Shane Parrish – Mastering Mental Models - [Invest Like the Best, EP.17]

My guest this week is Shane Parrish, who created the extremely popular Farnam Street—a website dedicated to understanding the world by mastering the best of what others have already figured out. More than 100,000 people subscribe to the Farnam Street Newsletter which summarizes what Shane and his team learned and wrote that week. I read it every Sunday. Shane and I cover a lot of ground including the future of work, automation, mental models, and reading. Shane is a voracious reader and offers unique suggestions for finding your next great book. Please enjoy! For comprehensive show notes on this episode go to investorfieldguide.com/parrish/ For more episodes go to InvestorFieldGuide.com/podcast. Sign up for the book club, where you’ll get a full investor curriculum and then 3-4 suggestions every month at InvestorFieldGuide.com/bookclub Follow Patrick on twitter at @patrick_oshag

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:04Patrick O'Shaughnessy?

  Hello and welcome, everyone. I'm Patrick O'Neal and this is Invest Like the Best. This show is an open-ended exploration of markets, ideas, methods, stories, and of strategies that will help you better invest both your time and your money. You can learn more and stay up to date at investorfieldguide.com.

• 0:24Speaker 01

  Patrick O'Neal is a principal and portfolio manager at O'Neal Asset Management. All opinions expressed by Patrick and podcast guests are solely their own opinions and do not reflect the opinion of O'Neal Asset Management. This podcast is for informational purposes only and should not be relied upon as a basis for investment decisions. Clients of O'Neal Asset Management may maintain positions in the securities discussed in this podcast.

• 0:46Patrick O'Shaughnessy?

  My guest this week is Shane Parrish. Many out there will be familiar with Shane, and if you are not, you should be. More than 100,000 people, myself included, spend their Sunday morning reading what Shane and his team have written that week to learn more about themselves and about the world. I tell Shane at the start of our conversation that we need to avoid just talking about books, and then we proceed to talk about books right away. I guess it was inevitable. Luckily, we cover a lot of other ground as well. Fans of Shane's multifaceted take on the world will enjoy our discussion of business, mental models, and unavoidably, reading. You can find show notes at investorfieldguide.com/shane. And now, please enjoy my conversation with Farnham Street's Shane Parrish.

• 1:30Patrick O'Shaughnessy?

  All right. Well, Shane, thank you so much for taking the time to do this with me today. We'll talk about a lot of different, interesting areas, and we'll try to actually steer clear of books. I think that you and me could tend to go down the book rabbit hole, so maybe we'll try to leave that for the very end. And instead, start by talking about some of the things that you think have led to your success, just in general, but also maybe particular elements that people can emulate or replicate in their own lives. So, one way of thinking about this is to ask, what things feel pretty easy or natural to you, but might look like very hard work to those on the outside looking in?

• 2:10Speaker 02

  Oh, like, everything is hard work. Um, uh, explaining kind of what's happened would be simple. It's it's luck, right? Like, it's a lot of hard work on my part and a lot of effort, but it it's never been easy. I mean, I didn't even start out as a big reader of books. I hated reading. I hated reading through elementary school. I hated reading through high school, um, because other people were telling me what to read, uh, and I didn't like that. And so I never, I was never really involved in kind of picking out books and reading them until maybe late in high school and university. And people think that reading comes naturally to me or that I read much faster than everybody else. I don't. I mean, I read at a very average pace. Um, I just probably spend more time reading than most people.

• 2:55Patrick O'Shaughnessy?

  Have you tailored, have you tapered that back at all? I know in years past that you probably read upwards of a hundred books a year. Are you still reading at that pace?

• 3:04Speaker 02

  Well, in 2014, I read a hundred and I think fifty-two books, uh, and cover to cover. So that that was an actual like number. And I think I started over three hundred, uh, and then the the delta being the books that I I gave away and didn't finish. And I think that was flawed. I mean, what I learned from that was towards the end of the year specifically, it just became about getting through these books. It became about like, oh, I'll just pick a short book. I'll pick an easy book because I was getting fatigued and tired. But the problem with that was, I mean, we read for, if we're not reading for entertainment, we read for learning. And if you're just trying to get through a book, you're not really learning. So, uh, one of the biggest lessons I learned from that was, you know,

• 3:44Speaker 02

  uh, it's about reading and reading for fluency and understanding. It's not about how many books you get through. So my reading has tapered. Uh, the time I spend reading has is definitely not a hundred and forty books a year. Uh, it's probably, you know, ten to fifteen hours a week at this point. And I think that that's a good pace for me. And a lot of it's become rereading, too, um, which is really important to me. So when I finish a good book now, I'll go back and I'll I'll start rereading it. And usually I won't even, uh, if I know it's a good book beforehand, I won't even take a note, uh, while I'm reading it because I know I'm gonna wanna read it again. And it's the second time through, which is after I know the journey that the author's taking me on, after I know where

• 4:26Speaker 02

  we're going and some of the subtleties and the nuances that I'll kind of come at with a pen. And what I'm finding is like, I'm actually taking less notes from the book, but I take way more away than I would expect from reading it twice.

• 4:37Patrick O'Shaughnessy?

  What's a good recent example of a book that you read a second or a third time that? You got a lot more out of it the second time through.

• 4:45Speaker 02

  I think the psychology of man's possible evolution was a good one. And the personal MBA was a good one, but that wasn't really a journey as much as kind of a compendium of things that I was supposed to have learned when I did my MBA. Marcus Aurelius Meditations. And the reason that some of these books speak to us differently, you know, you don't even have to read it twice in a row, but if you read the same book twice, it's, you're a different person when you pick it up. Like, I've read Marcus Aurelius Meditations probably, I don't know, five times now. And each time, I was a completely different person. The first time was in university, I thought it was crap. And then, you know, I think the most recent time was a couple of years ago when I was going through some personal struggles. And it speaks to you differently. The book is, you're in a different place.

• 5:30Speaker 02

  The book has the same words, but the meaning of those words changes because you're just, your life is different. It speaks to you at different times in different ways. And I think one of the values of rereading for books like that, not books of, of knowledge per se, as much as books of, books that touch our soul, if you will, are the fact that they can speak to us differently and they can become a source of reference over our lifetime and a source of comfort and strength.

• 5:58Patrick O'Shaughnessy?

  A lot of your content, what you produce, sort of a collection of mental models, if you will, on Farnam Street, obviously comes through what you've read. You're reading a lot of different things, synthesizing them and putting them in a sort of digestible format. When I talked to Michael Mobison, the way he put it was that, basically, his system for a living is this kind of daily input-output, where he's trying to take in raw information or books or data or conversations, whatever, and then process them and put them back out in a way that's useful. When, when did you realize that you doing that could have such a large audience? I know you started kind of just doing this for yourself, just as a way of, of processing information, just, just selfishly? What was the tipping point?

• 6:42Patrick O'Shaughnessy?

  What, what made you realize that doing this more in public? I think you originally were anonymous. What changed that, that made you, that has made Farnham Street so big?

• 6:51Speaker 02

  Well, so today, Farnham Street's an intellectual hub, right? We help people make better decisions, innovate and avoid stupidity. When it first started, it was 68131.blogspot.com, which was the zip code for Brookshire Hathaway, and there was no readers and it was just for me. And it was during my MBA that I started it because I wasn't learning how to synthesize reality and deal with problems. And I wasn't learning how to incorporate different domains and disciplines into problem solving. And I thought that that was a shortcoming of my MBA. So, um, kind of going to the Munger school, uh, I started learning on my own. Uh, and then I started connecting those things online. And it was only meant for me. It wasn't meant for anybody else. That's why it was a zip code.

• 7:34Speaker 02

  I figured nobody would actually stumble upon this website and nobody would ever want to type that in. Uh, and lo and behold, over, you know, three or four years of zero marketing, zero effort on my part to kind of put it out there, uh, we started collecting a little, a few readers. And then I think it was 2013 was the big tipping point for me personally, when I started realizing that there's a community of people out there who are interested in the same things that I am. They're curious, they're passionate, they're trying to explore not only the big ideas of the world, but on some level, what it means to live a meaningful life and what it means to, um, have knowledge and what it means to pursue knowledge.

• 8:17Speaker 02

  And so in 2013, I, I think the blog, um, became non-anonymous and that was because some of the stuff that I wanted to do required me to put my, my name out there. And those things were giving back to the, the community, if you will. So we do a books for schools program every year where we ask teachers to email us their class wish list, that, that, the books that the kids want to read in elementary school that's not part of the curriculum so that they can't get it. But reading is so fundamental. And then I, I publish those on, on Farnam Street and then generous readers go and buy books for classrooms. Um, but nobody was going to do that if they didn't know that there was a person behind it. And then we matched donations to the local food bank and we do all of these things, but

• 8:57Speaker 02

  nobody's going to participate in the sort of generosity for an anonymous blog. So reluctantly it became un-anonymous and that actually started driving more people to this site because then you have a person behind it and a real person that, um, you can build a trust relationship with. And, and that's how the reader base started growing. And I think we, we've gone from Oh, I don't know. We had no, no people on our email list three years ago to, I think we have almost a hundred thousand now. And all of that is post the anonymous stage.

• 9:33Patrick O'Shaughnessy?

  Just given kind of your unique perspective as someone who had a regular day job, but also someone who has built a business sort of from scratch in a very virtual sense, I'd love to hear your opinion on sort of the future of work. I've got this, this idea that, that won't leave my mind of, a guy that you had on your podcast named Venkat Rao has this idea of the crucible, which is sort of like a 12 person, ideally a 12 person sized group that works that are very smart, but different and works kind of competitively, but together to produce really interesting creative work. And you could contrast that with sort of the, the lone wolf type mentality, if you will, the, the, the Tim Ferriss or something

• 10:15Patrick O'Shaughnessy?

  like that where it's one person sort of building an empire. I'm curious what you think work in the future will look like. And this could be as wide ranging as your opinion on kind of the standard corporate model, big corporations, what will happen to economies of scale. You and I have both been reading this, this book, The Sovereign Individual, which I think is, is really interesting about sort of the returns to violence and why that high returns to violence in the past led to governments and maybe big corporations and that that will be changing in the information age. All of these things fascinate me. And, and since you've really lived all sides of this, I'd love to hear just kind of how you think work, the nature of work will change in the future.

• 10:55Speaker 02

  Yeah. So I've been involved in starting two successful businesses, myself and been involved in operating a few of them. I think the nature of work is going to look a lot like it did in the past to, to many people's surprise, right? It's still going to involve... Collaborating with other people, it's still going to involve listening to other people, still going to involve respecting their opinions. It's still going to involve incorporating skills and blending them together from different disciplines to solve challenging problems. I think all of those things exist today. I think they're going to exist in 20 years. I think the problems that we're going to encounter are going to be different and more

• 11:36Speaker 02

  challenging, and I think the environment of work shapes a lot of what's happening now. Like, if you think about the modern office place, I mean, just ask anybody, when's the last time they had two hours of time to sit and work at a problem with it being interrupted? And the answer to that question is, almost inevitably, I have never had that, or I don't have that. And we're about to have an entire generation of people come up through the modern workforce, where they're learning to work in five or 10-minute increments, they're learning to make decisions based on soundbites and catchy phrases, because that's all the time that they're given to trudge through these problems.

• 12:16Speaker 02

  And I think that that's going to create problems for us, because it's harder to have empathy for people when you don't rag through a problem. It's harder to work with people when you think that your soundbite that you got off Twitter is the definitive opinion. So I think a lot of what we will need is going to become harder in the future, and I think multidisciplinary teams, or cognitive diversity, or however you want to think about that, is going to be necessary but increasingly rare. And I think organizations, unintentionally through the environment, and the environment being the physical environment, and the environment being the culture, are kind of getting rid of people's ability to work focused on problems. I don't think there's ever a lone wolf.

• 13:00Speaker 02

  I mean, Tim Ferriss is a great example. He's enormously popular, but there's more people behind the scenes than Tim. Tim is not doing all of this himself. There's no possible way that a lot of these people that we hold up as heroes, like, he wrote The Four Hour Workweek. Do you think he's working a four-hour workweek? Does anybody really think that? I don't know. I don't think he is. I think that he works incredibly hard and I think he works harder than most people and I think he hustles really hard.

• 13:29Patrick O'Shaughnessy?

  Yeah, I don't I don't mean to use him as an example of of it being easy and it just being him. And I think his idea is is more efficient work, not less work, which is kind of what that four-hour thing means. But but I also do think that it is mostly him and I'm sure he works with a lot of great people and sort of con obviously, he's a big advocate of contracting out work. And I just wonder if if the future looks like smaller groups versus bigger corporations just because of the leverage provided by technology. Like, I've been amazed in in my, you know, ten, eleven-year career or so, how much easier it is to outsource things, like virtually everything in in almost every business that I've been involved in.

• 14:10Speaker 02

  Yeah, I think it's important to ask yourself what you're outsourcing and if that's a core value point and whether you want to have other people own that value or you. You can outsource things to big companies that have data. And if you're not, you know, in the future, data is going to become increasingly valuable, especially with the machine learnings. Whoever holds the data is going to hold the advantage, whether that advantage is cumulative or it's short-term and temporary, like an operational advantage. I don't know the answer to that. I mean, I wouldn't even speculate. But a lot of the outsourcing is going to be interesting from a who are you giving the advantage to and what advantage are you giving them? And is it a short-term versus long-term trade-off?

• 14:53Speaker 02

  And those are going to be tricky questions and I think they're so indep that they're dependent on what you're actually doing to answer those questions versus like here's a big overarching answer that makes sense in every case.

• 15:06Patrick O'Shaughnessy?

  Some people are better programmers naturally than others, but maybe touch on what you think are potentially valuable aspects of computer science and programming that anyone might might at least try to improve their their toolkit, if you will, their personal toolkit. In the work environment.

• 15:22Speaker 02

  Well, computer programmers tend to be very logical because, you know, computer programming forces you to be somewhat logical as you're solving a problem or you're working through a problem. You have to break it up into steps which become algorithms and, you know, you have some components and components and you have some sort of maintenance aspect to it. It helps you structure your thinking in a way. I mean, you're interacting with a computer, but it also helps you become more rational. And rationality is not the only way to make decisions. You know, emotional decisions are, you know, you could argue equally important and where you fall on the spectrum should vary based on the decision. But I think computer science helps you with that.

• 16:04Speaker 02

  I think computer science helps you understand a little bit more of what's going on inside this computer and how it works. And I think we're probably at a point where most people will never get a full understanding of how all of this works, but understanding a little bit about how your computer works is incredibly valuable.

• 16:22Speaker 02

  And I think that, like, it helps, the 15 years I spent in cyber, I guess if you will, helps me understand technology, understand how it interacts, understand the players in the field and understand when it can be a competitive advantage versus an operational advantage. And I think that that gives us a good feel for where we can add value, where the lever is if we need to, and just kind of how to go about structuring that differently if we have scale in an area, you know. It's also to the point where we can start thinking about whether we need custom software and what sort of advantage that will give us, if any, over our competitor.

• 17:06Speaker 02

  Often those advantages are fleeting and illusory, right? But people think that it's great and it's sexy to create software, but you have to think through the entire process of creating that software. There's creating, there's maintaining, there's, are you going to sell it to your competitors? Are you going to keep it? Who's going to create it? How are you going to hire these people and find them? I mean, computer scientists are so in demand. And then what sort of advantage are you going to get long? Long term from this and does it create stickiness? And there's a whole host of questions that you kind of want to walk through with this stuff. But all too easy, the answer is like, oh, we'll just, we'll just buy custom software. We'll create custom software and it's not as simple as that, right? You have to structure your thinking about how are we going to think through this problem?

• 17:49Speaker 02

  And does it make sense to do that versus the off the shelf stuff? Where you might not get all the information you need and you might be using the same system as your competitor. But that may be okay in this particular instance. Again, it becomes very circumstantial.

• 18:02Patrick O'Shaughnessy?

  What I found most interesting about, and I'm not, to be very clear, a natural programmer, but I have to do, you know, a decent amount of it just because of working with so much data. What I found most useful about that experience is the understanding of what can be automated and not. And also this, like you talk about, use this term chunking, which I think is, is an interesting term. Maybe you can describe it in a minute for, for how we learn. But, but the ability to take, say, large blocks of, of code that were complicated to build the first time, but it's something that's useful because it's something you repeat so often. And you can just like the, the idea of Ruby on Rails as maybe you can describe that too.

• 18:44Patrick O'Shaughnessy?

  But the, the repeatability and figuring out like what aspect it is of what you do that can and maybe should be automated versus what is more creative, sort of at the frontier and, and organic. Did, did you buy that, all that, that kind of line of thinking?

• 19:00Speaker 02

  Yeah, but this is where it's really interesting, right? So you can end up automating things that become faster and increase your velocity, but you're going in the wrong direction. And, you know, when you automate them and when you automate these processes, they make sense. But the, the world is changing, right? And just because it's automated and just because it's easy and you don't have to think about it, doesn't make it right. And this is where humans come in and this is where machine learning comes in a bit too. But this is part of the value that we add is, but we don't in the modern organization. It becomes incredibly tricky to, to, to add this value because it requires some sort of fluency with what's going on, what's happening. And the more and more that we automate, the less we understand of what's really going on.

• 19:45Speaker 02

  And so we have to be careful about what we're automating in, in terms of like, are we automating something that is giving us knowledge to understand what's really happening? And because what we're getting out of the automation is really a map. So you, you think about it like, you, you have a whole bunch of data going in and out of that, you get a number, a color, you know, whatever you want for your dashboard. So you're, you're, you're taking a reduction of the reality and then you're operating on that. And it becomes, often it becomes really hard to identify when reality is changed in a way that's favorable or non-favorable to you. So numbers are a starting point. They're a starting point for conversation, but they're also an abstraction. You know, they're the map, they're not the territory.

• 20:30Patrick O'Shaughnessy?

  This is really interesting. So almost, I've, I've tended to have a view that automation is, is almost all good. And what you're saying is that it might create sort of a blindness or a, you know, a lack of potential for growth in an area because once something's automated, you just let it work? Do you have an example of this where in your experience where something was automated that shouldn't have been and the resulting consequences?

• 20:58Speaker 02

  Probably none that I'm going to give on this show. I, I want to keep in good standing of, you know, my former employer. But the world changes and I think it's just key to, to be aware that, I think it was Hercules who said, you know, you can never step in the same river twice. And the automation gives a false sense of knowledge and you, you have a hard time. Uh, realizing when it's changed often until it's too late. And I think thinking through these problems on a regular basis and giving people structured time to kind of think about them. Uh, and instead of, you know, um, a great example would be if you have a dashboard and you're the CEO running a company and it goes to red saying, you know, fix it. Uh, you know, it becomes like, why is it red?

• 21:41Speaker 02

  And just working through the problem, you know, has something changed? And, and that's a key question that you can be asking throughout the whole process of solving these problems is has something changed? Uh, and if it has, we need to adapt, right? Because it's the, it was Darwin who said, you know, your ability to adapt is your ability to survive. And, uh, what do we want to do as businesses? Well, we want to survive. So you can actually create an advantage by being the first to adapt. Uh, and I think that people, um, don't necessarily think about it in those terms. And I think velocity and the ability to adopt are incredibly important when it comes to running a business, especially, um, you know, in the sub hundred million dollar range.

• 22:19Patrick O'Shaughnessy?

  Uh, you, this reminds me of, of one of your posts, which I think was mostly a summary of one book, uh, this idea of a growth mindset versus, I can't remember what the other term was, maybe a status quo mindset. Could you, could you describe that dichotomy?

• 22:33Speaker 02

  Yeah. So, I mean, people tend to have two mindsets, right? You have a fixed mindset or you have a growth mindset. And the growth mindset is that if I work harder, I can learn how to do it. And the fixed mindset is I'll never learn how to do it. I mean, that's a, you know, a two second overview of the concepts, but, um, they, they manifest themselves all over the place and they manifest themselves not only in individuals, but I think one of the points that a lot of people don't understand is they also manifest themselves in a culture, uh, in the culture of a company. And, you know, it becomes, uh, you know, it's not our fault, uh, it's somebody else's fault. Um, things aren't going my way or things aren't going the company's way. Well, we did everything we could. It's, um, those are the, the mindset changes that.

• 23:16Speaker 02

  Shape a culture and culture is one of the best sources of competitive advantage that can exist because it's something that can't really be deconstructed by your competitors. If you come up with even a patented technology, I mean, there's a million ways to probably do what you're doing. It might be slightly less efficient than the way that you've come up with, but you can usually work around those. You can come up with a product, but you know, I can usually copy your product. You can come up with great customer service and say, "Thank you" every time, you know, you interact with a customer, but that's all easily copyable. Those are short-term operational advantages and they're worth doing for sure. But they don't create something that your competitors can't really create.

• 24:01Speaker 02

  Culture becomes so much harder for people to copy or reverse engineer or deconstruct. The culture of a great company and in what the sense that I was talking about it in terms of adaptability and velocity, that's incredibly important. And the stories that you tell each other in the company, whether they're kind of the fixed mindset or the growth mindset, become the reality over time. I mean, culture is a series of stories that we tell people in an organization. And if you're telling people that they can't do anything about it, or you know, that you're not empowering them to do anything about it, you're not empowering them to make decisions, then people just kind of wave their hands and point at somebody else. And I think thinking through how we structure culture in an organization

• 24:44Speaker 02

  is incredibly important for the long-term sustainability of the organization, for its ability to adapt and excel in a very competitive environment where the ecosystem is always changing.

• 24:57Patrick O'Shaughnessy?

  How do you, how do you personally keep that growth mindset? Because I'm sure you're like me where it's so easy, like the fixed mindset is the, is the easier path, right? That the brain is really good at creating heuristics and subroutines, habits that become easy to repeat. And you always, you always use this word strain in some of your writing, which I really like, that like the growth mindset and getting back Better growing requires mental strain and discomfort. So is there, is there, are there ways that you like, like, I don't want to call them tips and tricks, but like, like red flags that you're, you've fallen into a fixed mindset in some sense,

• 25:39Patrick O'Shaughnessy?

  or ways that you kind of push yourself or structure your day to keep the growth mindset as, as more of the default?

• 25:46Speaker 02

  Well, so let's just go back to the, the growing part, just for one second before we, we go into that. The, the way that you grow and get better at something is to have it just beyond your level of competence. Right? There's a sweet spot where if it's too hard, uh, it's just impossible. And even with a growth mindset, it becomes so challenging that it becomes difficult to, to kind of struggle through that. Where there's this zone in the, the median where it's not too easy. Uh, you're outside of your, your kind of competence level. And usually you want some sort of coach or guide to guide you through that process. And, and that will help you get better. Right? That's where you learn. That's when you're handling it. It's like, um, you know, a great example is, uh,

• 26:28Speaker 02

  living in Canada, I learned to drive on the snow. I went to a parking lot, um, an empty parking lot full of snow. And you lose control of the car, but you do it in a safe environment where you're not going to hurt anybody else. But this is how you learn how your car responds on snow. This is how you learn to drive on ice. And if you don't do that, the first time you hit ice, or the first time you drive on snow, you panic. And there's, there's millions of people, even in Canada, who, you know, I don't think should be driving on snow. In part because they've never challenged themselves to, how do I regain control of my car when this happens? Like I'm way outside of my comfort zone. I'm spinning out of control, but I'm doing it in a safe place. Uh, and this is how you learn how to control your car, how your car reacts, how your tires respond.

• 27:13Speaker 02

  Uh, and that's a great example of kind of how we can learn to, to, to improve our driving ability. But it's really indicative of how we learn any ability. And sometimes you do that with a driving instructor and sometimes you do it on your own and you just have fun with it. It comes back to, again, having fun with life and having fun with learning and being curious about these things. And what was the second question, sir?

• 27:34Patrick O'Shaughnessy?

  So, so just ways that you either set your day up or, you know, have, have personal rules that help you do things like, like go, you know, ride the car in the parking lot.

• 27:45Speaker 02

  So getting better at things is, you start slow, right? You start with just getting better at one thing. And what you learn from getting better at one thing, you apply to getting better at something else. And then what you learn from that, it just becomes habitual at some point. And what it ends up doing is removing your ego very slowly over time. Somebody has a better way to do something. You start studying all these examples like Sam Walton, Michael Dell. They come up with a better way to do something. And i- if you acknowledge that they have better ways to do something than the way that you're doing it, then the best thing you can do is just quit what you're doing

• 28:26Speaker 02

  and adopt their, their philosophy or the, if you, Sam Walton, I mean, he was kind of famous for saying, he didn't come up with any ideas in retail. He just went to all of his competitors and kind of copied what they're doing. And if you think like tagline for Farnam Street is mastering the best of what other people have figured out. You know, we learn through experience, whether that experience is our own experience or that experience comes from somebody else. Experience is key. An experience can be reading, it can be talking, it can be living, the, the, the kind of experience. And I'm just trying to collect the best experiences I can and put them in my head to create a repository of them that I can pull upon. And they don't have to be my experiences.

• 29:09Speaker 02

  They can be somebody else's because I live one life and all of these people have already, you know, generally lived a life. And what can I pull and learn from them that'll help me not only make better decisions and avoid stupidity, but also Live a more meaningful life. We can learn a lot from people and what they regret, right? And, you know, there was a book called Thirty Lessons for the Living, and it was seniors and what they regretted most about life. And a lot of it comes down to relationships. You know, they didn't invest in relationships, or they went about achieving what they wanted in life using a strategy that, you know, alienated people, and they came to regret that. So when you start thinking about how we operate companies and how Farnam Street

• 29:52Speaker 02

  runs, and you start thinking through this win-win-win, a lot of that, you know, can be regret avoidance, too, right? We don't want to ever end up in a situation where we didn't treat somebody fairly, almost to their advantage over ours. And, you know, I think we're okay with that.

• 30:06Patrick O'Shaughnessy?

  I've been fascinated by this contrast between an internal versus an external kind of locus of control or driving motivators. And I know a few people that have sort of a pure internal locus, which is obviously an incredible competitive advantage and just life advantage in almost every way. But I think that unfortunately for most of us, we have this sort of external variable that matters a lot to us. And what I've figured out is that the best way to sort of hack that tendency is what you've mentioned, which is surrounding yourself, doing it with people, basically making yourself the least common denominator among those that you're with, because you care what they, you care what

• 30:49Patrick O'Shaughnessy?

  people think about you. And if the people whose opinions matter to you are notably, you know, better in key dimensions, that seems to be the easiest way to keep that growth mindset going, in my experience.

• 31:02Speaker 02

  Oh, definitely. I mean, out of my, I would say, five closest friends, I'm the lowest common denominator for most of them. And I think that, you know, that's incredibly valuable to me. And Hopefully, it's reasonably, you know, they get something out of it as well in that sense. But, you know, it's not enough to hang around with smart people, right? You want smart, ethical people who are full of energy and who see things differently than you do and who help you realize that you're living life. So for me and Farnam Street, work is life and life is work. I had blinds. There's no shutting off the clock at five. There's no, but that's the way I want it.

• 31:46Speaker 02

  And then hang around people who feel, you know, the same way. That's also important because if you're hanging around people that are not like that, not in line with how you work and how you do things, then it becomes a struggle, right? And you want to hang around with people that, you know, push you to be better and drive you and think differently about things. You know, if you read something from Farnam Street, it's going to be good. It's going to be timeless. It's going to be captivating and it's going to add to your mental toolbox. And that's what we're trying to do. And if you read it long enough, then hopefully you have enough tools in your toolbox to solve whatever problem that you're having. I think about it this way. It's like creating a repository in your mind of examples of good behavior or examples

• 32:27Speaker 02

  of concepts so that when you, we have so much domain dependence when we learn something. And part of the reason we have domain dependence is we learn something in one particular discipline and we don't think about it in other disciplines. And so if we add enough tools to your toolbox or a repository where, you know, here's how an NFL coach used it, here's how Atticus Finch used it, here's how, when you're confronted with this situation, now you have this mental library or catalog to pull from and you know what to do. You have a better sense of, oh, I think I understand this because, oh, I remember, you know, Coach Belichick did this or, oh, and then that ties in with, oh, and so did this guy, and so did this guy, and so did this guy. So now I at least have a heuristic.

• 33:12Speaker 02

  And you want to think through whether that heuristic is right or wrong, but you at least have this kind of, oh, well, here's probably what I should do. What's the same in this situation? What's different? Is this likely to succeed? Is it not? What are going to be the consequences to the people around me? And those are interesting problems, but at least you have some sort of baseline. And so we're trying to create that repository of knowledge for people over time where you're not dependent on. Thinking about things and I mean velocity is a great example. We talked about that earlier. That's a concept from physics, but we're talking about it in the context of business. And those things apply, same as biology and evolution and adapting to an evolving ecosystem. I mean, we're taking from one discipline and we're trying to apply it in another discipline.

• 33:56Speaker 02

  So that we're not dependent on thinking of evolution and adaptability only in the context of species. We're starting to think about it in the concept of people. We're starting to think about it in the concept of organizations. And we're trying to develop, you know, the best way that we can and using models from the world that have been time-tested are are one of the best ways to kind of go about learning something, I think.

• 34:18Patrick O'Shaughnessy?

  This all reminds me of, I have this habit of finding sort of representative metaphors or mental models that are short, that underneath them is some broader concept that I've learned and then I stick them on my desk, right? Just so that every once in a while my eyes glance, I'll find something. And one of them I originally found through an article on Farnam Street, which is this idea that biology enables and culture forbids. Can you flush that out a little bit?

• 34:44Speaker 02

  Yeah, well, biologically, I mean, we can do anything, right? It's cultural that restricts us. And culture creates proper norms. You can argue whether they're right or wrong, that's different. But I mean, it creates norms that shape behavior. But biologically, I mean, we have none of that, right? We have no restrictions on kind of what we can do. We put these restrictions on through laws, through culture, through societally, what's acceptable, what's not. And I think that that's an interesting concept, right? We're naturally very free and sometimes we're not. I mean, what did you think when you read that?

• 35:20Patrick O'Shaughnessy?

  Well, my experience is coming from the lens of physical learning. So when I read biology enables, where I've typically learned the best lesson has first been exploring some physical frontier. So I run a lot. I used to do different things. But understanding what it feels like physically to break down a barrier.

• 35:44Patrick O'Shaughnessy?

  Is an incredibly powerful bit of knowledge that you can then port over to non-physical tasks. Um, so, so I've got a hill in the woods where I run every morning and I force myself to run harder up the hill than I do the rest of the time. Because I know that that daily reminder, that sort of bit of physical learning of messing around at a frontier, mental and physical, then bleeds into the rest of my day. So when I read that phrase biology enables, that I, I think of that hill. And then when I read culture forbids, I think like this is, this seems to in two words encapsulate what I've realized about sort of the working world and society in general as I've gotten older.

• 36:25Patrick O'Shaughnessy?

  That there are more and more moments for me that I realize how much of my behavior, my friend's behavior, my family's behavior is, is that external locus of control, is this sort of set of norms um that we live within. It could be in your town, your country, your friend, whatever it is that drives so much of your behavior and then, and, and that just strikes me as insane and so limiting. Um, and so I just, I just so believe in that, you know, five-word phrase. It just seemed, it seems so true in my personal experience.

• 36:57Speaker 02

  Well, think about that in the context of a business, right? Uh, businesses have norms and it's deviating from those norms. And I'm not suggesting breaking the law or anything like that. Deviating from the standard practice moves you from the middle of a Gaussian distribution, usually to one of the tails. And if you're deviating correctly, that's how you outperform. Right? It's very hard to outperform doing the same things that everybody else does unless you're doing them at a lower cost or doing them better or faster. Uh, it's the deviation in strategy. So you also have this culture forbidding kind of strategy, right? Where you, you have the, the cultural norm is if you're a textile company in the sixties, that you will take the profits and reinvest them back in textiles.

• 37:40Speaker 02

  And then you have Buffett who deviated from that and created something great. There's a lot of people who deviate and create something that we, we don't even know the name of today because it failed. But it's that deviation that's correct, which is important, right? Um, and culture becomes not only the culture of the company, that what you will do and culture, um, but from.

• 38:02Speaker 02

  From a biological perspective, I mean, nothing is unnatural, like nothing a company could do in that sense, relating it back to companies again, is unnatural, like investing in an insurance company, that's not unnatural. It just is because we've got this kind of culture around it. And if you think of one of the, I don't want to get into too much religion, but one of the main things about religion and the value it has served, whether you believe in a god or whether you don't, is irrelevant for this argument, which is it has shaped society and prevented, it's also caused a lot of probably suffering, but it's also prevented a lot. It's shaped norms, it's helped move society forward.

• 38:47Speaker 02

  And I think that that's an incredibly valuable thing, but it's all cultural, it's all something we've, we've, you know, agreed to, whether we implicitly thought about it or not. I mean, a lot of what we think today is derived from that, and a lot of how we behave is derived from that. And I think that culture is incredibly important, but it's not just the biological culture, it's also like thinking about, well, what's the norm in the industry that we're operating in? What do other people do? And where do I think that they're wrong? And those are great sources of kind of, oh, well, maybe I can do this differently. And that's a great place to explore improving your business.

• 39:27Patrick O'Shaughnessy?

  You mentioned this idea of the, of the Gaussian distribution, which, you know, you take every one of your talents or, or your inferiorities, you plot somewhere on a distribution, and the shapes of those distributions can be different. But, you know, for the most part, being in the, you know, top 1% of something is, obviously there's 1% of the people that are, and it's, it's tough, and I'm probably not in the top 1% of any one individual thing. But I'm really struck by this idea of, and I'm a quant that thinks in multi-factor models, right? So that, you know, a stock might be in the second decile by a whole lot of different things, but it's in the first percentile when you combine those things and re-rank. And that's one of the open questions in factor-based investing.

• 40:12Patrick O'Shaughnessy?

  But I think it applies personally, too, that if you are really, you're in the 15th percentile or something on three things, it's likely that if you did a three-factor model on those three things, you're in the first percentile or something like that. And I think that's an interesting source of personal competitive advantage and business competitive advantage. And that time spent identifying that personal multi-factor model, if you will, is time well spent.

• 40:37Speaker 02

  Yeah, well, I mean, as you were saying that, I was thinking that one particular skill matters if you're in a niche and you want to be the expert, the domain expert on that. I want my brain surgeon in that niche. I want them in the top 1% of all brain surgeons. And there's specialities where we think about that. We want our pilots to be like that. We want our military to be like that. But for most of us, I mean, we're not going to be in the 1%. I'm never going to be in the top 1% of neurosurgery, no matter how hard I try. I'm never going to be an elite basketball player. But I can create a reasonable skill set that if aggregated combines to form something

• 41:21Speaker 02

  stronger than they would individually and then offers an advantage if I can apply it, right? And that's a great area for people to explore, which is why we're pursuing this worldly wisdom from multiple disciplines, which is to up our game across the board and help us, hopefully, by combining these things into something that is more than the sum of the parts.

• 41:46Patrick O'Shaughnessy?

  Yeah, it seems just like such a neat way to view the world and something that people can do, right? That it requires effort, of course, and learning, but you can identify those strengths and combine them and yield unexpected results. There's a nonlinear payoff to this.

• 42:03Speaker 02

  Yeah.

• 42:04Patrick O'Shaughnessy?

  That is really, you have to do it, you have to get a little experience of those payoffs to appreciate them.

• 42:09Speaker 02

  Yeah.

• 42:10Patrick O'Shaughnessy?

  But it works.

• 42:11Speaker 02

  But that comes back to diverging as well, right? Nonlinear can work both ways. It can work positive and negative. It's through divergence usually where you get these nonlinear payoffs.

• 42:19Patrick O'Shaughnessy?

  If you had to identify the most memorable individual day of your career, what would it be?

• 42:26Speaker 02

  Oh, gosh.

• 42:30Speaker 02

  I don't know. I don't think I really have a good answer to that question, at least not one I'm gonna share. But I don't, you know, every day is kind of memorable for me for different reasons. You know, getting reader emails is always memorable, helping people through problems. Developing friendships throughout Farnam Street has been incredibly important to me. And they're all memorable for different, different reasons. I mean, yeah, I don't think I could pick one day anyway. There's been some pretty incredible things that have happened. But I don't ever think of it in terms of like, looking back, here's the best day, here's the, here's the one thing that sticks out.

• 43:15Speaker 02

  It's more like, how do I enjoy the process of what I'm doing? How do I enjoy the rewards and, you know, even try to embrace some of the struggles of what we're doing? Like, I mean, I'm incredibly fortunate. I'm surrounded by my friends, I'm surrounded by smart readers, I'm surrounded by amazing people. I mean, I live a life that is, by all accounts, just amazing.

• 43:40Patrick O'Shaughnessy?

  What about, if you had to, coming at it a little bit differently, I ask this of everyone too. Identify the kindest thing that anyone's done for you?

• 43:48Speaker 02

  Yeah, I think in general, like, the kindest thing people do is give me their time. You know, and that applies to personal relationships, whether it's friendships or dating or whatever. And it applies to life. Time is the one thing we, we can't really create more of.

• 44:09Speaker 02

  You know, you, you can easily make more money, but you can't make more time. So it's really important to be aware of and conscious of how you're spending that time. And I think that when people give me their time, that's the most valuable thing that they can give me. That's the kindest thing. And if I treat that time with respect and I value it and, you know, I think that's a good way to get more of, more kindness out of people. But I wouldn't say there's been one individual act of kindness that kind of stands above all. I mean, I'm also like, again, it's hard for me to be representative, but I'm surrounded by incredibly kind people

• 44:48Speaker 02

  and incredibly generous people. So, I mean, it would just be a competition of sorts that don't really matter to me. It's people's time and thoughtfulness that... Makes a big difference.

• 45:00Patrick O'Shaughnessy?

  So I would be remiss if we didn't talk a little bit about books at the end, just because obviously we both love them. But I'm gonna go at it a totally different way because you already provide tons of recommendations to people. I'll link to where you can find your reading page. Maybe we could start by inverting it and saying, asking if there are any individual books or categories of books that you recommend people actually don't read or avoid.

• 45:26Speaker 02

  Yeah, I mean, what you select to read is incredibly important. And I wrote about this in an article called "The Potbelly of Ignorance," which is, you know, what you eat doesn't make a difference on a day-to-day basis. I mean, you could eat junk today, tomorrow, it's not gonna add up. You know, maybe in a month, your jeans start to get tight, and then over a year, two years, you look down and you have this potbelly. And the way that I related this was, what we read is the same way. So if you're reading for knowledge and you're not reading for entertainment, that's an important distinction here, then you wanna read things that generally change slowly over time, or don't change at all. And if you, so your reading has an opportunity cost. So you wanna focus on those things because

• 46:11Speaker 02

  that's probably the best use of your time from a knowledge perspective. And then, one thing I've discovered over time, and through my own struggles and trial and error in this category, is most of today's bestsellers kinda disappear in ten years. You know, a lot of the pop psychology books are no longer relevant or out of print. You know, a lot of those studies fail to replicate. So when you're thinking about things to avoid, you can start with, you know, most of what comes out in the next two months is just gonna fall to the wayside in ten or fifteen years. So a good way to kind of filter your reading is to go, okay, well, what books are still in print from the 1990s? What books are still

• 46:53Speaker 02

  in print from the 1980s? What books are still in print from the 1970s? Is there some sort of kernel of wisdom in those books that makes them still relevant over time? Does that help me develop my understanding of an idea, a concept, what it means to live or myself? And I think those are good places to start. So what to avoid is, you know, you can avoid most of what's new. It's not to avoid everything that's new because, I mean, there's some sort of social psychology at play where if you're at a dinner party and people are asking you what you're reading, you probably don't want to dive into some book that's going to alienate you as a person. You probably want to pick some bestseller that everybody knows about so you won't have a vague idea of that. That'll facilitate a conversation with people.

• 47:36Speaker 02

  But the flip side of that is most of those books are just gonna, you know, they're good for entertainment. They're not necessarily good for learning. And using that mindset will shift what you read.

• 47:46Patrick O'Shaughnessy?

  What about if you had to choose one book where you had the superpower to make everyone read, really read and digest to the extent they can, one book? What would it be?

• 47:58Speaker 02

  Oh, you know, that's so hard because making people read books is usually a way to get them not to actually receive the knowledge that's in the books, for one. Two is, books mean different things to different people. I think if I had the power, I'm going to change your question. I'll be a politician here and change the question a little bit. What I would want people to do is, I would want to show people more examples of people doing things the right way. People doing things out of passion and love and dedication and mastery. I would want to show people that, you know, news isn't about who can make the most lewd

• 48:38Speaker 02

  statements or comments, or it's not about fear. There's a million people out there doing amazing things and they don't get the attention that they deserve. And so I would change the way that we look at things to highlight more examples of success. And I would go back into schools and do that, really, and start showing kids. And I think that's where it really starts. I don't know how we've gotten to the place we are in the media landscape, but I'm not a big fan of it. And I think there's a million people out there doing things in the right way that win-win for everybody. And I think those people deserve our attention more so than the people that are doing things in the wrong way.

• 49:22Speaker 02

  Because I don't want society growing up realizing that, you know, this negative news cycle that we have is the norm. And I think we can change it, and I think we have the power to change it. And a lot of that starts with just who we highlight as curators, who we highlight as journalists, who we highlight in terms of reading and what's going on in the world. I mean, there's a million good things going on in your local community right now, and you probably don't see much of that. You see, you know, what's not working, and it's important to be aware of what's not working. I'm not saying get rid of that, but if I could change one thing, it would be to open people's eyes to the good that's happening, to the kindness in the world, to the compassion.

• 50:01Patrick O'Shaughnessy?

  It violates your answer to the other question a bit, but as my last question, I'll ask it anyway. If there are writers operating today, and I guess it doesn't have to be pure writing, it could be anyone producing interesting things, content of any kind, that are can't-miss people for you, meaning they come out with something new, you're going to show up and hear what they have to say?

• 50:22Speaker 02

  Yeah, there's a lot of people I respect, but for different reasons, I don't read very many people on a regular basis. And the reason I do that is just I want to do my own thing. I want to be aware of what other people are doing, but I don't want to be in a position where I'm kind of copying it. So there's nobody to read on a regular basis, but there's a lot of websites that I go to, you know, every once in a while, just to check in on what's happening or their take on a certain issue. And, I mean, that varies from like Sam Harris to Maria Popova, to James Clear, to Ryan Holiday, to checking with my friends.

• 51:00Speaker 02

  But, you know, at the end of the day, I'm more inclined to think for myself than I was probably two years ago than just adopt the opinions of really smart people. But I also recognize I can't think for myself on a whole bunch of different issues. So you have to pick and choose where you're kind of adopting other people's opinions and understand that you're adopting other people's opinions and you haven't done the work. And you have to kind of operate in a world where you can't do all the work yourself. So it's picking and choosing where I'm doing the work and where I'm adding the value to me and where I'm looking to other people that I trust and respect to do that

• 51:41Speaker 02

  for me. And then trying to understand, like, if that changed, how would I know? If the quality of that person's thought or writing changed, how would I understand that? And that's one thing we're totally conscious of at Farnam Street is that we don't, as we grow, we don't want readers feeling like the quality has gotten worse. We want them feeling the opposite. And in fact, that's exactly what's happened. I mean, we get emails every day from people saying, "Your quality over the past, you know, six months is just through the charts." And, you know, that's great, because that's really important to me.

• 52:14Speaker 03

  Well, this has been an absolute blast. I really appreciate your time. And I will be sure to point people to some of my favorite of the mental models and essays that you've provided us all with. So, so thank you for your writing and thanks for your time today.

• 52:26Speaker 02

  Thanks, Patrick. This was a great conversation.

• 52:31Speaker 03

  Hey, everyone. Patrick here again. To find more episodes of Invest Like the Best, go to investorfieldguide.com/podcast. If you're a book lover, you can also sign up for my book club at investorfieldguide.com/bookclub. After you sign up, you'll receive a full investor curriculum right away, and then three to four suggestions of new books every month. You can also follow me on Twitter, @Patrick_OShag, O-S-H-A-G. If you enjoy the show, please leave a quick review for us on iTunes, which will help more people discover Invest Like the Best. Thanks so much for listening.