December 10, 2018
Principles define how you make decisions in your life. Every day you are faced with thousands of decisions. The choices you make are driven by your principles whether you realize it or not.
When you take the time to understand your principles, you will understand how you make decision. This understand lets you make better decisions, change habits, and see patterns where others would miss them.
You can better develop your principles by understand the principles of others. Learn from people like Ray Dalio. Then modify them to fit your personality and goals.
No matter how prepared you are, fate is unpredictable and you will face a loss. It's unavoidable.
The import thing is to make sure you can handle a loss. Minimizing your down sides by finding your neutral point. An equilibrium where you are not loosing anything and you can sustain indefinitely. Once you identify this point, you can take calculated risks outside of it. Knowing that you have a cushion at your neutral point.
If you want to benefit from a loss, you need to analyze it. Compare your assumptions to the events that transpired. Identify where you went wrong. This will allow you to learn and grow with every loss you face.
Making many balanced and uncorrelated bets is the best way to minimize your risk while keeping the gains. If your bets become correlated, you lose the benefit of diversification because more of your portfolio can be effected by a single event.
In order to understand correlations, you won't only need to understand markets. You will need to understand people. Try to understand why opinions differ, even if they are at complete odds with you. This will help you gain insight into how the world works. There is more than one way to view the world, so be curious and open minded to other's opinions.
If you want to be successful, you need to leverage everything around you. Your intuition, technology, and the knowledge of others melded together. With more input you can make better decision.
However, no matter how much input you get, remember to not get greedy. When you want ever more and get out of balance you run the risk of losing more than you can handle. Instead, make intelligent adjustment. You will still have a huge upside but with the assurance that you won't lose it all.
Ray Dalio turned his everyday decisions into systems. He started by compiling the reasons for each choice. Then he aligned the reasoning with the category it applies to. Because there are fever types of decisions than there are decisions to make, he could streamline decision making.
Finally, he leveraged the power of computers. Algorithms don't have biases, they don't get emotionally attached, you can back test them, you can collaborated on them, and you can easily change them. To put it another way, computers are the ideal method for systemic decision making.
This approach is often underused. Few people analyze their actions and even fewer make steps to catalog them, much less automate them. But this is a practice that compounds, there is exponential benefit here. So what are you waiting for? Start writing down why you make decisions today.
The economy is built from simple transactions. You take assets or credit and exchange it for goods, services, or financial assets. That's it. This process is repeated countless times in countless scenarios to build up the overall economy.
You gain true clarity when you see a complex system as a combination of it's simple parts. This type of understanding applies to many things in life. By reducing your problems to their simpler parts, you gain the ability to tackle even the most challenging task. You no longer see it as a single daunting task, but many manageable tasks.
Before you can develop a good set of principles you need to come face to face with reality. Not the reality you wish was here, but the harsh reality that you are living in. See your flaws and failures for what they really are. Be brutally honest with yourself.
Then you can be radically honest with those around you. If you are honest with them, they will be honest with you. An honest feedback is the key to rapid learning and growth.
Take lessons from others, but don't forget the ultimate teacher. Nature is the one thing that's more advanced than any person or human creation. It's responsible for everything you see. So next time you are confronted with a natural truth, take a step back and examine it from the view of nature. See how it's part of the overall good. This is when you get a glimpse into the inner workings of the ultimate machine.
Pain is the best teacher. By being uncomfortable and failing, you are given opportunities to grow. We don't see these situation as opportunities because we only evaluate the first level consequences.
Like working out, the first level consequence is the pain and struggle you feel while working out, but if you look a little further down the line there are many benefits. You will feel better, live longer, and look better. This situation repeats itself throughout your life. By making a sacrifice now, you gain multiple befits in the future.
For life long success, there are 5 steps you need to perform well.
Set goals that are outside your reach. Don't settle for what you know you can
accomplish. Push yourself to new heights.
Identify the problems you run into. Because the goal is outside your reach,
you will inevitably run into problems. Don't sweep them under the rug, but embrace them. They are the most valuable lessons you will learn.
Diagnose the root cause of your problems. Go deeper than the action you took. Determine the characteristic and innate behavior that caused the problem.
Design the solution you want to see. Think of the steps that need to happen in order to solve your problem. Plan as far as makes sense with the knowledge you have, but don't spend too much time planning. A few hours is the maximum needed.
Finally execute on your plan. Make sure everything happens in the order it needs to and no step is missed. Then you will remove the biggest blocker from your current path and move on to the next problem or the next goal.
Every one of these steps is critical for effectively solving your problems. However, you can't be good at all of them. You will need help to succeed.
Being open minded is one of the hardest things you can do. It required you to go against your baser instincts when they are at their strongest. You have to face your fears of shame, failure, and humiliation head on.
However, through these battles you gain the truth. You get to make better decisions, see the world in new ways, and constantly improve. By being radically open minded, you unlock your potential.
So discard your biases and need to be right. Become and explorer on a journey to find the truth in life, and not out to prove your opinions.
There are many kind of people. All of them with their own strength and weaknesses. No matter how far you have gotten on your own, you will hit a wall when you need the help of others. The human species didn't survive this long because of the brilliants of the hermits. It survived because human have learned to work together in large groups.
So be open to the help and input of others. Recognize your weaknesses and fill in the gaps. You can only complete the puzzle by filling it with the correct pieces.
The fastest way to improve your life is to learn to make better decisions. There are three steps to making better decisions.
Gather enough information to increase your odds of making the correct decision. When doing this, remember the 80/20 rule and weigh the cost of delaying the decision vs the cost of being wrong.
Find common patterns in your decision making and turn them into principles. Simplify your decision making process to a level where anyone can take your explanation and make the same decision you would have.
Use algorithms where possible. Once you know how you make decisions, relying on computers to make them for you. They can make decisions faster and more reliably than you ever could.
There are undeniable correlations between life and work. Both are built on relationships, both are driven and improved by the people you surround yourself with.
Many of the things people pursue are a byproduct of the people an culture they create around them. If money is your goal, you will never make much by just chasing money. The way to make money is to become excellent and valuable at what you do. Then learn to market it and work with others to become even better.
So be tough on the people in your life and hold each other to a high standard, but balance out the toughness with love and care. Those people are the foundation for your future.
Radical truthfulness is the corner stone of the most important things in life. It allows you to build stronger relationships. You won't try to "protect" people from difficult situation, and instead give them time to prepare. You will grow closer than ever because there won't be hidden agendas or tricks.
Ultimately, you can only control yourself in being radically truthful, but this behavior is contagious. Those that get it won't want to operate any other way. Those that reject it won't be able to stand it and will distance themselves. This combination allows you to surround yourself with honest people like yours.
Resulting in a feedback loop that promote growth, bring weaknesses to the surface, and support each other in times of trouble.
People will care about the culture if they find their work and relationships meaningful. This type of culture can't happen on its own. You have to cultivate it by empowering the people with the right attitude while letting go people that are a negative to the culture. This approach is the definition of tough love.
You should deeply care for the people that are working for you. Making it a safe environment where people are allowed to make mistakes. Then being there to support them while they reflect, or helping them directly to find a solution.
A discussions with no resolution is a waste. Don't be a victim of that time sinks. If you get a meeting that can be resolved with an email, be the one to send that email. Resolve the meeting before it even happens. However, there are important meetings. You can still drive these to a conclusion.
To have a successful meeting, go in with a plan. Know what issues you will be tackling and structure the meeting accordingly. A negotiation needs to be handled differently than a learning session.
During the meeting, foster open discussion and the sharing of ideas. This helps everyone to get on the same page. Then they can work together towards the best solution. For open discussion to be successful, search for the best solutions. Be open minded but assertive.
Before the meeting is out, explicitly state the conclusion or agreed upon action items. This ending statement is the reason you had the meeting.
Throughout the years humanity saw many problems with dictatorship. People have a tendency to become selfish and make decisions that cause harm to the many to serve the few. So people learned to avoid putting all the power in the hands of a single individual.
More recently we are seeing problems with a fully equal democracy. Especially when making decisions with people of different believability. If you wanted to learn to throw a punch, would you listen to prized fighter or a couch potato? Why should treat other decisions any differently?
This is why you need to consider people's merit when taking advice. Believing the advice of someone who hasn't tried or only failed to accomplish a similar goal can be more dangerous than getting no advice at all. Be considerate of who's advice you take and what advice you give.
It's hard to hire good people. Unfortunately most people make it even harder by looking for someone great at what they do. By having vague criteria, with vague questions, and subjective decisions making, you end up making costly hiring mistakes.
An easier approach is to identify what roles you need to fill. Then look for someone that can fit that role. The roles you need to run your company are stable and consistent. Don't create the perfect role for someone find someone that fits a function you will always need.
When it comes to evaluating people, start with values, then character, and finally skills. This forces you to evaluate the least malleable aspects of the person first. You can always teach someone a new skill, but it can be impossible to change someone's values. Someone with the right skills but a bad character will do more damage to the moral of the company than leaving the role vacant until you find the right fit.
People should always know where they stand. Instead of a big surprise during an infrequent review, they should be receiving a stream of continuous feedback.
This allows them to address problems quicker, and gives them less shock when an issue is brought up. Especially if it is backed by a data and a specific occurrence.
The data set provides a way to see a pattern in their behavior. It makes it clear that the issue wasn't a one off but something that needs work. The specific scenario lets them address the problem concretely instead of an abstract concept.
Once you clearly identified the problem, you can put your heads together on a solution. If it is a skills issue, then some training can be what the doctor ordered. If it's a deeper abilities or values issue, you need to let the person go or find a new role for them.
You should always see if the abilities you've identified in the current role are suitable to fill another open role. If they are not, the person needs to go. Keeping someone around that does a subpar job or can't advance causes harm to everyone. The company has a blocker from getting someone better into the role and the person will become dissatisfied by being pigeonholed into a job they aren't suited for.
Don't generalize. Whether you are talking about events or people, generalizations only make it more difficult to solve problems.
When a problem occurs, identify who was responsible for the problem and what they did to cause it. This gives you a track record for the individual and for that type of issue. From there, you can provide the assistance needed to the person. If they have a skills issue, you can give them training. If they are overloaded, you can provide help. If they are struggling in a role, it might be time for a move.
When making a plan to help them, or any other plan, don't be vague. Determine who is going to do what and when. A "should" statement isn't going to help anyone until you identify who is responsible for accomplishing it and give them a time line.
Create a great team by starting with the design. Come up with a clear vision of where you want to see the team and the capabilities you need to achieve it. Then find the right people to fill the roles.
Ideally, there should be a single person to fill each role. They would need minimal supervisions and be fully responsible for their work. This means if they need assistance, it's up to them to ask for it or find someone who can help.
Try to avoid decisions by a comity. Requiring a group to agree is inefficient and harder to diagnose. In areas where you must involve multiple responsible parties, involve as few parties as possible. Going over 3 members is a signal of a problem.
It's easy to get lost in the insignificant details of your todos. Although all those things should get done, ask yourself if there are better ways to do them. Can you automate a repetitive task, delegate a task outside your area of expertise, or can you say no to a non critical task? Any of these options will help you clear your plate and focus on the highest value activities.
While working on these tasks, don't forget the ultimate goal you are after. Picture an outcome you are excited about. The process might become difficult but you should never loose the anticipation of the goal. If you are no longer excited for the final outcome, maybe the goal isn't worth working on and there is a different goal you should start.
We work with other for 3 goals.
Leverage to accomplish our chosen mission. At some point you will need
assistance to continue with what you want to accomplish in life. Working with other is the only way to grow it past what you can do on your own. Remember, the capabilities of a single person are always limited.
We want quality relationships and a great community. This is the people side of the equation. You want to have great people in your life. People that care about each other. People that can help you through the bad times and make the good times even better.
We want money to allow us to afford what we want for ourselves or for others. This is the most obvious goal of your work. We all need to earn a living. The question is how much money do we need to have the life we want.
The best part about these 3 goals is that they are intertwined. It's hard to have any one of these without the others. They support and build on each other.
Copyright © Artem Chernyak 2020