The Visile - November 2022 (almost)
Ideas and insights on decision making and maximizing leverage
Hey there 👋🏼
If you are wondering why you’re getting this mail, most likely you signed-up for The Visile sometime in Jan/Feb this year. To say that The Visile’s progress has been slow, is an understatement as I missed writing 8 monthly issues and the November issue is late by a day.
But I still firmly believe in the earned secret behind The Visile 👇🏼
Podcasts have the highest signal-to-noise ratio of any medium of content in the startup and tech world. Time is at a premium in the startup world. Most investors/founders are simply too busy to write long-form pieces about their insights, frameworks, or playbooks. Even those who write cannot do it as frequently as they would like to.
This is why podcasts matter. Podcast hosts curate conversations to extract unique & valuable insights from their guests. Thus, founders/investors can unpack significant value in just an hour on a podcast compared to many hours writing an essay.
Despite the content density, many see podcasts as a secondary content medium compared to essays, long-form writing, or Twitter threads. The Visile is an experiment to change this perception!
As 2022 draws to a close, here’s a fresh attempt to reinvigorate The Visile. The November issue is a light one, with 2 podcasts and you should expect a lot more in the next few months.
You can now also check the entire Visile library at www.TheVisile.com with a full-text search, tags, etc. Do take it for a spin when you get a chance. Here’s a preview of how it looks.
I hope you enjoy The Visile. You can reach me anytime at <thevisilenewsletter@gmail.com>. Feedback is welcome.
Rohit
Podcast: a16z podcasts
Episode: How to Decide, Convey vs. Convince, & More
A16Z partner Jeff Jordan talks to decision-making expert and poker champion Annie Duke on how to make better decisions.
Here are best-selling author Annie Duke and a16z managing partner Jeff Jordan on how to make better decisions.
Making fast decisions
You don't have infinite time to make decisions. So first up, you should know which decisions should be made quickly and which ones should take time.
But we still deliberate endlessly on many mundane tasks because we are afraid of making a mistake and inherent loss aversion bias. Annie Duke shares a useful heuristic - the happiness test.
Ask yourself this after every decision which didn't work for you 'did it affect my happiness at all?" The faster you say no, the faster you can make the decision next time. Here's an interesting example of a mundane everyday task - deciding what to order at a restaurant. 👇🏼
Annie: Okay, okay. So, you’re trying to decide between those two things. If you’re [your] mother-in-law, you’re quizzing everybody. So, let’s imagine that you ordered the veggie stew and it came back. And let’s imagine you got this bad outcome, where the food was really yucky and you didn’t even finish it because it was so gross. So, now let’s imagine it’s a year later and I say, “Hey, Jeff, how are you feeling right now, happy or sad? So, you remember that horrible veggie stew you had a year ago, how much of an impact did it have on your happiness today?”
Jeff: Zero.
Annie: Zero. Okay. So, let’s imagine I catch up with you in a month and I say, “Hey, Jeff, feeling happy or sad right now? Do you remember that horrible veggie stew you had like a month ago? How much of an effect on your happiness did it have today?”
Jeff: None.
Annie: None. What if I catch you a week later, by the way?
Jeff: None. Now, if it had been the fish that had been bad, like, a week maybe…
High volume & high frequency decisions can be made faster. You get quick feedback from the world & get another crack at it in a few hours. So instead of agonising over what to do, get a lot of a-bats, soak-in the feedback & iterate towards improving the decision making muscle.
Improving decision making process
Any decision is only as good as your decision making process which sits on a foundation of what you know about the world. Lets be real, you don't know much and a lot of you know is wildly inaccurate. So you are making all of your decisions on a very flimsy foundation.
One way to solve this is to ask other people for their perspectives for instance asking your colleagues's views on your marketing strategy. So you get them to a meeting room, present your marketing strategy to them and ask for their opinions. right? wrong! When presenting to them as a group you are laying out not just information that they need to agree/disagree with you, but also your own opinions on that. Many of them will now just chime with you on what they think (especially if you are a senior joe). To add insult to injury, in most group sittings, the loudest person drives the agenda and their opinions get disproportionate weight in decision making. Net-net you end up with in a bunch of useless opinions that screws your decision-making process. So what to do? Jeff shares an excellent tool for this - how to quarantine in group settings 👇🏼
So, the reason your decision hygiene point, maybe, was so interesting to me — is you called out one of my tools that I used as an operator, which was quarantining in group settings. I found, at OpenTable, that if I walked in and had, you know — put a strategic choice on the table, there was one-and-a-half people in there who would drive the discussion, and their opinion would always carry the day. <Yep.> So, I developed a tool where I would pre — on very important, big-time, strategic decisions, I would ask everyone to send me their lists of prioritizations. And then I would aggregate them, and then feed that back to the group — to heighten the contradictions, essentially. The quiet person who didn’t really want to put a contrary point of view, and spar with the other person. All of a sudden, the data is on the table because they quarantined the gathering of it. And then I found the conversation was so much better than just throwing it open and having, you know, the charismatic, loquacious, opinionated person, carry the day every time.
Once you force people to give their perspectives in isolation, then you feed that back into the group and use meetings to discuss only those points where people don't agree with each other. Not only you make a better decision, but you also save colossal amounts of time.
Pro-con lists are worthless
When faced with a decision that you should think deeply about, you'll often make a pro and con list - what's good and what's bad that happens based on your decision. Both Annie and Jeff agree that pro-con lists are worthless at best and damaging at worst.
There are three problems with pro-con lists. First it doesn't capture magnitude - if something's gonna go wrong, then how wrong? Second, it doesn't have the odds for the outcomes. Third the reason to make pro-con is to reduce the effect of your own biases in decision making. But you start deciding the minute you hear about a problem and the pro-con list will just amplify the conclusion you already have in your head (perhaps hidden from your conscious).
How to solve it? Convert your pro-con list to a decision tree. Pick up options, add what are the reasonable odds for it to happen and what'll be the payoffs for those.
Understanding the role of luck in decision making
Even a decision tree doesn't help you understand the role of luck in decision making. Usually it goes like this:
👍🏻 good outcome = earned through our hard work
👎🏻 bad outcome = sheer bad luck.
But what if there's a better way to think about it? First map your decisions on a 2X matrix of decision quality and outcome quality. Here's how to do it 👇🏼
Another thing that can be very helpful is to actually go through this process of thinking about this two-by-two matrix of the relationship between decision quality and outcome quality. So, there’s a quadrant, which is — good decision, good outcome, which you can think of as like an earned reward. Good decision, bad outcome — that would be bad luck. Bad decision, good outcome — dumb luck. Bad decision, bad outcome — I guess would be, like, your just desserts.
You'll most likely spend a lot of time in the bad outcome - bad decision quality quadrant. You got a bad result, you are feeling a low and want a way to get off the hook. What better way than to find a little bit of bad luck and put the onus of your loss on that stupid bad luck.
But what you are not very eager to do is to dive into the good-good quadrant and see if good luck played a role there and if there was a better way to make the decision because you feel good about your win and want to get the full credit for it. To really grasp the role of luck, you need to explore what other things could've happened and which other directions any decision could've led you to. And while you can do it retrospectively, it's only a game changer if you start doing it before a decision. VCs do this in part through investment memos 👇🏼
Jeff: It’s kind of interesting. The investment community often tries to capture the thinking at the time through the investment memo. Which then, you know, records, okay, you know — these are the potential outcomes that we can envision, here are the probabilities of the different outcomes. And in total, we’re willing to make this bet, even though there are some outcomes that are pretty unattractive, to say the least.
By doing this for long enough, you get your own playbook of learning a lot more from your wins than your losses.
Creating fast feedback loops for long-term decisions
Most VCs/investors don't get to know for a long time if their decision to invest in a company is good or not. The feedback loop spans 10s of years. How do you break it to build tighter feedback loops?
You break your prediction of the future state of the world into a set of intermediate steps. So you make predictions about how much of database spend will shift to cloud yearly & how many engineers your startup will attract every year. And then you add some odds to it. Now that you are making these predictions over a much shorter timeframe, one year in many cases, you'll start to get much faster feedback. And you can use this to course correct your decisions without waiting for 10 years in most cases.
Here's the full transcript of this amazing chat between Annie and Jeff on the a16z podcast: https://future.com/podcasts/how-to-decide-convey-convince/
Want your friends/colleagues to get insights from the best tech, startup and VC podcasts in 1/10th of the time? Then share The Visile with them.
Podcast: Forcing Function Hour
Episode: Maximize Your Leverage with Eric Jorgenson
Chris Sparks, the host of Forcing Function Hour talsk to Eric Jorgensen, investor, podcast host and author of the Almanack of Naval Ravikant on building leverage to improve our lives.
Leverage as a mental model
'Leverage' is a mental model that is equally powerful as compounding but not as well understood. Even if you are super productive, you can't work more than 24 hours a day.
Leverage lets you keep your head above the water by (a) finding the right resources - people, capital, tools & products to achieve more (b) how to prioritise the right task. To create leverage, you can't work on today's results today. Look forward 6 months, 1 year, 5 years from now to see what work will help you achieve more then.
This means setting up stuff today so that you aren't working hard tomorrow but still creating more impact than today. Eric gives a fantastic example of his book The Almanack of Naval Ravikant and how the stuff he did much before the book was published, got him sales, without actually trying to sell the book. 👇🏼
The first big win was actually probably the book. Something really clicks when you ignore something for an entire week. I mean like, I don't think about the book, I didn't make efforts to sell it, I didn't go on a podcast, I didn't get on a sales call. But I just checked a week later and it sold a thousand books, whether I was sleeping or at the gym or working on something entirely different. And that was a level of sort of autonomousness of leverage that, like, seeing that product just sell and sell and sell, and then recognizing that there's a landing page that was doing that, Amazon was taking the money and then printing the book for me on demand and shipping it out, and people were recommending it, and podcasts that I had recorded months ago were sort of helping people understand what the book would give them and why they should order it, and like all of this was just happening because I had spent the previous two or three years writing that book and setting that up and doing that work.
Increase your opportunity cost
A useful heuristic when figuring out if you should say yes/no to an opportunity is to think through if that effort will add to your leverage (in a few days/months/years) or not. Opportunity cost is a related mental model which can be used to decide which opportunities to pursue.
Simply put, opportunity cost is the cost of all the things that you could be doing right now but aren't because you are doing something else. Increasing opportunity cost means that over time you should be making your time worth more than it's today.
What then happens is that when you look at a bunch of tasks, you pick only the one that's more than your opportunity cost (i.e. worth your time). This means that over time you are doing more valuable tasks, which push up the value of your time even more (increase your opportunity cost) becoming a flywheel of sorts. But making your time worth more doesn't happen through wishful thinking.
You need to build leverage by building resources (capital, people, product, tools). A useful heuristic to know if you are doing 'higher value' tasks over time is that you should always feel a little uncomfortable accessing a new opportunity because it's always at the edge of your competence. Eric gives an excellent example of it here👇🏼
Usually, it involves reinvesting capital that is almost constantly more than you have ever reinvested before. It involves giving up or passing on opportunities that might have previously been life-changing opportunities. All of those are, like, uncomfortable things. But if you don't sort of continue to push that, you will find yourself a little bit stagnant, or, like, playing the same level for a long time, or getting your ass kicked because you're trying to level up but you're using the same tactics as before
Building leverage using capital
Capital is the most important lever for building leverage and the sooner you can make this lever 'longer', the more future opportunities you can unlock. Eric gives a useful rule of thumb to build leverage using capital - shift from a fixed investment amount to percentage
So shifting that from a fixed number of, "Oh, when I invest in a stock or a company I invest X amount," to, "What is the number of the outcome that would have to matter to me at each sort of stage of net worth for it to be worth my attention?" So, thinking about opportunity cost. And the rough rule of thumb I have is like, a one percent impact in net worth.
Aspirational hourly rate aka $10k work
Another way to think about your time is aspirational hourly rate. I'll be honest, I've read a lot about the $10k work and found most of it to be BS but Eric and Chris make a critical point here which stayed with me - “The way to think about aspirational hourly rate (a la $10K work) is to get to a place where you keep the upside of your work.”
In a fixed hourly rate job (which is most jobs) the employer cap your time's worth and keep all the upside that comes from your work beyond it. This doesn't mean everyone should become a founder, but find ways to get to a place where you get to keep the benefits of your leverage even if it's part time or a side hustle or just a hobby.
The point of putting numerical values to this aspirational hourly rate exercise is not to really find out how much money you can make but what's the shitty work you are doing and whats the valuable work. Putting it in $$ terms makes it real.
Finding your highest point of leverage
Most of the times we don't intuitively know what's our highest point of leverage. If you are a coder, you believe coding gets you maximum leverage or if you are a writer, you believe writing gives you maximum leverage. But if you are blind to the other, higher value leverages that you have/can build, you are soon going to hit major speed bumps in your life. You'll just stay with the status quo, telling yourself you are happy (you aren't) and don't want to break free (you do!).
Here are two thought experiments to get you to highest points of leverage.
First - find areas where you are resource constrained, where if you had more of that resource, you can do better. that's the point of leverage. 👇🏼
so building this meta-skill of being able to identify what is our highest source of leverage given the context that we're in. And I think you shared a very good framework for that, which is identifying where you are resource-constrained. That you had all these systems in place with angel investing, and that it was no harder to write a 50k check, which is 10x leverage than a 5k check. And so the only thing that was missing was the actual capital to invest. So if you could acquire access to that capital, you could leverage your efforts by 10x.
Second - assume that you get an extra hour in your day, what would you do with that hour? And if that's the best use of that hour, what's the lowest use of an hour in your actual day today? What'll it take to fit this hypothetical extra hour in your lowest value hour today? Even when using these heuristics to find the highest points of leverage, keep in mind that these points are fluid. As you build more leverage, as you increase the worth of your time, the highest point of leverage will shift.
Here’s the link to the full transcript of this episode: https://www.forcingfunction.com/podcast/eric-jorgenson
That’s it. Hope you enjoyed reading this issue of The Visile. Please take a moment to spread the word.
Rohit