Review – The Subtle Art of Not Giving A Fuck

The Subtle Art of Not Giving a Fuck: A Counterintuitive Approach to Living a Good Life

by Mark Manson, published 2016

How much deep wisdom can you expect from a recently published book written by a youthful individual who writes a blog about his opinions for a living? Not much, if you’re reasonable, and in that sense this book managed to be both exactly what I expected it would be and enjoyable nonetheless.

My basic gripe with this book is that it doesn’t manage to fully develop or even adhere to its titular theme, the idea of “giving a fuck.” It’s a cheeky way of stating something more profound, and while Manson manages to explore the profundity I don’t think he does it thematically which creates a disconnect between the marketing of the book and its ideas, and the actual philosophy itself. I think this book would’ve been more interesting if it was not called “The Subtle Art of Not Giving a Fuck”, which is a not very subtle way to appeal to a potential audience at the cost of the integrity of the book itself, which is otherwise sound.

But I am “not going to give a fuck” about that, because it’s irrelevant in light of what value I did take away from the book, which is notable. There are many pithy concepts in Manson’s work, I will list some of those that I found myself dwelling upon and try to share why they were meaningful to me.

Everything worthwhile in life is won through surmounting the associated negative experience […] The avoidance of suffering is a form of suffering. The denial of failure is a failure. Hiding what is shameful is itself a form of shame.

The concept here is not that struggling towards achievements gives achievements their meaning, but rather that it is unavoidable to struggle towards achievements in life. Furthermore, attempting to avoid the struggle is irrational because the avoidance of struggle is a struggle. Instead of one struggle (toward an achievement) you now face two– the avoidance of struggle as struggle, and the struggle towards achievement itself. Or, even worse, you face one struggle with no reward, the avoidance of struggle as struggle.

Embrace the struggle as necessary and vital.

No matter where you go, there’s a five-hundred-pound load of shit waiting for you. And that’s perfectly fine. The point isn’t to get away from the shit. The point is to find the shit you enjoy dealing with.

“The solution to one problem is merely the creation of the next one.” […] hope for a life full of good problems […] Happiness comes from solving problems. Happiness is […] a form of action; it’s an activity. […] Happiness is a constant work-in-progress, because solving problems is a constant work-in-progress […] True happiness occurs only when you find the problems you enjoy having and enjoy solving.

Two years ago, I had the opportunity to head a small retail sales organization in need of a turn around. It was hard work, the hardest work I’ve done to date. And I was successful in my work, but most of the time it didn’t feel that way to me because of my inexperience.

The thought I remember having most often was, “Am I doing something wrong?” My problems seemed to multiply without end. Every time I fixed something, something else broke. Every time I thought I had configured the organization, our processes, anything, into some kind of stable equilibrium, it would start tilting in another direction all over again. I became very discouraged because I associated this inability to find stability as some symptom of my incompetence or inadequacy as the man in charge.

I brought this up with more senior people in the organization during several sit downs and the reply I got each time was, “That’s business– there are always more problems to solve.” I didn’t appreciate it at the time, but it’s also life, life is a series of challenges and obstacles to overcome. There is no equilibrium, no final resting state besides death. Everything in prelude is constant turmoil and flux. You can accept that and get on with it, or you can invest a lot of time and energy in being bitter and resentful about it (speaking from experience here!) and you will succeed wildly in this failure of imagination if you want to do that.

It took about a year of struggling with that sense of self-doubt before I came to terms with the inescapable nature of recurring problems. At that point, I came to appreciate the concept philosophically– there were always going to be problems to solve, no matter whether you screwed things up or batted it out of the park. And once I had that piece, I realized the next piece was to find problems you like to solve. If you’re going to deal with problems, you might as well have fun with them.

This connects to my theory of investment, as well. I believe the ideal for investment is control, ownership, being in a position to add value by being a change agent. And so from that standpoint I believe the most fundamental investment value, besides price, yield, future prospects, etc., is that you select investment problems you enjoy solving. You be an owner where you can add value with your solutions to the problems the company faces, and where you enjoy providing those solutions.

Real, serious, lifelong fulfillment and meaning have to be earned through the choosing and managing of our struggles.

Who you are is defined by what you’re willing to struggle for. People who enjoy the struggles of a gym are the ones who run triathlons and have chiseled abs and can benchpress a small house. People who enjoy long workweeks and the politics of the corporate ladder are the ones who fly to the top of it. People who enjoy the stresses and uncertainties of the starving artist lifestyle are ultimately the ones who live it and make it.

This ties together the ideas of avoiding entitlement by embracing the necessity of struggle, and selecting struggles you enjoy. It provides explanatory value for the outcomes we witness in other people, particularly people who excel in certain fields. It helps us appreciate where their success comes from– their embrace of particular struggles. It helps us to understand that it is unreasonable to expect to enjoy those same rewards without the same affinity for those struggles.

We don’t always control what happens to us. But we always control how we interpret what happens to us, as well as how we respond.

“With great responsibility comes great power.”

A lot of people hesitate to take responsibility for their problems because they believe that to be responsible for your problems is also to be at fault for your problems.

Fault is past tense. Responsibility is present tense.

Many years ago I became interested in the thinking of the psychologist and philosopher, Nathaniel Branden. One of the books I read which had a big impact in my life was his not-so-subtly titled How To Raise Your Self-Esteem. It is a humongous work inside a small package, a title I can easily recommend to anyone, and there is one sentence in the book that hit me like a person you’ve always respected and admired admitting they can’t stand you: “No one is coming to the rescue.”

I made a lot of excuses for myself back then. I don’t know if it was a sense of self-pity or a sense of cosmic divinity (how could I of all people be meant to suffer or be anything but perfect?!), but I was good at sitting around waiting for everyone else to get clued in on how great I was. I spent A LOT of time trying to figure other people out and rationalize why, despite my brilliance and benevolence, they didn’t like me, weren’t attracted to me, didn’t enjoy my company, etc. What I didn’t do much of was think about what I could do differently to get different results in my life. My attitude was, “This is just the way I am, if the world doesn’t appreciate it, then fuck ’em!”

When I read that no one was coming to my rescue, I first thought, who would come to my rescue if someone was coming to my rescue? It wasn’t god, as I didn’t believe in it. It wasn’t my parents– my parents love me, and they didn’t seem to have taken the opportunity to rescue me from my struggles so far, so it seemed safe to assume they weren’t just waiting for the right occasion. It wasn’t my friends, they were struggling with some of the same things I was. And it wasn’t some random stranger, they don’t know me and couldn’t care about my struggles. By process of elimination, it dawned on me that the only person who could come to my rescue, was me, and even I wasn’t getting off my ass to do the deed. So, Branden was right, no one was coming to my rescue.

That’s when I stopped the unsatisfying game of assigning fault, and took up the mantle of responsibility for my own life. It’s been an imperfect practice, and it always will be, but it’s made all the difference in my life since then.

Life is about not knowing and then doing something anyway.

“If you’re stuck on a problem, don’t sit there and think about it; just start working on it. Even if you don’t know what you’re doing, the simple act of working on it will eventually cause the right ideas to show up in your head.”

Action isn’t just the effect of motivation; it’s also the cause of it.

This is a great reminder for me because I am a cerebral person. The thing I struggle with the most is overthinking my problems. This was again something I had to learn on the job while heading the retail operation. I would face a problem and try to find the “perfect” solution for it, which inevitably meant thinking and thinking and thinking again. I received another bit of wisdom in one of those senior manager sitdowns: “You’re never going to have the time or the ability to implement the perfect solution. Consider a couple options and then pick the one you’re most comfortable with and accept that you might make another mess that you can clean up later.”

Again, the lesson applies to life in general. You can think your problems to death, literally (see Buridan’s ass). You’ll get more places by simply doing, and dealing with the consequences. Consequences are unavoidable and there are always more problems to solve whether you get the current one right or wrong. There is also a parallel to investing practice here– facing a sound investment with a 10% return potential, should you hold out and wait for one that could return 20%? No. Invest whenever you can find a safe return and worry about whether you’ll have free resources for the 20% return when you come to it. If you do otherwise, you may give up even the 10% return chasing a phantom 20%.

Commitment gives you freedom because you’re no longer distracted by the unimportant and frivolous.

I’ve been kicking this one around a lot with friends recently. During the financial crisis, I was enamored with the idea of living with no flag, traveling around the world as a lifestyle, being a “citizen of the world.” It’s a sexy, exciting dream, but it makes no sense. Part of what makes being a “citizen” of any place enjoyable is the commitment you make to that place which allows you to have deeper connections and experiences than a mere tourist. It can be captured in the metaphor of the traveler who wants to know where the locals eat. You can’t eat like a local when you’re always on the move. You can’t live the life of a citizen when you’re an uprooted, uncommitted nomad.

This also dovetails with the simplicity mindset of Marie Kondo’s “Life-Changing Magic”. When you live life simply and rid yourself of ill-used possessions, you commit yourself to fuller utilization of the possessions that remain. You commit to a particular use pattern and give up the elusive dream of having and using it all, which is impossible. The things you discard are marginalia, they are unimportant, frivolous things in your life.

With your limited “fucks to give” in life, you must draw a close bead on the things you’re aiming to achieve.

Death is the only thing we can know with certainty […] it must be the compass by which we orient all of our other values and decisions.

And then there’s that. It’s great that the book tries to wrestle with the issue, because we have an anti-death culture, this diseased belief that “death can’t happen here.”

Yesterday I was re-reading the preface of Phil Fisher’s Common Stocks and Uncommon Profits. The preface is written by Phil’s son Ken, who is also part of the investment industry. At the time Ken was writing, his father was suffering from dementia and slowly dying. Ken reflected on the former vitality of his father which had now diminished, and lamented the fact that he tried to continue the game of investment even in his old age, which Ken argued was a young man’s game.

One example he provided was a time when his then eighty-year-old father told a group of people of some stocks he was picking which he looked to own “for the next thirty years.” The people he was speaking to thought this was cute, but Ken thought it was depressing and nonsensical. It was extremely unlikely his father would be around another thirty years and so his behavior and values were mismatched for what was appropriate to his stage of life. In effect, he was squandering what little time he had left, because he would not be honest about the inevitability of his impending death.

Ken suggested he would’ve been better off visiting with family, traveling or just taking it easy. And I agree. There’s a wisdom here in understanding death and keeping it, in some sense, in the forefront of one’s mind. We should be making the best plans we can with the time we think we have left, but we should never kid ourselves about how much time that is likely to be and what kind of plans are appropriate for the occasion.

Review – How To Read A Book

How To Read A Book: The Classic Guide to Intelligent Reading

by Mortimer J. Adler, Charles Van Doren, published 1972

“Literate ignoramuses who have read too widely and not well”

HTRAB seeks to be a remedy for those described above who have read many books but understood little of any of them. As the authors define it, good reading is active reading, that is, it involves note-taking and and highlighting (write in your books to make them truly yours) and question-asking, with the ultimate question being, “What has the author tried to communicate to me and, assuming I’ve understood him, what do I think of what he has said?” A book is an absent teacher– it is ultimately your responsibility to answer on your own and for yourself the questions you might pose to it.

The 4 levels of reading

The authors set out four levels of reading, which are hierarchical in terms of complexity and skill required, and cumulative, in the sense that each level includes the skills and complexity of those below it while adding unique qualities of its own. The levels are:

  1. Elementary
  2. Inspectional
  3. Analytical
  4. Syntopical

Elementary reading is exactly what it sounds like, the most basic level of reading that all people learning to read initially experience. At this level of reading, one begins to comprehend the letters and words they form as being connected to or representative of concepts, actions, etc. Unfortunately, at this level of reading, comprehension doesn’t go much beyond this and even more tragically, few readers ever seem to graduate beyond this level, even during and after time spent in college. For elementary readers, books are full of words one must step and stumble over, but little meaning is ever found in them.

Inspectional reading is the beginning of true “reading for understanding”, which is the kind of reading HTRAB is primarily focused on. Inspectional reading is both a level of sophistication and a specific tool that can be used to heighten overall understanding and reading skill for one who “reads well.” It is a skill in the sense that an inspectional reader is able to draw out of a book its essential meaning and something about the way in which the author goes about it (as opposed to an elementary reader, who never quite gets that far, missing the meaning forest for the crowd of symbolic trees). It is a specific tool in that inspectional reading entails a deliberate process by which a reader examines the preface and introductory material of the book (or the first few pages) and the conclusion or epilogue (or last few pages) in detail, surveys the table of contents (if available) and index to get a feel for the overall structure, order and topics covered in the book and then jumps around at random through the middle of the book reading passages and pages of interest that appear to be central to the author’s theme and argument. In this way, an inspectional reader quickly learns what the book is about, how the author goes about elaborating upon it and, perhaps most importantly, whether or not it’s a message and artifice worthy of the readers attention and time.

Without this process, or at a minimum, familiarizing oneself with the table of contents, a reader who starts at the first page and tries to plow through is only making his reading more challenging because he is attempting to learn what he is attempting to understand (the topic and structure), at the same time that he is trying to understand it.

The three primary questions answered by an inspectional (summary) reading are:

  1. What kind of book is it?
  2. What is it about as a whole?
  3. What is the structural order of the work whereby the author develops his conception or understanding of that general subject matter?

Tools to prepare you for reading well

The authors suggest four essential questions to be asked by an active reader:

  1. What is the book about as a whole?
  2. What is being said in detail, and how?
  3. Is the book true, in whole or in part?
  4. What of it?

These are questions the reader should have always in the back of his mind as he reads, and which he should be able to answer confidently by the time he finishes.

The authors also recommend several techniques for “making a book your own”:

  • Underline major points and forceful statements
  • Make vertical lines in the margins for passages worthy of quoting at length
  • Stars, asterisks or other markings in the margins where the ten or twelve most critical points are made throughout the book
  • Numbers in the margin to catalog the points of an argument being made sequentially
  • Numbers of other pages in the margin indicating where in the text an idea is revisited or referenced
  • Circling of key words or phrases, similar to underlining
  • Writing in the margin or top or bottom of the page or at the end of a chapter as endnotes, to record questions (and answers), a simplified thesis of what you have read or to catalog a sequential argument in concentrated form

Several other techniques and methods are discussed in HTRAB which are critical to reading well. One is to study the title of the book and learn what you can from it. Authors usually take care in naming their books and the titles give significant clues about what the book is and is not about. Another is to practice stating the unity of the book– in a sentence or a paragraph at most, explain what kind of book it is, what it is about and list the devices the author employs to explore that theme. A final tool is to keep in mind the author’s intentions at all times– every book is written ostensibly to solve a problem, which the book is supposed to be a solution for, which begs the questions, “What is the problem the author wanted to solve by writing his book?” and “What solution does he offer to the problem in writing his book?”

The process of analytical reading

The third level of reading, and the most critical for all who wish to learn to read well, is the analytical level. At the analytical level, the primary intention of the reader is to be thorough, complete and to read for understanding. Some of the tools previously discussed are, in fact, part of the analytical reading toolkit. In total, the process or “rules” for analytical reading are:

  1. Classify the book according to kind and subject matter
  2. State what the whole book is about with the utmost brevity
  3. Enumerate its major parts in their order and relation, and outline these parts as you have outlined the whole
  4. Define the problem or problems the author is trying to solve
  5. Come to terms with the author by interpreting his key words
  6. Grasp the author’s leading propositions by dealing with his most important sentences
  7. Know the author’s arguments, by finding them in, or constructing them out of, sequences of sentences
  8. Determine which of his problems the author has solved, and which he has not; and as to the latter, decide which the author knew he had failed
  9. Do not begin criticism until you have completed your outline and interpretation of the book (do not say you agree, disagree, or suspend judgment, until you can say, “I understand.”)
  10. Do not disagree disputatiously or contentiously
  11. Demonstrate that you recognize the difference between knowledge and mere personal opinion by presenting good reasons for any critical judgment you make
  12. For criticism, special criteria apply such as: show wherein the author is misinformed, uninformed, illogical or incomplete

I made a note of some other helpful tips for reading well analytically:

  • the important words (in the sense of being critical to the author’s argument) are the one’s that give you the most trouble
  • one clue to an important word is that the author quarrels with other writers about it
  • if you never ask yourself any questions about a passage, you cannot expect the book to give you insights you did not already possess
  • it is best to do all you can without outside help because if you act on this principle consistently you will find you need less and less of it (and take more and more from your reading)

Bringing it all together: syntopical reading

Syntopical reading is the reading of multiple books, with similar topics, in order to synthesize a “conversation” amongst and between the authors. The beauty of this method of reading is it allows one to pit perspectives and arguments from differing backgrounds and even differing time periods into one intellectual commons. It also allows the reader to get a “full measure” of the literary world’s treatment of a given subject. It can be performed by either multi-inspectional reading of various titles, or multi-analytical reading of those same titles.

The steps of a successful syntopical reading are:

  1. Creative a tentative bibliography of your subject
  2. Inspect all of the books in the bibliography to ensure they’re germane and to get a clearer perspective of the subject itself
  3. Inspect the books amassed to find the most relevant passages to the subject matter
  4. Bring the authors to terms by constructing a neutral terminology that all authors can be assumed to agree with, even if they didn’t employ such terminology themselves
  5. Establish a set of neutral propositions for all of the authors by framing a set of questions to which all or most of the authors can be interpreted to have provided answers, whether they actually treat the questions explicitly or not
  6. Define the issues, major and minor, by lining up the authors’ respective viewpoints on one side or another
  7. Analyze the discussion by ordering the questions and issues so as to throw maximum light on the subject

An afterword

Despite my efforts at being analytical, this review was something of an inspectional survey itself. One thing I took away from my reading is that I do a lot of the things mentioned in the analytical reading process, although I actually neglect a lot of the inspectional reading elements and now realize their value. The reading also confirmed some of my biases by throwing into stark relief the inadequacies of many other people’s reading efforts I am aware of, either from direct personal experience or via interaction with their “interpretations” of ideas gleaned from things they have read. It is somewhat dismaying to realize how few intellectual opponents would qualify as “well read” analytical book users, and how inadequate their attempts at criticism are in light of this. One would be more satisfied to think one’s opponents were both more competent, and more honest, than that.

At the end of HTRAB, the authors provide a number of special tips for the reading of specific kinds of works (poems and plays, history, social science, hard science and math, etc.), as well as a bibliography of “great books” (similar to that found here) and a short essay on what reading well can do for an individual. Aside from the hopefully true suggestion that the mind-exercise provided by reading well can actually help one sustain the vitality and quality of their life even into old age, the discussion of the growing relationship one can develop with truly “great” books is comforting, as well. I think for me personally this passage resonated because of my own experiences reading what I refer to as “acts of philosophy” even when their subject matter is not philosophy per se (endlessly re-readable books like [amazon text=Security Analysis&asin=007141228X] and [amazon text=Human Action&asin=1610161459] which seem to give up new secrets and ideas with each new pass through).

Despite my epistemological misgivings about HTRAB (for example, could HTRAB, in and of itself, assist a person currently capable of nothing more than elementary reading to rise above themselves?), I do believe it itself is a title worth revisiting in the future. My first foray amongst its pages was admittedly quick and inspectional, and there were many passages I will admit I skipped just so I could get to the end and get this up on my blog. It may or may not be a “great” book (I believe I will suspend judgment on that for now), it is undoubtedly a “good” book with much to recommend it and I would encourage anyone who is interested, as well as my future self, to pick it up and give it a read.

Quotes – The Connection Between Time And Value

Nothing important comes into being overnight; even grapes and figs need time to ripen. If you say that you want a fig now, I will tell you to be patient. First, you must allow the tree to flower, then put forth fruit; then you have to wait until the fruit is ripe. So if the fruit of a fig tree is not brought to maturity instantly or in an hour, how do you expect the human mind to come to fruition, so quickly and easily?

~Epictetus

Incoming Library Additions, And Why I Bought Them

I recently purchased 13 books for my library. However, I already regret doing so because I recently finished Marie Kondo’s The Life-Changing Magic of Tidying Up and it helped me to realize I already had a lot of unread books on my shelf that I will realistically never get to read because I’ve lost interest in their subject matter since I purchased them. To add 13 more books to a pile of unread books is wasteful of money and subtly increases my stress as I subconsciously keep track of “my giant stack of unread books.” Instead of reading being a pleasure that I can do when I feel like it, with a book I am currently interested in, I have created the conditions of a never-ending treadmill of progress project. Going forward, I am going to work through as many of these books as I can maintain interest in until one of two things happen: a.) complete the entire stack, at which point I can purchase a new title I am interested in reading, at the time I am interested in reading it or b.) sell/donate/discard all books I have not managed to read before I am overtaken by the impulse to purchase something else, which would serve as a good indicator that I’ve reached the limit of my interest from this current stack.

I have noticed that despite having access to an Amazon Prime account, I almost NEVER use the Prime, 2-day shipping feature. I am always happy to wait 3, 5 or sometimes even more days for books to arrive because I am usually in the middle of several books when I order another, and I have another reserve of several titles unread as well so I never worry about lost reading time. That should’ve been a good indication to me that there was something seriously wasteful in my habit!

That is my plan going forward. In the meantime, I thought it’d be good to record the titles I purchased along with the reason I purchased them. I want to formulate my interest as a question or questions I hope the book will help me answer. After all, this is why we read books– to answer questions we have about the book’s subject matter. I would like to develop the habit going forward of being more aware of my own questions and perceived purpose in reading books, especially to compare against on the occasion that a book positively surprises me and gets me thinking about a question I didn’t have before I arrived at it.

Here are my new books due to arrive soon:

  1. The School Revolution, by Ron Paul; we plan to homeschool our children, but could there ever be a (private) group schooling solution which would meet our family and social needs? I am interested in building alternative educational institutions that can “compete” the state and quasi-state institutions out of existence, is there merit to this idea and has Ron Paul thought through potential models for this that I could consider in my own efforts?
  2. How Asia Works, by Joe Studwell; I read and enjoyed Studwell’s Asian Godfathers and I want to know more about the managed economy models of southeast Asia, what is the true extent of “free market” influence in these major economies and how does it factor in to their growth stories since the 1960s?
  3. Elevating Child Care, by Janet Lansbury; I am interested in “Respect For Infant Education” as I have seen how transformative it is for parent-child relationships and child development after observing friends who use it in their families, what are the principles of RIE and what solutions and strategies does it offer for common parenting situations with infants?
  4. Before The Dawn by Nicholas Wade; what role did genetics and evolution play in early human history and what kind of evolution or genetic change is occurring in modern times and populations? What is the significance of race, genetically?
  5. The 10,000 Year Explosion, by Cochran and Harpending; how have changes in human technological know-how and social organization influenced human genetics at an individual or population level? What feedback loops exist such that genetic changes might result in further changes in technology and social organization?
  6. The Rational Optimist, by Matt Ridley; I am often mistaken for a pessimist and surely there is a lot to worry about for anyone who is rational and pays attention, but what is there to be optimistic about and why? What is the philosophical relationship between economic development and evolution?
  7. The Secret of Childhood, by Maria Montessori; what is childhood “really about”? What kinds of things are children capable of that we take for granted? How could I parent my future child with greater empathy for their capabilities and individual purpose?
  8. The Creation of the American Republic, 1776-1787, by Gordon Wood; was the American Revolution truly a “revolution”, politically and intellectually? What were the principles of government the “Founders” were truly after and why did they think this was an improvement over historical despotisms and English parliamentarism? If republicanism represents a true break with the political past, why isn’t it more common in history?
  9. Hive Mind, by Garrett Jones; is it more important to be part of a high IQ community, or to have a high IQ yourself? Can culture impact IQ (and raise it)? Could one consciously build a community or culture of high IQ people? What kind of outcomes or behaviors might be predictable in such a circumstance? Are IQs increasing or decreasing in the modern era and what is the consequence? Should I try to emigrate to a high IQ place and if so, where is that?
  10. The WikiLeaks Files, by WikiLeaks/Julian Assange; what are some of the high-level takeaways from the major WikiLeaks cable collections to date? How does one effectively search and scrutinize these cables for ones own research purposes? What does the information contained within these cables imply for the actual practice of global governance and foreign policy?
  11. Anarchy, State and Utopia, by Robert Nozick; is there a logically-consistent philosophical case for a minimalist government? Why is it intellectually superior to a private property society?
  12. Invisible Wealth, by Kling and Schulz; why do political borders and different legal systems seem to have such disparate impacts on economic development? Which follows which, the culture/political system or the economy? How sound is the idea of “competition amongst governments” and why don’t we see more countries’ policies moving toward a “developed” mean?
  13. The Logic of Collective Action, by Mancur Olson; what does the logic of collective action say about corporate governance structures in private companies? What warnings or limitations does it reveal for the conduct of public governance?

Notes – How To Master A New Skill

A note to self that I found elsewhere:

Anytime you are acquiring a new skill, remember the best path for doing something new or different looks like this:

  1. Find someone who is good at it.
  2. Watch that person do it.
  3. Get that person to talk about how they do it.
  4. Practice doing it yourself with his or her guidance.
  5. Ask the person to give you feedback.
  6. Practice doing it on your own.
  7. Seek feedback until you’ve mastered it.

On Living Life Without A Goal

A few weeks ago I had lunch over the weekend with an old friend I hadn’t seen in some time. Since our childhood when we had been very close, his life had been characterized by many challenges, upsets and frustrations. In general, he seemed to be living life adrift in a real sense, by his own acknowledgement, the metaphor manifesting itself physically when he literally went sailing around a nearby island on a borrowed sailboat and found himself caught in a strong wind and a nasty current that pushed him off course and left him adrift for several hours, wondering if and how he would make it back to shore.

It has been sad, as his friend, to watch him have such a tumultuous relationship with life. But during this get together, he did communicate that he had been making some positive changes and was coming to a greater self-awareness through practiced effort, at least in terms of what he didn’t want from life.

I am not an expert on life and how to live it, but I endeavor to be to whatever extent it is possible. I learn something new about the art of living daily and I hope this pattern repeats itself for all of my life, however long it happens to be. I share the following not with the attitude of a facetious advice-giver but rather from the standpoint of “Here’s where I am coming from on this issue.”

Knowing what we don’t want out of life or who we are not, is of incredible value. It can save us a lot of time and frustration and wasted energy pursuing dead-ends, so to speak, if we are able to avoid the cul-de-sacs completely and just stay on the main road. But it is not enough to have a negative direction. Velocity is determined not just by rate of travel but by direction as well.

I encouraged my friend to think about his life in an ideal way. I asked him to imagine for a second that he had accomplished his dreams, he had gotten what he wanted and no one had stood in his way and the few who had he had stepped over with ease. Then I asked him to describe what that looked like, what it felt like.

The point of the exercise is to develop a positive direction for your life, to imagine some goals you can work toward. (Then the real trick is to enjoy the getting there and not obsess about when, how or if ever you arrive.) I tried to create a metaphor to illustrate the chaos that would come up without living a goal-oriented life.

The best I could do was to ask my friend to imagine watching a person play a game of sport who did not know the rules, who did not respect the boundaries of play and who did not care to score any points. What would such a person look like playing this game?

In one moment, they’d be running toward the goal, in another instant they’d be steaming away from it. For hours at a time they might just sit on the ground and do nothing, making no progress in the game whatsoever, twisting blades of grass in between their fingers or staring at the sky. Sometimes they might work with their teammates to make progress toward the goal. At others they’d fanatically attack them and assist the other team. They might carry the ball out of the boundaries of play, ignoring the deafening scream of the ref’s whistle, only to later carry it back into play.

Now and then they’d score a point, the crowd would go wild but they’d have no idea why, and feel no sense of reward. They’d probably be incredibly confused and often frustrated during the whole ordeal.

This is what living life without a goal is like, in my mind. Choosing a goal is akin to giving your life the structure and rule set of a game, to add coherence to your actions. With a goal you can check yourself and see, “Am I getting nearer or farther?” with each step you take. Further, you have opportunities to practice “playing the game well”. For example, if a person considers themselves to be playing basketball, one can examine their relative skill against a set of ideals common to basketball. If one were to examine someone dribbling, throwing a ball through the air, passing, etc., outside the context of a game of basketball, it’d be nearly impossible to say with any meaning whether they were doing such things with skill or with carelessness.

Living life with a goal is a choice. It offers benefits, as well as responsibilities. It’s not strictly necessary to the idea of “merely surviving” (which, by the way, is a goal itself). But it is enough to make life more interesting and, perhaps, more meaningful.

Video – Michael Mauboussian On Forbes

Intelligent Investing with Steve Forbes presents Michael Mauboussin, chief investment strategist, Legg Mason Capital Management, author of Think Twice

Major take-aways from the interview:

  • 9%, 7.5% and 5.5-6%; the rates of return, respectively, for the S&P500, mutual funds and mutual fund investors, on average– why the discrepancy?
  • Mutual funds underperform the S&P500 on a total return basis due to fees; mutual fund investors underperform the funds mostly due to timing– most individuals buy when funds have done well, sell when they’ve done poorly, exposing themselves to underperformance and missing out on subsequent over-performance
  • Curiously, institutional investors underperform as well; the culprit is overactivity– people believe “if you work hard, you’ll be rewarded”, so institutional investors try to “earn” their returns by moving money around constantly
  • Increasingly, investment returns have to do with luck and not skill; all activities in life fall along a continuum between pure skill and no luck (running competition) to pure luck and no skill (the lottery); the “Paradox of Skill” states that the more skillful competitors are, the more uniform their results become and the more important luck is to explaining differences in results
  • How to accurately judge a manager’s returns? Sample size is important: the more decisions the manager has to make over time, the shorter time horizon can be used to judge them; the fewer decisions they make over time, the longer the time horizon used to judge them
  • Focus on process, not outcome; in investing– analytical process of ideas, behavioral/psychological process, and organizational process (constraints w/in the organization that impede performance)
  • Investing boils down to two activities: handicapping (looking at market assumptions via price and then backing into the scenario that would have to occur for that price to be reasonable, and judging the probability of it occurring) and bet-sizing (waiting until you have a strong advantage and then betting big)
  • Expectations-based investing process: back into the cash flow assumptions that justify current market price; financial/strategic analysis of the company and its industry to see if the company is likely to do better or worse than the market implies; then decide to buy, sell or do nothing– what’s built in? what’s likely to happen? then “over-under” rather than “I know precisely what those cash flows will be”
  • Systems that are entirely skill-based don’t revert to the mean at all; aside from fatigue, running a race 5x will result in the same, highly-skilled winner each time
  • The extent to which a system is not all-skill is the extent to which it can mean-revert, but the question is, what mean? A highly skilled person might come down off a peak but they will not revert to the mean of more normally skilled individuals, for instance (tall parents tend to have tall children, but they might not be as tall as the parents — mean reversion — but you also don’t expect them to go down to the height of the average population)
  • Investing is not all-luck, but it is luck-leaning on the continuum; the best way to judge managers is by process, not performance
  • “Buy cheap and hold”: consider the story of Bob Kirby and the “Coffee Can Approach” [PDF]
  • What can older investors do in today’s interest rate environment? Follow Jim Grant’s advice, “Roll back the calendar 30 years”, ie, nothing, they’re screwed
  • “Patience is the key” to great investment returns

Notes – Distilled BuffettFAQ.com Investment Wisdom Of Warren Buffett

All quotes were originally collected and compiled at the outstanding BuffettFAQ.com

On Learning Businesses

Now I did a lot of work in the earlier years just getting familiar with businesses and the way I would do that is use what Phil Fisher would call, the “Scuttlebutt Approach.” I would go out and talk to customers, suppliers, and maybe ex-employees in some cases. Everybody. Everytime I was interested in an industry, say it was coal, I would go around and see every coal company. I would ask every CEO, “If you could only buy stock in one coal company that was not your own, which one would it be and why? You piece those things together, you learn about the business after awhile.

Funny, you get very similar answers as long as you ask about competitors. If you had a silver bullet and you could put it through the head of one competitor, which competitor and why? You will find who the best guy is in the industry.

On The Research Process

It’s important to read a lot, learn about the industries, get background information, etc. on the companies in those piles. Read a lot of 10Ks and Qs, etc. Read about the competitors. I don’t want to know the price of the stock prior to my analysis. I want to do the work and estimate a value for the stock and then compare that to the current offering price. If I know the price in advance it may influence my analysis.

Pick out five to ten companies in which you understand their products, get annual reports, get every news piece on it. Ask what do I not know that I need to know. Talk to competitors and employees. Essentially be a reporter, ask questions like: If you had a silver bullet and could put it into a competitor who would it be and why. In the end you want to write the story, XYZ is worth this much because…

Narrowing the Investment Universe

They ought to think about what he or she understands. Let’s just say they were going to put their whole family’s net worth in a single business. Would that be a business they would consider? Or would they say, “Gee, I don’t know enough about that business to go into it?” If so, they should go on to something else. It’s buying a piece of a business. If they were going to buy into a local service station or convenience store, what would they think about? They would think about the competition, the competitive position both of the industry and the specific location, the person they have running it and all that. There are all kinds of businesses that Charlie and I don’t understand, but that doesn’t cause us to stay up at night. It just means we go on to the next one, and that’s what the individual investor should do.

Q: So if they’re walking through the mall and they see a store they like, or if they happen to like Nike shoes for example, these would be great places to start? Instead of doing a computer screen and narrowing it down?

A computer screen doesn’t tell you anything. It might tell you about P/Es or something like that, but in the end you have to understand the business. If there are certain businesses in that mall they think they understand and they’re public companies, and they can learn more and more about them…. We used to talk to competitors. To understand Coca-Cola, I have to understand Pepsi, RC, Dr. Pepper.

The place to look when you’re young is the inefficient markets.

Investment Process

  • Read lots of K’s and Q’s – there are no good substitutes for these – Read every page
  • Ask business managers the following question: “If you could buy the stock of one of your competitors, which one would you buy? If you could short, which one would you short?”
  • Always read source (primary) data rather than secondary data
  • If you are interested in one company, get reports for competitors. “You must act like you are actually going into that business, and if you were, you’d want to know what your competitors were doing.”

Four Investment Filters

Filter #1 – Can we understand the business? What will it look like in 10-20 years? Take Intel vs. chewing gum or toilet paper. We invest within our circle of competence. Jacob’s Pharmacy created Coke in 1886. Coke has increased per capita consumption every year it has been in existence. It’s because there is no taste memory with soda. You don’t get sick of it. It’s just as good the 5th time of the day as it was the 1st time of the day.

Filter #2 – Does the business have a durable competitive advantage? This is why I won’t buy into a hula-hoop, pet rock, or a Rubik’s cube company. I will buy soft drinks and chewing gum. This is why I bought Gillette and Coke.

Filter #3 – Does it have management I can trust?

Filter #4 – Does the price make sense?

Finding Bargains

The world isn’t going to tell you about great deals. You have to find them yourself. And that takes a fair amount of time. So if you are not going to do that, if you are just going to be a passive investor, then I just advise an index fund more consistently over a long period of time. The one thing I will tell you is the worst investment you can have is cash. Everybody is talking about cash being king and all that sort of thing. Most of you don’t look like you are overburdened with cash anyway. Cash is going to become worth less over time. But good businesses are going to become worth more over time. And you don’t want to pay too much for them so you have to have some discipline about what you pay. But the thing to do is find a good business and stick with it.

Don’t pass up something that’s attractive today because you think you will find something way more attractive tomorrow.

Defining Risk

We think first in terms of business risk. The key to Graham’s approach to investing is not thinking of stocks as stocks or part of the stock market. Stocks are part of a business. People in this room own a piece of a business. If the business does well, they’re going to do all right as long as long as they don’t pay way too much to join in to that business. So we’re thinking about business risk. Business risk can arise in various ways. It can arise from the capital structure. When somebody sticks a ton of debt into a business, if there’s a hiccup in the business, then the lenders foreclose. It can come about by their nature–there are just certain businesses that are very risky. Back when there were more commercial aircraft manufacturers, Charlie and I would think of making a commercial  airplane as a sort of bet-your-company risk because you would shell out hundreds and hundreds of millions of dollars before you really had customers, and then if you had a problem with the plane, the company could go. There are certain businesses that inherently, because of long lead time, because of heavy capital investment, basically have a lot of risk. Commodity businesses have a lot of risk unless you’re a low-cost producer, because the low-cost producer can put you out of business. Our textile business was not the low-cost producer. We had fine management, everybody worked hard, we had cooperative unions, all kinds of things. But we weren’t the low-cost producers so it was a risky business. The guy who could sell it cheaper than we could made it risky for us. We tend to go into businesses that are inherently low risk and are capitalized in a way that that low risk of the business is transformed into a low risk for the enterprise. The risk beyond that is that even though you identify such businesses, you pay too much for them. That risk is usually a risk of time rather than principal, unless you get into a really extravagant situation. Then the risk becomes the risk of you yourself–whether you can retain your belief in the real fundamentals of the business and not get too concerned about the stock market. The stock market is there to serve you and not to instruct you. That’s a key to owning a good business and getting rid of the risk that would otherwise exist in the market.

Valuation Metrics

The appropriate multiple for a business compared to the S&P 500 depends on its return on equity and return on incremental invested capital. I wouldn’t look at a single valuation metric like relative P/E ratio. I don’t think price-to-earnings, price-to-book or price-to-sales ratios tell you very much. People want a formula, but it’s not that easy. To value something, you simply have to take its free cash flows from now until kingdom come and then discount them back to the present using an appropriate discount rate. All cash is equal. You just need to evaluate a business’s economic characteristics.

[Highly qualitative, descriptive and verbal, has little to do with the numbers in justifying an investment]

The Ideal Business

WB: The ideal business is one that generates very high returns on capital and can invest that capital back into the business at equally high rates. Imagine a $100 million business that earns 20% in one year, reinvests the $20 million profit and in the next year earns 20% of $120 million and so forth. But there are very very few businesses like this. Coke has high returns on capital, but incremental capital doesn’t earn anything like its current returns. We love businesses that can earn high rates on even more capital than it earns. Most of our businesses generate lots of money, but can’t generate high returns on incremental capital — for example, See’s and Buffalo News. We look for them [areas to wisely reinvest capital], but they don’t exist.

So, what we do is take money and move it around into other businesses. The newspaper business earned great returns but not on incremental capital. But the people in the industry only knew how to reinvest it [so they squandered a lot of capital]. But our structure allows us to take excess capital and invest it elsewhere, wherever it makes the most sense. It’s an enormous advantage.

See’s has produced $1 billion pre-tax for us over time. If we’d deployed that in the candy business, the returns would have been terrible, but instead we took the money out of the business and redeployed it elsewhere. Look at the results!

CM: There are two kinds of businesses: The first earns 12%, and you can take it out at the end of the year. The second earns 12%, but all the excess cash must be reinvested — there’s never any cash. It reminds me of the guy who looks at all of his equipment and says, “There’s all of my profit.” We hate that kind of business.

Making Mistakes In Investments

We bought it because it was an attractive security. But it was not in an attractive industry. I did the same thing in Salomon. I bought an attractive security in a business I wouldn’t have bought the equity in. So you could say that is one form of mistake. Buying something because you like the terms, but you don’t like the business that well.

The Market and Its Price

The NYSE is one big supermarket of companies. And you are going to be buying stocks, what you want to have happen? You want to have those stocks go down, way down; you will make better buys then. Later on twenty or thirty years from now when you are in a period when you are dis-saving, or when your heirs dis-save for you, then you may care about higher prices. There is Chapter 8 in Graham’s Intelligent Investor about the attitude toward stock market fluctuations, that and Chapter 20 on the Margin of Safety are the two most important essays ever written on investing as far as I am concerned. Because when I read Chapter 8 when I was 19, I figured out what I just said but it is obvious, but I didn’t figure it out myself. It was explained to me. I probably would have gone another 100 years and still thought it was good when my stocks were going up. We want things to go down, but I have no idea what the stock market is going to do. I never do and I never will. It is not something I think about at all.

Forecasting

People have always had this craving to have someone tell them the future. Long ago, kings would hire people to read sheep guts. There’s always been a market for people who pretend to know the future. Listening to today’s forecasters is just as crazy as when the king hired the guy to look at the sheep guts. It happens over and over and over.

What’s going to happen tomorrow, huh? Let me give you an illustration. I bought my first stock in 1942. I was 11. I had been dillydallying up until then. I got serious. What do you think the best year for the market has been since 1942? Best calendar year from 1942 to the present time. Well, there’s no reason for you to know the answer. The answer is 1954. In 1954, the Dow … dividends was up 50%. Now if you look at 1954, we were in a recession a good bit of that time. The recession started in July of ’53. Unemployment peaked in September of ’54. So until November of ’54 you hadn’t seen an uptick in the employment figure. And the unemployment figure more than doubled during that period. It was the best year there was for the market. So it’s a terrible mistake to look at what’s going on in the economy today and then decide whether to buy or sell stocks based on it. You should decide whether to buy or sell stocks based on how much you’re getting for your money, long-term value you’re getting for your money at any given time. And next week doesn’t make any difference because next week, next week is going to be a week further away. And the important thing is to have the right long-term outlook, evaluate the businesses you are buying. And then a terrible market or a terrible economy is your friend. I don’t care, in making a purchase of the Burlington Northern, I don’t care whether next week, or next month or even next year there is a big revival in car loadings or any of that sort of thing. A period like this gives me a chance to do things. It’s silly to wait. I wrote an article. If you wait until you see the robin, spring will be over.

Managers Should Be Investors

Charlie makes a good point. Managers should learn about investing. I have friends who are CEOs and they outsource their investing to a financial advisor because they don’t feel comfortable analyzing Coke and Gillette and picking one stock vs. the other. Yet when an investment banker shows up with fancy slides and a slick presentation, an hour later the CEO is willing to do a $3 billion acquisition. It’s extraordinary the willingness of corporate CEOs to make decisions about buying companies for billions of dollars when they aren’t willing to make an investment for $10,000 in their personal account. It’s basically the same thing.

The Value of Accounting

I had a great experience at Nebraska. Probably the best teacher I had was Ray Dein in accounting. I think everybody in business school should really know accounting; it is the language of business. If you are not comfortable with the lan- guage, you can’ t be comfortable in the country. You just have to get it into your spinal cord. It is so valuable in business.

Staying Rational

One thing that could help would be to write down the reason you are buying a stock before your purchase. Write down “I am buying Microsoft @ $300B because…” Force yourself to write this down. It clarifies your mind and discipline. This exercise makes you more rational.