Charlie Munger on Mental Models, Wisdom, and Human Psychology

charlie munger mental models

Your brain is a roughly million-year-old piece of hardware – designed and built to operate in the world of hunting and gathering – where a dangerous animal may lurk behind the nearest bush. While our society has changed massively in the last 10,000 years (or even the last 500 years) – our brains have not had time to catch up.

You and I are equipped with a tool that – while wonderfully sculpted by evolution to thrive and reproduce in the world of hunter-gatherers – is riddled with shortcuts and processing errors that can manifest in mistakes, calamities, and all around terrible decisions.

Over the last year or so I have spent much time studying Charlie Munger – the billionaire “right hand man” of Warren Buffett. Charlie developed a rather unique worldview on human behavior and problem solving (that he dubs “worldly wisdom”) rooted in the idea fundamentally that you need a wide range of tools (what he calls mental models) to solve the many problems that life throws at you.

Among one of Charlie’s greatest insights were the combined notions that  (1) all academic disciplines must respect each other in order to be true and (2) that psychology underpins nearly all of them because it impacts and shapes human decisions.

What this means is that to think more effectively and achieve your goals you need to both master psychology and understand the mental models that underpin reality.

One of the most powerful things that you must understand about everything that I’m sharing with you here – these are not anecdotal observations or opinions – the decisions, mistakes, and behavior patterns that human engage in again and again, to their own determinant, are rooted fundamentally in science and proven repeatedly by numerous psychological studies.

Learning More About Charlie Munger’s Mental Models

As a starting point for that journey, I wanted to share with you several resources that I have learned from along the way.

I would absolutely start by watching (or listening to) this Youtube Video of Charlie Munger on “The Psychology of Human Misjudgment.” The video is priceless and I’ve listened to it 10+ times. Some of the examples are a bit dated because the speech is from 1995, but the message is timeless.

From there, I would recommend digging into a few books. I’ve put these in a particular order and suggest sticking to it – this will slowly introduce you to the topic and layer in key pieces of knowledge to build a more comprehensive understanding of Charlie Munger’s Mental Models and the Psychology of Misjudgment. [Click the titles for a link to Amazon]

Predictably Irrational by Dan Ariely

Predictably Irrational is absolutely the best starting place to dip your toes into this subject. It’s a quick read that is easy to grasp and has some great examples that will stick with you. I would compare this to Freakonomics in the sense it’s aimed at a popular audience and does a great job making the subject very approachable.

Influence by Robert Cialdini

In many ways the “bible” of this school of thought – Charlie Munger even mentions it several times in his speech on the psychology of human misjudgment. More technical than Predictably Irrational but a critical next step to go deeper on the topic.

Poor Charlie’s Alamanc by Peter Kaufman

Once you’ve completed your necessary psychology prerequisites – now its time to dig into the meaty stuff. This is a big book, I’m not gonna lie to you. Read every word. This is where Charlie Munger really starts laying out his framework for Worldly Wisdom and explaining in detail how to use psychology as well as mental models to think about the world. This book will explain how and why “worldly wisdom” and “mental models” are important, but does not go deep into actually explaining every mental model that governs reality.

Seeking Wisdom by Peter Bevelin

WARNING: DO NOT READ THIS FIRST. That said, wow. This book. I have never in my life underlined more phrases in a single book. This is probably the most information dense book I have ever read. It’s a treasure trove of information and can serve as a vital reference book for the rest of your life. You absolutely have to read the other books first or this will be like reading something written in Mandarin. This fills out an extremely detailed checklist of both the “Psychology of Misjudgment” and the “Psychics and Mathematics of Misjudgment” – replete with pages and pages of detail, studies, and information on a huge array of mental models.

Thinking Fast & Slow by Daniel Kahneman

Kahneman is a titan among research psychologists and in many ways the godfather behind many of these concepts – including being one of the founders of Prospect Theory, which uncovered many of these mental models and how they shape the world. This book is BIG and full of tough and often counter-intuitive mental models and psychological concepts, but this is the book you want to read to really dig into the core research that underpins much of these other books.

Podcasts on Mental Models

I wanted to share a few links to two Science of Success Podcast episodes where we also dig into these topics.

The Psychology of Making Better Decisions with Michael Mauboussin

How to Build a Toolbox of Mental Models to Understand Reality with Shane Parrish

Blog Posts on Mental Models

I also wanted to share a few links to two blogs that I particularly enjoy that both have wonderful and deep sections focusing on mental models.  Each of these are filled with dozens of mental models as well as examples and explanations to help better understand them.

Farnam Street – Mental Models

Joshua Kennon – Mental Models

Mental Model Checklist – Human Misjudgement

As a bonus for you – I’ve also included Charlie Munger’s (updated as per Seeking Wisdom) checklist of the standard causes of human misjudgment.

1)     Bias from mere association

2)     Underestimating the power of rewards and punishment

3)     Underestimating bias from own self-interest and incentives

4)     Self-serving bias

5)     Self-deception and denial  – distortion of reality to reduce pain or increase pleasure.

6)     Bias from consistency tendency – includes confirmation bias – looking for evidence that confirms our actions and beliefs and ignoring or distorting disconfirming evidence.

7)     Bias from deprival syndrome

8)     Status quo bias and do-nothing syndrome

9)     Impatience

10)     Bias from envy and jealousy

11)     Distortion by contrast comparison – also underestimating the consequences over time of gradual changes.

12)     Bias from anchoring – over-weighing certain initial information

13)     Over-influence from vivid or most recent information

14)     Omission and abstract blindness

15)     Bias from reciprocation tendency

16)     Bias from over-influence by liking tendency – includes bias from over-desire for liking and social acceptance

17)     Bias from over-influence by social proof

18)     Bias from over-influence by authority

19)     Sense making – construction explanations that fit an outcome – being too quick to draw conclusion, also thinking events that have happened were more predictable than they were

20)     Reason-respecting – complying with requests merely because we’ve been given a reason. Includes underestimating the power of giving people reasons.

21)     Believing first and doubting later

22)     Memory limitations

23)     Do-something syndrome – acting without a sensible reason

24)     Mental confusion from say-something syndrome

25)     Emotional arousal – hasty judgments under the influence of intense emotions. Exaggerating the emotional impact of future events.

26)     Mental confusion from stress

27)     Mental confusion from physical or psychological pain

28)     Bias from over-influence by the combined effect of many psychological tendencies operating together [lollapalooza]

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Do Less, Achieve More – The Personal Operating System

standing on the edge

“I’m swamped! So much to do and so little time! I’m never going to get it all done.” 

Sound familiar?

Take a step back from the precipice my friend.

“Being busy is a form of laziness, lazy thinking and indiscriminate action. The key to not feeling rushed is remembering that lack of time is actually a lack of priorities.” – Tim Ferriss

I’m just as lazy and unfocused as anyone else. Sometimes I can barely get anything done. I get sidetracked. I play too many video games. But I also accomplish much more than the average person. It’s not because I’m smarter or better or more motivated, it’s because I have a system that compensates for my laziness.

It’s called a Personal Operating System. It’s a set of rules and principles that govern my behavior. Systems are essential to running a successful business, why wouldn’t you also implement a system to run your life?

My Personal Operating System is based around a few core principles for maximizing productivity and output.

  • Schedule and ritual are essential to free working memory and avoid decision fatigue – automate the unimportant areas of life and save your creativity and decision making power for the few important and high impact items.
  • A personal operating system helps compensate for lack of productivity or motivation. A good system lets you recover and ensures that the few things you do accomplish have the highest leverage impact possible.
  • You have to get good at letting the little bad things happen or wait, so you can get the big things done. It’s not because I don’t have the time. This is a really important distinction – it is because I don’t have the attention.
  • Perform a regularly scheduled 80/20 analysis. Your to-do list should be only the highest leverage positive 20%; your not-to-do list should be to avoid the most negative 20% of people and activities. More on how to perform an 80/20 analysis.
  • Focus on eliminating as much as possible before doing more. What are the psychic anchors tethering me to the ground and creating stress?

The message is simple – focus on scheduling and automating as much as possible, zero in your activity on the highest leverage things you are doing, and cut out the rest.

I crunched my Operating System down into a one page PDF.  It’s part motivational quotes, part philosophy, and all about getting the right things done.

I review these principles first thing every Monday morning when I wake up. I also have a print-out pinned to my wall. I pull it out and read it over whenever I feel like I am losing focus or not accomplishing what I want.

You can download the PDF right here.

If you want to learn more about the philosophies underpinning my Personal Operating System, I highly recommend checking out the blog of Tim Ferriss and in particular a fantastic Mixergy interview he did recently that flushes out many of these ideas in more depth.

Image  Credit to Simon Harrod on Flickr.

How To Perform An 80/20 Analysis

Want to be more productive? Start by cutting out wasted time and focusing on the few highest leverage activities you can.

Sounds great, right? The problem is, of course, how do you actually DO that? The cornerstone of productivity is having simple and easy processes that enable you to follow through and pick back up when you slip.

One of the things I perform on a regularly scheduled basis is an “80/20 Analysis” of everything in my life.

If you’re unfamiliar with the 80/20 rule, also known as the Pareto Principle, check out this great article on Lifehacker about it. The core message is that most things we do are largely irrelevant and the “vital few” have an outsized impact on our lives.

Performing a regular 80/20 analysis has been an invaluable tool for me, and I wanted to share the template that I use to organize my own thoughts whenever I perform one.

GET IN THE MINDSET

Mindset is one of the most critical elements of success. You absolutely have to get your mindset right first. Tony Robbins frequently says that more than 80% of success is psychology. Here are some great quotes from Tim Ferriss to help you get your mind in the right place to conduct an 80/20 analysis.

“The goal is to find your inefficiencies in order to eliminate them and to find your strengths so you can multiply them.” – Tim Ferriss

“Simplicity requires ruthlessness.” Tim Ferriss

Do 80/20 analysis constantly, so to analyze also the 20% of people or activities that are creating 80+% of my stress, consuming 80+% of my time, and as is almost always the case, the stuff that was consuming the most time did not overlap very much with the 20% that was most important.

On a regular schedule you’ll sit and do that 80/20 analysis and ask yourself what’s the 20% of my life that’s getting me the most impact, the 80% impact, and how do I stop doing the rest.

Look at the 20% that are the highest leverage positive things and I’ll focus on those. I’ll look at then the 20% most negative things that are consuming the most time, and try to eliminate those. There’s quite a bit in-between that in the end, often takes care of itself, but really keeping your eye ball of your to-do list are the 80-20 positive, and the not-to-do list for the 80-20 negative is huge. 

When I’m really feeling overwhelmed, I actually focus on the negative, which is a good thing. I focus on eliminating as much as possible before I focus on doing more. What can I get rid of? What are the psychic anchors, which are like, tethering me to the ground where I’m trying to sprint forward, but I’m just dragging this weight behind me. I focus on a massive elimination first. I try to remove as much as possible so that I have fewer moving pieces to think about. So elimination is a huge part of why I get anything done.”

Tim Ferriss

STEP ONE – FOCUS

  •  Mute Cell Phone
  •  Close Outlook
  •  Close Chrome (or any other Browser)
  •  Take out a pad of Graph Paper

STEP TWO – THE CORE 80/20

Ask each question and brainstorm / write the answers down BY HAND on a sheet of paper. 

BUSINESS

  • What 20% of sources are creating 80% of my problems and unhappiness?
  • What 20% of sources are resulting in 80% or my desired outcomes & happiness?

PERSONAL LIFE

  • What 20% of sources are creating 80% of my problems and unhappiness?
  • What 20% of sources are resulting in 80% or my desired outcomes & happiness?

STEP THREE – THE FOLLOW UP QUESTIONS

  • If I was completely incapacitated and had to work two hours per day – what would I focus on?
  • If I was even more incapacitated and had to work two hours per WEEK – what would I focus on getting done?
  • What are the top three activities I use to fill time to feel as though I’ve been productive? What are my CRUTCH activities?
  • When do I feel STARVED FOR TIME? What commitments, thoughts, and people can I eliminate to fix this problem?

STEP FOUR – ACTION

  • 20% highest leverage positive things -> Defines TO DO LIST
  • 20% most negative things (eliminate) -> Defines NOT TO DO LIST
  • What is the financial impact (or other impact) of these activities?
  • Can these activities be eliminated? How?
  • Can these activities be delegated? How?
  • Can these activities be automated? How?
  • Define CONCRETE steps (especially next steps) for how to do each of the above.
  • Focus on eliminating as much as possible FIRST.

 

I made this into a downloadable PDF copy that you can get here if you want one for yourself.

Many of these quotes and ideas are from the blog of author Tim Ferriss and recent interview he did on Mixergy.com which I highly recommend checking out.

Hope you enjoyed this post and that it helps you become more productive.

29 Lessons from Paul Graham & Y Combinator – Advice for Startups

Hacker News was originally recommended to me by this crazy Czech guy named Jan Sramek. Jan flew in from London to New York and happened to be in my training class when I first started working at Goldman.

Jan, who is currently one of the founders of a stealth mode startup in Switzerland called Erudify, was sort of an oddity to us. Not only had Jan already written a Self Help Book by the ripe age of 22, but he also seemed to have an entire PR team lauding all these wild feats and accomplishments he had achieved in the UK during his undergrad years.

I knew he was a pretty smart guy and I would always pick his brain about what he was reading, thinking, etc.  One day I asked him if he knew any good blogs to read. I was bored and looking for some good stuff other than mashing refresh on the WSJ website and Bloomberg over and over again.

That happened to be one of the most fortuitous questions I’ve ever asked in my life. Not only did Jan recommend Tim Ferriss’s blog to me but he also shared Hacker News.

I still remember sitting at my desk as all the blog posts and news stories on Hacker News filled my head with entrepreneurial daydreams. Meanwhile I was stuck sitting there 14 hours a day with my eyes glued to the markets.

Since Y Combinator runs Hacker News, I instantly wanted to read the book “The Launch Pad: Inside Y Combinator, Silicon Valley’s Most Exclusive School for Startups” as soon as I heard about it.

Launch Pad is a quick read and I definitely recommend it for anyone interested in startup life or wanting to learn more. I learned a ton about Y Combinator and a bunch of its companies (Rap Genius and Code Academy are two that I discovered – and both kick ass).

Below are all of my Kindle highlights (29 in total) from the book.  I wanted to share them to give you a taste of what the book is like.

The twenty-five-year-old had the most advantages, which included “stamina, poverty, rootlessness, colleagues, and ignorance.”

If you’re not fully focusing on your product to the exclusion of all else, you’re wasting your time.

“There’s so much luck involved with startups you increase your odds of success by swinging the bat multiple times. Each time you do something that isn’t swinging the bat, you theoretically decrease your odds of success,”

No one asked ‘Should we fix payments, or build a recipe site?’ and chose the recipe site. Though the idea of fixing payments was right there in plain sight, they never saw it, because their unconscious mind shrank from the complications involved. You’d have to make deals with banks. How do you do that? Plus you’re moving money, so you’re going to have to deal with fraud, and people trying to break into your servers. Plus there are probably all sorts of regulations to comply with. It’s a lot more intimidating to start a startup like this than a recipe site. When Patrick Collison was asked what he thought about Graham’s point about the intimidating nature of a big problem, Collison politely dissented, arguing that what should be emphasized was that addressing a hard-to-solve problem is actually not as hard as everyone thinks: founders and employees alike are inspired to work harder than if they were taking on the mundane. [Referencing Stripe]

One’s environment is critically important to one’s productivity.

“Here’s how to generate new ideas. Three things. One: founders are target users. Two: not many people could build it, but founders are among them. Three: few people realize it is a big deal.”

“Ask yourself: ‘What do I wish someone would start a startup to do for me?’” says Graham. “The next best thing: something for someone else that you know is a problem.”

The best kind of thing to work on – and I appreciate this is going to be somewhat abstract or higher-level advice – the thing you want to work on is, there’s this need that’s really clear and you can just launch some shitty site and people just start using it.

Friends can mislead, Taggar says. His advice: address what businesses need, not what consumers say they would use.

“One of the big things they focus on is ‘proxy for demand.’ Which basically means when looking at some new idea, they want to see what people are doing at the moment? What kinds of crappy solutions are they hacking together at the moment.” They’ll ask founders who are building a product what their future users are doing right now. “If the answer is, ‘No one is really doing it at the moment’—a lot of people think that’s a good answer, but it’s not. Because it means they’re not desperate for it.”

“If you’re not embarrassed by the first version of the product you’ve launched, you’ve launched too late.”

He suggests that startups set a specific weekly target for growth, which can be measured in terms of revenue or users or something else, but should be essential to the startup. Anything that is not directly related to that metric is to be pushed to the wayside.

“I’m always a fan of, rather than trying to do huge, radical releases of stuff, just test out theories, the easy, simple way, and just see if anything starts happening,”

“The gold standard of weekly revenue growth is 10 percent a week. That’s insanely high. That works out to 142x a year.”

This is a strange question to pose, because, in startup life, commitment comes in only one size: total.

“They don’t fuck around, right? The startups that succeed, they don’t go to meet-ups, they don’t run around talking to boards of advisers, they just write code and talk to customers, right?” This is Graham’s oft-repeated mantra, too. Write code and talk to customers.

“We did it because we want their software to be good,” he explained. He mocked the “professional” notion that work and life are supposed to occupy separate spheres. In a startup that begins in an apartment, the founders work odd hours, wearing the most casual of clothing. They look at whatever they want online without worrying whether it’s “work safe.” The cheery, bland language of the office is replaced by wicked humor. And you know what? The company at this stage is probably the most productive it’s ever going to be.

In the YC universe, business schools are deemed so useless that no one bothers to expend any energy in remarking upon their irrelevance to software startups. The only question relating to formal education that does draw attention is whether to finish or even go to college.

Only to the basic YC tenets: work on code and talk with customers; launch fast and iterate; focus on one measurable weekly goal.

“The way to get really big returns is to do things that seem crazy,” he wrote in 2007, “like starting a new search engine in 1998, or turning down a billion-dollar acquisition offer”—a reference to Facebook.

“It will all come to what they feel in their gut about you guys as founders. If you seem”—he pauses again—“you know, fearsome, like you’re going to take over the world, then they’ll think, ‘OK, these guys are going to take over the world, and there’s definitely a world here for them to take over,’ right?”

The transition that makes people seem more confident, more resourceful, and tough—right?—that’s what you get out.

The YC User’s Manual tells founders that even in the very best case, when an investor is paying close attention, information equivalent to only four or five sentences will be absorbed from a presentation seen for the first time. One of the sentences should be a genuine insight, something that will surprise—“If a statement is not surprising, it’s probably not an insight,” the manual says. Investors may remember far less of the presentation than this, however. A single noun may be all that sticks in the mind afterward. “Something to do with chat.” “Something to do with databases.” The manual says about a third of the startups on Demo Day will do no better than this.

A lot of things broke. But a lot of things always break. So we’re going to fix the things that break.” He tries out a joke: “And then more things will break.

In YC’s portfolio “the number one company is worth more than the next 199 companies combined, while number two is worth more than the next 198 combined, and so on.”

[To be a billion dollar company] “One: you really need a huge market. And two: you need founder-market fit.”

“Just focus on one of three things: One, be cheaper. Two, focus on a niche. Or, three, be 10x better than the other products out there.”

“The point of this story is that you guys need to have this kind of swag. You need to suck people, and especially investors, into your own reality.” He heads into the conclusion. “So, what have we learned? One. You’ve got to put yourself out there and meet people, even if it’s awkward. Two. You’ve got to hug your cofounders and love your batchmates. Three. Experts aren’t going to help you solve your problems. Four. You’ve gotta have swag.”

“Smart people by definition have odd ideas.”

Hope you enjoyed and as always – hit me up on Twitter.

 

Five Random Life Lessons From Danny Meyer

danny meyer salt shaker

As you know I’m a huge fan of Danny Meyer and everything he’s done in the hospitality business. If you’re familiar with the Salt Shaker Theory – then you will enjoy these life lessons from Danny. I love reading great books about business and entrepreneurship and Setting the Table is no exception. Here are a few of the great life lessons I took from Setting the Table.

Give First

“I would enter the restaurant business with a potent combination of my father’s entrepreneurial spirit and my grandfathers’ legacies of strong business leadership, social responsibility, and philanthropic activism. And I would have a chance to give others two things I craved: good food and warm hospitality. I had begun to understand that business and life have a lot in common with a hug. The best way to get a good one was first to give one.”

“If I want our guests to take an interest in us, I’d better take an equal interest in them.”

This is really one of the most important lessons in business and in life. Give to others first and help other people. That’s how you become a valuable resource and ultimately how you build strong relationships.

Have Fun Being Serious

“ ‘We have fun taking service seriously,’ he said. ‘And as for perfection, we just hide our mistakes better than anyone else!’ That was a refreshing insight for me as I continued to hone my own version of hospitality.”

I am a huge proponent of this. Work hard and play hard. You have to be able to have fun with what you’re doing but also be able to take it seriously. I think the way Danny phrases it is perfect – have FUN taking it seriously.

Be Respectful

“‘Leave the campsite neater than I had found it’ (That concept remains, for me, one of the most significant measures of success in business, and in life.)”

I take this quote to mean a lot of different things. Don’t be selfish, don’t be entitled, be respectful to others. It’s such a simple quote but the implications are far reaching for how you should behave in business and in life.

Make People Feel Special

“Everyone goes through life with an invisible sign hanging around his or her neck reading, “make me feel important.” Giorgio and Mary Kay had it right. The most successful people in any business that depends on human relationships are the ones who know about that invisible sign and have the vision to see how brightly it is flashing. And the true champions know best how to embrace the human being wearing the sign.”

“Ideas at their best happen for people. At their worst they happen to people.”

“Feeling seen and acknowledged is a powerful human need.”

“For most people it’s far more important to feel heard than to be agreed with.”

Not only is this absolutely one of the most important lessons in social media, but it rings so true when talking about management, leadership and really the entire hospitality industry. Many businesses have been built on this idea alone.

Know Your Identity

“It was that they had no clear idea what Eleven Madison Park represented as a dining experience. Was it a bistro or a grand restaurant? Was it inexpensive or for special occasions? Was it French? Was it a place for sandwiches, potato chips, and cookies? Until we had answered those questions for ourselves, we couldn’t avoid confusing our potential customers. Know Thyself: Before you go to market, know what you are selling and to whom. It’s a very rare business that can (or should) be all things to all people. Be the best you can be within a reasonably tight product focus. That will help you to improve yourself and help your customers to know how and when to buy your product.”

Restaurant’s live and die by their identity. The storied past of restaurant failures is often a tale of restaurants failing to ever define what they truly want to be and relentlessly defending their values.

Which quote is your favorite? Join in the convo in the comments or hit me up on Twitter

Your Business Idea Is Worthless (And What You Can Do About It)

People get caught up in finding the “perfect idea” to execute and end up never executing anything. The problem with waiting around for the perfect idea is that even if you find it you have no idea if it works.

The real key is finding and filling demand. It doesn’t matter what your ideas is as long as it fills your customer’s demand.

Paras Chopra has an amazing post on his blog talking about how chasing market opportunities is the key to success. I can’t put it more simply than this quote.

“It is the market opportunity coupled with good execution which generates value and revenues. In this post I want to go one step further and argue that most successful (software) companies got there by chasing a market opportunity and not by having a unique business idea.”

Paras Chopra

Any business idea is only useful as long as it fills a particular demand. The best way to go about starting a business is to find customers, ask what their problems are, and then create a solution.

Dane Maxwell, another successful software entrepreneur said the same thing.

“If you only need a paying customer to start a business, then you don’t really even need an idea for a product because you can just ask them what their problems are, which is exactly how all of my products are built. I didn’t come up with any of the ideas on my own.”

-Dane Maxwell on Mixergy.com

“Disregard Ideas, Acquire Assets” explains the same premise in a different way. Picking one great idea and going all in isn’t the right strategy. If you want to start building something – start creating assets (like your social media presence) and then as your assets grow you can take advantage of the opportunities they create.

“What I’ve found though, is that the most exciting startup ideas are… backed by a hidden asset. When I talk about assets, cash is the least interesting of all of these. Instead, I’m talking about more intangible assets like skills, reputation, relationships, attention & fame. I’m of the strong opinion that the most reliable path towards startup success is to focus relentlessly on acquiring interesting assets and then execute on the startups that naturally fall out of them.”

-Xianhang Zhang on Quora

The big takeaway here is that waiting around for “that one great idea” is the completely wrong approach to starting a business. Find a market, find a customer, and try to fill their demand. Keep finding cheap ways to test ideas and see if you have traction.

Chase market opportunities. Build assets. Don’t worry about finding that holy grail. There is no great idea waiting on you to discover it and change the world.

Give First, Ask Questions Later

Giving is often an overlooked part of the business world. So many people are only concerned with “What’s In It For Me?” The real secret to success is to help other people first and give to them without asking for anything back.

Giving first can be a powerful act that can engender credibility and trust. When you give something away to someone without any conditions you suddenly stand out from the loud and clamoring crowd of people screaming “me me me me buy my product!”

What do I mean by giving? I’m not talking about free product samples. I mean giving information, time, or help. Offer to help someone out for free. Brainstorm ideas for other people and just offer them up without asking for anything back. Give something valuable.

Help other people become successful and help them build their careers. To paraphrase Dale Carnegie:

“You can become more successful in two months by becoming really interested in other people’s success than you can in two years trying to get other people interested in your own success.”

All the most successful bloggers follow the same strategy of giving. They give away tons of free and valuable content without asking for anything in return. Giving their blog content away loops readers in. They become more familiar with the blogger and they like their content and writing style. Maybe one day they purchase something from the blogger, maybe not.

These content creators aren’t hard selling you their products or ideas with cheesy advertising. They are becoming a valuable resource to you, a source of information and ideas. By giving away all their content for free they build credibility with their reader base. They also build relationships.

Don’t focus on “What can this person do for me?” Focus on what you can do to help them. Without asking for anything back. Giving to people first creates solid foundations for a relationship. Keith Ferrazzi writes about this in his book “Never Eat Alone:”

“Real Networking is about finding ways to make other people more successful. It was about working hard to give more than you get. … Learn to become indispensable to the people around you.”

Find a way to solve other people’s problems. That’s what selling really is at the end of the day – solving someone’s problems for them. The key to giving is that it builds a foundation for you to help people solve their problems and builds a relationship that can later be mutually beneficial for both of you.

To be successful, to create value, to build relationships – you have to give more than you get. Gary Vaynerchuck – the wildly successful social media mogul has a rule called the 80/20 rule of business. Give 80% of any relationship off the bat and watch the relationship blossom. He is comfortable giving four times as much to someone as he gets back from them because he knows that builds the foundation for real success and real relationships.

You have to be willing to take the leap first. Give something away. Don’t keep score and don’t ask for anything back.

Check out Gary’s 4 minute video on 80/20 rule right here.

James Altucher also has an awesome post on his blog about giving you can check out here.

 

Five Must Read Books On Entrepreneurship

“If I read a book that cost me $20 and I get one good idea, I’ve gotten one of the greatest bargains of all time.”  – Tom Peters

I am a sucker for cheesy and motivational business books and you can usually find me reading one (even on the beach). If I had to whittle my list of favorite business books down to just five selections that I would recommend to someone who is thinking about going out on their own and starting a business – these would hands down be the books that would make the cut. Warning – these books may make you want to quit your day job!! (The titles are affiliate hyperlinks if you want to check out their Amazon pages)

The Four Hour Work Week

The oddly titled book by controversial Silicon Valley personality Tim Ferriss (check out his blog here for some pretty interesting reading) is probably one of my favorite books of all time. I would say this book factored tremendously not only in my decision to ultimately leave my Wall Street job for more entrepreneurial pursuits but also in my own decision to write a book.  That said, take this book with a grain of salt. I think the message of the book is amazing – some of the concrete tips that Tim offers in the book are not entirely practical – but the framework that Tim uses to think about business and life is tremendously useful.

Tim’s biggest strength is his ability to think outside of the box. He really has an ability to see through all the preconceived notions and ideas that many people take for granted and turn them completely on their head.  Start with this book because it will get you fired up to really do something awesome – but after that are you going to need a little bit more substance.

The Personal MBA

This book is the meat and potatoes you’re gonna want after reading 4HWW.  Josh Kaufman absolutely crushes the fundamentals of business. Designed to be concise and information packed – this book tackles nearly every aspect of starting and running a business with amazing clarity. Josh read over 100 contemporary business books and synthesized them all into The Personal MBA. If you know nothing about business or think you know everything – I guarantee you will learn a tremendous amount from reading this.

This is the kind of book that you will want to keep in your bag because you keep taking it out and referencing different sections. This book focuses on teaching what Charlie Munger calls “mental models” – or “useful ways of thinking about the world that you can use to your advantage in a wide variety of situations” – giving you an arsenal of tools to tackle many different entrepreneurial problems.

The E-Myth Revisited

Michael Gerber draws on many of the themes from Personal MBA but really ties together the core of systematizing and documenting your business. The book is very straightforward and easy to follow because the core lessons follow the narrative of a fictional pie shop’s journey from disorganization to success. I’ve personally used dozens of the specific examples and lessons from this book to organize and streamline the operations of a mismanaged business. E-Myth combined with Personal MBA will give you a great foundation of business and operational knowledge to get you going.

Mindset

Mindset is the kind of book that will get you fired up to do absolutely anything. The crux of the book is that people fall into two camps – “fixed mindset” and “growth mindset” – and if you happen to be a fixed mindset thinker (I was in a lot of ways) – switching to the growth mindset can open up huge amount of opportunity for you. Mrs. Dweck delves pretty deep into the psychological foundation for which mindset you might find yourself in – but to sum up the basic tenants of the book:

“In the world of fixed traits – success is about proving you’re smart or talented. Validating yourself. In the [world of growth] – the world of changing qualities – it’s about stretching yourself to learn something new.”

Not trying to go quote crazy here but (I should probably write a whole post on this…) this quote defines how I thought about risk, success, and failure in many areas of my life before I read this book.

“Everything I was going through boiled down to fear. Fear of trying and failing… Nothing is harder than saying ‘I gave it my all and it wasn’t good enough.’ The idea of trying and still failing – of leaving yourself without excuses is the worst fear within the fixed mindset.”

“Instead of trying to learn from and repair their failures people with the fixed mindset may simply try to repair their self esteem… by assigning blame or making excuses.”

It’s impossible to learn from your mistakes if you deny them by blaming something else.

I will say – the one drawbook of this book is that it gets pretty repetitive towards the end – repeating the same lesson in several different contexts (business, parenting, sports etc) but the message is so powerful in my opinion that it outweighs the repetitiveness.

The Monk and The Riddle

“Imagine I have an Egg” – Mr Wizdom cups an imaginary egg in his hand –“and I want to drop this egg three feet without breaking it. How would I do that?”

If one book will push you over the edge and really give you the drive to strike out on your own – it would be this. A great (and quick) read about leadership, success, business, and life – this book is eerily timely in today’s technology world. Written and set in a pre dotcom bubble Silicon Valley – this book follows the fictional journey of Funerals.com and the not-so-fictional life of its author Randy Komisar.

“Instead of managing business risk to minimize or avoid failure, the focus here is on maximizing success… failure is an unavoidable part of the search for success. Silicon Valley does not punish business failure. It punishes stupidity, laziness, and dishonesty. Failure is inevitable if you are trying to invent the future.”

It’s really a book that makes you ask – “What do I want to do with my life?” – and forces you to think long and hard about the answer. This book is 90% inspiration 10% information – but it will fill you with the fire to take a risk, take charge of your life – and make it what you want it to be.  The quote I put at the beginning is the riddle – don’t try to answer it now. You have to sit with the riddle for a while and the answer will simply come to you.

The Salt Shaker Theory – Danny Meyer’s Secret Sauce For Restaurant Management

Danny Meyer’s “Setting The Table” is one of the best books ever written on the restaurant business. An exciting read that covers not only Danny’s life but also his philosophies on business and success. One of the most remarkable ideas from Setting The Table is the “Salt Shaker Theory.”

“Your staff and your guests are always moving your saltshaker off center. That’s their job. It is the job of life. It’s the law of entropy! Until you understand that, you’re going to get pissed off every time someone moves the saltshaker off center. It is not your job to get upset.

I love the last line – “Its not your job to get upset” – its a remarkably insightful line that almost channels buddhism. Business owners and restaurant operators often struggle in the face of change and uncertainty. How should you react if your salt shaker keeps getting moved?

“Your job is just to move the shaker back each time and let them know exactly what you stand for. Let them know what excellence looks like to you. And if you’re ever willing to let them decide where the center is, then I want you to give them the keys to the store. Just give away the fuckin’ restaurant!” Wherever your center lies, know it, name it, stick to it, and believe in it. Everyone who works with you will know what matters to you and will respect and appreciate your unwavering values. Your inner beliefs about business will guide you through the tough times. It’s good to be open to fresh approaches to solving problems. But, when you cede your core values to someone else, it’s time to quit.”

The salt shaker is a powerful metaphor for one of the keys to success in the restaurant industry – maintaining high standards and core values. Change is inevitable and you will always be faced with challenges along the way. The key phrase is “let them know what excellence means to you” – this quote isn’t about never changing or never adapting – its about never wavering on your values. Danny Meyers takes this compelling parable and explains how it informs his managerial style.

“Understanding the “saltshaker theory” has helped me develop and teach a managerial style I call constant, gentle pressure. It’s the way I return the saltshaker to the center each time life moves it.

I send my managers an unequivocal message: I’m going to be extremely specific as to where every component on that tabletop belongs. I anticipate that outside forces, including you, will always conspire to change the table setting. Every time that happens, I’m going to move everything right back to the way it should be. And so should you! That’s the constant aspect. I’ll never recenter the saltshaker in a way that denies you your dignity. That’s the gentle aspect. But standards are standards, and I’m constantly watching every table and pushing back on every saltshaker that’s moved, because excellent performance is paramount. That’s the pressure. Constant, gentle pressure is my preferred technique for leadership, guidance, and coaching. It’s the job of any business owner to be very clear as to the company’s nonnegotiable core values.”

It’s such a simple analogy but I think it drives home a great point – your values define you and sticking to your standards is essential to effectively managing and leading your business.

If you enjoyed this – you might also like my post Five Random Life Lessons From Danny Meyer. He is a truly inspirational restaurateur and has so much to teach about life and the restaurant business.