CW 368: The Science of Winning & Losing with Po Bronson Author, NY Times Journalist & Creator of ‘The $treet’ on FOX

Welcome to Creating wealth with Jason Hartman. During this program, Jason is going to tell you some really exciting things that you probably haven't thought of before. And a new slant on investing fresh, new approaches to America's best investment that will enable you to create more wealth and happiness than you ever thought possible. Jason is a genuine, self made multimillionaire who not only talks the talk, but walks the walk. He's been a successful investor for 20 years and currently owns properties in 11 states and South 17 cities. This program will help you follow in Jason's footsteps on the road to financial freedom. You really can do it. And now here's your host, Jason Hartman with the complete solution for real estate investors.

Welcome to the Creating wealth show. This is your host, Jason Hartman. This is episode number 368 and one thing I just wanted to go into before we get to our guest today is to remind you because this guest will not be talking about real estate too much. In fact, I thought after, after doing this, I kind of thought, you know, we could have just had him on a 10th show. But it's Po Bronson who will talk about winning and losing and a little bit about how traders on Wall street maybe females are better at that job. And it's, it's a mostly male dominated business. So obviously males and females have a different outlook on risk and so forth. So I think you'll find that very interesting when it comes to the investment side of things. But just some general life stuff here is very interesting and Po Bronson will be here to talk with us about that in just a moment. Of course, for those of you who aren't Regular listeners, our 10th shows are where we go over and review things that aren't directly related to finance or real estate investing, as most of the shows are, or really all of them are. Nine out of ten at least. And so this one could have been a tenth. But we're going to play it on 360 here and I think you'll really enjoy the interview because it's, it's quite fascinating. But before we get to that, I want to just remind you that real estate is ideal. That's I, D, E, A L. Well, why is it ideal? That's a great acronym and it's a great thing to just keep in mind maybe when you're trying to convince naysayers of why it's so good, why you're doing what you're doing. You know, there's always those Internet trolls and those armchair quarterbacks and those naysayers and a lot of them are close to us in our life. So we've got to, we've got to kind of keep that in check all the time. And some want the best for us, others truly don't, even though we may consider them friends. Just kind of a funny dark part of human nature that I'm sure we've all encountered at one time or another. The greenness of envy rears its ugly head or jealousy. And so that's part of it, but also just to keep on track and remind ourselves why we're doing this. This is just a really easy way to remember it, that real estate is ideal. Well, the first part is it produces income. The I is for income. So very few asset classes truly produce cash flow and income. And a typical real estate property that you might find on our website, where it's typically financed with maybe 25% down, that will produce cash flow for you if it's managed properly and so forth. Of course that's, that's always going to be my disclaimer. And that's a whole nother subject that we've talked about on many other shows and will continue to address over time. But you know, a typical property like that might produce say 150 or you know, maybe $200 a month in cash flow and that's fantastic. But it really produces a lot more cash flow than that because you're only putting maybe 25% of the money into the deal. You know, if you buy a dividend paying stock or mutual fund or some other, and there's really not too many of them out there, cash flow oriented investment, maybe a business, well, you're usually putting all cash down on that 100% down. So we've got to remember that the way we have to evaluate our income properties is not by the net cash flow they produce initially, of course, that becomes important later. But it's really a deceiving metric because it depends how you finance it, it depends on all sorts of things. We just need to evaluate it based on the ratio of price to gross income. Because there you can't cheat. Everything is simple, it's clear, it's not murky. And that's the way to keep it, keep it simple. Because a lot of important stuff gets lost in complexity, okay? So the simpler we can keep things, the better. So if it's $100,000 property and it produces $1,000 per month, or that ideal 1% rent to value ratio, well, that's a great income investment. So if you put all cash down as you would in a Dividend paying stock or a mutual fund, well then you would have your cash flow on it. But if you finance it, it's obviously going to reduce your cash flow. However, of course you have the benefit of leverage, which we'll talk about in a moment, and you can diversify more, you can buy more, you can control more. So you can, you can multiply Your Empire times four if you're only putting 25% down on the property. So income very important. Now another thing that's really important to understand about income is that we talk a lot on the show about inflation induced debt destruct and how that happens. And there's a small school of thought out there, of course, that it's always the question, you know, 1, if by land, 2 if by sea, right. Well, a few people, not too many, but a few think that we are headed for a deflationary environment in the economy. So inflation, most of you know, especially if you're a regular listener, you totally understand how inflation helps us dramatically in our investments. Not only because real estate is a great hedge against inflation, because what you're really investing in is commodities, or as I call them, packaged commodities, all the ingredients of the house or apartment building, but also that debt is reduced by inflation through my trademark term of inflation induced debt destruction. Right. So very powerful thing there. If we have deflation though, what happens then? Well, doesn't look good, right? The price of the property deflates in value, it goes down. The value of the debt inflates vis a vis the value of the dollar or whatever currency doesn't need to be the dollar, but I'm obviously using that as an example. So the debt actually increases in value and that's in a bad way because we have to pay it back in less, well, in more valuable dollars. So it's, it may be harder to earn that dollar to pay it back. Right. And again, a very unlikely scenario. But if that happens, you have the backdoor, the implicit option in any real estate deal where you can just walk away. And you know, I really used to look down on that and I used to think, gosh, you know, that's just so immoral. But I've done several shows on it quite a while ago during the depth of the financial crisis that we've largely papered over by printing more fake fiat money. Another very long subject, of course. But in doing that we really have kind of changed the dynamic of things. And I had a guest on who ran a website and I think the name of the website, you can look up this old show Just search it on our website@jason hartman.com and listen to it. But I think the name of the website was called youwalkaway.com and you know, he kind of moved the needle on my thinking several notches actually, because that's the business deal any borrower enters into with their mortgage company, right? The deal is, look, you loan the money, your collateral is the property. If the property can't generate the income to pay the debt or you know, as we saw the last time around in the foreclosure crisis, even if it could, that wasn't even the point. If someone felt like just walking away, they did it. Millions and millions and millions of people did it, in fact, or they renegotiated those loans. So that's the nuclear option, if you will. That's the last option. Right. But before that last option, here's what really is the benefit of owning income property in a deflationary environment. It's the only place you're probably going to get any yield on your investment. Because in a deflationary environment, what's going to pay you? I mean, you know, you're certainly not going to be able to invest for capital appreciation in anything. It's not going to be in real estate, it's not going to be in stocks, it's not going to be in gold or silver. What are you going to do in a deflationary environment if you own a business or invest in a business, as in the stock example, but even on a smaller scale small business, if you own a business, that businesses income will generally decline in a deflationary environment. So the question we always need to ask ourselves is like I talked about, I think it was on the last episode actually is my theory of relativity, okay, not Einstein's theory of relativity, but our theory of relativity. And that means several things. But the way I mean it now is asking yourself the very intelligent question. And here's the question. You ready? Write this one down. If you're not driving or jogging or doing anything dangerous, but if you are, just remember it. It's easy to remember. Here's the big question. You ready? Compared to what? Yeah, that's the question. Compared to what? The only question that we really, really need to be faced with in a huge way as investors in anything is compared to what? That's the question. Because economics and wealth creation are relative concepts, aren't they? And as such, as relative concepts, if everybody is having a hard time and everybody is struggling, then that means we're probably going to have some deflationary pressure in the economy. And so goods and services should. But we know this is very unequal. The way it works get a little bit less expensive. And so if your neighbor is earning 1% on their investments and you're earning 2%, well then you're outdoing them by 100% double. You're gaining ground twice as quickly as they are. So the question of compared to what is a really, really critical question. All right, the next part of ideal is depreciation. Of course. This is the, this is the part where income property is the most tax favored asset in America. It is just so phenomenal because if you can take advantage of depreciation write offs, and you know, many people can, at least to some extent, not all of them can do it completely. But we've talked on prior episodes about ways to hack the system. If you've attended our last Meet the Masters event, we talked about that quite extensively as well. And we've talked about it on the show. I've had different accounting professionals and CPAs on the show over the years to talk about that. So if you can qualify for depreciation tax benefits, it is literally the holy grail. Now remember, even if you don't qualify in a specific year, those benefits still accumulate and they are carried forward. So it's not like you never get them. Okay? It's just that maybe you don't get them in one specific year because you earn too much money at your day job. And so our tax code punishes success in many ways, doesn't it? But when you add back in the loopholes and you know how to work the system, it does reward success too. So, you know, you got to be just investing the right way. Listen to past episodes about that, come to our events, hear more about it. And I always have to make the disclaimer, of course, I am not a tax or legal professional, so consult with the appropriate professional. Equity buildup. Well, you know, the most popular old fashioned way to invest was to simply buy a property and let your tenant pay down your mortgage over the years. That's the E in ideal for equity buildup. Ide equity buildup. And so that's a pretty good deal. It's, it's not bad. I mean, you know, I always like to say that with income property, with real estate, we outsource our debts, we don't pay our own debts, we get somebody else to pay them, we get our tenants to pay them. So that's a great thing. Over time, you know, at least historically, rents increase. The mortgage hopefully is a Fixed rate mortgage. And you're going to be in pretty good shape because you're going to be holding that mortgage while increasing rents. Your cash flow will increase. And as you get to the tipping point about midway through that mortgage, you really start chunking down the principal balance on that mortgage. And the property is probably appreciated too. And so that's the next point. That's the A in ideal appreciation. So, I mean, what else do I need to say about appreciation? It's a fantastic thing, but it's especially fantastic when combined with the last part of ideal. That's the L. And the L is for leverage. So when you take appreciation and you combine it with leverage, as the name would imply leverage, you get to exponentially increase your return on investment, increase your roi. So, you know, if the property appreciates, let's say we use a nice round number, 5% annually. Say that's the average appreciation rate is 5%, but you've put 25% down on the property. Well, very simple math. Without considering tax benefits, without considering cash flow, whether it be positive or negative, but hopefully it's not negative. If you've stayed out of the overvalued markets, you should have good cash flow if you're managing your properties successfully. And you know, listen, I know there are bumps in the roads. I'm the first, I'm the first to say, I mean, I've experienced many bumps in the road over the years. This is not, this is not for free that you get to create wealth through real estate. You got to do something, you got to be involved. You're going to have bumps in the road, you're going to have problems, and you got to just deal with them as they come. So the leverage multiplies the return in that example by 4 or 400%. So a 5% appreciation return becomes 1, 2, 3, 4, a 20% return net to you number before counting any of those other things. So that's why it's so powerful, because you leverage the return, you leverage that appreciation. And when I talked about equity buildup, and I talked about appreciation, if you follow my refi till you die plan, this only gets a whole heck of a lot better. So if you want to know more about that, go to jasonartman.com search refi till you die. You'll see past episodes on the subject. You'll see blog posts on the subject explaining it and maybe some visual aids too. So great stuff there. Real estate is ideal. Income depreciation, equity buildup, appreciation and leverage. I, D, E, A, L. What an awesome investment. Hey, before we get to our guest, I want to remind you, of course, many of you listen to me on itunes. And thank you so much for listening. We appreciate that very much. And thank you so much for telling your friends about the show too. But you can also get me on Stitcher, Stitcher radio, and that's stitcher.com and a lot of Android users that aren't in the Apple universe or the Apple prison.

One of our guests on the show told me once, he said, apple is a prison, but it's a very nice prison because they keep you in that ecosystem. Right? And so I listen on itunes myself. But if you don't, a lot of Android users use Stitcher radio. BlackBerry users do too. So Stitcher is great. And one of the cool things about it is they're putting it in a lot of cars nowadays. That's becoming a big, big deal. And I don't think it bodes very well for good old fashioned terrestrial radio when you can listen to podcasts that are very specific that are on topics you like and are interested in, and you don't have 18 to 22 minutes literally of commercials every hour. I mean, wow. I almost never listened to terrestrial radio anymore. It's. I think it's really kind of going out of style a little bit. You know, it still has its place for certain things, but boy, podcasts are great because they, they let you get the exact content you want and you don't have to listen to all the commercials. So that's a great thing. Well, hey, without further ado, let's get to our guest, Po Bronson, who will talk about winning, losing, and who makes the best traders on Wall Street. Here we go.

My pleasure to welcome Po Bronson to the show. He's a former Silicon Valley journalist for Time, the New York Times, and Wired magazine, and author of Top the Science of Win Losing. Poe, welcome. How are you?

I'm doing very well, thank you very much.

Good, good. And you're coming to us today from San Francisco, is that correct?

Yeah. Beautiful, beautiful day here in San Francisco.

Excellent. Tell us a little bit about the science of winning and losing. It it appears that you have possibly debunked what Malcolm Gladwell was promulgating as this 10,000 hour theory.

You know, even watching the Olympics right now, you're seeing people who are going up against each other and both of them have 10.

Contest after contest. Now certainly that helped them get there, but that may not decide who wins and loses. And I feel like Ashley and Mai's work on this is not necessarily completely contradicting Gladwell's and Erickson's 10,000 hour work. I suppose there's other work contradicting exactly how many hours you need to do, but it's really additive. It's looking at about 80 other factors that affect performance under stress and pressure. From politics to courtrooms to business negotiations to financial trading to sales relationships, and in different industries as well as in sports, as well as in the fine arts and from music to baroque musicians to Renaissance painters. Competition is everywhere. You see it on TV and reality shows and, and we feel it in our lives. And we have this, really have this dual perspective on it. Right. You know, like to say someone is competitive. If you're looking at TV and you're looking at, you know, the Swedish cross country skier who did an amazing 18 second come from behind victory sequence there, her competitiveness was, was a thing to salute. But if we were at a dinner party and we were saying, you know, and that woman over there, she's really competitive, we would be kind of saying she has a personality disorder. We'd be saying she can't turn it off. She drags people into a sense of social comparison they don't want to be dragged into that cares about winning and losing when we, the social context deems it inappropriate to care. And so we make a distinction between adaptive competitiveness and maladaptive competitiveness. And in adaptive competitiveness, it's healthy competitive skills, a recognition of when to turn it up, and also recognition of when to turn it down. We were inspired actually by the ancient Greeks who, when they created the Olympics, it came out of a. It was a religious festival. And the ancient Greeks believed, and they had all these games and chess and checkers and bones and contests. It was part of their culture. They believed in the highest spiritual virtue was something called aratos. A R E T A S kind of rhymes with gravitas. And aratas was this notion that you become your truest self and you discover your greatest capacities through competing. And not just physical strength, but cunning and intelligence and honor, you discover these things. Not that competition bred immoral behavior, but that it taught moral behavior. And we wanted to redeem this notion, this positive, adaptive notion of competitiveness. In a society where we do see a lot of examples in sports of people cheating or in business of corruption. And where we see this connection between bad outcomes and competition, we want to resurrect the noble side of competition.

Very interesting. I mean, so many different parts of competition and so many things are competitive, as you said. Now does. Does your work primarily deal with. And you mentioned it at the beginning and that's why I asked being under pressure in a competition or should we just. All competition is pressure, I guess. But is it more like the heat of the moment type of stuff? When you mention athletics, the courtroom, making a trade right on the spot versus overall winning in life, for example, over the course of years.

It's a really great question. Religious philosopher James Karst makes a distinction between finite games and infinite games. And finite games would be like sports or a day of trading on Wall street, you know, where there's an opening bell and an ending bell or an opening whistle at the tip, often final horn. Infinite games is life. Life is an infinite game to school children going to school year after year, even the summer's off and breaks. It feels like an infinite game that you're always being compared to other kids. You're always a little ahead or a little behind. And it never ends. It goes on and on and on as far into the future as you can possibly see. And each infinite games and finite games create quite drastically different kinds of stress and they require different kinds of stress decompression. Infinite games require you to rest and recuperate during the game itself. Finite games allow you to hug it out, go have a beer and recuperate afterwards. So finite games can get very intense. Infinite games, you have to let it be sort of a low simmer. And one of the interesting that comes out of this that shows is that women may be better designed on average than men for infinite gains for very long term stresses. One of the surprising factors that pops out is in the educational sector where in hot house competitive private schools. And this is actually research from all around the world, from Trinidad and Tobago and China and England and American south charter schools. It shows that actually girls do better than boys in those types of schools. Girls do better in those types of schools uniformly. But boys, if they're one of the best, it's fine. But if they're not one of the best, if they're anything but the best, they actually would learn more if they went to a less competitive school.

Why is that? I mean, yeah, what do you attribute that to?

It's because of the long term stress of always comparing yourself to some other kids who's an A or an A plus student. And you just cannot get over every day and it just kills you. The real answer is not to go to a left or right. So the real answer is to understand how you must turn a healthy competition. Competitiveness is the ability to turn off that sense of comparing yourself to others, which is something that the boys aren't as good at. They are always comparing themselves to others and unable to turn it off. It creates more psychological stress and tears down their ego.

Very interesting. Now I got to just stop you there and ask you throw something in, because from a social perspective, or especially a dating and love oriented perspective, I think most of us would agree both genders, that females tend to be more competitive. And if you will, and I hope I don't offend any, but yeah, I'm gonna use the word caddy. It's surprising that you're saying they can turn it off in this way. But maybe you disagree with me on.

My statement, but no, I wouldn't disagree with all that. What they can, I mean, women have social domains where they compete that men don't compete over at all. Who's the best mother, who has the best shoes, whose kid has done this and that. And it's. And it feels endlessly and it is exhausting for them too. But they do turn it down. You know, what men are good at is like washing dishes and then turning that into a sport all of a sudden and then making it a blood Sport for about 15 minutes and then the dishes are all done and they have a beer and they hug it out and they're done and they let it go. And women, definitely on average, again, not true of all women or all men in any way, but will keep that sort of ember alive and let it be a slow burn and not completely turn up. But they'll never totally turn it up either. The slow barbing and the implicit and the kind of simmering, backstabbing thing is never an all out one. It's always kind of a gradual thing and that pace of it is something that they can handle, while with the boys, it tends to be more outright and really feel like a verdict on them. You know, boys are very good at pretending they're somebody else and then competing within that personality. But school.

You can't pretend to be LeBron James in the backyard playing basketball when you're at school. When you're at school, that grade, that's your grade, your actual grade is very, very threatening to the boys.

Yeah, you did an interesting part about Wall street and you know, you, you found that women tend to be better traders than men. However, there are. Why are there so many fewer of them? And, well, why are they better? What makes them better too?

Well, yeah, so it's not actually traders, it's financial analysts.

We're talking about stock analysts, the ones who are delivering every quarter the earnings projection for company after company. This is a longitudinal study over 25 years looking at 3 million analyst predictions. And they're looking at every risk factor for every company, trying to determine how is it really going to shake out? What's the future really hold for this company and that company and that company in this sector? It turns out that if you had a hedge fund where you bet on female financial analysts and you bet against male, you would make a lot of money. Female financial analysts are 8% more accurate than men. They're very good at judging the risks that a company is dealing with. Men tend to be over optimistic. Men are not as good at it. Or if you give them a superiority of their own, you might say that men are very good at ignoring these odds. Women are good at judging the odds. And you see this in quite a few spheres. Unfortunately, women are not hired at the rate that they should because they do the analyst job better than men do. But that isn't necessarily trading itself. Women tend to be. Some of the science says that if a woman tells you to sell a stock, you should really sell a stock.

That's one of the things about a male financial analyst is where they're weakest, is in telling someone to sell a stock. They can maybe pick a growth stock or something that's going to go up or a value stock, but they're not as good at telling you when to get rid of it. And that's something that female financial analysts do better. There's similar studies of this where female CFOs tend to keep companies from getting in trouble. Male CFOs tend to get them into deals that are far more aggressive, which sometimes pay off and sometimes don't. Same as women on the audit committee. You know, women do tend to moderate the risk that a large organization will take. And that could be an advantage or a disadvantage depending on what industry you're in.

But it's fair to say that women are more risk averse. Right.

But it turns out not to be risk averse as much as they're risk after. It's they're not scared of risk. They in fact accurately see just how much risk is there and they don't want to waste time with losing. So a good example is in politics. It's always been an issue to try to get women to run for larger political office. They'll run for school board plenty, but tend not to run for higher office so much of the time. And people assumed that they Were just risk averse. They didn't want to lose, want to waste their time with this stuff. And what they found though, when they did much more careful analysis, that when the odds of winning a political contest are below 20%, all of the candidates will be men. When the odds get above 20%, when they reach about 30%, women start jumping into the political races and in fact at that point jump in more than men do. Women are highly sensitive to the odds. Men sort of again, ignore the odds they run to for political office for different reasons. Regardless of whether they really think they can win. Women don't want to waste time with losing again. And this has been helpful in understanding. Like when you're up against an incumbent, everyone's like, oh, we got to find a female financialist. Now the smart people are saying, well, we're not going to get a woman to run. There's an incumbent. Like, the odds of winning now are only 8%. Let's look, let's put our energy over here in this other race where the incumbent is gone and it's an open seat.

So you said that there were 80, 80 or so different characteristics that determine the winners and the losers, right?

Yeah. From genetics to physiology to mental traits to science of teams and team traits. Yeah.

Okay, so tell us about some of these, if you would.

Well, let's just take something for fun, for what the heck. I mean, look at early childhood. You know, we know there is such a thing as sibling competition and wonder what does that help? You really like all that competition with your sibling. And it does, in fact, actually those who grow up with siblings do learn competitive skills. What's perhaps even more fascinating is actually by order of birth, while oldest siblings do get more time and energy from the parents and end up being 1% smarter on average and do well in life, it's the younger siblings that are the best competitive skills. Because to compete out there in the real world is when you're a kid, it means that there's always going to be someone who can read better than you, can draw better than you, can hit a baseball better than you, and you want to quit. I mean, it's the embarrassment of being next to these people and being compared is very hard. But this is something that younger siblings are used to their entire life. They grew up in a world where there was always a big brother or sister who could take what they want whenever they wanted, and who was better at everything than them. And they learned to not let that stop them. And so here we are, we have some interesting manifestations of it. With the Olympics going on, there's snowboarding events and mogul skiing events and these types of adventure sports. Younger siblings are twice as likely to be doing those types of sports than older siblings. Or in baseball, Major league baseball. There's been 350 pairs of brothers to play major league baseball in the history of the game. Younger brothers are twice as likely to steal bases as older brothers. They become risk takers because they have to compete with their older siblings from birth.

Okay, so what about only children then?

Yeah, so the question is, what do you do with only children? And what do you do if you were an only child or you have an only child? You know, one of the factors that really matters is another one is actually group based play. So if you have an only child, it's important to get them playing in groups, not just in pairs. When you do pair based play, we're talking about preschool aged kids. Profound effects. Pair based play for anybody tends to be very usually kind of polite and there's a lot of turn taking. Group based play tends to. They tend to play games, compete a lot. They have to learn to be loud, to be heard. You can be different than everybody else. You don't have to feel like you're the same. And so you're allowed to be better than others in a group structure. In a pair based structure, if you're better than the other person, it kind of destroys the relationship itself. So those who grew up playing in pair based play learn to de emphasize competition. And those who grew up in group based play tend to learn this. So group based play is really important for only children. Roughhousing with parents is also really important. That can replace in many ways, even improve upon what someone might do with their siblings if they did have siblings. And the best thing about roughhousing with the parent, which is actually natural, parents do this with their kids up to about the time they're 10 years old. We don't know why we do it. You know, pillow fights that are fun, hide behind the curtains, they boo, all this kind of stuff. Wrestling on the couch. It actually teaches kids to get aroused, to have fun and in kind of an intense mood, but to back away once it gets right up to the line when you almost can't take it anymore, when it's too much tickling. That's right, when the parent backs down or should back down. And this simulates for people who are later in life as competitors, it simulates that element of competing really hard but never breaking the rules. And it's people who didn't have roughhousing.

One second. So the take home on the roughhousing thing, I get that and that's a very good point. What's the take home on the only children though? Yes. Or I mean are they, are they. They should share and learn to play nice. I mean I sort of got that.

Everybody wants that.

Right. But really you need groups who wins and loses. Like that's, that's, that's the title of the book.

If you want, if you're only. Only children need group based play. Don't invite just one kid over, invite two kids over.

Okay.

At their preschool. Make sure they're playing in groups with other kids, not just, you know, and this can become inevitable. A child at the age of three who's spending one third of his time playing groups and 2/3 playing in pairs by the age of 5 or 6 will be spending 76% of his or her time playing in pairs and only 16% playing in groups.

I got that. But what does that show us about who wins and loses? Does that kid? I mean you're giving like parenting advice and that's great. But I'm curious what it turns into.

Play. Learn to be have proper competitive skills and can't win. And those who grew up doing pair pace play are really polite but can't win.

Okay, so that falls into really the team dynamic that you mentioned. So it's important in order to win, it's important to be able to work on a team. Is that kind of your point?

That's a whole different kind of thing. No, the group based play is often not really team related thing. It's often a lot of boasting and jockeying. Being on a team is a different vector actually. And one of the there is this, this sort of egalitarian notion of teams that you're all equal and you're all empowered and everybody gets a participation of.

A team version of a team.

Yeah, but if the science says that that's not what works, that actually.

Role differentiation and role clarification on a team really helps a team perform. It's important they not all be the same, be allowed to be different and that they know their role on a team. And this is true for everything from sports to hospital emergency rooms and how they're staffed and how people know how to handle medical emergency and what their roles are. That you can improve performance by improving clarification of what roles each person is supposed to do. And it's important to understand that again, this egalitarian notion of teams, it doesn't quite acknowledge the role of stars. Stars are really important because what stars do to a team is not just perform, but you have to work with them every day and they push people around them to get better and they improve the overall performance of a team significantly.

So in other words, that idea of I own a real estate company, for example, as another business I have. And so the idea of having the superstar sales agent is good for the rest of the team because it inspires the rest of the team. It's a role model.

Right. Inspires. Then they also have to live up to that person's work ethic and that person's expectations. Yeah. A lot of the science says, even in real estate, that stars are really important on a team. Immunologists, like at universities, it's interesting where they study this stuff. But having an all star research immunologist raises the productivity, the research productivity of the other immunologists at the university by 35%. If you go back to like Chicago Bulls basketball, it was like Scotty Tippen got really good because he had to practice every day with Michael Jordan and go up against him and it made him really good. The stars play this role on a daily basis with their teams.

What about, though, the potential for envy that's created and does that, I mean, in certain cases that does make the team less effective and less cohesive. Right. When there's someone that's above all the others and everybody gets jealous and.

Well, what seems to be. They do, they do look at this really carefully.

And with siblings, I'm sure that happens with siblings too.

Right. And what they're looking for is whether it feels justified. So if a star is getting paid, you know, four times as much as the others, but it feels justified because they really do that work, then it's fine. And it actually is great if people resent it and you know, because legitimately, like, it's not, it's not earned and you know, they're getting paid four times as much but only doing twice as much work, then people resent it. And it does undermine. People have to buy into the differentiation in the roles. If they don't buy into it, then we won't succeed.

Okay. So, yeah, buy in and thinking that it's fair. And that all makes sense.

It's the whole notion of harmony in a team is a really, really, really powerful idea we have. But these studies of orchestras around the world, and they found that the better an orchestra sounds on stage, the worse the relationship drama is off stage. And what happens is people grow up, you know, the best orchestras are composed often of the best musicians. And those best musicians grew up wanting to be soloists, not wanting to be part of the orchestra, but they had to learn to do it. But it's not necessarily their character trait. But that's what makes the orchestra sound really great, and they've had to learn to do it. But it turns out that the idea that team harmony drives results, it seems actually the other way around. Really good results tend to make the team happy and drive team relationships.

You know what's interesting as I'm listening to you, Po, this is a great testament as to why socialism and communism just doesn't work.

On the team stuff. Absolutely. Well, collectivist, you know, or capitalist notions. And they do these studies. You know, to be honest, I was thinking of one where they did a Japanese versus American teams were doing these negotiation tasks, right. And given these. There's a very common paradigm been used in social science the last 30 years. Big old team negotiations takes a week to. And they found that the Japanese teams were so focused on good team harmony and that the Americans didn't, you know, they gave lip service to that, but they weren't. They just really wanted to win. So what happened is they hit difficulty in the middle of the week. And this is where the Japanese insistence on team harmony led them to refuse to change tactics, refused to call out the people who weren't doing very well, to not embarrass them, and literally could not change and could not reverse what was going wrong. While the American teams wanted to have team harmony, but not to the point they weren't going to go down with a ship. So if the ship was going down, they were willing to break the harmony and say, you're not doing well enough and you shouldn't be the boss. We need to change how we're doing it. And to allow that discord allowed them to pivot and do really well in these tasks. And there can be such a thing as too much harmony in team based in teamwork.

Yeah, yeah, I agree with you. I definitely agree. Someone's got to be the leader, someone's got to be the star. And it's not all egalitarian. I would definitely agree with you. So what's going on in Silicon Valley nowadays if we change the subject just a minute before you go and do you report on it anymore or is that all?

I still follow it very closely. I'm not writing for anybody on it, but I can't escape it. I run this workplace.

10,000 square feet, 80 writers there, all freelance writers. And we have a hotbed of startups in the building. All of my friends work at startups in Silicon Valley or they work at Google or Facebook or Twitter. And what we have is another remarkable boom time going on with it being honestly kind of unclear what is really coming out of this. But there is no doubt that Facebook's huge and that Google is really growing, that Apple's got billions upon billions of real revenues. Right. So a lot of real sales here. That's going doesn't feel like it's like the dot com boom where it doesn't feel like it's ready to bust. But there are hundreds of apps and software programs everywhere and you can't imagine many of them succeeding.

But.

It still cranks on kind of like it always did.

Again, it's a culture of MBAs and engineers doing their stuff. And what we are seeing in San Francisco, real.

Social backlash to the cost of housing and causing people trouble.

Yeah, very interesting, very interesting stuff. So what's next for you?

I'm taking a break because that's what I learned from this book is to compete hard, then to rest and recuperate. And it's helped me learn that that's my best competitive style. And the other thing is I'm turning 50 soon and I promised myself when I was 32 that I was going to go off and use nonfiction to study the world. And when I was 50, I was going to come back and start writing novels again. And So I turned 50 soon. So we'll see if that happens.

Ah, good for you. That's awesome. The website is poebronson.com of course, books available on Amazon.com do you want to mention any of your other titles?

Poe what Should I Do With My Life was number one New York Times bestseller, Nurture, Shock. Our other most recent book, New Thinking About Children was New York times bestseller for nine months. And we're also available@topdogbook.com you can follow us on Facebook or Twitter.

Fantastic. And your personal website, poebronson.com thanks so much for joining us today, Po.

Thank you.

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