Reversible vs. irreversible decisions. We often think that collecting as much information as possible will help us make the best decisions. Sometimes that's true, but sometimes it hamstrings our progress. Other times it can be flat out dangerous.
Many of the most successful people adopt simple, versatile decision-making heuristics to remove the need for deliberation in particular situations.
One heuristic might be defaulting to saying no, as Steve Jobs did. Or saying no to any decision that requires a calculator or computer, as Warren Buffett does. Or it might mean reasoning from first principles, as Elon Musk does. Jeff Bezos, the founder of Amazon.com, has another one we can add to our toolbox. He asks himself, is this a reversible or irreversible decision?
If a decision is reversible, we can make it fast and without perfect information. If a decision is irreversible, we had better slow down the decision-making process and ensure that we consider ample information and understand the problem as thoroughly as we can.
Bezos used this heuristic to make the decision to found Amazon. He recognized that if Amazon failed, he could return to his prior job. He would still have learned a lot and would not regret trying. The decision was reversible, so he took a risk. The heuristic served him well and continues to pay off when he makes decisions.
Decisions Amidst Uncertainty
Let’s say you decide to try...
In this interview, Barbara Oakley, 8-time author and creator of Learning to Learn, an online course with over a million enrolled students, shares the science and strategies to learn more quickly, overcome procrastination and get better at practically anything.
Just when I start to think I’m using my time well and getting a lot done in my life, I meet someone like Barbara Oakley.
Barbara is a true polymath. She was a captain in the U.S. Army, a Russian translator on Soviet trawlers, a radio operator in the South Pole, an engineer, university professor, researcher and the author of 8 books.
Oh, and she is also the creator and instructor of Learning to Learn, the most popular Massive Open Online Course (MOOC) ever(!), with over one million enrolled students.
In this fascinating interview, we cover many aspects of learning, including how to make it stick so we remember more and forget less, how to be more efficient so we learn more quickly, and how to remove that barriers that get in the way of effective learning.
Specifically, Barbara covers:
After a decade of attending the Berkshire Hathaway annual shareholders meeting, these are the thoughts and experiences that stand out the most to me.
(My essay appears in the The Warren Buffett Shareholder.)
I’ve been going to the Berkshire Hathaway annual shareholders meeting almost yearly since 2008. My routine might be familiar to many – maybe uncomfortably so — and yet that routine is part of the experience.
After missing the meeting one year because of a cancelled Friday flight, I decided to start adding a bigger margin of safety and arriving on Thursday. If the flight is on time, it gives me two days to hang out before Saturday’s meeting, and I put that time to good use. Usually the meals leading up to the meeting are filled with friends, FS readers, and business partners.
When the big day finally arrives, I get up as early as my friends allow and drag everyone to the meeting, waiting in line at the CenturyLink Center’s south entrance to get a good seat. The crowd at the door is full of hedge fund managers, teachers, small investors, technology entrepreneurs, college students, people from all over — Buffett and Munger junkies all. It’s a motley crew, to say the least.
As a group, we’ve all got some peculiar wiring. More than once, we’ve sat out there in...
First-principles thinking is one of the best ways to reverse-engineer complicated problems and unleash creative possibility. Sometimes called “reasoning from first principles,” the idea is to break down complicated problems into basic elements and then reassemble them from the ground up. It’s one of the best ways to learn to think for yourself, unlock your creative potential, and move from linear to non-linear results.
This approach was used by the philosopher Aristotle andsup is used now by Elon Musk and Charlie Munger. It allows them to cut through the fog of shoddy reasoning and inadequate analogies to see opportunities that others miss.“I don’t know what’s the matter with people: they don’t learn by understanding; they learn by some other way—by rote or something. Their knowledge is so fragile!”— Richard Feynman The Basics
A first principle is a foundational proposition or assumption that stands alone. We cannot deduce first principles from any other proposition or assumption.
Aristotle, writing on first principles, said:
In every systematic inquiry (methodos) where there are first principles, or causes, or elements, knowledge and science result from acquiring knowledge of these; for we think we know something just in case we acquire knowledge of the primary causes, the primary first principles, all the way to the elements.
Later he connected the idea to knowledge, defining first principles as “the first basis from which a thing is known.”
The search for first principles is not unique to philosophy. All great thinkers do it.
Reasoning by first principles removes...
A vendor once tried to buy me a laptop. Not just any laptop but a very expensive laptop. The vendor claimed that there were no strings attached. And, as they pointed out, I was the only person in the meeting with them, so “no one would know” they had given it to me.
It wasn’t a hard decision. I said no.
It wasn’t because I didn’t need a laptop. In fact, I did need one. The laptop I was using was old and out of date. I had purchased it myself years ago in a fit of frustration at the ridiculous process the government wanted me to follow to obtain one from them.“No price is too high to pay for the privilege of owning yourself.”— Nietzsche
Governments have clear conflict-of-interest rules for people in situations like this one. The rules, however, are impractical. They’re also expensive. I remember one dinner with a vendor that ended up costing me hundreds of dollars personally. I made a mistake: I went to wash my hands around the time the vendor picked out some wine. I came back to see a glass of wine poured for me. When the bill came, the vendor insisted on paying it. Damaging our relationship and embarrassing him, I refused and said, “That’s very generous of you, but the government is clear; I’ve got to pay my share.”
My share? Over $200. I hadn’t picked the restaurant or the wine. When I returned to work a few days later...
The first thing he ordered was OJ with a splash of vodka. When people come to the FS bar the first thing they did was order a drink so this didn't seem out of the ordinary. But looking closely … this was no ordinary man.
Why was Seneca ordering a drink at the FS Bar? And who was that next to him? Is that Epictetus? It's clear this was going to be no ordinary night at the FS bar.
It's time to get to work.
(What follows is our imagined dialogue between Epictetus and Seneca, two essential contributors to Stoic thought, at the FS bar, presided over by an intellectually curious bartender, Kit.
Imagine: There is a slight breeze as the door opens. In walk Seneca and Epictetus. They are both dressed decently, but plainly. After taking a moment to adjust to the light, they each take a seat at the FS bar.)
Kit: Evening Gentlemen. What can I get you?
Epictetus: I'll have an orange juice with a little vodka. Get my friend here a hemlock tea.
Seneca: Very humorous. I'll have the same, please.
Kit: No problem. (She begins to mix the drinks)
Seneca turns to Epictetus, obviously continuing a conversation they had started earlier.
Seneca: I’m not sure I agree with you. Relationships don’t automatically interfere with our ability to be content. If you find someone who has the same approach...
We all hope totalitarianism — a form of government in which the state has no limits in authority and does whatever it wants — is a thing of the past.
Nazi Germany and Stalinist Russia showed what the end of humanity would look like, and it terrified us. But it's important to understand that totalitarianism didn't just spring up out of a mystical vacuum. As Hannah Arendt explains in The Origins of Totalitarianism, it is, rather, just one possibility along a path that most countries are on at one time or another. And that is why it is so important to understand what it is.The People
One of the most disturbing things about Nazism in Germany is how quickly the country changed. They went from democracy to concentration camps in fewer than ten years.
Most of us assume that the Germans of the time were different from us — we’d never fall for the kind of propaganda that Hitler spewed. And our democracy is too strong to be so easily dismantled. Right?
Arendt writes that “the success of totalitarian movements … meant the end of two illusions of democratically ruled countries….” One illusion was that most citizens were politically active and were part of a political party. However,
… the [totalitarian] movements showed that the politically neutral and indifferent masses could easily be the majority in a democratically ruled country, [and] that therefore a democracy could function according to rules which are actively recognized by only a minority. The second democratic illusion...
Today, I’m joined by speaker, international executive, and five-time author Margaret Heffernan. We discuss how to get the most out of our people, creating a thriving culture of trust and collaboration, and how to prevent potentially devastating “willful blindness.”
As former CEO of five successful businesses, Margaret Heffernan has been on the front lines observing the very human tendencies (selective blindness, conflict avoidance, and self-sabotage to name a few) that cause managers and sometimes entire organizations to go astray.
She has since written five books and has spoken all over the world to warn, educate and instruct leaders to not only be aware of these tendencies, but how to weed them out of our companies, our business, and even our relationships.
In this conversation, we discuss many of the concepts she shares in her books, namely:
It's tempting to think that in order to be a valuable team player, you should say “yes” to every request and task that is asked of you. People who say yes to everything have a lot of speed. They're always doing stuff but never getting anything done. Why? Because they don't think in terms of velocity. Understanding the difference between speed and velocity will change how you work.
I once worked for someone who offered me the opportunity to work on a new project nearly every day. These projects were not the quick ones, where you spend 15 minutes and crank out a solution. They were crap work. And there were strings: my boss wanted to be informed about everything, and there was no way I’d get credit for anything.
I remember my response: “That sounds amazing, but it’s not for me. I’m busy enough.”
Saying no to your boss, especially as often as I did, was thought to be risky to your career. I was the new kid, which is why I was getting all of these shit jobs thrown at me.
The diversity of skill sets needed to accomplish them would have made me look bad (perhaps the subtle point of this initiation). Furthermore, my already heavy workload would have gotten heavier with projects that didn’t move me forward. This was my first introduction to busywork.
My well-intentioned colleagues were surprised. “You’re not...
Understanding the concept of a half-life will change what you read and how you invest your time. It will explain why our careers are increasingly specialized and offer a look into how we can compete more effectively in a very crowded world.The Basics
A half-life is the time taken for something to halve its quantity. The term is most often used in the context of radioactive decay, which occurs when unstable atomic particles lose energy. Twenty-nine elements are known to be capable of undergoing this process. Information also has a half-life, as do drugs, marketing campaigns, and all sorts of other things. We see the concept in any area where the quantity or strength of something decreases over time.
Radioactive decay is random, and measured half-lives are based on the most probable rate. We know that a nucleus will decay at some point; we just cannot predict when. It could be anywhere between instantaneous and the total age of the universe. Although scientists have defined half-lives for different elements, the exact rate is completely random.
Half-lives of elements vary tremendously. For example, carbon takes millions of years to decay; that’s why it is stable enough to be a component of the bodies of living organisms. Different isotopes of the same element can also have different half-lives.
Three main types of nuclear decay have been identified: alpha, beta, and gamma. Alpha decay occurs when a nucleus splits into two parts: a helium nucleus and the remainder of the original nucleus. Beta decay occurs when...
How is it that two people delivering the same value to organizational outcomes, in the same role at the same pay, can have a massively different value to the organization itself?
Here's a common problem that a lot of people are unaware of: John is a remarkable employee. He delivers day in and day out. Jane is equally remarkable and delivers just as well. They're identical twins except for one difference. That one difference makes Jane incredibly valuable to the organization and makes John much less valuable.
That difference is friction.
To get John to do what he's supposed to do, his boss comes in and hits him over the head every day. John can't keep track of what he's supposed to do, and he does things only when instructed.
Jane, on the other hand, shows up knowing what she's supposed to do and doing it. She delivers without any added work from her boss.
John and Jane have the same boss. The amount of effort required to get John to do something is 10 times the amount of effort required to get Jane to do something.
Let's shift our perspective here.
From John's point of view, he's competent and capable, even if he's not ambitious or highly motivated.
From Jane's point of view, she's equally competent and capable and wonders why she's treated the same as John when she does the same amount of work with way less hassle.
From the boss's point of view, they're both valuable employees, but they are not...
When Pixar was dreaming up the idea for Inside Out, a film that would explore the roiling emotions inside the head of a young girl, they needed guidance from an expert. So they called Dacher Keltner.
Dacher is a psychologist at UC Berkeley who has dedicated his career to understanding how human emotion shapes the way we interact with the world, how we properly manage difficult or stressful situations, and ultimately, how we treat one another.
In fact, he refers to emotions as the “language of social living.” The more fluent we are in this language, the happier and more meaningful our lives can be.
We tackle a wide variety of topics in this conversation that I think you’ll really enjoy.
And much more. We could have spent an hour discussing any...
In 1890, a New Yorker named Eugene Schieffelin took his intense love of Shakespeare's Henry VI to the next level.
Most Shakespeare fanatics channel their interest by going to see performances of the plays, meticulously analyzing them, or reading everything they can about the playwright's life. Schieffelin wanted more; he wanted to look out his window and see the same kind of birds in the sky that Shakespeare had seen.
Inspired by a mention of starlings in Henry VI, Schieffelin released 100 of the non-native birds in Central Park over two years. (He wasn't acting alone – he had the support of scientists and the American Acclimatization Society.) We can imagine him watching the starlings flutter off into the park and hoping for them to survive and maybe breed. Which they did. In fact, the birds didn't just survive; they thrived and bred like weeds.
Unfortunately, Schieffelin's plan worked too well. Far, far too well. The starlings multiplied exponentially, spreading across America at an astonishing rate. Today, we don't even know how many of them live in the U.S., with official estimates ranging from 45 million to 200 million. Most, if not all, of them are descended from Schieffelin's initial 100 birds. The problem is that as an alien species, the starlings wreak havoc because they were introduced into an ecosystem they were not naturally part of and the...
The best advice I've ever gotten about thinking came from a private-company CEO who has a thirty-year track record that's up there with Warren Buffett's. One day he said to me, “Shane, most people don't actually think. They just take their first thought and go.”
We're all busy. We've got meetings, phone calls, texts, kids, spouses, parents, friends, and of course the ever-present email. Busyness has become an end in itself, and nothing is more dangerous. What my CEO friend meant was that people are losing the ability to think through a problem.
Most people schedule themselves like lawyers. They work in five- to eight-minute increments, scheduled back to back. The best part of their day is when they manage to sneak away for a quick coffee with a friend before heading into the next meeting they haven't had time to prepare for.
I actually schedule time to think. It sounds ridiculous, I know, but I protect this time as if my livelihood depended on it because it does. Sometimes I'm in the office and sometimes I'm in a coffee shop. I'm not always thinking about a problem that I'm wresting with. I'm often just thinking about things I already know or, more accurately, things I think I know. Setting aside time for thinking works wonders, not only for me but also for most of the people I've convinced to give it...
In a classic American folktale, a stubborn railroad worker decides to prove his skill by competing with a drilling machine. John Henry, enraged to hear that machines might take his job, claims that his digging abilities are superior. A contest is arranged. He goes head to head with the new drill. The result is impressive — the drill breaks after three meters, whereas John Henry makes it to four meters in the same amount of time. As the other workers begin to celebrate his victory, he collapses and dies of exhaustion.
John Henry might have been victorious against the drill, but that small win was meaningless in the face of his subsequent death. In short, we can say that he won the battle but lost the war.
Winning a battle but losing the war is a military mental model that refers to achieving a minor victory that ultimately results in a larger defeat, rendering the victory empty or hollow. It can also refer to gaining a small tactical advantage that corresponds to a wider disadvantage.
One particular type of hollow victory is the Pyrrhic victory, which Wikipedia defines as a victory that “inflicts such a devastating toll on...
We all get lucky. Once in a while we do something really stupid that could have resulted in death, but didn’t. Just the other day, I saw someone who was texting walk out into oncoming traffic, narrowly avoiding the car whose driver slammed on the brakes. As the adrenaline starts to dissipate, we realize that we don’t ever want to be in that situation again. What can we do? We can make the most of our second chances by building margins of safety into our lives.
What is a margin of safety and where can I get one?
The concept is a cornerstone of engineering. Engineers design systems to withstand significantly more emergencies, unexpected loads, misuse, or degradation than would normally be expected.
Take a bridge. You are designing a bridge to cross just under two hundred feet of river. The bridge has two lanes going in each direction. Given the average car size, the bridge could reasonably carry 50 to 60 cars at a time. At 4,000 pounds per car, your bridge needs to be able to carry at least 240,000 pounds of weight; otherwise, don’t bother building it. So that’s the minimum consideration for safety — but only the worst engineer would stop there.
Can anyone walk across your bridge? Can anyone park their car on the shoulder? What if cars get heavier? What if 20 cement trucks are on...
Guess who's back? Back again?
Michael Mauboussin is back, tell a friend.
Mauboussin was actually the very first guest on the podcast when it was still very much an experiment. I enjoyed it so much, I decided to continue with the show. (If you missed his last interview, you can listen to it here, or if you’re a member of The Learning Community, you can download a transcript.)
Michael is one of my very favorite people to talk to, and I couldn’t wait to pick up right where we left off.
In this interview, Michael and I dive deep into some of the topics we care most about here at Farnam Street, including:
The quality of your life will, to a large extent, be decided by whom you elect to spend your time with. Supportive, caring, and funny are great attributes in friends and lovers. Unceasingly negative cynics who chip away at your self-esteem? We need to jettison those people as far and fast as we can.
The problem is, how do we identify these people who add nothing positive — or not enough positive — to our lives?
Few of us keep relationships with obvious assholes. There are always a few painfully terrible family members we have to put up with at weddings and funerals, but normally we choose whom we spend time with. And we’ve chosen these people because, at some point, our interactions with them felt good.
How, then, do we identify the deadweight? The people who are really dragging us down and who have a high probability of continuing to do so in the future? We can apply the general thinking tool called Bayesian Updating.
Bayes's theorem can involve some complicated mathematics, but at its core lies a very simple premise. Probability estimates should start with what we already know about the world and then be incrementally updated as new information becomes available. Bayes can even help us when that information is relevant but subjective.
How? As McGrayne explains in...
What techniques do people use in the most extreme situations to make decisions? What can we learn from them to help us make more rational and quick decisions?
If these techniques work in the most drastic scenarios, they have a good chance of working for us. This is why military mental models can have such wide, useful applications outside their original context.
Military mental models are constantly tested in the laboratory of conflict. If they weren’t agile, versatile, and effective, they would quickly be replaced by others. Military leaders and strategists invest a great deal of time in developing and teaching decision-making processes.
One strategy that I’ve found repeatedly effective is the OODA loop.
Developed by strategist and U.S. Air Force Colonel John Boyd, the OODA loop is a practical concept designed to be the foundation of rational thinking in confusing or chaotic situations. OODA stands for Observe, Orient, Decide, and Act.
Boyd developed the strategy for fighter pilots. However, like all good mental models, it can be extended into other fields. We used it at the intelligence agency I used to work at. I know lawyers, police officers, doctors, businesspeople, politicians, athletes, and coaches who use it.
Fighter pilots have to work fast. Taking a second too long to make...
You can train your brain to think like CEOs, professional poker players, investors, and others who make tricky decisions in an uncertain world by weighing probabilities.
All decisions involve potential tradeoffs and opportunity costs. The question is, how can we make the best possible choices when the factors involved are often so complicated and confusing? How can we determine which statistics and metrics are worth paying attention to? How do we think about averages?
Expected value is one of the simplest tools you can use to think better. While not a natural way of thinking for most people, it instantly turns the world into shades of grey by forcing us to weigh probabilities and outcomes. Once we've mastered it, our decisions become supercharged. We know which risks to take, when to quit projects, when to go all in, and more.
Expected value refers to the long-run average of a random variable.
If you flip a fair coin ten times, the heads-to-tails ratio will probably not be exactly equal. If you flip it one hundred times, the ratio will be closer to 50:50, though again not exactly. But for a very large number of iterations, you can expect heads to come up half the time and tails the other half. The law of...