Category: Thinking

Get Smart: Three Ways of Thinking to Make Better Decisions and Achieve Results

“Give me six hours to chop down a tree and I will spend the first four sharpening the axe.”
— Abraham Lincoln

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Your ability to think clearly determines the decisions you make and the actions you take.

In Get Smart!: How to Think and Act Like the Most Successful and Highest-Paid People in Every Field, author Brian Tracy presents ten different ways of thinking that enable better decisions. Better decisions free up your time and improve results. At Farnam Street, we believe that a multidisciplinary approach based on mental models allows you to gauge situations from different perspectives and profoundly affect the quality of decisions you make.

Most of us slip into a comfort zone of what Tracy calls “easy thinking and decision-making.” We use less than our cognitive capacity because we become lazy and jump to simple conclusions.

This isn't about being faster. I disagree with the belief that decisions should be, first and foremost, fast and efficient. A better approach is to be effective. If it takes longer to come to a better decision, so be it. In the long run, this will pay for itself over and over with fewer messes, more free time, and less anxiety.

In Get Smart, Tracy does a good job of showing people a series of simple, practical, and powerful ways of examining a situation to improve the odds you're making the best decision.

Let's take a look at a few of them.

1. Long-Time Perspective Versus Short-Time Perspective

Dr. Edward Banfield of Harvard University studied upward economic mobility for almost 50 years. He wondered why some people and families moved from lower socioeconomic classes to higher ones and some didn't. A lot of these people moved from labor jobs to riches in one lifetime. He wanted to know why. His findings are summarized in the controversial book, The Unheavenly City. Banfield offered one simple conclusion that has endured. He concluded that “time perspective” was overwhelmingly the most important factor.

Tracy picks us up here:

At the lowest socioeconomic level, lower-lower class, the time perspective was often only a few hours, or minutes, such as in the case of the hopeless alcoholic or drug addict, who thinks only about the next drink or dose.

At the highest level, those who were second- or third-generation wealthy, their time perspective was many years, decades, even generations into the future. It turns out that successful people are intensely future oriented. They think about the future most of the time.

[…]

The very act of thinking long term sharpens your perspective and dramatically improves the quality of your short-term decision making.

So what should we do about this? Tracy advises:

Resolve today to develop long-time perspective. Become intensely future oriented. Think about the future most of the time. Consider the consequences of your decisions and actions. What is likely to happen? And then what could happen? And then what? Practice self-discipline, self-mastery, and self-control. Be willing to pay the price today in order to enjoy the rewards of a better future tomorrow.

Sounds a lot like Garrett Hardin's three lessons from ecology. But really what we're talking about here is second-level thinking.

2. Slow Thinking 

“If it is not necessary to decide, it is necessary not to decide.” 
— Lord Acton

I don't know many consistently successful people or organizations that are constantly reacting without thinking. And yet most of us are habitually in reactive mode. We react and respond to what's happening around us with little deliberate thought.

“From the first ring of the alarm clock,” Tracy writes, we are “largely reacting and responding to stimuli from [our] environment.” This feeds our impulses and appetites. “The normal thinking process is almost instantaneous: stimulus, then immediate response, with no time in between.”

The superior thinking process is also triggered by stimulus, but between the stimulus and the response there is a moment or more where you think before you respond. Just like your mother told you, “Count to ten before you respond, especially when you are upset or angry.”

The very act of stopping to think before you say or do anything almost always improves the quality of your ultimate response. It is an indispensable requirement for success.

One of the best things we can do to improve the quality of our thinking is to understand when we gain an advantage from slow thinking and when we don't.

Ask yourself “does this decision require fast or slow thinking?” 

Shopping for toothpaste is a situation where we derive little benefit from slow thinking. On the other hand if we're making an acquisition or investment we want to be deliberate. Where do we draw the line? A good shortcut is to consider the consequences. Telling your boss he's an idiot when he says something stupid is going to feel really good in the moment but carry lasting consequences. Don't React.

Pause. Think. Act. 

This sounds easy but it's not. One habit you can develop is to continually ask “How do we know this is true?” for the pieces of information you think are relevant to the decision.

3. Informed Thinking Versus Uninformed Thinking

“Beware of endeavouring to be a great man in a hurry.
One such attempt in ten thousand may succeed: these are fearful odds.”
—Benjamin Disraeli

 

I know a lot of entrepreneurs and most of them religiously say the same two words “due diligence.” In fact, a great friend of mine has a 20+ page due diligence checklist. This means taking the time to make the right decision. You may be wrong but it won't be because you rushed. Of course, most of the people who preach due diligence have skin in the game. It's easier to be cavalier (or stupid) when it's heads I win and tails I don't lose much (hello government).

Harold Geneen, who formed a conglomerate at ITT, said, “The most important elements in business are facts. Get the real facts, not the obvious facts or assumed facts or hoped-for facts. Get the real facts. Facts don’t lie.”

Heck, use the scientific method. Tracy writes:

Create a hypothesis— a yet-to-be-proven theory. Then seek ways to invalidate this hypothesis, to prove that your idea is wrong. This is what scientists do.

This is exactly the opposite of what most people do. They come up with an idea, and then they seek corroboration and proof that their idea is a good one. They practice “confirmation bias.” They only look for confirmation of the validity of the idea, and they simultaneously reject all input or information that is inconsistent with what they have already decided to believe.

Create a negative or reverse hypothesis. This is the opposite of your initial theory. For example, you are Isaac Newton, and the idea of gravity has just occurred to you. Your initial hypothesis would be that “things fall down.” You then attempt to prove the opposite—“things fall up.”

If you cannot prove the reverse or negative hypothesis of your idea, you can then conclude that your hypothesis is correct.

 

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One of the reasons why Charles Darwin was such an effective thinker is that he relentlessly sought out disconfirming evidence.

As the psychologist Jerry Jampolsky once wrote, “Do you want to be right or do you want to be happy?”

It is amazing how many people come up with a new product or service idea and then fall in love with the idea long before they validate whether or not this is something that a sufficient number of customers are willing to buy and pay for.

Keep gathering information until the proper course of action becomes clear, as it eventually will. Check and double-check your facts. Assume nothing on faith. Ask, “How do we know that this is true?”

Finally, search for the hidden flaw, the one weak area in the decision that could prove fatal to the product or business if it occurred. J. Paul Getty, once the richest man in the world, was famous for his approach to making business decisions. He said, “We first determine that it is a good business opportunity. Then we ask, ‘What is the worst possible thing that could happen to us in this business opportunity?’ We then go to work to make sure that the worst possible outcome does not occur.”

Most importantly, never stop gathering information. One of the reasons that Warren Buffett is so successful is that he spends most of his day reading and thinking. I call this the Buffett Formula.

 

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If you're a knowledge worker decisions are your product. Milton Friedman, the economist, wrote: “The best measure of quality thinking is your ability to accurately predict the consequences of your ideas and subsequent actions.”

If there were a single message to Get Smart, it's another plus in the Farnam Street mold of being conscious. Stop and think before deciding — especially if the consequences are serious. The more ways you have to look at a problem, the more likely you are to better understand. And when you understand a problem — when you really understand a problem — the solution becomes obvious. A friend of mine has a great expression: “To understand is to know what to do.”

Get Smart goes on to talk about goal and result orientated thinking, positive and negative thinking, entrepreneurial vs. corporate thinking and more.

The Power of Your Subconscious Mind

We think that we're in control. We believe that our conscious mind directs our thoughts and somehow controls our subconscious mind. We're wrong.

In Richard Restak's The Brain Has a Mind of Its Own:

At the moment of decision we all feel we are acting freely, selecting at will from an infinity of choices. Yet research suggests this sense of freedom may be merely an illusory by-product of the way the human brain operates.

Restak gives the example of reading this essay. You scan the title and a few sentences here and there and eventually make a decision to stop reading or read on. You might then go back to the beginning and start reading, or you might start reading wherever it was in the article when you decided to stop skimming.

“The internal sequence,” Restak writes, “was always thought to be: 1. you make a conscious decision to read; 2. that decision triggers your brain into action; 3. your brain then signals the hands to stop turning pages, focuses the eyes on the paragraph, and so on.”

But this isn't what happens at all. “An inexplicable but plainly measurable burst of activity occurs in your brain prior to your conscious desire to act.”

The subconscious mind controls a lot of what we think and the connections we make. And, of course, our thoughts influence what we do.

In The Thinker's Toolkit, Morgan Jones recalls the story found in David Kahn's The Codebreakers.

Breaking codes in World War II was perhaps the largest big data project ever to happen in the world up until that point. The conscious mind could only do so much. One German cryptanalyst recalled, “You must concentrate almost in a nervous trace when working on a code. It is not often done by conscious effort. The solution often seems to crop up from the subconscious.”

Believing that the conscious mind calls the shots prevents us from understanding ourselves, others, and how to make better decisions to name but a few things.

In Plain Talk, Ken Iverson offers some insight on how to turn these thoughts into practical utility.

“Every manager,” he writes “should be something of a psychologist—what makes people tick, what they want, what they need. And much of what people want and need resides in the subconscious. The job of a manager is to help the people accomplish extraordinary things. And that means shaping a work environment that stimulates people to explore their own potential.”

We place too much emphasis on the conscious mind and not enough on the subconscious one.

Unless you manage your environment, it will manage you. The old question ‘would you rather be the poorest in a wealthy neighborhood or the richest in a poor neighborhood?' is based on how the environment controls our subconscious and our subconscious controls our happiness.

Rich Thinking Versus Poor Thinking

“Thought is the original source of all wealth, all success, all material gain,
all great discoveries and inventions, and of all achievement.”
—Claude M. Bristol

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One of the most controversial chapters in Brian Tracy’s book, Get Smart!, is “Rich Thinking versus Poor Thinking.”

In that chapter, he shares a series of simple ideas you can learn and apply. While I fundamentally disagree with much of the gross over-simplification, there are veins of excellence that we can use to add to our mental toolkit.

(Pause for a second before we continue. Just to be clear, this isn’t an article about going from zero to a million in a lifetime. No clickbait here. No, this article is about giving you tools you can add to your mental toolbox.)

The Role of Mindset

Best-selling author Og Mandino says:

There are no secrets of success. There are simply timeless truths and universal principles that have been discovered and rediscovered throughout human history. All you have to do is to learn and practice them to enjoy all the success that you could desire.

Sounds a lot like what we’re trying to discover.

Fearing Failure

A lot of us do things not to succeed but to avoid failure. This is what Elon Musk calls the fundamental problem with regulators. Tracy writes:

Because of destructive criticism in early childhood and mistakes they have made as adults, they are paralyzed by the fear of making a mistake, of losing their time or money. Even if they are presented with an opportunity, they go into a form of paralysis.

Their fear of failure causes them to create all kinds of reasons not to take action. They don’t have the time. They can’t make the minimum investment. They don’t have the necessary knowledge and skills. Like a deer caught in the headlights, they are paralyzed by the idea of failure, which causes them to never take any action at all.

As it happens, most fortunes in America were started by the sale of personal services. The people had no money, but they had the ability to work hard, to upgrade their skills, and to become more and more valuable. As a result, more and more doors of opportunity opened up for them.

Fearing Disapproval and Criticism

This relates to our fear of criticism and disapproval, which results in approval-seeking behavior. And when we’re seeking approval and acceptance, we’re more likely to think conventionally. And when we think conventionally, we're unlikely to get above-average results.

We don’t want to look different. As a result, we stop learning and growing.

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“I will study and prepare myself and someday my chance will come.”
— Abraham Lincoln

Tracy writes:

To achieve something you’ve never achieved before, you must learn and practice something that you’ve never done before.

If you’re learning something universal you’ll always have an opportunity to practice what you learn.

Putting all of this together becomes tricky.

Often we have the courage to think and act differently, we mentally prepare ourselves for the critical feedback and then we dip our toe in the water only to find it’s not to our liking.

This is where persistence comes in.

Most of us are simply unwilling to sacrifice in order to succeed. We want our cake and we want to eat it too. Most of the people I know that are incredibly successful have suffered some setback that they had to overcome. A lot of people would have given up. Only they persisted. (Of course, there are plenty of people that persist and fail too.) I’m generalizing a bit here but the people who look for the nearest exit when things get tough are usually the ones with the average results.

Something-For-Something

There is only one type of relationship that is sustainable over a long period of time and that's one where everyone wins. Tracy writes:

Rich people are always looking for ways to create value, to develop and produce products and services that enrich and enhance the lives and work of other people.

They are always willing to put in before they take out. They do not believe in easy money or something for nothing. Rich people believe that you have to justly earn and pay for, in terms of toil and treasure, any rewards and riches that you desire.

Poor people lack this fundamental understanding, the direct relationship between what you put in and what you get out. They are always seeking to get something for nothing or for as little as possible. They want success without achievement, riches without labor, money without effort, and fame without talent.

Poor people gamble, buy lottery tickets, come to work at the last possible moment, waste time while they are there, and then leave work at the first possible minute. They line up by the hundreds and thousands to audition for programs like American Idol, thinking that they can become rich and famous without ever having paid the price necessary to develop the level of talent and ability that enables them to rise above their competitors.

One of the great secrets of becoming wealthy is to always do more than you are paid for. If you do, you will always be paid more than you’re getting today. And there is no other way.

Go the extra mile. Be willing to put in far more than you are taking out. There are never any traffic jams on the extra mile.

Fear can often keep us mediocre. We don’t risk being wrong.

Getting rich isn't as simple as changing your mindset. However changing your mindset can go a long way to changing the way you see the world. And when you see the world differently you can behave and respond differently to the stimuli around you. When you do that, you have the potential to outperform.

Richard Restak: Mozart’s Memorization of Miserere and Improving your Memory with Visual Chess

In 1956 George Miller, a Princeton University psychologist, set out an important principle that you’ve probably heard of in a paper titled “The Magical Number Seven, Plus or Minus Two.”

Miller revived an observation made by Scottish Philosopher William Hamilton. After throwing marbles on a floor, “you will find it difficult to view at once more than six, or seven at most, without confusion.”

More items, however, Hamilton noted can be remembered when they are “chunked.”

In the fascinating book Mozart's Brain and the Fighter Pilot: Unleashing Your Brain's Potential, Richard Restak shows us how to improve the performance of our brain by improving the performance of our memory through better “chunking”.

Memory Pegs

One can remember long strings of numbers, letters, or words when they are reconstructed into meaningful patterns, also known as “memory pegs.”

One that is familiar to most of us concerns the position of the planets in relations to the sun, which is remembered by the mnemonic aid “My Very Educated Mother Just Sent Us Nine Pizzas.” This sequence reminds us of the planetary order: Mercury, Venus, Earth, Mars, Jupiter, Saturn, Uranus, Neptune, and Pluto. (Before you ask, I haven’t abandoned Pluto just yet.)

Chunking is how a lot of inexplicable things happen with memory.

Consider Mozart’s memorization of the Miserere, written more than a century earlier by the Italian composer Gregorio Allegri.

In 1770, while in his early teens, Mozart visited the Vatican’s Sistine Chapel and heard this choral work performed on only two occasions. He then sat down and wrote out the entire score from memory. We know this because only three copies of the score existed at the time and its owner, the Vatican, forbade any publication. Thus, Mozart had no source for re-creating the score other than his own recall of the performances he had attended. Now that the score is freely available, Mozart’s accomplishment seems less remarkable. Musicians have told me that the Miserere is harmonically quite conventional for the period. Anyone who shared Mozart’s familiarity with similar musical forms would not find it a great challenge to chunk large parts of the work around these standard structures.

A further addition to the story comes from John Sloboda’s book The Musical Mind. “Mozart’s feat of memory does not involve inexplicable processes which set him apart from other musicians,” he writes. “Rather it distinguished him as someone whose superior knowledge and skill allow him to accomplish something rapidly and supremely confidently which most of us can do, albeit less efficiently, and on a smaller scale.”

The Memory Palace is a form of chunking, which propelled Joshua Foer to the world Memory Champion. The concept is believed to be first suggested by the Greek poet, Simonides of Ceos who suggested, as Restak tells us, “an imaginary walk through one’s own house or town square. At selected locations along the walk, Simonides would conjure up a vivid mental picture of the location to remind him of a point he wished to make in a speech.”

Basically link what you want to remember with a specific location you know well and a vivid image. Why a vivid image?

The reason comes from Ad Herennium, which dates to 82 B.C. The unknown author writes:

[O]rdinary things easily slip from the memory while the striking and the novel stay longer in the mind. We ought then to set up images that can adhere longest in memory. And we shall do so if we establish similitudes as striking as possible; if we set up images that are not many or vague but active; if we assign to them exceptional beauty or singular ugliness.

Bizarre Linking

Restak also offers another, “complementary memory method (that) involves linking together dramatic and often bizarre images that represent the memorized material.”

In their book, (The Memory Book) Lorrayne and Lucas give several examples of the use of stark images to provide memory clues to overcome absentmindedness. For instance, if you want to be sure you don’t leave your umbrella at the office, they suggest the following “ridiculous” image: “As you arrive and put your umbrella away, associate it to the first thing you see or do as you’re leaving the office. If you ride in an elevator picture an umbrella operating it.”

The brain weaves together the right and left hemispheres into one total experience.

Visualization exercises strengthen the powers of the right hemisphere. And when you bring the left hemisphere into play, the integration between the hemispheres is enhanced.

Intensely studying art can increase the powers of visual perception, something that was well-known to the ancients, who used art to meditate, focus, and hopefully further their quest towards enlightenment.

Asian art, especially Tibetan Buddhist paintings, was created to enhance the powers of visual perception. Buddhist devotees intensely studied the paintings until they could envision the images down to the smallest detail. They believed this act of visualization and intense concentration cleansed and prepared their minds to assume the attributes and wisdom of the beings portrayed in the paintings.

Roberta Smith, a New York Times art critic, said of these Tibetan paintings, “These images are visual exercises of the highest order. Each time you look at them, you see and understand more. . . . They were often tools that helped develop the powers of meditation basic to enlightenment.”

Visual Chess

Restak suggests you do the following exercise to improve your visual acuity by playing “visual chess.”

Most chess masters can manage a game of ‘mental chess’; some of the great masters of the past could play several opponents simultaneously while blindfolded. … Although it’s less demanding than blindfold chess, you’ll find it challenging.

Read into a tape recorder the first dozen moves of a famous chess match. My favorite is the game played in 1858 by American chess prodigy Paul Morphy against Duke Karl Brunswick and Count Isouard during an intermission in the royal box at the opera house in Paris. Whichever game you choose, read the moves slowly and distinctly with a five-second pause between each move. (For the first few efforts, you probably won’t have to read more than a dozen moves.) Then set up the chessboard and begin.

Turn on the tape recorder and mentally make the first move by white, followed by black’s response. Imagine the resulting position of the pieces on the board. Continue the moves until you experience a slight lack of clarity or doubt about the position of the pieces. Focus as keenly as possible. See the pieces in your mind. When you reach the point where you can’t image the board and the position of the pieces, open your eyes and move the pieces until you reach the position where you began to lose clarity. (The best arrangement of all is to have someone moving the pieces as you call out each move; thus, upon opening your eyes, you immediately encounter the exact position where your imaging faltered.) When you can once again establish a clear image of the position, close your eyes again and continue.

If you’re not into chess, you can accomplish the same thing by attempting to complete a crossword puzzle without resorting to pencil or pen.

As you come up with the correct words, visualize them on the grid and retain them in your memory. See how far you can get before you have to stop. Since this is a test of visualization rather than a test of your talent for solving crossword puzzles, have the solution readily at hand so you can mentally fill in the missing words and go on with visualizing.

These exercises are designed to prime the frontal lobes, which help with concentration and focus, the visual association areas, and the hippocampus and its attendant connections (which govern memory). Over time, disciplined practice can yield some very interesting and worthwhile improvements.

Mozart's Brain and the Fighter Pilot goes on to explore 27 other ideas to improve your memory and the operation of your brain.

Charlie Munger on Getting Rich, Wisdom, Focus, Fake Knowledge and More

“In the chronicles of American financial history,” writes David Clark in Tao of Charlie Munger: A Compilation of Quotes from Berkshire Hathaway's Vice Chairman on Life, Business, and the Pursuit of Wealth,” Charlie Munger will be seen as the proverbial enigma wrapped in a paradox— he is both a mystery and a contradiction at the same time.”

On one hand, Munger received an elite education and it shows: He went to Cal Tech to train as a meteorologist for the Second World War and then attended Harvard Law School and eventually opened his own law firm. That part of his success makes sense.

Yet here's a man who never took a single course in economics, business, marketing, finance, psychology or accounting, and managed to become one of the greatest, most admired, and most honorable businessmen of our age, noted by essentially all observers for the originality of his thoughts, especially about business and human behavior. You don't learn that in law school, at Harvard or anywhere else.

Bill Gates said of him: “He is truly the broadest thinker I have ever encountered.” His business partner Warren Buffett put it another way: “He comes equipped for rationality…I would say that to try and typecast Charlie in terms of any other human that I can think of, no one would fit. He's got his own mold.”

How does such an extreme result happen? How is such an original and unduly capable mind formed? In the case of Munger, it's clearly a combination of unusual genetics and an unusual approach to learning and life.

While we can't have his genetics, we can try to steal his approach to rationality. There's almost no limit to the amount one could learn from studying the Munger mind, so let's at least get started by running down some of his best ideas.

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Wisdom and Circle of Competence

“Knowing what you don’t know is more useful than being brilliant.”
“Acknowledging what you don’t know is the dawning of wisdom.”

Identify your circle of competence and use your knowledge, when possible, to stay away from things you don't understand. There are no points for difficulty at work or in life.  Avoiding stupidity is easier than seeking brilliance.

Of course this relates to another of Munger's sayings, “People are trying to be smart—all I am trying to do is not to be idiotic, but it’s harder than most people think.”

And this reminds me of perhaps my favorite Mungerism of all time, the very quote that sits right beside my desk:

“It is remarkable how much long-term advantage people like us have gotten by trying to be consistently not stupid, instead of trying to be very intelligent.”

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Divergence

“Mimicking the herd, invites regression to the mean.”

Here's a simple axiom to live by: If you do what everyone else does, you're going to get the same result that everyone else gets. This means, taking out luck (good or bad), if you act average, you're going to be average. If you want to move away from average, you must diverge. You must be different. And if you want to outperform, you must be different and correct. As Munger would say, “How could it be otherwise?”

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Know When to Fold Em

“Life, in part, is like a poker game, wherein you have to learn to quit sometimes when holding a much-loved hand— you must learn to handle mistakes and new facts that change the odds.”

Mistakes are an opportunity to grow. How we handle adversity is up to us. This is how we become personally antifragile.

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False Models

Echoing Einstein, who said that “Not everything that counts can be counted, and not everything that can be counted counts,” Munger said about his and Buffett's shift to acquiring high quality businesses for Berkshire Hathaway:

“Once we’d gotten over the hurdle of recognizing that a thing could be a bargain based on quantitative measures that would have horrified Graham, we started thinking about better businesses.”

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Being Lazy

“Sit on your ass. You’re paying less to brokers, you’re listening to less nonsense, and if it works, the tax system gives you an extra one, two, or three percentage points per annum.”

Time is the friend to a good business and the enemy of the poor business. It's also the friend of knowledge and the enemy of the new and novel. As Seneca said “Time discovers truth.”

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Investing is a Pari-mutual System

You’re looking for a mispriced gamble,” says Munger. “That’s what investing is. And you have to know enough to know whether the gamble is mispriced. That’s value investing.”  At another time he added: “You should remember that good ideas are rare— when the odds are greatly in your favor, bet heavily.

May the odds forever be in your favor. Actually, learning properly is one way you can tilt the odds in your favor.

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Focus

When asked about his success, Munger says, “I succeeded because I have a long attention span.”

Long attention spans allow for a deep understanding of subjects. When combined with deliberate practice focus allows you to increase your skills and get out of your rut. The Art of Focus is a divergent and correct strategy that can help you identify where the leverage points are and apply your effort toward them.

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Fake Knowledge

“Smart people aren’t exempt from professional disasters from overconfidence.”

We're so used to outsourcing our thinking to others that we've forgotten what it's like to really understand something from all perspectives. We've forgotten just how much work that takes. The path of least resistance, however, is just a click away. Fake knowledge, which comes from reading headlines and skimming the news seems harmless, but it's not because it makes us overconfident. It's better to remember a simple trick: anything you're getting easily through google or twitter is likely to be widely known and should not be given undue weight.

However, Munger adds, “If people weren’t wrong so often, we wouldn’t be so rich.

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Sit Quietly

Echoing Pascal, who said some version of ‘All of humanity's problems stem from man's inability to sit quietly in a room alone,' Munger adds an investing twist:  “It’s waiting that helps you as an investor, and a lot of people just can’t stand to wait.”

The ability to be alone with your thoughts, and turn ideas over and over, without the do something syndrome affects so many of us. A perfectly reasonable deviation is to hold your ground and await more information.

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Deal With Reality

“I think that one should recognize reality even when one doesn’t like it; indeed, especially when one doesn’t like it.”

Munger clearly learned from Joseph Tussman's wisdom. This means facing harsh truths that you have forced yourself to ignore. It means meeting the world on the worlds terms, not how you wish it would be. If this causes temporary pain, so be it. “Your pain,” writes Kahil Gibran in The Prophet, “is the breaking of the shell that encloses your understanding.”

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There is No Free Lunch

We like quick solutions that don't require a lot of effort. We're drawn to the modern equivalent of an old hustler selling an all curing tonic. Only the world does not work that way. Munger expands:

“There isn’t a single formula. You need to know a lot about business and human nature and the numbers…It is unreasonable to expect that there is a magic system that will do it for you.”

Acquiring knowledge is hard work. It's reading and adding to your knowledge so it compounds. It's going deep and developing fluency, something Darwin knew well.

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Maximization/Minimization

In business we often find that the winning system goes almost ridiculously far in maximizing and or minimizing one or a few variables— like the discount warehouses of Costco.

When everything is a priority nothing is a priority. Attempting to maximize competing variables is a recipe for disaster. Picking one variable, and relentlessly focusing on it, which is an effective strategy, diverges from the norm. It's hard to compete with businesses who have correctly identified the right variables to maximize or minimize. When you focus on one variable, you'll increase the odds you're quick and nimble — and can respond to changes in the terrain.

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Map and Terrain

At Berkshire there has never been a master plan. Anyone who wanted to do it, we fired because it takes on a life of its own and doesn’t cover new reality. We want people taking into account new information.”

Plans are maps that we become attached to. Once we've told everyone there is a plan and what that plan is, especially multi-year plans, we're psychologically more likely to hold to it because coming out and changing it would be admitting we're wrong. This creates a scenario where we're staking the odds against us in changing when things change. Detailed 5-year plans (that will clearly be wrong) are as disastrous as overly-general five year plans (which can never be wrong). Scrap it, isolate the key variables that you need to maximize and minimize, and follow the agile path blazed by Henry Singleton and followed by Buffett and Munger.

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The Keys to Good Government

There are three keys: honesty, effectiveness, and efficiency.

Munger says:

“In a democracy, everyone takes turns. But if you really want a lot of wisdom, it’s better to concentrate decisions and process in one person. It’s no accident that Singapore has a much better record, given where it started, than the United States. There, power was concentrated in an enormously talented person, Lee Kuan Yew, who was the Warren Buffett of Singapore.”

Lee Kuan Yew put it this way himself: “With few exceptions, democracy has not brought good government to new developing countries. . . . What Asians value may not necessarily be what Americans or Europeans value. Westerners value the freedoms and liberties of the individual. As an Asian of Chinese cultural background, my values are for a government which is honest, effective, and efficient.”

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One Step At a Time

“Spend each day trying to be a little wiser than you were when you woke up. Discharge your duties faithfully and well. Slug it out one inch at a time, day by day. At the end of the day— if you live long enough— most people get what they deserve.”

An incremental approach to life that reminds one of the nature of compounding. There will always be some going faster than you but we can learn from the Darwinian guide to overachieving your natural IQ. In order for this approach to be effective you need a long axis of time as well as continuous incremental progress.

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Getting Rich

“The desire to get rich fast is pretty dangerous.” 

Getting rich is a function of being happy with what you have, spending less than you make, and time.

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Mental Models

“Know the big ideas in the big disciplines and use them routinely— all of them, not just a few.”

Mental Models are the big ideas from multiple disciplines. While most people agree these are worth knowing, they often think they can identify which models will add the most value, and in so doing they miss something important. There is a reason that the “know nothing” index fund almost always beats the investors who think they “know.” Understanding this idea in greater detail, will change a lot of things including how you read. Acquiring the big ideas — without selectivity — is the way to mimic a know nothing index fund.

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Know-it-alls

“I try to get rid of people who always confidently answer questions about which they don’t have any real knowledge.”

Few things have made as much of a difference in my life as systemically eliminating (and when not possible, reducing the importance of) people who think they know the answer to everything.

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Stoic Resolve

“There’s no way that you can live an adequate life without many mistakes. In fact, one trick in life is to get so you can handle mistakes. Failure to handle psychological denial is a common way for people to go broke.”

While we all make mistakes, it's how we respond to failure that defines us.

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Thinking

“We all are learning, modifying, or destroying ideas all the time. Rapid destruction of your ideas when the time is right is one of the most valuable qualities you can acquire. You must force yourself to consider arguments on the other side.”

“It’s bad to have an opinion you’re proud of if you can’t state the arguments for the other side better than your opponents. This is a great mental discipline.”

Thinking is a lot of work. “My first thought,” William Deresiewicz said in one of my favorite speeches, “is never my best thought. My first thought is always someone else’s; it’s always what I’ve already heard about the subject, always the conventional wisdom.”

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Choose Your Associates Wisely

“Oh, it’s just so useful dealing with people you can trust and getting all the others the hell out of your life. It ought to be taught as a catechism. . . . But wise people want to avoid other people who are just total rat poison, and there are a lot of them.”

No comment needed there.

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Complement Tao of Charlie Munger with this excellent Peter Bevelin Interview.

The Most Respectful Interpretation

Consider this situation: You email a colleague with a question expecting a prompt response, but hours or days later you’ve yet to hear from them. Perhaps you can’t move forward on your project without their input so you find yourself blocked. How do you imagine you feel in this situation?

For many of us, situations like this result in feelings of anger, frustration, or annoyance. Maybe we take it personally and conclude that our colleague is lazy or that they don’t value our time or our work. Perhaps we send off a terse reminder asking for an update.

If we’re feeling particularly revengeful, we alert the person’s manager or mention our grievance to another colleague looking for validation that the offending colleague is in fact lazy and disrespectful – a form of confirmation bias.

Perhaps this colleague has been slow to respond to communications in the past, thus we extrapolate that to all of their communications, a case of the fundamental attribution error.

Of course, it's natural to feel anger and frustration when faced with these situations. But is anger the appropriate response?

In the Nicomachean Ethics Aristotle wrote about The Virtue Concerned with Anger. He begins Book IV with a description of good temper:

The man who is angry at the right things and with the right people, and, further, as he ought, when he ought, and as long as he ought, is praised. This will be the good-tempered man, then, since good temper is praised.

Aristotle tells us that anger has a time and place and that when applied to the right people and for the right reason, is justified and even praiseworthy. But we have to use anger judiciously:

For the good-tempered man tends to be unperturbed and not to be led by passion, but to be angry in the manner, at the things, and for the length of time, that reason dictates; but he is thought to err rather in the direction of deficiency; for the good-tempered man is not revengeful, but rather tends to make allowances.

In Aristotle’s description of good temper, he encourages us to err in the direction of “making allowances”. But how can we do this in practice?

Let’s return to our example.

We take our colleague's lack of response personally and assume they are lazy or disrespectful, but it is important for us to recognize that we are assuming. We often instinctively chose to assume the worst of people, because it slips easily into mind. But what if instead we chose to assume the best?

In her book Rising Strong, Brené Brown describes how she learned to assume that people are doing the best they can and shares a concept introduced to her by Dr. Jean Kantambu Latting, a professor at University of Houston. Brown writes:

Whenever someone would bring up a conflict with a colleague, she would ask, ‘What is the hypothesis of generosity? What is the most generous assumption you can make about this person’s intentions or what this person said?’

By pausing to reflect on our anger we can recognize that we are making a negative assumption and challenge ourselves to invert the situation and consider the opposite: “What is the most generous assumption I can make?”

Perhaps our colleague has been given a higher priority project, or they don’t understand that we’re blocked without their input. Maybe they are dealing with some personal challenges outside of the office, or they need input from somebody else to reply to our message and thus they’re blocked as well. Perhaps they've decided to reduce their email frequency in order to focus on important work.

When we pause to look at the situation from another angle, not only do we entertain some explanations that frame our colleagues in a more positive light, but we put ourselves into their shoes; the very definition of empathy.

We’ve all had competing priorities, distractions from personal issues outside of work, miscommunications regarding the urgent need of our response, etc. Do we think others judged us fairly or unfairly in those moments?

The point is not to make excuses or avoid addressing problems with our colleagues, but that if we recognize we are making negative assumptions by default, we might need to challenge ourselves to consider more generous alternatives. This may alter the way we approach our colleague to address the situation. It takes effort and a commitment to think about people differently.

Someone who knew this best was the late, great author David Foster Wallace.

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In his beautiful commencement speech to the Kenyon graduating class of 2005, Wallace reminds the students that the old cliché of liberal arts education teaching you to think is truer than they might want to believe. He warns that one of the biggest challenges the graduates will face in life is to challenge their self-centered view of the world – a view that we all have by default.

Using some of life’s more mundane and annoying activities like shopping and commuting, Wallace writes:

The point here is that I think this is one part of what teaching me how to think is really supposed to mean. To be just a little less arrogant. To have just a little critical awareness about myself and my certainties. Because a huge percentage of the stuff that I tend to be automatically certain of is, it turns out, totally wrong and deluded. I have learned this the hard way, as I predict you graduates will, too.

Here is just one example of the total wrongness of something I tend to be automatically sure of: everything in my own immediate experience supports my deep belief that I am the absolute centre of the universe; the realest, most vivid and important person in existence. We rarely think about this sort of natural, basic self-centeredness because it’s so socially repulsive. But it’s pretty much the same for all of us. It is our default setting, hard-wired into our boards at birth. Think about it: there is no experience you have had that you are not the absolute centre of. The world as you experience it is there in front of YOU or behind YOU, to the left or right of YOU, on YOUR TV or YOUR monitor. And so on. Other people’s thoughts and feelings have to be communicated to you somehow, but your own are so immediate, urgent, real.

Please don’t worry that I’m getting ready to lecture you about compassion or other-directedness or all the so-called virtues. This is not a matter of virtue. It’s a matter of my choosing to do the work of somehow altering or getting free of my natural, hard-wired default setting which is to be deeply and literally self-centered and to see and interpret everything through this lens of self. People who can adjust their natural default setting this way are often described as being “well-adjusted”, which I suggest to you is not an accidental term.

The recognition that we are inherently self-centered and that this affects the way in which we interpret the world seems so obvious when pointed out, but how often do we stop to consider it? This is our hard-wired default setting, so it's quite a challenge to become willing to think differently.

As an example, Wallace describes a situation where he is disgusted by the gas guzzling Hummer in front of him in traffic. The idea of these cars offends him and he starts making assumptions about the drivers: they're wasteful, inconsiderate of the planet, and inconsiderate of future generations.

Look, if I choose to think this way in a store and on the freeway, fine. Lots of us do. Except thinking this way tends to be so easy and automatic that it doesn’t have to be a choice. It is my natural default setting. It’s the automatic way that I experience the boring, frustrating, crowded parts of adult life when I’m operating on the automatic, unconscious belief that I am the centre of the world, and that my immediate needs and feelings are what should determine the world’s priorities.

But then he challenges himself to consider alternative interpretations, something often described as making the Most Respectful Interpretation (MRI). Wallace decides to consider more respectful interpretations of the other drivers – maybe they have a legitimate need to be driving a large SUV or to be rushing through traffic.

In this traffic, all these vehicles stopped and idling in my way, it’s not impossible that some of these people in SUV’s have been in horrible auto accidents in the past, and now find driving so terrifying that their therapist has all but ordered them to get a huge, heavy SUV so they can feel safe enough to drive. Or that the Hummer that just cut me off is maybe being driven by a father whose little child is hurt or sick in the seat next to him, and he’s trying to get this kid to the hospital, and he’s in a bigger, more legitimate hurry than I am: it is actually I who am in HIS way.

Again, please don't think that I'm giving you moral advice, or that I'm saying you're “supposed to” think this way, or that anyone expects you to just automatically do it, because it's hard, it takes will and mental effort, and if you're like me, some days you won't be able to do it, or you just flat out won't want to. But most days, if you’re aware enough to give yourself a choice, you can choose to look differently at this fat, dead-eyed, over-made-up lady who just screamed at her kid in the checkout line. Maybe she’s not usually like this. Maybe she’s been up three straight nights holding the hand of a husband who is dying of bone cancer. Or maybe this very lady is the low-wage clerk at the motor vehicle department, who just yesterday helped your spouse resolve a horrific, infuriating, red-tape problem through some small act of bureaucratic kindness. Of course, none of this is likely, but it’s also not impossible. It just depends what you want to consider. If you’re automatically sure that you know what reality is, and you are operating on your default setting, then you, like me, probably won’t consider possibilities that aren’t annoying and miserable. But if you really learn how to pay attention, then you will know there are other options.

A big part of learning to think is recognizing our default reactions and responses to situations — the so-called “System 1” thinking espoused by Daniel Kahneman. Learning to be “good-tempered” and “well-adjusted” requires us to try to be more self-aware, situationally aware, and to acknowledge our self-centered nature; to put the brakes on and use System 2 instead.

So the next time you find yourself annoyed with your colleagues, angry at other drivers on the road, or judgmental about people standing in line at the store, use it as an opportunity to challenge your negative assumptions and try to interpret the situation in a more respectful and generous way. You might eventually realize that the broccoli tastes good.