Blend the inside view (your experience) and the outside view (base rates) based on the degree of luck or skill involved; rely more on base rates for high-luck situations and more on your experience for high-skill situations.
Start with base rates by asking what happened when other people were in a similar situation before, as this improves the quality of forecasts and decision-making.
Consciously defer to base rates and set aside your own experience and inputs, as this is not a natural way of thinking but improves decision quality.
Systematically evaluate decisions by defining clear inputs and establishing specific measures of ‘goodness’ to judge the outcome, rather than relying solely on intuition.
To overcome algorithm aversion, first apply the algorithm to get a baseline answer, then allow for a small amount of human judgment or tweaking to foster a sense of volition and improve adherence to better solutions.
Continuously improve processes by gathering and implementing feedback, especially in dynamic environments where the rules or conditions can change, requiring your process to evolve.
Build true expertise by engaging in deliberate practice within a stable domain and receiving quality, accurate feedback to continuously improve at the boundary of your capabilities.
Develop intuition in stable, linear realms with repeated patterns by training it consistently, as intuition can be powerful in such unchanging environments.
In luck-laden or ‘biological’ (messy) systems where outcomes are less predictable, default to understanding and periodically revisiting your process, trusting that a good process will eventually lead to good outcomes.
Strategically balance exploitation (leveraging existing strengths) with exploration (seeking new ideas and domains), adjusting the trade-off based on the rate of change in your environment.
Take an inventory of your strengths, weaknesses, and preferred environments to choose a career path that leverages your strengths and aligns with where you can be most productive.
Identify what you are exceptionally good at, especially skills or abilities where others typically struggle, to find your unique value proposition.
Prioritize getting around eight hours of sleep nightly, as adequate rest significantly improves productivity, exercise, diet, and overall well-being.
Enhance sleep quality by exercising regularly and maintaining a good diet, including not overeating and consuming quality foods.
Limit alcohol consumption, ideally to very little or no more than one drink per day, as this can contribute to better sleep quality.
Eliminate all types of soda and soft drinks from your diet, as this change can potentially make it easier to maintain a healthy weight and improve overall well-being.
Treat time as your most scarce resource and be thoughtful about its allocation, considering opportunity costs for different activities.
Recognize that achieving significant output in one area (like reading/research) often requires deliberate trade-offs, such as reducing time spent on other activities (like watching TV).
Balance learning (input) with communicating (output) what you find interesting, as the act of synthesizing and explaining helps deepen understanding.
Utilize quiet weekend mornings by waking early, making coffee, and dedicating a few uninterrupted hours to reading, which can be a highly productive time.
For challenging or lengthy books, commit to deep reading by allocating a couple of hours a day for a week or more, especially during dedicated periods like holidays.
Acknowledge natural ebbs and flows in reading pace, but strive for consistency by doing something all the time, even if the volume varies week to week.
Periodically revisit previously read books, even for a few minutes, as good books offer new insights and perspectives when approached with fresh knowledge or a different point of view.
Surround yourself with books and knowledge resources, as having them physically accessible can provide comfort and encourage spontaneous learning and revisiting of ideas.
Employ checklists to ensure all necessary steps are covered and bases are touched, as they compel thoroughness even if they feel constraining.
To gauge the skill component in a field, observe how much experts agree on outcomes; high agreement often indicates a higher skill component and less randomness.
Understand that the fundamental value of a financial asset or business is the present value of the cash it generates, a principle that remains true regardless of environmental changes.
Recognize the invariant principle that the more certain an outcome, the less you get paid for betting on it, and conversely, the less certain, the more you get paid.
To assess the rate of change in an industry, examine entry and exit data; higher rates of company entry and exit indicate a less stable and more dynamic environment.
Another proxy for environmental change is to calculate the absolute average market share change among participants over a period (e.g., 3-5 years); higher volatility indicates a more dynamic environment.
To gauge environmental change, analyze ‘profit pools’ by breaking down how much each company makes and observing how these distributions change over time.
Adjust your willingness to pay for competitive advantage based on industry stability: pay less in volatile industries with high entry/exit and market share changes, and more in stable industries.
When advising older children, offer ideas and ways of thinking as ‘recommendations’ rather than directives, allowing them to take ownership of the decision-making process.
Distinguish between your problems (where kids can help) and your kids’ problems (where you should act as a facilitator, allowing them to solve it themselves to develop their own tools).