Fiction, Math and Infinite Books with Jim O'Shaughnessy

A chat with perhaps the world's most interesting person

Jim O’Shaughnessy is the founder of O’Shaughnessy Asset Management (acquired by Franklin Templeton), author of What Works On Wall Street (among many other books, most recently Two Thoughts), avid reader, host of the Infinite Loops podcast, and founder of O’Shaughnessy Ventures — which in turn runs the O’Shaughnessy Fellowship, Infinite Adventures (VC fund), Infinite Films (film-making) and Infinite Books (book publisher). If his book Invest Like The Best sounds familiar, that’s because the podcast by that name is run by his son Patrick! Suffice to say, if there ever was a “world’s most interesting person” award, Jim would be a top contender. I recently had the wonderful opportunity of speaking with him — here goes our conversation!

Jim O’Shaughnessy

JOS: Even today, by the way, if you go to various financial sites or providers and look at the P/E for, say, Apple, what you’ll find is that if you go to Reuters, you’ll get one P/E. If you go to Compustat, you’ll get a different P/E. If you go to Bloomberg, you get a third P/E.

So one of the things that we undertook at O’Shaughnessy Asset Management that my team, I still think hasn’t forgiven me for was, a multi-year project of cleaning data. And that is kind of the blue collar version that quants are kinda like, wait a minute, I gotta spend my entire day figuring out what Apple’s actual P/E is? It’s garbage in, garbage out.

And I still marvel. I read academic papers. I don’t read them as much as I used to since launching the new company, but they’re just riddled with errors. I could put somebody on staff at OSV to simply write up all of the errors that that we find on a daily basis. And, of course, now we have our own in-house AI because the commercially available stuff, a lot of it is very highly nerfed, and we want the unvarnished version.

So we’re also building out an AI suite at OSV. We’ll be able to dump, for example, basically an unlimited number of papers into it and then look for all the errors. And I’m not a conspiracy guy, so I don’t think these errors were done intentionally. I think they were just done like humans. I mean, if you wanna find the weakest link in any system, it’s us humans.

So it’s a great aspiration to write a book as magical as Gödel, Escher, Bach. What would your theme be in the book?

[Context: one of my goals in life is to write a book that will be as magical to someone else as GEB was for me.]

MM: I’m still figuring that out. But I think it will certainly have a mathematical, rigorous component. It won’t be all right brain for sure, but it will also not be a textbook that is all left brain. It will be a balance of both.

I feel very often the ideas that I find very elegant are mathematically elegant results. For example, in my honors calculus class, it’s a proof based class. You don’t actually do calculus. It’s about proving the fundamentals of calculus. And one of the things we proved is that the real numbers are unique.

And I know that Gödel, Escher, Bach talks a lot about isomorphism, and we studied isomorphism in a slightly different meaning of the word, which is that, anytime you have 2 sets, if you have a 1-to-1 correspondence between those sets, that is called a bijection. And if the bijection is order-preserving, then it’s called an isomorphism.

The point being that if you have an order-preserving bijection, then for all effective purposes, the sets are exactly the same with the elements renamed. So, basically, the sets are exactly the same, except that you have called the elements different things.

We proved that if you have any set that has certain properties, like countable dense subset and connected, it has to be isomorphic to the real numbers. So in that sense, the real numbers are unique. And I thought that was a very, very elegant result. Even in physics, we did the first equation of Maxwell, which I thought was very elegant.

Even a much simpler thing like e^(iπ) = -1.

JOS: Yeah. That’s always a fun one.

MM: I also think it should have some artistic or creative component. One thing I’ve been thinking about is ‘intellectual fiction’. I think Neal Stephenson is a prime example. I think Cryptonomicon is clearly a standout example. It’s a fictional book, but it literally has math theorems and graphs and all these fascinating things.

JOS: You might like 2 books that I just finished. One is called The Maniac, which is a fictionalised biography of John von Neumann. And it’s really enjoyable. I came late to that book, and I loved it. And then his first book, he’s a Chilean author, so these are the only 2 that are translated into English, something we hope to address with our book publishing arm, Infinite Books.

We’re hoping to be able to, in short order, simultaneously publish a book in all languages. It would be the electronic version, obviously, because that’s where it’s easy. But, the other book that he wrote that I finished just last week is When We Cease to Understand the World, and again, it’s also fictional and it’s looking at the various rivalries and various ways of trying to understand quantum physics and mechanics.

And it’s just so alive because he can take all the liberties he wants because it’s fiction. And yet it maps back to the actual history of the origins of quantum physics and Heisenberg and Schrodinger and how much they hated each other. These rivalries are a bit like Newton and Leibnitz, and it’s interesting how much they really informed what was going on.

And so it reminded me very much of what happened to poor David Bohm, who did the implicate and explicate order. Anyway, he was a student of Oppenheimer’s, and it came down during the McCarthy era that he was a communist or had communist sympathies. And so the way that these geniuses like Oppenheimer dealt with David Bohm is very much like the movie Mean Girls. Literally there was a thing that Oppenheimer wrote and said to his colleagues saying, “If we cannot disprove Bohm, then we must agree to ignore him.”

And that always fascinated me because people often forget, that, at least for now, a lot of this stuff is also informed by our very human emotions, likes, dislikes, etc. They affect even the purest math. And When We Cease to Understand the World really makes that point beautifully. And again, you couldn’t do it if it wasn’t fiction.

MM: I’m also a big fan of Claude Shannon, by the way. Like, huge, huge fan. I find it fascinating how he did all these different things. He was at Bell Labs, information theory, invested in the stock market, and made a killing on Teledyne and Motorola and all these great companies. I think he compounded at north of 25% CAGR for a couple of decades.

JOS: I love Shannon, and it still mystifies me that he is not more famous. Because, like, almost everything that we use on a daily basis needed Shannon to figure it out.

The Teledyne story is a really interesting one. Henry Singleton was an absolute genius at issuing shares to use as a cheap currency to acquire other companies, but then having the intuitive sense to know when he should buy them back.

I would bring Teledyne up in groups of asset managers, and and I’m talking big asset managers, right? And if I was sitting with 10 people, like, 8 of them had never studied Teledyne. I was always shocked by that.

So fictional version, but, also including mathematical formulas, beauties, etc. Interesting. And what would be the art part that you would bring in?

MM: I’m trying to figure it out. So maybe language and writing and that sort of thing, maybe photography. Could be astrophotography.

JOS: Oh, very cool. My wife is a street photographer and has a published book, and we collect art, and so I would say probably 30% of our collection is photography, 70% oil, sculpture, that kind of stuff.

But I’ve always enjoyed doing the rounds of the various photography exhibits with my wife because I ask her, why is this photograph so appealing? What about it is inviting me to be interested in it and commanding my attention? And I always figure there’s got to be a mathematical formula underneath it, and that is not always the case, but it is often the case.

It’s like in literature, the well known hero’s journey. Joseph Campbell was the first to really outline the actual step-by-step process of the hero’s journey. One of the things we’re programming our AI lab to do, is to be able to put a manuscript in it and rate it against the various underlying story structures.

One of our fellows is an architect, but he’s building an architecture for written works. And we think that’s really a fruitful endeavor, in terms of looking for kind of the pattern underlying why are some stories absolutely devoured by all of humankind, and others are just ignored? And what you do see is the underlying story structures give you a much greater insight into if you’re in the business of being a publisher and, you know, it’s a for-profit company.

That might be a very helpful piece of software for us to have, in terms of deciding whether we’re gonna go with this one book or one author over another.

MM: That brings me to something I wanted to touch on. I’m a voracious reader, but also I helped 2 authors with their books, and my name is in the acknowledgments of both. They are both bestsellers.

One thing that I had observed since then and, I had written in my notes, thought a lot about this, is that, I think there is a huge opportunity for a publisher that really changes the model. When I saw the process of creating these books, and I saw the whole journey very closely, I found it very dissatisfactory and inefficient. Penguin gives the author 10%. And I just felt it is a very, very inefficient process.

I think there’s a huge scope for a publisher that replicates the brand and distribution of say Penguin, has a quality filter, and does 80% royalty to author, 20% to publisher. And I know you do something similar at 70% to author, 30% for Infinite Books, which is basically the same. And so I want to dig in more and get your insights on that.

JOS: Listening to what you just said, that’s basically the goal of Infinite Books. Having written 4 books myself, I was very dissatisfied with the publishers. I had a variety of publishers. I had McGraw Hill, Broadway, and then yet another publisher. And in every case, it didn’t matter. It literally didn’t matter who the publishing company was. They all treated me the same. All of the line edits that they made actually detracted from the idea I was trying to express rather than amplifying it.

And so, when we launched Infinite Books, it was as a redress to everything that I and our editor in chief, Jimmy Soni, had really despised about publishers. Many books in America are still decided by people who hear something at a Manhattan cocktail party. If you wrote a great book right now and you submit it to the big publishers of the United States, the probabilities are very, very high that they you’ll get a rejection letter.

Whereas at Infinite Books we’re building tools that build in all of our quality filters into AI. So rather than it ending up in what traditional publishers call a slush file, we put every manuscript through the AI with the quality filters and everything.

And let’s say we get a thousand manuscripts — at a traditional publisher, they end up in that slush pile, and they have sometimes junior editors or readers who are meant to go through all of the manuscripts or the outlines, but it’s an incredibly laborious process, and they don’t do it well. And so, if you submit it to Penguin and all of the big publishers, Simon and Schuster, you’d probably get rejected.

If your book was really good and you submitted that manuscript to Infinite Books, we’d probably publish it if it passed all of our quality filters and everything else. But what we’re also trying to do is build a publishing company that is incredibly author friendly.

I joke that the big publishers in America, are using best practices, but only from 1925, not from 2025. If you were sitting at the top of Simon and Schuster and you had a huge back catalog — by the way, that’s where they make a lot of their money — and you were taking 90% of it and the author was getting 10%, or if it’s a really well known author, 15% of the royalties — are you gonna try to innovate that and do a 70, 30 split? I don’t think you are.

And that’s the challenge that we see with all of the traditional publishers. Large organizations tend to be very static and kind of set in their ways. So even if Simon and Schuster said it was gonna do a Skunk Works, side project to to use all the tools that we’re using at Infinite Books, I suspect that it would take them years and years and years and it would be so watered down because of the multiple committees it would have to go through.

And so a business model that is free from all of the constraints of the legacy companies can often break through. We did it with OSAM, for example. We sold O’Shaughnessy Asset Management to Franklin Templeton in 2021 because we had created this idea of custom portfolio creation, custom indexing, custom everything. And classic example, they saw that customization was the future, but they couldn’t build it internally because of all of their legacy issues. There’s a lot of psychological reasons why it doesn’t happen, a lot of human OS reasons why it doesn’t happen, but it’s applicable to other industries as well.

So what happens is a much smaller entity that has the right vision, and they do not have the bottlenecks of committees and other vicious things that stop innovation often dead in its tracks — then the big company simply watches, looks at all of the players in the field, and tags the one that they think is the best and acquire them. And that’s what happened to us.

If you get a bid like we did from Franklin Templeton that was at a price to magic ratio, you end up taking it. And so that gives us a a double interesting thing with Infinite Books and the other verticals that we’re building at OSV is, first off, we're doing it because I love books. I love authors. I love readers.

And it is a category that is ripe for disintermediation, ripe for arbitraging all of the inefficiencies out of it. So in either case, we think we’re gonna have a lot of fun, but also give voice to authors who have traditionally been ignored for a variety of reasons by the publisher.

MM: You mentioned Jimmy Soni, by the way. And I have interviewed him and Rory Sutherland for my Substack.

JOS: What did you take away from your interview with Jimmy?

MM: He mentioned a few stories about PayPal, and, like, the simultaneous chess game. And he said that many of the best founders are, intense game players. He said Travis Kalanick of Uber was the world’s top Wii tennis player. And these people just go very intensely into whatever they’re into.

I think he has spoken about this model of writing upwards versus writing downwards. And writing downwards is you’re an expert in the field, you are kind of writing down to the reader from up there. Versus writing upwards is like, I am very curious about this topic, and I am no expert in it, but I am very curious to learn more. And on that journey of curiosity-driven learning, patching things together, and presenting it to the reader. And I think he does that very well.

JOS: And the reason I made him editor-in-chief and CEO of Infinite Books was that very reason, but also he’s probably the most entrepreneurial author I’ve ever met, in that he really loves business. He really loves business models, all of those types of things. So I think he’s gonna be great in that spot at Infinite Books. And Rory Sutherland is on my advisory council. What did you get from Rory?

Rory Sutherland

MM: He’s a gem of a guy. He always has the most unique insights. He said you can you can use 2 dishwashers, and you don’t need any storage for plates. The level of creativity that he has is unbelievable.

JOS: Did he tell you the story about how he solved British Airways’ big problem with all the complaints they were getting when they would text their passengers that a flight was delayed?

So his company was brought in by British Airways, and they were gonna assign a fairly large mandate to his company to help them reduce the amount of irate customers, from the delays that they were getting on flights. And Rory said, can you show me what you send? Like, if BA flight 10 is delayed, will you show me what you send?

And they said, we send a text and an email saying, BA flight 10 is delayed. Right? And he goes, I can solve your problem for you right now.

And they’re like, what? And he goes, just add by how long, the estimate, how long it's gonna be delayed. And he goes, it isn’t the fact that the flight is delayed that annoys your passengers. It’s the uncertainty about what they can do with the time that they actually have to spend waiting for the flight to take off.

And he said, so if a flight is delayed 20 minutes, they’ll be, oh, it’s only delayed 20 minutes. That’s not a problem. But if a flight is delayed 2 hours, they’ll say, I guess I can have go and have lunch and maybe do a bit of shopping and then return to the gate. And so they tried it and the volume of their complaints just shrank dramatically.

And then another one, when I was chatting with him one time, he just kind of abruptly said to me, why is Uber so successful? And I gave the kind of standard asset management answers for that. And he’s like, no.

He goes, Uber’s entire market capitalization is based on that moving little car.

Because people can see exactly where the car is, they’re good. They’re fine. It doesn’t matter if it’s a 12 minute wait time or a 2 minute wait time. As long as they can look at that little graphic of the car coming to them, they’re absolutely fine.

Feedback and reading recommendations are invited at malhar.manek@gmail.com