Clear Thinking for Business and a Better Life
by Rolf Dobelli
- Below you can find my top highlights (quotes may be edited for readability)
- Skim… then slow down on the paragraphs that catch your interest. Reflection requires pause.
- If it resonates, you can purchase the full book here.
One Line Summary: This book borrows from modern psychology, stoicism and the philosophy of value investing to list 52 mental tools for better living.
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we’re constantly searching for a single principle, a single tenet, a single rule. Yet this holy grail of the good life doesn’t exist.
scholars have come to realize that the world is far too complicated to summarize in one big idea or handful of principles. We need a mental toolkit with a range of tools in order to understand the world, but we also need one for practical living.
you and I will inevitably stumble our way through life unless we have a sound box of mental tools and models to fall back on.
an “operating system for life” … mental toolkit metaphor … these tools are more important than factual knowledge.
MENTAL ACCOUNTING
Parking tickets used to infuriate me. These days I pay them with a smile. I just debit the sum from an account I’ve earmarked for donations.
People treat money differently depending on where it is coming from.
I always mentally add 50 percent to prices in shops and restaurants … taking income tax into account.
People who move to ugly cities for tax reasons make themselves petty and stubborn.
(How to not care about rise in price of your coffee): Come up with … a modest sum to which you’re completely indifferent – money you consider not so much money as white noise. … I save my energy rather than my money.
You can’t nulify the loss of time and money, but you can reinterpret it.
THE FINE ART OF CORRECTION
we overestimate the role of the set-up and systematically underestimate the role of correction.
anyone who’s spent more than five minutes in a relationship should already know that without ongoing finetuning and repairs, it doesn’t work. All partnerships have to be consistently nurtured.
The good life is only achieved through constant readjustment.
“Plans are nothing. Planning is everything.”
It’s not about having a fixed plan, it’s about repeated planning.
A capacity for corretion is the foundation of any functional democracy. It’s not about electing the right man or the wrong man or the right woman (ie., the “right set-up”); it’s about replacing … without bloodshed. Democracy has a built-in correction mechanism – and it’s the only form of government that does.
get rid of the stigma attached to correction
There’s more than one life goal … no one right job. They’re all myths. The truth is that you begin with one set-up and then constantly adjust it.
practice the art of correction by revising the things that aren’t quite working – swiftly and without feeling guilty.
THE PLEDGE – Inflexibility as a Strategem
(About a CEO) For years I’ve found it striking that he always turns down desert.
When it comes to important issues, flexibility isn’t an advantage – it’s a trap.
they use radical inflexibility to reach long-term goals that would be unrealizable if their behavior were more flexible.
Once you’ve pledged something, you don’t then have to weigh up the pros and cons each and every time you’re faced with a decision. It’s already been made for you, saving you mental energy.
Warren Buffet, for instance, refuses on principle to negotiate … he’s now guaranteed to be offered the best deal right from the word go, without wasting any time
It’s easier to stick to your pledges 100% of the time rather than 99 percent.
BLACK BOX THINKING
With each crash, future flights become safer.
self-deception is incompatible with the good life.
You should take these truths into account – and consider the consequences.
your best shot is to find a friend or partner you can rely on to give you the warts-and-all truth.
Whenever you make a big decision, write down what’s going through your mind – assumptions, trains of thought, conclusions.
analyze precisely what it was that led to your mistake.
if you can’t spot where you put a foot wrong, you’re going to fall falt on your face again.
discover why it happened and tackle the issue at its root.
COUNTERPRODUCTIVITY
while many technologies seem at first glance to be saving us time and money, this saving vanishes into thin air as soon as you do a full cost analysis.
Technology … often has a counterproductive effect on our quality of life.
A basic rule of the good life … if it doesn’t genuinely contribute something, you can do without it.
Next time, try switching on your brain instead of reaching for the nearest gadget.
THE NEGATIVE ART OF THE GOOD LIFE
The potential causes of a crash are well established: flying in bad weather, flying without a check list, flying when you’re too tired, flying without proper fuel reserves.
As long as I keep the downside at bay, the upside will take care of itself.
if you’re playing against an amateur, you’re best option is to focus on not making any mistake.
Greek, Roman and medieval thinkers even had a name for this approach: negative theology – the negative path, the way of renunciation, of mission, of reduction.
you can’t say what a good life guarantees; you can only say what a good life prevents – but you can say that for sure.
For 2,500 years… trying to figure out what makes people happy… in terms of concrete contributing factors… we’re still fumbling in the dark.
which factors jeopardize it – we can pinpoint them exactly: alcoholism, drug addiction, chronic stress, noise, a lengthy commute, a job you despise, unemployment, a dysfuntional marriage, stupidly high expectations, poverty, debt and financial dependence, loneliness, spending too much time with moaning Minnies, overreliance on external validation, constant self-comparisons with others, thinking like a victim, self-loathing, chronic sleep deprivation, depression, anxiety, rage and envy.
Those cannot simply be normalized. They’re always present
In the initial months after an injury, paraplegics focus almost exclusively on their disability – understandably so – and they feel correspondingly miserable. Yet after just a few months, their mood normalizes.
The downside is always more concrete than the upside … downside is like granite – upside is like air.
fate, by definition, is immune to influence. So don’t dwell on it.
Step one: avoid the downside.
“It is remakable how much long-term advantage people like us have gotten by trying to be consistently not stupid, instead of trying to be very intelligent.”
THE OVARIAN LOTTERY
Six percent of all the people who have ever lived on Earth (over the last 300,000 years) are alive at this moment.
Your successes are fundamentally based on things over which you have no control whatsoever.
stay humble – especially if you’re successful. The greater your success, the less you should toot your own horn.
people who pat themselves on the back … have been taken in by an illusion. Pride is not only politeness, it’s also factually misplaced. Getting rid of it is a fundamental cornerstone of the good life … gratitude is the only appropriate response.
Donations and taxes aren’t financial matters. First and foremost, they’re issues of morality.
THE INTROSPECTION ILLUSION
What you should be exploring is your past.
why introspection is so unrealiable? It’s that people love nothing better than being the sole authority in the room … there’s no mechanism for correction.
Because our emotions are so unreliable, a good rule of thumb is to take them less seriously – especially the negative ones.
The Greek philosophers called this ability to block things out ataraxia, a term meaning serenity, peace of mind, equanimity, composure or imperturbability.
I, for example, treat my feelings as though they don’t belong to me … I see myself as a huge an airycovered market, in which birds of all varieties flit from spot to spot.
THE AUTHENTICITY TRAP
Don’t buy into the authenticy hype. there’s the simple fact that we don’t really know who we are. People are respected because they deliver on their promises, not because they let us eavesdrop on their inner monologs.
An organism with no outer layer would die immediately. On a psychological level, authenticity just means you’ve given up on this barrier. You’re practically inviting people to exploit you. You’re making yourself not just silly but vulnerable.
the common contemporary belief that there is only a single, “true” self. This second persona isn’t a contrived pose; rather, it’s a professional, consistent, and reliable outward facing stance that leaves no room for doubts, frustrations or disappointments – those are for your diary, your partner or your pillow.
Restrict authenticity to keeping your promises and acting according to your principles. The rest is nobody else’s business.
“second persona” … not only shields you from toxic influences but also stabilizes what’s inside it.
even if other people … occasionally demand you show “more authenticity”, don’t fall into the trap. A dog is authentic. You’re a human being.
THE FIVE SECOND NO
first be cooperative, then imitate the behavior of your opponent throughout the rest of the game.
in the animal kingdom it’s called reciprocal altruism, or reciprocity.
Reciprocity only works in animals with long term memories … primarily apes.
The tit-for-tat strategy is what keeps the global economy going.
Reciprocity has its lurking dangers. If somebody does something nice for you, you feel duty bound to pay them back – by doing a favoir, for example.
You allow yourself to become manipulable.
every tit-for-tat strategy begins with an opening move, a leap of faith, a first, spontaneous yes; and often this is precisely what we come to regret.
We value arguments above time – an error in reasoning, because tehre is an infinite number of arguments and a decidedly finite amount of time.
Ever since I realized that spontaneously agreeing to things is a deep seated biological reflex, I’ve been using Charlie Munger’s five-second no as a counter-tactic: “If you say “No” nintey percent of the time, you’re not missing much in the world.”
“All those who summon you to themselves, turn you away from your own self.” – Seneca
THE FOCUSING ILLUSION
“Nothing in life is as important as you think it is while you are thinking about it” – Daniel Kahneman
The more narrowly we focus on a particular aspect of our lives, the greater its apparent influence.
Overcoming the focusing illusion is key to achieving a good life. It will enable you to avoid many stupid decisions. When you compare things … you then to focus on one aspect particularly closely, neglecting the hundred other factors. You assign this one aspect inordinate significance because of the focusing illusion.
We find it immensily difficult to view our current situation through an ultra-wide angle lens. Otherwise we wouldn’t get upset about trivialities.
Whe are specially vulnerable to the focusing illusion when it comes to money.
If you compare Buffet’s life minute to minute with yours, the effect of his wealth is negligible.
By focusing on trivialities, you’re wasting your good life.
THE THINGS YOU BUY LEAVE NO REAL TRACE – Why you should buy less and experience more
thinking about your purchase in a focused way makes you happy
hidden costs of maintaining nice things (both time and money) … the net result being a loss in happiness.
you job is an experience too
This issue was a major part of why I decided to become a writer. I love the act of writing. It’s far more important to me than the published book.
the book soon disappears onto the shelf, and I hardly givie it a second thought – I’m already contemplating the next one.
There’s nothing more idiotic than slogging away at a job that earns you lots of money but brings you no joy – especially if you’re investing that money in items rather than experiences.
marriage: in this end, this is also an experience.
The thought of your house – even if you’re currently standing in it – vanishes into the cacophony of your other daily thoughts.
But what if you’ve already bought …? Then at least make sure you’re consciously enjoying them. Ideally you want to be brushing and polishing them each morning. Make the focusing illusion work to your advantage.
THE CIRCLE OF COMPETENCE
“Each you will have to figure out where your talent lies. And you’ll have to use your advantages. But if you try to succeed in what you’re worst at, you’re going to have a very lousy career. I can almost guarantee it.
“I’m no genius. I’m smart in spots – but I stay around those spots.”
Be rigorous in organizing your professional life around this idea …
You’ll gain an invaluable feeling of mastery, and you’ll also be more efficient, because you won’t have to decide every time whether to accept or refuse a task.
He knew which opponents would force him out of his circle of competence, and he learned to avoid them.
Skills don’t transfer from one arena to another.
Obsession is an engine, not engine failure. The opposite of obsession, by the way, isn’t aversion but “interest” – a polite equivalent to saying “I’m not really that interested.”
Inside versus outside the circle of competence – we’re talking about thousandfold differences.
the idea that you can make life stick to a plan is illusion
it’s completely irrelevant how many areas you’re average or below average in. What matters is that you’re far above average in at least one area – ideally, the best in the world. Once that’s sorted, you’ll have a solid basis for a good life.
A single outstanding skill trumps a thousands mesiocre ones. Every hour invested into your circle of competence is worth a thousand spent elsewhere.
THE SERET OF PERSISTENCE – Why bores are more successful than adventurers
To avoid transaction costs, they buy and sell as infrequently as possible … don’t even seek out new investment opportunities. They wait for opportunities to come to them. “Charlie and I just sit around and wait for the phone to ring.”
investors take advantage of long timespans; stockbrokers don’t.
The most successful car of all time? The Toyota Corolla … since 1966 … It wasn’t the first year’s turnover that made the Corolla a superstar but the span of time over which it has been sold.
Slow, boring, longwinded processes lead to the best results. The same goes for your life.
The more peaceful the life, the more productive.
“Nor have teh lives of great men been exciting except in a few great moments.” Darwin, after going around the world, spent the whole of the rest of his life in his own house … a quiet life is characteristic of great men, and that their pleasures have not been of the sort that would look exciting to the outward eye.” – Bertrand Russel
A positive correlation … between restlesness and insight, between activity and results, can rarely be found.
Less busywork, more endurance. Once you’ve identified your circle of competence, stick at it as long as possible. Likewise if you find a good spouse, a suitable place to live or a rewarding hobby.
“You don’t have to be brilliant, only a little bit wiser than the other guys, on average, for a long, long time.” – Charlie Munger
THE TIRANNY OF A CALLING
the concept of a calling is one of the greatest illusions of our age.
“One of the symptoms of approaching a nervous breakdown is the belief that one’s work is terribly important.” – Bertrand Russel
You can pursue a craft with love, of course, and even with a touch of obsession, but your focus should always be on the activity, the work, the input – not on the success, the result, the output.
The Romantic notion that a calling makes you happy is false.
most calling are inextricable from unrealistic expectations.
the unrecognized pianist who n ow follows her “calling” as a music teacher in some nowhere town, even though she has no gift for teaching.
Even if there were such a thing as a true calling, it certainly wouldn’t be advisable to pursue it come come what may. Hackers, fraudsters and terrorists all believe they’ve found their calling.
Clearly, a calling is guarantee of a moral compass.
there is only talent and preference. Build on the skills you actually have, not on some putative sense of vocation. Luckily, the skills we’ve mastered are often the things we enjoy doing.
other people have also got to enjoy your talents.
“Few people are as unhappy as those with talent no one care about.” – John Gray
THE PRISON OF A GOOD REPUTATION
He’s utterly indifferent to what the world thinks of him and his achievements.
At some point during my midforties, however, I had my Bob Dilan moment: I understood that public perception has little to do with the quality of my work. It makes my books no better or worse.
If all the emphasis is on what the world’s going to think about you, forgetting about how you really behave, you’ll wind up with an Outer Scorecard.
Next time you’re meeting a friend, keep track: you’ll spend 90 percent of time talking about other people.
“When you get old, you have the reputation you deserve.” – Gianni Agnelli, former boos of Fiat
concentrating on prestige and reputation distorts our perception of what makes us truly happy.
If you’re not a politician or a celebrity and you don’t earn your money via advertising, then stop worrying about your reputation. Don’t Google yourself, and don’t crave recognition. Instead, accomplish something.
“If I do something that others don’t like but I feel good about, I’m happy. If others praise something I’ve done, but I’m not satisfied, I feel unhappy.”
treat external praise and censure with friendly, composed disinterest.
THE END OF HISTORY ILLUSION – You can change yourself, but not other people
The most effective way to steer your development is to use your idols. So be careful how you choose the people you admire.
“Avoid situations in which you have to change other people.”
I would never take on leadership of an organization if I had to alter the mindset of the people in it.
every year on December 31 my wife and I write down on slips of paper the names of people who aren’t good for us and whom we no longer want in our lives. Then we cast them solemnly into the fire, one by one. It’s a therapeutic and salutary ritual.
THE SMALLER MEANING OF LIFE
We construct an image of ourselves that’s like a comic-book drawing: absurdly oversimplified, completely without contradiction … you’re better off not answering the question of who you are. You’ll only be wasting your time.
Particularly lovely is the notion that the Earth is the shell of an enormous tortoise – a myth that can be found in both China and South America.
The world is fundamentally meaningless. So stop looking for the “larger meaning of life”. You’re only wasting your time.
There can be no good life without personal goals.
those for whom money was important but who had failed to achieve their financial goals were deeply unsatisfied.
a higher income had no effect on the satisfaction of people for whom wealth was not a life goal. It’s not money that makes you happy or unhappy, it’s whether or not you realize your ambitions.
goals make decision easier. Life consists of endless forks in the road.
“One recipe for a dissatisfied adulthood is setting goals that are especially difficult to atain.” – Daniel Kahneman
you need to make sure your goals are realistic.
You can’t really aim for goals like that, because 99 percent of the various things that have to fall into place are beyond your control.
Unrealistic goals are killjoys.
Leave your goals deliberatedly a little vague (“well-off” instead of “billionaire”, for instance).
If you achieve them, wonderful. If you don’t, you can still interpret your situation as though you had (at least in part).
Your brain will do it for you automatically.
What matters is to know where you’re going, not to get to any old place quickly.
YOUR TWO SELVES
How long does a moment last? Psychologists estimate three seconds, give or take. That’s the span of time we perceive as the present.
the two selves (experiencing self, remembering self) rarely give the same reply
whether you are on holiday for one week or three, your memory of it will be roughly the same.
Because of our remembering self’s miscalculations, we tend to prize brief intense pleasures too highly and quiet, lasting, tranquil joys too little … attention-grabbing YouTube videos instead of a good book.
There is a whole genre of book on “extreme living”. … These authors – and their readers – have fallen into the trap of the remembering self. Running barefoot across the USA or conquering Everest in record time can only be considered wonderful experiences in retrespect. At the time, they’re torture. Extreme sports feed memory at the cost of moment-by-moment happiness.
THE MEMORY BANK
My suggestion is not to avoid making long-term plans, but once they’re in place to focus wholly on the now.
Make the most about present experiences instead of worrying about future memories.
Savor the sunset instead of photographing it. //Miguel: or take a shot, and then spend the rest of time experiencing it!
THE “GOOD DEATH” FALLACY
Your remembering self produces systematic errors. It tells tall tales.
You will remember a film that’s exciting throughout but which ends unsatisfactorily as a bad film. Ditto for parties, concerts, books, lectures, homes and relationships.
you almost certainly won’t die in your prime, like James Dean – but after a protracted and gradual decline in your physical and mental capacities.
Age and death are the price we pay for a good life – like a hefty bill after a meal.
THE SPIRAL OF SELF PITY
Self-pity is one of the most useless responses to life’s trials.
blaming other people, specially your parents, has an expiry date.
studies show that even undeniably awful childhood events … are minimally correlated with success or satisfaction in adult life.
“It has been difficult to find even small effects of childhood events on adult personality, and there is no evidence at all of large – to say nothing of determining – effect.” – Martin Seligman
Far more decisive than our history are our genes – and their distribution is sheer chance.
Not getting bogged down in self-pity is a golden rule of mental health. Accept the fact that life isn’t perfect – yours or anyone else’s.
“Things will get thrown at you and things will hit you. Life’s no soft affair.” – Seneca
What point is there in “being unhappy, just because once you were unhappy.”
“Whenever you think that some situation or some person is ruining your life, it is actually you who are ruining your life… Feeling like a victim is a perfectly disastrous way to go through life.” – Charlie Munger’s “iron prescription”
HEDONISM AND EUDAIMONIA
Plato and Aristotle both believed that people should be as temperate, courageous, just and prudent as possible.
adopted … later by the Catholic Church … as the cardinal virtues: prudence, temperance, fortitude and justice.
Just as every musical note has two qualities – pitch and volume – every experienced moment has two components: a pleasurable (or hedonistic) component and a meaningful component.
Purpose and pleasure as the two cornerstones of happiness.
strike a balance between enjoyment and meaning.
Avoid the extremes. Because your marginal utility decreases the further you wander toward the fringe.
switch between meaningfulness and enjoyment. So if you’ve saved a small piece of the world, then I think you deserve a glass of fine red wine.
THE CIRCLE OF DIGNITY
I never do anything for money that I wouldn’t do for a tenth of the offered sum … I never let money be the decisive factor.
Commitments are so sacred that by nature they should be rare. – Warren Buffett
Society cares about cohesion not about the private interests of a single member.
Society only leaves people in peace if they conform. So brace yourself for those arrows and shore up your circle of dignity.
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Miguel: His lecture at LSE based on this book was quite entertaining too, find it here.
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