Monthly Archives: December 2015

Resolutions

Letters from a Stoic

As the new year approaches most people start thinking of what resolutions they’d like to make for the new year, to attempt to improve their life and themselves. I just read Seneca’s Letters from a Stoic, which had some good advice for living life and working to improve oneself. One quote in particular seemed especially appropriate at this time of year, as people are creating their resolutions for the next year. Regarding making plans for the future, Seneca said:

I shall put myself under observation straight away and undertake a review of my day – a course which is of the utmost benefit. What really ruins our characters is the fact that none of us looks back over his life. We think about what we are going to do, and only rarely of that, and fail to think about what we have done, yet any plans for the future are dependent on the past.

When making resolutions most people tend to think only of what they would like to become or achieve and don’t consider their past and factor their own past behavior into their plans for the future. Instead of just focusing on the future, we should first look back at our past, particularly the previous year, and attempt to identify what mistakes we have made, or the things we wanted to do, but did not, before attempting to plan for the future. Our past can give us a strong indication of how we will likely behave going forward, despite our best intentions, and taking that into account, we can create a better and more realistic plan for the new year.

Instead of creating a single, large, difficult resolution, that will most likely get abandoned, or forgotten, after a month or two, we should instead break it down into smaller, more attainable goals that we can keep track of on a weekly or monthly basis. A large resolution is typically too vague, allowing us to put it off, after all, we’ve got the entire year to work at it. By dividing up a large goal into smaller, specific steps we can make more continuous, incremental progress towards our overall goal.

In addition to too vague goals, one of the other biggest impediments to attaining or accomplishing our goals is distractions. We allow ourselves to get distracted surfing the Internet or watching television instead of working towards our betterment. We end up doing what is easy, or tell ourselves that we’ll take a short break, then hours later find we’ve gotten distracted and haven’t accomplished what we’d intended to do. On distractions Seneca had this to say:

Let us cut out all distractions and work away at this alone for fear that otherwise we may be left behind and only eventually realize one day the swiftness of the passage of this fleeting phenomenon, time, which we are powerless to hold back. Every day as it comes should be welcomed and reduced forthwith into our own possession as if it were the finest day imaginable. What flies past has to be seized at.

It’s easy to get distracted, especially when we are trying to work on something difficult, although even when we have free time, the choice between doing something productive that can benefit us in the long-term and indulging in a short-term distraction requires an exercise of willpower and long-term thinking.

If we allow distractions to continuously occupy our time, we can find ourselves looking back at the past and wondering where the time went and realize that we have nothing to show for it. By seizing each day and working, no matter how little, towards our overall goals, we can look back at where we started and find that we’ve made large gains through a series of small steps.

Regarding distractions I was reminded of what another famous stoic, Marcus Aurelius had to say in Meditations:

Do external things distract you? Then make time for yourself to learn something worthwhile; stop letting yourself be pulled in all directions. But make sure you guard against the other kind of confusion. People who labor all their lives but have no purpose to direct every thought and impulse toward are wasting their time–even when hard at work.

In addition to the obvious distractions, mindlessly surfing the Internet or sitting on the couch watching television, we can find ourselves seemingly actually working at something, but the work has no real benefit. Often when we have real work that we are supposed to be doing, but are not sufficiently motivated to do at the time we create busy work for ourselves, as a way to avoid working on our real task, while also being able to tell ourself that we’re still working. This busy work is just another form of distraction that can prevent us from achieving our goals. On trying to avoid and eliminate these distractions Marcus suggests:

Because most of what we say and do is not essential. If you can eliminate it, you’ll have more time, and more tranquility. Ask yourself at every moment, “Is this necessary?”

While this is an incredibly simple way to try to avoid distractions, it is not so easy to do. It requires the awareness to remember to question what we are doing and why we are doing it. A good way to practice and develop this awareness is through meditation, where as you focus on your breathing, you should attempt to recognize when your thoughts are wandering, and return your focus back to your breath.

Although distractions can prevent us from accomplishing our goals, they are also a necessity. Without having some kind of outlet, we’d never be able to relax and replenish our willpower so that we can continue to work towards our goals with purpose and meaning. The trick is to find and work to eliminate or minimize the unnecessary distractions, while leaving ourselves the occasional release.

A key to avoiding distractions is to make resolutions, or set goals, that are attainable and measurable, by having something relatively small to work at, and being able to see our progress towards a goal, it helps to provide us with a feedback loop that can help motivate us to continue making progress, and working towards our goals.

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Giving

A Christmas Carol

During this holiday season it seemed appropriate to discuss gift giving and receiving this week. Having just read Charles Dickens’ A Christmas Carol in which the famous Ebenezer Scrooge undergoes a drastic transformation from a miser into a generous giver, I began to reflect on the change into attitude experienced towards Christmas and giving in general as one gets older. As a child one looks forward to Christmas thinking of all the presents you might get and what you’ll do with them when you finally get them, with little or no thought for giving anything to anyone else. As Dickens said in A Christmas Carol:

…for it is good to be children sometimes, and never better than at Christmas, when its mighty Founder was a child himself.

Christmas as a child is a magical time, the only other day that really compares is your birthday. As a child it’s easy to come up with a long list of things you’d like to receive for Christmas. Then later, as an adult, it becomes much harder to come up with gift ideas, most of the things you really want, you’ve probably already bought for yourself and anything you might want, you could likely easily get for yourself as well whenever you choose to.

Once we’re older though and have enough income to buy the things we want without having to rely on others to buy them for us as gifts, one’s perspective on Christmas and gift giving in general likely undergoes a complete reversal. It’s no longer about what you can get, but what you’ll get for others. We begin to care more about making others happy than about getting or keeping more stuff for ourselves. After Scrooge has met with the ghosts, he tells his clerk:

A merry Christmas, Bob!” said Scrooge, with an earnestness that could not be mistaken, as he clapped him on the back. “A merrier Christmas, Bob, my good fellow, than I have given you, for many a year! I’ll raise your salary, and endeavor to assist your struggling family…

When we give a gift we feel good, having done something nice for someone else. The act of giving can make us feel good both through internal and external means. We first feel good internally, before and as we are giving a gift from being generous, caring or helping someone else in someway. We then get a second boost from the external source of the other person receiving the gift, and hopefully responding positively and with gratitude. The giving of a gift, or even the gift itself doesn’t have to be extravagant to have this positive effect. I was reminded of a quote from Jack Keroac in The Dharma Bums about giving simple, not necessarily highly valuable gifts:

“Smith you don’t realize it’s a privilege to practice giving presents to others.” The way he did it was charming; there was nothing glittery and Christmasy about it, but almost sad, and somethings his gifts were old beat-up things, but they had the charm of usefulness and sadness of his giving.

The simplest gifts can often be the most well received, the more care or effort we’ve put into a gift, especially if we’ve made it ourselves, instead of just buying something from a store, can make a gift much more memorable, and likely to be cherished. Similarly, a gift that requires someone to go out and doing something can produce memories that last a lifetime, which can be far more valuable than something bought at a store.

When someone gives a gift they get an emotional boost from the act of giving, a feeling of goodness from having done something nice for someone else. On the receiving side, there can be quite the opposite effect. After the initial warm feelings have worn off from receiving a gift, we’re left with a feeling of indebtedness, we now owe this person for what they have given us. This desire to reciprocate is part of our nature, as explained by Tren Griffin in Charlie Munger: The Complete Investor:

The urge to reciprocate favors and disfavors is so strong that even someone smiling at you is hard not to reciprocate. The indebted feeling that humans have when they receive a gift tends to make a person feel uncomfortable until he or she can extinguish the debt. The urge to reciprocate in some way so as to cancel the debt is so strong that it can even make people give up substantially more than they would if the process was fully rational.

When giving a gift a large part of the struggle when picking something out, beyond finding something that you think the person might like, is trying to match the value of what they have given you in the past, or what you expect they might give you in the future. We don’t want to not give enough and not fully payback or cancel out the debt we feel that we owe, while at the same time, not putting the recipient in too great of a debt to us. Although feelings of generosity can make us give more than is strictly necessary, it’s better to give too much, than to not give enough.

This holiday season, focus less on what you can get and more so on how you can give. Gifts don’t have to come from a store, even spending time with someone could be considered a gift. Instead of just buying something that they likely don’t really need, you could take them somewhere to do something they enjoy or have always wanted to try. We generally only think of getting material things for gifts, because it’s easy. Coming up with an idea of what to get might be difficult, or time consuming, but once you finally do, you can get it and give it and not give it another thought. The true spirit of giving is showing that you care, which can be expressed simply through the gift of your time.

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Biases

Fooled by Randomness

Recently I read Nassim Nicholas Taleb’s book Fooled by Randomness: The Hidden Role of Chance in Life and in the Markets which showed how we often mistake skill for luck when dealing with random events. Part of the reason why we make these mistakes is due to biases that we are unaware of, or do not take into account. Even when we think we’re evaluating things perfectly rationally we have inbuilt biases which can effect our evaluations.

While Taleb’s book mostly uses finance and financial markets as a basis for examples, I’ve found that finance can often provide us with examples and strategies for dealing with situations in everyday life outside of financial decisions.

One of our biggest biases is to rely too much on the past when trying to determine what can happen in the future. Obviously, the past is the only thing we really have as a basis when trying to predict the future, but the past can also restrict our thinking, as we tend to think that the future will look much like the past and don’t sufficiently plan for unexpected outcomes. Regarding this Taleb said:

We could be either too lax or too stringent in accepting past information as a prediction of the future. As a skeptic, I reject a sole time series of the past as an indication of future performance; I need a lot more than data. My major reason is the rare event, but I have plenty of others.
On the surface, my statement here may seem to contradict earlier discussions, where I blame people for not learning enough from history. The problem is that we read too much into shallow recent history, with statements like “this has never happened before,” but not from history in general (things that never happened before in one area tend eventually to happen). In other words, history teaches us that things that never happened before do happen.

When the unexpected happens we tend to be shocked and surprised, even though history is filled with instances of the unexpected happening. This surprise at the unexpected can be partially explained by two different biases, normalcy bias, in which we tend to expect things to continue happening in much the same way they have been and hindsight bias. When we look back at the past, things tend to look much less random and far more predictable than they actually were. Taleb explained hindsight bias by saying:

Past events will always look less random than they were (it is called the hindsight bias). I would listen to someone’s discussion of his own past realizing that much of what he was saying was just backfit explanations concocted ex post by his deluded mind.

In hindsight we can generally easily see why something happened that was completely unexpected at the time and wonder how we did not see it coming. The lesson that this should teach us, is that we are not being imaginative enough or looking for the possible, but improbable scenarios.

A book that illustrates how principles and lessons from finance can be applied to other areas in life, including sports, is Michael Lewis’ Moneyball: The Art of Winning an Unfair Game, which chronicles how the Oakland A’s used statistics and widely held biases, to find talent in unlikely places and build a winning baseball team on a budget. Lewis explained the connection between economics and baseball as:

Paul wanted to look at stats because the stats offered him new ways of understanding amateur players. He had graduated from college with distinction in economics, but his interest, discouraged by the Harvard economics department, had been on the uneasy border between psychology and economics. He was fascinated by irrationality, and the opportunities it created in human affairs for anyone who resisted it. He was just the sort of person who might have made an easy fortune in finance, but the market for baseball players, in Paul’s view, was far more interesting than anything Wall Street offered. There was, for starters, the tendency of everyone who actually played the game to generalize wildly from his own experience. People always thought their own experience was typical when it wasn’t. There was also a tendency to be overly influenced by a guy’s most recent performance: what he did last was not necessarily what he would do next. Thirdly–but not lastly–there was the bias toward what people saw in their own eyes, or thought they had seen. The human mind played tricks on itself when it relied exclusively on what it saw, and every trick it played was a financial opportunity for someone who saw through the illusion to the reality. There was a lot you couldn’t see when you watched a baseball game.

The A’s were able to take advantage of biases on the part of other teams, including their heavy reliance on recent past performance as an indicator of future performance to acquire talent for less. They also exploited the other team’s failure to consider certain types of people playing a position, just because that type of person hadn’t done it before. On the team’s ability to do what had never been done before Lewis said:

As the thirty-fifth pick approaches, Erik once again leans into the speaker phone. If he leaned in just a bit more closely he might hear phones around the league clicking off, so that people could laugh without being heard. For they do laugh. They will make fun of what the A’s are about to do; and there will be a lesson in that. The inability to envision a certain kind of person doing a certain kind of thing because you’ve never seen someone who looks like him do it before is not just a vice. It’s a luxury. What begins as a failure of the imagination ends as a market inefficiency: when you rule out an entire class of people from doing a job simply by their appearance, you are less likely to find the best person for the job.

Sticking with what has worked, or been done, in the past may continue to work in the future, but is unlikely to lead to unprecedented success, instead you must look for the opportunities that others have not, or cannot see, to reach new levels of success.

When making predictions about what is going to happen, we should be aware of how the past can bias and restrict our thinking and not just look for what seems like the most likely scenario, but also for the unexpected or improbable. By trying to think of the situations which may seem ridiculous or impossible, no matter how unlikely, and having a plan ready for them just in case, we can equip ourselves to take advantage of, or avoid them, while others are struggling to react. Because the one lesson we should really take from history is to always expect the unexpected.

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Biographies

Charlie Munger: The Complete Investor

Recently I’ve been wanting to read more biographies, to learn more about the historical figures who’s names most people have heard, but whose deeds we know much less about. I came across a book called Charlie Munger: The Complete Investor by Tren Griffin, which has many great quotes about learning and models which we can use when making decisions. Munger is the lesser known business partner of Warren Buffet and also a voracious reader and continuous learner. Early on in the book there was a quote which made a good case for reading more biographies as well as an explanation of why Munger has read so many of them.

Unfortunately, they are missing a key point: no one can ever be Charlie Munger, just like no one can be Warren Buffet. The point is not to treat anyone like a hero, but rather to consider whether Munger, like his idol Benjamin Franklin, may have qualities, attributes, systems, or approaches to life that we might want to emulate, even in part. This same process explains why Munger has read hundreds of biographies. Learning from the success and failure of others is the fastest way to get smarter and wiser without a lot of pain.

Reading a biography lets us learn about what someone accomplished in their life and how they were able to do what they did. Knowing how they were able to succeed, we can apply those lessons towards our own lives and work when we have to make decisions.

In addition to what someone did right in their life, by reading a biography we can also learn about the mistakes that they made. Learning about and from other’s mistakes hopefully allows us to do better if presented a similar situation, or teaches us how to avoid the situation entirely.

By reading many biographies we can fit multiple lifetimes worth of lessons into a much shorter period of time, since we don’t have to actually live them all out ourselves. By modeling ourselves on the best that humanity has and has had to offer we can work to become better than we otherwise might be. Regarding models for living Munger said:

There’s no reason to look only for living models… Some of the very best models have been dead for a long time.
–Charlie Munger, Berkshire Annual Meeting, 2000

Often a person’s life and contributions to humanity can’t be properly judged until after they have passed away. By modeling ourselves only after living people we risk choosing for models people who may start to live in a way which is no longer a worthy model to follow, that we may not recognize until it is too late. By also modeling ourselves after those who have already died we can benefit from history which will filter out those less worthy of emulation and highlight those of real value.

History allows us to learn about the lives of some of the greatest people who have ever lived and see not just what they contributed to humanity, but what they could have done better, allowing us to build on their work and correct mistakes that they made.

In America, we tend to view the founding fathers as almost godlike, infallible figures, but despite their achievements and lasting legacies, they were still only men, just as capable of making mistakes as anyone else. I recently read a biography of Thomas Jefferson, Thomas Jefferson: The Art of Power by Jon Meacham, which clearly illustrated the point within it’s introduction.

In the end, for all the debate and the division and the scholarship and the symposia, there may be only one thing about Thomas Jefferson that is indisputable: that the man who lived and worked from 1743 to 1826 was a breathing human being who was subject to the passion and prejudice and pride and love and ambition and hope and fear that drive most other breathing human beings.

Thomas Jefferson has gotten a lot of flak in modern times for his hypocritical views, including writing the Declaration of Independence, in which he declared “all men are created equal”, while being a slave owner his entire life. As president he worked to reduce the national debt, while also being in debt for most of his life.

Because of the reverence paid to the founding fathers, it seems to come as a bigger shock to us when we learn that they weren’t perfect and did in fact make mistakes. Even in his own time Jefferson recognized the attribution of superhuman knowledge and abilities to himself and those with whom he helped to found the country.

The past, he thought, should hold no magical, unexamined claim over the present. “Some men look at Constitutions with sanctimonious reverence, and deem them, like the ark of the covenant, too sacred to be touched,” he wrote in 1816.

They ascribe to the men of the preceding age a wisdom more than human, and suppose what they did to be beyond amendment. I knew that age well: I belonged to it, and labored with it. It deserved will of its country. It was very like the present, but without the experience of the present: and 40 years of experience in government is worth a century of book-reading: and this they would say themselves, were they to rise from the dead.

Even though the founding fathers were not perfect, they can still offer us many valuable lessons in living. Despite their flaws, they created a system of government which allows change, both to allow it to adapt to changing times, as well as to fix problems that have arisen from it. The passage of time has given us experience and changed philosophies which has allowed us to correct the most glaring mistakes within the system that they gave us.

History has yet to find anyone who has lived a perfect life, but offers us many who have lived good lives upon which we can model our own in an attempt to better ourselves. By reading many biographies we can accumulate lessons and models for living to better equip us for living and help us to be better people.

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