Ideas That Changed My Life

You spend years trying to learn new stuff but then look back and realize that maybe like 10 big ideas truly changed how you think and drive most of what you believe.

A few of mine:

Everyone belongs to a tribe and underestimates how influential that tribe is on their thinking. There is little correlation between climate change denial and scientific literacy. But there is a strong correlation between climate change denial and political affiliation. That’s an extreme example, but everyone has views persuaded by identity over pure analysis. There’s four parts to this:

Tribes are everywhere: Countries, states, parties, companies, industries, departments, investment styles, economic philosophies, religions, families, schools, majors, credentials, Twitter communities.

People are drawn to tribes because there’s comfort in knowing others understand your background and goals.

Tribes reduce the ability to challenge ideas or diversify your views because no one wants to lose support of the tribe.

Tribes are as self-interested as people, encouraging ideas and narratives that promote their survival. But they’re exponentially more influential than any single person. So tribes are very effective at promoting views that aren’t analytical or rational, and people loyal to their tribes are very poor at realizing it.

Psychologist Geoffrey Cohen once showed Democratic voters supported Republican proposals when they were attributed to fellow Democrats more than they supported Democratic proposals attributed to Republicans (and the opposite for Republican voters). This kind of stuff happens everywhere, in every field, if you look for it. 

Everything’s been done before. The scenes change but the behaviors and outcomes don’t. Historian Niall Ferguson’s plug for his profession is that “The dead outnumber the living 14 to 1, and we ignore the accumulated experience of such a huge majority of mankind at our peril.” The biggest lesson from the 100 billion people who are no longer alive is that they tried everything we’re trying today. The details were different, but they tried to outwit entrenched competition. They swung from optimism to pessimism at the worst times. They battled unsuccessfully against reversion to the mean. They learned that popular things seem safe because so many people are involved, but they’re most dangerous because they’re most competitive. Same stuff that guides today, and will guide tomorrow. History is abused when specific events are used as a guide to the future. It’s way more useful as a benchmark for how people react to risk and incentives, which is pretty stable over time.

 

Multi-discipline learning: There’s as much to learn about your field from other fields than there is within your field. Most professions, even ones that look wildly different, live under the umbrella of “Understanding how people respond to incentives, how to convincingly solve their problems, and how to work with others who are difficult to communicate with and/or disagree with you.” Once you see the roots shared by most fields you realize there’s a sink of information you’ve been ignoring that can help you make better sense of your own profession. I didn’t appreciate how important communication is to providing investment advice before reading about how many doctors struggle to communicate effectively with patients, leading to patients who don’t stick with treatment plans and are resistant to lifestyle change. There are millions of these dots to connect. Probing beyond the confines of your day job is more fun anyways.

 

Self-interest can lead people to believe and justify nearly anything. Think about businesses trying to survive competition being run by people trying to prove their career worth, and the incentive to run with the option that provides the cleanest path to the next win is huge, even when that option is something you wouldn’t accept in less-stressful circumstances. I have seen investors justify strategies and sales techniques they fiercely argued against at previous employers, coming around the moment their career depended on it. These are good, honest people. But self-interest is a freight train of persuasion. When you accept how powerful it is you become more skeptical of promotion, and more empathetic to those doing the promoting.

 

Room for error is underappreciated and misunderstood. It’s usually viewed as a conservative hedge, used by those who don’t want to take much risk. But when used appropriately it’s the opposite. Room for error lets you stick around long enough to let the odds of benefiting from a low-probability outcome fall in your favor. Since the biggest gains occur the most infrequently – either because they don’t happen often or because they take time to compound – the person with enough room for error in part of their strategy to let them endure hardship in the other part of their strategy has an edge over the person who gets wiped out, game over, insert more tokens, at the first hiccup.

 

Sustainable sources of competitive advantage. This might be the most important topic in business and investing because other than luck it is the only path to long-term success. The only truly sustainable sources of competitive advantage I know of are:

Learn faster than your competition.

Empathize with customers more than your competition.

Communicate more effectively than your competition.

Be willing to fail more than your competition.

Wait longer than your competition.

Everything else – intelligence, design, insight – gets smashed to pieces by competitors who are almost certainly as smart as you.

Your personal experiences make up maybe 0.00000001% of what’s happened in the world but maybe 80% of how you think the world works. People believe what they’ve seen happen exponentially more than what they read about has happened to other people, if they read about other people at all. We’re all biased to our own personal history. Everyone. If you’ve lived through hyperinflation, or a 50% bear market, or were born to rich parents, or have been discriminated against, you both understand something that people who haven’t experienced those things never will, but you’ll also likely overestimate the prevalence of those things happening again, or happening to other people.

Start with the assumption that everyone is innocently out of touch and you’ll be more likely to explore what’s going on through multiple points of view, instead of cramming what’s going on into the framework of your own experiences. It’s hard to do. It’s uncomfortable when you do. But it’s the only way to get closer to figuring out why people behave like they do.

 

Source –

https://collabfund.com/blog/ideas-that-changed-my-life/

Amp It Up

In this memo, I outline Amp It Up — the management philosophy I apply to Write of Passage. It has three pillars: increase the tempo, raise the standards, and narrow the focus. When you Amp It Up, people radiate ambition, urgency, boldness, and Hearts on Fire.

How do you build a high-performing company? 

 

Frank Slootman has answers. He’s led three companies to their IPOs: Data Domain, Service Now, and Snowflake. Slootman turned around these high-potential companies by implementing his “Amp It Up” philosophy, which he’s spoken about in his book, this article, and most of his podcasts. 

 

Amp It Up has three pillars: increase the tempo, raise the standards, and narrow the focus. 

 

This memo is a synopsis of his best ideas, with a particular focus on how we can apply them at Write of Passage. I’ve also shared this memo with friends and fellow founders outside the organization. 

 

Slootman’s Amp It Up Philosophy

1. Increase the Tempo

Without effective leadership, companies become sluggish as they grow. Malaise sets in. People become risk-averse. “I’ll do it right now” turns into “I’ll do it tomorrow,” which turns into “I’ll get it to you next week,” which turns into “Oops, I forgot about that.” 

 

It’s a leader’s job to prevent stasis. You have to inject the organization with energy and intensity. 

 

When people say they’ll get back to you in a week, ask them why not tomorrow or the next day? It doesn’t matter if your request is unreasonable. The point of the question is to increase people’s sense of urgency. When you change an organization’s tempo, people demand more from each other, which is the essence of a high-performing organization. 

 

Increasing the tempo isn’t just about speed. It’s also about rejecting incrementalism.

 

People who work incrementally inch forward instead of taking bold leaps. They make timid decisions because they’re risk-averse. They work from a place of fear because screw-ups at most companies are so severely punished. But if you only aim for marginal improvements, you’ll only make marginal progress. Incrementalism will kill your company, gradually sinking it into stasis and stagnation.

Avoiding risk is the riskiest strategy of all. Companies, like living organisms, need to constantly reinvent themselves.1

 

Push people to achieve their goals way faster than they think is possible. The need for speed inspires innovation. Ask somebody to do something 20% faster, and they’ll use conventional strategies. Linear progress is the best you’ll get. But if you ask them to do something 2,000% faster, they’ll have to question all their base-level assumptions and innovate.

 

Here are some questions we can ask, all of which are useful because they’re so dramatic:  

 

How can you achieve your 10-year vision in the next six months?

If we could only work one day per week, how would we change our approach? 

What’s the most fun project we could possibly take on? 

If all our existing marketing channels disappeared, how would we reach customers? 

What product feature would justify a 10x increase in prices?  

If we had 10x the money, what would we do differently?

The slower a company moves, the more people suffer from the “End of History Illusion,” where they think the company’s reached its apex of progress. Speed of innovation shows people how radically different the future can be. Fighting The End of History Illusion is why Jeff Bezos wrote “It’s Always Day 1” in his first shareholder letter. At Amazon, he worked in a building called Day 1, and he took the name with him when he moved offices.2

 

Speed matters in business. Day 1 companies make quick, high-quality decisions. Day 2 companies make them slowly. Day 2 companies are slow because they’re culturally uncomfortable making decisions with limited information. Bezos says most decisions should be made with roughly 70% of the information you wish you had. If you’re always waiting for 90%, you’ll move too slowly. And besides, the costs of being wrong are usually less than you think, so long as you quickly course-correct.3

 

Increasing the tempo isn’t just about working harder. You need to change how you work too. The need for speed is one reason why we have a meeting-skeptical culture at Write of Passage. A team member recently called for a kickoff meeting to initiate a production project. I immediately jumped in. Why meet in five days when you can spend five minutes writing down what assets you need, and start the project 24 hours later? In the end, we finished the project before the kickoff meeting would’ve even happened. 

 

When a meeting needs to happen, we make sure it happens well. Preparedness enables speed, which is why every meeting needs an agenda linked in the invite. If there’s a meeting on my calendar without one, I’ll cancel it. 

 

A clear vision is another way to fight incrementalism. The early slogan for the iPod mini was “1,000 songs in your pocket.” The clearer and more ambitious the vision, the less you can succeed with incremental thinking. This is one reason why we value clear writing so much at Write of Passage. When an organization’s mission is well defined, people feel it down to their bones. They’ll fight for the company. 

 

Think of the SpaceX employees who move their families to Brownsville, Texas so they can someday make humanity a multi-planetary species. Incremental thinking won’t get people to Mars either. The grandeur of the mission led SpaceX to build reusable rockets. Until then, astronauts only wanted to fly in new rockets. They didn’t trust ones that’d been used before. Now they prefer ones that’ve been used before because they’re “battle-tested.” Launches are also an order of magnitude cheaper now that you don’t need to build a new rocket every time you want to go to space.

 

Move fast, but don’t rush. Compress cycle times. Everything speeds up once the cadence changes. With speed comes energy and a culture of Hearts on Fire.

 

2. Raise the Standards

I’ll never forget a conference I once attended, hosted by Stripe CEO Patrick Collison. When I showed up, I was handed a white card with eight bullet points. The first seven had standard information like meal times and lodging directions. It was the point at the bottom that caught my attention. It said, “If anything isn’t impeccably perfect, please contact me immediately.”

 

Most conferences would’ve written “if something is wrong.” Patrick’s standard was much higher. If this was the standard he brought to a casual weekend conference, imagine the one he brings to Stripe. 

 

Steve Jobs had the same high standards. He had two classifications for quality: “insanely great” or “total shit.” There was no middle ground. A company’s propensity to cave to the creep of mediocrity is determined by what they deem acceptable. Leaders must refuse mediocre outcomes. 

 

People usually know when their work is mediocre. When people present projects to Slootman, he asks questions like: “Are you thrilled with this? Do you absolutely love it?” If people don’t respond with raging enthusiasm, he asks them to try again. 

 

Most managers set a low bar with murky expectations. Slootman sets a high bar with clear standards of success and failure. 

 

Slootman’s compensation philosophy reflected his performance culture. All of his employees have a compensation review at the end of every quarter. Bonuses are divided into a pool, depending on how well the company performs. His managers aren’t allowed to pass out an equal share. He insists on a bell-shaped distribution curve to reflect the delta between high and low performers. The problem is that, at most companies, the A-players are under-paid. To pay your top performers more, you have to pay low-performing ones less. We’re going to adopt similar principles at Write of Passage.

 

At most companies, employees can receive bonuses without earning them. Bonuses are paid so predictably that people effectively see them as base pay. This, Slootman says, is the sure sign of an “Entitlement Culture.”  

 

Bonuses aren’t guaranteed because the company’s success isn’t either. Market forces are always shifting. Upstarts are trying to displace you. Competitors are gunning for your market share. If instability makes people uncomfortable, they belong at the California DMV, not at an Amp’d Up organization.

 

3. Narrow the Focus

You can’t increase the tempo and raise standards unless you also narrow the focus. 

 

This principle is the most misunderstood. If you don’t take it seriously, you’ll think Slootman is telling you to work so hard that you become a slave, which isn’t the case. 

 

Focus goes against our human nature. Most teams are scatter-brained. They refuse to commit and spread themselves thinly across too many priorities (many of which are ill-defined). Your job as a leader is to direct people to what’s ultimately important. 

 

Narrow focus is also the result of clear thinking. It’s the leadership’s job to distill things down to their essentials. If leaders can’t communicate priorities at the top, how distorted will the thinking be for the rest of the team? 

 

At Write of Passage, we say “projects are power laws.” The most important projects are orders of magnitude more important than average ones. It’s the job of leadership to identify pressure points in the company. To relieve tension in the body, massage therapists apply pressure to specific areas. When they find the spot, they don’t need much pressure to make a big impact.  

 

Murky thinking prevents prioritization. Just as knowing human anatomy helps a massage therapist find pressure points, you’ll only know what to prioritize if you know the anatomy of your company. 

 

Left to their own devices, people will work on easy and sexy (but incremental) problems. You can’t let this happen. You have to keep people focused on the levers that move the business the most. 

 

Early on in the history of Write of Passage, we were guided by a quote from Jeff Weinstein at Stripe: “Solve problems 1 and 2, and let the other 98 burn.” There will always be too much to fix. Stripe co-founder John Collison once advised people to “be stuck more.” It’s good to ruminate on really hard problems. But if you’re averse to being stuck, you won’t persist through the pain that leads to an important breakthrough. 

 

People resist focus because they can’t decide what’s important. Prioritization scares them. They get Shiny Object Syndrome, where they flock to the hot new thing instead of doubling, tripling, and quadrupling down on what ultimately matters. Everybody’s scope will expand unless you constrain it with clear and concrete goals.

 

My friend Joe, the principal of Alpha School, says his three commitments over and over again because repetition is the twin sister of prioritization. If you can’t remember it, you can’t prioritize it. This is why nearly every successful entrepreneur masters the art of repetition. They’re memelords — they identify the most important variables for their company, codify them into principles, and relentlessly repeat them without ever losing chutzpah. The right mantras, said repeatedly, are mind-viruses. They change society by changing minds.

 

Prioritize prioritization. Move faster by focusing more. A company isn’t focused enough unless it’s heartbroken about the projects it’s rejecting (this is good writing advice too).

 

The sharper the point of an object, the faster it can travel. The Concorde had the sharpest point of all and is the fastest commercial jetliner of all-time. Bullet trains are the same. Focus makes organizations fast by making them pointy. Every additional project creates drag. Yes, every single one.

 

Anything that departs from your core mission is a distraction. Even the most well-intended projects have hidden costs. During early Q&As at Facebook, employees would ask Zuckerberg if the company could support nonprofits directly. He always said no. Supporting them wasn’t their comparative advantage. And besides, the nonprofits would all use Facebook once it became successful, which would help them in the long run. 

 

Force people to answer questions like: If we could only commit to one thing for the rest of the year, what would it be?

 

When I meet with multiple members of the same team, I like to ask: “What’s the team’s priority?” It takes two minutes. The more aligned the answers, the more focused the team (make sure to ask everybody separately though). If there’s too much variance among the answers, I know the team isn’t focused enough.

 

Slootman’s Ways of Working

Slootman’s philosophy is guided by a few more heuristics. Though he runs B2B companies, every principle I’ve selected below wholeheartedly applies to Write of Passage. 

 

They reflect our weaknesses as a company, such as our fear of confrontation, hesitation to let go of poor performers, and our tendency to take on too many projects at once. Following them will also help us build a culture of Radical Candor.

 

Leadership is Confrontation

Slootman was once asked to talk about a confrontation that stands out. To which, he replied: “My whole life is confrontation.” 

 

To be clear, a confrontation is not an argument or an attack. Confrontations are about facing the problem head-on. They should be calm and respectful, but direct. Each one should be done with High Care, High Empathy, and Low Emotion. Arguments are just the opposite. They’re born out of Low Care, Low Empathy, and High Emotion. 

 

Leaders are always confronting people because a company can only Amp It Up if its leadership upholds the quality bar. Every meeting, every encounter, and every confrontation is a chance to step up the pace, raise expectations, demand excellence, and narrow the plane of attack. Investigate problems quickly. Run towards BS. Demand clarity when you sense confusion. 

 

Yes, it is confrontational — but confronting people and problems is part and parcel of effective leadership. 

 

Work Sequentially

Less parallelization, more prioritization. 

 

Companies usually widen their surface area of attack as they grow. They distract themselves by taking on too many projects at once. Taken in isolation, each one is seen as only a small addition with no opportunity costs. But collectively, the organization loses its focus, until employees feel like they’re swimming in glue. 

 

Working sequentially is one solution. Say you have ten projects you want to complete. One strategy is to start all of them at the same time. On the other end of the spectrum, you can work on one at a time, and move onto the next project only after you’ve finished the preceding one (which Slootman calls “working sequentially”). 

 

Doing so forces you to prioritize. By encouraging debate about what projects to pursue and the tradeoffs that’ll result from such decisions, it clarifies what’s important in the organization.

 

Operators Should Run Strategy

When we were hiring for a Chief Operations Officer, we spoke with one candidate who proudly called himself a strategist. He didn’t want to do any of the actual work. He wanted to talk and whiteboard instead. We decided not to hire him because we wanted more of a hands-on contributor. And boy, I’m glad that’s what we did. 

 

Strategy is important, but you shouldn’t hire “strategists.” Operators should set the strategy instead. The problem is that operators and strategists have misaligned incentives. Slootman says that great operators live, breathe, and own their strategies. 

 

Strategy begins at the top. The Chief Executive Officer is the Chief Strategy Officer too. Many companies employ people who do nothing but set strategy. They’re effectively in-house consultants with no operational responsibilities. When the going gets tough, some of them even delegate their strategy to suits at consulting firms who can tell them what to do.

 

Hire Drivers, Not Passengers

Every company makes hiring mistakes. Most first-time founders fire poor performers too slowly. It’s not the C-players who kill your organization. Everybody knows they need to go. It’s the B-players who destroy it. They’re the mediocre ones who are good enough to keep around, but they’re lethargic. They slow organizations down by making them bulky. 

 

And the decline doesn’t just come from slowness. It comes from a failure to uphold the quality bar too. Standards fall. The work loses its magic. When commitment to excellence fades, the top performers look for other jobs.

 

B-players are cockroaches. Like carbon monoxide, they unknowingly kill you while you’re asleep. 

 

By keeping B-players, you’re repelling A-players. People resent slackers at work just as they resented slackers on group projects in school. High-performers want to work with people who are as talented and committed to the mission as they are. Being overly compassionate with under-performing employees in the short term leads to destruction in the long term.

 

Slootman makes the distinction between drivers and passengers.

 

Passengers are people who ride the company’s momentum without contributing to it. They’re absent and indifferent. They rarely take initiative or provide input. Since their survival strategy is to avoid trouble, they don’t push back against faulty logic. And they are dead weight. 

 

Once you remove the passengers, the pace and energy increase. As somebody said to me recently, “I’ve never fired somebody and not had their replacement be better.”

 

Hire drivers. They get satisfaction from making things happen, not from blending in. They increase the tempo, confront poor performance, are quick to stand up for the company when something’s not right, and feel a strong sense of ownership. This is why, at Write of Passage, we will forever reward clear and concrete feedback, especially when it’s delivered with care.

 

How the Amp It Up System Fits Together

Slootman’s system is a triad. Each pillar amplifies the other ones. Slootman asks: “How much faster do you run? How much higher are your standards? How hard do you focus?”

 

Narrow focus is the hardest one to do. If you try to increase the tempo and raise standards without narrowing your focus, you’ll burn yourself out and ship sloppy work. Do way less, but do it faster and better. 

 

Don’t fully optimize for one variable at the expense of the others. Solely obsess over speed and you’ll compromise high standards. A lack of context, documentation, clear communication, and getting the right people involved can lead to things breaking and negative downstream effects. If you feel like speed and quality are in tension, you should probably narrow the focus. 

 

On the topic of focus, I once heard a story about a billionaire who used to share a different message every time he spoke to his company. He employed smart people and thought they wanted novelty. That changed when one day, a trusted mentor looked him in the eye and said, “You’re doing it totally wrong. Pick a simple message and say it over and over again.” 

 

His next all-hands talk was at the company holiday party. He was so nervous to repeat a simple message and potentially look like an idiot in front of the entire company that he got wasted before he went on stage. But once he got up there, he stuck to the plan. His message was simple enough to summarize in one sentence. People loved it. Since then, he hasn’t stopped repeating the same message over and over again. 25 years after the holiday party talk, he insists that a key to his success is sloganizing everything and repeating the same basic mantras.

 

Amp It Up is one of those mantras for us at Write of Passage. When you apply the Amp It Up philosophy, people radiate ambition, urgency, boldness, and Hearts on Fire. Increase the tempo, raise the standards, narrow the focus.

 

Source -

https://writeofpassage.school/2023/02/10/amp-it-up/

Linear Vs Exponential Work

Think about your work in terms of timeframe, probability of payoff, and the relationship between input and output (linear vs. exponential). You could:

· Push rocks

· Roll snowballs

· Wait for waves

· Plant and harvest

· Or try to trigger avalanches

Pushing rocks: you’re Sisyphus. The day starts, you push the rock. Next day, same thing. It's linear work. You may get paid well, but you better love the work. Because that damn rock is waiting for you every morning. If you don’t show up, if you don’t push, nothing moves.

Rolling snowballs: you find a spot with sticky snow, you form a ball, you get going. In the beginning, people scratch their heads. It’s so small. Why bother? But you keep at it. The ball expands. It reaches a scale you could never have imagined. Your work compounds. You keep going. You build an empire.

Planting and harvesting: you're sweating today in the hope it will pay off next season. All you can do is pick good soil, tend to your field, plan, and fight pests and rodents. You don't control the weather. You don't control market conditions when you harvest. A big payoff is possible, but it's not guaranteed. You have to trust the process and hope for the best. If you get it right, you buy more land and enjoy some rest.

Waiting for waves: you’re standing at the beach, watching the endless ocean, filled with opportunity, offering treasure and deadly depths. You wait. You wait for a great wave, a massive trend, an opportunity. Until you spot it, you have to practice. You spend days, months, even years trying to catch small waves. You fall off the board. People say you’re wasting your time. But when you finally spot your wave, you're ready. You let it carry you, in perfect flow, and never look back.

Triggering an avalanche: the strangest and least predictable way to leverage your work. You rely on the built-up potential of your surroundings. You create things in the hope they will resonate with the world. You hope that one day, one of your ideas will connect and spread like a virus. But most of the time, nothing happens. You are a lone wanderer on a snowy mountain while everyone is comfortably sitting at the stove. But when you hit the right spot, an avalanche will roar down the slope and reshape the mountain. Your initial spark will take on a life of its own and, for better or worse, transform everything in its path.

Why does this matter?

What you do — and how you frame it — matters a great deal. Do you work to get paid today or to compound far into the future? Are you prepared to jump on an opportunity when it presents itself? Do you spend enough time practicing? If you are caught in a daily grind, are you possibly rolling boulders right over any seeds you planted?

Most likely, your work is some mix of the above. Think about someone like Beal.

· Looking at possible investments every day? Can feel like pushing boulders.

· Reinvesting profits and compounding the value of your portfolio and bank? Definitely a rolling snowball.

· Preparing your capital structure for the next credit cycle? More akin to planting seeds.

· Trying to revolutionize space launches? It feels almost like he was trying to ride a wave that wasn’t quite ready yet. Interestingly, once solved it can spawn an entire industry making it more avalanche-like.

· Offering a price to solve a mathematical problem? Following curiosity for its own sake and contributing to the whole of human knowledge… one of many people kicking around for a possible avalanche.

The right kind of work depends on who you are, what feels interesting to you, what opportunities are available to you, and what responsibilities you have.

Some pushing of rocks may be required, but don't let that define your life. Keep looking for opportunities to form a snowball, for fertile soil, or for beaches with promising waves. Pay attention. Maybe the ground around you is just waiting for someone to trigger an avalanche?

You can apply the same framework to life. For more inspiration and food for thought, watch or read the transcript of this excellent recent talk by Graham Weaver: ‘how to live an asymmetric life.’ “Yes, it is possible to reduce one’s downside,” Weaver reflected on his investing career, “but it is not possible to eliminate it.”

Source –

https://neckar.substack.com/p/journal-beal-infinite-loops-and-asymmetry

9 sources of permanent advantage

Raw talent/intelligence - Some people are just naturally better and smarter. 

Hard work - Some people work harder. 

Differentiation - Seeing the world differently. Doing something different. Reading different books. Interpreting the same information differently. 

Process / Discipline - Creating a process and following it. Working out every day is a great example. 

Talent Collector - The ability to hire the best people and get the most out of them. 

Patience - A lack of patience changes the outcome. 

Ability to take pain - Are you willing to look like an idiot to get better? How much risk are you willing to take, AND, importantly, can you handle the losses? 

Temperament - Keeping your head when everyone else is losing theirs. 

Luck 

Source – https://fs.blog/

Living An Asymmetric Life

Discovering the Power of Asymmetry

When I started my investing career, I focused almost exclusively on what I believed were the two fundamental rules of investing: Rule One: Don’t lose money, and Rule Two: Never forget Rule One. 

We bought some companies at very low prices and others at a discount to their net asset values. On three separate occasions, the memo I wrote to our investment committee claimed, “It is mathematically impossible to lose money on this investment.” We lost money all three times. In fact, I personally lost money on five of my first eight investments, and we lost money on our first fund. 

Over my 29-year career as a professional investor, I have come to realize that in those early days, I was dead wrong in my thinking about investing. If I had to summarize great investing in a single word, it would be “asymmetry.”

I learned that, yes, it is possible to reduce one’s downside, but it is not possible to eliminate it. The better strategy is to seek opportunities where the possibility of gains wildly outweighs what you can lose, which is typically capped at 1x your investment. 

Further, there are criteria, which, when you stack them on top of each other, don’t stack linearly; they become logarithmic — or asymmetric. For example, if you have an incredible management team who builds a great team to support them, moves at a fast pace, operates in a large industry, can redeploy large amounts of capital at high returns, and is willing to do so over a long time – then you’re not playing for a 1.5x or 2.0x outcome, you could be playing for a 10x, 20x, or even 100x outcome. 

Investing is about finding those asymmetric opportunities.

Living an Asymmetric Life

As I started applying the principle of asymmetry to investing, I also began to realize that the principles were even more powerful when I applied them to other areas of my life. And just like in investing, I was playing small in my life — playing not to lose. 

I uncovered several principles that would allow me to create asymmetry in my life, and these also stack logarithmically. Apply one of these to your life, and you will improve your life significantly. Apply two or three, and you will live an incredible life. And, if you can run the table and apply all four of these principles, you can live a life with joy, energy, and meaning — and you can sustain it for decades.

Principle 1: Do Hard Things

Our whole lives, we have been led to believe that the goal of life is ease and comfort. We can order food from an app and binge-watch movies from our couch for only $9.99 per month. The less energy we exert in getting what we want, the more we pat ourselves on the back for having “made it” in life. 

What a fantastic lie. 

When I rowed crew in college, we measured our fitness level with a 2,000-meter test on a rowing machine. From the first day of the season to my peak fitness six months later, I would get about 20 seconds faster. Ten of those seconds would come from the work we put in – rowing, weightlifting, and running for two or three hours a day for six months. But surprisingly, 10 of the 20 seconds came in the first two weeks of the season. It did not come from improvements in cardiovascular fitness, strength, VO2 max, or technique. It came from psychology. Specifically, I would get comfortable being uncomfortable. I would realize that I could sustain a high heart rate longer than I thought and that when I got to 1,500 meters and was in pain, I could keep going. 

The graph above depicts growth and change in our lives. We typically hit a plateau at some point, shown by the red circle. Once we reach a plateau, things are going to have to get worse before they get better. This is true for nearly all growth and improvement. For example, if you need to have a difficult conversation with your partner, your life will get worse first. But once you have the discussion, you will work through the issue and become closer. If you need to leave a difficult relationship, you might have a painful breakup, be lonely for a while, and then experience the anxiety or nervousness of dating again. Your life will get worse before it gets better. This is true for changing jobs, starting a new career path, learning a new skill, or starting a new habit. 

Everything you want is on the other side of “worse first.” But when you can get comfortable being uncomfortable, you can have nearly anything you want in this life. 

“When you can get comfortable being uncomfortable, you can have nearly anything you want in this life. ”

If you want to live an asymmetric life: Do hard things.

 

Principle 2: Do Your Thing

When I graduated from Stanford Business School, I had two alternatives for my career. One option was the job I had before business school, working at a large private equity firm. This path was clear. It had a salary and bonus, and several other classmates would be joining me at the firm. 

The other option was to try to start my own company. I had bought several companies as a fundless sponsor in business school, but this path was far from clear in my mind. I didn’t know how to start, how to raise money, or even if I could afford to pay myself. With all these unknowns looming large in my head, I chose to take the big private equity job.

The job was hard. I took early flights, traveled across the globe, stayed up late meeting bid deadlines to purchase companies, and worked 80+ hours per week. I didn’t have kids yet, but if I had, I would have gotten home late, been away a lot, and missed little league games. The job I had billed as the “easy” option in my head was actually really difficult. 

The first principle of Buddhism is Dukkah, which translates to “suffering.” Life has suffering. As I learned during this phase in my career — and Buddha learned 2,800 years before me — there is no “easy” or “safe” path. No matter what path you take, life will present suffering.

Life is suffering. So figure out something worth suffering for.” 

While still in that big PE firm job, I met a guy at a dinner named Dave who had the same role as me at a rival fund. As we ate, Dave told the story of a deal he had just bid on. He lit up as he talked about debt covenants, leverage multiples, and the intricacies of his bidding strategy. He had so much energy and enthusiasm — about debt covenants, of all things! Instead of enjoying my overpriced meal, I had a sinking feeling in my stomach. I realized my energy for this role was not even close to the passion Dave had. I also realized that Dave, and anyone else who was that fired up about this job, would crush me. He was living his dream; I was just going through the motions. 

When faced with choices about what we want to do, most of us miss one important piece of the equation. We factor in all the risks and tradeoffs, but we completely discount how differently we will show up when we’re truly energized about something. When our whole being is fully invested, we tap into a superpower, and we can sustain that for a long time. You won’t tap into this power as long as you’re living someone else’s dream. 

“When faced with choices about what we want to do, most of us miss one important piece of the equation. We factor in all the risks and tradeoffs, but we completely discount how differently we will show up when we’re truly energized about something.”

If you want to live an asymmetric life: Do hard things. Do your thing.

 

Principle 3: Do it for decades

In 2004, at my fifth business school reunion, one of my classmates put his arm around me and punched me in the gut (literally and figuratively). He said, “Graham, during the greatest wealth creation of all time (Internet 1.0), you’re buying stupid label printing companies.” And I remember thinking, “Yup, that’s pretty much right.” But neither my classmate nor I were thinking very far beyond that moment. 

Vince Lombardi, the legendary coach of the Green Bay Packers, once said, “The Green Bay Packers never lost a football game, but on a few occasions, we ran out of time.” 

I loved what I was doing. And therefore, I was willing to do it for a long time. I am now 22 years into my role as CEO of Alpine Investors, and I’m still fired up!

“I loved what I was doing. And therefore, I was willing to do it for a long time. I am now 22 years into my role as CEO of Alpine Investors, and I’m still fired up!”

The equation for returns is X = (1+R)^N, where N is quadratic. Consider this equation where X represents your competence in any given role. The R represents everything you’re doing to improve yourself:  coaching, reading, learning, writing out your goals, using your imagination, etc. The most powerful part of the equation is the N, the number of years you are in your role. If you love what you do, you will do it for a long time, and your N will be large. And if you improve at a reasonable rate over a long period, you can become the best in the world at what you do. 

There is almost no obstacle that won’t yield to you at full power for a decade. 

If you want to live an asymmetric life: Do hard things. Do your thing. Do it for decades.

 

Principal 4: Write your story

During the Great Recession, I hired my first-ever executive coach, JP Flaum. At the time, Alpine’s largest company was in default. Understandably, I blamed the company’s performance on the economic recession, but JP pushed me on this. He encouraged me to write a new story for this company based on three principles:

Describe the company five years from now, in detail. Get out of the fog of war in front of your face.

Describe it as the outcome you would want if you knew you would not fail. Picture your Nirvana.

Remember, “The ‘how’ is the killer of all great dreams.” So, don’t worry about how you will achieve any of the story as you’re writing it. Just write down the dream.  

We wrote a new story for that company, which involved hiring a new CEO, building an all-star team, improving the technology and the uptime of the product, building a world-class sales and marketing team, and winning new contracts. It was fun to write that story, but of course, it felt aspirational and out of reach. 

But we got to work on the first step: hiring a world-class CEO. And then, together with the CEO, we began to methodically execute the plan. We brought on an all-star team, improved our product, created a world-class sales and marketing organization, and ultimately won every contract (except one) which came up for bid over an 18-month period. The market didn’t change; the industry didn’t change; the competition didn’t change. We changed. We wrote a different story. 

Since then, we’ve written hundreds of stories. We wrote stories about the performance we wanted to achieve, the talent program we would build, the culture we needed to retain the best people, the training program we would create for new MBAs to become CEOs, the sourcing platform to find proprietary investments, and our plans to be a force for good in the world. All those stories seemed aspirational when we wrote them, and nearly all of them came true. 

No matter where you are in your life right now, you can write a new story. 

If you want to live an asymmetric life: Do hard things. Do your thing. Do it for decades. Write your story. 

 

Fear 

One of the biggest things that will hold you back in life is fear. Fear is a master manipulator. It will disguise itself as helping you, as being practical, as keeping you safe. And ultimately, fear will disguise itself as “not me” and “not now.” It might already be creeping in as you read this. 

These principles are the antidote to fear. Each of these four principles is a tangible, tactical way to look fear in the face and make a decision — one based not on fear, but on what is possible — on playing for the asymmetric upside in your life. 

Now is the time to do hard things. There is something you fear. Go do that. There is something you’re putting off. Do that. Because everything you want in this life is on the other side of “worse first.” 

Now is the time to do your thing. No matter what path you choose, you will suffer. But some things are worth suffering for, and you vastly underestimate your expected value when you are excited and at your full power. 

Now is the time to do it for decades. Great things take time. Because there is almost no obstacle that you can choose that won’t yield to you at full power and in control of the game clock.  

Now is the time to write your story. As your life goes on, you will realize how precious it really is, and you don’t want to spend it living someone else’s life. You have a magical life inside of you. Give yourself permission to live it. Take the time to write your story. Ask for what you want, and the universe will respond.   

You did not come this far to play small. You came this far to move the world. Now is your time.

 

Source -

https://www.grahamweaver.com/blog/2023-stanford-graduate-school-of-business-last-lecture

Getting To Genius

Everyone knows that to do great work you need both natural ability and determination. But there's a third ingredient that's not as well understood: an obsessive interest in a particular topic.

To explain this point I need to burn my reputation with some group of people, and I'm going to choose bus ticket collectors. There are people who collect old bus tickets. Like many collectors, they have an obsessive interest in the minutiae of what they collect. They can keep track of distinctions between different types of bus tickets that would be hard for the rest of us to remember. Because we don't care enough. What's the point of spending so much time thinking about old bus tickets?

Which leads us to the second feature of this kind of obsession: there is no point. A bus ticket collector's love is disinterested. They're not doing it to impress us or to make themselves rich, but for its own sake.

When you look at the lives of people who've done great work, you see a consistent pattern. They often begin with a bus ticket collector's obsessive interest in something that would have seemed pointless to most of their contemporaries. One of the most striking features of Darwin's book about his voyage on the Beagle is the sheer depth of his interest in natural history. His curiosity seems infinite. Ditto for Ramanujan, sitting by the hour working out on his slate what happens to series.

It's a mistake to think they were "laying the groundwork" for the discoveries they made later. There's too much intention in that metaphor. Like bus ticket collectors, they were doing it because they liked it.

But there is a difference between Ramanujan and a bus ticket collector. Series matter, and bus tickets don't.

If I had to put the recipe for genius into one sentence, that might be it: to have a disinterested obsession with something that matters.

Aren't I forgetting about the other two ingredients? Less than you might think. An obsessive interest in a topic is both a proxy for ability and a substitute for determination. Unless you have sufficient mathematical aptitude, you won't find series interesting. And when you're obsessively interested in something, you don't need as much determination: you don't need to push yourself as hard when curiosity is pulling you.

An obsessive interest will even bring you luck, to the extent anything can. Chance, as Pasteur said, favors the prepared mind, and if there's one thing an obsessed mind is, it's prepared.

The disinterestedness of this kind of obsession is its most important feature. Not just because it's a filter for earnestness, but because it helps you discover new ideas.

The paths that lead to new ideas tend to look unpromising. If they looked promising, other people would already have explored them. How do the people who do great work discover these paths that others overlook? The popular story is that they simply have better vision: because they're so talented, they see paths that others miss. But if you look at the way great discoveries are made, that's not what happens. Darwin didn't pay closer attention to individual species than other people because he saw that this would lead to great discoveries, and they didn't. He was just really, really interested in such things.

Darwin couldn't turn it off. Neither could Ramanujan. They didn't discover the hidden paths that they did because they seemed promising, but because they couldn't help it. That's what allowed them to follow paths that someone who was merely ambitious would have ignored.

What rational person would decide that the way to write great novels was to begin by spending several years creating an imaginary elvish language, like Tolkien, or visiting every household in southwestern Britain, like Trollope? No one, including Tolkien and Trollope.

The bus ticket theory is similar to Carlyle's famous definition of genius as an infinite capacity for taking pains. But there are two differences. The bus ticket theory makes it clear that the source of this infinite capacity for taking pains is not infinite diligence, as Carlyle seems to have meant, but the sort of infinite interest that collectors have. It also adds an important qualification: an infinite capacity for taking pains about something that matters.

So what matters? You can never be sure. It's precisely because no one can tell in advance which paths are promising that you can discover new ideas by working on what you're interested in.

But there are some heuristics you can use to guess whether an obsession might be one that matters. For example, it's more promising if you're creating something, rather than just consuming something someone else creates. It's more promising if something you're interested in is difficult, especially if it's more difficult for other people than it is for you. And the obsessions of talented people are more likely to be promising. When talented people become interested in random things, they're not truly random.

But you can never be sure. In fact, here's an interesting idea that's also rather alarming if it's true: it may be that to do great work, you also have to waste a lot of time.

In many different areas, reward is proportionate to risk. If that rule holds here, then the way to find paths that lead to truly great work is to be willing to expend a lot of effort on things that turn out to be every bit as unpromising as they seem.

I'm not sure if this is true. On one hand, it seems surprisingly difficult to waste your time so long as you're working hard on something interesting. So much of what you do ends up being useful. But on the other hand, the rule about the relationship between risk and reward is so powerful that it seems to hold wherever risk occurs. Newton's case, at least, suggests that the risk/reward rule holds here. He's famous for one particular obsession of his that turned out to be unprecedentedly fruitful: using math to describe the world. But he had two other obsessions, alchemy and theology, that seem to have been complete wastes of time. He ended up net ahead. His bet on what we now call physics paid off so well that it more than compensated for the other two. But were the other two necessary, in the sense that he had to take big risks to make such big discoveries? I don't know.

Here's an even more alarming idea: might one make all bad bets? It probably happens quite often. But we don't know how often, because these people don't become famous.

It's not merely that the returns from following a path are hard to predict. They change dramatically over time. 1830 was a really good time to be obsessively interested in natural history. If Darwin had been born in 1709 instead of 1809, we might never have heard of him.

What can one do in the face of such uncertainty? One solution is to hedge your bets, which in this case means to follow the obviously promising paths instead of your own private obsessions. But as with any hedge, you're decreasing reward when you decrease risk. If you forgo working on what you like in order to follow some more conventionally ambitious path, you might miss something wonderful that you'd otherwise have discovered. That too must happen all the time, perhaps even more often than the genius whose bets all fail.

The other solution is to let yourself be interested in lots of different things. You don't decrease your upside if you switch between equally genuine interests based on which seems to be working so far. But there is a danger here too: if you work on too many different projects, you might not get deeply enough into any of them.

One interesting thing about the bus ticket theory is that it may help explain why different types of people excel at different kinds of work. Interest is much more unevenly distributed than ability. If natural ability is all you need to do great work, and natural ability is evenly distributed, you have to invent elaborate theories to explain the skewed distributions we see among those who actually do great work in various fields. But it may be that much of the skew has a simpler explanation: different people are interested in different things.

The bus ticket theory also explains why people are less likely to do great work after they have children. Here interest has to compete not just with external obstacles, but with another interest, and one that for most people is extremely powerful. It's harder to find time for work after you have kids, but that's the easy part. The real change is that you don't want to.

But the most exciting implication of the bus ticket theory is that it suggests ways to encourage great work. If the recipe for genius is simply natural ability plus hard work, all we can do is hope we have a lot of ability, and work as hard as we can. But if interest is a critical ingredient in genius, we may be able, by cultivating interest, to cultivate genius.

For example, for the very ambitious, the bus ticket theory suggests that the way to do great work is to relax a little. Instead of gritting your teeth and diligently pursuing what all your peers agree is the most promising line of research, maybe you should try doing something just for fun. And if you're stuck, that may be the vector along which to break out.

I've always liked Hamming's famous double-barrelled question: what are the most important problems in your field, and why aren't you working on one of them? It's a great way to shake yourself up. But it may be overfitting a bit. It might be at least as useful to ask yourself: if you could take a year off to work on something that probably wouldn't be important but would be really interesting, what would it be?

The bus ticket theory also suggests a way to avoid slowing down as you get older. Perhaps the reason people have fewer new ideas as they get older is not simply that they're losing their edge. It may also be because once you become established, you can no longer mess about with irresponsible side projects the way you could when you were young and no one cared what you did.

The solution to that is obvious: remain irresponsible. It will be hard, though, because the apparently random projects you take up to stave off decline will read to outsiders as evidence of it. And you yourself won't know for sure that they're wrong. But it will at least be more fun to work on what you want.

It may even be that we can cultivate a habit of intellectual bus ticket collecting in kids. The usual plan in education is to start with a broad, shallow focus, then gradually become more specialized. But I've done the opposite with my kids. I know I can count on their school to handle the broad, shallow part, so I take them deep.

When they get interested in something, however random, I encourage them to go preposterously, bus ticket collectorly, deep. I don't do this because of the bus ticket theory. I do it because I want them to feel the joy of learning, and they're never going to feel that about something I'm making them learn. It has to be something they're interested in. I'm just following the path of least resistance; depth is a byproduct. But if in trying to show them the joy of learning I also end up training them to go deep, so much the better.

Will it have any effect? I have no idea. But that uncertainty may be the most interesting point of all. There is so much more to learn about how to do great work. As old as human civilization feels, it's really still very young if we haven't nailed something so basic. It's exciting to think there are still discoveries to make about discovery. If that's the sort of thing you're interested in.

Source –

http://www.paulgraham.com/genius.html