Nick Murray

Nick Murray joined Barry Ritholtz (@Ritholtz) on the Bloomberg Masters in Business podcast to talk about financial advising, psychology, and the single best thing an advisor can do. Though the conversation focused on finances – like many other domain specific examples we’ve featured like Andy Weir on writing or Amanda Palmer on performing – there is much for anyone to learn.

Murray is the author of numerous books including Simple Wealth, Inevitable Wealth and runs a newsletter at his site NickMurray.com. At “cocktail parties” he refers to himself as “an advisor to other financial advisors” and has decades of experience in financial services. Murray is smart. Ritholtz is too. Let’s see what we can learn.

#1 The mutual exclusivity of gains and plans.

You cannot, Murray says, chase both gains and follow an investment plan. “The best and easiest way an investor can blow himself up is chasing Alpha,” Murray says. Alpha in this case is the idea that you can compare one investment with some volatility to another with similar volatility, and have the former beat the latter. If this were sports, Alpha is being 3 wins better than another team that made a similar number of player trades.

You can chase Alpha if you want, Murray says, but you can’t do that and follow a retirement plan. You’d better pick one because we follow what we track. Seth Godin for example, does not track his book sales. He doesn’t look at his rank on Amazon or website traffic. Those metrics don’t matter to Godin so he doesn’t look at them. But Godin also admits that if he did look at them, he would want to improve them.

Where we look matters both professionally and personally. When Gretchen Rubin was trying to change her habits, she realized that if she paid attention to something, she did better with it. When she tracked her steps, she walked more. When she tracked her time, she paid closer attention to how she spent it.

If we turn things back to the financial realm, we can see that daily, weekly, and monthly numbers should be ignored. For most investors, Murray says, three steps is all they need.

  1. Figure out how much capital you need at retirement.
  2. Figure out the dates and dollar specific benchmarks to hit along the way.
  3. Figure out an asset allocation model that follows from number 2.

That’s it. But do we do this, no we do not.

We look at people like Warren Buffett, Howard Marks, or Ray Dalio and think hey, I could do that. Those guys know a lot, but there’s something we can learn from them too. They all read like crazy.

#2 Be a reader.

If you want to do well, you have to be a reader. Murray says that financial books are especially good about reminding us about the lessons of history. Curl up with a book like Rainbows End during the next financial crisis and you’ll see.

The power of reading, says Murray, is that it creates “adult memories” for us. He talks about going through different crashes, booms, and cycles and says that the people who were least prepared where the ones without an adult memory.

And this idea has been around for thousands of years. Seneca, wrote:

“Men who have made these discoveries before us are not our masters, but our guides…By other men’s labors we are led to the sight of things most beautiful that have been wrested from darkness and brought into light; from no age are we shut out, we have access to all ages.”

The value, says Murray, is that we can start to see the patterns of human nature. We see when people want to survive, want to conquer, or want more. We can see how men want to win big, and if we read we can see how.

Murray is certainly not the only one who advocates reading. Michael Mauboussin and Maria Popova both said that their deep understandings are not just from reading, but from speaking and writing about those things. Charlie Munger – oft-quoted wisdom – said, “In my whole life, I have known no wise people (over a broad subject matter area) who didn’t read all the time – none, zero.”

#3 How to win and win big.

The best investment option, says Murray, is be in the game with a plan. “The dominate determinate to long term financial outcomes is not investor performance, it’s investor behavior.” If you cash out at the bottom and buy in at the top you will never win. Of course you don’t do that, except maybe you do. Research shows that over ten year cycles, mutual funds have 10% returns but investors only realize 5%. Why?

We have those numbers because we sell too low and buy too high. “I’m absolutely convinced that turnover is correlated negatively to return,” Murray says. Instead we need to wait and slow down. “Don’t just do something,” Murray says, “sit there.”

Brad Feld say this axiom play out when he stopped flying around the country to put out fires at his investments. Nassim Taleb writes about this when he says, “I had been intuitively using the less-is-more idea as an aid in decision making.” Less trades, more results.

If we do want to make a change, we can focus on small infrequent actions rather than big sequential scenes. Howard Marks told Ritholtz that the best investors he met were the ones who were consistently above average but never “blew up” (see #1). It’s not just investors, but anyone can apply this thinking. Steven Kotler said that the best athletes he observed improved 4% with a hyper focus on their fields. Not an extreme athlete, but Charlie Munger uses the same approach.

From Tren Griffin.

“As a “know-something” investor, Munger is what he calls a “focus investor”—buying very few stocks relative to the size of his portfolio. In other words, he does not follow wide diversification. In fact, he believes that for a “know-something” investor, portfolio concentration decreases risk if it raises both the intensity with which an investor thinks about a business and the level of comfort he or she has with its economic characteristics. It is important to point out that Munger defines “risk” as a permanent loss of capital and not volatility, as it is often defined in today’s markets.

Focus and make small improvements daily are two key steps toward a big win. If also helps to know a bit about psychology.

#4 How have a great restaurant meal (have a bad one first).

The expression “buy low and sell high” makes logical sense. Our emotions though are not logical. Our emotions want the stock that’s going up and not the one going down. But as the prospectus says, past performance doesn’t not indicate future returns – and often it never will.

What we’ve found here is mean reversion, “something the average investor is not thinking about,” says Ritholtz.

What is it and what can we do? Let’s think about food first.

Imagine you go out to eat at Olive Garden. You walk in and the wait is long, the food is tepid, and the staff is unfriendly. The next week – having learned your lesson at Olive Garden – you go to Longhorn Steakhouse where the wait is short, the food is fantastic, and everybody knows your name.

Which restaurant is better?

In the scope of places to eat, those two restaurants are essentially the same (the same company owns them) but you had notably different experiences. What gives?

Reversion to the mean is an explanation that there are scattering of experiences (the orange line) you could have at a restaurant. Some will be good (Longhorn), some will be bad (Olive Garden).

restaurantsBellCurve

You could theoretically have a lot of above average experiences (more on the Longhorn side of the hump). Eventually though, your good meals will balance out with the bad and most of your meals will be about average.

Okay, but beyond a restaurant how does this apply to our lives?

If your investments do better than average, you are probably having what’s equivalent to a good experience at Longhorn Steakhouse. But you should know that your next experience (next quarter, next year) with that investment will be like the Olive Garden one. That’s how you average out.

We can avoid this, Murray says, by getting out of the hot experiences once we have them. Annually rebalancing is “a total no-brainer,” he says. If we continue our restaurant metaphor it’s like switching to a new class of restaurants, maybe the local Mexican and Mediterranean places. Even if we switch and have a bad experience there, that’s fine. We can keep eating there knowing it will improve back to the mean.

Reversion to the mean is a powerful construct and if you see it once you’ll start to see it everywhere. Thinking this way is one way to avoid chasing options that have already one and have no place to go but down. Another way to insulate yourself is start thinking like a dog.

#5 The benefits of being a Pavlovian dog.

Pavlov is the famous physiologist who trained his dog to salivate at a tone he rang a bell rather than the actual presentation of food. Besides helping his research on saliva, it’s also a good filter we can install in our lives. If we can arrange for automatic actions to prevent us from doing dumb things, then we’ll do dumb things less often.

A personal example of this is the extended warranty. My rule is to never get the extended warranty. Over time I know that never getting one will mean more dollars in my pocket than always getting one or sometimes getting one. Beyond just washing machines warranties, we can create other automatic response too.

Ritholtz says that his wealth management group’s survey questions have an aspect of this.

“We have a couple of CFPs in our office and they have a list of knockout indicators. When people start asking questions about sharpe ratios and things like that, they really want a hedge fund more than a long term plan. You want a whole lot more juice, a whole lot more cocktail party chatter and that’s not what we do. We’re boring.”

Ritholtz has, in the words of Stephen Dubner “taught his garden to weed itself.” He’s not the only one.

When marijuana was legalized in Washington there were a lot more business with cash to deposit. Banks though were in a difficult spot because marijuana was legalized statewide but not nationwide. Some banks saw an opportunity, but wanted to proceed with caution. How could they deal with only the most scrupulous and legally aligned growers? The bank created their own “knockout indicators.” As one bank manager explains:

“We want to know if their company location has any of the following security access, security cameras, security alarms, 24 hour surveillance. The answers to those questions should all be yes. Armed guards or guard dogs? The answers to those two questions should be no.

Getting those answers correct isn’t crystal clear to someone running a marijuana dispensary and those questions weeded out – pun intended – the wrong people.

Ramit Sethi has done the same thing in his hiring process and Van Halen did it to ensure their lighting rigs were set up correctly.

Financial advisors though have another challenge. Not only do they need to educate their clients (teach them to think one way when the bell rings) but they have to combat all the other bells that are ringing. Those bells sounds like gold coins during the Facebook IPO and it’s one of the two biggest financial risks anyone can take.

#6 What are the two biggest financial risks?

There are two big financial risks says Murray. Outlive your money and watch too much television. Let’s get the easier problem out of the way first.

Television is a mess, says Murray, “you can never get truth from media, you can only get news.” And news as a long term investor is not what you want. The daily or monthly market movements are, “of no long term importance,” says Murray, “they are only distractions.”

The problem is a race to the edge of crazy. There are so many voices that want your attention that each voice tries to be louder and more outlandish than the next.

This leads to a crazy mess where you don’t know what to believe. So, like a cluttered restaurant menu at a place you’ve never been before, you pick something that sounds familiar. In the crazy world of news we do the same thing.

This creates a positive feedback loop for what we eat. I don’t recognize anything -> I’ll order the sweet and sour chicken -> (the next time) I don’t recognize anything -> I’ll order the sweet and sour chicken….

We’ve entered the trap of the availability bias. Now, this isn’t a blog focused on psychology per se, but knowing where you are likely to mess up is a big help for not messing up. Counterintuitive thinking is a skill that anyone can hone and be helped by. It’s why Howard Marks says that you can’t beat the crowd if you follow the crowd and is the essence of Peter Thiel’s book Zero to One.

To get out of the positive feedback rut, we need to find opinions that are different than ours. Charlie Munger does this with his two track thinking. Nassim Taleb writes about it in Antifragile. Garrett Hardin gives filters in Filters Against Folly. Ask, “what else?” and you’ll be on your way to avoid it.

The harder problem is a much bigger one, that you will outlive your money. We already answered this problem in #1.

#7 Whatever you do, do not confuse volatility with risk.

As this is a post with many analogies, let’s add more. Imagine you enjoy watching tennis. The strategy of the player’s factors into each shot. It’s a display of human stamina, skill, and endurance.  It brings you to the edge of your seat as the match progresses.

Now imagine you are riding in an airplane in heavy turbulence. The pilots also use their stamina, skill, and endurance to safely fly the plane, but do you enjoy it? Why not?

It’s more or less the same thing. You observe a situation where a person must exhibit some skills to avoid some consequences.

Sure, you may die on a plane, but the odds of that are small. Only 761 commercial airline deaths occurred worldwide in 2014. You were 50X more likely to die from the flu, in the United States alone. Flying, is not dangerous, but may be volatile.

Risk is the chance of a blow up, risk is the flu.

As Tim Ferriss said, “we have a nebulous fear of risk.” Very few things will zero-out our balance and we can often afford more volatility in our lives. If you want to try, here’s Ferriss’s framework.

FearresettingFerriss

Other miscellaneous points

  • Technology is fallible. I was reminded of this when a simple zip-top bag with convenient “slider” failed to work. How does a zip-top bag fail to work when it doesn’t have a puncture? Murray has the same thinking if you replace “zip-top baggie” with “robo advisors.” Like we should be wary of action for the sake of action, so too technology for the sake of technology.
  • The largest positive change in financial advising has been the increased role of women. In true econ-speak, this “untapped resource,” has been a boon to the industry. Women, Tyler Cowen has written, face the biggest upside for employment in the future. Their ability to learn, empathize, and remain emotionally balanced are perfect fits for the new economic landscape.
  • Avoid vogue and du jour items and options. It’s partly explained when Murray talks about churning, but any switches have some costs. Vogue options – more than others – may have great costs  because they may be a straw man.
  • Two books have had core philosophical influences on Murray. The Road to Serfdom by F.A. Hayek and Stocks for the Long Run by Jeremy Siegel. I’ve added both to my growing piles.

Advertisements

Seth Godin and Brian Koppelman

Seth Godin (@ThisIsSethsBlog) joined Brian Koppelman (@BrianKoppelman) on his podcast The Moment to share what he did he to conquer his fears, the placebo effect, and more. Unlike the Ramit Sethi interviews (3) with Pat Flynn which focused on starting a business, Godin’s interviews (2) are more wide ranging.

This is good. Like a salad bar where we can pick and choose what we want or need to eat, Godin provides us with some suggestions on making our lives better.

thedipOne of their interviews was part of the promotion for Godin’s book The Dip, about which Koppelman says:

“That book and the way in which it makes you examine whether you’re on a hopeless endeavour or whether you’re in the moment before success is  crucial. Anyone in any pursuit can profit from that book. It makes you ask difficult questions, and the process from asking those questions will lead you to essential answers.”

Beyond the book there were many other big ideas, why are placebos healthy?

What do you tell that voice in your head?

How do you get an agent?

And much more. Let’s get started.

Placebo for you, placebo for me. Don’t ask your doctor, you can get them for free.

Talk of placebos comes up as Koppelman and Godin settle down in the studio and affix their headphones. Godin says that Beats headphones are less about the sound and more about the  “hey, look at me,” factor.

But there’s nothing wrong with this. The placebo effect is great says Godin, because it’s a low-cost, low-side-effect treatment that anyone can try. And try we should, because placebos are a tool that help change our behavior.

“We are wet machines that can easily be programmed.” – Seth Godin

Scott Adams calls us “moist robots,” and writes:

“The best way to manage your attitude is by understanding your basic nature as a moist robot that can be programmed for happiness if you understand the user interface.”

One way to program ourselves is with placebos. If you think wine is more expensive, says Godin, you will believe it’s better wine. So too for speaker cables (which Godin admits to).

Godin says that it even works on ourselves. We feel good because of the placebo effect, but also because we are the type of people who know the difference.

Brian Koppelman wears Sennheiser headphones because he believes they sound better and (suggests Godin) because he wants to be the type of person who notices this difference.

The voice in our heads that tells us we are the type of person who does something can be quite helpful, except when that voice is a jerk.

How Seth Godin quieted the voice in his head

Godin tells Koppelman that people live in two ways. The first, where most everyone begins, is just living. You respond to your environment and that’s it.

The second is asking what do I want to do with my life. It’s a big shift, says Godin. It’s when you look in the mirror and ask yourself, I’m on this planet and I got a head start, what am I going to do?

This second way is what Wayne Dyer faced. Dyer was about to be awarded tenure and have a job for life. But it wasn’t what he really wanted or needed. For Dyer he wanted the bumpier road with more adventure rather than the manicured sidewalks that a college campus would provide. For a long time Godin lived in the first way – reactionary and attune to the negative voices in his head.

It’s hard for me to imagine Godin as anything but Seth Godin™ but he was. In his early life Godin had a negative voice in his head. At that time he’d lost every election he had ran in. He didn’t make the trivia team he started. He was told by his peers at business school that he didn’t really deserve to be there.

What changed the voice in his head was a road trip. He traveled with a friend who suffered from  depression. When he saw what happened to her, Godin knew he had to change or else that would be him and he changed that negative voice.

We all have that voice, but there are tools readily available to us to quiet that voice.

Jim Kwik suggests we kill ANTS. These automatic negativmatrixleane thoughts can appear at any time and with practice we can stomp them out as quickly as they arrive.

Michael Singer says to visualize the thoughts moving through your brain and lean back. Imagine they go sailing through your mind and disappear into an ether – Matrix style if necessary.

Harv Eker talks back to the voice and tells it, “thank you for sharing.” This he says, is enough to take the sting out of the thoughts. Those thoughts aren’t the final verdict, and you can keep them as one of many options.

Godin didn’t have any of these tools. There was no blog collecting them and he replaced it with Cognitive Behavior Therapy, which he “strongly recommends.” Rather than (poorly) explain what it is, I’ll (correctly) share the Wikipedia link.

Don’t put the agent in front of the cart

How do you become successful in _____________? (Hollywood, Wall Street, Washington D.C. Etc.)

You need to do the work. You don’t need an agent, a connection, an in. You don’t need your brother, your boss, your friend of a friend of a friend. You need to do the work. Want to be a writer, Steven Pressfield tells you exactly how:

Screen Shot 2015-08-03 at 11.39.02 AM

A lot of people want to meet Godin and Koppelman because they’ve got connections. I imagine this word glitters in their minds. Koppelman tells the story about a meeting with a young writer – we’ll call him “Crumbly Comedy. Crumbly was asked Koppelman about possible connections.

Koppelman says that Crumbly wasn’t very funny. If he made a connection that would mean that Koppelman was putting some degree of approval on the kid. Carol Leifer writes in her book, How to Succeed in Business Without Really Crying, that she’s stopped making these connections because she’s been burned too many times by them.

So what should Koppelman do?

He doesn’t tell us, but in the meeting he says that his wife suggested that the student connect with his alumni network because there were people there who were exactly who Crumbly hoped to meet. Crumbly balked at the idea.

Godin thinks he knows what’s happening. “His problem is that he likes being an unsuccessful creator of writing,” says Godin, “the comfort is fabulous. It’s bulletproof.”

The reasoning goes, “unsuccessful writer” is a badge someone can wear. It’s an honor they conferred on themselves but didn’t have to take any risk to get. It’s one they think looks like something where people don’t get what they’re doing.

And it’s too bad this student didn’t reach out to the network because even loose similarities can be much more powerful than we realize.

Generally we tend to like people like us, and we don’t even need to be that similar. One study that demonstrates this is about hotel rooms and towels. Many hotels have adopted placards for the bathrooms that say something like, “if you want to use your towel again, hang it up.” hotelbathroomtowelsign

Many times – like this one – there’s a picture of the earth and the guest is left to think about the rainforest, global warming, and other ways to keep the planet healthy.

But why not put a dollar sign? The hotel saves money by doing less laundry, having less staff to to do the laundry, and by keeping fewer towels. The text could say “hang your towel when you are done, and we’ll have more cash to have some fun.” But no hotel puts that because it wouldn’t really be that effective. Well, guess what, “save the earth” isn’t the most effective either.

Placards about doing good are a good place to start, but could be even better. To maximize our persuasion – and most people don’t believe this but it’s true – we have to pull in social pressures.

When a hotel adds “other people who have stayed in this room reused their towels” to the standards “save the earth” card towel reuse increased 33%.

Knowing this we can give Crumbly some advice, in Dear Abby style:

Dear Crumbly Comedy, thanks for writing in and congratulations on your chat with Brian Koppelman. He’s good guy to know, but you can do better. That’s not to dismiss Mr. Koppelman, who’s had great success, but he’s only one person. Your alumni network can cast a much wider net across the same industry, plus your connection with each of them will be stronger. Even though you went to the same school years apart, there’s still a pull they will feel to help.

You have to do the work – there are no shortcuts.

Seth Godin’s advice on how to write a book

While Godin gives the example of a book, it applies to everything. Amanda Palmer makes the point that we are all artists. If you sell cars, you’re an artist. Your stage is the showroom, the car is the prop, your interactions the script. We’re all creating and we are all artists.

But how do you be a successful one?

Make something, says Godin, “If it’s good it will be shared.”

It’s the advice given by Simon Rich, Nicholas Megalis, and Andy Weir – each of whom gave away much of their early work. Godin says there are four steps to writing a book:

1.Write it.

2.Format it nicely.

3.Send it to 100 people.

4.Write your second book. If your first was good enough to get to 10K people, you’ll have no trouble selling your second.

That’s all it takes, and it’s easier than it’s ever been but it’s still not easy.

Both Godin and Koppelman practically sing about the options and instructions available now.

Whatever you want to do in life, there’s a path to get you there

Do you want to write a best selling science fiction book? The best of the best all have specific instructions for you.

  • Neil Gaiman says that if you want to write a Tolkien like novel, don’t read Tolkien like novels.
  • Stephen King says that if you want to write good books you have to read a lot of books.
  • Andy Weir says that if you want to publish something, don’t tell other people you are working on it.

The list of the greats who have given advice goes on, what more do we need? This is like Michael Jordan coaching us on what drills to do each day or Heidi Klum texting us what the next fashions will be.

But no matter how much we hear what people tell us, we have to do it. It’s not about dreaming your way to success says Godin, it’s about looking around and finding goals that you can aim for and pursue.

“I’ve seen this path followed by 1,000 people, where they work as an intern, then in a mailroom… then that’s a goal, you can say this kind of effort will get me there.” – Seth Godin

Godin says that he doesn’t do much consulting anymore because, “If someone hires me to be a consultant, they want me to solve their problem. All I really can do is turn on the lights and help them solve their problem.” He continues, “The paths are well lit.  It doesn’t mean they are easy, it doesn’t mean they aren’t uphill. It doesn’t mean it works for everyone.”

Even if you find yourself on hard path, that might mean you’re on the right one. Ryan Holiday wrote a book with that very title, The Obstacle is The Way. Peter Thiel writes the best founders come from situations that are “difficult but not impossible.”

And you want the hard path rather than the dream path. Dreams are empty calories. Goals are fine, systems are even better, but dreams are hogwash. “The word dream is an impossible place to hide,” says Godin.

We have to start. We have to be in it to win it. “The lottery tickets don’t cost that much,” Godin says, “but if you don’t buy a lottery ticket, you can’t win.”

Orangerie.jpgScott Adams compares life to a slot machine, it’s free to play but you have to be willing to pull the arm.

The journey won’t be a stroll through the gardens of Versailles. This is a hike where you fall down, skin your knee, and sleep on the ground.  But whatever you do, you have to keep going.

Fail, but don’t take it personally

When Godin was younger he listened to a lot of Zig Ziglar and adopted one of his expressions, “no for now.” This temporizes the nature of the rejection for Godin.

Think of it like winning or losing a game of poker, says Godin.

If you don’t know the rules, and lose, then the cause is your ignorance. How do you become less ignorant, you learn the rules. You didn’t lose because you suck. You lost because you didn’t know enough. Fix it for next time.

If you know the rules and lose, then maybe it was bad luck. You have to figure out how often bad luck happens. Ramit Sethi suggests you talk to others and figure out how often they have bad luck. Then you’ll have a number to start with. .

If you learn the rules and lose again, and it’s not bad luck, then maybe poker isn’t for you. Godin tells Koppelman:

“If the phone doesn’t ring, you have to say, I made something that didn’t work, and if you make something that doesn’t work too many times in a row… you might be delusional and thinking you have talent you do not have. So go to another area.”

A pivot like this happens time and time again. Sam Shank pivoted from Hollywood to Silicon Valley. Adam Carolla pivoted from radio to podcasts.

If you’re not a poker player, try a new game. But find one where you want to be around the people there.

Why Seth Godin isn’t on Twitter

Seth Godin isn’t on Twitter because he doesn’t want to bullied. He thinks that if he got on there would be too many people trolling his work – so he stays off. It’s the same thing that Mark Cuban and Zach Lowe talked about. It affects Amanda Palmer, James Altucher, and Jim Kwik.

Koppelman though had success with his Vines, but why would that work? My guess is that the newish medium and type of message acted as a filter to people who followed him. The only people who received the message, were people who wanted it.

Aziz Ansari mentioned the same thing about his comedy in a Freakonomics podcast.

“I’ve been really careful about what I choose to do, and I only do things that I really like. So I do things, if you do a show like Parks, or you do stand-up, which is just gonna be you, like, you’re gonna attract people to your work who are people you would probably enjoy meeting or speaking with. Like if I did some like, douchey show that I didn’t like, I would probably have some douchey fans that I don’t like. But since I’ve done stuff that I’m proud of and respect, the people that come up to me are cool and respect me and I respect them and they’re usually cool people.”

In Ansari’s case the people around him are his fans, and he creates an environment where the only people who want to get in are people he would want in. Being around the right group matters. Paypal succeed – writes Peter Thiel – because everyone there was different in the same way. The Sopranos succeeded – says James Manos – because everyone there was focused on just making a good show. Twisted Sister succeeded – says Jay Jay French – because the guys in the band were focused on making good music.

Just like the foursome of Dorothy, Scarecrow, Tin Man, and Cowardly Lion all had to be on their way to Oz together, so too do we in our ventures. But on that journey we should not and I mean never, “chase the pudding.”

Don’t chase “the pudding.”

In her book Yes Please, Amy Poehler writes about what it’s like to be nominated for an acting award:

“The worst part of being nominated for any award is that despite your best efforts, you start to want the pudding. You spend weeks thinking about how it doesn’t matter and it’s all just an honor and then seconds before the name of the winner is announced everything inside you screams . . . “GIMME THAT PUDDING!!” Then comes the adrenaline dump, followed by shame. You didn’t even want the pudding and here you are upset that you didn’t get it. You think about all the interviews you did talking about the pudding or all the interviews you passed on because you didn’t want people to think you wanted that pudding too much. You leave the awards show hungry and confused.”

We all have our “pudding.” Godin says he avoids his Amazon number or blog stats because once he starts tracking those things, he’ll want to see them go up. Gretchen Rubin used this in the opposite way with her habits. She noticed that when she started paying attention to things she wanted to improve, she improved them.

That’s not to say you’ll never be tempted. “I still get distracted by the shiny things,” Godin says. To combat these feelings, Godin focuses on finding quality moments rather than quantitative ones. Getting an email from someone that says Godin helped them change is what he wants now. And you need something because the world is full of narratives about the shiny prize.

Godin offers this tip: say no to a really good opportunity. In his case it was an offer of $1B for a project. Godin said no. When he did this, he tells Koppelman, it freed him to say no to every other deal that comes after it, because none of them will be better.

When do you start?

There’s one question to ask yourself, says Godin, and it comes from a trivia competition.

Godin saw with his trivia team that it’s not enough to know the answer. You need to know the answer and buzz in first. You need to ask, am I the type of person who knows how to do this?

That’s all you need to begin. Are you the type of person who knows how to write a book, build a business, start a podcast? Then begin.

Other bits of wisdom

Oh man, there was so much more good stuff in the interviews and you should certainly listen. Here are a few other takeaways.

  • Find a good zone of risk. Godin does his best work on an edge where a project might fail, but avoids ones where everything he’s built might fail. The former gives enough risk for him to feel like he’s doing his best work, the latter brings anxiety that prevents it.
  • Read Finite and Infinite Games, Jon Acuff’s Do Over, and Man on a Wire.
  • Push yourself in some area of your life. Godin praises Koppelman for taking a risk with songwriting and says that the unease from that will positively bleed over into other areas of his life.
  • Find a middle ground between perfectionism and “always be shipping.” You don’t want to constantly be pushing or constantly holding back says Godin.

If that doesn’t inspire you I don’t know what does. Go download these interviews so that you can listen to them while you do the work. For more check out the Brian Koppelman and Seth Godin interviews with James Altucher

// Versailles Photo Credit: “Orangerie” by Urban at fr.wikipedia – From French fr:Image:Orangerie.jpg, personal photo under GFDL license by fr:Utilisateur:Urban. Licensed under CC BY-SA 3.0 via Wikimedia Commons.

Mark Cuban and Zach Lowe

Mark Cuban (@MCuban) joined Zach Lowe (@ZachLowe_NBA) on the Lowe Post podcast to talk about a bunch of NBA things that were not solely NBA things. This blog is all about learning from people smarter than me (some of them a lot smarter than me) and Cuban and Lowe fit the bill.

Cuban has talked with James Altucher, owns the Dallas Mavericks basketball team, and stars on the TV show Shark Tank.  Lowe writes for Grantland.com and approaches sports more like a smart friend from work, rather than your drunk cousin.

Though there is a basketball flooring to their conversation, the topics bounce around enough that we can learn something.

Let’s go.

Not so fast breaks

The interview begins and Cuban tells Lowe that he’s on vacation with his family. This little banter to get things started was almost inconsequential until Cuban said:

“You go on vacation so you can crystalize your thinking about basketball and team building without as many distractions.”

To which Lowe added, “you have to get out of muck.”

A popular idea now is that we need to go, go, go, and be on, on, on and constantly connected. In his book, The Best Place to Work, Ron Friedman makes the case that we need breaks to realign our thinking. If we successfully disconnect, we’ll lower our chances of burnout.

We also might do better work. When Leslie Perlow worked with Boston Consulting Group, she found that when people disconnected, their clients actually felt like they were getting better work.

To a lesser degree, Maria Popova points out that we should examine the work of Henry David Thoreau who wrote:

“The really efficient laborer will be found not to crowd his day with work, but will saunter to his task surrounded by a wide halo of ease and leisure. There will be a wide margin for relaxation to his day. He is only earnest to secure the kernels of time, and does not exaggerate the value of the husk.”

Thoreau isn’t the only writer from history that praised breaks. The book, Daily Rituals, is full of examples like Benjamin Franklin, who worked in two four-hour blocks during the day.

Hindsight bias

Cuban is a vocal owner in the NBA, and as such he gets more than his fair share of criticism. Often this revolves around player personnel choices. Bill Simmons routinely teed off on Cuban’s choices of overpaying for a player to play the center position. But in this interview Cuban at least mutes the critics if he doesn’t silence them all together. Mostly because we forget good choices too quickly.

You see, points out Cuban, everyone forgets that sometimes his “dumb” decisions become “decisive” ones. For example, in 2008 the Dallas Mavericks traded for Jason Kidd, a player many thought past his peak. It wasn’t a popular move and Lowe points out, “you got crushed for that.”

“Yeah I did,” Cuban says. It was bad enough that when his team played against the player they traded, he scored over 40 points and the crowd cheered, “thank you Cuban,” in mockery of the mistake.

The chants were for the crowd, but the last laugh was for Cuban, who won the 2011 NBA championship, which included Jason Kidd.

Our short term memories tend to forget this. Later that year the team added some “head cases” that turned out poorly. Stop again, says Cuban. Fans and writers gleefully point out two players that didn’t work out, but they forget the ones who did. Monta Ellis and Jason Terry are two examples – Cuban says – of players where things turned out well, but these examples never came up when the failures were discussed.

Cuban’s comfort comes from knowing that every decision won’t be a successful one. Ramit Sethi brings up this idea too – know your numbers. There will be X% of trades/deals/ventures that don’t work out. Your job isn’t to make X = 0. Your job is to figure out what X is and then go from there.

Find your opponent’s weakness (Colonel Blotto reporting for duty, Sir!)

Cuban bought the Dallas Mavericks in 2000 for $285M (the team is now valued at $765M by Forbes, but Cuban would “laugh” at anything less than $1B). At the time, he tells Lowe, many teams in the league needed money – and Cuban had it. He was able to buy draft picks from other teams because those were the rules of the game.

Now that game is different. There are upper and lower spending limits for the teams and they need to adapt. They have figure out what battles to fight.

Michael Mauboussin introduced Colonel Blotto in his podcast with Shane Parrish. The essence of Blotto is that if you are more powerful you want fewer battlefields. If you are less powerful, you want more. Fewer battlefields allow stronger players to apply their overwhelming resources. Think traditional war, races for President of the United States, and airlines services.

More battlefields allow weaker players to win areas that strong players ignore. Think guerilla war, races for congressional districts, and email services.

In the NBA one of the new battlefields is advanced statistics. There, teams with fewer financial resources (like, the Houston Rockets) were able to accumulate victories. Competition there was sparse, so while teams with a lot of money (the Los Angeles Lakers) focused their resources on something else, the smaller teams won on the battlefield of advanced statistics.

Another area – that’s been well-trodden by now – is scouting. The San Antonio Spurs have had success because of the slew of international players they were able to find. A decade ago there were only three battlefields for scouting; big and small colleges and high school. The Spurs didn’t have the resources to “win” there, so they found a new area they could.

Cuban tells Lowe that with the new rules about team building and salaries, his staff is looking for new battlefields where they can pick up some wins.

Good addict, bad addict

Addiction funneled the right way seems to be a net benefit to people. Cuban was addicted to learning and money. Lowe is addicted to the NBA. Tim Ferriss and Jane McGonigal both said they need to keep certain video games away because they can take over their lives. Elon Musk had video game binges that could go on for days and which his roommate would have to intervene. Rich Roll said he was addicted to alcohol, food, and exercise (sequentially).

Steven Pressfield writes:

“There’s not that big of a difference between an artists and an addict. Many artists are addicts, and vice versa.”

If you find yourself with addictive tendencies, channel them wisely.

General decision making tips

Mark Cuban says that on Shark Tank he starts from a position of why he shouldn’t take the deal. The people pitching have to overcome a certain burden of proof before he’ll get involved. He also says that the longer the investor story or pitch, the worse the deal.

These are nice additions to our other decision making tips:

  • Seymour Schulich says only to take the deal if it’s 2X as good as the status quo.
  • James Altucher says to only do something if it’s a “Hell yes!”
  • Michael Mauboussin says to start with base rates and use Daniel Kahneman’s techniques.
  • Brad Feld and Stephen Dubner say to slow down and avoid “Go Fever.”
  • Peter Thiel asks, can I create a monopoly with this?
  • Howard Marks and Ray Dalio say to think of second level consequences. For example, when a lower gang member started diluting crack and pocketing the bonus, his superior J.T.  had to decide how to act. Should he beat the crap out of him and set an example, or should he go easy because this kid was thinking and showed initiative? He settled on financial pain, but told him that that sort of thinking was good.
  • Nassim Taleb says we should judge decisions not on outcomes, but on their logical sequence when they were made.

How to sell garbage bags

When he was a kid and wanted new shoes, Cuban said his dad made him work for them. A family friend said that Cuban could sell garbage bags – so that’s what he did. The pitch, he tells Lowe, went like this:

“Hi Mr Lowe, do you use garbage bags? I’ve got some great garbage bags. I charge six bucks for a hundred of them. The great thing about these garbage bags is not only do they work, but instead of you having to worry about having them, I’m going to keep track of when you need them and bring this box of a hundred garbage bags whenever you need them. Is that worth six bucks to you?”

The richness of this statement – refined many years after the fact I’m sure – is that it has good sales inbedded in it.

  • Cuban opens by getting a “Yes,” and that’s like setting dominos in motion.
  • He goes on to talk about the emotional appeal of garbage bags – they free you from worry.
  • Finally, he simplifies things so the customer only has to say “Yes.” It creates a low bar for the customer to clear.

These extractions (and many more) are from the Cialdini books, Influence and Yes! 50 Scientifically Proven Ways to Be Persuasive.

Thanks for reading. I’m @MikeDariano on Twitter. Even though this post is about Mark Cuban and Zach Lowe, the only reason I started writing this blog was because of James Altucher. James gives some of the best advice on living, learning, and earning.

Tom Rath

Tom Rath (@TomCRath) joined James Altucher to talk about mastery, learning, and how to love your job. Rath is on the podcast because he has a new book out, Are You Fully Charged?. He is also the author of Strengths Finder 2.0 and Eat Move Sleep, which James says he enjoyed.

Rath tells James that he even though he’s written several books and read many others, it’s hard for him to make sense of it and apply it to his daily life. He’s not the only one.

Michael Mauboussin and Maria Popova both said that their deep understandings are not just from reading, but from speaking and writing about those things. It’s why I created the Book Club here, because reading on your own without engaging with the book draws out only a wisp of the true value.

Rath’s journey of learning started very young, and with high stakes. When he was sixteen he had vision problems in one eye. A doctor told him that there were tumors growing on his eye, and he’d lose the eye. But that wasn’t the bad news. The bad news was that his tumor suppression genes didn’t work like they should, and he would be susceptible to cancer for the rest of his life.

“It got me really focused on all the things I could do to make a difference and treat each day as a moment to make a lasting impact,” Rath told James.

We often hear stories about how people change after events like this and scientists are starting to understand why. “Researchers have documented the phenomenon of posttraumatic bliss among patients confronting a terminal medical diagnosis,” writes Dr. Jane McGonigal in her book, Reality is Broken. “Something seems to click in their minds, empowering them to enjoy their lives more. It’s not just that they’ve realized how precious life is; there seems to be some kind of significant mental clearing that occurs along with a new ability to focus on positive goals.”

The diagnosis left Rath wondering how he was going to have a normal life. He soon realized there is no such thing. In his treatise, Principles, Ray Dalio writes:

“I learned that the popular picture of success—which is like a glossy photo of an ideal man or woman out of a Ralph Lauren catalog, with a bio attached listing all of their accomplishments like going to the best prep schools and an Ivy League college, and getting all the answers right on tests—is an inaccurate picture of the typical successful person. I met a number of great people and learned that none of them were born great—they all made lots of mistakes and had lots weaknesses—and that great people become great by looking at their mistakes and weaknesses and figuring out how to get around them.”

This is a point of emphasis for Dalio, the path to success is filled with challenges, no one walks down a red carpet. But like Ryan Holiday writes about in The Obstacle is The Way, this is good news.
Dalio again:

“Remember that identifying problems is like finding gems embedded in puzzles; if you solve the puzzles you will get the gems that will make your life much better.”

If we have to work hard at things to accomplish anything, what’s the best way to do it?

In Rath’s research and experience, the driver is intrinsic motivation. Money, Rath explains, is really important up to about $40,000 a year per household. Then its relation to well-being (note: “well-being” is a research catchall that includes “happiness”) tapers off to about $75,000 where it disappears completely.

We tend to muddle this equation because – says Rath – we buy stuff. James is on the record about aiming for experiences rather than things, and the research is pretty clear. Experience beats stuff six days a week and twice on Sunday.

Tim Ferriss explained on one of his podcasts that his entire family was taking a trip Not only did they get the anticipation for six months, but they also got the memories. Stuff typically doesn’t work this way.

Every smartphone I’ve had seems new and shiny out of the box but there is always some lag in the first week where I think, “Really? Didn’t I just buy this?”

Experience work the other way – we tend to forget about the mediocre parts and remember the best parts. Try it, what happened on your last experience to the beach, mountains, or theme park? My guess is that you easily remember the best parts.

Of course there will be some negative memories, what do we do with those? WE SHARE THEM! How crazy is that? Half of what James Altucher writes about are situations when things didn’t go well. Jon Acuff says that he specifically looks to turn negative experiences into stories he can use and lessons to be learned.

Alas, work is not vacation, but we can transfer these big ideas from why we love vacations into our work. Rath advises people to focus on their intrinsic motivation. What parts of your job do you do because you enjoy them?

Maria Popova was on a QA episode of the Tim Ferriss podcast and she shared this advice for someone who wanted to start a blog:

“Write for yourself, if you want to create something meaningful and fulfilling, something that lasts and speaks to people. The counterintuitive but really really necessary thing is that you must not write for people.”

Popova goes on to say that once you write for others – or write “content” – you lose the pure form of motivation you began with. This is important because that’s the very thing you need to be successful.

Later in the episode she answers a question from someone who wants to know the key attribute for success. Popova writes about people like Neil Gaiman, Susan Sontag, and Benjamin Franklin. The thread that runs through each of their stories, she says, is consistency. If you do the work each day, you’ll get better each day, and eventually you’ll have great work. Intrinsic motivation is the best way to do that work.

Going back to Ray Dalio, we can see this. Dalio’s net worth is 1.2 billion dollars, but that alone isn’t indicative. In the words of  the words of Seymour Schulich; “The word ‘billionaire’ is a very crude and inaccurate measure of how well I have played the game of life.”  But like Howard Marks, Dalio has ideas that we can apply to our lives: (emphasis mine)

“I believe the importance of good work habits is vastly underrated. There are lots of books written about good work habits, so I won’t digress into what I believe is effective. However, it is critical to know each day what you need to do and have the discipline to do it. People with good work habits have to-do lists that are reasonably prioritized, and they make themselves do what needs to be done.”

How to love your job

If you already love your job, good for you. There are a lot of people who just show up for the paycheck. What hacks can those people do to make their jobs a lot better?

1.Connect with a customer. Your job creates value, but for who? (Note: Are you sure your job creates value?) If you can connect with that person, you’ll have a chance to build up some internal motivation.

When call-center employees who were soliciting for a tuition fund, met a student who received the money they raised, they subsequently raised more money and reported their jobs as more enjoyable.

2.As someone you don’t like for a favor. Wha? How does asking your frenemy Francine from accounts receivable for help help you?

When Benjamin Franklin faced this same situation he asked his Francine if he could borrow a rare book from her. This request set up a sequence of thoughts, Franklin speculates:

  • “If I lend Franklin this book, I must not dislike him too much, else why would I let him borrow this book.”

Another tip is to include hand written post-it notes on your interoffice correspondence. Researchers have found that “TPS Reports” that include a handwritten note on the cover were returned completed almost twice as often compared to “Reports” without one.

3.Fake your friendships. As A.J. Jacobs and Gretchen Rubin have shared on the podcast and Penelope Trunk has written about, we can change our thoughts by first changing our actions. It’s what #2 pointed out specifically, but we can apply it more broadly for all parts of work. Bored at a meeting? Sit up and lean forward. Hate a certain task? Connect with a customer about it (see #1). It’s often a lot easier to change our actions before our thoughts.

4.Don’t fall for FAE. Fundamental Attribution Error is a psychological misstep where we tend to blame the person more than their condition. Jim is a jerk, Lauren is lazy, and Steve a slob. Instead we might want to take a step back and wonder why. Maybe Jim is a jerk because of something going on at home? Maybe Lauren thinks that working slower means working better. Everyone has story, find out the one of the people you work with.

Remember too, the words of Austin Kleon, “every job is still a job.” No matter where you work, there’s going to be something you won’t particularly like.

Balance

A key part of Rath’s work is about finding balance. Rath says that if we set the bar too high, as was the case for exercise recommendations, we turn people off.

Instead we should aim for a balance of the good and bad things in our life.

  • If you sit a lot, aim to walk a lot too.
  • If you eat an unhealthy lunch, aim to eat a healthy dinner.
  • If you have an unproductive morning, aim to have a productive afternoon.

If you’re having trouble balancing though, use the “bar too high” technique to reduce the things you don’t want to do.

  • Login to Facebook too much? Change your password to something long and don’t save it. If you have to type it in each time you’ll login less.
  • Each too much junk food? Quadruple bag it. When I buy licorice I actually put it in four gallon sized bags. It doesn’t take much to open each bag, but it’s enough of an obstacle that I don’t eat until I’m sick.
  • Don’t exercise enough? Know your tendency. Go back to the Gretchen Rubin interview and read her book, Better Than Before, to get some ideas for how to make it more enjoyable.

How to be a master

Mastery is something Rath has written quite a lot about in his books, and it sounds like he leans towards the importance of everyone finding their own talents – but not entirely. “It’s probably a triangulation of talent, practice, and luck,” Rather says.

The two talk about the 10K hour rule and both conclude it’s not so much of a rule as a metaphor. Rath says that if you have some natural talent in something, you may only need 5K hours to become world class at something. It goes along with Robert Greene’s thoughts that you don’t need deliberate practice for the hours to qualify. James Altucher adds that some world class people have achieved mastery because of the intersection of their merely good talents (like Scott Adams admits).

Simple hacks

Rath also shares a few simple hacks that make his life better.

  • Think about what notifications you need during important moments. If you are reading books to your kids, what do you need to come through? If you’re at a play with your spouse? Then set up your phone so those are the only notifications that get through all the time. Ryan Holiday took a step like this when he deleted Facebook from his phone.
  • Don’t be reactive to the work you do. As Adam Grant explained to James, the people who are most successful at their jobs do their work first.
  • Take walks. Walking may be the best lifehack there is. Daily Rituals is my favorite source of knowledge nuggets like these; Thomas Hobbes took a two-hour walk after breakfast to meditate, Rene Descartes would take his daily walk after lunch, Charles Dickens would leave promptly at 2:00 for a vigorous walk where he searched the countryside and streets of London for “pictures to build on.”

Oh yeah, the three keys to helping you learn and grow?

  1. Meaningful work.
  2. More positive than negative interactions
  3. Have enough energy to make a difference.

Thanks so much for reading. One caveat to experiences and things. If the thing lets you have an experience, it’s probably pretty good, especially if you can do it with others. Games are a great example of this. Playing board games and video games with others –  to a point, don’t go over 21hr/wk or bad things start to happen – largely brings positive effects. For a more down-to-earth example see Chris Janson’s Buy Me a Boat.

Can you do one thing for me? I’m in a reading rut right now and can’t get out. Can you tweet me (@MikeDariano) one book you’ve read in the last year that was especially good. Thanks.

Jim Kwik

Jim Kwik joined James Altucher to talk about how he learned things the hard way and ways he teaches people to learn things the easy way.  Kwik runs Kwik Learning whose mission is “to help you learn faster, master information overload and unlock your inner genius.” His YouTube channel is full of instructional videos like one on speed reading and “memory makes money.” Kwik is on Twitter, @JimKwik.

As the interview begins, Altucher says that past guest Steven Kotler refers to Kwich as a “superhero.” That’s not quite right, says Kwick, he’s more like a mechanic. Imagine your brain came with an owners manual, he tells James. He’s just the one who read the manual and knows which buttons to push and knobs to turn.

Kwik learned all this organically, and mostly the hard way. A lot of the lessons here come from doing things the hard way. Jairek Robbins told James that a number of his mistakes were ones where his dad – Tony – could have stopped. He didn’t, Jairek says, because the true lesson was in the mistake, not its explanation.

experienceandmoney

These moments can serve to catalyze us. Tony Robbins grew up without a lot of food and that motivates him to use his current success to feed people. Andy Weir failed to become an author after three years of full time focus. Later he began writing again and eventually he succeed. Lewis Howes couldn’t read well as a kid and self-identified as a jock to find success. Now Howes not only reads, but runs a seven figure business.

Kwik – and many other people – have withstood professional pressure to turn their experiences from coal to diamonds.  Kwik and Howes have a parallel story. As kids both were taught that their mental abilities set. Like the a regulator slows down go-karts at the local track, they believed they could only learn or read so much.

They aren’t the only ones.  Many people view intelligence as fixed. You’re smart or not. You’re a math person or not. You’re a label #1 or label #2. There are some ways labels like this can help us with the many decisions in daily life. This is not one. Your intelligence is not capped, but if you believe it the effects are real.

When college students were reminded of a negative stereotype (their race/sex/age/religion is less smart) before an exam, they did poorer than those students who weren’t reminded of anything. But, when students were told those negative stereotypes were straw men, and that intelligence is malleable like clay, those student did even better than the group that was told nothing.

Kwik’s experience – and fixed mindset – were compounded by a head injury when he was a kid. His memory problems – and perception – got worse. One day in class, he lied and said he hadn’t read a book rather than present his report to the class.

Part of the way Kwik got over this hurdles was by monitoring his self talk. Other guests here have shared their own tactics for monitoring self talk.

  • Michael Singer advises people to lean back and let the negative thoughts pass you down your stream of consciousness.
  • T. Harv Eker says to himself “thank you for sharing when a negative thought goes through his head.
  • Tony Robbins writes, “Know that it’s your decisions, and not your conditions, that determine your destiny.”

For Kwik, the key was to think of himself either as a thermostat or thermometer. A thermometer is reactive to the conditions while a thermostat sets the conditions. This is a big different he tells James. Once he acted more like the latter, he noticed that things began to change.

A pivotal moment in his life came when Kwik spent a school break with a friend’s family. His friend’s father was on a walk with Kwik, when the man asked how school was, “and I broke down and cried,” Kwik says. School was not well.

Then the man asked Kwik to write down everything he wanted to do in life. His wishes. His dreams. His hopes. Then he looked at the list and told Kwik he was this close, holding his fingers ten inches apart. That distance represented the space between Kwik’s ears.

“Don’t let school get in the way of your education,” the man told him.

Whether the man knew it or not, the act of writing things down matters quite a bit. When we write something down it creates a commitment of action. When we do that we redefine part of who we are to be part of that thing. It’s why salespeople have clients fill out paperwork or write down their goals for the month. A written commitment creates a emotional pull.

Thanks to the man’s book suggestions (Napoleon Hill type books) and another fall which landed him in the hospital, Kwik started to read more. Not only that, he started to learn. There was no class at college on how to learn he said, so he began there. Now there is exactly that class, Barbara Oakley’s course and book are both great resources to begin with.

Kwik made the best of his situation even though he was laid up. He could have moped around and felt sorry for himself. That wouldn’t have been helpful. Nicholas Megalis did the same thing, using a hospital bed as a springboard to exploring new social media apps. Neither man needed a new computer, time, or health. They just needed a moment to act.

While in the hospital Kwik learned the value of reading and tells James:

“The intelligent person learns from their own experience but the wise person learns from the experience of other people.”

We can, “download decades of experience in days,” he said. This is not a new idea. Two thousand years ago Roman Philosopher Seneca wrote the same thing:

SenecaOpenBookKwik was able to find his footing and began to seek books that were “force multipliers.” There are some books, he tells James, that can amp up other areas of your life. Speed reading books are a good example of force multipliers. I would suggest Antifragile, Influence, and The 5 Elements of Effective Thinking as books with high per page returns.

As he learned more, Kwik distilled ten areas to focus on to be a superhero mentally.

  1. Eat well. “We are what we eat,” Kwik tells James.
  2. Kill ANTs. (Automatic Negative Thoughts)
  3. Be physically healthy. It’s amazing the number of great thinkers that took daily walks. Beethoven, Twain, and Darwin among others. Ryan Holiday also confesses to physical activity as a mental stimulus.
  4. Brain Nutrients. There are certain foods that help your brain function. Rather than prescribing something, Kwik suggests self-experimentation. Steven Kotler suggested similar things. Peter Diamandis and Tim Ferriss are two names that come up often.
  5. Have a positive peer group. It wasn’t until Jay Jay French found a group of guys who really wanted to make great music that his band finally took off. It only took him until the 11th try.
  6. Have a clean environment. Gretchen Rubin wrote that she cleans her desk on Friday afternoons as a way to bookend the workweek and get started right on Monday.
  7. Sleep. It’s more than rest, it’s like preparing the kitchen. Imagine how messy a busy kitchen is after a night of diners. What would happen if the food wasn’t refrigerated, the knives weren’t washed, and the floor wasn’t mopped? There’s no way that kitchen could open the next night. That’s what sleep does for our brains.
  8. Brain protection. Wear a helmet.
  9. Learn new things. “The brain thrives on novelty,” Kwik tells James.
  10. Stress management. See the advice about about how we monitor our thoughts.

But don’t try to do all of these things, Kwik says. Instead, aim for to improve one or two for now, then move through the list.

A big chunk of the interview is Kwik walking James through the loci method of memory. It’s one of the best instructions and examples of the method that I’ve heard. The technique has been around a long time, but the book that popularized it is Moonwalking with Einstein. If you enjoyed this part of the interview, or want to dive into memory, or learn how to memorize a deck of cards, get the book.

If the loci method isn’t exactly what you want, Kwik gives a FAST way to learn.

Forget. Forget what you know or don’t know or don’t know you know about something he tells James. Instead, focus on what’s going around you situationally. We have a limited number of short term memory slots, try to forget about everything except what you are aiming to learn.

Active. As Michael Mauboussin said, “when I need to write about it or speak about it, I tend to know the material reasonably well.” Maria Popova added, “learning to read well and to write well is really learning to think well.”

State. Emotions are associated with learning, Kwik says, and if you control them you can better create the right mood.

Teaching. “When you teaching something,” Kwick says, “you get to learn it twice.”

For even more Jim Kwik here’s a three-hour hangout he did for Google.

If you liked what Jim had to say, go ahead and thank him on Twitter. One of my favorite things about the podcast is the ability to learn big things in a condensed fashion. Just Kwik’s idea about “killing ants” is one I can put into practice right away. James Altucher’s email list is another one that works well for me. Even though not every single email is spot on for me, there’s always something each week that helps my thinking. Sign up for James’ condensed big ideas.

Ramit Sethi’s Business Advice

ramitface.bmpRamit Sethi has been a guest on Pat Flynn’s Smart Passive Income podcast three times. Sethi had many good things to say to Altucher when they talked in episode #36, and his time with Flynn is no different. In those conversation Sethi laid out, how to build your product, how to market it, and how to make decisions.

I’m a fan of Sethi and writing this post was quite fun. It was like picking up breadcrumbs that someone had dropped along a path, leading me to a big idea. That said, there’s probably something I missed. If you notice a big ideas missing, please let me know.

How do you build a product?

If the key in real-estate is; location, location, location. Then the key to internet products according to Sethi is; research, research, research.

Sethi’s first blog, I Will Teach You To Be Rich, was built on answers to questions his friends asked. A book came from the blog. While on tour to promote the book, people started asking him questions that weren’t in the book. One of those questions was about how to make a side income. Which led to the next project.

This sequence isn’t uncommon. Austin Kleon (episode #19), Wayne Dyer (episode #6), Steven Kotler (episode #118), Stephen Dubner (episode #110) and others have all said that they got ideas for their next project from questions raised by their current one.

You want to spend time on research, not just creating, Sethi says.

Justin Jackson (@mijustin) – another product person – tells this story. He was walking to his barber one day, turning over ideas in his head. One was about how to improve his barber’s scheduling system. Jackson could create an online tool that let people schedule appointments, see openings, and make changes. The barber could collect email addresses, track key metrics, and sell products. Then, if he can build a system for one barber, he can sell a license to other barbers. This appeared to be a win for everyone.

When Jackson arrives at the barber shop, he hops into the chair and starts to share his ideas.

The barber listens patiently for a few minutes, but interrupts Jackson to tell him that he hears this idea all the time. “All the time?” Jackson asks, “but then why don’t you do it?”

“It won’t work for me,” the barber tells him. The barber explains that he wants something that’s quick and easy. He needs to efficiently answer the phone while cutting someone’s hair, check and note the caller’s appointment time, and get back to the job at hand.

Jackson thought he had a golden idea until he talked to his potential audience.

Sethi puts hard numbers down, spend 50% of your time on research. That doesn’t mean tweeting, “Hey guys, I need your help, what do you think I should build/write/code/draw/design.” Instead, look for a problem to solve, then:

1. Create a surveymonkey survey. These don’t have to be perfect questions, but put your best guesses out there.
As the results come in, talk to people in your industry and ask key metric standards. If you emailed everyone on your email list and 10% responded, figure out if that’s an average number. Ask how big someone’s list size is, ask them about how often they email people. Ask lots of questions.

2. Create a Google Doc. While the survey responses pile up, create a document with  your predictions. If the question is, “What do you like most about vacation” put headings like, Relax, Family Time, Sand, Etc.
At this point these are your best guesses, and they are merely a place to start. Do not become attached to them because:

3. Disprove your Doc assumptions. Did you know the term Devil’s Advocate originated  the Roman Catholic Church? It was a position assigned to someone who would make the case against someone’s canonization. That’s what you – or your team – needs to do.

If you’ve got more than one person, your most convincing advocate will be someone who actually believes in their stance. In Yes!: 50 Scientifically Proven Ways to Be Persuasive, the authors write that someone who’s merely playing the role will be viewed as less persuasive by their co-workers.

Sethi saw his assumptions dwindle like a stack of chips at the craps table when he launched his Earn1K course. He thought people wanted to create extra income to be “ballers” who flew to Las Vegas for the weekend. In reality people wanted optionality in their lives. The wanted the ability to do this or that or not do something.

Look at the survey results and start to see how things fit with your original assumptions. The goal here is to figure out the shape and picture of the puzzle that’s forming. While you do this, be open to the idea that your original pieces may not be part of the final puzzle.

4. Create a picture with real people. In your document you want to include headings that are the big ideas that have emerged, and direct quotes from people. If the reason they go on vacation is to “get away from the office” then those exact words need to end up on your document.

At this point you don’t need to worry about statistical significance. If only 16.87% of people say they like to “get away” that’s fine at this point. You’re like someone who’s chosen to begin a healthy diet. You don’t need to know the difference between quinoa and couscous, you do need to know the difference between couscous and candy bars

5. Interview people. Much like the survey and document, this doesn’t need to be complicated. Sethi notes that you need to check your biases at the door and don’t ask leading questions. This stage is still research and to dive deeper into the problem that people are having.

Soon you will start to get an idea about what people want. Sethi says:

“At a certain point I start to see a lot of patterns in people. They’re going to always be using the same words. They’re going to be saying the same things, and at a certain point instead of just listening I can say, “You know, it sounds like what you’re saying is blah blah blah” and I kind of read back what I’ve learned. Sometimes they’ll say, “Well, kind of, but not really.””

Only then can you start to probe and say things like, “if there was a vacation autoresponder that cut down on your mobile emails would you use that?” or “if there was a way to get back into work-mode when you returned, would you pay for something like that?”

Once you start to poke around and get traction you need to find hard yeses to these questions. If someone hasn’t said, “shut up and take my money,” you need to keep looking.

6. Create small groups. Once you think you have something, you can build it. This too can be quite small. Sethi says that his team will use Google Docs to create a slide deck for people to go through. That works because this is still not a polished project.

Ask 10-20 people to be part of your small group. Have them go through the entire course/book/system that your research suggested.

Product people sometimes miss this – I know I have – but it’s everywhere once you realize it. Authors have beta readers they seek feedback from. Comedians go to clubs on Tuesday nights to test material.

7. Maintain an internal locus of control. Do not worry about what other people are doing. Do not worry that So-and-so released such-and-such and it’s their 4th one this year. You do not care. Bigger numbers don’t necessarily mean more or better.

For example, Peter Thiel (episode #43) writes that bigger corporate boards aren’t necessarily better boards. You might think that more minds might mean more solutions, but this isn’t Thiel’s experience. More minds mean more debate and fewer decisions.

You can only control the things you do, you may as well focus on those. Michael Singer (episode #119) suggests you mentally lean back and imagine things passing you. T. Harv Eker (episode #100) says that he mentally says, “thank you for sharing,” when distracting thoughts arise.

Ramit Sethi’s Guide to Marketing

wrappedcookies
Can you spot the 3 marketing points in the stack of cookies?

Marketing – like development – comes from the research. Marketing and Development are not a chicken and egg problem. Marketing and Development are a egg and scrambled egg breakfast platter problem. One must come before the other.

If you do good research for development, your marketing should flow right out of that. That said, here are some macro ideas anyone can use.

1. Let your language flow from your research. Sethi says that his “Earn 1K” program was called something different in the development stages. After some tests, his team realized they needed to tone down the language because people didn’t believe it.

For example, Sethi says. If you were to create a dating product, think about how your language may differ for different sexes. For men it may be; “double your dating.” For women; “catch him and keep him.”

With any of these ideas, let the copy come from the customer’s cries.

2. Answer objections. Sethi calls this the Theory of Preeminence and he outlined it in his first talk with James Altucher. “When we created a product called Earn1K, this was the headline…finally a proven legitimate program to identify a profitable idea and turn it into a reliable side income of a $1,000 a month with just five hours a week.” Then Sethi explains why this works:

  • Some people earn 10K but many don’t believe it, 1K is reachable.
  • Don’t I need to quit my job? Nope, it’s a side income.
  • This sounds like a scam, has it been tested? Yes, it’s proven and reliable.
  • But what if I don’t have an idea? The course helps you identify one.

3. Give social proof. People want to see that people like them – and the more similar the better – have used the product. This is where you can go back to your small group. Sethi says that some of his small groups have been free, on the condition of those people letting IWT to interview them later on. This is social proof, and the better you implement it, the better your results will be.

Researchers have found that good social proof can improve conversations from 0-25% and great social proof from 25-32%. The more niched your product, the more focused you can be with your social proof. In the vacation example you can focus on men who travel for business. In the dating example you can focus on young people who live in large metropolitans.

4. Know what your market will pay. Sethi says that one of his first products was about how to save money. “Guess what,” he says, “people who want to save money don’t want to pay to to see how.” That was poor alignment on his part Sethi says.

 

5. And don’t sacrifice your price. Unless you’re selling t-shirts at Target, don’t discount your product. If you worked hard on something and it’s worth $50, then sell it for $50.

You need to be confident in what you’ve created, Sethi says, and this comes from all the testing and research you’ve done.

Instead of thinking in terms of cost, think in terms of value. How helpful is the thing that you’ve created? Books are classic examples of great values but they are priced at <$20 (an example of #4 above). No matter how great your book is, you’ll be hard pressed to sell it for a lot more than that.

But many books have great value. I’ve read some books where I would have liked further discussion on a topic or someone to follow up with how I was putting the principles into practice or video examples. If you can create more ways to interact, apply, or understand the material then that’s added value.

6. Sell in long emails. “One thing I’ve learned,” Sethi says, “is if people have a pain point or if they are interested in what you have to say, there’s no limit to what they’ll read.”

Each email that you send should contain something of value, Sethi says. People should be excited to open your email and see what’s inside.

This also filters in the right people. If your writing is a reflection of who you are and what you are selling, then it’s step one of customer acquisition.

Ramit Sethi’s Guide to Running a Business

mullerlyer-illusiaSethi has been doing the internet business hustle long enough now that it’s his business, not a side project and he thinks of it like one. There are a few lessons he’s learned along the way that can help anyone with their business.

1. Understand psychology. There are a lot of psychological tools that Sethi uses in his sales pages, and for good reason, they work. Ideas like scarcity, abundance, social proof, and more are all little levers we can pull that will nudge people along. In an interview with Tim Ferriss he recommended people read, Mindless Eating, The Age of Propaganda, and The Social Animal.

There’s a reason people don’t change, Sethi says, and it’s not for a lack of information.

“Hey, everyone knows what those compound interest charts are, they don’t change behavior at all. Or when it comes to dieting, or weight loss–“If people really understood how bad carbs are, if we just wrote another paper on it, then they would change.” WRONG! If they change their behavior first, then their attitude will follow.”

Howard Marks noted that the biggest #fail in investing is psychological misunderstandings, not financial ones. To fix our thinking, we need to flip the sequence we often try. Both A.J. Jacobs (episode #94) and Gretchen Rubin (episode #97) use the idea that behavior -> thinking pattern and Sethi does too.

2. Does 5X move the needle? Did you know there’s an IWT app? Yep, really. For all the things Sethi is, he’s not one to shy away from talking about his products. Yet I had never heard of the app before. It’s because they’ve cut bait on it.

Sethi says that they had a meeting about it and a team member suggested they spend some time optimizing the app and making changes. They could do that, Ramit says, but it wouldn’t really change anything.

“I called it the 5x Principle, because even if we 5x sales, it would make no material impact. It wouldn’t even move the needle!”

They could have changed the app and increased sales fivefold, but it wouldn’t have had a significant impact.

3. Haters gonna hate. There will be people who call you names, it did not end in middle school. The key is to not take it personally, because it will eat you away if you let it. Pat Flynn says, “when I would get negative criticisms for something I would think about it for DAYS. It would just kill me.”

Amanda Palmer (episode #82) and James Altucher both said the same thing – it hurts.

4. You are a CEO – act like one. “I want everyone listening to start thinking of themselves as a CEO,” says Sethi, “not some scrappy internet nutcase but a CEO. A CEO walks into the room and they think very methodically and deliberately.”

One way to improve your thinking is to develop decision making models like Michael Mauboussin (episode #TKP1). Peter Thiel also has some good mental models. Shane Parrish at Farnam Street has the best collection of them.


If there’s a conclusion to Sethi’s system it’s; just do it. Do one small thing that moves your business or book or course forward. While writing this I thought how similar it was to walking through a dark room. You can’t see anything and sort of move slowly about. You’ll run into the chair and maybe knock over a lamp. But if you remember where the chair and lamp are, you won’t make that same mistake twice. That’s Sethi’s secret – don’t make the same mistake twice. Learn lessons along the way. Do research that gives you a leg up on your guesses and be critical of them.

But how do you do it? Where do you start? Begin by finding smart people to get ideas from. I started this site because James Altucher consistently has podcast guests sharing great ideas.

Howard Marks

Barry Ritholtz was joined by Howard Marks to talk about competition, decision making, and persistence. Marks is the co-founder of Oaktree Capital Management and author of The Most Important Thing Illuminated: Uncommon Sense for the Thoughtful Investor. His funds have achieved 18-22% returns and his net worth is $2B. Marks has been incredibly successful in his financial life, but it’s wise to remember the words of Seymour Schulich; “The word ‘billionaire is a very crude and inaccurate measure of how well I have played the game of life.”

Bigger than the billions are Marks’ ideas, which he shares with Ritholtz.

Competition is not capitalism.

This expression comes from Peter Thiel (episode #43), who writes that the accumulation of capital does not happen in instances of competition. The reason there are few wealthy pizza palace owners is because there is too much competition. Competition eats away at capital accumulation, no matter how good your pie.

Marks learned this serendipitously in his career. One day a client called the place he worked and asked about a high yield bond fund. The company didn’t offer that, so Marks’ boss assigned him the task of developing one. Marks’ career grew as the desire for bond funds grew. There were very few people at the time who were operating bond funds like this and Marks says he was “lucky to get in early.”

It’s the same story Jason Calacanis (episode #77) tells about getting in early with blogging and Jay Jay French (episode #75) tells about his band being ready to play on MTV. More competition would have meant less capital for each of them.

Think at the second level.

“If you think the same as everybody else, you’ll behave the same as everybody else, and you can’t expect to outperform them.” – Howard Marks

Marks tells Ritholtz that first level thinking is the style of thinking that many people use. It’s cause and effect thinking. It’s thinking in simple contexts rather than complicated or complex ones.

First level thinking is – someone pays me for my work, it must be valuable.

Second level thinking is – why does someone pay me for my work, what value do I provide?

Taylor Pearson, Adam Davidson, and others suggest that the employment landscape is changing in exactly this way, and the people who recognize it first will be the second level thinkers.

Marks suggests we follow this advice from Warren Buffett:

“The less prudence with which others conduct their affairs, the greater the prudence with which we should conduct our own affairs,”

And Marks has applied this thinking too. In 2007 he started a distressed debt fund – in 2008 the market crashed. In January 2000 he wrote about the internet bubble – in March it peaked. It’s a sample size of two, Ritholtz points out, but it’s a pretty good record.

How to avoid the winner’s curse.

The winner’s curse is, by definition, paying more than anyone else will pay. So how do you avoid paying too much?

Marks suggests awareness, “the secret to solving all problems starts with awareness of that problem.”  We call this the Rumpelstiltskin Effect, and have seen it over and over again:

  • Adam Savage cracked the code by finding out out glass bottles are named.
  • Carol Leifer cracked the code by finding out how to shut down hecklers.
  • John Chatterton cracked the code by finding out how to identify sunken submarines.

Avoiding the winner’s curse – or any psychological pitfall – begins by knowing its name.

“The biggest investing errors come not from things that are factual or analytical,” Marks says, “but from those that are psychological.” If you can keep yourself out of the way, you’ll be well on your way.

The average way to be the best.

Marks tells Ritholtz about a meeting he once had with a fund manager. The guy told Marks that he was proud of his slightly above average results, because over 20 years that meant he was in the top 5% of all performers.

A short time later Marks met a manager who was in the midst of a quite bad year, but justified it by explaining you had to have some years of loses to have the great years of gains.

Instead it’s more about survival. If you avoid blowups, you’ll survive. If you do good work, you’ll survive. In blogging like this, more people leave each year and the pool of survivors moves up the ladder of success.

What to do when you hear the crickets.

For ten years no one responded to Marks’ chairman memos. Ten years! And it’s not like these weren’t of consequence. Warren Buffett said, “When I see memos from Howard Marks in my mail, they’re the first thing I open and read. I always learn something.” Ritholtz praises them as well, but also asks, why Marks kept writing them when it seemed like no one cared.

“I enjoyed the process,” Marks says. It’s the same thought process Chris Hadfield (episode #111) used in his pursuit to become an astronaut. Hadfield reasoned that there was a good chance he would never make it, but wanted to try. He made sure that the work along the way was interesting to him as well as leading the way to becoming an astronaut.

Finance has been a great career for Marks, but many young people do it for the money. Don’t, says Marks. Instead, find something you enjoy doing and get good at it.

How to not make mistakes.

The best way to avoid mistakes, says Marks, is to read widely. You’ll start to see the cycles of life. Marks tells Ritholtz about this bull market cycle; nobody thinks things will improve -> some people think things are getting better -> most people think things will improve forever -> CRASH. Nobody thinks things will improve…

You dont’ have to live through these things to understand them, Marks says. Instead read widely about different ideas and cultures and history. As the roman financier Seneca wrote:

“By other men’s labors we are led to the sight of things most beautiful that have been wrested from darkness and brought into light; from no age are we shut out, we have access to all ages.”

Try Against the Gods, Fooled by Randomness, or The Short History of Financial Euphoria, says Marks. Also good are Poor Charlie’s Almanack, The Warren Buffett Way, or Outsiders. Ritholtz too has book suggestions.

We’ll never be mistake free, says Marks, and sometimes we’ll need to face situations with consequences. In those cases, he suggests we seek outcomes we can live with.

Be logical, not emotional.

Marks says that a lot of companies get tripped up in emotional hurdles – especially when they buy back their stock. Why do companies buy back stocks when the price is high, Marks asks. Instead they should be buying back when the price is low.

Have a set of procedures for how you would like to act and plan ahead. When John Chatterton dove into a sunken submarine, he had to navigate by touch using only his memory of the sub’s layout. When Chris Hadfield launched into space, he had his steps choreographed like a dancer. When Ramit Sethi (episode #36) teaches courses, he tells people how to have logical answers (add value) rather than emotional ones (cut price).

Our logical responses are like paths through the woods. If we are familiar with them, then we can better stay on them, even when running from a bear (market).

Thanks for reading, I’m @MikeDariano.