Big Ideas

The power of ideas

“Oh, the thinks you can think up if only you try.” - Theodor Seuss Geisel

One spends years trying to learn new things and acquire new skills but then looks back and realizes that something like 7 big ideas truly changed how one thinks and drives most of what one believes. Here are a few of mine:

Everyone belongs to a clan and underestimates how influential that clan is on their thinking. There is little correlation between flat earth supporters and scientific literacy. But there is a strong correlation between flat earth supporters and political affiliation. That is an extreme example, but everyone has views persuaded by identity over pure analysis. There is four parts to this:

  • Clans are everywhere: Countries, states, parties, companies, industries, departments, investment styles, economic philosophies, religions, families, schools, majors, credentials, social media communities.

  • People are drawn to clans because there is comfort in knowing others understand your background and goals.

  • Clans reduce the ability to challenge ideas or diversify your views because no one wants to lose support of the clan.

  • Clans are as self-interested as people, encouraging ideas and narratives that promote their survival. But they are exponentially more influential than any single person. So, clans are very effective at promoting views that are not analytical or rational, and people loyal to their clans are very poor at realizing it.

Psychologist Geoffrey Cohen once showed Democratic voters supported Republican proposals when they were attributed to fellow Democrats more than they supported Democratic proposals attributed to Republicans (and the opposite for Republican voters). This kind of stuff happens everywhere, in every field, if you look for it.

Everything has been done before. The scenes change but the behaviors and outcomes don’t. 

Historian Niall Ferguson’s take on his profession is that “The dead outnumber the living 14 to 1, and we ignore the accumulated experience of such a huge majority of mankind at our peril.”

The biggest lesson from the 100 billion people who are no longer alive is that they tried everything we are trying today. The details were different, but they tried to out compete entrenched competition. They swung from optimism to pessimism at the worst times. They battled unsuccessfully against reversion to the mean. They learned that popular things seem safe because so many people are involved, but they are most dangerous because they are most competitive. The same things guide today and will guide tomorrow. History is abused when specific events are used as a guide to the future. It is more useful as a benchmark for how people react to risk and incentives, which is fairly stable over time.

Multi-discipline learning: There is as much to learn about your field from other fields than there is within your field. Most professions, even ones that look starkly different, live under the umbrella of “Discerning how people respond to incentives, how to convincingly solve their problems, and how to work with others who are difficult to communicate with and/or disagree with you.” Once you see the roots shared by most fields you realize there is a basin of information you have been ignoring that can help you make better sense of your own profession. The ability to discern the connections may even make yours a radical theory, as you will ebb against the mainstream flows.

“The best thing a human being can do is to help another human being know more — Charlie Munger

I did not appreciate how important communication is to providing advice before reading about how many doctors struggle to communicate effectively with patients, leading to patients who do not stick with treatment plans and are resistant to lifestyle changes. There are millions of dots to connect throughout countless disciplines. Probing beyond the confines of your particular discipline is more enjoyable anyways.

Self-interest can lead people to believe and justify nearly anything. Think about businesses trying to survive competition being run by people trying to prove their career worth, and the incentive to run with the option that provides the cleanest path to the next win is gigantic, even when that option is something you would not accept in less-stressful circumstances.

To be a human is to be a rational animal. - Ayn Rand

I have seen people justify strategies and sales techniques they fiercely argued against at previous employers, coming around the moment their career depended on it, this is the modern affliction of the American Bobo. These are good, honest people. However, self-interest is a freight train of persuasion. When you accept how powerful it is you become more skeptical of promotion, and more empathetic to those doing the promoting.

Room for error is underappreciated and misunderstood. It’s usually viewed as a conservative hedge, used by those who don’t want to take much risk. But when used appropriately it’s the opposite. Room for error lets you stick around long enough to let the odds of benefiting from a low-probability outcome fall in your favor. Think in engineering terms, where this principle is often posited as factor of safety. Factor of safety, in short, asks what is our risk of ruin? How much can we afford to lose or go without before failure? Ideally the system is set up for small failures to occur to avoid cataclysmic failure. 

Since the biggest gains occur the most infrequently – either because they do not happen often or because they take time to compound – the person with enough room for error in part of their strategy to let them endure hardship in the other part of their strategy has an edge over the person who gets wiped out, game over, insert more quarters, at the first failure.

Sustainable sources of competitive advantage. This might be the most important topic in business and investing because other than luck it is the only path to long-term success.

  • Learn faster than your competition.

  • Empathize with others more than your competition.

  • Communicate more effectively than your competition.

  • Be willing to fail more than your competition.

  • Wait longer than your competition.

Everything else – intelligence, design, insight – gets broken to pieces by competitors who are almost certainly as smart as you.

Your personal experiences make up a negligible amount of what’s happened in the world but maybe 80% of how you think the world works. People believe what they’ve seen happen exponentially more than what they read about has happened to other people. We are all biased to our own personal history. Everyone. If you have lived through hyperinflation, or war, or were born to rich parents, or have been discriminated against, you both understand something that people who have not experienced those things never will, but you will also likely overestimate the prevalence of those things happening again or happening to other people. By over weighting your lived experience you are walking through life with cognitive biases that filter out much of the way the world is truly.

Begin with the assumption that everyone is out of touch and you will be more likely to explore what is going on through multiple points of view, instead of discerning what is going on into the framework of your own experiences. It’s not easy. It’s uncomfortable when you do. But it’s the only way to get closer to figuring out why people behave like they do. Remember that human behavior is determined not by what really happened but by the interpretation of what happened. Keep an open mind and take calculated risks.