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Same as Ever: A Guide to What Never Changes

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Same as Ever: A Guide to What Never Changes

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Highlights & Notes

Our life is indeed the same as it ever was… . The same physiological and psychological processes that have been man’s for hundreds of thousands of years still endure. —Carl Jung

The wise in all ages have always said the same thing, and the fools, who at all times form the immense majority, have in their way, too, acted alike, and done just the opposite. —Arthur Schopenhauer

History never repeats itself; man always does. —Voltaire

I’ve learned an important trick: to develop foresight, you need to practice hindsight. —Jane McGonigal

The dead outnumber the living … fourteen to one, and we ignore the accumulated experience of such a huge majority of mankind at our peril. —Niall Ferguson

Amazon founder Jeff Bezos once said that he’s often asked what’s going to change in the next ten years. “I almost never get the question: ‘What’s not going to change in the next ten years?’ ” he said. “And I submit to you that that second question is actually the more important of the two.” Things that never change are important because you can put so much confidence into knowing how they’ll shape the future. Bezos said it’s impossible to imagine a future where Amazon customers don’t want low prices and fast shipping—so he can put enormous investment into those things. The same philosophy works in almost all areas of life.

What would be true in every imaginable version of your life, not just this one? Those universal truths are obviously the most important things to focus on, because they don’t rely on chance, luck, or accident.

Entrepreneur and investor Naval Ravikant put it this way: “In 1,000 parallel universes, you want to be wealthy in 999 of them. You don’t want to be wealthy in the fifty of them where you got lucky, so we want to factor luck out of it… . I want to live in a way that if my life played out 1,000 times, Naval is successful 999 times.” That’s what this book is about: In a thousand parallel universes, what would be true in every single one?

Author Tim Urban once wrote, “If you went back in time before your birth you’d be terrified to do anything, because you’d know that even the smallest nudges to the present can have major impacts on the future.” How hauntingly true.

It was a complete fluke, a random and thoughtless bit of dumb luck that became the most important decision of my life—far more important than every intentional decision I’ve ever made—or ever will make.

Historian David McCullough once told interviewer Charlie Rose that “if the wind had been in the other direction on the night of August twenty-eighth [1776], I think it would have all been over.” “No United States of America if that had happened?” Rose asked. “I don’t think so,” said McCullough. “Just because of the wind, history was changed?” asked Rose. “Absolutely,” said McCullough.

The Lusitania was hit with a torpedo, killing nearly twelve hundred passengers and becoming the most important trigger to rally U.S. public support for entering World War I. Had the fourth boiler room been operating, Turner would have reached Liverpool a day before the German submarine had even entered the Celtic Sea, where it crossed paths with the Lusitania. The ship likely would have avoided attack. A country may have avoided a war that became the seed event for the rest of the twentieth century.

So much of the world hangs by a thread. An irony of studying history is that we often know exactly how a story ends, but we have no idea where it began.

People like to say, “To know where we’re going, you have to know where we’ve been.” But more realistic is admitting that if you know where we’ve been, you realize we have no idea where we’re going. Events compound in unfathomable ways.

One is highlighting this book’s premise—to base predictions on how people behave rather than on specific events. Predicting what the world will look like fifty years from now is impossible. But predicting that people will still respond to greed, fear, opportunity, exploitation, risk, uncertainty, tribal affiliations, and social persuasion in the same way is a bet I’d take.

Every event creates its own offspring, which impact the world in their own special ways. It makes prediction exceedingly hard. The absurdity of past connections should humble your confidence in predicting future ones.

The other thing to keep in mind is to have a wider imagination. No matter what the world looks like today, and what seems obvious today, everything can change tomorrow because of some tiny accident no one’s thinking about. Events, like money, compound. And the central feature of compounding is that it’s never intuitive how big something can grow from a small beginning.

We are very good at predicting the future, except for the surprises—which tend to be all that matter.

The biggest risk is always what no one sees coming, because if no one sees it coming, no one’s prepared for it; and if no one’s prepared for it, its damage will be amplified when it arrives.

As financial advisor Carl Richards says, “Risk is what’s left over after you think you’ve thought of everything.” That’s the real definition of risk—what’s left over after you’ve prepared for the risks you can imagine. Risk is what you don’t see.

Two things can explain something that looks inevitable but wasn’t predicted by those who experienced it at the time: • Either everyone in the past was blinded by delusion. • Or everyone in the present is fooled by hindsight.

The Economist—a magazine I admire—publishes a forecast of the year ahead each January. Its January 2020 issue does not mention a single word about COVID-19. Its January 2022 issue does not mention a single word about Russia invading Ukraine. That’s not a criticism—both events were impossible to know when the issues were planned in the months before publication. But that’s the point: The biggest news, the biggest risks, the most consequential events are always what you don’t see coming. Put another way: There is rarely more or less economic uncertainty; just changes in how ignorant people are to potential risks. Asking what the biggest risks are is like asking what you expect to be surprised about. If you knew what the biggest risk was you would do something about it, and doing something about it would make it less risky. What your imagination can’t fathom is the dangerous stuff, and it’s why risk can never be mastered.

A big part of this idea is coming to terms with how limited our view of what’s happening in the world can be.

History knows three things: 1) what’s been photographed, 2) what someone wrote down or recorded, and 3) the words spoken by people whom historians and journalists wanted to interview and who agreed to be interviewed. What percentage of everything important that’s ever happened falls into one of those three categories? No one knows. But it’s tiny. And all three suffer from misinterpretation, incompleteness, embellishment, lying, and selective memory. When your view of what’s happening and has happened in the world is so limited, it’s easy to underestimate what you don’t know, what else could be happening right now, and what could go wrong that you’re not even envisioning.

Psychologist Daniel Kahneman says, “The idea that what you don’t see might refute everything you believe just doesn’t occur to us.”

One, think of risk the way the State of California thinks of earthquakes. It knows a major earthquake will happen. But it has no idea when, where, or of what magnitude. Emergency crews are prepared despite no specific forecast. Buildings are designed to withstand earthquakes that may not occur for a century or more. Nassim Taleb says, “Invest in preparedness, not in prediction.” That gets to the heart of it.

Two, realize that if you’re only preparing for the risks you can envision, you’ll be unprepared for the risks you can’t see every single time. So, in personal finance, the right amount of savings is when it feels like it’s a little too much. It should feel excessive; it should make you wince a little. The same goes for how much debt you think you should handle—whatever you think it is, the reality is probably a little less. Your preparation shouldn’t make sense in a world where the biggest historical events all would have sounded absurd before they happened.

Your happiness depends on your expectations more than anything else. So in a world that tends to get better for most people most of the time, an important life skill is getting the goalpost to stop moving. It’s also one of the hardest.

Happiness is little changed despite the world improving.

Montesquieu wrote 275 years ago, “If you only wished to be happy, this could be easily accomplished; but we wish to be happier than other people, and this is always difficult, for we believe others to be happier than they are.”

People gauge their well-being relative to those around them, and luxuries become necessities in a remarkably short period of time when the people around you become better off.

Investor Charlie Munger once noted that the world isn’t driven by greed; it’s driven by envy.

It’s staggering how expectations can alter how you interpret current circumstances.

Money buys happiness in the same way drugs bring pleasure: incredible if done right, dangerous if used to mask a weakness, and disastrous when no amount is enough.

Today’s economy is good at generating three things: wealth, the ability to show off wealth, and great envy for other people’s wealth.

It’s become so much easier in recent decades to look around and say, “I may have more than I used to. But relative to that person over there, I don’t feel like I’m doing that great.”

But nostalgia for the 1950s is one of the best examples of what happens when expectations grow faster than circumstances. In many ways it’s always been like that and always will be. Being driven by what other people have and you don’t is an unavoidable trait in most people. It also highlights just how important managing expectations can be if you want to live a happy life.

Actual circumstances don’t make much difference in all these cases. What generates the emotion is the big gap between expectations and reality.

Peter Kaufman, CEO of Glenair and one of the smartest people you will ever come across, once wrote: We tend to take every precaution to safeguard our material possessions because we know what they cost. But at the same time we neglect things which are much more precious because they don’t come with price tags attached: The real value of things like our eyesight or relationships or freedom can be hidden to us, because money is not changing hands. Same with expectations—they’re easy to ignore because their value isn’t on a price tag. But your happiness completely relies on expectations. Your boss’s impression of your career relies on them. Consumer confidence relies on them. What moves the stock market relies on them. So why do we pay so little attention to them? We spend so much effort trying to improve our income, skills, and ability to forecast the future—all good stuff worthy of our attention. But on the other side there’s an almost complete ignorance of expectations, especially managing them with as much effort as we put into changing our circumstances.

The first rule of a happy life is low expectations. If you have unrealistic expectations you’re going to be miserable your whole life. You want to have reasonable expectations and take life’s results, good and bad, as they happen with a certain amount of stoicism.

My friend Brent has a related theory about marriage: It only works when both people want to help their spouse while expecting nothing in return. If you both do that, you’re both pleasantly surprised.

The only way around that might be recognizing two things. One is the constant reminder that wealth and happiness is a two-part equation: what you have and what you expect/need. When you realize that each part is equally important, you see that the overwhelming attention we pay to getting more and the negligible attention we put on managing expectations makes little sense, especially because the expectations side can be so much more in your control. The other is to understand how the expectation game is played. It’s a mental game, and it’s often crazy and agonizing, but it’s a game that everyone is forced to play, so you should be aware of the rules and strategies. It goes like this: You think you want progress, both for yourself and for the world. But most of the time that’s not actually what you want. You want to feel a gap between what you expected and what actually happened. And the expectation side of that equation is not only important, but it’s often more in your control than managing your circumstances.

People who think about the world in unique ways you like also think about the world in unique ways you won’t like.

The key thing is that unique minds have to be accepted as a full package, because the things they do well and that we admire cannot be separated from the things we wouldn’t want for ourselves or we look down upon.

That may perfectly sum up how extremely successful people operate. Of course they have abnormal characteristics. That’s why they’re successful! And there is no world in which we should assume that all those abnormal characteristics are positive, polite, endearing, or appealing. Something I’ve long thought true, and which shows up constantly when you look for it, is that people who are abnormally good at one thing tend to be abnormally bad at something else. It’s as if the brain has capacity for only so much knowledge and emotion, and an abnormal skill robs bandwidth from other parts of someone’s personality.

Naval Ravikant once wrote: One day, I realized with all these people I was jealous of, I couldn’t just choose little aspects of their life. I couldn’t say I want his body, I want her money, I want his personality. You have to be that person. Do you want to actually be that person with all of their reactions, their desires, their family, their happiness level, their outlook on life, their self-image? If you’re not willing to do a wholesale, 24/7, 100 percent swap with who that person is, then there is no point in being jealous. Either you want someone else’s life or you don’t. Either is equally powerful. Just know which is which when finding role models.

People don’t want accuracy. They want certainty.

The fundamental cause of the trouble is that in the modern world the stupid are cocksure while the intelligent are full of doubt. —BERTRAND RUSSELL

A common trait of human behavior is the burning desire for certainty despite living in an uncertain and probabilistic world.

The core here is that people think they want an accurate view of the future, but what they really crave is certainty.

Daniel Kahneman once said, “Human beings cannot comprehend very large or very small numbers. It would be useful for us to acknowledge that fact.”

Physicist Freeman Dyson once explained that what’s often attributed to the supernatural, or magic, or miracles, is actually just basic math. In any normal person’s life, miracles should occur at the rate of roughly one per month: The proof of the law is simple. During the time that we are awake and actively engaged in living our lives, roughly for eight hours each day, we see and hear things happening at a rate of one per second. So the total number of events that happen to us is about 30,000 per day, or about a million per month. If the chance of a “miracle” is one in a million, we should therefore experience one per month, on average.

The idea that incredible things happen because of boring statistics is important, because it’s true for terrible things too.

What’s different now is the size of the global economy, which increases the sample size of potential crazy things that might happen. When eight billion people interact, the odds of a fraudster, a genius, a terrorist, an idiot, a savant, a jerk, or a visionary moving the needle in a significant way on any given day is nearly guaranteed.

The decline of local news has all kinds of implications. One that doesn’t get much attention is that the wider the news becomes the more likely it is to be pessimistic. Two things make that so: • Bad news gets more attention than good news because pessimism is seductive and feels more urgent than optimism. • The odds of a bad news story—a fraud, a corruption, a disaster—occurring in your local town at any given moment is low. When you expand your attention nationally, the odds increase. When they expand globally, the odds of something terrible happening in any given moment are 100 percent. To exaggerate only a little: Local news reports on softball tournaments. Global news reports on plane crashes and genocides.

Compare this to the past. Here’s Frederick Lewis Allen again, writing about life in 1900: The majority of Americans were less likely than their descendants to be dogged by that frightening sense of insecurity which comes from being jostled by forces—economic, political, international—beyond one’s personal ken. Their horizons were close to them. Their horizons were close to them. In modern times our horizons cover every nation, culture, political regime, and economy in the world. There are so many good things that come from that.

People don’t want accuracy. They want certainty.

Charlie Munger gave a talk in the 1990s called “The Psychology of Human Misjudgment.” He listed twenty-five biases that lead to bad decisions. One is the “Doubt-Avoidance Tendency,” which he described: The brain of man is programmed with a tendency to quickly remove doubt by reaching some decision. It is easy to see how evolution would make animals, over the eons, drift toward such quick elimination of doubt. After all, the one thing that is surely counterproductive for a prey animal that is threatened by a predator is to take a long time in deciding what to do.

Given that track record, will people ever choose to ignore the experts? “No way,” Tetlock once said. “We need to believe we live in a predictable, controllable world, so we turn to authoritative-sounding people who promise to satisfy that need.”

It often takes too long for a sufficient sample size to play out. So everyone is left guessing.

Distinguishing between unfortunate odds and recklessness is hard when risk has painful consequences. It’s easier to see black and white even when the odds are apparent.

What you always want to avoid are catastrophic risks. A pilot who crashes once every ten thousand flights is a catastrophe. But our difficulty dealing with probability and large numbers makes us overly sensitive to run-of-the-mill, inevitable risks. Same as ever.

Stories are always more powerful than statistics.

The best story wins. Not the best idea, or the right idea, or the most rational idea. Just whoever tells a story that catches people’s attention and gets them to nod their heads is the one who tends to be rewarded. Great ideas explained poorly can go nowhere, while old or wrong ideas told compellingly can ignite a revolution.

If you have the right answer, you may or may not get ahead. If you have the wrong answer but you’re a good storyteller, you’ll probably get ahead (for a while). If you have the right answer and you’re a good storyteller, you’ll almost certainly get ahead. That’s always been true, always will be true, and it shows up in so many areas of history.

Good stories tend to do that. They have extraordinary ability to inspire and evoke positive emotions, bringing insight and attention to topics that people tend to ignore when they’ve previously been presented with nothing but facts.

Even within a good story, a powerful phrase or sentence can do most of the work. There is a saying that people don’t remember books; they remember sentences.

Readers don’t want a lecture; they want a memorable story.

Or take the stock market. The valuation of every company is simply a number from today multiplied by a story about tomorrow.

Mark Twain said, “Humor is a way to show you’re smart without bragging.”

When a topic is complex, stories are like leverage.

Leverage squeezes the full potential out of something with less effort. Stories leverage ideas in the same way that debt leverages assets.

Ken Burns once said, “The common stories are one plus one equals two. We get it, they make sense. But the good stories are about one plus one equals three.” That’s leverage.

The most persuasive stories are about what you want to believe is true, or are an extension of what you’ve experienced firsthand.

Stories get diverse people to focus attention on a single point.

Steven Spielberg noted this: The most amazing thing for me is that every single person who sees a movie … brings a whole set of unique experiences. Now, through careful manipulation and good storytelling, you can get everybody to clap at the same time, to laugh at the same time, and to be afraid at the same time.

Guiding people’s attention to a single point is one of the most powerful life skills.

Good stories create so much hidden opportunity among things you assume can’t be improved.

How many great ideas have already been discovered but could grow one hundred times or more if someone explained them better? How many products have found only a fraction of their potential market because the companies that made them are so bad at describing them to customers? So, so many.

Visa founder Dee Hock once said, “New ways of looking at things create much greater innovation than new ways of doing them.”

Some of the most important questions to ask yourself are: Who has the right answer, but I ignore because they’re inarticulate? And what do I believe is true but is actually just good marketing?

The world is driven by forces that cannot be measured.

Attempting to distill emotional and hormonal humans into a math equation is the cause of so much frustration and surprise in the world.

But the strategy that worked at Ford had a flaw when applied at the Department of Defense. Edward Lansdale, head of special operations at the Pentagon, once looked at McNamara’s numbers. He said something was missing. “What?” McNamara asked. “The feelings of the Vietnamese people,” Lansdale replied. You couldn’t reduce that to a statistic or a chart. This was a central issue with managing the Vietnam War. The difference between battle statistics brought to Washington and the feelings among those involved could be a million miles apart.

Jeff Bezos once said, “The thing I have noticed is when the anecdotes and the data disagree, the anecdotes are usually right. There’s something wrong with the way you are measuring it.”

An aide to Bradley mentioned during the war: “If we were fighting reasonable people they would have surrendered long ago.” But they weren’t, and it—the one thing that was hard to measure with logic—mattered more than anything.

Athletic performance isn’t just what you’re physically capable of. It’s what you’re capable of within the context of what your brain is willing to endure for the risk and reward in a given moment. Your brain’s first job is to make sure you don’t die. So like a speed governor on a car, it won’t let you exert true maximum performance—which could leave you exhausted to the point of being vulnerable—unless the stakes are high enough. It will shut you down at a lower physical “limit” if the risk of exertion isn’t worth the reward.

This helps explain crazy stories about people lifting up cars when someone is pinned underneath, their life in jeopardy. Capabilities are a function of in-the-moment circumstances.

“there is more in athletics than sheer chemistry.” There was a behavioral and psychological side that was much harder to measure. You never know how an athlete can perform until you put them in the heat of the moment, with the pressures, risks, and incentives of real-world conditions that can’t be emulated in the laboratory.

Hill discovered the same, but for our bodies. He called them “moral factors.” Our bodies are not machines, and we shouldn’t expect them to perform as such. They have feelings, emotions, and fears, all of which regulate what we’re capable of. All of which are very hard to measure.

Investor Jim Grant once said: To suppose that the value of a common stock is determined purely by a corporation’s earnings discounted by the relevant interest rates and adjusted for the marginal tax rate is to forget that people have burned witches, gone to war on a whim, risen to the defense of Joseph Stalin and believed Orson Welles when he told them over the radio that the Martians had landed.

Every investment price, every market valuation, is just a number from today multiplied by a story about tomorrow. The numbers are easy to measure, easy to track, easy to formulate. It’s getting easier as almost everyone has cheap access to information. But the stories are often bizarre reflections of people’s hopes, dreams, fears, insecurities, and tribal affiliations. And they’re getting more bizarre as social media amplifies the most emotionally appealing views.

Same thing here: The most important variable was the stories people told themselves. And that was the only thing you couldn’t measure and couldn’t predict with foresight. That’s why the results don’t compute.

Economist Per Bylund once noted: “The concept of economic value is easy: whatever someone wants has value, regardless of the reason (if any).” Not utility, not profits—just whether people want it or not, for any reason. So much of what happens in the economy is rooted in emotions, which can, at times, be nearly impossible to make sense of.

The ones who thrive long term are those who understand the real world is a never-ending chain of absurdity, confusion, messy relationships, and imperfect people.

The first step toward accepting that some things don’t compute is realizing that the reason we have innovation and advancement is because we are fortunate to have people in this world whose minds work differently from ours.

Author Robert Greene once wrote, “The need for certainty is the greatest disease the mind faces.”

The next is accepting that what’s rational to one person can be crazy to another. Everything would compute if everyone had the same time horizon, goals, ambitions, and risk tolerances. But they don’t.

Third is understanding the power of incentives. A financial bubble might seem irrational, but the people who work in industries that are in bubbles—mortgage brokers in 2004 or stockbrokers in 1999—make so much money from them that there’s a powerful incentive to keep the music playing. They delude not only their customers but themselves.

Last is the power of stories over statistics. “Housing prices in relation to median incomes are now above their historic average and typically mean revert” is a statistic. “Jim just made $500,000 flipping homes and can now retire early and his wife thinks he’s amazing” is a story. And it’s way more persuasive in the moment. It’s hard to compute, but it’s how the world works.

Crazy doesn’t mean broken. Crazy is normal; beyond the point of crazy is normal.

There is a very common life cycle of greed and fear. It goes like this: First you assume good news is permanent. Then you become oblivious to bad news. Then you ignore bad news. Then you deny bad news. Then you panic at bad news. Then you accept bad news. Then you assume bad news is permanent. Then you become oblivious to good news. Then you ignore good news. Then you deny good news. Then you accept good news. Then you assume good news is permanent. And we’re back where we began. The cycle repeats.

Minsky’s seminal theory was called the financial instability hypothesis. The idea isn’t heavy on math and formulas. It describes a psychological process that basically goes like this: • When an economy is stable, people get optimistic. • When people get optimistic, they go into debt. • When they go into debt, the economy becomes unstable. Minsky’s big idea was that stability is destabilizing. A lack of recessions actually plants the seeds of the next recession, which is why we can never get rid of them.

A growing belief that things will be okay pushes us—like a law of physics—toward something not going okay.

Surprise has six common characteristics: • Incomplete information • Uncertainty • Randomness • Chance • Unfortunate timing • Poor incentives

The irony is that when markets are guaranteed not to crash—or more realistically, when people think that’s the case—they are far more likely to crash. The mere idea of stability causes a smart and rational movement toward bidding asset prices up high enough to cause instability. Stability is destabilizing. Or, put another way: Calm plants the seeds of crazy. Always has, always will.

“Everything feels unprecedented when you haven’t engaged with history,” writer Kelly Hayes once wrote. It’s such an important idea. Historian Dan Carlin wrote in his book The End Is Always Near: Pretty much nothing separates us from human beings in earlier eras than how much less disease affects us… . If we moderns lived for one year with the sort of death rates our pre-industrial age ancestors perpetually lived with, we’d be in societal shock.

For those who grew up in the 1930s and 1940s, there was nothing unusual about finding yourself threatened by contagious disease. Mumps, measles, chicken pox, and German measles swept through entire schools and towns; I had all four. Polio took a heavy annual toll, leaving thousands of people (mostly children) paralyzed or dead. There were no vaccines. Growing up meant running an unavoidable gauntlet of infectious disease. Compare this to my generation—who benefit from a half dozen vaccines within weeks of birth—and it’s like we live in separate worlds. I can’t fathom what was normal two generations ago.

Part of what made COVID dangerous is that we got so good at preventing pandemics in the last century that few people before 2020 assumed an infectious disease would ever impact their lives. It was hard to comprehend. So people were utterly unprepared for a pandemic when it arrived. The irony of good times is that they breed complacency and skepticism of warnings.

A common irony goes like this: • Paranoia leads to success because it keeps you on your toes. • But paranoia is stressful, so you abandon it quickly once you achieve success. • Now you’ve abandoned what made you successful and you begin to decline—which is even more stressful. It happens in business, investing, careers, relationships—all over the place.

  • Importante

What calm planting the seeds of crazy does is important: It makes us fundamentally underestimate the odds of things going wrong, and the consequences of something going wrong. Things can become the most dangerous when people perceive them to be the safest.

A final word about why things have a tendency of getting out of hand. It’s that optimism and pessimism always have to overshoot what seems reasonable, because the only way to discover the limits of what’s possible is to venture a little way past those limits.

If you want to know why there’s a long history of economies and markets blowing past the boundaries of sanity, bouncing from boom to bust, bubble to crash, it’s because so few people have Seinfeld’s mentality. We insist on knowing where the top is, and the only way to find it is to keep pushing until we’ve gone too far, when we can look back and say, “Ah, I guess that was the top.”

The only way to know we’ve exhausted all potential opportunity from markets—the only way to identify the top—is to push them not only past the point where the numbers stop making sense, but beyond the stories people believe about those numbers. When a tire company develops a new tire and wants to know its limitations, the process is simple. They put it on a car and run it until it blows up. Markets, desperate to know the limits of what other investors can endure, do the same thing. Always been the case, always will be. There are two things you can do about it. One is accepting that crazy doesn’t mean broken. Crazy is normal; beyond the point of crazy is normal. Every few years there seems to be a declaration that markets don’t work anymore—that they’re all speculation or detached from fundamentals. But it’s always been that way. People haven’t lost their minds; they’re just searching for the boundaries of what other investors are willing to believe. The second is realizing the power of enough. Being more like Seinfeld. Investor Chamath Palihapitiya was once asked about earning the highest returns, and remarked: I would really love to just compound at fifteen percent per year. Because if I can do that for fifty years that’s just enormous. Just slow and steady against hard problems.

Maybe there’s more potential out there, but it’s fine to say, “You know what, I’m pretty happy with this level of risk and I’m fine just watching this game play out.” Not everyone can do it—and markets on average can never do it—but more of us should try.

  • Importante

Too Much, Too Soon, Too Fast A good idea on steroids quickly becomes a terrible idea.

Warren Buffett once joked that you can’t make a baby in one month by getting nine women pregnant. You’d be surprised, though, how common it is for people to attempt to speed up a process beyond what it can handle. Whenever people discover something valuable—particularly a lucrative investment or a special skill—there is a tendency to ask, “Great, but can I have it all faster?” Can we push it twice as hard? Can we make it twice the size? Can we squeeze some more juice out of it?

Wadlow grew too large given the structure of the human body. There are limits to scaling.

The same action at different sizes produces massively different problems.

“For every type of animal there is a most convenient size, and a change in size inevitably carries with it a change of form,” Haldane wrote. A most convenient size. A proper state where things work well but break when you try to scale them to a different size or speed. It applies to so many things in life.

Schultz wrote in his 2011 book Onward: “Growth, we now know all too well, is not a strategy. It is a tactic. And when undisciplined growth became a strategy, we lost our way.”

Tire tycoon Harvey Firestone understood this well, and wrote in 1926: It does not pay to try to get the business all at once. In the first place, you can’t get it, so a good deal of your money is thrown away. In the second place, if you did get it, the factory could not handle it. And in the third place, if you did get it, you could not hold it. A company that gets business too quickly acts just about as a boy does who gets money too quickly.

Nassim Taleb says he’s a libertarian at the federal level, a Republican at the state level, a Democrat at the local level, and a socialist at the family level. People handle risk and responsibility in totally different ways when a group scales from 4 people to 100 to 100,000 to 100 million.

Fish with slowed-down growth in their early years go on to live 30 percent longer than average. Those with artificial, supercharged growth early on die 15 percent earlier than average.

Growth is good, if only because runts eventually get eaten. But forced growth, accelerated growth, artificial growth—that tends to backfire.

Robert Greene writes: “The greatest impediment to creativity is your impatience, the almost inevitable desire to hurry up the process, express something, and make a splash.”

An important thing about this topic is that most great things in life—from love to careers to investing—gain their value from two things: patience and scarcity. Patience to let something grow, and scarcity to admire what it grows into. But what are two of the most common tactics when people pursue something great? Trying to make it faster and bigger. It’s always been a problem, and always will be. Same as ever.

Stress focuses your attention in ways that good times can’t.

A constant truth you see throughout history is that the biggest changes and the most important innovations don’t happen when everyone is happy and things are going well. They tend to occur during, and after, a terrible event. When people are a little panicked, shocked, worried, and when the consequences of not acting quickly are too painful to bear.

Stress, pain, discomfort, shock, and disgust—for all its tragic downsides, it’s also when the magic happens.

The army’s early interest in cars and planes wasn’t a fluke of lucky foresight. Go down the list of big innovations, and militaries show up repeatedly. Radar. Atomic energy. The internet. Microprocessors. Jets. Rockets. Antibiotics. Interstate highways. Helicopters. GPS. Digital photography. Microwave ovens. Synthetic rubber.

Are militaries home to the greatest technical visionaries? The most talented engineers? Perhaps. But more importantly, they’re home to Really Big Problems That Need to Be Solved Right Now. Innovation is driven by incentives, which come in many forms. On one hand there’s “If I don’t figure this out I might get fired.” That will get your brain in gear. Then there’s “If I figure this out I might help people and make a lot of money.” That will produce creative sparks. Then there’s what militaries have dealt with: “If we don’t figure this out right now we’re all going to die and Adolf Hitler might take over the world.” That will fuel the most incredible problem-solving and innovation in the shortest period of time that the world has ever seen.

The same people with the same intelligence have wildly different potential under different circumstances. And the circumstances that tend to produce the biggest innovations are those that cause people to be worried, scared, and eager to move quickly because their future depends on it.

Stress focuses your attention in ways good times can’t. It kills procrastination and indecision, taking what you need to get done and shoving it so close to your face that you have no choice but to pursue it, right now and to the best of your ability.

Big, fast changes happen only when they’re forced by necessity.

There’s an obvious limit to stress-induced innovation. There’s a delicate balance between helpful stress and crippling disaster. The latter prevents innovation as resources are sapped and people turn their attention from getting out of a crisis to merely surviving it. And perhaps just as important is what happens when we have the opposite. When everything is great—when wealth is flush, when the outlook is bright, when responsibility is low, and threats appear gone—you get some of the worst, dumbest, least-productive human behavior. President Richard Nixon once observed: The unhappiest people of the world are those in the international watering places like the South Coast of France, and Newport, and Palm Springs, and Palm Beach. Going to parties every night. Playing golf every afternoon. Drinking too much. Talking too much. Thinking too little. Retired. No purpose. So while there are those that would totally disagree with this and say “Gee, if I could just be a millionaire! That would be the most wonderful thing.” If I could just not have to work every day, if I could just be out fishing or hunting or playing golf or traveling, that would be the most wonderful life in the world—they don’t know life. Because what makes life mean something is purpose. A goal. The battle, the struggle—even if you don’t win it.

Entrepreneur Andrew Wilkinson echoed the same when he said, “Most successful people are just a walking anxiety disorder harnessed for productivity.”

The fear, the pain, the struggle are motivators that positive feelings can never match. That’s a big takeaway from history, and it leads to a realization that will always be true: Be careful what you wish for.

A carefree and stress-free life sounds wonderful only until you recognize the motivation and progress it prevents. No one cheers for hardship—nor should they—but we should recognize that it’s the most potent fuel of problem-solving, serving as both the root of what we enjoy today and the seed of opportunity for what we’ll enjoy tomorrow.

Good news comes from compounding, which always takes time, but bad news comes from a loss in confidence or a catastrophic error that can occur in a blink of an eye.

An important fact that explains a lot of things is that good news takes time but bad news tends to occur instantly. Warren Buffett says it takes twenty years to build a reputation and five minutes to destroy one. A lot of things work just like that.

We do it all the time. The most important things come from compounding. But compounding takes awhile, so it’s easy to ignore.

Americans over age fifty have seen real GDP per person at least double since they were born. But people don’t remember the world when they were born. They remember the last few months, when progress is always invisible.

But bad news? It’s not shy or subtle. It comes instantly, so fast that it overwhelms your attention and you can’t look away. Pearl Harbor and September 11 are probably the two biggest news events of the last hundred years. Both took about an hour to play out, start to finish. It took less than thirty days for most people to go from never having heard of COVID-19 to it upending their life.

Things that thrived for decades can be ruined in minutes. There is no equivalent in the other direction. There’s a good reason why. Growth always fights against competition that slows its rise. New ideas fight for attention, business models fight incumbents, skyscrapers fight gravity. There’s always a headwind. But everyone gets out of the way of decline. Some might try to step in and slow the fall, but it doesn’t attract masses of outsiders who rush in to push back in the other direction the way progress does.

Making a human: incomprehensibly complex. The death of a human: really simple. On a similar note, author Yuval Noah Harari writes: “To enjoy peace, we need almost everyone to make good choices. By contrast, a poor choice by just one side can lead to war.”

The irony is that growth and progress are way more powerful than setbacks. But setbacks will always get more attention because of how fast they occur. So slow progress amid a drumbeat of bad news is the normal state of affairs. It’s not an easy thing to get used to, but it’ll always be with us.

A lot of progress and good news concerns things that didn’t happen, whereas virtually all bad news is about what did occur.

It is so easy to discount how much progress is achievable.

When little things compound into extraordinary things.

A 2010 Yale study showed that one of the leading causes of the increase in obesity is not necessarily people eating larger meals; it’s eating more small snacks throughout the day. It’s a good example of how lots of things work. Most catastrophes come from a series of tiny risks—each of which is easy to ignore—that multiply and compound into something huge. The opposite is true: Most amazing things happen when something tiny and insignificant compounds into something extraordinary.

Small risks weren’t the alternative to big risks; they were the trigger.

Big risks are easy to overlook because they’re just a chain reaction of small events, each of which is easy to shrug off. So people always underestimate the odds of big risks. We’ve seen it happen time after time.

A new virus transferred to humans (something that has happened forever), and those humans interacted with other people (of course). It was a mystery for a while (understandable), and then bad news was likely suppressed (bad, but common). Other countries thought it would be contained (standard denial) and didn’t act fast enough (bureaucracy). We weren’t prepared (overoptimism) and could respond only with blunt-force lockdowns (panic, do what you gotta do). None of those on their own are surprising. But combined they turned into a disaster.

It’s good to always assume the world will break about once per decade, because historically it has. The breakages feel like low-probability events, so it’s common to think they won’t keep happening. But they do, again and again, because they’re actually just smaller high-probability events compounding off one another. That isn’t intuitive, so we’ll discount big risks like we always have. And of course, the same thing happens in the other direction. —

The time, not the little changes, is what moves the needle. Take minuscule changes and compound them by 3.8 billion years and you get results that are indistinguishable from magic.

That’s the real lesson from evolution: If you have a big number in the exponent slot, you do not need extraordinary change to deliver extraordinary results. It’s not intuitive, but it’s so powerful.

If you understand the math behind compounding you realize the most important question is not “How can I earn the highest returns?” It’s “What are the best returns I can sustain for the longest period of time?” Little changes compounded for a long time create extraordinary changes. Same as ever.

Progress requires optimism and pessimism to coexist.

The best financial plan is to save like a pessimist and invest like an optimist. That idea—the belief that things will get better mixed with the reality that the path between now and then will be a continuous chain of setback, disappointment, surprise, and shock—shows up all over history, in all areas of life.

There is a balance, he said, between needing unwavering faith that things will get better while accepting the reality of brutal facts, whatever they may be. Things will eventually get better. But we’re not going home by Christmas. That’s the balance—planning like a pessimist and dreaming like an optimist. That mix is counterintuitive, but it’s so powerful when done right. Remaining optimistic while accepting the reality of despair is fascinating to witness.

Psychologists Lauren Alloy and Lyn Yvonne Abramson have a theory I love called depressive realism. It’s the idea that depressed people have a more accurate view of the world because they’re more realistic about how risky and fragile life is.

What Gates seems to get is that you can only be an optimist in the long run if you’re pessimistic enough to survive the short run.

In the middle is the sweet spot, what I call the rational optimists: those who acknowledge that history is a constant chain of problems and disappointments and setbacks, but who remain optimistic because they know setbacks don’t prevent eventual progress. They sound like hypocrites and flip-floppers, but often they’re just looking further ahead than other people.

The trick in any field—from finance to careers to relationships—is being able to survive the short-run problems so you can stick around long enough to enjoy the long-term growth. Save like a pessimist and invest like an optimist. Plan like a pessimist and dream like an optimist.

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The business that takes huge risks with new products, like an optimist, but is terrified of short-term debt and always wants a big chunk of safety-net cash, like a pessimist.

Same in investing. I wrote in my book The Psychology of Money: “More than I want big returns, I want to be financially unbreakable. And if I’m unbreakable I actually think I’ll get the biggest returns, because I’ll be able to stick around long enough for compounding to work wonders.”

There is a huge advantage to being a little imperfect.

Evolution has spent 3.8 billion years testing and proving the idea that some inefficiency is good. We know it’s right. So maybe we should pay more attention to it.

Many people strive for efficient lives, where no hour is wasted. But an overlooked skill that doesn’t get enough attention is the idea that wasting time can be a great thing.

The irony is that people can get some of their most important work done outside of work, when they’re free to think and ponder. The struggle is that we take time off maybe once a year, without realizing that time to think is a key element of many jobs, and one that a traditional work schedule doesn’t accommodate very well.

The New York Times once wrote of former Secretary of State George Shultz: His hour of solitude was the only way he could find time to think about the strategic aspects of his job. Otherwise, he would be constantly pulled into moment-to-moment tactical issues, never able to focus on larger questions of the national interest. Albert Einstein put it this way: I take time to go for long walks on the beach so that I can listen to what is going on inside my head. If my work isn’t going well, I lie down in the middle of a workday and gaze at the ceiling while I listen and visualize what goes on in my imagination. Mozart felt the same way: When I am traveling in a carriage or walking after a good meal or during the night when I cannot sleep—it is on such occasions that my ideas flow best and most abundantly.

The traditional eight-hour work schedule is great if your job is repetitive or physically constraining. But for the large and growing number of “thought jobs,” it might not be. You might be better off taking two hours in the morning to stay at home thinking about some big problem. Or go for a long midday walk to ponder why something isn’t working. Or leave at 3:00 p.m. and spend the rest of the day envisioning a new strategy.

The most efficient calendar in the world—one where every minute is packed with productivity—comes at the expense of curious wandering and uninterrupted thinking, which eventually become the biggest contributors to success.

Same in investing. Cash is an inefficient drag during bull markets and as valuable as oxygen during bear markets. Leverage is the most efficient way to maximize your balance sheet and the easiest way to lose everything. Concentration is the best way to maximize returns, but diversification is the best way to increase the odds of owning a company capable of delivering returns. On and on.

If you’re honest with yourself, you’ll see that a little inefficiency is the ideal spot to be in.

Investing in your long-term future is of course great, because the odds that the economy will become more productive and more valuable are pretty good. But trying to predict the exact path we’ll take to get there can be such a waste of resources. I describe my forecasting model as “good enough.” I’m confident people will solve problems and become more productive over time. I’m confident markets will allocate the rewards of that productivity to investors over time. I’m confident in other people’s overconfidence, so I know there will be mistakes and accidents and booms and busts along the way. It’s not detailed, but it’s good enough.

The more precise you try to be, the less time you have to focus on big-picture rules that are probably more important. It’s less about admitting that we can’t forecast, and more about acknowledging that if your forecast is merely good enough, you can invest your time and resources more efficiently elsewhere. Just like evolution, the key is realizing that the more perfect you try to become, the more vulnerable you generally are.

It’s Supposed to Be Hard Everything worth pursuing comes with a little pain. The trick is not minding that it hurts.

There’s a scene in the movie Lawrence of Arabia in which Lawrence puts out a match with his fingers and doesn’t flinch. Another man watching tries to do the same and yells in pain. “It hurts! What’s the trick, then?” he asks. “The trick is not minding that it hurts,” Lawrence says. This is one of the most useful life skills—enduring the pain when necessary rather than assuming there’s a hack, or a shortcut, around it.

He was nice. But he never mentioned the most effective social media trick: write good stuff that people want to read. That’s because writing good stuff isn’t a hack. It’s hard. It takes time and creativity. It can’t be manufactured. It works, with a near 100 percent success rate. But it is the social media equivalent of a heavy workout.

Hacks are appealing because they look like paths to prizes without the effort. But in the real world, those rarely exist.

Charlie Munger once noted: “The safest way to try to get what you want is to try to deserve what you want. It’s such a simple idea. It’s the golden rule. You want to deliver to the world what you would buy if you were on the other end.”

Seinfeld asked if McKinsey is funny. No, the magazine said. “Then I don’t need them,” he said. “If you’re efficient, you’re doing it the wrong way. The right way is the hard way. The show was successful because I micromanaged it—every word, every line, every take, every edit, every casting.” If you’re efficient, you’re doing it the wrong way. That is so counterintuitive. But I think it perfectly highlights the danger of shortcuts. Part of this is simply understanding the costs of success. Jeff Bezos once talked about the realities of loving your job: If you can get your work life to where you enjoy half of it, that is amazing. Very few people ever achieve that. Because the truth is, everything comes with overhead. That’s reality. Everything comes with pieces that you don’t like. You can be a Supreme Court justice and there’s still going to be pieces of your job you don’t like. You can be a university professor and you still have to go to committee meetings. Every job comes with pieces you don’t like. And we need to say: That’s part of it.

A simple rule that’s obvious but easy to ignore is that nothing worth pursuing is free. How could it be otherwise? Everything has a price, and the price is usually proportionate to the potential rewards. But there’s rarely a price tag. And you don’t pay the price with cash. Most things worth pursuing charge their fee in the form of stress, uncertainty, dealing with quirky people, bureaucracy, other peoples’ conflicting incentives, hassle, nonsense, long hours, and constant doubt. That’s the overhead cost of getting ahead. A lot of times that price is worth paying. But you have to realize that it’s a price that must be paid. There are few coupons, and sales are rare.

A unique skill, an underrated skill, is identifying the optimal amount of hassle and nonsense you should put up with to get ahead while getting along.

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Franklin Roosevelt—the most powerful man in the world, whose paralysis meant his aides often had to carry him to the bathroom—once said, “If you can’t use your legs and they bring you milk when you wanted orange juice, you learn to say ‘that’s all right,’ and drink it.”

“Where there’s pain there’s profit,” he often reminds people. There’s an optimal level of hassle to accept, even embrace.

A good rule of thumb for a lot of things is to identify the price and be willing to pay it. The price, for so many things, is putting up with an optimal amount of hassle.

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Most competitive advantages eventually die.

“The tendency for evolution to create larger species is counterbalanced by the tendency of extinction to kill off larger species.” Body size in biology is like leverage in investing: It accentuates the gains but amplifies the losses. It works well for a while and then backfires spectacularly at the point where the benefits are nice but the losses are lethal.

What’s incredible about this is that evolution encourages you to get bigger, then punishes you for being big. It’s a telling sign of what happens in so many areas of life: Competitive advantages don’t stick around for long.

The only thing harder than gaining a competitive edge is not losing an advantage when you have one.

The career version of this is the Peter Principle: talented workers will keep getting promoted until they’re in over their head, when they fail.

A third is the irony that people often work hard to gain a competitive advantage for the intended purpose of not having to work so hard at some point in the future. Hard work is in pursuit of a goal, and once that goal is met the relaxation that feels so justified removes paranoia. This allows competitors and a changing world to creep in unnoticed.

But competitive advantages tend to be short-lived, often because their success plants the seeds of their own decline.

No one’s ever safe. No one can ever rest.

“Keep running” just to stay in place is how evolution works. And isn’t this how most things in modern life work? Business? Products? Careers? Countries? Relationships? Yes to all of them. Evolution is ruthless and unforgiving—it doesn’t teach by showing you what works but by destroying what doesn’t.

Another takeaway is to keep running. No competitive advantage is so powerful that it can let you rest on your laurels—and in fact the ones that appear to do so tend to seed their own demise.

It always feels like we’re falling behind, and it’s easy to discount the potential of new technology.

There’s a typical path of how people respond to what eventually becomes a world-changing new technology: • I’ve never heard of it. • I’ve heard of it but don’t understand it. • I understand it, but I don’t see how it’s useful. • I see how it could be fun for rich people, but not me. • I use it, but it’s just a toy. • It’s becoming more useful for me. • I use it all the time. • I could not imagine life without it. • Seriously, people lived without it? • It’s too powerful and needs to be regulated.

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A common view through history is that past innovation was magnificent, but future innovation must be limited because we’ve picked all the low-hanging fruit.

That was why Edison was so optimistic about innovation. He explained: You can never tell what apparently small discovery will lead to. Somebody discovers something and immediately a host of experimenters and inventors are playing all the variations upon it. He gave some examples: Take Faraday’s experiments with copper disks. Looked like a scientific plaything, didn’t it? Well, it eventually gave us the trolley car. Or take Crookes’ tubes; looked like an academic discovery, but we got the X-ray from it. A whole host of experimenters are at work today; what great things their discoveries will lead to, no one can foretell. “You’re asking if the age of invention is over?” Edison asked. “Why, we don’t know anything yet.” This, of course, is exactly what happened.

Facebook similarly began as a way for college students to share pictures of their drunk weekends, and within a decade it was the most powerful lever in global politics. Again, it’s just impossible to connect those dots with foresight.

And that’s why all innovation is hard to predict and easy to underestimate. The path from A to Z can be so complex and end up at such a strange point that it’s nearly impossible to look at today’s tools and extrapolate what they might become. Someone somewhere right now is inventing or discovering something that will utterly change the future. But you’re probably not going to know about it for years. That’s always how it works.

Dee Hock says, “A book is far more than what the author wrote; it is everything you can imagine and read into it as well.” It’s similar with new technology. The value of every new technology is not just what it can do; it’s what someone else with a totally different skill set and point of view can eventually manipulate it into.

Another takeaway is that it’s so easy to underestimate how two small things can compound into an enormous thing. Take the way Mother Nature works: A little cool air from the north is no big deal. A little warm breeze from the south is pleasant. But when they mix together over Missouri you get a tornado. That’s called emergent effects, and they can be wildly powerful. Same with new technology. One boring thing plus one boring thing can equal one world-changing thing in a way that’s hard to fathom if you don’t respect exponential growth. The same thing happens in careers, when someone with a few mediocre skills mixed together at the right time becomes multiple times more successful than someone who’s an expert in one thing.

Harder Than It Looks and Not as Fun as It Seems “The grass is always greener on the side that’s fertilized with bullshit.”

In 1963, Life magazine asked James Baldwin where he gets his inspiration. Baldwin responded: You think your pain and your heartbreak are unprecedented in the history of the world, but then you read. It was books that taught me that the things that tormented me most were the very things that connected me with all the people who were alive, or who ever had been alive. An artist is a sort of emotional historian.

There’s a saying—I don’t know whose—that an expert is always from out of town. It’s similar to the Bible verse that says no man is a prophet in his own country. That one has deeper meaning, but they both get across an important point: It’s easiest to convince people that you’re special if they don’t know you well enough to see all the ways you’re not.

Good advice that took me awhile to learn is that everything is sales. Everything is sales. This is usually framed as career advice—no matter what your role in a company is, your ultimate job is to help sales. But it applies to so many things. Everything is sales also means that everyone is trying to craft an image of who they are. The image helps them sell themselves to others. Some are more aggressive than others, but everyone plays the image game, even if only subconsciously. Since they’re crafting the image, it’s not a complete view. There’s a filter. Skills are advertised, flaws are hidden.

I grew up with a chronic stutter. People who have known me for years tend to say “I never knew you had a problem” when I tell them about it. It’s a well-meaning comment, but it actually highlights the issue. You didn’t know I stutter because I didn’t talk when I knew it would be difficult for me. You never know what struggles people are hiding. I’ve always wondered how many people I know are stutterers, but, like me, have kept it mostly hidden. And how many other issues are like that? Depression, anxiety, phobias … so many things can be disguised in a way that places a facade of normalcy over a person’s internal struggles.

Most things are harder than they look and not as fun as they seem.

Incentives: The Most Powerful Force in the World When the incentives are crazy, the behavior is crazy. People can be led to justify and defend nearly anything.

Jason Zweig of The Wall Street Journal says there are three ways to be a professional writer: 1. Lie to people who want to be lied to, and you’ll get rich. 2. Tell the truth to those who want the truth, and you’ll make a living. 3. Tell the truth to those who want to be lied to, and you’ll go broke. What a wonderful summary of the power of incentives, and an explanation for why people do some of the crazy things they do.

“Definitely there is always conscience. But poverty will not make you feel the pain.” Scamming people is easier to justify in your head when you’re starving.

Incentives are the most powerful force in the world and can get people to justify or defend almost anything.

When you understand how powerful incentives can be, you stop being surprised when the world lurches from one absurdity to the next. If asked, “How many people in the world are truly crazy?” I might say, I don’t know, 3 percent to 5 percent. But if I asked, “How many people in the world would be willing to do something crazy if their incentives were right?” I’d say, oh, easily 50 percent or more.

What makes incentives powerful is not just how they influence other people’s decisions but how blind we can be to how they impact our own.

Ben Franklin once wrote, “If you would persuade, appeal to interest and not to reason.” Incentives fuel stories that justify people’s actions and beliefs, offering comfort even when they’re doing things they know are wrong and believe things they know aren’t true.

James Clear put it this way: “People follow incentives, not advice.”

A doctor once told me the biggest thing they don’t teach in medical school is the difference between medicine and being a doctor—medicine is a biological science, while being a doctor is often a social skill of managing expectations, understanding the insurance system, communicating effectively, and so on.

When good and honest people can be incentivized into crazy behavior, it’s easy to underestimate the odds of the world going off the rails.

Unsustainable things can last longer than you anticipate. Incentives can keep crazy, unsustainable trends going longer than seems reasonable because there are social and financial reasons preventing people from accepting reality for as long as they can.

A good question to ask is, “Which of my current views would change if my incentives were different?” If you answer “none,” you are likely not only persuaded but blinded by your incentives.

Nothing is more persuasive than what you’ve experienced firsthand.

Now You Get It Nothing is more persuasive than what you’ve experienced firsthand.

Harry Truman once said: The next generation never learns anything from the previous one until it’s brought home with a hammer… . I’ve wondered why the next generation can’t profit from the generation before, but they never do until they get knocked in the head by experience.

It’s not until your life is upended, your hopes dashed, your dreams uncertain that people say, “What was that wild idea we heard before? Maybe we should give it a shot. Nothing else is working, might as well try.”

“If you find the right balance between desperation and fear, you can make people do anything.”

When someone helps you get out of an emergency situation and into a better life, then you’re going to give them your support. Do you think people would then say, “This is all such nonsense. I’m against that”? No. That doesn’t happen.

These are some of the most extreme examples that exist. But the idea that people who are under stress quickly embrace ideas and goals they never would otherwise has left its fingerprints all over history.

Your personal views fall into the same trap. In investing, saying “I will be greedy when others are fearful” is easier said than done, because people underestimate how much their views and goals can change when markets break.

The same idea holds true for companies, careers, and relationships. Hard times make people do and think things they’d never imagine when things are calm.

Chris Rock once joked about who actually teaches kids in school: “Teachers do one half, bullies do the other,” he said. “And learning how to deal with bullies is the half you’ll actually use as a grown-up.” It’s real experience with risk and uncertainty, which is something you cannot fathom until you’ve experienced it firsthand.

Jim Carrey once said, “I think everybody should get rich and famous and do everything they ever dreamed of so they can see that it’s not the answer.” Part of this is the same reason that predicting how you’ll respond to risk is difficult: It’s hard to imagine the full context until you experience it firsthand.

Future fortunes are imagined in a vacuum, but reality is always lived with the good and bad taken together, competing for attention. You might think you know how it’ll feel. Then you experience it firsthand and you realize, ah, okay. It’s more complicated than you thought. Now you get it.

Time Horizons Saying “I’m in it for the long run” is a bit like standing at the base of Mount Everest, pointing to the top, and saying, “That’s where I’m heading.” Well, that’s nice. Now comes the test.

Long term is harder than most people imagine, which is why it’s more lucrative than many people assume.

The long run is just a collection of short runs you have to put up with.

So rather than assuming long-term thinkers don’t have to deal with short-term nonsense, ask the question, “How can I endure a never-ending parade of nonsense?”

Baseball player Dan Quisenberry once said, “The future is much like the present, only longer.”

Your belief in the long run isn’t enough. Your partners, coworkers, spouses, and friends have to sign up for the ride.

A lot of it comes from the gap between what you believe and what you can convince other people of.

Eventually being right is one thing. But can you eventually be right and convince those around you? That’s completely different, and easy to overlook.

Patience is often stubbornness in disguise.

The world changes, which makes changing your mind not just helpful, but crucial. But changing your mind is hard because fooling yourself into believing a falsehood is so much easier than admitting a mistake.

Doing long-term thinking well requires identifying when you’re being patient versus just stubborn. Not an easy thing to do.

Long term is less about time horizon and more about flexibility.

A long time horizon with a firm end date can be as reliant on chance as a short time horizon. Far superior is flexibility. Time is compounding’s magic, and its importance can’t be minimized. But the odds of success fall deepest in your favor when you mix a long time horizon with a flexible end date—or an indefinite horizon.

Benjamin Graham said, “The purpose of the margin of safety is to render the forecast unnecessary.” The more flexibility you have, the less you need to know what happens next. And never forget John Maynard Keynes: “In the long run we’re all dead.”

There are two types of information: permanent and expiring. Permanent information is: “How do people behave when they encounter a risk they hadn’t fathomed?” Expiring information is: “How much profit did Microsoft earn in the second quarter of 2005?”

Permanent information is harder to notice because it’s buried in books rather than blasted in headlines. But its benefit is huge. It’s not just that permanent information never expires, letting you accumulate it. It also compounds over time, leveraging off what you’ve already learned. Expiring information tells you what happened; permanent information tells you why something happened and is likely to happen again. That “why” can translate and interact with stuff you know about other topics, which is where the compounding comes in.

Trying Too Hard There are no points awarded for difficulty.

Let’s discuss an enduring quirk of human behavior: the allure of complexity, intellectual stimulation, and discounting things that are simple but very effective, in preference to things that are complex but less effective.

Simplicity is the hallmark of truth—we should know better, but complexity continues to have a morbid attraction. When you give an academic audience a lecture that is crystal clear from alpha to omega, your audience feels cheated… . The sore truth is that complexity sells better.

John Reed wrote in his book Succeeding: When you first start to study a field, it seems like you have to memorize a zillion things. You don’t. What you need is to identify the core principles—generally three to twelve of them—that govern the field. The million things you thought you had to memorize are simply various combinations of the core principles.

This is so vital. In finance, spending less than you make, saving the difference, and being patient is perhaps 90 percent of what you need to know to do well.

In health it’s sleep eight hours, move a lot, eat real food, but not too much. But what’s popular? Supplements, hacks, and pills.

Stephen King explains in his book On Writing: This is a short book because most books about writing are filled with bullshit. I figured the shorter the book, the less bullshit.

Complexity gives a comforting impression of control, while simplicity is hard to distinguish from cluelessness.

Things you don’t understand create a mystique around people who do.

Length is often the only thing that can signal effort and thoughtfulness.

Simplicity feels like an easy walk. Complexity feels like a mental marathon.

He wrote: “The moral of this is not that ignorance is an advantage. But some of us are too much attracted by the thought of rare things and forget the law of averages in diagnosis.”

But a truth that applies to almost every field is that there are no points awarded for difficulty. It’s possible to try too hard, to be too attracted to complexity, and doing so can backfire spectacularly.

Wounds Heal, Scars Last What have you experienced that I haven’t that makes you believe what you do? And would I think about the world like you do if I experienced what you have?

An important component of human behavior is that people who’ve had different experiences than you will think differently than you do. They’ll have different goals, outlooks, wishes, and values. So most debates are not actual disagreements; they’re people with different experiences talking over each other.

The same is true for recessions—things heal. And markets—things recover. And businesses—past mistakes are forgotten. But scars last.

A study of twenty thousand people from thirteen countries who lived through World War II found they were 3 percent more likely to have diabetes as adults and 6 percent more likely to suffer depression. Compared to those who avoided the war, they were less likely to marry and less satisfied with their lives as older adults.

In 1952, Frederick Lewis Allen wrote about those who lived through the Great Depression: [They] were gnawed at by a constant lurking fear of worse things yet, and in all too many cases actually went hungry… . [They cast] a cynical eye upon the old Horatio Alger formula for success; to be dubious about taking chances for ambition’s sake; to look with a favorable eye upon a safe if unadventurous job, social insurance plans, pension plans. They had learned from bitter experience to crave security.

It is too easy to examine history and say, “Look, if you just held on and took a long-term view, things recovered and life went on,” without realizing that mindsets are harder to repair than buildings and cash flows. We can see and measure just about everything in the world except people’s moods, fears, hopes, grudges, goals, triggers, and expectations. That’s partly why history is such a continuous chain of baffling events, and always will be.

Less known is what happened to the poor dogs years later. A massive flood in 1924 swept through Leningrad, where Pavlov kept his lab and kennel. Flood water came right up to the dogs’ cages. Several were killed. The surviving dogs were forced to swim a quarter mile to safety. Pavlov later called it the most traumatic thing the dogs had ever experienced, by far. Something fascinating then happened: The dogs seemingly forgot their learned behavior of drooling when the bell rang. Pavlov wrote about one dog eleven days after the floodwaters receded: After the application of the [bell] all the remaining conditioned reflexes almost completely disappeared, the animal again declined the food, became very restless and continuously stared at the door.

Different conditions productive of extreme excitation often lead to profound and prolonged loss of balance in nervous and psychic activity … neuroses and psychoses may develop as a result of extreme danger to oneself or to near friends, or even the spectacle of some frightful event not affecting one directly.

But hard-core stress leaves a scar. Experiencing something that makes you stare ruin in the face and question whether you’ll survive can permanently reset your expectations and change behaviors that were previously ingrained. “A mind that is stretched by new experience can never go back to its old dimensions,” said Oliver Wendell Holmes.

Historian Michael Howard has said that war and welfare go hand in hand. Perhaps that’s because even the most financially prepared, the most risk averse, and those with the most foresight can be completely crushed by war. Europeans did not get to choose whether they wanted to be caught up in World War II—it became the most pressing issue of their lives whether they supported it or not, and it crushed their sense of control whether they prepared for it or not.

Two things tend to happen after you get hit with something big and unexpected: • You assume what just happened will keep happening, but with greater force and consequence. • You forecast with great conviction, despite the original event being improbable and something few, if anyone, predicted. The more impactful the surprise, the more this is true. And, importantly, the more those who didn’t experience that big event will struggle to understand your point of view.

But usually a better question is, “What have you experienced that I haven’t that makes you believe what you do? And would I think about the world like you do if I experienced what you have?”

  • Importante

It’s uncomfortable to think that what you haven’t experienced might change what you believe, because it’s admitting your own ignorance. It’s much easier to assume that those who disagree with you aren’t thinking as hard as you are. So people will disagree, even as access to information explodes. They may disagree more than ever because, as Benedict Evans says, “The more the Internet exposes people to new points of view, the angrier people get that different views exist.” Disagreement has less to do with what people know and more to do with what they’ve experienced. And since experiences will always be different, disagreement will be constant. Same as it’s ever been. Same as it will always be. Same as it ever was.

The typical attempt to clear up an uncertain future is to gaze further and squint harder—to forecast with more precision, more data, and more intelligence. Far more effective is to do the opposite: Look backward, and be broad. Rather than attempting to figure out little ways the future might change, study the big things the past has never avoided.

When you focus on what never changes, you stop trying to predict uncertain events and spend more time understanding timeless behavior.

Who has the right answers but I ignore because they’re not articulate? Which of my current views would I disagree with if I were born in a different country or generation? What do I desperately want to be true so much that I think it’s true when it’s clearly not? What is a problem that I think applies only to other countries/industries/careers that will eventually hit me? What do I think is true but is actually just good marketing? What haven’t I experienced firsthand that leaves me naive about how something works? What looks unsustainable but is actually a new trend we haven’t accepted yet? Who do I think is smart but is actually full of it? Am I prepared to handle risks I can’t even envision? Which of my current views would change if my incentives were different? What are we ignoring today that will seem shockingly obvious in the future? What events very nearly happened that would have fundamentally changed the world I know if they had occurred? How much have things outside my control contributed to things I take credit for? How do I know if I’m being patient (a skill) or stubborn (a flaw)? Who do I look up to that is secretly miserable? What hassle am I trying to eliminate that’s actually an unavoidable cost of success? What crazy genius that I aspire to emulate is actually just crazy? What strong belief do I hold that’s most likely to change? What’s always been true? What’s the same as ever?

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