How to minimize mistakes in our life

Charlie Munger has been called “one of the great minds of the 20th century.”He is Warren Buffet’s partner and co-chairman of Berkshire Hathaway.  

Charlie describes himself as a “multidisciplinary thinker.”  The Farnam Street blog notes that Charlie draws “heavily from the study of psychology, economics, physics, biology, and history, among other disciplines, in developing his system of ‘multiple mental models’ to cut through difficult problems in complex social systems. It is a system like no other.”

“Why is it important to be a multidisciplinary thinker?” asks Peter Kaufman, the editor of Poor Charlie’s Almanack, the Wit and Wisdom of Charlie Munger.

“The answer comes from the Austrian philosopher Ludwig Wittgenstein, who said, ‘To understand is to know what to do,'” says Peter.  “Could there be anything that sounds simpler than that? And yet it’s a genius line—”to understand is to know what to do.” 

Consider the mistakes we make in life.  

“How many mistakes do you make when you understand something?” Peter asks.  

“You don’t make any mistakes,” answers Peter.  “Where do mistakes come from? They come from blind spots, a lack of understanding.”

Why should we become multidisciplinary in our thinking? 

“Because as the Japanese proverb says, the frog in the well knows nothing of the mighty ocean.’ 

“You may know everything there is to know about your specialty, your silo, your well,'” Peter observes.  “But how are you going to make any good decisions in life—the complex systems of life, the dynamic system of life—if all you know is one well?”

How do we become multidisciplinary in our thinking?

Peter’s answer?

“I discovered that on the Internet there were twelve years of Discover magazine articles available in the archives*.  I read every single one,” Peter reflects.  “It only took me six months. And it wasn’t that hard because it was written in layperson’s terms.”

The benefit?

“I had inside my head every single big idea from every single domain of science and biology,” Peter shares.  “This is how I use ideas that no one else in the world uses, and yet I can be comfortable that they’re right.

“If you skillfully follow the multidisciplinary path,” says Charlie Munger, “you will never wish to come back. It would be like cutting off your hands.”

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Reflection:  Consider a recent decision I made that turned out poorly.  What were the factors that led to the decision?

Action:  Read one of the articles from Discovery magazine that Peter references.

Can we see the world from someone else’s perspective?

“The basic axiom of clinical psychology reads, ‘If you could see the world the way I see it, you’d understand why I behave the way I do,’” says Peter Kaufman, the editor of Poor Charlie’s Almanack, the Wit and Wisdom of Charlie Munger.

This week we are looking at some of Peter’s wisdom.

“Now there’s two corollaries to that axiom,” he continues.  “They’re logical extensions. They’re undeniable.” 

Corollary number one: “If you want to understand the way someone’s behaving, you must see the world as they see it,” he says.

Makes sense.  

Corollary number two: “If you want to change a human being’s behavior,” he says, “change how they see the world.”

This is where it gets interesting.

“Now this sounds impossible,” Peter observes.

Or, is it?

“It’s not really that hard,” he suggests.  “You take a business. Most employees of a business see the world as employees. What if you could get them to see the world instead through the eyes of an owner? 

“Do you think that’s going to change how they behave?” he asks. 

“It totally changes how they behave,” says Peter.  “Employees don’t care about waste.  Owners do.  Employees don’t self-police our place.  Owners do.”

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Reflection:  Think back on a time when I changed my mind about an important topic.  How did this happen? 

 Action:  Take time today to attempt to see the world the way someone close to me does. 

Do we want to go quickly or go far?

“The three hallmarks of a great investment are superior returns, low risk, and long duration,” Peter Kaufman observes.

“The whole world concentrates on category one. But if you’re a leader of any merit at all, you should be treating these three as what?” asks Peter. 

Co-priorities.

“How do you get low risk and long duration?” 

Win-win. 

“This is the biggest blind spot in business. People are actually proud of a win-lose relationship. ‘Yeah, we really beat the crap out of our suppliers.'”  Or: “‘we’ve got these employees… on an HB1 visa, they can’t work anywhere else for three years.’ They’re proud of it!’ 

“Total win-lose,” Peter observes.

“You take game theory, and you insert the word “lose” in any scenario in game theory, and what do you have? 

A sub-optimal outcome. 

“What happens when you insert win-win in any game theory scenario, what do you get?” asks Peter.

Optimal.  Every time. 

Peter then outlines a specific “win-win” strategy we can utilize which is similar to Conscious Capitalism’s stakeholder theory.  As leaders we seek to optimize across all six stakeholder groups: our customers, our suppliers, our employees, our owners, our regulators, and the communities we operate in.

“The secret to leadership is to see through the eyes of all six important counter-party groups and make sure that everything you do is structured in such a way to be win-win with them,” says Peter.   

“If you can truly see through the eyes of all six of these counter-party groups and understand their needs, their aspirations, their insecurities, their time horizons—how many blind spots do you have now?” Peter asks.

Zero. 

“How many mistakes are you going to make? 

Zero.

“People don’t think this is possible,” observes Peter.  “It’s really easy. To understand is to know what to do.” 

Peter references two proverbs, first a Turkish one: “No road is long with good company…The essence of life,” he believes, “is to surround yourself, as continuously as you can, with good company.” 

The second proverb is an African one: “If you want to go quickly, go alone; if you want to go far, go together.” 

Peter believes this is the definition of win-win.

“Most people grow up wanting to go quickly alone. It doesn’t work. You wind up like Ebenezer Scrooge in A Christmas Carol. You get to the end of your life. Yeah, you’re rich, you’re powerful, you’re famous, and you want a do-over because you realize at the end of your life, “I didn’t live my life right. I don’t have what really matters. 

“What really matters is to have people pay attention to you, listen to you, and respect you; to show you that you matter; and to love you.  And to have it be genuine, not bought. 

“Live your life to go far together,” says Peter.

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Reflection: Consider Peter’s ideas around superior returns, low risk, and long duration.  How well do I attempt to balance all three elements in my life?

Action: Journal about my answer to the question above.

Why our fear of loss works against us

There a simple, two-word description that describes how everything in the world works, Peter Kaufman tells us.

Mirrored reciprocity.

“Your entire life… Every interaction you have with another human being is merely mirrored reciprocation,” Peter observes.

“You’re going to get back whatever you put out there,” Peter comments.

We get what we give.  

Yesterday, we looked at Peter’s 98-2 principle, which he calls “the elevator model.”  Upon entering an elevator and encountering a complete stranger, if we smile and say “Good morning,” there is a 98-percent chance the other person will smile and say good morning back,” predicts Peter, who is best known as the editor of Poor Charlie’s Almanack, the Wit and Wisdom of Charlie Munger.

Good things happen when we “go positive and we go first.”

And, yet, we don’t.  

We don’t smile and say “good morning.”

Why not?

Because there’s a two percent chance the other person will scowl and hiss at us.

Peter points to the research of Daniel Kahneman, the Nobel Prize winner in behavioral economics.

What did he win his Nobel Prize for? 

“For answering the question, why would people not go positive and not go first when there’s a 98 percent chance you’re going to benefit from it, and only a 2 percent chance the person’s going to tell you to screw off and you’re going to feel horrible, lose face, and all the rest of that.” 

What does Daniel’s research show?

“There’s a huge asymmetry between the standard human desire for gain and the standard human desire to avoid loss,” Peter says.

Our desire to avoid loss is so strong it wins the day even though there is only a two percent chance of it actually happening. 

Peter quotes the baseball player Lou Brock who set the Major League record for stolen bases who said: “Show me a guy who’s afraid to look bad, and I’ll show you a guy you can beat every time.”

“If you’re getting beat in life, chances are it’s because you’re afraid of appearing foolish,” Peter observes. 

How does Peter live his own life?

“I risk the two percent.” 

He quotes U2 lead singer Bono: “I know 10 percent of people are going to screw me. That’s okay. If I’m not willing to be vulnerable and expose myself to that 10 percent, I’m going to miss the other 90 percent.” 

“Those are his numbers—90–10.  That’s why that guy’s had such a great life,” Peter reflects. 

Go positive.  Go first.  Be patient.

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Reflection:  Do I generally extend trust or make people earn my trust?  What would it cost me to extend trust first?

Action: Be intentional about extending trust first.

A 22-second course in leadership

“I know what everybody in the world is looking for,” says Peter D. Kaufman.

The answer to this question is also a “22-second course in leadership,” suggests Peter, who is the editor of Poor Charlie’s Almanack, the Wit and Wisdom of Charlie Munger.

Peter doesn’t shy away from big statements.  So far this week, we’ve looked at his answers to two big questions:

Is there a simple two-word description that accurately describes how everything in the world works?

Answer: Mirrored reciprocation.

What’s the most powerful force that we as human beings, both as individuals and groups, can potentially harness towards achieving our ends in life?

Answer: Compound interest which Peter defines as the “dogged incremental constant progress over a very long time frame.”

So, what is everyone in the world looking for?

We are all on a “quest, an odyssey, a search for that individual that [we] can 100 percent absolutely and completely trust.  But who’s not just trustworthy, but principled, and courageous, and competent, and kind, and loyal, and understanding, and forgiving, and unselfish,” Peter states.

“If you ever think you may have encountered this person, you are going to probe and probe and test and test to make sure that they are real, that you’re not being fooled. And the paradox is that it looks like you’re probing for weakness, but you’re not. You’re probing for strength,” says Peter.

“And the worst day of your life is if instead of strength, you get back weakness. And now you feel betrayed. You know why? You’ve got to start your search all over again. It’s the worst thing in the whole world, isn’t it?”

What does this have to do with leadership?

Everything, Peter tells us.  

“Here’s your twenty-two-second course in leadership…  

“All you have to do is take that list,” Peter tells us: “Trustworthy, principled, courageous, competent, loyal, kind, understanding, forgiving, unselfish – and in every single one of your interactions with others, be the list!”

Remember how the puppy in our story yesterday went all in?

“You do this with the other human beings you encounter in life. They’re all going all in, and not because it’s your idea,” Peter observes.

“That’s all it takes. You don’t have to go to business school. You don’t need books. You don’t need guest speakers.”

He asks: How many of you want to be paid attention to?  How many of you want to be listened to?  How many of you want to be respected? How many of you want meaning, satisfaction, and fulfillment in your life in the sense that you matter? How many of you want to be loved?”

Everybody’s exactly the same.

So, what gets in our way?

“Most people spend all day long trying to get other people to like them. They do it wrong,” Peter discerns.  

“You do this list, you won’t be able to keep the people away. Everybody’s going to want to attach to you. And be willing to do what? Just like the puppy, they’d be willing to die for you. Because you are what they’ve been looking for their whole lives.”

“This is pretty profound, isn’t it?” Peter observes.

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Reflection:  Who is the best leader you’ve ever worked for or with?  What traits made them stand out?

Action: Be that person.  Today.