Ambiguity Aversion

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

How does someone make good decisions? There’s a lot of smart people talking about it and we’ve written about a number of them here. Michael Mauboussin, Nassim Taleb, Rory Sutherland, Gerd Gigerenzer, and Richard Thaler all come up on this blog. Part of what makes decision making difficult is the destination.

Diet is an easy example. The destination is a healthy body. The decision is to replace unhealthy foods with healthier ones.

Diet is easy (kinda) because it’s a kind rather than wicked environment. As David Epstein spoke about, some sports like golf and chess are very stable. Other parts of life are much more complex. Epstein’s point was that we shouldn’t learn lessons that work in one area but are void in another.

Diet is kinda kind because it’s a lot of chemistry with some social and some psychology mixed in. This is why diets tend to work with design interventions. Penn Jillette ate just a potato and fasted and that worked. Coaching solved the design issue while chemistry took care of the weight.

Let’s look at something different. Let’s look at something common in harder decisions, ambiguity.

Scott Kelly successfully spent a year in space and wrote about it in the book, Endurance. Kelly and his twin brother Mark had a rough life growing up. Part of the reason was that his family was middle class trying to live an upper-class lifestyle. Part of the reasons was his father was a drunk. One night dad went out to the bars with no food or money at home. Kelly wrote:

“The physical feeling of hunger is horrible, but much worse is the bottomlessness of not knowing when it will end.”

Later when Kelly was on the ISS there were some launch accidents. Their supply ships blew up on the launch pad or malfunctioned and burned up in the atmosphere. The ISS has a safety gap in supplies and redundancies in machineries but there was still the doubt about when the next capsule would make it up.

When there’s ambiguity for loss – how many people would really want to live in space for more than a year? – we tend to shy away from it. When there’s ambiguity for gain we can place Small Bets.

Rory Sutherland notes that we like brands because it’s insurance that something isn’t shit. Buying brands limits ambiguity. We buy brands because risks are calculated in the pre-frontal cortex whereas ambiguity is in the limbic systems, “said a simpler way, with ambiguity emotions play a much more significant role in the process than they do with risky decisions or deductive decisions.”

The lesson then is to make small, non-lethal bets, even if it costs a lot, in areas that are important to us. Buy the damn Samsung TV but take risks on anything that can compound over time like financial, habitual, or relational. Bill Gurley said about missing Google:

“I think it came down to the price at the time was remarkably high and the team was remarkably self confident in a way that would cause you to question whether they could pull it off but they did. I go back and the learning is that if you have remarkably asymmetric returns you have to ask yourself, ‘how high could up be and what could go right?’ because it’s not a 50/50 thing. If you thought there was a 20% chance you should still do it because the upside is so high.”

Humans don’t like ambiguity. It shields us from some mistakes, but it also conceals some gems.


Thanks for reading.

Andreessen and Horowitz on 10 years

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

Ben Horowitz and Marc Andreessen were interviewed by Stewart Butterfield about their ten years at a16z. We’ll frame three rhetorical questions from the interview.

How to start? Copy

a16z started by copying Michael Ovitz’s model at CAA. Horowitz said, “We probably saved five years by copying his model.”

Recapped in, Who is Michael Ovitz, the idea was to have a team of domain experts serving clients. This was a different model for entertainment and it worked for Ovitz. It was also different for venture capital and it worked there too. But it won’t work for you unless your industry is new.

Andreessen explained that once a company starts, “Then it’s a compounding advantage where you get more and more different from the status quo…why would William Morris copy you (Ovitz)?” The couldn’t because they’d need to take salary cuts. The William Morris executives had too many stakeholders, neé bills, in their lives.

This question gets asked a lot, What’s stopping Company X from doing this? Why can’t Microsoft in the 90’s, Google in the 00’s, Facebook in the 10’s just come in and do this? 

The best answer is to say that they can’t. This is what Max Levchin did with Affirm. And it’s not unique to startups. Competitors need to think about where their opponent’s weaknesses lie and head for those. That was the CAA and a16z agency model. Take some salary money and create services.

What’s going to happen next? No one knows.

Andreessen lived through this with the Netscape browser and has seen the internet, mobile, and social trends. He said, “People don’t think these things are obvious in the beginning. They are only obvious after the fact.”

When he pitched media companies for investments in Netscape they balked. Those business “knew that normal people wouldn’t use the internet if it didn’t have Time magazine on it because Time would obviously be the killer app for the internet.”

But killer apps require a convergence of this, that, and something else. Andreessen said that “basically everything happens,” but like a solar eclipse, things like markets, technologies, and governments have to line up – or not oppose – first. One example is the book, The One Device.

If no one knows what’s going to happen and anyone can make something happen, even if it’s small, that’s great news. Andreessen is optimistic and recommends the book, How History Gets Things Wrong. The future is flexible! What’s going to happen next is up to you.

How to make mistakes? Probabilistically.

Horowitz likes the way Bezos puts it, “We rate people on the inputs, not the outputs.”

Andreessen elaborated, “We have a very specific philosophy on that (mistake making) and the book I recommend is Thinking in Bets where she (Annie Duke) talks about what is the nature of a mistake in a probabilistic domain.”

Instead of looking at outcomes, look at processes. Sports can provide handy visual examples. We praise Bill Belichick a lot but Chuck Klosterman made this point to Bill Simmons:


In his podcast with Russ Roberts, David Epstein said the same thing, “We have to be really conscious of the fact that a good outcome means we used a good process and vice versa.” Both of Michael Mauboussin’s books, More Than You Know and The Success Equation address this kind of making.

At a16z they use an idea maze. Andreessen explained, “is like a hundred step process to work your way through all the different permutations of the idea before you figure out the real thing.” It’s a way to think of alternative histories, counterfactuals, and possible outcomes. It’s a way to think probabilistically.

One idea maze solution is money. But that’s an idea maze problem too. Stewart said, “Having a whole bunch of money takes away a critical forcing function.”

Constraints like this can help. David Lynch wrote that more money means less thinking. Interviewer extraordinaire Terri Gross said that daily interviews make her a better interviewer.


Thanks for reading.


David Epstein

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

David Epstein is on the podcast tour, talking about his new book Range, “why generalists triumph in a specialized world.” His advice isn’t to specialize or generalize but to have both, at the individual and community levels. He told Patrick O’Shaughnessy, “In areas where the next steps were clear, specialists were better. In areas where the next steps were less clear, people who worked across a large ranger were most effective.”

If you read Jack of all trades as a negative this book is for you. If it’s a positive expression then you’re rowing in the same direction as Epstein. Either way, seeing things from Epstein’s perspective is helpful. It’s what academics tend not to do. On Longform Epstein said, “The researchers (I cite) never come to the same place, they always go to their own conference where everybody believes their stuff.”

Yet a new POV is like a boost in IQ.

Michael Pollan saw this in his writings on homes, gardens, food, farms, – and most recently, hallucinogenics. “Doing it for the first time gives you a kind of wonder, of first sight, that you’ll never get again.” Even breaks from projects, relationships, or the simple crossword puzzle reveal solutions.

To make his perspective reflective Epstein does a lot of research. He tries to read ten journal articles a day early on, wandering into rabbit holes as needed. One tip he shared on Longform was to not dig into the method section unless the overall ideas look interesting.

Epstein also likes to talk to people. “I’m a reporter and I know if I talk to someone I’m going to find out things I’m not going to find out any other way.” In each of his interviews, he’s curious, which as Epstein notes, is a kind of ranginess itself. And he’s always been that way.

First, “I wanted to be an astronaut.” Then Epstein went to school at Columbia, started running track, and took a summer class because it would be easier to run track during that time.

That class was geology. Epstein loved it so much he went to graduate school for it. There he took a night class in journalism. That was fun too. With an eclectic mix, his job prospects were mixed. But he found one, the night shift, operating a phone for news tips and running out to report on stories as necessary. The experience was “a great boot camp.” It was his XMBA

Epstein followed other serendipitous moments to Sports Illustrated. His career was punctuated by that went well assignments and a focus on the truth rather than the conventional. Traditional answers are easy to tell ourselves and to tell others but traditional doesn’t necessarily mean true. Sometimes we have to find new, odd, and different solutions. Sometimes we have to show some range.

Rory Sutherland makes this point in his book, Alchemy. Terry O’Reilly’s does too, writing, “The difficult thing about counterintuitive solutions is that they are often difficult to swallow and hard to present, and are usually shunned by almost everyone initially.”

Epstein saw this too, telling Russ Roberts, “As one researcher told me, ‘The difference between cancer research and Jeopardy is that in Jeopardy we know all the answers.”

It comes up in so many domains of life that it’s hard to ignore. Part of life is making the trains run on time and part of life is laying new track. Part of life is efficient execution and part of life is non-fatal exploration.

One way to explore better is, the next time you make an analogy, “Instead of picking the first analogy that comes to mind because it has some surface similarities, create a reference class of analogies and think of what happens on the broad scale instead of the particular details.”

Exploration came up often in Epstein’s conversations. After his lunch with Russ Roberts, “I ended up with half a dozen new things on my reading list, which for someone who doesn’t know what they’re going to do next, it’s tremendously important to get suggestions to read things I wouldn’t have otherwise read.”

Epstein is also in a culture – writing – that allows this. You told O’Shaughnessy,

“Give people the liberty to start exploring.” Culture influences people. The Apple and Steve Jobs culture, said Ken Segall, was “a table, white board, and an honest exchange of ideas.”

So explore more. In his interviews Epstein mentions many different sources, here’s a few.

About To Youyou, the Nobel Prize winner with ‘No’ credentials. BBC.

About Wicked and Kind environments with the psychologist, Robin Hogarth. YouTube

About the book The Master and his Emissary, right brain and left brain, Iain McGilchrist. YouTube

About Dark Horse projects of self exploration with Todd Rose YouTube.

Act and Adapt

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

Lots of life is a balance. Greed and benevolence. Extreme ownership and decentralized command. Firm and soft. Act and adapt. When abstracted and visualized we make maps. As Adam Savage wrote, “Drawing is your brain transferring your ideas, your knowledge, your intentions, from the electrical storm cloud at its center, through synapses and never endings, through the pencil in your hand, through your fingers, until it is captured in the permanence of the page, in physical space.

The things we draw, the maps we make aren’t real – but they are helpful.

In POV40IQ emails this week we looked at situations where actions rule and ones where adaptation rules. One more example is Disney.

Marty Sklar is the only Disney employee to attend the opening of all eleven theme parks across the world. Disney theme park service is best in class. It’s so good they teach the Disney way as a class. Ramit likes it.

Sklar knows a lot of these things. Some he taught. Some he writes about, like in the book, Mickey’s Ten Commandments, a book focused on how Disney makes their theme parks so Disney like.

One way to do that is to have a patron’s point-of-view.

“In the earliest days of Disneyland, when everything was new for the guests and the Imagineers, Walt Disney decreed that every designer was to go to the park at lease every other week and stand in the lines (we call them queues) to understand what our guests were experiencing.”

That’s a case of Disney acting to see how they could improve people’s experience at the parks. Lots of good businesses do this. The IKEA founder, for example, still occasionally worked the cash registers when he was CEO.

Disney’s effort shows. The parks include some of the most innovative designs in the world. Understanding psychology, much like Rory Sutherland, Disney knows that entertaining waits aren’t waits at all.

Dumbo gives people a place to rest (in the air conditioning!). The Jungle Cruise queue is full of humor. So is the Haunted Mansion. Taking the customer’s perspective, Disney Imagineers acted. But sometimes the Imagineers adapt.

After 2008 Disney stumbled. In 2009 Disney reported to investors that attendance dropped 1% but park and resort operating profits fell by half.

How did Disney keep attendance levels up? They adapted. They offered free dining plans. People liked it, and they got used to it. Now it’s a program that brings people back year after year.

In one post we compared Howard Marks to Russian nesting dolls. There we noted the three levels we ‘live in’. Our heads, our buildings, and our environment. At each of these, we act or adapt depending on the circumstances.

Thanks for reading.

Small Bets

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

I had a problem. Too many of my subscriptions went unread. Too much podcast advice went unheeded.

I had another problem, I need repetition to learn things. The first time it took me over an hour to change a headlight. Now it takes fifteen minutes.

I have a solution (not for the headlight). If you want a short email, each weekday, focused on one theme for the week you can sign up.

There will be no links. There will be no breaking news. There will be no interviews, analysis, or something else, someone else is already doing really well.

There will be stories. Some will be apocryphal, second hand, and every now-and-again they will be untrue. That’s okay. We aren’t aiming for statistical significance, we’re aiming for ideas to try.

Rory Sutherland is fond of saying that a change in perspective is worth forty IQ points. That’s what this is. It’s a fast hit, a thinking vitamin, a dash mushroom. It’s asymmetrical, minuscule investments for gigantic payouts. There will be weeks when this email is unhelpful, maybe even unwelcome. But there will be once when it leads to a brilliant idea. Sign up.

The theme for week one is small bets. Here are two snapshots.

Happy (belated) Father’s Day to the dads. Father is a biological term but that’s not really what we celebrate. It’s not the number of kids you have but the kind and kindness you show.

How we measure things matters. In academia it’s p-value. A value of p=.05 means that there’s less than a one in twenty chance the observed effect is due to chance. For studies published in journals read by professors that’s good. But not for real life. Instead, we’re looking for anything that works.

That’s what Sam Walton did we he started Walmart. As Charlie Munger notes, Walton invented almost nothing we might think of when we think of Walmart. Instead, he copied the best from everyone else then stacked, piled, or implemented it himself. Walton once bragged that no one had been in more Kmart stores than he had. One time he was walking down the aisle of Costco taking notes on his ubiquitous notepad when the store manager asked him to leave. That was Sam Walton.

Not all the ideas were good but none were fatal. One time Walton borrowed $1,800 for an ice cream machine and popcorn maker. They grabbed attention and got people into the story. But he wrote: “Every crazy thing we tried hadn’t turned out as well as the ice cream machine, of course, but we hadn’t made any mistakes we couldn’t correct quickly, none so big they threatened the business.”

These emails will not be statistically significant in the academic sense. These will be stories. There will be survival bias. There will be irrelevant, apocryphal, and wrong things. That’s okay too because a change in POV is worth 40IQ.

Marc Cohodes is a short seller. Cohodes is candid. He’s active on Twitter (@AlderLaneEggs) and even creates websites for whistleblowers to report fraud at companies he suspects. He’ll swear in interviews. He’s a reckless guy.

Except he’s not. To short a stock, Cohodes borrows a share at one price with a promise to repay at a later date. In theory, his downside is infinite while his upside is capped – at zero. Though brash, he’s cautious and Cohodes said that he uses the lifeguarding motto he was taught as a way to think about how he invests. Lifeguards are taught to Reach, Throw, Row, Go.

Though it makes for good television, running into the surf, diving into a pool, or swimming through the water is the path of last resort.

Caution saves lives. The Red Cross has even adapted the rhyme to instruct most people; Reach or Throw, don’t Go. The point is to nibble new ideas, not gulp them down.

Charlie Munger is an investor, but not a short seller like Cohodes. Munger has worked with Warren Buffett for four decades. Buffett said that Munger has the best brains in the business. Reflecting on his early investing career, Munger told a group of University of Michigan students, “I was not a courageous, adventuresome admirable man. I was a cautious little squirrel.”

There are many ways to take big swings but those are often the moments that expose us most. Sam Walton took calculated risks by getting cheap rents and copying best practices. His weird ideas were small things, like introducing Walmart shoppers to flip flops or buying an ice cream cart to use for promotions.

It’s not big swings that change our course but new ideas. As they say, a change in POV is worth 40IQ.

Tyler Willis

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

Jerry Neumann again chatted with Patrick O’Shaughnessy on Invest Like the Best. Neuman is kind and curious and we’ve looked at some of his ideas already:

He also turned us on to Rob Fitzpatrick, author of The Mom Test. Recently Neumann invested in Unsupervised and he said, “One founder is one of the few people in the commercial world who understands this (machine learning) technique and the other founder has worked at startups before and is an awesome outside facing person.”

There are two parts to any business; doing then telling. If neither is done well, startups won’t succeed. Josh Wolfe told O’Shaughnessy, “There are amazing credible people. And there are amazing salesman. And sometimes those two people are one. When they are you have an amazing entrepreneur. But often times they’re not.” So you get two. You get someone like Tyler Willis, that “outside facing” person.

“I was not a good traditional student,” Willis said. We hear this a lot and it’s helpful to think of school as one type of education. Another type is to do. Tom Goodwin said, “Leaving school and starting out, or leaving school and traveling the world and writing, or leaving school and creating a documentary are actually pretty remarkable ways to learn.”

However, Willis said, “If you’re going to drop out you need to work harder than you would have in school.” That’s kind of what he did and does. “So I tried to do things. I became a fairly voracious reader. I read a lot of nonfiction to understand different people’s opinions about different things. I read history, biographies, a lot of varied topics.”

But Willis also gives a reason to stay in school. “If you don’t know which way to go, the default should be to stay in school.” Defaults, base rates, and distributions are all mathematical fences to corral our psychological guesses. Michael Mauboussin is fond of citing Daniel Kahneman’s work, and no wonder. Kahneman observed – academically – our self-aggrandizement.

Base rates are for other people. Right?

Ramit Sethi said that for the second edition (10th anniversary) of his book, I Will Teach You to be Rich, he was coaching a group of readers through the content. He asked them, What would you do with $10,000? They’d be canny of course. Ramit said they were full of baloney. “According to these answers, we have a bunch of Mother Theresa’s in the group. They will pay down debt, give to charity, do this and that.”

These were people who had enrolled to be coached through a book on better financial decisions. But it’s not just them. It’s all of us. Even Kahneman fell for it, thinking he could write Thinking Fast and Slow in less time than the base rate might suggest.

Willis is familiar with the work of Ramit who champions good designs. Dan Lockton has done lots of good work on designs too and noted that designs only do so much. Lockton said, “When people feel they are being influenced in a way that doesn’t match their understanding of the situation they will rebel.”


In 2014 Willis spoke about growth. First, “You have to create a product of value before you can grow your product.” Then, “The number one thing is that speed beats everything else. The faster that you iterate, the more you win…You could be one standard deviation better than the next guy but if he has 20% more cycles he’s going to beat you.”

Jerry Murrell messed up a lot of businesses before starting Five Guys. Anson Dorrance told his soccer players that goals only happen every seven shots or so. Scott Adams compares life to a slot machine that costs little and has “rare and uncertain payoffs.”

Mauboussin titled one of his books, The Success Equation. The formula is some luck mixed with some skill. Mauboussin’s goal was to look back to peek forward at expected values. His advice might be, ‘do more skill dependent things.’ But for some people it’s even simpler, ‘do more.’ Think of marketing as an MVP process too said, Willis.


Want a dainty daily dose of ideas? Sign up for emails. 

Martin Lindstrom

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

Martin Lindstrom was doing research for LEGO. He was a good choice because he loved LEGOs. As a kid, Lindstrom built a LEGO Land in his backyard. It was so popular that one day two – kind – IP lawyers showed up and asked him to call it something else.

LEGO saw 2003 as a time of change. Call of Duty was released and The Matrix trilogy finished. It seemed like kids wanted easier toys (everyone knows kids have short attention spans, right?) with more technology. LEGO adapted, making sets with bigger blocks, fewer steps, and less intricacy. Things only got worse.

Year-over-year Christmas sales fell 30%. LEGO headed out into homes around Europe to find out what kids really want. At one home the LEGO team asked a kid about his favorite possession and he pointed to a pair of ratty shoes. Those? Yep. Why?! Well, the kid said, those are my first skateboard shoes. That moment showed LEGO that kids only had short attention spans for boring things. The company shifted directions and found success.

It wasn’t that kids wanted easier LEGO toys, they wanted less boring ones.

Lindstrom calls these moments “Small Data” and said “these seemingly insignificant observations, is all about causation. The reason why.”

Lindstrom is a consultant, spending most of his time in planes, hotels, and client’s offices. He’s the author of Small Data, Brandwashed, and Buyology. We’ll look at his suggestions for creativity, how to focus on the customer and how we think fast and slow.

Phone and serendipity. There’s a joke that veterinarians are just like doctors only their patients can’t tell them what’s wrong. Lindstrom is like a consumer vet. How does he do this kind of work? Recently he got rid of his smartphone, “I don’t have a smartphone because it makes me detach from the world and stops my creativity.”

The problem isn’t the phone so much as what it replaces, boredom. “I’ve learned that creativity happens when you’re completely bored and that inspiration for creativity is when you start to see the world. Yet we hide behind the screen, a comfortable distance from the real world.”

This summer our family is reading The Lion, the Witch, and the Wardrobe. The story begins when four children are whisked to a countryside house to avoid the bombs of World War II. The children are nervous but excited, especially to explore the nearby woods. “There might be eagles. There might be stags. There’ll be hawks,” Peter exclaims to the others.

But the first day it rains. “Of course it would be raining,” groans Edmund. “Do stop grumbling, Ed.” said Susan. “There’s a wireless and lots of books.” “Not for me,” said Peter, “I’m going to explore the house.” On a rainy day, in the English countryside, within a large home, four children discover that a wardrobe is not just a wardrobe.

Fast forward to today’s English countryside and any home and with a smartphone, and the entertainment is quite different. The radio for Peter, Susan, Edmond, and Lucy had an effective library of one, whatever was being broadcast. Now the effective library is more like 11,000+. In his technology strategy analysis, Ben Thompson often brings up the moment when Netflix signed up to stream Starz to create an effective library of 11,000. A few months early the iPhone was released. Then, Facebook published its mobile site.

From the world of Narnia in 1950 to the world of the smartphone in 2008, effective libraries crawled along until they suddenly jumped. When I was a kid it was easy to be bored. I watched ESPN SportsCenter every summer day but only for an hour. Then it repeated itself and I was bored. Try doing that on YouTube when YouTube’s incentive is the opposite.

Yet we need to be bored.

Ed Sheeran told Howard Stern, “The worst thing in the world is being in the studio and you’re, like, mid-flow, bang bang bang, and you get a text and you go into your phone and that’s an hour of your time gone.”

To stop the flow no-nos Sheeran’s apps had to go. He deleted a bunch. “If you don’t have any distractions – I was literally writing four or five songs a day ‘cause there was nothing else to do.”

Lindstrom’s research revealed that too, “Even if you have a smartphone on a desk that’s not yours, it will affect your performance negatively.” Kenneth Jeffrey Marshall said, “I don’t own a smartphone. I don’t own a television. I don’t have a Bloomberg terminal. All of that seems to have led to better decisions. There’s less noise, and little loss of signal.”

With Starz on Netflix, phones in pockets, and infinite feeds we consume and assume rather than observe and wonder.

Brian Grazer, curiouser raconteur wrote about curiosity as a prerequisite to serendipity. You don’t need a smartphone, an internet connection, or an encyclopedia. You just have to notice things and ask questions about them. It’s like when Neo sees a glitch in the Matrix or when you pause and say that’s interesting.

This is hard for us to do because serendipity and curiosity aren’t linear. There’s no cause and effect and as people, we love to see cause and effect. Lindstrom notes that “Clue gathering is never linear.”

David Epstein told Patrick O’Shaughnessy this when they talked. During his research, Epstein reads ten journal articles a day, sometimes veering in odd directions. That’s okay.

Rabbit holes and wardrobes both lead to interesting places, often more than smartphones.

Outsider POV on the customer. Businesses succeed when they serve customers and earn sustainable profits. But, “Business are struggling right now because they don’t understand the customer.”

Why is that? “There’s a huge difference between selling to you and listening to you.” Lindstrom put his phone away and started to listen more. In his books, he writes about being in different homes around the world and watching what people do, what people hang on their walls, what people store in their refrigerators and where.

I have a neighbor who doesn’t recycle. At all. This amazes me. At our previous house, we sorted and transported our recycling. At our current house, we have a single stream bin and a combination of lasers, pressurized air, and algorithms sort it. For us, it’s easier. For my neighbor, it’s not.

That’s the kind of point-of-view a business needs to understand. Priors are important because humans compare in relative, not absolute terms.

David Halpern’s work in the United Kingdom is probably the best application of the behavioral economics work done by Kahneman, Tversky, and Thaler. Halpern reflected, “We’re not very good at estimating the absolute value or price of something but we’re pretty good at estimating relative to something else.”

Like me, Halpern is willing to pursue easy environmentalism. While was in charge of Britains ‘Nudge Unit’ Halpern noticed that if more people insulated their attics they’d use less energy and save more money in the future. Using a direct mailing, Halpern and his team notified people of the potential savings.

Rather than absolute terms (all live on the planet will die unless…) they used relative terms (you could save money…). But almost no one took them up on the offer.

Here we should hear and heed Lindstrom. Go sit with your customer. That’s what they did. Halpern’s Nudge team went out and talked to people. Everyone wanted to save money but that only happened in the future. There was a price to pay to get there. It was costly, not in money per se but in something else. It’s a cost every adult has borne at one point. Cleaning out an attic is a pain in the ass.

There are decisions to make about what to keep and what to pitch. How many photo albums are enough? Will I ever go skiing again? Why did I buy this in the first place? Could I sell this and if so for how much?

With this understanding, the Nudge team started sharing coupons and connections to movers who would at least bring everything down. That made it easier. Rather than a physical and psychological effort, people had half that. Halpern found out when he talked to his customers, in this case, fellow citizens.

Lindstrom has also worked with IKEA and showed up one day to meet with the CEO only to find he wasn’t in his office. That’s odd. Lindstrom checked with his secretary who explained that he was in the store.

When Lindstrom finally tracked down founder, Ingvar Kamprad, he was working at the cash register! Lindstrom said, “If you want to study animals, don’t go to the zoo, go to the Amazon.” If you want to understand customers, don’t use spreadsheets, go to the cash register.

We looked at the Pixar fairy tale and how unlikely it was…

…but part of the reason the company made great movies was the field trips. Ed Catmull wrote, “Many on the crew of Finding Nemo also became scuba certified.” For Monster’s University, the crew visited MIT, Harvard, Princeton, UC Berkeley, and Stanford.

When John Lasseter and Catmull got to Disney they insisted the animators go to New Orleans for The Princess and the Frog. “Attending the Krewe of Bacchus parade on the Sunday before Mardi Gras gave them a vivid frame of reference when they animated a sequence based on that festival.” Catmull explained, “The authenticity it fosters in the film always comes through, even if moviegoers know nothing about the reality the film is depicting.”

The Pixar teams had to go there because they couldn’t listen to scuba divers, professors, and parade queens. That introduces Kulturbrille, culture glasses, that tint whatever you see.

Lindstrom said, “Familiarity, in fact, is at best counterproductive, and at worst, paralyzing.” Mark Ritson said that the early days for a consultant are the most important because, “The minute you start getting paid to work for a company, product, or service, it is impossible to see that product the way the customer sees it.”

Lowes Foods in North Carolina asked Lindstrom for help and in turn, Lindstrom asked everyone there for something. Rather than do his own research, Lindstrom took the store employees with him. “Why not issue a report? There’s no emotion to a report. But if you see a person cry, or emotionally affected, you will realize it has more impact than 10,000 people in a report. We infused empathy into the minds of the employees.”

Then, when they were working, the employees understood the why.

Customers hire businesses for all kinds of jobs to be done. Sometimes they know, sometimes they don’t. It can be clear, or opaque. Whatever the conditions, listening to your customers is crucial.

Buyology. Lindstrom’s book, Buyology, is an academic-like approach to how people unconsciously react. “Emotion is a sort of autopilot we’ve inherited through millions of years of evolution,” Lindstrom writes.

The book has many sections on smoking, in part, because Lindstrom’s mom was a smoker. “I noticed that when there were no ashtrays around my mom smoked less. Not because it was inconvenient but because it didn’t remind her to smoke.”

Using this insight he put people in an fMRI machine and wondered if Mark Ritson’s brand codes.

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This is the DNA of a brand. There’s a story, maybe true but definitely helpful that the classic Coca-Cola bottle had to be designed such that even if it was smashed it someone could recognize it.

Cigarettes companies cannot advertise on television and this constraint turned one of their weaknesses into a strength. Without one medium, the cigarette companies got really good using the others. Smokers in an fMRI had similar brain activity when they saw cigarettes or a camel, mountains, or rugged cowboys.

However, when asked, people said it wasn’t subconscious associations. Lindstrom said, “Feeling the emotion is a process distinct from having the emotion in the first place.”  And we post-rationalize. Jonathan Haidt said, “The conscious mind thinks it’s the Oval Office when in reality it’s the press office.”

Lindstrom saw this strongest in Coke and Pepsi test. If fed with a straw, participant’s brains and surveys reported liking Pepsi more. If asked, participants said they liked Coke. Like Dominos pizza, Pepsi had negative brand equity when compared to Coke.

Lindstrom wants people to ask questions and listen to the answers. That means putting down your phone and heading out to your customers.

This takes work. Lindstrom is on the road almost all of the year, but it’s an important job. Ron Shaich asked customers why they wanted their bread sliced. Eric Maddox asked why one person hung around another. Brian Koppelman asked why poker players (and then billionaires) talked a certain way. These are glitches in the matrix or ‘that’s interesting’ moments.

Sometimes we know why we do things, sometimes we don’t but that’s just a reason to ask more questions.


Thanks for reading.

Nell Scovell

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

Just the funny parts by Nell Scovell is the story of 30+ years of television writing. We highlight people from all walks of life because of the potency of out of sample tests. If something proves true, relevant, or helpful in more than one domain it’s more likely to help in ours.

When running his models, Cliff Asness told Barry Ritholtz that out of sample tests are “very calming because it made you think there’s a much smaller chance that you’re just lucky.” So, what did Nell Scovell do so well?

Partner well. “My career has let me put words in the mouths of iconic performers like Bette Midler, Bob Newhart, Craig T. Nelson, and Miss Piggy. Those performers make everything funnier. It’s like having Serena Williams as your doubles partner.”

When Brian Koppelman wrote Billions, he knew the actors could add something to the writing. One step back and Koppelman’s writing partner, David Levein, is his doubles partner on the page.

Good partnerships are built, said Marc Andreessen, when “It has to be more important that the other one gets to make the decision than for you to prove yourself right.”

See it to believe it. It was Monty Python and other TV comedy where Scovell noticed that men and women are both funny. Ramit Sethi included case studies in his latest book for this reason too. When Paul Rudd told Marc Maron that he didn’t realize acting was something to do, Maron said that hears that a lot. It’s not just a job but that a job can be done by someone like me.

Heads I win, tails I don’t lose. I “TRYING SOMETHING NEW SHOULD BE THE EASIEST thing in the world. If you succeed, great. And if you fail, you have the perfect excuse: “Hey, I’ve never done this before.””

Chris Cole wondered why more people don’t take these kinds of risks. The cost is so small compared to the possible payout. Ask the girl, call the boy, talk to your boss.

Career. Scovell had a lot of bombed jokes and bad jobs. So what. Move on. “This approach also applies to an overall career where it’s better to focus on the next opportunity rather than ruminate on missed chances and setbacks.”

Jerry Murrell started and failed at a number of businesses. He had setbacks and no experience in restaurants – and why restaurants are terrible businesses – but he started one anyway. “I really didn’t know what I was doing,” Murrell said, “I’m just lucky that I got in the hamburger business.” It was that opportunity that became Five Guys.

Culture stems from the top and flows down. In television that’s the showrunner. These people can frame how things are going to work – and where. In New Jersey, the writers were, “Operating outside Hollywood’s sphere (which) gave Monk a different feel. No one was reading the trades and the small staff buckled down and stayed focused.”

For Ken Burns, that means New Hampshire. For George Lucas, it was the Bay Area. Organizations can get a mental distance and remove cultural influences by abstraction. Here’s Bill Simmons on how the Celtics dealt with Greg Oden’s medical history.

Serendipity, according to Scovell is a “felicitous accident.” On one shoot she was getting a lot of pushback from the director of photography about how to compose different shots. During a rain break, she slipped under an overhang where a cameraman was watching the gear. They struck up a conversation, got to know one another, and as the shooting progressed he backed up her ideas.

It’s about being open to opportunities.

In 1979 Bill Walsh was the head coach and GM of the San Francisco 49ers. He visited UCLA to see if hurdler James Owens could be a football wide receiver. When Walsh got there he needed someone to throw the football to Owens. There was a quarterback there too, so Walsh asked him to throw a few balls. That quarterback’s name was Joe Montana.

Diversity. Scovell compares the Hollywood glass ceiling to the antifragile metal from the Terminator. That’s too bad because as one mentor told her, “A fairer sampling of humanity will always produce better comedy.”

Businesses call this “cognitive diversity” and as Michael Mauboussin said, “People that can surface different kinds of view is key for quality decision making.” How do you get diversity? Batches. Rory Sutherland notes that when choosing one thing we aim for the average thing. Families own one minivan. Vacations are the average for how much we can spend and choose to do. But do batch work and the decisions change. Hire one person each month for a year and it’ll be the average applicant. Hire twelve people once a year and there’ll be diversity.


Thanks for reading.

Ramit Sethi

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

Ramit Sethi is a great interview. He’s on the podcast circuit because he’s updated I Will Teach You to be Rich. I like Ramit, in part because he’s a nice guy.

Years ago I sent him an out-of-the-blue email about working for him. His response was prompt, kind, and thoughtful. It was like a stranger holding open a door for you, but also noticing the map in your hands and offering directions and a dinner suggestion.

These notes and quotes are from Ramit’s podcasts with Tim Ferriss and The Mad FiEntist.

Good designs. Ramit believes in automated finances. Just like email filters, but for money he tells Ferriss. But Ramit’s taken this approach beyond money. “I wake up in the morning and double click on my calendar and everything is perfectly organized.”

Designs influence behavior. Dan Lockton talked about how metaphors influence our thoughts (Startups are like a…). There’s an architecture of happiness. ‘Choice architecture’ is one tenet of nudging because designs matter.

In his podcast with Howard Marks, Ferriss credited the design around him (physically and contractually) for his investing success. “I’ve done reasonably well in private technology startups because I lived in the middle of it in San Francisco, it was the only thing I paid attention to, and it protected me from my lesser behaviors because I wasn’t allowed to sell.”

Habits are behaviors we’ve already designed for, choices are opportunities we haven’t yet.

Base rates and optimistic future selves. Ramit is coaching a group of people through his book and asked what they might do if gifted ten thousand dollars. “According to these answers, we have a bunch of Mother Theresa’s in the group. They will pay down debt, give to charity, do this and that.”

Much like as Daniel Kahneman thought he could write a book in less time than everyone else, these people thought they could spend money more wisely than their previous selves. But we’re all overly optimistic about ourselves.

This is part-of-the-reason Michael Mauboussin hammers base rates again and again. Base rates help even when someone doesn’t think they will. Bent Flyvbjerg studies megaprojects like dams, bridges, airports and the like and said:

“You hear this when you talk to project planners like I do in my research. You will hear them say you cannot compare projects, it’s impossible, each project is unique. Our statistician laughs when he hears this because he says the curves of cost overruns and benefit shortfalls are so similar that it’s ridiculous to talk about the projects as being unique.”

Adam Carolla colorfully put it this way:


See it to believe it. Ramit includes examples in the second edition of his book. People who retired early(ish). People with a lot of money. People with enough. He told Ferriss that seeing someone like you, doing something new, makes the doing seem possible.

Doris Kearns Goodwin saw it in this book. For Sig Mejdal it was this book. Nell Scovell saw it in this show. This works for college or entrepreneurship too said, Malcolm Gladwell:

Context matters. The middle of the Ferriss interview has a lot about relationships and Tim shares how he and his partner conduct a weekly check-in. “We started off with, ‘shit you need to fix’, then it was ‘growth opportunities’, now its ‘what I’d like to see more of’. The phrasing turns out to be really important.”

For investors, this means figuring out what kind of (bull or bear) market they’ve invested in. For baseball managers, this means figuring out what kind of ballpark a hitter played in. For marketers, this means figuring out what works and why.

Rory Sutherland’s Alchemy is full of examples of context mattering a great deal. One friend enjoyed a trip to the Caribbean so much he loaded up on banana flavored rum to share with his friends back home. But he got home and realized banana flavored rum goes best with sand and sun.

Important things, measurable things, and their differences. Ramit praises the Financial Independence, Retire Early group. Most people don’t save enough, but they have. That’s good. However, “I think a lot of FIRE people decide what’s not important to me. They are on top of that. I think the challenge I would make is, ‘You nailed what’s not important to you, now let’s talk about what is important to you.’”

This is hard. This is latent needs.

Rory Sutherland wrote to “Interpret laterally rather than literally.” The literal interpretation of FIRE is to ‘retire early’. The lateral interpretation is, ‘And then do what?’

In the same way that marketers find the latent needs of their customers, individuals who retire need to provide for their latent needs. Jobs provide meaning, friendships, income, hobbies, connections, and more. “Sometimes the most valuable things in life live outside a spreadsheet.”

Brynjolfsson and McAfee have made the role of ‘job’ more important in their research because of this. Universal Basic Income is like FIRE, a literal interpretation of work but not an accurate one.


Thanks for reading.


Howard Stern

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

Howard Stern Comes Again is a collection of (mostly recent) interviews from the Howard Stern Show.

The last time I heard Stern was in 1998. My summer job was sealing asphalt and one guy loved Stern. He was a hard worker so I didn’t mind pairing up with him but I just didn’t get Stern. It was too early. This book of interviews is smart, funny, and insightful. Stern is contrite and kind. This might be the ultimate book where your mileage will vary but here’s a taste of a few lessons I learned.

The hedonic treadmill is real. Most every guest is rich. Stern is rich too. But money isn’t everything. The celebrities, the actors, the guitarists, the lead singers, and the comedians are also parents, brothers, wives, and friends. They still have problems in their lives, challenges with their health, and obstacles every day.

In what Stern calls my best interview ever, he asks Conan O’Brien about turning down a deal from Fox for twenty-million dollars. Conan replies, “I never made a decision in my career based on money. Not once.” For him, the value was in the body of work. Conan valued his portfolio more than another portico.

Each year there’s a new number. According to Nature, it’s $95,000. But the real number is something else. ‘Enough’ is only enough when it meets expectations. Like pouring water into a graduated cylinder, at a certain level, it’s all you need. Only we change. We adapt to the hedonic treadmill, up and down. The way to get off, as Conan noted, is to want something else.

Work, work, work, work. Stern writes in the introduction, “Nothing is casual. Everything requires work, research and thought.” Throughout the book, the interviewees comment on Stern’s preparedness. Stern may seem like someone who just rolls out of bed and does his show, but that’s how good he is. Prepare enough and anything looks easy.

Stern asks Madonna why celebrities aren’t friends with each other. “Because everybody is busy working,” she tells him.

Before commenting on how hard their jobs are, most interviewees point out they aren’t complaining. It’s easy to think that someone making millions of dollars a year should be breaking their back and busting their hump. They did, they do. Chris Rock said, “Malcolm Gladwell (and 10,000 hours) in the closest I come to religion.”

When Steve Martin ventured away from the warm safety of television writing to be a standup comedian he was scared. Instead of being a writer, magician, and comedian he would just be one. He hit the road because “The lonely road with nobody watching was the place to dig up my boldest – or dumbest – ideas and put them on stage.” Stern too writes that he was glad he got his reps in while he was small.

Years later Gladwell points out that his point wasn’t to set a benchmark but a stage. To get “10,000 hours” requires a lot of support.

Time is zero-sum. Both Bill Murray and Ed Sheeran say they’ve simplified their mobile/social usage. Murray said, “I only got a phone to text with my sons…I’m not a very organized guy Howard. I’m really not. I can’t take on any more.”

Ed Sheehan commented, “The worst thing in the world is being in the studio and you’re, like, midflow, bang bang bang, and you get a text and you go into your phone and that’s an hour of your time gone.” Sheeran deleted social apps, then, “If you don’t have any distractions – I was literally writing four or five songs a day ‘cause there was nothing else to do.”

A constant distraction decreases creativity and serendipity. This idea also fits well with Cal Newport’s career capital theory and the example of Brian Koppelman’s Career.

Fit. Jerry Seinfeld said, “I am not arrogant and stupid enough to think I did that. I know that I got caught in a perfect storm. Me and Larry fit together perfectly. And then the cast.”

“What I do is too hot for television,” wrote Stern, “I mean ‘hot’ in the way that Marshall McLuhan used the word. You got to be ‘cool’ on TV. You can’t heat things up too much. People get uncomfortable. When you see a guy growling and gritting his teeth and baring his fangs, it looks ugly. When you eliminate the video and just go with the audio, it becomes wonderful. It becomes refreshingly honest.”

Different forms have different norms. The best work is done when there’s a good fit. Michael Lewis noticed this about podcasting:

This doesn’t only apply to media. Good businesses have the right culture. Good marketing matches a business’s spirit. Good distribution depends on the product and the customer.

School of life. A lot of the guests had difficult periods of life. Stephen Colbert’s father and brothers died in a plane crash and after that school punishments become hollow. But, “Oh, I read every day. I read almost a book a day. But I just read whatever I wanted to.”

He didn’t care for school but books, books were grand. When I talk to young people I notice that often they dismiss both school and learning. Like train cars hitched to each other, if one’s bad then another is too.

That’s not the case.

Life is full of learning, and best when it is. Tom Cruise never went to film school but said, “Film school was every day I was making a movie.” Michael Lombardi got his Ph.D in football from Al Davis, Bill Walsh, and Bill Belichick. That’s a better education than any school could provide. Sanjay Bakshi said the Berkshire Hathaway letters are free, though he paid for the postage for the early ones while at the LSE and it was the best investment of his life.


Thanks for reading.