[Note: I shared this mental model with my email subscribers on Oct 23, 2016. If you want to receive a new mental model every week, join the club.]
What it is:
It’s a shortcut that our minds take, when evaluating the consequences of a decision. We ascribe more importance to the first examples that come to mind. But here’s the thing – they’re not necessarily more important or probable. They’re just easier to recall / visualize.
Examples in business:
What you see is all there is – When we get into a strategic business partnership, we get complacent, thinking “we’ve made it”. But we haven’t. It’s just that success is easy to visualize, but the thousand ways it can fail are not.
Attribute substitution – when we hear a hard question, we substitute it with a simple one. “How happy are you?” becomes “How much money do you have?”. “Will this strategy work?” becomes “Do I remember an instance of this working?” Never mind that you’ve only heard of instances where it worked (if it didn’t work, you probably wouldn’t have even heard about it).
Rules to protect yourself:
Remind yourself that just because you can recall or visualize something easily, it doesn’t become more probable or valuable.
Use checklists for decisions that are influenced by a number of factors. [Note: checklists are very useful when evaluating startups at OperatorVC. It’s surprisingly easy to get swayed by a good looking product].
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One year ago, I started the Sunday Reads newsletter. It’s a short email that goes out once every week (on Sunday, obviously), with “the best articles on business, strategy, entrepreneurship, and everything in between.”
Every week, I share the best articles I read that week. Sometimes they’re organized around a theme. Sometimes not. But there they are, without fail, in your inbox every Sunday.
I realized just last week that over the year, I had shared 600+ articles through that weekly email. And often, I read at least ten times as many articles during the week, to choose these best 10-12 articles.
What have I learned from these 6,000+ articles? Have they made me better at what I do?
No trees were harmed in the making of this post
A part of me answers almost immediately – yes, for sure! But how exactly have they helped? Can I tease out the key lessons I’ve learned from the articles? Or is it just a vague sense of achievement and hope – surely I haven’t wasted those hours?
So, over the last 7 days, I went back to those 52 emails. And pulled out the key learnings and principles that I’ve actually tried to use in my life.
Two caveats before we go on:
First, this is a long post. I’ve tried to summarize the key concepts I’ve learned, and it turns out 6,000 articles means a ton of learnings!
Second, I’ve included (several) links for further reading. Every paragraph is a rabbit hole. So, first read through the whole thing without clicking through on any link. Then, come back. Feel free to dive as deep as you want, on the subjects that interest you.
1. Goals don’t work. Use systems instead.
This was not a new lesson for me. But across article after article, book after book, this got reinforced. No matter the field, what seems to work is understanding the basic principles and following them. That’s it.
Success is not about choosing an ambitious goal and stretching to reach it. Whether in running your business or trying to win arguments with your spouse, hard work won’t cut it. Instead, you understand the basics, try a lot of different things, learn what works, and iterate or double down.
If you do it right, then no matter whether you succeed or fail in one specific endeavor, you’ll always come out ahead. You’ll always learn something that’ll be useful next time.
[Tweet “Goals are for losers. Use systems instead.”]
This sounds a little hackneyed at this high level, I know. But as you’ll see, it permeates all the other lessons below.
Further reading:Goals vs. Systems. I’ve read this a few times before, but I was still blown away by the simplicity when I read it just now. If you like this, you’ll love Scott Adams’ book.
2. Growth Mindset vs. Fixed Mindset
There are two types of people – those with a fixed mindset, and those with a growth mindset.
If you have a fixed mindset, you think you are at the peak of your skills. You’re the best artist, manager, husband, wife, etc. you can be.
If, on the other hand, you have a growth mindset, then you strongly believe you can grow and improve at whatever you do. Whether in your personal life (you can always become a better husband. OK, that hit too close to home), or in your professional career. There’s always room for improvement.
Your mindset determines how successful you are to a surprising extent. People with growth mindsets are more willing to try new things, learn new skills, and take risks. And those who take risks, get the rewards. Fortune favors the brave, etc.
Further Reading: You can read Carol Dweck’s book Mindset, which outlines the research on the subject. Or read Maria Popova’s review of the book.
3. Deliberate Practice
Let’s say you have a growth mindset. Is that enough to grow and improve your skills over time?
If the goals vs. systems argument tells us anything, it’s that just believing you can improve at something isn’t enough. So, what’s the system for this?
Practice. Not just doing something for 10,000 hours. Deliberate practice. Working at the edge of your abilities, getting immediate feedback (succeeding / failing), learning, and trying again. That’s what builds skills.
If you want to learn business, start a side-business. At every stage – idea generation, building your first product, selling it to your first customer – you’ll fail the first few times. And you’ll learn immensely.
If you want to improve your writing skills, start a blog. It takes 2 minutes on Medium. Write every day, and ask your friends and colleagues for feedback. Rinse, repeat.
[Tweet “Don’t just practice. Do deliberate practice. That’s how you build skills.”]
Further Reading: Cal Newport’s book on the subject is excellent. This article from his blog is a good summary of the six traits of deliberate practice.
These were the three most important learnings for me from my last year of reading.
Take a systems approach to all your endeavors
There’s always room to become better at what you do
The “system” to become better is deliberate practice
Everything else stems from these key principles. They form the foundation for the rest of the learnings. Get these right, and everything else falls into place. How’s that for a system?
As I continued plowing through the articles, I saw that a lot of them were organized around skills essential to succeed in the workplace today. Communication, structured thinking and problem solving, creativity, and focus (especially focus), to name a few.
How do we build these skills?
4. How to learn anything
Communication, structured thinking, etc. are critical skills. But there’s one skill that’s a precursor to all this – the ability to pick up new skills quickly.
As Scott Adams says in his book, every new skill you learn doubles your chances of success. To take a simple example – an MBA who knows to code is far more valuable than just an MBA. And if this person also understands, say, cinematography, then the unique opportunities available are far more lucrative.
So, you need to continually build new skills throughout your career, to take advantage of new opportunities. And ideally, you’ll build skills that are themselves useful across a diverse set of sectors (system approach again).
[Tweet “Every new skill you learn doubles your chances of success”]
OK, you’re sold. Learning how to learn is key (it’s also the secret moral of Kung Fu Panda, but that’s another story).
But how do you learn? You could join a course at your local university, or hire a teacher online, and do your 10,000 hours.
Or, you could use the Pareto principle to identify the 20% of concepts that have 80% of the importance, and quickly learn and practice those.
Don’t you want to be that guy, who always sees through to the crux of an issue? Who understands the real problem, which no one else can see? Who always sees the way out of an unresolvable predicament?
I certainly want to be that guy.
Turns out, this is a learnable skill.
a. Don’t be stupid
Charlie Munger, Warren Buffett’s partner-in-crime, once said, “The best way to be smart is to not be stupid”.
We are not rational beings, as economists would have us believe. Not by a long shot. As I’ve written before, we’re not only not rational, we’re also irrational in consistent and repeatable ways.
We’re subject to several cognitive biases, which predictably warp our judgement.
Anchoring is one example of a pervasive bias. The first number thrown in a negotiation becomes an unconscious anchor to the rest of the bargaining. That’s why both parties fight to shout out the first bid.
Availability bias is another one. We overestimate the probability of an event if we can remember vivid instances of it. We pay more for earthquake insurance than for calamity insurance (even though the latter includes earthquakes!), we overestimate the possibility of winning the lottery if our neighbor just won it last week, and so on.
How do you avoid these biases? Here’s the thing – you can’t.
Since these operate at a subliminal level, just knowing them won’t prevent them. Next time someone makes the first offer in a negotiation, you’ll predictably bargain around that.
Instead, counteract these in your decision-making by using a two-track thinking process.
First, make a decision rationally (to the best of your abilities)
Then, try and recognize the biases you’re subject to, and adjust accordingly
Do this again and again, and you’ll soon become a natural. At not being stupid.
[Tweet ““The best way to be smart is to not be stupid””]
b. Develop a latticework of mental models
This idea also comes from Charlie Munger.
There are several different frameworks that help us understand the world. Understanding and building a repository of these frameworks in our heads can help us become much faster at comprehending the forces at play around us.
[Aside: if you want to learn how to have great startup ideas, read this guide. But be warned, you’ll sometimes come up with ideas that seem to have a lot of potential, but are actually bad. Here’s how to recognize bad ideas that look good.]
7. How to communicate better
a. How to write better
Just two rules: (1) Never use passive voice; and (2) Keep it simple. Don’t use two words where one will do. Don’t use a long sentence where two shorter ones will do. That’s it. Nothing more.
(1) First, understand whether your opponent’s opinion is changeable at all. Ask: “What specific data points, if true, would convince you to change your mind?” If nothing will, you might as well not waste your time arguing. [Aside: yes, the similarity to the scientific method is not incidental].
(2) Then, as Daniel Dennett says here, first restate your opponent’s view so clearly and succinctly that they wish they could have put it that way themselves.
(3) Then, call out the specific areas on which you agree with your opponent, and what you’ve learnt from their view.
Then, and only then, should you say even one word of criticism.
And yes, remember Miller’s Law. “To understand what another person is saying, you must assume that it is true and try to imagine what it could be true of.”
Before you say some statement is wrong or silly, first challenge yourself to think of a scenario where that statement actually makes sense. [The same principle applies for criticizing political decisions, competitors’ moves, etc.]
[Tweet “Be happy to be proven wrong. You only learn when you lose arguments.”]
c. How to give feedback better
There’s no playbook here.
Actually there is one – sandwich your feedback between two appreciative comments. It’s also known as The Shit Sandwich, and no, it doesn’t work. People see it coming a mile away. You start by saying “Your emails are always so well formatted”, and the opposite person immediately thinks, “God! How have I screwed up now?”
Instead, be authentic.
And come from the right place. Remember, you’re giving feedback so that the person succeeds going forward. And give constructive feedback frequently – don’t wait for review cycles, or the end of the week, etc.
In addition to all these, there’s one more important tenet to interpersonal communication. Always respond positively when someone says something to you. Negative / sarcastic reactions, or even no reaction at all, can be very damaging to relationships, as this article from Farnam Street recounts.
8. How to focus
This is an important one. Between emailing all day, getting pings on Whatsapp, and checking what’s new on Twitter, it’s a wonder we get any work done.
Even as I type this, my hand continually reaches out to check my phone. Maybe there’s a new message since I last checked 2 minutes ago?
As this article from the NYT argues, focus is a critical skill. And it’s incredibly hard in this age of digital distraction. But as Cal Newport shows in his book Deep Work, it can be learned.
How do we learn it? By practicing it:
First, use the Pareto principle. Take your to-do list, and remove the 80% of tasks that are unimportant.
Then, use Parkinson’s Law (“work expands / contracts to fill the time available to it”). Give yourself slightly less time than needed for each of the 20% important tasks. This will force you to focus – if you get distracted, you won’t be able to finish in the given time.
Of course, you’ll have to do the less important tasks at some point. For this, use a shallow work checklist that you tick things off when taking a break from the important tasks.
9. How to become a better manager
Read this FAQ from Henry Ward, CEO of eShares. Enough said.
10. How to get lucky
The last and final lesson I learned, and arguably the most important one. Building all those skills is great – it sets you up for success. But getting all the firewood together in one pile is not enough. Something has to light the fire. And luck is that matchstick.
Analogies apart (you can tell they’re my weak spot), you can acquire all the skills you want and work as hard as you can. But to win really big, you also need Lady Luck to favor you. And luck can be as capricious as they come.
But, like everything else above, you can engineer luck as well. You can expose yourself to positive luck, while limiting the downside from negative luck.
a. Employ a barbell strategy – maintain a portfolio of low-risk / low-reward and high-risk / high-reward strategies.
Keep your day job, and try and build a side-business on the weekends. Quit your job only after the startup starts to scale. Even Craigslist was built in Craig’s spare time.
[Extra marks if you build your side business in a Power Law market. In such markets, if you do win, you’ll win huge.]
b. Build a strong network of ‘weak’ links – the best opportunities are at the edges of the status quo in every field. If you know people at the cutting edge in every industry, you’ll be better placed to spot and capitalize on big opportunities. Spend time with A+ people from other industries. [Note: This is also evidently the no. 1 predictor of career success].
No, I haven’t made a typo in the title. The age old saying “Winners don’t do different things. They do things differently.”, made famous by Shiv Khera in his book You Can Win, is wrong.
I remember when the book came out, everyone quoted it as gospel. Every individual can be great. All you need to do is work hard, and work smart. And they would all nod knowingly at the last clause. So that’s what I did – studied hard, went to a good B-School, got a great job and worked hard (and smart) there.
But unfortunately, this saying isn’t true. And it’s becoming more false as technology eats the world (to co-opt Marc Andreessen’s pet phrase).
This mentality of doing things smarter now pervades all aspects of our life. But it suffers from one fallacy – what I call ‘focusing on the numerator’.
It’s like a company that focuses only on improving its profit margin. It brings in cutting-edge efficient machines, implements Just-in-time production techniques, and what have you. But with all these productivity improvements, how much could the profit margin increase? From 15% to 20%? 40%? 100%??
Even in the best (and impossible) scenario, the upside is capped at 100% of revenue. What if you focused, instead, on the denominator? What if you looked for ways to achieve a step jump in revenue? Suddenly, there’s far more value to capture, even if you are inefficient.
What you work on matters, and matters far, far more than how hard you work. This is an example of a Power law, which I’ve written about before. In the early 1900s in England, there was a profession of people called ‘knocker-uppers’ (no, it’s not what you think). Their task was to wake people up every morning. They would walk the streets with a long stick, and tap on windows till people woke up. Many of them worked hard. I’m sure they worked smart too – with well-balanced, aerodynamic and sonorous sticks. Still, they lost their livelihoods in a jiffy when alarm clocks came into the market.
Moral of the story: Do more valuable tasks, instead of doing less valuable tasks efficiently or smartly. Doing something unimportant well does not make it important.
This is how the world is today – it’s the new normal. The companies that win are the ones that innovate 10X and ‘change the game’. Not the ones who innovate incrementally. As Peter Thiel says in his book, don’t move an industry to greater efficiencies (i.e., from 1 to 1.1). Focus instead on moving something from zero to one.
[Tweet “Do more valuable tasks, instead of doing less valuable tasks efficiently or smartly.”]
Look at the biggest companies around us – Google (search advertising), Apple (iPhone), Amazon (e-commerce, e-books, etc.). They didn’t just improve search algorithms, build a better phone, or sell books through a simpler distribution chain. They revolutionized their respective industries. Not by doing things differently or more efficiently, but by doing different things.
And it’s not just companies – it’s visible in every aspect of life. No longer can you say, “Karm kar, phal ki chinta na kar” (“Work hard, don’t worry about the result”) in all honesty. If the recipe sucks, it doesn’t matter how good a cook you are.
[Tweet “If the recipe sucks, it doesn’t matter how good a cook you are.”]
This may be bad news. But it’s good news as well. Once you start looking for this ‘focus on the numerator’ behavior everywhere, you can make more valuable decisions about your company, your products, and your time.
A few examples of the implications, off the top of my head:
Product Management: Instead of A/B testing and optimizing your nth new feature, focus on getting more people to use your product. Andrew Chen puts this well in a recent article.
HR: Instead of trying to getting the best out of your team, learn how to build a better team. [This is more important in technology businesses, and less so in traditional brick-and-mortar companies.]
Health: You can try to manage your cholesterol by eating french fries cooked in refined oil or unsaturated oil or whatever the flavor of the season is. Or, you can just stop eating french fries!
Personal Finance: Focus on earning more, not spending less. A direct corollary of the revenue-profit point I made earlier. It’s ironic, but I’m the prime target for this lesson. As a Tam-Brahm, I started expense budgeting almost before I could walk. I’ve spent countless hours balancing my expenses, tracking my receipts, and strategizing lower spends, when I could have instead focused on doing more valuable things. Which means anything else, basically.
Personal Productivity: Be effective, not efficient, as Tim Ferriss says in The Four Hour Work Week. Do two important things, instead of 10 unimportant ones. Again, a slap on my face – so far, I was firmly in the ‘get more out of your day‘ brigade.
TL:DR: In work as in life, we should strive hard by all means. But we must think hard first – is what I’m doing the most valuable thing I could do? Let’s build more important things, instead of optimizing our lives away.
What do you think? Are there any other examples of ‘focus on the numerator’ behavior? Drop me an email at [email protected], comment here, or tweet at @jithamithra.
6-9 months ago, when everyone was posting lists of the top 10 books they read, I was unfortunately busy with work. And then, when I wanted to post my own list, it was much too late to do so – people had moved on to sharing Upworthy articles instead.
Nevertheless, what’s far more useful is to talk about the top things I learnt from books – the ideas, insights, stories that changed how I think about life and work. After all, that’s why you read books – to improve yourself in some way – isn’t it? Well, at least all books apart from the Twilight series.
So, here are the 5 ideas that transformed how I think about life and work, and the books I read them in. Rather than describing these ideas in detail, I’ll also share links to articles that offer a short version. But I would definitely recommend you read the book themselves too!
An understanding of psychology is, in my view, an essential skill for anyone whose daily life involves interactions with other people to get stuff done. The human mind is not only not rational, it is also irrational in a few consistent and repeatable ways. Understanding these cognitive biases and fallacies that we suffer from can go a long way in helping you get what you want in interactions with people.
[Tweet “The human mind is not only not rational, it is also irrational in consistent and repeatable ways.”]
One of the key concepts I’ve come across in this area is that the human mind is really two distinct personalities – let’s call them System 1 and System 2. System 1 is the more automatic, quick-and-dirty, heuristic based, lazy thinker – get to an answer quickly by applying habits and patterns, often at a subliminal level. System 2, on the other hand, applies more careful, overt deliberation to any problem, coming to a solution in a more considered manner.
At any time, you’re thinking in one of these two modes. For example, when you’re doing math, you’re carefully thinking of the problem and solution – that’s System 2 in operation. When you’re tying your shoelaces, you’re usually not thinking about the loops and knots actively – you just do it. That’s an example of a System 1 task.
Now, at most times, the mind defaults to System 1 – which tries to recognize and apply patterns without thinking too much. And the result is that it can get tricked in fairly predictable ways – what we call cognitive biases. Two examples of these are anchoring (where an initial number suggested to you often influences your answers to a numerical question) and availability bias (you tend to overestimate the probability of an event if you can remember examples – this sometimes results in people paying more for earthquake insurance than insurance for natural calamities – even though the latter includes earthquakes!). Won’t go into detail on these biases here – you can read the articles I’ve linked to, and the book. But I’ll blog about them soon too!
Another interesting implication of the dominance of System 1 is that you can trick your brain into certain emotions. For example, you know that when you’re happy, you tend to smile. But did you know that this can work in reverse – that you can trick your brain into happiness, by simply smiling? This was a ridiculously amazing insight for me – to know that causality works both ways, and I can control my emotions. I’m a ‘moist robot’, in Scott Adams’ words.
When I was in business school, I read Fooled by Randomness, by Nassim Taleb. At that point, I thought it was the best book I had ever read – so many brilliant ideas, one after the other. I read it again recently, and while I’m a little less effusive, it’s definitely worth a read – it’s long-winded and unnecessarily complicated in parts, and the language is often self-absorbed – but if you can look beyond that, the insights will hit you at an unrelenting pace.
But the most important insight for me – in that it almost exclusively governs my world view since I read it – is that of making skewed bets. The world is innately random – your success depends far more on your luck than on your ability. At first glance, this seems to encourage laziness. Why work hard when your destiny doesn’t depend on it? But looking deeper, the implication is that you should try and expose yourself to ‘positive’ luck as far as possible, while limiting the impact of ‘negative’ luck. In simpler terms, expose yourself to very high upside, while limiting your downside as far as possible.
This is called making a skewed bet – where if you win, the gains are a windfall; but if you lose, you don’t lose that much. A lot like financial options or a startup – if you make it, you make it. And if you fail, then your losses are limited – the cost of the option, 1 year of salary, etc. Of course, the probability of a loss may be 90%. But if you make 10 skewed bets, then you’ll make a windfall gain on 1 of them – and that may be more than enough.
Another important way to keep yourself open to good luck is by simply staying on the field. Thomas Edison got the light bulb right on his 1000th attempt – and that happened only because he kept trying different things, and didn’t give up after 999. To surf a ‘killer wave’, you need to first be in the sea, navigating the 100 tepid waves before.
[Tweet “To surf a ‘killer wave’, you need to first be in the sea, navigating the 100 tepid waves before.”]
Taking the previous point further – success, then, seems to be a process rather than a brilliant idea, inch-perfect execution or just good luck. Try a lot of different things, observe, learn, and iterate. So that you slowly, over time, collect all the right materials for the magnifying glass of luck to ignite. You do all the right things and keep improving, so that when Lady Luck knocks, you’re ready.
Success is therefore a system (take several skewed, high-reward/low-cost risks), rather than a goal (I want to get rich). Now that’s at a macro-level, but this makes sense even at the micro-level – rather than adopting a goal of doubling your user base and throwing money at it, take a systematic approach of trying different things, observing, and then betting the farm on the 2-3 marketing techniques that work.
Scott Adams (of Dilbert fame) carefully charts out this approach in his book.
Book:How to fail at almost everything & still win big. I would venture that this is one of the best and most actionable books I’ve read. But read at your own peril – as they say, one should be careful when taking life and business advice from a cartoonist.
Further Reading:Goals vs. Systems – a short blog post applying this concept to life in general.
4. Power Laws, or why working hard is not enough – Zero to One
I’ve already blogged about this here, but it’s worth reiterating. Today’s business world is not a normal distribution, with most people distributed around average payoffs. Rather, it’s an exponential distribution – very few companies will make most of the money to be made. Therefore, success depends far, far more on what you do, than on how you do it.
In a power law distribution, very few sample points account for a majority of the population’s value.
The power law will permeate all your decisions (e.g., one marketing hack will drive 90% of your traction, one product feature will drive 90% of repeat users, etc.). Won’t go into more detail here – definitely read the post!
[Tweet “Success depends far, far more on what you do, than on how you do it.”]
The previous three concepts have all been around the idea of work and success. This one is different, and is a tool that I’ve found quite useful in jump-starting creative thinking about problems.
Let’s say you’re trying to think of a startup idea in a given space. You could look at what users do now, what they buy, how they consume, etc., and try to find areas where you can add value. Or, you can look at how the industry will inevitably evolve in the future and see how you can accelerate that.
The author calls this concept an ‘attractor state’ – given industry trends today, what do you see as the logical next frontier over the next 10-20 years? And how can you participate in that, rather than making incremental changes to the status quo? To paraphrase Wayne Gretzky, the ice hockey legend – don’t skate to where the puck is, but to where it will be.
This is a slightly nebulous concept, so let me provide an example. Let’s say I want to create an offering in the payments space. One option is to join the crowded current market, and provide a mobile wallet solution, a payment gateway, etc. Another way is to think of where the industry will be in 10-20 years – its attractor state. I’m not a payments expert, but seeing how it has evolved over time (barter -> gold -> paper money -> credit cards -> mobile wallets), there’s a clear trend towards individualization. The reasons mobile wallets are a great innovation is that everyone carries a mobile today, and they don’t share mobiles – it is a unique identifier of a person. Taking this individualization further, the next wave of advancement has to be biometrics – where unique characteristics of your person (iris, voice patterns, fingerprints, etc.) are your identifier, based on which transactions can be completed from your account. You don’t need to whip out your phone or credit card – just staring at a tiny lens is enough to connect to your payment account.
How does this help an entrepreneur? With this end-game in view, entrepreneurs can think about how they can add (and capture) disproportionate value in the long-term – the products and services they can start building today, to accelerate the attractor state. In the case of payments, it could be future biometric sensors, systems for collating massive customer data, POS terminals for accepting payments, etc. – each of these possibilities could be game-changing.
[Tweet “”Don’t skate to where the puck is, but to where it will be.” – Wayne Gretzky”]
Won’t go into much more detail here – but I’ll write a blog post or two on this concept soon. I find it an incredibly powerful way to improve your creativity when thinking about problems and solutions.
Book:Good strategy Bad Strategy. Apart from a discussion of attractor states, this book also has a great discussion of chain linked strategy and focus as a source of competitive leverage. I’ve blogged about this here.
Further Reading: Will write a detailed post on this soon!
These are the five concepts from books that changed my world-view. It may be asking too much to hope that they fundamentally alter your thinking too, but I hope you find these perspectives and books interesting. Do comment!