A Learning a Day

A long time reader and friend wrote me an email a few days ago where she said (among other things) that while she didn’t agree with all the posts, she appreciated the fact that there was a post here everyday.

I feel the same way as well.

My opinions have changed with time and I’m sure that trend of constant change is not going to change any time soon. It does gets a bit complicated when you have a strong point of view. For instance, when I just started working, I was fairly open about the fact that I had pirated music and movies from my university days. I didn’t really care about whether the content I consumed was paid for (of course, this means it wasn’t paid for 95% of the time). Now, I’m at the other end of the spectrum. My views began changing as I began earning money and reached a head early this year when I realized that my attitude to piracy was at odds with what I claimed to be my values. I was in danger of marginal thinking. So, I’m 100% anti-piracy now and bring up this discussion at every opportunity as I’ve learnt a lot from my experience with this subject.

I used to previously wonder about whether this habit of changing strong opinions was a problem I needed to sort out. However, I have begun to view this as a positive trait thanks entirely to a great post from Jason Fried, the founder of 37 signals, on their blog. I have posted this piece of advice from Jeff Bezos once previously but would like to share it again as it is a real gem. Enjoy. And thank you Jeff and Jason!

Some advice from Jeff Bezos

Jeff Bezos stopped by our office yesterday and spent about 90 minutes with us talking product strategy. Before he left, he spent about 45 minutes taking general Q&A from everyone at the office.

During one of his answers, he shared an enlightened observation about people who are “right a lot”.

He said people who were right a lot of the time were people who often changed their minds. He doesn’t think consistency of thought is a particularly positive trait. It’s perfectly healthy — encouraged, even — to have an idea tomorrow that contradicted your idea today.

He’s observed that the smartest people are constantly revising their understanding, reconsidering a problem they thought they’d already solved. They’re open to new points of view, new information, new ideas, contradictions, and challenges to their own way of thinking.

This doesn’t mean you shouldn’t have a well formed point of view, but it means you should consider your point of view as temporary.

What trait signified someone who was wrong a lot of the time? Someone obsessed with details that only support one point of view. If someone can’t climb out of the details, and see the bigger picture from multiple angles, they’re often wrong most of the time.

Great advice.

Every morning I wake up, I face the resistance. The resistance would rather have me in bed for a few minutes longer, a few hours even, than go brush my teeth and get productive. It’s excuses soon start running thin on most days since I’m eager to get going. So, when I sit up, it tried a different tactic. It starts asking me if I am capable of getting what I want to get done today.

“Can you do it?” – it goads. “You didn’t get to it yesterday.”
”But I couldn’t. There were too many other things on.”
“It doesn’t matter. You didn’t. Why would you today?”

Here’s what I’ve found.

1. The way to vanquish the resistance is to focus on your process. My process involves an insistence that I must keep plugging away and keep making progress. Results come later. The resistance can’t quite use the “bad results” excuse with me and begins to fail at the part where I describe my process and my intention to just follow it for another day.

2. The resistance is a very persistent toxic force. It will show up every morning – you have to admire it’s persistence and learn to laugh at it. It will try to get you to stay in bed longer, procrastinate longer, and stop you from showing up. On days when you’re weakened by illness or consumed by a lack of purpose, it works. Don’t let it work. Do things because you want to.. not because you lost a battle with the resistance.

3. For an interesting piece on how the resistance makes you physically sabotage yourself, read Steven Pressfield’s post

4. Fighting the resistance and winning is a great way to get the day started. Use the force. Win.

This week’s book learning is the (final) part 12 of a 12 part series on The Ascent of Money by Niall Ferguson. (Parts 1, 2, 3, 4, 5, 6, 7, 8, 9, 10, 11)

Houses are the most popular asset allocation. We are so obsessed with houses that house purchasing is one of the most popular board games ever – Monopoly!

Additionally, there is a false belief that property investments are the way to get rich. Historic returns often show that an index fund gives you twice the rate of return over 20 years in both the USA and UK. Property is only a security to the person lending you money as the house cannot run away.

So, as we concluded in our investment series, Niall Ferguson warns us against investing all our money in a house. If you are a home owner and have money to invest, view real estate as you would any other investment and remember to diversify.

Interestingly, home ownership does provide many tangible benefits to an economy – home owning groups are more likely to save, get educated, and contribute to their communities. But, thanks to mortgage and housing industries that make money by pushing people into houses they can’t afford, this could lead to more harm than good.

Sketch by EB

That said, the societal power of a sense of ownership cannot be discounted. Micro finance is not the solution to the problem as most micro finance firms charge extortionate rates of interests making them similar to loan sharks. Some communities have found a way around this by giving credit to housewives. Women are much better with credit than men and our challenge will be to help women in poor communities afford houses.

Throughout the course of this series, we have touched on major building blocks of the financial system – credit, stocks, bonds, insurance, and hedging while also touching financial ideas like the welfare state and real estate. I hope it helped!

At a previous project, we used to have a core team meeting on Friday evening where the project team updated the senior stakeholders of our progress. The meeting was the last thing in the day on Friday and we used to follow up with a next steps email afterward.

More often than not, we’d have a short note from our client – something to the tune of ‘Good job team. Great progress next week/let’s keep it going.’

It felt great. Some weeks were about the “great progress” while some others were just about the fact that we kept plugging away. It didn’t matter. A compliment on a friday evening made it feel like the week was worth the effort. Daniel Kahneman’s research in “Thinking, Fast and Slow” points to the fact that we only really remember the peaks and ends of experiences. It makes sense – if a work week is an experience, the friday evening is the end.

It’s a note to myself – when ending the work week, make sure to compliment the team I’m working with. It is such a simple thing to do and is always warranted since we’ve put our heart and soul into making progress that week. And, as we know, it makes a difference.

Silent gratitude is of use to no one..especially as we wrap up the work week and head into the weekend.

Here’s an exercise suggestion –

1. Take some time today to figure out how much of the day you spend in a good mood
2. Next, for the parts when you are in a bad mood, figure out what caused it and what you could have done better.

Repeat this exercise for a few days and you’ll find that the patterns begin to repeat.

A couple of years back, I realized that most of my bad moods were external driven – something or someone upset me and sent me down a bad mood spiral. I’ve worked on that and that’s changed a lot. A recent health check on causes for bad moods have led me to the following top 3 causes –

1. A stress about something unfinished (60%)
2. A recent unpleasant external experience (30%)
3. An irritation at being unable able to help someone close to me while they’re in need (10%)

As you can see, the causes are largely internal. I’m figuring out how best to cope with the primary cause of a bad mood – stress about something unfinished. A big part of that comes with setting realistic goals – something I’m working to get better at.

A bad mood is a destroyer of value and happiness. It affects the people around us. Dealing with a bad mood deserves a separate series of posts so I won’t go there. Today’s post is about 2 things – first, figure out if you’re spending an unhealthy proportion of time in a bad mood. If so, figure out what causes these moods. And second, your mood is your responsibility. Fix it.

When I’m playing football, I think of nothing but the game. Psychologists call this “flow.” I’ve often thought about how the football state-of-mind can be gotten to throughout a workday. I have since realized that it isn’t as simple as just showing up to play. Here are 7 things that help me –

1. Sleep as much as you need. 8 hours, 6 hours, 7 hours – figure out how much sleep you need and prioritize this over all else.

2. Show up and set a time limit. Show up on time or early and make the game fun by committing to a time limit. The moment you know you’ll be in the office till midnight, procrastination is inevitable.

3. Eat regularly to guard against ego depletion. Schedule meals regularly (perhaps lunch and an afternoon snack?) to keep your willpower muscle going strong. And while you are at it, eat healthy.

4. Group meetings where possible or space them out with 3-4 hour slots to maximize flow time. Yes, yes, you have lots of meetings and they are productivity killers. We know. Do what you can to make sure you have uninterrupted “flow” hours in a day.

5. Practice when you find some free time and stay fit. When you find free time, upgrade your skills. Or head to the gym. Staying fit matters.

6. Be ruthless about time spent outside of the field. Paul Scholes and Ryan Giggs know a thing or two about longevity and they were big proponents of quiet lives and yoga. Do what it takes to show up enthusiastic the next morning.

7. Expose yourself to other play outside of work to improve your creativity. Sportsmen always play sports in training as other sports give them skills that they can use in their sports. Engage in activities outside work as they’ll often help you develop useful skills outside the office.

A manager of mine once said – “You have 3-4 productive hours in a day – 5 if you are lucky – use them carefully and use them well.”

Indeed.

..will not help you stay a millionaire in the long term. In fact, it could sabotage your chances.

Lottery winners hardly ever use their lottery winnings productively. Why?

The answer lies in the “how.” It is one thing to get a million and quite another to “be” a millionaire. To be a millionaire requires you to understand the “how” involved with being a millionaire i.e. the millionaire approach. For example, we picture millionaires with red Ferraris at home when research on real millionaires show that most of them drive 2nd hand cars to save money. Giving someone the ability to make big decisions does nothing if they haven’t grown into their role.

It is one thing to have resources. It is another thing to know how to use them.

you have to be willing to be disliked.

One doesn’t come without the other.

This week’s book learning is part 11 of a 12 part series on The Ascent of Money by Niall Ferguson. (Parts 1, 2, 3, 4, 5, 6, 7, 8, 9, 10)

Property ownership is a recent phenomenon. Until a 100 years ago, only the aristrocracy owned land. The consistent nature of war in Europe meant the price of food (and thus, the price of land) was consistently high. However, as peace time came in, land’s value began going down while the aristocracy lived way beyond their means leading to a gradual loss of property over time.

The concept of a “property owning democracy” was created in America. Moves by Franklin D Roosevelt lead to governments protecting mortgages leading to the set up of FANNY MAE. Initially, there was segregation in the policy as African Americans paid higher interest. By the 1970s, the set up of FREDDIE MAC made discrimination a crime. Margaret Thatcher followed suit in the UK and the rest of the world followed.

But, the US ran into all sorts of trouble in the 1980s thanks to de-regulating SNLs or “Savings and Loans” corporations that enabled people to buy property. Since they effectively insured SNLs, SNL scams were all over the place and cost the US more than 150 billion dollars. Around the same time, Salomon brothers’ bond traders reinvented mortgages by bundling them all together and converting them into “bonds” by sub-dividing them into strips that mature at different times – giving birth to a “collateralized debt obligation” or CDO.

Sketch by EB

These CDOs marked a shift from a world where there was a link between interest givers and payers. Previously, home owners paid interest to their lenders. Now, the lenders bought securities from the big banks meaning home owners paid their interest to someone who didn’t even know they existed.

Additionally, since these mortgage based securities were actually guaranteed by the US government, their credit ratio was equivalent to US treasury bonds! Thus, more and more “sub-prime mortgages” (risky loans given to folks with dodgy credit history) were given away leading to more people “buying” houses they couldn’t afford. The disconnect between lenders and interest givers meant banks took larger and larger risks… until that fateful day in 2008 when Lehman Brothers declared bankruptcy triggering the global meltdown.