1: Stanford business professor Tina Seelig divided her class into fourteen teams and gave them a challenge:
“Each group would get five dollars of seed funding and have two hours to make as much money as possible,” Sahil Bloom writes in his book The 5 Types of Wealth: A Transformative Guide to Design Your Dream Life.
When the two hours were up, each team presented their approach and results, sharing how they tackled the challenge.
“When given this challenge,” Sahil writes, “most respondents will take a linear, logical approach, such as bartering. These options would generate a modest return on five dollars of seed capital.”
Some groups ignored the five dollars and spent their time brainstorming ideas to make as much money as possible in the two-hour time block. Their ideas included “Made and sold reservations at the best restaurants in town” and “Refilled bike tires in the center of campus for a dollar each,” Sahil shares.
These groups tended to make a better return than those who focused on the $5 of seed capital.
“The winning group also ignored the money, but they took an entirely different approach,” Sahil writes.
“They recognized that the most valuable asset was not the money or the two hours they were given for the challenge but the presentation time in front of a class of Stanford students,” he notes.
“Internalizing the value of this asset,” Sahil explains, “they sold the presentation time to a company looking to recruit Stanford students for $650, netting a monstrous return on the $5 of initial capital.”
Some groups thought in linear, logical terms. They achieved linear, logical outcomes.
The winning group thought differently. They used what is referred to as the Socratic method, “a process of asking and answering questions that stimulate critical thinking to expose and vet underlying assumptions and logic,” Sahil explains.
To apply this approach ourselves, Sahil provides us with a four step process:
1: Start by crafting open-ended questions that encourage broad thinking, rather than yes/no answers.
2: Propose ideas based on these questions.
3: Probe these ideas with progressive questioning.
4: Continue this process of questioning and refining until the most promising ideas are fully developed and robust.
We begin by asking “What problem we are trying to solve?”
Clarifying the problem before jumping in is the critical first step in this process, setting the stage for all that follows.
“For the students in the business school class, the wrong problem was how to use the five dollars to make the most money,” Sahil writes. “The right problem was how to make the most money given the time allotted for the exercise.”
We ask: What is our hypothesis about the problem? What are the origins of that thinking? Why do we think this? Is our thinking too vague? What is it based on?
Throughout, we also check for assumptions. Sahil suggests we “identify the source of beliefs on a problem” and “be ruthless in evaluating their integrity and validity.”
We ask: Why do we believe this to be true? How do we know it’s true? How would we know if we were wrong?
We also question the evidence supporting our thinking. We ask: What concrete evidence do we have? How credible is it? What hidden evidence may exist?
We clarify the stakes and understand the consequences of being wrong. Can an error be quickly fixed? How costly is this mistake?
Next, we evaluate potential alternatives. What other beliefs or viewpoints might exist? Why might they be superior? Why do others believe them to be true? What do they know that we don’t?
After zooming in, we zoom out. We ask: What was our original thinking? Was it correct? If not, where did we err? What conclusions can we draw about systemic errors in thinking?
“In the business school experiment,” Sahil writes, “spending time asking questions to identify this right problem was what unlocked the group to think differently about the assets at their disposal and ultimately to come up with a more creative solution.”
3: Socratic questioning is not applicable to every situation because it requires time and effort.
“It shouldn’t be used on low-cost, easily reversible decisions,” he writes. “But when we encounter a high-stakes decision with the potential for asymmetric rewards in our business, career, or life, it’s worth engaging in the exercise.”
Doing so will enable us to “think differently and uncover the path most likely to generate asymmetric, risk-adjusted returns,” Sahil explains.
More tomorrow!
______________________
Reflection: When I face an important decision, do I slow down long enough to question my assumptions and clarify the real problem I’m trying to solve?
Action: Before making my next high-stakes decision, write down my initial view of the problem and then use Socratic questions—What am I assuming, how do I know it’s true, and what alternatives exist?—to refine my thinking and choose a better path.
What did you think of this post?
