Tag: Mistakes

[Episode #30] Company Culture, Collaboration and Competition: A Discussion With Margaret Heffernan

On this episode, I’m joined by speaker, international executive, and five-time author Margaret Heffernan (@M_Heffernan). We discuss how to get the most out of our people, creating a thriving culture of trust and collaboration, and how to prevent potentially devastating “willful blindness.”

As former CEO of five successful businesses, Margaret Heffernan has been on the front lines observing the very human tendencies (selective blindness, conflict avoidance, and self-sabotage to name a few) that cause managers and sometimes entire organizations to go astray.

She has since written five books and has spoken all over the world to warn, educate and instruct leaders to not only be aware of these tendencies, but how to weed them out of our companies, our business, and even our relationships.

In this conversation, we discuss many of the concepts she shares in her books, namely:

  • How to tap into the collective knowledge of your organization so problems are solved quickly, efficiently, and cooperatively.
  • The strange experiment Margaret ran to build “social capital” in one of her early businesses that transformed the way her employees treated and interacted with each other
  • How to build a culture that doesn’t create in-fighting and unhealthy competition within your organization, and how many companies today are missing the mark
  • One simple thing you can do as a leader to increase the buy-in, productivity and overall satisfaction of your team members (and it takes less than 30 seconds to do.)
  • The dangers of binary thinking and how Margaret catches herself from oversimplifying a situation.
  • Why arguing may be one of the purest forms of collaboration — and how to do it correctly.
  • How to identify the environment and context where you do your best work and how to best replicate it.
  • How “willful blindness” has caused catastrophic disasters in business, professional and personal relationships, and what we can do to avoid being another statistic
  • The wonderful advice Margaret gave to her kids when it came to choosing a career path

And much more.

If you interact with other human beings in any capacity, you need to hear what Margaret has to say.

Take a listen and let me know what you think!

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#ListenAndLearn

Transcript
An edited copy of this transcript is available to members of our learning community or for purchase separately ($7).

If you liked this, check out all the episodes of the knowledge project.

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Charlie Munger and the Pursuit of Worldly Wisdom

Charlie Munger, the billionaire business partner of Warren Buffett and major inspiration behind this site, is not only one of the best investors the world has witnessed, he’s also one of the best thinkers. A quick recap is in order.

Munger has illuminated timeless wisdom in the minds’ search algorithm, Academic Economics, stretch goals, mental models, the value of thinking backward and forward, problem-solving, partnerships, and inversion among others.

“What is elementary, worldly wisdom? Well, the first rule is that you can’t really know anything if you just remember isolated facts and try and bang ‘em back. If the facts don’t hang together on a latticework of theory, you don’t have them in a usable form.”

— Charlie Munger

He’s even offered two sets of book recommendations.

In his book, Charlie Munger: The Complete Investor, which has become my new go-to recommendation for people interested in an introduction to Munger’s thinking. Griffin lays out Munger’s path to worldly wisdom.

Munger has adopted an approach to business and life that he refers to as worldly wisdom. Munger believes that by using a range of different models from many different disciplines—psychology, history, mathematics, physics, philosophy, biology, and so on—a person can use the combined output of the synthesis to produce something that has more value than the sum of its parts. Robert Hagstrom wrote a wonderful book on worldly wisdom entitled Investing: The Last Liberal Art, in which he states that “each discipline entwines with, and in the process strengthens, every other. From each discipline the thoughtful person draws significant mental models, the key ideas that combine to produce a cohesive understanding. Those who cultivate this broad view are well on their way to achieving worldly wisdom.”

It is clear that Munger loves to learn. He actually has fun when he is learning, and that makes the worldly wisdom investing process enjoyable for him. This is important because many people do not find investing enjoyable, especially when compared to gambling, which science has shown can generate pleasure via chemicals (e.g., dopamine) even though it is an activity with a negative net present value. What Munger has done is created a system—worldly wisdom—that allows him to generate the same chemical rewards in an activity that has a positive net present value. When you learn something new, your brain gives itself a chemical reward, which motivates you to do the work necessary to be a successful investor. If you do this work and adopt a worldly wisdom mindset, Munger believes you will create an investing edge over other investors.

Munger used a latticework of mental models in developing his approach. Herbert Simon, in his autobiography, Models of My Life, captured the idea of a mental model when he said:

A large part of the difference between the experienced decision maker and the novice in these situations is not any particular intangible like “judgment” or “intuition.” If one could open the lid, so to speak, and see what was in the head of the experienced decision maker, one would find that he had at his disposal repertoires of possible actions; that he had checklists of things to think about before he acted; and that he had mechanisms in his mind to evoke these, and bring these to his conscious attention when the situations for decisions arose.

“You’ve got to have models in your head. And you’ve got to array your experience—both vicarious and direct—on this latticework of models.”

— Charlie Munger

Latticework

Munger carefully chose the latticework model, to convey the idea that things are interconnected. We need more than a deep understanding of one segment, we need a working knowledge of all of them and how they interact and link. This is conveyed by the Japanese proverb “The frog in a well knows nothing of the mighty ocean.”

In Charlie Munger: The Complete Investor, Griffin continues:

Understanding the worldly wisdom methodology is made easier if you see it applied in an example. To illustrate the method, Munger gave the example of a business that raises the price of its product and yet sells more of that product. This would appear to violate the rule of supply and demand as taught in economics. However, if one thinks about the discipline of psychology, one might conclude that the product is a Geffen good, which people desire more of at higher prices. Or one could conclude that low prices signal poor quality to buyers and that raising prices will result in more sales. Alternatively, you can look for bias caused by incentives and discover that what has actually happened in his example is that the seller has bribed the purchasing agents of the purchasers.

Munger described a situation in which this actually happens:

Suppose you’re the manager of a mutual fund, and you want to sell more. People commonly come to the following answer: You raise the commissions which, of course, reduces the number of units of real investments delivered to the ultimate buyer, so you’re increasing the price per unit of real investment that you’re selling the ultimate customer. And you’re using that extra commission to bribe the customer’s purchasing agent. You’re bribing the broker to betray his client and put the client’s money into the high-commission product.

While we can’t know everything, we can know the big ideas from multiple disciplines. We don’t want to be the frog. This is one way we can add value in the decision-making process and it allows for the effective use of what I call the Munger two-step, which is something we talk about at Re:Think Decision Making.

“Simply put,” Griffin writes, “Munger believes that people who think very broadly and understand many different models from many different disciplines make better decisions.”

In a 2003 speech as UCB Business School entitled Academic Economics — Strengths and Weaknesses, after Considering Interdisciplinary Needs, Munger said:

You’ve got a complex system and it spews out a lot of wonderful numbers that enable you to measure some factors. But there are other factors that are terribly important, [yet] there’s no precise numbering you can put to these factors. You know they’re important, but you don’t have the numbers. Well, practically (1) everybody overweighs the stuff that can be numbered, because it yields to the statistical techniques they’re taught in academia, and (2) doesn’t mix in the hard-to-measure stuff that may be more important. That is a mistake I’ve tried all my life to avoid, and I have no regrets for having done that.

Worldly Wise

Griffin continues:

In Munger’s view, it is better to be worldly wise than to spend lots of time working with a single model that is precisely wrong.

A multiple-model approach that is only approximately right will produce a far better outcome in anything that involves people or a social system. While making the case for a lattice of mental models approach (described here shortly), Robert Hagstrom pointed out that Munger is providing support for those who advocate for a wide-ranging liberal arts education.

Munger would be what the poet Archilochus calls a fox. The ancient Greeks said “The fox knows many things; the hedgehog one great thing.”

“The theory of modern education is that you need a general education before you specialize. And I think to some extent, before you’re going to be a great stock picker, you need some general education.”

— Charlie Munger

Commenting on Munger, former Microsoft CEO Bill Gates said, “(he) is truly the broadest thinker I have ever encountered.” Buffett added that Munger has “the best 30-second mind in the world. He goes from A to Z in one move. He sees the essence of everything before you even finish the sentence.”

How does Munger do this? That’s a question worth slowing down and thinking about.

“You have to realize the truth of biologist Julian Huxley’s idea that ‘Life is just one damn relatedness after another.’ So you must have the models, and you must see the relatedness and the effects from the relatedness.”

— Charlie Munger

Where do we get these ideas? We let history be our guide. If one way to ensure you make poor decisions is to use a small sample size, we can reason that we should seek out the biggest sample sizes we can.

What crosses most of history? Biology, Chemistry, Physics. And of course, throw in some Psychology so we can better understand how we are led astray.

Thinking

Griffin continues:

Munger’s breadth of knowledge is something that is naturally part of his character but also something that he intentionally cultivates. In his view, to know nothing about an important subject is to invite problems. Both Munger and Buffett set aside plenty of time each day to just think. Anyone reading the news is provided with constant reminders of the consequences of not thinking. Thinking is a surprisingly underrated activity. Researchers published a study in 2014 that revealed that approximately a quarter of women and two-thirds of men chose electric shocks over spending time alone with their own thoughts.

If you can’t be alone with your thoughts, you don’t deserve them. We try to run away from the pain of thinking. Instead, we turn to the instant gratification of Netflix.

Munger’s speeches and essays are filled with the thoughts of great people from the past and present from many different domains. Munger is also careful to set aside a lot of time in his schedule for reading. To say he loves books is an understatement. Buffett has said that Munger has read hundreds of biographies, as just one example. He is very purposeful in his approach to worldly wisdom, preferring not to fill his calendar with appointments and meetings.

When talking about how to get smarter, Buffett said: “You could hardly find a partnership in which two people settle on reading more hours of the day than in ours.” Adding, “Look, my job is essentially just corralling more and more and more facts and information, and occasionally seeing whether that leads to some action.”

This is where we go astray so easily. It’s easy to think about our own discipline, the one we live in on a daily basis. This comes naturally. However, it’s likely to lead to problems. We become the proverbial man with a hammer, “To the man with a hammer everything looks like a nail. If you only have one model you will fit whatever problem you face to the model you have.” It’s hard work to think. That’s why so few people seem to take this passage. But it should be hard, otherwise, it would be too easy.

“I believe in the discipline of mastering the best that other people have ever figured out. I don’t believe in just sitting down and trying to dream it all up yourself. Nobody’s that smart.”

— Charlie Munger

A Multidisciplinary Approach

The tagline for this website: Mastering the best of what other people have already figured out, comes from the Munger quote above.

Griffin continues:

It is critical for a person who desires to be wise to think broadly and learn from others. Munger has said many times that someone who is really smart but has devoted all of their time to being an expert in a narrow area may be dangerous to themselves and others. Examples of this include macroeconomists who study the economy but are disastrous when investing their own portfolios and marketing experts who may think that most all business problems can be solved through marketing. Financiers tend to think similarly about their own profession. Too many people believe that what they do at work is hard and what others do is easy.

The best approach is the multi-disciplinary one, Munger argues:

You may say, “My God, this is already getting way too tough.” But, fortunately, it isn’t that tough—because eighty or ninety important models will carry about 90 percent of the freight in making you a worldly wise person. And, of those, only a mere handful really carry very heavy freight.

“This reference to eighty or ninety important models” Griffin writes, “has caused people to ask Munger for a complete list of these important models.”

While Munger identified many models in the discipline of psychology in his famous “The Psychology of Human Misjudgment” speech and mentioned other models on an ad-hoc basis, he has never prepared a complete list covering all disciplines.

Munger believes that by learning to recognize certain dysfunctional decision-making processes, an investor can learn to make fewer mistakes. He also believes that no matter how hard someone works and learns, mistakes cannot be completely eliminated. The best one can hope for is to reduce their frequency and, hopefully, their magnitude.

Munger elaborates in a 1995 speech at Harvard University:

Man’s imperfect, limited-capacity brain easily drifts into working with what’s easily available to it. And the brain can’t use what it can’t remember or when it’s blocked from recognizing because it’s heavily influenced by one or more psychological tendencies bearing strongly on it … the deep structure of the human mind requires that the way to full scope competency of virtually any kind is to learn it all to fluency—like it or not.

In a 2007 speech at USC law school, Munger says:

I constantly see people rise in life who are not the smartest, sometimes not even the most diligent, but they are learning machines. They go to bed every night a little wiser than they were when they got up, and boy, does that help, particularly when you have a long run ahead of you. … So if civilization can progress only with an advanced method of invention, you can progress only when you learn the method of learning. Nothing has served me better in my long life than continuous learning. I went through life constantly practicing (because if you don’t practice it, you lose it) the multidisciplinary approach and I can’t tell you what that’s done for me. It’s made life more fun, it’s made me more constructive, it’s made me more helpful to others, and it’s made me enormously rich. You name it, that attitude really helps.

Back to Griffin, writing in Charlie Munger: The Complete Investor, who says:

In looking at a decision, Munger believes that it is wise to ask questions. Have dysfunctional decision-making heuristics from psychology caused an error? Are there approaches one can use to find those mistakes? Munger likes to use a model from algebra and invert problems to find a solution. Looking for models that can reveal and explain mistakes so one can accumulate worldly wisdom is actually lots of fun. It is like a puzzle to be solved.

A lattice approach is, in effect, a double-check on the investing process. But instead of just two checks, you are checking the result over and over. Munger believes that by going over your decision-making process and carefully using skills, ideas, and models from many disciplines, you can more consistently not be stupid. You will always make some bone-headed mistakes even if you’re careful, but his process is designed to decrease the probability of those mistakes.

To make sure he is taking advantage of as many models as possible, Munger likes checklists. At the 2002 Berkshire Hathaway annual meeting, Munger said:

“You need a different checklist and different mental models for different companies. I can never make it easy by saying, “Here are three things.” You have to derive it yourself to ingrain it in your head for the rest of your life.”

— Charlie Munger

Learning From Mistakes

An aspect of Munger’s approach is learning from your mistakes. I’ve made more than my fair share of them.

“I like people admitting they were complete stupid horses’ asses. I know I’ll perform better if I rub my nose in my mistakes. This is a wonderful trick to learn.”

— Charlie Munger

Griffin writes:

Munger has said repeatedly that he made more mistakes earlier in life than he is making now. One of his early mistakes was to own a company that made electrical transformers. He has also said that he has found himself in real estate ventures that would only be enjoyed by a masochist. He seems to have more tolerance for mistakes in real estate than other areas of business. The idea of building things as opposed to just trading stocks has a particular appeal to Munger.

Munger believes that one great way to avoid mistakes is to own a business that is simple to understand, given your education and experience. He pointed out: “Where you have complexity, by nature you can have fraud and mistakes.” This approach echoes the view of Buffett, who likes challenges that are the business equivalent of netting fish in a barrel.

Buffett has said that if you cannot explain why you failed after you have made a mistake, the business was too complex for you. In other words, Munger and Buffett like to understand why they made a mistake so they can learn from the experience. If you cannot understand the business, then you cannot determine what you did wrong. If you cannot determine what you did wrong, then you cannot learn. If you cannot learn, you will not know what you’re doing, which is the real cause of risk.

“Forgetting your mistakes is a terrible error if you’re trying to improve your cognition. Reality doesn’t remind you. Why not celebrate stupidities in both categories?”

— Charlie Munger

Griffin concludes:

Munger has chosen the word wisdom purposefully because he believes that mere knowledge, especially from only one domain, is not enough. To be wise, one must also have experience, common sense, and good judgment. How one actually applies these things in life is what makes a person wise.

Charlie Munger: The Complete Investor is about more than investing, it’s about the pursuit of wisdom across boundaries.

Shaun McNiff: Mistakes and the Creative Process

I came across this passage in Shaun McNiff’s Trust the Process: An Artist’s Guide to Letting Go that speaks to the tension between fear of making mistakes and the necessity of them in the creative process.

When asked for advice on painting, Claude Monet told people not to fear mistakes. The discipline of art requires constant experimentation, wherein errors are harbingers of original ideas because they introduce new directions for expression. The mistake is outside the intended course of action, and it may present something that we never saw before, something unexpected and contradictory, something that may be put to use.

Management, generally by its nature and incentive system, attempts to remove variability and thus mistakes. Yet mistakes are a necessary component of creativity.

Fear also plays an important role in the creative process and how we come up with creative insights.

 

Daniel Dennett: How to Make Mistakes

IntuitionPumps

In Intuition Pumps And Other Tools for Thinking, Daniel Dennett, one of the world’s leading philosophers offers a trove of mind-stretching thought experiments, which he calls “imagination-extenders and focus-holders” (intuition pumps). They allow us to “think reliably and even gracefully about really hard questions.”

The first intuition pump is on mistakes.

More specifically, how to make mistakes and the keys to good mistakes.

History Rhymes

The history of philosophy is in large measure the history of very smart people making very tempting mistakes, and if you don’t know the history, you are doomed to making the same darn mistakes all over again.

Learning

Mistakes are not just opportunities for learning; they are, in an important sense, the only opportunity for learning or making something truly new. Before there can be learning, there must be learners. There are only two non-miraculous ways for learners to come into existence: they must either evolve or be designed and built by learners that evolved. Biological evolution proceeds by a grand, inexorable process of trial and error — and without the errors the trials wouldn’t accomplish anything.

Evolution is the Enabling Process of Knowledge

Evolution is one of the central themes of this book, as all my books, for the simple reason that it is the central, enabling process not only of life but also of knowledge and learning and understanding. If you attempt to make sense of the world of ideas and meanings, free will and morality, art and science and even philosophy itself without a sound and quite detailed knowledge of evolution, you have one hand tied behind your back. … For evolution, which knows nothing, the steps into novelty are blindly taken by mutations, which are random copying “errors” in DNA.

The Key to Good Mistakes

The chief trick to making good mistakes is not to hide them — especially not from yourself. Instead of turning away in denial when you make a mistake, you should become a connoisseur of your own mistakes, turning them over in your mind as if they were works of art, which in a way they are. The fundamental reaction to any mistake ought to be this: “Well, I won’t do that again!” Natural selection doesn’t actually think the thought; it just wipes out the goofers before they can reproduce; natural selection won’t do that again, at least not as often. Animals that can learn—learn not to make that noise, touch that wire, eat that food—have something with a similar selective force in their brains. (B. F. Skinner and the behaviorists understood the need for this and called it “reinforcement” learning; that response is not reinforced and suffers “extinction.”) We human beings carry matters to a much more swift and efficient level. We can actually think the thought, reflecting on what we have just done: “Well, I won’t do that again!” And when we reflect, we confront directly the problem that must be solved by any mistake-maker: what, exactly, is that? What was it about what I just did that got me into all this trouble? The trick is to take advantage of the particular details of the mess you’ve made, so that your next attempt will be informed by it and not just another blind stab in the dark.

We have all heard the forlorn refrain “Well, it seemed like a good idea at the time!” This phrase has come to stand for the rueful reflection of an idiot, a sign of stupidity, but in fact we should appreciate it as a pillar of wisdom. Any being, any agent, who can truly say, “Well, it seemed like a good idea at the time!” is standing on the threshold of brilliance. We human beings pride ourselves on our intelligence, and one of its hall marks is that we can remember our previous thinking, and reflect on it—on how it seemed, on why it was tempting in the first place, and then about what went wrong.

[…]

So when you make a mistake, you should learn to take a deep breath, grit your teeth, and then examine your own recollections of the mistake as ruthlessly and as dispassionately as you can manage. It’s not easy. The natural human reaction to making a mistake is embarrassment and anger (we are never angrier than when we are angry at ourselves), and you have to work hard to overcome these emotional reactions. Try to acquire the weird practice of savoring your mistakes, delighting in uncovering the strange quirks that led you astray. Then, once you have sucked out all the goodness to be gained from having made them, you can cheerfully set them behind you, and go on to the next big opportunity. But that is not enough: you should actively seek out opportunities to make grand mistakes, just so you can then recover from them.

Natural Selection

Every organism on the earth dies sooner or later after one complicated life story or another. How on earth could natural selection see through the fog of all these details in order to figure out what positive factors to “reward” with offspring and what negative factors to “punish” with childless death? Can it really be that some of our ancestors’ siblings died childless because their eyelids were the wrong shape? If not, how could the process of natural selection explain why our eyelids came to have the excellent shapes they have? Part of the answer is familiar: following the old adage: “If it ain’t broke, don’t fix it,” leave almost all of your old, conservative design solutions in place and take your risks with a safety net in place. Natural selection automatically conserves whatever has worked up to now, and fearlessly explores innovations large and small; the large ones almost always lead immediately to death. A terrible waste, but nobody’s counting. Our eyelids were mostly designed by natural selection long before there were human beings or even primates or even mammals.

Card Tricks

Here is a technique that card magicians—at least the best of them—exploit with amazing results. (I don’t expect to incur the wrath of the magicians for revealing this trick to you, since this is not a particular trick but a deep general principle.) A good card magician knows many tricks depend on luck—they don’t always work, or even often work. There are some effects—they can hardly be called tricks—that might work only once in a thousand times! Here is what you do: You start by telling the audience you are going to perform a trick, and without telling them what trick you are doing, you go for the one-in-a-thousand effect. It almost never works, of course, so you glide seamlessly into a second try, for an effect that works about one time in a hundred, perhaps. When it too fails (as it almost always will) you slide into effect #3, which only works about one time in ten, so you’d better be ready with effect #4 which works half the time (let’s say), and if all else fails (and by this time, usually one of the earlier safety nets will have kept you out of this worst case), you have a failsafe effect, which won’t impress the crowd very much but at least it’s a surefire trick. In the course of a whole performance, you will be very unlucky indeed if you always have to rely on your final safety net, and whenever you achieve one of the higher-flying effects, the audience will be stupefied. “Impossible! How on earth could you have known that was my card?” Aha! You didn’t know, but you had a cute way of taking a hopeful stab in the dark that paid off. By hiding the “error” cases from view, you create a “miracle”.

Evolution Works The Same Way

Evolution works the same way: all the dumb mistakes tend to be invisible, so all we see is a stupendous string of triumphs. For instance, the vast majority — way over 90 percent — of all the creatures that have ever lived died childless, but not a single one of your ancestors suffered that fate. Talk about a line of charmed lives!

One big difference between the discipline of science and the discipline of stage magic is that while magicians conceal their false starts from the audience as best they can, in science you make your mistakes in public. You show them off so that everybody can learn from them. … It is not so much that our brains are bigger or more powerful, or even that we have the knack of reflecting on our own past errors, but that we share the benefits that our individual brains have won by their individual histories of trial and error.

I am amazed at how many really smart people don’t understand that you can make big mistakes in public and emerge none the worse for it.

We all know people, perhaps ourselves included, who will go to great lengths to avoid admitting they were wrong. But Dennett argues:

Actually, people love it when somebody admits to making a mistake. All kinds of people love pointing out mistakes. Generous-spirited people appreciate your giving them the opportunity to help, and acknowledging it when they succeed in helping you; mean-spirited people enjoy showing you up. Let them! Either way we all win.

Of course, in general, people do not enjoy correcting the stupid mistakes of others. You have to have something worth correcting, something original to be right or wrong about …

Bertrand Russell: On Avoiding Foolish Opinions

bertrand russell avoiding foolish opinion

We’d all like to avoid folly, wouldn’t we?

Avoiding stupidity is easier than seeking brilliance. And it doesn’t take a genius. Only a few simple ideas.

Philosopher Bertrand Russell (1872-1970) offers some advice, which will not keep us from all error but will help us navigate away from obvious error.

On Avoiding Foolish Opinions

Via The Basic Writings of Bertrand Russell:

If the matter is one that can be settled by observation, make the observation yourself. Aristotle could have avoided the mistake of thinking that women have fewer teeth than men, by the simple device of asking Mrs. Aristotle to keep her mouth open while he counted. He did not do so because he thought he knew. Thinking that you know when in fact you don’t is a fatal mistake, to which we are all prone. I believe myself that hedgehogs eat black beetles, because I have been told that they do; but if I were writing a book on the habits of hedgehogs, I should not commit myself until I had seen one enjoying this unappetizing diet. Aristotle, however, was less cautious. Ancient and medieval authors knew all about unicorns and salamanders; not one of them thought it necessary to avoid dogmatic statements about them because he had never seen one of them.

Many matters, however, are less easily brought to the test of experience. If, like most of mankind, you have passionate convictions on many such matters, there are ways in which you can make yourself aware of your own bias.

If an opinion contrary to your own makes you angry, that is a sign that you are subconsciously aware of having no good reason for thinking as you do. If some one maintains that two and two are five, or that Iceland is on the equator, you feel pity rather than anger, unless you know so little of arithmetic or geography that his opinion shakes your own contrary conviction. The most savage controversies are those about matters as to which there is no good evidence either way. Persecution is used in theology, not in arithmetic, because in arithmetic there is knowledge, but in theology there is only opinion. So whenever you find yourself getting angry about a difference of opinion, be on your guard; you will probably find, on examination, that your belief is going beyond what the evidence warrants.

A good way of ridding yourself of certain kinds of dogmatism is to become aware of opinions held in social circles different from your own. When I was young, I lived much outside my own country in France, Germany, Italy, and the United States. I found this very profitable in diminishing the intensity of insular prejudice. If you cannot travel, seek out people with whom you disagree, and read a newspaper belonging to a party that is not yours. If the people and the newspaper seem mad, perverse, and wicked, remind yourself that you seem so to them. In this opinion both parties may be right, but they cannot both be wrong. This reflection should generate a certain caution.

Becoming aware of foreign customs, however, does not always have a beneficial effect. In the seventeenth century, when the Manchus conquered China, it was the custom among the Chinese for the women to have small feet, and among the Manchus for the men to wear-pigtails. Instead of each dropping their own foolish custom, they each adopted the foolish custom of the other, and the Chinese continued to wear pigtails until they shook off the dominion of the Manchus in the revolution of 1911.

For those who have enough psychological imagination, it is a good plan to imagine an argument with a person having a different bias. This has one advantage, and only one, as compared with actual conversation with opponents; this one advantage is that the method is not subject to the same limitations of time or space. Mahatma Gandhi deplores railways and steamboats and machinery; he would like to undo the whole of the industrial revolution. You may never have an opportunity of actually meeting any one who holds this opinion, because in Western countries most people take the advantage of modern technique for granted. But if you want to make sure that you are right in agreeing with the prevailing opinion, you will find it a good plan to test the arguments that occur to you by considering what Gandhi might say in refutation of them. I have sometimes been led actually to change my mind as a result of this kind of imaginary dialogue, and, short of this, I have frequently found myself growing less dogmatic and cocksure through realizing the possible reasonableness of a hypothetical opponent.

Be very wary of opinions that flatter your self-esteem. Both men and women, nine times out of ten, are firmly convinced of the superior excellence of their own sex. There is abundant evidence on both sides. If you are a man, you can point out that most poets and men of science are male; if you are a woman, you can retort that so are most criminals. The question is inherently insoluble, but self esteem conceals this from most people. We are all, whatever part of the world we come from, persuaded that our own nation is superior to all others. Seeing that each nation has its characteristic merits and demerits, we adjust our standard of values so as to make out that the merits possessed by our nation are the really important ones, while its demerits are comparatively trivial. Here, again, the rational man will admit that the question is one to which there is no demonstrably right answer. It is more difficult to deal with the self esteem of man as man, because we cannot argue out the matter with some non-human mind. The only way I know of dealing with this general human conceit is to remind ourselves that man is a brief episode in the life of a small planet in a little corner of the universe, and that, for aught we know, other parts of the cosmos may contain beings as superior to ourselves as we are to jellyfish.

Still curious? Check out Bertrand Russell’s 10 Commandments of Teaching.

Making A Mistake: Fienberg and Buffett

making a mistake

Knowing when you’ve made a mistake and learning from that experience can be a very rewarding and profitable undertaking.

If you can admit your mistake, you can learn from it. However, an inability to learn from mistakes can mean you make the exact same mistake again.

Consider Steve Feinberg, the onetime owner of Chrysler, and CEO of Cerberus Capital Management reflecting on his ‘mistake’

…even now, Mr. Feinberg, a man who can play a decent game of chess while blindfolded, is hard-pressed to pinpoint many mistakes. Sitting in his office on Park Avenue, far away from the detritus that surrounds Detroit, he grows pensive when asked what he has learned from his audacious — and failed — effort to privatize and resurrect the legendary and deeply troubled auto giant. “I don’t know what we could have done differently,” he says, crossing his arms on his chest. “From the day we bought it, we worked hard to improve it.” He pauses, pondering, as the clock ticks away. Then he shakes his head. “We were too optimistic on timing,” he says. “Maybe what we should have done was not bought it.”

Compare that with Warren Buffett talking about his oft-cited U.S. Airways purchase in hindsight:

I liked and admired Ed Colodny, the company’s then-CEO, and I still do. But my analysis of USAir’s business was both superficial and wrong. I was so beguiled by the company’s long history of profitable operations, and by the protection that ownership of a senior security seemingly offered me, that I overlooked the crucial point: USAir’s revenues would increasingly feel the effects of an unregulated, fiercely-competitive market whereas its cost structure was a holdover from the days when regulation protected profits. These costs, if left unchecked, portended disaster, however reassuring the airline’s past record might be.

Words matter. To learn more about decoding CEOs read Investing Between the Lines: How to Make Smarter Decisions By Decoding CEO Communications.