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It’s getting harder to have the expertise necessary to navigate every arena in our lives independently. Sometimes, we need to defer to the expertise of others, but how do we know who to trust?
We are a culture of explainers. You’ve met them and so have I—the people who think they’re more informed than the experts, always happy to share their thoughts with anyone who will listen. Such people sometimes were considered quirky, even endearing, because they meant well and were usually few and far between. However, “the public space is increasingly dominated by a loose assortment of poorly informed people,” writes Tom Nichols in his excellent book The Death of Expertise.
There is an intellectual Gresham’s Law emerging, as misinformation overtakes knowledge. But this isn’t really a new thing. The conflict between people who know and people who believe they know isn’t always so obvious, but as the gap between experts and the general citizenry grows, so too does the mistrust.
In some cases, ignorance has become hip. Consider the flat Earth movement, vaccines, or the raw milk craze of a few years ago. Rejecting the advice of experts has become a cultural symbol. Why listen to doctors about vaccines, or the Center for Disease Control about the hazards of raw milk? And don’t even get me started on the shape of the Earth.
Spanish philosopher Jose Ortega y Gasset in 1930 decried the “revolt of the masses,” writing:
Thus, in the intellectual life, which of its essence requires and presupposes qualification, one can note the progressive triumph of the pseudo-intellectual, unqualified, unqualifiable, and, by their very mental texture, disqualified.
I may be mistaken, but the present-day writer, when he takes his pen in his hand to treat a subject which he has studied deeply, has to bear in mind that the average reader, who has never concerned himself with this subject, if he reads, does so with the view, not of learning something from the writer, but rather, of pronouncing judgment on him when he is not in agreement with the commonplaces that the said reader caries in his head.
Ortega y Gasset attributed the increasing numbers of the ignorant public to prosperity, among other things. It’s hard to argue with success. Technology, secondary education, and the emergence of the United States as a global power undermine the idea that average individuals are ill-equipped to decide for themselves. And yet those powerful forces also have demanded that individuals develop specialized expertise that conflicts with broader competence. Sometimes, we must even be content to know what we don’t know, and trust other experts.
In the 1960s, political scientist Richard Hofstadter wrote that “the complexity of modern life has steadily whittled away the functions the ordinary citizen can intelligently and competently perform for himself.” In his book Anti-Intellictualism in American Life, Hofstadter points out with concern that
In the original American populistic dream, the omnicompetence of the common man was fundamental and indispensable. It was believed that he could, without much special preparation, pursue the professions and run the government.
Today, he knows that he cannot even make his breakfast without using devices, more or less mysterious to him, which expertise has put at his disposal; and when he sits down to breakfast and looks at his morning newspaper, he reads about a whole range of issues and acknowledges, if he is candid with himself, that he has not acquired the competence to judge most of them.
This overwhelming complexity of modern life “produced feelings of helplessness and anger among a citizenry that knew itself increasingly to be at the mercy of smarter elites,” writes Nichols. And Hofstadter warns, “What used to be a jocular and usually benign ridicule of intellect and formal training has turned into a malign resentment of the intellectual in his capacity as expert. Once the intellectual was gently ridiculed because he was not needed; now he is fiercely resented because he is needed too much.”
Don’t get me wrong. Reasoned skepticism and disagreement are essential to progress and democracy. The problem is that most of what’s happening isn’t reasoned skepticism. It’s the adult equivalent of a two-year-old throwing a tantrum.
Sometimes experts are wrong and the common citizen is right, but those occasions are few and far between. What’s growing is our inability to distinguish between experts being wrong occasionally and experts being wrong consistently. Participants in public debate search for loopholes and exceptions—anything that provides an excuse to disregard opinions they don’t like.
This sets up binaries and polarities, demanding that things be either true or false. This eliminates nuance. The reality is that most expert opinions are true at least in part, and the real value in disagreement is not dismissing the thing entirely, but taking the time to argue the weak points to make the overall better.
Laypeople would do well to remember that reasoned disagreement is what moves us forward. Not every idea has to be complete and completely defensible right from the beginning. It is because we question and push ideas that we make the progress that we do. Experts would do well to remember that they may be masters of their fields, but they are servants to society. Mastery means nothing without trust and engagement.
It’s intellectual hubris to think that with a few minutes of googling our opinions are on par with people who have spent their lives in a domain. And yet we’ve been taught that we are entitled to our own opinion and that it deserves equal weighting. Sure you hold your own opinion, but it doesn’t deserve equal weighting.
The filing cabinet of knowledge stored in Warren Buffett’s brain has helped make him the most successful investor of our time. But it takes much more than simply reading a lot. In this article, learn how to create your own “snowball effect” to compound what you know into opportunity.
Starting [at a young age] he’s read everything that he could find about business. The subject that interests him, he’s read newspapers, biographies, trade press. He went over to his grandfather who was a grocer and he read the progressive grocer magazine, and he read articles on how to stock a meat department. He’s gone to visit every company that he could find that was even slightly interesting to him, he went down to visit a barrel maker and spent hours talking about how to make barrels. He went to American Express, and he spent hours talking about that business, he went to GEICO and learned about the insurance business. He has stacks of reports on his desk from the companies he owns, pig stalls, jewelry, boat winches, everything you can imagine. He reads hundreds of annual reports every year from companies that he doesn’t own yet, because he just wants to understand their businesses, and then when the opportunity arises, then he’s ready and he can make a decision. What he’s really done is he’s created this immense vertical filing cabinet in his brain of layers and layers and layers of files of information that he can draw back on now for more than 70 years worth of data.
A lot of us are on the treadmill of consuming expiring information. Not Buffett. He filled his mental filing cabinet with information that had a long half-life.
While most of us focus on consuming information that we won’t care about next month, let alone next year, Buffett focused on knowledge and companies that change very, very slowly or not at all. And because the information he was learning changed slowly he could compound his knowledge over time. And as Schroeder notes, Buffett has been in business for a long time, giving him incredible opportunities to create a cumulative base of knowledge.
Expiring information is sexy but it’s not knowledge. Here are a few telltale signs you’re dealing with expiring information. First, it’s marketed to you. Second, lacking details and nuance, it’s easily digestible. This is why it’s commonly telling you what happened, not why it happened or under what conditions it might happen again. Third, it won’t be relevant in a month or a year. Expiring information is one reason I stopped reading most news. It’s a false map.
But there is another subtle difference to Buffett’s approach that often goes unnoticed and few people talk about.
Buffett insists on doing his own thinking and vacuums up the details. When we don’t think for ourselves it’s easy to put the blame on someone else, to “pass the buck” so to speak.
When we consume information that doesn’t expire or expires slowly; is very detailed; and we spend time thinking about it not passing the buck, we can match patterns. This is how you learn to see what other people are missing. The longer you do this, the more advantage you get.
Most of us use a computer to store information so that we can retrieve it when we need it. We’ve organized our knowledge around a computer. Not Buffett.
The biggest thing he’s done is to learn and create this cumulative base of knowledge in his head. One reason that he doesn’t use a computer is that in a sense, he is one. He also needs a computer to get…he uses it for news. He wants to know what’s going on in the world. So he is on the internet a lot to get news reports, and he’s up late at night seeing what’s going on. He doesn’t use it as a filing cabinet or for computation.
Just like the rest of us, Buffett’s dependent on information and knowledge to make great decisions. Unlike most of us, he has a great memory—perhaps because he’s not trying to outsource his memory or thinking to others.
A lot of what the snowball is about the concept of learning, and creating, and the advantage of having the information and knowing it. When I came here today one of the things that I was thinking is that what you do is so much at the intersection, because retrieving information is different from having it already in your head. The internet is wonderful for being able to retrieve and get information.
What you do is different. You work on manipulating how you use the information. In fact, Warren Buffett and Charlie Munger have the files in their head. That’s why they aren’t really out there googling all the time looking for, trying to look stuff up, because they already know it.
There are applications that somebody who doesn’t have the upper digits memory and their computational power would need in order to be as successful as them. Sometimes when they say, we don’t use computers. An ordinary person can be them.
I think a lot of the work that you do here is helpful to the ordinary person, but Warren Buffett or Charlie Munger don’t need it. At the same time, the lesson that they have, which is that learning yourself, making yourself as smart as you can is extremely valid, and not just relying on a library where you can look something up all the time, because a lot of times when you need to make a decision, and you need 50 pieces of information, you need to know it then.
That’s been one of Warren Buffet’s greatest secrets of success.
I’m not suggesting we all copy Buffett.
While there is no denying he’s successful, the way we think he developed his remarkable facility owes a great deal to living in a certain time period, with a certain biology, and a level of focus and dedication to a single pursuit that few of us can manage. That doesn’t mean we should go to the other extreme and ignore him.
There is much we can learn from him. The key questions are: what’s he doing that works, why does it work, and can I adapt it to my circumstances?
The Snowball is about learning, lifelong learning. Spending some time with these questions will allow you to find ways to make your own learning and your knowledge base more powerfully productive for you.
Inefficient does not mean ineffective, and it is certainly not the same as lazy. You get things done – just not in the most effective way possible. You’re a bit sloppy, and use more energy. But don’t feel bad about it. There is real value in not being the best.
Trying to be perfect is a waste of time.
Many of us feel constant pressure to adapt perfectly to our environments, especially our workplaces. Don’t waste time, we’re told. Maximize the output of your moments. Minimize your energy expenditure. If you aren’t getting great, someone else is, so before you collapse into a heap of perceived failure, take stock and improve your efficiency. We assume this is the ticket to success—to continually strive to be the best at whatever we are doing.
There is, however, something to be said for inefficiency: not doing everything perfectly, expending extra energy, making mistakes, trying new things—and possibly sucking at them. Sticking with something, even if you will never be as good as the person next to you. You develop flexibility and adaptability. You’re better prepared for new opportunities when there are changes in your environment.
Inefficient does not mean ineffective, and it is certainly not the same as lazy. You do things. You just don’t always do them in the most effective way possible. You’re a bit sloppy, and use more energy. But don’t feel bad about it. There is real value in not being the best at everything.
To understand how inefficiency can help you get ahead, let’s start with a story.
Imagine a tree that grows these tasty, nutritious turquoise berries. A species of bird has adapted to eating them efficiently. It has a beak that gets under the protective berry shell just so, allowing it to consume loads of the ripest berries whenever it wants. Its claws have adapted to the tree’s slippery branches, so it is the only creature in the forest that can perch on them with ease. The tree produces these berries all year round, thanks to a stable climate, so there are tons of them. The bird has evolved for the task of eating these berries, and they provide all the bird’s nutritional needs, so the bird has no incentive to try anything else.
In the forest there also lives a little mammal. Occasionally, the bird drops a berry and this mammal gets a taste of them. It really likes the berries, and tries to get more of them. It can never compete with the bird directly, as the bird is so specialized. But over time, it adapts to the situation. It starts to go after the berries at night, when the bird is asleep and not feeding. Its claws evolve to grip the tree better. Its vision in the dark improves. Being more active at night, it finds tasty grubs to spear with those sharper claws, so it eats them as well. The bird still gets the majority of the berries, but the mammal gets enough to keep the effort worthwhile, supplementing along the way.
Then, one day, a huge environmental change impacts the forest where this is all playing out. It is significant and lasts for a while. The vegetation patterns are disrupted. Food sources change. Who is in the better position to thrive in the new conditions? The environmental changes are a disaster for the bird. They are an opportunity for the mammal.
Why? In part, because the mammal benefits from its own previous inefficiency. Both the bird and the mammal can get the juicy turquoise berries. The bird is significantly more efficient at doing so, which is an advantage in a stable environment. Nothing can compete.
But in times of change, the inefficiency that forced the mammal to supplement the leftovers it could scrounge when the bird was sleeping is an advantage. That inefficiency allowed for the development of other traits that gave it flexibility to adapt to changing environmental circumstances. It became a generalist, with some specialized features like night vision that are broadly useful.
There is a bright side to disruption. Short-term disturbances enable fast-growing species with high metabolic rates and with inert life stages capable of withstanding adverse conditions to capitalize on briefly favorable circumstances, and it is these opportunists that are in the best position to spawn highly competitive dominants in postcrisis ecosystems from which well-adapted incumbents have been eliminated. — Geerat Vermeij, Nature: An Economic History
Total efficiency constrains us. We become super invested in maintaining the status quo because that is where we excel. Innovation is a threat. Change is terrifying. Being perfect at something is dangerous if it’s the only thing you can do.
Perhaps we need to change our idea of what it means to be the best.
Have you ever been to a rock-climbing gym? You can usually pick out the beginners, because climbing quickly exhausts them and they end up using their hands like meat hooks to grasp the holds and pull themselves up the wall. After a bit of time, this changes. They figure out they’ll tire less easily if they use their legs more. So they develop their technique, pushing up with the legs more than pulling up with the arms.
After more time and effort and practice, new climbers can become really good at rock climbing. But no one gets good by using the same holds to climb the same bit of wall. Being really good at rock climbing means trying different techniques in different locations, dealing with weather and pain and the unexpected. It means being adaptable. Being a great rock climber is about adjusting for the environment, and continually seeking out the challenge of foreign rocks and new climbs. A climber who scales El Capitan 20 times will be incredibly efficient at climbing that one rock face—might even become a climbing guide—but will not be able to get up a new mountain with equal speed.
Efficiency is great in an unchanging environment, but to expect an environment to remain static is unrealistic. Environments change all the time. When workplaces value efficiency in a changing environment, they become fragile. Inefficiency, like a genetic mutation, can allow for serendipitous discovery. Sure, it may produce the same mistakes as before, but if the environment is different, they might actually work now.
Don’t be afraid of a challenge. Don’t be afraid of not being the best. When you routinely put yourself in situations where you aren’t the most skilled, you learn, you grow, and eventually, you adapt. You build your repertoire of traits and talents, so when change hits you have a wide array of skills. This flexibility can also give you the confidence to seek change. The mammal could explore and find new opportunities, but that bird was never going to leave the trees.
Why did Homo sapiens diverge from the rest of the animal kingdom and go on to dominate the earth? Communication? Cooperation? According to best-selling author Yuval Noah Harari, that barely scratches the surface.
Yuval Noah Harari’s Sapiens is one of those uniquely breathtaking books that comes along but rarely. It’s broad, but scientific. It’s written for a popular audience, but never feels dumbed down. It’s new and fresh, but not based on any new primary research. Sapiens is pure synthesis.
Readers will easily recognize the influence of Jared Diamond, author of Guns, Germs, and Steel, The Third Chimpanzee, and other similarly broad-yet-scientific works with vast synthesis and explanatory power. It’s not surprising, then, that Harari, a history professor at the Hebrew University of Jerusalem, has noted Diamond’s contributions to his thinking. Harari says:
It [Guns, Germs, and Steel] made me realize that you can ask the biggest questions about history and try to give them scientific answers. But in order to do so, you have to give up the most cherished tools of historians. I was taught that if you’re going to study something, you must understand it deeply and be familiar with primary sources. But if you write a history of the whole world you can’t do this. That’s the trade-off.
Harari sought to understand the history of humankind’s domination of the earth and its development of complex modern societies. He applies ideas from evolutionary theory, forensic anthropology, genetics, and the basic tools of the historian to generate a new conception of our past: humankind’s success was due to our ability to create and sustain grand, collaborative myths.
To make the narrative more palatable and sensible, we must take a different perspective. Calling us humans keeps us too close to the story to have an accurate view. We’re not as unique as we would like to believe. In fact, we’re just another animal. We are Homo sapiens. Because of this, our history can be described just like that of any other species. Harari labels us like any other species, calling us “Sapiens” so we can depersonalize things and allow the author the room he needs to make some bold statements about the history of humanity. Our successes, failures, flaws and credits are part of the makeup of the Sapiens.
Sapiens existed long before there was recorded history. Biological history is a much longer stretch, beginning millions of years before the evolution of any forbears we can identify. When our earliest known ancestors formed, they were not at the top of the food chain. Rather, they were engaged in an epic battle of trench warfare with the other organisms that shared their habitat.
— Yuval Noah Harari, Sapiens
These archaic humans loved, played, formed close friendships and competed for status and power, but so did chimpanzees, baboons, and elephants. There was nothing special about humans. Nobody, least of all humans themselves, had any inkling their descendants would one day walk on the moon, split the atom, fathom the genetic code and write history books. The most important thing to know about prehistoric humans is that they were insignificant animals with no more impact on their environment than gorillas, fireflies or jellyfish.
For the same reason that our kids can’t imagine a world without Google, Amazon and iPhones, we can’t imagine a world in which have not been a privileged species right from the start. Yet we were just one species of smart, social ape trying to survive in the wild. We had cousins: Homo neanderthalensis, Homo erectus, Homo rudolfensis, and others, both our progenitors and our contemporaries, all considered human and with similar traits. If chimps and bonobos were our second cousins, these were our first cousins.
Eventually, things changed. About 70,000 or so years ago, our DNA showed a mutation (Harari claims we don’t know quite why) which allowed us to make a leap that no other species, human or otherwise, was able to make. We began to cooperate flexibly, in large groups, with an extremely complex and versatile language. If there is a secret to our success—and remember, success in nature is survival—It was that our brains developed to communicate.
Welcome to the Cognitive Revolution
Our newfound capacity for language allowed us to develop abilities that couldn’t be found among our cousins, or in any other species from ants to whales.
First, we could give detailed explanations of events that had transpired. We weren’t talking mental models or even gravity. At first, we were probably talking about things for survival. Food. Water. Shelter. It’s possible to imagine making a statement something like this: “I saw a large lion in the forest three days back, with three companions, near the closest tree to the left bank of the river and I think, but am not totally sure, they were hunting us. Why don’t we ask for help from a neighboring tribe, so we don’t all end up as lion meat?”
Second, and maybe more importantly, we could also gossip about each other. Before religion, gossip created a social, even environmental pressure to conform to certain norms. Gossip allowed control of the individual for the aid of the group. It wouldn’t take much effort to imagine someone saying, “I noticed Frank and Steve have not contributed to the hunt in about three weeks. They are not holding up their end of the bargain, and I don’t think we should include them in distributing the proceeds of our next major slaughter.”
Harari’s insight is that while the abilities to communicate about necessities and to pressure people to conform to social norms were certainly pluses, they were not the great leap. Surprisingly, it’s not our shared language or even our ability to dominate other species that defines us but rather, our shared fictions. The exponential leap happened because we could talk about things that were not real. Harari writes:
As far as we know, only Sapiens can talk about entire kinds of entities that they have never seen, touched, or smelled. Legends, myths, gods, and religions appeared for the first time with the Cognitive Revolution. Many animals and human species could previously say, “Careful! A lion!” Thanks to the Cognitive Revolution, Homo sapiens acquired the ability to say, “The lion is the guardian spirit of our tribe.” This ability to speak about fictions is the most unique feature of Sapiens language…. You could never convince a monkey to give you a banana by promising him limitless bananas after death in monkey heaven.
Predictably, Harari mentions religion as one of the important fictions. But just as important are fictions like the limited liability corporation; the nation-state; the concept of human rights, inalienable from birth; and even money itself.
Shared beliefs allow us to do the thing that other species cannot. Because we believe, we can cooperate effectively in large groups toward larger aims. Sure, other animals cooperate. Ants and bees work in large groups with close relatives but in a very rigid manner. Changes in the environment, as we are seeing today, put the rigidity under strain. Apes and wolves cooperate as well, and with more flexibility than ants. But they can’t scale.
If wild animals could have organized in large numbers, you might not be reading this. Our success is intimately linked to scale. In many systems and in all species but ours, as far as we know, there are hard limits to the number of individuals that can cooperate in groups in a flexible way. As Harari puts it in the quotation at the beginning of this post, “Sapiens can cooperate in extremely flexible ways with countless numbers of strangers. That’s why Sapiens rule the world, whereas ants eat our leftovers and chimps are locked up in zoos and research laboratories.”
Sapiens diverged when they—or I should say we—hit on the ability of a collective myth to advance us beyond what we could do individually. As long as we shared some beliefs we could work toward something larger than ourselves—itself a shared fiction. With this in mind, there was almost no limit to the number of cooperating, believing individuals who could belong to a belief-group.
With that, it becomes easier to understand why we see different results from communication in human culture than in whale culture, or dolphin culture, or bonobo culture: a shared trust in something outside of ourselves, something larger. And the result can be extreme, lollapalooza even, when a lot of key things converge in one direction, from a combination of critical elements.
Any large-scale human cooperation—whether a modern state, a medieval church, an ancient city, or an archaic tribe—is rooted in common myths that exist only in people’s collective imagination. Churches are rooted in common religious myths. Two Catholics who have never met can nevertheless go together on crusade or pool funds to build a hospital because they both believe God was incarnated in human flesh and allowed Himself to be crucified to redeem our sins. States are rooted in common national myths. Two Serbs who have never met might risk their lives to save one another because both believe in the existence of the Serbian nation, the Serbian homeland and the Serbian flag. Judicial systems are rooted in common legal myths. Two lawyers who have never met can nevertheless combine efforts to defend a complete stranger because they both believe in the existence of laws, justice, human rights, and money paid out in fees.
Not only do we believe them individually, but we believe them collectively.
Shared fictions aren’t necessarily lies. Shared fictions can create literal truths. For example, if I trust that you believe in money as much as I do, we can use it as an exchange of value. Yet just as you can’t get a chimpanzee to forgo a banana today for infinite bananas in heaven, you also can’t get him to accept three apples today with the idea that if he invests them wisely in a chimp business, he’ll get six bananas from it in five years—no matter how many compound interest tables you show him. This type of collaborative and complex fiction is uniquely human, and capitalism is as much an imagined reality as religion.
Once you start to see the world as a collection of shared fictions, it never looks the same again.
This leads to the extremely interesting conclusion that comprises the bulk of Harari’s great work: If we collectively decide to alter the myths, we can relatively quickly and dramatically alter behavior.
For instance, we can decide slavery, one of the oldest institutions in human history, is no longer acceptable. We can declare monarchy an outdated form of governance. We can decide women should have the right to as much power as men, reversing the pattern of history. We can also decide all Sapiens must follow the same religious text and devote ourselves to slaughtering the resisters.
There is no parallel in other species for these quick, large-scale shifts. General behavior patterns in dogs or fish or ants change due to a change in environment, or to broad genetic evolution over a period of time. Lions will likely never sign a Declaration of Lion Rights and suddenly abolish the idea of an alpha male lion. Their hierarchies are rigid, primal even.
But humans can collectively change the narrative over a short span of time, and begin acting very differently with the same DNA and the same set of physical circumstances. If we all believe in Bitcoin, it becomes real for the same reason that gold becomes real.
Thus, we can conclude that Harari’s Cognitive Revolution is what happens when we decide that, while biology dictates what’s physically possible, we as a species decide norms. This is where biology enables and culture forbids. “The Cognitive Revolution is accordingly the point when history declared its independence from biology,” Harari writes. These ever-shifting alliances, beliefs, myths—ultimately, cultures—define what we call human history.
A thorough reading of Sapiens is recommended to understand where Harari takes this idea, from the earliest humans to who we are today.
 It was only when Sapiens acquired weapons, fire, and most importantly a way to communicate so as to share and build knowledge, that we had the asymmetric weaponry necessary to step out of the trenches and dominate, at least for now, the organisms we co-exist with.
 It’s unknown what role ego played, but we can assume people were not asking, “Oh, does this headdress make me look fat?”
 Ants can cooperate in great numbers with their relatives, but only based on simple algorithms. Charlie Munger has mentioned in The Psychology of Human Misjudgment that ants’ rules are so simplistic that if a group of ants starts walking in a circle, their “follow-the-leader” algorithm can cause them to literally march until their collective death.
We can learn valuable lessons from the life of Samuel Andrews. Haven’t ever heard of him? There’s a reason. He was John D. Rockefeller’s right-hand man, and stood to become one of the world’s richest men. But then something got in the way.
There is an important lesson to be learned from the story of Samuel Andrews, as told by biographer Ron Chernow in Titan: The Life of John D. Rockefeller.
John D. Rockefeller learned to clean oil from Sam Andrews. Andrews was the ideal partner for Rockefeller. While he lacked business sense, he had mechanical knowledge that Rockefeller didn’t. The quality of kerosene that Andrews was able to produce, and the efficiency of his process, rendered him indispensable—until something got into the way. But before we get to that, a bit of history.
It was Rockefeller himself who propositioned Andrews to go into business in the first place.
“Sam,” he said, “we are prospering. We have a future before us, a big future. But I don’t like Jim Clark and his habits. He is an immoral man in more ways than one. He gambles in oil. I don’t want this business to be associated with a gambler. Suppose I take them up the next time they threaten a dissolution. Suppose I succeed in buying them out. Will you come in with me?”
Andrews agreed and they shook hands on the deal.
Only a few weeks later Rockefeller quarreled with Clark. “If that’s the way you want to do business we’d better dissolve, and let you run your own affairs to suit yourself,” Clark warned. Rockefeller moved swiftly.
Rockefeller met with his partners and stated publicly that he wished to dissolve the partnership. The two sides walked away after the meeting with contrasting feelings. The Clarks imagined they had cowed the young whippersnapper, while Rockefeller raced to the office of the Cleveland Leader to place a notice dissolving the partnership.
The next morning the Clarks were stunned to see the notice. The Clarks failed to realize that Rockefeller had Andrews on his side. As per the partnership agreement, the business went up for auction.
Ron Chernow describes the situation thus:
Even as a young man, Rockefeller was extremely composed in a crisis. In this respect, he was a natural leader: the more agitated others became, the calmer he grew. It was an index of his matchless confidence that when the auction occurred, the Clarks brought a lawyer while Rockefeller represented himself. “I thought that I could take care of so simple a transaction,” he boasted. With the Clarks’ lawyer acting as auctioneer, the bidding began at $500 and quickly rose to a few thousand dollars, then inched up slowly to about $50,000—already more than Rockefeller thought the refining business worth.
Since this was such a critical and defining moment in Rockefeller’s career, we can read his own words:
Finally it advanced to $60,000, and by slow stages to $70,000, and I almost feared for my ability to buy the business and have the money to pay for it. At last the other side bid $72,000. Without hesitation I said $72,500. Mr. Clark then said: “I’ll go no higher, John; the business is yours.” “Shall I give you a check for it now?” I suggested. “No,” Mr. Clark said, “I’m glad to trust you for it; settle at your convenience.”
At age 25 he and Sam Andrews controlled Cleveland’s largest refinery. No sooner had the ink dried than they took up a metagame strategy, one of rapid expansion, that he knew was diametrically opposed to how the Clarks would likely respond.
Refinery after refinery came under their control. From the start, Rockefeller used his business sense and relied on Sam Andrews for technical advice. Rockefeller held Andrews in esteem until Ambrose McGregor was named superintendent of the Standard Oil refineries in Cleveland. McGregor demonstrated superior ability. Andrews was shown to be less capable. His ego took a beating.
One day in 1878, Andrews snapped at Rockefeller, “I wish I was out of this business.”
Rockefeller remained calm and called his bluff, replying, “Sam, you don’t seem to have faith in the way this company is operating. What will you take for your holdings?”
“I will take one million dollars,” Andrews shot back.
“Let me have an option on it for twenty-four hours,” said Rockefeller, “and we will discuss it tomorrow.”
The next morning when Andrews arrived, Rockefeller had a check made out for one million dollars.
While he appeared confident, Rockefeller was petrified at the thought of Andrew’s holdings hitting the open market and depressing the stock. Andrews thought he had bested Rockefeller. However, when Rockefeller sold the shares to William H. Vanderbilt for a quick $300,000 profit, Andrews changed his mind, voicing his displeasure to Rockefeller.
Rockefeller, feeling some sense of loyalty to the man who had helped him build and empire and quickly fallen out of favor, offered back the stock for the same price at which he had sold it.
Feeling slighted, his ego bruised, Andrews spurned the offer. This decision kept him from becoming one of America’s richest men. The very same stock would have been worth $900 million by the early 1930s.
Later Rockefeller would say of Andrews, “He was ignorant, conceited, lost his head…governed by the same wicked sort of prejudice accompanying the egotism so characteristic of that type of ignorant Englishman.”
There is a little Sam Andrews in all of us. The lesson to walk away with is that temperament matters. A lot.
The ability to keep your head when others are losing theirs is a superpower. The world doesn’t always work the way you want to it. People will slight you. You’ll get fired. You’ll make mistakes. People who are smarter than you will compete for your job. And how you respond to all of this will make all the difference.
Rockefeller gained an advantage by keeping his head while others lost theirs. In fact, the higher the stakes, the cooler he was said to become. Andrews, on the other hand, couldn’t keep his head. As a result, a blow to his ego prevented him from being one of the richest men in the world.
Source: Chernow, Ron. Titan: The Life of John D. Rockefeller. New York: Knopf Doubleday, 2007