The Exchanges

Q Is there an example that comes to mind?

A We'll, we'll use the example from, from the personal MBA. I, I make an argument very early on in the book that, um, that business school in, in very many senses is primarily about status signaling. It's, it's about signaling that you are part of a group of serious qualified business people, um, sophisticated operators, people who are competent, people who know what are, what's going on, people who can make big things happen in the world. There is nothing that's taught in business school classrooms that you are not capable of learning and understanding and applying on your own. There's, there's, there's not full stop. Even so people are willing to spend. So the, the latest estimate that I've, that I've heard when you, when you calculate all of the costs of going to a top program. So tuition fees, um, cost of living opportunity to cost of lost wages. When, when you calculate the whole thing, there are, if I'm remembering correctly, Nine schools that have just passed the 400,000 dollar mark in terms of total cost of a program. That's a very expensive status signal, and there are some, some people in some circumstances for whom that will be a good or at least neutral investment, and there are a lot of people in the world for whom that will be a millstone around their neck for the rest of their life. And so, I, I was noticing this subtext in a lot of my work, both in, in, in the per…

AI assessment note: “We'll, we'll use the example from, from the personal MBA.”

Q Which must have been like a crazy place to go right away, right? Like right outside of school, you end up at one of the largest consumer product companies in the world. Well-honed processes, not, I would imagine, not super entrepreneurial. And then how did that translate into sort of the personal MBA?

A The personal MBA, a couple things. Um, it was mind bending working at a company that large. So I, I went, I think the, the only real commercial experience I had was, was working, um, over the summer for a computer place that, you know, built computers and fixed computers. I would drive down to help an old lady figure out how to open her email, like that kind of stuff. And so walking into this business that is, is gigantic, it took a while to wrap my head around exactly what an organization of that size, how it works, what are all the pieces, how does everything fit together? I had this experience, you know, growing up working in these very small businesses, the computer store, um, mowing lawns for people. This was the back, um, like 1998, 1999. So developing websites for people. So I had some experience in the smallest of the small businesses in the world. And the, the internship experience was the largest of the large. Doesn't get much bigger than that. And so what I wanted to do with their personal MBA was, uh, I was, I was walking into a job where a lot of people that I was going to be working with had just graduated from a top-fifteen MBA school. It didn't make sense for me to quit my job and borrow a bunch of money, go back to school, you know, to come back to the kind of job I already had. I just wanted to learn what I needed to know to succeed. And so the personal MBA be…

AI assessment note: “the personal MBA became a project where instead of going to school, I decided to read”

Q That's great. Like where did, where did Munger come into this? Cause I, I remember, um, Charlie Munger and mental models being a huge influence in the personal MBA is basically a book of mental models that people need to know for business. Was Munger sort of like something you discovered as you were doing this research, or?

A Munger, I discovered Munger, I would say, two or three years into the project, actually. So, so I was, I was reading and researching on my own, just picking up any business book that looked interesting. And what I found was, was that there was a larger set of books that helped. So, so for example, um, Influence by Robert Cialdini. Not necessarily a business book, it's a, it's a psychology book. And so I w I was reading and researching and at that time, it's kind of the, the early advent of the blogging period. And I came across, uh, lessons in elementary worldly wisdom, the transcript of Charlie Munger speech. And when I came, when I came across that, it was, it was a revelation. It's like, this is exactly what I've been looking for. This is exactly what I've been trying to do. Of course, here's, here's another rabbit trail into let me read everything that Charlie Munger has ever written or look at all of his speeches, all of it, all of The things that he's done, and it was fascinating and illuminating, and it was focused on investors, so people who are making capital allocation decisions. And at this point, I think I was, um, a year out of college, and frankly, I didn't have a whole lot of capital to invest. Theoretically, like, as an investor, yes, this is a wonderful tool, but what I was looking for is this approach, like, what are all of the ideas that are essential for a b…

AI assessment note: “I discovered Munger, I would say, two or three years into the project, actually.”

Q the bigger goal. You sort of, you know, you think about it differently, but yeah, I find that really interesting. There are many conversations. One thing that you're Amazing at is synthesizing information across a broad domain. You have this unparalleled skill. What's your process for that? How would you teach that to somebody else? Like walk me through how you do that. It's, it's like, it blows my mind.

A Thanks. Um, I think in terms of, of technique or process, there's two steps to it. Um, one is the more input that you have from a wide variety of sources, the more material that you have to work with. So I, I think if, if we invert that into what a lot of people don't do is they pay attention to a very narrow set of sources or all of their, their reading, their research, their experimentation, their Is in one very narrow domain, and they don't really stray outside of that. The wider you look, the wider the, the variety of sources that you have coming into your brain, the more access to interesting insights and connections you would, you would have. So, so yes, reading broadly, experimenting broadly, having experiences in different domains and trying to bring those domains together. That's the first part. And I think once you do that, and this was very much the process for the personal MBA, I, I read 100,000 of business books over a very long period of time, and when you do that, you start to see the same ideas come up over and over and over again, and so there's, there's a certain frequency analysis that you can do on paying attention to, to the ideas, the organizing structure, the names, the The concepts, the relationships that keep coming up over and over as you are doing this wide exploration, and that's a really good pointer that, that there's something about that that's pa…

AI assessment note: “in terms of, of technique or process, there's two steps to it”

Q And do you do that in advance? Like your time and energy budget? You're like, I have two days to decide this or.

A Yeah, I try. Um, but I'm also, I'm also of the inclination that I'm going to make that time and energy budget as big as I can possibly make it. That's not necessarily optimal in the sense that, you know, there are some things like, for example, if you're choosing a water bottle. You can probably satisfy us on that. They'll all hold water. It'll be fine. But if you, if you care about, so, so one thing that is, um, I know about myself, I care about the tools that I use. I care about the things that, that are in my environment day to day. And so, yeah, I'm, I'm willing to have a larger time or energy budget about certain things that I use often that I care a lot about or that produce a particular result that I want. Yeah, it's, it's always like, here's my budget, and then I'm going to, to collect as much information as I can with, with the amount of resources and attention at my disposal, and then go with the, the best one that I know at the time.

AI assessment note: “Yeah, I try. Um, but I'm also, I'm also of the inclination”

Q and over. So experience isn't enough to like learn something. How, I'm curious as to, to hear you riff on sort of like how the, not only do we acquire skills, but how do we learn something? Maybe we can separate those. So let's go with like, how do we learn something? And then maybe is that different than rapid skill acquisition or where are they, where do they overlap?

A Yeah, I think the, the first thing to delineate is knowledge and skill are two completely different things. So knowledge in the learning sense, gathering information, forming these concepts. So like the personal MBA is a book of business knowledge. It is not a book of business skill in the sense that skill is being able to perform in a particular way. With an objective that you care about. So you should be able to see yourself in the real world doing something to produce a particular result in a reliable, repeatable way. That's what skill is. I think a lot of people conflate the two. Um, so going to school often gives you knowledge. Some of that knowledge is useful. Some of the knowledge is not. And then skill is usually gathered in the context of doing the thing that you care about doing. With skill, in general, the best approach is, um, I, I really like this phrase, how quickly can you start making mistakes? How quickly, how can you get to the point of, yeah, learn a little bit about the topic, whatever it is that you're trying to do, because that helps you understand what performance looks like. It helps you self-correct, so as you're doing the thing you're trying to do, if you make a mistake, you're capable of recognizing and correcting that mistake in the moment. But skill is always gained in the context of practice, and, um, and there's been a lot of research over the yea…

AI assessment note: “the first thing to delineate is knowledge and skill are two completely different things.”

Q What are the ones that you keep coming back to personally again and again? Like what are the, the ideas from, um, not just the book, but like the idea, like, are you finding yourself more in the complex systems? Are you finding yourself more in the people? Like what are the models that you repeatedly use when you're making decisions?

A Yeah, I think about the, the ideas in working with yourself and working with other people all the time. Um, so it, it's really helpful to have a working understanding of, uh, sunk cost. Um, it's, it's work, it's useful to have a working knowledge of akrasia, like when you're trying to get yourself to do something, you know, you should, uh, be, be doing, but somehow there's some sort of barrier that's keeping you from doing that. I think at this point, I've, I've worked in enough businesses and started enough of my own businesses that the business side of things is relatively fluid. It doesn't take a whole lot of mental effort or energy to keep those things in mind right now. But you are the instrument that you use to get things done in the world. And so the, the debugging your own mind and help and trying to anticipate how others are thinking and feeling and trying to optimize around that, there's still a tremendous amount of effort and skill that's valuable in that domain. And I find myself thinking about those sorts of things quite often.

AI assessment note: “it's really helpful to have a working understanding of, uh, sunk cost”

Q Well, let's double click on that for a second. How do we debug our own brain?

A I think it's helpful to understand one of the things that, that I've found in terms of a technique that I use a lot is, uh, is logging. So just trying to pay attention to what it is that you're doing, what you're trying to do, and then writing down both what you accomplish in the course of a day, but also the decisions that you make and the places where you get stuck, or you've been trying to make progress on a, uh, in a certain area for a while and And it's just not working, or you're feeling uncomfortable, or there's a decision that you need to make that you're not making for whatever reason. I think a lot of times people will just sit with that and not do anything about it. Like the, the mentally and emotionally, they get bound up about certain decisions. And unless you are making a concerted effort to capture what those decisions are and go back into your thought process and try to figure out why, like, why am I stuck on this particular thing? What information do I need that I don't have yet? Like, who could I talk to about this? Is there an experiment that I could run to, to try it this way and see if it works? All of those things, it's pretty straightforward to do them. It's the remembering to do them, and the, the, the consistent noticing when there's a barrier, and then trying to, to deconstruct and go a little bit deeper into why that barrier might exist in the first p…

AI assessment note: “technique that I use a lot is, uh, is logging.”

Q How do you filter that information? Like, how do you find high quality sources of information? Are there sort of like tips or tricks that you found? Is it, I mean, internet reviews seem, you know, generally pretty useless and

A This is where recommendations are worth their weight in gold. So if there's a source that you trust that talks about a specific thing in a specific way, that's a very good signal. Reviews can be good signal if they include the information that this is what I was trying to do, and this is the problem I was trying to solve, and this is how this particular resource solved this problem or helped me with this, provide a solution in, in a very concrete way. I don't pay much attention on the review front to, oh, this was really interesting. This was, this was enjoyable. This was a fun use of my time because that's, I mean, if you're looking at a fiction book, that's exactly what you're optimizing for. But if you're trying to solve a problem, you're really looking for, I needed something to do X. I, I tried a bunch of different things or I tried this one. It solved my problem. Then that's that, that automatically goes on the consideration set of like things that I should pay attention to things that I should try.

AI assessment note: “This is where recommendations are worth their weight in gold.”

Q that, one of the things I'm hearing is that the, again, the ability to fail, the ability to play is part of being able to do something, uh, not only learning, but if you're learning with an instructor, do you, do you lose that ability to play? Do you lose the ability to fail? Because they're always correcting you before you sort of like get too far out of line.

A No. So, so that's, it's related. It's not exactly the same thing. And so usually when you're, when you're learning a skill, one of the things that allows you to learn that skill faster or pick up that skill faster is what's called a fast feedback loop. And so there should be a very short period of time between making a mistake and Or not performing in the way that you want to perform. Recognizing that there's something to be improved, and then making the adjustment, making the improvement. And so when, what an excellent instructor or coach or someone who is a teacher, somebody who's helping you develop the skill, what they give you primarily, aside from having some knowledge and experience about what performance looks like, Is they are a party that is outside of yourself, who can take an objective look at exactly what it is that you're doing, and they can notice the fine variations, the, the small mistakes, the things that you might not even notice, and then the feedback loop that, so they can, they can stop you, they can call it out, they can help you correct it in the moment. Whereas you might not even recognize that you're making, making a mistake. That's the value of having, having a coach. And I think that, that a lot of the, the most effective forms of practice are all of those things that give you that fast feedback loop, whether it's, it's, you know, there's somebody ou…

AI assessment note: “No. So, so that's, it's related. It's not exactly the same thing.”

Q be like, well, if it fails, like, what's the worst case outcome? You know, rarely is it multiplicative and you're going back to zero. Uh, and in some cases, people just think that other people have this ability, like entrepreneurs are just born with this ability to, uh, Have no fear and pursue their dreams. And what would you respond? I like it. What would your response be to that?

A There are no born people who know exactly what's going to happen. And so we, we, another way of putting it is we expect ourselves to be omniscient and omnipotent and we are not, and neither is anybody else. And, and so I think dropping that as much as we can, or at least acknowledging our preference of like, we would, we would like to know what's going to work or what's not going to work before we do it. That would be a wonderful capability to have. Every business person, every investor on the face of the earth would give up their entire, um, everything that they own in order to have that capability because with it, you could do anything. Um, I, I think just coming to terms with these are fundamental aspects of reality. They can't be run around. They can't be hacked. They can't be Eliminated in the context of anything that we want to do with our lives. These, these are inherent facts about the world that we live in. And so accepting that that's the, the way things are, um, it's, it's, it's the first part of the battle. If you don't do that, you're going to have a really hard, difficult time doing anything else. But once you get past that, that's where the exploration and experimentation, trying new things, taking informed risks. So So pushing in ways that probably aren't going to kill you or do permanent damage, but might represent a real breakthrough in this area that, that yo…

AI assessment note: “There are no born people who know exactly what's going to happen.”

Q I think one of the things that Munger also said was, uh, you know, there's very few models that carry the bulk of the weight of the thinking and the outcomes. What are the, what are the ones in the personal MBA that you see repeatedly the most useful in your own day to day life and the feedback that you're getting from people reading it?

A So the, the personal MBA, it's actually, it's baked into the structure of the personal MBA. So, so the book is roughly three parts. Uh, part one is all about business, what they are, how they work. Uh, part two is about people because businesses are created by people for the benefit of other people. And so if you don't have a working understanding of how people work, you're going to have a really difficult time. And then part three is about systems. So what are complex systems? What are some of the principles that can help you think about or reason about complex systems? And having that knowledge is what helps you start to tweak or experiment in a complex system in a way that's not going to have, hopefully, unanticipated consequences, negative third or fourth or fifth order effects, that kind of thing. The organizing principle in the first part of the book about business is something that I call the five parts of every business. Which is, is essentially a working definition of what a business is and what a business does. And just very briefly, a business has five parts. They create something valuable for other people, which is value creation. Marketing is attracting attention and getting people interested in whatever it is you have to offer. Sales is about the process of taking someone who is interested, a prospect, and getting them to pull out their wallet, checkbook, credit c…

AI assessment note: “The organizing principle in the first part of the book about business is”

Q said, thousands of books, hundreds of thousands, are you going across time as well? Like, are you looking at sixties, seventies, eighties, nineties, 2000, or is it sort of like, what are the last, uh, you know, 100 bestselling business books and then pulling them out? Like, so when you're getting these ideas, how much are, how do you know that they're also, uh, not going to disappear across time?

A This, this might be a distinguishing factor of the research process. I tried to narrow down what I'm reading to mostly books that, that you could fit into the framework of how to think about fill in the blank. And so I'm not reading a bunch of biographies. I'm not reading a bunch of, you know, entertainment or, or, um, call it trend pieces. Like, you know, here's Uh, I just, I remember a book from a couple of years ago of like the rising trend of, of Twitter. It's like, that's not a good investment in terms of this kind of research. I want to read something like influence, which is how to think about cognitive biases in this, in the specific application of persuasion and sales. I want to read on writing well by William Zinsser to, to get in my brain, like how to Can they nonfiction material in a clear, concise way? And, and so I think the more, the more practical and application oriented, uh, sources that, that narrows down the scope considerably because there's, there's a bunch of sources that, um, I'm not necessarily paying attention to not to say that there's not value there. It's just not the same kind of thing, but then that allows, because, you know, looking at it from the, the, the standpoint of application really lets you say, okay, Here are the techniques that keep coming up. Here are the concepts that come up over and over again. And that's where you really start to s…

AI assessment note: “I'm not reading a bunch of, you know, entertainment or, or, um, call it trend pieces.”

Q And do you find there's some sort of like triangulation with that as well? Because, uh, if people are trying to solve the same problem, Over and over again with the same products, like you're, you're, you're getting the variables that probably matter to solving that particular problem or am I just sort of, yeah.

A No, I think that's accurate. I think there, there's also, and it's, it's important to, to talk about this in the experimentation exploration context. Um, when you're doing this sort of research, there's always a certain amount of malinvestment. Like you buy, you know, you buy a microphone that doesn't work for you. Um, you, you buy a water bottle that's highly reviewed and it ends up leaking or being annoying in some way. And there's a certain amount of waste in the process of, of doing this exploration, which, which is really annoying. Like you would hope to avoid most of that. But I think in a lot of domains where you're doing synthesis or you're doing optimizy sort of research, that malinvestment is a form of tuition. It's the price that you're paying to gather information about this domain that you care about. And so if the problem is worth solving at all, it's probably worth having an experimentation budget where, you know, in the process of trying things, you'll find some things that work and some things that don't, and hopefully you can minimize that cost for sure. But you're always going to have a certain amount of part of the process or part of the materials or part of your sources that just aren't going to work out. And that that's, there's nothing wrong with that. That's to be expected.

AI assessment note: “No, I think that's accurate. I think there, there's also, and it's, it's important”

Q microphones and audio equipment and like your ability to just take in a huge amount of information and distill it. Like, Walk me through how you do that with something tangible, like a water bottle or a microphone or something you've done recently that I don't even know about. Cause you're doing, it's, it's sort of like the same process, right? Like you're gathering this information, you're distilling it, you're

A Yeah. So, so in those other domains, I usually have a specific problem that I want to solve. Like there's a reason that I'm doing it, or there's a reason that I care about it. And that's where the exploration and experimentation piece comes in. I don't necessarily know what's going to work in advance, but I do know that I have a problem that I care about and a way to solve it, which is I can collect a whole bunch of different examples and And test them out or put them through a process of comparing A versus B over and over and over and over again. If you do that for any significant length of time, you start noticing which are the things that solve your problem better and which are the things that have some significant drawbacks. And so, yeah, I don't know if there is any magic here aside from curiosity and interest and patience. Just being willing to test a whole bunch of different things beyond, beyond what you would usually do in the context of satisficing, like just trying to get to good enough as quickly as you can, or just picking something that somebody else recommends and going with that recommendation blind. I think just even a relatively small amount of experimentation can get you further down to The, the line of what is the best X for Y problem, then you can find reading in a book or searching the internet or, or, um, asking a friend about it.

AI assessment note: “I can collect a whole bunch of different examples and And test them out”

Q all time, The Personal MBA. In this conversation, we talk about rapid skill acquisition, mental models, decision-making, overcoming fear, and so much more. It's time to listen and learn. You grew up in a small one-stop like Midwestern town with no role models and like entrepreneurship or business. And you came to write one of the best-selling business books of all time with a personal MBA. How did that happen?

A It's kind of weird. Uh, a long circuitous route. Yeah, so I, I grew up in a little town called New London in, uh, north central Ohio. Uh, think light manufacturing a little bit and agriculture. So one stoplight, there's a McDonald's. I think this, this happened before I moved to the town, but, um, the, the story is that the town shut down. They called off school and had a parade. Uh, full of tractors when the McDonald's opened in, in, uh, in my hometown. So, uh, so yeah, I, I grew up, um, not around business at all. Um, most of my role models were the teachers at, at the school. Those were the adults I interacted with on a day to day basis. And, and most of the adults were Either worked a farm, or they, uh, they made a commute to, to one of the larger towns in the surrounding area, and did some, you know, light manufacturing, I think rural Ohio stuff. Yeah, my, my investigation into business didn't start until I was, uh, a few years into college. That was my first real exposure to business as a topic of study, and something that, um, Really, once I started learning about it, it was fascinating to me.

AI assessment note: “my investigation into business didn't start until I was, uh, a few years into college.”