Best printers for Home

Best Mixer Grinder

Best wired Earphones

Best 43 Inch TV in India

Best Wi Fi Routers

Best Home Theatre in India

Smart Watch under 5000

Best Laptops for Education

Best Laptop for Students

<p><strong></strong></p><ul><li><strong><keyword id="6362665" type="ORGANIZATION" weightage="60" keywordseo="berkshire-hathaway">Berkshire Hathaway</keyword>'s $570 million bet on Snowflake shows CEO <keyword id="6358963" type="DEFINITION" weightage="60" keywordseo="Warren-Buffett">Warren Buffett</keyword> completely trusts his two portfolio managers, Todd Combs and Ted Weschler, one fund manager says.</strong></li><li><strong>"Buffett has given full agency to his lieutenants," <keyword id="9926894" type="UNKNOWN" weightage="60" keywordseo="jake-taylor">Jake Taylor</keyword>, CEO of <keyword id="9926895" type="UNKNOWN" weightage="60" keywordseo="farnam-street-investments">Farnam Street Investments</keyword> and cohost of the "Value: After Hours" podcast, told Business Insider.</strong></li><li><strong>"A high-profile <keyword id="6358815" type="UNKNOWN" weightage="60" keywordseo="tech">tech</keyword> IPO is a resounding confirmation that his actions match his words," he added.</strong></li><li><strong>Taylor's comments echo those of Paul Lountzis, who said the Snowflake investment proves Buffett "totally trusts Todd and Ted" in an interview this week.</strong></li><li><strong><strong><a href="https://www.businessinsider.com/international?r=US&amp;IR=TIR=T">Visit Business Insider's homepage for more stories</a>.</strong></strong></li></ul><p>Berkshire Hathaway's <a href="https://markets.businessinsider.com/news/stocks/warren-buffett-berkshire-hathaway-invest-550-million-snowflake-ipo-2020-9-1029571458#">plan to invest</a> about $570 million in Snowflake's IPO shows that CEO Warren Buffett has complete faith in his deputies, Farnam Street Investments CEO and "Value: After Hours" cohost Jake Taylor told Business Insider this week.</p><p>"Buffett has given full agency to his lieutenants," Taylor said, referring to Berkshire's portfolio managers, Todd Combs and Ted Weschler. "A high-profile tech IPO is a resounding confirmation that his actions match his words."</p><p>"Any lingering doubts that these guys get to invest however they want has been extinguished," he added.</p><p><strong><em>Read more</em></strong><em>: </em><em><a href="https://www.businessinsider.com/warren-buffett-berkshire-hathaway-snowflake-ipo-investment-rationale-fund-manager-2020-9?r=US&amp;IR=TIR=T" target="_blank" rel="noopener noreferrer">A major fund manager explains the rationale behind Berkshire Hathaway's $570 million investment in Snowflake's IPO — and outlines why it's a good sign for shareholders</a></em></p><p>Taylor's comments echo those of Paul Lountzis, founder and president of Lountzis Asset Management, in an <a href="https://www.businessinsider.com/warren-buffett-berkshire-hathaway-snowflake-ipo-investment-rationale-fund-manager-2020-9?r=US&amp;IR=TIR=T">interview with Business Insider this week</a>.</p><p>Berkshire's bet on Snowflake — despite <a href="https://markets.businessinsider.com/news/stocks/warre-buffett-berkshire-hathaway-570-million-snowflake-ipo-rare-unicorn-2020-9-1029574925#">Buffett's historical aversion</a> to public listings, loss-making tech companies, and lofty valuations — demonstrates that he has "total trust in Todd and Ted," Lountzis said.</p><p>Buffett has emphasized in the past that Combs and Weschler, who <a href="https://www.geico.com/about/pressreleases/2019/20191224/">managed about $14 billion each</a> at the last count, are free to make their own investment decisions.</p><p>"They don't have to check with me before they buy or sell anything," he said in a <a href="https://finance.yahoo.com/news/warren-buffetts-money-managers-todd-combs-ted-weschler-speak-142643892.html">Yahoo Finance interview</a> in 2017. "It's entirely their decision."</p><p><em><strong>Read more:</strong> <a href="https://www.businessinsider.com/stock-market-crash-expert-warns-great-depression-setup-90-plunge-2020-9" target="_blank" rel="noopener">'The worst crash in our lifetime': One market expert says stocks are screaming towards a Great Depression-like setup in early 2021 — and warns an 80% to 90% plunge isn't out of the question</a></em></p><h2>Finding value</h2><p>Snowflake is seeking a $24 billion valuation, more than 78 times its revenue last year. Yet Berkshire's investment in the cloud-data platform isn't a betrayal of Buffett's signature value-investing approach, Taylor said.</p><p>"My personal view is 'value' can come in a lot of flavors," he said. "Just because something isn't statistically cheap doesn't mean it can't be mispriced."</p><p>Zachary Lountzis, Paul's son and a vice president at his fund, made a similar argument. "Growth is a component of value," he said, as a business can be be undervalued if the market underestimates its future earnings growth.</p><p><em><strong>Read more:</strong> <a href="https://www.businessinsider.com/stock-picks-to-buy-30-undervalued-firms-with-strong-fundamentals-2020-9" target="_blank" rel="noopener">Buy these 30 stocks that offer the best bargains for strong sales and earnings growth in a pricey market, Credit Suisse says</a></em></p><p>Buffett voiced a similar view at Berkshire's shareholder meeting last year.</p><p>"All <keyword id="35175" type="ORGANIZATION" weightage="60" keywordseo="investing">investing</keyword> is value investing," he said. "You're putting out some money now to get more later on."</p><p>"All the same calculation goes into it, whether you're buying some bank at 70% of book value, or you're buying Amazon at some very high multiple of reported earnings."</p><p><strong>Read more</strong>: <em><a href="https://www.businessinsider.com/stock-picks-to-buy-16-cheap-tech-for-growth-stifel-2020-9?r=US&amp;IR=TIR=T" target="_blank" rel="noopener noreferrer">Buy these 16 tech stocks that are beaten down from the pandemic and now primed for explosive growth in the months ahead, Stifel says</a></em></p>

Warren Buffett's $570 million bet on Snowflake shows he completely trusts his deputies, investor Jake Taylor says

<p><div class="KonaFilter image-container"><div class="image"><p class="source"><a href="http://www.farnamstreetblog.com/2013/12/mental-model-circle-of-competence/">Farnam Street</a></p></div><p></p></div><em>"I'm no genius. I'm smart in spots-but I stay around those spots."</em><br /><em>- Tom Watson Sr., Founder of IBM</em></p>
<p>The concept of the "Circle of Competence" has been used over the years by Warren Buffett as a way to focus investors on only operating in areas they knew best. The bones of the concept appear in his <a href="http://www.berkshirehathaway.com/letters/1996.html" target="_blank">1996 Shareholder Letter</a>:</p>
<blockquote>
<p style="padding-left: 30px;">What an investor needs is the ability to correctly evaluate selected businesses. Note that word "selected": You don't have to be an expert on every company, or even many. You only have to be able to evaluate companies within your circle of competence. The size of that circle is not very important; knowing its boundaries, however, is vital.</p>
</blockquote>
<p>It's a simple concept: Each of us, through experience or study, has built up useful knowledge on certain areas of the world. Some areas are understood by most of us, while some areas require a lot more specialty to evaluate.</p>
<p>For example, most of us have a basic understanding of the economics of a restaurant: You rent or buy space, spend money to outfit the place and then hire employees to seat, serve, cook, and clean. (And, if you don't want to do it yourself, manage.)</p>
<p>From there it's a matter of generating enough traffic and setting the appropriate prices to generate a profit on the food and drinks you serve-after all of your operating expenses have been paid. Though the cuisine, atmosphere, and price points will vary by restaurant, they all have to follow the same economic formula.</p>
<p>That basic knowledge, along with some understanding of accounting and a little bit of study, would enable one to evaluate and invest in any number of restaurants and restaurant chains; public or private. It's not all that complicated.</p>
<p>However, can most of us say we understand the workings of a micro-chip company or a biotech drug company at the same level? Perhaps not.</p>
<p>But as Buffett put so eloquently, we do not necessarily need to understand these more esoteric areas to invest capital. Far more important is to honestly define what we do know and to stick to those areas. The circle can be widened, but only slowly and over time. Mistakes are most often made when straying from this discipline.</p>
<p style="text-align: center;">* * *</p>
<p>The concept applies outside of investing.</p>
<p>Buffett <a href="http://www.tilsonfunds.com/BuffettNotreDame.pdf" target="_blank">describes</a> the circle of competence of one of his business managers, a Russian immigrant with poor English who built the largest furniture store in Nebraska, thusly:</p>
<blockquote>
<p style="padding-left: 30px;">I couldn't have given her $200 million worth of Berkshire Hathaway stock when I bought the business because she doesn't understand stock. She understands cash. She understands furniture. She understands real estate. She doesn't understand stocks, so she doesn't have anything to do with them. If you deal with Mrs. B in what I would call her circle of competence… She is going to buy 5,000 end tables this afternoon (if the price is right). She is going to buy 20 different carpets in odd lots, and everything else like that [snaps fingers] because she understands carpet. She wouldn't buy 100 shares of General Motors if it was at 50 cents a share.</p>
</blockquote>
<p>It did not hurt Mrs. B to have such a narrow area of competence. In fact, one could argue the opposite: Her rigid devotion to that area allowed her to focus. Only with that focus could she have overcome her handicaps to achieve such extreme success.</p>
<p>In fact, Charlie Munger takes this concept outside of business altogether and into the realm of life in general. The essential question he sought to answer: Where should we devote our limited time in life, in order to achieve the most success? Charlie's <a href="http://ycombinator.com/munger.html" target="_blank">simple prescription</a>:</p>
<blockquote>
<p style="padding-left: 60px;">You have to figure out what your own aptitudes are. If you play games where other people have the aptitudes and you don't, you're going to lose. And that's as close to certain as any prediction that you can make. You have to figure out where you've got an edge. And you've got to play within your own circle of competence.</p>
<p style="padding-left: 60px;">If you want to be the best tennis player in the world, you may start out trying and soon find out that it's hopeless-that other people blow right by you. However, if you want to become the best plumbing contractor in Bemidji, that is probably doable by two-thirds of you. It takes a will. It takes the <keyword id="6358717" type="COMPANY" weightage="60" keywordseo="intelligence">intelligence</keyword>. But after a while, you'd gradually know all about the plumbing business in Bemidji and master the art. That is an attainable objective, given enough discipline. And people who could never win a chess tournament or stand in center court in a respectable tennis tournament can rise quite high in life by slowly developing a circle of competence-which results partly from what they were born with and partly from what they slowly develop through work.</p>
</blockquote>
<p style="padding-left: 30px;">So, the simple takeaway here is clear. If you want to improve your odds of success in life and business then define the perimeter of your circle of competence, and operate inside. Over time, work to expand that circle but never fool yourself about where it stands today, and never be afraid to say "I don't know."</p>
<p><em>Circle of Competence is part of the <keyword id="1737858" type="UNKNOWN" weightage="60" keywordseo="Farnam-Street">Farnam Street</keyword> <a href="http://www.farnamstreetblog.com/mental-models/" target="_blank">latticework of mental models</a>.</em></p>

The 'Circle Of Competence' Theory Will Help You Make Vastly Smarter Decisions

<p><div class="KonaFilter image-container float_right"><div class="image on-image"><p class="source"><a href="http://www.flickr.com/photos/abee5/8314929977/">Abhi Sharma/Flickr</a></p></div><p></p></div>Little differences over a long lifetime create big disparities. This is the nature of compounding. If you make decisions only a little better than your cohort that should translate into a big difference over a lifetime.</p>
<p>Someone who saves money for retirement is probably going to be in a better situation come 65 than someone who didn't start saving until they were 45.</p>
<p>Here are five <keyword id="5050" type="UNKNOWN" weightage="60" keywordseo="books">books</keyword> that I think everyone should read before they turn 30. Reading and understanding these will give you an edge, however slight, that will increase the odds that things will work out to your satisfaction. When you're a rich billionaire because of this, just remember me ok.</p>
<p><strong>1. "<a href="http://a-fwd.com/es=farstrblo068-21&amp;it=farstrblo0a-21&amp;fr=farstrblo08-21&amp;de=farstrblo07-21&amp;uk=farstrblo-21&amp;ca=farst-20&amp;com=farnamstreet-20&amp;asin-es=006124189X&amp;asin-it=006124189X&amp;asin-fr=006124189X&amp;asin-de=006124189X&amp;asin-uk=006124189X&amp;asin-ca=006124189X&amp;asin-com=006124189X" target="_blank">Influence: The Psychology of Persuasion</a>"</strong><br />Psychologist Robert Cialdini introduces the universal principles of influence: reciprocation, scarcity, authority, commitment, liking, and consensus. Sure you can watch the <a href="http://www.farnamstreetblog.com/2012/02/the-principles-of-influence-video/" target="_blank">short video</a> but its not the same. Buy the book. Why do you need to learn these? To paraphrase Publius Syrus, 'He can best avoid a snare who knows how to set one.' After you read this book move on to "<a href="http://a-fwd.com/es=farstrblo068-21&amp;it=farstrblo0a-21&amp;fr=farstrblo08-21&amp;de=farstrblo07-21&amp;uk=farstrblo-21&amp;ca=farst-20&amp;com=farnamstreet-20&amp;asin-es=1578645018&amp;asin-it=1578645018&amp;asin-fr=1578645018&amp;asin-de=1578645018&amp;asin-uk=1578645018&amp;asin-ca=1578645018&amp;asin-com=1578645018" target="_blank">Poor Charlie's Almanack</a>."</p>
<p><strong>2. "<a href="http://a-fwd.com/es=farstrblo068-21&amp;it=farstrblo0a-21&amp;fr=farstrblo08-21&amp;de=farstrblo07-21&amp;uk=farstrblo-21&amp;ca=farst-20&amp;com=farnamstreet-20&amp;asin-es=1578644283&amp;asin-it=1578644283&amp;asin-fr=1578644283&amp;asin-de=1578644283&amp;asin-uk=1578644283&amp;asin-ca=1587991888&amp;asin-com=1578644283" target="_blank">Seeking Wisdom: From Darwin To Munger</a>"</strong><br />The last time I mentioned this book <keyword id="1737858" type="UNKNOWN" weightage="60" keywordseo="Farnam-Street">Farnam Street</keyword> readers flooded my inbox. I'll try to address the two primary concerns that appeared. First, if you can't find it new just purchase a used copy. Who cares? Second: Yes it's an "expensive" book. Ignorance is more expensive. Just buy it.</p>
<p><strong>3. "<a href="http://a-fwd.com/es=farstrblo068-21&amp;it=farstrblo0a-21&amp;fr=farstrblo08-21&amp;de=farstrblo07-21&amp;uk=farstrblo-21&amp;ca=farst-20&amp;com=farnamstreet-20&amp;asin-es=0140442103&amp;asin-it=0140442103&amp;asin-fr=0140442103&amp;asin-de=0140442103&amp;asin-uk=0140442103&amp;asin-ca=0140442103&amp;asin-com=0140442103" target="_blank">Letters from a Stoic</a>"</strong><br />I came to Seneca a few years after I turned 30. It's clear from reading Seneca that he's full of wisdom. His letters deal with everything we deal with today: success, failure, wealth, poverty, grief. His <keyword id="63774" type="UNKNOWN" weightage="60" keywordseo="Philosophy">philosophy</keyword> is practical. Not only will reading this book help equip you for what comes in life but it'll help you communicate with others.</p>
<p><strong>4. "<a href="http://a-fwd.com/es=farstrblo068-21&amp;it=farstrblo0a-21&amp;fr=farstrblo08-21&amp;de=farstrblo07-21&amp;uk=farstrblo-21&amp;ca=farst-20&amp;com=farnamstreet-20&amp;asin-es=1165074052&amp;asin-it=1165074052&amp;asin-fr=1165074052&amp;asin-de=1165074052&amp;asin-uk=1165074052&amp;asin-ca=1165074052&amp;asin-com=1165074052" target="_blank">The Moral Sayings of Publius Syrus</a>"</strong><br />A Syrian slave, Syrus is a full of timeless wisdom. Want an example? "From the errors of others, a wise man corrects his own." Here is another "It is not every question that deserves an answer." Ok, one more? "To do two things at once is to do neither." And he didn't even know of Facebook and Twitter. You can read this book in under an hour but spend the rest of your life trying to learn and apply his wisdom.</p>
<p><strong>5. "<a href="http://www.amazon.ca/exec/obidos/ASIN/1611634091/farst-20" target="_blank">The Essays of Warren Buffett: Lessons for Corporate America, Third Edition</a>"</strong><br />I'd much rather recommend "<a href="http://a-fwd.com/es=farstrblo068-21&amp;it=farstrblo0a-21&amp;fr=farstrblo08-21&amp;de=farstrblo07-21&amp;uk=farstrblo-21&amp;ca=farst-20&amp;com=farnamstreet-20&amp;asin-es=1595910778&amp;asin-it=1595910778&amp;asin-fr=1595910778&amp;asin-de=1595910778&amp;asin-uk=1595910778&amp;asin-ca=1595910778&amp;asin-com=1595910778" target="_blank">Berkshire Hathaway Letters to Shareholders</a>" (also <a href="http://www.berkshirehathaway.com/letters/letters.html" target="_blank">freely available</a>), however I recognize that most people would be intimidated by its size. In the Essays, Lawrence Cunningham thematically organizes Buffett's own words. There is more than enough here to get a clear picture of the principles and logic of Buffett and Munger's philosophy for business, life, and investing.</p>
<p>If you're over 30, that's ok too. It's never too late.</p>

5 Books You Should Read Before You Turn 30

<p><div class="KonaFilter image-container float_right"><div class="image on-image"><p class="source"><a href="http://www.flickr.com/photos/eflon/4681519270/">Alex/Flickr</a></p></div><p></p></div>The concept of the "Circle of Competence" has been used over the years by <keyword id="6358963" type="PERSON" weightage="60" keywordseo="Warren-Buffett">Warren Buffett</keyword> as a way to focus investors on only operating in areas they knew best. The bones of the concept appear in his <a href="http://www.berkshirehathaway.com/letters/1996.html" target="_blank">1996 Shareholder Letter</a>:</p>
<blockquote>
<p>What an investor needs is the ability to correctly evaluate selected businesses. Note that word "selected": You don't have to be an expert on every company, or even many. You only have to be able to evaluate companies within your circle of competence. The size of that circle is not very important; knowing its boundaries, however, is vital.</p>
</blockquote>
<p>It's a simple concept: Each of us, through experience or study, has built up useful knowledge on certain areas of the world. Some areas are understood by most of us, while some areas require a lot more specialty to evaluate.</p>
<p>For example, most of us have a basic understanding of the economics of a restaurant: You rent or buy space, spend money to outfit the place and then hire employees to seat, serve, cook, and clean. (And, if you don't want to do it yourself, manage.)</p>
<p>From there it's a matter of generating enough traffic and setting the appropriate prices to generate a profit on the food and drinks you serve - after all of your operating expenses have been paid. Though the cuisine, atmosphere, and price points will vary by restaurant, they all have to follow the same economic formula.</p>
<p>That basic knowledge, along with some understanding of accounting and a little bit of study, would enable one to evaluate and invest in any number of restaurants and restaurant chains; public or private. It's not all that complicated.</p>
<p>However, can most of us say we understand the workings of a micro-chip company or a biotech drug company at the same level? Perhaps not.</p>
<p>But as Buffett put so eloquently, we do not necessarily need to understand these more esoteric areas to invest capital. Far more important is to honestly define what we do know and to stick to those areas. The circle can be widened, but only slowly and over time. Mistakes are most often made when straying from this discipline.</p>
<p><span style="line-height: 1.5em;">The concept applies outside of investing.</span></p>
<p>Buffett <a href="http://www.tilsonfunds.com/BuffettNotreDame.pdf" target="_blank">describes</a> the circle of competence of one of his business managers, a Russian immigrant with poor English who built the largest furniture store in Nebraska, thusly:</p>
<blockquote>
<p>I couldn't have given her $200 million worth of Berkshire Hathaway stock when I bought the business because she doesn't understand stock. She understands cash. She understands furniture. She understands real estate. She doesn't understand stocks, so she doesn't have anything to do with them. If you deal with Mrs. B in what I would call her circle of competence… She is going to buy 5,000 end tables this afternoon (if the price is right). She is going to buy 20 different carpets in odd lots, and everything else like that [snaps fingers] because she understands carpet. She wouldn't buy 100 shares of General Motors if it was at 50 cents a share.</p>
</blockquote>
<p>It did not hurt Mrs. B to have such a narrow area of competence. In fact, one could argue the opposite: Her rigid devotion to that area allowed her to focus. Only with that focus could she have overcome her handicaps to achieve such extreme <keyword id="21796" type="UNKNOWN" weightage="60" keywordseo="success">success</keyword>.</p>
<p>In fact, Charlie Munger takes this concept outside of business altogether and into the realm of life in general. The essential question he sought to answer: Where should we devote our limited time in life, in order to achieve the most success? Charlie's <a href="http://ycombinator.com/munger.html" target="_blank">simple prescription</a>:</p>
<blockquote>
<p>You have to figure out what your own aptitudes are. If you play games where other people have the aptitudes and you don't, you're going to lose. And that's as close to certain as any prediction that you can make. You have to figure out where you've got an edge. And you've got to play within your own circle of competence.</p>
<p>If you want to be the best tennis player in the world, you may start out trying and soon find out that it's hopeless - that other people blow right by you. However, if you want to become the best plumbing contractor in Bemidji, that is probably doable by two-thirds of you. It takes a will. It takes the intelligence. But after a while, you'd gradually know all about the plumbing business in Bemidji and master the art. That is an attainable objective, given enough discipline. And people who could never win a chess tournament or stand in center court in a respectable tennis tournament can rise quite high in life by slowly developing a circle of competence - which results partly from what they were born with and partly from what they slowly develop through work.</p>
</blockquote>
<p>So, the simple takeaway here is clear. If you want to improve your odds of success in life and business then define the perimeter of your circle of competence, and operate inside. Over time, work to expand that circle but never fool yourself about where it stands today, and never be afraid to say, "I don't know."</p>

Why Successful People Define Their 'Circle Of Competence'

<p><div class="KonaFilter image-container float_right"><div class="image on-image"><p class="source"><a href="http://www.apimages.com/secured_user/Download.aspx?st=dl&amp;attemptedDL=1&amp;errors=&amp;impid=&amp;hash=KEuylw75KtgPSyrXceovuFK2uIDiLhRo2wXi%252fp%252fa0FPRq9YfKH8dYrHzVcx9LC1ioLEERSsIVzy%252bxfNe64XK7g%253d%253d">AP Images</a></p></div><p></p></div><em><strong>FA Insights is a daily newsletter from Business Insider that delivers the top news and commentary for financial advisors.</strong></em></p>
<p><strong><a href="https://www.gmo.com/America/CMSAttachmentDownload.aspx?target=JUBRxi51IIBEIq6GNuTKr%2bf2o0WPxzkpzr%2bP3HvjlK76FjNoPoANwwlALT63inFWprLEELY64Wg5MCZKlzumQq3wwEcDvcI%2bAax7rLu70%2bguqx3EEZtMYw%3d%3d">James Montier: The Golden Rule Of Investing</a> (GMO) </strong></p>
<p>"The golden rule of investing: no asset (or strategy) is so good that you should invest irrespective of the price paid," writes GMO's James Montier in a new White Paper.</p>
<p>"If when buying a house the mantra is 'location, location, location,' when thinking about any investment (be it an asset or a strategy), the equivalent refrain should be 'valuation, valuation, valuation.' We would argue that one of the myths perpetuated by our industry is that there are lots of ways to generate good long-run real returns, but we believe there is really only one: buying cheap assets."</p>
<p><a href="http://www.investmentnews.com/article/20131205/FREE/131209947#"><strong>Shiller: People Make Better Decisions With Financial Advisors</strong></a><strong> (Investment News)</strong></p>
<p>"People make better decisions with financial advisors," Nobel Prize-winning economist Robert Shiller said during a conference hosted by the National Association of Personal Financial Advisors (NAPFA) and Forbes, reports Liz Skinner at Investment News. Shiller also said that people should have access to financial advice through a Medicaid-type approach if they can't afford it.</p>
<p><a href="https://advisors.vanguard.com/VGApp/iip/site/advisor/researchcommentary/article/IWE_InvComTurnabout"><strong>The Overall Municipal Market Is Still Sound</strong></a><strong> (Vanguard)</strong><a href="https://advisors.vanguard.com/VGApp/iip/site/advisor/researchcommentary/article/IWE_InvComTurnabout"><strong></strong> </a></p>
<p>Historically Treasuries have yielded more than Munis but that relationship has reversed more recently, according to Vanguard. "The turmoil started with the 2008-2009 financial crisis and continued amid dire headlines about state and local finances."</p>
<p>"Through June, July, and August, a time when investor concerns mounted over Detroit's bankruptcy filing and the financial health of Puerto Rico, 10-year municipal yields averaged about 12% more than 10-year Treasuries. By the end of October, the gap had closed somewhat, but 10-year muni yields were still averaging about 8% more. Over the past decade, however, muni yields have averaged 5% less than their Treasury equivalents." Investors should not be swayed by this says Vanguard which thinks the muni market is still "sound." Munis have a tax-favored status and Vanguard argues that investors should determine if they want muni holdings in their portfolio based on their "long-term goals, risk tolerance and tax considerations."</p>
<p><strong><a href="http://www.businessinsider.com/patience-in-asia-2013-12">3 Factors Make Us Optimistic About Investing In Asia</a> (Investment Adventures In Emerging Markets) </strong></p>
<p>While many investors are getting antsy about investing in Asian emerging markets, Mark Mobius says there are three key reasons he continues to be optimistic on the region. 1. "When compared with developed markets generally, Asia's emerging markets have had higher rates of historic economic growth, and growth expectations for the year ahead are generally higher as well." 2. "The high level of foreign reserves we generally find in emerging markets in Asia, which exceeds developed markets in general." 3. "Debt levels in Asian emerging markets are much lower than those in developed markets."</p>
<p><a href="http://www.businessinsider.com/the-circle-of-competence-theory-2013-12"><strong>The 'Circle Of Competence' Theory Will Help You Make Vastly Smarter Decisions</strong></a><strong> (Farnam Street)</strong></p>
<p>Warren Buffett has long used the concept of the "Circle of Competence" to urge investors to focus on areas they know best. "What an investor needs is the ability to correctly evaluate selected businesses," he wrote in a 1996 shareholder letter. "Note that word "selected": You don't have to be an expert on every company, or even many. You only have to be able to evaluate companies within your circle of competence. The size of that circle is not very important; knowing its boundaries, however, is vital." Even if investors don't understand the detailed workings of a company if they can define areas of expertise the can stick to it and over time expand out. And this applies outside the world of investing and to broader success in life.</p>
<p><div class="KonaFilter image-container"><div class="image"><p class="source">Farnam Street</p></div><p></p></div></p>

GMO's James Montier Presents The Golden Rule Of Investing 

<p class="source"><span>AP Images / Nati Harnik</span></p><ul class="summary-list"><li>Jacob Taylor, CEO of Farnam Street Investments and author of "<a href="https://www.amazon.com/Rebel-Allocator-Jacob-Taylor/dp/173268832X" target="_blank" rel="noopener">The Rebel Allocator</a>," said his 25-minute phone call with Charlie Munger was "the most surreal experience" of his life.</li><li>Through a fictional lens, Taylor teaches readers timeless lessons in business.</li><li>He says "people are afraid to think for themselves."</li><li><a href="https://www.businessinsider.com/prime">Click here for more BI Prime stories.</a></li></ul><p>It's not everyday that <a href="https://www.businessinsider.com/category/charlie-munger">Charlie Munger</a>, vice chairman of <a href="https://www.businessinsider.com/category/berkshire-hathaway">Berkshire Hathaway</a> and <a href="https://www.businessinsider.com/category/warren-buffett">Warren Buffett's</a> right-hand man, calls you personally. </p><p>"It was more than you could ever imagine for a Munger fanboy like myself," said <a href="https://orphanira.com/jake/">Jacob Taylor</a>, CEO of <a href="https://orphanira.com/">Farnam Street Investments</a>, on "<a href="https://www.theinvestorspodcast.com/the-good-life/">The Good Life</a>," an investing podcast. "You pick up the phone and on the other end is Charlie's voice, and, it's like, almost kind of the voice of God in a way."</p><p>He continued: "It was the most surreal 25 minutes of my life."</p><p>Exaggerations aside, Taylor was in awe of the investment legend. Especially when Munger praised Taylor's book: "<a href="https://www.amazon.com/The-Rebel-Allocator/dp/B07QN1FWMG" target="_blank" rel="noopener">The Rebel Allocator</a>."</p><p>"His biggest thing that he wanted to tell me, was encourage me to get the book made into a movie," he said. "I haven't made a ton of progress yet on that."</p><p>And it wouldn't have been a conversation with Munger without some market wisdom from the investing legend.</p><p>"He had read some of my quarterly letters that I write for being the CEO of Farnam Street," he said. "He told me if I was finding too much right now [investment opportunities] he'd actually be worried ... Just to be patient, and look where others aren't looking, and don't be afraid to go where the fish are. It was just an incredible experience."</p><p>Taylor's book is designed to teach timeless business lessons to readers through a fictional mentor/mentee relationship.</p><p>It centers around a young man, Nick, who's studying for his MBA, but is skeptical of capitalism. That is, until he befriends Mr. X - a Mr. Miyagi-esque, billionaire mentor. Through a series of exchanges, Mr. X slowly changes Nick's views of business and capitalism as a whole, and also shares a series of timeless life/business advice.</p><p>Taylor notes that Mr. X's character is really an amalgamation of different business "heroes" - and attributes of Warren Buffett, Charlie Munger, Ray Kroc, Sam Walton, and Henry Singleton are all incorporated into his character.</p><p>"I did try to make as much of it obsolescence-proof as I could," he said. "The lessons are very generalized. It's more trying to teach you how to think about the problem and frame the problem correctly." </p><h2>Key takeaways</h2><h3><strong>1. The importance of capital allocation</strong></h3><p>"When I say capital allocation, at the end of the day it's what you spend your money on inside your business," he said. "Everybody that works in a business or does anything is doing capital allocation at all times." </p><p>Capital allocation - and how to improve/grow in this area - is a recurring theme throughout the book. Taylor says it applies in all aspects of our lives.</p><p>"What do you spend your money on? What do you spend your time on? What do you spend your energy on?" he said. "Capital in this instance happens to be for a business context, but all of those lessons that apply to business also apply to life, and family, and friends, and leadership. You're a capital allocator whether you want to be or not."</p><h3><strong>2. Inner scorecard</strong></h3><p>"People are afraid to think for themselves," he said. "At the end of the day, I really wanted the book to a boost to their confidence to follow their own decision making, and to follow their own inner scorecard."</p><p>For the uninitiated, the inner scorecard is a principle that Warren Buffett has advocated for incessantly over the years. In short, one's inner scorecard encompasses values, morals, ethics and the ability to do the right thing when decision making. It's identifying what's important to you, thinking independently, and not avoiding herd mentality.</p><p>Buffett's unblemished record of decades of business transactions is a testament to this way of thinking. </p><p>"If everyone's thinking for themselves, it's actually a much more robust system," he said. </p><h3><strong>3. Capitalism is not the enemy</strong></h3><p>"Capitalism is a little bit under pressure right now," he said. "I think the tide is probably swinging the other way - and I think it's really easy for people to forget about the little mundane, nice things that free markets provide for us everyday."</p><p>Statistics back Taylor's thesis.</p><p>According to a recent <a href="https://www.victimsofcommunism.org/2019-annual-poll">YouGov poll</a>, <a href="https://www.businessinsider.com/millennials-would-vote-socialist-bernie-sanders-elizabeth-warren-debt-2019-10">70% of millennials</a> say they're likely to vote socialist in the upcoming 2020 election. What's more, 36% say the approve of communism. </p><p>"We really take that ease of life that comes from free markets, and capitalism, and competition - we take it for granted," he concluded. "I do have concerns - especially for younger people - that they haven't been impressed with enough appreciation for the good things that come from it. I purposefully tried to skew the book a little bit younger for that reason. I wanted it to resonate with a younger person."</p>            <h3>NOW WATCH: <a href="https://www.businessinsider.com/planes-dump-jet-fuel-aircraft-landing-emergency-2019-12">Why do planes dump fuel?</a></h3>

Legendary investor Charlie Munger loved 'The Rebel Allocator' so much he called the author and encouraged him to make it a movie. Here are the book's 3 key takeaways.

<p><div class="KonaFilter image-container float_right"><div class="image on-image"><p class="source">David McNew/Getty Images</p></div><p></p></div><keyword id="18635" type="CITY" weightage="60" keywordseo="Amazon">Amazon</keyword> CEO <keyword id="191583" type="PERSON" weightage="60" keywordseo="Jeff-Bezos">Jeff Bezos</keyword>, despite contributing to the <a href="http://www.businessinsider.com/why-bookstores-are-doomed-2013-10">destruction of the physical bookstore</a>, is a man intensely interested in and <a href="http://www.businessinsider.com/jeff-bezos-favorite-business-books-2013-9">passionate about books and reading. </a></p>
<p><span style="background-color: #ffffff;">In the appendix of Brad Stone's new book about Amazon, <a href="http://www.amazon.com/The-Everything-Store-Bezos-Amazon-ebook/dp/B00BWQW73E">"The Everything Store,"</a> the</span>re's a list of <keyword id="5050" type="UNKNOWN" weightage="60" keywordseo="books">books</keyword> called "Jeff's Reading List," highlighted <a href="http://www.farnamstreetblog.com/2013/10/jeff-bezoss-reading-list/">by Shane Parrish at Farnam Street.</a></p>
<p><span style="line-height: 1.5em;">"Books have nurtured Amazon since its creation and shaped its culture and strategy," Stone writes. "Here are a dozen books widely read by executives and employees that are integral to understanding the company." </span></p>
<p><span style="line-height: 1.5em;">The list is not just weighty business tomes, though classics like <a href="http://www.amazon.com/Innovators-Dilemma-Technologies-Management-ebook/dp/B004OC07GM/ref=sr_1_1?ie=UTF8&amp;qid=1382469222&amp;sr=8-1&amp;keywords=the+innovator%27s+dilemma">"The Innovator's Dilemma"</a> are there, but includes novels and biographies as well. They help explain some of Bezos' core management philosophies, like "two pizza teams," the Amazon maxim that no team be larger than the number of people that can share two pizzas. It also includes books that helped inspire the creation of Amazon Web Services, the company's highly lucrative cloud business, and the Kindle.</span></p>
<p><span style="line-height: 1.5em;">It's an amazing way to get into the mind of Jeff Bezos. </span></p>
<p>We've listed the books here, along with Stone's explanation of why each made the list. </p><p class="tagline">Disclosure: Jeff Bezos is an investor in Business Insider through his
personal investment company Bezos Expeditions.</p>

The 12 Essential Books On Jeff Bezos' Reading List

<p><div class="KonaFilter image-container float_right"><div class="image"><p class="source"><span>Victor Fraile/Getty Images</span></p></div><p></p></div>How do companies create habit forming products? It's simple: They manufacture them.</p>
<p>In 2008 Nir Eyal was part of a team of Stanford MBAs starting a company backed by "some of the brightest investors in Silicon Valley."</p>
<p>They wanted to build a platform to place ads into online social games. Eyal wondered how mind manipulation worked - how do products change our actions, and create compulsions.</p>
<p>How do you engineer user behaviour? Are there moral implications? Could these forces be used for good (nudging).</p>
<p>So he looked around for a guide. He couldn't find anything that satisfied him so he documented his experiences, reading, and observations of hundreds of companies "to uncover patterns in user experience designs and functionality." He wanted to know what was common between the "winners" and determine what was missing from the "losers."</p>
<p>The result of this effort is his book <a href="http://a-fwd.com/es=farstrblo068-21&amp;it=farstrblo0a-21&amp;fr=farstrblo08-21&amp;de=farstrblo07-21&amp;uk=farstrblo-21&amp;ca=farst-20&amp;com=farnamstreet-20&amp;asin-es=1494277530&amp;asin-it=1494277530&amp;asin-fr=1494277530&amp;asin-de=1494277530&amp;asin-uk=1494277530&amp;asin-ca=1494277530&amp;asin-com=1494277530" target="_blank">Hooked: How to Build Habit-Forming Products</a> and the creation of the Hook Model: a four-phase process that companies use to form habits.</p>
<blockquote>
<p>Through consecutive hook cycles, successful products reach their ultimate goal of unprompted user engagement, bringing users back repeatedly, without depending on costly advertising or aggressive messaging.</p>
<p><div class="KonaFilter image-container display-table"><div><div class="image"><p class="source"><span><a href="http://www.farnamstreetblog.com/2014/03/hooked/">Farnam Street</a></span></p></div><p></p></div></div></p>
</blockquote>
<p>That sounds like a <a href="http://www.farnamstreetblog.com/2014/03/ryan-holiday-growth-hacking/" target="_blank">growth hacker's</a> dream.</p>
<p>Let's take a look.</p>
<h3><span>1. Trigger</span></h3>
<blockquote>
<p>A trigger is the actuator of behavior - the spark plug in the engine. Triggers come in two types: external and internal. Habit-forming products start by alerting users with external triggers like an email, a website link, or the app icon on a phone.</p>
<p>For example, suppose Barbra, a young woman in Pennsylvania, happens to see a photo in her Facebook newsfeed taken by a family member from a rural part of the state. It's a lovely picture and since she is planning a trip there with her brother Johnny, the external trigger's call-to-action intrigues her and she clicks. By cycling through successive hooks, users begin to form associations with internal triggers, which attach to existing behaviors and emotions.</p>
<p>When users start to automatically cue their next behavior, the new habit becomes part of their everyday routine. Over time, Barbra associates Facebook with her need for social connection.</p>
</blockquote>
<h3><span>2. Action</span></h3>
<blockquote>
<p>Following the trigger comes the action: the behavior done in anticipation of a reward. The simple action of clicking on the interesting picture in her newsfeed takes Barbra to a website called Pinterest, a "pinboard-style photo-sharing" site.</p>
<p>This phase of the hook, as described in chapter three, draws upon the art and science of usability design to reveal how products drive specific user actions. Companies leverage two basic pulleys of human behavior to increase the likelihood of an action occurring: the ease of performing an action and the psychological motivation to do it.</p>
<p>Once Barbra completes the simple action of clicking on the photo, she is dazzled by what she sees next.</p>
</blockquote>
<h3><span>3. Variable Reward</span></h3>
<blockquote>
<p>What distinguishes the Hook Model from a plain vanilla feedback loop is the hook's ability to create a craving. Feedback loops are all around us, but predictable ones don't create desire. The unsurprising response of your fridge light turning on when you open the door doesn't drive you to keep opening it again and again. However, add some variability to the mix - say a different treat magically appears in your fridge every time you open it - and voila, intrigue is created.</p>
<p>Variable rewards are one of the most powerful tools companies implement to hook users; chapter four explains them in further detail. Research shows that levels of the neurotransmitter dopamine surge when the brain is expecting a reward. Introducing variability multiplies the effect, creating a focused state, which suppresses the areas of the brain associated with judgment and reason while activating the parts associated with wanting and desire. Although classic examples include slot machines and lotteries, variable rewards are prevalent in many other habit-forming products.</p>
<p>When Barbra lands on Pinterest, not only does she see the image she intended to find, but she is also served a multitude of other glittering objects. The images are related to what she is generally interested in - namely things to see on her upcoming trip to rural Pennsylvania - but there are other things that catch her eye as well. The exciting juxtaposition of relevant and irrelevant, tantalizing and plain, beautiful and common, sets her brain's dopamine system aflutter with the promise of reward. Now she's spending more time on Pinterest, hunting for the next wonderful thing to find. Before she knows it, she's spent 45 minutes scrolling.</p>
</blockquote>
<h3><span>4. Investment</span></h3>
<blockquote>
<p>The last phase of the Hook Model is where the user does a bit of work. The investment phase increases the odds that the user will make another pass through the hook cycle in the future. <span>The investment occurs when the user puts something into the product or service such as time, data, effort, social capital, or money.</span></p>
<p>However, the investment phase isn't about users opening up their wallets and moving on with their day. Rather, the investment implies an action that improves the service for the next go-around. Inviting friends, stating preferences , building virtual assets, and learning to use new features are all investments users make to improve their experience. These commitments can be leveraged to make the trigger more engaging, the action easier, and the reward more exciting with every pass through the hook cycle. …</p>
<p>As Barbra enjoys endlessly scrolling through the Pinterest cornucopia, she builds a desire to keep the things that delight her. By collecting items, she'll be giving the site data about her preferences. Soon she will follow, pin, re-pin, and make other investments, which serve to increase her ties to the site and prime her for future loops through the hook.</p>
</blockquote><div class="feed-footer-wrapper"><div class="feed-footer">

  <h3>More from Farnam Street:</h3>

  <ul>
       <li>
     <a href="http://www.farnamstreetblog.com/2014/03/ben-horowitz-5-books/" data-bi-base="http://www.farnamstreetblog.com/">Ben Horowitz: 5 Reads</a>
    </li>
       <li>
     <a href="http://www.farnamstreetblog.com/2014/03/nassim-taleb-alternative-history/" data-bi-base="http://www.farnamstreetblog.com/">Nassim Taleb on the Notion of Alternative Histories</a>
    </li>
       <li>
     <a href="http://www.farnamstreetblog.com/2014/03/hooked/" data-bi-base="http://www.farnamstreetblog.com/">Hooked - How Companies Create Habit Forming Products</a>
    </li>
       <li>
     <a href="http://www.farnamstreetblog.com/2014/03/ryan-holiday-growth-hacking/" data-bi-base="http://www.farnamstreetblog.com/">Ryan Holiday on Growth Hacking</a>
    </li>
       <li>
     <a href="http://www.farnamstreetblog.com/2014/03/10-ways-to-get-smarter-be-more-productive-and-do-everything-with-zero-effort/" data-bi-base="http://www.farnamstreetblog.com/">10 Ways to Get Smarter, Be More Productive, and Do Everything with Zero Effort</a>
    </li>
     </ul>
 </div></div>

The Science Behind How Companies Get You Hooked On Their Products

<p><div class="KonaFilter image-container float_right"><div class="image on-image"><p class="source"><span>Business Insider</span></p><p class="caption">Ben Horowitz</p></div><p></p></div>Ben Horowitz is the co-founder of Andreessen Horowitz, the Silicon Valley venture firm that invested in Facebook, Twitter, Skype, and Foursquare. Of course, they've backed a lot of failures too. But suffice to say that few people think about competition as much as Horowitz, so I was interested in seeing his reading list.</p>
<p>He recommends the following reads for managers, entrepreneurs, and investors.</p>
<p><strong>1. "<a href="http://a-fwd.com/es=farstrblo068-21&amp;it=farstrblo0a-21&amp;fr=farstrblo08-21&amp;de=farstrblo07-21&amp;uk=farstrblo-21&amp;ca=farst-20&amp;com=farnamstreet-20&amp;asin-es=0062060244&amp;asin-it=0062060244&amp;asin-fr=0062060244&amp;asin-de=0062060244&amp;asin-uk=0062060244&amp;asin-ca=0062060244&amp;asin-com=0062060244" target="_blank">The Innovator's Dilemma</a>" - Clayton Christensen</strong></p>
<p>Interestingly this is the only <a href="http://www.farnamstreetblog.com/2011/10/what-did-steve-jobs-read/" target="_blank">business book that Steve Jobs liked</a>. In his <a href="http://a-fwd.com/es=farstrblo068-21&amp;it=farstrblo0a-21&amp;fr=farstrblo08-21&amp;de=farstrblo07-21&amp;uk=farstrblo-21&amp;ca=farst-20&amp;com=farnamstreet-20&amp;asin-es=1451648545&amp;asin-it=1451648545&amp;asin-fr=1451648545&amp;asin-de=1451648545&amp;asin-uk=1451648545&amp;asin-ca=1451648545&amp;asin-com=1451648545" target="_blank">biography of Jobs</a>, Walter Isaacson's wrote that it "deeply influenced" Jobs. Fittingly the book shows why and how most companies miss out on new waves of innovation - they do exactly what they are taught to do in business school.</p>
<p><strong>2. "<a href="http://a-fwd.com/es=farstrblo068-21&amp;it=farstrblo0a-21&amp;fr=farstrblo08-21&amp;de=farstrblo07-21&amp;uk=farstrblo-21&amp;ca=farst-20&amp;com=farnamstreet-20&amp;asin-es=0679724672&amp;asin-it=0679724672&amp;asin-fr=0679724672&amp;asin-de=0679724672&amp;asin-uk=0679724672&amp;asin-ca=0679724672&amp;asin-com=0679724672" target="_blank">The Black Jacobins</a>" - C.L.R. James</strong></p>
<p>This is a powerful history of the Haitian Revolution of 1794-1803, which became the model for Third World liberation movements. A barely literate slave, Toussaint L'Ouverture, lead the people of San Domingo against successive invasions by French, Spanish, and English forces. Oh yea, and in the process he helped form the first independent nation in the Caribbean.</p>
<p><strong>3. "<a href="http://a-fwd.com/es=farstrblo068-21&amp;it=farstrblo0a-21&amp;fr=farstrblo08-21&amp;de=farstrblo07-21&amp;uk=farstrblo-21&amp;ca=farst-20&amp;com=farnamstreet-20&amp;asin-es=0385483821&amp;asin-it=0385483821&amp;asin-fr=0385483821&amp;asin-de=0385483821&amp;asin-uk=0385483821&amp;asin-ca=0385483821&amp;asin-com=0385483821" target="_blank">Only the Paranoid Survive</a>" - Andy Grove</strong></p>
<p>I read this book as part of my MBA program. It's full of common sense, which, while I didn't know it at the time, isn't so common.</p>
<p><strong>4. "<a href="http://a-fwd.com/es=farstrblo068-21&amp;it=farstrblo0a-21&amp;fr=farstrblo08-21&amp;de=farstrblo07-21&amp;uk=farstrblo-21&amp;ca=farst-20&amp;com=farnamstreet-20&amp;asin-es=0060799900&amp;asin-it=0060799900&amp;asin-fr=0060799900&amp;asin-de=0060799900&amp;asin-uk=0060799900&amp;asin-ca=0060799900&amp;asin-com=0060799900" target="_blank">Focus</a>" - Al Reis</strong></p>
<p>This is an interesting pick. Marketing "expert" Al Ries believes that focus is the answer to continued growth and prosperity. You know, the common sense approach that Apple and almost no one else seems to follow these days: focus on core products and avoid the siren song of everything else. Of course this isn't the only way to success and lots of companies that focus fail while lots of companies that diversify succeed. Notwithstanding that, <a href="http://www.farnamstreetblog.com/2013/09/a-few-lessons-from-sherlock-holmes/" target="_blank">focus</a> is <a href="http://www.farnamstreetblog.com/2013/09/a-few-lessons-from-sherlock-holmes/">the key to mindfulness</a>.</p>
<p><strong>5. "<a href="http://a-fwd.com/es=farstrblo068-21&amp;it=farstrblo0a-21&amp;fr=farstrblo08-21&amp;de=farstrblo07-21&amp;uk=farstrblo-21&amp;ca=farst-20&amp;com=farnamstreet-20&amp;asin-es=0385042353&amp;asin-it=0385042353&amp;asin-fr=0385042353&amp;asin-de=0385042353&amp;asin-uk=0385042353&amp;asin-ca=0385042353&amp;asin-com=0385042353" target="_blank">My Years at GM</a>" - Alfred Sloan</strong></p>
<p>This is a book that everyone talks about but few people have read. Bill Gates, who did read it, called it the best business book every written. Peter Drucker said the same thing. A great story about how to lead, organize, and communicate things at a large organization.</p><div class="feed-footer-wrapper"><div class="feed-footer">

  <h3>More from Farnam Street:</h3>

  <ul>
       <li>
     <a href="http://www.farnamstreetblog.com/2014/03/ben-horowitz-5-books/" data-bi-base="http://www.farnamstreetblog.com/">Ben Horowitz: 5 Reads</a>
    </li>
       <li>
     <a href="http://www.farnamstreetblog.com/2014/03/nassim-taleb-alternative-history/" data-bi-base="http://www.farnamstreetblog.com/">Nassim Taleb on the Notion of Alternative Histories</a>
    </li>
       <li>
     <a href="http://www.farnamstreetblog.com/2014/03/hooked/" data-bi-base="http://www.farnamstreetblog.com/">Hooked - How Companies Create Habit Forming Products</a>
    </li>
       <li>
     <a href="http://www.farnamstreetblog.com/2014/03/ryan-holiday-growth-hacking/" data-bi-base="http://www.farnamstreetblog.com/">Ryan Holiday on Growth Hacking</a>
    </li>
       <li>
     <a href="http://www.farnamstreetblog.com/2014/03/10-ways-to-get-smarter-be-more-productive-and-do-everything-with-zero-effort/" data-bi-base="http://www.farnamstreetblog.com/">10 Ways to Get Smarter, Be More Productive, and Do Everything with Zero Effort</a>
    </li>
     </ul>
 </div></div><p class="tagline">Disclosure: Marc Andreessen, co-founder of Andreessen Horowitz, is an investor in Business Insider.</p>

The 5 Books Mega Investor Ben Horowitz Says You Need To Read

<p><div class="KonaFilter image-container float_right"><div class="image"><p class="source"><span><a href="https://www.flickr.com/photos/adeepbreath/">Flickr/Adam Swank</a></span></p></div><p></p></div>Here are five simple notions, found in "<a href="http://a-fwd.com/es=farstrblo068-21&amp;it=farstrblo0a-21&amp;fr=farstrblo08-21&amp;de=farstrblo07-21&amp;uk=farstrblo-21&amp;ca=farst-20&amp;com=farnamstreet-20&amp;asin-es=0471446912&amp;asin-it=0471446912&amp;asin-fr=0471446912&amp;asin-de=0471446912&amp;asin-uk=0471446912&amp;asin-ca=0471446912&amp;asin-com=0471446912" target="_blank">Damn Right!: Behind the Scenes with Berkshire Hathaway Billionaire Charlie Munger</a>," that Charlie Munger, the Billionaire business partner of Warren Buffett, finds helpful in solving problems.</p>
<h3>1. Simplify</h3>
<p style="padding-left: 60px;">"My first helpful notion is that it is usually best to simplify problems by deciding big "no-brainer" questions first."</p>
<h3>2. Numerical Fluency</h3>
<p style="padding-left: 60px;">"The second helpful notion mimics Galileo's conclusion that scientific reality is often revealed only by math, as if math was the language of God. Galileo's attitude also works well in messy practical life. Without numerical fluency, in the part of life most of us inhabit, you are like a one-legged man in an ass-kicking contest."<span style="line-height: 1.5em;"><br /></span></p>
<h3>3. Invert</h3>
<p><a href="http://www.farnamstreetblog.com/2013/10/inversion/" target="_blank">Inverting the problem</a> won't always solve it, but it will help you avoid trouble. Call it the avoiding stupidity filter.</p>
<p style="padding-left: 60px;">"The third helpful notion is that it is not enough to think problems through forward. You must also think in reverse, much like the rustic who wanted to know where he was going to die so that he'd never go there. Indeed, many problems can't be solved forward. And that is why the great algebraist, Carl Jacobi, so often said: 'invert, always invert.' And why Pythagoras thought in reverse to prove that the square root of two was an irrational number."</p>
<h3>4. Study The Basics</h3>
<p>The basics are something that keeps coming up. The first of<a href="http://www.farnamstreetblog.com/2013/07/five-elements-of-effective-thinking/" target="_blank">the five elements of effective thinking</a>is understand deeply.</p>
<p>Munger also believes in the basics:</p>
<p style="padding-left: 60px;">"The fourth helpful notion is that the best and most practical wisdom is elementary academic wisdom. But there is one extremely important qualification: you must think in a multidisciplinary manner. You must routinely use all the easy-to-learn concepts from the freshman course in every basic subject. Where elementary ideas will serve, your problem solving must not be limited, as academia and many business bureaucracies are limited, by extreme balkanization into disciplines and subdisciplines, with strong taboos against any venture outside assigned territory. …</p>
<p style="padding-left: 60px;">"If, in your thinking, you rely on others, often through purchase of professional advice, whenever outside a small territory of your own, you will suffer much calamity."</p>
<p>This happens in part because professional advisors are often undone, not by their conscious malfeasance rather by troubles found in their subconscious bias.</p>
<p style="padding-left: 60px;">"His cognition will often be impaired, for your purposes, by financial incentives different from yours. And he will also suffer from the psychological defect caught by the proverb: to a man with a hammer, every problem looks like a nail."</p>
<h3>5. Lollapalooza Effects</h3>
<p>And you need to combine really big things.</p>
<p style="padding-left: 60px;">"The fifth helpful notion is that really big effects, lollapalooza effects, will often come only from large combinations of factors. For instance, tuberculosis was tamed, at least for a long time, only by routine combined use in each case of three different drugs. And other lollapalooza effects, like the flight of an airplane, follow a similar pattern."</p><div class="feed-footer-wrapper"><div class="feed-footer">

  <h3>More from Farnam Street:</h3>

  <ul>
       <li>
     <a href="http://www.farnamstreetblog.com/2014/06/jp-morgan-summer-reading-list/" data-bi-base="http://www.farnamstreetblog.com/">What Bankers Read At the Beach</a>
    </li>
       <li>
     <a href="http://www.farnamstreetblog.com/2014/06/charlie-munger-notions/" data-bi-base="http://www.farnamstreetblog.com/">5 Simple Notions that Help Solve Problems</a>
    </li>
       <li>
     <a href="http://www.farnamstreetblog.com/2014/06/warren-buffett-the-snowball/" data-bi-base="http://www.farnamstreetblog.com/">Warren Buffett on Scorecards, Investing, Friends, and the Family Motto</a>
    </li>
       <li>
     <a href="http://www.farnamstreetblog.com/2014/06/rethink-innovation/" data-bi-base="http://www.farnamstreetblog.com/">Re:Think Innovation</a>
    </li>
       <li>
     <a href="http://www.farnamstreetblog.com/2014/06/the-martini/" data-bi-base="http://www.farnamstreetblog.com/">The History of the Martini</a>
    </li>
     </ul>
 </div></div>

5 Simple Ways To Solve Complex Problems

<p><div class="KonaFilter image-container float_right"><div class="image on-image"><p class="source"><span>Christopher Furlong/Getty Images</span></p></div><p></p></div>Last year, I read <a href="http://www.farnamstreetblog.com/reading/" target="_blank">161 books cover-to-cover</a>.</p>
<p>And that doesn't include the ones that I started to read and put down.</p>
<p>I learned a lot in the process about what works and what doesn't work.</p>
<p>I have a system that I use for non-fiction books that enables me to remember quite a bit.</p>
<p>And when I can't remember I generally know where to look to find the answers.</p>
<p>Here are some of the tips that work for me:</p>
<ul>
<li>Learn <a href="http://www.farnamstreetblog.com/how-to-read-a-book/" target="_blank">How to Read A Book</a>.</li>
<li>Start with the index, table of contents, and the preface. This will give you a good sense of the book.</li>
<li>Be ok with deciding now is not the time to read the book.</li>
<li>Read one book at a time.</li>
<li>Put it down if you lose interest.</li>
<li>Mark up the book while reading it. Questions. Thoughts. And, more importantly, connections to other ideas.</li>
<li>At the end of each chapter, <em>without looking back</em>, <a href="http://www.farnamstreetblog.com/2013/05/how-to-retain-more-of-what-you-read/" target="_blank">write some notes</a> on the main points/arguments/take-aways. Then look back through the chapter and put anything down you missed.</li>
<li>Specifically note anything that was in the chapter that you can <a href="http://www.farnamstreetblog.com/2013/05/how-to-retain-more-of-what-you-read/" target="_blank">apply somewhere else</a>.</li>
<li>When you're done the book, take out a blank sheet of paper and explain the core ideas/arguments of the book to yourself. Where you have problems, go back and review your notes. This is the <a href="http://www.farnamstreetblog.com/2012/04/learn-anything-faster-with-the-feynman-technique/" target="_blank">Feynman Technique</a>.</li>
<li>Put the book down for a week.</li>
<li>Pick the book back up, re-read all of your notes/highlights/marginalia/etc. Time is a good filter - what's still important? Note this in the inside of the cover with a reference to the page number.</li>
<li>Put the notes that you want to keep in your common place book/resource.</li>
</ul>
<p>But one thing that most people don't appreciate enough is that <em>what you read</em> makes a huge difference for <em>how well you remember</em> things.</p>
<p>We fail to remember a lot of the stuff we read because it's not <em>building on</em> any existing knowledge. We're often trying to learn complex things (that change rapidly) without understanding the basic things (which change slowly or not at all).  Or, worse still, we're uncritically letting other people do the thinking for us. This is the adult equivalent of regurgitating the definition of a bolded word in our high school textbook.</p>
<p>Both of these lead to the illusion of knowledge and overconfidence.</p>
<p>I'd argue that a better approach is to build a <a href="http://www.farnamstreetblog.com/mental-models/" target="_blank">latticework of Mental Models</a>. That is, acquire the core multi-disciplinary knowledge and use that as your foundation. This is the best investment because this stuff doesn't change and if it does it changes really slowly. This becomes your foundation. This is what you build on. So when you read and connect things to the core knowledge, not only do you have a better idea of how things fit together but you strengthen those connections in your head from use.</p>
<p>If you're looking to acquire worldly wisdom, <a href="http://www.farnamstreetblog.com/2013/08/what-should-i-read-two-ideas-to-help-guide-us/" target="_blank">time is your best filter</a>. It makes sense to focus on learning the core ideas over multiple disciplines. These remain constant. And when you have a solid foundation it's easier to build upon because you connect what you're learning to the (now very solid) foundation.</p><div class="feed-footer-wrapper"><div class="feed-footer">

  <h3>More from Farnam Street:</h3>

  <ul>
       <li>
     <a href="http://www.farnamstreetblog.com/2014/05/remembering-what-you-read/" data-bi-base="http://www.farnamstreetblog.com/">A System for Remembering What you Read</a>
    </li>
       <li>
     <a href="http://www.farnamstreetblog.com/2014/05/berkshire-hathaway-success/" data-bi-base="http://www.farnamstreetblog.com/">Three Underrated Reasons for Berkshire Hathaway's Enormous Success</a>
    </li>
       <li>
     <a href="http://www.farnamstreetblog.com/2014/05/ryan-holiday-the-obstacle-is-the-way/" data-bi-base="http://www.farnamstreetblog.com/">The Obstacle Is the Way - Turning Adversity Into Advantage</a>
    </li>
       <li>
     <a href="http://www.farnamstreetblog.com/2014/05/einstein-the-world-as-i-see-it/" data-bi-base="http://www.farnamstreetblog.com/">Einstein: The World As I See It</a>
    </li>
       <li>
     <a href="http://www.farnamstreetblog.com/2014/05/the-oldest-living-things-in-the-world/" data-bi-base="http://www.farnamstreetblog.com/">The Oldest Living Things in the World</a>
    </li>
     </ul>
 </div></div>

This System Will Help You Retain Everything You Read

<p><div class="image-container float_right" style="width:480px"><div class="image"><p class="source">REUTERS/Rick Wilking</p><p class="caption"><keyword id="6362665" type="COMPANY" weightage="60" keywordseo="Berkshire-Hathaway">Berkshire Hathaway</keyword> Vice Chairman <keyword id="293271" type="PERSON" weightage="60" keywordseo="Charlie-Munger">Charlie Munger</keyword>.</p></div></div>Some surprising people, <a href="http://www.businessinsider.com/exxonenergy-independence-is-undesirable-2013-3">including the CEO of Exxon</a>, think true American <keyword id="6357014" type="ENTERTAINMENT" weightage="60" keywordseo="energy">energy</keyword> independence is actually a bad idea.</p>
<p>Add Berkshire Hathaway Vice-Chairman Charlie Munger's name to that list.</p>
<p>Munger recently spoke at the Committee of 100 U.S.-China relations conference (via <a href="http://www.farnamstreetblog.com/2013/07/energy-independence-is-a-terribly-stupid-idea/?utm_source=dlvr.it&amp;utm_medium=twitter">Farnam Street Blog's Shane Parrish notes</a> and <a href="https://twitter.com/TimHarford/status/360037922805784576">Tim Harford</a>).</p>
<p>The moderator asked Munger a basic question about which sectors Berkshire believes are ripe for growth.</p>
<p>He responded by begging off that question and launched instead into a critique of America's energy policy, especially the continued insistence on independence.</p>
<p>But unlike other commentators who've refuted the concept, Munger approached the question from a more apocalyptic angle:</p>
<p>Here's Parrish's transcript:</p>
<p style="padding-left: 30px;">If energy independence was such a good thing, let’s just imagine that we go back to 1930 or something like that and we were hell bent to have total energy independence from all the foreigners. And we just drill and use every technique we can and we produce our hydrocarbon reserves which are absolutely certain to be limited.</p>
<p style="padding-left: 30px;">Well, by now have way less in reserve and are way less energy independent. <strong>In trying to get energy independence we would have destroyed our safety stock of <keyword id="6359072" type="CITY" weightage="60" keywordseo="oil">oil</keyword> within our own borders</strong>.</p>
<p style="padding-left: 30px;"><strong>Oil and gas are absolutely certain to become incredibly short and very high priced</strong>. And of course the United States has a problem and <keyword id="1334" type="COUNTRY" weightage="60" keywordseo="China">China</keyword> has a worse problem.</p>
<p style="padding-left: 30px;">And China has the correct solution. Imported oil is not your enemy it’s your friend.</p>
<p style="padding-left: 30px;">Every barrel that you use up that comes from somebody else is a barrel of your precious oil which you’re going to need to feed your people and maintain your civilization.</p>
<p style="padding-left: 30px;">And what responsible people do with a Confucius ethos is they suffer now to benefit themselves, their families, and their countrymen later. And the way to do that is to go very slow on producing your own (domestic) oil. You want to produce just enough so that you keep up on all of the technology. And don’t mind at all paying prices that look ruinous for foreign oil. It’s going to get way worse later.</p>
<p style="padding-left: 30px;">Every barrel of foreign oil that you use up instead of using up your own — you’re going to eventually realize you were doing the right thing.</p>
<p>Energy is one of the unique areas, he continued, where free-market policies end up causing more problems than they solve. In the case of energy, he said, governments should step in and encourage imports (it should be noted, of course, that this situation already partially exists, since exporting U.S. crude has been banned since the '70s): </p>
<p style="padding-left: 30px;">Why are the policy makers in both countries so stupid on this single issue because they are not stupid generally? I think that it’s partly the economists who have caused the problem. Because they have this theory that if people react in a free market that it’s much better than any type of government planning but there is a small class of problems where it’s better to think the things through in terms of the basic science and ignore these signals from the market.</p>
<p style="padding-left: 30px;">Now if I’m right in this, there are a whole lot of lessons that logically follow:</p>
<p style="padding-left: 30px;">(1) Foreign oil is your friend not your enemy; (2) You want to produce your own assets slow; … (3) The oil in the ground you’re not producing is a national treasure; … running out of hydrocarbons is like running out of civilization. All this trade, all these drugs, fertilizers, fungicides, etc. … which China needs to eat with a population so much, they all come from hydrocarbons.</p>
<p style="padding-left: 30px;">And it is not at all clear that there is any substitute. When the hydrocarbons are gone, I don’t think the chemists will be able to simply mix up a vat and there will be more hydrocarbons. It’s conceivable, of course, that they could but it’s not the way to bet. I think we should all be quite conservative and we should pay no attention to these silly economics and politicians that tell us to become energy independent.</p>
<p>So what should we be doing instead?</p>
<p>Munger believes we ned to shift resources away from producing whatever is left in the ground and save it for his purported day of reckoning.</p>
<p>Rather, we should be investing in all the other forms of energy out there:</p>
<p style="padding-left: 30px;">We have a brain block on this issue. We should behave now to do on purpose what we did by accident: we conserved some of our oil because we were not aggressive enough and smart enough to get it out faster, that was accidentally doing the right thing. Now we should do on purpose what we formally did by accident. We should conserve and subsidize new forms of energy … we should suppose these big national grids.</p>
<p>Here's the full clip. The energy part starts around 37 minutes:</p>
<p></p>

CHARLIE MUNGER: Energy Independence Is A Dumb Idea

<p><em><div class="KonaFilter image-container float_right"><div class="image"><p class="source"><span>Lane Hickenbottom/Reuters</span></p><p class="caption">Vice-Chairman of Berkshire Hathaway Charlie Munger.</p></div><p></p></div>"In my whole life, I have known no wise people (over a broad subject matter area) who didn't read all the time - none. Zero. You'd be amazed at how much Warren reads - and how much I read. My children laugh at me. They think I'm a book with a couple of legs sticking out."</em></p>
<p>That comment is what really kickstarted my own <a href="http://www.farnamstreetblog.com/2013/09/finding-time-to-read/" target="_blank">reading habits</a>. While <a href="http://www.farnamstreetblog.com/reading/" target="_blank">my 161 books last year</a> pales in comparison to the quality of Munger's reading habits, it's a start.</p>
<p>Munger, of course, is the billionaire business partner of Warren Buffett and the Vice Chairman at Berkshire Hathaway.</p>
<p>Not only is Munger one of the smartest people on the planet - his lecture on <a href="http://www.farnamstreetblog.com/2013/02/the-psychology-of-human-misjudgement/" target="_blank">the psychology of human misjudgment</a> is the best 45 minutes you might spend this year - but he's put all of those brains to use in a practical way.</p>
<p>If you're looking for a book to read this summer, this list of books recommended by Munger is a great place to start.</p>
<h3>1. <a href="http://a-fwd.com/es=farstrblo068-21&amp;it=farstrblo0a-21&amp;fr=farstrblo08-21&amp;de=farstrblo07-21&amp;uk=farstrblo-21&amp;ca=farst-20&amp;com=farnamstreet-20&amp;asin-es=1616149426&amp;asin-it=1616149426&amp;asin-fr=1616149426&amp;asin-de=1616149426&amp;asin-uk=1616149426&amp;asin-ca=1616149426&amp;asin-com=1616149426" target="_blank">Faraday, Maxwell, and the Electromagnetic Field: How Two Men Revolutionized Physics</a></h3>
<p>It's a combination of scientific biography and explanation of the physics, particularly relating to electricity. It's just the best book of its kind I have ever read, and I just hugely enjoyed it. Couldn't put it down. It was a fabulous human achievement. And neither of the writers is a physicist.</p>
<h3>2. <a href="http://a-fwd.com/es=farstrblo068-21&amp;it=farstrblo0a-21&amp;fr=farstrblo08-21&amp;de=farstrblo07-21&amp;uk=farstrblo-21&amp;ca=farst-20&amp;com=farnamstreet-20&amp;asin-es=140006256X&amp;asin-it=140006256X&amp;asin-fr=140006256X&amp;asin-de=140006256X&amp;asin-uk=140006256X&amp;asin-ca=140006256X&amp;asin-com=140006256X" target="_blank">Deep Simplicity: Bringing Order to Chaos and Complexity</a></h3>
<p>… it's pretty hard to understand everything, but if you can't understand it, you can always give it to a more intelligent friend.</p>
<h3>3. <a href="http://a-fwd.com/es=farstrblo068-21&amp;it=farstrblo0a-21&amp;fr=farstrblo08-21&amp;de=farstrblo07-21&amp;uk=farstrblo-21&amp;ca=farst-20&amp;com=farnamstreet-20&amp;asin-es=0140278796&amp;asin-it=0140278796&amp;asin-fr=0140278796&amp;asin-de=0140278796&amp;asin-uk=0140278796&amp;asin-ca=0140278796&amp;asin-com=0140278796" target="_blank">Fiasco: The Inside Story of a Wall Street Trader</a></h3>
<p>I remember reading this shocking book and thinking, holy s---. This book will make you sick.</p>
<h3>4. <a href="http://a-fwd.com/es=farstrblo068-21&amp;it=farstrblo0a-21&amp;fr=farstrblo08-21&amp;de=farstrblo07-21&amp;uk=farstrblo-21&amp;ca=farst-20&amp;com=farnamstreet-20&amp;asin-es=0141007303&amp;asin-it=0141007303&amp;asin-fr=0141007303&amp;asin-de=0141007303&amp;asin-uk=0141007303&amp;asin-ca=0141007303&amp;asin-com=0141007303" target="_blank">Ice Age</a></h3>
<p>Of this book Munger said: "(The) best work of science exposition and history that I've read in many years!"</p>
<h3>5. <a href="http://a-fwd.com/es=farstrblo068-21&amp;it=farstrblo0a-21&amp;fr=farstrblo08-21&amp;de=farstrblo07-21&amp;uk=farstrblo-21&amp;ca=farst-20&amp;com=farnamstreet-20&amp;asin-es=0609809997&amp;asin-it=0609809997&amp;asin-fr=0609809997&amp;asin-de=0609809997&amp;asin-uk=0609809997&amp;asin-ca=0609809997&amp;asin-com=0609809997" target="_blank">How the Scots Invented the Modern World</a></h3>
<p>A lot of really important stuff like: The first modern nation, the first literate society, the ideas for (modern) democracy and free markets, all originated with the Scots.</p>
<h3>6. <a href="http://a-fwd.com/es=farstrblo068-21&amp;it=farstrblo0a-21&amp;fr=farstrblo08-21&amp;de=farstrblo07-21&amp;uk=farstrblo-21&amp;ca=farst-20&amp;com=farnamstreet-20&amp;asin-es=026269185X&amp;asin-it=026269185X&amp;asin-fr=026269185X&amp;asin-de=026269185X&amp;asin-uk=026269185X&amp;asin-ca=026269185X&amp;asin-com=026269185X" target="_blank">Models of My Life</a></h3>
<p>An autobiography of Nobel laureate Herbert A. Simon, a remarkable polymath who more people should know about. In an age of increasing specialization, he's a rare generalist - applying what he learned as a scientist to other aspects of his life. Crossing disciplines, he was at the intersection of "information sciences." He won the Nobel for his theory of "bounded rationality," and is perhaps best known for his insightful quote "A wealth of information creates a poverty of attention." (Also part of <a href="http://www.farnamstreetblog.com/2014/04/5-books-that-will-change-your-life/" target="_blank">five books that will change your life</a>.)</p>
<h3>7. <a href="http://a-fwd.com/es=farstrblo068-21&amp;it=farstrblo0a-21&amp;fr=farstrblo08-21&amp;de=farstrblo07-21&amp;uk=farstrblo-21&amp;ca=farst-20&amp;com=farnamstreet-20&amp;asin-es=014200278X&amp;asin-it=014200278X&amp;asin-fr=014200278X&amp;asin-de=014200278X&amp;asin-uk=014200278X&amp;asin-ca=014200278X&amp;asin-com=014200278X" target="_blank">A Matter of Degrees: What Temperature Reveals about the Past and Future of Our Species, Planet, and Universe</a></h3>
<p>… a wide-ranging exploration of how the fundamental scientific concept of temperature is bound up with the very essence of both life and matter.</p>
<h3>8. <a href="http://a-fwd.com/es=farstrblo068-21&amp;it=farstrblo0a-21&amp;fr=farstrblo08-21&amp;de=farstrblo07-21&amp;uk=farstrblo-21&amp;ca=farst-20&amp;com=farnamstreet-20&amp;asin-es=0822959046&amp;asin-it=0822959046&amp;asin-fr=0822959046&amp;asin-de=0822959046&amp;asin-uk=0822959046&amp;asin-ca=0822959046&amp;asin-com=0822959046" target="_blank">Andrew Carnegie</a></h3>
<p>The definitive biography of an industrial genius, philanthropist, and enigma. At the meeting in May of this year, Munger also mentioned the <a href="http://a-fwd.com/es=farstrblo068-21&amp;it=farstrblo0a-21&amp;fr=farstrblo08-21&amp;de=farstrblo07-21&amp;uk=farstrblo-21&amp;ca=farst-20&amp;com=farnamstreet-20&amp;asin-es=0307386791&amp;asin-it=0307386791&amp;asin-fr=0307386791&amp;asin-de=0307386791&amp;asin-uk=0307386791&amp;asin-ca=0307386791&amp;asin-com=0307386791" target="_blank">Mellon Brothers</a> as people to study.</p>
<h3>9. <a href="http://a-fwd.com/es=farstrblo068-21&amp;it=farstrblo0a-21&amp;fr=farstrblo08-21&amp;de=farstrblo07-21&amp;uk=farstrblo-21&amp;ca=farst-20&amp;com=farnamstreet-20&amp;asin-es=0393317552&amp;asin-it=0393317552&amp;asin-fr=0393317552&amp;asin-de=0393317552&amp;asin-uk=0393317552&amp;asin-ca=0393317552&amp;asin-com=0393317552" target="_blank">Guns, Germs, and Steel: The Fates of Human Societies</a></h3>
<p>A book <a href="http://www.farnamstreetblog.com/2013/07/eight-books-bill-gates-is-reading-this-summer/" target="_blank">recommended by Bill Gates</a> and Charlie Munger? Gates said, the book "had a profound effect on the way I think about history and why certain societies advance faster than others."</p>
<h3>10. <a href="http://a-fwd.com/es=farstrblo068-21&amp;it=farstrblo0a-21&amp;fr=farstrblo08-21&amp;de=farstrblo07-21&amp;uk=farstrblo-21&amp;ca=farst-20&amp;com=farnamstreet-20&amp;asin-es=0060845503&amp;asin-it=0060845503&amp;asin-fr=0060845503&amp;asin-de=0060845503&amp;asin-uk=0060845503&amp;asin-ca=0060845503&amp;asin-com=0060845503" target="_blank">The Third Chimpanzee: The Evolution and Future of the Human Animal</a></h3>
<p>What is it about that two percent difference in DNA that has created such a divergence between evolutionary cousins? … renowned Pulitzer Prize-winning author and scientist Jared Diamond explores how the extraordinary human animal, in a remarkably short time, developed the capacity to rule the world … and the means to irrevocably destroy it.</p>
<h3>11. <a href="http://a-fwd.com/es=farstrblo068-21&amp;it=farstrblo0a-21&amp;fr=farstrblo08-21&amp;de=farstrblo07-21&amp;uk=farstrblo-21&amp;ca=farst-20&amp;com=farnamstreet-20&amp;asin-es=006124189X&amp;asin-it=006124189X&amp;asin-fr=006124189X&amp;asin-de=006124189X&amp;asin-uk=006124189X&amp;asin-ca=006124189X&amp;asin-com=006124189X" target="_blank">Influence: The Psychology of Persuasion</a></h3>
<p>A frequent and persistent recommendation from Munger. I believe he's given away more copies of this book than any other. Here is <a href="http://www.farnamstreetblog.com/2014/04/influence-psychology-persuasion/" target="_blank">a quick overview</a>.</p>
<h3>12. <a href="http://a-fwd.com/es=farstrblo068-21&amp;it=farstrblo0a-21&amp;fr=farstrblo08-21&amp;de=farstrblo07-21&amp;uk=farstrblo-21&amp;ca=farst-20&amp;com=farnamstreet-20&amp;asin-es=0195093852&amp;asin-it=0195093852&amp;asin-fr=0195093852&amp;asin-de=0195093852&amp;asin-uk=0195093852&amp;asin-ca=0195093852&amp;asin-com=0195093852" target="_blank">Living within Limits: Ecology, Economics, and Population Taboos</a></h3>
<p>While both books are exceptional, I actually prefer Hardin's other book - <a href="http://a-fwd.com/es=farstrblo068-21&amp;it=farstrblo0a-21&amp;fr=farstrblo08-21&amp;de=farstrblo07-21&amp;uk=farstrblo-21&amp;ca=farst-20&amp;com=farnamstreet-20&amp;asin-es=0140077294&amp;asin-it=0140077294&amp;asin-fr=0140077294&amp;asin-de=0140077294&amp;asin-uk=0140077294&amp;asin-ca=0140077294&amp;asin-com=0140077294" target="_blank">Filters Against Folly.</a></p>
<h3>13. <a href="http://a-fwd.com/es=farstrblo068-21&amp;it=farstrblo0a-21&amp;fr=farstrblo08-21&amp;de=farstrblo07-21&amp;uk=farstrblo-21&amp;ca=farst-20&amp;com=farnamstreet-20&amp;asin-es=0199291152&amp;asin-it=0199291152&amp;asin-fr=0199291152&amp;asin-de=0199291152&amp;asin-uk=0199291152&amp;asin-ca=0199291152&amp;asin-com=0199291152" target="_blank">The Selfish Gene</a></h3>
<p>Dawkins explains how the selfish gene can also be a subtle gene. The world of the selfish gene revolves around savage competition, ruthless exploitation, and deceit, and yet, Dawkins argues, acts of apparent altruism do exist in nature. Bees, for example, will commit suicide when they sting to protect the hive, and birds will risk their lives to warn the flock of an approaching hawk.</p>
<h3>14. <a href="http://a-fwd.com/es=farstrblo068-21&amp;it=farstrblo0a-21&amp;fr=farstrblo08-21&amp;de=farstrblo07-21&amp;uk=farstrblo-21&amp;ca=farst-20&amp;com=farnamstreet-20&amp;asin-es=1400077303&amp;asin-it=1400077303&amp;asin-fr=1400077303&amp;asin-de=1400077303&amp;asin-uk=1400077303&amp;asin-ca=1400077303&amp;asin-com=1400077303" target="_blank">Titan: The Life of John D. Rockefeller, Sr.</a></h3>
<p>At 800 or so pages this is the perfect book for a week-long vacation. From humble beginnings to the height of great power Rockefeller did it all. I think you'll find he has more in common with Marcus Aurelius than today's billionaires.</p>
<p><span style="line-height: 1.5em;">Born the son of a flamboyant, bigamous snake-oil salesman and a pious, straitlaced mother, Rockefeller rose from rustic origins to become the world's richest man by creating America's most powerful and feared monopoly, Standard Oil. Branded "the Octopus" by legions of muckrakers, the trust refined and marketed nearly 90 percent of the oil produced in America.</span></p>
<h3>15. <a href="http://a-fwd.com/es=farstrblo068-21&amp;it=farstrblo0a-21&amp;fr=farstrblo08-21&amp;de=farstrblo07-21&amp;uk=farstrblo-21&amp;ca=farst-20&amp;com=farnamstreet-20&amp;asin-es=0393318885&amp;asin-it=0393318885&amp;asin-fr=0393318885&amp;asin-de=0393318885&amp;asin-uk=0393318885&amp;asin-ca=0393318885&amp;asin-com=0393318885" target="_blank">The Wealth and Poverty of Nations: Why Some Are So Rich and Some So Poor</a></h3>
<p>A best-selling exploration of why some nations achieve economic success while others don't. As you can imagine, it's complicated.</p>
<h3>16. <a href="http://a-fwd.com/es=farstrblo068-21&amp;it=farstrblo0a-21&amp;fr=farstrblo08-21&amp;de=farstrblo07-21&amp;uk=farstrblo-21&amp;ca=farst-20&amp;com=farnamstreet-20&amp;asin-es=0471392642&amp;asin-it=0471392642&amp;asin-fr=0471392642&amp;asin-de=0471392642&amp;asin-uk=0471392642&amp;asin-ca=0471392642&amp;asin-com=0471392642" target="_blank">The Warren Buffett Portfolio: Mastering the Power of the Focus Investment Strategy</a></h3>
<p>This book has been recommended by both Buffett and Munger on a few occasions.</p>
<h3>17. <a href="http://a-fwd.com/es=farstrblo068-21&amp;it=farstrblo0a-21&amp;fr=farstrblo08-21&amp;de=farstrblo07-21&amp;uk=farstrblo-21&amp;ca=farst-20&amp;com=farnamstreet-20&amp;asin-es=0060894083&amp;asin-it=0060894083&amp;asin-fr=0060894083&amp;asin-de=0060894083&amp;asin-uk=0060894083&amp;asin-ca=0060894083&amp;asin-com=0060894083" target="_blank">Genome: The Autobiography of a Species in 23 Chapters</a></h3>
<p>Science writer Matt Ridely unfolds the genome for us. Munger recommended in 2001.</p>
<h3>18. <a href="http://a-fwd.com/es=farstrblo068-21&amp;it=farstrblo0a-21&amp;fr=farstrblo08-21&amp;de=farstrblo07-21&amp;uk=farstrblo-21&amp;ca=farst-20&amp;com=farnamstreet-20&amp;asin-es=0143118757&amp;asin-it=0143118757&amp;asin-fr=0143118757&amp;asin-de=0143118757&amp;asin-uk=0143118757&amp;asin-ca=0143118757&amp;asin-com=0143118757" target="_blank">Getting to Yes: Negotiating Agreement Without Giving In</a></h3>
<p>The book is one of the primary business texts in North America. So it shouldn't surprise you that I was first introduced to this as part of my MBA program.</p>
<h3>19. <a href="http://a-fwd.com/es=farstrblo068-21&amp;it=farstrblo0a-21&amp;fr=farstrblo08-21&amp;de=farstrblo07-21&amp;uk=farstrblo-21&amp;ca=farst-20&amp;com=farnamstreet-20&amp;asin-es=0060972572&amp;asin-it=0060972572&amp;asin-fr=0060972572&amp;asin-de=0060972572&amp;asin-uk=0060972572&amp;asin-ca=0060972572&amp;asin-com=0060972572" target="_blank">Three Scientists and Their Gods: Looking for Meaning in an Age of Information</a></h3>
<p>What is the meaning of life? This book takes a look at the work and beliefs of three leading American scientists: Edward Fredkin, Edward O. Wilson and Kenneth Boulding.</p>
<h3>20. <a href="http://a-fwd.com/es=farstrblo068-21&amp;it=farstrblo0a-21&amp;fr=farstrblo08-21&amp;de=farstrblo07-21&amp;uk=farstrblo-21&amp;ca=farst-20&amp;com=farnamstreet-20&amp;asin-es=0385483821&amp;asin-it=0385483821&amp;asin-fr=0385483821&amp;asin-de=0385483821&amp;asin-uk=0385483821&amp;asin-ca=0385483821&amp;asin-com=0385483821" target="_blank">Only the Paranoid Survive: How to Exploit the Crisis Points That Challenge Every Company</a></h3>
<p>Grove gives us an inside account of how he, virtually overnight, changed the path of Intel forever.</p>
<p>Of course, this is a condensed list of his recommendations. Consider this a look at one of Munger's many bookshelves.</p>
<p>Two others that might interest you are <a href="http://a-fwd.com/es=farstrblo068-21&amp;it=farstrblo0a-21&amp;fr=farstrblo08-21&amp;de=farstrblo07-21&amp;uk=farstrblo-21&amp;ca=farst-20&amp;com=farnamstreet-20&amp;asin-es=0471446912&amp;asin-it=0471446912&amp;asin-fr=0471446912&amp;asin-de=0471446912&amp;asin-uk=0471446912&amp;asin-ca=0471446912&amp;asin-com=0471446912" target="_blank">Damn Right!: Behind the Scenes with Berkshire Hathaway Billionaire Charlie Munger </a>and, one of my all time personal favorites, <a href="http://a-fwd.com/es=farstrblo068-21&amp;it=farstrblo0a-21&amp;fr=farstrblo08-21&amp;de=farstrblo07-21&amp;uk=farstrblo-21&amp;ca=farst-20&amp;com=farnamstreet-20&amp;asin-es=1578644283&amp;asin-it=1578644283&amp;asin-fr=1578644283&amp;asin-de=1578644283&amp;asin-uk=1578644283&amp;asin-ca=1578644283&amp;asin-com=1578644283" target="_blank">Seeking Wisdom: From Darwin to Munger</a>.</p>
<p>And before you email me to tell me how expensive some of these books are consider this: ignorance is more expensive.</p><div class="feed-footer-wrapper"><div class="feed-footer">

  <h3>More from Farnam Street:</h3>

  <ul>
       <li>
     <a href="http://www.farnamstreetblog.com/2014/06/charlie-munger-recommended-books/" data-bi-base="http://www.farnamstreetblog.com/">20 Book Recommendations from Billionaire Charlie Munger That will Make you Smarter</a>
    </li>
       <li>
     <a href="http://www.farnamstreetblog.com/2014/06/the-history-of-the-manhattan/" data-bi-base="http://www.farnamstreetblog.com/">The Joy of Mixology - The History of the Manhattan</a>
    </li>
       <li>
     <a href="http://www.farnamstreetblog.com/2014/05/rory-sutherland-this-thing-for-which-we-have-no-name/" data-bi-base="http://www.farnamstreetblog.com/">Rory Sutherland - This Thing For Which We Have No Name</a>
    </li>
       <li>
     <a href="http://www.farnamstreetblog.com/2014/05/certainty-is-an-illusion/" data-bi-base="http://www.farnamstreetblog.com/">Certainty Is an Illusion</a>
    </li>
       <li>
     <a href="http://www.farnamstreetblog.com/2014/05/the-origins-of-good-and-evil/" data-bi-base="http://www.farnamstreetblog.com/">Just Babies: The Origins of Good and Evil</a>
    </li>
     </ul>
 </div></div>

25 Books Billionaire Charlie Munger Thinks Everyone Should Read

<p><div class="KonaFilter image-container float_right"><div class="image"><p class="source"><span><a href="http://commons.wikimedia.org/wiki/File:Mount_Everest_%28topgold%29.jpg">Wikimedia Commons</a></span></p></div><p></p></div>In 1996 a disaster of historic proportion happened on the peak of Mount Everest. In the entire climbing season, 15 climbers died. Eight of those deaths took place on a single day.</p>
<p>Journalist and mountain climber Jon Krakauer captured this story in his breathtaking book "<a href="http://a-fwd.com/es=farstrblo068-21&amp;it=farstrblo0a-21&amp;fr=farstrblo08-21&amp;de=farstrblo07-21&amp;uk=farstrblo-21&amp;ca=farst-20&amp;com=farnamstreet-20&amp;asin-es=0385494785&amp;asin-it=0385494785&amp;asin-fr=0385494785&amp;asin-de=0385494785&amp;asin-uk=0385494785&amp;asin-ca=0385494785&amp;asin-com=0385494785" target="_blank">Into Thin Air</a>." Krakauer didn't just uncover the story after the fact, he was on the mountain that day.</p>
<p>You would think that by now Everest would have become such a commercial expedition that anyone with sufficient money and a little climbing ability could make it to the summit and back. While that's largely true, it's not that unusual to hear of people dying. The 1996 disaster was different. Aside from the number of people dying on the same day, it was inexplicable.</p>
<p>The weather on the summit can kill you in the blink of an eye. Weather changes everything. Only the weather on this day was no different than usual. No sudden avalanches pushed a group towards death. No freak snow storms blew them away. No, their failure was entirely human.</p>
<p>"<a href="http://a-fwd.com/es=farstrblo068-21&amp;it=farstrblo0a-21&amp;fr=farstrblo08-21&amp;de=farstrblo07-21&amp;uk=farstrblo-21&amp;ca=farst-20&amp;com=farnamstreet-20&amp;asin-es=0385494785&amp;asin-it=0385494785&amp;asin-fr=0385494785&amp;asin-de=0385494785&amp;asin-uk=0385494785&amp;asin-ca=0385494785&amp;asin-com=0385494785" target="_blank">Into Thin Air</a>" puts part of the blame on the stubbornness of Anatoli Boukreev, a Kazakhstani climbing guide. While there is some evidence to support this claim, most climbers are, by definition, stubborn and arrogant. Despite this, disasters of this magnitude are rare. There was something more at play.</p>
<p>We'll never know for sure what happened but it looks like an example of mass irrationality.</p>
<p>Only 720 feet from the summit, in an event that has since become known as "the traffic jam," teams from New Zealand, the United States, and Taiwan, representing 34 climbers in total, were all attempting to summit that day. Their departure point was Camp 4, at 26,000 feet. The summit was 29,000 feet. Those 3,000 feet are quite possibly one of the most dangerous spots on the planet. As such, preparation is key.</p>
<p>The Americans and New Zealanders co-ordinated their efforts. The last thing you want is people walking on each other impeding a smooth progression up, and if you're fortunate, down the mountain. The Taiwanese climbers, however, were not supposed to climb that day. Either reneging or misunderstanding, they proceeded on the same day.</p>
<p>Now the advance team also made a mistake, perhaps from confusion about the number of climbers. They failed to secure safety ropes at Hillary Step. This wouldn't have been such a big deal if there were not 34 climbers trying to reach the summit at the same time. As a result of the ropes not being laid, progression was choppy and bottlenecked.</p>
<p>The most important thing to keep in mind in any attempt at Everest is time. Climbers have limited oxygen. Weather can change in a heartbeat and you don't want to be on the summit at night. If you leave Camp 4 at midnight and things go your way, you might be able to reach the summit 12 hours later. But, importantly, you also have a turnaround time, which depends on weather and oxygen levels.</p>
<p>This is the time that no matter where you are, you're supposed to turn around and come home. If you're 200 feet from the summit and it hits your turnaround time, you have a very important choice to make. You can attempt to climb the last 200 feet or you can turn around. If you don't turn around you increase the odds of running out of oxygen and descending in some of Everest's most dangerous weather.</p>
<p>In this case the teams encountered a traffic jam at Hilary pass that slowed progression. They disregarded their turnaround time, which had just passed. American Ed Viesturs, watching from a telescope at Camp 4, was in disbelief. "They've already been climbing for hours, and they still aren't on the summit," he said to himself, with rising alarm. "Why haven't they turned around?"</p>
<p>On that day and with those oxygen supplies the last safe turnaround time was two o'clock. Members, however, continued on reaching the summit upwards of two hours past this time. Doug Hansen, a postal service worker from the New Zealand group, was the last to summit. It was just after four. While he made it to the top, the odds were against him ever coming back.</p>
<p>Like seven others, he died on the descent. Descents are normally difficult and prone to mistakes: you're tired, oxygen is low, and you drop your guard. In this case weather added another variable. A blizzard had come in quickly. Going down was nearly impossible. Rescue workers saved as many people as they could but the -40<span>°</span> temperatures, blizzard, and darkness combined to make the elements too strong.</p>
<p>The death toll on Everest in 1996 was the highest recored in history. And we still don't clearly understand why. Chris Kayes, a former stockbroker turned expert on organizational behaviour, has an idea though.</p>
<p>Kayes suspected the Everest climbers had been "lured into destruction by their passion for goals." They were too fixated on achieving their goal of successfully summiting the mountain. The closer they got to their goal, he reasons, the harder it would be to turn around. This isn't just an external goal. It's an internal one. The more we see ourselves as accomplished climbers or guides, the harder it is to turn around.</p>
<p>"In theology," writes Oliver Burkeman in, "<a href="http://a-fwd.com/es=farstrblo068-21&amp;it=farstrblo0a-21&amp;fr=farstrblo08-21&amp;de=farstrblo07-21&amp;uk=farstrblo-21&amp;ca=farst-20&amp;com=farnamstreet-20&amp;asin-es=0865478015&amp;asin-it=0865478015&amp;asin-fr=0865478015&amp;asin-de=0865478015&amp;asin-uk=0865478015&amp;asin-ca=0865478015&amp;asin-com=0865478015" target="_blank">The Antidote: Happiness for People Who Can't Stand Positive Thinking</a>," where a version of this Everest story appears, "the term 'theodicy' refers to the effort to maintain belief in a benevolent god, despite the prevalence of evil in the world; the phrase is occasionally used to describe the effort to maintain any belief in the face of contradictory evidence."</p>
<p>Borrowing from that, Chris Kayes termed <span><em>goalodicy</em></span>. He also wrote a book on it called "<a href="http://a-fwd.com/es=farstrblo068-21&amp;it=farstrblo0a-21&amp;fr=farstrblo08-21&amp;de=farstrblo07-21&amp;uk=farstrblo-21&amp;ca=farst-20&amp;com=farnamstreet-20&amp;asin-es=023000332X&amp;asin-it=023000332X&amp;asin-fr=023000332X&amp;asin-de=023000332X&amp;asin-uk=023000332X&amp;asin-ca=023000332X&amp;asin-com=023000332X" target="_blank">Destructive Goal Pursuit: The Mount Everest Disaster</a>."</p>
<h3>In the corporate world we're often focused on achieving our goals at all costs. This eventually reaches the status of dogma.</h3>
<p>This insight is the core of an important chapter in Burkeman's book, "<a href="http://a-fwd.com/es=farstrblo068-21&amp;it=farstrblo0a-21&amp;fr=farstrblo08-21&amp;de=farstrblo07-21&amp;uk=farstrblo-21&amp;ca=farst-20&amp;com=farnamstreet-20&amp;asin-es=0865478015&amp;asin-it=0865478015&amp;asin-fr=0865478015&amp;asin-de=0865478015&amp;asin-uk=0865478015&amp;asin-ca=0865478015&amp;asin-com=0865478015" target="_blank">The Antidote</a>":</p>
<blockquote>
<p>[W]hat motivates our investment in goals and planning for the future, much of the time, isn't any sober recognition of the virtues of preparation and looking ahead. Rather, it's something much more emotional: how deeply uncomfortable we are made by feelings of uncertainty. Faced with the anxiety of not knowing what the future holds, we invest ever more fiercely in our preferred vision of that future - not because it will help us achieve it, but because it helps rid us of feelings of uncertainty in the present. "Uncertainty prompts us to idealise the future," Kayes told me. "We tell ourselves that everything will be OK, just as long as I can reach this projection of the future."</p>
<p>…</p>
<p>We fear the feeling of uncertainty to an extraordinary degree - the psychologist Dorothy Rowe argues that we fear it more than death itself - and we will go to extraordinary lengths, even fatal ones, to get rid of it.</p>
</blockquote>
<p>There is an alternative, of course. Burkeman argues that "we could learn to become more comfortable with uncertainty, and to exploit the potential hidden within it, both to feel better in the present and to achieve more success in the future." (In fact, this is the strategy Henry Singleton, one of the most successful businessmen ever, <a href="http://www.farnamstreetblog.com/2013/01/henry-singleton-on-strategic-planning-stay-flexible/" target="_blank">pursued</a>.)</p>
<p>Burkeman argues that a lot of our major life decisions are made with the goal of minimizing the "present-moment emotional discomfort." Try this "potentially mortifying" exercise in self-examination:</p>
<blockquote>
<p>Consider any significant decision you've ever taken that you subsequently came to regret: a relationship you entered despite being dimly aware that it wasn't for you, or a job you accepted even though, looking back, it's clear that it was mismatched to your interests or abilities. If it felt like a difficult decision at the time, then it's likely that, prior to taking it, you felt the gut-knotting ache of uncertainty; afterwards, having made a decision, did those feelings subside? If so, this points to the troubling possibility that your primary motivation in taking the decision wasn't any rational consideration of its rightness for you, but simply the urgent need to get rid of your feelings of uncertainty.</p>
</blockquote>
<h3>Goals Gone Wild</h3>
<blockquote>
<p>The goalsetting that worked so well in (Gary) Latham and (Edwin) Locke's studies, … had various nasty side effects in their own experiments. For example: clearly defined goals seemed to motivate people to cheat. In one such study, participants were given the task of making words from a set of random letters, as in Scrabble; the experiment gave them opportunities to report their progress anonymously. Those given a target to reach lied far more frequently than did those instructed merely to "do your best." More important, though, (Lisa) Ordóñez and her fellow heretics argued, goalsetting worked vastly less well outside the psychology lab settings in which such studies took place. In real life, an obsession with goals seemed far more often to land people and organisations in trouble.</p>
</blockquote>
<h3>The General Motors Example</h3>
<blockquote>
<p>One illuminating example of the problem concerns the American automobile behemoth General Motors. The turn of the millennium found GM in a serious predicament, losing customers and profits to more nimble, primarily Japanese, competitors. Following Latham and Locke's philosophy to the letter, executives at GM's headquarters in Detroit came up with a goal, crystallised in a number: twenty-nine. Twenty-nine, the company announced amid much media fanfare, was the percentage of the American car market that it would recapture, reasserting its old dominance. Twenty-nine was also the number displayed upon small gold lapel pins, worn by senior figures at GM to demonstrate their commitment to the plan. At corporate gatherings, and in internal GM documents, twenty-nine was the target drummed into everyone from salespeople to engineers to public-relations officers.</p>
<p>Yet the plan not only failed to work - it made things worse. Obsessed with winning back market share, GM spent its dwindling finances on money-off schemes and clever advertising, trying to lure drivers into purchasing its unpopular cars, rather than investing in the more speculative and open-ended - and thus more uncertain - research that might have resulted in more innovative and more popular vehicles.</p>
</blockquote>
<p>When we reach our goals but fail to achieve the intended results, we usually chalk this up to having the wrong goals. While it's true that some goals are better than others, how could it be otherwise? But the "more profound hazard here affects virtually any form of future planning."</p>
<blockquote>
<p>Formulating a vision of the future requires, by definition, that you isolate some aspect or aspects of your life, or your organisation, or your society, and focus on those at the expense of others. But problems arise thanks to the law of unintended consequences, sometimes expressed using the phrase "you can never change only one thing." In any even slightly complex system, it's extremely hard to predict how altering one variable will affect the others. "When we try to pick out any thing by itself," the naturalist and philosopher John Muir observed, "we find it hitched to everything else in the universe."</p>
</blockquote>
<h3>Turning Towards Uncertainty</h3>
<p>What would it look like to embrace uncertainty?</p>
<p>For this Burkeman turns to Saras Sarasvathy, who interviewed forty-five "successful" entrepreneurs. Saravathy's findings are surprising. She found a disconnect between our thoughts on entrepreneurs as successfully pursuing a goal-oriented approach and reality.</p>
<blockquote>
<p>We tend to imagine that the special skill of an entrepreneur lies in having a powerfully original idea and then fighting to turn that vision into reality. But the outlook of (Saras) Sarasvathy's interviewees rarely bore this out. Their precise endpoint was often mysterious to them, and their means of proceeding reflected this. Overwhelmingly, they scoffed at the goals-first doctrine of Locke and Latham. Almost none of them suggested creating a detailed business plan or doing comprehensive market research to hone the details of the product they were aiming to release.</p>
</blockquote>
<p>The most valuable skill of a successful entrepreneur, "isn't vision or passion or a steadfast insistence on destroying every barrier between yourself and some prize."</p>
<blockquote>
<p>Rather, it's the ability to adopt an unconventional approach to learning: an improvisational flexibility not merely about which route to take towards some predetermined objective, but also a willingness to change the destination itself. This is a flexibility that might be squelched by rigid focus on any one goal.</p>
</blockquote>
<p>Underpinning Sarasvathy's "anti-goal" approach is a set of principles she calls "effectuation."</p>
<blockquote>
<p>"Causally minded" people, to use Sarasvathy's terminology, are those who select or are given a specific goal, and then choose from whatever means are available to make a plan for achieving it. Effectually minded people, on the other hand, examine what means and materials are at their disposal, then imagine what possible ends or provisional next directions those means might make possible. The effectualists include the cook who scours the fridge for leftover ingredients; the chemist who figured out that the insufficiently sticky glue he had developed could be used to create the Post-it note; or the unhappy lawyer who realises that her spare-time photography hobby, for which she already possesses the skills and the equipment, could be turned into a job.</p>
<p>One foundation of effectuation is the "bird in hand" principle: "Start with your means. Don't wait for the perfect opportunity. Start taking action, based on what you have readily available: what you are, what you know and who you know." A second is the "principle of affordable loss": Don't be guided by thoughts of how wonderful the rewards might be if you were spectacularly successful at any given next step. Instead - and there are distinct echoes, here, of the Stoic focus on the worst-case scenario - ask how big the loss would be if you failed. So long as it would be tolerable, that's all you need to know. Take that next step, and see what happens.</p>
</blockquote>
<p>Burkeman concludes:</p>
<blockquote>
<p>"See what happens," indeed, might be the motto of this entire approach to working and living, and it is a hard-headed message, not a woolly one. "The quest for certainty blocks the search for meaning," argued the social psychologist Erich Fromm. "Uncertainty is the very condition to impel man to unfold his powers." Uncertainty is where things happen. It is where the opportunities - for success, for happiness, for really living - are waiting.</p>
</blockquote>
<p>"<a href="http://a-fwd.com/es=farstrblo068-21&amp;it=farstrblo0a-21&amp;fr=farstrblo08-21&amp;de=farstrblo07-21&amp;uk=farstrblo-21&amp;ca=farst-20&amp;com=farnamstreet-20&amp;asin-es=0865478015&amp;asin-it=0865478015&amp;asin-fr=0865478015&amp;asin-de=0865478015&amp;asin-uk=0865478015&amp;asin-ca=0865478015&amp;asin-com=0865478015" target="_blank">The Antidote: Happiness for People Who Can't Stand Positive Thinking</a>" is a counter-balance to our modern belief that being happy is only an effort away.</p>
<p><em>Inspired by <a href="http://www.brainpickings.org/index.php/2014/02/05/oliver-burkeman-antidote-plans-uncertainty/">brain pickings</a> </em></p><div class="feed-footer-wrapper"><div class="feed-footer">

  <h3>More from Farnam Street:</h3>

  <ul>
       <li>
     <a href="http://www.farnamstreetblog.com/2014/02/oliver-burkeman-uncertainty/" data-bi-base="http://www.farnamstreetblog.com/">The Dangers of Planning: Goals Gone Wild</a>
    </li>
       <li>
     <a href="http://www.farnamstreetblog.com/2014/02/the-structure-of-a-story/" data-bi-base="http://www.farnamstreetblog.com/">The Structure of a Story</a>
    </li>
       <li>
     <a href="http://www.farnamstreetblog.com/2014/02/following-your-passion-cal-newport/" data-bi-base="http://www.farnamstreetblog.com/">Following your Passion is Horrible Advice</a>
    </li>
       <li>
     <a href="http://www.farnamstreetblog.com/2014/02/chris-hadfield-on-life/" data-bi-base="http://www.farnamstreetblog.com/">Chris Hadfield on Life, the Universe and What's Really Out There</a>
    </li>
       <li>
     <a href="http://www.farnamstreetblog.com/2014/02/balzac-love-letter/" data-bi-base="http://www.farnamstreetblog.com/">Passionate Prose: Balzac's Love Letter</a>
    </li>
     </ul>
 </div></div>

You Searched For "farnam street investments" and got 14 results

Warren Buffett's $570 million bet on Snowflake shows he completely trusts his deputies, investor Jake Taylor says

Theron Mohamed

The 'Circle Of Competence' Theory Will Help You Make Vastly Smarter Decisions

Farnam Street

5 Books You Should Read Before You Turn 30

Farnam Street

Why Successful People Define Their 'Circle Of Competence'

Farnam Street

GMO's James Montier Presents The Golden Rule Of Investing

Mamta Badkar

Legendary investor Charlie Munger loved 'The Rebel Allocator' so much he called the author and encouraged him to make it a movie. Here are the book's 3 key takeaways.

Christopher Competiello

The 12 Essential Books On Jeff Bezos' Reading List

Max Nisen

The Science Behind How Companies Get You Hooked On Their Products

Farnam Street

The 5 Books Mega Investor Ben Horowitz Says You Need To Read

Farnam Street

5 Simple Ways To Solve Complex Problems

Farnam Street

This System Will Help You Retain Everything You Read

Farnam Street

CHARLIE MUNGER: Energy Independence Is A Dumb Idea

Rob Wile

25 Books Billionaire Charlie Munger Thinks Everyone Should Read

Farnam Street

This Mount Everest Disaster Shows The Danger Of Clinging To Goals

Farnam Street

Popular Keywords

Buying Guides