you're 10 years old who's going to be the best at a particular activity physical activity the oldest kids right the kid who was born in January has 10 months of maturity on the Kid born in October and when you're 10 years old 10 months is an extraordinary long period of time it's can be the it can be three or 4 in in height it can be a difference between between being clumsy and being massively coordinated so we think we are picking the best and we're not we're picking the oldest right

13:10 and then we take the oldest and we give them special coaching and all kinds of extra opportunities and all kinds of extra games and lo and behold 10 years later they really are the best right but it's a self-fulfilling prophecy right we created the conditions that made them the best and foolishly thought we were actually identifying um real talent now you only have to look at that and realize what an extraordinary constraint um on capitalization that is right logic would tell us that the distribution of hockey ability or soccer ability should be even throughout the year there by rights should be as many great soccer players or hockey players born in December as January but when we look at these teams and we see they're overwhelmingly waited for the first three months of the year that suggests

13:56 that we are um that the capitalist ation rate for hockey it's must be less than 50% right we are leaving all of the talent born in the second half of the year on the table now there's clearly a very easy solution to that problem and that is that when we put together leagues of uh uh for soccer soccer and hockey and any other sport um in the age class um Arena we should have different streams for kids born in different months we should have three parallel leagues one for kids born in the first four months of the year one for kids born in the middle four months and one for kids born in the last four months right and have them develop independently until they're in their mid- teens and then select it's a really simple way and if we did that we would double or triple our

14:42 capitalization of talent in that particular realm now why don't we do that right because we refuse to admit that our own rules arbitrary rules constrain capitalization and we cling to a naive belief that these meritocracies that we have constructed in this particular realm um are entirely rational and efficient and fair so this is a second constraint on capitalization it's the stupidity constraint right it is our inability to understand that there is something deeply arbitrary and unfair in the way we have written the rules on which a meritocracy exists right now for those of you who think that that is a minor issue and that so what if those kids can't play hockey you

15:28 know why can't they just play another um sport let me remind you that this is true of many sports I'm going to I'll I'll um I'm going to give you the the birth dates of the 2007 Czech uh junior soccer team ready January 1st January 3rd January 5th January 12th January 26 January 27th February 1st February 14th February 20th February 21st February 24th March 15th March 26th March 29th April 16th May 20th May 26th June 22nd June 24th August August 18th and September 26th that if that's not a con a stupidity constraint on capitalization on football ability um um soccer ability in a country by the way that cares more about football than you know perhaps any

16:13 other I don't know what is right that's a and I you know we need to take in other words very seriously the question of um how we choose to structure um systems of uh meritocratic systems and this also you can apply this exact same logic um to Educational Opportunity if you look at um how well kids do in school based purely on their birth dates on whether they fall into the youngest oldest or middle uh age cohort in their class you see exactly the same patterns in fact there's a beautiful study done recently that tracked thousands and thousands of kids across the west and track them all the way through to their University level and found that kids

16:59 born in the um relatively youngest cohort of their age class um were 11% less likely to go to college than kids born in the relatively oldest um cohort of their of their age class 11% is a huge difference and it says that we are that is 11% of kids whose opportunity is being who whose whose human potential is being squandered right completely for closed why because we are so stupid as to organize our elementary school education without reference to the obvious fact of biological maturity right it is another it is a glaring example of how stupidity constraints um

17:47 uh dramatically limit um the capitalization of human potential um so third constraint um and I can go on about constraints but I'll stop with the third one um and this is in many ways the most uh fun one and the most controversial one but but I think it's it's worth um digging into um and it's it's what I what I would say is an attitudinal constraint on capitalization um so one of the I have a whole chapter in my book um which is about this question of why it is that Asian kids do so much better at math than their Western counterparts right now the numbers here are irrefutable and they're extraordinary the differences in uh mathematics performance between uh uh kids in Singapore Hong Kong South Korea uh Japan um and Kids In America

18:36 Germany England or what have you um the fact we just got a a round of results from these International math test comparisons I think a couple weeks ago and we're talking the difference is not this the difference is is that um and if you look closely at um trying to figure out why it seems to be the case that the difference the reason for that difference has to do with attitudes it has to do with what is the attitude with which the child in those two sets of cultures approaches a math problem and it seems to be the case that when um Asian kids sit down and face a high school math problem they have a different expectation of what solving that problem entails they have an expectation that if they apply effort to

19:22 the problem the problem is solvable whereas when we look very closely at the attitudes of Western children um they seem to have the attitude that um their ability to solve that math problem is a function of their ability of their innate ability something they either have or they don't right and that attitudinal difference seems to make a um a Prof have a profound effect on the ability of kids to do well at math because as it turns out the Asian approach to mathematics is the correct one when I say correct let me give you an example so these International math tests that we give um to kids around the world they called Tims we give the Tims every four years it's the same test to kids all over the world and um and that's how we come up with these rankings of how countries do well when

20:07 we give the Tims to kids um at the same time as we give them the math test we give them a questionnaire and the questionnaire is really long it's 120 questions long and it asks them all kinds of questions about that will be useful to researchers so how many hours do you study do your parents encourage you do you like M you know all those kinds of things but it's really really long and it's so long in fact that most kids don't finish the questionnaire it's just too too long right so a couple years ago this really brilliant guy um called earling bow at Penn uh decided he would rank the countries of the world by what percentage of questions on the questionnaire their kids finished right and you know what he found when he did that ranking and compared it to the ranking of countries on the World by

20:53 what percentage of questions on the math test their kids got right the two rankings were exactly the same and when I say exactly the same I mean there was a correlation of. n. n in the history of social science there has never been a correlation of 0. n between two it's the same thing when we if you want to know how good a country does at mathematics in other words you don't have to ask that those that country's kids any math questions you just have to make them do a task that requires them to sit down at a seat for an extended period of time and focus on a task right and if they can do it they're good at math really really fascinating in other words what we're saying is when we look at um uh Asian cultures what we are

21:40 seeing is this this difference in mathematical ability what we're seeing is not some underlying difference in Talent OR aptitude for mathematics but a difference in capitalization that Asian the Asian cultural attitude about work has the result of being a far more efficient way of capitalizing on math ability than Western attitudes towards work and that tells us um where the deficit in our um mathematical education in the Western World lies it's not in our curriculum it's not in the quality of our teachers it's not in the size of our classrooms it's not in the amount of money we spend on schools it is the attitude in the head of the child as he or she sits down in 11th grade and does

22:26 algebra or calculus right and by the way nor is it a problem in our genes as some people would like to say of there's a whole bizarre argument that westerners have an inferior set of genes when it comes to mathematics than easterners you know a totally uh ludicrous and unnecessary step in this argument no it's about culture it's about a difference in attitude and about their ability to far more efficiently capitalize on um the abilities of their kids um uh now why now why is this the case I mean this is a I'll just digress for a moment um a really really interesting question is okay if Asian cultures have profoundly different attitudes towards effort when it comes to mathematics why

23:13 right why does that come from and nobody knows um but in my book I Venture what I think is a plausible explanation um and that is that I think it has to do with um uh patterns of effort laid down um in um in his historical agricultural practices uh that when you look what what is the thing that um Hong Kong uh South China South Korea and Japan all have in common and that is they are historically rice growing cultures right and what is distinctive about rice growing it is the most uh labor intensive and Co cognitively complex form of Agriculture known to man um we know so my on my my father's European ancestors in the Middle Ages in northern England

23:59 uh probably worked a thousand hours a year as peasant Farmers so what that meant was they worked from uh from dawn to noon uh five days a week um on the weekends they drank themselves silly um and during the winter they slept basically um and they got lots I don't know if you know this but a peasant in medieval England got lots and lots and lots of holidays um that peasant's counterpart in South China or Japan in the same period would not have worked $1,000 hour a year they would have worked $3,000 a year for the simple reason that Rice farming is just a whole it is not a not a difference not a not just a difference in degree from wheat farming is a difference in kind it's a whole different way of working it

24:45 demands that you wake up at dawn and work all the way until dusk it demands that you work on the weekend in fact there's a wonderful um uh uh uh Chinese proverb that I quote in the book which is um a man uh who works dawn to dusk 360 days a year will not go hungry right which is encapsulates the difference between um eastern and western agricultural practices no my peasant ancestors in northern England it would be inconceivable that they could call that a proverb they would have said the man who works 175 days a year Dawn to 11 may or may not not be hungry

25:30 right well my argument is if your culture does that if that's what you guys what you do for a thousand years that attitude is a deeply rooted part of your makeup and when your kids even if they didn't themselves work in a rice Patty when they sit down and face a calculus or an algebra problem that Legacy that attitude towards effort and persistence translates beautifully to that most modern of town s right and that and means that your culture will do a far better job of of of capitalizing um on on on its inability now is that the whole story I don't know probably not there probably all kinds of other um explanations as well and I get into some of them um but I think it is important

26:16 that when we look at things from this perspective um to try and to try and answer questions using um history and culture as our guide um when you think about problems in other words from the perspective of capitalization I think you look for answers in different places than when you have a far uh more simple or more reductive approach um to these kinds of things now why is this capitalization discussion of capitalization so important um because I think when we look at um uh why certain people or groups succeed in the world our default explanation is always that those differences in success reflect underlying differences um inability um and we forget about how much um poverty

27:03 uh stupidity and attitudes are far more important constraints on on capitalization you know I remember I'm a I'm a happen I'm a a runner and U um I have observed like most Runners have over the last 25 or 30 years how utterly dominant uh the Kenyans and the Ethiopians have been in long-distance running and um this has prompted all kinds of people to say that this must represent some fundamental difference in underlying levels of ability that there must be something peculiar about the genetic makeup of East Africans that makes them better Runners than um the rest of us that's a talent explanation right but a far more elegant and persuasive and simpler explanation for them is that they have a higher level of capitalization than we do Alberto

27:50 Salazar who's the Great American marathoner um he um recently pointed out that in Kenya there are probably a million school boys between the age of 10 and 17 years of age who run uh over 10 around 10 to 12 miles a day right a million boys running 10 to 12 miles a day between the age of 12 and 17 the same number um in the United States is probably 5,000 if that right so our capitalization rate when it comes to distance running what is it is it it's surely less than 1% right it's probably .5% right how many kids who are capable of being great long-distance runners in the United States ever discover whether they have that um that uh that ability

28:37 they never do because they never actually do the work necessary to find it but in Kenya how many great distance Runners do they miss if they have a million school boys running 10 miles a day almost none their capitalization rate is probably 95% that's the difference right the difference has to do with what does the culture value and where does it spend its time and ATT ition and how good is it at finding and making and exploiting that kind of human potential they're really good at that when it comes to distance running um and we're not and I think when you think about things that way it powerfully clarifies how you go about improving um our use of human potential it means that you don't give up it means that you don't say look at a group that's not succeeding and say they are incapable of

29:22 success and say that the problems that they face are too powerful to inate to in Grain for us to do anything about the capitalization argument I think um enables us it empowers us it tells us that we can actually make a profound difference in how well people turn out if we choose to pay attention to the constraints imposed by poverty by stupidity um and by attitude um so that's a little um glimmer of the kinds of things that I'm wrestling with um in this book there's many more but I'd be happy to answer any questions that how many of you [Applause] have I hate that you didn't mention the

30:08 Beatles one I really like that one 4,000 hours I I don't know if you mention people who are over 40 or 50 can't spend 10,000 hours doing something what do you suggest to us to become outliers oh this is a the question is in reference to I talk in the book at one point about um how long it take to be good at something and this observation by many psychologists that um that uh to master a cognitively complex task whether it's playing chess at an elite level or being a brain surgeon or a classical music composer or a good computer programmer um requires seemingly without exception uh 10,000 hours of deliberate practice uh so 10,000 hours is roughly 4 hours a day

30:54 for 10 years so you need to put in that kind of time um before even the most talented of people innately talented of people can ever achieve an elite status um but I would actually the and uh what I don't think this argument that observation suggests that people who are older in life that this is closing doors to people who are older in life on the contrary I says I think it suggests the opposite that it says that at any point in our lives if we are in a position to apply ourselves in a formal and rigorous and intensive way to a problem we should be able to see fruits of that it says in other words that what is special about um uh people who do highly extraordinary or creative acts is not that they are um

31:40 there's something special of something inherent in their minds some particular genius or that there is some magical property associated with youth right on the contrary it says that no what sets them apart is that simply that what we are seeing is the um the the necessary and predictable outcome of applying oneself um rigorously to a task something that can that is available to anyone at any point in their life if they choose to um apply themselves in that way so it's I think it's a a liberating um observation sure so uh L League Baseball has a cut of date uh May 1st and uh I wonder what is the best mitigation strategy for a boy who wants to play ke ball and is born on April 37 yeah

32:28 um so the question was about little leag baseball little leag baseball has a cut off in Midsummer or early summer and in fact if you look at the distribution of birth dates of uh uh baseball players professional baseball players in in America you will see that they are highly clustered in the late summer months uh Most baseball players are June July August or July August September I've forgotten exactly where the um so we see this same effect very clearly with baseball what does the kid who was born on on April 27th uh do well uh in a certain way nothing um there's nothing you can do this is I mean this is um one of the things that I that I in writing this book was objecting to was this strain in American thinking that says that all obstacles are ultimately

33:14 um um uh overcomable um by individuals if that individual simply chooses to um be determined enough I think that's very true and I Persistence of determination are incredibly important um components of of success but we also have to understand that when it comes to stupidity constraints there is very little that individuals can do that's the reason that's why we call them stupidity constraints because they have been stupidly oo imposed on a collective level and are powerful enough to um overcome even really really determined um individuals there are certain things that can only be done at the society level right and you know it is only our naive I said only our naive faith in the

34:00 efficiency and fairness of mocra systems that prevents us from seeing this the only thing you can do for the Kid born April 27th Who Wants To Be A baseball player is do what I talked about is create parallel leagues based on on physical maturity that's the way you do it um and it is a if you look when I read that roster list for those Czech teams you know there are lots and lots and lots of kids in Czech in in the Czech Republic who want to be um successful um uh soccer or hockey players um but who happen to be born at the end of the year and you can see there's the evidence they're not getting it they're not making it right it's not enough to ask the individual to um to try harder sure back yeah so um I was kind

34:46 of wondering as I read through the book if uh you know given that it's kind of about constraints placed uh somewhat arbitrarily and if you came across any examples in your research of sort of out of those theories in other words people that manage to succeed at certain things despite those constraints yeah so this is a very interesting question so this is something I thought about a lot subsequent to this um so the book identifies I'm really interested in this book in advantages that are advantages meaning the kinds of opportunities and advantages that end up putting you further ahead than you would have been otherwise right but that's clearly only one of four conditions there are also advantages that are disadvantages so if your father is worth

35:35 a billion dollars do you think that you would be uh as a kid uh better off or worse off today right than you than you would be if your father made $100,000 I would rather have a dad who made H 100,000 than have than a billion right I think that having a father with a billion dollars would actually be quite quite crippling to your motivation and so that's an advantage that's actually a disadvantage right so then there's also disadvantages that are disadvantages so uh that would be that's condition three and that would be to grow up the child of a single mother who's addicted to drugs in uh in a uh in East Memphis is a disadvantage that's a disadvantage you really you know almost

36:22 no one overcomes that right but what you're asking about is the fourth condition which is are there disadvantages that are advantages now that is the most fascinating one of all so um uh for example one of the uh most uh fascinating observations that's been made in recent years is that uh someone did a study recently that pointed out that 30% of American entrepreneurs uh have been diagnosed at some point in their life with a profound learning disability and you know you only have to the list of people who fall into this category so the dyslexics you know Branson's a dyslexic Charles Schwab is a dyslexic the guy who founded um Kingo is a dyslexic uh I can go on I

37:07 mean the list is like this long right so why is that well the argument is that it's not a CO instance is in fact um it is a direct function their entrepreneurialism is a direct function of their disability so how do you succeed if you cannot read or write from the the very earliest stages in your Elementary education you compensate for that if you're the ones who make it a lot of kids don't make it but those who do compensate how do they compensate well from the very earliest age you learn how to delegate so kids who make it through school kids who make it through school who can't read or write you know how they do it they do it by having others do their read reading and writing for them right you learn you compensate by being a really good oral Communicator you can't write or read so you you're a

37:55 talker right you learn how to Pro solve right cuz your life is one big problem you're in an institution asks you to do two things and you can't do either of them right and you learn how to be a leader you have to do all those things problem solve delegate um oral communicate you learn how to lead in fact there's a beautiful study that was also done that said that pointed out that of dyslexic entrepreneurs 80% of them were a captain of a high school sports team versus 30% of non-dyslexic entrepreneurs that's the character type right so when you get into the real world and what is it required of an entrepreneur that they be a good leader that they delegate that they be an a problem solver and that they be good oral communicators these people have been spending their whole life

38:40 practicing the very the four skills that are at the Cornerstone of entrepreneurial success now if you talk to those people and you ask John Chambers dyslexic right can has difficulty reading his own email right you ask all those guys um what did you know what role did dyslexia play in your success they would say it wasn't an obstacle that I had to overcome it was it is in fact the reason I'm successful it is a disadvantage that ended up being an advantage now I am actually this category to me is the most fascinating one of all um so let me give you another example um one of the most striking findings in educational research is that there's almost no payoff that we can find to reducing class size even though all

39:27 parents are obsessed with class size right irrationally so if your kid is in a class size of 25 and you hear that at some other school it's 19 and so you pay $25,000 a year to get your kid into the school with the 19 kids instead of the 25 right in fact Reams and Reams and reams of academic Studies have failed to show any advantage to smaller class sizes except for uh really disadvantaged kids in very very early grades for everyone else it's a total wash why is it a wash because it makes no sense why would you do just as well in a class where the teacher's not paying you enough as much attention right shouldn't shouldn't there be a correlation between teacher inputs and student performance uh yes but only if there are there is no such thing as a disadvantage

40:14 that can be an advantage what if the disadvantage of being in a large classroom is something that you compensate for what if it's like dyslexia what if if you're one of 30 kids you compensate and learn self-reliance and that self-reliance in the end is just an important a trait as the thing that you would get from a heavy amount of teacher feedback right we are resolutely uninterested in the category of benefits that fall into that fourth category right we can't even talk about them no one wants to talk about what are the things what are the kind of um customized disadvantages that we might introduce into our school system that might have uh a positive effect right and we're we're all we operate under this extraordinarily

40:59 psychologically naive notion that the only thing that matters in school are advantages that are advantages right as if everything else didn't exist like I would love to see for example I'm now ranting on on on but um it is not like I I live in Manhattan in Manhattan we have these super super super fancy private schools the most advantaged private schools in the world right that cost 30 grand a year um high schools um I'm not convinced that that isn't a that those schools don't fall into the category of advantages that are disadvantages I would love to see I would love to know on a kind of see a systematic analysis of whether you're helped why is it the case that you're better off going to that school than learning how to cope in a far more um heterogeneous um Rough and

41:46 Tumble um uh Public School environment I don't it's not it's not obvious to me why that's in fact most of the successful people who send their kids to those schools when went to Rough and Tumble heterogeneous Public Schools so it is this massive Act of cognitive dissonance that you turn on the very thing that clearly made you successful and deny it to your child right in the name of what right the same grandfather who says that he walked seven miles to school every morning Barefoot drives his kid his grandchild in the SUV two blocks to school cuz it's raining out if it worked for you Grandpa why doesn't it work for me if you at other um possible cultural

42:33 explanations for Success like you prepar to Asian to Western but even within Western there's of I read a lot of studies that try to explain for example if it's genetic or cultural that you know there are more Nobel prizes among Jews or you Western European Eastern European Jews and is there any way to debunk that per se yeah there uh so um a lot of advantages um Jewish advantages are shared by other ethnic groups who have are in a similar sociological position so the parses in India uh the Lebanese throughout the world um the uh ethnic Chinese in Southeast Asia in Malaysia and Vietnam and um and I mean I could go on but there's a whole series of groups that if you look closely at

43:18 their um the roles they have played and the success they have achieved uh it's so they're all they're all doing the same thing so Jews are not anomalous they're not anomalous at all they are part of a pattern of accomplishment that is common to this these discreet um ethnic minorities within larger countries and a lot of that has to do with the kind of extraordinary set of um there are a series of disadvantages that come with being in that position but there are also a set of advantages um so Outsider status um being this kind of minority Outsider group is incredibly useful if you would like to play any sort of middle man role right um which what all those groups do Lebanese uh Pary um ethnic Chinese and uh and and

44:05 Jews always play invariably end up playing this entrepreneurial middleman role which is something that is uniquely available to The Outsider because the outsider um as an outsider is allowed to do things that you can't do if you're a member of a majority you can be tough you can say no if you're gonna be a banker right where you're where you're I mean this does not apply to the bankers on Wall Street over the last 10 years but historically if you were a banker your success depended on your ability to say no right and to be mean to say to someone who is not paying you got to pay right it's really hard to do that if you are a member of the majority culture because you risk your social standing when you stand up to someone and put your foot down but if you're a member of

44:52 a minority group that's outside the general culture you can be tough you can say no right so that's why you see banking is always dominated by those four groups throughout the you know my my mother group up in Jamaica uh the Jamaican it's funny actually Jamaica is a perfect example of this the entrepreneurial commercial class of Jamaica is ethnic Chinese Jewish um and Lebanese right it's it's like an exact um uh uh um indication of this very thing so we could play with that idea and um and I and and come to an understanding of all kind of of patterns of accomplishment in those groups because all those groups also have disproportionate professional success and disproportionate intellectual to some extent disproportionate intellectual success as

45:38 well um feel like I'm discriminating against the back of the room uh referring to the 10,000 hour idea what in your opinion what is it um how difficult is it to be successful in today's time period where we're at right now as opposed to the Great Depression as opposed to maybe the great impression recession uh well that's an interesting question I mean the um I think it's easier in the sense that there are just so many other there are so many um uh such an array of things to be good at now right um success was narrowly defined in the 30s as being a doctor or a lawyer um today we have you know 25 different

46:26 things that we would would give Accord that same status to um or at least after the uh melt done on Wall Street 24 um uh sorry I can't resist the Wall Street dicks um uh so in that sense you know if you think about um uh the kinds of things that are available to those who are willing to put 10,000 hours of practice in the list is just longer now and so in that sense I would say that we're um at an advantage but in referring to you know how Bill Gates you know work towards his achievement and you know 3:00 a.m. to 6:00 a.m. at UB programming and that seeing that success before it actually became what we're all here doing now oh I see well there's always going to be yeah well we're in this and that

47:13 that kind of question is unanswerable because it requires us to know what the next you know the thing about people of Bill Gates's generation was that they were um getting their $10,000 hours in in a discipline before the rest of the world realized that was the discipline that mattered right by definition we do not know what that discipline is today only the 15-year-old equivalent of Bill Gates does so those of you with 15-year-old children should ask them but you know I'm not going to know sure the the culture of Honor harling Kentucky a little bit I found that really fascinating yeah so I have a in the culture section of the book I um I I talk about I try to cond I talk about um I'm trying to sort of um

48:01 it's a I'm trying to set up the discussion of Asians in math because the hard thing to understand about the kind of cultural explanation I give for Asian mathematics superiority is this notion that the kids who are doing well in math today in South Korea or Singapore or where have you Japan are not themselves rice Farmers nor their parents nor in some cases are their grandparents right so why how is it possible that Rice farming could be the explanation for the way they are well in order to buy that you have to buy the idea that cultural um models and codes and rules persist that long after the circumstances that created them have gone away those things are still in the air and they don't they

48:46 don't they don't um Peter out or vanish they're actually they stick around and so I I describe I give an account an explanation for why Appalachia in America has always been um the most violent part of the United States um and the explanation for that is not in the particular immediate conditions of Appalachian life it has to do with where the ancestors of those living in Appalachia come from um and they all they many of them they that that Appalachia was settled by people by the Scotch Irish people from the Borderlands of the United Kingdom um who had developed in their time their hundreds of years there in that most kind of um Lawless and um dangerous and um uh uh um

49:34 um Barren um existence had developed this thing called a culture of Honor which was a culture where your where your honor was everything and where you would do anything to defend it and that is precisely the kind of culture that leads to lots and lots and lots of violence um but it was a that whole section of the book is is preparing us for the notion for the seemingly counter intuitive notion that what your great great great great grandparents did for a living can make a difference in how you see the world um which is not an obvious it's a difficult point I think for many people um to grasp sure uh you made a great case for the uh 10,000 hours of work it takes to become exceptionally good and at something and then also for um the

50:19 people that are basically at a disadvantage but I'm wondering about where you have the loss to society where you only have so many slots so for if you had a better pathway for the che team so that the people were equally distributed would they have a better team yeah I think it stands to reason that the checks so suppose the cchs have or the can let's use the Canadians since I Canadian um suppose the Canadians did had three parallel leagues um then their denominator of kids that they're choosing from I think if you look at the distribution now you can make a a reasonable that they are the cap rate is 40% right if we can raise the capitalization rate to 80% we have doubled the number the available pool of

51:07 kids that we're choosing from for the most elite level so it doesn't change the same number of people um uh are there's only a limited number of slots in the National Hockey League but it stands to reason if the pool that you're pulling from is twice as big um the average level of talent should be higher um uh uh that you should in other words be able to to raise the median level of talent in the league if you've increased your um if you've increased your uh the pool you're you're you're you're fishing in follow okay okay I know I'm about to get like totally smoked but go ahead so so then uh you would expect that the people that were born later in

51:53 the year on the cck team or on all these teams would possibly better than the ones that are born earlier yeah uh that's yes here's where it starts to get really really interesting you might so they have overcome well there are several things there remember um or they may Simply Be maturational anomalies that is to say um not all if you look at a group of seveny olds um uh they don't all mature at the same uh rate it is mostly the case that the kids born in January are going to be bigger and stronger than the kids born in December but some of the December borns at the age of 10 or 11 are going to be as mature as those born in January I think what you're seeing is that um those are the kids who end up making the NHL they're just ones whose whose growth

52:38 curve was a little bit accelerated um I think that's the um although don't know it's a very good question it would be worth looking into but I did look at the list of like the greatest hockey players ever and you know they're almost all January February March so does it play into the the you know the the ability the C operate the ability to take advantage of like you were talking about the East African Runners and the million they have there but their system is not able to do anything with that know so yes the quality of of the the the ones who make it through there's a great conversation that's happening here AC Microsoft around Innovation and part one of the ideas is you know how do we dig in and find Innovation where it is it's it's not always just coming out of MSR there might be we're bad at finding

53:25 ideas great innovation in other parts of the company somebody that's in operations or support has a great idea but if there's not the mechanisms to pull that out and do something with that and so we're there's this downward pressure on the stupidity factor of of not allowing us to find those ideas as well as the upward push in trying to to share those yeah so this is a good point so um to go back to your point as well so one way imagine you know it's as a thought experiment let's just use hockey for example suppose we wanted to increase the cap rate um in hockey in in Canada um one way to do it is to talk do what I'm talking about which is not to increase the number of slots in the National Hockey League but simply to

54:11 increase the number of Developmental leagues to have this kind of but another way is to is to increase the slots suppose as a thought experiment we double the size of um the National Hockey League and we say we're we're now going to have 30 teams right would that be would the would the expansion of that end have the effect of forcing um a higher e a greater efficiency in the capitalization of hockey teams in um uh of of of of hockey in the developmental leagues in other words can we are two ways to do this can you do this bottom up or can you do this um uh top down the only um I would be curious I'm curious about the top down version because we have a version of it in this country right now right where you have um uh

54:56 companies like Microsoft which um a whole tier of high technology companies which are in Perpetual have a Perpetual shortage of very very talented people right they're always complaining we can't we can't find enough people who to fill these kinds of slots we got to go overseas we got to all this kind of um and so in this case it has not had the um this this Perpetual shortage of very talented people has not really had the effect I think of dramatically raising our capitalization rates when it comes to math and science in fact over the course of the last 25 or 30 years the relative performance of the United States in math and science seems to if I if I have my numbers correctly seems to have if anything eroded um so that suggests that maybe uh top down that

55:41 that um that supply side or demand side approaches I always get the mixed up one of them you know what I'm talking about increasing number of slots at the top may not be the best um way to do it although I don't I mean but it's open to it's it's worth you know think about all these various um scenarios sure so do you think when companies invest in communities by having math programs and all this that a lot of that effort's going to be wasted because the societal underpinnings aren't there like you described yeah yeah you need to have a kind of I mean there has to be like to go back to the the the Kenyon Runners for example so they do have um there's an awful lot of it's actually incredibly wasteful to have a 90% capitalization rate for distance running you don't actually want a million of your

56:27 12-year-olds running um 10 miles a day because you only have four spots on the Olympic team or whatever three spots Olympic team you want them to be doing something that has some kind of ultimate payoff so it's actually that's actually not a it's not a model we want to emulate it's probably a good thing that we have a 1% capitalization rate but we just shouldn't whine about our performance in running but as a result but um uh uh but there are a whole series of of like here's a this is a totally wacky idea that I've been talking about with some people which is um uh suppose you uh rewarded in suppose you set up a system that allowed individuals or groups or nonprofits to profit from Raising cap rates so I go

57:13 into suppose I go into the to South Central LA and I have a class of first grade class right now I know actuar speaking looking at the those kids in their socio economic background that the amount of federal tax those kids will pay like uh actuar 20 30 years hence is probably close to zero right you have to join you have to really be a member of the middle class to to pay taxes these days and the the number of kids in a the worst part of South Central who end up in the middle class is very very small so suppose I said to so the cap rate if we Define capitalization as joining the middle class and paying federal taxes the capitalization rate in a bad neighborhood in South Central is pretty

58:00 much zero okay so what if we said to anyone that if you um can raise the capitalization rate in that group I'll give you a cut of their federal taxes so what if you said just like you it's like a you could you could Venture Capital um groups of kids right no I'm just doing this as a as a kind of as a kind of thought experiment so we know we're getting so why do you because we're getting zero fedal tax dollars now what would be so wrong to say if you Joe Smith want to invest in this class of kids for the next 25 years I'll give you 50% of their tax revenue in perpetuity and if you so in other words if you can get you know three computer programmers and two doctors out of this class of 30 kids you're going to be a very very rich man and by the way Society will be way

58:46 better and the kids will be happier because they will have what they don't have now which is someone who is actively interested in and capable of of increasing their capitalization right of getting the rate from zero to whatever it is 10 15 20 35% I see I I have no there's all people you know when you tell idea to people they very often people think oh that it just sounds so you know what it's whatever problems are that idea it's a lot better than what we have now which is no one caring for the kids right but the point is that capitalization strategies um change the discussion they move us away from this I am so sick of this Relentless absurd um exhausting focus on ability which is

59:33 just beside the point and um and uh they move us away from that and move us towards um this focus on um the exploitation of the ability that's already there and that's just a far more rational place to start if we had if we did everything in our power to exploit ability and we still saw differences in outcomes then we can talk Talent right if we had if in America we had 25 million high school kids running 12 miles a day and we still were getting you know smoked at the Olympics in the 10,000 meters I will entertain every genetic argument you want about difference between us and East Africans but until we do that it's a pointless argument right that's what I so that's why I think we need to be much more inventive in our uh in our thinking

1:00:19 about capitalization what if that Runners playing soccer hockey lacrosse football baseball basketball right like we spread our C pool over many more Sports than Pyon does yeah no no that's I mean that's was my point that it's apples and that because of those very very differen great differences in the way in which Talent athletic Talent is capitalized in these two cultures you can't draw any conclusions about inability you might be have a higher capitalization rate it's just div yeah just before Malcolm goes any further I want to come that he's going to have to leave the building cuz he has to go do a Talk At The Gates Foundation where I think he's going to be convincing them to make that investment in those kids or anything

1:01:06 um but so so I know a everybody you know wants the book and I did have Malcolm has pre-signed tons of copies of the books so my question to you is we can have Malcolm answer questions for all of us for the next 15 minutes and then get in the car and get over the bridge or he can sign and personalize books for a very few of you so I'm thinking we're moving toward the questions yeah okay over there in the corner in the context of the capitalization where you were talking before about um Runners and I'm a big track fan in Jamaica island of only about a million people I think it's a million and a half now produces a disproportionate amount of sprinters and allow them run for other countries in the midd you think that falls into the

1:01:52 same thing even though they have a small pool of people who are available to yeah well as some as you know I'm have to make and so I'm powerfully disposed to answer this question in a way that reflects um most flatteringly on Jamaica um Jamaica is it's a beautiful example of this right so um uh in this long running debate about nurture versus nature in running in sprinting especially you know the the quote unquote gene pool of Jamaica isn't any different than any number of other countries around the world and yet Jamaica utterly dominates sprinting this is a clear case where Cap rates for sprinting in Jamaica are must be very very close to 90% And I I I I have no

1:02:38 real evidence for this other than anecdotally I was just in Jamaica for Christmas visiting my cousins and I'm a runner so I go was I would go running around you know in the little hills around um my aunt's house and I it was this hilarious thing there never Happ to be anywhere else that the sight of someone running in Jamaica is just just ignite some kind of thing in all passes by so here I am you know running along down the road and like people like slow down wave and like some guy will be trudging along back from work and he would say he would like he' go run run run oh oh he would run after me and like run with me for like it was just like this and I realized like this is it's an obsession right it's a complete Obsession and there is so much status associated with the act of running that if you have any you know even remote

1:03:24 ability in this area you exploit it right and you know Usain Bolt at this point is a is a you know not since Bob Marley has has there been someone who has ignited this degree of so I think it's a beautiful illustration of of what I'm talking about so um you indicate that um this is all based on kind with Society values is so did you look at how long it would take a societal value change to impact the capitalization of the of the folks on it because you we're going to a new phase of political life here I think a lot of us are hoping that some new values pop out how long that those might take effect yeah yeah so I I'm a real Optimist in I believe these kinds of shifts can happen really quickly and

1:04:10 let's let's stick with sports for a moment because Sports is a just a An Elegant way of um you think about what happened after Title Nine is it title n um so I was just with I saw a friend of mine um other day who has uh 12-year-old daughter so she's 40 something and she was talking about the difference that is between her upbringing and um her daughters and my friend is a is an athletic person in the sense that she's you know has no there's no but she did not play any sports at all as a kid so she grew up in an upper middle class family in Providence Road Island not some you know sticky play like you know Eastern Seaboard it never even occurred to her to do Sports none

1:04:56 and in her daughter's life Sports is everything I mean not everything they they do the same amount of school work she did but they play so many organized Sports she can't keep track of it that is a capitalization our capitalization rate for women and soccer or basketball 20 only 25 or 30 years ago was what 5% 2% 3% today it's 50 60 70% that's one generation it's an incredible shift in what we think of in our kind of priorities in that particular area that makes me profoundly optimistic about our ability to uh shift our capitalization um uh uh the the focus of our interest in other more consequential areas because let's face it that's not a very consequential area but if we can do it with you know with soccer I feel like we

1:05:43 can do it with all kinds of other things but sure on your blind sing the SP give opportunities you go you raising your hand just now yes I don't have a question I was doing it for you you on The Blind Side yes okay thank you so much so my question is about sort of the opposite of the um positive impact of culture and the one you call that the right on negative historical impact of culture and I really want to explore your thoughts around um let's take slavery for example and S of the longstanding impact of slavery and what are your thoughts about outliers been that Community black community and and

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