On this episode of the Knowledge Project, I chat with Patrick Collison, co-founder and CEO of the leading online payment processing company, Stripe. If you’ve purchased anything online recently, there’s a good chance that Stripe facilitated the transaction.
What is now an organization with over a thousand employees and handling billions of dollars of online purchases every year, began as a small side experiment while Patrick and his brother John were going to college.
During our conversation, Patrick shares the details of their unlikely journey and some of the hard-earned wisdom he picked up along the way. I hope you have something handy to write with because the nuggets per minute in this episode are off the charts. Patrick was so open and generous with his responses that I’m really excited for you to hear what he has to say.
Here are just a few of the things we cover:
The biggest (and most valuable) mistakes Patrick made in the early days of Stripe and how they helped him get better
The characteristics that Patrick looks for in a new hire to fit and contribute to the Stripe company culture
What compelled he and his brother to move forward with the early concept of Stripe, even though on paper it was doomed to fail from the start
The gaps Patrick saw in the market that dozens of other processing companies were missing — and how he capitalized on them
The lessons Patrick learned from scaling Stripe from two employees (he and his brother) to nearly 1,000 today
How he evaluates the upsides and potential dangers of speculative positions within the company
How his Irish upbringing influenced his ability to argue and disagree without taking offense (and how we can all be a little more “Irish”)
The power of finding the right peer group in your social and professional circles and how impactful and influential it can be in determining where you end up.
The 4 ways Patrick has modified his decision-making process over the last 5 years and how it’s helped him develop as a person and as a business leader (this part alone is worth the listen)
Patrick’s unique approach to books and how he chooses what he’s going to spend his time reading
…life in Silicon Valley, Baumol’s cost disease, and so, so much more.
Patrick truly is one of the warmest, humble and down to earth people I’ve had the pleasure to speak with and I thoroughly enjoyed our conversation together. I hope you will too!
Math has long been the language of science, engineering, and finance, but can math help you feel calm on a turbulent flight? Get a date? Make better decisions? Here are some heroic ways math shows up in our everyday life.
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Sounds intellectually sophisticated, doesn’t it? Other than sounding really smart at after-work cocktails, what could be the benefit of understanding where math and physics permeate your life?
Well, what if I told you that math and physics can help you make better decisions by aligning with how the world works? What if I told you that math can help you get a date? Help you solve problems? What if I told you that knowing the basics of math and physics can help make you less afraid and confused? And, perhaps most important, they can help make life more beautiful. Seriously.
If you’ve ever been on a plane when turbulence has hit, you know how unnerving that can be. Most people get freaked out by it, and no matter how much we fly, most of us have a turbulence threshold. When the sides of the plane are shaking, noisily holding themselves together, and the people beside us are white with fear, hands clenched on their armrests, even the calmest of us will ponder the wisdom of jetting 38,000 feet above the ground in a metal tube moving at 1,000 km an hour.
Considering that most planes don’t fall from the sky on account of turbulence isn’t that comforting in the moment. Aren’t there always exceptions to the rule? But what if you understood why, or could explain the physics involved to the freaked-out person beside you? That might help.
In Storm in a Teacup: The Physics of Everyday Life,Helen Czerski spends a chapter describing the gas laws. Covering subjects from the making of popcorn to the deep dives of sperm whales, her amazingly accessible prose describes how the movement of gas is fundamental to the functioning of pretty much everything on earth, including our lungs. She reveals air to be not the static clear thing that we perceive when we bother to look, but rivers of molecules in constant collision, pushing and moving, giving us both storms and cloudless skies.
So when you appreciate air this way, as a continually flowing and changing collection of particles, turbulence is suddenly less scary. Planes are moving through a substance that is far from uniform. Of course, there are going to be pockets of more or less dense air molecules. Of course, they will have minor impacts on the plane as it moves through these slightly different pressure areas. Given that the movement of air can create hurricanes, it’s amazing that most flights are as smooth as they are.
You know what else is really scary? Approaching someone for a date or a job. Rejection sucks. It makes us feel awful, and therefore the threat of it often stops us from taking risks. You know the scene. You’re out at a bar with some friends. A group of potential dates is across the way. Do you risk the cringingly icky feeling of rejection and approach the person you find most attractive, or do you just throw out a lot of eye contact and hope that person approaches you?
Most men go with the former, as difficult as it is. Women will often opt for the latter. We could discuss social conditioning, with the roles that our culture expects each of us to follow. But this post is about math and physics, which actually turn out to be a lot better in providing guidance to optimize our chances of success in the intimidating bar situation.
In The Mathematics of Love,Hannah Fry explains the Gale-Shapley matching algorithm, which essentially proves that “If you put yourself out there, start at the top of the list, and work your way down, you’ll always end up with the best possible person who’ll have you. If you sit around and wait for people to talk to you, you’ll end up with the least bad person who approaches you. Regardless of the type of relationship you’re after, it pays to take the initiative.”
The math may be complicated, but the principle isn’t. Your chances of ending up with what you want — say, the guy with the amazing smile or that lab director job in California — dramatically increase if you make the first move. Fry says, “aim high, and aim frequently. The math says so.” Why argue with that?
Understanding more physics can also free us from the panic-inducing, heart-pounding fear that we are making the wrong decisions. Not because physics always points out the right decision, but because it can lead us away from this unproductive, subjective, binary thinking. How? By giving us the tools to ask better questions.
Consider this illuminating passage from Czerski:
We live in the middle of the timescales, and sometimes it’s hard to take the rest of time seriously. It’s not just the difference between now and then, it’s the vertigo you get when you think about what “now” actually is. It could be a millionth of a second, or a year. Your perspective is completely different when you’re looking at incredibly fast events or glacially slow ones. But the difference hasn’t got anything to do with how things are changing; it’s just a question of how long they take to get there. And where is “there”? It is equilibrium, a state of balance. Left to itself, nothing will ever shift from this final position because it has no reason to do so. At the end, there are no forces to move anything, because they’re all balanced. They physical world, all of it, only ever has one destination: equilibrium.
How can this change your decision-making process?
You might start to consider whether you are speeding up the goal of equilibrium (working with force) or trying to prevent equilibrium (working against force). One option isn’t necessarily worse than the other. But the second one is significantly more work.
So then you will understand how much effort is going to be required on your part. Love that house with the period Georgian windows? Great. But know that you will have to spend more money fighting to counteract the desire of the molecules on both sides of the window to achieve equilibrium in varying temperatures than you will if you go with the modern bungalow with the double-paned windows.
And finally, curiosity. Being curious about the world helps us find solutions to problems by bringing new knowledge to bear on old challenges. Math and physics are actually powerful tools for investigating the possibilities of what is out there.
Fry writes that “Mathematics is about abstracting away from reality, not replicating it. And it offers real value in the process. By allowing yourself to view the world from an abstract perspective, you create a language that is uniquely able to capture and describe the patterns and mechanisms that would otherwise remain hidden.”
Physics is very similar. Czerski says, “Seeing what makes the world tick changes your perspective. The world is a mosaic of physical patterns, and once you’re familiar with the basics, you start to see how those patterns fit together.”
Math and physics enhance your curiosity. These subjects allow us to dive into the unknown without being waylaid by charlatans or sidetracked by the impossible. They allow us to tackle the mysteries of life one at a time, opening up the possibilities of the universe.
As Czerski says, “Knowing about some basics bits of physics [and math!] turns the world into a toybox.” A toybox full of powerful and beautiful things.
Inertia is the force that holds the universe together. Literally. Without it, things would fall apart. It’s also what keeps us locked in destructive habits, and resistant to change.
“…death is the destination we all share. No one has ever escaped it. And that is as it should be, because death is very likely the single best invention of life. It’s life’s change agent; it clears out the old to make way for the new … Your time is limited, so don’t waste it living someone else’s life.”
— Steve Jobs
Inertia is the force that holds the universe together. Literally. Without it, matter would lack the electric forces necessary to form its current arrangement. Inertia is counteracted by the heat and kinetic energy produced by moving particles. Subtract it and everything cools to -459.67 degrees Fahrenheit (absolute zero temperature). Yet we know so little about inertia and how to leverage it in our daily lives.
The Basics
The German astronomer Johannes Kepler (1571–1630) coined the word “inertia.” The etymology of the term is telling. Kepler obtained it from the Latin for “unskillfulness, ignorance; inactivity or idleness.” True to its origin, inertia keeps us in bed on a lazy Sunday morning (we need to apply activation energy to overcome this state).
Inertia refers to resistance to change — in particular, resistance to changes in motion. Inertia may manifest in physical objects or in the minds of people.
We learn the principle of inertia early on in life. We all know that it takes a force to get something moving, to change its direction, or to stop it.
Our intuitive sense of how inertia works enables us to exercise a degree of control over the world around us. Learning to drive offers further lessons. Without external physical forces, a car would keep moving in a straight line in the same direction. It takes a force (energy) to get a car moving and overcome the inertia that kept it still in a parking space. Changing direction to round a corner or make a U-turn requires further energy. Inertia is why a car does not stop the moment the brakes are applied.
The heavier a vehicle is, the harder it is to overcome inertia and make it stop. A light bicycle stops with ease, while an eight-carriage passenger train needs a good mile to halt. Similarly, the faster we run, the longer it takes to stop. Running in a straight line is much easier than twisting through a crowded sidewalk, changing direction to dodge people.
Any object that can be rotated, such as a wheel, has rotational inertia. This tells us how hard it is to change the object’s speed around the axis. Rotational inertia depends on the mass of the object and its distribution relative to the axis.
Inertia is Newton’s first law of motion, a fundamental principle of physics. Newton summarized it this way: “The vis insita, or innate force of matter, is a power of resisting by which every body, as much as in it lies, endeavors to preserve its present state, whether it be of rest or of moving uniformly forward in a straight line.”
When developing his first law, Newton drew upon the work of Galileo Galilei. In a 1624 letter to Francesco Ingoli, Galileo outlined the principle of inertia:
I tell you that if natural bodies have it from Nature to be moved by any movement, this can only be a circular motion, nor is it possible that Nature has given to any of its integral bodies a propensity to be moved by straight motion. I have many confirmations of this proposition, but for the present one alone suffices, which is this.
I suppose the parts of the universe to be in the best arrangement so that none is out of its place, which is to say that Nature and God have perfectly arranged their structure… Therefore, if the parts of the world are well ordered, the straight motion is superfluous and not natural, and they can only have it when some body is forcibly removed from its natural place, to which it would then return to a straight line.
In 1786, Immanuel Kant elaborated further: “All change of matter has an external cause. (Every body remains in its state of rest or motion in the same direction and with the same velocity, if not compelled by an external cause to forsake this state.) … This mechanical law can only be called the law of inertia (lex inertiæ)….”
Now that we understand the principle, let’s look at some of the ways we can understand it better and apply it to our advantage.
Decision Making and Cognitive Inertia
We all experience cognitive inertia: the tendency to stick to existing ideas, beliefs, and habits even when they no longer serve us well. Few people are truly able to revise their opinions in light of disconfirmatory information. Instead, we succumb to confirmation bias and seek out verification of existing beliefs. It’s much easier to keep thinking what we’ve always been thinking than to reflect on the chance that we might be wrong and update our views. It takes work to overcome cognitive dissonance, just as it takes effort to stop a car or change its direction.
When the environment changes, clinging to old beliefs can be harmful or even fatal. Whether we fail to perceive the changes or fail to respond to them, the result is the same. Even when it’s obvious to others that we must change, it’s not obvious to us. It’s much easier to see something when you’re not directly involved. If I ask you how fast you’re moving right now, you’d likely say zero, but you’re moving 18,000 miles an hour around the sun. Perspective is everything, and the perspective that matters is the one that most closely lines up with reality.
“Sometimes you make up your mind about something without knowing why, and your decision persists by the power of inertia. Every year it gets harder to change.”
— Milan Kundera, The Unbearable Lightness of Being
Cognitive inertia is the reason that changing our habits can be difficult. The default is always the path of least resistance, which is easy to accept and harder to question. Consider your bank, for example. Perhaps you know that there are better options at other banks. Or you have had issues with your bank that took ages to get sorted. Yet very few people actually change their banks, and many of us stick with the account we first opened. After all, moving away from the status quo would require a lot of effort: researching alternatives, transferring balances, closing accounts, etc. And what if something goes wrong? Sounds risky. The switching costs are high, so we stick to the status quo.
Sometimes inertia helps us. After all, questioning everything would be exhausting. But in many cases, it is worthwhile to overcome inertia and set something in motion, or change direction, or halt it.
The important thing about inertia is that it is only the initial push that is difficult. After that, progress tends to be smoother. Ernest Hemingway had a trick for overcoming inertia in his writing. Knowing that getting started was always the hardest part, he chose to finish work each day at a point where he had momentum (rather than when he ran out of ideas). The next day, he could pick up from there. In A Moveable Feast, Hemingway explains:
I always worked until I had something done and I always stopped when I knew what was going to happen next. That way I could be sure of going on the next day.
Later on in the book, he describes another method, which was to write just one sentence:
Do not worry. You have always written before and you will write now. All you have to do is write one true sentence. Write the truest sentence that you know. So, finally I would write one true sentence and go on from there. It was easy then because there was always one true sentence that I knew or had seen or had heard someone say. If I started to write elaborately, or like someone introducing or presenting something, I found that I could cut that scrollwork or ornament out and throw it away and start with the first true simple declarative sentence I had written.
We can learn a lot from Hemingway’s approach to tackling inertia and apply it in areas beyond writing. As with physics, the momentum from getting started can carry us a long way. We just need to muster the required activation energy and get going.
Status Quo Bias: “When in Doubt, Do Nothing”
Cognitive inertia also manifests in the form of status quo bias. When making decisions, we are rarely rational. Faced with competing options and information, we often opt for the default because it’s easy. Doing something other than what we’re already doing requires mental energy that we would rather preserve. In many areas, this helps us avoid decision fatigue.
Many of us eat the same meals most of the time, wear similar outfits, and follow routines. This tendency usually serves us well. But the status quo is not necessarily the optimum solution. Indeed, it may be outright harmful or at least unhelpful if something has changed in the environment or we want to optimize our use of time.
“The great enemy of any attempt to change men’s habits is inertia. Civilization is limited by inertia.”
— Edward L. Bernays, Propaganda
In a paper entitled “If you like it, does it matter if it’s real?” Felipe De Brigard[1] offers a powerful illustration of status quo bias. One of the best-known thought experiments concerns Robert Nozick’s “experience machine.” Nozick asked us to imagine that scientists have created a virtual reality machine capable of simulating any pleasurable experience. We are offered the opportunity to plug ourselves in and live out the rest of our lives in permanent, but fake enjoyment. The experience machine would later inspire the Matrix film series. Presented with the thought experiment, most people balk and claim they would prefer reality. But what if we flip the narrative? De Brigard believed that we are opposed to the experience machine because it contradicts the status quo, the life we are accustomed to.
In an experiment, he asked participants to imagine themselves woken by the doorbell on a Saturday morning. A man in black, introducing himself as Mr. Smith, is at the door. He claims to have vital information. Mr. Smith explains that there has been an error and you are in fact connected to an experience machine. Everything you have lived through so far has been a simulation. He offers a choice: stay plugged in, or return to an unknown real life. Unsurprisingly, far fewer people wished to return to reality in the latter situation than wished to remain in it in the former. The aversive element is not the experience machine itself, but the departure from the status quo it represents.
Conclusion
Inertia is a pervasive, problematic force. It’s the pull that keeps us clinging to old ways and prevents us from trying new things. But as we have seen, it is also a necessary one. Without it, the universe would collapse. Inertia is what enables us to maintain patterns of functioning, maintain relationships, and get through the day without questioning everything. We can overcome inertia much like Hemingway did — by recognizing its influence and taking the necessary steps to create that all-important initial momentum.
Reversible vs. irreversible decisions. We often think that collecting as much information as possible will help us make the best decisions. Sometimes that’s true, but sometimes it hamstrings our progress. Other times it can be flat out dangerous.
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Many of the most successful people adopt simple, versatile decision-making heuristics to remove the need for deliberation in particular situations.
One heuristic might be defaulting to saying no, as Steve Jobs did. Or saying no to any decision that requires a calculator or computer, as Warren Buffett does. Or it might mean reasoning from first principles, as Elon Musk does. Jeff Bezos, the founder of Amazon.com, has another one we can add to our toolbox. He asks himself, is this a reversible or irreversible decision?
If a decision is reversible, we can make it fast and without perfect information. If a decision is irreversible, we had better slow down the decision-making process and ensure that we consider ample information and understand the problem as thoroughly as we can.
Bezos used this heuristic to make the decision to found Amazon. He recognized that if Amazon failed, he could return to his prior job. He would still have learned a lot and would not regret trying. The decision was reversible, so he took a risk. The heuristic served him well and continues to pay off when he makes decisions.
Decisions Amidst Uncertainty
Let’s say you decide to try a new restaurant after reading a review online. Having never been there before, you cannot know if the food will be good or if the atmosphere will be dreary. But you use the incomplete information from the review to make a decision, recognizing that it’s not a big deal if you don’t like the restaurant.
In other situations, the uncertainty is a little riskier. You might decide to take a particular job, not knowing what the company culture is like or how you will feel about the work after the honeymoon period ends.
Reversible decisions can be made fast and without obsessing over finding complete information. We can be prepared to extract wisdom from the experience with little cost if the decision doesn’t work out. Frequently, it’s not worth the time and energy required to gather more information and look for flawless answers. Although your research might make your decision 5% better, you might miss an opportunity.
Reversible decisions are not an excuse to act reckless or be ill-informed, but is rather a belief that we should adapt the frameworks of our decisions to the types of decisions we are making. Reversible decisions don’t need to be made the same way as irreversible decisions.
The ability to make decisions fast is a competitive advantage. One major advantage that start-ups have is that they can move with velocity, whereas established incumbents typically move with speed. The difference between the two is meaningful and often means the difference between success and failure.
Speed is measured as distance over time. If we’re headed from New York to LA on an airplane and we take off from JFK and circle around New York for three hours, we’re moving with a lot of speed, but we’re not getting anywhere. Speed doesn’t care if you are moving toward your goals or not. Velocity, on the other hand, measures displacement over time. To have velocity, you need to be moving toward your goal.
This heuristic explains why start-ups making quick decisions have an advantage over incumbents. That advantage is magnified by environmental factors, such as the pace of change. The faster the pace of environmental change, the more an advantage will accrue to people making quick decisions because those people can learn faster.
Decisions provide us with data, which can then make our future decisions better. The faster we can cycle through the OODA loop, the better. This framework isn’t a one-off to apply to certain situations; it is a heuristic that needs to be an integral part of a decision-making toolkit.
With practice, we also get better at recognizing bad decisions and pivoting, rather than sticking with past choices due to the sunk costs fallacy. Equally important, we can stop viewing mistakes or small failures as disastrous and view them as pure information which will inform future decisions.
“A good plan, violently executed now, is better than a perfect plan next week.”
— General George Patton
Bezos compares decisions to doors. Reversible decisions are doors that open both ways. Irreversible decisions are doors that allow passage in only one direction; if you walk through, you are stuck there. Most decisions are the former and can be reversed (even though we can never recover the invested time and resources). Going through a reversible door gives us information: we know what’s on the other side.
Some decisions are consequential and irreversible or nearly irreversible – one-way doors – and these decisions must be made methodically, carefully, slowly, with great deliberation and consultation. If you walk through and don’t like what you see on the other side, you can’t get back to where you were before. We can call these Type 1 decisions. But most decisions aren’t like that – they are changeable, reversible – they’re two-way doors. If you’ve made a suboptimal Type 2 decision, you don’t have to live with the consequences for that long. You can reopen the door and go back through. Type 2 decisions can and should be made quickly by high judgment individuals or small groups.
As organizations get larger, there seems to be a tendency to use the heavy-weight Type 1 decision-making process on most decisions, including many Type 2 decisions. The end result of this is slowness, unthoughtful risk aversion, failure to experiment sufficiently, and consequently diminished invention. We’ll have to figure out how to fight that tendency.
Bezos gives the example of the launch of one-hour delivery to those willing to pay extra. This service launched less than four months after the idea was first developed. In 111 days, the team “built a customer-facing app, secured a location for an urban warehouse, determined which 25,000 items to sell, got those items stocked, recruited and onboarded new staff, tested, iterated, designed new software for internal use – both a warehouse management system and a driver-facing app – and launched in time for the holidays.”
As further guidance, Bezos considers 70% certainty to be the cut-off point where it is appropriate to make a decision. That means acting once we have 70% of the required information, instead of waiting longer. Making a decision at 70% certainty and then course-correcting is a lot more effective than waiting for 90% certainty.
In Blink: The Power of Thinking Without Thinking, Malcolm Gladwell explains why decision-making under uncertainty can be so effective. We usually assume that more information leads to better decisions — if a doctor proposes additional tests, we tend to believe they will lead to a better outcome. Gladwell disagrees: “In fact, you need to know very little to find the underlying signature of a complex phenomenon. All you need is evidence of the ECG, blood pressure, fluid in the lungs, and an unstable angina. That’s a radical statement.”
In medicine, as in many areas, more information does not necessarily ensure improved outcomes. To illustrate this, Gladwell gives the example of a man arriving at a hospital with intermittent chest pains. His vital signs show no risk factors, yet his lifestyle does and he had heart surgery two years earlier. If a doctor looks at all the available information, it may seem that the man needs admitting to the hospital. But the additional factors, beyond the vital signs, are not important in the short term. In the long run, he is at serious risk of developing heart disease. Gladwell writes,
… the role of those other factors is so small in determining what is happening to the man right now that an accurate diagnosis can be made without them. In fact, … that extra information is more than useless. It’s harmful. It confuses the issues. What screws up doctors when they are trying to predict heart attacks is that they take too much information into account.
We can all learn from Bezos’s approach, which has helped him to build an enormous company while retaining the tempo of a start-up. Bezos uses his heuristic to fight the stasis that sets in within many large organizations. It is about being effective, not about following the norm of slow decisions.
Once you understand that reversible decisions are in fact reversible you can start to see them as opportunities to increase the pace of your learning. At a corporate level, allowing employees to make and learn from reversible decisions helps you move at the pace of a start-up. After all, if someone is moving with speed, you’re going to pass them when you move with velocity.
In this interview, Barbara Oakley, 8-time author and creator of Learning to Learn, an online course with over a million enrolled students, shares the science and strategies to learn more quickly, overcome procrastination and get better at practically anything.
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Just when I start to think I’m using my time well and getting a lot done in my life, I meet someone like Barbara Oakley.
Barbara is a true polymath. She was a captain in the U.S. Army, a Russian translator on Soviet trawlers, a radio operator in the South Pole, an engineer, university professor, researcher and the author of 8 books.
Oh, and she is also the creator and instructor of Learning to Learn, the most popular Massive Open Online Course (MOOC) ever(!), with over one million enrolled students.
In this fascinating interview, we cover many aspects of learning, including how to make it stick so we remember more and forget less, how to be more efficient so we learn more quickly, and how to remove that barriers that get in the way of effective learning.
Specifically, Barbara covers:
How she changed her brain from hating math and science to loving it so much she now teaches engineering to college students
What neuroscience can tell us about how to learn more effectively
The two modes of your brain and how that impacts what and how you learn
Why backing off can sometimes be the best thing you can do when learning something new
How to “chunk” your learning so new knowledge is woven into prior knowledge making it easily accessible
The best ways to develop new patterns of learning in our brains
How to practice a skill so you can blast through plateaus and improve more quickly
Her favorite tactic for dealing with procrastination so you can spend more time learning
The activities she recommends that rapidly increase neural connections like fertilizer on the brain
Whether memorization has a place in learning anymore, or simply a barrier to true understanding
The truth about “learning types” and how identifying as a visual or auditory learner might be setting yourself up for failure.
…and a whole lot more.
If you want to be the most efficient learner you can be, and have more fun doing it, you won’t want to miss this discussion.
I’ve been going to the Berkshire Hathaway annual shareholders meeting almost yearly since 2008. My routine might be familiar to many – maybe uncomfortably so — and yet that routine is part of the experience.
After missing the meeting one year because of a cancelled Friday flight, I decided to start adding a bigger margin of safety and arriving on Thursday. If the flight is on time, it gives me two days to hang out before Saturday’s meeting, and I put that time to good use. Usually the meals leading up to the meeting are filled with friends, FS readers, and business partners.
When the big day finally arrives, I get up as early as my friends allow and drag everyone to the meeting, waiting in line at the CenturyLink Center’s south entrance to get a good seat. The crowd at the door is full of hedge fund managers, teachers, small investors, technology entrepreneurs, college students, people from all over — Buffett and Munger junkies all. It’s a motley crew, to say the least.
As a group, we’ve all got some peculiar wiring. More than once, we’ve sat out there in the rain, more or less oblivious to the bad weather, as we discussed such topics as first-conclusion bias, insurance float, the intricacies of goodwill accounting, the merits of the latest acquisition, and the future of discount furniture retailing.
As the meeting gets started, I listen as intently as I can, but like most people in the audience, I find myself drifting from time to time. The bland questions seem to repeat year after year and offer the same predictable answers as the year before. Fortunately, the questions have improved since Warren changed the meeting format by inviting analysts and reporters.
So sleepy or not, I listen, I write down notes, I laugh, I rummage around the Convention area and eat Dilly Bars and See’s Candy, I return to the meeting and learn some more. Write, eat, write, whisper, laugh, write, whisper, laugh, write. At some point, the day is up and it feels like we’ve barely scratched the surface. What about last year’s unusually high amortization charge?
After the meeting, it’s time for a drink at the hotel across the street. All I want to do is take a nap, but that’s not what I’m here to do. I try to meet with one particular person, but I see someone else, and of course he’s got a friend in tow. Then I see an employee from Berkshire whom I want to ask a question, so I ditch my friends for a minute. Then I see the professor I met that one year. Then I see… This goes on for a few hours, until dinnertime.
Left to right: Ted Seides, Shane Parrish, Brent Beshore, Eric Jorgenson, And Patrick O’shaughnessy
Dinner, of course, is simply more of this. More friends; more talking about business, investing, learning, and mental models; more catching up. On Sunday, I get up early again and go to another breakfast, or perhaps a brunch meeting. I meet up with more old friends, more new acquaintances.
The Berkshire Hathaway annual meeting is an excuse to gorge — not just on Dilly Bars, See’s Candy, and steak, which I wholeheartedly consume, but also on friends, conversation, and learning. The whole experience is intensely stimulating, in the mildly stressful “these people are a lot smarter than me; I really need to read more” kind of way.
More important, the annual meeting offers a reminder of what matters. The world we live in is full of 24/7 noise — full of people who are trying to tell us to learn about the new and novel, people telling us we can get something for nothing, people trying to tell us the unknowable, people who won’t do the work. When you’re living in the moment, it’s hard to see that you’re in this system. It’s only when you step back that you realize that your mind has become cluttered and you’ve lost a sense of what’s important and what’s meaningful.
Omaha is a reminder of what’s important in relationships. The local residents are enormously kind and tolerant of over 50,000 people swooping in for a weekend. They are so kind, in fact, that I call them honorary Canadians. The people who come to the meeting tend to be part of a unique subset of society. While they might be bankers, teachers, businesspeople, or even unemployed, they share the same values of delayed gratification, integrity, and generosity. They share the same desire for learning. Everyone is happy. What you won’t find in Omaha are complainers, people trying to scare you, or people seeking to get rich overnight. In essence, you find yourself surrounded by the people you want to become.
Guy Spier and Shane Parrish
When you’re listening to Warren and Charlie talk, the noise of the unimportant vanishes. In its place, you find the same topics year after year. The same phrases. The same patterns. The same predictable answers. Even the same basic eating habits. So why go if the answers are always the same? After all, I’ve been attending for nearly 10 years; by now, haven’t I heard most of what Warren and Charlie have to say?
The point is that the answers stay the same. Warren and Charlie talk about the same invariant general principles every single year without fail. What I’ve learned most from Warren and Charlie over the years is the beauty of what doesn’t change. When you learn something that doesn’t change, you can step off the treadmill of keeping up and start to compound your knowledge. While this compounding may slow you down at first, it offers exponential returns. After all, what better investment can you make than learning, with deep fluency, timeless principles like second-order thinking, something that applies to a wide variety of situations and is likely to remain constant?
You can see in real time how Warren and Charlie adapt their timeless principles to the reality of the day. There is no wishful thinking, just a lens into the world. By applying timeless concepts to whatever is topical, they show a deep, multi-layered understanding of what’s happening in the world. Implicit in all of this is how they work with the world rather than against it.
And Warren and Charlie are not the only ones I learn from. I also learn from the hedge fund managers, teachers, small investors, technology entrepreneurs, and college students who are waiting outside the arena in the rain. I learn from the friends and acquaintances at the breakfasts, brunches, lunches, dinners, and cocktail hours. I learn from the Berkshire employees and the professors-I-met-that-one-year, and the guy who knows more about insurance than I’ll ever hope to know.
The world becomes clear after I leave Omaha. My sense of what’s important is renewed — what might have been the most urgent thing in the world on Thursday now seems to fade into the distance as unimportant. I make better decisions, I become a better person, and material concerns fall by the wayside. There is nothing missing. And because what’s important has been amplified, I’m better able to make the decisions I’ve been postponing. When I’ve been surrounded by so many people, my sense of the person I want to become improves.
I don’t go to Omaha looking for answers; I go for the pursuit. I go there to deepen my understanding of the key ideas that matter in work and life. It’s almost like changing your oil. As the year goes on, little bits get in your oil. At first, if you don’t change your oil often enough, your engine runs suboptimally. Eventually, however, if you still don’t change your oil, your engine seizes. Going to the meeting is my oil change.
Charlie has always called Berkshire a “didactic” enterprise. For a while, I wasn’t sure what he was talking about. (I had to look up “didactic,” too.) But I get what he means now. The annual letter, the meeting — partially, these serve to inform the shareholders. But let’s be honest, it’s about more than that. Warren and Charlie don’t need to make such a production of the annual meeting. It’s a platform for the two Wise Men of Omaha to tell us the way it is and show us how it could be. (The maddening thing is that they’re usually right.)
The Street in Omaha where we got our name.
And that’s the way many shareholders see it, too. Berkshire isn’t just a company that’s made us a great deal of money. And it hasn’t just provided a way to learn how to make more money. Berkshire is a philosophy of life — a philosophy of trust, a philosophy of lifelong learning. Mainly, a philosophy of rationality and independent thinking in a crowd.
Charlie likes to say that if he and Warren had stopped learning when they were young, Berkshire would be a shadow of its current self. And I realize that is the lesson I relearn every year in Omaha, among the chained-together meetings and the lack of sleep. We’re all trying to create positive outcomes and to do that in the right way, with humility, gratitude, and rational thought. We’re trying to grow.
Because what else would motivate a bunch of nutcases to fly 400 or 500 or 2,000 miles (or 2,004 kilometers) to eat candy and listen to a couple of old men talk about business?
After nine years, I still don’t quite know the answer. All I know is that I’m one of those nutcases. And I’ll keep coming back as long as Berkshire Hathaway will have me.
