“If You Don’t Stand for Something, You’ll Fall for Anything”
Anonymous
The email newsletter "The Volatility Illusion" by Jason Zweig discusses the perceived increase in market volatility, especially in light of recent significant stock movements. Zweig argues that this perceived volatility is often a cognitive illusion influenced by media reporting. He emphasizes the importance of understanding the actual percentage changes rather than the raw point changes in stock prices. Additionally, the newsletter delves into the word "volatile" etymology and its historical connotations, linking it to financial markets and broader cultural contexts.
Key Points
Perceived Market Volatility:
Recent significant drops in stock prices of companies like Nvidia and Tesla have led to a perception of increased volatility.
Zweig suggests this perception is partly due to "denominator blindness," in which people focus on absolute point changes rather than percentage changes.
Denominator Blindness:
Historical context: A 508-point drop in the Dow in 1987 was a 22.6% decline, whereas a recent 530-point drop was only 1.4%.
Media focus on large-point changes can make the market seem more volatile than it is.
Historical and Etymological Context of "Volatile":
The word "volatile" has roots in the Latin word "volare," meaning "to fly."
Historically, volatility was associated with flightiness and unpredictability, much like the behavior of financial markets.
Cultural References:
References to historical texts and artworks illustrate the concept of volatility.
The term "volatile" has been associated with financial instability and madness in historical contexts.
Key Quotes
"Volatility is back. Or so everyone seems to believe."
"By focusing on the magnitude, rather than the percentage, of price changes, news organizations... make markets feel more newsworthy, and volatile, than they are."
"500-point moves in the Dow still feel big even though they've shrunk into insignificance as the stock market has risen."
"Volatile means winged, after all. Artists portrayed Hermes or Mercury with wings on his feet or sandals, wings on his head or hat, and often wings on his wrists or arms."
"Is there a better metaphor for the way volatility in the financial markets always ends up consuming the very people who thought they wanted to pursue it?"
Why It Matters
Investor Psychology:
Understanding the cognitive biases affecting market volatility perceptions can help investors make more rational decisions.
Recognizing "denominator blindness" can prevent overreactions to market movements.
Media Influence:
Awareness of how media reporting can distort perceptions of market volatility is crucial for investors.
Investors should seek to understand the context of point changes regarding percentage impacts.
Historical Perspective:
The historical and etymological context of "volatile" provides a richer understanding of the term and its relevance to financial markets.
This perspective can help investors appreciate the long-standing nature of market unpredictability.
Practical Advice:
Reader contributions offer practical strategies to manage common investment pitfalls, such as emotional attachment to stocks and information overload.
Learning from others' experiences can provide valuable insights and strategies for better investment practices.
Cultural and Artistic Connections:
The cultural references and historical artworks highlight the broader implications of volatility beyond just financial markets.
These connections enrich the discussion and provide a deeper understanding of the concept.
By examining these aspects, the newsletter encourages investors to adopt a more nuanced and informed approach to market volatility.
Staring into the abyss as a core life skill | benkuhn.net
In "Staring into the Abyss as a Core Life Skill," Ben Kuhn discusses the importance of confronting uncomfortable truths and making difficult decisions, a skill he dubs "staring into the abyss." He argues that this ability is crucial for personal growth, making better life decisions, and achieving success. Kuhn shares his observations from working with Drew, the CEO of Wave, and other influential figures like Eliezer Yudkowsky and Holden Karnofsky, who excel at this skill. He highlights how avoiding uncomfortable truths can lead to suboptimal life choices and prolonged suffering. Kuhn also offers strategies for improving this skill, such as learning from others who are good at it and engaging in productive conversations with trusted individuals.
Key Points
Definition of "Staring into the Abyss":
Confronting uncomfortable truths and making difficult decisions.
Includes acknowledging past mistakes and making necessary changes.
Importance of the Skill:
Crucial for personal growth and making better life decisions.
Helps avoid locking oneself into a suboptimal future.
Examples of Effective Abyss-Staring:
Drew and Lincoln’s multiple pivots at Wave to find successful business models.
Eliezer Yudkowsky’s realization about AI alignment and rationality.
Holden Karnofsky’s shifts in focus at GiveWell and Open Philanthropy.
Consequences of Avoiding the Abyss:
Leads to poor life decisions and prolonged suffering.
Common in career choices, job dissatisfaction, and relationships.
Strategies for Improvement:
Learn from people who excel at confronting difficult truths.
Engage in conversations with trusted individuals to break unproductive thought patterns.
Seek out mentors or managers who demonstrate this skill.
Key Quotes
On the Nature of Abyss-Staring:
"Staring into the abyss means thinking reasonably about things that are uncomfortable to contemplate."
On the Impact of Abyss-Staring:
"I’ve come to believe that becoming more willing to stare into the abyss is one of the most important things you can do to become a better thinker and make better decisions about how to spend your life."
On Learning from Others:
"I got lucky to work closely with Drew, but I expect it’s possible to seek out people who are great at this."
On the Challenges of Abyss-Staring:
"It involves acknowledging that you made a poor decision in the past... and it saps your motivation to invest in getting better at your current job if you think it’s likely that you’ll leave soon."
Why It Matters
This essay emphasizes the critical importance of facing uncomfortable truths and making tough decisions, which are essential for personal and professional growth. By avoiding these difficult confrontations, individuals risk making poor choices and suffering prolonged negative consequences. The ability to "stare into the abyss" is crucial for achieving success and leading a fulfilling and meaningful life. Ben Kuhn's insights and strategies provide a valuable framework for anyone looking to improve their decision-making skills and overcome the natural tendency to avoid discomfort.
Danny Kahneman's Best Idea - The Best Interest
The article "Danny Kahneman’s Best Idea" by Jesse Cramer, published on April 14, 2024, discusses the significant contributions of Daniel Kahneman, particularly his work with Amos Tversky on prospect theory. The piece highlights how their research has reshaped the understanding of human decision-making, emphasizing the concept of loss aversion and its implications for long-term investors. The article aims to educate investors on the psychological biases affecting their decisions and offers strategies to mitigate them, promoting more rational investment behavior.
Key Points
Daniel Kahneman’s Legacy:
Daniel Kahneman, who passed away on March 27, 2024, is celebrated for his groundbreaking work in cognitive psychology and behavioral economics, particularly in collaboration with Amos Tversky.
Prospect Theory:
Definition: Prospect theory challenges the traditional rational choice theory by suggesting that people evaluate potential gains and losses relative to a reference point rather than in absolute terms.
Loss Aversion: People tend to weigh losses more heavily than equivalent gains, meaning the pain of losing is often more impactful than the pleasure of gaining.
Diminishing Sensitivity: As the magnitude of gains or losses increases, the perceived value of those gains or losses decreases.
Impact on Long-Term Investors:
Behavioral Flaws: Investors often make irrational decisions due to loss aversion, leading to panic selling or other suboptimal behaviors.
Awareness and Mitigation: Understanding these biases is crucial for investors to manage their portfolios effectively and avoid common pitfalls.
Strategies to Combat Loss Aversion:
Intelligent Allocation: Diversification is highlighted as a key strategy to balance potential gains against the risk of losses.
Rational Decision-Making: Investors should strive to make decisions based on long-term goals rather than short-term market fluctuations.
Historical Data and Examples:
Stock vs. Bond Portfolios: The article compares historical returns and drawdowns of 100% stock portfolios and 60/40 stock/bond portfolios to illustrate the practical implications of loss aversion.
Behavioral Tics: Examples like the reactions to the Dot Com bubble and the Great Financial Crisis show how severe losses can lead to long-term avoidance of investing.
Tribute to Kahneman and Tversky:
Their work has fundamentally changed the fields of psychology and economics, providing valuable insights for long-term investors.
Key Quotes
On Prospect Theory:
"Prospect theory, often called 'loss aversion,' turned the world on its head."
"They suggested that people assess potential gains and losses relative to a reference point, and they tend to weigh losses more heavily than equivalent gains."
On Investor Behavior:
"If you’re a long-term investor, you need to understand prospect theory."
"The ability to deal with losses is what separates successful investors from unsuccessful investors." – Ben Carlson
On Loss Aversion:
"For starters, Kahneman and Tversky found that the pain of loss was often twice as acute as the joy of winning."
On Investment Strategies:
"Diversification’s fundamental benefit is reducing portfolio risk (pain) while maintaining portfolio reward."
On Kahneman and Tversky's Impact:
"Kahneman and Tversky fundamentally changed psychology, economics, and (specifically for us) how we think about long-term investing."
Why It Matters
Enhanced Understanding of Investor Psychology:
The article underscores the importance of recognizing and understanding cognitive biases, such as loss aversion, which can significantly impact investment decisions and overall financial health.
Improved Investment Strategies:
By leveraging insights from prospect theory, investors can develop more resilient strategies that account for human psychological tendencies, leading to better long-term outcomes.
Educational Value:
The piece serves as a valuable educational resource for novice and experienced investors, providing practical advice on mitigating the effects of loss aversion through diversification and rational decision-making.
Tribute to Pioneering Work:
Highlighting Kahneman and Tversky's contributions not only honors their legacy but also reinforces the relevance of their research to contemporary investment practices.
In summary, Jesse Cramer's article provides a detailed and accessible exploration of Daniel Kahneman's influential ideas, offering practical advice for investors to navigate the financial markets' psychological challenges.
How to Juggle Priorities: Decide Which Balls Are Glass and Which Are Plastic (ashleyjanssen.com)
In the article "How to Juggle Priorities: Decide Which Balls Are Glass and Which Are Plastic," Ashley Janssen discusses a metaphor shared by author Nora Roberts, relayed through a Twitter thread by Jennifer Barnes. The metaphor compares juggling life's many responsibilities to juggling balls of different materials: glass and plastic. Glass balls represent crucial responsibilities that can cause significant damage if dropped. In contrast, plastic balls can be safely dropped without severe consequences. Janssen explores identifying which responsibilities are glass and which are plastic, emphasizing the importance of intentional prioritization. The article provides practical advice on managing relationships and consequences to decide better what tasks to prioritize and which can be temporarily or permanently set aside.
Key Points
The Juggling Metaphor:
Glass vs. Plastic Balls: Glass balls are critical tasks or responsibilities that would cause significant damage if dropped. In contrast, plastic balls are less critical and can be dropped without major consequences.
Beyond Work-Life Balance: The metaphor is not about balancing work and family as broad categories but recognizing the individual tasks within those categories that vary in importance.
Understanding Relationships:
Concentric Circles of Relationships: Not all relationships are equal; some are closer and more important (e.g., immediate family), while others are more distant (e.g., colleagues).
Impact on Relationships: Decisions should consider the impact on these relationships. For example, missing a significant family event can have more severe consequences than a work-related one.
Evaluating Consequences:
Real vs. Imagined Consequences: Differentiate between actual consequences and those merely feared or imagined.
Questions to Consider: Evaluate whether dropping a task will harm your reputation, livelihood, or someone you care about.
Temporary vs. Permanent Drops:
Not Now vs. Never: Dropping a task temporarily doesn't mean it can't be picked up later. Circumstances change, and priorities can be revisited.
Permanent Drops: Some tasks or commitments can be permanently set aside if they no longer serve you or align with your current life stage.
Actionable Advice:
Intentional Decision-Making: Be deliberate about which balls to drop instead of letting it happen haphazardly.
Flexibility: Understand that priorities can change, and it's okay to reassess and adjust your commitments.
Key Quotes
On the Juggling Metaphor:
"The key to juggling is to know that some of the balls you have in the air are made of plastic and some are made of glass. And if you drop a plastic ball, it bounces, no harm done. If you drop a glass ball, it shatters, so you have to know which balls are glass and which are plastic and prioritize catching the glass ones." – Nora Roberts, via Jennifer Barnes
On Relationships:
"There are some relationships that are glass, and some that are plastic, and the decisions you make need to be made accordingly."
On Consequences:
"You have to intentionally decide which balls will bounce and which balls will shatter, and drop the plastic ones before the glass ones start to fall."
On Temporary Drops:
"Just because you decide to let something drop doesn’t necessarily mean you can’t pick it up again later when you don’t have so many balls in the air."
On Permanent Drops:
"Are there any balls you are juggling out of habit or obligation? These are the commitments or priorities that you no longer enjoy, you have grown out of, or are not relevant during this season of your life."
Why It Matters
Improved Prioritization:
The article offers a practical framework for prioritizing tasks and responsibilities, helping individuals focus on what truly matters and manage their time more effectively.
Stress Reduction:
By identifying which tasks can be safely deprioritized, individuals can reduce stress and avoid being overwhelmed by juggling too many responsibilities.
Enhanced Decision-Making:
The advice on evaluating relationships and consequences provides a structured approach to making informed decisions, leading to better outcomes in both personal and professional life.
Flexibility and Adaptability:
Emphasizing that priorities can change and tasks can be picked up again later promotes a flexible mindset, which is crucial in navigating the complexities of modern life.
Personal Growth:
Encouraging individuals to drop tasks that no longer serve them aligns with personal growth and development, allowing them to focus on more fulfilling and relevant activities.
Getting Our Focus Back (renegadeotter.com)
Andrei Taran's article "Getting Our Focus Back” explores the pervasive issue of declining attention spans in the 21st century, primarily driven by technology and social media. Taranchenko discusses how technology companies have engineered devices and apps to capture and monetize our attention, leading to addictive behaviors similar to substance dependence. He references Johann Hari's book "Stolen Focus" and Nicholas Carr's observations in "The Shallows" to illustrate how digital distractions have rewired our brains and impaired our ability to concentrate on long-form content.
The article discusses how social media, notifications, and work-related group chats contribute to this distraction, creating a "distraction economy." It also touches on the increased use of focus-enhancing stimulants and questions whether the rise in ADHD diagnoses among adults is genuinely medical or a byproduct of our digital habits.
Taranchenko offers practical advice for regaining focus, such as uninstalling addictive apps, disabling notifications, and using mental tricks to stay concentrated. He suggests physical changes like reducing the number of monitors in a workspace and dedicating specific devices for distractions. The article concludes with recommendations for further reading and watching to understand and combat the issue of digital distraction.
Key Points
Technological Impact on Attention:
Technology companies have designed devices and apps to capture and monetize our attention.
This has led to addictive behaviors similar to substance dependence.
Historical Context:
Johann Hari's "Stolen Focus" and Nicholas Carr's "The Shallows" highlight the impact of digital distractions on our brains.
These issues were observed as early as 2008, before the pervasive use of smartphones and social media.
Distraction Economy:
Social media, notifications, and work chats create constant distractions.
This environment trains our brains to seek small, easily digestible information, reducing attention spans.
Consequences:
Increased use of focus-enhancing stimulants.
A rise in ADHD diagnoses among adults is possibly linked to digital habits.
Practical Solutions:
Uninstall addictive apps and disable notifications.
Use mental tricks like imagining attention as a finite resource (oxygen in a spaceship).
Physical changes like reducing monitor use and dedicating devices for distractions.
Further Reading and Watching:
Books like "The Power of Habit" help us understand compulsive behaviors.
Documentaries like "The Social Dilemma" to see how tech companies manipulate attention.
Key Quotes
On Attention as a Resource:
"Attention is arguably the most precious resource of the 21st century."
On Digital Addiction:
"Your compulsion to check your phone without any specific reason is not significantly different from any other form of dependence."
On Historical Observations:
"Over the past few years I’ve had an uncomfortable sense that someone, or something, has been tinkering with my brain, remapping the neural circuitry, reprogramming the memory." — Nicholas Carr
On the Impact of Social Media:
"Do this long enough, and your brain will learn to pay attention to things only in small doses."
On Practical Solutions:
"Try and leave your phone behind when you get out of the office for lunch, for example – alone or with your colleagues."
Why It Matters
The article highlights a critical issue of our times: the erosion of our ability to focus due to the pervasive influence of technology. Our productivity and mental well-being are at risk as our attention spans shrink. Understanding this phenomenon is crucial for developing strategies to reclaim our focus and lead more balanced lives. By addressing the root causes and implementing practical solutions, we can mitigate the negative effects of digital distractions and improve our capacity for deep, meaningful work.
Long Distance Thinking - by Simon Sarris
In "Long Distance Thinking," Simon Sarris explores the value and necessity of deep, contemplative thought in an era that favors quick, easily digestible ideas. He critiques the popular notion that complex ideas should be explainable to a six-year-old, arguing that many important concepts require time and maturity to grasp fully. Sarris uses the example of historical firefighting policies to illustrate how oversimplified solutions can lead to long-term problems, emphasizing that true understanding and effective solutions often emerge from prolonged and careful consideration. He calls for a return to contemplation and warns against the dangers of reducing complex thoughts to simplistic summaries.
Key Points
Critique of Simplified Understanding:
The popular aphorism, often misattributed to Einstein, that "If you can't explain it to a 6-year-old, you don't understand it yourself," is criticized for promoting oversimplification.
Many ideas, like the knowledge of a carpenter, cannot be easily transmitted through simple explanations and require hands-on experience and time to understand fully.
Historical Example of Fire Management:
In the 1930s, the U.S. adopted aggressive firefighting policies based on the simple idea that all fires should be extinguished early.
Decades later, it became clear that this approach hindered the natural lifecycle of forests, such as preventing new sequoias from growing.
The shift from firefighting to fire management acknowledges fire's complex role in ecosystems and illustrates the need for long-term thinking.
The Importance of Scale and Technology:
Modern technology amplifies the consequences of decisions, making it crucial to consider the long-term impacts of policies.
Sarris warns that rapid technological advancements can lead to significant errors without careful, prolonged thought.
The Value of Contemplation:
Sarris advocates for contemplation, a process of thinking deeply and viewing ideas from multiple perspectives.
He contrasts modern dictionary definitions of "contemplate" with older, richer definitions to highlight how the depth of thought has been eroded over time.
Philosophical and Practical Implications:
True knowledge and effective solutions often require continued attention and cannot be achieved through quick fixes.
Sarris encourages readers to resist the urge to oversimplify and instead nurture ideas carefully, much like cultivating a garden.
Key Quotes
On Simplified Understanding:
"Here is some terrible advice: 'If you can't explain it to a 6-year-old, you don't understand it yourself.'"
"What is easy to explain is not necessarily what is best. What is easy to understand is not necessarily what is true."
On Historical Fire Management:
"A quick thought becomes policy, which becomes a long disaster, which teaches us, at last, to think a little longer."
"We simply do not know all the rules. We can only intervene and wait for the surprising consequences we never predicted."
On Contemplation:
"Philosophy begins in wonder, and the art of it is to keep this wonder with you."
"The cure for over-summary, I think, is something akin to cultivation. States and maturity need good growing conditions and time."
Why It Matters
"Long Distance Thinking" matters because it emphasizes the importance of depth and patience in understanding complex issues, an increasingly rare approach in today's fast-paced, information-saturated world. Sarris's critique of oversimplification is particularly relevant in an age where social media and soundbites often reduce nuanced ideas to catchy but shallow statements. By advocating for contemplation and long-term thinking, Sarris calls for a cultural shift towards more thoughtful and effective decision-making. This approach is crucial for addressing complex, systemic problems that cannot be solved with quick fixes but require sustained attention and understanding.
The Backlog Peter Principle - Ken Kantzer's Blog
In the blog post "The Backlog Peter Principle," Ken Kantzer explores the application of the Peter Principle to personal productivity, specifically focusing on how task backlogs can become unmanageable. The Peter Principle states that "every employee tends to rise to their level of incompetence," It describes how backlogs can deteriorate into lists filled with difficult or undesirable tasks. Kantzer shares his experience of cyclical productivity and frustration, attributing these cycles to the buildup of challenging tasks in his backlog. He suggests periodically purging or reassigning tasks and taking vacations can help reset and improve productivity.
Key Points
Understanding the Peter Principle:
The Peter Principle explains why employees often become ineffective when promoted to roles they are not competent in.
Kantzer relates this principle to task management, suggesting that backlogs can reach a state of incompetence where only the most difficult tasks remain.
Cyclical Productivity:
Kantzer describes experiencing cycles of high productivity followed by periods of stagnation and frustration.
He attributes these cycles to his backlog's natural accumulation of challenging tasks.
Backlog Dynamics:
Initially, easy tasks are quickly completed, leaving behind more difficult or undesirable ones.
As new tasks are added, the easy ones are again quickly resolved, while the hard ones accumulate, worsening the backlog over time.
Creative Destruction:
To manage the backlog effectively, Kantzer advocates for "creative destruction," which involves periodically purging or reassigning tasks that are unlikely to be completed.
This process helps reset the backlog to a more manageable state.
Vacations as a Reset:
Taking vacations can organically clean out the backlog, as some tasks become irrelevant or are completed by others during the absence.
This often leads to a period of hyper-productivity upon returning, not just due to being refreshed but also because the nature of the work has changed.
Broader Applications:
The concept of the Peter Principle in backlogs can be applied to various systems, such as product backlogs, initiatives, and committees.
Kantzer illustrates the principle in action by providing an example from his life involving the cyclical loss and recovery of his kids' sippy cups.
Key Quotes
On the Peter Principle:
“Every employee tends to rise to their level of incompetence” — Laurence J. Peter, THE Peter Principle (1969).
On Backlog Deterioration:
"Your backlog continues to worsen, day after day until you wake up one morning and find that every single project you have on your list is horrible."
On Creative Destruction:
"Some creative destruction is essential to counteract this: periodically, you have to look at your list of tasks and acknowledge that some of them just won’t get done by you."
On the Effect of Vacations:
"Taking a long vacation often cleaned out my queue in an organic way. I think that explains (to a large degree) why vacations are often followed by a period of hyper-productivity – more than can be explained simply by 'feeling more refreshed.'"
Why It Matters
Kantzer's insights into the Backlog Peter Principle highlight an often-overlooked aspect of productivity: the management of task backlogs. By applying the Peter Principle to backlogs, he provides a framework for understanding why periods of high productivity are often followed by stagnation. This understanding is critical for professionals and managers who seek to maintain consistent productivity and avoid burnout. The strategies of "creative destruction" and taking purposeful breaks offer practical solutions for managing backlogs effectively, ensuring that individuals and teams can maintain momentum and focus on high-leverage activities. These concepts are widely applicable across various domains, from personal task management to organizational project planning, making them valuable for anyone looking to optimize their workflow.