Link to FS blog post: https://fs.blog/great-talks/multidisciplinary-approach-thinking-peter-kaufman/

Peter Kaufman is one of the most successful businessmen of our time, and yet few people have ever heard of him. He’s the CEO of Glenair, an aerospace company based in California, and the editor of Poor Charlie’s Almanack, a book about Charlie Munger.

This speech was to the California Polytechnic State University Pomona Economics Club. The transcript and audio are reproduced here with the permission of Peter Kaufman. As with many “conversational” talks given without notes, it’s better to listen to the audio to pick up on subtleties that won’t come across in the lightly edited transcript. In essence, the talk has a simple takeaway.

Using a true multidisciplinary understanding of things, Peter identifies two often overlooked, parabolic “Big Ideas”: 1) Mirrored Reciprocation (go positive and go first) and 2) Compound Interest (being constant). A great “Life Hack” is to simply combine these two into one basic approach to living your life: “Go positive and go first, and be constant in doing it.”

You have to figure out what your own aptitudes are. If you play games where other people have the aptitudes and you don’t, you’re going to lose. And that’s as close to certain as any prediction that you can make. You have to figure out where you’ve got an edge. And you’ve got to play within your own circle of competence.

If you want to be the best tennis player in the world, you may start out trying and soon find out that it’s hopeless—that other people blow right by you. However, if you want to become the best plumbing contractor in Bemidji, that is probably doable by two-thirds of you. It takes a will. It takes the intelligence. But after a while, you’d gradually know all about the plumbing business in Bemidji and master the art. That is an attainable objective, given enough discipline. And people who could never win a chess tournament or stand in center court in a respectable tennis tournament can rise quite high in life by slowly developing a circle of competence—which results partly from what they were born with and partly from what they slowly develop through work.

1. Inversion: Avoiding stupidity is easier than trying to be brilliant. Instead of asking, “How can I help my company?” you should ask, “What’s hurting my company the most and how can I avoid it?” Identify obvious failure points, and steer clear of them.

2. Doublespeak: People often say the opposite of what they mean, especially in political language. It allows people to lie while looking like they’re telling the truth. As George Orwell famously wrote in 1984, “War is peace. Freedom is slavery. Ignorance is strength."

3. Theory of Constraints: A system is only as strong as its weakest point. Focus on the bottleneck. Counterintuitively, if you break down the entire system and optimize each component individually, you’ll lower the effectiveness of the system. Optimize the entire system instead.

4. Preference Falsification: People lie about their true opinions and conform to socially acceptable preferences instead. In private they’ll say one thing. In public, they’ll say another.

5. Faustian Bargain: A man once sold his soul to a demon in exchange for knowledge. At first, it seemed like a smart trade. But the man lost in the long-run. Tragically, what the man lost was more valuable than what he earned. In short, he won the battle but lost the war.

6. Mimetic Theory of Desire: Humans are like sheep. We don’t know what we want, so we imitate each other. Instead of creating our own desires, we desire the same things as other people. The entire advertising industry built on this idea.

7. Mimetic Theory of Conflict: People who are similar are more likely to fight than people who are different. That’s why Civil Wars and family feuds create the worst conflicts. The closer two people are and the more equality between them, the greater the potential for conflict.

8. Talent vs. Genius: Society is good at training talent but terrible at cultivating genius. Talented people are good at hitting targets others can’t hit, but geniuses find targets others can’t see. They are opposite modes of excellence. Talent is predictable, genius is unpredictable.

9. Competition is for Losers: Avoid competition. Stop copying what everybody else is doing. If you work at a for-profit company, work on problems that would not otherwise be solved. If you’re at a non-profit, fix unpopular problems. Life is easier when you don’t compete. (Hint: don’t start another bottled water company).

10. Secrets are Hidden in Plain Sight: Most people think of secrets as Easter eggs. They assume that if a secret is important, it’s necessarily going to be hard to find. The best ideas can come from things that are so well-known that they aren’t well-seen.

11. The Never-Ending Now: The structure of our social media feeds blinds us to history, as it causes us to live in an endless cycle of ephemeral content consumption. The structure of the Internet pulls people away from age-old wisdom.

12. Demand Curves Slope Down: The harder something is to do, the fewer people will do it. For example, raise the price of a product and fewer people will buy it. Lower the price and more people will buy it. Economics 101.

13. Look for Things That Don’t Make Sense: The world always makes sense. But it can be confusing. When it is, your model of the world is wrong. So, things that don’t make sense are a learning opportunity. Big opportunities won’t make sense until it’s too late to profit from them.

14. The Wisdom of Paradox: Logic is the key to scientific truths, but paradoxes are the key to psychological ones. When it comes to the human condition, the deepest truths are often counter-intuitive. When you find two opposites that are both true, start exploring.

15. Law of Shitty Click-Through Rates: Most marketing strategies have a short window of success, as click-through rates decrease as tactics mature. For example, the first banner-ad has a click-through rate of more than 70%. Now we avoid them with ad-blockers.

16. Russell Conjugation: Journalists often change the meaning of a sentence by replacing one word with a synonym that implies a different meaning. For example, the same person can support an estate tax but oppose a death tax — even though they are the same thing.

17. Opportunity Cost: By reading this tweet, you are choosing not to read something else. Everything we do is like this. Doing one thing requires giving up another. Whenever you explicitly choose to do one thing, you implicitly choose not to do another thing.

18. Overton Window: You can control thought without limiting speech. You can do it by defining the limits of acceptable thought while allowing for lively debate within these barriers. For example, Fox News and MSNBC set limits on what political thoughts they consider acceptable, but in the grand scheme of things, they’re both fairly conventional. The political spectrum stretches far beyond the ideas they entertain, but ideas outside their limits are shunned.

19. Planck’s Principle: Science doesn’t progress because people change their views. Rather, each new generation of scientists has different views. As old generations pass away, new ideas are accepted and the scientific consensus changes.

20. Bike-Shed Effect: A group of people working on a project will fight over the most trivial ideas. They’ll ignore what’s complicated. They’ll focus too much on easy-to-understand ideas at the expense of important, but hard to talk about ideas. For example, instead of approving plans for a complicated spaceship, the team would argue over the color of the astronaut’s uniforms.

21. Table Selection: This idea comes from poker, where you’re advised to choose your opponents carefully. That means you shouldn’t compete against the best people. You don’t need to get good at doing difficult things if you get good at avoiding difficult things. If you want to win, pick an easy table and nail your execution.

22. Goodhart’s Law: When a measure becomes a target, it ceases to be a good measure. One hospital took too long to admit patients so a penalty was given for 4+ hour wait times. In response, ambulance drivers were asked to slow down so they could shorten wait times.

23. Gall’s Law: 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 cannot be patched up to make it work. You have to start over with a working simple system.

24. Hock Principle: Simple, clear purpose and principles give rise to complex and intelligent behavior. Complex rules and regulations give rise to simple and stupid behavior.

25. Parkinson’s Law: Work expands to fill the time available. People don’t want to look like they’re lazy, so they find extra tasks to tackle, even if they’re trivial. If you have six months to complete a project, it will take six months to complete. Set deadlines accordingly.

26. The Second Law of Thermodynamics: The world tends towards disorder. That’s why your room becomes messier and messier over time. It’s also why an engine converts only ~35% of its energy into useful work. Time moves towards increasing one direction: increasing entropy.

27. The Paradox of Specificity: Focus isn’t as constraining as it seems. In the age of the Internet, when everybody has Google search and personalized social media feeds, differentiation is free marketing. The more specific your goal, the more opportunities you’ll create for yourself. Narrowing your aperture can expand your horizons.

28. Emergence: When things interact, they often birth new, unpredictable forms. Therefore, the sum total of a system is more than its competent parts. As a system evolves, its structure can transform — just like how water becomes cold water until it turns into ice.

29. Occam’s Razor: If there are multiple explanations for why something happened and they are equally persuasive, assume the simplest one is true. In the search for truth, remove unnecessary assumptions. Trust the lowest-complexity answer.

30. Hickam’s Dictum: The opposite of Occam’s Razor. In a complex system, problems usually have more than one cause. For example, in medicine, people can have many diseases at the same time.

31. Hormesis: A low dose of something can have the opposite effect of a high dose. A little bit of stress wakes you up, but a lot of stress is bad for you. Lifting weights for 30 minutes per day is good for you, but lifting weights for 6 hours per day will destroy your muscles. Stress yourself, but not too much.

32. Robustness Principle: Be conservative in what you do, be liberal in what you accept from others. It’s a design guideline for software and a good rule for life: Hold yourself to a higher standard than you hold others to.

33. Legibility: We are blind to what we cannot measure. Not everything that counts can be measured, and not everything that can be measured counts. But people manage what they can measure, so society repeats the same mistakes.

34. Horseshoe Theory: Extreme opposites tend to look the same. For example, a far-right movement and a far-left movement can be equally violent or desire a similar outcome. People on both sides are more similar to each other than they are to people in the center.

35. Availability Cascade: A self-reinforcing cycle that creates collective beliefs. An idea will gain traction once it enters the mainstream, which triggers a chain reaction, which causes lots of people to adopt it not because it’s true but because it’s popular.

36. Creativity Begins at the Edge: Change starts away from the spotlight. Then, it moves towards the center. That’s why the most interesting ideas at a conference never come from the main stage. They come from the hallways and the bar after sunset

37. The Copernican Principle: The more we learn about astronomy, the less it seems that earth is special. It’s a small part of the universe, and each human is a small part of the earth. We are all spinning through the solar system — nowhere near the beginning or end of time.

38. Personal Monopoly: Corporations reward conformity, but the Internet rewards people who are unique. If you work in a creative field, strive to be the only person who does what you do. Find your own style, then run with it. Create intellectual real estate for yourself.

39. The Paradox of Consensus: Under ancient Jewish law, if a suspect was found guilty by every judge, they were deemed innocent. Too much agreement implied a systemic error in the judicial process. Unanimous agreement sometimes leads to bad decisions.

40. Penny Problem Gap: Economists assume demand is linear, but people’s behavior totally changes once an action costs money. If the inventors of the Internet had known about it, spam wouldn’t be such a problem. If sending an email cost you $0.001, there’d be way less spam.

41. The Invisible Hand: Markets aggregate knowledge. Rising prices signal falling supply or increased demand, which incentivizes an increase in production. The opposite is true for falling prices. Prices are a signal wrapped in an incentive.

42. Base Rate: The average outcome for an event over time. They’re like batting averages for life, and they work best with big sample sizes. For example, if you’re starting a business, avoid the restaurant business where margins are low and competition is high.

43. Circle of Competence: Define the limits of your knowledge. Hint: the limits are smaller than you think. That’s because being an expert in one area doesn’t make you an expert in anything else. Be clear about what you know and don’t know.

44. Convexity: If you want to be lucky, look for opportunities with big upsides and low downsides. In addition to increased optionality, your errors will benefit you more than they harm you. Convex payoffs let you tinker your way to success and innovation.

45. The Go-For-It Window: Large gaps between accelerating technologies and stagnating social norms create lucrative new business opportunities. But they are only available for a short time when people can capitalize on the difference between the real and perceived state of the world. For example, 2007 was the perfect time to launch the iPhone, but Google Glasses launched too early.

46. Via Negativa: When we have a problem, our natural instinct is to add a new habit or purchase a fix. But sometimes, you can improve your life by taking things away. For example, the foods you avoid are more important than the foods you eat.

47. The Medium Is the Message: We pay too much attention to what is being said. But the medium of communication is more impactful. For example, the Internet’s impact on humanity has a bigger influence than anything that’s said on the Internet.

48. Resource Curse: Countries with an abundance of natural resources such as diamonds and fossil fuels tend to have less economic growth and worse development than countries with fewer natural resources.

49. The Paradox of Abundance: The average quality of information is getting worse and worse. But the best stuff is getting better and better. Markets of abundance are simultaneously bad for the median consumer but good for conscious consumers.

50. The Map Is Not the Territory: Reality will never match the elegance of theory. All models have inconsistencies, but some are still useful. Some maps are useful because they’re inaccurate. If you want to find an edge, look for what the map leaves out.

51. Baker’s Dozen: The key to good hospitality is to delight your guests with an unexpected gift. If you run a hotel, leave a chocolate on the bed. If you run a bakery, give your customers one extra bagel. If you write a tweetstorm, share an extra idea.

Much is made of the relative strength of small insects as compared to that of humans. For example, a leafcutter ant can carry about 50 times its weight; whereas an average human can only carry about half its weight. The standard reasoning goes that an ant scaled to the size of a human would retain this strength-weight advantage, giving a 200-pound ant the ability to lift 10,000 pounds. In actuality, however, an ant scaled to this size would only be able to lift about 50 pounds, assuming it could move at all. The effect of gravity at small scales is miniscule, but the effect increases exponentially with the mass of an object. This underscores the basic lesson of the scaling fallacy—systems act differently at different scales.

• Via Anshul Khare from the book - Universal Principles of Design.

Don’t feel bad about that, though, it’s not just you. The stars themselves form as a result of the properties of atoms, the specific features of each star set by the chance distribution of ripples of condensation through clouds of dust and gas. Our sun wasn’t required to be where it is, with the luminosity it has — it just happens to be there, and our existence follows from this opportunity. Our species itself is partly shaped by the force of our environment through selection, and partly by fluctuations of chance. If humans had gone extinct 100,000 years ago, the world would go on turning, life would go on thriving, and some other species would be prospering in our place — and most likely not by following the same intelligence-driven technological path we did.

And if you understand the mediocrity principle, that’s OK.

The reason this is so essential to science is that it’s the beginning of understanding how we came to be here and how everything works. We look for general principles that apply to the universe as a whole first, and those explain much of the story; and then we look for the quirks and exceptions that led to the details. It’s a strategy that succeeds and is useful in gaining a deeper knowledge. Starting with a presumption that a subject of interest represents a violation of the properties of the universe, that it was poofed uniquely into existence with a specific purpose, and that the conditions of its existence can no longer apply, means that you have leapt to an unfounded and unusual explanation with no legitimate reason. What the mediocrity principle tells us is that our state is not the product of intent, that the universe lacks both malice and benevolence, but that everything does follow rules — and that grasping those rules should be the goal of science.

-P Z Myers, Biologist: 2011 Edge Annual Question Response

Models

• Feedback loop. To understand a situation, I need to look at what is coming in to the situation, but I also have to pay attention to history. If what has happened historically tends to intensify (rich get richer), it’s a positive feedback loop. Positive feedback loops can always be driven both ways. If what has happened historically tends to diminish (thermostat), it’s a negative feedback loop. Thinking in SystemsQuality Software Management: Volume 1, Systems Thinking.

• Finite state machine. The world responds differently to the same inputs at different times. Think about discrete “states”. Inputs move the the world to a new state. (Feedback Loop)

• Program. Sometimes I can make sense of the world as a recipe, a sequence of steps that always apply.

• Subroutine. I can break the recipe into parts and give the parts names. This lets me understand the whole while deferring details. (Succession, Model).

• Recursion. A particularly powerful way of breaking programs into parts is to have a part refer to itself. (Self-reference)

• Input/process/output. Another way to break up a program is first to think of getting the inputs ready, then processing the inputs, then preparing the outputs.

• Test. Another way to break up a program is first to think about what it looks like from the outside, its input/output behavior. This thinking takes the physical form of a test. Tests can also be written after the program already exists. (Succession, Model)

• Model. Another way to break up a problem is to emphasize parts for the moment and ignore other parts. “This is a just a model,” tells me it’s okay to ignore some details for the moment (but not too long). The powerful thing about models for me is that when I’m using one, I don’t have to think from scratch, I can say “what would this model say about the situation?” I’m actually thinking, but I stop being overwhelmed.

• Object. Rather than have a program being a sequence of steps that operates on external data, another way of dividing a program up is to have bits of data and steps live together.

• Pattern. Programs are mighty specific. Sometimes the world rhymes but it doesn’t repeat. A patterns lets me capture the rhyming but leave some details to be worked out later. (Model)

• Fractal. Some things that look infinitely complicated actually result from the same rules working at different scales. (Model) Fractal Geometry of Nature.

• Scarcity/sufficiency. The same people behave completely differently depending on whether they believe resources are scarce or sufficient. The Mountain People. The Forest People.

• Refactoring. From early in programming I was taught design and then implementation. Refactoring, adding design information to existing code, relieved my anxiety about making mistakes. Refactoring. (Succession)

• Scientific method. Make hypotheses (beliefs) explicit and deliberately try to falsify them. The New Organon.

• Net present value. A dollar today is worth more than a dollar tomorrow. Spend later and earn sooner.

• Options. Owning the right to buy (sell) something provides more leverage than owning the thing itself.

• Hero’s journey. I avoid panic in tough situations by stepping back and seeing the situation as part of a story. The Writer’s Journey.

• Gaussian distribution. The tug-of-war between two negative feedback loops results in a clear spike in a histogram of samples with some values a little higher and a little lower.

• Power-law distribution. A pure positive feedback loop results in lots of tiny samples and a few really, really, really large samples. The more samples, the more “really”s (i.e. no Central Limit Theorem).

• Assembly line. Oh, this big job of making can be broken down into a sequence of relatively-autonomous steps. The steps can be parallelized and/or batched for economies of scale. (Succession)

• Just in time manufacturing. Each step in the assembly line produces both things and feedback about the making of the things. Reduce batch sizes to increase the proportion of information to things. (Optimization) Toyota Production System.

• Buffer. A buffer or inventory between steps reduces the variance communicated between steps. This both good if it keeps the second step going and bad if it prevents the first step from improving. The Goal.

• Reversibility. To make progress with large, complicated, unpredictable system, quit killing yourself trying to predict the unpredictable. Instead, make all decisions reversible (even if this seems expensive). (Optimization) Reversibility.

• Convex/concave. Distinguish between high-risk/high-reward situations with compounding payoffs and low-risk/low-reward situations with diminishing payoffs. (Optimization, Derivatives) Convexity for Programmers.

• Derivatives. Figure out where things stand now, how things are changing, and how fast that change is changing. Intervene at the appropriate level.

• Metric. From a desired change, derive a measurement that will change if the desired change happens. Beware of “grabbing the speedometer” or “teaching to the test”.

• Optimization. Get from a current situation towards a desired situation in small steps.

• Local maxima. During optimization, be aware of when further progress in small steps is impossible because of diminishing returns. Be prepared to reverse progress for a while to get on a slope with a higher maxima. (Diminishing returns).

• Pareto. Measure and rank potential improvements. One is likely to contain much more potential than all the others combined. Continue until nothing stands out. (Power law distribution, local maxima, optimization).

• Tradeoff. There are no solutions, only tradeoffs. Move from “this is how we do things” to “more of this means less of that, therefore in this situation we do things thusly”. Also known as “it depends, but on what?”. The Secrets of Consulting.

• Transcendence. If you don’t like the answers offered by today’s tradeoff, change the shape of the curves.

• Negotiation. The process of discovering what you really care about most while helping someone else discover what they care about most. At the end, if there’s an intersection, you have a deal. In any case, both parties learn. (Tradeoff, Transcendence)

• Succession. Don’t choke down the whole salami. Eat one slice at a time. Choose the next slice after finishing the previous slice.

• Indirect approach. When faced with opposition, move so that your goal is ambiguous. (Succession) Strategy.

• Accountability. Offer trustworthiness by accounting for your actions and consumption without blame

• Manipulation. The attempt to induce someone else to make a decision without full freedom or information.

• Authenticity. To be unapologetically and fully yourself. Terrifying at first. Sometimes painful if someone doesn’t like your authentic self. Better than the alternatives. (see also Boundaries)

• Bids. Relationships are built out of a sequence of bids for attention, which can be responded to by turning towards, turning against, or turning away. The balance of towards versus against or away predicts the longevity of the relationship. The Relationship Cure.

• Detachment. Being in this moment, not the future or the past, not the antecedents or the consequences.

• Preferential attachment. The rich get richer. The complex get complexier. Makes no sense some times. Tough. Linked.

• Self-reference. The ultimate programmer trick. Referring to a thing inside itself, as this note does. Gödel, Escher, Bach: An Eternal Golden Braid.

• Operant conditioning. Skinner was a narrow-minded idiot. Incentives are far more nuanced than this. (Feedback Loop, not) Punished By Rewards.

• Maslow’s hierarchy. You have to take care of basic needs like security before belonging and aspiration matter. (Scarcity/sufficiency)

• Emergence. Big, complicated things aren’t designed whole. Optimize, escape local maxima, work at various scales. (Optimization, Local Maximum, Fractal)

• Affordance/mapping. Design interfaces that invite their available actions (affordances) and use consistent mappings from one space to another (left is left and right is right or up is loud and down is quiet). The Design of Everyday Things.

• Paradigm. What we see is colored by what we expect. Deliberately changing what we expect can change what we see. The Structure of Scientific Revolutions.

• Rewriting. Change the structure without changing the meaning. I learned this with trig identities. (Succession)

• Bayes. Rather than search for certainty, work to reduce uncertainty. I’m only ten years into trying to understand Bayes and I only really can apply it to poker. The Theory That Would Not Die.

• Invalidation. You can’t prove anything about the world true, you can only prove it false. The Logic of Scientific Discovery.

• Variance. You can play well and lose and play badly and win. Don’t keep score by winning and losing. Keep score by playing well and learning to play better. (Detachment)

• Butterfly effect. Small actions can have large effects. If I want to have large effects, look for or create positive feedback loops that amplify my actions.

• Diminishing returns. Be aware of when what were previously fruitful efforts no longer product the same payoff. Switch. (Convex/concave, Feedback loop).

• The Chasm. When communicating an innovation, you can’t get everyone on board at once. Start with the novelty vampires, then the rational risk takers, then the majority (I lose interest before the majority). Crossing the Chasm.

• Metaphor. Think about one topic by thinking about another. There’s a source topic, a destination topic, a mapping between the two, and the danger of carrying it too far. Saying “abstract thought is metaphorical” is metaphorical–thought is electro-chemical goo. (Model) Women, Fire, and Dangerous Things.

• Moral hazard. Think about what people would do if they were selfish bastards, even if they aren’t. If someone has an incentive, no matter how base, to act badly, either rejigger the incentives or keep your eyes open.

• Exponential depletion. When someone says, “There are 200 years of coal in the ground at current rates of consumption,” alarm bells should shriek. Depending on how fast consumption is growing, that might be 50 years or 30 years or even 10 years. Same goes for startup runway and consumption of any non-renewable resource. What’s in the bank versus compounded consumption rate.

• Graph. If I can translate a complicated problem into a graph, then there are all sorts of operations I can perform on the graph that translate back to the original problem (need to catalog these). (Model)

• Queueing. Divide the world into tasks, stations, and queues (Graph). Think of how the world is divided, and how it could be divided. Think about the distribution of sizes of tasks, arrival of tasks, changing queue size. Measure latency, throughput, and variance.

• Punctuated equilibrium. Change doesn’t happen steadily. Things will look stable then jump to a new “stable”. “It’s been stable” is not an argument that it won’t change. “It’s been growing” is not an argument that it will keep growing forever (Exponential depletion).

• Half life.

Techniques

When I get stuck, these are specific things I do that can unstuck me.

• Implication. Hold your nose and do the math. Set aside “this is what I believe” or “this is what I would prefer”. Apply a model or analogy first, then analyze the results. Boundaries. Be clear about what is my responsibility and what is not my responsibility. “I just got difficult feedback. How much is about me and how much is about the person giving the feedback?” Waiting. Timing matters. If you are waiting for something specific, then waiting is an action. Contrarian. You can’t create more impact than someone else by doing what they do. You either have to be better than they are or you have to do something different. I prefer to do something different. One simple heuristic is if someone says, “Obviously…” I always ask myself what would happen if the opposite were true. The greater the fury behind the “obviously”, the longer I’ll spend considering the counterfactual. Usually this leads to dead ends, but when it doesn’t, you won’t have any competition until it’s too late. Isolation. When faced with a big, complicated, confusing situation (like tracking down a weird bug), first turn it into a small, simpler, still-confusing situation. Binary search is efficient but it’s hard not to try to understand first. Phase shift. If you’re stuck doing A and then B, try doing half of A, the second half of A and the first half of B together, then the second half of B. (Implement-Test)(Implement-Test) becomes (Test-Implement)(Test-Implement). (Requires a cycle as a prereq). Believe the Market. When one of my theories (see above) predicts that people will act in one way but a bunch of reasonable people act in a different way, I ask, “What theory would explain their behavior?” (I also use this on myself when I behave in ways I don’t like.) Thompson Sampling. “A little nonsense/now and then/is relished by/the wisest man”. Put a little investment, occasionally, into even bad ideas, just in case. Reverse causality. When someone says, “This person is senior so they write the meeting summary,” I immediately say, “Maybe they look senior because they write the meeting summaries.” Try writing the summary yourself and see if people treat your like you are senior. What I Learned Writing This I spent hundreds to thousands of hours learning each topic. I use many of these ideas to avoid being overwhelmed in complex or ambiguous situations. I use the ideas to generate more ideas. “Well, if this situation is convex, then that implies we should…” There are more links between the ideas than I suspected. Succession, in particular, is absolutely fundamental. There seems to be a distinction between models and techniques. The techniques are now habits. I don’t have to call them up consciously. To Do For each, could talk about definition, example, limitations, reference, application, personal history (both when first encountered and when useful), example-of, syllabus), connections between. Have deep and shallow “learn more” links. Have illustrations (pictures) as well as examples. I’m missing a “how I use this to think” section, either a concrete example or something more pattern-y: patterns I look for, patterns I avoid, how I apply. I should write up one idea “completely”. What does “complete” mean? To what purpose? For whom? Wait for feedback. Order and group. Wait for suggestions. What is this good for? Wait for readers to tell me how they found it helpful.

When discussing technologies to support learning and education, my mentor Seymour Papert often emphasized the importance of “low floors” and “high ceilings.” For a technology to be effective, he said, it should provide easy ways for novices to get started (low floor) but also ways for them to work on increasingly sophisticated projects over time (high ceiling).

For a more complete picture, we need to add an extra dimension: wide walls. It’s not enough to provide a single path from low floor to high ceiling; we need to provide wide walls so that kids can explore multiple pathways from floor to ceiling.

— Mitchel Resnick

This gives us a lens through which evaluate tools:

• Low floor: how easy is it to learn?
• Wide walls: how inclusive is it? How many different use-cases does it serve?
• High ceiling: does it scale with growth?

Most programming tools focus exclusively on creating a high ceiling. By choosing the other two neglected dimensions, Scratch has carved out a durable niche for itself. It is widely used in intro-to-programming courses, beginner robotics, after-school classes… any place a simple but open-ended programming model is needed.

How can your product focus on:

Lowering the floor — becoming simpler, cheaper, “good enough” Widening the walls — serving an ignored audience or market

Source: http://gordonbrander.com/pattern/low-floor-wide-walls-high-ceiling/

• Audio Link
• Transcript Link

Reproducing the copy here, because it is wisdom personified in simple terms:

Spencer Hoff: Thank you for coming. Today we’ve got Mr. Peter Kaufman, CEO of Glenair, who wrote this book, Poor Charlie’s Almanac about Charlie Munger. It’s an excellent book, best book I’ve ever read by far in my life. He serves on the board of Daily Journal with Mr. Charlie Munger and he’s going to give us a few words today. So please welcome Mr. Peter Kaufman everybody.

Peter Kaufman: Thank you. Now I’m happy to talk about a subject. I was asked to talk about the multidisciplinary approach to thinking. So I’ll start out with that. But if you guys get bored or something and say ‘Well I thought we were supposed to have fun listening to this today.’ You can raise your hand and say ‘Could you talk about leadership or team building or business strategy or ethics or something else?’ I gave a talk recently at Google, in fact I’ve given three talks at Google. And the first talk I gave they said ‘What are you going to talk about?’ And I said, ‘Well, what do you want to talk about?’ They said, ‘About whatever you want. What do you usually talk about?’ Well I usually talk about leadership, culture, team building, strategy, ethics. And they said, ‘We don’t hear about that team building crap. We get that all the time. We want to hear about self-improvement.’ So I will mix in with our multidisciplinary topic a little bit of self-improvement as well. Is that OK?

OK.

So why is it important to be a multidisciplinary thinker? The answer comes from the Austrian philosopher Ludwig Wittgenstein who said, ‘To understand is to know what to do.’ Could there be anything that sounds simpler than that? And yet it’s a genius line, to understand is to know what to do. How many mistakes you make when you understand something? You don’t make any mistakes. Where do mistakes come from? They come from blind spots, a lack of understanding. Why do you need to be multidisciplinary in your thinking? Because as the Japanese proverb says, ‘The frog in the well knows nothing of the mighty ocean.’ You may know everything there is to know about your specialty, your silo, your well, but how are you going to make any good decisions in life…the complex systems of life, the dynamic system of life…if all you know is one well?

So I tried to learn what Munger calls, ‘the big ideas’ from all the different disciplines. Right up front I want to tell you my trick was, because if you try to do it the way he did it you don’t have enough time in your life to do it. It’s impossible. Because the fields are too big and the books are too thick. So my trick to learn the big ideas of science, biology, etc., was I found this science magazine called Discover Magazine. Show of hands, anybody here ever heard of Discovery magazine? A few people. OK. And I found that this magazine every month had a really good interview with somebody from some aspect of science. Every month. And it was six or seven pages long. It was all in layperson’s terms. The person who was trying to get their ideas across would do so using good stories, clear language, and they would never fail to get all their big ideas into the interview. I mean if you’re given the chance to be interviewed by Discovery magazine and your field is nanoparticles or something, aren’t you going to try your very best to get all the good ideas into the interview with the best stories etc. Okay. So I discovered that on the Internet there were 12 years of Discover magazines available in the archives. So I printed out 12 years times 12 months of these interviews. I had 144 of these interviews. And I put them in these big three ring binders. Filled up three big binders. And for the next six months I went to the coffee shop for an hour or two every morning and I read these. And I read them index funds style, which means I read them all. I didn’t pick and choose. This is the universe I’m going to own the whole universe. I read every single one.

Now I will tell you that out of a hundred and forty four. If I’d have been selecting my reading material, I probably would have read about 14 of them. And the other 130? I would never in a million years read six pages on nanoparticles. Guess what I had at the end of six months? I had inside my head every single big idea from every single domain of science and biology. It only took me 6 months. And it wasn’t that hard because it was written in layperson’s terms. And really, what did I really get? Just like an index fund, I captured all the parabolic ideas that no one else has. And why doesn’t anybody else have these ideas? Because who in the world would read an interview on nanoparticles? And yet that’s where I got my best ideas. I would read some arcane subject and oh my god I saw, ‘That’s exactly how this works over here in biology.’ or ‘That’s exactly how this works over here in human nature.’ You have to know all these big ideas. Or there is an alternative, find somebody who did what I did and just get all the ideas from them. Now when I was your age and I was in school I thought the asymmetry of it was very unfair because I had to do all the work. So every time I go back and meet with a group of students I change the asymmetry around. I did all the work for you…

I have 30 examples in here of models that I derived from what I call my ‘three buckets’. Let’s see if I’ve got my three buckets in here. I do. I do have my three buckets. Ok. So this is how I use ideas that no one else in the world uses and yet I can be comfortable that they’re right. A statistician’s best friend is what? A large relevant sample size. And why? Because a principle derived from a large relevant sample size can’t be wrong can’t it? The only way it could be wrong is if the sample size is too small or the sample itself is not relevant.So I want to tell you what my three buckets are where I drive my models, multidisciplinary models. Number one is 13.7 Billion years in science. Is that a large sample? It’s the largest one in the whole universe. There is no larger sample. Because what is it? It’s the inorganic universe. Physics. Geology. Anything that’s not living goes in my bucket number 1. 13.7 billion years

Bucket number 2 is three and a half billion years in science. It’s biology on the planet Earth. Is that a big sample size? Is it relevant? We’re biological creatures. Let me ask you this, inorganic, bucket number one, is it relevant? We live in. So bucket Number one we live in, 13.7 billion years. Bucket number two is what we’re part of, biology. 3.5 billion years. And number three is twenty thousand years of recorded human history. That’s the most relevant of all. That’s our story. That’s who we are.

So we’re going to take a couple of examples here of multidisciplinary thinking. We’ll ask this question, is there a simple two word description that accurately describes how everything in the world works? That would be very useful wouldn’t it if you know how everything works in just two words? So we go to bucket number one. How does everything work? We go to Newton’s Third Law of motion, we’re getting very multidisciplinary here. Does anybody in the room know what Newton’s third law motions says? (Answer: “For every action there is there will always be an equal and opposite reaction.”) That’s beautiful. He wins one of my pens here for answering that question correctly. I always give out rewards. It’s like operant conditioning from psychology, right? So there you go.

Yes if I put this bottle of water on this table, Newton’s third law of motion says that if the bottle pushes down the table with ‘force X’, and it also strangely says that the table pushes back with equal ‘force x’. That’s very strange. But you know how long that’s been true? 13.7 billion years that’s been true. Now what if I push down twice as hard, what does the table do? Well if I push down twenty one and a half times hard? What does the table do? Twenty one and a half! OK. Now is there a good word, a catchall word to describe what we’re talking about here when this pushes down and this thing pushes back? Yeah, it’s reciprocation isn’t it? But it’s not mere reciprocation. It’s perfectly mirrored reciprocation. The harder I push, the harder it pushes back. Does everybody buy that? That’s bucket number one. That’s how the world works. It’s mirrored reciprocation. Everything in the inorganic universe works that way.

We go to bucket number 2. I’m going to introduce a little humor into this. Even though this is dog, pretend it’s a cat. OK? This is a cat for the time being. Mark Twain said that a man who picks up a cat by its tail will learn a lesson he can learn in no other way. What does this cat going to try to do? It’s going to do what? (Answer: “Attack you.”) Yeah it’s going to try and scratch me right with its sharp claws. And why? It doesn’t find being picked up by its tail very agreeable does it? Now what if I start swinging this cat around by its tail. What does the cat do now? Now it’s trying to scratch my eyes out. It said, ‘You escalated on me pal, I’m going to escalate back on you.’ Does that sound a lot like mirrored reciprocation? But what if instead of doing something disagreeable with this cat we do something very agreeable with us this cat? And this cat’s sitting here and we come over and we gently pick it up by its tummy and we put it in our crook of our elbow and we gently stroke it. Does the cat try and scratch us? What does it do? It licks our hands. And as long as I sit here and stroke it, it’s going to continue to try and lick my hand. It wants to show me what? ‘I like this. This is agreeable. You’re a good guy. Keep it up man!’ It’s mirrored reciprocation isn’t it? If I act in a disagreeable way to the cat, the cat acts in a disagreeable way back, and mirrored. If I act in an agreeable way. What do you think we’re going to find when we go to bucket number three? It’s exactly the same thing isn’t it? Your entire life. Every interaction you have with another human being is merely mirrored reciprocation. Now you’re going to say to yourself ‘This is too simple. Can’t be this simple.’ It is this simple! It doesn’t mean it’s not sophisticated. This is a very sophisticated model we just derived isn’t it? We did a multidisciplinary didn’t we? We looked into the three largest sample sizes that exist, the three most relevant, and they all said exactly the same thing. Do you think we can bank on that? 100 percent we can bank on that.

So if you think about things being complex as being sophisticated like most people do, you think the more complex it is the more sophisticated it is. I want you to remember, as best you can, what I’m about to say it’s very very important. Albert Einstein once listed what he said were the five ascending levels of cognitive prowess. No there’s nobody in this room that doesn’t want to be level number one. Right? That’s why we’re here. You don’t want to be level number five. You want to be level number one. Wait until you hear what these levels are, it’s going to blow your mind. So number 5 he said, at the very bottom, was smart. OK. That’s the lowest level of cognitive prowess is being smart. The next level up, level 4, is intelligent. Level 3, next up, is brilliant. Next level up, level 2 he said is genius. What? What’s higher than genius? He must have that backward. No he doesn’t. Wait until you hear what number one is according to Albert Einstein. We just demonstrated it. Number one is simple. Simple transcends genius.

Why is simple….the right kind of simple…better than genius? Because you can understand it! I bought this book I usually take it when I’m giving a talk like this. It’s the Ethics by Spinoza. Spinoza’s ethics book was written by a true genius. And guess what? You can’t understand anything in it. But can you understand what I walked you through, mirrored reciprocation? OK.

Now because this is an economics club right. Everybody here interested in economics? So let’s give an example of a model derived, multidisciplinary, same way we did before, but is just about as pure an economic model as you can find. So now we’re going to ask the question, what’s the most powerful force that we as human beings, both as individuals and groups, can potentially harness towards achieving our ends in life?

Ok. We go to bucket number one. We ask, what’s the most powerful force in bucket number one? I’m going to quote Albert Einstein again. He said, ‘The most powerful force in the universe is compound interest.’ But that’s not all he said about compound interest. He not only said that it’s the most powerful force in the universe, he said it’s the greatest mathematical discovery of all time. He said it’s the eighth wonder of the world. And he said that those who understand it get paid by it and those who don’t pay for it. He said all these things, Albert Einstein, about compound interest. Now what’s a good working definition of compound interest? I will propose one. You can have your own, but this is mine. I say compound interest is dogged incremental constant progress over a very long time frame. Is that a fair definition? Alright? I think that’s the answer from bucket number 1. The most powerful force that could be potentially harnessed is dogged incremental constant progress over a very long time frame.

We go to bucket number 2. Three and a half billion years of biology. What’s the most powerful force in three and a half billion years a biology? It’s the machine of evolution. How does it work? Dogged incremental constant progress over a long time frame. This is the beauty of deriving things multidisciplinary. You can’t be wrong! You see these things lined up there like three bars on a slot machine. Boy do you hit the jackpot.

What do you think we’re going to find when we go to bucket number three? Twenty thousand years of human experience on earth. You want to win a gold medal in the Olympics. You want to learn a musical instrument. You want to learn a foreign language. You want to build Berkshire Hathaway. What’s the formula? Dogged incremental constant progress over a very long time frame. Look how simple this is. This is above genius. It’s absolutely above genius because you can understand it. This isn’t somebody drawing all these formulas and things up here about, you know, how numbers multiply and amplify over time. The problem that human beings have is we don’t like to be constant. Think of each one of those terms. Dogged incremental constant progress over a very long time frame. Nobody wants to be constant. We’re the functional equivalent of Sisyphus for pushing his boulder up the mountain. You push it up half way, and you go, ‘Awe, I’ll come back and do this another time.’ It goes back down. ‘I’ve got this great idea, I’m going to really work hard on it.’ You push it up half way and,’ Awe, you know I’ll get back to this next month.’ This is the human condition. In geometric terms this is called variance drain. Whenever you interrupt the constant increase above a certain level of threshold you lose compounding, you’re no longer on the log curve. You fall back onto a linear curve or god forbid a step curve down. You have to be constant. How many people do you know that are constant and what they do? I know a couple. Warren Buffett and Charlie Munger. Everybody wants to be rich like Warren Buffett Charlie Munger. I’m telling you how they got rich. They were constant. They were not intermittent.

Let me give you an example of why intermittency is perhaps the most important thing in your lives whether you realize it or not. We’ll begin with the example of bringing home a puppy from the pet shop. Brand spanking new puppy from the pet shop. And the kids are so excited, they’re so excited. What’s your goal of bringing home this puppy to your household? I say it’s to have an engaged contributing all-in new member of your household. And night number one, how are we doing? It’s a disaster. This thing’s over in the corner shaking like a leaf. It’s anything but engaged. It’s anything but contributing and it’s anything but all-in. It’s shaking like a leaf. Human beings are really good at solving this problem. We know we need to create a calm, reassuring, secure, and safe environment.

We know that even though this puppy can’t understand what we’re saying, we need to communicate in soothing tones. And we also know that we need to provide food and water for this puppy. But underlying all these things, stitching them all together, we really know we have to be constant don’t we? You can’t not feed the puppy one day or what happens? Well the puppy freaks out. The puppy becomes neurotic puppy. It doesn’t know whether it can trust you or no not. This trust that this puppy needs to go all-in is dependent upon you being constant in these behaviors. Does everybody except that? So if we are constant, usually in about seven days more or less, if we are (constant) this little puppy will trot over to our side and it will attach itself to us. And for the rest of its life it will be willing to die for us. That puppy just went all-in didn’t it. Now did it go all-in because it’s our idea that we want an engaged contributing all-in new member of our household? It doesn’t even know what our idea is does it? Why did it just go all in? It was the puppy’s idea!

Now let me tie this to your lives. I did this at Google and they really couldn’t figure out what I was doing. And then afterwards they said ‘You know that was really good. Your eight dollar crystal ball that’s really a good trick. So I’ll do my eight dollar crystal ball trick. And I told them…I had rows bigger than this one, full of the smartest people in the world. And I said guess what I’m going to do with my eight dollar crystal ball? I said, I’m going to do a psychic reading of anybody in this room. Anybody. And I said to Google, ‘If you think that I’ve got a stooge in the room where I’ve got this prearranged. I don’t. Go out in the corridor and bring somebody in. I’ll do the psychic reading.’ This eight dollars I spent on Amazon, the best money I ever spent. So I’m going to select you. What’s your name? (Answer: “Emily”) We’re going to take Emily, we’re going to do a psychic reading of Emily right in front of you. You’re going to believe this. I’m going to nail this. You’re all going ‘This guy’s a nutcase.’ Spencer’s going, ‘Man why did I invite this guy?’ Just be patient Spencer, this is good stuff. I’ll pull it off. So I’m going to tell Emily what she’s been looking for for her whole life. Is there anybody here who thinks I can do this? Well wait until you hear my answer and then for the rest of your life you’re all going to go, ‘I know what everybody in the world is looking for.’ Emily, your entire life you’ve been on a quest, an odyssey, a search for that individual that you can 100 percent absolutely completely trust. But who’s not just trustworthy, but principled, and courageous, and competent, and kind, and loyal, and understanding, and forgiving, and unselfish. I’m right aren’t I? (Answer: “Dead on”) You know what else my eight dollar Crystal Ball tells me? If you ever think you may have encountered this person, you are going to probe and probe and test and test to make sure that they are real, that you’re not being fooled. And the paradox is that it looks like you’re probing for weakness but you’re not. You’re probing for strength. And the worst day of your life is if instead of strength you get back weakness. And now you feel betrayed. You know why? You’ve got to start your search all over again. It’s the worst thing in the whole world isn’t it? Does everybody here agree with me on this? Look how simple this is.

Here’s your 22 second course in leadership. That’s all it takes. You don’t have to go to business school. You don’t need books. You don’t guest speakers. All you have to do, is take that list that’s in Emily’s head and every single other person in this room, every single other person in the whole world, has this list in their head. Trustworthy, principled, courageous, competent, loyal, kind, understanding, forgiving, unselfish. And in every single one of your interactions with others, be the list! Remember how that puppy went all in? You do this with the other human beings you encounter in life. They’re all going all in and not because it’s your idea. Most people spend all day long trying to get other people like them. They do it wrong. You do this list, you won’t be able to keep the people away. Everybody’s going to want to attach to you. And be willing to do what? Just like them puppy, they’d be willing to die for you. Because you are what they’ve been looking for their whole lives. This is pretty profound isn’t it?

Look at this picture. I love this picture. Does this woman look like she’s having a good time. OK. So I helped teach this high school class in Los Angeles, and the first class of each semester, a brand new group just like you guys, and I make them go through the following exercise. And believe me just like my eight dollar Crystal ball, afterwards you’re going to go ‘I’m really glad I hear that. Because now I really understand things at a level I didn’t understand them before.’ And to understand is to what? To know what to do.

This will clear up all your blind spots about yourself and other human beings. I asked the group, show of hands, how many of you think all human beings are alike? Why? (Answer: “We all have the same basic needs. We express them differently. Tremendous diversity in how we go about meeting them, but ultimately (inaudible).”) You get two pens! That’s a beautiful answer. So we’re going to identify what those needs are. What’s your name? (Answer: “Craig”) Craig nailed it. Show of hands. How many of you want to be paid attention to? I mean is there really anybody here who doesn’t want to be paid attention to? You’re a different kind of human being if you are. OK. How many of you want to be listened to? How many of you want to be respected? How many of you want meaning satisfaction fulfillment in your life in the sense that you matter? And then I tell the high school kids, number five. I put it number five, even though it’s the most important of the five I put it last, because if I put it first you wouldn’t raise your hands because it’s awkward. They’re just going to think I’m weird. But then they do raise their hand because I soften them up. How many you want to be loved? Everybody’s exactly the same. The only difference is, as Craig said, is the strategy the that they’re employing to try to get to fulfill those needs. OK.

Now I’m going to tell you the strategy that dogs use. The dog’s to be very unhappy with me for telling you this. I’m ratting them out. So when your dog is in the backyard and he goes to the fence between your house and the next house and he talks to the dog next door, I’m going to tell you what he says, no one has ever divulged this before. You’re the first group to hear this. Your dog says to the dog next door, ‘Can you believe how easy it is to manipulate human beings and get them to do whatever you want them to do for you?’ And the dog next door goes, ‘I know it’s a piece of cake.’ And your dog says ‘Yeah. All you have to do is every single time they come home, you greet them at the door with the biggest unconditional show of attention that they’ve ever gotten in their whole life. And you only have to do it for like 15 seconds and then you can go back to doing whatever you were doing before and completely ignore them for the rest of the evening.’

However you do have to do this every single time they come home. And what will the person do? They’ll take care of them. They’ll do anything for this dog. OK? Now do you think that this woman feels she’s being paid attention to? And listened to? And respected? Do you think she’s getting meaning satisfaction and fulfillment? Do you think she matters to this dog? And do you think she thinks this dog loves her? And what does the dog get in return? Everything.

All you have to do, if you want everything in life from everybody else, is first pay attention, listen to them, show them respect, give them meaning, satisfaction, and fulfillment. Convey to them that they matter to you. And show you love them. But you have to go first. And what are you going to get back. Mirrored reciprocation. Right? See how we tie this all together? The world so damn simple. It’s not complicated at all! Every single person on this planet is looking for the same thing. Now why is that we don’t act on these very simple things?

So I have an example I use with the class, my elevator example. I’m famous for my elevators story. You’re standing in front of an elevator. The doors open. And inside the elevator is one solitary stranger, you’ve never met this person before in your whole life. You walk into the elevator you have three choices for how you’re going to behave as you walk into this elevator. Choice number one you can smile say ‘good morning’. And I say, at least in California, if you do that 98 percent of the time the person will smile say good morning back. You can test it. OK. My guess is you’re going to find that 98 percent of the time that people say ‘good morning’. Choice number two, you can walk in and you can scowl and hiss at this stranger in the elevator. And they have no idea why you’re scowling and hissing at them. And I say 98 percent of the time, they may not his back at you, but they will scowl back at you. And option number three. This is where the wisdom comes. You can walk into the elevator and you can do nothing. And what do you get 98 percent of the time if you walk into an elevator and you do nothing from that stranger in the elevator? Nothing. It’s mirrored reciprocation isn’t it? But what did you have to do? You have to go first. And you’re going to get back whatever you put out there.

This is why these bars are full of people at 2:00 a.m. drowning their sorrows. Knocking down these drinks. ‘When’s the world going to give me something man? When am I going to get mine?’ Well what did you ever do? Did you ever get up of the morning and smile at the world? No. You either did nothing or you scowled and hissed at the world. You’re getting back exactly what you would expect to get back if you understood how the world really works. Which is why we study multidisciplinary things right? We can’t be wrong on this can we? It’s all mirrored reciprocation. So what do you want to do? You want to go positive, you want to go first. What’s the obstacle? There’s a big obstacle. This is an economics club. Certainly you have all heard of Daniel Kahneman, Nobel Prize winner in economics. Behavioral economics. And what did he win his Nobel Prize for? For answering the question, why would people not go positive and not go first when there’s a 98 percent chance you’re going to benefit from it, and only a 2 percent chance the person’s going to tell you to ‘screw off’ and you’re going to feel horrible, lose face, and all the rest of that. And that’s real. That’s why we don’t do it. He said there’s huge asymmetry between the standard human desire for gain and the standard human desire to avoid loss. Which one do you think’s more powerful? 98 percent versus 2!

Now I gave this same talk at Fairfax up in Toronto, Prem Watsa’s outfit. It’s the Berkshire Hathaway of Canada. And I said ‘Of all people in the whole world, you guys should not be making this mistake.’ Why? Because you’re in the insurance business. How does insurance work? You’re supposed to spend 2 percent to protect 98 percent, right? Look what you’re doing. You’re spending 98 percent to protect against the 2 percent probability that somebody makes you look foolish. Lou Brock set the Major League record for stolen bases with the St. Louis Cardinals many years ago. And he once said, ‘Show me a man who is afraid of appearing foolish and I’ll show you a man who can beat every time.’ And if you’re getting beat in life, chances are it’s because you’re afraid of appearing foolish. So what do I do with my life? I risk the two percent. I was so proud the other day, I was reading Bono on Bono. Bono’s the lead singer of U2. He’s the only other person I’ve ever encountered in my entire life, and I asked all my cronies, ‘Has anybody else ever encountered this elevator model before?’ ‘No. No that’s yours Peter.’ And I said, ‘You know how I said 98-2? Guess who’s got the exact same model? Bono! Well he doesn’t have 98-2, he’s got 90-10.’ Those are his numbers 90-10. Can I be wrong on this? That guy is really squared away. I hope some day I’m as squared away as he is. It’s incredible to think, he figured it out. That’s why that guy’s had such a great life. He goes, ‘You know I know 10 percent of people are going to screw me. That’s OK. If I’m not willing to be vulnerable and expose myself to that 10%, I’m going to miss the other 90%.’ Does that makes sense? Now Charlie Munger one day, you know he turned my whole life upside. I was over at his house one day. (He said) ‘Peter, I’ve been hearing about you going around giving all these talks. You don’t have to go around the country telling people how to make more money.’ I said, ‘Well that’s not what I do Charlie.’ I was very nimble on my feet. I said there’s a catch. I do tell how to make more money… By the way you do these things that get people all in and whatnot, you’ll make all the money there is to be made. You really will. That’s not why I’m here. I’m here to give you the second half of the message, which is how to be a good person! What’s your name? (Answer: “Albert”) Albert, How many lifetimes do you have Albert? (Answer: “One”) That’s correct, you get a pen. You see Albert lucked out, he got an easy question. Is your lifetime important to you Albert? (Answer: “One of the most important. Absolutely)

Now what do we know in economics, it’s an economics model, what do we know we need to use as our decision making prism whenever something is both finite, like one, and important like your life? How do we have to make decisions? You had Mankiw here right? He didn’t talk about opportunity cost? Have you all heard of opportunity cost? It’s the classic illustration of opportunity cost. You have a finite number of something, it’s important. If you’re doing ‘A’ with it, it means what? It means you’re not doing B or C or D or E. What do you have to do? You have to evaluate all the different alternatives and pick the one that’s most optimal. Is that fair? So you’ve got one lifetime. How do you want to spend your one lifetime? Do you want to spend your one lifetime like most people do, fighting with everybody around them? No. I just told you how to avoid that. And in exchange have what? A celebratory life. Instead of an antagonistic fighting life. All you have to do is go positive, go first, be patient enough. You know we have to be patient for a week with this puppy. You know all along it usually takes for a human being to do all the probing and testing that Emily was going to do and to find out that you’re for real? It takes six months. This is why nobody does it. ‘Oh it takes too long.’ Compared to what? Look at the plan B that everybody uses. It’s terrible! It doesn’t work. They spend their whole lives fighting with everybody.

The three hallmarks of a great investment are superior returns, low risk, and long duration. The whole world concentrates on Category 1. But if you’re a leader of any merit at all, you should be treating these three as what? Co-priorities. How do you get low risk and long duration? Win-Win. This is the biggest blind spot in the business. People are actually proud of a win-lose relationship. ‘Yeah we really beat the crap out of our suppliers.’ You know, ‘We’ve got these employees for…you know, we’ve go them on an HB1 visa, they can’t work anywhere else for three years.’ They’re proud of it! Total Win-Lose. You take game theory (link 1, 2) and you insert the word lose in any scenario in game theory and what do you have? A suboptimal outcome. What happens you insert win-win in any game theory scenario, what do you get? Optimal every time. What must you necessarily do if you’re interested in achieving Win-Win frameworks with your important counterparties in life? You must understand the basic axiom of clinical psychology, which I know because I multidisciplinary. I also learned psychology. The basic axiom of clinical psychology reads, ‘If you could see the world the way I see it, you’d understand why I behave the way I do.’ That’s pretty good isn’t it? Now there’s two corollaries to that axiom. And I say if you buy the axiom, which you should, you must buy the two corollaries as well because they’re logical extensions. They’re undeniable. Corollary number one, if that axiom is true and you want to understand the way someone’s behaving, you must see the world as they see it. But corollary number two, if you want to change a human being’s behavior and you accept that axiom, you must necessarily, to get them to change, change how they see the world. Now this sounds impossible. It’s not really that hard. You take a business. Most employees of a business see the world as employees. What if you could get them to see the world instead through the eyes of an owner? Do you think that’s going to change how they behave? It totally changes how they behave. Employees don’t care about waste. Owners do. Employees don’t self-police or place. Owners do.

This is the secret to leadership. The secret to leadership is to see through the eyes of all six important counterparty groups and make sure that everything you do is structured in such a way to be win-win with them. So here are the six. Your customers, your suppliers, your employees, your owners, your regulators, and the communities you operate in. And if you can truly see through the eyes of all six of these counterparty groups and understand their needs, their aspirations, their insecurities, their time horizons. How many blind spots do you have now? Zero. How many mistakes are going to make? You’re going to make zero. People don’t think this is possible. It’s really easy. To understand to know what to do. So I’m going to wrap up here I’ve only got like two minutes. There’s this great African proverb. It’s the definition of win-win. ‘If you want to go quickly go alone, if you want to go far go together.’ Live your life to go far together. Don’t live it to go quickly alone. Most people grow up wanting to go quickly go alone. It doesn’t work. You wind up like Ebenezer Scrooge in A Christmas Carol. You get to the end of your life. Yeah you’re rich, you’re powerful, you’re famous, and you want a do over because you realize at the end of your life, ‘I didn’t live my life right.’ I don’t have what really matters. What really matters is to have people pay attention to you, listen to you, and respect you, show you matter, and to love you. And to have it be genuine, not bought. Does that makes sense?

And I’ll leave you my last bit of wisdom. There’s another proverb, it’s a Turkish Proverb. ‘No road is long with good company.’ The essence of life is to surround yourself, as continuously as you can, with good company. Like I have today. You’re marvelous company. But how did I get that? I had to earn it didn’t I? I’m not just some guy you picked off the street. I earned the privilege of coming here and the privilege of being with you. It gives me what? It gives me meaning in my life. It makes me feel I matter. To have people listening to me. This is my strategy for getting those five thing. You can develop your own strategy and I hope it involves going positive and going first. Thank you.

Colin Powell has a rule of thumb about making tough decisions that I feel is helpful when facing such situations. He says that every time you face a tough decision you should have no less than forty percent and no more than seventy percent of the information you need to make the decision. If you make a decision with less than forty percent of the information you need you are shooting from the hip and you will make too many mistakes.

The second part of the decision making rule is what surprises many leaders. They often think that they need more than seventy percent of the information before they can make a decision. But, I explain to them, if you get more than seventy percent of the information you need to make the decision then the opportunity has usually passed and someone else has beaten you to the punch.