William Thorndike

Supported by Greenhaven Road Capital, finding value off the beaten path.

William Thorndike joined Patrick O’Shaughnessy on the Invest Like the Best podcast to talk about his book and his investments. Thorndike’s book The Outsiders is great and we’ve covered it before – The Outsiders. In that post we introduced the decentralized command stool.

The recent post on Intelligent Fanatics, and accompanying book is another source of these ideas. In that book, Sean Iddings writes that people and the culture they sew, may be one of the best competitive advantages a company can create.

Thorndike’s interview with O’Shaugnessy touched on the book but not excessively. Instead we’ll look at Thorndike’s experiences and advice for decision making. Ready?

1/ Lightbulb. “I read it (The Money Masters by John Train ) and immediately realized this was something I wanted to learn more about and eventually do.” This book started a “process” and Thorndike sent away for the Berkshire Hathaway annual letters.

“Lightbulb moments” doesn’t mean flip of the switch results. It’s more akin to “overnight success.” Naval Ravikant, Haralabob Voulgaris and Jim O’Shaughnessy all had these moments that inspired some digging. They were moments that turned them quizzical. It was a feeling of, ‘that’s interesting’ rather than AHA!

2/ Pattern seeing. Thorndike’s book came out of his pattern recognition skills. He researched companies and started to see that great companies had great capital allocators in charge of them.

Building pattern recognition takes time. Judith Elsea said, “How do you evaluate founding teams? You do that by a process of triangulation, some pattern recognition skills that have been developed over multiple observations. You spend a lot of time talking to the partners.”

Patterns are good first filters to find ideas that trip our ‘that’s interesting switch.’ At her VC firm, Elsea has a model that does this. Others like Ian Cassel told Patrick in his episode that he builds his from “qualitative and quantitative nuggets.”

But remember that constellations are patterns too. We see stars and connect them with imaginary lines based to create things our culture values.

3/ Productivity. Beyond allocating capital, the outsider CEOs were productive too. This tended to manifest in two ways. They hired strong COOs and they had limited investor relations.

The best managers hire people who do some job better than them. If you can’t do this, says Jocko Willink, maybe you better check your ego. Jim O’Shaughnessy agrees.

Once The Outsiders got great people in those jobs, they limited who was at the table. Wesley Grey told Barry Ritholtz:

“We know multiple multi-billion dollar hedge fund managers with heavy value focus that are literally out of business because the back half of 2015, because deep value got destroyed and redemptions overwhelmed their ability to convince capital to stay.”

In his book about Charlie Munger, Tren Griffin wrote: “Graham value investor Marty Whitman has even said he does not what people in his fund who do not understand Graham value investing system because he must sell shares when they redeem their ownership interest.”

To put it another way, limit the people who can force a decision.

4/ Writing as thinking. “It’s interesting to write when you are trying to figure something out. It’s fun to try to solve an interesting problem and write about it.”

On the podcast, I talked about how checklists relate to this. If you write down your mistakes and successes, you can create a checklist for avoiding the bad and pursuing the good. Or, you can use what others have learned.

Charley Ellis told Ted Seides what the checklist looks like to be like David Swensen at Yale:

  • “A chief investment officer who is brilliant.”
  • Someone who is “exceedingly modest.”
  • Rationality. As Peter Lynch said, “You can’t treat it like your grandchildren. If the fundamentals slip you have to say goodbye to it. Remember, the stock does not know you own it.”
  • Experience. “He’s been doing it for more than thirty years.” This has led to a terrific network. “If I could ever do something that David found useful I would do it immediately.”
  • Governance structure. (see #3 above) Ellis said the Yale committee could “play well with others” and were prepared for the meetings. “All of us on the committee scared ourselves into being fully prepared.”

Following a checklist won’t create success. “Take all the different comparative advantages,” said Ellis, “and it’s virtually impossible to replicate.” But, like Thorndike says, writing is a way to solve your problems.

5/ From structured checklists to adaptive questions. One theme of late has been the idea that good decision makers use a rigid structure to filter ideas and from a smaller set of options become more flexible in their inquiry.

Thorndike appears to do this. His initial filter is companies with recurring revenues and growing markets in non-capital intensive industries.

Royce Yudkoff gave similar advice for ‘search funds,’ noting that you won’t get everything you want but filters help you narrow things down.

Whether it’s a formula, ‘black box’, algorithm, filter, philosophy, or checklist, good decision makers start with structure and finish with finesse.

Thanks for reading,
Mike

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Griffin/ Munger 2

Supported by Greenhaven Road Capital, finding value off the beaten path.

We’ve already covered Tren Griffin’s book: Charlie Munger; The Complete Investor. That post was in the ‘dozen things’ format that Griffin uses at his site 25iq.com. To recap:

  1. Be inspired but don’t try to imitate Munger (or anyone).
  2. Work hard on simple things. Getting these right is hard enough.
  3. Writing (checklists) is a form of thinking.
  4. Focus on facts, not projections.
  5. Think about things as systems.
  6. Anthropomorphize to reframe something.
  7. Don’t overmeasure.
  8. Turn problems into games.
  9. Know the fool at the poker table.
  10. Be okay with the wrong side of maybe.
  11. Always be learning.
  12. Passion comes from ability + interest.

The first reading of a book is like a connect the dots exercise. The second reading of a book is more like coloring with a box of crayons. There are still things beyond my scope but the experience was more vivid. Central to this second reading was thinking about checklists.

How to create checklists like Charlie Munger

Good decision making starts with filters. Munger and Warren Buffett will look at situations that are “too hard” and stop there. Buffett and Munger also prefer not to invest in technology products. If a business has a moat, it moves on like a talent show contestant.

In his class at Harvard, Royce Yudkoff teaches students to look for businesses with recurring customers. Whether wizened or weaned, good decision makers start with a firm filter to eliminate options.

Of course, filters won’t be perfect. Sometimes a checklist will filter too much and you’ll pass on a wonderful opportunity. That’s fine. Ben Carlson tells his clients that investing is a game of “regret minimization.” Someone will be more successful than you, good for them.

Othertimes checklists will not filter out enough. That’s okay too, to a point. Good decision makers aim to get in the best probabilistic situations but understand what Phillip Tetlock calls the wrong side of maybe.

Despite these two drawbacks – mistakes of omission and commission – filters remain helpful because they create detachment. This is a key leadership trait says Jocko Willink. Detaching from your position means a decision maker can be more empathetic, an important part of negotiations and coaching.

In addition to understanding the other side, checklists separate decision makers from what Munger calls “the psychology of human misjudgment.” Griffin writes, “A financial planner provides the greatest value for clients by helping investors keep their emotional and psychological dysfunctions under control.” This is something Tadas Viskanta talked about with James Osborne.

When Munger builds a checklist he uses data from things that actually happen rather than things that could happen. He’s said, “projections are put together by people who have an interest in a particular outcome.” Michael Lombardi put it in football terms when he cautioned against the one-year-wonder.

Munger harvests data from internal and external sources. See’s Candy is the oft-cited example of when Buffett and Munger learned from a success. It was this investment that validated the idea to buy high-quality businesses.

Externally Munger reads – a lot. “Nothing has served me better in my long life than continuous learning.” In addition to reading is time for thinking. “People calculate too much and think too little.”

A checklist, like any tool, requires a capacity for operations. Griffin points out that Munger has patience, is comfortable as a contrarian, and enjoys the process.

 

Thanks for reading,
Mike

Intelligent Fanatics

Supported by Greenhaven Road Capital, finding value off the beaten path.

 This was a fun, quick book. Sean Iddings and Ian Cassel tell the stories of eight intelligent fanatics who created amazing businesses – for everyone involved. This book makes the case that founder/owners, shareholders, and employees can all win together. The most striking example of this was in the story of F. Kenneth Iverson of Nucor Steel whose situation was so extreme because of the contrast to the industrial robber barons that came before him.

The end of the book nicely summarizes the lessons learned and I’ll instead focus on three internal attitudes of the intelligent fanatics and three external structures they put in place. This book is similar to William Thorndike’s The Outsiders.

In a podcast interview, Sean Iddings described an intelligent fanatic as people who  “do things ordinary mortals can’t…Intelligent fanatics see things others can’t see.”

Attitudes

Intelligent Fanatics (IFs) are first and foremost iconoclasts, “and this is the most basic characteristics.” Being excellent requires being different. IFs succeed because they see things in a different way and they aren’t afraid of blazing their own trail.

As we’ve seen with Ken Grossman and Jim Koch, brewers embody this attitude. We also saw in the AirBnUber post that each of those companies was founded with an irreverence for the status quo. Silicon Valley may be prototypical with their attitude to ‘move fast and break things.’

That doesn’t mean go wild though. IFs approach situations with a curious mindset. They’re humble and hungry. It’s a feeling of; I don’t know how to do this – – yet. When Danny Meyer opened his first restaurant in New York City he demonstrated this. Meyer was treading water as he figured out the details. He knew what good food should be from his time in Europe, but not how to cook it at scale. He knew where restaurants should be, but not ones in his price range. He knew what kind of service he wanted but not how to habitually hire the right people. Meyer’s most important skill was his willingness to figure things out.

Brian Grazer wrote about living a curious life:

“The quality of many ordinary experiences often pivots on curiosity. If you’re shopping for a new TV, the kind you ultimately take home and how well you like it is very much dependent on a salesperson who is curious: curious enough about the TVs to know them well; curious enough about your own needs and watching habits to figure out which TV you need. That’s a perfect example, in fact, of curiosity being camouflaged.”

The final attitude that IFs have is a certain naivete. Most of the IFs in the book had zero experience in the field they eventually came to dominate. This meant they arrived without having learned the wrong lessons about how to run a business. That was the case too for Grossman and Koch, as they became professional brewers after their first career.

People like Nassim Taleb and Daryl Morey warn against a business only mindset. The job of consultants, Morey said, was to feign total certainty about uncertain things. Rather, IFs get their hands dirty running their business and figure out the important structures as they go.

Structures

The strength of one man – and they’re all men in this book – will only expand if there are others around who can help carry the load. It’s the job of that person though to get everyone rowing in the same direction. Iddings writes:

“What the intelligent fanatic model proposes is that the only truly sustainable cometitive advantage is a company’s human capital.”

There were multiple ways to do this, but let’s look at only three;

Each of the IFs created a culture of experimentation. John Paterson of National Cash register wrote that it was hard to predict what the next thing is and so you need an adaptive mindset.

Brent Beshore said that there is no big secret to a successful business. Success only comes from figuring out (via experimentation) what works and doing more of that.  Ken Fisher said  “I’ve been prepared to operate by trial and error, you can do a huge amount of small things on a small scale, test them and see if they work, and if they work, do them on a bigger scale and if they don’t work move on to the next one.” Jeff Bezos likes to hire versatile people because conditions change. Andy Grove said that people should prepare like fireman; train for many possible outcomes.

IFs also created a culture of frugality.  Failing to do this can be fatal. Thorndike wrote, “There’s an apparent inverse correlation between the construction of elaborate new headquarter buildings and investor returns.” The Instagram founders got their first round of funding and thanks to a low overhead thought they could last for years while they worked on their product.

The final structure from IFs was a decentralized staff. They put the decision maker face to face with the customer. Sometimes this meant IFs would leave the corporate office – if they worked there at all – and hit to road to talk to customers. Other times this meant empowering the front lines staff to make decisions.

A decentralized command structure works because no one knows the situation like the person in the situation. This has worked for expanding SoulCycle, finding Saddam Hussein, and coaching professional sports.

 

Thanks for reading,
Mike

If this sounds interesting,  get my book suggestsions.

Haralabos Voulgaris

Supported by Greenhaven Road Capital, finding value off the beaten path.

Haralabos Voulgaris (‘Haralabob’) joined Bill Simmons for a Round 1 Playoffs basketball podcast. What stood out was Haralabob’s detachment. I recently finished a re-read of Charlie Munger; The Complete Investor and one big takeaway from that book was how rational Munger is. Good decision makers are rational decision makers and it’s a trait Haralabob has in spades. Without further gambling cliches, let’s get into the notes.

 

1/ Availability heuristic. Heuristics have long been awesome parts of being homo sapiens but they sometimes misfire.

Heuristics can be positive (I’ve heard that book mentioned a lot, I’ll check it out), neutral, (I didn’t realize that many people had this kind of car), or negative ( I think XYC is a good investment because I’ve heard a lot about them). Good decision making means figuring out how ‘true’ information that easily comes to mind is.

In their podcast, Haralabob tells Simmons that he voted for Kawhi Lenord for MVP in part,  “I think people discount his defense. I think people discount how efficient he is on offense. He’s the only player that has to defend the other team’s best option.”

He’s saying that Leonard does things that are important but are hard to see. That is, these things aren’t available.

2/ Situations matter. “I think Paul George has a lot more upside (over Jimmy Butler) if he’s in the right situation.” Haralabob and Simmons compare these players because they were both playing and potentially traded. Haralabob points out something that Simmons has mentioned many times over that situations matter. For example, how would Tom Brady have turned out without Bill Belichick?

We saw in the AirbnUber Strategy post the importance of a situation. Neither company was first to market but both ended up winning (for the moment) because of a number of factors.

Another example is the Marshmallow Test Context. Self-control and delayed gratification wrote Walter Mischel is domain dependent.  The rewards and temptations of one situation can cause an otherwise restrained person to be anything but.

3/ “Don’t be a model whore.”  This is an idea I’ve seen more lately and Haralabob explains it nicely.

“In our model one of the things we had was that if a rookie projected above Lebron (James) the model was messed up. Tyreke Evans’s rookie year was quite good and compared favorably to Lebron and I remember looking at that and thinking ‘there’s something wrong with that.’”

Models are crucial first steps of an evaluation. We see this with people who buy businesses like Trish and James Higgins, Brent Beshore, or Royce Yudkoff. All of them use models to filter but then they also roll their sleeves up. Haralabob said, “You can’t just be a model whore, you have to watch the games.”

Good decision makers use models as first filters but then don their deerstalker.

4/ Basement bloggers. One great thing about the internet are the ‘basement bloggers.’ Whatever niche you want to dive into, it’s probably out there. For Haralabob there’s “the super quiet part of the internet, the people who go to Sloan every year and write a blog who are doing stuff that is super advanced,” who are really interesting.

The opportunity to learn has never been greater.

5/ Corner threes? That’s interesting.

“I remember reading Phil Jackson saying something like, ‘we don’t take those corner threes because they lead to fast breaks,’ and I was like – oh, that might make sense. So I watched every corner three that was taken in the NBA and charted whether it led to a fast break or didn’t it. Actually, it was the case that corner threes led to less fast breaks than other shots from the three point line.”

thatsinterestin

Danny Moses told Patrick O’Shaughnessy that a “healthy skepticism” is helpful. That’s what Haralabob had. When something doesn’t jive with our view of the world it’s a good opportunity to go digging. Patrick Collison said that this is how Stripe started. He saw that app store payments were easy but internet payments were not.

 

Thanks for reading,
Mike

 

Finances and Fitness

Supported by Greenhaven Road Capital, finding value off the beaten path.

The reverse chronological podcast feed is fertile ground for serendipity. Hearing interviews with Ben Carlson on Planet Microcap and Ryan Flaherty on The Tim Ferriss Podcast consecutively helped coalesce ideas about better decision making.

1/ KISS (keep it simple, stupid). “People assume they have to make it complex to succeed,” said Carlson, “to change strategies with every macro environment.” Rather the best financial plan is a simple one that you’ll stick with.

Flaherty said that when elite athletes come to him there are only a few key exercises that they need to focus on. Among them in the hex squat. The performance of this activity is the best predictor for the speed of an athlete.

One mental misstep is to assume complicated solutions are better. This isn’t always the case.

The first dog I owned, a labradoodle, was having running issues. She could run alongside me just fine but would limp around the next day. The vet suggested surgery in his office or laser surgery in Columbus Ohio. The three thousand dollar surgery seemed like a complicated solution, so instead of running we spent the summer swimming and the problem went away thanks to simple rehabilitation.

2/ Learn the basics. “For people trying to understand how the market works, for how business works, you can do a lot worse than dabbling in stock picking when you’re first starting out,” said Carlson. The goal isn’t to jump in and start accumulating ten baggers, but see how the game is played. Good decision makers build up a deep understanding.

Good decision makers/investors don’t start buying Apple puts. That’s like the couch potato joining a CrossFit gym to bang out overhead squats. Flaherty says he’s amazed at the number of people who start doing exercises without really knowing how to do them. If you want to learn how to do the Olympics lifts, Ryan says, find someone to teach you how to do them.

In investing or fitness, don’t expect to go from novice to professional. It takes time to get good at something and you’re better off starting with the basics.

3/ How committed are you?  The largest constraint for health and wealth is time. Flaherty says that even professional athletes come to him with limited time. Everyone has a full slate of commitments and they can only do so much.

Carlson says much the same about investing. “(Individuals) either don’t have enough time or they don’t have the skill set to approach the market.” If you aren’t willing to put in the time to figure things out then active (microcap) investing probably isn’t for you. Fortunately, there are many other options such as index funds.

Steve Pressfield has written about the differences between professional and amateurs. The crux is that professionals show up every day, rain or shine, whether they’re in the mood or not. It helps if you at least somewhat enjoy the activity. Some runners and writers, for example, share the attitude, I don’t like running/writing, but I like having run/written.

4/ Compounding. At the end of the interview, Flaherty said that he often gives the book The Slight Edge to people as a gift. The idea in that book is that if you do a lot of little things in your work those will compound to large advantages later on.

This is a natural link to investing. When Carlson is asked about how investors can tune out the noise (Example: My Friend is Beating Me) he says that two things tend to work. You can absolve yourself of any news and take the Rip Van Winkle approach. This only works because of compounding. This ‘8th wonder of the world’ is what allows us to delay gratification.

5/ Fix your weaknesses. A problem that amateur and professional athletes both have is weak supporting muscles. It’s fine to build up the major groups says Flaherty, but it’s not fine to neglect the supporting muscles. Though they play a smaller role, they could still be the weakest link a chain that breaks.

For the investor, the weaknesses move from tendons, ligaments, and small muscle groups into their head. Wise investors explains Carlson, need emotional discipline. An ability to stick with the plan, be humble, and avoid negative herding tendencies. Having a financial advisor – like Carlson – is a firebreak for rash decision making. Another is the checklist.

It’s hard to fix physical or mental weaknesses yourself and that’s why external sources; coaches, checklists, training partners, mentors, books, etc. help so much.

6/ Permanent loss. “True risk,” says Ben, “is that which is irreversible.” Investors are fine until they lock in an outcome. He summarizes Bernstein, saying, volatility is a while deep risks come from permanent decisions.

Professional athletes are like money managers in that one big mistake can ruin their careers. This is why we see people going to coaches like Flaherty to get better, stronger, and healthier. Work on the little things when things are good so that you can draw on them when things are not.

 

Thanks for reading,
Mike

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Troy Carter

Supported by Greenhaven Road Capital, finding value off the beaten path.

Troy Carter joined Guy Raz on the How I Built This podcast to tell his story.

Carter is a high school dropout. Instead of learning from teachers he chose Jazzy Jeff and the Fresh Prince (Will Smith). “They were the only guys from Philadelphia, they were from our neighborhood, they were successful, they were like gods in Philly and they were the way out. Meeting them was plan A, B, and C.” Soon after meeting the duo Carter realized, “I wanted to be less Fresh Prince and more James (Lassiter) and he became my teacher.” It was the manager, not the performer, who Carter wanted to emulate.

Finding mentors is crucial for success. These people, either directly in our lives or in books, have a huge influence in our lives. For Ken Grossman it was the men on his block growing up. For Brian Chesky it was reading a book about Walt Disney. For Judd Apatow it was seeing Steve Martin.

With this choice, Carter moved to L.A. to work for Lassiter and it was great.  “I was having the time of my life.” But he wasn’t getting a lot of work done. “I was taking a lot of shortcuts…I thought I was much bigger than I was.” Carter lacked the rare and valuable skills required for his rare and valuable job.

It’s amazing that he advanced so quickly without experience. Tom Brokaw started building his skills as a teenage disk jockey. Casey Neistat made homemade videos. Bill Belichick grew up in the game of football and has such a deep understanding that coaches say he will spend twenty minutes talking about a single play.

Great jobs require great skills and Carter didn’t have them (yet). He was fired and returned to Philadelphia.

Thanks to some connections via friends and family, Carter gets back in the game by managing Eve. He soon found out that you’re never really ready.

“I had absolutely no clue what I was doing…initially the job was protecting my friend and everything else was learning as I was going along. I remember our first tour was the Cash Money/Ruff Ryders tours. I got on the bus and there was this old bus driver and he said ‘you got the float?’ and I said I’d be right back. So I got off the bus and called one of my buddies who had done touring for a long time and asked ‘what’s float?’ and he said it’s the money you give the bus driver for gas, tolls, and food.”

In his book about Amazon, Brad Stone writes:

“By the first weeks of 1996, revenues were growing 30 to 40 percent a  month, a frenzied rate that undermined attempts at planning and required such a dizzying pace that employees later found gaps in their memory when they tried to recall this formative time. No one had any idea how to deal with that kind of growth, so they all made it up as they went along.”

As Carter cut his teeth he developed his “West Philly Spidey Sense,” a negotiation skill. “Being able to read rooms and read people is very very important and also knowing what’s important for that person on the other side of the table and what’s important for the client. A lot of times it’s not conflicting.”

Through practice, Carter came to the same conclusion as the Harvard Negotiation Project, the book Getting to Yes, and our ideas in How to Negotiate Well.  Carter also learned about how Eve could expand from music to other areas like television, movies, and clothing. Mimicry is a good way to start and Carter copied the Fresh Prince playbook just like Jason Calacanis mimicked Tim O’Reilly.

Carter’s success brought him an acquisition offer and he sold his management company for two million dollars. It sounded great on the surface – Carter had money and a way to scale his business – but it ultimately didn’t work.

“I was dreading getting up and going into the office. I would go in and pull the shades down because I didn’t want to work with people there.” As Mohnish Pabrai and Brian Scudamore noted, if you aren’t excited to go to work something is wrong.

Carter also found out that “Two million dollars isn’t actually two million dollars. You buy a house, pay taxes, a couple of new cars and I invested in the new business.” He didn’t have a low overhead mindset.

Not liking his job he took the money and invested in a new business, taking Eve with him. One year later Eve walked in to explain she’s leaving him for another agent. ‘How bad was this’ asks Guy Raz and Carter says that it was bad, but, “You can’t fall off the floor.”

After this reset, Carter gets introduced to another young, up and coming female artist. She had just been dropped by another label. Her one year experiment to break into the music business was over and her father wanted her to go back to college. Carter says “she was an incredibly hard worker.” That person was Lady Gaga.

Carter and Gaga were an overnight success together… – – wait, wait, wait. You know there’s no such thing as an overnight success.

Raz asks if Carter knew Gaga would be huge. “The real answer is, you don’t know. You think and you hope but you don’t know.” It would take a lot of work and so that’s what they started doing, work. Gaga was a great songwriter and many people wanted her songs – just not her singing them.

Around this time Facebook and MySpace were becoming larger “and we started using those platforms and we were lucky because they were global.” Their shoestring budget was used for tours and costumes thanks to this low-cost distribution blessing.

In tinkering with how to distribute music, Carter started to talk with those technology companies and led to a few investments.

Screen Shot 2017-05-02 at 9.12.49 AM.png

 

Thanks for reading,
Mike

 

Jocko Willink

 

Supported by Greenhaven Road Capital, finding value off the beaten path.

In episode #073 of his podcast, Jocko Willink answered questions from the internet. It was another two hours chock full of good advice.

What I like so much about Jocko’s podcast is that he uses the lens of war to see the human condition. This isn’t that unlike Charlie Munger speaking about the Psychology of Human Misjudgment or Daryl Morey explaining how to assemble an NBA basketball team. Each has to account for how psychological principles and a range of outcomes affects their decision making. Good processes – I think – are domain independent.

Ready?

1/ How not to overreact. The first questioner asks if Jocko has to think about not overreacting. He says;

“I would say at this point it’s fairly ingrained, I don’t overreact to stuff anymore.”

“In order to move in that direction picture what a situation looks like from the outside, what do I look like?”

Avoiding overreaction to a situation takes practice. Jocko has years of ‘reps’ with soldiers, businessmen, and even his own children. Doing something over and over is a great way to build a skill.

Jim O’Shaughnessy and Jeff Annello also spoke to the value of repetitions.

Controlling your actions also requires detachment. In the podcast, Jocko and Echo Charles compare it to watching tape like sports teams do. You need to be able to see things from another point of view. In his book about Charlie Munger, Tren Griffin comes back to the idea of detachment again and again. Munger has succeeded because he’s able to detach from the crowd and his biases.

In a podcast with Tim Ferriss, Willink said they used simulated firefights. “What we did was put them under extraordinary pressure where to fail to detach and step up and away from the problem would result in failure.”

The Harvard Negotiation Project calls detachment “the third stance.” Imagine what another person would see if they were watching a situation. Jocko and Echo also compare it to being above a maze. From there you can see how all the parts interact. Detachment is a key part of accurate empathy.

This idea is simple but not easy.

Jocko said that the situation of the United passenger being dragged off the plane was an example of a failure to detach. If you want to help in a situation like this, says Jocko, do so in a way that helps the people involved remove themselves from the storm of distortion. Get them to detach.

2/ Dichotomies.

  • New leaders need to balance humility (I don’t know everything) with preparation (but I’ll learn as much as I can).
  • To implement a decentralized command, allow subordinates to lead a project but within an area where you won’t lose strategic ground or have them lose face.
  • Work can be fun and serious at the same time but leaders should set boundaries. Jocko told his soldiers ‘no jokes on the radio and no jokes in the slides’. Those areas were set aside to be serious.

Finding balance is hard. If you’re unsure how to balance two opposite things, identify where an asymmetrical payoff exists. Jocko explained, “You tell a good joke, it gets you 2 credits. You tell a joke that’s bad it’s negative 39.” If the risk/reward ratio is too high move toward the other end.

3/ Grit. Around here we like Grit and so does Jocko. Patrick O’Shaughnessy wrote:

“I learned through experience this year that growth and discomfort go hand-in-hand. When faced with almost any choice, I took the harder option whenever I could.”

In the field of education teachers are taught that students learn best when the information is in their “zone of proximal development.” A fancy term for ‘sweet spot.’ Jocko also believes in the Goldilocks; not-too-easy but not-too-hard approach. He said, “The attitude of ‘we’re crushing it’ is probably an indicator that you’re not doing the best job.” In that case, things are too easy.

Of course, you don’t want things to seem impossible. In a children’s book I read to my kids the author made the distinction between things that are hard and things that take a long time. Leaders can create a Goldilocks zone but individuals can create one for themselves. This is what Jocko has done:

“Of course I come up short. What do I do when those things happen? I keep going…Worn down isn’t beaten and frustration isn’t going to kill me. When I do come up short that’s okay because I just learned one more thing that’s going to get me over the top.”

4/ Ego. Someone asks Wilink how to manage people that try to outperform you. You’ve got a good problem on your hands, says Jocko, “The more people you can bring on your team that out perform you the better you’re going to do.” If you aren’t willing to hiring people that do better work than you then the problem is “100% ego. ”

Successful operators hire people smarter than them.

Thanks for reading,
Mike

A full version of this post is available to subscribers of Mike’s Notes.