Supported by Greenhaven Road Capital, finding value off the beaten path.
Jeff Annello is the coconspirator at Farnam Street and through some internet wandering I found two of his interviews that had some nice ideas. One with Halelly Azulay at The Talent Grow Show and the other with Chris Macintosh at The Big Question.
What appealed to me in these two interviews was Annello’s sense of work. He seems like a “lunchbox” worker. Show up each day, do good work, and your rewards will compound. If that was all I got from his interviews, that mindset would have been enough. But there were more notes than just that. Ready?
1/ Tools of the trade. In both interviews, Annello uses the analogy of a tool for mental models and said, “a mental model is a tool that helps you understand some particular aspect of how the world works.” Analogies like tools for mental models are good because they help articulate ideas. For example, one of Charlie Munger‘s oft quoted pieces of advice is to destroy your bad ideas. At the 2017 DJCO meeting Munger said he’s been busy doing this:
“I’m very busy destroying bad ideas because I keep having them. It’s hard for me to just single out one from such a multitude. I actually like it when I destroy a bad idea because it’s my duty to destroy it.”
Now mix in Annello’s tool analogy and we can visualize throwing out old tools and replacing them with new ones. Anyone who’s switched from corded drills to cordless ones or replaced a dull saw blade appreciates the new tool. So it goes for our mental models.
Annello, like a craftsman, enjoys the tools. “What’s constantly exciting to me is getting lifelong tools in the toolbox.” You see this in computer programmers who like to code and in woodworkers who have more planes that you’d ever thought possible. If you enjoy using things you’ll use them more.
Great jobs (like working at Farnam Street!) – writes Cal Newport – are rare and valuable and require rare and valuable skills. If you can match your temperament, work ethic, and luck in life towards tools used in those jobs you’ll get them.
Of course using a tool doesn’t mean using it properly. Annello suggests getting reps. “I think an efficient decision maker is like a chess player that has studied a lot of games, and can very quickly call to mind other moves that have been made and what the best moves are.” Annello knows that pattern recognition is a superpower because it saves you time.
Bill Belichick won a Super Bowl because he and Ernie Adams taught it to Malcolm Butler. Warren Buffett idolized Ted Williams because of William’s pattern recognition at home plate. This superpower is built, just as Annello says, through repetitions. Which works for almost everything says Arnold Schwarzenegger:
A book interlude.
Annello said suggested It’s Your Ship for leaders. Sapiens was “an amazing book.” The Power Broker was “a fabulous book.” Poor Charlie’s Almanac is “the best summation of what causes us to make the errors we make.” Explaining Social Behavior was “an amazing book.” The Honest Truth About Dishonesty was good too.
2/ Biases and decision making. In both interviews, Annello was asked about common mistakes and he says one is “first conclusion bias.” Munger likes to say, Annello explains, “I never let myself hold an opinion unless I know the other side of the opinion better than that person does.” Avoid this bias with a “step back and ask, is that actually the best decision?”
My first conclusion bias was to think, “Yes, this a good idea.” But wait a minute. In agreeing with Annello aren’t I doing just that? Letting my first reaction rule the day? Rather, let’s take the scientific approach (“Good science bombards ideas from all possible angles,” Annello says) and test this.
Annello points out in the interview that for physical things, there’s isn’t really a bias. Ducking, catching, swinging, hoping or dodging are all skills honed over thousands of years of evolution. We’ve got a good track record for decisions of that sort. What trips us up are complex systems we aren’t well adapted for.
One way to improve our decision making in these areas is to spend time planning for the important parts. The Mercury, Gemini, and Apollo missions ran as many simulations and calculations as possible ahead of time. Flight director Gene Kranz said that they aimed to have most everything figured out. “During a mission countdown or even a flight test, so many things would be happening so fast that you did not have any time for second thoughts or arguments. You wanted the debate behind you.” The capsule speeds went from 5miles/min to 5miles/second and first reactions had to be correct. They sharpened them through preparation.
In other instances, we can slow down. Here’s what Danny Kahneman told Michael Mauboussin:
Better decision making comes from good preparation beforehand and awareness when to slow down so we can avoid the first conclusion bias.
3/ Disruption. Companies lose market share because something happened they didn’t expect. “The core thing you’re asking yourself,” says Annello, “is, does the world really work this way or not?” Is the way you’re doing business a way that will continue to work?
It’s difficult to answer this from within the system. “There’s this problem of being inside a system and not being abe to see it,” says Annello. What you need to do is “solicit advice from people who don’t belong to your worldview.”
When Reed Hastings excluded the DVD executives from the strategic meeting of the company it was an exemplary exception.
“One of the most painful moments along the journey was the DVD was all the revenue, all the profit. We were hybridizing it with streaming and getting more attention but the discussion was still around DVDS. We realized that we had to kick out the DVD executives of the main management meeting. That was hard because we loved them, but they weren’t adding value in terms of the streaming discussion. We compared ourselves and asked, ‘Compared to a streaming pure play, what would we do?’”
Companies must change, even though it’s hard. “It’s very difficult for a business who has dominated one sort of business model to adapt their model to the new world and dominate in another way,” says Annello. Yet, they must.
“Like everything in life, reading has opportunity cost. The time you spend reading articles online is time you’re not spending reading something deeper and long lived, like a book.”
Reading, like any other verb, occurs when our habits (internal default) or structure (external default) allow for it. Part of [passing the marshmallow test](https://thewaiterspad.com/2017/03/06/steven-pressfield/) is having If/Then plans to circumvent temptations. If I sit down, Then I’ll have a book rather than my phone. Even small obstacles – constructed or removed – can get us to do more of one thing and not another. Annello wants you to read more, so do I.
Thank you for reading,