Author: MIKE

Money solves a lot of problems and it’s a stable form of compensation. That makes it a great incentive.

Here, take this thing that you think is valuable and others think as valuable and thanks to the computer in your pocket you don’t actually need the thing but a code on a site that sends the digital version of the thing to someone else. Trust me, this works.

But money isn’t the only incentive. Eventually it’s not even the most important. However, not thinking about money as an incentive requires imagination. Nothing is official but here’s one reported consideration for the NBA.

This is a terrible idea.

Bill Simmons—who we like—understands why. In his version of the in-season competition, Simmons awards teams a better chance to win the NBA championship. In zero-sum competitions, people would give body parts to win. How much does the marginal million matter?

It’s not just sports. After a certain salary, company culture matters more than company checks.

Incentives are like a series of dials: culture, mission, pay, people, autonomy, and so on.

Bob Iger wrote that he and others stayed at Capital Cities because of loyalty. Plus it was a great place to work. Once in the Disney machinery things changed. Iger again, “If you stuck to your budget and behaved ethically, Tom and Dan (Cap Cities) gave you room to operate with independence…Disney was the opposite of all that.”

It’s great that money isn’t the only motivator. This allows for interesting solutions. If you need some ideas, try some Alchemy.

You know a mental model is good if you continue returning to it. Taleb’s antifragility is like this. Munger’s emphasis on inversion. Another is Boyd’s OODA loop.

Run the numbers on a fifteen or thirty-year mortgage with the mindset to invest the difference and both are good choices. Avoiding mistakes is more than half-the-battle.

When I finished that post, I thought good choices were low variance. “Don’t be house rich and cash poor,” my dad advised. With too much house, a job loss would introduce a lot of volatility. Similarly, an emergency fund tempers variance. So does ‘living within your means.’

However, variance isn’t the first principle.

What matters more is response cadence. We’ll call this articulation of cadence and the OODA loop: Variance Response Time (VRT).

A public school teacher will have a high VRT due to the nature of hiring. With seasonal hiring and year-long contracts, a teacher must step into another industry or live off their savings. A large emergency fund (dollars are units of time) will make the transition more comfortable.

Medical providers will have a low VRT. While their emergency funds vary, a physician, nurse-practitioner, or medical assistant can immediately find work. With a lower VRT these people can recover from choosing from a mixed bag of good and bad choices.

A tree has the longest VRT. A force outside the normal ecosystem conditions and that’s it. Kaput.

While money, knowledge, and transfer (i.e. licensing requirements) will all affect VRT, so will complexity. It doesn’t matter how much money or knowledge someone has if they don’t know which question to ask first. Boyd’s first ‘O’ is Orient. Or as Steven Soderbergh put it, “If you don’t know where the camera should go it doesn’t matter what you’re shooting on.”

None of this is new but examples seem to help drive the point home. Catholic churches do read the same gospels each year. So, am I able to adapt quickly or am I setup so I won’t have to?

It’s interesting to hear successful people talk about physical location as a competitive advantage. We should probably hear more of it.

George Lucas left Hollywood for San Francisco. Ken Burns lives in rural New England. Buffett is in Nebraska. Brent Beshore, successful in his own niche, operates in Missouri. All of these places are advantages, not disadvantages, to the participants.

Getting away from the cacophony of a major city helps someone do a certain kind of work. For these individuals, the loss of interactivity is offset by a new set of actions.

Daryl Morey spoke about this to Bill Simmons. Morey noted that in addition to no state taxes, Houston Texas had more to offer players. Great weather, fine recreation, good culture, and so on. In addition to dollars and moneyball, Morey has a large competitive advantage. I often wonder why the local Orlando Magic doesn’t offer more to their players about brand building, as one of the greatest brands in the world shares the same ‘magic.’

The nature of these competitive advantages came up in a podcast with Zach Lowe and Howard Beck who said (39:30):

I don’t think it’s fair to the fans when you treat every injury to every player like it’s a national security matter and the Nets have done that. That’s Sean Marks embodying the Spurs’ culture.

This is Marks’ mistake. He’s taken too much. While the Spurs have a great cultural reputation it was time-sensitive. The next great culture team will have to find the first principles and not the outcomes. It wasn’t that the Spurs kept things secret but that they did so for a reason. That’s the key, and it’s important to ask if that still matters.

At the 2019 Sloan Sports conference, Beck and Lowe were on a panel with Paul Pierce who said, “team style of play is created around their best player.” Any competitive advantage is contextual. The time and place matter just like the people and actions.

One of Nassim Taleb’s contributions is reminding people of opposites. That the opposite of fragility is not robustness but anti-fragility. That absence is not the opposite.

With that in mind we’ll see that the absence of ego isn’t anti-ego (humility) but just null-ego. Ted Sarandos spoke on the Aspen Ideas To Go podcast about the early days of Netflix.

It’s easy storytelling that Netflix disrupted television. It’s convenient to label Reed Hastings a genius (no matter how much he emphasizes his luck). It’s a great contrast to say that Netflix landed House of Cards and no one else did. However the truth is always more complex.

Everyone, Sarandos explained, wanted House of Cards. The show was not like an indie-band that blew up. It was an auction and Netflix was the highest bidder.

In addition to the highest bid, Netflix had another competitive advantage. A null-ego. Sarandos said:

“We had to convince the talent, ‘Why do it with us?’ We famously gave them twenty-six episodes with no pilot and a promise not to give them any notes on the production. I did that because there was no reason they should have done it with us. We had never done an original anything.”

Ted Sarandos

Sarandos and Hastings didn’t have an ego and that served them well. Jason Blum said that this is his advantage too. Michael Ovitz wrote about this too, noting that daytime television didn’t have much glitz and glam but it did pay the bills.

Sarandos continued: “at the beginning (the light touch) was out of necessity. I didn’t have enough people and I told David Fincher, ‘You don’t want me giving notes.’ I knew enough people who had shared enough horror stories.”

This decentralized command is common for high functioning organizations with great culture and talented employees. Warren Buffett has said to, “hire well and manage little.” Both The Simpsons and Seinfeld were famously no-note-sets.

Sarandos understands this, “The real art of what my team does is pick the show runner and then give them the tools they need.”

However, interviewer Derek Thompson and Sarandos talk about why this doesn’t happen. It’s the belief that activity is good. Taleb wrote about this too:

“Ingenious interventionism is very persuasive across professions…if you supply a typical copy editor with a text, he will propose a certain number of edits, say about five changes per page. Now accept his corrections and give this text to another copy editor…and you will see he will suggest an equivalent number of edits.”

Nassim Taleb

Like the Hollywood-note-machines or Nassim’s editors we can often think of change as good. However, sometimes all it takes is the removal of something harmful rather than the addition of something helpful.

How do you believe someone?

It seems like context is really important. Used-care-salesmen face an uphill battle on the field of ‘reputation’. Businessmen in suits have some kind of unconscious advantage. Then there’re podcasters.

Why are podcast people so persuasive?

I wondered this after looking up another ETF by another ETF operator and podcast interviewee. They always seem to have good ideas and my rationalizing brain runs faster than my legs on my podcast runs. Negative splits are a joke compared to the legitimization I can do. Well, you do need to zig when everyone else zags.

Part-of-the-reason may be due to something Dr. Tim Levine (YT) calls “Truth-Default Theory.” The thinking goes that Truth-Default allows coordination.

The part of Levin’s talk that related to my podcast persuadability was when he addressed couples. In one study they collected college couples and told some couples that one might be lying about some things (it was a large collection of statements to hide the true nature of the study) and they told other couples nothing of the sort.

For couples who received hints of deception, the lie-spot-rate was slightly above average (60%). However in couples with NO hints the rate terrible. It was so bad, Levine said, “During debriefing we had several subjects deny the nature of the experiment and tell us their partner did not lie to them and we were surely mistaken.”

In a study of political agreeableness, there was a humanizing element to hearing someone’s voice rather than reading their words. This is may be what happens in podcasts. Listeners subscribe to things they want to hear (confirmation tendency) with people they enjoy listening to (liking tendency) in a medium (McLuhan) that is more persuasive.

Pile on Levine’s theory that we default to believe. He said, “My theory is that absent some kind of prompting, thoughts of deception don’t even come to mind.” The payoff to believing must be worth it.

On a Christmas walk with my father-in-law, we covered a lot of ground in both sidewalk and ideas, and one that we touched on was fasting. I explained that I believed in fasting without considering the science. In fasting, there’s nothing to sell.

Constant vigilance is impossible and unwanted. Truth trust leads to cooperation–which got us here. However, an awareness might help at least avoid the situations that aren’t win-win.

Thanks for reading. More around this idea on Twitter.

I don’t remember resolutions as a kid other than be nice to my brother or study more. Ambiguous, token offerings.

As an adult, I get it. Finances, health, and friendships all take on different meanings as time passes. It’s that wonder of the world called: compounding.

Part-of-the-reason things compound is the system. As kids, our systems is buffered, like bowling alley gutter guards, by caring adults and lack of resources. It’s harder to go to extremes. As an adult these buffers fall away and we rely on the skill called ‘personal responsibility’.

If t-shirts are any indication, there are fewer adults ‘adulting’ each day. Luckily for them, very little ‘adulting’ is required except for small moments of design. Their obstacles are really opportunities.

Rich Barton said “Every friction point in our lives is a chance for an entrepreneur to solve a problem.” Jeff Jordan said that eBay bought PayPal because of transaction cost frictions. Ted Sarandos noted this too, “What it takes to get you out of your house if you’re on episode four of Stranger Things is pretty high.”

Frictions are the source of the negative effects that lead to the resolutions.

For our resolute resolvers then, we can ask if we want to do more of something we should make it easier to do and if we want to do less of something we should make it difficult to do. They should design it.

However, most people don’t consider themselves designers. They confuse design with art. Art is the “shabbiest” kind of design writes Victor Papanek. Design is not white walls and pine desks and smart drawings. Design is ugly prototypes and rough consensus and running code and living problems.

Design just changes the system. Anything that changes behavior is a design. So if we want to change something, we can design it—business or personal.