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Successful investors don't really comply with human nature. They defy it.
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To get the most out of the year, you also need to take some actions that have no immediate return today.
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A very short time horizon reduces your apertures like blinders on a horse.
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If you change your focus, you can change your future.
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If you want to succeed, you cannot afford using a strategy which is non-reproducible.
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If you want to know what your own deficiencies are, simply look at what irritates you in other people.
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You learn from your failures and you learn from the failures of others, but ideally before the failure happens.
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Once you have strategies to cover the blind spot and to cover what can go wrong, then you free up space to use intuition.
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Break or not to go slow, but to enable driving fast. Well, hello everyone.
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I'm it's Jim O'Shaughnessy with another Infinite Loops.
1:03
I'm very excited to welcome back today's guest, Luca Dellanna.
1:06
I love you you My My children are in Italy right now.
1:13
I used to go every year and I need I really need to get back, Luca, because I love all things Italian. Uh you as well.
1:24
Today, we're going to be talking about your wonderful new book, which I'm holding up for those who are watching the video and for those just listening to me, the title of the new book is Winning Long-Term Games, Reproducible Success Strategies to Achieve Your Life Goals.
1:42
So, Luca, as I was getting ready uh for our conversation today, I was rereading parts of your book and I remembered an old uh uh tale that I can't don't where it came from, but it concerns three bricklayers.
1:59
And when they were asked what they were doing, the first book bricklayer that they asked looked up and griped, "I'm breaking my back and working my fingers to the bone for a boss who doesn't really care about me."
2:16
The the second bricklayer said, "I'm earning a living to support my family who I love."
2:24
The third bricklayer looked up and said, "I'm helping to build a beautiful cathedral."
2:32
Now, which bricklayer are you advocating that our listeners and viewers should be in your book?
2:40
Well, definitely not the first one.
2:44
I think personally that both the second and the third one are spine as long as you derive meaning from it.
2:53
And as long as it lets you uh work um in a way that you get something from your work other than just the salary.
3:08
So, um I can say like the third bricklayer would be ideal because since he's building the cathedral, he has this long-term.
3:19
And he cares not just about following the plan and doing what's on his to-do list.
3:26
But he only cares about today's to-do list in the function in which it helps him achieve the long-term goal.
3:34
So, he needs to build a pillar.
3:37
He doesn't care about building the pillar faster.
3:39
He cares about building something that can sustain the cathedral.
3:45
And once you get this uh this long-term focus, this focus on the ultimate goal, what you do will be much better.
3:56
Because again, you will not stay superficial, but you will make sure that it works, which means that you will maybe change what you're doing, you will adapt it so that it works best.
4:05
You don't fall into the trap of um following the plan even when it's the wrong plan, you don't follow fall into the trap of doing something just to check the box even if it's not effective and so and and so on.
4:22
Uh the reason why I'm not uh necessarily against the second bricklayer, I think it depends it depends if he's doing it as I'm just getting my paycheck.
4:35
And in that case, it's it's it's not very good.
4:37
Or if he's doing it in with the focus of I need to sustain I want to sustain my family which I love very much.
4:46
In that case, he also has a good long-term focus.
4:50
Because one problem of the the third bricklayer might might have, if he only cares about the cathedral, that's great if that's everything he really cares about.
5:04
But if for example, he cares both about the cathedral and his family, for example, he needs to balance both.
5:12
He needs to make sure that he builds the cathedral in a way which is safe enough so that he doesn't get injured.
5:18
He needs to make sure that he doesn't get up in the in the pursuit of the cathedral to the point in which even if he manages to achieve the cathedral, he will feel unhappy because he sacrificed too much of of the family for example.
5:35
So so it really depends on whether there is this long-term and broad focus on.
5:41
That's an excellent point um because some things that might appear short-term uh to people looking on like the people uh inquiring of the bricklayers might look at the the way you put it think oh this guy's just working for a salary uh whereas that's not the truth at all right he's he's uh he he wants to be able to support and sustain his family over a long period of time and he also maybe wants to build a beautiful cathedral.
6:14
So I think that's a that's a good exception to the uh the second uh bricklayers response which many people might say oh that's just short-term that's not uh you know sustainable if all he cares about is is his job right?
6:32
Yeah exactly this is something that I've noticed a lot with uh with some of the companies I work with.
6:38
Like if you're only like you cannot pretend that it's all bricklayers in your company are of the third type.
6:45
You cannot tell all your fear because we're working for the cathedral.
6:50
Because I mean if you ask specifically for for bricklayers of the third type it will work but if you're like most large companies where you have a lot of the bricklayers of the second type you don't you cannot just use these grandiose visions if what they care is sustaining their family.
7:10
You need to accept it that it's a worthwhile goal but of course not if they do it in the way of I just do the bare minimum but the question is how do you engage them in such a way that they feel engaged at work and yet they understand that you understand that work is just a part of their life.
7:30
How do you give them like the possibility of bringing purpose even if they own even if they care let's say only about their job.
7:41
And once once you try to engage the second type of bricklayer, you just you do a lot of good things that that that would be that that if you don't do you then you leave a lot on the plate.
7:54
So, that's an interesting observation because I've seen that often times when companies get really really big, they lose the ability to attract the second or third type of bricklayer and attract a lot more of the people who are kind of like paycheck oriented.
8:17
How how would you go about if if I hired you and I was a huge company and and I put the tr- the problem to you in exactly this way.
8:26
I would say, "Luca, how most of the people who work here are these second type of bricklayers.
8:32
How how can you help me get more out of them for the larger, longer term, more sustainable, and in this case, more beautiful goal of a gorgeous cathedral?"
8:46
Yeah, I think that the key is to show them the impact of their work, but the impact that they have now.
8:53
So, not to the impact that they will have in a century once the cathedral is finished, but the impact that they have now.
8:58
I make Let's make the example Starbucks.
9:03
We all know about Starbucks.
9:05
They hire so many people, they have so many employees, they cannot just get the bricklayers of the third type.
9:12
So, what I would do if I were a manager of Starbucks, I would observe my team working for 5 minutes.
9:20
And then I would call a small time out, you know, like basketball style, like everyone in a circle for 10 seconds, and then I would point out all the impact that I've seen over the last 5 minutes.
9:31
I would say, for example, "Johna, the after that you made on the flat white was beautiful.
9:39
Michelle, when you smile to the customer and you call their name, you really brighten brighten them up.
9:47
Francis, great job helping the new trainee Mark operating the coffee machine.
9:55
And you do this for like 30 seconds, 1 minute.
9:59
The point is you show them one that their actions have impact.
10:04
Two, that their impact is going noticed.
10:09
And then you ask them to do you ask them to do more.
10:12
And what will happen ideally is that during those 5 minutes, the next 5 minutes, people will feel great.
10:21
And maybe they will do more of those actions.
10:23
Now, the question is what will happen over the next 10 minutes?
10:25
Because if someone puts more effort than normal and it does and it goes unnoticed, they will learn the lesson that putting effort is not worth the is not worth it.
10:40
So, what you do is that you observe again all the improvement that you see over those 5 minutes.
10:46
And then you call a second time out.
10:48
And again, you make them notice that you notice the effort that they impact that they created with the extra effort they put.
10:56
And that will really solidify.
10:56
And I've seen that I've seen people doing that, not at not at Starbucks.
11:02
I've seen it in in other in other context.
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And sometimes it can really bring some people to tears to to tears because for the first time they see that the small things that they do are actually noticed.
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It's going to be the best day at work that they have.
11:22
And they will be super motivated and super engaged and they will keep doing all the small things. And and it cost nothing.
11:29
But again, the the key is to see the impact that people have today.
11:35
And then the other thing because I I I've talked about this example a lot of the times, people usually know about it and they do it, but they do it with a time frame which is too long.
11:46
For example, they have a weekly meeting, they do the first part in the weekly meeting, and then they think, "Okay, next week I will tell my people all the good things I've noticed during the week." That's too long.
11:57
Because maybe on Tuesday they start putting more effort.
12:02
On Wednesday, they're like, "Ah, but yesterday my boss didn't notice."
12:07
Then so by Thursday they will have lost all motivation.
12:11
And instead of the right time frame, it's really 5 or 10 minutes. 5 or 10 minutes.
12:16
You do it two times, you do it three times, it stays.
12:19
I think maybe even inspired by our first conversation, one of the things that I do now is uh I don't do any type of annual or even quarterly review for people who work with me.
12:32
I give them immediate feedback if I see them doing something that I think looks really that is really great for the team, I am immediately tell them.
12:44
And I have found that that is actually quite extraordinary.
12:47
The whole idea, I think we've often get it exactly backwards, right?
12:52
The value of I I learned in many of the companies that I started and ran, the value of a annual review was negligible to negative.
13:05
Uh because, you know, it it it had no real impact.
13:08
Like, people aren't thinking about, "Oh, yeah, that great thing you did nine months ago."
13:15
It it It isn't It doesn't conform to the way our human OS works, right?
13:20
And And the other thing I would love for you to do is set up for our audience of listeners and viewers, someone's out there listening and they are filled with ambition and they really want to have what you say, a great long-term strategy, play the long-term game versus sequentially playing shorter-term games, which a lot of people do.
13:47
Take us through how how would you if you were consulting with them, how would you help them set up a system, a process for succeeding at playing the long-term game?
14:01
Yeah, so first I want to explain what uh usually they're they're wrong thinking about and the wrong thinking usually is the idea that if I get the most out of each day, I will also get the most out of the year.
14:19
And this is wrong because to get the most out of the year, you also need to take some actions that have no immediate return today.
14:30
So, this is the kind of like the one of the mental switches that we need to do.
14:34
And then um before I answer this question, I present this thought experiment which I find which I found very useful, which is that yeah, imagine that you want to become um I don't know, let's say let's say that you want to become a millionaire, but today, you only have bad options.
14:58
You go to Las Vegas and you can put everything on on the 36 or you sell your kidney.
15:03
They're all terrible options.
15:06
Let's imagine that you give yourself 2 years to become a millionaire.
15:11
You have some better options.
15:11
I don't know, you start a startup um something like something like that. That's much better.
15:20
Now, let's say that you give yourself 20 years to become a millionaire.
15:25
You have great options that are not that risky, that do not bring you unnecessary sacrifices that are excessive.
15:34
So, one of the keys to about winning long-term games is to switch from how do I achieve my goals as fast as possible, which makes you think about bad solution, or solutions that might work, but are unlikely to work, or solutions that work, but have negative externalities on the rest of your life, and instead you switch to how can I succeed as certainly as possible.
16:08
Um of course, you always want to have a reasonable time frame, like you don't want to get too lazy or whatnot, but you can give yourself, I don't know, 12 10 years, 15 years, 20 years.
16:18
Then of course, if you can do it better, but you start from a longer time frame.
16:24
And that opens up your options and gives you strategies which are much better.
16:31
Because um nowadays we're talking uh I don't know if you heard uh um uh yesterday or the day before yesterday there were um an activist group uh put some painting on Stonehenge.
16:46
So, you know, my critique to that activist group is that it's fine to solve the problem as if it must be solved today.
16:57
If the climate change problem must be solved today, then of course you need to do like the most attention-seeking uh action. What's the problem?
17:08
If that's the action that gets the most done today, but it achieves the limit, because if you antagonize the population that doesn't like you vandalizing things, you cannot achieve that much if you only if you don't have the support of the world population, especially for something like climate change that requires the support of everyone.
17:33
What would be most more effective would be if the activist group ask themselves, "How can we solve the climate change problem in 20 years?"
17:42
That opens so many better options.
17:46
Some options are like some people become engineers and find some solution, advance green tech.
17:50
Some other people is gain trust, become a respected person, and use your platform to change some habits in the population. Uh and so on. So, this is the idea.
18:02
If you give it next a shift from succeeding as fast as possible to succeeding within a reasonable time frame as certainly and with as much impact as possible, you open up greater options.
18:21
That uh basically describes the fundamental philosophy with which I ran all of my asset management companies.
18:30
When when one one of the first things you notice when you're studying investor behavior is that they are hyperbolic discounters.
18:41
They they focus on what a stock is doing today or if they're seemingly longer term in a quarter or a year.
18:51
And that is mostly noise.
18:51
And one of the things that I often say is if you change your focus, you can change your future.
19:00
And changing your focus requires, as you advocate, a longer term period of time because a a a very short uh time horizon reduces your aperture.
19:13
It's like blinders on a horse.
19:14
And you you only see very, very limited options.
19:17
And as you point out, most of those options tend to be not very great.
19:23
Um, you know, selling your kidney if you want to become a millionaire, that has horrible externalities, uh, for you over long periods of time.
19:35
And the get-rich-quick, uh, mentality leads often to get-poor-quick.
19:41
Um, but that seems to be such a guiding It seems to be in the base code of our human operating system that we we look for and thus the popularity of all of the, you know, how how how to make a million dollars in a year or how to trade your way to, uh, prosperity, um, through these high-risk, uh, investments.
20:10
It In fact, a shorter-term focus leads you necessarily to things that are much riskier because, like the payoff on a, uh, on a really crazy one-off bet might be super high, but the chances of that bet paying off are super low.
20:33
And so, how do you I loved your example of the immediate feedback, uh, using Starbucks as the example.
20:41
Um, what other ways can people who are playing longer-term games, but do have employees who maybe aren't playing those long-term games, what other examples can you give to for the the, uh, person trying to inspire them, uh, to, uh, get them to at least elongate their focus from the just the here and now.
21:10
There are I think two parts to this answer.
21:13
And and both necessary to work.
21:15
So, the first thing is you should make extremely clear that you will not accept any objective that is achieved in a way that compromises the long term.
21:29
That has negative externalities over the long term.
21:31
You need to make extremely clear that you will not consider that the objective achieved even if based on a metric or a KPI it has been achieved if it's been detrimental to the long term.
21:47
Now, a little parenthesis.
21:47
If you just say that people will not might not trust you.
21:53
You need to make either an example either there has to be an example.
21:56
For example, John that's what happened to John two years ago.
22:00
He came with me with a huge contract and still I didn't give him a bonus because he obtained that contract lying to the client.
22:09
Something something something like that.
22:11
Or you make a thought experiment.
22:13
Like you make an hypothetical.
22:15
So, you say for example, if you come to me with a great contract but you obtain it lying to the client and that has a negative externalities I will you will not get your bonus for that.
22:30
So, that is crystal clear.
22:32
So, this is the first part.
22:32
And then the second part is people will not believe you if you do not show with your actions that you truly believe it.
22:40
And not only that but the costlier are your actions the more people believe you.
22:49
So, the question is what are actions with which you can signal that you truly have a long term focus?
22:57
And this shouldn't be cringe actions or actions that are purely for virtue signaling but they should have a true business uh business value for that.
23:07
And so now I I don't know top of my head it could be something like investing in the education of your employees, even if you have a high turnover.
23:18
That's that's a way of signaling we are here for the long term.
23:20
Or things such as whenever you have a meeting, you always ask you spend a bit of your precious time asking what are what are the long-term impacts of this action?
23:33
And if they're negative, you say no even if there is if there is a short term.
23:38
Or it could be things such as um commitments that some investments are held up for at least some period even if it even if it would be more beneficial to sell them in a certain number.
23:52
Like it could be anything, but the idea is something which is costly.
23:59
So it's not easy, but it's also not signaling like it has a real value.
24:03
And that really brings the point across to your people.
24:08
If I'm recalling it correctly, the book The Weirdest People in the World talks about that extensively.
24:18
Costly actions unify people to a degree and I think in the book they use martyrs in religion.
24:27
You can't take a more costly action than to give up your life for something that you deeply believe in.
24:33
Now obviously we're not advocating anyone take such a high cost signaling in in business, but the the other thing that you talk about was something that I learned from my grandfather.
24:47
He called it pre-meditating and you call it a pre-mortem, which is the more common term.
24:56
Um Let's talk a little bit about that because my what my grandfather taught me was A writing is very important. Writing is thinking.
25:06
And to put your thoughts and ideas on paper engages a whole different creative process than just letting them splash about in your head.
25:16
But one of the things that really helped me that he taught me was you you've got to do kind of a decision tree that is here's what I want.
25:28
Here's what happens in my life if I get what I want that's good.
25:31
But then he also insisted that you do here's what happens in my life that if I get what I think I want that could be bad.
25:42
And then he also has you do it for the other way.
25:44
Here's what's happened that could be good if I don't achieve this thing that I think I want.
25:49
And here's what happens that could be bad if I don't achieve this thing that that I don't want.
25:56
I think it's kind of like it it helps with some avoiding like common mistakes like quitting too early.
26:02
That's something that I mean everybody knows that if when you interview somebody who's like a great podcaster, right?
26:10
One of the first things that you most often hear is yeah, I recorded 400 podcasts before people even noticed who I was. Right?
26:23
And and that is uh you know, one of the most common things people say well yeah, I I tried podcasting. How many you record? Uh three.
26:35
And and when you look at the empirical data, it it bears that out.
26:38
Most people uh who want to take a hand at podcasting never even get to 20.
26:47
And and the so so the people that you're looking at have done things very, very differently, right?
26:53
And the challenge there is that that also gets a lot of hindsight bias, a lot of survivorship bias, because you don't necessarily know just by looking at say a Senra who does the Founders podcast.
27:11
Um you you you don't necessarily know what it took to get him there when when you are just looking uh at what he's doing.
27:21
Another thing, and this is something you specifically uh point out, it and a lot of people I know fall into this trap, and that is thinking that you're smarter than you actually are.
27:35
Uh I love to quote the uh philosopher Jed McKenna who who says that stopping being smart was the smartest thing I ever did.
27:45
Talk to us a little bit more about um ways that people can avoid the common mistakes.
27:51
Another one you mentioned is, you know, insisting that you achieve this goal in just like one specific way, uh and or envying people for short-term uh successes that are like big scores or whatever that aren't reproducible.
28:11
Give us Give us a a couple more ideas along those lines.
28:15
Yeah, I think that the key is the last um like you the last word you use is reproducible.
28:23
I think that this is the key because there are a lot of strategies which might work, but not necessarily.
28:29
These are non-reproducible strategies, and the problem is that if 100 people use a non-reproducible strategy, maybe you have 10 of them which will succeed, and that might make you think that it's a reproducible strategy.
28:45
But you are only one person, and so if you want to succeed, you cannot afford using a strategy which is non-reproducible.
28:55
So, the question is not only you need to think about finding a strategy which might lead to success, but once you have it, you might also do what you mentioned before, what your grandfather called uh premeditating, like premeditating everything about all the ways in which you do your strategy and still you fail.
29:16
And then you take action on on all those possible things. I make an example. So, I am an author.
29:24
Most authors, at least at the first book, they think, "If I write a a great book, I will become a great author."
29:34
And then they discover that the writing a great book is necessary, but it's not sufficient.
29:39
You also need to have a great audience.
29:41
You need to have a great distribution.
29:44
Sometimes you need to stay there for some time, because people will not read the book the first time they you put it in front of their face. You need many things.
29:54
So, one way is that you do it you become an author, you do a first book, you fail, you learn from it, you do a second book, you fail again, you learn, and eventually you succeed.
30:05
Or, the more efficient way is that you ask yourself, "Let's imagine I write a great book and still it's not a success.
30:15
What could be the reason?"
30:17
And then you think, "Ah, maybe I because I don't have an audience."
30:18
And so you add this to your strategy.
30:20
Now, let's imagine that I have an an audience and I write a great book and still I'm not successful.
30:26
What could be the reason?
30:28
Ah, maybe I need to to find a great publisher.
30:30
Like, you keep building on that.
30:34
So, the key is to learn from your failures and from the failures of others.
30:39
You can also ask yourself, "What are other great authors that What What are other authors that wrote a great book and yet didn't become a successful author?
30:49
So, you learn from your failures and you learn from the failures of others, but ideally before the failure happens.
30:52
So, with this pre-meditating or with this pre-mortem.
31:00
The author Douglas Adams who wrote Hitchhiker's Guide to the Universe had a great quote, which is human beings who are who seemingly are unique in their ability to learn from others are also are also defined by their disinclination to do so.
31:22
Why do you think that we have a problem from learning from the failures of other people?
31:28
I I myself and and or strategies.
31:31
I myself think that that is some of the most rich material that you can analyze because it also points out some of these other shortcomings.
31:43
So, for an example, in investment strategies, I gave an example of an investment strategy that had done remarkably well over a five-year period.
31:59
And it was a single line strategy.
32:01
Buy the 50 stocks with the greatest percentage gain in revenues, right?
32:05
And then it's got a five-year period where it just It goes three times better than the market.
32:14
It sounds reasonable, and yet when you elongate your study period and you include a 45-year look at buying the strategy of the stocks with the best revenue gains, it does worse than T-bills.
32:31
And And so, that ability to be enticed by the short term.
32:37
That's the That's one of the things that I find when I'm talking to people about this and I would be I would love to hear the way you do it is is that we find it so in extra blee intoxicating.
32:50
And it seems to make sense.
32:50
And you know, I recall Mikhail Gorbachev was once asked about some a decision that he made that turned out to be bad.
33:01
And he said to the questioner, you know, you your question isn't isn't really make sense because it it it's abstract.
33:12
I I had to make decisions in the full-blooded and very emotional reality of the here and now.
33:22
How How do people get around that?
33:25
Well, so first let me answer the question of like why we um why it's difficult to to to learn uh to learn from our own mistakes of others.
33:36
I make the example of driving.
33:40
There is a There was a study they made a few years ago in which 93% of American drivers said that they were better drivers than average.
33:49
Which is a statistical impossibility. Why though?
33:52
The reason is because if I drive too slow I think that I'm a safe driver.
34:01
If I drive too fast I think that I am a good driver because I'm driving too fast because I'm I'm able to drive fast.
34:08
If I make an emergency braking because I was driving too fast, I was putting myself in danger and then make an emergency braking and I don't have any accident I think that I am very good at braking.
34:20
Uh and it's slowing down and making emergency braking.
34:23
And so all possible kind of mistakes, there is always like there is until it produces a real pain, there is a possibility of seeing it as a daily evidence that you are good at surviving, even though even though you're not.
34:37
So, this is this is this is one thing one one one component.
34:42
And for me, the the the the answer is to see in your mistakes always see in your mistakes as an evidence that you were doing so the often underlying problem.
34:54
So, this this this is this is part of the thing.
34:56
That the other question which is um which you mentioned is the problem of we know things in theory, but then we need to get to make the decisions like here and now in the emotional in the emotion of the moment like go about your uh I think that now it seems a bit idealistic, but one big step forward is to try to make at least the least amount of decisions in the here and now.
35:26
For example, even if you're a president, which is a job which necessarily requires you to do a lot of emotional decisions and so on, you can always like write before some guidelines.
35:39
You can always um war game a few scenarios.
35:44
You can always pay someone to remind you of of your of your guide of your guidelines.
35:52
I think I've I've uh heard don't know if it's true or not, but I heard that in Switzerland there is a law for investors that they need to write down the motivations for buying a stock to one of their partners before they are allowed to buy, which if true is a wonderful way to make sure that you even in an emotional moment, there is a limit to how emotional your decisions can be.
36:21
So, I think that like you can start thinking about all all of the systems uh And then anyway, I think that it just goes to understanding that making the wrong emotional decision will be the one of the most common um failure mode.
36:46
Like once you internalize that and you truly internalize it, I think I think that it it gets a little bit of shift in your decision-making.
36:54
Sadly, it's hard to internalize like just theoretically.
36:59
Usually, it takes a real loss in life somewhere. But, yeah.
37:06
The uh survey of of uh drivers in the United States that that uh re that uh replicates everywhere.
37:13
And there's even a name for it.
37:15
They call it the Lake Wobegon effect.
37:17
Uh on the humorous Garrison Keillor who had a radio program on National Public Radio in the United States, always joked about Lake Wobegon where all the children were above average and all the people were good-looking.
37:33
Uh which of course doesn't work that way, but it it also is the source of a uh sometimes I think it's a feature and not a bug in human operating system.
37:46
Uh we tend to And by the way, it doesn't seem to be easy to educate it away.
37:50
Um for example, when you look at PhDs in a uh elite university uh in a particular department and you ask them, "What chance do you have to be the head of this department?"
38:07
They fall into the exact same trap.
38:09
Uh "Well, I think I have a very very good chance of becoming the next head of the department."
38:14
And then when you ask them about a colleague who potentially has a much better CV, has a much better history of publishing impactful articles. Oh, no, no, no.
38:28
No, they're they're not they they don't have this this or this.
38:33
It leads one to understand that, you know, the idea of it's very difficult for us to see our own flaws.
38:43
And yet we seem to be pretty good at seeing the flaws in others.
38:49
And it's it's led to a lot of maxims like if you if you want to know what your own deficiencies are, simply look at what irritates you in other people.
38:58
And that's going to give you a pretty good example of what your own flaws are.
39:04
How how how do you how do you get around that?
39:07
How do you get around the the way I got around it in my asset management career was protocols and processes.
39:15
Um and uh you know, doing everything I could to avoid uh the emotional decision.
39:22
Because one of the findings of looking at long periods in investing that I found was that successful investors don't really comply with human nature, they defy it.
39:34
And they defy it by looking and thinking historically as opposed to like what I read in the newspaper this morning.
39:39
Uh there's a whole host of things that they can do, but they're hard.
39:46
And they can really overwhelm even the most persistent person.
39:54
What other ways will would you advocate?
39:57
Let's say I hired you in to be a consultant on and I said okay, so uh with all these verticals at Ocean City Pictures, I want the film division to ultimately be making really positive uh great films that inspire people.
40:12
And in the publishing division, I want to only publish great books like yours.
40:21
And and and and you notice that we were publishing Well, let's make that make it obvious.
40:29
We we were maybe not maybe we were doing a lot of short-term things that didn't get to those goals.
40:36
Other than just pointing them out, what kind of process would you advise me to put in place so that everyone on the team is like, "Oh, okay. I get it.
40:45
This is this is where he wants to go with this."
40:50
I think that there are that there is a like you you use a three-step process.
40:55
The first one which really doesn't have to be to be long like it can really be just just a few minutes is to explain extremely clearly what your vision is and what will be the sacrifice and like the things you will not do and the sacrifices that will be necessary to make to make the vision.
41:14
Something like we aim to publish great movies, which means that uh sometimes we will have um I don't know to give up um Which means that we will have to be extremely selective uh uh with with how we choose and we are very willing to have um to have months I don't know months in which we don't publish something for example.
41:41
Like it's not necessary that the trade-off you want to make, but I mean like like I would what are the trade-offs you want to make?
41:46
What will be some of the negative consequences of the focus you want to have and make clear beforehand that you're willing to have those.
41:57
That's the the first one.
42:00
Then the second thing I I find extremely extremely effective to make uh hypotheticals.
42:08
Like that's the fastest way in which you can train someone on something which is not a necessarily a process like something which requires a bit of personal judgment and maybe a bit of agency it's hypothetical.
42:22
Which means you sit half an hour 1 hour with them or with a group with a group and you go to a scenarios.
42:30
Which could be something along the line for for movies for example, what I would do is um we spend maybe half an hour together reviewing uh some submissions and you explain to them your judgment.
42:46
So for example, what you like here, what you don't like here and then you ask them with the next example to give their judgment and then you comment on your on their judgment.
42:56
Uh good good point because um you're you're you're missing this fact something like that and then you move to that to the next step which is you make them take decisions and you give them like feedback on the decision.
43:13
Like usually most companies they do this in real life.
43:17
Problem is that in real life maybe it takes 2 years to take uh 100 decisions.
43:23
You can shorten it in uh half a day if you make hypothetical. So you can train faster. Why does it work?
43:29
Since it's active training it has a very strong emotional component that you do not get in classroom training uh since it's immediate feedback it's also more more stronger feedback.
43:44
So that's feedback that is more likely to remain in the moment when some people have later to take like emotional choice right rushed choices when they're on their own or and so on.
43:58
And then the third thing um the third thing which is important is again don't let months pass without feedback.
44:08
Like, let's say that on Monday you did the role play the hypothetical exercises.
44:15
On Tuesday, maybe you let them half a day, and then at lunch break there is a little bit of the brief.
44:20
And we try how did it go?
44:23
Great job doing this and that decision.
44:29
You forgot to practice this thing that we practiced yesterday, something like that.
44:33
And then you do it Tuesday evening, and then you do it on Wednesday evening, and then you do it on Friday evening, and then you you space It starts to fade out, but the beginning has to be extremely extremely tight.
44:47
And and that really works.
44:47
And people sometimes they tell me like, "Luca, but that takes a lot of time." And I'm No, no.
44:53
It takes a lot of time the first week.
44:57
But then you save so much time, and then there's the other managers who try to save time the first week, and as a result, every month they need to spend time on it.
45:05
And even worse, they don't get a result despite spending time spending time all the time.
45:13
What do you think about I love the idea of hypothetical, something I do quite a bit when I'm thinking about things.
45:18
And one of the things that I've been doing increasingly is using AI to generate hypotheticals that I can then consider.
45:34
And I sort of use I'm a big believer in what they call the centaur model of AI, which is it's human plus AI.
45:40
It you know, people in my opinion, people who just think, "Oh, AI is going to solve everything." I don't think so.
45:49
I think it's a very very useful tool that a human being can interact with and iterate with.
45:58
And it also can, for example, one of the ideas that we had that illustrates this is it's not part of our human nature to go and try to find a null set, right?
46:09
A null set is you have a hypothesis that you test and that it proves that your hypothesis was incorrect, right?
46:16
It's It's part of our human nature cuz we want to get published.
46:21
We want to have an innovative new discovery.
46:23
You know, Arthur Koestler said once that the more profound your discovery, the more obvious it appears afterwards.
46:30
And And so, that's in our nature, right?
46:33
We We We fail to learn via negativa about all the things that didn't work.
46:41
When we were at Osum uh Osum Asset Management, we had what we called a research graveyard.
46:49
And it was all the things that we researched that didn't work.
46:53
Um and it was extremely valuable.
46:56
And so, one of the ideas for AI that we have is just have an AI publish uh via negativa, come up with hypotheses that lead to null sets because humans don't want to do it, but the machine doesn't care.
47:11
It can go up with some brilliant uh hypotheses that seem compelling, a little bit like my "Hey, just buy the stocks with the biggest percentage gain in revenues, and you're going to do really, really well."
47:22
Well, you learn via negativa that that's not true, but you also need time.
47:29
And And I'm wondering how you would get uh people who don't kind of really think about this uh um strategically the way you do.
47:41
I I In addition to the instant feedback, doing the the week uh of intense training that leads to greater longer-term results over time, what other ways could you help uh somebody who's trying to inspire that group of people who may be more short-term oriented, maybe not thinking about it the right way.
48:04
What are the tricks of the trade, I guess, I would ask you would would you use to help bring them along?
48:12
Yeah, so before I answer that I just need to to add the little clause that everything I I will say now is absolutely in my opinion is absolutely not a substitute for what was done for what I mentioned before, the hypothetical.
48:26
And if you think that you and generally most of the people would need would think that they need an additional tool because the hypothetical cannot bring any result, usually is because they're not doing the hypotheticals well enough or they're not doing them short tight enough in time, as I described, because it's really just just just so important.
48:50
So, that said that said, I think that some some of the things like you can do.
48:55
One, if possible, is to bring people in contact with people who already demonstrate the values of or the thinking that you want them to have and you watch them in action.
49:09
I know this because I used to work for a few years um for the consulting division of a large manufacturing company.
49:19
And sometimes you have clients which were resistant to implement what we were suggesting to them because they thought yeah, it sounds good, but um maybe it's not really worth it or I don't believe that you can really that you can really For example, we were suggesting people that um uh site managers that they go that they do a certain thing certain things operation like on the operations floor every week.
49:46
And they were like, there's no way that people really do it.
49:48
You're just saying these.
49:50
And so we would bring them out for day to a manufacturing site that our company owned.
49:57
And immediately they would be changed because the moment that you see someone that is actually doing it, you get it.
50:03
Not only because you see the result, you see that the factor is working well, but also because you see that the person because she's putting the very senior person, she's putting the time to do the things by the book.
50:17
Or like for example, to think in writing.
50:21
The moment you see someone that thinks in writing, then you you get it.
50:26
So, for example, I can imagine that there would be a few readers that are listening to this and say like, "Oh, Jim Jim says that he thinks a lot by writing that she's in the value, but I wonder is it how he is?
50:36
I wonder if he really does it?"
50:39
But I swear that if they come up to to see you one morning and they see you that you actually do, it will click.
50:44
The moment that they see someone as busy as Jim or Shameless Steve doing taking some time to write, they will get it and they will do it.
50:54
So, this will be what this will be one thing.
50:55
Put them in contact even just for an hour with someone who's already practicing and living the values and the judgment and the evaluations you want them to to do, they will get it.
51:06
So, this is um So, this will be one thing one thing uh one thing I suggest.
51:13
And then if not, the other thing is to understand how antifragility works.
51:20
So, I expect that most listeners probably they heard the they they know the term antifragility from Nassim Taleb's book.
51:26
It's um basically what benefits from problems, what gets stronger from problems, from variation, from stressors, and so on is antifragile.
51:37
And the typical example is our muscle.
51:42
If we go to the gym and we give problems to our muscles, for example, lift weights to lift our muscles get stronger.
51:51
However, and and this is the key, there are some people which seem that they cannot go to the gym. Why?
51:59
For example, that was the case for me uh many years ago.
52:04
I never really um trained my muscle when I was 16, 17 years old.
52:08
I had a few I had issues and I and it seemed to me that if I go to the gym I injure myself, like I would have some little bit of tendinitis, something like that.
52:21
And it seems like everything is too much.
52:25
And or we go to a I lift something which is too light to produce any result.
52:31
And we see these also at work.
52:31
There are some people that if you give them problems, they they feel like they're demotivated because every problem is either too trivial to bring any uh any positive outcome or too big and they lose motivation and they don't even start working on it, which is all.
52:48
But the key, if you go back to the gym example, to the muscle example, there is it's obvious that there is a a range of weights that is between those two those two groups, which is light enough so that it doesn't cause any injury and it's significant enough so that uh I can grow my muscle.
53:11
So, maybe I lift 10 kilos, I injure myself.
53:13
I lift 5 kilos, it's not enough.
53:16
But there is that 7 weight 7 kilos weight which produces some gain and those gains make me stronger.
53:23
And the same applies to students, to employees.
53:27
They look demotivated because we are only giving them big problems or small problem.
53:31
There is a task of the right size that they are willing to do and if they produce a significant outcome that can start a virtual circle of reinforcement.
53:42
So, a lot of management whether you are a personal coach at the gym, whether you are a teacher at a at the school, or whether you are a manager in the company, is finding that range that is that produces antifragile reaction.
53:57
Not too small that it produces no reaction, not too big that it produces a fragile reaction, but the right range that it produces an antifragile reaction.
54:06
So, going back to the example I gave, the idea is to find the task that is the right size so that your employees feel like they can do it.
54:17
When they do it, and it produces a positive outcome that you can reward without being fake, with that you reward something trivial, and it starts a feedback of I can do it, learning is good, putting effort is good, this feeling leads to something. Uh so.
54:38
So, it's a bit like the Goldilocks solution, if you will.
54:42
The This one's too hot, this one's too cold, this one's just right.
54:45
Um and then the earlier example you gave is to make the abstract concrete, right?
54:52
In other words, uh I I heard Jim thinks by writing, uh yeah, that's abstract.
54:59
People are like, I don't know so much.
55:02
But then the minute you actually see that happening, that engages the emotions, makes it concrete for you.
55:11
And then that locks in their understanding of that type of behavior.
55:17
What Where does that leave like big What What's the term that they many people use?
55:23
Big hairy audacious goals.
55:26
Um and and I think for example of like NASA landing Apollo 11 on the moon. Right?
55:32
So, you could look at that one of two ways, right?
55:34
You could look at it as, yeah, okay.
55:36
So, we landed it on the moon, big deal. It was a one-off. Well, it wasn't.
55:42
There were subsequent landings, but it could lead people to say, well, that's just a waste of taxpayer money, and why aren't they spending that money on ameliorating the problems down here on Earth?
55:57
And you would then miss, of course, all of the innovations that came from that single or in series of events of landing on the moon.
56:08
How do you calibrate it so that, kind of using your example of of getting in in that sweet spot of you're becoming anti-fragile by doing something that's hard, but then you can in fact do?
56:22
How How do you get them to also take in that there are certain one-offs like the moon landing that are worthwhile because of all of the secondary and tertiary advancements that spring from it?
56:37
I think that one necessary thing is again, like this concept is sometimes like abstract.
56:45
And I would make it as concrete as possible.
56:47
So, for example, if you tell people just there are advancements kind of abstract.
56:52
If you tell them, we invented this, this, this, and that, including this thing, which is, for example, I don't know, maybe in the microwave that you used to cook breakfast this morning, that that already brings brings the point to my show much closer. So, this is one thing.
57:07
And then you need to repeat and repeat the thinking.
57:09
Because you say it only once, people will forget.
57:11
If I were, for example, I don't know, the president of the US justifying NASA or the or the president of NASA, I will keep repeating that.
57:23
Every single press conference I go, we are doing this because of that.
57:25
This is the tangible benefit for the population.
57:30
And then you try again to bring it to time frames which are compatible for the population.
57:35
Like because at NASA or SpaceX or so on, they are um place which gets people which are more ambitious than usual.
57:46
So you can give them like cathedral type objectives.
57:51
But when you talk to the general populations and you need to justify not existence of NASA, the general population is like the second type of bricklayer.
58:00
You need to give them then explain what's the benefit that we will have uh in the short term and the benefit that we get to you.
58:08
I have another example related to NASA, which is the story which I don't know if it's true or if it's apocryphal of uh President Jeff Kennedy that goes to NASA and talks to the janitor and he asked the janitor, "What What's your job here?"
58:22
And the janitor says, "I'm helping sending rockets to space."
58:28
And I hated example because it produced a set of CEOs or or or leaders which think that you need to that that's the way in which you motivate everyone by giving grandiose goals.
58:42
In real life, the janitors will not be motivated by the idea that they send the the ship into space.
58:48
They will not be motivated if the people who use the toilet they tell them, "Thank you for keeping the toilet that the cleanest toilet I've ever seen."
59:00
So you need to bring it back to things which are relevant to the very specific audience uh that that's that you're talking about.
59:09
So for example, like it would be like sure, going to thinking about going to the moon brings result.
59:15
But if today we spend one day brainstorming ideas for the moon, what's the benefit that you will get from this today? That will not motivate.
59:26
One role two does things like intuition like in being able to successfully uh play long-term games.
59:35
And And I bring that up because most of my history was essentially very empirical.
59:41
Uh I was very empirically driven.
59:44
I wanted evidence for any particular thing I was going to do.
59:49
I would do gather that evidence by looking at super long periods of time as much as I had access to.
59:58
And yet one of the things that I've noticed um is that if you look at the same sort of pattern time and time again again your repetition.
1:00:10
Uh what what happens is you you get a saturated or imbued intuition when you see that pattern again.
1:00:17
How do you How would you fit that in to your framework for succeeding at long-term games?
1:00:27
Well, I think that uh the in the book I I mentioned this saying that a break are not to go slow but to enable driving fast.
1:00:40
And I think that the same applies applies the applies here that like you want to collect data and to make an empirical research but that that doesn't mean that you maybe there's not space on intuition but the problem is that if you use intuition alone then you are at a high risk of a crash because you might have a lot of blind spot.
1:01:01
But once you have strategies to cover the blind spot and to cover what can go wrong then you free up space um to use intuition.
1:01:13
So that also leads us into the idea of how how can somebody pursuing these long-term games uh and goals uh increase their surface area of luck. That fascinates me.
1:01:30
I think that this is the super important and it's something that we definitely don't doubt enough uh in society, I think.
1:01:39
Like maybe there are some groups of you like Silicon Valley and whatnot that that are more familiar, but it's completely absent from from another from from from a huge part of the of society this discussion.
1:01:54
I think that it's extremely important uh one to talk about it and two to give concrete examples, concrete stories. Explain.
1:02:07
The problem is that it's so easy to do it superficially.
1:02:12
Like you can you can say something like uh uh there is this entrepreneur that um I don't know, they they increase their surface area or or for example, I don't know, something like you move to Silicon Valley, you increase your surface surface area because you meet you can meet many more people.
1:02:34
I think that if you stay so superficial, you get people will listen to you, they're not into your conversation, but then they go back to their normal lives and nothing really changed.
1:02:47
And I think that we need to go a bit deeper, which means um going very concrete about what they actually did.
1:03:01
So, it's not just you go to Silicon Valley because then the problem is also like maybe you get people who go to Silicon Valley and then they live their life as normal and nothing really happened.
1:03:12
Then then you also need to explain like you need to be be to like like that's you need to increase our surface area but it will not sufficient because the surface area only increases the chance that an encounter happens but then you also need to have the skills so that when the encounter happens you can get something out of it.
1:03:30
So you need to have maybe a track record that you can tell give to the other people so that they trust you.
1:03:38
You need to have an idea of what you can suggest to the other people that we can do now or that they can we contact to you. Um and so on.
1:03:49
So yeah, I think that it really pays to go to to go in the concrete.
1:03:53
I think you can have a 10-minute conversation with someone about increasing the surface area and you can spend your life having 10-minute conversations and you will not change much or you can have a few 30-minute conversations where you go more concretely and you will really really change only change your change people.
1:04:16
And yeah, so for example for listeners the question is really think about what are your goals?
1:04:24
What needs to happen for your goals?
1:04:26
Like which people for example you need to meet?
1:04:29
And then you ask yourself how can I increase the chances that I meet those people?
1:04:35
And then what I meet that person how do I increase the chance that something happens out of it?
1:04:42
Like you need to think about everything not just what's necessary but then but you need to have a set of actions which is sufficient.
1:04:52
You know the other part of human nature it seems to me that I I've had a challenge trying to get people to understand that changing their focus could change their future, right?
1:05:07
Is that I believe that uncertainty is where most of the alpha resides.
1:05:15
And we have as part of our human nature it's just a real hatred of unpredictability you know the idea of like uh sticking out black swans is anathema to to many people because they're very highly risk-averse.
1:05:40
How because you do talk about risk a lot and you should in your book for example that you you don't want to do like hole-in-one strategies you don't want to do things that have a very very limited ability to pay off but if they do pay off it's like winning the lottery right lottery strategies are a really really bad idea.
1:06:03
And and many people tend to equate that with well that's very unpredictable that you know so that equals bad right?
1:06:13
How how do you deal with the idea of getting people to see a way toward well like for example we we often are limited by our own past right?
1:06:29
So I I often use the example with that GE the company was in a position to immediately commercialize transistors.
1:06:44
And they didn't do it and they didn't do it because they had a long history of their vacuum tube division being the biggest revenue generator.
1:06:52
How do you get over those blind spots that you know something might appear at least originally like like oh you know that's going to be costly or that isn't going to work. That's not sustainable.
1:07:11
Um and you know, things like the internet.
1:07:14
People said that about the internet.
1:07:15
Like that's crazy, you know, that it's not going to be that's never going to catch on.
1:07:20
They said it about PCs, smartphones, gene editing.
1:07:21
Gene editing especially, right?
1:07:26
Super expensive to map the human genome, right?
1:07:30
But now we're at a point after that had been done to where the cost of having your own genome mapped is now pretty affordable and reachable by many many people.
1:07:42
How do you get them to understand that balance and and kind of seek out the black swan even if every part of their being is like, why would I ever do that?
1:07:56
Yeah, I think that one thing that to differentiate is the risk of the stack tick versus the risk of the strategy.
1:08:04
So, honey, you mentioned lottery strategies.
1:08:09
So, playing the lottery can be a good tactic if you are guaranteed that within your time frame in which you will play the lottery, you will you have a high chance of winning.
1:08:23
So, let me make the example, entrepreneurship.
1:08:26
For example, like maybe if you do something that has a 5% chance of succeeding with a 20 but but a 20 but a 100 times fail. Is it a good bet or not?
1:08:40
My My answer is it depends on how many times you can take that bet.
1:08:45
If you can take that bet only once, you have a 95% chance of losing.
1:08:50
Doesn't matter the payoff.
1:08:50
You have a 95% chance of losing.
1:08:53
If you can take that bet 20 times, you have a very high chances of succeeding eventually.
1:09:00
So, it becomes a very good bet.
1:09:03
So, very often we evaluate the risk based on the single time.
1:09:09
So, for example, let's say um you move to that um like you publish a book.
1:09:19
Like you decided to take a to publish a book. Is it a good idea?
1:09:25
Well, if you're going to write one book only, unless you're already like successful and famous and that then kind of guarantee success, probably it's a bad idea.
1:09:34
But, if you're willing to write five books, that's probably going to be a good idea because the strategy of we of writing five books is going to be good.
1:09:43
And once you start thinking on this, you discover that a lot of things which look risky, they actually are much much less risky.
1:09:54
And uh so, I think that this is this is a very important um shift to make.
1:09:58
And then the second thing is, as you have said, we are bounded by our past in many ways.
1:10:06
You mentioned some companies which miss some new technology.
1:10:11
And part of it is what um like the the classic innovator dilemma.
1:10:18
You're missing because what you're doing is already so profitable.
1:10:23
But, part of it it's also because you are you success in an area makes you restrict your definition of what you do. So, I make an example.
1:10:32
If Facebook said, "We are a social website."
1:10:36
They would have missed the transition to mobile.
1:10:41
If Facebook says, "We are a way for people to connect online."
1:10:46
then moving to mobile becomes almost a natural shift.
1:10:51
So, the thing is if you think about your career, if I think of myself, for example, I don't know as um a consultant who um um trains management, then I will miss a lot of things, maybe.
1:11:05
If I think about myself as a consultant who helps companies get successful, I will miss many few I will miss fewer things.
1:11:14
And I think that this is a very important component.
1:11:18
I love that distinction because the way that you are defining it for yourself provides your own guardrails, right?
1:11:26
And I think that's an absolutely brilliant way of looking at it.
1:11:32
Um especially with the Facebook example, right?
1:11:38
You know, the the the more you spend time defining a mission statement or a North Star or what have you, that allows for the greatest flexibility.
1:11:53
Um in your example, where a way of connecting people does not preclude being on mobile, does not preclude all of the various permutations that they could take to form those networks of people.
1:12:07
So, how how would you practically get, let's say you again, you're working with the management team, um and uh you you read their mission statements and what you see is exactly what you just gave as a bad example, right?
1:12:25
Like uh you know, we're let's stick with GE.
1:12:28
We make vacuum tubes because we're the best at making vacuum tubes and they're so profitable for us and we're going to continue to strive to make the absolute best vacuum tubes that the world has ever seen.
1:12:43
How do you get them to reorient the idea and, you know, app make it much more, you know, we empower uh technical innovation.
1:12:53
You're going to be better at this than me.
1:12:59
Yeah, so I think that one of um So, one thing is to make the mission statement like as customer focused as possible.
1:13:13
Uh so, if you say like we make a vacuum cleaner, you're focusing on yourself.
1:13:18
I would make it on like what how you help customers.
1:13:22
And you're going to get And this is by the way is not my idea.
1:13:24
Like I read it on uh in Simon Sinek's book.
1:13:29
Uh which has a title similar to mine.
1:13:29
I didn't know about the existence.
1:13:32
People started telling me after I published my book.
1:13:35
And that was my main takeaway from his book was this idea of like broad mission statement.
1:13:42
Um And then the other thing I would do in a a mission statement is only the first part.
1:13:51
Every employee in your company needs to have a mission statement, which is not the mission statement of the company.
1:14:00
Because again, you cannot go to the janitor of GE and tell them you're making vacuum cleaners.
1:14:07
You're You're telling him how he helps people.
1:14:13
But then again, you want to have it broad focused.
1:14:15
So, maybe it's not going to be necessarily you clean the you clean the toilet.
1:14:21
Because if you tell him you clean the toilet, maybe he will not clean the office uh the the I don't know, something that spills out of the toilet.
1:14:31
But you want to be something like you help uh having our the rest of our employees having um clean environment.
1:14:39
Or even better, not you don't focus on clean, you focus on like a conducive work environment.
1:14:47
I think you need to do this job for each single role in your company.
1:14:53
It needs to be relevant to that.
1:14:56
So, the what you mentioned is also one of the most common errors that I've certainly seen as I look at, you know, companies that execute successfully versus poorly is and and persuasion as well.
1:15:13
Um if if you focus on what you're getting out of it, that's generally not a good way to have a mission statement.
1:15:20
It's not a good way to persuade people.
1:15:23
What your idea is vastly better idea.
1:15:27
In other words, let's focus on what the customer gets out of it.
1:15:32
And the that that entirely changes your focus again.
1:15:36
And so, how would you go about I'm going to ask you to do the impossible.
1:15:42
Um you're setting up a a new company and uh you you are retained by the people who are backing that company.
1:15:54
And and they say, "Luca, what we want you to do is build this in so that from day one, before we hire anyone, this is going to be a company that is completely dedicated to long-term goals and being as anti-fragile as possible."
1:16:14
I know I I know that this is very unfair of me, but but it just give me some examples of how you would proceed to do that for for those people starting that company. Yeah.
1:16:24
One thing I would do is to tell them that like you cannot do it in day one.
1:16:30
You can do it in that maybe day 14.
1:16:33
So, again, if you ask me to do it in day one, I will only come back with that solution.
1:16:39
I think it takes 14 for Like now, I don't know it's 14, but like a reasonable time frame.
1:16:44
And the reason is because first thing you need to hire a good CEO that is on board with with the long-term focus, that has the skills uh not only to run the company, but also to to to drive those those attitudes and those um characteristic you want to have.
1:17:08
And then you hire uh the next and and you train him.
1:17:14
So, again, I don't like not like maybe too long at either, but you want to have you want to explain very clearly what you want to them what is different from the usual job and what's the trade-offs you want you are okay with him make.
1:17:28
Then you play some hypothetical spaceship.
1:17:33
And then you move to the next step, which is okay, we hire a few other people at the next level.
1:17:42
And then again you train those people.
1:17:47
Because those people they will be the ones hiring next and you want to be training them before they hire, otherwise you will you will get you will get into some problem.
1:17:57
If Now now I put it a bit magical.
1:18:01
Probably there would be people hiring those people helping you the CEO et cetera.
1:18:05
They need to be on board.
1:18:07
So, again, you need to train them.
1:18:07
You need to to make it clear what are the trade-offs and so on.
1:18:10
So, again, you cannot be some like the the worst mistake is to go into checklist syndrome which is the idea with I write a mission statement done.
1:18:24
Like you do it as an independent task. Okay, that's done.
1:18:28
Which is whose purpose is self-contained, it's doing the task.
1:18:29
No, the purpose is not self-contained, it's about how that changes in future.
1:18:38
So, having this deal is not something that you do, okay, I have this deal done.
1:18:41
No, the question is I have this deal in a way that it makes everything else easier.
1:18:50
So, you cannot take shortcuts that will make them the next thing harder.
1:18:55
And then and then again, now I don't want to give them the impression that it has to be a super structured structured and super and super slow process because you have the process like you do it in the one.
1:19:10
Then you have the process which done perfectly and so on, maybe we'll do it in 30 days and then probably the sweet spot is is about 14.
1:19:19
So, you don't do you don't necessarily do all the things all the time as if you wanted to achieve 100% you do a lot of Pareto prioritizing and so on, but I think there's still some of the principles that have to be followed.
1:19:30
And then how would you one of the things that I've noticed about especially younger enterprises is that the agility of the management team is quite important.
1:19:43
Um and and by that I mean, you know, you can have the everyone bought in on the goals, you can have everyone bought in on the mission, so to speak.
1:19:52
Um but then how do you how do you reward uh because I think that's what you've got to do.
1:20:01
Um then and I this gets back to your the costly signaling, right?
1:20:07
Do do you just do that by costly signaling yourself that people need to be agile or is there some other method that you can I guess give permission to people within your organization, hey, we value your ability to say, "Ooh, that changes a lot of things.
1:20:30
We might have to pivot here.
1:20:32
It's kind of like uh uh David Deutsch talking about how science is always searching for better and better explanations, right?
1:20:39
Um but how would you do that in the business setting?
1:20:46
Yeah, so this is this is very tricky because on one side companies need agility, they need a higher operational cadence, they need to like be able to go fast and all those things.
1:20:58
However, there are also plenty of ways in which you can do it wrong.
1:21:03
So, you need to take uh you need to balance those two things.
1:21:08
The wrong way to balance is you start with just agility.
1:21:14
And then someone at some point someone will take some will go too much into agility, will take a shortcut they shouldn't have taken, and then you have a hard conversation with them.
1:21:26
But that is a bit frustrating because it would be like, "Yeah, I make your point, but you are the one telling me that I should be agile."
1:21:35
Why why didn't you That's a bit frustrating.
1:21:37
Then that's a bit limiting.
1:21:40
Like a lot of times you have this conversation, and then the person like overcompensates and loses agility.
1:21:47
You get in a lot of problem.
1:21:48
Again, what I what I'm a really big believer in is when you tell people that agility is a core value of your company, for example, you need to make three to five hypotheticals which drive the point of the tradeoffs that you're okay, what you're not okay, what's too much, what's too little, and you do this balance using a few examples.
1:22:12
And once it's clear, like once you consider that a few then not only the other person will be ready to and more likely to do as you do, as you wanted, but if they do something that you didn't want, the conversation will be so much more constructive because there was clarity before.
1:22:32
The more things are the less things are clear, the more conversations are destructive.
1:22:36
There is blaming, there is frustration, and the more things were clear before, the more they they the more the conversations will be constructive.
1:22:44
So, I think it really pays to take Again, it doesn't seem agile to take 30 minutes to explain with a few example what really you mean by agility, but you do it once and you save a lot of problems down the road. Interesting.
1:22:58
You don't have to name any specific company, but is there a good example right now that you can give of um an industry or company, you can make it a hypothetical company if you want, that everyone is like, "Wow, they're killing it.
1:23:15
They're just knocking the ball out of the park."
1:23:17
that is actually basically the result of them playing short-term games and just getting really, really lucky.
1:23:29
Well, one example that comes to mind uh and this is tricky, is uh would be Tesla.
1:23:41
In the sense that Tesla has a very long-term vision, but a lot of their operations, or at least their operations a few years ago, was very short-term um was really short-term based.
1:23:54
It's quite complex because Tesla does very well some things long-term, like the plan and the fact that they understood that to get there, it won't be a straight line, but they need to get some building blocks, and they focused on building.
1:24:09
So, so I don't want to bring it only as a negative.
1:24:14
So, they did a lot of good things at long, but they also took a lot of risks, which in my opinion were avoidable, and I really think that in 10 parallel worlds, we have the five worlds in which Tesla is successful as it is now, and five worlds where something major happened earlier in Tesla's history, and uh and it went bankrupt or got acquired and so on.
1:24:39
And sometimes when people read about my book, like they're saying like, "Luka, you're advising like take a bit less risk, but we need more people like Elon Musk."
1:24:52
And I'm like, "Yes, you need We need more people like Elon Musk."
1:24:53
And the reason why we don't have so many people with Elon Elon Musk is because there are a lot of people who could become like Elon Musk, and they're taking a little bit too much risk or they don't have enough long-term focus uh to get there.
1:25:11
So, I'm not saying like you shouldn't be like like you should be the opposite of Elon Musk.
1:25:14
I'm just saying like like my ideal thing is Elon Musk with 10 more percent of his time spent on on the risky a few things a few key things.
1:25:26
That's a fascinating example because and Elon Musk is the perfect example almost because I find that that people take a very either or yes no that view of him.
1:25:41
He seems to be quite um deliberately almost getting the people who love Elon versus the people who hate him.
1:25:52
And I love your example because what you're saying is, "Yeah, great long-term goals.
1:25:57
Yeah, we need more people like him, but the nuance here is Barry, if he had spent maybe 10 or 15% more of his time on these short-term risks in your parallel world example where, you know, there are 10 Elon Musks and only five succeed with Tesla, you might be able to push that up to eight succeeding with Tesla.
1:26:25
I love that example because it it brings out something that I think we have lost a lot of in our more modern way of looking at things, which is nuance.
1:26:37
And the ability to say, "Yeah, no, it's not 100% this or that."
1:26:43
What you've got to understand is it's probably they're probably, to stick with Musk, you know, he's probably at 90% of getting uh all of those tremendous things happening, but if he could just change these parts here.
1:26:58
I love that because then you can increase the base rate in parallel worlds in which Elon succeeds.
1:27:08
Well, I I'm my producer always gives me with the metaphor hooked on my phone.
1:27:14
Um so, I could talk to you for forever about this stuff.
1:27:20
I absolutely love the work you're doing and I hope that uh many people buy your book. I loved it.
1:27:27
I think it very uh I think it's very helpful for people who understand that that longer-term goals and uh methods to get them are probably going to be a lot um more rewarding for them just in in their life uh in general, not just in some specific career goal.
1:27:48
Uh well, as you might recall from your last visit to Infinite Loops, we are going to wave a magic wand and we are going to make you the emperor of the world.
1:27:58
Uh you can't uh kill anyone, Luka.
1:28:01
You can't put anyone in a reeducation camp, but you can speak two things into a magical microphone that will intercept the entire population of the world whenever their next morning is, they're going to wake up and they're going to think "I've just had two of the greatest ideas in the world, and unlike all the other times, I'm going to actually start acting on these today."
1:28:25
What two things are you going to incept in the world's population? Yeah, that's fine.
1:28:32
This time I can answer faster than last time because I knew that the question was coming.
1:28:38
So, this time one would be long-term thinking.
1:28:41
So, a lot of what we've talked about, but simply the idea of start doing things which take a bit of time to get results.
1:28:50
Because there are so many people who are stuck because they only do things that bring results within a maximum of 1 week.
1:29:00
And they would benefit from taking long-term action.
1:29:03
I'm not talking about 20 years.
1:29:05
I'm talking even 3 months.
1:29:08
For example, going to the gym, you only need 3 months to see results.
1:29:14
It's not too long, but if you only do things that bring results in 1 week, you will not do it.
1:29:18
Learning a skill, you can learn a good quantity of each skill.
1:29:23
I know people for example who have a like the way in my 20s, I had quite a few friends who had problems dating because they would spend every evening going out to the bar or so on instead of taking 1 month off from the bar to work on themselves.
1:29:46
If they took 1 month off, went a bit to the gym, bought a bit more clothes, learned a few social skills, and then went back to the bars did the success that would have with.
1:29:56
But we keep thinking that we got them we get the most out of the year by getting the most out of every day and really meet ourselves.
1:30:03
So, this this this would be this would be the this would be the number one thing.
1:30:08
And then the second thing well, it would still be the concept of opportunity cost, which I mentioned the last time.
1:30:15
And if you want to say something new, the idea that thinking about the risk doesn't make you go slow, but it enables you to go fast.
1:30:28
I do do not need to bring the risk to zero.
1:30:30
You just need to take out the five biggest risk and bring them down 80% of the five biggest risk that you have, and that probably takes a few hours, and and it has a dramatic impact. Perfect.
1:30:44
I think both of those are excellent recommendations. I loved your book.
1:30:49
I highly recommend that all my listeners and viewers pick up a copy.
1:30:53
Luca, thank you so much for coming back on Infinite Loops. Thank you, Jim. It was such a pleasure.