Tag Archives: Decision Making

A Few Lessons From Sherlock Holmes by Peter Bevelin

  1. Bevelin takes quotes and examples from Sherlock Holmes as examples of several tools and techniques to improve thinking and decision making
Key Takeaways
  1. Observation and inference
    1. See things for what they are and report them truthfully
    2. Beware of first impressions – appearances can be deceiving
    3. More is missed by not looking than not knowing
    4. It is not the amount of information that counts by the relevant one
    5. Sometimes it helps to shift perspective
    6. The value of experience is not in seeing much but seeing wisely
    7. “By doing it many times over till it is done perfectly – for it is worth doing.”
    8. Checklist routines for critical factors to help
    9. Look as diligently for what is missing for what is there
  2. Deduction
    1. Reasoning backwards, working back from observations/effects to causes
    2. Use the simplest means first
  3. Analogies
    1. You cannot judge the relevance of an isolated fact. Experience has taught me, and must have taught you, that the most trivial, commonplace and seemingly irrelevant facts have a way of suddenly assuming a crucial importance by connecting, explaining or filling in the detail of later discoveries
    2. That process…starts upon the supposition that when you have eliminated all which is impossible, then whatever remains, however improbable, must be the truth. It may well be that several explanations remain, in which case one tries test after test until one or other of them has a convincing amount of support
  4. Test your theory
    1. If it disagrees with the facts, it is wrong
    2. There is nothing more deceptive than an obvious fact
  5. Patience
    1. Distance gives perspective – sometimes we need to remove ourselves from the problem and get a fresh perspective
  6. Put self in other’s shoes
    1. If we could see the world the way others see it, we easier understand why they do what they do
    2. Don’t make the world fit your tools and use the right tool for the job
  7. Criticize self
    1. Have you tried to find evidence against what you believe? Why might we be wrong? What have we overlooked? What (new) information or evidence is needed to make us change our mind?
    2. When we meet a fact which contradicts a prevailing theory, we must accept the fact and abandon the theory, even when the theory is supported by great names and generally accepted
  8. Learn from mistakes
    1. Update your beliefs in light of new information
    2. For one’s own training it is better to make an incorrect diagnosis than none at all – if you call yourself to account afterwards
  9. Know your limits
    1. Don’t think about how to get things done, instead ask whether they’re worth doing in the first place
    2. A lot of misery comes from what we allow ourselves to get dragged into
What I got out of it
  1. Really good, short read on some key characteristics necessary for deep thinking and better decision making

The Logic of Failure: Recognizing and Avoiding Error in Complex Situations by Dietrich Doerner

  1. Logic of failure – certain tendencies in our patterns of thought that, while appropriate to an older, simpler world, prove disastrous for the complex and interdependent world we live in now
Key Takeaways
  1. 4 habits of mind and characteristics of thought that account for the frequency of our failures
    • The slowness of our thinking (streamlining thinking process causes us to omit key variables)
    • Our wish to feel confident and competent in our problem solving abilities (lack of ability to critically reflect on our decisions)
    • Our inability to absorb quickly and retain large amounts of information (humans don’t gather enough information to form new models efficiently)
    • Our tendency to focus on immediately pressing problems (ignore problems our solutions will create, lack of second (12th) order thinking)
  2. Humans ignore causal links and consequences, focusing on short term solutions that implicate the long term effects
  3. Frequent hypothesis testing and critical questioning vital
  4. People tend to regulate the situation and not the decision process
  5. Efficient problem solving revolves around complexity (interconnectedness of different variables), dynamics (autonomously moving) and intransparence (never fully aware of all information, engage in problem with information available to them)
  6. Defining goals is first step in problem solving and then gather appropriate level of information
  7. Convert unclear goals by ranking goals by urgency, viability and probability of success
  8. Must distinguish between delegating and dumping responsibility
  9. Must rank and delegate when we have more than one goal but when we solve one we may create another
  10. Must go beyond just causal relationships but to abstract relationships as well, we must know the hierarchy as well and think in analogies – exploring the unknown via the known
  11. Reductive hypothesis – analyze the final “piece” of a problem and reverse these effects in order to find the true cause of the problem or situation
  12. Strategy is a system of makeshifts, changing as circumstances change
  13. “Good” participants in the game have made considerably less decisions early on and asked many more questions than “bad” participants 
  14. Humans terrible at understanding the power of compounding. Don’t be fooled by the term “deceleration” – this is still growth and can compound massively over time!
  15. Laymen and professionals both face distortionary forces in decision and assumption making
  16. Don’t overgeneralize on local experiences. Rather, use sequential hypothesis to continuously ask questions, test and adapt
  17. Must first define goals, then build a model/strategy and then begin filling this model with information until we are comfortable to form a final conclusion
  18. Planning – condition element, action element and result element
  19. Can’t be too unqualified, must take circumstances and exceptions into account (don’t use “always”, “never”, etc.)
  20. We have to study the consequences of our measures in order to find opportunities to correct our incorrect behavioral tendencies and assumptions about reality
  21. Humans are inclined to maintain the illusion of competence by failing to reflect on their decision and problem solving approaches
  22. Often redirect our thinking from actual goals to the goal of preserving a sense of our competence
  23. We cannot teach common sense but we can put ourselves in positions where a clear sense is required, which will help us to develop a common sense for future encounters of a similar kind
What I got out of it
  1. Great book which looks at the fallibilities of our thinking and decision making process and how to improve it

The Decision Book by Mikael Krogerus and Roman Tschappeler

  1. Provides a brief summary of 50 decision models, or mental frameworks, on how to best attack a particular problem or situation. Focuses on better understanding ourselves, others, making the right choices with the information you have, creating effective teams and more.
Key Takeaways
  1. This book is a treasure for those who are looking for new mental models and how to apply them to many difficult/varied scenarios
What I got out of it
  1. Incredible reference for difficult decisions, how to improve yourself, how to improve others, how to create effective teams and more. Website

Damn Right! Behind the Scenes with Berkshire Hathaway Billionaire Charlie Munger by Janet Lowe

  1. Lowe details Charlie’s life through his early career as a lawyer, later partnership with Buffett to form Berkshire Hathaway, his family, his hobbies and outlook on life
Key Takeaways
  1. Warren, Charlie are very similar and make an amazing team. They are both from Omaha but didn’t meet until 1959
  2. Very eclectic reader – hundreds of biographies
  3. Wanted wealth because it grants independence
  4. Loves complex ideas and detailed analysis
  5. Credits his success to self-education, mental discipline, deeply understanding big ideas
  6. Always act as honorably as possible
  7. Star Island is his secluded family getaway
  8. Family was very smart, hard working and loving. Father taught him power of Tao – love of doing small things excellently
  9. Poker helps with business decisions – when to fold early and when to back heavily
  10. Somewhat arrogant but his opinions are not set in stone
  11. Divorced “Nancy 1” and soon after remarried to “Nancy 2”
  12. Tended to do a task himself or totally delegate it (usually delegated)
  13. Saw advantage of high quality businesses (easy decisions) early on and helped Buffett see the benefit of paying a fair price for high quality businesses
  14. Made first real money in real estate in California
  15. Able to look at facts and come up with new, insightful conclusions
  16. Great at analyzing businesses quickly and saying no if it falls outside his circle of competence
  17. Can zero in on what is truly important
  18. Must think correctly AND independently
  19. To become truly wealthy, need ownership in a business
  20. Simply easier to be ethical, rational and honest. Hard work and honesty gets you almost anything
  21. If Charlie trusts someone, he trusts them completely
  22. Blue Chip float lead to purchases in See’s Candy, Precision Steel
  23. Typically make one major decision every 3 years. Extreme patience with extreme decisiveness
  24. Must only deal with quality people
  25. Want to be in sectors that tend towards natural monopolies
  26. Bought Buffalo Evening News in 1977. At the time was nearly 25% of BRK net worth
  27. Foresaw savings and loan debacle and moved Wesco away from thrift
    1. “Our experience in shifting from savings and loan operation to ownership of Freddie Mac shares tends to confirm a long-held notion that being prepared, on a few occasions in a lifetime, to act promptly in scale, in doing simply and logical things, will often dramatically improve the financial results of that lifetime…A few major opportunities clearly recognizable as such, will usually come to one who continuously searches and waits, with a curious mind, loving diagnosis involving multiple variables. And then all that is required is a willingness to bet heavily when the odds are extremely favorable, using resources available as a result of prudence and patience in the past.”
  28. Remember the obvious rather than grasping the esoteric
    1. “Most geniuses—especially those who lead others—prosper not by deconstructing intricate complexities but by exploiting unrecognized simplicities.” — Andy Benoit
  29. “Our rule is pure opportunism”
  30. Look for integrity, intelligence, experience and dedication. Look to create the best business environment anywhere through evaluations without extensive meetings, capital access, focused compensation, and freedom to do one’s best
  31. Don’t confuse simplicity with ease
    1. “People underrate the importance of a few simple big ideas. And I think to the extent Berkshire Hathaway is a didactic enterprise teaching the right systems of thought, the chief lesson is that a few big ideas really work. I think these filters of ours have worked pretty well because they are so simple.”
  32. In the mid ’90s, BRK transitioned to owning more companies outright and became the buyer of first resort
  33. Munger admires Costco so much he violated his rule and joined their Board
  34. Avoid the mistake of not buying great, undervalued businesses when the stock has appreciated
  35. Tell the truth, tell it fully, tell it fast
  36. Giving time, talent, risking reputation as important as contributing money
  37. Many people specialize too early. Must deeply learn subjects you can’t live well without (psychology, math, physics, engineering)
  38. Paranoid self pity, the “victim mindset” is the most destructive frame of mind
    1. Every time you think about someone or something ruining your life, it’s in fact just you
  39. A few really big ideas carry most of the weight
  40. “To those whom much is given, much is expected. Always live below your financial means so that you will have money to invest. Invest in such a way so as to avoid the possibility of falling into a negative position – primarily, by limiting the amount of debt you use…If you want to get smart, the question you have to keep asking is “why, why, why?” And you have to relate the answers to a structure of deep theory. You’ve got to know the main theories. And it’s mildly laborious, but it’s also a lot of fun…From physics, Munger has learned to solve a problem by seeking the simplest, most direct answer. The easiest way invariably is the best way. From mathematics Munger learned to turn problems upside down or to look at them backward – invert, always invert.”
  41. If he taught finance, would look at about 100 companies who have thrived or failed
  42. Take a simple, basic idea and take it very seriously
  43. Truth is hard to assimilate in any mind when opposed by interest
  44. 5 best practices for thinking, problem solving, decision making
    1. Simplify by answering the big “no brainer” questions first
    2. Gain numerical fluency
    3. Invert problems
    4. Must use elementary and multidisciplinary thinking
    5. Lollapalooza effects come only from a combination of a large number of factors
  45. Pilot training should be implemented into different fields
    1. Formal education wide enough to cover practically everything useful
    2. Wide base of knowledge raised to practical fluency
    3. Ability to think forwards and backwards (concentrate on what you want to avoid as much as what you want to happen)
    4. What is most important gets the most attention
    5. Checklist routines are always used
    6. Forced into a special knowledge maintenance routine
What I got out of it
  1. Interesting read on Charlie Munger’s life, career, though process. Multidisciplinary thinking, inverting problems, always act honestly key topics, take a simple, basic idea and take it very seriously

Diaminds by Mihnea Moldoveanu and Roger Martin


  1. “How do successful thinkers think? And how is it that their ways of thinking make it more likely that they will succeed than fail in the cauldron of business and life…? In this book we set out to isolate a few of the key mechanisms in the minds of successful thinkers – mechanisms that seem to account for enormous differences in individual outcomes. We attempt to describe those mechanisms precisely enough that readers will see how they themselves can absorb and develop them.”
Key Takeaways
  1. Ask not “what” you / others think but rather “how” do they think
  2. Can’t directly observe thinking so have to look at what people say and do and then ask “how do you think and how does that lead to your actions, success?”
    1. How people speak and how they act a direct window into their thought process
  3. Successful thinking integrates several radically different models while preserving the thinker’s ability to act decisively. Able to quickly and effectively abstract the best qualities of radically different ways of seeing and representing; in doing so, that person develops ‘a better lens’ on the bewildering phenomenon we call the ‘world’
  4. Diamind = dialectical mind = a mind that beholds at least two often contradictory ways of seeing the world, gives each its full due, and instead of fearing and fleeing the resulting tension, lives it, embraces it, and comes up with a better way – one that does violence to neither but improves on both
  5. Like most behavior, thinking is tainable and habitual
    1. Mental habits are procedures that have been engineered for specific purposes; they are unconscious and natural. Understanding this is one key to mental habit detection, creation and procreation
  6. Making things explicit is a great learning tool
  7. Behavior does not have to be conscious to be intelligent – most diaminds don’t know how they think
  8. Thinking can be thought of as communication between present and future you
    1. External interactions, way we communicate with others influences internal communication (thinking)
      1. Can observe mental habits by people’s external patterns of communication
      2. Changing conversation patters is the lever for changing thought patterns. Changing self-talk changes mental habits
  9. Ask “what does my mind (not “I”) want to do with the world?” Give distance between self and mind is important
  10. Suppressing thoughts doesn’t work as you have to first think of what you are trying to suppress in order to suppress it
  11. Behavior becomes more intelligent, more adaptive, in proportion to the inclusiveness of the predictive model you have built from the situation at hand
    1. Integration requires an integrator – a powerful, versatile model of the situation that can explain, contain and comfortably accomodate the various impulses you feel. It also requires a will to weather the discomfort of this larger model in order to bring about the integration question. The integrator’s skill set can be traced back to a set of habitual ways of being, of habits of mind
  12. Small but frequent things (dense things) like thoughts and interactions will quickly compound with small changes
  13. Beware human’s inborn tendency to prefer simple explanations
  14. Brain as software – imagine you can program people’s actions through the inputs you feed it. What input (smile, smirk, praise, etc.) do you have to feed in order to elicit a desired response
  15. People suck at doubting but is what Taleb specializes in. Diamind realizes this and cultivates doubting skills as there are unknowns everywhere
  16. Truth does not equal certainty. Problems arise when one needs to be certain of a truth
  17. Diaminds live out their beliefs, act on and take responsibility for their predictions. Actually have skin in the game
  18. 3 central dogmas of today’s age – people are rational, cause and effect have a linear relationship and things fall into a normal (Gaussian) distribution
  19. Mind is like a fishnet and world an ocean – have to believe something in order to see it (what you catch)
  20. Inner diversity is key – many mental models, see same problem in many different ways
  21. Explanation much weaker than prediction
  22. Incorporating pre-set stopping rules (sell at 20% loss, etc.) key to dealing with unknowns and Black Swans
  23. True inner openness comes from a dogged pursuit of inner diversity (comfortable with unknowns, having many mental models)
  24. Must figure out distribution of events and estimate the parameters of these distributions
  25. Key to define as precisely as possible what a ‘non-white’ swan looks like
  26. Willingness to work and be open minded is vital
  27. Replace all explanations and justifications with predictions and commitmens – highly testable, known time fspan
    1. Prediction journal very, very helpful in keeping track of correct versus incorrect predictions. Review. Repeat. Review again
  28. Nothing is true independent of its context
  29. Replace as many statements of fact as you can with statements that highlight the dependence of the facts on the underlying theories and mechanisms that must be valid in order for the statement of fact to make sense
  30. Inverse thinking
    1. Look upon the present as if it were the past. Then look back and by eliminating all the paths you could not have taken, figure out how you must have travelled from the presnt to the future
  31. Diaminds have audacity – the ability to make the abductive leap that takes one to imagine a desired state of the world that is implausible or even inconceivable right now, to take seriously the notion that this implausible state of the world is real and then work to bring about the conditions that will supply the best explanation as to how it came about. Talk about the future as if it were the past
  32. The perception a fact is valid (a bluff) is often as powerful as the truth
  33. Writing promotes deep thinking; lists obscure it
    1. Effective self-talk is like storytelling, it is a narrative
  34. Diaminds able to successfully navigate complex world through good mental habits – think/see/do
  35. Recording yourself having a conversation can be helpful as speaking is a window to how you think
  36. “Mentalese” – language specific to thinking and problem solving
    1. Types of problems – simple vs. hard (initial and desired conditions clearly defined and there is a definite process as to how to achieve it; hard problems may be clear but you can’t see your way to the solution before actually solving the problem)
    2. Tame vs. Wicked – tame have been proven over time to be solvable in some way, wicked problems are problems whose initial and desired conditions are subject to change as a function of the very process by which you’re trying to solve them
    3. Solutions – local vs. general (specific (heuristics) vs. adaptable (algorithm)
      1. General being better as it is more widely applicable
  37. A problem is the difference between your current state and the ideal state
  38. Believing something always a matter of choice and diaminds are very choosy
  39. Diaminds awesome at flipping between simple and hard problems, determining if tame or wicked
  40. Turn goals into objectives to make real (time bounded, controllable and measurable)
  41. Diaminds think about thinking while thinking; and then act
  42. Deal with – Defer – Delete is a useful framework for problem solving
  43. Must take into account problem, own thinking other’s thinking / intelligence / background
  44. Diversity trumps ability – large group’s average guess often better than the expert’s
  45. Generality does not guaranteee truth
  46. Not all statements are meaningful
  47. Can never tell if a regularity is a law (black swan)
  48. Useful problem solving framework on page 212
What I got out of it
  1. Incredible read. I thought it did an amazing job of highlighting good thinking habits and reinforcing the fact that they can be trained and learned; speaking a window into how somebody thinks

Knowledge and Decisions by Thomas Sowell

  1. Sowell argues that knowledge is man’s most severe restraint but knowing the power of incentives, who the decision maker is, and a couple other key elements helps making decisions at least a little easier
Key Takeaways
  1. Humans’ most severe restraint is knowledge but still must make important decisions
  2. Examine and judge companies, people, etc. based on process / results over lofty goals
  3. Realize the importance of incentives, constraints, feedback mechanisms
  4. Sowell examines evolution of decision-making processes and how it spreads between different areas
  5. No person or group is likely to have sufficient knowledge to make a perfect decisions the first time around
  6. There is an independent reality through which each individual perceives only imperfectly, but which can be understood more fully with feedback that can validate or invalidate what was initially believed
  7. Ideas are everywhere but knowledge is rare
  8. Civilization an enormous device for economizing on knowledge. As people live closer together, ideas and their adoption spread much quicker
  9. Need to consider not only how much we know but how well we know it
  10. How decisively we act depends on how certain we are of the consequences
  11. Must understand who the primary decision maker is, with what incentives they are working with as well as constraints, feedback mechanisms
  12. Must understand the decision-making process and its costs
  13. Most basic of all decisions is who shall decide
  14. Most basic inherent restraints are time and wisdom
  15. Every item / decision has both a time price and a monetary price – this is its real cost
  16. Incentives not only affect decisions but the type of people drawn to certain decision making roles
What I got out of it
  1. A little disappointed but definitely has some good nuggets. Judge people / companies on process / results over their lofty, stated goals; power of incentives, constraints and feedback mechanisms; understanding who the decision maker is is very important; real cost include time price and money price

Coherence by Alan Watkins

  1. Knowledge about human relationships, biology, brain, adult development, behavior, human system, emotional intelligence, medicine, evolution, physics, signal processing, sports psychology all help improve management and performance by better understanding what influences performance. Enlightened Leadership – all behaviors, decisions, thoughts are integrated (coherence)
Key Takeaways
  1. Best way to understand results is to understand behavior and the internal and external influences on behavior
    1. Physiology – Emotion – Feeling – Thinking – Behavior – Results
    2. Feeling wins over thinking every time; physiology trumps emotion
  2. Learning how to change quality of signals in our system can help deliver brilliance every day (Enlightened Leadership)
  3. Best results come when you are positive and motivated
  4. Coherence = Flow = Stable Variability (robust)
  5. Physiological coherence leads to emotional coherence leads to cognitive coherence leads to behavioral coherence
  6. Coherent leaders – integrity, vast interpersonal flexibility (understand what makes people tick) and behavioral flexibility
  7. Individual people must keep evolving if organization is to improve
  8. 3 Stages of evolution – emergence, differentiation, integration
    1. Differentiation – you must be clear and specific in your plans, goals, etc.
  9. Must be a burning platform for change – question everything you do (eliminate if find only do it because it was done yesterday)
  10. 2 key stages in human development – waking up (lose dualism of power and control) and growing up (maturity)
  11. 6 dimensions of EQ – self-awareness, resilience, attention (internal motivation), social intuition (empathy), sensitivity to context, outlook (optimism/pessimism)
  12. Energy management over time management!
  13. Heart rate variability (HRV) very important (flexibility, antifragility) – more is better; emotional self-management, exercise (yoga) omega 3, breathing skills all help improve it
  14. The heart is the most powerful signal generator in the body and can even affect others (entrainment)
    1. Use to create physiological coherence which gives more energy
  15. Mind does not dominate body, there is a constant dialogue between the two; they become one (integrative medicine)
  16. HRV determines ability to respond to challenges
  17. Must schedule periods of recuperation (pair with The Way We’re Working Isn’t Working)
  18. Energy bank – the idea of keeping track of energy “deposits and withdrawals” (things which give or take energy away from you)
  19. Chaotic breathing leads to loss of energy
  20. Be dynamically responsive instead of reactive (breath = stability = entrainment)
  21. 12 aspects of breath – rhythmicity (steady in and out); smoothness; focus on heart; speed of breaths; pattern (ratio of in/out); volume; depth; entrainment; resistance; mechanics; flow patterns (air around body); special techniques (vipassana, buteyko)
  22. Mismanaged emotion often a root cause of ill health (3 E’s – emotion, eat, exercise)
  23. Level of personal control related to health
  24. Not event but how you react / deal with it that matters
  25. Emotion is integration of all physiological signals; feeling is the awareness and recognition that signal comes from the body (observation of emotion)
  26. Only 2 inborn fears – falling and loud noises
  27. Conditioning system inaccurate because designed for survival, not sophistication
  28. Huge number of our decisions are based on emotion, not reason. Emotional awareness therefore greatly improves decision-making
  29. Challenge for men is lack of emotional awareness, for women it may be lack of control of emotions
  30. Emotional mastery leads to clearer thinking, better ability to learn
    1. Must induce an appropriate emotional state to best learn (calm, positive and motivated)
  31. All decisions essentially made by feelings and then justified by logic
  32. Thin slicing – ability to detect patterns based on narrow slices of experience
    1. Intuition can’t be trusted without emotional coherence
  33. Good leaders use emotion because that’s what motivates people
  34. Best leaders best at dealing with change
  35. Heart’s electromagnetic field radiates up to 50 feet away! – leader’s presence truly can be felt in a large room
    1. Negative state of mind casts chaotic energy whereas positivity casts clean and organized energy
  36. Enjoyment and quality of life comes from experiences, not things
  37. Happiness is a habit
  38. Only genuinely sustainable motivation is intrinsic
  39. The self, consciousness, and emotion evolved together and tied to each other
  40. Intelligence is simply awareness
    1. Only 2 opposing emotional states – love and fear
    2. Most people’s emotional lexicon / palette very limited (becoming better versed and more nuanced in how you define each feeling allows you to become more self-aware
    3. Must be aware but also be able to label individual emotions (access and then action)
  41. Emotional MASTERY
    1. Sit comfortably and BREATHE (focus on heart)
    2. Simply notice what emotion exists in your body
    3. Label what you think best captures it
    4. Explore the features of the emotion in your own body – location, size, color, sound, temperature, intensity
    5. How does the emotion move through your body
    6. Does the emotion have any special features?
  42. Enhance habits / rituals with a positive emotion
    1. Landscaping – determine where in routine can get most practice per buck
  43. Need emotional intelligence, literacy and self-management
  44. Memories stored like holograms
    1. Coherence, BREATHE leads to perfect hologram which can make you better and more clearly recall what we know
  45. 10 levels of consciousness
    1. Shadow work – working on aspects of ourselves that are not easy to see, address and heal
    2. Level 6 – cease to be a victim, don’t let others control your emotions, complete ownership of all aspects of self
    3. Level 7 – selflessness, loving empathy without criticism
    4. Level 9 – pre-awareness,n no observer and object, just one union; time false, space infinite and everything connected; no duality – all simply is, cease to have preferences
  46. Happiness truly a life of service
  47. 9 internal phenomena which influence thinking, behavior, etc
    1. Values – feeling defined by a principle
    2. Belief – thought powered by emotion
    3. Attitude – collection of values / beliefs and which influences thoughts, behavior, perspective
    4. Culture – collective attitude of the group
  48. Cognitive coherence lies in increasing perceptual awareness
    1. SHIFT – stop and shift attention to your heart; breathe through this area of your chest to induce positive emotion, feel it through your body; turn your brain back on and notice insights
  49. Enlightened leadership emerges with coherence across all critical and internal areas (physiology, emotion, cognitive, maturity, values / Behavior, networks, impact)
  50. The purpose of doing everything is to generate better results
  51. Long-term, consistent, brilliant behavior requires us to be in tune with what we think, feel and the amount of energy we have
  52. Must understand root causes of what leads to better performance
  53. Correcting behavior doesn’t lead to success, only stops failure (must introduce new behaviors)
  54. Obsession with results has lead to a widespread erosion of humanity
  55. Must understand appropriate pressure needed for peak performance for self and others
    1. Narrow the focus and clarify as much as possible
    2. Early detection of underperformance crucial
      1. Loss of perception, self esteem, increased irritability, ill health all good indicators
  56. Best leaders move seamlessly through 4 quadrants – I, IT (short-term), IT (long-term), WE
  57. Few leaders think about how they think, their weaknesses, brand, leaderships qualities and therefore have little self-awareness
  58. Maturity is key to be a great leader – differentiation between knowledge and wisdom
  59. True leaders aim to strip away illusions and see deeper realities – able to integrate knowledge and wisdom, more holistic view, no preconceived answers, continuously try to flush out hidden assumptions
  60. Vision – picture of the future you’re aiming for
  61. Ambition – how big / impactful you want to be
  62. Purpose – emotional statement to drive engagement and differentiate yourself
  63. Strategy – how to get ot vision, ambition and purpose
  64. Governance – process for making better, more efficient decisions and better accountability and alignment
  65. 12 performance enhancing behaviors
    1. Imagine – gathering info, forming concepts, conceptual flexing
    2. Involve – empathetic connecting, facilitating interaction, developing people
    3. Implement – being proactive, continuous improvement, building customer value
    4. Ignite – influencing others, building confidence, communicating clearly
    5. Knowing where you stand is vital
  66. Understanding personal purpose is vital
  67. Job – Career – Calling
    1. What would you do for free? What comes effortlessly to you?
  68. Appreciation and forgiveness of self and others is key
  69. To be the best leader you can be you must make personal connections, understand other’s motives, be consistent and know how to best work with different working styles
  70. Ultimate goal – influence and ability to foster deep, influential relationships
  71. Relationships tend to fail because of either poor communication or low levels of trust
    1. Effective communication has two basic aspects – transmission and reception
    2. 3 levels of communication -what people say, what people think or feel and most deeply, what people mean
  72. Making others feel heard is extremely motivating
  73. Trust givers trust people automatically where trust earners must make others prove themselves first
  74. TRUST – taking responsibility for understanding other people’s traits
  75. Internal coherence lays foundation for extraordinary performance and also to develop deeper and longer lasting relationships (ultimate prize in life
  76. Leaders must be able to transform their personal leadership qualities, real development and the corporate culture
  77. When hiring, look at what the business needs and if necessary, bring someone in and train them rather than trying to fit the role to the person
  78. Use MAP to get at the true meaning of what people say. Move attention to body and breathe, appreciate the speaker, play back the underlying meaning
  79. Watkins is the founder of Holacracy – Tony Hsieh recently implemented at Zappos
    1. Clarify purpose; clarify all decision making forums; define limit of authority; define reporting process, establish clear accountability; create new roles; assign new accountabilities to new roles; establish new policies or changes to existing policies; define ways of working within teams
What I got out of it
  1. Being self-aware is absolutely vital and focusing on the different areas (physiology, emotion, cognitive, maturity, values / Behavior, networks, impact) is key. Must be healthy before can focus on emotions, cognition…

Charlie Munger: The Complete Investor by Tren Griffin

  1. Another book on how Buffett and Munger think and how this differentiates them
Key Takeaways
  1. Munger’s independent thinking and emotional control set him apart
  2. Graham principles
    1. Stock = buying a part of the business
    2. Margin of Safety
    3. Mr. Market
    4. Must be rational, objective and dispassionate to be a successful investor
  3. Worldy wisdom – develop many mental models to make better decisions
  4. Don’t be a genius, simply avoid big mistakes
  5. Be a learning machine and learn from the mistakes of others
  6. Heuristics and biases
    1. Power of incentives
    2. Liking/loving
    3. Disliking/hating
    4. Doubt avoidance
    5. Inconsistency avoidance
    6. Curiosity tendency
    7. Kantian fairness
    8. Envy/jealousy
    9. Reciprocation
    10. Influence from association
    11. Pain avoiding denial
    12. Excessive self-regard
    13. Over-optimism
    14. Deprival super reaction
    15. Reward and punishment super response
    16. Social proof
    17. Contrast misreaction tendency
    18. Stress influence
    19. Availability misweighing
    20. Use it or lose it tendency
    21. Drug misinfluence
    22. Senescence-misinfluence
    23. Authority misinfluence
    24. Twaddle (nonsense) tendency
    25. Reason respecting tendency
    26. Lollapalooza tendency
  7. The right stuff
    1. Patient
    2. Disciplined
    3. Calm but courageous and decisive
    4. Reasonably intelligent but not misled by their high IQs
    5. Confident and non-ideological
    6. Honest
    7. Long-term oriented
    8. Passionate
    9. Studious
    10. Collegial
    11. Sound temperament
    12. Frugal
    13. Risk-averse
  8. 7 Variables in the Graham value investing system
    1. Determining the appropriate intrinsic value of a business
      1. Discounted value of the cash that can be taken out of a business during its remaining life
      2. Owner earnings – Net income + depreciation + depletion + Amortization – CapEx – additional working capital
    2. Determining the appropriate margin of safety
    3. Determining the scope of an investor’s circle of competence
    4. Determining how much of each security to buy
    5. Determining when to sell a security
    6. Determining how much to bet when you find a mispriced asset
    7. Determining whether the quality of a business should be considered
    8. Determining what business to own (in whole or in part)
  9. Berkshire math
    1. For intrinsiv value, use long-term (30 year) US treasury rate as the discount
    2. Don’t buy unless you have at least a 25% (and up to 60%) margin of safety
    3. Process
      1. Calculate past and current owner earnings
      2. Insert into the formula a rasonable and conservative growth rate of the owner earning’s
      3. Solve for the PV of the owner’s earnings by discounting using the 30 year treasury rate
      4. Focus on ROE, not EPS
  10. Moats
    1. Supply-side economies of scale and scope
    2. Demand side economies of scale (network effects
    3. Brand
    4. Regulation
    5. Patents and Intellectual Property
What I got out of it
  1. Reiterates a lot of what I’ve already read from Berkshire letters, etc. but a good overview

Fooled by Randomness by Nassim Taleb

  1. Often mistake luck and randomness for skill and determinism
Key Takeaways
  1. In the long run, acute successful randomness fools will run out of luck and after years of success will have one devastating quarter where they lose everything in one huge blow up
  2. Induction – infer things about the nature of the world based on our observations. This approach leads to problems as one disconfirming piece of evidence (one black swan) makes the long held belief that all swans are white incorrect
  3. Can never be sure any theory is correct. Always consider the possibility that your theories and assumptions may be proved wrong and examine how such a development would affect your portfolio
  4. The past blowups were always surprises, as all future ones will be as well. Just because it hasn’t happened before, doesn’t mean that it won’t
  5. Path dependent outcome – things sometimes end up as is because of luck or randomness (QWERTY), not because it is optimal
  6. Going the extra mile is disproportionately rewarded but without visible progress, most people give up before they succeed
  7. Human brain not built to accurately forecast or think about probabilities
  8. People get attached to things they already own but we should be able to accept change in our minds when presented with enough evidence
  9. Capability for rational reason can easily be overwhelmed by emotions
  10. We are inherently poor at understanding the impact of rare events
  11. The opposite but more enduring trading strategy is betting on rare, unlikely events with a big payoff should they occur. Although a market crash might be unlikely, it can still be worth betting on it if the possible reward in such an event is large enough
  12. If we are to be fooled by randomness, make it the best kind and work to your advantage
  13. In the face of randomness, act as stoics would – no self-pity, show personal elegance, don’t blame others and don’t complain
  14. Reduce exposure to noise – newspapers, daily stock market price movements,
What I got out of it
  1. Can’t predict the big blow ups, can have years of success but all be wiped out in one catastrophic year

The Black Swan by Nassim Taleb

  1. Black Swan is an event which is an a rarity, has an extreme impact and is retrospectively (though no prospectively) predictable. This book concerns itself with our blindness with respect to randomness, particularly the large deviations. Must use the extreme event as the starting point and not treat it as an exception to be pushed under the rug. The future will be increasingly less predictable the more we try to control it and “know” it through vast amounts of data
Key Takeaways
  1. Human nature makes us concoct explanations for black swans after he fact, making it explainable and predictable
  2. Literally, just about everything of significance might quality as a black swan
  3. Black Swan logic makes what you don’t know far more relevant than what you do know
  4. It is much easier to deal with the Black Swan problem if we focus on robustness to errors rather than improving predictions
  5. What is surprising is not the magnitude of our forecast errors, but our absence of awareness of it
  6. Certain professionals, while believing they are experts, are in fact not
  7. You can set yourself up to collect serendipitous Black Swans (of the positive kind) by maximizing your exposure to them. Tinker as much as you possibly can to collect as many Black Swan opportunities as possible
  8. People often get into trouble as they tend to learn the precise, not the general. Also, people tend to only learn facts and not rules
  9. To the author, the rare event = uncertainty
  10. Platonicity – mistaking the map for the territory, forcing categorizations and forms when it is inappropriate (almost always)
  11. Read books are far less valuable than unread ones (antilibrary)
  12. History is opaque. You see what comes out, not the script that produces events, the generator of history
  13. Triplet of opacity – the illusion of understanding (world is more complicated than we realize); retrospective distortion (can only assess matters after the fact); overvaluation of “factual” information
  14. Our minds are incredible explanation machines – often creating stories to fit the facts
  15. History and society does not crawl. It jumps
  16. Categories are necessary to survive but people get in trouble when they don’t realize the fuzziness of boundaries
  17. The problem lies not in the nature of the events, but in the way we perceive them
  18. Extremistan (real world) where Black Swans exist and have a huge impact (notion of Bill Gates distorting average wealth in a group) vs. Mediocristan (average) where there is no person tall/heavy enough to distort group averages
  19. Be suspicious of knowledge you derive from data
  20.  Don’t simplify anything beyond what is necessary
  21. Black Swans differ per person – it occurs relative to the person’s expectations and they don’t have to be instantaneous surprises
  22. Positive Black Swans tend to take time to show their effects whereas negative ones happen very quickly
  23. Blindness to black swans can come from: error of confirmation, narrative fallacy, human nature is not programmed for Black Swans, distortion of silent evidence and we “tunnel” (focus on a few well-defined sources of uncertainty)
  24. Domain specificity – our reactions, mode of thinking, intuitions, depend on the context
  25. Naive empiricism – finding evidence of what suits your beliefs (NED – no evidence of disease vs. END – evidence of no disease)
  26. People build stories in order to help tie events, facts together but can hurt us when it increases our impression of understanding
  27. It takes considerable effort to see facts while withholding judgment and resisting explanations
  28. The Black Swans we imagine, discuss and worry about do not resemble those likely to be Black Swans. We worry about the wrong “improbable” events
  29. Favor experimentation over storytelling, experience over history and clinical knowledge over theories. Another approach is to predict and keep a tall of the predictions
  30. The relevant is often boring, nonsensational and we tend to favor the sensational and the extremely visible
  31. Your happiness depends far more on the number of instances of positive feelings than on their intensity when they hit
  32. Silent evidence – you only see survivors and hear their stories, you don’t hear of the “drowned sailors who also prayed to God”
  33. The gravest of all manifestations of silent evidence is the illusion of stability
  34. Has been shown that people often take risks not because of bravado but because of ignorance and blindness to probability
  35. Reference point argument – don’t compute odds from the vantage point of the winning gambler but from all those who started in the group
  36. Be very careful of the “because,” especially in situations where you suspect silent evidence. People harbor a natural scorn for the abstract
  37. Ludic fallacy – the attributes of the uncertainty we face in real life have little connection the sterilized ones we encounter in exams and games
  38. Knightian risks you can compute whereas Knightian uncertainty is incomputable
  39. Prediction, not narration, is the real test of our understanding of the world
  40. The larger the role of the Black Swan the harder it will be for us to predict
  41. People are arrogant about what we think we know. Increasing knowledge helps but it can hurt as even more by increasing our confidence, ignorance and conceit
  42. Ideas are sticky – once we produce a theory, we are not likely to change our minds – those who delay forming theories are better off
  43. Certain fields like astronomers and physicists tend to have experts whereas stockbrokers, court judges, etc. tend not to be experts
  44. You cannot ignore self-delusion
  45. What matters is not how often you are right, but how large your cumulative errors are
  46. We cannot truly plan because we do not understand the future but we can plan while bearing in mind such limitations
  47. People cannot work without a point of reference (anchoring)
  48. The policies we need to make decisions on should depend far more on the range of possible outcomes than on the expected final number
  49. When new technology emerges, we either grossly underestimate or severely overestimate its importance
  50. Choose to follow evidence over theory as we cannot explain everything and often underestimate the complexity of nature and biology
  51. We fail to learn about the difference between our past predictions and the subsequent outcomes (when we think of tomorrow we just project it as another yesterday)
  52. We don’t learn much from our past experiences and we also don’t know what to epect from the future
  53. Randomness is incomplete information (opacity)
  54. Doesn’t advise always withholding judgment, opinions, predicting, being a fool – but be a fool in the right places. Avoid unnecessary dependence on large-scale harmful predictions. Avoid the big subjects that may hurt you in the future. Do not listen to economic forecasters or to predictors in social science but do make your own forecasts. Know how to rank beliefs not according to their plausibility but by the harm they may cause
  55. Make many small bets with asymmetric payoffs and where the harm is minimal
  56. Maximize the serendipity around you
  57. Trial and error means trying a lot
  58. You need to love to lose – series of small failures are necessary in life
  59. Barbell strategy – be hyperconservative and hyperaggressive instead of being mildly aggressive or conservative (90% in extremely safe instruments and 10% in extremely speculative bets)
  60. Do not try to predict precise black swans. Invest in preparedness, not in prediction
  61. Seize anything that looks likeopportunity – free options
  62. Beware of precise plans by governments
  63. Nobody in particular is a good predictor of anything
  64. Pascal’s wager – eliminates the need for us to understand the probabilities of a rare event and focus on the payoff and benefits of an event if it takes place
  65. Gray Swan – reducing Black Swans surprise effect by getting a general idea about the possibility of their outcomes
  66. An early, initial advantage tends to follow people through life
  67. For something to become “contagious” it must agree with human nature
  68. Luck is the grand equalizer
  69. Moving forward we will have fewer but more sever crises
  70. 80/20 rules can become the 50/01 rule – 50% of work done by 1% of workers (80/20 might even be more extreme in Extremistan, like 97/20)
  71. Study the intense, uncharted, humbling uncertainty in the markets as a means to get insights about the nature of randomness that is applicable to psychology, probability, mathematics, decision theory and even statistical physics . You will see the sneaky manifestations of the narrative fallacy, the ludic fallacy and the great errors of Platonicity (going from representation to reality)
  72. Fractal randomness is a way to reduce these surprises, to make some of the swans appear possible, so to speak, to make us aware of their consequences, to make them gray. Fractal randomness does not yield precise answers
  73. Worries less about small failures than large, catastrophic ones (“safe” blue chips vs. venture capital)
  74. “Missing a train is only painful if you run after it.” – it is more difficult to lose in a game that you set up yourself
  75. Redundancy equals insurance
  76. Mother Nature does not like overspecialization, anything too big, too much connectivity and globalization,
  77. The organism which has the highest number of secondary uses is the one that will gain the most from environmental randomness and opacity
  78. Certain fields make distinctions which make sense in their narrow world but have no effect in the real world
  79. Let human mistakes and miscalculations remain confined – artificially reducing volatility and ordinary randomness increases exposure to Black Swans as it creates an artificial quiet
  80. Living organisms need variability and randomness in order to avoid become fragile – diet, workouts, tabata, slow meditative walks, thermal variability, sleep deprivation, fasting – trade duration for intensity
  81. A little bit of extreme stress is vastly better than a little bit of stress all the time
  82. Volatility does not equal risk
  83. Do not bet on Black Swans taking place – he is advocating acts of omission and not comission
  84. Evolution does not work by teaching but by destroying
  85. The Black Swan corresponds mainly to an incomplete map of the world
  86. Focus more on the consequences of decisions than on their probabilities
  87. People are suckers and will gravitate to those variables which are unstable but appear stable
  88. There is no reliable way to compute small probabilities
  89. It is much more sound to take risks you can measure than to measure the risks you are taking
  90. Recommendations of the style “do not do” are more robust empirically. Success consists mainly in avoiding losses, not in trying to derive profits
  91. Acting, doing something, often more harmful than doing nothing
  92. How to move from the Third to Fourth Quadrant (Black Swan)
    1. Have respect for time and nondemonstrative knowledge
    2. Avoid optimization; learn to love redundancy (do not overspecialize)
    3. Avoid prediction of small-probability payoffs – thought no necessarily of ordinary ones
    4. Beware the “atypically” remote events
    5. Beware moral hazard with bonus payments
    6. Avoid some risk metrics
    7. Positive or negative Black Swan?
    8. Do not confuse absence of volatility with absence of risk
    9. Beware presentations of risk numbers
  93. 10 Principles for Black Swan Robust Societies
    1. What is fragile should break early, while it’s still small
    2. No socialization of losses and privatization of gains
    3. People who were driving a school bus blindfolded (and crashed it) should never been given a new bus
    4. Don’t let someone making an “incentive” bonus manage a nuclear plant – or your financial risks
    5. Compensate complexity with simplicity
    6. Do not give children dynamite sticks, even if they come with warning labels
    7. Only Ponzi schemes should depend on confidence. Governments should never need to “restore confidence”
    8. Do not give an addict more drugs if he has withdrawal pains (no leverage)
    9. Citizens should not depend on financial assets as a repository of value and should not rely on fallible “expert” advice for their retirement (investments should be for entertainment)
    10. Make an omelet with broken eggs (have the right people like entrepreneurs take the risks, not bankers; smaller firms with less effects if the fail)
What I got out of it
  1. Awesome book. I think Antifragile ties in all his books into one but still makes a lot of great points and might be worth re reading at some point