A Twitter thread by Douglas Craig.
A thread on Seeking Wisdom by Peter Bevelin. Things I took from the book (Part One, ~100 things)
1) “a man who has committed a mistake and doesn’t correct it, is committing another mistake” – Confucius
2) We can’t eliminate mistakes, however we can prevent those that can really hurt us
3) Bevelin recommends everyone to read Berkshire Hathaway and Wesco Financial (Munger is chairman) reports. Teach us lessons in business, investing and life.
4) “The advice we give others is the advice we need ourselves” – Gian-Carlo Rota. Therefore if you create a clone of yourself you can give good advice to your clone + thus yourself
5) The brain changes continually as a result of our experiences. Experiences produce physical changes in the brain. Note how NOBODY has the same brain
6) “Our life is what our thoughts make it” –Marcus Aurelius. Perspective is key for our lives
7) Studies show that if people expect something to go wrong with their health, it often does. Being pessimistic is terrible for you
8) Mutations cause variations. In the same vain - changing behaviors, changes results.
9) Evolution has no goal. Another way to describe natural selection is as a process of elimination
10) Our brain is programmed to harm avoidance first. We register pain more sensitively than any other emotion so try to avoid it
11) The fear of loss is much greater than the desire to gain. Prospect theory
12) Our aversion to pain encourages us to take the most rewarding view of events. We interpret choices and events in a way that make us feel better. Note: it is easy to make up stories to make yourself look like the hero
13) If certain brain connections help us interact with our environment, we use them more than connections that don’t help us. Since we use them more, they become strengthened. This can reinforce unhelpful things so be careful
14) Even though we are capable of logic, our brain does not operate by principles or logic
15) “if you once forfeit the confidence of your fellow citizens, you can never regain their respect and esteem” – Lincoln. Be careful of your reputation.
16) “At the moment of action, man will no doubt be apt to follow the stronger impulse; and though this may occasionally prompt him to the noblest deeds, it will far more commonly lead him to gratify his own desires at the expense of other men” –Darwin
17) “Our fears are always more numerous than our dangers” – Seneca
18 a) Fear is our most basic emotion. Fear evolved to help us anticipate danger and avoid pain. Common fears are: violence, crime, punishment, rejection, failure, the unknown, the immediate, the unpredictable, and the uncontrollable.
18 b) Also the loss of: our health, family, friends, security, money, social status, power and jobs.
19) The degree of fear we feel depends on our interpretation of the threat and our perception of control. The more helpless and vulnerable we feel, the stronger our fear emotion becomes.
20) The more we are exposed to a stimulus, even a terrifying one, the higher our tolerance threshold of fear becomes. Therefore exposure to fears is important for getting over them
21) To learn what works and does not and what is good or bad for us means we have to explore. You cannot intellectualize everything, go experiment.
22) We must be flexible in order to deal with constant change and unpredictability
23) Being flexible and learning a variety of options to choose from to deal with the world is of great value. Triangulate theories instead of sticking to one.
24) Our brain is wired to perceive before it thinks – to use emotion before reason. So our first thought is seldom our best thought.
25) Go to where word of mouth is the advertising method, it is best at removing BSers. Useful for restaurants, mechanics, things to do etc
26) Genes, life experiences, present environment and randomness affect our behaviors.
27) There is a disconnect between the ancestral world to which our brain adapted to, and today’s world. We care way too much about social exclusion nowadays
28) Ego, greed, envy, fear, mindless imitation of others are some key reasons why smart people get bad results
29) “why oh why are human beings so hard to teach, but so easy to deceive” – Dio Chrysotom
30) We most easily associate to the events whose consequences we have experienced most often and the ones we easily remember. The more vivid or dramatic an event is, the easier we remember it
31) People can influence us by associating a product, service, person, investment or a situation with something we like.
32) We tend to dislike people who tell us what we don’t want to hear even when they didn’t cause the messenger. Remember don’t shoot the messenger
33) Get bad news immediately, good news takes care of itself. Bad news left leads to more problems
34) Merely because you associate some stimulus with earlier pain or pleasure doesn’t mean the stimulus will cause the same pain or pleasure today. Past experiences are often context dependent.
35) Create negative emotions if you want end a certain behavior. E.g. framing smoking as someone losing something is better than trying to show the positives of stopping
36) After a success we become overly optimistic risk takers. After a failure, we become overly pessimistic and risk-averse, even in cases where success or failure was merely a result of chance.
37) Immediate losses are better than delayed ones. Just as we don’t like bad experiences, we also don’t like waiting on them. Acute stressors >>> chronic stressors
38) Praise is more effective at changing a behavior than punishment. Carrot > stick generally. As Carnegie says; give someone a great reputation to live up to
39) Don’t over-learn from your own or others bad or good experiences. The same action under other conditions may cause different consequences.
40) Separate between skill and chance. Be honest to yourself, was it just luck?
41) Reward individual performance and not effort of length in organisation and reward people after and not before their performance.
42) Never let it pay someone to behave in a way you don’t want.
43) Incentives for the decision maker determine behavior. That means that we have to recognize self-interested behavior in others.
44) People do what is perceived to be in their best interest. This can lead to a lot of biased pictures of reality.
45) Buffet – “I have no use for projections or forecasts. They create an illusion of apparent precision. We never look at projections, we care very much about track records. If a company has lousy track record but a bright future, we will miss the opportunity.”
46) Buffet- “Investment bankers dispense income and balance sheets 5 years into the future for a company they barely had heard of a few months ago. Ask IB ppl for their 1 year budgets that his own firm prepared in previous years and compare how they matched reality for some fun”
47) Don’t automatically trust people who have something at stake from your decision. Ask: what are the interests? Who benefits?
48) Understand people’s motivations. Money, status, love of work, reputation, position, power, envy? What are they rewarded and punished for? Are they benefiting or losing from the present system?
49) “Man suffers much because he seeks too much, is foolishly ambitious and grotesquely overestimates his capacities” – Isaiah Berlin. Focus + be realistic(ish)
50) “things that happen to other don’t happen to me” is a dumb thing to think
51) We tend to overestimate our ability to predict the future. People tend to put a higher probability on desired events than undesired events. Optimism is good however with important decisions, realism is better.
52 a) Studies found CEOs overpaid for acquisitions for 3 reasons. 1-overconfidence after recent success. 2-a sense of self-importance (that higher salary = higher skill). 3-CEOs belief in their own press coverage.
52 b) Note: I thought I thought I was important enough to get a website after I got 3k followers in a week lol. So +ve press can lead to a lot of dumb decisions out of self inflated ego
53 a) When we fail, we blame external circumstances or bad luck. When others are successful, we tend to credit their success to luck and blame their failures on foolishness. When our investments turn into losers, we had bad luck. When they turn into winners, we are geniuses.
53 b) This way we draw the wrong conclusions and don’t learn from our mistakes. We also underestimate luck and randomness in outcomes.
54) Write down your thoughts pre and post a decision to analyse how it went. This limits us making BS narratives
55) Experts love to extrapolate their ideas from one field to all other fields. They define problems in ways that fit their tools rather than ways which agree with the underlying problem. Be careful of this
56) We immediately classify people which brings to mind a host of associations. We often allow one trait to color all other characteristics and therefore judge people as better or worse than they actually are. Therefore, be careful of how you judge people.
57) An articulate person may be more persuasive than a reserved person, but the latter may know what he is talking about. Like Taleb said - complex people less likely to be BSers
58) Munger on what enterprises need to run well: “integrity, intelligence, experience and dedication.”
59) “an optimist is a person who sees a green light everywhere, while a pessimist sees only the red stoplight. The truly wise person is color blind” – Dr Albert Schweitzer
60) Overconfidence can cause unreal expectations and make us more vulnerable to disappointment. However on flip side: as Dalio notes – if you aren’t failing you aren’t pushing your limits
61) Long term advantages come from limiting downside not increasing upside. Be consistently not stupid instead of trying to be very intelligent as Munger says.
62) Analyse downside as much as upside. Focus on what can go wrong and the consequences. Build in a margin of safety. Know how to handle things if they go wrong.
63) Consider people’s actual accomplishments and past behaviour over a long period of time rather than first impressions.
64) When comparing records or performances, remember that successes draw far more attention than failures. Failures are not talked about as much as successes unsurprisingly.
65) “Nothing is easier than self-deceit. For what each man wishes, that he also believes to be true.” – Demosthenes
66) We deny and distort reality to feel more comfortable, especially when reality threatens our self-interest. Your ego stops you being objective with yourself.
67) We view things the way we want to see them. We hear what we want to hear and deny what is inconsistent with our deeply held beliefs.
68) We make sense of bad events by telling ourselves comforting stories that give them meaning
69 a) Thucydides on his enemies: “their judgement was based more upon blind wishing than upon any sound prediction; for it is a habit of mankind to entrust to careless hope what they long for, and to use sovereign reason to thrust aside what they do not desire”.
69 b) Despite me planning to study 10 hours per day, historically I have never actually done that. Be realistic
70) “the first principle is that you must not fool yourself – and you are the easiest person to fool” – Feynman. “nothing is so difficult as not deceiving oneself” – Wittgenstein. Try to notice when you lie to yourself
71) Refusing to look at unpleasant facts doesn’t make them disappear. Bad news that is true is better than good news that is wrong
72) “the difficulty lies not in the new ideas, but in escaping the old ones, which ramify, for rhose brought up as most of us have been, into every country corner of our minds” -Keynes. Sometimes forgetting unhelpful things is as useful as learning new things
73) “I can’t behave in a way that is inconsistent with my self-image. I have a reputation to uphold.” Is a dumb attitude. Don’t get trapped in self-image, just do whatever the fuck you want
74a) We want to maintain a positive self-image. When that is violated, we use defenses in order to justify our behavior. We also behave in ways that are consistent with how others see us. If people label us as talented, we try to appear as talented even if it is not true.
74 b) Why people with many followers get cocky as fuck trying to act smart as a couple of people bigged them up
75) The more individual responsibility we feel for a commitment, the harder it is to give up
76) “What the human being is best at doing is interpreting all new information so that their prior conclusions remain intact” – Buffet. Why discussing politics on the internet is pointless
77) “I don’t want to sell this declining stock and face a loss. I put $100k into this so must prove to myself and others I made the right choice” – dumb attitude, sunk cost fallacy will cost you $$$. Fail early instead
78) Why do we do things merely because we have paid for them? If it is not the best spend of your time, then you shouldn’t do it as you can’t get your money back. In business and life
79) We are most consistent when we have made a public, effortful or voluntary commitment. The more public a decision is, the less likely it is that we will change it.
80) Buffet on master plans – “we do have a few advantages, perhaps the greatest being that we don’t have a strategic plan. Thus we feel no need to proceed in an ordained direction”. Master plans are not useful, adapting constantly is better
81) “The task of man is not to see what lies dimly in the distance, but to do what lies clearly at hand” – Carlyle. Focus on today, not what might happen in the future
82) “I’ve invested 15 years into this, so I won’t walk away now” loyalty for the sake of loyalty isn’t always best. Be careful of this
83) John agrees to buy a car for $1k less than market value. Then salesman discovers an error, it will now be $200 more than market value. Because John wants to remain consistent he buys the car. Be careful of people trying to make you consistent, it costs you $$.
84) Salesman can use consistency with amazing deals to get your £. An advert in news says Fridge for £100 less than market value. You go to shop and ‘none’ are left, however you are committed to buying a fridge so spend £50 above market value and lose.
85) “did you know that you and the managers of company X are widely known to be cooperative and fair?” is a negotiating tactic to fit people into consistency + get better deal
86) Foot in the door technique can lead to getting larger requests. E.g. “can you just read one paragraph of my essay?” leads to reading the whole essay and editing it. Be careful of small requests as they can be a trick to get you to agree to a larger one you don’t want to do
87) When people get us to commit, we become responsible. This can be useful and unhelpful. Notice when it happens
88) “There is nothing wrong with changing a plan when the situation has changed” – Seneca. Like Bezos' tactic, fast course correcting is better than a slow master plan.
89) “You can’t avoid wrong decisions. But if you recognize them promptly and do something about them, you can frequently turn the lemon into lemonade” – Munger
90) Get people committed in advance and they tend to live up to their commitment
91) Don’t force people to publicly make commitments that you don’t later want the opportunity to change
92) “the most important thing to do when you find yourself in a hole is to stop digging” – Buffet
93) What happened in the past may be a guide for how likely something is to happen in the future
94) Framework for goals: Ask - What do I want to achieve? What causes that? Considering what I know today and what is likely to happen in the future, how should I act to achieve my goal? Will new money and time invested achieve my goal
95) Munger likes a story of how when Walmart planned to open in a local town the existing supermarket just shut down. The owner knew admitting defeat was far preferable to a protracted battle. Remember to choose your battles wisely.
96) “Facts do not cease to exist because they are ignored” – Aldous Huxley
97) “When you find information that contradicts your existing beliefs, you’ve got a special obligation to look at it – and quickly” – Buffet
98) “You don’t change something people love” – Faith Popcorn (what a name BTW). Remember coke when they changed the flavor
99) We dislike losing the things we have more than we appreciate gaining the things we don’t have.
100) When something we like is threatened to be taken away from us we value it more. So it is less hassle not to give someone something, than to give them something then take it away.
End of part 1, I shall link part 2 after I write it.