Three rare and powerful skills:

1. Understanding why people believe things in a way that makes you respect their delusions.

A rare and useful skill is understanding that people you find to be deluded likely suffer from the same shortcomings you do.

Historian Will Durant wrote in his book The Lessons of History that we should learn enough from history to respect each other’s delusions. He explained:

Our knowledge of any past event is always incomplete, probably inaccurate, beclouded by ambivalent evidence and biased historians, and perhaps distorted by our own patriotic or religious partisanship. Most history is guessing, and the rest is prejudice.

I think this boils down to three points:

• Everyone is heavily influenced by what they’ve experienced firsthand, because what you’ve experienced is more persuasive than something you read about.

• Even our understanding of firsthand experience is sketchy, because we oversimplify what happened and self-justify our involvement.

• Those who didn’t experience an event firsthand have an even weaker grasp on reality because they can cherry pick the oversimplified, self-justified arguments and data from people with firsthand experience.

So everyone has delusions about how the world works. You, me, everyone.

We are all prisoners to our past, products of our generation, and influenced by who we’ve met and what we’ve experienced, most of which has been out of our control. Some are worse than others, and some are more aware of their blindspots. But everyone has a firmly held belief that an equally smart and informed person disagrees (Read more...)

An asset you don’t deserve can quickly become a liability.

Maybe your portfolio surged during a bubble, your company hit a monster valuation, or you negotiated a salary that exceeds your ability. It feels great at the time. But reality eventually catches up, and demands repayment in equal proportion to your delusions – plus interest.

These debts are easy to ignore because they are often repaid in the form of self-doubt and crushed morale. But they are very real, and when you understand their power you become careful what you wish for.

Companies should want the valuation they deserve, and not a penny more.

Workers should want a salary that matches their skill, and nothing more.

Families should want a lifestyle they can sustain, and nothing higher.

None of those are about settling or giving up. It’s about avoiding a certain kind of psychological debt that comes due when reality catches up.

WeWork is currently worth $3.5 billion, which is a monster success for a 12-year-old company – it’s probably in the top 0.0001% of business successes. But of course no one feels that way. The company was worth $47 billion a few years ago, and it was trying to go public at a $100 billion valuation, which no one could justify but felt fun because those were the times we were living in. So by comparison today’s valuation feels like a corporate bellyflop – embarrassment, employees whose stock options expired worthless, and morale shattered as it laid off thousands (Read more...)

Two weeks ago, Mitt Romney wrote an opinion piece in The Atlantic titled, “America Is in Denial”. The piece highlights numerous potentially “cataclysmic events” facing the nation, namely droughts out west, inflation, rising debt levels, profligate government spending, melting ice caps, illegal immigration, and the events of January 6th. Interestingly though, Romney argues that the most significant threat is actually not the events themselves, but rather Americans’ refusal to address them.

The question is why?

Romney believes it is due to our “powerful impulse to believe what we hope to be the case — We don’t need to cut back on watering, because the drought is just part of a cycle that will reverse. With economic growth, the debt will take care of itself. January 6th was a false-flag operation.”

You may or may not agree with Romney’s causes for concern, but for the moment let’s assume that at least a few have merit. If so, why do people so rarely act before a crisis occurs? Why do we instead choose to bury our heads in the sand and hope for the best?

The answer is actually quite simple — no one knows when something will break. It could be imminent or many years away. No. One. Knows. As a result, people tend to push the throttle until it does.

History is full of examples. It’s why governments don’t reform until it’s too late, real estate developers believe there is always room for one more building….theirs (Read more...)

Tesla has single-handedly transformed the landscape of the automobile industry worldwide in less than two decades. Before it, almost no car companies were seriously invested in developing all-electric vehicles (EVs).

Now, automakers around the world are racing to catch up to Tesla, completely overhauling their R&D to prioritize EVs.

And we think Tesla and the cars it makes are good.

Yes, it’s had its fair share of controversy and drama over the years, from accusations of sexual harrasment at the company to CEO Elon Musk’s infamously mercurial behavior on Twitter (and his efforts both to outright buy it and then get out of buying it). Tesla was also recently de-listed from the S&P 500 Environmental, Social and Governance (ESG) index, which struck many people as odd for a company whose raison d’être is to eliminate fossil fuel emissions.

Setting aside all that recent news to look at Tesla’s cars themselves, the Models S, 3, X, and Y are truly groundbreaking in the EV space because they were the first cars to do everything that a gas-powered car can do without asking drivers to sacrifice style and luxury. And people have been lining up in droves to buy them. So, despite the controversies, the company seems to be doing an admirable job of hewing to its mission to “accelerate the world’s transition to sustainable energy.”

We’ve recently gotten really interested in the materials that make up our world, and so we started to wonder: what are Tesla’s cars actually (Read more...)

Steamboat Willie put Walt Disney on the map as an animator. Business success was another story. Disney’s first studio went bankrupt. Later cartoons were monstrously expensive to produce, and financed at onerous terms. By the mid-1930s Disney had produced more than 400 cartoons – most of them short, most of them liked, and most of them losing money. Disney and his studio were nearly broke.

Snow White and the Seven Dwarfs changed everything. The $8 million it earned in the first six months of 1938 was an order of magnitude higher than anything the studio earned previously. It transformed Disney Studios. All company debts were paid off. Key employees got retention bonuses. The company purchased a new state-of-the-art studio in Burbank, where it remains today. By 1938 Walt had produced several hundred hours of film. But in business terms, the 83 minutes of Snow White was pretty much all that mattered.

Long tails drive everything. They dominate business, investing, sports, politics, products, careers, everything. Rule of thumb: Anything that is huge, profitable, famous, or influential is the result of a tail event. Another rule of thumb: Most of our attention goes to things that are huge, profitable, famous, or influential. And when most of what you pay attention to is the result of a tail, you underestimate how rare and powerful they really are.

Venture capital is a tail-driven business. You’ve likely heard that. Make 100 investments, and almost all of your return will come from five of them; most (Read more...)

If you find something that is true in more than one field, you’ve probably uncovered something particularly important. The more fields it shows up in, the more likely it is to be a fundamental and recurring driver of how the world works.

Take two topics that seemingly have nothing to do with each other: goldfish and tech companies.

Take two groups of identical baby fish. Put one in abnormally cold water; the other in abnormally warm water. The fish living in cold water will grow slower than normal, while those in warm water will grow faster than normal.

Put both groups back in regular temperature water and they’ll eventually converge to become normal, full-sized adults.

Then the magic happens.

Fish with slowed-down growth in their early days go on to live 30% longer than average. Those with artificial super-charged growth early on die 15% earlier than average.

That’s what biologists from University of Glasgow found.

The cause isn’t complicated. Super-charged growth can cause permanent tissue damage and “may only be achieved by diversion of resources away from maintenance and repair of damaged biomolecules.” Slowed-down growth does the opposite, “allowing an increased allocation to maintenance and repair.”

“You might well expect a machine built in haste to fail quicker than one put together carefully and methodically, and our study suggests that this may be true for bodies too,” one of the researchers wrote.

The same thing has been found in humans. And in birds. And in rats.

And (Read more...)