This piece argues that real innovation and quality come from embracing uncertainty, not avoiding risk. Vaughn Tan says our fundamental approach to goals might be wrong. Key examples: Google's 20% time policy is good but unused—culture matters more; Apple's hardware premium comes from its unique 'Apple feel,' not engineering tolerance; Pixar makes each film different yet unmistakably Pixar, showing you can be both new and familiar.
Vaughn Tan, in his appearance on Invest Like the Best, explores how individuals and organizations can cultivate high quality and innovation. His core argument is that true innovation stems from embracing uncertainty rather than avoiding risk—a concept he terms the "Uncertainty Mindset." By studying
Vaughn Tan holds a PhD from Harvard, is a former Google employee (Advertising, Earth, Maps, Space Flight, Fusion Tables), a woodcarver, and currently a professor at UCL, researching quality, innovation, and organizational behavior. The central thesis of this episode is: true innovation and high quality stem from actively embracing uncertainty, not from avoiding risk. The most weighty judgment in the entire episode: "If you truly stop to think about what you actually want in food, career, or business, you might realize—the way we pursue these goals is fundamentally wrong."
Vaughn Tan argues that everyone who produces truly outstanding work has their own unique definition of quality—one that often diverges from mainstream consensus.
He cites Copenhagen's favorite wine bar, Wittstranden, where the owner defines quality as: "A place where you are forced—but also enjoy—meeting people you wouldn't normally meet." Tan points out that a default assumption in strategic thinking is that "everyone is pursuing the same outcome"—but this is precisely wrong. Different companies choose to pursue different outcomes, and that is the source of innovation and success.
> "No one can create a truly great product by trying to make something identical to what others have made. They always first figure out why what's already on the market doesn't suit them, and then solve that problem." —Vaughn Tan
Key implication: In an investment context, this is akin to Buffett's notion of "spending a lot of time finding the market you want to participate in, rather than the attack plan once you're in the market."
Tan distinguishes between risk and uncertainty: Risk involves knowing all possible outcomes and their probabilities (like rolling dice); uncertainty means not even knowing the possible outcomes—and this is the reality in most situations.
He introduces the concept of "productive discomfort": the discomfort brought by uncertainty can sometimes be paralyzing, but at other times it forces you to seek new information, change your mind, and interact with people in new ways. The problem is that we instinctively avoid all discomfort, whether good or bad.
Training method: A top restaurant team studied by Tan voluntarily commits to a project far beyond its current capabilities every nine months—such as completely dismantling and rebuilding the kitchen, or hosting an unprecedented interdisciplinary conference during peak season. This is not about "starting from scratch," but rather:
1. Spending three months on an extremely uncertain project
2. Integrating the lessons learned into the next iteration
3. Gradually scaling up projects from small to large, like progressively increasing weight in strength training
> Key condition: Discomfort must be designed to be "helpful," and time must be set aside for rest and learning. Simply applying continuous pressure leads to "tendon rupture."
Tan’s core findings are based on 5–6 years of observation of R&D teams at five world-class restaurants: these teams systematically create internal uncertainty for themselves, which paradoxically makes them better able to cope with rapidly changing external environments.
"Negotiated joining": When a new member joins, they have clearly defined responsibilities, but a significant portion (even up to 50%) of their duties are "unknown"—the newcomer must spend months discovering what the company needs and what they can offer.
Tan notes: Google’s 20% time policy is theoretically sound, but most employees do not use it. The key is not the policy itself, but creating a culture where employees dare to turn "underutilized time" into time for learning and exploration.
> "If you already have an internship program but fully script the intern’s responsibilities—you are wasting that opportunity. Even just 10% of the time (one afternoon per week) for the intern to explore what the company needs would yield completely different results." — Vaughn Tan
Tan makes an important distinction:
Using cooking as an example: Making a perfect French omelet—golden on the outside, custard-smooth on the inside—appears simple but requires extensive "embodied knowledge" (judged through smell, sight, sound, and touch). This is a classic case of "complex but not complicated."
Implications for organizations: In complex systems, there is equifinality—multiple paths from A to B, each optimal for a different definition of optimality. Standard operating procedures (SOPs) are useful when there is only one correct way, but when multiple ways exist, they stifle creativity.
> He cites Ritz-Carlton's practice: giving every frontline employee a financial ceiling, below which customer requests can be fulfilled without approval—"What truly makes customers happy often costs very little."
Tan uses a personal experiment to illustrate that "we know very little about what we consume":
He bought a box of out-of-season strawberries from a supermarket, soaked them for an hour, and then poured the water onto slugs in his garden—the slugs died quickly. This is not to say that strawberries are lethal, but rather to demonstrate that the trace amounts of agricultural chemicals we ingest daily may accumulate into unknown consequences over decades.
Core logic chain:
1. We typically only care about the "output" (taste, appearance)
2. Trace back to the "process" (how it was processed, how it was transported)
3. Then trace further back to the "input" (how it was grown, what chemicals were used)
Tan argues that this framework applies to all consumption and lifestyle choices—from food to wine, from cannabis to personal care products. True quality awareness involves tracing all the way back from the output end to the input end.
Tan defines "playfulness" not as immaturity, but as a willingness to fundamentally rebuild one's own cognitive framework.
> "Most people are willing to change assumptions at the level of 'paint color' or 'roof tiles.' Truly playful people are willing to rebuild the entire house from the foundation—and even dig deeper." —Vaughn Tan
Key prerequisite: Truly playful individuals have an exceptionally thorough understanding of foundation-level stuff. This is akin to improvisational music or basketball—all "normal" movements must become instinctual to free up cognitive energy for "hovering on the edge of losing control."
Implications for investors: The best question is not "What is the advantage of your investment process?" but rather "What is the hardest thing to replicate in your organizational culture?" —This is often more valuable than the investment process itself.
| Position | Analyst View | Key Data |
|---|---|---|
| Positive (as a case study of innovative organization) | The 20% time policy exists but most employees do not use it; the most interesting projects emerge "bottom-up" | |
| Apple | Positive (as a case study of "style as an asset") | Hardware premium stems from the "Apple feel" rather than engineering tolerances; user loyalty is higher than Samsung |
| Pixar | Positive (as a case study of "achieving both old and new") | Every film feels like a Pixar production, yet content can be entirely different (e.g., Wall-E has almost no dialogue) |
| Superhuman | Positive (as a case study of "defining unique quality") | A $30/month email client optimized for "Inbox Zero" and extreme design |
| Ritz-Carlton | Positive (as a case study of "empowering frontline employees") | Employees are given a financial ceiling; customer requests below this amount require no approval |
1. "The definition of quality is the starting point of innovation" — Vaughn Tan
Everyone who creates great work has their own unique standard of quality, different from the mainstream consensus. The default assumption of strategic thinking—that "everyone pursues the same outcome"—is wrong: different companies pursue different results, and that is the source of innovation.
2. "Uncertainty ≠ Risk" — Vaughn Tan
Risk means knowing all possible outcomes and their probabilities; uncertainty means not even knowing what the possible outcomes are. In reality, most situations involve uncertainty, not risk.
3. "Productive discomfort can be trained like weightlifting" — Vaughn Tan
Top restaurant teams proactively commit to projects far beyond their capabilities every nine months, starting small and scaling up, like gradually increasing weight in weightlifting. The key: discomfort must be designed to be "helpful," and time for rest and learning must be reserved.
4. "'Negotiated joining' can avoid both false positives and false negatives" — Vaughn Tan
When new members join, leave some "unknown responsibilities" for them to discover what the company needs on their own. This applies to roles with high uncertainty—if the job content is entirely predetermined, traditional hiring methods suffice.
5. "Simple ≠ Simplistic, Complex ≠ Complicated" — Vaughn Tan
Simplification removes information; simplicity removes unnecessary information, leaving only the essence. Complexity is knowledge-intensive yet elegant; complication is chaotic and hard to understand.
6. "Tracing from output back to input is true quality awareness" — Vaughn Tan
The Slug experiment illustrates: the trace amounts of agricultural chemicals we ingest daily may accumulate unknown consequences over decades. This framework applies to all consumption choices—from food to wine to cannabis.
7. "Those with true playfulness are willing to rebuild the entire house from the foundation" — Vaughn Tan
Playfulness is not immaturity; it is the willingness to fundamentally reconstruct one's own cognitive system. The prerequisite is an extremely thorough understanding of the underlying foundations.
8. "The best question is not 'What is the advantage of your investment process?' but 'What in your organizational culture is hardest to replicate?'" — Vaughn Tan
The "soil" at the organizational level is often more valuable than the investment process itself and better explains long-term success.