The transcript from this week’s MIB: Luis Perez-Breva of MIT is below.
You can stream/download the full conversation, including the podcast extras on iTunes, Bloomberg, Overcast, and Soundcloud. Our earlier podcasts can all be found on iTunes, Soundcloud, Overcast and Bloomberg.
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BARRY RITHOLTZ, HOST: This week on the podcast, I have a special guest. His name is Luis Perez-Breva. He is a professor at MIT where he directs the Innovation Team’s program. He is also the author of “Innovating: A Doer’s Manifesto”.
And this is really a fascinating conversation. For those of you who are interested in the direction that technology is taking us and how startup Silicon Valley technology, problem solving, big data, artificial intelligence, et cetera, is progressing, I think you will find this to be a surprising and fascinating conversation.
Luis approaches the idea of problem solving and innovation in a different order and in a different construct than I think most people think of in terms of technology and innovation. He really looks at this as a problem solving and iterative process as opposed to something driven purely by technology or purely by capital. In fact, he specifically thinks most people are doing this wrong because they’re focusing on the concept of big ideas as opposed to thinking about hunches and small incremental changes that solve problems as opposed to what we discussed the grand pivot that seems to be so popular these days in Silicon Valley.
So if you’re all interested in venture capital, or technology, or the future direction of tech, I think you’ll find this conversation quite fascinating.
With no further ado, my conversation with Luis Perez-Breva.
I’m Barry Ritholtz. You’re listening to Masters in Business on Bloomberg Radio. My guest today is Luis Perez-Breva. He is an expert in the process of technology innovation. He holds multiple degrees from multiple countries, including Physics, Business, Artificial Intelligence from Spain, France and the U.S. He is a Professor at MIT and he is the author of “Innovating: A Doer’s Manifesto for Starting from a Hunch, Prototyping Problems, Scaling Up, and Learning to be Productively Wrong.”
He currently directs the MIT Innovation Teams Program and advices organizations on artificial intelligence and innovation. Luis Perez-Breva, welcome to Bloomberg.
LUIS PEREZ-BREVA, AUTHOR, LECTURER AND RESEARCH SCIENTIST, MIT: Thank you. Thank you for having me.
RITHOLTZ: So you’ve said a number of things that I find fascinating. Let’s jump right in to the comment you made about impossible projects. You said I’m drawn to projects that look impossible. What are impossible projects? And if they’re impossible, what can you do with them?
PEREZ-BREVA: Well, they’re really not impossible, they just look like that. And it’s mostly because of the way we think. We think in our siloes and in our disciplines. And so a bunch of stuff then all of a sudden looks like no one knows how to do it. But everything you love about innovation started out looking impossible.
RITHOLTZ: So give us an example of something that looked impossible but turns out not to be.
PEREZ-BREVA: My favorite one because it’s been a long time and it’s still mesmerizing is Henry Ford. But I’ll bring it to the present for you.
So if Henry Ford was alive today, what he would have said is that he wanted to make jet planes, private jet planes affordable. Because that’s what a car was back then. So this seems like a completely impossible thing to do actually. No one believed him. Everyone thought he was wrong and yet he someone — they didn’t change America forever. So that kind of problem whether it be that big or smaller, but that people cannot seem to be able to bring to that is what draws my attention every single time.
RITHOLTZ: And I noticed you said affordable. It’s not just that he wants to manufacture cars. He wants to manufacture cars in such a scale that they were affordable to anyone working in his factories. That seems to be an interesting caveat.
PEREZ-BREVA: That’s the key. When you actually look at the history of Henry Ford as historians tell it, just different from how you may read it in a book, in a business book. You hear that all he wanted was make cars affordable because his experienced saving and growing up in a farm make him realized how hard it was to make supply runs to the city. So that was the objective.
Everything else; the scale, manufacturing, finance, increase in wages was, as means to an end, which is make cars affordable. It’s like problem solving all along.
RITHOLTZ: So let’s address problem solving a little bit. The title of the book you referenced being productively wrong. How is a person productively wrong?
PEREZ-BREVA: You know, the way I’ve actually come to realize that even more ever since I had kids, when you’re a kid, when we were children, you spend all your day being fundamentally wrong; run things out and mostly not getting everything right and just you don’t really care.
RITHOLTZ: Just experiment.
PEREZ-BREVA: Just experimenting. No one seems to care and so on.
Then eventually, we learn just enough to believe that everything applies by a formula and then we destroy the magic effectively. We destroy the spirit of inquiry.
But the way we seem to learn as humans, and this we know from neuroscience from how hard it is for artificial intelligence and so on, is by fundamentally being wrong sufficiently many times until we figure out what was wrong about it. So we don’t learn by being right or by formula, we learn by fundamentally being wrongs.
I’ll give you one quick example which I learned from my daughter when she was starting to play violin. She played out of tune pretty much every time, until one day she didn’t. And then she figured out when the violin itself was out of tune. And this happened gradually to a point that she never actually realized that she was playing out of tune until that one day in which all of us heard that she did. So she actually learned to play in tune, mostly by being wrong every single time.
And I bring this up because playing an instrument is such an intuitive thing depending on how you learn it, that it brings this about how we learn even when you’re an adult. So I started to learn violin with my daughter.
RITHOLTZ: Really? And you know, the violin is unique or at least different from a piano or something where each note is defined. It’s fretless and so you could be off by a quarter of a tone. It’s a very different experience.
But that leaves the question, we think of child’s play as things kids do for fun. But you’re really implying that child’s play is a form of experimentation and learning.
PEREZ-BREVA: Yes, or you can look at it the other way around. We adults should play much the same way because that’s how we acquired a bunch of things we use every day; language, your surroundings, your sense of taste. Everything was acquired that precise way.
RITHOLTZ: Through experimentation and being wrong.
PEREZ-BREVA: Through experimentation and play. But it was play.
Now we grow up and we kind of are afraid of being wrong, we need to be right. And so before you know it, you’re just not using your brain for what it was, by default (ph) to do best, which is learning through this kind of play.
RITHOLTZ: Let’s talk about innovation a little bit. What is innovation and how does it work?
PEREZ-BREVA: Funny that’s — innovation has been said to be so many things. It’s an overused word.
So I’ll tell you what I think innovation is. Innovation is the end result, meaning you go about trying to solve some obstacle, solve a problem. And most people will think you’re wrong. And one day they stop thinking you’re wrong and then they’ll call it an innovation.
So innovation is how people certify what you did. But at first, it looks preposterous, it was fundamentally wrong, and you did it because you felt there was something to it that other people couldn’t see.
RITHOLTZ: Give us an example of something that was preposterous and then adapted by everybody.
PEREZ-BREVA: I love — I’m just going to use big example. So you see how preposterous they were and how logical they seem today.
So Bill Gates in 1975 talks about a computer in every desk and at every home, right? So now go back to 1975, right — where there are maybe a few mainframes here and there —
RITHOLTZ: No internet, no — no one needs a computer
PEREZ-BREVA: No internet —
(CROSSTALK)
PEREZ-BREVA: No one knows what to do with it. There wasn’t even spreadsheet yet. That would come a bit later. And you can read the entire history, I mean, at the time.
And somehow today because you have a computer in your pocket and probably another in your desk and another at home and maybe five iPads and who knows what, maybe your phone is a computer as well. Now it seems perfectly natural. So that is what makes it look like an innovation.
It’s even better because by the time it’s gone through its cycle, it actually looks old. The idea of a computer in every desk and at every home seems old all of a sudden. And yet, it was a brutal innovation that has created so much economic progress in all sorts of fields, like we’re sitting in a room where there’s a gazillion (ph) of computers. The idea itself was preposterous in 1975. Actually, so preposterous, it didn’t matter.
RITHOLTZ: That’s fascinating. Let’s talk a little bit about technology and innovation. But I want to start with the idea of ideas. Where do innovative ideas come from?
PEREZ-BREVA: That’s a trick question.
RITHOLTZ: OK.
PEREZ-BREVA: It’s a trick question because over the last 10 years, we placed such an importance on the word idea, that in my book, I decided to give up on it and I actually talked about hunches. Because now ideas have become so important that it’s actually burdening most of us. We think we need to come up with this innovative idea before we even do anything.
RITHOLTZ: So what’s the difference between an idea and a hunch other than people don’t judge hunches as partially as they might judge ideas?
PEREZ-BREVA: So the basic difference is in admission. Practical sense, nothing. Ideas come from pretty much anywhere unless I have told you the best ideas start out being just preposterous, combining two things that are not meant to go together.
But from a perception standpoint, from how you go and see people pitching ideas and investing in ideas, people should not be investing in ideas. People should be investing in profession (ph), in organizations, in dreams if you want, if you want to take it to the extreme.
But idea is just — they are born bad. All ideas are effectively born bad.
RITHOLTZ: Ideas are born bad?
PEREZ-BREVA: Yes.
RITHOLTZ: Go into more detail about why do you believe all ideas are born bad.
PEREZ-BREVA: Well you know, if you truly have one of those ideas that in the future someone will say they were innovative, right, what you realize is that there is a lot to learn ahead of you. And it’s just impossible for you to have figured it out all in your head.
So the first thing that needs to happen to that idea is change, because it’s in your head and it doesn’t exist anywhere, and for it to exist you need to scale something up to the world. And it will be amazing if you have figured everything out perfectly in your head. So you need to almost assume that your idea interesting, enticing at it seems to you is just fundamentally wrong in more ways than it is actually right. And that’s how you figure out how to get it to scale.
RITHOLTZ: So in other words, an idea is almost a conclusion and you need all the intervening steps to get there.
PEREZ-BREVA: Exactly. And by the time you are done, your idea will only look like the initial idea to you but to no one else.
RITHOLTZ: So how does one develop innovations, hunches, I won’t say ideas — how does one develop the skills to produce better hunches and lead yourself towards greater innovation?
PEREZ-BREVA: It’s actually much simpler than people think. Once you remove the obsession to come up with these Earth-shattering, or disruptive idea, then you realize that all you need to start is something that doesn’t seem to be right.
So you might as well start by trying to put together two things that actually don’t seem to fit together. And that causes you to ask a question, OK, this doesn’t work, why? And as you start from there, you realize that all you need to do is continue to put these pieces, these parts together to prove to yourself that this will actually not work. Slowly, you increase in either build up scale, just give up on it mostly because you lose interest. Then that’s fine. That’s how we humans operate. It’s actually a very simple way to do it. And you can practice it.
So as you practice, you start to see opportunities are essentially merging things that you and perhaps only you see that are meant to go together, but no one else does just yet.
RITHOLTZ: That’s quite interesting.
What do you think the differences between ideas and execution? Because they really are two completely different skill sets. But you know, my experience when I’ve taught over years is that paying too much attention to those two words actually gets you to linear thinking because then it causes you to ask the question, when would they stop initiating (ph) and then start executing?
RITHOLTZ: Meaning too linear, not flexible or —
(CROSSTALK)
PEREZ-BREVA: Exactly. And what we know from innovations and every single treaties (ph) and innovation tells you this, is that innovation is fundamentally non-linear. If your endeavor sets you up to try to predict the future so that you know when to start executing, you are starting the wrong way.
So what I tell my students and what we — the way we teach it and the way I explained it in the book is your challenge is to scale up something. That’s the only thing that matters. And you cannot scale up by mostly disassociate an execution from idea. Execution will change your idea and your idea will change what you execute on, continually a different scale.
RITHOLTZ: So is that from whence comes the infamous pivot, or you get all these startup companies in Silicon Valley and they look like they’re going to be one thing, and then halfway through, suddenly they point in a different direction from a fundamentally similar technology or idea. But the problem that they’re trying to solve seems to be something completely different than the original idea.
PEREZ-BREVA: I love that you called it infamous pivot. It was me. You did it.
RITHOLTZ: Yes, the — well, haven’t we heard that phrase a million times in the past decade?
PEREZ-BREVA: Yes. You know, a lot about innovation, we’re just chatting about it, it depends on from where you’re looking at it.
So if you are at the receiving end of it and you’re just looking at what a company does without all the knowledge of what they’re doing every day, it looks as though they change direction all the time. Now that’s just the perception from the outside, which means it’s not what you should do, it’s what people think you’re doing.
But what you are doing is effectively continuously change incrementally how you’re thinking about it, reformulating it continuously. And as you start to look at traction in different directions, it seems as though you’re doing different things. But every time you look at any of those stories, the way they really happened, not the way they are told, there was no pivot, nobody started pivoting and changing their mind every 20 seconds and the advice to pivot constantly makes no particular sense to me.
RITHOLTZ: So they’re working on something. It’s evolving, it’s iterating over time. And suddenly, I think you used the phrase traction, something starts to gain traction and scale.
So what we are hearing after the fact as a pivot is really a normal evolution towards something that’s working.
PEREZ-BREVA: Yes. Except that some companies have taken as a mantra to take pivoting as a thing they do. And so every now and then they say they try to cause themselves to think — how should I change direction today. And that’s a really hard question.
RITHOLTZ: Right.
PEREZ-BREVA: Actually the feel of entrepreneurship which is different from innovation, is full of really strange questions like —
RITHOLTZ: Give us another example.
PEREZ-BREVA: We’ve just discussed when should I stop mediating versus executing. I don’t know how to even pose that question meaningfully. Should I pivot today? Maybe, maybe not. I just — I have no data, no evidence to kind of grasp.
Some other advice you hear a lot is focus on the user. But really if what you’re doing is that new, is there already a user for it? If not, you’re just making it up. By the way, I’m all for making stuff up. I’m not for ignoring the fact that you just made it up, right? So it’s considering the assumption you make is actually the big mistake you would do.
RITHOLTZ: So there’s an apocryphal story about Steve Jobs and the iPhone. And people at Apple kind of challenged what he wanted to do saying the user doesn’t have any idea of what a glass phone is going to be like. And Jobs famously said, I’ll tell the use what they want. Is that what we’re talking about in terms of not focusing too much on the user experience and instead if you really want to innovate, you have to forget about the user for a while?
PEREZ-BREVA: So I think if we went back 10 years ago, maybe 15, and anybody came to us and said you need to be listening to more podcasts, the answer would be what is this person talking about.
RITHOLTZ: Right.
PEREZ-BREVA: So I don’t think you can expect anybody; neither the innovator, nor the entrepreneur, nor the investor, nor anybody to predict the future, right?
And so at some point, if you truly are looking four, or five years ahead, and you’re going to users and hoping they have an answer of what the future beholds five years ahead, I think you’re diluting yourself. Nobody has that answer. Someone has to make up that future. That’s the way I hear what Steve Jobs might have said, right? I wasn’t in the room, so —
RITHOLTZ: Let’s talk a little bit about what’s going in the world of innovation today, how can we tell if a good idea or a hunch is going to succeed?
PEREZ-BREVA: That’s a question I get every semester. And the answer I’m afraid is you can’t.
RITHOLTZ: You just got to try it out —
(CROSSTALK)
PEREZ-BREVA: Try it out and see what happens.
Now, the good news is that you also got to define what success is. So there’s no way you can fail, unless you make it a purpose like many people do.
RITHOLTZ: Meaning that — well, how do people define success if they have an idea?
PEREZ-BREVA: Well, what I propose people do and what I talk about in my book is, you know, you have a hunch, how about we try to figure out what problem is it you really think you’re solving.
There’s a way to think about problems that’s pretty straightforward. And what I tell my students and they look at me funny, is that if an alien species were to come down to Earth and show you the solution, would you even know that that’s actually a solution to your problem? Because if not, then you will never find it on your own and that’s how you fail.
So you start working backwards of what you think solves the problem. And then before you know it, you realize you actually get to define everything. So you continuously do that, and before you known it, you succeed. Maybe it’s a different way you thought you would. But that’s how you succeed. You try and you go through scale.
RITHOLTZ: You’re the Director for the MIT Innovation Teams Program.
PEREZ-BREVA: Yes.
RITHOLTZ: What does that program do? What are its goals? And what has come out of that program?
PEREZ-BREVA: So it’s a very unusual entity in academia. A few years ago, we thought about — well, you know, we want to educate people to actually meaningfully innovate as a career choice. How do we do that?
So most people think that you go — you want technologies from academia to leave and have an impact in the world. And of course we want that. But what I really want is for every single student at MIT and wherever I’ve taught this now worldwide, to learn how do this as a career choice and then they can choose to do it or not. That’s their choice.
So I thought, how do we do that? And it occurred to us that you could actually get MIT Technologies which is a real tangible thing, and then ask students from all domains. So I may get an engineering technology and the students are from science, business and architecture. And then try to teach them what it actually means to innovate with that tangible starting point.
And the process is very simple. So someone in a lab at MIT has discovered that a new thing is actually possible. So I tell my students, OK, somewhere there hidden is a superpower. We just don’t know what the superpower is. And obviously that superpower is going to solve a problem somewhere, we just don’t know where, nor what the problem is. So we need to solve for those two things.
RITHOLTZ: So people are really approaching the concept of ideas and innovation backwards. They’re starting with the ideas opposed to what problem is it solving.
PEREZ-BREVA: Exactly. And that alone takes me about a month for students to appreciate that we’re actually turning things on its head because it’s actually simpler.
(CROSSTALK)
RITHOLTZ: Finding problem and solve it.
PEREZ-BREVA: Exactly. And of course, there’s no chance you’re going to find the perfect problem at the start. But as long as you understand how to do it, you can do it increasingly more quickly. And that’s what led me to believe that you could actually practice this even when you don’t have a technology at the input which is what the book covers.
But beauty is that the result is actually very clear path to action to take this technology, change it, and address the problem, that even the researchers hadn’t thought about. And so a bunch of startups have actually come out of this even though it’s not my objective, right? My objective is to educate students so they do this continuously, right?
RITHOLTZ: So you write in the book that people — and again, to reference Silicon Valley, they do it backwards. They — as soon as they have an idea, they try and get funding, they try and go out and raise capital. You suggests not to do that until way later. Explain the thinking.
PEREZ-BREVA: So there’s two ways to think about that.
I think that if all you have is an idea which as you know I think they tend to be born not so great, not to say bad — and you obsess about pitching it and selling it, you’re putting yourself in the worst negotiation position you can possibly ever be, which is someone is going to decide what your company is going to look like, they may give you money, you may look like great because you got the money, but then you may soon realize your idea needed a whole different process.
So I asked, in the book I asked everybody who has an idea to think of themselves as investor zero. Because the first time is going to be spent by them. And instead of spending six months doing VCs (ph) or asking for money, what can you accomplish in those six months to spare yourself the agony of going for money with a bad idea? And in the process, can you actually make that idea better? And that’s what I mean by exploring at first.
Now I’ve got to say that nowadays — and a good friend of mine alerting me today — nowadays, capital has become cheap in the sense that there’s an abundance of capital for investors, and so now it’s even harder for people with good ideas or with a desire to put these good ideas to not be drawn into these frenzy of asking for money and then going — and creating a company on top of something that’s really maybe not that great of a starting point.
RITHOLTZ: The name of the program you direct has the word Teams right in it. What is it about teams that’s so important and doesn’t that kind of contradict the idea of the lone inventor toiling away in his lab or her lab until late at night?
PEREZ-BREVA: Interesting.
So I’m not sure the lone inventor at the lab will actually become the innovator, right? Sometimes they do, sometimes they don’t. But in order to become an innovator, they have to become something else, right? That something else is they’re required to talk to other people for some purpose, even if to understand what the world looks like outside of the lab and learn about the stuff they haven’t learned in the lab. They have to be ready to change the idea. They have to be ready to use science or technology or the discipline, whatever it may be, a different way than they were used to doing it in the lab, or if they are in a company, in their company, right?
And so once you do that, sometime along the process, there’s got to be a team because there is no company of one, right? So it’s not so much that the team is important. It’s that you need to learn how to connect with other people and let other people go. And along the path, discover how to interact with people to actually bring the idea to scale.
So we call it teams to emphasize the fact that we’re going to bring people from different disciplines together and they’re going to learn because remember, it’s navigational experience that’s a trick. They’re going to learn how good or bad they are at interacting with other kinds of people. And they’re going to learn how to either change that or they’re going to learn who to not to work with again, in the future.
RITHOLTZ: Let’s talk a little bit about your career in academia. How did you find your way to MIT?
PEREZ-BREVA: The first time?
RITHOLTZ: Yes.
PEREZ-BREVA: So I was finishing my Master’s Degree in Spain and I decided I want to try something new. And a friend of my family said you should go to United States. And I said, OK.
And so I looked around and I found these people working on a mix of artificial intelligence and math and I really wanted to do that, even though I was just a chemical engineer at that time, or not even that yet.
And so I sent an email asking to meet, and then another, and then another. And I kept them being told a bunch of things but none of them was no. Everything was a challenge. So well, we may not be able to get you a visa, and I answered I’ll figure that out even though I didn’t know how, and blah, blah, blah. You can imagine that went for nine months.
And at the end of nine months, I responded to this professor who’s since become a good friend, you know what, just tell me no, I said. Because if you don’t tell me no, I’m just going to keep going at it. And I need you to say no.
RITHOLTZ: And they don’t like to say no, do they?
PEREZ-BREVA: Apparently not. I thought he would. I thought he would immediately say no.
And I told him, you know, I have a lot of offers to stay around here and do my Master’s thesis. I just want to go work with you. I’ve told you all these things I’ve said we would sort it out. But say no or I will continue forever and I will never graduate.
And so he said to me, OK, give me three days, which was not the response I was expecting. I was expecting the response no. And then in the end, he said OK, you can come. And that was the first time I made it to MIT mostly as a visitor to work on artificial intelligence being a chemical engineer, which was the first time I realized that what you study should not constrain you.
RITHOLTZ: Right. Makes a lot of sense.
PEREZ-BREVA: And yet, I’m not sure everybody will actually realize how much they let their background constrain them instead of actually empowering them.
So that’s the way I first made it to MIT. And ever since, I have come and gone six or seven times.
RITHOLTZ: Right. So you’ve got a — you ended up getting a graduate degree from MIT?
PEREZ-BREVA: Yes, but later. First, I did a startup in Silicon Valley. I actually spent some months at MIT, then they offered me to stay for PhD. I applied and I got accepted. And then I said no, I’m not doing it. I’ve studied for too long, I need real world experience. And I went to startup in Silicon Valley.
RITHOLTZ: What was the startup?
PEREZ-BREVA: To locate cellphones in case of emergency —
RITHOLTZ: Oh, the E911.
PEREZ-BREVA: Exactly. To this day when you call E911, in most of the states in the United States, you are being located by the company we founded with a technology we invented.
RITHOLTZ: That’s fantastic.
PEREZ-BREVA: It’s phenomenal.
RITHOLTZ: And you’re using triangulation between cell towers or some formula based on that?
PEREZ-BREVA: No. We’re using AI.
RITHOLTZ: So it’s artificial intelligence based on factors, not the old way which was the triangulation —
PEREZ-BREVA: Not the old way. It turns out the triangulation would actually not work. But it would take me a long time actually to persuade you that that doesn’t work. But it actually links to a lot of what I discovered since that the way we use science is very constraining. We use it as a model, we try to feed the world to the science. But with AI, you can do it the other way around and you can make science much more playable. And that’s what I’ve been doing for years in my —
(CROSSTALK)
RITHOLTZ: So you stow (ph) with reality and then you find out where it takes you.
PEREZ-BREVA: And you find out where it takes you and you can actually work and operate directly in province (ph), which is what we did then.
Back then the real problem was, and this is like already 20 years ago. So you’ve been located by AI ever since to help you, right?
So we realized that the only problem was that we didn’t know where you were and you needed us to know. And then we don’t care if triangulation works, right? The problem to solve is where are you when you call 911, right? That’s it. If triangulation doesn’t work, then we need something else. And there’s data. And the data we have is rich because it contains everything that’s surroundings. So we built an AI that would actually learn from that data how to locate you for the purpose of 911 of course.
And so that worked out. To this day, it’s the most phenomenal technology that does this. It’s incredibly scalable and it works. And it looks near magical because it’s not based on model thinking or science-based thinking even though science plays a role, but it’s not the way we typically use science.
RITHOLTZ: So after that company, did you then go back and get your PhD from MIT or —
PEREZ-BREVA: I went back to — I did everything in the wrong order.
So I did a company in AI, and then I went to have PhD in AI. People typically do MBA, but somehow I got my cables crossed.
RITHOLTZ: You have a business degree also.
PEREZ-BREVA: Yes. That I got after — before I actually did the company.
RITHOLTZ: OK.
PEREZ-BREVA: So as I said, everything in the wrong order.
I did my PhD. Half the way through my PhD, I needed more challenge. So I took a year of sabbatical from my PhD and went to live in France. And I continued working for my company and at the same time took a degree in quantum mechanics because I thought quantum computing was going to be hot and I needed to understand that —
RITHOLTZ: And it is becoming hot —
PEREZ-BREVA: It is becoming hot. It’s actually a fascinating field.
And then I went back to MIT, finished my PhD, did a number of startups on the side. And as I was leaving MIT, I was approached by a faculty who have taught me, who have seen me teach in context and said, would you help us set up this program, innovation teams that needs revamped to truly do what it’s meant to accomplish. And you’ve done this. He said because you understand — you have a PhD, you sounded (ph) to be rigorous. And at the same time, you’ve done this in the real world with real technologies from, and you actually are not afraid of any deep tech. As you can imagine with physics, chemical engineering and —
(CROSSTALK)
PEREZ-BREVA: — as a background, I’m not scared of technology anymore if I ever was, right.
And so I see all kinds of fantastic technologies and I actually can help to that process. And that’s how I stayed in academia.
RITHOLTZ: So that’s a really interesting arc of a career. MIT is well-known for having a very savvy intelligent student body. What have you learned from your students?
PEREZ-BREVA: All sorts of things. First of all, that the better I get, or actually I should put it in reverse. The more I see them do what I teach them, the more I realize I can teach more. I know that in the general world, sometimes less is better. But at MIT, more is better.
So I’ve gotten to actually teach so much more throughout the semester than I thought possible before, to that point that I now believe that I can — anybody, no matter their background, can be trained to innovate, starting from what they have. And that’s why I wrote the book. And that I learned from the students by actually pushing the envelope.
The other thing I learned, and this is shocking, this is still shocking to me — student body changes every two years. And what I mean by that is that the mindset of students changes radically every two years, and would have thought at least 10 years, or 5, or generational, 20. Every two years, if you have not completely done a blank slate in your head as to who the people are in front of you, you are going to miss the boat.
RITHOLTZ: So is that a function of the state of the economy? Is that a function of technology and social networks? What’s driving those changes? Or is it just a perennial backdrop things are always changing?
PEREZ-BREVA: I’ve tried all sorts of explanation at the back of my head. Sometimes I thought it was emergence of cellphones and so on. Sure, those play a role. But there is something new like that every two years. So every year, every two years is different. Every semester is different already. But every two years, you need to entirely clean the class and redo it from the grounds up so that you can actually communicate meaningfully with students, which makes me better, right. That’s how I get better.
RITHOLTZ: Wow. That’s pretty wild.
Let’s talk about innovation around the world. Where are some of the most significant innovations being created globally?
PEREZ-BREVA: It’s hard to answer that question because if you believe what I’ve said about innovation before, we won’t know it until it’s on, and then we’ll call it an innovation in hindsight. But what it’s doing, it looks preposterous.
RITHOLTZ: So let me ask that question slightly differently. We’re very much biased here in the United States. We think of ourselves as a capital of innovation. Is America still a leader in innovation compared to its recent history?
PEREZ-BREVA: If you were to talk to a number of historians and economists, they would tell you that innovation is over. Actually 30 years, someone says that.
RITHOLTZ: Right.
PEREZ-BREVA: So there is something very unique and amazing about American culture. And I say that from the perspective of someone who came here for what he thought was just a year and could not get himself to leave actually, because I love it.
American culture combines ingenuity with a kind of attitude with trying things out, and not being afraid to not get things right at the first time. And notice I avoid the word failing.
RITHOLTZ: Well, I was going to say I look at failure in the United States as not a black mark than it is elsewhere, and if you look at some of the world’s great innovators, be it Steve Jobs or Henry Ford or Thomas Edison. All of them have had substantial failures, and that failure didn’t operate as a constraint for them going forward.
And I don’t — maybe this is my hometown bias — but I think around the rest of the world, I think failure carries more of a stigma than it does in the U.S.
PEREZ-BREVA: So I’ve had to dwell with that question. So I think the word failure, which has become incredibly popular in the last 10 years, and only in the last 10 years, is being overused. I mean, it doesn’t mean exactly what I perceived my students and the people I see in the United States actually do.
So failure is a word, the rest of the world actually use it to describe their fear.
RITHOLTZ: Their fear?
PEREZ-BREVA: Yes. So the first time I went I started teaching abroad, they asked me, what about failure with this kind of panicky eyes? And I said what about it? I said it makes no — it has no meaning. And they looked at me and said, what do you mean? I said, yes, why do you even worry about that? So like, it’s just the word has no meaning. You try it. It works or it doesn’t work. That’s it.
RITHOLTZ: And if it doesn’t work, you move on to the next —
PEREZ-BREVA: You either fix it, right, or you figure out you can fix it, but then it probably means you are no longer interested and you move on.
So the keyword failure that’s being overused is actually distracting you from what I believe the true American value is, which is you just try it up. It works, great. Doesn’t work, you fix it. You don’t care, you move on.
RITHOLTZ: We have been speaking with Professor Luis Perez-Breva of MIT, author of “Innovating: A Doer’s Manifesto.”
If you enjoy this conversation, be sure and stick around for the podcast asterisk (ph) where we keep the tape rolling and continue discussing all things innovation.
Be sure and check out My Daily Column. You can find that on BloombergView.com. Follow me on Twitter @ritholtz. We love your comments, feedback and suggestions. Write to us at mibpodcast@bloomberg.net. I’m Barry Ritholtz. You’re listening to Masters in Business on Bloomberg Radio.
Welcome to the podcast.
Thank you Luis for doing this. I find your work fascinating and I have so many questions to get to. I don’t even know where to start.
What motivated you to write the book? Because writing a book is a challenge, and then going out and talking about it afterwards is a slog. What made you say I know, I’ll put 350 words — 350 pages of words down to sum up my past 20 years’ worth of work?
PEREZ-BREVA: So I can give you two stories, the one to move forward and the one in hindsight.
RITHOLTZ: OK.
PEREZ-BREVA: So looking forward, I had no clue what I was doing. Let’s be serious. I figure stuff as I go because learning is my thing.
So I didn’t know what it would take to write a book, nor how much more work there was after you turn in the manuscript.
RITHOLTZ: Right. That second half is — you think you’re done and it’s like, oh no, you got six more months of work.
PEREZ-BREVA: But in hindsight, the motivation was, the true motivation was that I’ve been teaching this for now a decade. And I know of all the problems, confusions, paradoxes that form in my students’ heads, and the more they spend trying to disabuse them of prejudice is so that they see it’s actually far simpler. Which doesn’t mean it doesn’t take a lot of work.
It does take a lot of work. But it’s actually far simpler to do. And you can actually practice it, whereas people start to think about, are you born, are you made, and strange questions. That’s what’s motivating me to say, OK fine, I need to write this down because there is no way they could ever get it anywhere because all the other books say, ask you to fail and rather they succeed. So that was one piece.
In hindsight, what this allowed me to do is realize why I’ve been camping in academia. It kind of helped me bring a bunch of thoughts together. So if you look at my funny story arc, there’s just one constant all throughout, which is I’ve always made computers do my bidding. I’ve always used computers ever since I was eight to have them do what I wanted. And I’ve been obsessed about how to make that dumb machine work for me forever.
So in everything I’ve done has actually to some degree or another involved computers. When I got into AI, I wanted to take this to the next level, which is I need AI to have me do and continue to learn and play with the science I still don’t know, so I can reach further and make up new stuff.
So I never got that from my PhD and I spent a number of years trying to figure out what I thought I was missing which is, how do you actually solve a real world problem? What does it actually even mean? And how do I bring this into the equation?
So that motivation is what kept me going forward the last 10 years, though I could not phrase it as much until I finish the book and said, I figured it out, right. So now I can actually go that next kind of AI that no one is thinking about because everybody is obsessed with data as opposed to what we can have computers do for us, which what everybody want.
RITHOLTZ: So you wrote that innovation has been commoditized. What do you mean by that?
PEREZ-BREVA: I actually mean it in a very good way. It’s like, it’s never been so easy for you to get another kind of education altogether. Go online and you can find information about whatever you want. You can build any kind of contraption. You can put it to your service, the science we’ve done, what everybody else has experimented before. This was not available when I was a student. Actually I was one of the first people to play with the internet when I was a student in Barcelona. And this was not there. If it had been there, it’s fantastic. Why go through all these degrees?
And so what I feel is like if people understand how easy it is put technology to your service which I hope I can get to do eventually with this form of AI that makes science and technology more playable, then it’s never been easier to just drive your indication based on the project you want to do today. And if you actually understand how to scale things up, you can actually make a living of it.
And I think it’s a responsibility of all of us to take advantage of the fact that innovation or the tools for innovation have been so commoditized to bring it to all of America, right, and kind of erase the chasm that exists there today.
RITHOLTZ: So let’s talk about that scaling up, because you could solve a problem but that doesn’t mean it’s going to scale. How do you take a solution to an issue and make it scale?
PEREZ-BREVA: This may not sound immediately intuitive because there’s nothing intuitive about scale up. So ideas per se don’t scale. What scales up is organizations.
RITHOLTZ: Organizations?
PEREZ-BREVA: Organizations, which is that you start it with five people and doing a few of those. It’s not about how many you do. It’s being able to do the same for less money with more people in some way. So you get to 50 people and you have more products, but each of them cost you less money. This should not be logical, right? Doing more products would cost you more money.
So even though we’ve gotten used to the idea that with volume comes shipping (ph), you know —
RITHOLTZ: Economies of scale.
PEREZ-BREVA: — economies of scale. We call it that way, but we don’t really understand. Why? I’ll tell you an example.
You bake eight cookies, you bake 16 cookies, you’re spending more moneys. Actually the only reason why you’re not spending much more money is because you’re still using the same oven.
So it’s not necessarily intuitive about what it means to actually scale things up. But what it scales is the endeavor, not the idea.
And so what you need to do is think about it the way astronauts go to the moon, or to the International Space Station, which is the only way you can scale up is you catch — if you catch everything that would look like a failure, at this scale up which is only in ever (ph). And so you don’t fail.
So why do I bring astronauts? Because that’s what they do according to Chris Hadfield, as I explained in the book and many others, they just go through every excruciating detail about what we’ll tell them.
RITHOLTZ: Right.
PEREZ-BREVA: And they plan for it. They either suggest modifications to the engine, they come up with protocols, they do something. So that by the time they bring their endeavor to scale, which is getting it to International Space Station, they are prepared for whatever may happen. So that if it all fails, it’s because it was not predictable. That’s what it means to actually achieve scale.
And then it may well be that the problem you are targeting just lives at the smallest scale. That’s fine. You’ll learn that through this process.
RITHOLTZ: You talk about leadership and innovation. Why is it that we see a lot of people who create ideas, who create hunches, who create concepts aren’t always the best person to lead organizations to implement the scaling of those ideas? And pick a company, be it, it could be Uber, it could be The Weinstein Company, it doesn’t matter. It seems that the people who create are crucial to help drive the idea only take it so far and there are better people to manage those scaling businesses. Or is that wrong?
PEREZ-BREVA: I think it’s neither right nor wrong. It’s true for some people. Steve Jobs was able to, Bill Gates was able to. In the case of Uber, it didn’t happen, at least now that we know. Maybe you know, it will happen with like Steve Jobs and —
RITHOLTZ: You come back in a few years.
PEREZ-BREVA: — they come back in the future. It’s hard to make those general statements about people — but it’s also true that some people — and I have plenty of friends that have shared this with me, entrepreneurs that just like to build it and get it going and bring it a given scale, and then they’re better off doing the next one than they are actually doing this. And that’s actually a career choice.
But they also want to distinguish — I don’t know who the innovator was in the Uber story. We talk about the CEO —
RITHOLTZ: Right.
PEREZ-BREVA: — which may be the entrepreneur, but was he the innovator?
RITHOLTZ: He was the founder. We don’t know if he was the —
PEREZ-BREVA: So those two are not necessarily always the same, right.
And sometimes, I would say that in the case of many daring innovators, they’ve actually started some and they’ve stayed. And in some case, they’ve actually gone. Wozniak left Apple, and he was key to the innovations that got Apple started, as was Steve Jobs, right. So I think it’s more of a personal choice and career choice than it is a rule.
RITHOLTZ: So there’s a general fear in the population about technology and that automation is taking jobs away. I don’t get the sense you look at it quite that way. What do you think about big data, AI, and what it means for the broader economy? Is technology going to turn us all into unemployed, or is technology going to help us continue creating the next generation of jobs?
PEREZ-BREVA: So on that one, I’m rooting for humans. So I think we’re going to see amazing things coming up.
I would also like to bring up what we actually call technology because the definition, the T at MIT, what got MIT started is the idea of using science and knowledge to help humankind reach further and gain control over nature. So if it is not helping us, it’s not technology, at least according to this definition.
So the way I and many of my friends think about technology and what I think is my next passion now is what we need to do is make a better effort to bring this technology so that more people can play with it and benefit from it. And that needs to be done, it needs to be brought to scale. I think we haven’t done such a great job at that for the last 10-20 years. But we can.
But I don’t think that on its own, big data or AI, the way you see it implemented today is going to do any of those things that the fear mongers say are going to happen.
RITHOLTZ: So what does it mean in terms of artificial intelligence, can we really help machines acquire intelligence in a human-like fashion? If you have to look out 50 or 100 years, what are these machines going to look like?
PEREZ-BREVA: Actually I’m going to surprise you with this. The idea of artificial or generalized artificial intelligence was proposed at the beginning of the field. And the presumption was that if we ever got a computer to beat a human at chess or a strategy game, we have achieved generalized artificial intelligence.
Because back then, we thought that that was super hard for a computer. And I guess what we now know is that we do need artificial — generalized artificial intelligence to do that even though the progress has been remarkable, but it’s only been machine learning.
And it also means that we’re done in an odd way. We need a new objective. Because the way we define that generalized artificial intelligence which is a touring (ph) test and these problems is gone. I mean, like, we don’t know what we’re doing anymore.
So I would rather think of an AI that actually helps us directly in the sense of we need a new objective. And to me, the objective is AI that helps us the JARVIS helps Tony Stark become a superhero, Iron Man. So in that movie, Iron Man, everybody talks about Tony Stark and whatever, but the great, great, great tool is JARVIS which is the AI that powers the suit and helps Tony Stark build stuff.
Now imagine you had some kind of a system that’s way more powerful than Google, but still is helping you problem solve things so that you can accomplish something new, that’s what we need AI to do. That’s what I want AI to do.
RITHOLTZ: So that’s quite fascinating. If — in other words, our focus is really on the wrong thing and we should actually be thinking about AI as a problem-solving tool and not a means in and of itself? Am I getting that right?
PEREZ-BREVA: I think so. That’s the way — by the way, that’s actually much closer to the way you are benefiting from AI today.
So with the limited capabilities of Netflix in terms of intelligence as they broadly understood, you’re benefiting from how Netflix collate what other people have looked at without having watched a single one of those movies, Netflix itself, and you’re getting the recommendations of movies. The same for Google. You’re actually accessing Google, typing a few keywords and you’re getting to see how other people have sorted out the web, right.
So the way AI has been helping us has already been that way even though it’s limited. It’s still only machine learning.
RITHOLTZ: One of the questions that someone — I mentioned somebody I was interviewing you and they said, ask him if innovation has become concentrated in too few hands?
PEREZ-BREVA: I think money has become concentrated in too few hands.
RITHOLTZ: Money in terms of capital for technology or money generally, or both?
PEREZ-BREVA: Money generally. And what you see is that if you don’t have good ideas that you actually kicked the tires for yourself before going out for money, you’re just going to be subjected to how those people think about what innovation should be, right. And so you’re going to go through a path that may not be the best.
Now because money is more concentrated, either being companies that are pushing more research I would say, not so much innovation, or in hands of a few philanthropists, you sort of need to figure out a way to make a case appealing that even though it may not match how they think about innovations, they agree with you that a problem can get solved.
So if you do your homework, it’s OK. But I think the problem is that money has gotten too concentrated in hands. And that may create the perception that is harder.
RITHOLTZ: So let me pull an example out from the real worlds. Google very famously tells its engineers, you could take 20 percent of your time one day a week and think about problems that have nothing to do with the work you’re doing.
Can you organize and structure a work for us to be innovative that way? Or they’re just wasting time? What does that directive from management actually end up accomplishing?
PEREZ-BREVA: It boils down to what you ask them to present at the end of those 20 percent time spent on ideas. If they are just presenting ideas, I don’t think it’s efficient. But you can actually guide a work — I mean a workforce that actually do innovate continuously if you place the interest in, can you please tell me how we will direct resources to prove this thing that you have at the next scale.
And that’s actually a different way to think about innovation. We’ve actually done it outside of MIT and proven it to myself that you can truly get highly motivated people and prepare them to do this and innovate continuously in this way and create new organizations that work.
RITHOLTZ: Whenever we think of innovative companies, it’s the same couple of names seem to come up over and over again.
I was struck not too long ago when someone had asked Jeff Bezos about the Amazon Phone which failed. And instead of getting defensive about it, he very much embraced it and said we need more failures. If we’re not failing frequently, then we’re not trying enough stuff, we’re playing it too safe. I want to see a lot of things tried, and by definition a lot of them are going to fail.
I think that philosophy is quite insightful. What companies or leaders do you look at that you think understand innovation and know how to solve problems using technology and are likely to be the innovators of the future?
PEREZ-BREVA: It’s always hard to know exactly what’s going on inside the company, right. We have unusual visibility on some and no visibility on others. So it’s hard to make a blanket statement.
The few examples we know of are companies are still starting up. And so they are not so good at keeping secrets. And so you actually get to see more.
So there’s a lot to like and not to like about how things are developing for many. I certainly love everything Jeff Bezos does. And even though I would not use the word failure because it kept — they just moved on, I agree and sympathize with maybe have to try. And of course if everything works out, you’re not trying hard enough, right.
So I admire the way Elon Musk has gotten around to create the companies he has created. But I have actually developed the appreciation by reading the biography more than what the news say about him. I am not particularly impressed by any web company that we see nowadays, even though there is lots of incubators and things out there. I actually feel that they’ve proven kind of the opposite that if you just start with a web idea, it takes very long, it is too costly and no one makes a profit.
So I’m actually — if at all they’ve proven that there is a way to the web companies, which everybody thinks they’re easier, and only create perceived value but not real value.
RITHOLTZ: Well, Airbnb, I guess you can call that an app company like Uber. What about Netflix? They pretty much exist.
PEREZ-BREVA: Well, Netflix is from a different breed, right, of companies. They started physical.
RITHOLTZ: Right. Sending DVDs —
PEREZ-BREVA: Sending DVDs and —
RITHOLTZ: — which if you remember, the idea sounded ridiculous.
PEREZ-BREVA: It sounded completely ridiculous at first. Actually, Netflix which I talked about in the book, is a great example because they too have been exposed in the press, and every four years someone says they’re ridiculous and they’re wrong. And then four years later, it turns out they weren’t. So that’s why the mechanic is so great.
But Netflix also shows you the idea that there’s a difference between coming up with an app and just counting users and actually scaling up a company. The way Netflix gets to where it is today is by actually becoming various different companies along the way when you look at what they actually do. Today, they produce movies. Yesterday, they sold DVDs, actually they rented DVDs.
RITHOLTZ: So they went from DVD rental to content streaming to content manufacturing.
PEREZ-BREVA: And some things are kept along the way. So in their case, it’s a very clever use of machine learning that’s kept along the way and allows them to think about the next scale up. And that’s the piece they keep on growing. So they are building a very incredible capability that gets to be incredibly versatile. It’s like the perfect example of proper financial wisdom which is you know, you want to diversify. In the face of uncertainty, you want to actually diversify and not do the opposite, which is focus just on one idea and spend all your money in it. That sounds financially wrong advice.
And so there’s companies like that that are incredibly innovative that we just don’t know what they’re doing. Apple for instance is the typical example. The typical question is with Steve Jobs, are they still innovative or not? I don’t know the answer to that. But in the meantime while we’re not looking, they became a services company, right. So they keep on reinventing themselves.
So rather than looking at who tries and fails a lot which implies a degree of visibility on to their process that we may not have, just look at how subtly they actually changed the company they are. And every time you look at it, it seems like perfectly incremental and yet it’s completely different — Amazon, the everything store, then producing movies, the elastic cloud along the way. They use what they have to change who they are. And you may not see how they do it, but that’s what happens every single time.
RITHOLTZ: So what about Facebook which is a web or I guess you can all them an app company, but it’s certainly an internet company? And they have a bunch of other properties like Instagram and go on the list of things that they’ve purchased. Are they a company that’s innovative or are they — is social their only thing and that’s going to be — they’ll either live or die on how popular social networks are?
PEREZ-BREVA: I’ve got — I mean, I have to confess that when it comes to companies that’s just purely social, I have a hard time understanding why they have any competitive advantage, whatsoever, except that they’re there already. Which means that if someone else comes around with something that’s fundamentally different, it might be wiped out. But that’s my own shortcoming. It’s not the shortcoming of Facebook.
In the case of Facebook, I see lots of ideas, I see lots of chaos in many ideas, many companies are using machine learning for many things. But I also see mostly an advertising company, right, in everything they do. To some degree like Google though, Google has tried more actively to branch out from that.
So how long can we withstand that? You know, if you were in business school 10 years ago, they would have told you the secret of Google was that at they ended the banner tyranny of the internet. You sure remember that in the ‘90s, internet was just mostly ad banners and eventually some content.
Now look at the internet today. It’s exactly the same as it was in 1998. A bunch of ads over there, stuff that’s most likely you bought already, and that’s why how they know you like it and so they advertise it again.
So we’re getting — I believe we’re getting to the same point. Maybe I’m wrong, which as you know, I don’t care much about.
But so when I look at these companies, I just don’t know how to assess what they’re doing. And this is not to say that they are not doing great things. Maybe tomorrow, Facebook will make an announcement and I’ll say, look I was wrong in Bloomberg. And I’ll move on, right?
RITHOLTZ: So you keep coming back to the idea of not caring about being wrong. And before I get to my favorite standard questions I ask all our guests, I have to ask you one more question about that. Most people have so much ego tied up in being right, it prevents them from either admitting error or trying things that have a low probability of success, or just you mentioned earlier, just playing and seeing what happens. How did you evolve to the point where you became very comfortable with — I know failure is a loaded word, but being wrong, trying things out, moving on?
PEREZ-BREVA: I don’t want to claim massive insight or foresight on the matter. So part of me, I’m just — I wasn’t aware that I was supposed to not care. I mean, part of it was just, I don’t know, something about my upbringing that that. And then seriously, if I don’t get to know every three days, it’s not my life. I’ve been told no about craziest stuff I’ve proposed to do.
Or nearly every three days, some of it is crazy, some of it I was right. But even super dear mentors that they’ve taken high esteem have told me time and again, what are you doing, this is not the normal path. And I tell them, I just don’t understand really the normal path. The fact that it’s normal doesn’t make it logical to me.
So call it that my head is wired the opposite direction just because I’m dyslexic and so certain things that seem obvious to a lot of people are not obvious to me. But I don’t claim to know, to have a secret (ph) all of a sudden I got inspired. Maybe I was just wrong one too many times to realize that it’s not that bad.
RITHOLTZ: But you don’t take no as I think most people’s intention. When someone says no to you, it’s almost a challenge.
PEREZ-BREVA: Yes. What I tell my class, the students, is that as long as no one is hurt, and that’s very important, you should not take the first no for a no, right. And that doesn’t apply to relationships, right. This applies to —
RITHOLTZ: You’re talking technology —
PEREZ-BREVA: Technology, business — you just not take the first no for an answer because sometimes people need a second chance to think it through.
RITHOLTZ: Right.
PEREZ-BREVA: And so maybe too, right, is a good starting point to get yourself trained.
And then they develop all these funny games, i.e. I call them Karate Kid tasks for the movie. You probably remember the first Karate Kid movie in which there was wax on, wax off, that stuff —
RITHOLTZ: Sure.
PEREZ-BREVA: — and the kid learned karate by actually kind of waxing cars and painting fences. So that’s a lot of a few Karate Kid tasks to kind of train them to be wrong.
One of them, I asked them to just call a pizza, I mean, some pizzeria and ask for a doctor’s appointment.
RITHOLTZ: Right.
PEREZ-BREVA: Of course they think it’s going to be embarrassing, but it’s just a phone call, right. And then once they do it, you don’t know who’s more surprised, if the person who called or the person who receives the call, right. I asked them to please not abuse the pizzeria, just try it once. But to get the feeling of put themselves in the shoes of that stress moment (ph) and realize it’s not that bad, right?
And once you’ve realized that and you trained yourself to these mistakes, I call them near misses if you want, then you get a whole different sense of what it actually means to be wrong. It’s the example I gave you earlier. If the violin is out of tune, it kind of still sounds OK. It’s not as great, right, but it’s not — it needs to be really bad, bad, bad, for you to know to even recognize the sound. And after a while, that helps you play better.
RITHOLTZ: So let me jump to my favorite questions. These are the ones I ask all my guests.
Tell us the most important thing that people don’t know about your background.
PEREZ-BREVA: How do people normally answer to that question?
RITHOLTZ: Well usually it’s some little tidbit that people — that is surprising. But you have a lot of interesting surprising things in your background already.
PEREZ-BREVA: So I learned to program by accident. My mom had taken a class in Computer Science, because it was new and she went next door and took a class. And we had this 48k computer.
And she told me, look, they’ve given me the Mastermind game, only that needs to be coded in the computer. So the first time, she wrote it in the computer for me and I played. But it was one of those computers like really old, like you could not save.
RITHOLTZ: Every time you want to play, you have to re —
PEREZ-BREVA: I have to rewrite it.
And so I wrote it, and then wrote it again, and then wrote it again, and modified it so I could win always. And before you know it, I actually know how to code basic, and I was eight years old, mostly because I just wanted to play Mastermind. And that has defined the way I think about AI and everything I’ve told you before in ways that it keep coming back to my head.
The ability to play, make things that seem complicated playable, changes how we actually approach them. And that’s actually defined why I keep on jumping through field seemingly in a way.
RITHOLTZ: That’s quite fascinating.
Tell us about some of your early mentors.
PEREZ-BREVA: Hard to say. I’ve been through so many countries and I’ve met so many interesting people that it’s hard for me to say.
RITHOLTZ: Clearly, the person in MIT who you had a long email relationship before you — has to be a significant mentor.
PEREZ-BREVA: Yes. He’s a significant mentor. We haven’t spoken in a few years now because directions take us different ways. But that’s much later in life, right.
So he was certainly a great mentor, more recently —
RITHOLTZ: What was his name?
PEREZ-BREVA: Tomaso Poggio.
RITHOLTZ: OK.
PEREZ-BREVA: He’s still a professor at MIT.
The recently Charlie Cooney has been a great mentor because he sort of told me, I think you have a book in your hands, when I wasn’t even thinking about it. And I guess I did.
And even earlier, a lot of family friends, essentially a family — the friend of my family was quoting earlier that — was talking to me and said, what are you going to do next, and I said I don’t really know. I haven’t learned enough to what I want to accomplish. And he said, you don’t know what you’re doing, you need to leave this country and go to United States. And I said, OK. So I guess he’s helped me in this path.
RITHOLTZ: So who in the worlds of innovation, who influenced your thinking? What philosopher, thinker, technologist affected in a fundamental way your thoughts on innovation?
PEREZ-BREVA: Many. I’ll give you twos. One is Thomas Kuhn which is very known in the United States and hardly known in Europe, surprisingly. In Europe, people talk about Popper, which is the competing school of thought.
I think Thomas Kuhn explains the scientific method in a way that resonates with me and Popper doesn’t.
RITHOLTZ: Why is that?
PEREZ-BREVA: Popper is formulaic, and Kuhn essentially admits one thing that I’ve come to believe was a mantra which is that the beginning of any theory is fundamentally ill-conceived, mostly wrong by any traditional standard, barely works, and yet somehow it becomes a standard afterwards.
And that beginning starts with people putting together what seems preposterous, mostly because they have a hunch that something isn’t working.
I’m putting my own words in Kuhn, right. So don’t — Kuhn doesn’t use hunch and I’m not sure he will agree with the way I interpret his writings.
And I think it’s really hard book to read. It took me — I read it at first at the age of 23. I didn’t understand it. I only understood it at the age of 29 when I read it again. And by the way, that’s because your brain keeps on evolving, right. So it’s not fully matured and able to understand every single thing until you are close to 29 by some of the latest research.
The other thing that actually influenced me is the opposite extreme. I’ve had this question in my head about why does Warren Buffet not invest in innovation, not technology startups, but innovation? You know, he should. I mean, I’m not the one to say what he should do with his money.
RITHOLTZ: It’s a fascinating question. It seems like a bit of a dichotomy.
PEREZ-BREVA: Right. But he invests in long term only for value creation, and he also has philanthropy, right. And innovation is a lot of about moving obstacles to progress in the long term that actually create benefits from society and value. So it’s like he should be investing in that, and yet he doesn’t. I don’t mean he should. But trying to answer this question has caused me to think about more carefully about what innovation actually is and how it is different from just creating a company or doing a startup. It’s much more ambitious.
RITHOLTZ: So you mentioned Kuhn. Tell us about some of your favorite books.
PEREZ-BREVA: So those change all the time. But the latest breed is the Hitchhiker’s Guide to the Galaxy, which I keep on coming back to.
RITHOLTZ: I love that series. Douglas Adams. He’s fantastic.
PEREZ-BREVA: And the reason I love it is just it’s just absurd in such a profoundly logical way that it’s just hilarious.
Another book that I devoured was The Martian two years ago when I first got it. And I still read it again because it is the way science really is, not the way it is being taught. It’s not about the model, it’s about using nature to help you. And that book, every page is literally a person trying to survive, making science and nature work for him, right.
RITHOLTZ: It’s a series of problem-solving —
PEREZ-BREVA: Problem-solving with no solution real and lots of what you might call failures, but really if you fail, he died. So that was not an option.
And the mechanic of the book, the richness of it, even if you don’t fully understand the technology, you can tell the story is enormously vibrant.
And the last book I keep on coming back to every now and then is What If from Randall Munroe.
RITHOLTZ: Sure.
PEREZ-BREVA: And you can tell the trend, right. I’m techie, I love SciFi because I want to create the SciFi so it becomes real.
RITHOLTZ: But just a touch of absurdity, too.
PEREZ-BREVA: it needs to be absurd because otherwise you can’t get good ideas. They need to look absurd at first, not because — just because — and this is something I realized over time. Ideas are absurd because of your training. They were not absurd per se. So if your background taught you to ignore certain things and assume certain things and even that challenges that will look absurd. Only until you show it works.
RITHOLTZ: So since you came into the field of fill the blank, artificial intelligence, innovation some years ago, what has changed and is that for the better or for the worse?
PEREZ-BREVA: Many things have changed. I’ll give you one for the better and one for the worse.
We’ve become way more siloed.
RITHOLTZ: Siloed?
PEREZ-BREVA: Yes. And that creates enormous amounts of inefficiencies in education, in investing, in innovation that I myself avoid with iTeams (ph) which is a cross-disciplinary, across the entire institute. That’s something that I believe is going to change.
At the same time, the opposite as also become true. You could dedicate yourself on whatever, online, if only you had a project or a means to guide you with a project to acquire that knowledge, which is the reason why I wrote the book to start with.
And so those two things have happened. One, people siloed and more formulaic. More students ask me today for formulas for innovation than they did 10 years ago, which makes no sense because if there’s a formula, there’s a recipe. Then you’re going to bake the same cake, someone did. How is that an innovation? It’s a great copy, by all means, eat the cake. But it’s not innovation.
But then on the other side, more and more people I believe can actually start to learn on their own and ignore recipes or said models because there is such an abundance of information that wasn’t there 10 years ago. And AI is only making that or will only make it if I get my way, would only get it, make it even easier to put that to your service so you can solve whatever problem you fancy.
RITHOLTZ: Tell us what you do outside of the office to relax or for fun?
PEREZ-BREVA: I spend as much time as I can with my kids for — not just because I’m a family man, it’s just they’re hilarious. But it’s not with my kids as in traditional playing. Of course as you can imagine, we build contraptions. I’m having them build computers. They’re five and eight. But it’s OK. It’s good, early enough.
So I’m having them assemble the computers. We are doing all sorts of absurd things. And we play together and I’m even learning violin with both of them. And that’s incredibly enriching for me.
RITHOLTZ: So if a Millennial or recent college grad came up to you and said I’m interested in a career in technology, innovation, startups, what sort of advice would you give them?
PEREZ-BREVA: Interesting question. So my first advice is find a problem, right. Because technology is what you use to make the problem go away, right, and innovation is the presence of doing that to some degree.
If you can’t find a problem, then look harder. But if all you intend to do is get money, you know, the current cycle is going to end. Eventually it’s going to become impossible to create these multi-billion dollar investments that take 10 or 15 years to show a profit if not more. So that’s not going to be there forever.
And when that goes away, if you’re just above that view of the world, it’s not going to help you. So just find a problem and work backwards from that problem to get the education you want, rather than obsessing about what do I become; a Computer Scientist or so on and so forth.
RITHOLTZ: And our final question, what is it that you know about technology and innovation today that you wish you knew 25 years or so ago when you were first starting out?
PEREZ-BREVA: So I think of myself as a different person every so often. So I’m not sure what myself of 20 years ago really thought. I can’t cat (ph) with him to figure that out.
So I’m not sure that that’s what I wanted. But whatever I wrote in the book gives me the answer that I think I was looking for while I didn’t know what I was doing.
So I guess that what I did is that. And so if not the question that would have phrased, what I thought I needed to understand to make it to the next leap for myself and that has been a really enriching experience.
RITHOLTZ: We have been speaking with Luis Perez-Breva. He is a professor at MIT and the author of Innovating: A Doer’s Manifesto.
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I would be remiss if I did not thank my crack staff who helps put together this podcast each week. Medina Parwana is our audio engineer and producer, and keeps me honest each week and moving along as these conversations progress across 90 minutes. Taylor Riggs is our other producer/booker. Michael Batnick is our head of research. Attica Valbourn (ph) is our business producer.
I’m Barry Ritholtz. You’ve been listening to Masters in Business on Bloomberg Radio.
