#7 – Michael Mauboussin: The Fascinating World of Increasing Returns
Jul 15, 2024
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Michael Mauboussin, finance expert, talks about increasing returns, market dynamics, Charles Darwin, AI, and the Santa Fe Institute. They discuss leveraging increasing returns in business, impact of intangible assets, navigating complex technologies, and embracing complexity in everyday life.
Increasing returns drive company scaling through factors like economies of scale and network effects.
Policymakers face challenges in evaluating increasing returns' impact and leveraging AI and blockchain technologies.
Deep dives
Exploring the Dynamics of Markets and Increasing Returns
In this podcast episode, Michael Mouboussin discusses the dynamics of markets and increasing returns. He elaborates on various types of increasing returns, including economies of scale, international trade, learning by doing, positive feedback and network effects, and recommendation of ideas, detailing how these factors contribute to the scaling of companies.
Transforming Businesses to Benefit from Increasing Returns
Mouboussin provides examples of companies that have successfully transformed their business to leverage increasing returns, such as Tesla and BYD in the electric vehicle market, highlighting how production scale and speed can lead to lower costs and competitive advantages.
Intangible Assets, Scale, and Barriers to Entry
The discussion shifts to the relationship between intangible assets and scale, emphasizing how while strong increasing returns can create barriers to entry, intangible assets can quickly go out of fashion and pose challenges such as theft and recommendation dynamics.
Policy Implications and Navigating Intangible Assets
Mouboussin examines how policymakers can approach and leverage increasing returns in an ecosystem driven by technologies like generative AI and blockchain. He underscores the complexities in evaluating the impact of increasing returns on creating barriers to entry in markets.
My guest today is Michael Mauboussin (@mjmauboussin), one of the world’s leading experts in finance. Michael serves as Head of Consilient Research at Counterpoint Global, Morgan Stanley. He has authored three books and regularly appears in the Wall Street Journal, Financial Times, New York Times, and other publications. Since 1993, Michael has been an adjunct professor of finance at Columbia Business School and is also the chairman emeritus of the board of trustees at the Santa Fe Institute.
In our conversation, we delve into the dynamics of markets, discuss all sorts of increasing returns, and explore topics such as Charles Darwin, policymaking, AI and Web3, and the Santa Fe Institute. I hope you enjoy our discussion.
Find me on X at @ProfSchrepel. Also, be sure to subscribe to the Scaling Theory podcast.
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References:
Michael J. Mauboussin & Dan Callahan, "Increasing Returns: Identifying Forms of Increasing Returns and What Drives Them" (2024) https://perma.cc/Y3DN-LNMY
Michael J. Mauboussin & Dan Callahan, "Stock Market Concentration: How Much Is Too Much?" (2024) https://perma.cc/7EEX-ZY9T