Avoid judging yourself by short-term outcomes, as this leads to more mistakes. Instead, focus on having a sound process and being thoughtful about your actions, as this discipline is the best approach for long-term success.
To achieve what you want, focus on deserving it by working backward from your desired outcome. This involves aligning your actions and character with what you aspire to be.
Write your own obituary, detailing how you want to be remembered, then work backward from that vision to guide your life’s actions and decisions.
Recognize that mistakes of omission (things you didn’t do but should have) are often far more significant than mistakes of commission (things you did but shouldn’t have). Actively consider alternative paths not taken.
Incorporate curiosity about the paths you aren’t taking into your daily thinking. Thoughtfully consider why you’re not pursuing them, as this awareness is crucial for knowing when to change your mind or alter course.
Be acutely aware of the levels of leverage you operate with in life and strive to keep them constrained. This ensures you can withstand being wrong and remain durable enough to persist through challenges, answering the bell for the next round.
Design your life and business decisions to avoid situations where circumstances force your hand, limiting your options. This means maintaining low leverage and ensuring you always have optionality, personally and professionally.
Aim for ‘satisfaction’ rather than ‘optimization’ in your decisions, moving from one satisfactory outcome to the next. This approach helps you last long enough to benefit from the compounding effect of always being in the game.
Always remember that ‘any number, no matter how big, multiplied by zero is zero.’ Prioritize survival and staying in the game to avoid catastrophic losses, even if it means sacrificing some short-term gains.
Prioritize fortifying your balance sheet and operating from a position of safety, even if it means making decisions that are not optimally timed in retrospect. Your primary goal is always to ensure you can ‘answer the bell for the next round.’
Recognize that short-term optimal choices are rarely long-term optimal. To succeed in the long term in a short-term world, be willing to opt out of immediate gains and accept looking like an ‘idiot’ temporarily.
To think long-term, ensure you have the financial ability to withstand short-term underperformance, the psychological fortitude to endure social isolation or ridicule for going against the crowd, and an environmental stability that won’t jeopardize your position.
Cultivate patience, especially in investing. Recognize that simple, consistent actions like saving monthly and investing in an index fund, over a very long time, are a near-guaranteed formula for financial independence, but impatience often derails this process.
Apply the ‘great algorithm’ of life: consistently do more of what is already working. This simple principle, though not always easy, leads to effective long-term results.
Let go of your ego and be willing to accept what the universe presents to you, rather than trying to force outcomes. Recognize that some things must be allowed to happen, not made to happen.
Develop a lifelong inventory of multidisciplinary mental models and frames of reference. Use this ’lattice work’ to create a mental construct for judging every new situation or piece of information you encounter.
Maintain a degree of filter skepticism towards supposedly authoritative figures, recognizing that the amount of unknowable information is immense. Don’t take assertions too seriously, as even experts often don’t truly know.
Adopt Peter Bernstein’s definition of risk: ‘more things can happen than do happen.’ Constantly consider the full spectrum of possibilities, not just the most likely or observed outcomes.
When assessing risk, weigh the certain, quantifiable costs against the uncertain, unknown potential dangers. Prioritize avoiding unknown, potentially catastrophic outcomes over minor, quantifiable losses.
Adhere to the principle that you can never make a good deal with a bad person. Prioritize character and integrity in your relationships and business dealings.
Always treat everyone with dignity and respect, regardless of their circumstances or position in life. This fundamental kindness fosters positive interactions.
Operate with a ‘go positive, go first’ mindset, consistently offering goodwill and unconditional support. While some may not reciprocate, the cumulative effect will lead you to find people who will love you forever.
Trust people by default, as this creates velocity and saves time. While it may occasionally backfire, limit your downside so it can’t ‘kill’ you, making it a better approach than constant suspicion.
Generally, err on the side of staying with people longer, giving them a longer leash, and allowing them to play out their hand. This positive environment can help people flourish and reveal their true capabilities.
Cultivate empathy for those in less fortunate circumstances, recognizing that not everyone has the luxury to think long-term. Avoid casting judgment on their short-term decisions, as their circumstances may force them.
Consistently strive to be helpful, add value, and make people glad they interacted with you. This central organizing principle, applied over time, will lead to the world rooting for your success.
Always try to do favors for people, as life is long and these actions can come back to benefit you over time. This fosters a positive central organizing principle.
Align yourself with the general principles of the universe, such as being helpful and adding value, and the universe will do most of the work for you.
Use writing, particularly at a keyboard, as a primary method to form and clarify your thoughts. This process is extraordinarily important for understanding and articulating complex ideas.
To make better decisions during emotional crises, generally be methodical and incremental in your actions. For big decisions, make fewer of them, take time to slow down, and consider taking a walk before acting immediately.
Be prepared to take dramatic, decisive action, such as selling almost all equity positions, when market prices make no fundamental sense, even if it’s a departure from your usual incremental approach.
While drive is important, be aware of the addictive adrenaline rush from ‘deal junkies’ and constantly doing the next deal. Ensure your drive is balanced and applied in the right dosage to avoid unhealthy patterns.
Cultivate thoughtfulness, lay out a clear plan, and consistently execute it over decades to earn confidence. Strive to be a self-motivated, independent, and autonomous thinker, not primarily driven by the approval of others.
Always refer back to the underlying base rate of a situation or decision. If you believe something will differ from the base rate, clearly explain and reconcile why, as this is a crucial discipline.
Organize teams to be small enough that two pizzas can feed everyone, fostering daily feedback, accountability, and preventing excessive complexity.
Approach organizational building like constructing with Lego blocks: focus on creating small, individual units (blocks) that have integrity and work together, building a large structure one piece at a time.
Ensure individual accountability for decisions (‘one throat to choke’), but encourage decision-makers to leverage the collective resources of friends, peers, colleagues, and data. Strive to avoid ‘stupid mistakes’ by utilizing available support.
Focus on avoiding stupidity, as this is often easier and more effective than constantly striving for brilliance.
When considering any action or plan, consistently ask yourself, ‘If we do that, what are we not doing?’ This timeless question helps uncover opportunity costs and encourages thoughtful decision-making.
When considering opportunity costs, broaden your framing beyond simple ‘X or Y’ to ‘X or not X,’ encompassing all other potential alternatives. This ensures a more comprehensive evaluation of choices.
Adopt a ’not yet’ mindset, where instead of saying ’no’ to new ideas or opportunities, you respond with ’not yet, tell me about it, should I?’ This fosters curiosity and openness to new possibilities.
Study first and second-year accounting (including cost and managerial accounting) to grasp concepts like opportunity cost and full cost allocation. Beyond this, focus on understanding the economic substance rather than getting lost in complex accounting theory.
Remember the adage ’the map is not the territory.’ While maps (like accounting statements) are useful, do not over-rely on them or assume they contain the entire truth; they only represent a portion of reality.
When encountering EBITDA, mentally substitute ‘bullshit earnings’ to remind yourself of its limitations. Understand that it often understates true economic costs, especially in capital-intensive businesses.
When evaluating EBITDA, nuance its application based on capital intensity. It’s less misleading for businesses with low ongoing capital expenditure (like old media assets) where amortization is a sunk cost, but highly problematic for capital-intensive industries.
In business dealings, don’t try to change how others think; instead, focus on understanding the underlying economic reality. Be comfortable translating between different perspectives (like a diplomat) to make rational decisions for your own organization.
Maintain a high bar for selling existing holdings; the case to sell something and buy something new must be truly compelling. The ’tie goes to the runner’ (the existing position).
When considering selling an asset with unrealized gains, factor in the tax implications. You’re reinvesting ‘60-cent dollars’ (after tax) versus ‘100-cent dollars’ (pre-tax) by holding, so the new opportunity must be ‘super compelling.’
In investing, emulate Ted Williams by only swinging at pitches (opportunities) that are in your precise ‘strike zone.’ Be patient and wait for the most favorable opportunities, knowing there are no called strikes.
Develop a steady and subtle approach, appreciating that consistent effort, in the fullness of time, will lead to desired outcomes.
Be rational and thoughtful in your personal choices, making decisions that reinforce your desired path. Take advantage of the unique gifts and environmental circumstances available to you.
Define success as building and being part of organizations that provide sustenance, learning, and creative opportunities for many people, serving customers in a way that makes them happy and eager for more.
Strive to find work that feels like what you were ‘put on earth to do,’ where you experience joy and fun, as this makes even challenging aspects of a job fulfilling.
Embrace and find joy in your natural gifts and talents, using them to their fullest extent, as this can be a deeply fulfilling and purposeful experience.
Adopt a ’logistics and support’ mindset, focusing on ensuring your team or those you serve have the fundamental resources and support they need to succeed. This goes beyond tangible items to a mindset of ‘otherness.’
Employ your skills and gifts for a noble and good cause, as this combination will force multiply your impact and effectiveness.
Consider your legacy and financial planning to ensure your family’s sustenance after your death, as exemplified by Ulysses S. Grant writing his biography to provide for his wife and family.
Invest in biographies, as they offer immense value for a small cost, providing years of an author’s research and a person’s life experience. Consider buying both physical and digital copies to support authors.
In large organizations, allow business units and their systems to operate autonomously to mitigate risk. Centralization can create fragility, whereas autonomy provides a level of safety against systemic failures, such as cyber risks.
Implement multi-year compensation structures, such as five-year rolling averages, to foster an ownership mentality and align incentives with long-term performance. This provides more accurate feedback than single-year results.
Be aware of your own biases, such as being more comfortable with modest, frugal behaviors, as this can lower your guard against deception. Rely on trusted colleagues to alert you to blind spots.
Treat initial business interactions as a ‘dating process’ to discern if you can truly work with someone over long periods and in various circumstances, rather than focusing solely on the immediate transaction.
When evaluating decisions or performance, understand not only what actions were taken and why, but also what actions were not taken and why. This provides a more complete picture and helps identify mistakes of omission.
In business, charge everyone the same fair price, rather than charging higher prices just because you can. This principle, rooted in treating all people as equal, fosters trust and long-term customer relationships.
Build or invest in companies that genuinely do things for their customers, rather than to them, ensuring a win-win relationship that fosters long-term success.
When building trust and making decisions, ensure stakes and bets are appropriately sized, especially early on. Increase them gradually as trust develops, focusing on sound process and avoiding stupidity.
If you are a stable, well-known entity able to issue very long-term debt at exceptionally low, fixed rates, consider using all the debt available, as it effectively functions as fixed-cost equity.
View interest rates as a ‘curfew’: high rates (like 14-15%) act as an early curfew, limiting risky behavior, while ultra-low rates (like 0%) are like no curfew, encouraging all ideas to be funded without pushback or consideration of opportunity cost.
Be wary of capital allocation decisions made in a ’no curfew’ environment (ultra-low interest rates), where every idea gets funded without considering gravity, counter-examples, or opportunity costs. This can lead to misallocation and unsustainable practices.
Avoid operating or investing in businesses where managers fool themselves by relying on EBITDA, leading to underpricing products and being forced into unsustainable competitive situations.
Acknowledge that ‘points of no return’ exist in life and try to be thoughtful, aware, and make reasonable, rational decisions when facing them. This helps in navigating critical junctures.
Recognize that a lack of trust in institutions leads to a breakdown of institutional authority and legitimacy, creating a world that is undesirable to live in.
Be aware that seemingly diversified risks can correlate to a single, unexpected event, like a global pandemic. Diversification alone may not protect against systemic shocks.