Bethany McLean (@Bethanymac12) joined Barry Ritholtz on the Master’s In Business podcast. McLean is the author of Shaky Ground (US mortgages), All the Devils are Here (Financial Crisis), and The Smartest Guys in the Room (Enron).
While those book all sound good – I added them my list – she spoke about few big ideas too.
Filters against folly.
McLean graduated as a math and English major, a two-sided brain that Ritholtz says he shares. Ugh. The left/right brain stuff is antiquated, and too focused on a fixed mindset. Let’s apply this thinking as mental models anyone can use.
We’ll take our terminology about this model – that McLean and Ritholtz use – from Garret Hardin’s (3) Filters Against Folly:
1- Numerate. What do the numbers say? Ken Fisher told Ritholtz, “there’s a place for numbers and place for not numbers.” Is your place one where they fit?
2- Literate. What do the words mean? When Stephen Gould’s cancer diagnosis had a mean survival of eight months, what did that mean?
3- Ecolate. Then what? Something comes next, like dominos. A Backstory podcast on Cuba noted that the Cuban Missile Crisis wasn’t 13 days long, it was 18 months long, starting with the Bay of Pigs snafu.
Another example is from Gilbert Gall’s book, Billion Dollar Ball:
“What the (college) presidents didn’t seem to understand was that by establishing their athletic departments as stand-alone businesses outside the normal constraints of the university budget, they were setting the stage for an unprecedented surge in spending and even more dramatic shifts in the commercial nature of college sports.”
What came next was the growth of college football.
A balance of these three filters keeps us from getting steamrolled – especially from dynamic personalities. McLean said that Jeffery Skillings from Enron was very good at manipulating the story part of our filter. “You get it,” was the best compliment you could get, McLean says. That makes us feel good, and turns down our other filters.
This misstep can happen the other way too, we think something is so good that we don’t question it. Part of the reason that Greenspan missed the barreling crises, says McLean, is that he let his ideology get in the way of the facts.
How do we stop this from happening? We need to change the story.
Benjamin Graham did it for the stock market by renaming it, “bipolar Mr. Market.” Mellody Hobson reframes the problem by pretending her company is public. Chris Dixon reframes startups as a maze. Dan Coyle reframes exercise repetitions as meditative. Stephen Dubner reframes shopping experiences to change the marketing. Reframing activates our mental filters. (tweet)
The advantages of the backwater.
McLean started writing for the personal finance section of Fortune. “It was sort of the backwater,” she said, “no one wanted to do writing for, so you could get in the door.”
In episode 13 of Mike’s Notes, we looked at the importance of perseverance.
If you want rare and valuable jobs, you must have rare and valuable skills. – Cal Newport
There, we told the stories of Gary Vaynerchuk, Felicia Day, and Austin Kleon, and how each of put in the time to get good at something.
So too for McLean. She got the chance to write for Fortune, and she took it. The dominos of one decision can be seen here too: she only got the chance to write the Enron book because of the Enron article, which she only got the chance to write because she put in her time in the backwater of Fortune.
Not only is this sequence of events important, but it’s easy too. Most people don’t want to be in the backwater. When Daymond John started Fubu by selling hats out of a garbage bag outside the mall. This backwater equivalent of retail gave him an advantage, one he seized.
Get ideas from, and test them with, other people
One of the people McLean spoke with while she was at Fortune was short-seller Doug Millett. She did this because she wanted to get the other side of the story. At Fortune people would stop by to pitch stocks. McLean even had to pick winners every three weeks for the magazine.
“I’m tired of writing about these glowing companies,” McLean said, “so I began to seek out short sellers.” Not because she thought they were right or wrong, but because their thoughts differed.
In my podcast with Aaron Watson, we talked about biases, and I noted that biases don’t necessarily mean we’re wrong. They are something to be aware of, like your temperature. If it’s too far out of whack, then you need to check it.
McLean had the inside view (the people who came to Fortune to pitch stocks), now she wanted the outside view (the short sellers) to get the full picture. Morgan Housel used this same model to find his job at The Motley Fool. Bill Simmons used this model to be a “superforecaster.”
Other people see our blind spots and biases easier than we do. McLean found people who had the sharpest eyes to spot hers.
Thanks for reading, I’m @mikedariano on Twitter. If you liked this post, you might like my latest book: http://amzn.to/1nztynB.
7 thoughts on “Bethany McLean”
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