Category Archives: Books

Sadaharu Oh: A Zen Way in Baseball by Sadaharu Oh, David Falkner

Summary

  1. Sadaharu Oh, one of the all time leading home run hitters, describes his journey towards mastery

Key Takeaways

  1. Oh’s proudest accomplishment and what he admires most is durability, endurance, spirit-discipline. Like he and Lou Gehrig had 
  2. Because of his profession, he was asked all sorts of questions about war and peace, politics and more. A man who has chased a little white ball his entire life should not be held as an Oracle from the Buddha 
  3. Baseball was a form of spirit discipline. A way to make myself a better person – although I surely never sought discipline for such a reason. It became my Way, as a tea ceremony or flower arranging or the making of poems were the Ways of others. 
  4. In his last game, he hit a home run and his opponents came out to shake his hands and bow to him. His opponents life’s his spirits and, in doing so, reminded him of something that I had spent 22 years learning. That opponents and I were really one. My strength and skills were only one half of the equation. The other half was theirs. 
  5. Practical training in skills, if done in a certain way, is a form of spirit-discipline. And in combat I learned to give up combat. I learned in fact, there were no enemies. An opponent was someone whose strength joined to yours and created a certain result. My baseball career was a long, long initiation into a single secret: that at the heart of all things is love. We are, each of us, one with the universe that surrounds us – in harmony with it, not in conspiracy against if. To live by being in harmony with what surrounds you is to be reminded that every end is followed by a new beginning – and that the humblest of life’s offerings is as treasured as the greatest in the eyes of the Creator. 
  6. I am not a religious man but I have been accompanied every step of the way by powers that are not mine alone. And so it was left to me always do make the most of the life I had. For myself and for what I am merely custodian to. 
  7. Fortune moves in and out of people’s lives like a living spirit. Because all of us are susceptible, sometimes we wind up seeing things; other times we scarcely know that our lives have been touched 
  8. A man’s purpose, my father has insisted to this day, is to be of genuine service to others 
  9. Defeat, like victory, is a passing thing. It is with you only as long as you insist on keeping it 
  10. The professional world enabled me after many years to understand that what I did everyday mattered far more than the glory or grief of a moment. I was not a “natural” hard worker. I have two in me, one is weaker, the other stronger. The weaker one always looks for a way out, wants fun and good times – and usually finds them; the other is therefore forced to work hard to catch up. 
  11. Just prior to the season, the coaching staff, as is traditional in Japanese baseball, reviewed the goals that were expected from each of the players on the team. There is no sense of contract in this, but there is a very strong cultural sense of obligation to which a player must answer. Obligation is a very powerful force in our lives – ours is a culture of shame – and the player who falls short of the goals established for him by his team runs the risk of having to answer to the sternest authority of all – his own sense of self worth. There were lofty goals for me for they seemed good targets to shoot for. However, what awaited me at the summit of my young baseball life was a three year free fall that nearly destroyed me
  12. In order to better deal with the high expectations, I adopted the slogan “take it easy.” Kawakami, a batting legend and hitting coach, and Wally Yonamine gave me their first baseman’s mitts. They were to be mine, letting me know in the strongest symbolic way they could that whatever batting problems I had were independent of my future with the Giants. I was the Giants’ new first baseman. I was very moved and obligated to them for this gesture. 
  13. Hitting is with your hip, not your hand. Imagine that your eyes are in your front hip. You can see the ball with your hip. It is difficult. Be patient and it will come. 
  14. I did not feel “easy” about this [living up to the obligation, loyalty, high standards that his nation expected of him]. I felt so stirred and fired up it took me some doing to convince myself that it was real. Oh, yes, I wanted to live up to that! I wanted to be worthy and responsible…was I confused? Confusion doesn’t begin to speak of it! But my brother taught me there was no need to make a display of feelings. I never imposed on anyone else what I was going through. 
  15. The dormitory exists for a purpose most valued in our culture – namely to nurture young people in the hard discipline of group endeavor. That a baseball team needs a sense of real togetherness is obvious, and that young people away from home for the first time need the helpful guidance of their elders is quite clear. But like everything, there is always a kind of balance between the ideal and the actual, and the tension between the two – in any culture – is how you begin to experience the particulars of a life. 
  16. Every man should have a good rival. Kitsugi saved my career even in the throes is the awful struggle between us. 
  17. The goal of zen is to become void of desire, but can a man attain such a high goal?
  18. It’s more important to do things than to brood over them 
  19. Ma, from Aikido, is space. It exists because there is an opponent. To eliminate ma, make the opponent yours. That is the real task. Absorb and incorporate his thinking into your own. Become one with him so you know him perfectly and can be one step ahead of his every movement. Make use of an opponent’s strength and yours will be doubled 
  20. After three years and much desperation, the coaching staff decided to try the one legged stance they joked about earlier. This removed the hitch in my swing and improved my timing. Oh learned absolute focus and balance in this pose – ma, ki. Immovable self discipline comes only when you master the use of ki. Acquiring the “body of a rock” literally meant having the discipline to wait. This implies far more than balance. To train one’s entire being to hold back from the tricks and feints of a pitcher, no less than from an enemy with a sword, is finally the single most important step in harmonizing one’s ki with the opponents. Ma, the interval or distance between you, is eventually that which you rather than the other create by the strength of your waiting. Everything was now suddenly poured into this subtle act of waiting. For waiting, I understood in this moment, far from being something passive, was the most active state of all. In its secret heart lay the beginning and the end of all action. In it lurked the exact moment to strike. With the ability I had acquired to wait, I now could make my contact point somewhat further back. This in turn gave me slightly more time before I had to commit myself. I thus wound up being able to see an incoming pitch till the last possible moment…Later, I got to meet Hank Aaron and learned that he trained himself to wait by measuring the pitcher’s best fastball. 
  21. I learned to focus at all times on the area just below my navel. I achieved great balance with this focus and was always ready 
  22. There was baseball in everything I did. I had this gnawing sense of fear that I would let down or be unable to play up to what I had previously done. 
  23. Baseball was with me wherever I went. There was simply nothing else!
  24. You see, Arakawa-san explained [his hitting coach and, in many ways, mentor], the better you hit, the less reason you have to think. After all, isn’t the goal of Zen to achieve a void?
  25. One day, when I went for training, I assumed my pose with the sword and methodically began my swings. I had taken only three swings that day – normally I took hundreds – when Arakawa-san suddenly stopped me, a look of pleasure glowing on his face. That’s it! That’s it! You’ve done it, he said excitedly. Done what? I asked, puzzled. It had taken all this time but you have just performed three identical, perfect swings. There is no more to do for today than to concentrate as hard as you can on remembering what it is you have done. You have finally understood. That is all I can say. You must accept this now. 
  26. Teams devised the “Oh Shift” (much like the Ted Williams shift) to try to get me to alter my swing. It was a psychological challenge as much as anything. My answer was to swing as I always did, to keep the contest of hitting between myself and the pitcher standing 60 feet away. Arakawa-san and I had reached the point where there were no tricks in what I was doing. And consequently no tricks used against us would get in our way. Nothing could stop me from hitting. I longed to hit as a starving man longs for food
  27. Arakawa-san said we would beat Babe Ruth. I thought he was joking but he was earnest. I’ll never be sure but he got me thinking and aspiring towards greater goals than I ever would have had myself 
    1. A great mentor, coach, partner helps you see possibilities greater than you ever would have on your own
  28. The door of possibility had opened. I walked through, never to go back. This was not unadulterated joy as far as I was concerned. For I discovered in this most amazing season of my life that achievement and recognition were not necessarily the same thing. 
  29. There are 4 stages in martial arts training – technique, skill, art, the Way itself. Early on, Arakawa-San likened me to Musashi but now he said I also had his ability. Musashi said that he looked up to the gods and Buddha but that he would never rely on them 
  30. It took me 25 years to learn but after Arakawa-san there was no more important person in my life that Nagashima-san (the best and most prolific player on the Giants). Learning to play with him was everything. He was an all time legend but I’m not sure I ever truly knew him. This mysterious part accounted for the tremendous hold he had on the imaginations of people in our country. It is this part that makes me think he had genius as well as talent. 
  31. In a slump, you ask yourself “why?” This is silent, never to be overheard. It seals you in the privacy of effort. My why is that I’m hungry for skill! I kept a bat and a notebook at my bedside so that if I came out of sleep with an idea, I could practice it and then write it down. I also got in the habit of simply writing to myself to raise my spirits, as I was the one I had to depend on
  32. 7 steps of my form – fighting spirit, stance, grip, backswing, stride forward, downswing, impact 
  33. My old friends come from every walk of life. They bring with them many interests and many new things to talk about
  34. Making things too comfortable takes away the challenge. And everything I do, including salary talks, has only one goal – to keep my mind focused on the challenge 
  35. All of a sudden I was one shy of the 700 home run mark and it seemed like a real barrier. I found myself trying and, in trying, trying to stop myself from trying 
  36. I never once had the idea that because I had made this or that record I could just lie back and play the star. If anything, I worked harder than ever. 
  37. In 1980 I hit a slump but it was different than before. My spirit was not there. My desire for combat was gone. I have no anger anymore. Mastery in Aikido means loss of desire for combat. 
  38. After I retired, I became assistant manager. I was ready to give what I could to younger players. I had certainly been blessed by having a master teacher, and if I could ever give just one young player a fraction of what was given to me, my role would be fulfilled. I did not ask for nor did I expect to receive special considerations based on the stature I had acquired as a player. During practice, I made it a point to pull and push batting cages around, to pick up balls, and to do other ordinary grounds keeping chores. I ate and lived among the players  
  39. I learned from Arakawa-san, my greatest teacher, that the Way is long and mastery of any sort is not easy to achieve. Above all, what I learned from my Sensei was how to wait. I believe I learned the meaning of waiting on one foot. If I understand anything in this life, it is how to wait. It is not an answer. But for me it is everything. 
  40. Nin – Oh added this frequently to autographs he signed. It means patience, or more precise, constancy. 

What I got out of it

  1. I had never heard of Sada but his story is incredible – his 3 years of struggle lead to desperation which allowed him to try something unusual – hitting on one foot. His thoughtfulness and clarity of thought are beautiful. The steps towards mastery using a Zen-like framework apply broadly (pair with Waitzkin’s The Art of Learning)

The Goal: A Process of Ongoing Improvement by Eliyahu Goldratt, Jeff Cox

Summary

  1. Using The Goal (understanding the world and the principles that govern it), thousands of corporations have increased profits through reducing invenory, eliminating bottlenecks, and applyign the theory of constraints

Key Takeaways

  1. No exceptional brain power is needed to construct a new science or expand an existing one. What is needed is just the courage to face inconsistencies and to avoid running away from them just because that’s the way it was always done. This challenging of basic assumptions is essential to breakthroughs. Progress in understanding requires that we challenge basic assumptions about how the world is and why it is that way. If we can better understand our world and the principles that govern it, I suspect all our lives will be better. 
  2. I do not believe in absolute truths. I fear such beliefs because they block the search for better understanding. Whenever we think we have final answers, progress, science, and better understanding ceases. Understanding of our world is not something to be pursued for its own sake, however. Knowledge should be pursued, I believe, to make our world better – to make life more fulfilling
  3. Every action that brings a company closer to its goal is productive. Productivity is meaningless unless you know what your goal is
  4. The goal is making money but this can be expressed in many different ways (cash flow, ROI, net profit) and some measurements to help you track this include throughput, inventory and operational expense.
    1. Throughput is the rate by which money is generated through sales (finished product which isn’t sold is not throughput)
    2. Inventory is all the money the company has bought which it intends to sell
    3. Operational expense is all the money spent turning inventory into throughput.
    4. You must express the goal in terms of these measurements. Increasing throughput while simultaneously decreasing inventory and operational expense 
  5. Must consider the company as a whole, no local optimums
  6. A measurement not clearly defined is worthless, even dangerous. 
  7. Having people and machines working nonstop is inefficient 
  8. Dependent events and statistical fluctuations are incredibly important to understand and keep track of. Whatever is the slowest process or bottleneck of any sort is your limiting factor. You can sprint in every other area but if you don’t increase the throughput of the bottleneck, productivity won’t increase at all. The capacity of the plant is the capacity of the bottleneck. The actual cost of a bottleneck is the total operating cost / the number of hours the bottleneck produces. Make sure the bottleneck’s time is never wasted (idle, working on defective parts, working on parts you don’t need immediately) and, if you can, shift work from bottleneck to non-bottlenecks
  9. There must be a way to signal the bottlenecks with the release of material schedule – they must be at the “front” of the assembly process
  10. The amount of time material spends in a plant can be broken down into 4 parts
    1. Set up while the resource is being set up
    2. Process time
    3. Queue time for resources
    4. Wait time for another part.
    5. By reducing batch sizes you can decrease the amount of time parts spend in queue and wait time since you are no longer turning non-bottlenecks into bottlenecks 
  11. All of Rogo’s (the main character’s) suggestions make common sense but they flew in the face of everything he had ever learned and if he hadn’t taken the time to think and sweat through the problems himself, he would never have gained the conviction in them necessary to implement them and turn the plants around. What Alex really needs to learn from Jonah is not plant management practices but how to persuade people how to question common sense and common practice and how to overcome resistance to change
  12. Accounting’s true meaning is to keep control and see how much the company is spending, and helping to understand the process as a whole so that the best thing can be done for the organization. Financial metrics can be hurtful if they’re taken just for their own sake and looked at out of context
  13. Capacity constraint resources are one step below bottlenecks and have to be improved in lockstep or else you could get a wave of bottlenecks at the same time
  14. You have to shift from a cost-centered world to a throughput-centered one. You have to find the weakest link or the bottleneck first in order to increase throughput – not solely focused on cutting costs.
    1. Identify the bottlenecks
    2. Identify how to exploit the bottlenecks
    3. Subordinate everything to the above decision
    4. Increase the bottleneck
    5. If the bottleneck is still broken go back to step one, and don’t let company inertia stop you
  15. The more inventory, the less spare capacity you need and vice versa. As you take on more orders it might not create more bottlenecks but it drastically reduces your spare capacity which means you have to take on more inventory in order to compensate
  16. The first step must be to identify the week link as this is the bottleneck the areas you need to focus on first
  17. Three fundamental questions
    1. What to change
    2. What to change to
    3. How to go about making this change 
  18. A goal should not have a set final metrics – it should be something that triggers ongoing improvement and innovation 
  19. Toyota did away with economical patching and instead focused on the set up time trying to reduce that as much as possible. This allowed them to switch components of what the operator was doing quickly and efficiently
  20. Better production flow or shorter lead times creates incredible cost savings and efficiency savings for many reasons 
  21. A grave mistake by some top management is to layoff capacity – either people or machines – when throughput increases and efficiencies increase. This sends the signal to the company that if you become better and more efficient at your job, that you will lose it. Instead, encourage the sales team to go out and make more sales to take advantage of the increased capacity 
  22. Production’s biggest focus has to be improving flow. There are many other things that can be done but that ultimately lies with other departments. They must prevent overproduction (don’t produce unneeded product), condemn local efficiencies and focus on the global. Lastly, you must balance the flow after all these disruptions are mitigated 
  23. Small disruptions can become major ones but the most important disruptions are those which impact availability. Those are the ones you need to focus on and get rid of. In order to address, you should create a database of disruptions and whenever a major one which impacts availability occurs, it should be defined and described within the database

What I got out of it

  1. Goldratt did a great job of weaving in some valuable lessons in a story format. It was a production example but the ideas and the theory of constraint can be widely applied

The Dream Machine: JCR Licklider and the Revolution that Made Computing Personal by Mitchell Waldrop

Summary

  1. Licklider was far ahead of his generation in seeing the potential for computers – for making them humane and individual, in democratizing access to information, creating a symbiosis between man and machine. It was his work in the Pentagon along with many other visionaries who made this possible – that allowed for the standalone computer with a mouse and a graphical user interface to come into existence. His desire to understand how the brain worked as a system fueled his curiosity. Lick went on to form the ARPA Information Processing Techniques Office in 1962 and started the research funding for interactive computing and pervasive worldwide networks that has resulted in most of the technology we use today and also fueled the next generations of computing researchers – many of whom became the founders and mainstays of Xerox PARC. When computers were a short step removed from mechanical data processor, Lick’s treatises on human/computer symbiosis shifted our understanding of what computers were and could be.

Key Takeaways

  1. Lick’s goal was to forge ahead with the human/computer symbiosis and create an interconnected, self-perpetuating system into a single computer network. An electronic medium to connect everyone – the ARPA net. Today it is known as the internet and everything we now associate with it
  2. JCR Licklider may be one of the most intuitive geniuses of all time. He simply saw in his head how information flowed, and how people, things, and ideas are interconnected
  3. Lick, while humble and nice, hated sloppy work, glib answers, and never took anything for granted. He was mischievous and a little anarchical. He was never satisfied with the ordinary and always pushed the limits. His grounding in psychology was essential for his later work with computers as he always tried to design the computer and how it functioned to best meet the needs of the humans operating it. Lick approached every problem as a systems problem rather than a detailed or individual problem
  4. The first high-profile project he worked on was related to acoustics for the war and his boss had a simple mantra: hire the best people, buy them the best machines money can buy, inspire them to no end, and work them 14 hours a day. With this formula they achieve nearly everything they set out to
  5. Norbert Wiener was a prodigious character at MIT. He was a genius in multiple ways, especially mathematics where he was able to use his intuition and form physical models in his head of the problem rather than merely manipulating symbols on the page. He had the hologram in the head 
  6. Alan Turing didn’t like seeing what others had accomplished before him. He preferred to reinvent the wheel and figure things out for himself. He wasted a lot of time and reinvented the wheel but he came to understand things deeply.
  7. Johnny Von Neumann’s stored program concept created software and changed computing, opening up the potential that we associate with computers today
  8. Claude Shannon thought of information through a 5 part framework: source, transmitter, communication medium, receiver, destination. This simple framework helped him think through the purpose of information and not get bogged down in details. Information ought to measure how much you learn from a given message. If you knew everything in a given message, the information content is zero. However, information and meaning is separated as it relates to computers. Shannon also proved that it is possible to get a message through with perfect fidelity no matter how much static or distortion or how faint the signal. It’ll eventually get too slow and the codes too long but it is possible to overcome noise. This is the fundamental theorem of information theory. Shannon didn’t like how information and meaning could be too easily confused so he had Von Neumann come up with a new name and he came up with one immediately: entropy. Information is entropy. It has the same formula as the physicists formula for entropy. A mathematical variable related to the flow of heat. Information is everywhere and in everything it is as old as time and ties together the mind-body problem, computation, communication, and more
  9. Lick was interested in every domain and was always pulling in new ideas from different fields. He loved novel ideas and would always push himself and others to think about things differently in order to gain new or deeper insights. While Lick has high expectations for his team, he was extremely devoted and his team knew it – he had built a tribe more than a research group. Lick optimized for creativity and productivity so cared very little for credit. He would give his ideas and insights away for others to work on and publish so that he could get more done 
  10. Understanding how our brain works brought together information theory, logic, communication, cognitive science, behavioral psychology, and much more. Two key breakthroughs were understanding chunking and that it matters tremendously how our neurons fire and are organized – not just the raw number of neurons we have
  11. When Lick was brought on to head up the new ARPA project there was no budget, no mandate, no charter. This was perfect as they could simply talk about and work on the most important questions and topics as they came up, not being pigeonholed or sucked into a specific purpose but able to adjust and adapt to everything new that was happening
  12. A key realization for Lick was that if all his visions where to come true, he had to create a self-reinforcing and self-sustaining community between all the different groups who are contributing to this project. Without this focus and insight, many of these dreams might have been lost, forgotten, or not achieved for some other reason
  13. Corvado created the first open source system which led to the software boom and the PC. Controversial at the time, he followed the dictum that if you create something useful people, will use it. This was significantly different from other utilities of the past because rather than value flowing just one way (like electricity to users), value flows two ways now: from software to user and user back to software. This had tremendous implications
  14. Lick give people plenty of space as long as they’re doing something interesting and living up to his high standards. However, if not, he can be ruthless and shut down programs that weren’t performing
  15. For all of Lick’s strengths, he was terrible administratively. Frustrating his colleagues and friends as they had to badger him for weeks or months to get anything done. And, when everything is funded by ARPA, this was a huge deal 
  16. Lick at ARPA and Bob Taylor at Xerox Parc had to learn how to find a way to get their groups all to move together, to give their groups a sense of cohesion and purpose without crushing their spontaneity and creativity. They had to set things up and create an environment where they would follow their own instincts and self-organize. This is the fundamental to dilemma of management. Bob Taylor spent years traveling and getting to know the cultures of different high performing groups and he took the time to speak to the youngest people there. Not only tp pick up their ideas but to understand what their values were and how he could cater to them.  Taylor’s style of research can be summed up as don’t just invent the future, go live in it. Don’t worry about the cost for now but whatever you invent, make sure to use it and then show others how to use it and why it’s helpful. The only mandatory program was a once weekly discussion from the program leaders about what they were doing and for an hour the other people would have at him. This created a sense of cohesion and purpose and also flushed out ideas before going too far along the wrong path. These meetings often got heated and Taylor would help turn them from “class 1” to “class 2” meetings, meaning they would go from yelling at each other to having to explain the other side‘s position to their satisfaction. This worked amazingly well to flush out ideas and improve communication.
  17. Xerox PARC’s main vision was to create the digital office, an integrated symbiosis between working man and machine. Broadly, it was split into two groups – one focused on hardware and the other on applications. Low cost, high performance and high quality graphics was a thread which ran through everything they were trying to do. Moore’s Law was just beginning to take hold and this who were still sold on time sharing began to be able to see the possibility of an individual, high powered machine for everybody
    1. There was this thread that ran through Vannevar Bush, Licklider, Doug Engelbart, Alan Kay, and others. It was the ascent of man, it was like the Holy Grail. PARC would rationalize it according to what Xerox needed but whenever they could phrase an idea to align with this path everybody’s eyes would light up, hitting a sort of resonance frequency. 
      1. Engelbart’s “Mother of All Demos” – showing off technology which set fire to the vision of the future and what could be
  18. Alan Kay was one of the key members of PARC’s team and was a prodigy from a young age. He learned to read by the age of three and read hundreds of books before going to school. By that young age he knew that a lot of what the teachers were telling him was wrong or at least that there were multiple points of view. The teachers did not like this. He never distinguished art from science and was one of the key pioneers in this field. 
  19. Good names are incredibly important for prototypes – they have to be familiar, easy to spell, easy to use, easy to understand, have a broad theme, and conjure up pleasant feelings. 
  20. Alan Kay mentions that in the history of art, it is not the adults who actually invent the new medium who do amazing things, but the first generation of kids to grow up with it who do
  21. Xerox was growing so quickly in the late 1960s and 1970s that they almost choked on their own growth. In order to survive, they had to bring in management, marketing, and finance types – mostly from IBM and Ford.  While this helped them survive their amazing growth, it also reinforced some bad lessons – that nothing exists or is useful unless it could be shown and captured on the spreadsheet and eventually this led to the demise of Xerox PARC and that era of research and innovation. Jim O’Neil became the numbers guy and shut down much of the spontaneous generation and innovation because if it didn’t meet his numbers he couldn’t “see it” and wouldn’t buy into it. When sales and finance make all the shots, the company is on a downward spiral as they are not able to innovate or think long term
  22. Xerox PARC was an Eden in many ways but what allowed them to flourish was the vision, the people, and an abundance mentality. The fact that they had money to spend and didn’t have to jump through hoops to get it. When there is scarcity you don’t have a community, you just have a bunch of people trying to survive. In 1975 Xerox’s printer and copier business was being threatened and this was their cash cow. The instinct is to keep pouring money into this in order to save it but sometimes that isn’t appropriate. You must know when to cannibalize or disrupt yourself 
  23. You always got the sense that Lick was playing. He was like a kid in a candy store. His exploratory and curious child-like mind never went away. He was not suited to be an administrator or manager but was a visionary and community builder. He encouraged people and showed them what was possible, what they were really working towards 
  24. DEC took advantage of the open architecture and was able to foster creativity and uses for their machines that they never would’ve been able to come up with. Many people loved the ability to tinker, upgrade, or personalize what they bought rather than buying a finish package from an IBM for example. Roberts and his Altera machine would follow DEC‘s lead and make it an open architecture which unleashed a wave on entrepreneurialism and garage start ups by the hundreds – filling all sorts of niches and launching some of the world’s biggest and most successful companies (such as Microsoft)

What I got out of it

  1. An incredibly fun read – detailing not only the people and the history behind the computer revolution, but the atmosphere, thinking, and optimism which fueled it

How Asia Works: Success and Failure in the World’s Most Dynamic Regions by Joe Studwell

Summary

  1. This book is about how fast or not economic transformation is achieved. It argues there are 3 interventions the government can take to influence this process: maximize output from agriculture with highly intensive household farming (pushing up yields and outputs to its highest level which primes demands for goods and services), direct investment and entrepreneurs towards export-oriented manufacturing as it makes use of the limited skills of labor by working with machines and technology (subsidies should incentivize spending in technology and manufacturing), and interventions in the financial sector to focus capital on intensive small scale agriculture and manufacturing development. The state’s role is to keep money targeted at a development strategy which gets the highest rate of technological learning, giving the highest rate of return, and helping the country grow as sustainably as possible, improving the lives and outcomes of everyone .

Key Takeaways

  1. Agricultural
    1. Agriculture is the place to start with up-and-coming countries because the vast majority of their people are tied to the land. Structuring incentives so that these people can prosper creates the foundation for further economic success 
    2. By approximately evenly dividing up the land amongst the peasants and incentivizing a maximization of output (rather than profit), yields go through the roof which helped pay and feed these families. It allowed everyone to compete on an approximately equal footing and everyone believed they had a chance st success – which they did. This “gardening” approach is the most appropriate way to think about and structure agricultural societies early on as it can make full use of all the available labor. Surprisingly, these smaller plots owned by the farmers had far greater yields than many plantations – busting the myth of efficiency in large scale agricultural operations
    3. The political elite tend to be out of touch with the agricultural peasants and therefore undervalue and under-appreciate their power and ability to help the economy 
    4. If you want industrialization, first fix agriculture
    5. Even a total outsider can tell the difference between a plot of land tended by an owner vs. a tenant
    6. A consistent application of these policies across different cultures and regions is a stark reminder that geography is not destiny 
    7. Farmers laid the foundation for industrialization and their household savings provided the base to build factories and later the market for the goods these factories made. Taiwan is the prime example in this case as many factories were built in rural areas and many farmers became industrial entrepreneurs. Indonesia and the Philippines are the negative examples – they nationalized land before the farmers could build up wealth and plantation inefficiency took hold. In addition, loopholes in policies so the rich could amass massive land holdings, put the poor at a disadvantage and worsened conditions
    8. Besides owning the small fields, the farmers need the extension, marketing, and credit to progress 
    9. As rural laborers begin moving into higher paying industrial and service jobs, farming needs to rebalance from productivity towards profitability – shifting towards more mechanized farms away from gardening plots. The countries will need to specialize at this point, moving away from farm protection and subsidies and to a niche they can compete in. This shifts money to this area and gives other poor countries the chance to follow the same playbook 
  2. Manufacturing 
    1. If there is one thing economic history can teach us is that there are no economic policies or laws which are sound forever 
    2. Manufacturing helps local people learn skills and to leverage the machines which they initially import, increasing productivity. Local entrepreneurs know the local market but they must compete with international firms in order to continue improving and to survive long-term without protection 
    3. Government must incentivize – through protection and subsidy – their rural entrepreneurs so they can get into large scale manufacturing rather than service industries at this phase. They must have export discipline – proving that their goods are competitive on a global stage and thus merit subsidies to grow.
    4. The government shouldn’t pick winners as much as weed out losers. South Korea did this which is why they ended up with one or two massive companies in each sector without explicit state investment or control. Protectionism hurts in the short term but helps economies evolve and it’s people learn useful skills and in the long term is beneficial
    5. Growing economies typically start industrialization with textiles later moving on to steel, shipbuilding, food stuffs, petro-chemicals, and eventually cars other heavy industry
    6. While Taiwan what is the exemplar in land redistribution, South Korea took over as the exemplar of industrialization – setting up their entrepreneurs to have to compete with international markets and companies by providing enough subsidy and protection to let them grow, learn, and thrive
    7. It is interesting to look in hindsight that Taiwan, South Korea, and Japan accomplish their amazing feats with no, or at least very few, trained economists. They simply followed the model of early America and later Germany 
    8. Government must not ask entrepreneurs to innovate for moral reasons. Rather they must accept and incentivize their animal spirits so that they can innovate, industrialize, and develop the country as is needed for their own benefit and for the benefit of all
    9. More than ever, firms are able to flourish if they have the right state industrialization policies in place. Hyundai was able to flourish and become one of the world’s most successful car manufacturers from an unpromising start and a family with no automotive experience thanks to the favorable Korean policies 
    10. The goal is technological learning which hopefully leads to internal, domestic innovation. While land reform and infant industry regulations are difficult, there are no better options. Technical and technological progress equates to economic progress and history has shown that these difficult but necessary steps must be taken 
    11. Big business is incredibly important. There are smaller countries with big firms which have gotten rich but never the other way around. However, government must continuously restrain their entrepreneurs or else you end up with oligarchs like in Russia or SE Asia
  3. Financial
    1. Bank deregulation and removal of capital controls too early hurt developing economies such as Thailand or Indonesia. The agricultural and industrial sectors must be ready before these financial policies are enacted. Several different monetary and fiscal policy approaches have led to success but they all had the right policies, pointing at the right targets 
    2. In the Philippines, private banks would lend to the rich entrepreneurs at favorable terms which of course help them but didn’t help the country develop at all. However, ultimately what led to the downfall of economic collapse of the Philippines was their lack of export discipline which would have provided them with export loop feedback so that they could continuously improve and better compete on a global stage – improving their technical know-how across the country
    3. Korea and the Philippines both borrowed extremely heavily and were in a lot of debt but Korea used that money to improve the technology and scale to a global level where the Philippines did not
    4. Malaysia pumped too much money into real estate and the stock market instead of directing it towards industry. They tried to skip a step in order to compete and out do Singapore but this eventually led to an economic collapse and stagnated technological progress 
    5. Capital allocation must be tied to industrial policy and export performance or else capital will be deployed in low return investments. Government must incentivize and cajole entrepreneurs towards manufacturing and international markets. The financier is not the economic savior some suggest but responds to the environment around him which the government helps create. Foreign funds must not be allowed in too early and deregulation can only happen once manufacturing is humming and technological progress is underway 
    6. Banking systems are so effective because they respond to central bank policy which is controlled by government policy. It is a simple and effective method, easier to to control than bond and stock markets
    7. There is no good understanding today of when a country should deregulate 
  4. China 
    1. China first tried the mass scale agriculture approach but soon realized it was ineffective so they transitioned to the gardening approach which greatly helped feed and put to work hundreds of millions. They also abandoned an approach where they would try to come up with everything internally and opened up trade to buy, borrow, and steal the best inventions and processes rather than trying to come up with everything internally
    2. Chinese government has always been paranoid of being at the mercy of necessary food stuff importers. They have taken away a lot of farmland dedicated to these grains in the past decade and may soon change the policy so they secure enough food to be continue to be independent 
    3. It is yet to be seen if China’s close control of oligopolies can help the economy long term. So far they have been able to strike a balance between control and allowing the entrepreneurs and employees to profit 
    4. China has a heavy bias to public and state owned enterprises rather than private companies. 
    5. People worry about shadow banking systems which lend to wealthy citizens outside the direct view of the government in order to seek higher returns but this has existed in one form or another in every developing country. Whenever government policy favors agriculture and industry over finance, shadow finances will pop up
    6. China’s financial policies are not as loose as many think if taken into context of Japan and Korea in similar stages, the size of their economy and the make up of their assets, and the fact that little money is owed externally. They are making great technological progress with the money they’ve borrowed but the best days of industrial-led policy development have passed so they will need to be more efficient moving forward. It is China’s size and not necessarily their innovative policies which have shaken the world. It does not yet have any world renowned firms and, if it is to take the next step developmentally, must improve its institutional policies 
  5. Other
  1. One of the key lessons when analyzing failed states is that they are isolated, closed off, and do not trade or interact with external countries. It has shown to be very hard, if not impossible to thrive if you are not open and trade with other countries 
  2. There is a weaker than expected correlation between education and rise in GDP. Most education occurs on the job and within firms rather than in school settings making industrial focus extremely important. If there is no industry to serve as a vehicle for learning, formal education may go to waste 
  3. Demographics, political pluralism / democracy are very important but is not touched on at length in this book 
  4. Rule of law is not one of the pillars for economic development but it is for overall development 
  5. Broadly, there are two types of economics. The first is akin to an education for developing countries in which the people require the skills needed to compete with their global peers. It requires nurture, protection, and competition. The second is more focused on efficiency and is applicable for more developed countries which needs less state intervention, more deregulation, freer markets and a larger focus on profits. The question is not if there are two but when they meet and how to best transition between the two. Where certain economically developed countries have fallen flat is that they fail to continue to evolve and develop. No policy is good forever and things must change. In addition, economic development is only one leg of the stool. Freedom, rule of law, environmental health, and individual autonomy are equally important and are needed for any country to prosper
  6. There is no significant economy who has evolved successfully out of policies of free trade and deregulation from the get go. They require proactive interventions – namely in agriculture and industry that foster early accumulation of capital and skill 

What I got out of it

  1. For developing countries, the best way to prosper is to first redistribute land so the people can use gardening style agriculture to feed themselves and save some money, then government’s must create subsidies and protective policies so that internal industry can grow and flourish with the goal of increasing skill and technological know-how so that future innovation can happen, then finance comes into the picture and must be used to further direct these two areas effectively and sustainably

Out of the Crisis by Edwards Deming

The Marmon Group: The First Fifty Years by Jeffrey Rodengen

Summary

  1. The stories of Jay and Bob Pritzker and how they started their empire with an unlikely acquisition of Colson Corporation. Jay was a financial wizard and he perfected a way to finance acquisitions by using a loophole in the tax code (this became known as the Pritzker Method), he was also universally respected as a savvy negotiator. Bob was the first engineer in the Pritzker family (the rest were lawyers) and he had a passion for plant management. They made a perfect pair for buying and turning around companies. The Marmon Group is a unique, loose federation of companies comprised mostly of manufacturing companies that operate a broad spectrum of American industry. As of 2002, the more than 100 companies have revenue in excess of $6b and produce a mind-boggling array of products. The Marmon Group continues to thrive and grow because of the trust and integrity built into its most basic structure (Berkshire acquired a controlling interest in 2008 and later bought it outright)

Key Takeaways

  1. The Marmon Group member companies are managed independently, at the local level, and a dual reporting structure feeds financial results to the group’s Chicago HQ where each member company is tracked closely by a small group of executives and managers. Beyond that, most operating and capital decisions are entrusted to the individual company presidents. Even acquisitions are managed at the local level. There are centralized resources and expertise which give companies a strong incentive to join the Marmon Group. Although the enterprise was built through acquisition, much of its growth over the years has been organic. Rather than serve as active micro-managers, the cadre of executives in Chicago viewed themselves as a consulting organization that provided tax, personnel, real estate, and other advice to the member companies of The Marmon Group. Operating policies include nearly complete autonomy, trust, simplicity, and effective leadership at the local level. 
  2. A great opportunity for the Pritzkers was a manufacturing company which was ailing. No attention was given to what business the company operated in and whether it would fit well with existing member companies – it just mattered that it was a solid opportunity
  3. Today, The Marmon Group is the Pritzker family’s largest enterprise, no small feat as they own Hyatt, a large interest in Royal Caribbean Cruise Line, many real estate holdings, and various joint ventures and partnerships
  4. Nicholas Pritzker, Jay and Bob’s grandfather, wrote  a small book that has been passed down the generations; the theme of the book is “Your only immortality is the impact you have on your successors.”
  5. “The only reasons owners of Colson and other troubled companies sold to us at bargain prices in the early days was because they had no place else to go.” – Bob Pritzker
  6. The Marmon Group was built from the ground up with virtually no financial investment by the Pritzker family. The brothers built the company by shrewdly investing in, and then greatly improving, poorly performing businesses. These were then used as vehicles to purchase yet more businesses, and the process evolved into a role model for building a conglomerate.
  7. Colson had troubles and in order to not default, they had to merge with another company that had sufficient working capital to finance a new plant – Great American Industries. It was not a smooth merger and some of the holding companies had fraudulently accounted for their inventories (Colson’s biggest piece of business at the time was a navy contract to produce the Mighty Mouse rocket)
  8. The Pritzkers built up Marmon because of ambtiton but also diversification. They understood that a broad-based organization with manufacturing operations in a variety of industries would be protected during normal economic swings 
  9. Pritzker Method – basically we bought a dominant position in a public company, then proposed a merger for cash or securities, finally we brought it private, and then began revitalizing operations and selling off parts of the business that didn’t fit with its core competenciesd. That’s the history of many of Marmon’s deals
  10. Cerro, metal and mining operation, and Trans Union, a spin-off of Standard Oil where it leased rail cars but also got into consumer credit reporting and other services, were Marmon’s biggest deals. The CEO of Trans Union thought it would be worth more to private owners than to a public company because a private owner would value the firm on the basis of cash flow rather than share earnings. Their cash flow per share at that time was almost 3x its earnings per share. 4 years after the merger, the board lost a case which made them liable for $13.5m to shareholders because it was deemed that they sold too low. This was hailed as a crazy verdict but eventually the Pritzkers paid for the $13.5m fine as long as the board members agreed to pay $25k per year for 5 years to the Illinois Institute of Technology and Stanford Medical School. They footed the bill because they thought the decision was unfair
  11. “One of the advantages of working with Marmon is you sit down with the president and make a decision. You don’t write a big book like you have to do in a public company and then hopefully get on the docket and make a presentation to the board to get approval to do something. With Marmon, we could just sit down and have a discussion and move ahead.”
  12. Bob used to teach at the University of Chicago, and he’s more like a professor. When I came here, one VP gave me some excellent advice. He told me to think of the office as patient waiting rooms and Bob is the doctor. He’ll come around, and he doesn’t like to read a lot of information. Don’t send him long reports or any of those kinds of things. He’ll come around and take your temperature and find out what’s going on and how you feel and what he can do to help. It was good advice
  13. The only constants would be internal expansion and reinvestment augmented by a steady pace of acquisition, characterized more by opportunity than anything else. There was no planned growth. In Marmon, “we’re not planners, we’re opportunists. We really haven’t sat down and said, ‘we really should get in this’ and make a plan.”
  14. Marmon moved on potential acquisitions with speed and surety, sending in small teams from Chicago to rapidly evaluate a company’s potential and future. The team considered a lot of factors, including any potential liability, its financial health, morale, tax status, any potential environmental problems, and capacity for growth. One element that was never considered during due diligence was potential synergy with other Marmon Group companies; each company had to stand on its own as a successful enterprise. This, more than any other single factor, became the defining quality of the sprawling Marmon Group. The Marmon Group comprised member companies run by executives who were almost completely autonomous in their ability to make business decisions. The very speed of this process is one of the selling points – wer’re prepared to act rapidly. 
  15. People sold to Marmon for many reasons but namely they wanted to cash out but continue working. They were the perfect home and everybody trusted them
  16. The Marmon Group stubbornly resisted any kind of corporate organization as a matter of principle – the Pritzkers have an aversion to large bureaucracies. They preferred to keep things as simple and direct as possible. “Trust is crucial in running this company.”
  17. Member companies would often bring acquisition ideas to HQ
  18. Marmon businesses operate about 400 manufacturing, distribution, and service facilities, and employ about 19,000 people worldwide. Revenues exceeded $7.7 billion in 2017.
  19. Today, Marmon Holdings, Inc., part of Berkshire Hathaway Inc., is a global industrial organization comprising 13 diverse business sectors and more than 100 autonomous manufacturing and service businesses. These 13 sectors are:
    1. Beverage Technologies
    2. Foodservice Technologies
    3. Water Technologies
    4. Transportation Products
    5. Rail Products & SErvices
    6. Intermodal COntainers
    7. Crane Services
    8. Retail Solutions
    9. Metal Services
    10. Engineered Wire & Cable
    11. Electrical Products
    12. Plumbing & Refrigeration
    13. Industrial Products

What I got out of it

  1. Learned a lot about Marmon’s history and their values – their speed in execution, opportunistic mindset (nothing was “planned”), their focus on trust/autonomy, and the fact that they never considered synergies between their companies all stood out to me.

The Systems Bible: The Beginner’s Guide to Systems Large and Small by John Gall

Summary

  1. The fundamental problem does not lie in any particular System but rather in Systems as Such. Salvation, if it is attainable at all, even partially, is to be sought in a deeper understanding of the ways of all Systems, not simply in a criticism of the errors of a particular system. Systems are seductive. They promise to do a hard job faster, better, and more easily than you could do it by yourself. But if you setup a System, you are likely to find your time and effort now being consumed in the care and feeding of the system itself. New problems are created by its very presence. Once set up, it won’t go away; it grows and encroaches. It begins to do strange and wonderful things and breaks down in ways you never thought possible. It kicks back, gets in the way and opposes its own proper function. Your own perspective becomes distorted by being in the system. You become anxious and push on it to make it work. Eventually you come to believe that the misbegotten product it so grudgingly delivers is what you really wanted all the time. At that time, encroachment is complete. You have become absorbed. You are now a systems-person.

Key Takeaways

  1. Systemism – mindless belief in systems, that they can be made to function to achieve desired goals. The strange behavior (antics) of complex systems
  2. Systems Never Do What We Really Want Them to Do
    1. Malfunction is the rule and flawless operation the exception. Cherish your system failures in order to best improve 
    2. The height and depth of practical wisdom lies in the ability to recognize and not to fight against the Laws of Systems. The most effective approach to coping is to learn the basic laws of systems behavior. Problems are not the problem; coping is the problem
    3. Systems don’t enjoy being fiddled with and will react to protect themselves and the unwary intervenor may well experience an unexpected shock 
    4. Failure to function as expected is to be expected. It is a perfectly general feature of systems not to do what we expected them to do. 
    5. “Anergy” is the unit of human effort required to bring the universe into line with human desires, needs, or pleasures. The total amount of anergy in the universe is constant. While new systems may reduce the problem it set out to, it also produces new problems. 
    6. Once a system is in place, it not only persists but grows and encroaches 
    7. Reality is more complex than it seems and complex systems always exhibit unexpected behavior. A system is not a machine. It’s behavior cannot be predicted even if you know it’s mechanism 
    8. Systems tend to oppose their own proper functions. There is always positive and negative feedback and oscillations in between. The pendulum swings 
    9. Systems tend to malfunction conspicuously just after their greatest triumph. The ghost of the old system continues to haunt the new
    10. People in systems do not do what the system says they are doing. In the same vein, a larger system does not do the same function as performed as the smaller system. The larger the system the less the variety in the product. The name is most emphatically not the thing
    11. To those within a system, the outside reality tends to pale and disappear. They are experiencing sensory deprivation (lack of contrasting experiences) and experience an altered mental state. A selective process occurs where the system attracts and keeps those people whose attributes are such as are attracted  them to life in that system: systems abstract systems people 
    12. The bigger the system, the narrower and more specialized the interface with individuals (SS number rather than dealing with a human)
    13. Systems delusions are the delusion systems that are almost universal in our modern world 
    14. Designers of systems tend to design ways for themselves to bypass the system. If a system can be exploited, it will and any system can be exploited 
    15. If a big system doesn’t work, it won’t work. Pushing systems doesn’t help and adding manpower to a late project typically doesn’t help. However, some complex systems do work and these should be left alone. Don’t change anything. A complex system that works is invariably found to have evolved from a simple system that worked. A complex system designed from scratch never works and can not be made to work. You have to start over, beginning with a working simple system. Few areas offer greater potential reward than understanding the transition from working simple system to working complex system 
    16. In complex systems, malfunction and even total non function may not be detectable for long periods, if ever. Large complex systems tend to be beyond human capacity to evaluate. But whatever the system has done before, you can be sure it will do again
    17. The system is its own best explanation – it is a law unto itself. They develop internal goals the instant they come into being and these goals come first. Systems don’t work for you or me. They work for their own goals and behaves as if it has a will to live
    18. Most large systems are operating in failure mode most of the time. So, it is important to understand how it fails, how it works when it’s components aren’t working well, how well does it work in failure mode. The failure modes can typically not be determined ahead of time and the crucial variables tend to be discovered by accident
    19. There will always be bugs and we can never be sure if they’re local or not. Cherish these bugs, study them for they significantly advance you towards the path of avoiding failure. Life isn’t a matter of just correcting occasional errors, bugs, or glitches. Error-correction is what we are doing every instant of our lives
    20. Form may follow function but don’t count on it. As systems grow in size and complexity, they tend to lose basic functions (supertankers can’t dock)
    21. Colossal systems cause colossal errors and these errors tend to escape notice. If it is grandiose enough, it may not even be comprehended as an error (50,000 Americans die each year in car accidents but it is not seen as a flaw of the transportation system, merely a fact of life.) Total Systems tend to runaway and go out of control
    22. In setting up a new system, tread softly. You may be disturbing another system that is actually working
    23. It is impossible not to communicate – but it isn’t always what you want. The meaning of a communication is the behavior that results
    24. Knowledge is useful in the service of an appropriate model of the universe, and not otherwise. Information decays and the most urgently needed information decays fastest. However, one system’s garbage is another system’s precious raw material. The information you have is not the information you want. The information you want is not the information you need. The information you need is not the information you can obtain. 
    25. In a closed system, information tends to decrease and hallucination tends to increase
  3. What Can Be Done
    1. Inevitability-of-Reality Fallacy – things have to be the way they are and not otherwise because that’s just the way they are. The person or system who has a problem and doesn’t realize it has two problems, the problem itself and the meta-problem of unawareness
    2. Problem avoidance is the strategy of avoiding head-on encounters with a stubborn problem that does not offer a good point d’appui, or toe hold. It is the most under-rated of all methods of dealing with problems. Little wonder, for its practitioners are not to be found struggling valiantly against staggering odds, nor are they to be seen fighting bloody but unbowed, nor are they observed undergoing glorious martyrdom. They are simply somewhere else, successfully doing something else. Like Lao Tzu himself, they have slipped quietly away into a happy life of satisfying obscurity. The opposite of passivity is initiative, or responsibility – not energetic futility. Choose your systems with care. Destiny is largely a set of unquestioned assumptions 
    3. Creative Tack – if something isn’t working, don’t keep doing it. Do something else instead – do almost anything else. Search for problems that can be neatly and elegantly solved with the resources (or systems) at hand. The formula for success is not commitment to the system but commitment to Systemantics 
    4. The very first principle of systems-design is a negative one: do without a new system if you can. Two corollaries: do it with an existing system if you can; do it with a small system if you can.
    5. Almost anything is easier to get into than out of. Taking it down is often more tedious than setting it up
    6. Systems run best when designed to run downhill. In essence, avoid uphill configurations, go with the flow. In human terms, this means working with human tendencies rather than against them. Loose systems last longer and function better. If the system is built too tight it will seize up, peter out, or fly apart. Looseness looks like simplicity of structure, looseness in everyday functioning; “inefficiency” in the efficiency-expert’s sense of the term; and a strong alignment with basic primate motivations 
      1. Slack in the system, redundancy, “inefficiency” doesn’t cost, it pays
    7. Bad design can rarely be overcome by more design, whether bad or good. In other words, plan to scrap the first system when it doesn’t work, you will anyway
    8. Calling it “feedback” doesn’t mean that it has actually fed back. It hasn’t fed back until the system changes course. The reality that is presented to the system must also make sense if the system is to make an appropriate response. The sensory input must be organized into a model of the universe that by its very shape suggests the appropriate response. Too much feedback can overwhelm the response channels, leading to paralysis and inaction. The point of decision will be delayed indefinitely, and no action will be taken. Togetherness is great, but don’t knock get-away-ness. Systems which don’t know how much feedback there will be or which sources of feedback are critical, will begin to fear feedback and regard it as hostile, and even dangerous to the system. The system which ignores feedback has already begun the process of terminal instability. This system will be shaken to pieces by repeated violent contact with the environment  it is trying to ignore. To try to force the environment to adjust to the system, rather than vice versa, is truly to get the cart before the horse
      1. What the pupil must learn, if he learns anything, is that the world will do most of the work for you, provided you cooperate with it by identifying how it really works and identifying with those realities. – Joseph Tussman 
    9. Nature is only wise when feedbacks are rapid. Like nature, systems cannot be wise when feedbacks are unduly delayed. Feedback is likely to cause trouble if it is either too prompt or too slow. However, feedback is always a picture of the past. The future is no more predictable now than it was in the past, but you can at least take note of trends. The future is partly determined by what we do now and it’s at this point that genuine leadership becomes relevant. The leader sees what his system can become. He has that image in mind. It’s not just a matter of data, it’s a matter of the dream. A leader is one who understands that our systems are only bounded by what we can dream. Not just ourselves, but our systems also, are such stuff as dreams are made on. It behooves us to look to the quality of our dreams
    10. Catalytic managership is based on the premise that trying to make something happen is too ambitious and usually fails, resulting in a great deal of wasted effort and lowered morale. On the other hand, it is sometimes possible to remove obstacles in the way of something happening. A great deal may then occur with little effort on the part of the manager, who nevertheless (and rightly) gets a large part of the credit. Catalytic managership will only work if the system is so designed that something can actually happen – a condition that commonly is not met. Catalytic managership has been practiced by leaders of genius throughout recorded history. Gandhi is reported to have said, “There go my people. I must find out where they are going, so I can lead them.” Choosing the correct system is crucial for success in catalytic managership. Our task, correctly understood, is to find out which tasks our system performs well and use it for those. Utilize the principle of utilization
    11. The system itself does not solve problems. The system represents someone’s solution to a problem. The problem is a problem precisely because it is incorrectly conceptualized in the first place, and a large system for studying and attacking the problem merely locks in the erroneous conceptualization into the minds of everyone concerned. What is required is not a large system, but a different approach. Solutions usually come from people who see in the problem only an interesting puzzle, and whose qualifications would never satisfy a select committee. Great advances do not come out of systems designed to produce great advances. Major advances take place by fits and starts
      1. Most innovations and advancements come from outside the field
    12. It is generally easier to aim at changing one or a few things at a time and then work out the unexpected effects, than to go to the opposite extreme, attempting to correct everything in one grand design is appropriately designated as grandiosity. In dealing with large systems, the striving for perfection is a serious imperfection. Striving for perfection produces a kind of tunnel-vision resembling a hypnotic state. Absorbed in the pursuit of perfecting the system at hand, the striver has no energy or attention left over for considering others, possibly better, ways of doing the whole thing
    13. Nipping disasters in the bud, limiting their effects, or, better yet, preventing them, is the mark of a truly competent manager. Imagination in disaster is required – the ability to visualize the many routes of potential failure and to plug them in advance, without being paralyzed by the multiple scenarios of disaster thus conjured up. In order to succeed, it is necessary to know how to avoid the most likely ways to fail. Success requires avoiding many separate possible causes of failure. 
    14. In order to be effective, an intervention must introduce a change at the correct logical level. If your problem seems unsolvable, consider that you may have a meta problem
    15. Control is exercised by the element with the greatest variety of behavioral responses – always act so as to increase your options. However, we can never know all the potential behaviors of the system
    16. The observer effect – the system is altered by the probe used to test it. However, there can be no system without its observer and no observation without its effects
    17. Look for the self-referential point – that’s where the problem is likely to be (nuclear armament leading to mutually assured destruction)
    18. Be weary of the positive feedback trap. If things seem to be getting worse even faster than usual, consider that the remedy may be at fault. Escalating the wrong solution does not improve the outcome. The author proposes a new word, “Escalusion” or “delusion-squared or D2“, to represent escalated delusion 
    19. If things are acting very strangely, consider that you may be in a feedback situation. Alternatively, when problems don’t yield to commonsense solutions, look for the “thermostat” (the trigger creating the feedback)
    20. The remedy must strike deeply at the roots of the system itself to produce any significant effect
    21. Reframing is an intellectual tool which offers hope of providing some degree of active mastery in systems. A successful reframing of the problem has the power to invalidate such intractable labels as “crime”, “criminal”, or “oppressor” and render them as obsolete and irrelevant as “ether” in modern physics. When reframing is complete, the problem is not “solved” – it doesn’t even exist anymore. There is no longer any problem to discuss, let alone a solution. If you can’t change the system, change the frame – it comes to the same thing. The proposed reframing must be genuinely beneficial to all parties or it will produce a destructive kickback. A purported reframing which is in reality an attempt to exploit will inevitably be recognized as such sooner or later. The system will go into dense mode and all future attempts to communicate will be viewed as attempts to exploit, even when not so motivated
    22. Everything correlates – any given element of one system is simultaneously an element in an infinity of other systems. The fact of linkage provides a unique, subtle, and powerful approach to solving otherwise intractable problems. As a component of System a, element x is perhaps inaccessible. But as a component of System B, C, or D…it can perhaps be affected in the desired direction by intervening in System B, C, D…
    23. In order to remain unchanged, the system must change. Specifically, the changes that must occur are changes in the patterns of changing (or strategies) previously employed to prevent drastic internal change. The capacity to change in such a way as to remain stable when the ground rules change is a higher-order level of stability, which fully deserves its designation as Ultra-stability 

What I got out of it

  1. A fun and sarcastic read about systems, their general behavior, how difficult they are to change, and much more.

The Elephant in the Brain: Hidden Motives in Everyday Life by Kevin Simler

Summary

  1. Human behavior is not always what it seems as it tends to be driven by multiple motives and some of these motives are subconscious or we are at least not fully aware of them. We are designed this way so that we can chase selfish motives while attempting not to appear selfish to others. Our brains try to get past this by keeping us in the dark – the less we know, the less we’ll give away. We are strategically self-deceived – individually and as a society. In a word, the “elephant in the brain” is selfishness and this book shows why only by confronting it can we begin to deal with it and what’s really going on. This book shines the light on certain real world examples where self-deception is rampant 

Key Takeaways

  1. Elephant in the brain – an important but unacknowledged feature of how our mind works, an introspective taboo
  2. We pretend like we know what we’re up to but we often don’t and this gets us into trouble 
  3. People are judging us all the time. Namely, our motives. Because people are judging us, we downplay our selfish motives and make our selves look as good as possible. This applies not only to our words but also our thoughts. In some areas of life we are more likely to point out selfish motives (politics) but in others (medicine) we are more likely to gloss over and act like everyone’s intentions are pure 
  4. By studying primates we can get a good idea of what our social interactions really mean. Distance gives perspective. Social grooming in apes is about hygiene but also politics, prestige, status, hierarchy, and reciprocation. Similar for humans 
  5. The major social interactions which fall into this category for humans is sex, hierarchy and politics. Inter-species competition is at the root and is rarely discussed. Collaboration is the flip side of the same coin. A lot of energy is wasted with competition. Imagine how much shorter redwoods could be and how much energy they’d save if they could agree on a height maximum. This is one of our species superpowers – turning wasteful competition into fruitful collaboration. Norms define these behaviors and is part of what we try to deceptively overcome. We hold ourselves back collectively for the greater good. The norm isn’t defined by how it is explicitly defined but by which actions are punished and to what degree. Weapons originally and later gossip and reputation helped keep people in line and follow norms. However, everyone cheats and it is intentions even more than actions which are judged. Humans are incredible at spotting cheating because our brains are adapted to it – meaning humans have always cheated as it gets you the reward without the cost if you can pull it off. A little discretion can go a long way if you’re trying to cheat – think of the brown paper bag used when people want to drink in public. 
  6. The most honest signals are expensive to produce but even more expensive to fake. 
  7. We deceive ourselves but blame others and project our own failings or guilt onto others. Self-deception can be used to protect ourselves but if our mental models help us navigate the world, why would we have evolved to react this way? Information is the lifeblood and you’d think that with less or incorrect info we’d be worse off. This is the old school of thought. The new school is that self deception is used for manipulation and is self-promoting. We deceive ourselves to better deceive others. Lying is hard to pull off, is cognitively demanding, and we are afraid of getting caught so not admitting it to ourselves is easier. We are not as opaque as we believe and our thoughts can be quite transparent to others but if we don’t know something, others won’t be able to see it. Modeling the world accurately isn’t the be all, end all of our brains. It is reproduction and in this case self deception helps us further this goal 
  8. 4 types of self deception in mixed motive scenarios 
    1. Madman – you’ll do anything to attain your goal and others know it. Intimidation
    2. Cheerleader – a form of propaganda where you try to change other people’s beliefs 
    3. Loyalist – shows commitment and belief and will go along with the party or person no matter what. Earned trust 
    4. Cheater – turning a blind eye so you have plausible deniability. Throw people off our trail 
  9. The main cost of self deception is that it can get us to act suboptimally
  10. Our saving grace is inconsistency as one part of our mind’s “system” can be aware of something but be hidden from others. Our brains architecture keeps some of our baser evolutionary motives hidden from full view and allows us to act hypocritically without truly realizing it. Our mind is built to help us advance socially. Shame, guilt, and other negative emotions is our brain’s cue to avoid those neural pathways, putting our true desires even further out of grasp 
  11. The most important self deception is about our own motives. 
  12. We don’t always know the “why” behind what we do but we always think we do. We can rationalize anything we do The brain can be thought of as a press secretary – giving internal and external interpretations of the experiences. Your brain is not the king of decisions like we’d like to think, but merely the rationalizer of them. Every time we give a reason we may just be making it up. We know ourselves less than we think. We cherry pick and celebrate our most pro social reasons and hide away the anti social ones 
  13. We are also intentionally blind to many non-verbal cues such as body language because being consciously aware of and in control of them would give away too much and make us feel too manipulative. Body language is an honest signal and is it the sense that it is more costly to fake them produce so we can use it effectively and should rely upon it in many different situations to get a better feel for how others are feeling rather than relying on what they’re saying. Eye contact (an even ratio of eye contact while listening and speaking conveys dominance and high social status), open postures, contact, lean in or back, pheromones, proximity, touch, how relaxed we seem, social status, and more. The beauty of nonverbal communication is that it allows us to pursue illicit agendas with a smaller risk of getting caught and accused as the actions are harder to pin down than outright actions are. That is why being aware of them is slightly dangerous and is why we don’t teach them to our children 
  14. Laughter is designed for social situations, it is a sound which is always used for communication purposes, and laughter occurs in other species. This inter and intraspecies communication indicates to self and others our playful intent and happy mood. This allows for safe social play even when the behavior could technically be dangerous or serious – it is a play signal. Flirting with violating a norm or actually violating it tends to be found funny. Context is extremely important as the same event can be seen very differently. Humor is extremely informative and showing us what is acceptable and what is transgressive, showing us where the boundaries are and are norms and how far we can push it. Since laughter is in voluntary and deniable it is a great window of truth because we can’t hold it back as easily as we can with language and it gives a safe harbor to be able to explain things away if what we laugh it seems inappropriate to others
  15. Language and speech 
    1. Speaking gains you social status if you prove you’d be a powerful ally who knows something which is new and/or useful to you. When you speak you can show off your verbal and mental “tools” which make you a strong ally. That is the subtext to every speech. Speaking well gains you prestige as prestige can be equated with being a strong allies others want to partner with 
    2. This may be why people tend to speak more than listen although listening might be the best thing you can do as you can learn more 
    3. People are more impressed with others who have something interesting to say regardless of where the conversation goes rather than being led to a specific topic the speaker knows a lot about 
  16. Conspicuous consumption influences everything we do, what we buy, how we judge others, it conveys our status, values and priorities
  17. People have forever been obsessed with gossip, news, and media. And although they may say it is for staying on top of global events, the subtext is that they want to be able to know what others are talking about and chime in in conversation 
  18. Art is an impressive display in the sense that it is meant to impress others. Evolutionarily it is hard to describe or explain because it is costly takes a lot of time and does not directly do anything to enhance our survival but one thought about what it signals to potential mates the fact that we have surplus time, energy, health, and wealth to pursue these sorts of things it makes more sense. The gower bird is a great example because the male builds some impressive structures and collects hard to find artifacts and colors to put within the structure which shows the female he has surplus energy and proves he is a qualified mate. What makes this even more interesting is that after they mate the male does not help raise the young at all. His pre-mating structure speaks to his genes more than anything else he could do. Art therefore needs to be impractical in order to succeed as it shows the fitness of the individual who is performing it
  19. Charity, like everything else discussed, is not done for pure charitable reasons or else people would donate differently. There are five main factors which influence what we do and how we give it including: visibility, peer pressure, proximity, relatability, and mating motives. Being generous signals that we have a surplus of wealth time and fitness and we want our leaders to be generous because it shows that they don’t play zero-sum games, that they know how to share, and that they are socially aligned 
  20. Education in large part is the signaling mechanism to show that you have the capability to learn a broad swath of information, prioritize and work hard. It does not necessarily mean that you know these topics very well. Education is a form of conspicuous consumption too as it tends to be expensive and going to college shows you can afford it. It shows which students can learn well but not necessarily how much they know. Colleges also are in some fashion propaganda machines and also serve to “domesticate” young people
  21. As is this case with many of these hidden mode of explanation, things which seem like flaws for the stated function are in fact features of the hidden one
  22. Bringing food to people who are sick is a universal but in today’s age, far more important is that it is homemade – showing you took time out of your busy schedule to make this
  23. Americans spend too much on medicine in an effort to “keep up with the Joneses”. It is hard for most people to act in the belief that doing less or maybe even nothing is the best course of action no matter if it has been proven that it can be better. More is thought of as better because it signals that we care and are cared for. People don’t actually care as much about if something works – they want the best doctors doing the most expensive treatments. Sleep, rest and eating well is not received well when we’re sick. 
  24. We worship and believe in religion because it helps us socially by forming a cohesive community. We become accepted by a group which helps us survive and reproduce. While the skeptic may think of religions as delusions, it is hard to argue against their benefits. Sacrifice is very socially beneficial to show your loyalty and fitness. The boredom experienced in sermons may be a feature and not a bug – you are conspicuously sacrificing your time for the group 
  25. Groups of nice, trusting people tend to out compete groups of nasty people. This has deep implications if you think about it

What I got out of it

  1. Fun read with deep implications. We keep ourselves in the dark to many of our selfish motives in order to better deceive others

Essays of Warren Buffett: Lessons for Corporate America by Lawrence Cunningham

Summary
  1. An organized compilation of Warren Buffett’s annual letters, broken down by concept. “By arranging these writings as thematic essays, this collection presents a synthesis of the overall business and investment philosophy intended for dissemination to a wide general audience.”
Key Takeaways
  1. Focus on the business with outstanding economic characteristics (favorable and durable moats) and management
  2. People are everything – partner with CEOs who will act well even if they could cheat, who act as if they’re the sole owner, as if it’s the only asset they hold, as if they can’t sell or merge for 100 years
  3. Performance should be the basis for executive pay decisions, as measured by profitability, after profits are reduced by a charge for the capital employed in the relevant business or earnings retained by. If stock options are used, it should be related to individual rather than corporate performance, and priced based on business value
  4. True risk is not volatility but permanent loss of capital
  5. Rather be approximately right than precisely wrong
  6. Put eggs in one basket and watch that basket
  7. Price is what you pay, value is what you get
  8. The 3 legs of the investing stool – Mr. Market, margin of safety, circle of competence
  9. Value investing is a redundancy – aim for focused or intelligent investing
  10. Deploying cash requires evaluating 4 commonsense questions based on information rather than rumor
    1. the probability of the event occurring
    2. The time the funds will be tied up
    3. The opportunity cost
    4. The downside if the event does not occur
  11. Guard against the institutional imperative – CEOs herd-like behavior, producing resistance to change, inertia, and blindness
  12. If you aren’t happy owning business when exchange is closed, you aren’t happy owning it when open
  13. Create the business and environment that attracts the people, management, shareholders that you want
  14. Useful financial statements must enable a user to answer 3 basic questions about a business
    1. Approximately how much a company is worth
    2. Its likely ability to meet its future obligations
    3. How good a job its managers are doing in operating the business
  15. Owner earnings –> cash flow = operating earnings + depreciation expense and other non-cash charges – required reinvestment in the business (average amount of capitalized expenditures for PPE that the business requires to fully maintain its long-term competitive position and its unit volume)
  16. Intrinsic value = the discounted value of the cash that can be taken out of a business during its remaining life
  17. Don’t risk what you have and need for what you don’t have and don’t need
  18. Beware weak accounting (EBITDA), unintelligible foot notes, those who trumpet projections
  19. Directors must be independent, business savvy, shareholder oriented, have a genuine interest in the business
  20. Really only 2 jobs – capital allocation, attract and keep outside management
  21. Choose a cold sink (weaker competition) than best management
  22. Conventionality often overpowers rationality
  23. Risk – we continually search for large business with understandable, enduring and mouth-watering economics that are run by able and shareholder-oriented managements
    1. The certainty with which the long-term economic characteristics of the business can be evaluated
    2. The certainty with which management can be evaluated, both as to its ability to realize the full potential of the business and to wisely employ its cash flows
    3. The certainty with which management can be counted on to channel the reward from the business to the shareholders rather than to itself
    4. The purchase price of the business
    5. The levels of taxation and inflation that will be experienced and that will determine the degree by which an investor’s purchasing-power return is reduced from his gross return
  24. When dumb money acknowledges its limitations, it ceases to be dumb
  25. Need to do very few things right if you avoid big mistakes
  26. Changing styles often is a recipe for disaster
  27. Worry most about management losing focus
  28. If you won’t own a business for 10 years, don’t own it for 10 minutes – materially higher earnings in 5-10 years is what you’re looking for
  29. Time is the friend of the wonderful business, the enemy of the mediocre
  30. Have not learned how to solve difficult business problems, but have learned to avoid them
  31. Never in a hurry – enjoy the process more than the proceeds
  32. “Expert error” – falling in love and acting on theory, not reality
  33. You don’t have to make it back the way you lost it
  34. In commodity-type businesses, it’s almost impossible to be a lot smarter than your dumbest competitor
  35. 4th Law of Motion – for investors as a whole, returns decrease as motion increases. a hyperactive market is the pickpocket of enterprise
  36. Attract proper inventors through clear, consistent communications of business philosophy
  37. It pays to be active, interested, and open-minded, never in a hurry
  38. Avoid small commitments – if something is not worth doing at all, it’s not worth doing well
  39. Deals often fail in practice but never in projections
  40. In a trade, what you give is as important as what you get
  41. The goal of each investor should be to create a portfolio (in effect, a “company”) that will deliver him other the highest possible look-through earnings a decade or so from now. An approach of this kind will force the investor to think about long-term business prospects rather than short-term market prospects, a perspective likely to improve results. It’s true, of course, that, in the long run, the scoreboard for investment decisions is market price. But prices will be determined by future earnings. In investing, just as in baseball, to put runs on the scoreboard one must watch the playing field, not the scoreboard
  42. The primary test of managerial economic performance is the achievement of a high ROE employed and not the achievement of consistent gains in earnings per share
  43. The difficulty lies not in the new ideas but in escaping the old ones.
  44. Ultimately, business experience, direct and vicarious, produced my present strong preference of businesses that possess large amounts of enduring Goodwill and that utilize a minimum of tangible assets.
  45. Nothing sedates rationality like large doses of effortless money
  46. Speculation most dangerous when it looks easiest
  47. Fear is the foe of the faddist but the friend of the fundamentalist
  48. Take into account exposure, not experience
  49. Noah Rule – predicting rain doesn’t count, building arks does
  50. Tolerance for huge losses is a major competitive advantage
  51. Berkshire’s next CEO – temperament is important, independent thinking, emotional stability, and a keen understanding of both human and institutional behavior is vital to long-term investing success.
What I got out of it
  1. An amazing collection of investing, finance, accounting, and management ideas

The Master Algorithm: How the Quest for the Ultimate Learning Machine Will Remake Our World by Pedro Domingos

Summary
  1. Opening the black box and truly understanding machine learning is deeply important as it impacts every aspect of our lives. This book provides a conceptual model for machine learning, the basic ideas which make up this field. The central thesis of this book is that all knowledge, past, present, and future, can be derived from data by a single universal algorithm – the master algorithm
Key Takeaways
  1. An algorithm is a series of instructions telling a computer what to do. No matter how complex, there are 3 options – and, or, not. Claude Shannon’s breakthrough thesis was that resistors use logic based on these options
  2. Machine learning algorithms can learn by making inferences from data and the more they have of it the better. It is a technology that builds itself and can build other artifacts, turning data into algorithms
  3. Algorithms are absolutely everywhere and are changing how we do business, make decisions, and even fall in love. It is all about accurate predictions and greatly expand this scope
  4. The master algorithm is the key to machine learning, unifying various different thoughts into one ultimate algorithm – a general learner. It may be the best start or path towards a theory of everything that we have
  5. Complexity is a huge battle each computer scientist must face as each algorithm is typically built on top of other algorithms. However, the learner algorithm can overcome this as it is fed the data and the desired result and spits out the algorithm that fits the situation. This type of technology is more like nature. Learning algorithms are the seed, data is the soil and the programs are the crops
  6. Machine learning can be thought of as the inverse of programming as you can feed the desired output and data and out comes the algorithm
  7. ML requires statistical rather than probabilistic thinking. 99% accuracy may be the best you can get. ML automates automation itself, otherwise programmers become the bottleneck
  8. Data is the name of the game and is why network effects are so powerful and why google and other platform type companies have tailwinds at the back.
  9. You need data commensurate with the complexity of the task at hand. The algorithm can only be as good as the data that goes into it so huge amounts of relevant data is the name of the game
  10. Data can be thought of as the new oil and there is huge money in refining it
  11. If something exists but the brain can’t learn it, it is the equivalent of not existing for us
  12. Overfitting is a big problem and occurs when data is stuffed in and patterns are thought to be there that really aren’t. One way to limit this is by rewarding simpler theories and algorithms
  13. Generalizing data for situations that haven’t been seen before is difficult. Accuracy on held out data is the gold standard for testing an algorithms accuracy
  14. The S-curve is the most important curve in the world
  15. The exploration vs exploitation trade off must be considered in life and in algorithms
  16. Nature and nurture work together seamlessly to help us survive – the program and the data
  17. Dimensionality is the second worst issue in machine learning
  18. Clustering – assignment of a set of subsets (clusters) so that observations within the same cluster are similar according to some predesignated criterion or criteria, while observations drawn from different clusters are dissimilar
  19. Law of affect – people move towards pleasure and away from pain
  20. Reinforcement learning – long term algorithms which are programmed to choose the move with the greatest value
  21. Power law of practice – chunking in action, best way to learn
  22. Causality – Being aware of your environment, how your actions impact it and adapting to best get what you want
  23. Relational learning – Best way to understand an entity is to see how it relates, fits in and acts with the entities around it. This way it is not an individualistic exercise, but a holistic, network-type view. Predator and have deeply intertwined characteristics. This may be one of the best ways to understand how the world works 
  24. A man is wealthy if he is richer than his wife’s sisters husband – HL Mencken
    1. Lateral networks
  25. They found that advertising to one of the most trusted reviewers of a product is as effective as advertising to a third of all possible customers 
  26. Some of the most important inventions or discoveries in history have been unifiers – things which took many separate processes can now be done in one. The internet and electricity are two examples of unifiers. The master algorithm is the unifier of ML. It let’s any application use any learner by abstracting the learner into a common form that is all the applications need to know. Out of many models, one
  27. All learners have representation, evaluation, and optimization processes 
  28. Like the brain, genetic search followed by gradient descent may be one of the best tactics. Evolution creates the structure and individual experience molds it to specific uses 
  29. As you interact with algorithms, understand what model of you you want it to have and what data you can give it in order to bring that model to fruition. In the future, everyone will have bots which take your preferences, wishes, desires, etc into account and will navigate the world around you and deal with other people’s and company’s bots to get you the best outcome. Therefore, having the most accurate digital representation of you is important and the company which can safely and securely develop this virtual data storage of people and know what to share, when, and with whom is bound to get incredibly wealthy 
  30. Technology is a phenotype of humans and will help us continue to expand our scope and capabilities
  31. Domingos paints a pretty rosy future where these algorithms help us achieve what we want and automate a lot of what we do today. There will be high unemployment but it won’t matter because the machines can produce what we need so cheaply that basic income is universal and only those who want to work will have to – necessarily in certain niches where computers aren’t as effective as humans
What I got out of it
  1. The master algorithm is a general learner algorithm and the more relevant data you have, the better. Great primer into ML, algorithms, and how they are and will continue to impact our lives