Are you indecisive? Struggle to make fast decisions? History of poor choices? Put things off? Resort to "other peoples thinking" or following the crowd?
We are the sum of our choices. Where you are in life right now, your current situation, it's nobodies doing but your own. It's the sum total of every decision you've ever made. We are our choices.
This video shows you how to free up time and energy to make better decisions, how to think critically about your decisions, as well as practical mental models you can use immediately to make better decisions and improve your life.
Check it out and let me know what you think in the comments?
Here's what we cover:
Part one: Reduce your cognitive load
1. Make fewer decisions (decision fatigue is very real)
2. Do less stuff (sacrifice, say no to everything)
3. Make 1 decision that removes the need for future decisions
4. Have a simple personal life (low maintenance partner is key)
5. Limit your personal surface area (more area, more problems)
Part two: Think critically
1. Think critically, do your own analysis, don’t default to what others are doing (popular delusions and the madness of crowds)
2. My minimum viable wedding (MVW) + first principles + pics
2. Apply your core values/principles to guide consistent action
3. Look at decision making patterns of failures and successes (anti-patterns, positive patterns, and pattern matching for success)
Part three: Apply mental models
1. Define your goal clearly (the Polaris star)
2. Think long-term (this is 10-20-30 years, not 1-year)
3. Project decision options as vectors towards your goal
4. Calculate half-life of decision (decay or dividends)
5. Consider 2nd order consequences (what happens downstream)
6. Consider dependencies and sequencing (grandmasters are always 10+ moves ahead, it's all about the endgame)
Hey everyone, Sam Ovens here, and in today's video, I'm going to show you how to make a decision, and how to choose the right path in the road, and how to get what you want, how to arrive at the place that you want to go, and basically how to have a better life.
Because if you think about it, where you are in life right now is nobody's doing but your own, and basically, your life at this moment is the sum total of your choices.
Every single individual choice you made at every moment, in every second of every day, got you to where you are now, right? So basically, our life is just the sum total of our choices. How does one make a choice? Through a decision. And in this video, I'm going to show you how to make decisions that are good. All right? So let's get to it.
So, I have basically broken this down into three parts. Part one is called Reduce Load, and part two is called Think Critically, and part three is called Apply Mental Models. All right? So there's three parts, and there's about a total of 22 things that we're going to cover. Now, we're going to just go through them really snappy, real quick, and get it done, and help you make some good decisions.
Let's start with part one, which is Reduce Load. So, P1... Whoops, I've already made a bad decision. P1: Reduce Load. So, the first part of making good decisions is to reduce the amount of them that you have to make, right?
Decisions require energy, and energy is finite, we only have so much of it, and we can't really hack it or generate more of it. Energy is a very scarce resource, and so we really... The first step we want to do is just reduce the load, right? Most people spend all of their energy making decisions that are useless, and then when it comes to the critical decisions in their life, they have no energy left to actually think about things properly, so they make really poor decisions because they've burned all of their energy thinking about what socks to wear, or what sandwich to eat for lunch, or whether they said something dumb on the weekend. Right?
So, how do we reduce the load? Well, I've got five simple things. The first one is to just make less decisions. Right? And this is due to something called decision fatigue. Decision fatigue is basically like when you just don't have any more cognitive energy left to decide what to do, so you just either do nothing, or you just default to something because you just can't be bothered anymore, right? Now, decision fatigue is real, and what most people don't understand is that we use energy and we accumulate decision fatigue on the most mundane of things, like "What should I wear this morning? What should I eat for lunch? What should I eat for breakfast?" Like "Where are my keys?" Like all of this crap, right?
So, one of the best ways to reduce the load is just to make less decisions, and to do that, you just do less stuff. And the best way to do less stuff is to just do less stuff. Most people, they try to do more crap. They're like, "Yeah, I'll do that, yeah, I'll do that," and they're constantly looking for more things. They're like, "What else can I do? What else can I read? Who else can I talk to? How many more times can I go out? How many more social media channels are there? How many more shows can I watch on Netflix? What if I go on to HBO as well as Netflix, and then go on to more shows, and then what other sport can I get into so I can watch more sports games?" Right? They actively go out recruiting and seeking and hunting for more stuff.
But if you want to reduce the load, you have to do less stuff, and what that means is sacrifice, right? So I'll put in here, sacrifice. Now, sacrifice is dangerous, it's probably one of the most powerful things there is, and really successful people really know how to sacrifice. I think a lot of this comes to playing chess, or knowing how to play chess. I played chess when I was younger, and it really teaches you how to use sacrifice quite well, because it's not about losing a piece, it's about winning the game. And so you learn to sacrifice pawns and knights, you learn to sacrifice all sorts of pieces to win the game, and the end justifies the means a lot of the time.
And so, this kind of way of thinking, and this way of sacrificing at the small picture for the big picture, is a really powerful thing to do. Most people are terrible at sacrifice, and you know you're good at sacrifice when you actually say no more than you say yes. So, someone asks you if you want to do something, you just say, "Oh, no," and you just say no more than yes. If you're a yes person and you say yes most of the time, and you're actively looking for more opportunities to say yes, then you suck at sacrifice, right?
However, you aren't really a master of sacrifice until you truly say no and get rid of things that you just, with every single part of you, want. Right? So it's not sacrifice when you don't really want to do the thing, and you just say, "Oh yeah, I sacrificed that." That isn't sacrifice. Sacrifice is when you truly, really want something, and you enjoy it, and you thoroughly want it badly, and you say no, and you don't do it. So, for a lot of people who like partying or going out, it might be partying, just sacrificing that. That's big, right? So, do less stuff.
Then the third one is to make one decision that... What have I got here? Removes future decisions. Right? Now, this is a powerful one. Most people, they wake up in the morning, and then they're like, "Oh, what am I going to wear today?" So they walk over to their wardrobe, and they just stand there and look at it, and they're like, "Well, I could wear that. Well, I could wear that. What socks am I going to wear? Ooh, what have we got here?" They just go through a bunch of mindless crap, and then they've burned a ton of cognitive computations on some trivial crap, right?
So, what you want to do is just make one decision. So, I just wear the same clothes every day. Now, I don't wear the exact same shirt and the exact same socks and underwear and everything every day, because that would be pretty unhygienic and smell pretty bad, and so... Plus my wife wouldn't be very happy. I might not have a wife. So, what I do instead is I just get the exact same t-shirt, so I just have like six or seven of these in different colors, but they're the exact same damn shirt. Same size, same brand, same everything, they're just some different colors.
And so, when I wake up in the morning and I'm like, "What am I going to wear?" Well, it just depends which one I grab, right? Then I don't have to think about it. And then same with my shorts, I have four pairs of the same shorts, and then socks, I basically have like 10 of the same socks. Same with underwear, they're all the same. And I only have one pair of shoes. Well, actually, I got two. One are running shoes, and the other ones are just normal shoes that I wear every day. So I don't really have to think about any of that stuff. And then I just have two hats, because my hair's long at the moment, and one hat's typically in the wash, so whatever hat isn't in the wash, that's what I put on. That's it.
So what I did, instead of deciding what I'm going to wear every day, I make one decision one time that solves all decisions in the future. Right? So, you can wear the same clothes every day, and if you think that's gross, well, have multiple of the same thing, and if you think that's boring, have them in different colors. But if that's still too boring for you, and you're someone, some fashionista or some crap, then what you want to do is just have a different outfit for a different day. Right? So at least you can plan this thing one time and get it done with, right? Done. Now, every time you go to make that decision, it's just the same, and you're no longer deciding, you're just recurring the same thing that you did in one point in time. Right? This is huge, makes a ton of difference.
Another one that humans suck at is food. You know, we need to eat food all the damn time, and that's never going to change. For the rest of your life, you're going to have to eat like three meals a day, right? Most people think, "What am I going to eat? Where am I going to get it from? When should I get it?" All of these things, and it's just total waste of time. So, again, make one decision that removes all future decisions.
I just get this thing called Thistle, T-H-I-S-T-L-E dot C-O, and it's a meal delivery. It's really healthy, healthier than I could make, and healthier than I could get if I went out, right? And it has variety, they change things around every week, and it comes every day, and it's lunch and dinner for six days a week, and it changes around. So I have lunch at the same time every day, 12:00, I have dinner at the same time every day, about 7:00, and I just know what I'm going to eat. Done. Most people would probably, on their food and what they're going to wear, they would've already burned probably like 20% of their day's cognitive energy, right? It's just stupid. Make one decision that removes future ones.
Then the fourth one: Have a simple personal life. Now, this is big, right? You've got to choose which side you want complexity on, right? You can't have complexity on both sides. And what I mean by this is personal life and then your thing, and your thing might be sports, it might be art, it might be photography, it might be music, or it might be business, right? For me, it's business and building things, and so there's a lot of complexity on this side. I'm always in the middle of a lot of very complex, difficult, time-consuming, and all-energy-consuming things that require every ounce of me to even understand what's going on. And so I can't have complexity in my personal life as well. It just would not work. Right? I'm at my limits a lot of the time just with this going on here, and things nice and simple in my personal life. So if all of a sudden, I have a bunch of complexity over here in my personal life, I'm screwed. Everything's going to go to shit.
And so, how do you have a simple personal life? Well, I see so many business people and entrepreneurs just get burned, basically the same way like a lot of professional athletes get burned. And what they do is they start making some money, and then their lifestyle just creeps, and it grows into this massive hungry beast that then consumes them. Right? So, what a lot of professional athletes do is when they start making money, they start buying cars and mansions and beach houses, and throwing parties, and doing a whole bunch of stupid shit, and then basically behaving like it's always going to be really good like this. And then all of a sudden, it's not, and then they're screwed because they need so much time, energy, and money to feed this thing, and it just ruins them.
And this is really stupid. I see a lot of entrepreneurs do this too. And what you've got to be very careful with is you can't let the byproducts of your thing distract you from your thing, right? So, if your thing is basketball, and you start making money from basketball, you don't then start buying lots of things and going to lots of parties, and start thinking you're really cool, and doing all of these interviews and crap. Because what happens is then that distracts you from being the best basketball player you can be, and that is the reason why all of these things are happening. So, if you get distracted by this, it takes your energy and attention away from this, and then this disappears and this disappears, and you've got nothing. Right?
So it's totally stupid, and it happens to everyone. I see it, it's just this disease that gets everybody. And the key to it is to have a simple personal life. Like, as your income expands, don't increase your lifestyle. In the beginning, yes, sure, increase your lifestyle, because... You know, like me, I was living in my parents' garage, and I basically... Like, of course if start to make some money, I'm probably going to get myself a place that isn't my parents' garage, right? By all means, do that. And if you're absolutely broke and eating ramen noodles every day, then by all means, start eating some proper food. But at a certain point, you don't really need to go further than that, right?
I did this early on in my career. As soon as I started making lots of money, I started buying lots of stuff. I bought cars, I had a boat, and all of this crap. And all of a sudden, it just... I realized that most of my time and energy and mental capacity was spent worrying about this crap that I owned, and not focusing on my business, which was actually the vehicle that produced the resources to even be able to do this stuff. So when I realized that, I got rid of it all, and then I just tried to make my life more simple, and just more plain. Right? So no fancy clothes, no fancy cars, no fancy houses or mansions or any of that stuff. I can live on about $20,000 a month. And a lot of you might think, "Well, that's a ton of money," and yeah, it is, and it's... Like, I'm not saying I live like poor, or I'm living like a monk or anything like that. But compared to what a lot of entrepreneurs spend on their personal lives, that's very small, right?
So I take a lot of pride in trying to spend less personally, the more money my company makes. It's like a little game to me, and I actually get satisfaction from trying to make it more simple and more frugal and more cheap. That's actually enjoyable for me. Instead of trying to make it bigger and bigger and bigger, because when you take that load off you personally, and when you simplify all of this, then you've got a lot more mental space and mental capacity, and you don't have as much worry. And then you can take bigger risks with your company, you can... Because you don't need to keep paying these really consuming lifestyle costs every single month, right? And this is a big one. A lot of billionaires do this. A lot of billionaires drive Priuses and live in houses that cost... that they once bought for like 50 grand, or that cost under a million bucks, right? A lot of billionaires live cheap, and a lot of sales reps and real estate agents and people, like, borderline bankrupt have really fancy, frivolous personal lives. Right? So, that's a big one.
What else have we got? Oh, there's another key piece to this one, which is pretty big, and I'll put it down here. We'll call this 4.1, or we'll just call it, yeah, 4.2. And it is a low-maintenance partner. Now, that might be boyfriend, girlfriend, wife, husband, whatever, right? Now, you want to have a low-maintenance partner, and this is... I don't think it's possible to be an entrepreneur, at least a successful one, if you have a high-maintenance partner. You're screwed, you're done. Because business is so... To be really good at what you do, it's complicated and it's demanding, and you can't do that, you can't figure your way out through this maze of chaos and uncertainty when... And you can't push the frontier of this thing if you've got someone that's bugging you and demanding you all the time, right?
Now, this is so key, and you probably know immediately whether you have a low-maintenance partner or not. Now, if you don't have a low-maintenance partner, if you have a high-maintenance partner, I want to be clear, I'm not saying leave them, but you do need to intervene. You do need to sort this thing out, because your chances of success are screwed unless you fix this one up. Right? People need to understand that love isn't ownership, and high-maintenance people think that it's ownership. They think that because they're with you, they own you, and if you're doing something else, then that is like they're not owning you, and then they... It's totally messed up, man, it's psychologically fucked up.
So you need to sort this thing out, and if someone truly does love you, and if you truly love someone, then you would want them to do and succeed at their dream, right? And you would want to help that and be a part of it, right? So this is very unhealthy, and not only psychologically, not only in your relationship, but in your life, but also for your business, or whatever it is that you're doing. Keep it simple.
Now, the fifth one is to limit surface area. Now, what does that mean? Well, you want to think of your life as like a canvas, right? Just imagine a canvas. Now, the more surface area that you cover, the more crap that you're going to catch, right? Just imagine that life is like just this flying around of paint going everywhere. Now, how do you get less paint on you? Well, you just have a smaller surface area, right? Now, this is how you basically reduce the load, you have a small, simple life, and you do less stuff, and you make less decisions, and you suffer less decision fatigue: by shrinking the canvas. Less surface area.
Now, how do you do that? Well, it should be your goal and your intention to limit your surface area. So, think about all of the places that you go or that you exist that allow things to come at you. So if you just imagine yourself... What I can do is just draw a picture of my typical unisex stick figure, right? So imagine this is you. Now, you want to think about you on any typical day, and you want to watch the inputs that come to you. Like, what are all these things that come to you, demanding your time, your attention, your energy? How do these things get at you? There's going to be things coming. Now, they might be notifications, they might be emails, they might be phone calls, they might be texts, they might be WhatsApp messages. Oh my God, there's so much stuff these days that allow people to come and fuck with you, right?
And then there's mail, physical mail. That stuff can come at you. Then there's people that knock on your door. Then there's people that call your home line if you have one of those. There's so much stuff that comes at you. Every social media channel basically has DMs and doesn't allow you to turn the fucking DMs off, so that's all coming at you. Notifications is coming at you. You've got them on your browser, you've got them on your phone, you've got them in your inbox. You probably have like five inboxes, you've probably got seven bank accounts that are all sending you notifications, and you've probably got four PayPal accounts, you've probably got two Venmo accounts. You've probably got a PO box and your normal home address, and probably some mail still being sent to your old address that's getting forwarded to your new address. Right? This is what a lot of people probably have.
Now, that is a lot of surface area. That's a lot of shit coming at you, and you want to limit that. So, the best way is just to eliminate, so, you don't need that, you don't need that, you don't need that, you just keep going through it and just stripping it, right? For example, I don't tell anyone what my phone number is unless I absolutely have to, and my phone number is nowhere. It's not on the footer of my emails, I don't have business cards, and I don't tell anyone my phone number, so basically, no one has my phone number other than the people that should have it.
And even still, if they call me, I don't answer my phone. In fact, my phone's typically on airplane mode, and it's in my drawer. So even if they did call me, it would just ring to voicemail. And then if you call my voicemail, then it says, "Hi, you've reached Sam. I'm not available right now. Please leave a message saying who you are, what you're calling about, and what you want, basically." Right? And then, if they don't leave a message, or if they leave a vague message, I just delete it.
And then I don't tell anyone my email address either. You restrict this stuff, limit the surface area. People who have footers at the bottom of their email that tell them every different way to get in touch with them, including fax and landline and personal phone and all this crap, it's crazy, right? And then I don't have WhatsApp, I don't use Skype, I don't use DMs on any channel. Like, go ahead and send me a DM somewhere, and watch what happens. I don't do any of this. In fact, really, the only channel we have at my company is Slack, so if someone wants to contact you, they use Slack. So my wife has a Slack account so she can message me on Slack. So do my parents and my family, they still use Slack too.
Because it's not healthy to have so many different channels that people can contact you on. You want to tell people the best one to get you on, right? That way, you can actually help them and be the most service. So, my parents know, message Sam on Slack. My sisters know, my wife knows, and so does my team. And then, that's a way to limit surface area, right? And if someone tries to get me to download WhatsApp to message them, I'll be like, "Nope, not doing that, just send me an email." Or if someone wants to message me on Facebook, then I just won't reply. And if it is one of my friends, I'll say, "Look, I don't check Facebook, but send me an email to this email address." Limit the surface area. Also, if you go out a lot, like to parties and socializing and all of this, that's expanding the surface area. You're just laying, stretching the canvas to catch more stuff, right? Limit it.
Now, that's part one. And if you do these things, you'll have a reduced load, and that's the beginning. Now you've actually got some sanity. Now you've got some energy left over to actually do something with, right? So this isn't even really how to make a decision. This is just making sure that you've got the stuff required to actually make a decision, which is energy and a sane mind. So that's P1.
Now let's go to P2. Now, P2, also known as part two, is called Think Critically. Now, thinking critically. So, you want to do your own analysis, and you don't want to default to what everyone else is doing, right? Most people in the world, when they need to make a decision, they just look at what everyone else is doing, and then they just mimic them, right? It's craziness. Like, if everyone's doing it, doesn't mean you should do it. It's actually kind of a warning sign. Now, you need to be able to do your own analysis and think critically, and to do this, it's very cognitively demanding. And the reason why most people, I think, just copy other people is because they don't have any damn energy left, so they just mimic. So this is why this is part one, to make sure that you've got the stuff, energy, required to think critically.
So, the first part, or the first one of Think Critically, is to do your own analysis. Don't just copy crowd. Right? If everyone's doing something, it doesn't mean you should do it, first and foremost. If you want to achieve anything great, it's going to come from doing something abnormal. I'm honestly astonished that people haven't figured this one out. If you look back through history, everyone that's ever done anything great basically didn't copy anyone else, but yet everyone's still copying everyone else. What's really funny is that some people try to copy me by copying exactly what I do, and I'm like, "Man, this person doesn't get it." To actually copy me, you would do something different, because that is what I'm trying to do. My strategy is to do something different and do my own analysis, and not copy other people. So then, if someone comes along and copies me, and actually thinks they're doing what I'm doing, they're not. They've totally missed it, and the funniest part is they think they're actually copying me. Right?
So, do your own analysis, don't just copy the crowd. Now, in the beginning, imitation... Like, typically imitation comes before creativity or creation. So don't get me wrong, when you're just getting started, your best bet is to often just kind of learn from others, and try to copy their patterns, and try to master their ways first, before you have the ability to go and create. Because first, you have to learn the building blocks, and one you learn the building blocks and you learn the common patterns, then you can start to think of new ways to pattern those blocks, right? And that's when you can truly start to make leaps and bounds.
But first, imitation often comes, so starting off by copying templates and learning from people is pretty good, but if you really want to push things, and if you really want to find new levels and really push the frontier, then you need to do your own analysis. And really, you should do your own analysis always, and sometimes if that means just copying the person who you think is best to copy, at least you did your own analysis. Most people never do their own analysis, right?
Now, another one, or one example I can give you to explain this, is my Minimum Viable Wedding, MVW. So, when I got married, and here's a photo here.... MVW stands for Minimum Viable Wedding. So, when I proposed to my wife, and then we were thinking, "Are we going to have a wedding?" At first, my wife was like, "Yes, we should," and I was like, "Okay, well, you should get a wedding planner, because it's going to be a lot of work." And so she got one, and then she realized that she had to talk to the wedding planner a lot, and it was very demanding. Like, the amount of... It was mostly just the attention and the energy that this beast required to actually have a day where people got some alcohol and some food, and got to wear some clothes that were a bit fancier than normal, right?
When that happened, she was like, "Oh, I don't really know if I want to do all of this. This is really draining." And I was like, "Well, shit, I definitely don't want to do all of that. That looks really draining." So then we thought, "Well, should we even have a wedding?" And we decided to basically... Well, I did an analysis. I did my own critical thinking. And the process I went through was, "Well, why? What things are important?" Asking why is a key thing. And really, we looked at all of the components of a wedding, so we took a wedding, which is something, and then we broke it out into its constituent parts, like the different parts that come together to form this whole that we call wedding. And the things, we basically looked at all of them and we were like, "Which ones do we think are valuable, and which ones do we think are waste?"
Now, the dress, we were like, "Okay, yeah, the dress makes sense." And then the ring, yeah, the ring makes sense. The ring, you know, you're going to wear for a long time. And then the photos, and then the location. And then we thought, "But what about all the alcohol, all the food, all the catering, all of that crap? And then what about organizing all of those people and trying to get them into their place?" We're like, "No, that's not really that important."
So we really just took these things that we thought were important, and we got a good ring, we had a good dress, and we went to a great location, Queenstown in New Zealand, and I rented a helicopter so that we could go in a helicopter and land on top of some different mountains. And then we got a really good wedding photographer to come along with us, and we basically just spent the day flying around, landing on mountains, and getting cool photos like this. And then we went out to a nice place for dinner, had some nice wine, and that was our Minimum Viable Wedding.
Now, this is not just copying the crowd. Copying the crowd is like, "Got to get a venue, got to invite these people, got to have an invite, got to do all of this crap." We didn't do any of that. We thought critically about it, we were like, "Which things make sense for us, which things don't?" And we did it that way. It took way less time, it was really easy to do, and I actually think we got more reward from it and more pleasure from it than a typical wedding. Now, that might not be the same for you. You might value other things than what I value, right? There isn't one best way for everything; it depends on you and your situation. So, this is what I'm getting at. Think critically, and don't just copy the crowd, right? And I gave my Minimum Viable Wedding as an example.
A third one would be... Well, that's actually an example, but I'll put that as number two. The third one is apply core values, or core principles. Right? Now, having core principles is a very helpful thing to have, because ahead of time, you make these decisions about how you want to live your life, and what things you value and what things you don't, once. You do it one time, and then you just stay with integrity from those principles, and you stay true to those principles for the rest of your life, right? So taking some time to really define your principles, and the mission that you're on, and the goal that you want, is extremely powerful.
So here is basically what ours are at Consulting.com. You can see the mission, "To collectively educate every human on Earth," and then you can see the principles. So, for example, student obsessed, "What's best for the student is what's best for everyone." And then high standards, "Great just isn't good enough." Long-term thinking. Lean and frugal, "Constraints breed resourcefulness, do more with less." Be scientific, "Reason from first principles, use data, test, and iterate." Question everything, "Ask why and hold nothing sacred in the pursuit of truth."
So I use these all the time. Even when it comes to my damn wedding, I'm basically questioning everything and being scientific, and I don't really care at all about being conventional. And I would always prefer to be on the side of lean and frugal, rather than extravagant and stupid, right? So these are very, very, very helpful. I highly recommend you take the time to write down five to ten principles that you really believe in. Because when it comes to making a decision, you can do your analysis and look at all of your different options, like, "We could do this, we could do that, we could do that. If we did that, we would be sacrificing this. If we did that, it would be good for this, but bad for that." And you've got all of these different options, all of these different possible paths. And then you're like, "Which one should we choose?" Well, it basically comes down to, well, which thing is... Which core pieces are most important and most valuable to us, or to our company, or to our relationship, or to us as an individual? Right?
And you're forever screwed if you don't actually know what's valuable for you, because then you can never make a decision, because there's no decisions that are good for everyone, always, permanently, forever. Different people value different things, and they're trying to achieve different things, right? So this is a huge hack for making decisions. And you can never really grow and scale a big company without principles and a clearly defined mission, because if you don't have a clearly defined mission, then once you get a lot of people, you can't communicate with all of them all the time, and they all need to be rowing and pointing in the same direction, right? Direction and alignment is hugely important, and if you don't have that clearly defined, everyone's going to start spawning out in different directions. Some directions are going to be the inverse of others, everything's going to start contradicting itself, it's going to get convoluted, and it's going to just blow up and self-destruct. Right?
Also, people are going to start making decisions in different ways. In meetings, some people are going to think that profit is more important than the customer. They're like, "Well, screw those customers, let's just charge them a lot more, because we can make more money for us." Someone might think that way. A lot of people think that way. I see it every day. But that's why having something like this is important, because if making a lot more money or doing what's best for the student are options, then I'll always side with what's best for the student. And so, that way, when you grow a company and a team, everyone knows which one to choose when they approach that fork in the road. Very powerful.
Now, another one is to look... Number four is to look at decision patterns. Now, decision patterns is something that are very powerful, and a lot of people don't know how to spot them. A lot of people are very bad at pattern recognition. They only see things as they are, they don't see... When they see something like this whiteboard, or this letter, or this number 3, they're just like, "Oh, that's a whiteboard, or that's the number 3." They don't look at the space in between the things, right? Some people look at the objects, and some people look at relationships between the objects, and the best way is to look at both. Look at the relationships between the things and the things, because sometimes you can spot a pattern of objects, and sometimes you can spot a pattern of relationships, or a pattern of relationships in objects. And this allows you to be way better at pattern recognition.
So, for example, with my Minimum Viable Wedding, I approached a fork in a road where there was two paths. One was very complex, and the other one... Well, basically, there was three basic paths. One was have a complex wedding, because that's what everyone does, and the other one was to have no wedding at all, which seemed a bit extreme. And then the other one was to come up with some new thing, some new species, some new breed of wedding, right? And then I thought, "Well, where else have I seen this pattern, where it's convention, nothing, or new mix?" And I was like, "Oh, well, I remember The Lean Startup, where they talk..." Which is a book I read by Eric Ries, and they talk about this concept of the MVP, which means Minimum Viable Product.
And basically, what they're talking about in that book is how a lot of startups believe they need to build this big, fancy, deluxe, extravagant product for it to add any value to people. And it's basically a death march that people go on, and it requires huge amounts of energy, resources, and everything, and it doesn't really add that much value, and it often ends in failure. And then, he talks about the lean startup, which is basically where you come up with an MVP, a Minimum Viable Product, where you look at, really, what the user wants, and then you look at the product that you want to build, and then you think which things are really important for the user and which things aren't, what's value, what's waste, and you start stripping it out. You start stripping it back until it's down to something very minimum. It's not nothing, it's not something extravagant, it's whatever is the minimum viable. That is what the pattern in there is.
And so, when it came to my wedding, I thought, "Huh, I could just apply that. Instead of MVP, MVW, Minimum Viable Wedding." Just did the same analysis, ran the same pattern on it, and came up with a different thing. And I've done this with lots of stuff, I just run the same pattern. We've got Minimum Viable Process in our company. We think, "Oh, this would be perfect process, or this would be the perfect system, but this would be MVP, Minimum Viable Process." In my course, where I teach people... Consulting.com, the course we have, we teach people how to come up with a service or a product, and we teach them Minimum Viable Service, Minimum Viable Product. We teach this too. And then when it comes to coming up with a course, we show people in Uplevel Consulting, which is one of our courses, how to make the ultimate course, and we talk about MVC, Minimum Viable Course. Right?
So, I learned this pattern once, and it's basically a decision-making pattern. I learned it once, but instead of thinking that only applies to products in startups, no, I took that and I applied it everywhere. I basically took a pattern and extrapolated it out over everything, and used it as a model for making decisions. And this is what you want to start doing, you want to start analyzing decisions that people make and companies make, and you can look back in time. Often it's best to look back in time, because then you can see the future, because the future's today, and you can really judge whether those decisions were good or not. Looking at decisions people make today isn't very helpful, because you've got to wait for the future to occur for you to really know whether that was smart or not, so I like looking at history for this.
And what I'm looking for is common patterns. Now, obviously, I might not be in the same niche, I might not be in the same country. That time, like the 1900s or whatever, that time isn't now. Things have changed, technology is different, people's tastes and culture, everything has changed. But that doesn't mean that I can't use those patterns from the past for decisions today, right? And you want to kind of build a library in your mind of different patterns, and when you build this library of different patterns, then whenever it comes to a decision, when you're thinking critically, and you've got energy to do so because you've done less stuff, then you can start taking this situation and seeing what it would look like on different patterns from these different libraries in your mind. And you're basically projecting it out on that pattern, projecting it out on that one, projecting it out on that one, projecting it out on that one, and you're like, "Ooh, that, that one. That one makes sense."
Now, you need to build this library, or these libraries, in your mind so that you can call them when you're making decisions in life. That is why it's important to analyze things. Like, I don't just analyze my own decisions, I analyze other people's decisions, and then I wait, I don't make a... I don't think, like, "Oh, that was a bad decision," or "That was a good decision." I wait for time to tell me, because my opinion isn't fact. Like, it might be, but only time is going to tell us whether it was fact or opinion. And so I like to wait for time to be the judge and the decider of that, and then I start connecting these things, and seeing what patterns are bad, and what patterns are good. And when you know what patterns are bad, you stay away from them. You're like, "Ooh, this looks like a bad pattern." Right?
For example, having a extravagant lifestyle, right? Fuck, we've seen so many instances of this bad pattern that I don't know how people can actually apply this pattern and be blind to it. It's everywhere, it's blatant. Like, look at Mike Tyson. Dude was crushing it, making a killing. He bought a damn tiger. He did all sorts of crazy shit, and it didn't really go too well for him, right? A lot of athletes end up broke, and then once they're at the top of their game. A lot of entrepreneurs I've seen. This pattern of massive, demanding, hungry lifestyle and being extravagant doesn't end well, okay?
What is the inverse of this pattern? We know that it's a bad pattern, anti-pattern, we shouldn't do it, but what's the inverse? Because often when we know what's bad, the inverse of that is good. So we try it, so we flip it, and then what about a simple personal life? Well, a lot of people who have simple personal lives are extremely successful. Like, you've got Warren Buffett, who has very simple life. The Google founders, Larry Page, Sergey Brin, they have a Prius, right? A lot of successful people in all sorts of domains, over all areas of time in history, had simple lives, and that was a good thing. So you see what we've done now? We've built up a library of just a pattern, an anti-pattern and a positive pattern, for how to have a lifestyle. Right? Simple and frugal is good, extravagant and ridiculous is bad, and now we've got something. And then the MVP pattern, right, hopefully you can start to see what I'm doing here.
And don't ever think that this one thing can only be applied for that one thing. A lot of people will see how Warren Buffett lives, and be like, "Oh, that just works for Warren Buffett, and that was just because he's over in Omaha," and then they'd be like... They just dismiss it. "Well, that's only because he's old." Right? That's silly. You want to look at multiple instances. You can't tell much from a singular instance, but once you look at a range of instances in a range of different industries over a range of different eras of time, then you can start to see the patterns. If it's true across all of these different variables, then you know what an anti-pattern and a good pattern is, right? And you can't really argue with that.
Now, let's go to part three. Do I have any space? Yup. P3, and this is called Apply Mental Models, which we've started to get into a little bit. So, applying mental models is basically different patterns, right? Now, I'm going to give you some, because these take time to get, and you have to really be looking at good things and studying good things to be able to accumulate good things, right? So I'm just going to give you a whole bunch of them, which will help you a lot, and these are some of the best of all time that I've found from looking at a lot of stuff. Probably been in business for like 30,000 hours or something, which is quite a lot of time, crammed into about nine years, and from that, I'm going to show you some of the best mental models I got. I got... How many of them? I think there is like eight or something like that, so let's get started.
Mental model one. Now, this is really a core thing that you need for every mental model in everything, and that's just: Define goal. Right? This is so important. You can't do anything without knowing what your goal is, right? The goal, I refer to it as like your Polaris star, and the reason I call it that is because, you know, in days of old, when you were out at sea on a ship, and you didn't have GPS and all this crap that we've got today, you would look to the sky and spot the North Star, Polaris star, and you would use that to calibrate where you were going so that you could... You knew where you were in time and space, and how to get to where you were going, right? So you can see I took that pattern from a ship in days of old and applied it to goals. So you need a Polaris star. It's the only way to know whether you're going in the right direction or not, or actually what you're trying to do. So, have a goal.
And then the second one is to think long-term. Now, long-term, some people, I often talk, I'm talking about long-term and short-term, and then I realized that the whole time I was talking about it, the person I was talking to was thinking that long-term was like six months. When I say "long-term," I'm thinking 10, 20, 30 years. Right? Short-term, I'm thinking one year. Short-term is a year; long-term is 10, 20, 30 years. Right?
Now, the longer-term you think, the better the decisions you will make. Long-term thinking is just a pillar of success, no matter who you look at. This is a pattern, right? People who think short-term, they end up, like, obese and fused, their skin fuses to their couch, and they have to get craned out, right? Doesn't end well. Bad pattern. But thinking long-term, this goes quite well, right? So you want to think long-term. The longer-term you think, the better, and your mission that you should define here should be long-term. Companies that have set very long-term missions, they're the ones that do the best.
Now, three. What have we got here? Project decision options, project vectors/options. So, what you want to do once you've got your goal, and I'll draw this down here with a different color... So let's say here's goal, and here is now, and you are here now, and you want goal, right? Well, what you want to start doing, and goal should be long-term, is whenever you've got to make a decision, the first thing you want to do is kind of project out these different vectors and see how far or how close they will take you to your goal. Right? Now, some of them might be better in the short term, but worse in the long term, and some of them might take you a long way, but in a slightly different course. You've got to look at all of the different options that you have when you're making a decision to see where it's going to go, and you want to kind of project them out like this. That is a good first step.
Now, you can't even do this until you know what your goal is. You also can't do it until you're completely honest with where you are right now, right? You have to be totally honest with yourself about your current situation, and what you have in inventory, and then you have to be clear and decisive about this long-term goal, and then you start to map these things out. Right?
Now, what else have we got? Then you want to calculate the half-life of decisions. Now, I took this pattern from chemistry, this isn't even... I'd never heard anyone else use it in the context of decision-making, but I borrowed that pattern and used it here. So, in chemistry, you talk about a half-life of something, like the half-life of caffeine might be six hours. That means you ingest some caffeine, it has some kind of effect in you for like six hours, and then it fades, right? So that's a half-life, everything has a half-life.
And when it comes to decisions, they have a half-life too, if you think about it. So, if every day, I wake up and I think, "What am I going to wear today?" What is the half-life of that decision? It's 24 hours. I'm going to have to make it again and again and again. But what is the half-life of a decision where I decide to wear the same thing every day? That half-life is about, like, years, it could be 10 years, 20 years. So, with the same amount of energy, I made a decision that lasted 20 years, whereas with the same amount of energy, someone made a decision that lasts 24 hours, right? That is analyzing the half-life of a decision.
So, that's one great mental model. The other one is food. Like, if you think every day at lunch and dinner, "What am I going to eat?" And then you go into a research, like, R&D process that lasts an hour, probably an argument with your partner, "What are we going to eat?" "I don't know, I don't know, I don't know," now it's a domestic, now it goes into tomorrow. This happens, right? So, really, really, really stupid.
You want to look at it and be like, "I can't do this every damn day. Right? This is stupid. I'm not going to spend an hour every day of my life quarreling about some matter that's going into my mouth. I need to come up with a longer-term solution." So you come up with a meal delivery thing, like thistle.co that I told you I was using. I have to think about it once, solved for years, right? And it's also better for my health, better for everything, and it saves money too, because it's cheaper than even going to the supermarket and buying my own stuff. So it's better financially, it's better for me health-wise, it's better for my relationship, it's better for everyone I'm around, it's better for everything, right? So it's a great decision, and it was only using the same amount of energy and time that a lot of people spend to make a decision about what meal they're going to eat once. Right? Half-life.
Then another one would be second-order consequences. Now, note on this half-life one, you typically have dividends or decay. Now, dividends is when you make one decision once, and its half-life isn't only a long time, but it starts to pay dividends, so the decision adds more value in the future than it does today. That is a really good decision, the same way money accumulates compound interest when saved. So, if you have money, then you get paid interest that comes back around and adds to the principal on which the interest is recalculated, and it grows, and then you see an exponential curve, right? That means that that decision today to save money is worth more in the future than it is today. You don't see much today, but in the future, you see a lot.
Now, that is something that has a special kind of half-life to it. Not only does that decision last for a long time, but its value increases exponentially over time. So this one would pay dividends, right? And you can have linear, logarithmic, or exponential dividends over time, and these are really good decisions. They're rare. If you ever find one of them, jump at it. Most, you're just lucky if the damn thing lasts a bit of time and doesn't pay any dividends, right? But ones that actually have a... Ones that pay dividends over time and curve exponentially, those are really big ones.
Another one is decisions can also have decay. So, like, "What am I going to eat for lunch today?" That decision doesn't even last 24 damn hours, because if I'm thinking, "What am I going to eat for lunch?" then that's only really going to last about six hours before I'm like, "I'm hungry again. What am I going to have for dinner?" So its decay is sharp, it pays no dividends, and it lasts for six hours, so it's a terrible decision. Six hours, no dividends, done. Why would you want to spend any of your time dealing with something that has things like that? Right? Bad.
So, I like to get rid of all of those things, and just focus on the ones that have these nice properties. Like, what's a decision that's going to last for a long time, and what's a decision that's going to pay dividends exponentially in the future? Some of these decisions, you might be wondering. Well, saving money's a great one, right? Because of compound interest and all of these things. So saving is good; spending lots and being an idiot isn't. And then your health, that's a really important one. So, like food and exercise, those pay exponential dividends, because in the future, when you're older, you're going to really be noticing the effects of your decisions today, right? So that's another one. Hiring good people, very important. Knowledge, your brain, like reading books, and like trying new things, and really experimenting and building your knowledge and your library of mental models.
Becoming smarter, becoming healthier, fitter, and being more disciplined, having a simple life, all of these things have really positive effects in the future, more so in the future than they have today. So these are great things to spend your time thinking about. Also, hiring good people. If you hire someone today, then today they're not going to add that much value, but if you think out into the future, they're going to add a lot, because, well, they might add really nothing, they might ruin your whole business, right? A hiring decision is one of those big ones, because who you hire is going to go and interface with other people in the company. If you hire someone good, they're going to make everyone else in the company better. They're going to make the company better. And they're going to get better over time, and so everything's going to get better over time, right?
And then that person is going to hire people, and As hire As, but Bs hire Cs. So if you hire an A, then they're going to hire other As, of which will hire other As, and you're good. Your company's going to get exponentially better with time. However, you hire a B, then they're going to interface with other people and probably make them a bit worse, and productivity worse, products and every other thing in the company worse. And then they're going to go out and hire people worse than them, because they are so shit that they don't want anyone to be a threat to them, so they're going to, on purpose, hire people beneath them so they can think that they're good, and then your company is now... Because obviously, if As hire As and Bs hire Cs, then Cs are going to hire Ds, and if you've got Ds, then you're really going to fail, or you're going to go to jail, right?
So, again, look at the half-life of these decisions, and you want to free up energy by reducing load so that you can think critically and analyze the decisions, and spend more time and more energy on things like "Who are we going to hire?" and like health and fitness and savings and knowledge and learning, and less time on shit like "What am I going to wear?" and "What am I going to eat?" Right?
What else have we got? Consider second-order consequences. So, number six. Oh, I've already got that. Sorry, I didn't explain it. I actually kind of explained it with the "As hire As, Bs hire Cs" already. So, second-order consequences is, again, like something that you find a lot with chemistry, and what it basically means is that if you do something now, then that's going to have a downstream effect that you're not going to be fully aware of, right?
So, let me give you an example, let me make it completely clear. So, let's say I'm deciding, "Should I buy a 42-inch HD plasma TV?" Or whatever the hell they call those things these days, right? Should I buy this TV or not? Now, if you were an amateur decision-maker, you would think that the only downside of buying this TV would be that it would cost you some money. "Oh, this TV's going to cost me a grand. That's a grand I don't have in my bank account, that is..." They're weighing these things, right? "Should I have the grand in my bank account? Should I have the grand in a TV? And then the TV's going to depreciate, TV might get stolen, so I might need some contents insurance, TV might consume some energy from the grid." This might be the limit of their analysis.
What I'm interested in isn't the first-order consequences, it's the downstream effects. So what's going to happen the second order, the third order, the fourth order, right? So, the second-order consequence of buying a 42-inch TV is that I'm going to watch it. Why am I going to watch it? Because why the hell else would I buy it? Obviously I'm going to watch it. And you know what, the worst thing is that I'm going to think that I'm not getting my value if I don't watch it, so I'm going to be in a state of mind where I'm like, "I need to watch this TV to make the most of it. To prove it out as a good investment, I need to sit there and look into this tube." Right?
This is where it gets dangerous, because now I'm spending my time watching the TV, so now not only have I lost money, of which I can't easily liquidate because it depreciated probably 60% the moment I left the store, and now I also am watching it, so my time is gone, right? And then my intelligence is probably starting to decay too, because I'm watching this tube. So, now that's the second order. What's going to happen third order? Well, now, because I don't have much time, I'm getting lazier, I might be going to bed later, and now my cognitive ability is harmed because I'm getting less sleep, because I want to stare at this tube for more hours.
And then my intelligence is going down, so now I end up at work, and I'm dumber, I am a bit more delusional because I'm seriously deprived of sleep, and I'm also a grand poorer, right? And I also feel like I don't have that much time, and my mind is always trying to connect dots about all of these different shows that I'm watching. It's trying to problem-solve fictional characters, like fictional life problems, more than it's trying to solve my own immediate problems. So now I'm basically fucked, right? Now, from here, the third order, fourth order, fifth order, it's just going to go to hell from here. Then I might get fired. Now I'm going to spend more time watching the TV because I'm fired. Now I'm probably going to start beating myself up, and then I'm probably going to start hanging out with other people who were fired and beating themselves up. Now we're going to go exponential and feed back on each other, and then I'm probably going to get fat, and then I'm... It's getting bad, right?
That is what I'm thinking about. So that is second-order consequences, and don't think it's truncated just at second order. It goes third, fourth, fifth, sixth, it goes all the way downstream. So you want to consider these things when you make a decision. But a decision like eating a salad, it sucks right now. I won't like. I eat salads every day; it's not that fun. I'd way rather eat a burger, right? But I think of, is this good? What is this going to do for my health? Good things.
I'm going to be healthier. That means I'm also going to be fitter, and I'm going to be in better shape, which always feels good, and it's healthier. And that means I'm going to have more mental clarity. I'm also going to have more self-control and self-discipline, because I didn't want to do this thing and I forced myself to do it. Right? And it also costs less money, I didn't have to think about it much, and now, in the afternoon, my cognitive ability is sharper because my body isn't committing so much blood to my stomach to ingest this piece of meat. Right? So it's all good, and every day, that gets better, right? Second-order consequences of eating a salad versus burger, second-order consequences of reading a book versus buying a 42-inch TV. You see what I'm doing? Good.
Now, what else have we got? Consider dependencies and sequencing. Dependencies and sequence. So, when you're looking at these different decisions and running all of these different mental models, you also... You've got your now, you've got your goal, and you can look at these different vectors, but different things work at different degrees depending on their dependencies and where they are in place, in time, right? So, you might take one action here, and then one action here, one action there, and then two in parallel, and then that allows you to go three in parallel, and then one massive effort to get here. Right?
Now, the sequence. So, obviously you can't have concurrent... Like, you can't run concurrent projects and products until you have a team. Not only a team, but two teams that can really act autonomously and achieve excellence on their own, right? This is why I don't understand entrepreneurs that build so many products. Like, people think I'm crazy for having one product when we only had a small team, and now we've got like two, or three if you include my mastermind. But really, I think they're crazy for having 20 products when they're one person, because you can't run 20 things in parallel when there's one of you. You can only run one. Even when there's a few of you, they're not really product developers or product managers, they're... You might hire some customer support and some salespeople. These people help with the operation of the business, and the selling of it, and the bookkeeping of it, and the operation, but they don't create the product and the value, and they don't create that. So you can't actually run concurrent products if you just are one person, or if you have a few people.
So, the right time to add another product to your product suite, or the right time to do multiple things at the same time, is... It depends. So it has a dependency, right? So, a dependency of doing multiple products might be that you have to have a team, right? Or I'll give you another example. With my company, we've got a refer a friend program, where people can... Our customers can refer a friend and get a commission for doing so. Now, in order to do that, which has always been on my roadmap, I always wanted to do it, but we needed some... It had some dependencies. First of all, we had to own our own billing system, because there was no way I could implement this on anything else. We also had to have our own content portal, basically, because none of the other out-of-the-box solutions could do it. And then we needed to have email ability to send emails to people, and we needed to have really good tracking.
So, in order to do refer a friend, I needed to have our own content portal, our own billing system, our own tracking system that was really good, with algorithms for attribution that were accurate, and then we also needed to have... Yeah, I think I might have said a few other things, but those are dependencies. So then we're looking at the dependencies of this, and then we're like, "Which one makes most sense now?" You know, this is kind of like how you're playing chess, you're... A grandmaster in chess is always 10 moves ahead, right? So when they move one piece here, most people are just looking at their move there, but really, what the grandmaster's doing is this move is only a requirement for their endgame, right? And so you don't understand what's going on.
And so, this is a dependency and a sequence. When you think long-term and you reverse-engineer from that backwards, then you can start to sequence things in the right way. And it doesn't make sense to a lot of people, but it makes perfect sense for the long-term goal. Right? That's another thing to think about.
Then, what else have we got? Weigh input and output symmetry. So, seven: input/output symmetry. So, when you make a decision, you have to do something, you have to take action, right? That requires energy and time and resources, money too. Then you have an output, which is basically what value you're going to get. It might be freed-up time, it might be more money, or it might be more value added to your customers, which later, downstream, will turn into money, right? So you've got inputs and outputs, and what you want to do is you want to weigh the input against the output, and you want to look at it like this.
Let's say this requires 10 units of energy in, and then it has one unit of energy out. Right? I spend a lot of time working on this, and I get barely any value. So this is asymmetric down. There's more downside than there is up, and we say asymmetric because it's not symmetrical, right? But then this would be something that was symmetrical. We would have a 10 in and a 10 out, right? If we do this one, we're going downhill over time, so we're going nowhere. We're actually going to failure. And if we scale up these efforts, we're just going to accelerate our demise.
And then this one, we're going nowhere, which is basically failure, because you have the Red Queen effect going on in here, which is basically like... In evolution, there's basically an arms race, and you need to innovate at faster and faster and faster intervals over time. So really, if your goal is to maintain, then you're dying, right? There's no such thing as maintenance. And you can Google this, it's called the Red Queen effect. It's like a evolutionary hypothesis that talks about organisms in an environment in nature, fighting for scarce resources for survival, and how, really, you can't just keep incrementally improving. It has to be exponential improvements over time, right? So, maintenance is a no. Going down is a no. So then, what we're really looking for here is a small input, like a one, with an asymmetric output, which is going to be like a hundred, right? This has more up than down. That is a good decision.
An example of this would be like reading a book. It costs barely anything, it's like 14 bucks on Amazon, right? And then it just takes some of your time, but it makes you smarter. And what you can do when you're more intelligent is ridiculous, right? So a book, reading a book... A good book, I'd have to add, because if you read a bad book, I mean, that's not really helping. But this makes you a lot, lot smarter. And if you want a good book, read Principles by Ray Dalio. Principles, Ray Dalio. I tell you, if you read that book, you will have asymmetric upside, and you'll get smarter, and your life will be better. More decisions like that. So that's weighing the input/output symmetry.
Then the next one would be consider the risk and ease of undo. I'm running out of space here, but I'll just call this eight: risk, ease of undo. So, when you're looking at different decisions and different options you can take, risk is an important one. If you have to bet... Like, let's say you've got a million bucks. If a decision requires you to bet all $1 million, and it has a low chance of success, this is extremely risky, right? However, if you have $1 million, and you bet $10,000, and it doesn't have that high a chance of success, then that's kind of all right. You can make a lot of 10-grand losses with a million. But if you have a million, you can't make... You can only make one loss of one million. Do you see what I'm saying?
Same thing goes with time. You can't really bet multiple lifetimes on something. You only have one of them, so you really need to consider the risk, and you also need to consider the risk of... the ease of undo. So, you know, if you mistype something on your computer, you just press Apple+Z or Ctrl+Z, and it undoes it. Same thing goes for some decisions, right? Some decisions are easier to undo than others. Like, for example, if you were to say something to someone important's face that was offensive, and on the television, that is quite hard to undo, right? However, if you were to just hire the wrong person, that's quite easy to undo in the short term. It gets harder to undo in the long term. So you always want to think about, "If this is wrong, how easy can I undo it?"
Now, you also want to think, "If this is wrong, how screwed am I?" Now, you want to make decisions that have high upside potential, so potential to win big, but low downside potential, and easy to undo. Right? These are good decisions. So, we basically would call this truncated downside distribution, but uncapped upside distribution. For example, in baseball, if you really swing for the fences, you can only really get a home run. That's it. So you've got truncated upside. But if you really swing for it and you miss, then you might get nothing, right? So it's not really that the... We don't really have an amazing upside-to-downside kind of thing, and you can't undo it, it's final, right?
However, in business, things are very different. In business, you can have some decisions where you invest a small amount of money, and it's very easy to undo, and the upside is enormous because it's uncapped. For example, you could, when you're testing ads on Facebook or whatever, you could cap your downside at like, I don't know, a hundred bucks, so the maximum you could lose is a hundred dollars, and it's very easy to undo because you can just turn them off and delete them. And you're going to know the result quite quickly, within like 48 to 72 hours. But the upside potential is huge, because you might be able to 10, 20 times your money, and then you can do that again and again and again, and each time you do it, you get better. So, upside potential is huge, downside is truncated, time frame is nice and short, it has positive feedback into the future, so it has dividends if we get it right, and very easy to undo.
You see what I mean? You can start to look at risk and ease of undo. And whenever you're doing your risk calculations, you always want to put in a margin of safety, because humans are naturally optimistic, and what that means is your upside projection is probably going to be a bit too high, and your downside prediction is probably going to be a bit too low. So, you should probably cut in half your upside projection, and probably times by two your downside prediction. Right? That's adding a margin of safety, and you always want to do that to things. You want to err on the side of prudent, not optimistic. You want to be optimistic, but you want to construct your models on prudent kind of doomsday scenarios. Right? Because that way, if the worst happens, it wasn't even as bad as you thought, which is a good thing. However, if the good happens, and it turns out to actually be horrific, well, what the hell were we thinking? Right?
Now, we've got counteract troughs with inverse curves. Nine: Counteract troughs. So, now we're getting into some cooler stuff. Let's say here's time, and here's reward, right? It could be... You know, I have to just move this a bit. So we've got a little chart here, we've got reward, which could be dollars, value, anything. And here we've got time, and it might be years, right? Now, let's say positive, negative, and... Yeah. So, let's say that one course of action, one decision that we're interested in, in the short term, it takes us down, and in the long term, it takes us up. Right? Now, we would call this a trough. For example, a software business has a huge trough, because you have to pay money to acquire a customer, which costs money. Also, software engineers are extremely expensive and hard to find, and so that costs money. And they typically have subscription business models, which means that you only collect a small amount of cash up front. For example, HubSpot, they pay, I think, two or three years of MRR, which is monthly recurring revenue, to acquire a customer. That's a huge trough.
So, when you're faced with a decision that's good in the long term, but bad in the short term, you can't take this path because you're going to go negative. You can't do that because you don't have enough money. So you have to think, "How am I going to counteract this trough?" Now, one way is you could raise capital, you could use debt, you could do all sorts of things. But what I prefer to do is counteract a trough with an inverse curve, so we do something like this. Let's say this is option A, and this one's option B.
Now, a classic example of this is consulting. I tell people the best business to start is a consulting business. Why? Because it has this sort of curve to it. In the short term, you don't really incur much costs, and you collect money up front for services rendered, which is just you, so it's very good in the short term. You make a lot of money, you don't have much cost, and it's fast to get going. But in the long term, it goes like this because you can't scale, because it's all based on you as a human, and you can't scale well. However, in the world of software, we're using bits, not atoms, and bits scale real well. So then, it's real bad in the short term, but good in the long term, because it can scale.
So we've got these two inverse curves. Now, what I like to do is counteract one with the other, so start with consulting, get some cash flow going that way, and then maybe invest in a product-based kind of business, like come up with a course, or come up with a SaaS product or something, and then you can counteract this curve to ultimately end up where you want to go over the long term.
So that is some things about how to make some decisions. Right? We've covered a lot, and I'll just summarize it quickly. Part one, reduce the load. Make things simple, do less stuff, say no to everything, have a simple life, low-maintenance partner. Part two, think critically. Don't follow what everyone else is doing. Take the time and the energy to do your own analysis and make your own decision, and have conviction in your own judgment and your own analysis. Don't just copy everyone. You'll never get anywhere doing that. If you do what everyone does and think how everyone thinks, then you will be like everyone else, which is average, right? So, to be abnormal, we must do abnormal, and that requires standing alone out of the crowd. Right?
Now, part three is apply mental models. You want to build a collection of these. And by no means is this an exhaustive list, right? I gave you some. This is pretty sweet, I wish someone gave me this many, and these are good ones, when I got started, but I had to learn the hard way and pick these up over 30,000 hours. So, this is a good start, and this is a lot better than how most people make decisions. So, hopefully this video will help you improve your life, make some better decisions, and get more of what's good and less of what's bad.
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