Interview with NYU Professor Vasant Dhar: Thinking With Machines - motley-fool-money Recap

Podcast: motley-fool-money

Published: 2025-12-28

Duration: 23 minutes

Guests: Vasant Dhar

Summary

NYU Professor Vasant Dhar discusses the growing influence of AI in daily life, the concept of bounded rationality, and the compounding edge theory in markets and sports. He emphasizes the importance of individual awareness in consuming AI to avoid cognitive decline.

What Happened

Professor Vasant Dhar shares his unique experiences growing up in India and Ethiopia, which shaped his resilience and interest in AI. He recounts a humorous childhood mistake that led to an unusual educational trajectory, ultimately fostering his adaptability and determination.

Dhar explains the concept of bounded rationality introduced by Nobel laureate Herbert Simon. Humans, according to Simon, use heuristics to make decisions due to limited cognitive resources, which was foundational in the development of AI and expert systems in the 1980s.

The conversation shifts to the idea of compounding small edges, as exemplified by tennis great Roger Federer's 54% point win rate. Dhar equates this to financial markets, where a slight edge, if compounded, can lead to significant success over time.

Dhar discusses the challenges of applying systematic investing principles to long-term investments due to insufficient data. He recounts his collaboration with colleagues like Aswath Damodaran to explore the possibility of creating AI bots to mimic expert valuation approaches.

The potential risks of AI as a gatekeeper in human activities are highlighted, with Dhar expressing concern about a gradual shift towards a Huxleyan world. He warns against over-reliance on AI, which could lead to cognitive decline, using personal anecdotes like spatial navigation challenges due to GPS reliance.

Dhar emphasizes the critical role of individuals in managing their consumption of AI, drawing parallels to the impact of social media. He advocates for using AI to enhance human capabilities rather than as a crutch, stressing the importance of active engagement and awareness in technology use.

In discussing his book, 'Thinking with Machines,' Dhar shares his motivation for writing it himself instead of using AI tools like ChatGPT. He sees writing as a personal and enjoyable process, highlighting the importance of expressing one's unique voice and ideas.

Key Insights