Oh, they’d say, and then after a pause to digest this revelation, they’d ask: What makes a startup a good investment?

So I would explain that what makes a startup promising, not just in the eyes of investors but in fact, is growth. Ideally in revenue, but failing that in usage. What they needed to do was get lots of users.

How does one get lots of users? They had all kinds of ideas about that. They needed to do a big launch that would get them “exposure.” They needed influential people to talk about them. They even knew they needed to launch on a tuesday, because that’s when one gets the most attention.

No, I would explain, that is not how to get lots of users. The way you get lots of users is to make the product really great. Then people will not only use it but recommend it to their friends, so your growth will be exponential once you get it started.

At this point I’ve told the founders something you’d think would be completely obvious: that they should make a good company by making a good product. And yet their reaction would be something like the reaction many physicists must have had when they first heard about the theory of relativity: a mixture of astonishment at its apparent genius, combined with a suspicion that anything so weird couldn’t possibly be right. Ok, they would say, dutifully. And could you introduce us to such-and-such influential person? And remember, we want to launch on Tuesday.

It would sometimes take founders years to grasp these simple lessons. And not because they were lazy or stupid. They just seemed blind to what was right in front of them.

• Paul Graham source

• What I want to talk to you about today is the difference between gifts and choices. Cleverness is a gift, kindness is a choice. Gifts are easy – they’re given after all. Choices can be hard. You can seduce yourself with your gifts if you’re not careful, and if you do, it’ll probably be to the detriment of your choices.

• How will you use these gifts? And will you take pride in your gifts or pride in your choices?

Tomorrow, in a very real sense, your life – the life you author from scratch on your own – begins.

How will you use your gifts? What choices will you make?

Will inertia be your guide, or will you follow your passions?

Will you follow dogma, or will you be original?

Will you choose a life of ease, or a life of service and adventure?

Will you wilt under criticism, or will you follow your convictions?

Will you bluff it out when you’re wrong, or will you apologize?

Will you guard your heart against rejection, or will you act when you fall in love?

Will you play it safe, or will you be a little bit swashbuckling?

When it’s tough, will you give up, or will you be relentless?

Will you be a cynic, or will you be a builder?

Will you be clever at the expense of others, or will you be kind?

• I will hazard a prediction. When you are 80 years old, and in a quiet moment of reflection narrating for only yourself the most personal version of your life story, the telling that will be most compact and meaningful will be the series of choices you have made. In the end, we are our choices. Build yourself a great story. Thank you and good luck!

It turned out, though, that Mr. Iger had a fierce will under that gentlemanly exterior. Early on, he began getting up at 4 a.m. to outwork everyone else and he still does. He sets out his exercise clothes the night before, so he doesn’t have to turn on the lights in his closet and thus wake up his wife, Willow Bay, a former Estee Lauder model and broadcaster who is now dean of the USC Annenberg School of Communication and Journalism. He leaves out a coffee mug for Ms. Bay and warms up some milk for her coffee before he tackles the VersaClimber.

“I never viewed myself as exceptional,” Mr. Iger says over salmon and a glass of red wine at the Napa Rose restaurant in Disneyland. “And so whenever I got a job, I was relying on hard work more than anything and a level of enthusiasm and optimism. When I went to ABC Sports, everybody there went to Stanford or Dartmouth or Columbia.

“Ithaca College, O.K.? I didn’t have an inferiority complex but I knew I wasn’t one of them. I didn’t wear Gucci shoes. I didn’t wear Brooks Brothers clothes. I couldn’t afford any of that stuff, but I knew I had a work ethic that was prodigious. And what happened early on is people started relying on me because they knew if they asked me to get something done, including Roone Arledge” — the ABC executive — “I would get it done.

“So suddenly I realized, well, wait a minute. I may not be special in certain ways. But when it came to getting things done, I was special. And that’s actually driven me throughout, you know?”

Actually, Mr. Iger’s book is a primer on how much you can achieve if you keep your ego in check. In an era of brutish and ego-driven leadership in the White House, Silicon Valley and in many other countries around the world, Mr. Iger doesn’t lead with his ego or try to drive the other alphas out of the herd.

“You have to have an ability to subjugate your own ego,” he says. “It serves you well when you’re rising and then even when you have risen, there are going to be times when you just have to put that away.”

1. Be Impeccable With Your Word.

2. Don’t Take Anything Personally.

3. Don’t Make Assumptions.

4. Always Do Your Best.

Selected excerpts:

That’s what I’m interested in talking about today. Because if I’ve learned one thing, it’s that technology doesn’t change who we are, it magnifies who we are, the good and the bad.

Our problems – in technology, in politics, wherever – are human problems. From the Garden of Eden to today, it’s our humanity that got us into this mess, and it’s our humanity that’s going to have to get us out.

If you want credit for the good, take responsibility for the bad

But whether you like it or not, what you build and what you create define who you are.

It feels a bit crazy that anyone should have to say this. But if you’ve built a chaos factory, you can’t dodge responsibility for the chaos. Taking responsibility means having the courage to think things through.

Graduates, at the very least, learn from these mistakes. If you want to take credit, first learn to take responsibility.

Be a builder

In other words, whatever you do with your life, be a builder.

You don’t have to start from scratch to build something monumental. And, conversely, the best founders – the ones whose creations last and whose reputations grow rather than shrink with passing time – they spend most of their time building, piece by piece.

Builders are comfortable in the belief that their life’s work will one day be bigger than them – bigger than any one person. They’re mindful that its effects will span generations. That’s not an accident. In a way, it’s the whole point.

Graduates, being a builder is about believing that you cannot possibly be the greatest cause on this Earth, because you aren’t built to last. It’s about making peace with the fact that you won’t be there for the end of the story.

You won’t be ready

Fourteen years ago, Steve stood on this stage and told your predecessors: “Your time is limited, so don’t waste it living someone else’s life.”

Here’s my corollary: “Your mentors may leave you prepared, but they can’t leave you ready.”

When the dust settled, all I knew was that I was going to have to be the best version of myself that I could be.

I knew that if you got out of bed every morning and set your watch by what other people expect or demand, it’ll drive you crazy.

So what was true then is true now. Don’t waste your time living someone else’s life. Don’t try to emulate the people who came before you to the exclusion of everything else, contorting into a shape that doesn’t fit.

It takes too much mental effort – effort that should be dedicated to creating and building. You’ll waste precious time trying to rewire your every thought, and, in the mean time, you won’t be fooling anybody.

Graduates, the fact is, when your time comes, and it will, you’ll never be ready.

But you’re not supposed to be. Find the hope in the unexpected. Find the courage in the challenge. Find your vision on the solitary road.

Don’t get distracted.

There are too many people who want credit without responsibility.

Too many who show up for the ribbon cutting without building anything worth a damn.

Be different. Leave something worthy.

And always remember that you can’t take it with you. You’re going to have to pass it on.

Definitions

1. “Patsy” is defined as someone who is “easily taken advantage of, especially by being cheated or blamed for something.”

2. “naïvety” is defined as " a state of having a lack of experience, understanding or sophistication, often in a context where one NEGLECTS PRAGMATISM IN FAVOR OF MORAL IDEALISM"

3. They means that a naïve man believes that the world is a fair and moral place and he is not being fooled, even when the odds of that happening are monumentally higher than those of the other alternative.

This man is not “PRAGMATIC,” a term that’s defined as someone who “evaluates theories or beliefs in terms of the success of their practical application.” That is, a naïve man is not a practical man who would see the world as it truly is. Such a naïve man is “morally idealistic” who does not assume ulterior motives in others when he deals with others.

Being naïve in life in general may not cause you much harm if you’re lucky. But being naïve in financial markets virtually guarantees significant harm, and even ruin.

Games for Patsies

1. IPOs

   • If you are buying into IPOs, you are a pasty in the game. Why?
     • Information Asymmetry. The insiders know more than you. You are not an insider.
     • Timing. They decide when to come to market and will come only in “more favorable” circumstance. “Less favorable” for you.
     • Scarcity. Create artificial scarcity by limiting the quantity of shares and the hype.

2. Heavy Promotions

   • Anything that’s being heavily promoted where the person doing the promotion has financial incentive to pitch you, even if the product is unsuitable, is toxic
   • Case in point: Most investment advice. All over-promotional managements talking up stock, indulge in aggressive accounting to trap investors.Most credit rating opinions and audit opinions.
   • Default position you should take is not to trust them blindly. If you, then you are the patsy in the game.

3. Spotting Frauds

   • People who are pragmatic and do not take anything at face value, and are not prone to give into what Robert Cialdini calls “authority bias” and bias from “social proof,” are well positioned to spot frauds well before other “believers” who will turn out to be patsies in the game.
   • Case in point: Here, Markopolos is Fat Tony. He doesn’t believe other investors. He doesn’t believe the auditors. He doesn’t believe the claimed performance. Indeed, he thinks the performance is just too good to be true. And he believes that if something’s too good to be true (like landing 99 heads in a row in a “fair” coin), then it probably is.

4. You Fooling Yourself

   • Patsy in the Game: That game can be a single player game.
   • Richard Feynman was right when he said that “the first principle is that you must not fool yourself and you are the easiest person to fool.

Take for example of what happens when you are invested in something and new evidence comes that ruins your hypothesis. Maybe the business is no longer as good as you thought. Maybe the management is really not as good as you thought or maybe the valuation model was wrong. There could be so many reasons which can ruin any investment hypothesis. The correct thing to do, in such situations, is to recognize the mistake, scramble out of it, and then try not to make that type of mistake again.

Well, the normal outcome, as many of us know, is the opposite. And this happens for reasons we may label as “commitment bias,” “endowment effect,” “psychological denial,” “blind overconfidence” etc etc. We may give this type of tendency all sorts of names, but the reality is that we are really good at fooling ourselves into believing the unbelievable despite contrary evidence.

When we choose to ignore overwhelming evidence showing that we were wrong and continue to stay invested in situations which just don’t make sense anymore, how different are we from that naïve school kid who continued to believe that the coin was fair even after it had landed heads 99 times in a row?

We are not that different at all. And by not being different from that naïve kid, we become a patsy in the game.

Each of us has two types of intelligence, known as fluid and crystallized. Fluid intelligence is our capacity to reason and solve novel problems, independent of knowledge from the past, and it peaks earlier in life. Crystallized intelligence is the ability to use skills, knowledge and experience; it shows rising levels of performance well into middle age and beyond. According to Georgia Tech psychology professor Phillip Ackerman, the best way for older adults to compensate for declines in youthful “fluid” intelligence is to select jobs and goals that optimize their “crystallized” knowledge and skills.

For instance, while the field of software coding favors the young and fluid, managing projects and the business can shift the needed skills to an older profile.Consider the career of Diane Greene, who spent her 20s and early 30s organizing windsurfing races and working for Coleman, the camping equipment company. At 33, she earned a master’s degree in computer science and pronounced herself ready for a “grown-up’s job.” In 1998, at age 43—late by Silicon Valley’s youth-centric standards—Ms. Greene cofounded the software company VMware and then led it for a decade. In 2015, Google acquired another company she started and, at age 60, put her in charge of one of its most important businesses, Google Cloud (a position from which she stepped down in January).

What about creativity and innovation? That realm must belong to the young, with their exuberance and fresh ideas, right? Not necessarily. For instance, the average age of scientists when they are doing work that eventually leads to a Nobel Prize is 39, according to a 2008 Northwestern University study. The average age of U.S. patent applicants is 47.

Take Ken Fisher, who today runs Fisher Investments, a stock fund with $100 billion under management and 50,000 customers. After graduating from high school, he flunked out of a junior college. “I had no particular direction,” he said. He went back to school to study forestry, hoping for a career outdoors, but switched to economics and got his degree in 1972. In his early 20s, he hung out his shingle as a financial adviser, following his father’s career. To bring in extra money, he took construction jobs, and he played slide guitar in a bar. But he also read and read: “Books about management and business—and maybe thirty trade magazines a month for years,” he says. By the time he reached his 30s, an idea had gelled that would make him his fortune. As he puts it, during that period of reflection, “I developed a theory about valuing companies that was a bit unconventional.”

Tales of late bloomers are found in every walk of life and often feature an under-appreciated talent that emerged more slowly than the standard expectations. As a high school athlete in San Mateo, Calif., the New England Patriots’ legendary quarterback Tom Brady, winner of six Super Bowls, wasn’t on the radar of most college recruiters. Though he made the team at highly rated Michigan, he had to compete to become the starting quarterback in both his junior and senior years. He was only the 199th player selected in the NFL draft in 2000. A year later, when the Patriots’ starting quarterback was sidelined by injury, Mr. Brady, by then 24, finally got his big chance—and emerged over the course of that season as the spectacular success that he’s been ever since.

How many of us were overlooked in our school years, or dismissed early in our careers, or are dismissed even now? What gifts and passions might we possess that haven’t yet been discovered but that could give us wings to fly? Record-setting astronaut Scott Kelly, who has spent more than five hundred days in space, the most of any American, said he was so bored in high school that “I finished in the half of the class that made the top half possible.” Billionaire Diane Hendricks, daughter of dairy farmers, sold houses in Wisconsin, married, divorced, then 10 years later met her next husband, Ken, a roofer. The two maxed out their credit cards to start ABC Supply, a source for windows, gutters, and roofing material. Today Ms. Hendricks presides over a company worth $5 billion.

International star Andrea Bocelli began singing opera when he was 34. Martha Stewart was 35 when she started her catering business in a friend’s basement, and 42 when her first book of recipes was published. Toni Morrison published her first novel, “The Bluest Eye,” at 39 and won a Pulitzer Prize for “Beloved” at 56 and the Nobel Prize in Literature five years later. J.K. Rowling was a divorced mother on public assistance before she created Harry Potter at age 35. Tom Siebel founded his first big tech company, Siebel Systems, at 41, and his second, C3, at 57. Famous movie villain Alan Rickman owned a graphic design studio for years before he got his first taste of fame at 42 for his role as Hans Gruber in “Die Hard.”

“There are no second acts in American lives,” wrongly observed “The Great Gatsby” author F. Scott Fitzgerald. But Fitzgerald was an early blooming snob: He attended Princeton and was already a famous literary success in his mid-20s. But that was his peak. By his 30s, Fitzgerald was spiraling downward. He must have met all kinds of late bloomers and second acts who were on their way up. He died a bitter man at 44, the same age that Raymond Chandler began to write detective stories. Chandler was 51 in 1939, the year his first book, “The Big Sleep,” was published.

A Ghurka rifleman escaped from a Japanese prison in south Burma and walked six hundred miles alone through the jungles to freedom. The journey took him five months, but he never asked the way and he never lost the way. For one thing he could not speak Burmese and for another he regarded all Burmese as traitors. He used a map and when he reached India he showed it to the Intelligence officers, who wanted to know all about his odyssey. Marked in pencil were all the turns he had taken, all the roads and trail forks he has passed, all the rivers he had crossed. It had served him well, that map. The Intelligence officers did not find it so useful. It was a street map of London.

―Mitch Albom, The Time Keeper

We’re told, “Go make money. Go buy a big house.” Again, external multi-player competitive game.

When it comes to learn to be happy, train yourself to be happy, completely internal, no external progress, no external validation, 100% you’re competing against yourself, single-player game.

We are such social creatures, we’re more like bees or ants, that we’re externally programmed and driven, that we just don’t know how to play and win at these single-player games anymore.

We compete purely on multi-player games.The reality is life is a single-player game. You’re born alone. You’re going to die alone. All of your interpretations are alone. All your memories are alone.

You’re gone in three generations and nobody cares. Before you showed up, nobody cared. It’s all single-player.

• Behavioral economics teaches that people are overconfident: They believe they know more than they do, or they assume their knowledge is more precise than it is.

• Behavioral economists say that confirmation bias leads most people to seek out evidence supporting what they already believe or to ignore data that might disprove their beliefs.

• Behavioral economics says investors are myopic: Short-term losses or costs can blind them to the pursuit of longer-term rewards.

• Behavioral economists say you should inform your decisions with the base rate, or the best available historical evidence of how likely an outcome is.

• Extensive research documents unconscious biases, or factors that shape our behavior below the level of awareness.

• Most people tend to be unrealistically optimistic, overestimating how likely they are to have good fortune and underestimating how many bad things will happen to them.

• The disposition effect leads investors to sell their winning stocks too soon and hold onto their money-losing positions too long.

• The sunk-cost fallacy leads many people to keep trying to justify a past decision even after it’s become obvious that it was a mistake.

• Research in dozens of countries around the world shows that investors almost everywhere keep most of their stock portfolios in shares of local companies instead of spreading their bets worldwide. This “home bias” leaves them underexposed to the benefits of global diversification.

• Research shows that many people are prone to “status-quo bias” or investing inertia, preferring to leave their current portfolio in place even when they might be better off switching to other choices.

• Behavioral economics shows that people are predictably bad at estimating probabilities: They tend to overestimate the likelihood of rare events and underestimate the frequency of common events.

• Many people exhibit what’s called the bias blind spot, or the tendency to see clearly that other people’s behavior isn’t optimal while remaining oblivious to our own shortcomings.

• Experiments in behavioral economics show that most people are prone to anchoring. People who compare prices to the last digits of their Social Security number, for instance, are willing to pay more for something if their final digits are high.

• Experiments have shown for decades that people tend to draw sweeping conclusions from extremely small samples of data.

• Decades of data show that investors may overreact to relatively minor fluctuations in the stock market.

1. Synthesize new ideas constantly. Never read passively. Annotate, model, think, and synthesize while you read, even when you’re reading what you conceive to be introductory stuff. That way, you will always aim towards understanding things at a resolution fine enough for you to be creative.

2. Learn how to learn (rapidly). One of the most important talents for the 21st century is the ability to learn almost anything instantly, so cultivate this talent. Be able to rapidly prototype ideas. Know how your brain works. (I often need a 20-minute power nap after loading a lot into my brain, followed by half a cup of coffee. Knowing how my brain operates enables me to use it well.)

3. Work backward from your goal. Or else you may never get there. If you work forward, you may invent something profound–or you might not. If you work backward, then you have at least directed your efforts at something important to you.

4. Always have a long-term plan. Even if you change it every day. The act of making the plan alone is worth it. And even if you revise it often, you’re guaranteed to be learning something.

5. Make contingency maps. Draw all the things you need to do on a big piece of paper, and find out which things depend on other things. Then, find the things that are not dependent on anything but have the most dependents, and finish them first.

6. Collaborate.

7. Make your mistakes quickly. You may mess things up on the first try, but do it fast, and then move on. Document what led to the error so that you learn what to recognize, and then move on. Get the mistakes out of the way. As Shakespeare put it, “Our doubts are traitors, and make us lose the good we oft might win, by fearing to attempt.”

8. As you develop skills, write up best-practices protocols. That way, when you return to something you’ve done, you can make it routine. Instinctualize conscious control.

9. Document everything obsessively. If you don’t record it, it may never have an impact on the world. Much of creativity is learning how to see things properly. Most profound scientific discoveries are surprises. But if you don’t document and digest every observation and learn to trust your eyes, then you will not know when you have seen a surprise.

10. Keep it simple. If it looks like something hard to engineer, it probably is. If you can spend two days thinking of ways to make it 10 times simpler, do it. It will work better, be more reliable, and have a bigger impact on the world. And learn, if only to know what has failed before. Remember the old saying, “Six months in the lab can save an afternoon in the library.”

Two practical notes. The first is in the arena of time management. I really like what I call logarithmic time planning, in which events that are close at hand are scheduled with finer resolution than events that are far off. For example, things that happen tomorrow should be scheduled down to the minute, things that happen next week should be scheduled down to the hour, and things that happen next year should be scheduled down to the day. Why do all calendar programs force you to pick the exact minute something happens when you are trying to schedule it a year out? I just use a word processor to schedule all my events, tasks, and commitments, with resolution fading away the farther I look into the future. (It would be nice, though, to have a software tool that would gently help you make the schedule higher-resolution as time passes…)

The second practical note: I find it really useful to write and draw while talking with someone, composing conversation summaries on pieces of paper or pages of notepads. I often use plenty of color annotation to highlight salient points. At the end of the conversation, I digitally photograph the piece of paper so that I capture the entire flow of the conversation and the thoughts that emerged. The person I’ve conversed with usually gets to keep the original piece of paper, and the digital photograph is uploaded to my computer for keyword tagging and archiving. This way I can call up all the images, sketches, ideas, references, and action items from a brief note that I took during a five-minute meeting at a coffee shop years ago–at a touch, on my laptop. With 10-megapixel cameras costing just over $100, you can easily capture a dozen full pages in a single shot, in just a second.

Be humble. You may be wrong.

Be hard working. You may be luckier.

Be kind. You may be remembered.

Be generous. Others may reciprocate.

Be curious. You may stay teachable.

Be trustworthy. You may see further.

Be forgiving. You may feel lighter.

Be yourself. You will be happier.

Some heuristics to make decisions. Please add your own and challenge these.

1. Schedule time to think.

2. When considering options, watch your heart rate.

3. If all things are equal take the road less travelled (i.e., hard decisions easy life, easy decisions, hard life.)

4. No decision is sometimes the best path. If you can’t get comfortable deciding, the answer is to explore the tension not force a decision.

5. Instead of fight or flight, gather info. Think about what you can do to get the information you need to make a better decision.

6. Saying no is more important than saying yes.

7. Use time to filter people and ideas. The majority of the time you don’t need to be an early adopter.

8. Look for win-win decisions. If someone absolutely has to lose, you’re likely not thinking hard enough or you need to make structural/environmental changes.

9. When stuck work back to first principles and build up.

10. The rule of 5. Think about what the decision looks like 5 days, 5 weeks, 5 months, 5 years, 5 decades.

11. Let other people’s hindsight become your foresight.

12. Avoid things the best version of yourself will regret.

13. Ask what information would cause you to change your mind. If you don’t have that information, find it. If you do, track is religiously.

14. Focus on collecting feedback to calibrate your ability to make this decision.

15. If you’re outside your circle of competence and still have to make a decision, ask experts HOW they would make the same decision not WHAT they would decide.

16. Lean into (not away from) what’s making you uncomfortable.

17. Put things on a reversibility/consequence grid —irreversible and high consequence decisions likely require more time. The rest of the time you can usually go fast.

18. Identify the 2-3 variables that really matter and break them down to unearth assumptions and get the team on the same page.

19. Fast decisions should never be rushed.

20. Too much information increases confidence not accuracy.

21. Avoiding stupidity is easier than seeking brilliance.

22. Walk around the decision from the perspective of everyone implicated (shareholders, employees, regulators, customers, partners, etc.)

23. Some warnings signs that increase the likelihood of stupidity are (environment, the pace of change, rushing, physically tired, hyper-focus, authority, consensus-seeking behavior).

24. Own the decision. (If you make decisions by comittiee have one person sign their name to the decision - someone needs to own it.)

25. Decisions are nothing without execution.

26. Ask yourself “and then what?”

Think of it this way: Each week you get 10,000 minutes to live your life (it’s actually 10,080 minutes, but let’s round for simplicity). If these 10,000 minutes represent 100% of your week, then each minute is 1 basis point (i.e. one hundredth of a percent). If you sleep 7 hours a night that’s 2,940 minutes or ~30% of your week. If you work 40 hours, that’s another 2,400 minutes or 24% gone. Therefore, if you spend 5 minutes reading one of my posts, that’s 5 basis points of your week that you are allocating to me. I know that doesn’t sound like much, but when you consider the endless amount of content competing for your attention, it’s amazing.

Knowing When To Trade

1. The key to changing your worldview on time is knowing when to trade it for money. Obviously, if you don’t have much money, you don’t have many options for trading, but as you gain wealth, this tradeoff will become more relevant. The traditional way to think about when to trade your money for your time has been to pay for anything that is below your hourly wage. This explains how one could justify paying for a cleaning or laundry service. I generally agree with this, but it can be expanded.
2. You should also trade your money for anything that you would regret missing on your deathbed. If you can imagine yourself regretting skipping an event in your final days of life, then you should trade money for it today. This worldview is something I only adopted recently, but it has made my decision-making process so much easier when it comes to tradeoffs like these. For example, I would probably spend money to visit a good friend, but I wouldn’t spend money to have a nice car. I will (hopefully) remember seeing my friend on my deathbed, but the car? No chance. ``

While I worked with Danny on a project, many things amazed me about this man whom I had believed I already knew well: his inexhaustible mental energy, his complete comfort in saying “I don’t know,” his ability to wield a softly spoken “Why?” like the swipe of a giant halberd that could cleave overconfidence with a single blow.

But nothing amazed me more about Danny than his ability to detonate what we had just done.

Anyone who has ever collaborated with him tells a version of this story: You go to sleep feeling that Danny and you had done important and incontestably good work that day. You wake up at a normal human hour, grab breakfast, and open your email. To your consternation, you see a string of emails from Danny, beginning around 2:30 a.m. The subject lines commence in worry, turn darker, and end around 5 a.m. expressing complete doubt about the previous day’s work.

You send an email asking when he can talk; you assume Danny must be asleep after staying up all night trashing the chapter. Your cellphone rings a few seconds later. “I think I figured out the problem,” says Danny, sounding remarkably chipper. “What do you think of this approach instead?”

The next thing you know, he sends a version so utterly transformed that it is unrecognizable: It begins differently, it ends differently, it incorporates anecdotes and evidence you never would have thought of, it draws on research that you’ve never heard of. If the earlier version was close to gold, this one is hewn out of something like diamond: The raw materials have all changed, but the same ideas are somehow illuminated with a sharper shift of brilliance.

The first time this happened, I was thunderstruck. How did he do that? How could anybody do that? When I asked Danny how he could start again as if we had never written an earlier draft, he said the words I’ve never forgotten: “I have no sunk costs.”

To most people, rewriting is an act of cosmetology: You nip, you tuck, you slather on lipstick. To Danny, rewriting is an act of war: If something needs to be rewritten then it needs to be destroyed. The enemy in that war is yourself.

After decades of trying, I still hadn’t learned how to be a writer until I worked with Danny.

I no longer try to fix what I’ve just written if it doesn’t work. I try to destroy it instead— and start all over as if I had never written a word.

Danny taught me that you can never create something worth reading unless you are committed to the total destruction of everything that isn’t. He taught me to have no sunk costs.

A professional investor for over three decades, he recently shared his wisdom on Twitter over a thread of 26 tweets. In this dispassionate and non-judgmental delivery, he imparts some amazing insights and wisdom for investors. They have all been reproduced below.

I don’t know how the market will perform this year. Or the next year. I don’t know if stocks will be higher or lower in 5 years. Indeed, even though the probabilities favour a positive outcome, I don’t know if stocks will be higher in 10 years.

On the other hand…

I DO know that, according to Forbes, “since 1945…there have been 77 market drops between 5% and 10%, and 27 corrections between 10% and 20%”. I know that market corrections are a feature, not a bug, required to get good long-term performance. I know that during these corrections, there will be a host of “experts” on business television, blogs, magazines, podcasts and radio warning investors that THIS is the big one. That stocks are heading dramatically lower, and that they should get out now, while they still can. I know that given the way we are constructed, many investors will react emotionally and heed these warnings and sell their holdings, saying they will “wait until the smoke clears” before they return to the market. I know that over time, most of these investors will not return to the market until well after the bottom, usually when stocks have already dramatically increased in value. I think I know that, at least for U.S. investors, no matter how much stocks drop by, they will always come back and make new highs. That’s been the story in America since the late 1700s. I think I know that this cycle will repeat itself, with variations, for the rest of my life, and probably for my children’s and grandchildren’s lives as well. Massive amounts of data have documented that while the world is very chaotic, the way humans respond to things is fairly predictable. I don’t know if some incredible jump in evolution or intervention based upon new discoveries will change human nature but would gladly make a long-term bet that such a thing will not happen. I don’t know what exciting new industries and companies will capture investor’s attention over the next 20 years.

But…..

I think I know that investors will get very excited by them and price them to perfection. I do know that perfection is a very high hurdle that most of these innovative companies will be unable to achieve. I think I know that they will suffer the same fate as the most exciting and innovative companies of the past and that most will crash and burn. I infer this because “about 3,000 automobile companies have existed in the United States” and that of the remaining 3, one was bailed out, one was bought out and only one is still chugging along on its own. I know that, as a professional investor, if my goal is to do better than the market, my investment portfolio must look very different than the market. I know that, in the short-term, the odds are against me but I think I know that in the long-term, they are in my favour. I do know that by staking my claim on portfolios that are very different than the market, I have, and will continue to have, far higher career risk than other professionals, especially those with a low tracking error target. I know that I cannot tell you which individual stocks I’m buying today will be responsible for my portfolio’s overall performance. I also know that trying to guess which ones will be the best performers almost always results in guessing the wrong way. I know that as a systematic, rules-based quantitative investor, I can negate my entire track record by just once emotionally overriding my investment models, as many sadly did during the financial crisis. I think I know that no matter how many times you “prove” that we are saddled with a host of behavioral biases that make successful long-term investing an odds-against bet, may people will say they understand but continue to exhibit the biases. I think the reason for the persistence of these “cognitive mirages” is that up to 45% of our investment choices are determined by genetics and cannot be educated against. Read: Why do individuals exhibit investment biases? I think I know that if I didn’t adhere to an entirely quantitative investment mythology, I would be as likely—maybe MORE likely—to giving into all these behavioral biases. I don’t know exactly how much of my success is due to luck and how much is due to skill.

But I do know that luck definitely played, and will continue to play, a fairly substantial role.

I don’t know how the majority of investors who are indexing their portfolios will react to a bear market.

I think I know that they will react badly and sell out of their indexed portfolio near a market bottom. I think I know that the majority of active stock market investors—both professional and aficionado—will secretly believe that while these human foibles that make investing hard apply to others, they don’t apply to them. I know they apply to me and to everyone who works for me.

Finally, while I think I know that everything I’ve just said is correct, the fact is I can’t know that with certainty and that if history has taught us anything, it’s that the majority of things we currently believe are wrong.

I’ve long enjoyed his detailed notes from reading 200+ books but found new found respect when he tried to distill knowledge + wisdom he gained into a set of directives through his latest post. Thank you Derek!

Reproducing it as a cheatsheet for my easy reference: 

How to be useful to others

1. Get famous. The more people you reach, the more useful you are. 2. Get rich. Getting rich is double-useful, you add value + spend it in useful ways 3. Share strong opinions. People will either adopt or aruge against you. 4. Be expensive. People will value it more and get more use of it.

How to get rich

1. Live where luck strikes. Be right in the middle of everything. 2. Say yes to everything. Nothing is too small. Do it all. Like lottery tickets. 3. Learn the multiplying skills. Skills that multiply the success of your main pursuit. 4. Pursue market value not personal value. Follow the money. It tells you where you’re most valuable. 5. Shamelessly imitate success. Get great at executing other people’s ideas as well as your own. 6. Be the owner, not just inventor. To get rich, be the owner. Own as close to 100% as possible. 7. Benefit from human nature. Just learn the game, then play it

How to thrive in an unknowable future

1. Prepare for the worst. Just prepare, then carry on appreciating the good times. 2. Expect disaster. Expect it all to disappear. 3. Own as little as possible. The less you own, the less you’re affected by disaster. 4. Choose opportunity, not loyalty. Have loyalty for only your most important human relationships. 5. Choose the plan with the most options. That lets you change your plans. 6. Avoid planning. Wait until the last moment to make each decision.

How to like people

1. Assume it’s their last day. Treat them accordingly. 2. Be who you’d be when alone. When in a crowd, be the same person you’d be when alone. 3. Assume men and women are the same. Counteract your tendency to exaggerate the differences. 4. Always make new friends. Let go of people that don’t welcome and encourage your change. 5. Avoid harming the relationship. It’s more effective than seeking the positive. 6. Act calm and kind. Regardless of how you feel. 7. Don’t try to change them. Don’t teach a lesson… unless they asked you to. 8. Find wisdom in your opponents. Engage those who think opposite of you. 9. Purge the vampires. Get rid of people that drain you.

What to do when you get successful

1. Change yes to “Hell yeah!” or no. Now say no to anything that makes you say anything less than “Hell yeah!” 2. Keep momentum. If you stop that forward motion you can never get it back.

How to stop being rich and happy

1. Prioritize lifestyle design. Make your immediate gratification the most important thing. 2. Chase that comparison moment. Do it! Be happy for a week. After, seek happiness from another new thing. 3. Buy, not rent. 4. Internalize your new status. 5. Be a connoisseur. 6. Get to know your possessions. 7. Acclimate to comfort.