The Knowledge Base is a single long page that serves as the warehouse for mental models and principles gleaned from the books I review. A mental model is a thought technology, a tool that one uses to define a situation or devise a solution. We see a lot of things happen on any given day and much of it is familiar to us. The way we respond, over time, is based on our models (i.e. views) of the situation. The more models, the more ways you can understand and adapt.
Principles are the age-old bits of wisdom, usually found in aphorisms and heuristics, that typically help us decide what is the “right” thing to do. When combined with mental models, we’re able to broaden our thinking, take smarter actions, and avoid bias and narrow views.
You don’t have to be smart to be successful. But you absolutely cannot be dumb. Mental models and principles are a very good way to avoid being dumb.
The list will expand and contract and be curated over time with new book reviews and categories by theme or origin. Consider what you see today to be a proto-version of Ray Dahlio’s Principles. Or Taleb’s Bed of Procrustes. Or Farnam Street’s entire site. Or Aurelius’s Meditations.
For more, read the transcript of Charlie Munger’s foundational speech. Here’s an excerpt:
“The first rule is that you’ve got to have multiple models—because if you just have one or two that you’re using, the nature of human psychology is such that you’ll torture reality so that it fits your models, or at least you’ll think it does.”
Here’s the mental models and principles that I’ve developed so far. They’ll be categorized and drawn from book reviews for now. Over time, they will be codified and probably made into a book that I really hope you’ll buy. It will cost $1,000,000. If a million people pledge to buy it, I’ll charge $1. Until then, and even afterward, they will be curated on this site in an effort to be useful to everyone.
Real strategy requires the kernel: problem diagnosis, guiding policy, and coherent action.
A problem well-defined is half-solved —Oscar Wilde
Vague language is a sign of confusion and fear to choose.
Bad strategy is not the lack of good strategy. It is its own dangerous thing and crowds out good strategy.
Goals are often just statements of desire; they aren’t strategy.
Strategy is a plan to overcome an obstacle.
Great strategy honestly acknowledges the problems and provides coordinating and focused actions to overcome them.
Actions must coherent, direct responses to the problem and must be immediate.
Markets do not evolve from simple to complex; it’s the other way around.
Managing the bridge between goals and objectives is a leader’s top job.
Good strategy focuses on one, or a very few, pivotal objectives. A’la Michael Porter’s straddling problem.
Never label a condition as a problem. A condition, like underperformance, is a result or symptom. The problem is the cause, something deeper.
Strategy determines what purposes are worth pursing *and* achievable.
If you don’t have a competitive advantage, don’t compete.
Strategy is about figuring out what is going on; comprehending the situation is half the battle before deciding what to do.
Deep change in a system requires a deep change in diagnosis. Diagnosis is a leverage point. A’la Harai’s power of narrative; to change people, change the narrative. And Tim Ferriss’s “Let it serve you”, reframe the problem as a benefit. And Tony Robbin’s additional reframe: “Think of this as a gift” a setback that actually helped you in some other way.
You can use a shoe to hammer a nail but it will take a long time. Find the power tools.
Seek coordinated actions only when the gain is large. Otherwise, keep people in their specialty silos.
Certain aspects of future events are predetermined. Find out which ones.
Pivot points, by definition, emerge from the imbalance of a situation.
Understand the equilibrium, sense the imbalance, and act with the small adjustment that unleashes much larger pent-up forces.
Like people, an organization can only focus on a few critical issues at any one time.
Remember the power of the proximate objective—something close enough to feasibly achieve and even overwhelm.
Ignore ambitious goals; test their feasibility instead by judging the level of ambiguity about the obstacles to overcome.
Just improve your position. You don’t win chess by trying to to checkmate with every move.
A chain is only as strong as its weakest link. Either replace it or eliminate it.
There is little payoff in incrementally strengthening the link.
To assess potential, identify the limiting factors.
Never accept the first reasonable answer to a hard question or problem. Test it.
Most advantages only extend so far. Look for an advantage that is sustainable, something others can’t duplicate.
Increasing value requires progress on at least one of four fronts: deepening advantages, broadening the extent of advantages, creating higher demand for advantaged products or services, or strengthening the isolating mechanisms that block easy replication or imitation.
Preventing duplication or imitation is the best defense and best generator of value. Continually improve methods, products, or services. A’la Bezos’s statement that old business was 70% marketing, 30% quality, and now it’s flipped.
Favor a business or service that can rapidly redevelopment and improve.
You can’t show your skill as a sailor when there is no wind.
Organizational inertia falls in three categories: the intertia of routine, cultural inertia, and inertia by proxy.
Inertia by routine is the result of bad management.
To kill cultural inertia, simplify routines, processes, and eliminate the hidden bargains, excess layers of administration, and halt nonessential operations. A’la Jobs’ quip that simplicity is the ultimate sophistication. And Tim Ferriss’s question: What would it look like if it were easy?
To change a group’s norms, change the alpha.
Inertia by proxy is dealt with by creating separation. Fragment units, eliminate their cross-subsidies and dependencies, destroy political coalitions, remove those who do not need to work in close coordination.
A loss of organizational coherence increases internal competition. Departments fight when they’re confused on a crowded dance floor.
A good strategy is a hypothesis of what will work.
To be innovative, or just plain effective, focus not on what is done but why.
Always start with why. Question it all.
Enlightened observation is built on the eternal question of why.
Never build a system so complex that you can’t understand or analyze its failure points and failure modes.
Avoid, forever, the inside view that “this time is different”.
From Sources of Power
More often than not, a difficult choice comes from a lack of understanding what you want.
Novices decide slowly, comparing lots of approaches. Experts decide faster by generating a single course of action through experience.
There are two basic decision approaches: optimization and satisficing.
There are two basic decision processes: comparative evaluation and singular evaluation.
Hard decision with a lot on the line? Use optimization via comparative analysis. Everything else? Satisfice with singular analysis.
Expand the experience base if you want to make decisions more quickly.
Planning is mental simulation.
Mental simulation is vulnerable to narrative fallacies.
Premortems are a hedge against narrative fallacies.
Develop decision scenarios. No better way to understand your desires and the system you’re working within.
Complexity is neither fragile nor robust. It can be either. It can be a sign of sophistication or a sign that the plan is likely to break down.
To solve an ill-defined problem, clarify the goal even as you try to achieve it, rather than keeping the goal constant.
Flying behind the plan–the condition of overwhelm where a person cannot generate expectancies.
An expert is someone who can critique and correct themselves quickly.
Generate feasible options quickly.
Rigor is not a substitute for imagination.
Consistency is not a replacement for insight.
The antigoal. Goals are wanted outcomes. Antigoals are unwanted outcomes.
A good story has these necessary features: drama, empathy, wisdom, plausibility, consistency, economy, uniqueness.
Working memory. This is the ability to hold information for brief periods of time. Once resolved, the memory is deleted.
Long-term memory. This is the ability to store information to retrieve later. The key is storing such information with multiple members in case one leaves
Limited attention. Teams can only discuss/work on one thing at a time.
Perceptual filters. Teams do not have direct experience but must depend on secondhand reports that can introduce inaccuracies.
Learning. Teams need to learn in many ways, such as acquiring new procedures, discarding inefficient behaviors and figuring out how to become more effective.
We prefer consistency rather than the “problems” of inconsistency.
Describe your intent with as little information as you can.
Hold no more than ten beliefs.
A decision is considered poor when the knowledge gained would have led to a different decision in a similar situation. This is hindsight bias and regret.
Think probablistically. It’s the best way to stay nimble. Anticipate failures and the unexpected by scoring (guessing) the probability you’re right. It’s never 100%
Don’t just accept small errors. Make them more visible.
Less but better
Essentialism is a disciplined, systematic approach for determining where our highest point of contribution lies, then making execution of those things almost effortless.
The endowment effect – we overvalue what we own
A counter to the endowment effect – If I didn’t already own this, how much would I spend to buy it?
Choose choice in every area of your life. Optionality produces upside risk.
A strategic position is not sustainable unless there are trade-offs with other positions.
The faintest pencil is better than the strongest memory.
The reverse pilot: test whether REMOVING an initiative or activity will have any negative consequences.
To attain knowledge, add things every day. To attain wisdom, subtract things every day.
We can’t know what obstacles to remove until we are clear on the desired outcome.
Done is better than perfect.
Minimal viable effort
Goals are for losers
A goal is a specific objective that you either achieve or don’t sometime in the future. A system is something you do on a regular basis that increases your odds of happiness in the long run.
Consistency is the bedrock of the scientific method.
Success causes passion more than passion causes success.
Failure is a resource that can be managed.
If you want success, figure out the price, then pay it.
If the cost of failure is high, simple tasks are the best because they are easier to manage and control.
For the truly bad moods, exercise, nutrition, sleep, and time are the smart buttons to push.
Where there is a tolerance for risk, there is often talent.
Every Skill You Acquire Doubles Your Odds of Success
Good + Good > Excellent
Everything you learn becomes a shortcut for understanding something else.
A thank-you is like a treat for a human.
If you learn to control your ego, you can pick strategies that scare off the people who fear embarrassment, thus allowing you to compete against a smaller field.
From Naked Statistics
Bell Curve/Normal Distribution
Central Limit Theorem
Regression to the Mean
Correlation not Causation (avoid narratives and consistency bias)
Statistics cannot be used to prove a hypothesis as simply true or false, emphatically, but rather true or false within a certain level of probability.
Value at Risk
Measure of dependency of variables
Precision vs Accuracy – no amount of precision can make up for inaccuracy.
The questions that compel the analysis are far more important than the tools used to find the information.
The Null Hypothesis
Type 1 and Type 2 Error relative to Upside/Downside Risk
The Scottish Verdict
Probability doesn’t make mistakes; people using probability make mistakes.
There are three realms of influence: personal, social, and structural
There are two components to influence: motivation and ability
Fuzzy objectives are anathema to influence
Clear goals and compelling targets engage the head and heart
If you want a measure to influence behavior, it must be refreshed frequently.
Good measures drive the right behavior
Change vital behaviors, and soon you’ll achieve the results you’ve wanted all along.
As you watch others not doing the right thing while repeatedly doing the wrong thing, ask: Do they enjoy it?
It is not enough to do your best; you must know what to do, and THEN do your best.
A positive deviant is a person who, by all rights, ought to have a problem but for some reason doesn’t.
Influencers use four tactics to help people love what they hate: 1. Allow for choice. 2. Create direct experiences. 3. Tell meaningful stories. 4. Make it a game.
a change of heart can’t be imposed; it can only be chosen.
You can impress or you can influence but you probably can’t do both
Frequency creates familiarity creates comfort
to encourage people to attempt something they fear, you must provide rapid positive feedback that builds self-confidence.
Setbacks are guides, not brakes
People won’t attempt a behavior unless (1) they think it’s worth it, and (2) they think they can do what’s required. If not, why try?
When it comes to working with others, you can have a high amount of control on a task or you can have a high amount of influence. But you can’t have both.
Sacrifice accelerates change
The opinion leader (much different, and more influential, than the thought leader)
Less is more when it comes to rewards so long as they are quickly delivered, gratifying, and targeted at vital behaviors.
Look to the environment to understand many of the behaviors
To change focus, change the data stream
Engage all six sources of influence to overdetermine the change you seek.
Trial and learn, not trial and error.
From The Lean Startup
If it takes two years, you’re building the wrong thing.
Learning is the essential unit of progress for startups (and any other new venture).
Validated learning is backed up by empirical data collected from real customers.
The right way to measure a startup is by how much validated learning we’re getting for our efforts.
Think Big, Start Small.
If you cannot fail, you cannot learn.
Answer four questions before starting a new venture: (1) Do consumers recognize that they have the problem you are trying to solve? (2) If there was a solution, would they buy it? (3) Would they buy it from us? (4) Can we build a solution for that problem?
Success is not delivering a feature; success is learning how to solve the client’s problem.
Every business plan begins with a set of assumptions.
Genchi gembutsu: japanese for “go and see for yourself”.
No amount of design can anticipate the many complexities of bringing a product to life in the real world.
When in doubt, simplify.
A startup’s job is to (1) rigorously measure where it is right now, confronting the hard truths that assessment reveals, and then (2) devise experiments to learn how to move the real numbers closer to the ideal reflected in the business plan.
A smoke test (like trying to get preorders) measures only one thing: whether customers are interested in trying a product.
For a report to be considered actionable, it must demonstrate clear cause and effect.
Whoever is left out of the discussion ends up being the target for blame.
Organizations have a muscle memory.
The minimum viable product
Always have a theory.
Variable rates of reinforcement guarantee behavior
Work Breakdown Structure
Payoff matrix for simultaneous games
Decision Tree analysis for sequential games
Nash Equilibrium – something everyone seeks in most office games we play
Risk categories – Avoid, Control, Accept, Transfer
Monte Carlo simulation of project performance to establish contingency budgets
Reduce risk by dividing the project lifecycle into phases, separated by Critical Decision Points.
Intuition with broader bounds is better than rationality in narrow scope (a gambler’s intuition to never draw on an inside straight)
Game types within game theory
Cartage schemes – a set of canned strategies designed to be invoked when certain parameters are presented.
Maccoby player types – Gamesman, Jungle Fighter, Company Man, Craftsman
Metcalf’s Law and network effects
Personality tests are effectively an inside view at the preferred mixed strategies for a person in an organization
When the organization is losing, people act different. They play to maximize personal payoff.
Information is the lifeblood of the organization.
Information streams must be designed for timely, accurate, and relevant.
Management Information Structures – collect data, turn it into information, deliver it to decision-makers.
Tit-for-Tat strategies and the power of immediate retaliation and immediate forgiveness.
The Corner Cube Model (3-dimensional, three variable graph) of strategic, project, and asset management KPIs and cartage schemes on high and low KPI value.
The most powerful questions to ask employees are the questions that bear the strongest link to the most business outcomes.
In the face of poor performance, start with why. Is the poor performance trainable? Is it caused by a manager tripping the wrong trigger? Missing the motivation?
Great performance management is simple, frequent, and focused on the future.
In the same manner as cartage schemes for strategy, develop a canned series of questions for assessing employee conditions, performance, and need.
As much as possible, define every role using outcome terms.
Attention is the manager’s greatest currency.
Great managers look inward. Great leaders look outward.
Persistence directed primarily toward your non-talents is self-destructive.
Don’t use average to estimate the limits of excellence.
A person’s satisfaction is the clue to their talent. So ask what their greatest personal satisfaction is.
People leave managers, not companies.
When setting expectations, define the right outcomes, not the right steps.
Rapid learning is a vital clue to find talent. There is a talent connected to whatever a person has learned quickly.
Always have an answer ready for when an employee asks “Where do I go from here?”
A person has talent, skills, and knowledge. You can only hire for talent. The rest can be taught.
Great managers do not believe that everyone has unlimited potential.
You can never breathe motivational life into someone else.
A person is considered ‘talented’ when their roles match their talents. Otherwise, talent has no chance to exhibit itself.
Define the right outcomes and give freedom for people to pursue those outcomes according to their style and talent.
Do not script culture.
Identify a person’s strengths. Define outcomes that play to those strengths. Find a way to count, rate, or rank those outcomes. And then let the person run.
No matter the task or role, if you measure it and reward it, people will try to excel at it.
The poor performer knows he is struggling before you do.
If your worldview is wrong, then you will systematically make wrong guesses.
Data as therapy
To control the gap instinct, look for the majority.
Beware comparisons of averages.
Beware comparisons of extremes.
Statistics as therapy — the world appears to be doing much worse until you put it in its historical context.
Practice distinguishing between a level (bad) and a direction (better). Convince yourself that things can be both better and bad.
Gradual improvement is not news. When a trend is gradually improving, with periodic dips, you are more likely to notice the dips than the overall improvement.
Factfulness is recognizing when we get negative news, and remembering that information about bad events is much more likely to reach us. To control the negativity instinct, expect bad news.
Risk = danger x exposure.
“In the deepest poverty you should never do anything perfectly. If you do you are stealing resources from where they can be better used.” — Ingegerd Rooth
Never, ever leave a number all by itself. Never believe that one number on its own can be meaningful. It you are offered one number, always ask for at least one more. Something to compare with.
Divide. Amounts and rates can tell very different stories. Rates are more meaningful, especially when comparing between different-sized groups.
Question your categories.
Slow change is still change.
Get a toolbox, not a hammer.
The blame game often reveals our preferences. We tend to look for bad guys that confirm our existing beliefs.
Look for causes, not villains.
Look for systems not heroes.
Factfulness is recognizing when a decision feels urgent and remembering that it rarely is. To control urgency, take small steps.
Be wary of drastic action. Ask what the side effects will be. Ask how the idea has been tested.
A fact-based worldview will be more comfortable. It creates less stress and hopelessness simply because the dramatic view is so negative and terrifying.
Mastery has two core ingredients: time and desire.
Intensity of effort is genetic, inborn. It comes from a deep, powerful inclination toward a particular subject.
Your true lack of desire catches up with you.
People get the mind and quality of brain that they deserve through their actions in life.
If it is money and comfort that dominate our decision, we are most often acting out of anxiety and the need to please our parents.
The greatest mistake you can make in the initial months of your apprenticeship is to imagine that you have to get attention, impress people, and prove yourself.
Your thoughts will tend to revolve around what you value most.
When it comes to mastering a skill, time is the magic ingredient.
Of seventy great classical composers, it took ten years to produce their first great work.
The Conventional Mind is passive — it consumes information and regurgitates it in familiar forms.
The Dimensional Mind is active, transforming everything it digests into something new and original, creating instead of consuming.
There is nothing that becomes repetitive and boring more quickly than free expression that is not rooted in reality and discipline.
People are dying for the new, for what expresses the spirit of the time in an original way.
Fuse the intuitive with the rational.
You must see every setback, failure, or hardship as a trial along the way, as seeds that are being planted for further cultivation, if you know how to grow them.
Those qualities that separate us are often ridiculed by others, or criticized by teachers.
People do not advertise their rigidity. You will only trip up against it if you try to introduce a new idea or procedure.
From Thinking In Systems
A system is a set of things interconnected in such a way that they produce their own pattern of behavior over time.
A system must consist of three kinds of things: elements, interconnections, and a function or purpose.
It is easier to learn about a system’s elements than about its interconnections.
Purpose is deduced from behavior, not from rhetoric or stated goals.
An important function of almost every system is to ensure its own perpetuation.
Changing relationships usually changes system behavior.
We tend to focus more on inflows than outflows.
A stock takes time to change because flows take time to flow.
Everything we do as individuals, industry, or society is done in the context of an information-feedback system
Three questions to judge the effectiveness of a model: are the driving factors likely to unfold this way? If they did, would the system react this way? What is driving the driving factors?
Delays are pervasive in systems and they are strong determinants of behavior.
Nonrenewable resources are stock-limited. Renewable resources are flow-limited.
Placing a system in a straitjacket of constancy can cause fragility to evolve. — C.S. Holling
Resilience is not the same thing as being static or constant over time.
The capacity of a system to make its own structure more complex is called self-organization
Self-organization is often sacrificed for purposes of short-term productivity and stability.
When a subsystem’s goals dominate at the expense of the total system’s goals, the resulting behavior is called suboptimization.
Nonlinearity means that the act of playing the game has a way of changing the rules.
It’s a great art to remember that boundaries are of our own making and that they can and should be reconsidered for each new discussion, problem, or purpose.
At any given time, the input that is most important to a system is the one that is most limiting.
Policy resistance comes from the bounded rationalities of the actors in a system, each with his or her or its own goals.
If there is a delay in your system that can be changed, changing it can have big effects.
Missing information flows is one of the most common causes of system malfunction.
Most of what goes wrong in systems goes wrong because of biased, late, or missing information.
Intent versus Impact
3 types of conversation: what happened, the feelings conversation, and the identity conversation
When we are unsure of someone’s intentions, we too often decides they are bad.
When stuck in a stalemate, step away from discussing what is true and shift towards discussing what is important.
Feelings are an integral part of conflict
Listen beyond the argument for the emotions; where do they sound hurt, angry, or offended. Acknowledge those feelings and respond to them.
Three components for identity: you will make mistakes; your intentions are complex; you have contributed to the problem.
Don’t try to control their reaction
Everyone has a hypothesis, an assumption, about your intentions.
“This is your fault” really means you did something wrong and you should be punished.
Listening to them helps them listen to you.
- Truth – to – different stories
- Accusations – to – intentions and impact
- Blame – to – contributions
- Judgments and characterizations – to – feelings
- What’s wrong with you – to – what’s going on for them?
The Difficult Conversation Checklist
- Prepare by Walking Through the Three Conversations
- Sort out What Happened
- Understand Emotions
- Ground Your Identity
- What’s at stake for you about you? What do you need to accept to be better grounded?
Check your purposes and decided whether to raise the issue
- Purposes: What do you hope to accomplish by having this conversation?
- Deciding: Is this the best way to address the issue and achieve your purposes?
Start from the third story
- Describe the difference between your stories.
- Share your purposes
- Invite them to join you as a partner in sorting out the situation together
Explore Their Story and Yours
- Listen to understand their perspective.
- Share your own viewpoint
- Reframe, reframe, reframe to keep on track.
- Invent options that meet each side’s most important concerns and interests
- Look to standards for what should happen.
- Talk about how to keep communication open as you go forward.
The Strategic Choice Cascade model. Start with winning aspiration, then where to play, then how to win, then capabilities, then management systems.
Strategy is an integrated set of choices that uniquely positions the firm in its industry so as to create sustainable advantage and superior value relative to the competition.
Strategy is not a vision.
Strategy is not a plan.
Benchmarking is a recipe for mediocrity.
What matters is winning. Great organizations choose to win rather than simply play.
Where to play and how to win are mutually reinforced ideas
Technical superiority alone is not sustainable
The strategic moat concept – a distinct, defensible position that is as inimitable as it is valuable.
The Activity System Method for mapping core capabilities.
Strategy creation and review often devolves into “corporate theater at its best”.
The one-page OGSM tool. A method for hardwiring the focus on clear, concise information, including Objectives, Goals, Strategy (where to play and how to win), and Measures.
Norms for Dialogue: Advocacy versus Assertive Inquiry.
Only when strategic choices and clear and simple can they acted upon.
Strategy Logic Flow – a structured method of thought experiment to test a strategy
Competitive Analysis – game analysis to determine the expected competitive response from other firms as a reaction to your where-to-play and how-to-win choices.
“Articulating options provides a gut check.”
Barriers to Choice – a testing method to determine what worries the team most about the potential strategy; used to tease out “what must be true” for the strategy to be effective.
Reverse-Engineering: a concept related to Gary Klein’s premortem that involves seven steps to test a strategic idea:
- Frame the choice
- Generate strategic possibilities
- Specify conditions (what most hold true for the idea to be strategically sound)
- Identify barriers to choice (what do you feel least confident to be true?)
- Design valid tests
- Conduct tests
The elephant and the rider
Self-control is an exhaustible resource.
IDEO project mood chart
Three part model for guiding change: direct the rider, motivate the elephant, shape the path.
Sometimes, data is simply TBU—true but useless.
Knowledge does not change behavior. We have all encountered crazy shrinks and obese doctors and divorced marriage counselors.
Solutions-Based Therapy and The Miracle Question
Success can look like a problem when there’s too much analysis.
To make a switch, you must script the critical moves.
The rider (rational part of the mind) is exhausted by ambiguity
Clarity dissolves resistance.
SMART goals (Specific, Measurable, Actionable, Relevant, and Timely) presume the emotion; they don’t generate it.
Black and white BHAGs (big, hair, audacious goals a’la Jim Collins) motivate the rider and the elephant. Such as BPs “No Dry Holes” initiative.
Specific about the beginning and the end, fuzzy about the middle
The sequence of change is not ANALYZE-THINK-CHANGE, but rather SEE-FEEL-CHANGE.
If you need quick and specific action, then negative emotions might help. For all else, positive emotion is what sustains the effort.
Shrink the change to make the progress.
Instead of milestones, seek “inch pebbles”.
Script the critical first moves.
But don’t script too much. The sheer quantity of rules can smother common sense.
Hope is precious to a change effort. It’s Elephant fuel.
Select small wins that have two traits: (1) they’re meaningful, (2) they’re within immediate reach. If you can’t achieve both traits, ALWAYS choose the latter.
The consequences vs identity model of decision-making.
Growth vs fixed mindsets
Fundamental Attribution Error – we often attribute people’s behavior to the way they are rather than the situation they are in.
Preloaded decisions a’la cartage schemes and IFTTT approaches to habit-forming.
Reinforcement is the secret to sustaining effort. Steady praise and recognition at every small sign of success.
Our rational perspective is negative by nature. Problems are easy to spot; progress less so.
But the progress is precious. Shamu didn’t learn to jump through a hoop because her trainer was bitching at her.
Mere exposure effect.
Cognitive dissonance effect.
The people who change have clear direction, ample motivation, and a supportive environment.
System 1 and System 2 thinking
Much like the electricity meter outside your house or apartment, the pupils offer an index of the current rate at which mental energy is used
“Law of Least Effort”
When people believe a conclusion is true, they are also very likely to believe arguments that appear to support it
The common admonition to “act calm and kind regardless of how you feel” is very good advice: you are likely to be rewarded by actually feeling calm and kind
The main function of System 1 is to maintain and update a model of your personal world, which represents what is normal in it
A capacity for surprise preserves mental health
The operations of associative memory contribute to a general confirmation bias
Don’t mistake for cause what can be explained by randomness
Anchoring effects – battle them by thinking the opposite
The emotional tail wags the rational dog
The importance of an idea is often judged by the fluency (and emotional charge) with which that idea comes to mind
Base rates matter
It is easier to construct a coherent story when you know little and have fewer pieces to the puzzle
Confidence is a feel. Declarations of high confidence mainly tell you that an individual has constructed a coherent story in his mind, not necessarily that the story is true.
The difference in emotional intensity is readily translated into a moral preference
True experts know the limits of their knowledge
High-validity vs low-validity environments
The planning fallacy
Losses evoke stronger negative feelings than costs
Don’t mistake decisions and outcomes. Good decisions can have bad outcomes and vice versa.
A choice architect has the responsibility for organizing the context in which people make decisions.
There is no such thing as a “neutral” design.
The key is that choices are not blocked off or significantly burdened. If people want to do stupid things, the policy won’t make it hard for them. The policy just tries to nudge them the right way.
Never underestimate the power of inertia.
Kahneman and Tversky identified three major heuristics that translate to biases of judgement: anchoring, availability, and representativeness.
Anchors serve as nudges. The more you ask for, the more you tend to get.
Availability is the manner in which people can easily recall examples of something which in turn makes the example seem much more possible than it may be.
Self-control can be illuminated by thinking about an individual as containing two semiautonomous selves: a far-sighted “planner” and a myopic “doer”. The planner speaks from your reflective system; this is Mr. Spock. The doer is your automatic system and is Homer Simpson.
Social influences come in two basic categories: information and peer pressure.
Humans make mistakes. A well-designed system expects its user to err and is as forgiving as possible.
Attitudes toward risk depend on the frequency with which investors monitor their portfolio.
The invisible hand works best when products are simple and purchased frequently.
Change is situational. Transition is psychological. It is a three-phase process that people go through as they internalize and com eot terms with the details of the new situation that the change brings about.
Three phases of transition: ending, losing, letting go; the neutral zone; the new beginning.
Transitions begin with an ending and finish with a beginning.
The starting point for dealing with transition is not the outcome but the ending that you’ll have to make to leave the old situation behind.
Organizations overlook that letting-go process completely, however, and do nothing about the feelings of loss it generates.
The failure to identify and get ready for endings and losses is the largest difficulty for people in transition.
Inwardly, you can find yourself struggling for a time in a state that was neither the old nor the new. It was a kind of emotional wilderness, a time when it wasn’t quite clear who you were or what was real.
If you don’t understand and expect it, you’re more likely to try to rush through or even bypass the neutral zone–and be discouraged when you find that doesn’t work. You may mistakenly conclude that the confusion you feel there is a sign that something is wrong with you.
The positive function of the neutral zone will be discussed further so let me simply say that the gap between the old and the new is the time when innovation is most possible and when the organization can most easily be revitalized.
Letting go, repatterning, and making a new beginning: together these processes reorient and renew people when things are changing all around them.
Most managers and leaders put 10 percent off their energy into selling the problem and 90 percent into selling the solution to the problem. People aren’t in the market for solutions they don’t see, acknowledge, and understand.
Let them see the problem firsthand. This is part of selling the problem. As long as you are the only one fielding complaints, poor service is going to be your problem no matter how much you try to get your subordinates to acknowledge its importance.
Start holding regular team meetings. The plan had been to hold meetings every two weeks. We changed that immediately. The team met every morning for ten minutes for the first two months. Such frequent clustering can override old habits and the old self-images and build new relations that teamwork requires.
Don’t argue with what you hear. In the first place, it will stop the conversation and you won’t learn any more. You’ll also convince them that you don’t understand them—or, worse yet, that you don’t care what they feel and think.
Loss is a subjective experience and your “objective” view is irrelevant.
People seem to overreact to a change when they are reacting more than we are. Changes cause transitions which cause losses and it is the losses, not the changes, that people react to; second, it’s a piece of their world that is being lost, not a piece of ours, and we often react angrily ourselves when it’s part of our own world that is being lost. Being reasonable is much easier if you have little or nothing at stake.
Overreaction is normal and not really overreaction at all. Learn to look for the loss behind the loss and deal with that underlying issue. You’ll get much further if you can show people that Loss A is really unrelated to the dreaded, larger Loss B than if you simply try to talk them out of their reaction to Loss A.
The question to ask yourself is this: What can I give back to balance what’s been taken away? Status, turf, team, membership, recognition, roles? If people feel that the change has robbed them of control over their futures, can you find some way to give them back a feeling of control?
Managers risk three equally serious and difficult reactions when they do not specify what is over and what isn’t:
- People don’t dare to stop doing anything. They try to do all the old things and the new things. Soon they burn out with the overload.
- People make their own decisions about what to discard and what to keep, and the result is inconsistency and chaos.
- People toss out everything that was done in the past and the baby disappears witht he bathwater.
Show how endings ensure the continuity of what really matters.
The status quo is just an innovation brought about by a transition that people have forgotten.
While the first task of change management is to understand the desired outcome and how to get there, the first task of transition management is to convince people to leave home.
Dangers of the neutral zone include the tendency for people’s anxiety to rise and their motivation to fall. They feel disoriented and self-doubting, resentful and protective.
Old weaknesses, previously patched over or compensated for, remerge in full flower in the neutral zone. (anger, drinking, bad coping mechanisms)
“I had an immense advantage over many others dealing with the problems. I had no fixed ideas derived from long-established practice to bias my mind and did not suffer from the general belief that whatever is, is right.” Henry Bessemer
The task in the neutral zone is two-fold: first, get your people through this phase of transition in one piece; and second, capitalize on all the confusion by encouraging them to be innovative.
One of the most difficult aspects of the neutral zone is that most people don’t understand it. They expect to be able to move straight from the old to the new.
Moses’ long journey through the wilderness is both less daunting and more applicable to your situation: the outlook, attitudes, values, self-images, and ways of thinking that were functional in the past have to “die” before people can be ready for life in the present.
Moses, with the help of Jethro, reorganized his decision-making process in the neutral zone by regrouping people into new units under new, temporary decision makers—”judges” in the parlance of his day.
Set short-range goals for people to aim toward and establish checkpoints along the way for longer-term outcomes that you are seeking.
NETMA syndrome: an employee condition that affects the executive as, by the acronym, Nobody Ever Tells Me Anything.
When orders decrease, set people to work painting the factory.
Look at the neutral zone as a chance to do something new and interesting and to pursue that goal with energy and courage.
Use the neutral zone as a time to redesign how you do what you do. You’ll emerge from the wilderness both stronger and better adapted to your new environment.
The shift out of the neutral zone comes from an inner repatterning and sorting process in which old and no longer appropriate habits are discarded and newly appropriate patterns of thought and action are developed.
Beginnings reactivate some of the old anxieties that were originally triggered by the ending. Beginnings establish once and for all that an ending was real.
People are really different—they aren’t just “defective” versions of yourself.
To make a new beginning, people need the Four P’s: the purpose, a picture, the plan, and a part to play.
A purpose must be real, not make-believe. When budget cuts are described as a way to “improve operations”, you’re simply sowing mistrust and cynicism at a time when you’re going to need all the commitment and energy you can muster.
The purpose needs to grow out of the actual situation faced by the organization and the organization’s nature and resources.
Do not overwhelm people with a picture that is so hard for them to identify with that they become intimidated rather than excited.
Align yourself and your people on one side and the problems on the other.
If a transition is mishandled, we usually say “the change didn’t work” or that it “fell short of our expectations.” What we ought to say is that we got the people out of Egypt but they’re still wandering somewhere in the wilderness.
First Law of Organizational Development: those who were most at home with the necessary activities and arrangements of one phase are the ones who are the most likely to experience the subsequent phase a a severe personal setback.
Second Law of Organizational Development: the successful outcome of any phase of organizational development triggers its demise by creating challenges that it is not equipped to handle.
Third Law of Organizational Development: in any significant transition, the thing that the organization needs to let go of is the very thing that got it this far.
Fourth Law of Organizational Development: whenever there is painful, troubled time in the organization, a development transition is probably going on.
Fifth Law of Organizational Development: during the first half of the life cycle, organizations become concerned with their stability through the Making-It Stage.
In the institution phase of their existence, organizations become so concerned with the stability of their own practices and the sanctity of their values that they end up generating the very problems that initiate the transition to the next phase of organizational life: closing in.
As an institution closes in, the concern for rules and policy becomes an obsession with showing that everything has been done properly and that expecting anything other than the unhappy outcome that actually occurred is in itself improper.
The real hallmark of Closing In is that the organization seals itself off from effective communication with its environment and becomes preoccupied with its own inner workings to the point where operations are ritualized into secret and magical acts.
What most organizations need is not fixing but renewal.
Organizational renewal always involves getting a new central idea around which to build the organization’s activities and structures.
GRASS: Guilt, Resentment, Anxiety, Self-Absorption, and Stress. These are the five real and measurable costs of not managing transition effectively.
When a person is not doing his job, there can only be two reasons for it. The person either can’t do it or won’t do it; he is either not capable or not motivated.
There are only two ways in which a manager can impact an employee’s output: motivation and training.
If you are not training, then you are basically neglecting half the job.
The main purpose of the one-on-one is mutual teaching and exchange of information.
The one-on-one should be regarded as the subordinate’s meeting, with its agenda and tone set by him.
Grove’s Principle of Didactic Management, “Ask one more question!” When the supervisor thinks the subordinate has said all he wants to about a subject, he should ask another question.
The true output of the planning process is the set of tasks it causes to be implemented.
Implement only that portion of a plan that lies within the time window between now and the next time you go through the exercise.
A successful MBO system needs only to answer two questions: 1. Where do I want to go? (The answer provides the objective.) 2. How will I pace myself to see if I am getting there? (The answer gives us milestones, or key results.)
The one thing an MBO system should provide par excellence is focus. This can only happen if we keep the number of objectives small.
Good management rests on a reconciliation of centralization and decentralization.
Corporate culture is a set of values and beliefs, as well as familiarity with the way things are done and should be done in a company.
How does a manager motivate his subordinates? For most of us, the word implies doing something to another person. But I don’t think that can happen, because motivation has to come from within somebody. Accordingly, all a manager can do is create an environment in which motivated people can flourish.
To make hybrid organizations work, you need a way to coordinate the mission-oriented units and the functional groups so that the resources of the latter are allocated and delivered to meet the needs of the former.
You don’t need management to supervise the workings of free-market forces.
If the person’s life depended on doing the work, could he do it? If the answer is yes, that person is not motivated; if the answer is no, he is not capable.
A need once satisfied stops being a need and therefore stops being a source of motivation.
Once someone’s source of motivation is self-actualization, his drive to perform has no limit.
Eliciting peak performance means going up against something or somebody.
The role of the manager here is also clear: it is that of the coach.
It is very important to assess actual performance, not appearances; real output, not good form.
A poor performer has a strong tendency to ignore his problem. Here a manager needs facts and examples so that he can demonstrate its reality. Progress of some sort is made when the subordinate actively denies the existence of a problem rather than ignoring it passively, as before.
An interview produces the most insight if you steer the discussion toward subjects familiar to both you and the candidate.
Training is, quite simply, one of the highest-leverage activities a manager can perform.
From Fooled By Randomness
Probability is not a mere computation of odds on the dice or more complicated variants; it is the acceptance of the lack of certainty in our knowledge and the development of methods for dealing with our ignorance.
Bad information is worse than no information at all.
That which came with the help of luck could be taken away by luck. Things that come with little help from luck are more resistant to randomness.
Skewness: it does not matter how frequently something succeeds if failure is too costly to bear.
Mild success can be explainable by skills and labor. Wild success is attributable to variance.
Do not judge a performance in any given field by the results. Judge it by the costs of the alternative.
The quality of a decision cannot be solely judged based on its outcome.
Denigration of history: the thought that the sorts of things that happen to others will not happen to you.
Care only about the generator; not the results.
Rational thinking has little, very little, to do with risk avoidance.
Epiphenomenalism: the illusion of cause-and-effect. For example, risk management has less to do with actual risk reduction than it has to do with the impression of risk reduction.
Random is not equiprobable. Some outcomes will give higher probability than others.
Prepare for all outcomes. Always prepare.
Stop loss: a predetermined point of exit.
It is not how likely an event is to happen that matters, it is how much is made when it happens that should be the consideration. How frequent the profit is irrelevant; it is the magnitude of the outcome that counts.
Rare events are, by nature, undervalued.
An open society is one in which no permanent truth is held to exist. A good model for society that cannot be left open to falsification is totalitarian.
Survivorship bias: the history performing realization will be the most visible.
No one accepts randomness in their successes, only their failures.
The overfitting effect of data analysis.
Real randomness does not look random.
Virtue is its own reward.
Don’t do to others what you don’t want them to do to you; the rest is just commentary.
We favor the visible, the embedded, the personal, the narrated, and the tangible; we scorn the abstract.
Economics does not describe how people do act but rather how they should act.
From On Desire
The best way–indeed, perhaps only way—to attain lasting happiness is not to change the world around us or our place in it but to change ourselves.
We should learn to sort through our desires, working to fulfill some of them while working to suppress others.
No key ingredient of happiness is missing.
A considerable portion of human behavior is motivated by a desire to generate negative feelings in others.
We are more interested in the positional value of our possessions than in their absolute value.
It is far easier to stifle the first desire than to satisfy all the ensuing ones.
Instrumental and terminal desires.
Hedonic terminal desires and nonhedonic terminal desires.
Desires formed by emotions are highly motivated.
We do not have one inner self; we have several, and they are capable of making contrary choices.
Adaptation: we tend to get used to what we have and therefore like it less with the passage of time.
Miswanting and adaptation lie at the heart of human insatiability.
Decision theory tends to work best for trivial decisions, such as in games. For life’s biggest decisions, such as whether or not to get married or have children, it’s pretty much useless.
Computers need a motivating force before they do anything.
There is no instant cure for unwanted desire. Overcoming desire is a long, slow process and those participating in it will periodically experience setbacks.
Anyone who wishes to deal with desire must adopt semiarbitrary rules for living.
Limitation always makes for happiness.
The greatest remedy for anger is delay.
Wealth rarely compensates one for the drudgery necessary to acquire it.
We shouldn’t trust our desires.
Know that our desires don’t exist in isolation.