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Episode: Magnificent Markets and Conflict on Campus

Author: TED Audio Collective / Youngme Moon, Mihir Desai, & Felix Oberholzer-Gee
Duration: 00:41:57

Episode Shownotes

Felix and Mihir discuss the meaning and impact of the increasing concentration of stock market performance via the “Magnificent 7” and the source and resolution of conflicts on campuses.  Hosted on Acast. See acast.com/privacy for more information.

Full Transcript

00:00:10 Speaker_00
Hello, everyone. You're listening to After Hours. I'm Felix.

00:00:13 Speaker_01
I'm Mihir. Good to see you again, Felix. Yeah, it's great to be with you. So I have to say I'm enjoying this time of year. The cold weather. Yeah, exactly. I am feeling that afterglow of finishing a lot of teaching. That was a lot of work. It was really fun.

00:00:31 Speaker_01
And it's almost a little bit of ambivalence because you're going to miss it, but you're also so happy it's over.

00:00:38 Speaker_00
And one at the same time.

00:00:39 Speaker_01
Right, exactly. You're feeling both those things at the same time.

00:00:42 Speaker_00
I had such an interesting week. I taught in three very different executive education programs. And I have to say, business people, in particular, maybe in the popular press, they don't always get the most respect. But if you sit in these conversations

00:01:00 Speaker_00
And you listen to how incredibly thoughtful, informed, concerned, motivated everyone is. Such a thrill. So, what do we got today, Felix? So, I have many questions for you around this issue of concentration in stock performance. So, the market is up.

00:01:25 Speaker_00
quite considerably, but if you look at what other companies that are driving the rally, it's a surprisingly small number. And I'm curious, should I be worried? Should I be concerned? Is it maybe a good sign of things to come?

00:01:40 Speaker_00
I would love to talk about that.

00:01:42 Speaker_01
That would be great. That sounds wonderful.

00:01:44 Speaker_00
And what do you have for me here?

00:01:45 Speaker_01
Well, this is a hard thing to talk about, but I wanted to talk a little bit about campuses. Okay.

00:01:50 Speaker_01
Over the last several months, campuses have become front and center in the debates around not just what is happening in the Middle East, but in the way campuses should be conducted and the way people on campuses are reacting to what's happening.

00:02:05 Speaker_01
And I'm curious why campuses, which we both dearly love for all the reasons we started with, have become so front and center and whether they deserve that and whether something is deeply wrong on campuses or if things are okay.

00:02:20 Speaker_01
And it's a weird topic, Felix, it's a hard topic, but I thought we should at least share our views on what is going on on university campuses.

00:02:27 Speaker_00
Interesting.

00:02:28 Speaker_01
Close to home.

00:02:28 Speaker_00
Let's try it. We will try.

00:02:35 Speaker_01
Okay, Felix, stock market concentration. What's on your mind?

00:02:39 Speaker_00
I know, who thought we would talk about this? There hasn't been that much concentration in the last couple of years. And now we see the market is doing quite well in the US and it's doing okay in other places as well.

00:02:53 Speaker_00
And the S&P 500 year-to-date, almost 20% gain, so it's really a great story if you first look at it. And then it turns out, almost all of it is driven by 6-7 stocks. And we haven't really seen these levels of concentration.

00:03:13 Speaker_00
since the internet boom of 2020. Right. Is this time very different? Should I not be worried? Why is it happening? What's your take on all of this?

00:03:24 Speaker_01
Yeah, it is just completely fascinating. Just let's get some facts on the table. The companies of course are Apple and Alphabet and Microsoft and Nvidia and Amazon and Tesla and Meta. They're referred to as the Magnificent Seven.

00:03:36 Speaker_01
And at this point, those seven companies account for 30% of all of the market value of the S&P 500. And that is just stunning.

00:03:45 Speaker_01
Now, unsurprisingly, of course, the top seven companies at any time account for a very large share, but it's typically more like 16, 17. It's now almost double that.

00:03:54 Speaker_01
And for the course of the year, they're up 70% while the market, as you put it, was up a little less than 20%. So in fact, if you strip them out, the market is kind of flat.

00:04:04 Speaker_00
It's flat, yeah, nothing is happening. Nothing is happening, right?

00:04:07 Speaker_01
And so how do you make sense of that? And I think there are a couple of different potential explanations, and we should just think about which one we like the best. Okay. So the first is, it's a little bit of a herd mentality.

00:04:20 Speaker_01
It's a little bit of a flight to safety during a time of economic uncertainty, that everybody wants to go to these relatively safe assets. And the funny part, Felix, is usually those safe assets are things like government bonds.

00:04:33 Speaker_01
One explanation is that it turns out those safe assets are now Apple and Amazon and Microsoft. And maybe what we're seeing is those companies have actually become vehicles for safety. And that is one way to try to understand that.

00:04:50 Speaker_01
I'll give you a couple of more. The second way to think about it is either they are leading or lagging and by that I mean this disjunction will get resolved and the question is whether those Magnificent Seven are ahead of the pack or behind the pack.

00:05:08 Speaker_01
We could see all those underperformers catch up. the market performance would go from being quite narrow to being quite broad. Alternatively, it's the magnificent seven that's the aberrational group.

00:05:19 Speaker_01
And it's the rest of the market that is actually telling you what is really going on in the economy. And as a consequence, they're kind of lagging. And so what's gonna happen over time is it'll just deflate.

00:05:30 Speaker_01
You mentioned the dot-com bust as one example. There's an even earlier, I think more resonant parallel, which is what was called the nifty 50.

00:05:39 Speaker_01
So in the early 1970s, there were these 50 big blue chip companies that similarly just attracted massive amounts of value and then everything else underperformed.

00:05:51 Speaker_01
In that case, it became a situation where that nifty 50 really presaged the decline of the market. Basically everything started to go down. So that's, I think, one way to think about it. I'd love to hear what you make of all this.

00:06:04 Speaker_00
So one other theory that I find interesting to think about is these are the same companies that we sold off about a year ago. Absolutely.

00:06:14 Speaker_00
And so if you look at changes over time, if we sold off a set of companies last year, even if it's mostly a return to the mean valuation that is maybe not quite as terrible as we anticipated a year ago, given the size of these companies, that should mean you are a really important driver of stock market performance.

00:06:33 Speaker_00
And then, of course, this is also coupled with the entire hype around AI. In particular, the tech portion of The Magnificent Seven, they're all in one way or another involved with AI. So one view is,

00:06:50 Speaker_00
It's really a combination of having sold off these companies not so long ago and now the realization that maybe AI is most lucrative, is most helpful, is most interesting for the large tech companies as opposed to many other players and that creates this rally, that creates this concentration.

00:07:09 Speaker_00
And then a final theory is these really big companies, they have found ways to really entrench themselves. It's safety, but it's not safety because they have amazing performance.

00:07:24 Speaker_00
because they're doing really wonderful things, it's because they have pretty solid performance, because in many ways they have managed to wipe out competition.

00:07:35 Speaker_00
And that of course would then be a concern for the longer term performance of many other companies that would at one and the same time explain why you have some companies that are doing so well, and then many, many other companies that don't seem to perform quite as well.

00:07:51 Speaker_01
Yeah, I like both of those explanations and I'll try to give you a third explanation. So I love your product markets explanation, which is that latter one. They are just succeeding remarkably well.

00:08:00 Speaker_01
They are more and more dominant in product markets for maybe good reasons, maybe bad reasons, Felix, whatever. And that dominance should be manifest in really, really high values. I think that's a totally reasonable way to think about the world.

00:08:12 Speaker_01
I also like your first explanation, which is there's this technology which is going to be transformative, and many people think it will be completely transformative, and the benefits to scale will be really, really large.

00:08:24 Speaker_01
And I have kind of signed up to that idea. Oh, really? Not all of those companies. We've talked previously a little bit about Google, will they benefit or not versus people like Microsoft.

00:08:34 Speaker_01
I think it plays out differently across those different companies. But I do think AI is going to lend itself to scale. And so that could be interesting.

00:08:42 Speaker_01
I want to give you one other further explanation, which is a weird explanation, which is it's tempting to focus on the seven. But maybe the lesson is in the 493. Maybe it's just really, really hard to beat your cost of capital.

00:08:59 Speaker_01
Maybe interest rates have gone up and maybe it's just extremely competitive and everyone else is treading water.

00:09:08 Speaker_01
So one way to understand this is not just that, oh, these seven companies are exceptional, but maybe the world after 15 years of low rates and maybe a little bit of an easier way to compete is getting very tough.

00:09:24 Speaker_01
Well, that would be manifest in the 493, really struggling.

00:09:28 Speaker_01
And then if you really want to go down this path, you can ask yourself, if you really believe in the productivity revolution that AI might bring in the next 20 years, then maybe all the rents from that productivity revolution will go to those seven and no one else will get that productivity revolution.

00:09:48 Speaker_01
And the productivity revolution will be so great and so concentrated because it'll happen throughout the economy, but all the profits from it will accrue to Nvidia, for example. And maybe that's what's going to happen. What do you make of that?

00:10:06 Speaker_00
I like this idea of thinking about what's going on with the 493. What I love about the way you put it is the key question is really if in fact there's big productivity gains and there's big profitability, where will these profits flow?

00:10:24 Speaker_00
And one story is they flow to big tech. I think it's equally reasonable that it'll make people more productive.

00:10:35 Speaker_00
If people are more productive, I'll probably share some of that in the form of higher wages, because we attract good people who are then really great at using these new tech products. That may be a big part of it.

00:10:49 Speaker_00
will not really lead to increased margins, because in competition with one another, everybody has similar tools, everybody has similar technology, and raising prices and raising margins will be really hard.

00:11:03 Speaker_01
That's a good story in the sense that productivity and the gains from productivity get distributed a little bit more widely. The kind of story I told is one way to understand the last maybe 15, 20 years.

00:11:14 Speaker_01
There's a lot of gains from productivity, but going in some sense to very few companies. And so I like your story.

00:11:20 Speaker_01
My only concern about it is on a valuation basis, the top seven would be viewed as expensive by some traditional metrics of price earnings ratios.

00:11:31 Speaker_01
And in fact, the overall market by some traditional metrics of price-earning ratios is relatively expensive in the sense of just what it looks like relative to, for example, long-term interest rates.

00:11:41 Speaker_01
Which means, of course, that the 493 can be understood to be either extremely cheap or just dead in the water.

00:11:50 Speaker_01
I think we spent a lot of time thinking about the seven, but the 493 is what's interesting to me because your story is, well, the 493 will get better.

00:11:58 Speaker_01
The alternative view is the 493 are just going to grind it out for the next decade in a world where, yes, the Fed does engineer the soft landing, but it's kind of like a low growth world and we're just grinding out for 10 years.

00:12:11 Speaker_02
Yeah.

00:12:12 Speaker_01
That's consistent with the 493 being valued the way they are. And then the top seven you have to kind of rationalize as being some kind of productivity boon.

00:12:21 Speaker_00
So let me ask you, if you think about the implications for investors of all the stories we just told and all the ideas about why we might see what is happening in the market at this moment in time,

00:12:35 Speaker_00
One story that you hear is it makes stock picking really difficult, because all the index money is obviously bet on the magnificent 7, and the likelihood that you will dramatically underperform if you pick anything other than the big 7 is now really great.

00:12:55 Speaker_00
So that makes it really hard. That's probably not bode well for the efficiency with which we allocate capital. if in fact many of the opportunities that will arise maybe in the wake of AI lie not only with the big seven but elsewhere in the economy.

00:13:14 Speaker_00
What are the implications for investors? How do you think about that?

00:13:17 Speaker_01
So I'm going to give you a super boring answer, which is I don't think you want to chase it, nor do you want to fight it. Chasing it would mean, man, I'm going to pile in behind the big seven because obviously they're the winners of the world.

00:13:29 Speaker_01
And fighting it would mean I'm going to buy a bunch of value indices because I think that it's all wrong.

00:13:34 Speaker_01
I think the same advice that always holds holds today, which is if you are a typical retail investor and you have good asset allocations that are like pretty reasonable for your exposure to markets, you should be thankful that the year was as good as it was.

00:13:49 Speaker_01
And you should kind of stay with it. And you shouldn't pull it out. And you shouldn't put new money in. You should kind of do what you've been doing.

00:13:54 Speaker_01
And I think the mistake that investors make, for example, when COVID happened, when the market tanked, was to react to that by taking out all their money. And in fact, over the last 12 months, a lot of inflows have been negative.

00:14:09 Speaker_01
Retail investors have been pulling money out of the market. Now, maybe that was good. Maybe it wasn't. You don't really want to be thinking too hard about this. I think as an economic phenomenon, it's super interesting.

00:14:20 Speaker_01
In terms of whether you should alter your portfolio, unless you're doing it 24-7, I'm a little bit skeptical.

00:14:27 Speaker_00
So then what does it mean for managers of active funds?

00:14:31 Speaker_01
It means life is so hard, Felix. And by the way, that's part of what goes on here.

00:14:36 Speaker_01
In these moments when performance is so concentrated, you're coming up to December 31st and you're asking yourself, I want to look like somebody who participated in that. And my holdings get published and then

00:14:47 Speaker_01
There's this like year end effort to mimic the strategies that have been working.

00:14:52 Speaker_01
So active investors who are tracking indices, which is most of the mutual fund industry, it is hard and life is hard and you end up mimicking things that you don't even really believe in because you have to at these moments.

00:15:04 Speaker_01
And then if you have more latitude, which is possible at places like long, short hedge funds, then you have to really take some serious bets. Now they have been crowding into this trade massively.

00:15:16 Speaker_01
And then finally, if you're that last part of the market, which is the really quantitative hedge funds, you're doing something similar. You're looking at all these signals and you're saying, hey, the thing that's working is the big seven.

00:15:27 Speaker_01
So let's pile into the big seven. And those reflexes, are what is worrisome, honestly, Felix.

00:15:33 Speaker_01
The reflexes that are internal to financial markets, which is people reading signals that tell you just to keep buying, active fund managers who are trying to track and index and who have nothing to do, but I got to buy that stuff because I got to look like I bought it.

00:15:48 Speaker_01
Those are the internal dynamics of financial markets and those perversities are the worrying part. It's different than our previous conversation where we're talking about like fundamentals.

00:15:56 Speaker_01
But there is a whole internal world that I think can make this reverse rather quickly as well.

00:16:02 Speaker_00
And this is consistent with some research that we have.

00:16:05 Speaker_00
If people look at the efficiency with which capital gets deployed in economies and how that's related to concentration, one of the things that you see is that often following periods of high concentration, Capital is misallocated in significant ways.

00:16:22 Speaker_00
And the misallocation essentially reflects the dilemma that you just talked about.

00:16:28 Speaker_00
I might be an active investor, my incentives are supposed to be to unearth some piece of information that no one else has, and so I can bet confidently on a company whose performance no one else anticipates.

00:16:41 Speaker_00
In the current situation, my incentives to do this are super, super weak.

00:16:46 Speaker_00
And so over time, say if concentration were to be maintained at these high levels over long periods of time, one worry is that the incentives that are so important for capital allocation that we have a group of people who are constantly thinking about, what could I do that the crowd doesn't see?

00:17:05 Speaker_00
That might be one of the victims of increasing levels of concentration over a long period of time.

00:17:10 Speaker_01
I've been toying with this metaphor, Felix, and I'm curious what you make of it. One way to understand financial markets is as a mirror. And the other way to understand financial markets is as a lamp.

00:17:23 Speaker_01
So a mirror is something that just reflects what is going on in the underlying economy. So our first part of the conversation was financial markets are a mirror. There are things going on and then you're seeing it manifest.

00:17:35 Speaker_01
And that's what's fun about financial markets. You can look at them to understand the real economy. But the alternative is it's a lamp.

00:17:42 Speaker_01
It's actually projecting something onto the real economy, and it's influencing the real economy, and it's changing the real economy because of all these decisions.

00:17:51 Speaker_01
And the reason I like that metaphor is because most of the time we think about it as a mirror. Look at what's happening in the world, and if you want to understand it, look at financial markets as sending you signals about that.

00:18:02 Speaker_01
But sometimes these internal dynamics crowd out the mirror and then it's just projecting itself on the actual real economy and influencing the real economy. So that's, I think, what we're going to find out in the next 12 months.

00:18:14 Speaker_01
Whether this concentration is a manifestation of something real or a reflection of some of these internal dynamics. So we'll come back and see.

00:18:22 Speaker_00
Given all the narcissism in today's world, I'm generally not so fond of mirrors. But in this case, I think I'm going to make an exception. There you go. So we hear life on campus, conversations on campus. What's on your mind?

00:18:48 Speaker_01
Well, I think two things. First, I think campus life was a little bit different this last semester. I felt it and I think everybody felt it.

00:18:56 Speaker_01
That of course has to do with global events, but campuses are also communities and the global events penetrated that community and changed the life.

00:19:06 Speaker_01
So I wanted to talk a little bit about that, why that happened and how it happened and what your experience of it was. And then second, campuses are really special places. I think we both love them.

00:19:17 Speaker_01
And yet they are now becoming a larger focal point for what is going on in the world. And people are looking to campuses to understand the world.

00:19:27 Speaker_01
People look to campuses to understand the next generation and they kind of extrapolate things that happen on campuses and they attribute it to generational changes.

00:19:38 Speaker_01
We've had so many events on campuses and we don't have to run through the whole litany of them that have happened over the last two months, but there have been some very disturbing things that have happened. I wonder how you understand it.

00:19:48 Speaker_01
And I know that's like a very vague question, but do you understand it as being something that is just a reflection of our world? Or do you understand it as having its own pathologies?

00:20:01 Speaker_01
And do you understand it as being representative of something larger that is happening from a generational perspective, which is sometimes how it's portrayed in the press?

00:20:11 Speaker_00
What strikes me perhaps the most is how difficult it has been to talk about a whole set of really touchy topics.

00:20:22 Speaker_00
I think the conflict in the Middle East comes to mind first, but there's actually a number of conversations that are now incredibly difficult to have.

00:20:31 Speaker_00
And I think my surprise comes from an observation that red states and blue states conversations have been difficult now for a very long time.

00:20:43 Speaker_00
Many of those things didn't touch campuses all that much because we live among people who are, to a first approximation, very similar to us.

00:20:52 Speaker_00
And as a result, we felt like, yeah, the campus is in great shape, we have differences in opinion, but where those differences surface, we can easily talk about it. And then I think the last year or so has shown that that's not really true.

00:21:06 Speaker_00
There is a whole set of conversations that are incredibly difficult for us to have, where it feels antagonistic, where it feels there's very limited ability to listen to people who have a different view.

00:21:21 Speaker_00
And one of the biggest questions I have, where I'm not so sure why this really is, What has happened that makes these conversations much more difficult?

00:21:33 Speaker_00
What are the underlying changes, perhaps from generation to generation, perhaps as a result of changes in technology, perhaps as a result of how we interact with one another? What is it that makes conversations so hard?

00:21:49 Speaker_00
I see it so often now that when I speak to people about a whole range of issues that they say, look, in that particular respect, the best thing I can possibly do is I say nothing.

00:22:00 Speaker_00
Anything that I can say will only come at a cost that I don't want to bear. And so being silent on a whole host of issues is how I respond to the current climate. And that, of course, is terrible.

00:22:14 Speaker_01
Right. Absolutely. And so let me give you a couple of hypotheses, and I'm curious which you might like. Okay. So one is that campuses are just like the rest of our world.

00:22:25 Speaker_01
It's just become more polarized, and it shouldn't be surprising that we should see this on campuses. I've always thought one of the amazing things about campuses are they're open.

00:22:35 Speaker_01
Obviously the students are selected, but they're open and they're part of a community. They're like hospitals. People can walk around them. People can express views. It's actually a remarkably open part.

00:22:44 Speaker_01
And there are very few, if any, organizations in the world that are open in that way. So unsurprisingly, when the world moves in a direction, which is towards more conflicted views, you're gonna see them on campuses.

00:22:58 Speaker_01
The second theory is, no, there's something specific going on in academia. And so here's the second explanation, which is, you know, at a first approximation, we have academics and academic communities that are left of center.

00:23:12 Speaker_01
I think that's a fair and easy thing to characterize it as. And so that drift has accelerated, perhaps, so it goes to the theory. And the disjunction between that way of thinking about the world

00:23:27 Speaker_01
and the way that much of the rest of the world thinks about the world has grown bigger. And so academic centers then become somehow disconnected and lose their legitimacy.

00:23:36 Speaker_01
And then they become, look at what has happened on campuses because they're so out of the mainstream.

00:23:41 Speaker_01
And then the third possibility is a generational problem, which is the generation that is now coming through the university system is somehow different. They're somehow brittle.

00:23:52 Speaker_01
They have not been able to deal with different points of view for various reasons. Call it COVID, call it technology, call it helicopter parenting. There's broad cultural stereotypes that get used here.

00:24:07 Speaker_01
And then that generation is so brittle that they can't handle the conversations. I don't know. Do any of those theories resonate with you or do you have a different theory?

00:24:18 Speaker_00
Your second theory makes sense in the sense that the rest of society might look to campuses and might feel that, oh my god, this on-campus conversation feels very different from how we think about issues and how we talk about issues.

00:24:32 Speaker_00
So that might explain why the conversation between the campus and the rest of the world has gotten more fraught, more difficult, more controversial.

00:24:42 Speaker_00
I don't think it does a great job explaining why the conversation on campus has become more difficult. And when I think about what has changed that these conversations feel more difficult, I have two ideas. And they both might be completely wrong.

00:25:01 Speaker_00
I don't really know. But here's two conjectures. One is, the role of identity in conversations and in politics and in attitudes towards issues has grown much larger. And one peculiar aspect of identities is that they're not really negotiable.

00:25:22 Speaker_00
When someone says, you just don't know what it's like to be a black gay person. Yeah, that's exactly right. I cannot possibly know what that is like.

00:25:32 Speaker_00
And as a result, any conversation that says you should do this or you should think about it in a particular way, you have no idea what it's like to be a Christian conservative with a sense that my way of life is going out of style or is threatened.

00:25:50 Speaker_00
And that's exactly right. I have no idea what that is like.

00:25:54 Speaker_00
That makes it really really hard to have these conversations because in the end we're hostage to nothing that you can possibly say has really any bearing on how I think about the world, what I think is right, what I think is wrong, because

00:26:11 Speaker_00
my identity is non-negotiable, it's not something that we can talk about. So I think that's part of it.

00:26:17 Speaker_00
And then the second trend, and it's sort of related to that, is I think we have come to think of language much more as a weapon than was traditionally the case.

00:26:31 Speaker_00
So the violence that can be inherent in language and the damage that can be done in language. traditional attitudes, we had some limits to what you can say and what you cannot say, but we tried to push these limits as much as possible.

00:26:49 Speaker_00
And now I think, in particular on campuses, there is much more of a view that Language can violate someone else's right, can really hurt people. There's a lot of harm in how we talk about things and what we say.

00:27:04 Speaker_00
And what's interesting to me about that is the yardstick. When do I know that what I say is harmful to you? That is just your feeling. There's no objective standard. You tell me when it's harmful and I just have to accept it.

00:27:20 Speaker_00
And that's another version of this earlier problem that That line, what can be said and what cannot be said, is really not negotiable because the moment I talk to you and you're somehow different, you own that line and you tell me where it is.

00:27:34 Speaker_00
And as a result, I have to stay away from that line. We can't really have a dialogue.

00:27:41 Speaker_01
I think both of these points are deep and true. In my mind, they speak a little bit to what might be different now. And that becomes, I think, a little bit of a generational story.

00:27:54 Speaker_01
And the difficult thing about both of them, Felix, is they're in some ways quite legitimate. When somebody says, you don't know what it's like to be a Christian conservative on campus, or you don't know what it's like, that is true.

00:28:05 Speaker_00
It's true. Yes, it's exactly right.

00:28:06 Speaker_01
And so that role of identity is important and was probably underappreciated historically. And it is important to acknowledge that those differences exist.

00:28:14 Speaker_01
But your point is that it's becoming the end of the conversation because then there is no further thing to say, because there is no scope for communication and learning. And that seems very problematic.

00:28:26 Speaker_01
So we should be able to preserve the benefits of an appreciation of identity without giving it so much power that it occludes what is the commonality. In a way, what draws together campuses and what draws together humanity is commonality.

00:28:40 Speaker_01
We're human beings, we have common sympathies and common feelings and common emotions. And so we should be able to navigate that path. And then your second point is related, which is language is now viewed as harmful in certain ways.

00:28:51 Speaker_01
And again, there's some truth in that.

00:28:54 Speaker_00
It's totally right.

00:28:54 Speaker_01
You can say something that's very hurtful to me.

00:28:56 Speaker_00
Yes.

00:28:56 Speaker_01
And we probably historically underappreciated that. and we didn't give it the credence it deserved. But yet now it has come to dominate.

00:29:05 Speaker_01
I think it has often been extrapolated to this generation that is so preoccupied with identity and so preoccupied with language. The disjunction for me is, I don't know if that's really true.

00:29:17 Speaker_01
My view of the world is a little bit different, which is there are small fractions of people who are very preoccupied with these questions.

00:29:28 Speaker_01
And then there is like this massive middle, which is actually not as interested in that, but yet they find themselves captive to it.

00:29:37 Speaker_01
And so I guess what I'm wondering about, Felix, is these ideas of what is happening and why people have become brittle on campuses. Part of what you're suggesting is that people are behaving differently.

00:29:48 Speaker_01
There's a different explanation, which is actually there's a vast group that's yearning for conversation and for challenge. Yet there's relatively small groups who are preventing that from happening. Do you view this as a generalized phenomenon?

00:30:05 Speaker_01
Or do you view this as a phenomenon that is occurring on the margins, but what is happening on the margins is very corrosive to the whole community?

00:30:15 Speaker_01
My instinct is that it's a little bit more something that's happening on the margin because I interact with students who want to have conversations. So when you talk with them one-on-one, they're desperate for challenging conversations.

00:30:28 Speaker_00
I want to go back to an earlier point that you made, these historical injustices, that we didn't pay much attention to language, that we didn't pay sufficient attention to identity. That's completely right.

00:30:41 Speaker_00
And I think that creates the legitimacy for holding back, respecting other identities as non-negotiable,

00:30:50 Speaker_00
I share your observation that there is appetite for challenging and different conversations, but they take place within groups that are very similar to begin with.

00:31:03 Speaker_00
When I think about my conversations with students about what is happening in the Middle East,

00:31:09 Speaker_00
The most open-minded, interesting, fascinating conversations that I had are with students who are in no way tied to the region, because they grew up in very different circumstances, they're not Jewish, they're not Muslim, no aspect of their identity has a direct bearing on the conflict.

00:31:32 Speaker_00
And then we can have these conversations and we can think about, oh my god, how on earth can we get out of this spiral of violence? What are creative ideas? And I completely agree with you that people want to have these conversations,

00:31:49 Speaker_00
They're conditioned by, we don't have to think much about how identity informs our views of what is happening, and we don't have to worry much about anything that I will say will harm you in a really deep way.

00:32:04 Speaker_00
And I think both of these things can be true at one and at the same time. So when you are in a group where you know everybody's very conservative, it's perfectly okay to then debate what's the limits to a particular conservative position.

00:32:19 Speaker_00
If you're in a group where everyone's a liberal, we can have conversations about how far should you go with any of the liberal policies.

00:32:27 Speaker_00
But the most interesting conversations we can't really have, because the moment it becomes really contentious, because the conversations play across identities and across understandings of what language is harmful and what language is not harmful, those conversations, they die.

00:32:46 Speaker_00
And I think they have gone away. I don't know. I'm a little more hopeful, Felix, because if we go down that path,

00:32:54 Speaker_01
it'll lead to sorting. Just like we've had geographic sorting, we'll have sorting at the company level, it'll happen at the university level, it'll happen at the campus level, it'll happen every way.

00:33:04 Speaker_01
And universities really suffer when there is extreme sorting because we believe in the diversity of ideas and we believe in debate and we believe in all these things. So if we end up in a very sorted world, then we all lose.

00:33:19 Speaker_01
Because in some sense, the one place in the world where we should be able to be together with conflicting views is in a campus. That is the goal. And so we have got to figure this out.

00:33:32 Speaker_01
I guess I'm still hopeful because I see lots of people who want to have conversations, but who are just scared out of their mind.

00:33:39 Speaker_01
We've got to get an equilibrium where we give everybody enough confidence to feel like we can be sensitive to differences, we can be sensitive to identity, we can be sensitive to the role of language, but it cannot stop us from talking.

00:33:54 Speaker_01
And a lot of that has to do with, in my mind, forgiveness. We have to be more forgiving. Forgiving of mistakes people make when they talk and forgiving of ignorance of your particular background and what it means.

00:34:07 Speaker_01
a lot of things in the world get better if you're forgiving, as opposed to being very demanding on each other. So maybe that's a little bit of the answer as well. I don't know.

00:34:16 Speaker_00
Let me share another reason why I think we can be hopeful. The hope is perhaps that over time we get better at recognizing that every person has lots and lots of different identities.

00:34:30 Speaker_00
And some of these we have to be very mindful and very careful and many other identities. we can talk about basically everything.

00:34:40 Speaker_00
If that's the evolution of how we incorporate concern for identity and concern for harmful language into the conversations that we have and don't have or have and can't have, I'm much more optimistic that we can actually talk about most of the things most of the time.

00:34:59 Speaker_00
But it would be a recognition that every one person is not just this one thing. Your religion doesn't define you, your political attitude doesn't define you, your gender identity doesn't define you.

00:35:15 Speaker_00
It's this wild mix and combinations of all of these things that you are.

00:35:20 Speaker_00
And that I think enables conversations in a way that maybe we sometimes don't recognize because we have picked a very select few dimensions along which we define identity and along which we define what's okay to say and what's not okay to say.

00:35:38 Speaker_01
Yeah. Not to tie too neat a bow on it, maybe the pendulum swang towards this emphasis on identities and maybe it was very helpful.

00:35:47 Speaker_01
Yeah, we had to go through a period where what had been taboo to talk about and what had been not discussed enough had to be at the forefront. And it needed its time in the forefront. And that was very important and really wonderful.

00:36:01 Speaker_01
And then the question is, can you get it to swing back? Can you get it to be what you've just described and a greater appreciation for commonality as opposed to difference? And I think we have to see how that happens.

00:36:13 Speaker_01
I remain very optimistic because I think if anywhere can figure it out, it is on university campuses. And in some sense, we have to. Because our imperative is so tied up in the idea of functioning in this way.

00:36:25 Speaker_01
But it is hard not to feel like it is a perilous moment at the same time, given everything that's going on.

00:36:30 Speaker_00
And to bring it home, part of what I love about doing this podcast across all the different guests that we have, all the different people we talk to, is every time before we record, I have a sense of, oh my god, I get to talk to really smart and thoughtful people.

00:36:51 Speaker_00
and everything else doesn't really matter. I get to talk to someone who is thoughtful and smart and eloquent in defending a particular view of the world and you learn a ton.

00:37:05 Speaker_00
So if that's the general direction, long term I think we might be in good shape.

00:37:11 Speaker_01
So is that how you feel when you talk to me or is that how you feel when you talk to anybody?

00:37:14 Speaker_00
No, actually you can be completely honest. And we have recommendations, of course.

00:37:30 Speaker_01
Yes. So now that teaching is over, I'm remembering some of the books that I've read in the summer that were really fantastic.

00:37:38 Speaker_01
So there is an nonfiction book called The Best Minds by Jonathan Rosen, which is a memoir, which I usually don't typically like. It is the story of a gentleman named Michael Lauder, who is Jonathan Rosen's friend and who we grow up with.

00:37:52 Speaker_01
who has this remarkable career as a young person and is diagnosed with schizophrenia and then goes to Yale Law School, goes to work at Bain, and then comes undone by schizophrenia and ends up committing a horrible crime.

00:38:08 Speaker_01
And so it is just so well written and such a thoughtful meditation on mental illness and the way we think about mental illness. Previously, I've recommended Strangers to Ourselves by Rachel Aviv and The Mind Fixers, which is about psychopharmacology.

00:38:23 Speaker_01
And I think this one is kind of nice because it's a memoir and it has a different kind of tone to it and it's written just so beautifully. So, The Best Minds by Jonathan Rosen.

00:38:35 Speaker_00
It sounds wonderful, really great.

00:38:37 Speaker_01
Is it science-based? It does have science in the background. It even has the healthcare system in the background, obviously. We see how he navigates the healthcare system.

00:38:47 Speaker_01
You don't want to read it to learn about schizophrenia, but you want to read it just as a story of mental illness and about that fine line. And we all know people who are on that line between genius and madness. And it's so compelling and so trenchant.

00:39:03 Speaker_01
You can't help but think, this could happen to any of us. And it's very complex when it does. Wow.

00:39:08 Speaker_00
Okay. What a recommendation. And what do you have, Felix? I'm on a roll. I recommended a cop show, mostly thinking of you, of course. And this week, again, another cop show. Oh, my dreamy outcome. Have you seen Three Pines?

00:39:24 Speaker_00
I think I've heard of it, I have not seen it. It's really remarkable. Maybe the most fascinating thing is it takes place in French-speaking Canada, and the context is Canada's treatment of Indigenous people, Indigenous women in particular.

00:39:45 Speaker_00
So the little town is close to a school, a home that mistreated indigenous children for a very long time. There are people living in the village who went to that school and have complicated memories about what happened.

00:40:03 Speaker_00
And it's just a spectacular way to show the historical significance of those relationships You know how sometimes it can feel you're misusing that context to do something bigger? It never feels like that. It feels very genuine.

00:40:20 Speaker_00
And the filmmaker is someone who's a member of the Kainai First Nation tribe, a person called Tailfeather.

00:40:28 Speaker_00
And perhaps the involvement of someone who's really close to the phenomenon helped to make it real authentic and to make it feel like we're not just misusing the context, but the combination as a result. is really powerful.

00:40:43 Speaker_00
So it's a miniseries, eight episodes. Crimes are typically solved across two episodes, which is also interesting. Then there's a bigger story in the back. That is fantastic. It's really super interesting to watch.

00:40:53 Speaker_01
And it stars one of my favorite actors, which is Alfred Molina. He's amazing.

00:40:57 Speaker_00
Oh, yes. He's really amazing.

00:40:58 Speaker_01
And I'm just looking at it here. By the way, I feel compelled because I feel like I'm losing my status as the cop show guy. I'm just going to mention Annika with Nicola Walker, which is also fantastic.

00:41:10 Speaker_01
Anyway, I just feel like I have to do that because I feel now some competition with you on the cop show. No, you've come through with two very strong ones, Felix.

00:41:18 Speaker_00
I'll retreat to my territory of making music suggestions next week.

00:41:23 Speaker_01
No, well, I was actually going to recommend a Turkish polka, but maybe next time.

00:41:28 Speaker_00
And this is it for tonight. Thank you for listening. This was After Hours from the TED Audio Collective.