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The Attention Span. “Picking Fights.”

I’ve been extremely fortunate to spend well over a decade interacting with and studying the world’s best businessmen, investors and strategists.

While I wish I could say I possess any of their traits myself, I do think I’ve been able to identify some of the universal characteristics of greatness.

“Picking Fights”

[7 minute read]

Gazelle: I told you. I made contact with the KGB, MI6, Mossad, and Beijing. They all insist it wasn't one of theirs.
Valentine: Beijing. So freaky how there's no recognizable name for the Chinese Secret Service. Now that's what you call a secret, right?
- From the movie Kingsman, The Secret Service

The best intelligence agency is the one you don’t even know exists. The ancient Chinese would never dream of erecting a statue to a great general. This is because a truly brilliant tactician would have won before he set foot upon the field, ideally without even engaging in combat. Thus everything he did would look easy and inevitable. If you’re getting noticed fighting all these heroic battles, you haven’t done your homework going in.

If you pick the right game, your victory is assured before you start playing. I’ve written previously about understanding where a game sits on the luck/skill continuum, and identifying tail-trades. But there’s a bigger picture here. After studying elite strategists across diverse fields, there are 2 deceptively simple, but essential, components to all game selection:

Know who you are and where you are.

One of my favourite Wall Street adages is: “If you don’t know who you are, the stock market is an expensive place to find out.” Graham Duncan of East Rock Capital wrote an excellent essay (below) on matching character to game selection in investing. After interviewing and assessing more than 5,000 investment managers, he sees investing competence as a mental evolution. We progress from apprentice, to expert, professional, master and finally steward of the game. As mindsets evolve they become increasingly versatile. Unusually rapid cognitive flexibility is a defining trait of some of the best traders, forecasters and businessmen of all time. Duncan argues a “master of the game” mindset was best described by Harvard professor Bob Kegan in his description of a “self-transforming mind.”

The self-transforming mind transcends ideological systems, and sees everything in terms of shades of gray, rather than polarities and binary choices. The very best investors I’ve encountered have an uncanny ability to anticipate all potential outcomes, weight them probabilistically, then adapt dynamically. It’s a talent for making good decisions, but without simplifying the complexity of the situation. As Kegan explains in the video below, this is “both/and” thinking rather than “either/or” we’re commonly used to. For example, today’s stock market can be both exhibiting the behavioural excesses common to previous financial bubbles, and completely different due to the incomprehensible scale of the technology being used to trade it.

Allegedly only 1% of the adult population is at the both/and level. How does one attain it practically? Kegan said the fastest way to develop mental complexity is to hang out with people one stage ahead of you. On a practical basis, Paul Graham nailed a critical nuance with an incredibly simple insight in his essay “Keep Your Identity Small”:

“If people can't think clearly about anything that has become part of their identity, then all other things being equal, the best plan is to let as few things into your identity as possible.”

Graham’s point is that the moment you self-identify as something (for example, a liberal or conservative) you limit the flexibility with which you can perceive the world. This is why siloed experts fail repeatedly in a complex, accelerating environment. Discarding outdated beliefs is typically harder than learning new information. If it’s something that makes up a part of your social identity it’s even more difficult. A challenging exercise is to ask yourself “what did I previously believe, that is now no longer true?”

In terms of knowing where you are, Duncan also framed this within a business context. “After reading a large number of business school case studies, a friend of UCLA business strategy professor Richard Rumelt observed to him that “‘it looks to me as if there is really only one question you’re asking in each case: What’s going on here?’” Rumelt writes: “it was something I’ve never heard said explicitly but it was instantly and obviously correct. A great deal of strategy work is trying to figure out what is going on. Not just deciding what to do, but the more fundamental problem of comprehending the situation.”

This is rarely as easy as it sounds and sometimes extremely uncomfortable. In one of the all-time great speeches, “Courage Under Fire”, Admiral Jim Stockdale describes his experience of being relentlessly tortured for seven and a half years as a POW during the Vietnam war. He describes how the optimists were actually among the most vulnerable, because they had an unrealistically positive view of their own prospects.

“You must never confuse faith that you will prevail in the end- which you can never afford to lose- with the discipline to confront the most brutal facts of your current reality, whatever they might be.”

These concepts combine in the challenging book A Treatise on Efficacy, recommended by a wise reader. I’ve increasingly realized that success in our networked world is going to require a completely new mindset, a synthesis of Eastern and Western thinking. This is the focus of A Treatise. It’s not an easy read, I almost gave up more than once. The wonderful Blas Moros has summarized the book in a 30 page PDF (below- the book itself is only 200 pages!).

The crux is basically the importance of deeply understanding the stark reality of “what’s going on” before you even start, then you’ll see the potential inherent in the situation. The self-transforming mind adapts to it, nudges where appropriate and wins almost inevitably. This is what makes an unfair fight, and this is what brings together where you are with who you are.

The Ancient Greeks enshrined the concept of cause and effect in the Western consciousness. Their hero is Hercules- the man who through great feats of strength and cunning defeats his foes. The Chinese equivalent, Yu the Great, came out of a time of a gargantuan flood when the world was filled with monsters. He dug out riverbeds and directed the water back into the sea. Hercules sets himself out in opposition to great forces and prevails. Yu uses the natural propensity of water to flow downwards to the sea to work to his advantage. As the great Bruce Lee said:

“Be like water making its way through cracks. Do not be assertive, but adjust to the object, and you shall find a way around or through it. If nothing within you stays rigid, outward things will disclose themselves.
Empty your mind, be formless. Shapeless, like water. If you put water into a cup, it becomes the cup. You put water into a bottle and it becomes the bottle. You put it in a teapot, it becomes the teapot. Now, water can flow or it can crash. Be water, my friend.”

Other interesting Reading:

  • Read: A Treatise on Efficacy Summary by Blas Moros (30pp PDF).
  • Why Read. As I said above, this book is essential, but challenging, reading. This was a slow, 10-page-a-day exercise for me. Blas’ summary will be very helpful in giving you a sense of whether the content and style is useful for you. You’ll be seeing a lot more of these ideas in the weeks ahead.
  • Read: Courage Under Fire by Admiral Jim Stockdale (21 page PDF).
  • Why Read. A classic of modern stoicism, Stockdale’s experience shows us all what it’s like to survive almost incomprehensible suffering. Like Solzhenitsyn before him, he eventually ends up grateful for his experience in the camp.
  • Read. The Playing Field by Graham Duncan (25min read).
  • Why Read. A high-quality and insightful piece on thinking about investing mindsets. It is completely resonant with the perennial concepts of constant adaptation and self-awareness.
  • “For investors, I’ve come to think of five levels of the game:
  1. Apprentice — learning the game
  2. Expert — mastering the game you were taught
  3. Professional — making the game you were taught fit your own strengths and weaknesses
  4. Master — changing the game you play as part of your own self-expression and operating at scale
  5. Steward — becoming part of the playing field itself and mentoring the next generation.”
  • Watch. Bob Kegan on the Self-Transforming Mind (19 minute watch).
  • Why Watch. More details as to what it means to attain this mindset. Kegan’s wonderful “big idea” is that the rare, exclusively mid-life transition to self-transforming mind is an evolutionary response to transcending the narrow egoic consciousness that may be leading to our own destruction.

Have a great weekend!


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