Behavioral Investing Quotes

The best way to protect an asset is with systems that self organize and self execute behaviors which function as protective to the asset.

When we look at asset protection from a natural perspective, we realize that in nature, assets are protected not with fences or walls but with internal and external immune systems. So the best way to protect an asset is with systems that self organize and self execute behaviors which function as protective to the asset.

A broken soul doesn't invest in boundaries because the world has crossed them, without mercy.

Beginning in infancy (or even before) each of us, in response to perceived threats to our well-being, develops a false self: a set of protective behaviors driven at root by a sense of need and lack. The essence of the false self is driven, addictive energy, consisting of tremendous emotional investment in compensatory "emotional programs for happiness," as Keating calls them.

Our favorite holding period is forever. We are just the opposite of those who hurry to sell and book profits when companies perform well but who tenaciously hang on to businesses that disappoint. Peter Lynch aptly likens such behavior to cutting the flowers and watering the weeds.

when people hear anything that sounds like criticism, they tend to invest their energy in self-defense or counterattack. If we wish for a compassionate response from others, it is self-defeating to express our needs by interpreting or diagnosing their behavior. Instead, the more directly we can connect our feelings to our own needs, the easier it is for others to respond to us compassionately.

In some settings, however, rampant opportunistic behavior severely limits what can be done jointly without major investments in monitoring and sanctioning arrangements.

Leaders must either invest a reasonable amount of time attending to fears and feelings, or squander an unreasonable amount of time trying to manage ineffective and unproductive behavior.

According to the Shuos," Jedao said, "games are about behavior modification. The rules constrain some behaviors and reward others. Of course, people cheat, and there are consequences around that, too, so implicit rules and social context are just as important. Meaningless cards, tokens, and symbols become invested with value and significance in the world of the game. In a sense, all calendrical war is a game between competing sets of rules, fueled by the coherence of our beliefs. To win a calendrical war, you have to understand how game systems work.

Our goal is more modest: We simply attempt to be fearful when others are greedy and to be greedy only when others are fearful.

Stop blaming other people for your own behavior! Own the truth. If you don't like it, then invest the time and energy to change it.

Narcissists do show a lack of concern for others, but they are equally insensitive to their own true needs. Often their behavior is self-destructive. Moreover, when we speak of narcissists’ “self” love, we need to make a distinction. Narcissism denotes an investment in one’s image as opposed to one’s self. Narcissists love their image, not their real self. They have a poor sense of self; they are not self-directed. Instead, their activities are directed toward the enhancement of their image, often at the expense of the self.

The best way to measure your investing success is not by whether you’re beating the market but by whether you’ve put in place a financial plan and a behavioral discipline that are likely to get you where you want to go. In the end, what matters isn’t crossing the finish line before anybody else but just making sure that you do cross it.8

We do not need to be rational and scientific when it comes to the details of our daily life—only in those that can harm us and threaten our survival. Modern life seems to invite us to do the exact opposite; become extremely realistic and intellectual when it comes to such matters as religion and personal behavior, yet as irrational as possible when it comes to matters ruled by randomness (say, portfolio or real estate investments). I have encountered colleagues, “rational,” no-nonsense people, who do not understand why I cherish the poetry of Baudelaire and Saint-John Perse or obscure (and often impenetrable) writers like Elias Canetti, J. L. Borges, or Walter Benjamin. Yet they get sucked into listening to the “analyses” of a television “guru,” or into buying the stock of a company they know absolutely nothing about, based on tips by neighbors who drive expensive cars.

But the financial industry is supremely pragmatic. While it may genuflect to the old icons, it invests its research dollars in the search for newer, better gods.

If you are wearing yellow goggles, every blue thing will appear green to you. It is your perception, and it is your reality.

In the Israeli army, soldiers are divided into those who think with a rosh gadol—literally, a “big head”—and those who operate with a rosh katan, or “little head.” Rosh katan behavior, which is shunned, means interpreting orders as narrowly as possible to avoid taking on responsibility or extra work. Rosh gadol thinking means following orders but doing so in the best possible way, using judgment, and investing whatever effort is necessary. It emphasizes improvisation over discipline, and challenging the chief over respect for hierarchy.

The fact that people are fallible is your biggest enduring advantage in the accumulation of greater wealth. The fact that you are just as fallible is the biggest impediment to that very same goal.

Family-centered parents do not have the emotional freedom, the power, to raise their children with their ultimate welfare truly in mind. If they derive their own security from the family, their need to be popular with their children may override the importance of a long-term investment in their children’s growth and development. Or they may be focused on the proper and correct behavior of the moment. Any behavior that they consider improper threatens their security. They become upset, guided by the emotions of the moment, spontaneously reacting to the immediate concern rather than the long-term growth and development of the child. They may yell or scream. They may overreact and punish out of bad temper. They tend to love their children conditionally, making them emotionally dependent or counterdependent and rebellious.

Humans possess the ability to engage in both external observation and internal introspection. How much time they invest engaged in each activity is reflective of their values, which manifest themselves in behavior, personality formation, and influences the selection of narrative stories that they share with their brethren.

On traditional economic theory: We do not play chess as if we were a grandmaster, invest as if we were Warren Buffett, or cook like an Iron Chef. It is more likely we cook like Warren Buffett, who loves to eat at Dairy Queen.

Knowing the why is the deepest and most powerful form of knowledge because the why is always the driver of the what and how. When you understand why the stock market goes up and down, making informed decisions about investing becomes easier. When you understand why someone does what they do, their actions and behaviors make a lot more sense.

Motivation or Ability — Which Should You Increase First? After uncovering the triggers that prompt user actions and deciding which actions you want to turn into habits, you can increase motivation and ability to spark the likelihood of your users taking a desired behavior. But which should you invest in first, motivation or ability? Where is your time and money better spent? The answer is always to start with ability.

The psychology of individuals – warts and all – must be a central consideration in the formulation of any practical investing approach. The good news here is that others’ misbehavior will consistently and systematically create opportunities for you. The bad news is that you are prone to all of the same quirks and are just as likely, in the absence of strict adherence to the rules, to create the same opportunities for others.

The moderate narcissist offers enough good days to keep you invested and enough bad days that hurt you and leave you utterly confused. Moderate narcissistic people have cognitive empathy, so they sometimes seem to “get it.” They are entitled and seek validation and have a cocky, but not menacing, arrogance. They are hypocritical and believe that there is one set of rules for them and another for everyone else. They often feel that they are the victim in situations that do not go their way. They do not take responsibility for their behavior and will shift blame onto others for anything that makes them look bad. They are deeply selfish and will choose what works for them to the detriment of you or anyone else.

We have been conditioned since birth with the belief that satisfaction of these inner needs comes through our interaction with the world. We seek inner fulfillment through what we have or what we do, through the experiences the world provides, and through the ways others behave toward us. This is the meme that governs so much of our thinking and behavior: the meme that says whether or not we are content with life depends on what we have and what we do. Prevalent as this meme may be, it seldom provides any lasting satisfaction. A person may gather a great deal of wealth, but is he really more secure? More than likely, he will soon find new sources of insecurity. Are my investments safe? Will the stock market crash? Can I trust my friends? Should I employ “security” companies to protect my possessions?

What I am proposing here is that you consistently bet on inconsistency. What I am asking you to do is bet unfailingly on the failures of human reason, which is a sure bet indeed. It is a painful thing to admit that education, intellect and willpower are inadequate to make you the type of investor you would like to be, but it’s not as painful as losing money.

If anyone could anticipate a market drop, no one would ever invest in the market above the level to which it will decline. That is to say, market corrections are unforeseen events.

Once bitten, twice shy isn't a very good investment strategy.

More often than not, extreme events revert to the mean—the average—for no other reason than that result is more likely.

be aware that the market does not turn when it sees light at the end of the tunnel. It turns when all looks black, but just a subtle shade less black than the day before.

we don’t need to outsmart everyone else. We need to stick to our investment discipline, ignore the actions of others, and stop listening to the so-called experts.

Under the tenets of behavioral finance, markets are not always efficient. It is human behavior that moves markets and not the universal information shared by market participants.

The idea that a few things account for most results is not just true for companies in your investment portfolio. It’s also an important part of your own behavior as an investor.

Human behavior and information bias play a huge role in transaction prices. It creates short-term opportunities that can be exploited.

The market rewards, not the best stock, but the best behavior.

Identical information can lead to opposite conclusions based on relative perceptions of its receivers.

Humans are not machines. They analyze information through the lenses of their experience, knowledge, and cognitive biases. All of it makes their perception, their unique viewpoint.

Take your time investing so much emotion into other people's behavior. Many philosophies instruct us never to become invested in the behavior of others.

Think a little differently from the herd and see things they can’t or won’t.

Technology is an extension of human behavior,

Economic conditions may differ from period to period, but human psychology is embedded among us and will not change.

Market participants are humans, and so are their behaviors.

The fact that your brain becomes more risk seeking in bull markets and more conservative in bear markets means that you are neurologically predisposed to violate the first rule of investing, “buy low and sell high.” Our flawed brain leads us to subjectively experience low levels of risk when risk is actually quite high, a concept that Howard Marks refers to as the “perversity of risk.

Humans’ reactions are contaminated with their cognitive biases, greed, fear, and survival instinct. However, capital market success requires precisely the opposite behavior of what your intuition is suggesting.

This tendency of overconfidence and poor outcomes is not confined to only retail investors. Institutional investors suffer from overconfidence equally if not more, and their investment results are not superior either.

It feels bad to wade in the repercussions of our behavior, it feels good to apologize and disavow and consider oneself exempt moving forward. But being online, being white, being online as a white person, means never being exempt. Antiracist as a noun does not exist. There's only people doing the work, or not. The person genuinely invested in the work doesn't run from discomfort but accepts it as the price of personhood taken for granted.

Success in investing doesn’t correlate with IQ once you’re above the level of 100. Once you have ordinary intelligence, what you need is the temperament to control the urges that get other people into trouble in investing.

Now, it has been independently shown that people hate to lose something more than they enjoy gaining it. For example, they don't mind paying for something with a credit card even when told there is a discount for cash, but they hate paying the same amount if they are told there is a surcharge for using credit. As a result, people will often refuse to gamble for an expected profit (they turn down bets such as "Heads, you win $120; tails, you pay $100), but they will gamble to avoid an expected loss (such as "Heads, you no longer owe $120; tails, you now owe an additional $100"). (This kind of behavior drives economists crazy, but is avidly studied by investment firms hoping to turn it to their advantage.) The combination of people's loss aversion with the effects of framing explains the paradoxical result: the "gain" metaphor made the doctors risk-averse; the "loss" metaphor made them gamblers.

Imagine a world where you could gain more knowledge by reading fewer books, see more of the world by minimizing travel and get more fit by doing less exercise. Certainly, a world where doing less gets you more is highly inconsistent with much of our lived experience, but is just the way Wall Street Bizarro World operates. If we are to learn to live in WSBW (and we must), one of the primary lessons to be learned is to do less than we think we should.

In a bubble, people demonstrate some sort of cult-like behavior. They defend their positions, not by economic logic, but by force. They do this by calling those who disagree with them dirty, and mocking people who give them prudent advice.

[Mood allocates] investments of time, effort, resources, and risk taking to maximize Darwinian fitness in situations of varying propitiousness. High and low moods adjust cognition and behavior to cope with propitious and unpropitious situations.

Though taken for granted today, making milk safe and cleaning up water supplies were herculean efforts, involving massive investments of public dollars and new laws mandating that farmers, milk distributors, and other private actors change their behavior. No city required milk pasteurization at the beginning of the twentieth century. By the early 1920s, virtually all the largest cities did, and many offered “milk stations” where poorer residents could buy clean milk. Infant mortality plummeted.25

Unlike when people lived in small communities and could not escape their past behavior, we live in an age of anonymous one-time encounters, and many people have become expert at the art of fast persuasion. Trust, formerly earned through actions, is now purchased with sleight of hand, and sleight of words. I encourage women to explicitly rebuff unwanted approaches, but I know it is difficult to do. Just as rapport-building has a good reputation, explicitness applied by women in this culture has a terrible reputation. A woman who is clear and precise is viewed as cold, or a bitch, or both. A woman is expected, first and foremost, to respond to every communication from a man. And the response is expected to be one of willingness and attentiveness. It is considered attractive if she is a bit uncertain (the opposite of explicit). Women are expected to be warm and open, and in the context of approaches from male strangers, warmth lengthens the encounter, raises his expectations, increases his investment, and, at best, wastes time. At

Chris informs Sylvère that the flirtatious behavior she shared with Dick the previous night amounts to a “Conceptual Fuck” (21). Because Sylvère and Chris are no longer having sex, Kraus tells us, “the two maintain their intimacy via deconstruction: i.e. they tell each other everything” (21). Chris tells Sylvère that Dick’s disappearance invests the flirtation “with a subcultural subtext she and Dick both share: she’s reminded of all the fuzzy one-time fucks she’s had with men who’re out the door before her eyes are open

That is the fantastic intolerable paradox of my life, that I have gone questing for what I possessed initially -- a belief to invest my days with dignity and meaning, a pattern of behavior through which man might most articulately express his devotion to his fellows.

What would we think of people who threw litter on their own front lawns, poured a few cups of sugar in their gas tanks, and then splashed some catsup on their clothes before going to the big interview? Would we say that such behavior is merely foolish or downright dangerous? Would we think of these people as rational? Would rational people sabotage their own well-being, their own possibilities for the future? What would be the point of such behavior? What in the world could they be thinking? What are we thinking when we invest months of effort in our recovery only to let it dribble away? If the meetings are working for us, is it rational to stop going? If we’ve suffered for want of love, isn’t it self-defeating to stop phoning our new friends in the fellowship? Aren’t we sabotaging our own possibilities

A teenager may think he or she is creating a better “self,” a better object, with each selfie. But I would argue that every selfie taken, and improved upon, causes an erosion or dismissal of the true self. With each selfie taken, and invested in, the true self is diminished.

In busy times there is also a temptation to let investments such as training take a back seat to getting the work out the door. Only adherence to the firm's principles and values prevents opportunistic behavior that may have short-term benefits but long-term adverse consequences.

External motivators for behavior such as rewards and punishments may destroy the precious internal motivation to be good, making leverage by such artificial means necessary by default. As an investment in easy parenting, trusting in a child's desire to be good for us is one of the best.

Mother Nature convincingly suggests that those who stay scared and run with the herd are more likely to stay alive. As investors around you behave irrationally and the news describes a miasma that will last for years, it’s easy to lose sight of your well-laid plans. It’s tempting to join the herd…

Germans adored Hitler; they invested their own egos in him and, after the war, they were unable to acknowledge the inhumanity of his ideals or their horrifying consequences. They understand the defence against remembering the criminal and horrific events as a self-protective repudiation of a melancholia that would have set in absolutely inevitably if Germans had truly confronted their bond with Hitler and their burden of guilt. Through the omnipotently manifesting narcissism and National Socialist ideals, fellow humanity and the capacity for empathy with the victims were expelled from the self and destroyed.

Book-buyers aren’t attracted, by and large, by the literary merits of a novel; book-buyers want a good story to take with them on the airplane, something that will first fascinate them, then pull them in and keep them turning the pages. This happens, I think, when readers recognize the people in a book, their behaviors, their surroundings, and their talk. When the reader hears strong echoes of his or her own life and beliefs, he or she is apt to become more invested in the story. I’d argue that it’s impossible to make this sort of connection in a premeditated way, gauging the market like a racetrack tout with a hot tip.

Three Steps to Less Collect data by tracking your time, energy, and resources to identify patterns. Focus on one thing at a time. Eliminate multitasking and other unproductive behaviors. Implement the Pareto Principle (the 80/20 Rule). Focus on the things in your life that give you the highest return on investment.

Whenever anyone asks me for investment advice, I tell them to buy a diversified portfolio heavily tilted toward stocks, especially if they are young, and then scrupulously avoid reading anything in the newspaper aside from the sports section. Crossword puzzles are acceptable, but watching cable financial news networks is strictly forbidden.#

When the game is no longer being played your way, it is only human to say the new approach is all wrong, bound to lead to trouble, etc. I have been scornful of such behavior by others in the past. I have also seen the penalties incurred by those who evaluate conditions as they were – not as they are. Essentially I am out of step with present conditions. On one point, however, I am clear. I will not abandon a previous approach whose logic I understand even though it may mean foregoing large, and apparently easy, profits to embrace an approach which I don't fully understand, have not practiced successfully and which, possibly, could lead to a substantial permanent loss of capital.6

I began this process without preconceptions of how the information would shake out. Five consistent types of behavioral risk emerged: Ego, Emotion, Information, Attention, and Conservation. The number of bad decisions we can make is limitless (have you seen reality TV?), but all behavioral risk has one or more of these five risk factors at its core.

We also have to invest time attending to our own fears, feelings, and history or we’ll find ourselves managing our own unproductive behaviors. As daring leaders, we have to stay curious about our own blind spots and how to pull those issues into view, and we need to commit to helping the people we serve find their blind spots in a way that’s safe and supportive.

Would the behavior of the United States during the war—in military action abroad, in treatment of minorities at home—be in keeping with a “people’s war”? Would the country’s wartime policies respect the rights of ordinary people everywhere to life, liberty, and the pursuit of happiness? And would postwar America, in its policies at home and overseas, exemplify the values for which the war was supposed to have been fought? These questions deserve thought. At the time of World War II, the atmosphere was too dense with war fervor to permit them to be aired. For the United States to step forward as a defender of helpless countries matched its image in American high school history textbooks, but not its record in world affairs. It had opposed the Hatian revolution for independence from France at the start of the nineteenth century. It had instigated a war with Mexico and taken half of that country. It had pretended to help Cuba win freedom from Spain, and then planted itself in Cuba with a military base, investments, and rights of intervention. It had seized Hawaii, Puerto Rico, Guam, and fought a brutal war to subjugate the Filipinos. It had “opened” Japan to its trade with gunboats and threats. It had declared an Open Door Policy in China as a means of assuring that the United States would have opportunities equal to other imperial powers in exploiting China. It had sent troops to Peking with other nations, to assert Western supremacy in China, and kept them there for over thirty years.

book-buyers want a good story to take with them on the airplane, something that will first fascinate them, then pull them in and keep them turning the pages. This happens, I think, when readers recognize the people in a book, their behaviors, their surroundings, and their talk. When the reader hears strong echoes of his or her own life and beliefs, he or she is apt to become more invested in the story.

Americans tend to see themselves in control of their fate, while Chinese see fate as something external,” Lam, the professor, said. “To alter fate, the Chinese feel they need to do things to acquire more luck.” In surveys, Chinese casino gamblers tend to view bets as investments and investments as bets. The stock market and real estate, in the Chinese view, are scarcely different from a casino. The behavioral scientists Elke Weber and Christopher Hsee have compared Chinese and American approaches to financial risk. In a series of experiments, they found that Chinese investors overwhelmingly described themselves as more cautious than Americans. But when they were tested—with a series of hypothetical financial decisions—the stereotype proved wrong, and the Chinese were found to take consistently larger risks than Americans of comparable wealth.

Stop Rewarding Bad Behavior – If narcissists are emotionally like children, the last thing we want to do is give them candy every time they walk in our houses with dirty shoes. If your narcissist is hoovering you after discarding you horrifically, the best satisfaction would be to give them nothing but silence. Complete withdrawal and indifference is what destroys the narcissist and keeps them up at night. If your narcissist did not appreciate your presence, why not give them your absence? If you are dealing with a narcissist you can’t avoid, don’t indulge them in their grandiose fantasies. Stop giving them so much air time with your people-pleasing habits. Don’t invest more energy than you need to. Every ounce you give the narcissist is energy you could be using to better yourself. Remember, it’s time to idealize and supply yourself – not the narcissist.

The earlier you start making small changes, the more powerfully the Compound Effect works in your favor. Suppose your friend listened to Dave Ramsey’s advice and began putting $250 a month into an IRA when she got her first job after graduating from college at age twenty-three. You, on the other hand, don’t start saving until you’re forty. (Or maybe you started saving a little earlier but cleaned out your retirement account because you didn’t notice any great gains.) By the time your friend is forty, she never has to invest another dollar and will have more than a $1 million by the age of sixty-seven, growing at 8 percent interest compounded monthly. You continue to invest $250 every month until you reach sixty-seven, the normal retirement age for Social Security for those born after 1960. (That means you’re saving for twenty-seven years in contrast to her seventeen years.) When you’re ready to retire, you’ll have less than $300,000 and will have invested $27,000 more than your friend. Even though you saved for many more years and invested much more cash, you still ended up with less than a third of the money you could have had. That’s what happens when we procrastinate and neglect necessary behaviors, habits, and disciplines. Don’t wait another day to start the small disciplines that will lead you in the direction of your goals!

Google had discovered a way to translate its nonmarket interactions with users into surplus raw material for the fabrication of products aimed at genuine market transactions with its real customers: advertisers.94 The translation of behavioral surplus from outside to inside the market finally enabled Google to convert investment into revenue. The corporation thus created out of thin air and at zero marginal cost an asset class of vital raw materials derived from users’ nonmarket online behavior.

That animal is not your possession. He doesn't exist for your amusement. He has needs, instincts. Urges." The way he said that word, in that deep, earthy growl, had chills rippling over her skin. She swallowed hard. "Urges?" "Yes. Urges." He sauntered toward her- as much as a man could saunter in knee-deep water. "But what could a lady like you know about those?" "Oh, I understand urges. Right now, I have the powerful urge to do this." She shoved him hard in the chest, hoping to send him flailing backward into the river. He didn't budge. Not a teeter. Not a totter. Not even a blink. Penny would not surrender. She took a step in reverse and then tried again, adding the weight of her body to the effort. This time, he was ready for her. He caught her wrists in his hands, stopping her before she could even make contact. "Now, now, Your Ladyship. This is most unbecoming behavior." "I know that." She clenched her hands into fists. "You are so maddening. You have a way of provoking me, unlike anyone I've ever known. It's as though I become a different person when I'm around you, and I'm not certain I like her." He pulled her to him. "I like her." Penny expected he would shortly ruin that statement. I like her- smoldering pause- potential to increase the return on my property investment. Not this time. Instead, he lowered his head until his mouth brushed hers. Teased her lips apart, until his tongue brushed hers. And then they tumbled together against the riverbank, and his everything brushed hers.

The most significant transformational moment in my career was an act of elimination. It wasn’t my idea. I was in my late thirties and doing well flying around the country giving the same talk about organizational behavior to companies. I was on a lucrative treadmill of preserving, but I needed my mentor Paul Hersey to point out the downside. “You’re too good at what you’re doing,” Hersey told me. “You’re making too much money selling your day rate to companies.” When someone tells me I’m “too good” my brain shifts into neutral—and I bask in the praise. But Hersey wasn’t done with me. “You’re not investing in your future,” he said. “You’re not researching and writing and coming up with new things to say. You can continue doing what you’re doing for a long time. But you’ll never become the person you want to be.” For some reason, that last sentence triggered a profound emotion in me. I respected Paul tremendously. And I knew he was right. In Peter Drucker’s words, I was “sacrificing the future on the altar of today.” I could see my future and it had some dark empty holes in it. I was too busy maintaining a comfortable life. At some point, I’d grow bored or disaffected, but it might happen too late in the game for me to do something about it. Unless I eliminated some of the busywork, I would never create something new for myself. Despite the immediate cut in pay, that’s the moment I stopped chasing my tail for a day rate and decided to follow a different path. I have always been thankful for Paul’s advice.

The first finding that jumped out at us was that it is possible to learn too much ! In the tournament, investing lots of time in learning was not at all effective. In fact, we found a strong negative correlation between the proportion of a strategy's moves that were INNOVATE or OBSERVE, as opposed to EXPLOIT, and how well the strategy performed. Successful strategies spent only a small fraction of their time (5-10%) learning, and the bulk of their time caching in on what they had learned, through playing EXPLOIT. Only through playing EXPLOIT can a strategy directly accrue fitness. Hencem every time a strategy chooses to learn new behavior, be it through playing INNOVATE or OBSERVE, there is a cost corresponding to the payoff that would have been received had EXPLOIT been played instead. This implied that the way to get on in life was to do a very quick bit of learning and then EXPLOIT, EXPLOIT, EXPLOIT until you die. That is a sobering lesson for someone like myself who has spent his whole life in school or university.

Common phrases narcissists use and what they actually mean: 1. I love you. Translation: I love owning you. I love controlling you. I love using you. It feels so good to love-bomb you, to sweet-talk you, to pull you in and to discard you whenever I please. When I flatter you, I can have anything I want. You trust me. You open up so easily, even after you’ve already been mistreated. Once you’re hooked and invested, I’ll pull the rug beneath your feet just to watch you fall. 2. I am sorry you feel that way. Translation: Sorry, not sorry. Let’s get this argument over with already so I can continue my abusive behavior in peace. I am not sorry that I did what I did, I am sorry I got caught. I am sorry you’re calling me out. I am sorry that I am being held accountable. I am sorry you have the emotions that you do. To me, they’re not valid because I am entitled to have everything I want – regardless of how you feel about it. 3. You’re oversensitive/overreacting. Translation: You’re having a perfectly normal reaction to an immense amount of bullshit, but all I see is that you’re catching on. Let me gaslight you some more so you second-guess yourself. Emotionally invalidating you is the key to keeping you compliant. So long as you don’t trust yourself, you’ll work that much harder to rationalize, minimize and deny my abuse. 4. You’re crazy. Translation: I am a master of creating chaos to provoke you. I love it when you react. That way, I can point the finger and say you’re the crazy one. After all, no one would listen to what you say about me if they thought you were just bitter or unstable. 5. No one would believe you. Translation: I’ve isolated you to the point where you feel you have no support. I’ve smeared your name to others ahead of time so people already suspect the lies I’ve told about you. There are still others who might believe you, though, and I can’t risk being caught. Making you feel alienated and alone is the best way for me to protect my image. It’s the best way to convince you to remain silent and never speak the truth about who I really am.

When we regress into the outer critic, we obsess about the unworthiness [imperfection] and treacherousness [dangerousness] of others. Unconsciously, we do this to avoid emotional investment in relationships. The outer critic developed in reaction to parents who were too dangerous to trust. The outer critic helped us to be hyperaware of the subtlest signal that our parents were deteriorating into their most dangerous behaviors. Over time the outer critic grew to believe that anyone and everyone would inevitably turn out to be as untrustworthy as our parents. Now, in situations where we no longer need it, the outer critic alienates us from others. It attacks others and scares them away, or it builds fortresses of isolation whose walls are laundry lists of their exaggerated shortcomings. In an awful irony, the critic attempts to protect us from abandonment by scaring us further into it. If we are ever to discover the comfort of soothing connection with others, the critic’s dictatorship of the mind must be broken. The outer critic’s arsenal of intimacy-spoiling dynamics must be consciously identified and gradually deactivated.

This was my world: a world of truly irrational behavior. we spend our way into the poorhouse. We buy big TVs and iPads. Our children wear nice clothes thanks to high-interest credit cards and payday loans.... We spend to pretend that we're upper-class. And when the dust clears - when bankruptcy hits or a family member bails us out of our stupidity - there's nothing left over. Nothing for the kids' college tuition, no investment to grow our wealth, no rainy-day fund if someone loses her job. We know we shouldn't spend like this. Sometimes we beat ourselves up over it, but we do it anyway.

Groups have powerful self-reinforcing mechanisms at work. These can lead to group polarization—a tendency for members of the group to end up in a more extreme position than they started in because they have heard the views repeated frequently. At the extreme limit of group behavior is groupthink. This occurs when a group makes faulty decisions because group pressures lead to a deterioration of “mental efficiency, reality testing, and moral judgment.” The original work was conducted with reference to the Vietnam War and the Bay of Pigs fiasco. However, it rears its head again and again, whether it is in connection with the Challenger space shuttle disaster or the CIA intelligence failure over the WMD of Saddam Hussein. Groupthink tends to have eight symptoms: 1 . An illusion of invulnerability. This creates excessive optimism that encourages taking extreme risks. [...] 2. Collective rationalization. Members of the group discount warnings and do not reconsider their assumptions. [...] 3. Belief in inherent morality. Members believe in the rightness of their cause and therefore ignore the ethical or moral consequences of their decisions. 4. Stereotyped views of out-groups. Negative views of “enemy” make effective responses to conflict seem unnecessary. Remember how those who wouldn't go along with the dot-com bubble were dismissed as simply not getting it. 5. Direct pressure on dissenters. Members are under pressure not to express arguments against any of the group’s views. 6. Self-censorship. Doubts and deviations from the perceived group consensus are not expressed. 7. Illusion of unanimity. The majority view and judgments are assumed to be unanimous. 8. "Mind guards" are appointed. Members protect the group and the leader from information that is problematic or contradictory to the group's cohesiveness, view, and/or decisions. This is confirmatory bias writ large.

Power distance: the degree to which members of a society expect power to be unequally shared. Uncertainty avoidance: a society’s reliance on social norms and procedures to alleviate the unpredictability of future events. Assertiveness: the extent to which a society encourages people to be tough, confrontational, assertive, and competitive rather than modest and tender. Humane orientation: the degree to which a society encourages and rewards individuals for being fair, altruistic, generous, caring, and kind to others. Future orientation: the extent to which a society encourages and rewards future-oriented behaviors such as planning, investing in the future, and delaying gratification. national culture The values and attitudes shared

This was my world: a world of truly irrational behavior. We spend our way into the poorhouse. We buy giant TVs and iPads. Our children wear nice clothes thanks to high-interest credit cards and payday loans. We purchase homes we don’t need, refinance them for more spending money, and declare bankruptcy, often leaving them full of garbage in our wake. Thrift is inimical to our being. We spend to pretend that we’re upper-class. And when the dust clears—when bankruptcy hits or a family member bails us out of our stupidity—there’s nothing left over. Nothing for the kids’ college tuition, no investment to grow our wealth, no rainy-day fund if someone loses her job. We know we shouldn’t spend like this. Sometimes we beat ourselves up over it, but we do it anyway.

This was my world: a world of truly irrational behavior. We spend our way into the poorhouse. We buy giant TVs and iPads. Our children wear nice clothes thanks to high-interest credit cards and payday loans. We purchase homes we don't need, refinance them for mare spending money, and declare bankruptcy, often leaving them full of garbage in our wake. Thrift is inimical to our being. We spend to pretend that we're upper-class. And when the dust clears--when bankruptcy hits or a family member bails us out of our stupidity--there's nothing left over. Nothing for the kids' college tuition, no investment to grow our wealth, no rainy-day fund if someone loses her job. We know we shouldn't spend like this. Sometimes we beat ourselves up over it, but we do it anyway.

This was my world: a world of truly irrational behavior. We spend our way into the poorhouse. We buy giant TVs and iPads. Our children wear nice clothes thanks to high-interest credit cards and payday loans. We purchase homes we don’t need, refinance them for more spending money, and declare bankruptcy, often leaving them full of garbage in our wake. Thrift is inimical to our being. We spend to pretend that we’re upper class. And when the dust clears — when bankruptcy hits or a family member bails us out of our stupidity — there’s nothing left over. Nothing for the kids’ college tuition, no investment to grow our wealth, no rainy-day fund if someone loses her job. We know we shouldn’t spend like this. Sometimes we beat ourselves up over it, but we do it anyway.

Basically, Graham breaks the art of investing down into two simple variables – price and value. Value is what a business is worth. Price is what you have to pay to get it. Given the stock market’s manic-depressive behavior, numerous occasions arise where a business’ market price is distinctly out of line with its true business value. In such instances, an investor may be able to purchase a dollar of value for just 50 cents. Note that there is no mention here of interest rates, economic forecasts, technical charts, market cycles, etc. The only issues are price and value. I should also note that Graham emphasizes a large margin of safety. The strategy is not to buy a dollar of value for 97 cents. Rather, the gap should be dramatic so as to absorb the effects of miscalculation and worse-than-average luck.

Once we begin to examine the forces that drive the misogynist, we find that much of his abusive behavior is a cover-up for his tremendous anxiety about women. He is caught in the conflict between his need for the woman's love and his deepseated fears of her. This man needs, as we all do, to feel emotionally taken care of, to be loved, and to feel safe. As adults we fulfill these yearnings through physical intimacy, emotional sharing, and parenting. But the misogynist finds these yearnings terribly frightening. His normal needs to be close to a woman are mixed with fears that she can annihilate him emotionally. He harbors a hidden belief that if he loves a woman, she will then have the power to hurt him, to deprive him, to engulf him, and to abandon him. Once he has invested her with these awesome and mythical powers, she becomes a fearful figure for him.

no matter how you look at the issue, prevention is a fundamentally preferable and more cost-effective way to promote health and longevity. Most people agree that we invest insufficiently in prevention, but they would also surmise that it is difficult to get young, healthy people to avoid behaviors that increase their risk of future illness. Consider smoking, which causes more preventable deaths than any major risk factor (the other big ones being physical inactivity, poor diet, and alcohol abuse). After prolonged legal battles, public health efforts to discourage smoking have managed to halve the percentage of Americans who smoke since the 1950s.19 Yet 20 percent of Americans still smoke, causing 443,000 premature deaths in 2011 at a direct cost of $96 billion per year. Likewise, most Americans know they should be physically active and eat a healthy diet, yet only 20 percent of Americans meet the government’s recommendations for physical activity, and fewer than 20 percent meet government dietary guidelines.20 There are many, diverse reasons we are bad at persuading, nudging, or otherwise encouraging people to use their bodies more as they evolved to be used (more on this later), but one contributing factor could be that we are still following in the footsteps of the marquis de Condorcet, waiting for the next promised breakthrough. Scared of death and hopeful about science, we spend billions of dollars trying to figure out how to regrow diseased organs, hunting for new drugs, and designing artifical body parts to replace the ones we wear out. I am in no way suggesting that we cease investing in these and other areas. Quite the contrary: let’s spend more! But let’s not do so in a way that promotes the pernicious feedback loop of just treating mismatch diseases rather than preventing them. In practical

Putting it all together, fluctuations in attitudes and behavior combine to make the stock market the ultimate pendulum. In my 47 full calendar years in the investment business, starting with 1970, the annual returns on the S&P 500 have swung from plus 37% to minus 37%. Averaging out good years and bad years, the long-run return is usually stated as 10% or so. Everyone’s been happy with that typical performance and would love more of the same. But remember, a swinging pendulum may be at its midpoint “on average,” but it actually spends very little time there. The same is true of financial market performance. Here’s a fun question (and a good illustration): for how many of the 47 years from 1970 through 2016 was the annual return on the S&P 500 within 2% of “normal”—that is, between 8% and 12%? I expected the answer to be “not that often,” but I was surprised to learn that it had happened only three times! It also surprised me to learn that the return had been more than 20 percentage points away from “normal”—either up more than 30% or down more than 10%—more than one-quarter of the time: 13 out of the last 47 years. So one thing that can be said with total conviction about stock market performance is that the average certainly isn’t the norm. Market fluctuations of this magnitude aren’t nearly fully explained by the changing fortunes of companies, industries or economies. They’re largely attributable to the mood swings of investors. Lastly, the times when return is at the extremes aren’t randomly distributed over the years. Rather they’re clustered, due to the fact that investors’ psychological swings tend to persist for a while—to paraphrase Herb Stein, they tend to continue until they stop. Most of those 13 extreme up or down years were within a year or two of another year of similarly extreme performance in the same direction.

As he throws himself into one scheme after another, he draws lessons that improve his focus and judgment. He knits what he learns into mental models of investing, which he then uses to size up more complex opportunities and find his way through the weeds, plucking the telling details from masses of irrelevant information to reach the payoff at the end. These behaviors are what psychologists call “rule learning” and “structure building.” People who as a matter of habit extract underlying principles or rules from new experiences are more successful learners than those who take their experiences at face value, failing to infer lessons that can be applied later in similar situations. Likewise, people who single out salient concepts from the less important information they encounter in new material and who link these key ideas into a mental structure are more successful learners than those who cannot separate wheat from chaff and understand how the wheat is made into flour.

Qualities such as honesty, determination, and a cheerful acceptance of stress, which can all be identified through probing questionnaires and interviews, may be more important to the company in the long run than one's college grade-point average or years of "related experience." Every business is only as good as the people it brings into the organization. The corporate trainer should feel his job is the most important in the company, because it is. Exalt seniority-publicly, shamelessly, and with enough fanfare to raise goosebumps on the flesh of the most cynical spectator. And, after the ceremony, there should be some sort of permanent display so that employees passing by are continuously reminded of their own achievements and the achievements of others. The manager must freely share his expertise-not only about company procedures and products and services but also with regard to the supervisory skills he has worked so hard to acquire. If his attitude is, "Let them go out and get their own MBAs," the personnel under his authority will never have the full benefit of his experience. Without it, they will perform at a lower standard than is possible, jeopardizing the manager's own success. Should a CEO proclaim that there is no higher calling than being an employee of his organization? Perhaps not-for fear of being misunderstood-but it's certainly all right to think it. In fact, a CEO who does not feel this way should look for another company to manage-one that actually does contribute toward a better life for all. Every corporate leader should communicate to his workforce that its efforts are important and that employees should be very proud of what they do-for the company, for themselves, and, literally, for the world. If any employee is embarrassed to tell his friends what he does for a living, there has been a failure of leadership at his workplace. Loyalty is not demanded; it is created. Why can't a CEO put out his own suggested reading list to reinforce the corporate vision and core values? An attractive display at every employee lounge of books to be freely borrowed, or purchased, will generate interest and participation. Of course, the program has to be purely voluntary, but many employees will wish to be conversant with the material others are talking about. The books will be another point of contact between individuals, who might find themselves conversing on topics other than the weekend football games. By simply distributing the list and displaying the books prominently, the CEO will set into motion a chain of events that can greatly benefit the workplace. For a very cost-effective investment, management will have yet another way to strengthen the corporate message. The very existence of many companies hangs not on the decisions of their visionary CEOs and energetic managers but on the behavior of its receptionists, retail clerks, delivery drivers, and service personnel. The manager must put himself and his people through progressively challenging courage-building experiences. He must make these a mandatory group experience, and he must lead the way. People who have confronted the fear of public speaking, and have learned to master it, find that their new confidence manifests itself in every other facet of the professional and personal lives. Managers who hold weekly meetings in which everyone takes on progressively more difficult speaking or presentation assignments will see personalities revolutionized before their eyes. Command from a forward position, which means from the thick of it. No soldier will ever be inspired to advance into a hail of bullets by orders phoned in on the radio from the safety of a remote command post; he is inspired to follow the officer in front of him. It is much more effective to get your personnel to follow you than to push them forward from behind a desk. The more important the mission, the more important it is to be at the front.

In a paper called “The Economics of ‘Acting White,’” the young black Harvard economist Roland G. Fryer Jr. argues that some black students “have tremendous disincentives to invest in particular behaviors (i.e., education, ballet, etc.) due to the fact that they may be deemed a person who is trying to act like a white person (a.k.a. ‘selling-out’). Such a label, in some neighborhoods, can carry penalties that range from being deemed a social outcast, to being beaten or killed.” Fryer cites the recollections of a young Kareem Abdul-Jabbar, known then as Lew Alcindor, who had just entered the fourth grade in a new school and discovered that he was a better reader than even the seventh graders: “When the kids found this out, I became a target. . . . It was my first time away from home, my first experience in an all-black situation, and I found myself being punished for everything I’d ever been taught was right. I got all A’s and was hated for it; I spoke correctly and was called a punk. I had to learn a new language simply to be able to deal with the threats. I had good manners and was a good little boy and paid for it with my hide.

It is a truism today, in this highly technologically-developed culture, that students need technical computer skills. Equally truistic (and, not incidentally, true) is that the workplace has become highly technological. Even more truistic – and far more disturbing – are the shifts in education over the last two decades as public elementary schools, public and private high schools, and colleges and universities have invested scores of billions of dollars on “digital infrastructure,” computers, monitors and printers, “smart classrooms,” all to “meet the demands” of this new technological workplace. "We won’t dwell on the fact – an inconvenient truth? – that those technological investments have coincided with a decline in American reading behaviors, in reading and reading comprehension scores, in overall academic achievement, in the phenomenon – all too familiar to us in academia – of “grade inflation,” in an alarming collapse of our students’ understanding of their own history (to say nothing of the history of the rest of the world), rising ignorance of world and American geography, with an abandonment of the idea of objectivity, and with an increasingly subjective, even solipsistic, emphasis on personal experience. Ignore all this. Or, if we find it impossible to ignore, then let’s blame the teachers...

What makes relationship break ups so difficult in a codependent society is not the pain of the romance ending - although there is certainly a lot of pain and grief about such endings - it is the shame that our disease beats us up with for:  being "failures;"  or for being unworthy and unlovable;  or for being so "stupid" as to make such a "wrong" choice.  Very often we hang onto a relationship long after it is empty and dead because we feel that ending it will prove that we were "wrong" - or that something is wrong with us.  This is especially true in instances where our family or friends warned us that the person wasn't good for us - then we have a great deal of ego investment in proving them wrong.  This kind of attempt to avoid "failure" - to avoid admitting "defeat" - has caused many a person to stay in relationships that were abusive long after they knew it was hopeless. The subconscious programming is so strong that it overrides common sense, intellectual knowledge, and conscious awareness - and keeps us putting a great deal of energy into rationalizing and denying reality.  It is that subconscious programming - which can not be substantially changed without becoming emotionally honest, which includes releasing the repressed grief energy from childhood - that makes us powerless to live life in any way except reacting to the extremes of codependency.  It is powerlessness over that programming that has caused us to be our own worst enemies.

Here’s some startup pedagogy for you: When confronted with any startup idea, ask yourself one simple question: How many miracles have to happen for this to succeed? If the answer is zero, you’re not looking at a startup, you’re just dealing with a regular business like a laundry or a trucking business. All you need is capital and minimal execution, and assuming a two-way market, you’ll make some profit. To be a startup, miracles need to happen. But a precise number of miracles. Most successful startups depend on one miracle only. For Airbnb, it was getting people to let strangers into their spare bedrooms and weekend cottages. This was a user-behavior miracle. For Google, it was creating an exponentially better search service than anything that had existed to date. This was a technical miracle. For Uber or Instacart, it was getting people to book and pay for real-world services via websites or phones. This was a consumer-workflow miracle. For Slack, it was getting people to work like they formerly chatted with their girlfriends. This is a business-workflow miracle. For the makers of most consumer apps (e.g., Instagram), the miracle was quite simple: getting users to use your app, and then to realize the financial value of your particular twist on a human brain interacting with keyboard or touchscreen. That was Facebook’s miracle, getting every college student in America to use its platform during its early years. While there was much technical know-how required in scaling it—and had they fucked that up it would have killed them—that’s not why it succeeded. The uniqueness and complete fickleness of such a miracle are what make investing in consumer-facing apps such a lottery. It really is a user-growth roulette wheel with razor-thin odds. The classic sign of a shitty startup idea is that it requires at least two (or more!) miracles to succeed. This was what was wrong with ours. We had a Bible’s worth of miracles to perform:

Absorbingly articulate and infinitely intelligent . . . There is nothing pop about Kahneman's psychology, no formulaic story arc, no beating you over the head with an artificial, buzzword -encrusted Big Idea. It's just the wisdom that comes from five decades of honest, rigorous scientific work, delivered humbly yet brilliantly, in a way that will forever change the way you think about thinking:' -MARIA POPOVA, The Atlantic "Kahneman's primer adds to recent challenges to economic orthodoxies about rational actors and efficient markets; more than that, it's a lucid, mar- velously readable guide to spotting-and correcting-our biased misunder- standings of the world:' -Publishers Weekly (starred review) "The ramifications of Kahneman's work are wide, extending into education, business, marketing, politics ... and even happiness research. Call his field 'psychonomics: the hidden reasoning behind our choices. Thinking, Fast and Slow is essential reading for anyone with a mind:' -KYLE SMITH,NewYorkPost "A stellar accomplishment, a book for everyone who likes to think and wants to do it better." - E. JAMES LIEBERMAN ,Libraryfournal "Daniel Kahneman demonstrates forcefully in his new book, Thinking, Fast and Slow, how easy it is for humans to swerve away from rationality:' -CHRISTOPHER SHEA , The Washington Post "A tour de force .. . Kahneman's book is a must-read for anyone interested in either human behavior or investing. He clearly shows that while we like to think of ourselves as rational in our decision making, the truth is we are subject to many biases. At least being aware of them will give you a better chance of avoiding them, or at least making fewer of them:' -LARRY SWEDROE, CBS News "Brilliant .. . It is impossible to exaggerate the importance of Daniel Kahne- man's contribution to the understanding of the way we think and choose. He stands among the giants, a weaver of the threads of Charles Darwin, Adam Smith and Sigmund Freud. Arguably the most important psycholo- gist in history, Kahneman has reshaped cognitive psychology, the analysis of rationality and reason, the understanding of risk and the study of hap pi- ness and well-being ... A magisterial work, stunning in its ambition, infused

We don't die willingly. The more invested we are in the worlds projected by patterns, the stronger the denial, anger, and bargaining, and the despair of depression. Insight practice is inherently frustrating because you are looking to see where, at first, you are unable to see--beyond the world of the patterns. Another way to look at insight practice is to see that the process has three stages: shock, disorganization, and reorganization. The first stage starts when you see beyond illusion. You experience a shock. You react by denying that you saw what you saw, saying, in effect, "That makes no sense. I'll just forget about that." Unfortunately, or fortunately, your experience of seeing is not so easily denied. It is too vivid, too real, to ignore. Now you become angry because the illusion in which you have lived has been shattered. You know you can't go back, but you don't want to go forward. You are still attached to the world of patterns. You feel anxious, and the anxiety gradually matures into grief. You now know that you have to go forward. You experience the pain of separating from what you understood, just as the lama in the example experienced pain at the loss of his worldview. You then enter a period of disorganization. You withdraw, become apathetic, lose your energy for life, become restless, and routinely reject new possibilities or directions. You surrender to the changes taking place but do nothing to move forward. A major risk at this stage is that you remain in a state of disorganization. You hold on to an aspect of the old world. parents who have lost a child in an accident or to violence, for example, have great difficulty in letting go. They may keep the child's bedroom just as it was. Their views and expectations of life have been shattered, and, understandably, they cling to a few of the shards. They may stay in the stage of disorganization for a long time. The third stage of insight is reorganization. You experience a shift, and you let the old world go, even the shards. You accept the world that you see with your new eyes. What was previously seen as being absolute and real is now seen differently. The old structures, beliefs, and behaviors no longer hold, and you enter a new life.

HOW TO CREATE A GOOD HABIT The 1st Law: Make It Obvious 1.1: Fill out the Habits Scorecard. Write down your current habits to become aware of them. 1.2: Use implementation intentions: “I will [BEHAVIOR] at [TIME] in [LOCATION].” 1.3: Use habit stacking: “After I [CURRENT HABIT], I will [NEW HABIT].” 1.4: Design your environment. Make the cues of good habits obvious and visible. The 2nd Law:Make It Attractive 2.1: Use temptation bundling. Pair an action you want to do with an action you need to do. 2.2: Join a culture where your desired behavior is the normal behavior. 2.3: Create a motivation ritual. Do something you enjoy immediately before a difficult habit. The 3rd Law: Make It Easy 3.1: Reduce friction. Decrease the number of steps between you and your good habits. 3.2: Prime the environment. Prepare your environment to make future actions easier. 3.3: Master the decisive moment. Optimize the small choices that deliver outsized impact. 3.4: Use the Two-Minute Rule. Downscale your habits until they can be done in two minutes or less. 3.5: Automate your habits. Invest in technology and onetime purchases that lock in future behavior. The 4th Law: Make It Satisfying 4.1: Use reinforcement. Give yourself an immediate reward when you complete your habit. 4.2: Make “doing nothing” enjoyable. When avoiding a bad habit, design a way to see the benefits. 4.3: Use a habit tracker. Keep track of your habit streak and “don’t break the chain.” 4.4: Never miss twice. When you forget to do a habit, make sure you get back on track immediately. HOW TO BREAK A BAD HABIT Inversion of the 1st Law: Make It Invisible 1.5: Reduce exposure. Remove the cues of your bad habits from your environment. Inversion of the 2nd Law: Make It Unattractive 2.4: Reframe your mind-set. Highlight the benefits of avoiding your bad habits. Inversion of the 3rd Law: Make It Difficult 3.6: Increase friction. Increase the number of steps between you and your bad habits. 3.7: Use a commitment device. Restrict your future choices to the ones that benefit you. Inversion of the 4th Law: Make It Unsatisfying 4.5: Get an accountability partner. Ask someone to watch your behavior. 4.6: Create a habit contract. Make the costs of your bad habits public and painful.

Why, he asked, do all of our policing efforts have to be so reactive, so negative, and so after the fact? What if, instead of just focusing on catching criminals—and serving up ever harsher punishments—after they committed the crime, the police devoted significant resources and effort to eliminating criminal behavior before it happens? To quote Tony Blair, what if they could be tough on crime but also tough on the causes of crime?3 Out of these questions came the novel idea for Positive Tickets, a program whereby police, instead of focusing on catching young people perpetrating crimes, would focus on catching youth doing something good—something as simple as throwing litter away in a bin rather than on the ground, wearing a helmet while riding their bike, skateboarding in the designated area, or getting to school on time—and would give them a ticket for positive behavior. The ticket, of course, wouldn’t carry a fine like a parking ticket but instead would be redeemable for some kind of small reward, like free entry to the movies or to an event at a local youth center—wholesome activities that also had the bonus of keeping the young people off the streets and out of trouble. So how well did Richmond’s unconventional effort to reimagine policing work? Amazingly well, as it turned out. It took some time, but they invested in the approach as a long-term strategy, and after a decade the Positive Tickets system had reduced recidivism from 60 percent to 8 percent. You might not think of a police department as a place where you would expect to see Essentialism at work, but in fact Ward’s system of Positive Tickets is a lesson in the practice of effortless execution. The way of the Nonessentialist is to go big on everything: to try to do it all, have it all, fit it all in. The Nonessentialist operates under the false logic that the more he strives, the more he will achieve, but the reality is, the more we reach for the stars, the harder it is to get ourselves off the ground. The way of the Essentialist is different. Instead of trying to accomplish it all—and all at once—and flaring out, the Essentialist starts small and celebrates progress. Instead of going for the big, flashy wins that don’t really matter, the Essentialist pursues small and simple wins in areas that are essential.

Was this luck, or was it more than that? Proving skill is difficult in venture investing because, as we have seen, it hinges on subjective judgment calls rather than objective or quantifiable metrics. If a distressed-debt hedge fund hires analysts and lawyers to scrutinize a bankrupt firm, it can learn precisely which bond is backed by which piece of collateral, and it can foresee how the bankruptcy judge is likely to rule; its profits are not lucky. Likewise, if an algorithmic hedge fund hires astrophysicists to look for patterns in markets, it may discover statistical signals that are reliably profitable. But when Perkins backed Tandem and Genentech, or when Valentine backed Atari, they could not muster the same certainty. They were investing in human founders with human combinations of brilliance and weakness. They were dealing with products and manufacturing processes that were untested and complex; they faced competitors whose behaviors could not be forecast; they were investing over long horizons. In consequence, quantifiable risks were multiplied by unquantifiable uncertainties; there were known unknowns and unknown unknowns; the bracing unpredictability of life could not be masked by neat financial models. Of course, in this environment, luck played its part. Kleiner Perkins lost money on six of the fourteen investments in its first fund. Its methods were not as fail-safe as Tandem’s computers. But Perkins and Valentine were not merely lucky. Just as Arthur Rock embraced methods and attitudes that put him ahead of ARD and the Small Business Investment Companies in the 1960s, so the leading figures of the 1970s had an edge over their competitors. Perkins and Valentine had been managers at leading Valley companies; they knew how to be hands-on; and their contributions to the success of their portfolio companies were obvious. It was Perkins who brought in the early consultants to eliminate the white-hot risks at Tandem, and Perkins who pressed Swanson to contract Genentech’s research out to existing laboratories. Similarly, it was Valentine who drove Atari to focus on Home Pong and to ally itself with Sears, and Valentine who arranged for Warner Communications to buy the company. Early risk elimination plus stage-by-stage financing worked wonders for all three companies. Skeptical observers have sometimes asked whether venture capitalists create innovation or whether they merely show up for it. In the case of Don Valentine and Tom Perkins, there was not much passive showing up. By force of character and intellect, they stamped their will on their portfolio companies.