Why Do We Write This Blog?

A few months ago a friend asked me why we write this blog. They wanted to know if we thought we were an expert or an authority on the subjects we talk about, and thus felt it appropriate to share our views. It’s a good question that I was thinking more about and had been meaning to turn into a blog post in reply. So, here’s why we write this blog.

Not experts or authorities, but popularizers

While our level of study and experience with the primary subject matter of this blog varies from quite intensive to novice, we don’t see ourselves as experts and don’t believe we have any special authority on the subject. We don’t write about things we’re interested in to try to provide an “official” analysis or to convey the idea that we ought to be listened to just because we know what we know. Instead, our goal is only to popularize the ideas that interest us and that we consider important.

We popularize for three reasons. One, it improves our lives if more people are interested in the things we are interested in. Two, we find talking about the things we’re interested in to be entertaining and thus enjoyable in and of itself. And finally, we think we’re good at popularizing.

In our experience, we are typically the “gateway drug” of various ideas in our friend network. In other words, we are the first point of contact for many of our friends, on many subjects, to first learn of the existence of a particular idea. That isn’t because we’re super smart, or super knowledgeable, or they are the opposite– it’s simply because we happen to have eclectic tastes that are often orthogonal to our friends own cultivated interests. And because we’re passionate about what we believe in and find ourselves talking about such things quite frequently, there are many opportunities for our friends and other people we know to get exposed to our ideas.

We haven’t had an original idea, ever, though we’ve synthesized a few good notions by mashing unrelated concepts together. We’re not trying to create a scientific revolution or move humanity forward with an invention. We’re content to merely spread what we think are good ideas to other people. More importantly, we think there are common logical threads woven through the core principles of our most important ideals such that there is a coherence to being interested in all of them simultaneously. We’re interested in showing more people how subjects seemingly as diverse as economics, politics, philosophy, nutrition, corporate governance, parenting and family formation can all be linked together by common ideas.

Part of our family’s inheritance

If we produce a premium product on this blog in terms of a collection of ideas, experiences and opinions which together are valuable, we can do a lot of “work” in terms of human capital for our family, including our children. We can pass this resource on to them not only in their present intellectual endeavors, but to future generations who may come to know us only by the written record we’ve left behind. This blog will serve as part of the treasure of our family and we hope it will provide compound interest all its own!

A research emporium

We read a lot. We ask a lot of questions. We spend a lot of time thinking about the things we become interested in. And we have limited memory with which to serve all of these activities and thoughts. Our blog is an extension of our accumulated memory on various subjects. What’s more, it’s searchable with an algorithm, and it is open to the public. We enjoy contributing to the collective intelligence of humanity in this small way, particularly our own! We are always amazed to look back on something we’ve written about in the past and go, “Oh, so that’s what we think about that subject!” And it makes it easier to answer people’s questions or have a deeper discussion when we can reference our previous thinking to others by linking them to a blog post.

A tool to aid in concrete thinking

The practice of writing one’s thoughts down, particularly for public consumption, focuses the mind. It requires one be more thoughtful about what is essential to the idea. It demands one hone one’s rhetorical blade. It just produces better thinking over all to go through an idea enough to try to explain it to others. Our ideas always get better when we try to write about them. Better thinking means better doing.

And a tool to aid our writing

Of course, practicing writing one’s thoughts also means practicing one’s writing. We think we make improvements in that area by writing this blog as well.

It’s fun!

We think we’re good writers. And we like our own ideas. And we enjoy humoring ourselves with our own thinking. Even if no one else comes by to look at what we’re doing or gaze in awe at our commanding knowledge on certain subjects, we’ll be entertained by looking back on what we wrote.

Review – The Rational Optimist (#books, #optimism, #reason, #evolution, #economics, #development)

The Rational Optimist: How Prosperity Evolves

by Matt Ridley, published 2011

Why, for the last 300 years, has “everything” been getting better and better in terms of just about any human outcome you can come up with? Human beings are getting better at exchanging ideas and thus generating new and better ideas. In addition, the total stock of life improving ideas humanity can build from is compounding at an increasing rate. The benefits of free exchange extend beyond the economic realm and into the philosophic, and then back again.

The author charts a surprising course through humanity’s shared hunter-gatherer history. He argues that it was economic trade which allowed the division of labor to develop, and the division of labor which allowed for the transition from hunter-gatherer subsistence living to agricultural subsistence, and from there to a compounding of capital and an increasing division of labor and economic specialization that allowed for mankind to finally break free of the Malthusian trap in many parts of the globe (and more every year).

In addition, he says we are never going back. The genie is out of the bottle and rather than the division of labor being fragile, it is far more robust than any social structure yet experienced and gets stronger the more specialized it becomes.

Because of this, and because when surveying history up to this point in the broadest terms possible there is evidence of things getting better and better for more and more people, not the opposite, the author concludes that the rational thing is to be an optimist and expect this trend to continue.

There are several convenient leaps of logic built off flimsy premises that would startle and upset an opponent of markets and industrialized societies, but there is such a preponderance of hard logic and even harder evidence that there isn’t enough here to tip over the apple cart. But the value of this book is less in its rhetorical force for free markets and industrial development and more in its sweeping survey of a number of seemingly unrelated historical data and economic phenomena into a coherent picture of hopefulness about humanity’s future. I found myself joyfully surprised by the idea that in the chicken-egg quandry of agriculture and trade, the author contends that trade came first and produced all the surplus we moderns have enjoyed since then.

Going “back to the land” or seeking out de-urbanized, atomized communities seem to be doomed to bring their proponents a lower standard of living overall, idealizing a past reality that never actually existed or rejecting the very thing (the division of labor) which is necessary to enjoying a desirable standard of living with modern securities and comforts.

3/5

Why Homeschooling? (#education, #homeschool, #parenting)

This is adapted from an email I recently sent to a friend, who asked, “Why do you plan to homeschool your child?”

Education is informed by parenting and values
When we think about the purpose of parenting, we take a page out of Maria Montessori’s handbook and assume that our Little Lion basically has everything he needs already inside of him to be who he is going to be. It is not our job to give him personality, values or direction in life. Since we brought him into the world through no choice of his own and in a helpless state, it is our job to care for him and aid him in his own natural development so he can achieve independence and be whoever it is he will be. We hope to provide positive models and examples of what kind of person he can be and believe we will inevitably teach him the only thing we can teach him — who we are — by simply being authentic around him, but we don’t see it as our job to select values for him and teach him that he should value them.

We think this is different from a “traditional” parenting model which is built around the idea of the parents instructing the child in a particular set of values so they can become a “good” instance of that kind of person. For example, a Catholic parent might hope to raise a “good Catholic” and make religious values part of the child’s upbringing and instruction. A sports enthusiast might hope to see his child become a “good golfer”, and so instruct the child on the techniques and discipline necessary to excel at the sport. Thinking culturally, a Chinese person might see it as important to raise a “good Chinese child” with all the cultural implications that entails in terms of diet, attitudes toward life, behaviors and interests.. A materialist might think it important to raise a child who is a “good moneymaker”. And so on. We don’t see “goodness” as a goal of our efforts as parents, necessarily.

Our value framework
That being said, we are people and we do have values. We operate within a paradigm of what we see as desirable behavior, values and goals and what we see as opposed or detrimental to those things. This can’t seem to be avoided as thinking, acting beings– every moment we are faced with choices and the act of choosing implies moving toward some things and away from other alternatives. If one’s life has any consistency, these values and choices add up and create some coherence. Our coherence forms around interdependence and voluntaryism. We prefer a paradigm where people interact with one another on a peaceful basis, out of mutual desire and aimed at mutual benefit. This stands opposed to the narrative of “zero sum” and “dog eat dog”, where some must be slaves and some must be masters. We don’t see value in “using” people, which is one reason why we don’t plan to “use” our son to fulfill our own desires to create a good X.

By not pursuing “traditional” parenting, we have to use some other system of values to guide our choices and this is it. It inevitably informs our education decisions.

Education is socialization
Our theory of education is that education inevitably involves two concepts: grasping cause-effect relationships existent in reality and the pattern of facts that occurs as a result, and transmitting a system of values explicitly and implicitly about the role of individuals in society (what people refer to as socialization). Far from naively believing that education should only be about teaching cause-effect and facts, we embrace the reality that it is the very selection of which cause-effect relationships and which facts to focus on in a system of education that is itself a form of meta-socialization, before even formal social instruction is reached.

The intersection of parenting, values and education
Now I will try to put these three pieces together– our desire to give our child sufficient degrees of freedom to realize his inherent potential free of interference or intervention from us or others, our own system of values which idealizes free exchange, and our belief that education accomplishes two things in instructing a student about the nature of reality and also about their social role.

There seems to be an appropriate educational means to each set of values or goals in life. If you want a religious society, you need an education system focused on religious instruction. If you want a democratic society, you need an education system open to all and controlled by the government. If you want a free society, you need an education system (or lack of one!) that acknowledges individual differences and caters to them.

When I think about some of the alternatives we can consider when educating our child, they seem to fall short in various meaningful ways. Public or private, our child’s education will largely be guided by dictates of minimum standards and required instructional curricula handed down by people we don’t know from hundreds of miles away. We are socializing our child to understand that parents don’t have an important role to play in developing and implementing an educational program in their child’s life, this is something that can be given to “society” and its representatives, therefore, the child is to serve society because it is being instructed in things society deems it important for it to learn.

We will be telling our child that what it thinks is interesting, exciting, or important to learn is not germane to the process of education. We will be telling our child that education is something that happens in a prescribed place for a prescribed amount of time under tutelage of people who are “approved to teach.”

This seems like an overly regimented way to approach learning that denies the diversity of learning opportunities we believe actually exist. Our child won’t be able to listen to their own mind and body in knowing when to focus on studying something and when to take a break. And they will be inculcated into a pattern of hoop-jumping and test-taking that will push their sense of self outward, to what other people think about their competencies and capabilities, rather than inward in terms of what they think of these things relative to their values and goals.

It’s possible specific, market-based institutions can serve an educational role in our child’s life at various times and for various reasons, but it’s unlikely our educational habits will ever involve the kind of structure where we say goodbye to our child in the morning and hello in the afternoon, Monday through Friday. Homeschooling seems to meet our needs better.

How we plan to homeschool
So what does our homeschool curriculum look like? There are really only three “subjects” we think it is important we instruct our child in, at his own pace and based on his own developing interest– reading, writing and arithmetic. If our child learns to read, he will be able to follow his own interests by studying texts and other written resources imparting knowledge to any degree he would like. If he can write, he can communicate his ideas in another way besides verbally and improve his ability to connect and exchange with others. And if he can do basic math, he can think about personal circumstances (finance, time-keeping, etc.) and the nature of reality (“science”) in more sophisticated ways. These three disciplines are the fundamental building blocks of all other subjects of human knowledge he might like to instruct himself in. We would encourage him to consider learning these things and make every effort to provide him excellent instruction whenever he desires it until he has competency or mastery over them.

From there, the world is his oyster. He can be a self-guided learner and follow his passions, instincts and curiosities wherever they might lead. And we believe that by creating a paradigm for him from the get go that moves at his pace, he will maintain more innate enthusiasm for learning and growing than if he is faced with a “mandatory curriculum” and told he has to learn things he isn’t interested in and doesn’t care about, which don’t help him solve real problems he is facing. And we believe that by observing us, he will come to see the desirability of reading, writing and arithmetic because it will allow him to have more meaningful interactions with us.

Acknowledging our limits, embracing a child’s potential
Beyond that, we just don’t think we’re competent, as parents, people or anything else, to successfully predict what his life will be like and what knowledge he’ll need to be “successful” at it. As a result, our plan is to put a lot of trust and faith in him to figure it out with limited initial guidance. We’re excited to see who he will become and we hope this approach will be less stressful and more loving for all involved when we let go of the standard parent temptation to fight a child’s nature and try to shape them into something more “desirable” or good, from the parent’s point of view.

And this is why we’re interested in RIE, by the way, we feel it is laying the groundwork for the type of relationship we’re planning to build with our Little Lion, and we think it dovetails with our belief in trusting him to be who he is and giving him the framework and structure to thrive as such.

Looking Back On The Records Of My Life

I’m going through my personal document archive right now. I have data stretching back to 2007, though most of it clusters around 2009+ which when I started getting “serious” about hoarding data, documents and other bits of intellectual flair about myself. What started off as a simple Spring Cleaning-type exercise in tidying up my digital filing system is instead turning into a philosophical journey to a land of the past self and it’s inviting a lot of questions and thoughts I wasn’t expecting to have, such as…

I’ve got A LOT of information I collected at various times I was attempting to self-educate on topics of interest. For example, I have enough reading material to teach and supply a graduate level course on investing and financial analysis, business management and strategy and basic accounting and corporate finance. I also have collected digital copies of nearly every book and article I’ve read on economics and related sociology and historical topics. It’s essentially a download of my brain on these topics and, given that I feel comfortable with my level of knowledge in these areas, I’ve done a lot of the hard work in gathering up a comprehensive curriculum here which might be of use to a future learner, such as my child.

But will my child want to study these things? Will my Little Lion need to do the kind of painstaking scouring of primary materials, in volume, that I did? Or will my Little Lion learn a lot of the fundamentals by a kind of osmosis being around me, talking about this stuff with me, such that it won’t really be much use to have the archive for personal perusal?

Now that I am done with these materials, they have little value to me personally. It’s nice to imagine I’d dig in here and there for reference or to double-check something, but I haven’t touched this stuff since 2012 when I began collecting it. That’s 5 years! I knew I had it all this time, but I never went looking for it. What are the chances I will look back on it another 5 years from now? Or 20?

I try to live a simple life. I’m not a minimalist in practice, but the people around me would accuse me of such. I am tempted to just delete this stuff wholesale.

When I think about transmitting my book learning to my kin, and I think about the principles of selectivity and simplicity, there are few titles I would like to hand down and say “Read this if you want to be part of the family/have success in your life/grow your mind.” A book like Human Action comes to mind. That’s as close to Required Reading on each of those points as anything I can think of. But a PDF copy of “Investment Topic X”? Or “Economic Subject Y”? I don’t think it is essential to have that all lined up for the next in line.

The modern trend of Big Data promises amazing returns to collecting and analyzing comprehensive data about people’s interests, behaviors, etc. Mostly, it is a false promise in my experience and I think it’s a false promise in looking through my archive as well. Here’s some notes I took in 2010 on some subject. Here is a spreadsheet I built for something in 2011. Here is some list of experiences I wanted to have, or goals I was chasing after. It is the story of my life, the breadcrumbs along the path to whatever my final purpose and meaning is. (It’s amazing how you seem to get an idea in your head early on in your life and just iterate it over and over. I wonder where those ideas come from and why we get fascinated with them?) But what of it? Can’t rehash that part of my life and choose differently, and I am where I am, and it doesn’t offer much predictive value for where I am going unless it is to continue on the path I am on, but then it is inevitable so, again, what of it?

I think about this with my email archiving as well. I have a lot of emails stored up over the year. Conversations on all kinds of topics. Lengthy diatribes about what I think and why. A veritable mind map on a plethora of issues. It’s fun to be able to look back on it from time to time. But really, it is of more value to Google in selling my (anonymized?) data to advertisers than it will ever be to me in providing some kind of meaningful insight or prediction about myself. Mostly it is good for looking up old logins, loyalty program info, or upcoming event or itinerary data. After that, it is the past, and it doesn’t matter.

I have all these photos, too. Ever since I had a web-connected phone, they just started accumulating. A snap here, a photo there. How many have I looked back on even a week or two after I took it? The significance fades, even if the memory is still there. One day I could share with a friend who wants to know about a place I’ve been or an experience I’ve had, or with my Little Lion, to illustrate what life was like before I was a parent. Why? Why does this matter? It is gone. It can’t be gotten back to. What can it tell us? Little, I think.

So, a new habit to inculcate: create a robust, dynamic filing structure for recalling and accessing current data and records of interest, and then have the discipline to purge when these files go “inactive” in my consciousness.

A Summary Of Horizon Kinetics’ Arguments Against Indexation (#investing, #theory, #indexing)

Murray Stahl and Steven Bregman of Horizon Kinetics have written an ongoing series examining the theoretical and practical flaws of indexation as an investment strategy. As the series is long and the arguments are many, I’ve decided to try to summarize each of their major essays into a single summary sentence to make the argument easier to follow. All links below come from the “Under the Hood: What’s In Your Index? series:

  1. International Diversification – Bet You Don’t Know How Much You’ve Got, investors seeking diversification with their indexing strategies are ignorant of the fact that almost 30% of the revenues of S&P 500 companies come from outside the US, and many international companies in non-US indexes derive substantial parts of their revenue from the US; therefore political diversification of economic risk is illusory in index allocation strategies
  2. Not Your Grandfather’s S&P, the calculation of the S&P 500 was adjusted for available float (non-inside held shares) beginning in 2005, meaning that much of expectations about its return built on past price performance is no longer analagous because earlier index returns were purely market cap-weighted and thus the index got the full benefit of great, insider-owned growth stories such as Wal-Mart and Microsoft
  3. Your Bond Index – Part of the ETF Bubble; valuation-agnostic institutional investors following a “diversified” asset allocation model use tools such as international bond ETFs to gain exposure, and the liquidity constraints of the underlying issuance create perverse results wherein war-torn, criminally fraudulent and economically unstable foreign regime debt ends up with lower yields than stable, profitable US corporate debt
  4. How to NOT Invest in the Dynamism of Emerging Markets: Through Your Emerging Markets ETF; using India ETFs as an example, it is shown that the concentration of market caps, lack of trading liquidity and concentration of the largest firm’s revenue sources outside the home market imply that one can not reliably get exposure to an emerging market by buying emerging market ETFs, meaning that the “diversification” available with such tools is illusory
  5. How Liquid is YOUR ETF, or What Does This Have to Do With Me?; in a “virtuous circle”, the liquidity of index ETFs has attracted long-term asset allocators whose allocation decisions have created even greater liquidity in the ETF, but the events of August 24th, 2015, show that it’s possible for this circle to operate in reverse, creating sharply-divergent share price performance between an ETF itself and its underlying holdings
  6. The Beta Game – Part I; allocation models favor low-beta strategies (historical price risk relative to broader market) over high-beta strategies, such that high-beta strategies are being allocated out of existence and low-beta strategies are being allocated into a bubble, even when the underlying strategy itself seems to imply higher risk and volatility than the broad market
  7. A New Bubble Indicator; Is One of Your Stocks In a Momentum ETF?; “the appearance of billion-dollar momentum ETFs means that the most expensive stocks are being bid higher, and those that have not done well – that is, their relative momentum has abated, as it ultimately must – are being sold short, so the cheap are being sold cheaper”, “The index universe has become, simply, a big momentum trade. It is the most crowded trade in the history of investing.”
  8. The Beta Game – Part II; when the beta-trade goes in reverse because peak beta-driven demand is reached, index ETFs which are primarily purchased because of their beta will fall in value and funds will flow into contrarian, non-indexed securities which will also have constrained supply (illiquid) resulting in sharper price increases
  9. The Robo-Adviser, Part I: What Does Rebalancing Mean to You?; asset allocation patterns, especially the robo advisor-driven variety, create a structural need for outsize turnover volumes of ETFs versus the turnover of their underlying stocks as portfolios are more aggressively rebalanced, in the future a cascading rebalancing effect could create dramatic selloffs in underlying securities just as cascading demand seems to drive price increases on the way up
  10. The Robo-Adviser, Part II: What’s in Your Asset Allocation Program?; robo-advisor portfolio recommendations seem to make similar investment allocations despite different inputs, creating a herd momentum in index ETFs
  11. How Indexation is Creating New Opportunities for Short-Sellers, And Why This Should Alarm Ordinary Buyers of Stock and Bond ETFs; historically low interest rates and growth of indexing as a strategy have made short-selling a punishing exercise, but sudden and unpredictable price volatility will force low-beta ETFs to dump their holdings in favor of other securities, opening up opportunities for short-sellers to profit
  12. Why Utility Stocks Should Concern Income-Oriented Investors; qualitative analysis reveals a worrisome risk picture for the utility industry, yet ETF flows and the search for yield have combined to create high P/Es for the industry as a whole
  13. The Exxon Conundrum; despite a massive decrease in the price of oil and thus $XOM’s per share earnings, its share price was relatively unimpacted and it remains an overweight position of numerous ETFs, suggesting it is $XOMs pre-existing size and liquidity which generates its (over-)valuation, and not the other way around
  14. 5000 Years of Interest Rates (Part I); interest rates in 5,000 years of recorded human history across the globe have never been near zero or negative as they predominantly are in Western economies at present, meaning equity valuations are built on truly unprecedented circumstances while most financial logic involves historical pricing as a basis constructing behavioral models
  15. 5000 Years of Interest Rates (Part II); interest rate increases would result in painful adjustments to the value of fixed-income (bonds) and fixed income-like ETFs (REITs, utilities), and a safer bet would be in non-indexed securities whose prices are already somewhat depressed and whose underlying businesses represent idiosyncratic risks versus the broad market
  16. What’s in Your Index? The Value of Cash; cash is deemed to be a liability in a low interest rate environment, creating a drive to acquire assets regardless of valuation, when in reality cash might be the very thing investors need to survive the coming tide of rising rate-induced market crashes
  17. What’s in Your Index? Gold Miner ETFs; leveraged ETFs in the gold miner space seem to be creating price movements divorced from the underlying fundamentals of gold itself, indicating this is not an efficient market despite the fact that it is being indexed (or rather, because it is being indexed)
  18. The Indexation That Is, Versus The Indexation That Should Be; the commodity nature of index strategies implies that most fund providers who face the same profit motives as active managers of the past will promote diversification strategies to “index investors” that will cause them to underperform the broad market for the same reasons active managers did

The Argument (So Far), Summarized:

  •  Modern indexation is primarily practiced via allocation to various thematic ETFs
  • The construction of the thematic ETFs is often inconsistent with their stated theme and therefore unable to provide the sought after diversification, due to liquidity constraints
  • The price behavior and valuation of the holdings within these ETFs seem divorced from underlying economic reality and are largely explainable through the feedback mechanism of high inflows to indexation/ETF-based strategies themselves
  • Myopic focus on beta (a measure of relative volatility) and momentum (tendency for price trend to continue, a characteristic which shouldn’t exist in an efficient market) have created herd mentalities and currently dominate index-driven strategies
  • Indexation as a strategy requires and logically replies upon historical price data, but the data being relied upon was gathered in an interest rate environment that was historically normal but entirely dissimilar to recent interest rate paradigms, bringing into question the validity of this data to present strategies
  • Indexation relies upon the existence of an efficient market to operate, but the indexation phenomenon itself seems to be driving persistent inefficiencies in the market, bringing into question the stability of the indexation phenomenon
  • Most current index investors do not follow the historic and academic recommendations for executing an index strategy, nor can they given the profit motives of investment marketers offering ETFs outside of the broad market index theme, ensuring underperformance relative to the index benchmark for the same reasons active managers underperformed in the past

BONUS, Horizon Kinetics Q4 2016 Market Commentary, summarized:

  • When the total available pool of index-driven funds reaches its limit, index strategies which are valuation-neutral will no longer set the marginal price for the underlying securities they own, and that price will be set by value-conscious active managers, implying a sharp correction downward for indexed security prices in general
  • Indexation as a strategy has a place in certain portfolios in a “normal market”, but this is not that market and therefore indexation seems to carry undue risk
  • There is no such thing as an “inadequate index return”, so index investors have no logical basis for being unhappy with the returns they get
  • If index investors did try to pull their money all at once, there is no logical alternative to active asset managers because bonds are priced too high to offer a greater return and there is not enough money in money market funds to change places with the index fund outflows at current prices
  • Returns to large cap equities from 1926-2015 have averaged between 9% and 10% a year; returns to equities from 1824-1924 averaged 7% a year, but most of that return came in the form of dividends, not price appreciation
  • In an age of indexation, true diversification comes from analyzing individual securities and finding the one’s whose share price performance is not dictated by broader market trends, as indexed ETF securities are
  • The age of analyst-driven active management may again be upon us

Review – Good Strategy/Bad Strategy (#review, #books, #strategy)

Good Strategy/Bad Strategy: The Difference and Why It Matters

by Richard Rumelt, published 2011, 2013

I recently came across GS/BS on an old blog I have been subscribed to for years. Being in the middle of some strategic planning within our own business, the find seemed timely so I moved the title to the top of my list and set aside “The Russian Revolution: A People’s Tragedy” for completion at a later date. I am glad I did, although having now concluded the read I find I have a conflicted view of the book.

One reason I find myself interested in this book is it is in fact, interesting. I find myself thinking a lot, and thinking differently, about various strategic topics covered in the book as well as my own related challenges, which suggests the book has given me a valuable new framework. On the other hand, I thought the author did not define his terms in such a way that leaves me feeling confident he has created a solution to the problems he has identified with most approaches to strategy– it’s almost like he came up with an even sexier sounding way to think about strategy problems without addressing the concrete limitations of the approaches he has critiqued.

In my review rubric, a 5/5 is a “classic” book that not only can be read again and again, but should and likely will be, each reading offering new insights or appreciation of the human condition examined within. A 4/5, on the other hand, is not a “near classic” but rather just a “very good book” that is worthy of recommendation to others. A 3/5 is a book with some value, but is otherwise unremarkable. And we won’t waste or time rehashing the miserable 2/5 and 1/5 ratings. I am puzzled because I think I am going to end up re-reading this book, and most likely in a very short period of time after I’ve tried to digest and apply some of what I think I’ve just learned to my own strategic activities. That suggests it is a potential 5/5. But I don’t feel like I will enjoy this book more with each re-reading, especially because some of the case studies contained within will have grown very stale (many I have encountered in other reading materials and few of those had any new insights to glean this time around). And because of my concerns with the definitions and overall structure of the book, I am not even sure it is a 4/5. I went back and forth with a friend in a private message system about whether I thought he should read it or not, finally settling on “yes”, and I have recommended it to others since then. It’s definitely not a 3/5.

Since my mind is not made up about what this book is saying, I don’t have a concise review of its major ideas to offer at the moment. I might reflect and write another post if and when I do, likely after the suggested re-reading. For now, I am just going to collect all the passages I highlighted and see if anything obvious bubbles up into my consciousness as a result:

  • Strategy is about “discovering the critical factors in a situation and designing a way of coordinating and focusing actions to deal with those factors.”
  • A strategy that fails to define a variety of plausible and feasible immediate actions is missing a critical component.
  • Doing strategy is figuring out how to advance the organization’s interests.
  • The kernel of a strategy contains three elements: a diagnosis, a guiding policy and coherent action.
  • The most basic idea of strategy is the application of strength to weakness.
  • A hallmark of true expertise and insight is making a complex subject understandable.
  • If you fail to identify and analyze the obstacles, you don’t have a strategy.
  • A strategy is like a lever that magnifies force.
  • Strategic objectives should address a specific process or accomplishment.
  • Business competition is not just a battle of strength and wills; it is also a competition over insights and competencies.
  • To obtain higher performance, leaders must identify the critical obstacles to forward progress and then develop a coherent approach to overcoming them.
  • The need for true strategy work is episodic, not necessarily annual.
  • A good strategy defines a critical challenge.
  • Strategies focus resources, energy and attention on some objectives rather than others.
  • All analysis starts with the consideration of what may happen, including unwelcome events. I would not care to fly in an airplane designed by people who focused only on an image of a flying airplane and never considered modes of failure.
  • A great deal of strategy work is trying to figure out what is going on.
  • Slowing growth is a problem for Wall Street but is a natural stage in the development of any noncancerous entity.
  • A diagnosis is generally denoted by metaphor, analogy or reference to a diagnosis or framework that has already been accepted.
  • A guiding policy creates advantage by anticipating the actions and reactions of others, by reducing the complexity and ambiguity in the situation, by exploiting the leverage inherent in concentrating effort on a pivotal or decisive aspect of the situation, and by creating policies and actions that are coherent, each building on the other rather than cancelling one another out.
  • The coordination of action provides the most basic source of leverage or advantage available in strategy.
  • Anticipation simply means considering the habits, preferences, and policies of others as well as various inertias and constraints on change.
  • A master strategist is a designer.
  • The truth is that many companies, especially large complex companies, don’t really have strategies. At the core, strategy is about focus, and most complex organizations don’t focus their resources. Instead, they pursue multiple goals at once, not concentrating enough resources to produce a breakthrough in any one of them.
  • A competitive advantage is interesting when one has insights into ways to increase its value.
  • The first step in breaking organizational culture inertia is simplification.
  • To change the group’s norms, the alpha member must be replaced by someone who expresses different norms and values.
  • Planning and planting a garden is always more interesting and stimulating than weeding it, but without constant weeding and maintenance the pattern that defines a garden — the imposition of a special order on nature — fades away and disappears.
  • In a changing world, a good strategy must have an entrepreneurial component. That is, it must embody some ideas or insights into new combinations of resources for dealing with new risks and opportunities.
  • Making a list is a basic tool for overcoming our own cognitive limitations. The list itself counters forgetfulness. The act of making a list forces us to reflect on the relative urgency and importance of issues. And making a list of “things to do now” rather than “things to worry about” forces us to resolve concerns into actions.
  • When we do come up with an idea, we tend to spend most of our energy justifying it rather than questioning it.
  • A new alternative should flow from a reconsideration of the facts of the situation, and it should also address the weaknesses of any already developed alternatives. The creation of new, higher-quality alternatives requires that one try hard to “destroy” any existing alternatives, exposing their fault lines and internal contradictions.

4/5

Things I Think I’ve Learned: The First 90 Days of Being A Parent

I’ve been a parent for just over 90 days now. It’s easy to think one’s anecdotal experiences are empirically-verified facts about the reality of parenting, child development and how it all works, so take these observations with the same level of skepticism I have in recounting them. In no particular order, and solely from the perspective of a new father, here is a list of things I think I’ve learned so far about being a parent (formatted as bullet points this list would be extra annoying to read, but understand each paragraph is a separate idea):

There is an unreal adrenaline rush that occurs the first time you see your kid. It last about ten days. During that time, you are on a cloud and you feel invincible. When people start asking you, days after the fact, “Are you getting any sleep?” you don’t get why it matters, because you aren’t and you still feel GREAT!

Even if you think a successful relationship depends upon avoiding the temptation to manage one another’s emotions, your spouse will be going through some extreme hormonal swings and you may find it necessary to “slap” (verbally) some sense into them from time to time and in so doing, manage their emotions. Betraying your deeply held principles doesn’t feel right, but it does seem expedient.

Finding a “balance” of responsibilities with your spouse vis a vis the new child, housework, any pets or other dependents you own and maintain, work, “play”, etc., is obviously subjective and dependent upon your previous arrangements and ideas of what works, but it’s going to get flipped completely upside down and you’ll take turns feeling like life isn’t “fair” while occasionally stumbling upon a seemingly stable equilibrium that will work for awhile and then get blown apart, forcing you to scramble to find another.

You will quickly learn what is in fact essential for you to survive day-to-day, and it will probably involve the same kind of activities the child is engaged in– eating, sleeping, eliminating. You will convince yourself early on you “can’t function” without some kind of release or chance to relax, but the reality seems to be that if you just dedicate yourself to this mindless caregiving quest and cover these essentials, you’ll eventually be too tired to notice how little fun you’re having, but manage to get through your days quite satisfied with what you’ve spent your time on regardless. That being said, if you can ever find the odd thirty minutes for a mindless diversion, take it. It will be deeply satisfying.

A baby is an enormous time sink. You will suddenly understand why your friends, whose competencies and adequacies as adult human beings you began to question when they seemed to falter in the face of new parenthood, totally deserve some slack. You will begin to deeply question what kind of abuse or neglect of one’s family a person is engaged in who seems to be unphased by this humongous new responsibility in their life (in fact, you’ll find the theme is common that those who seem to balance it all without skipping a beat are shirking their duties and not admitting to the fact that someone else is shouldering the burden for them.)

It really does take a village. But not a democratic, collectivist political one. Having family and friends nearby to pitch in is invaluable. There’s no way to appreciate (besides reciprocating) what help they offer you in this time with cooking, cleaning and other care-giving. Doing a new parent a solid like that just has no equivalence to a non-parent in some kind of scrape. If you have relatives willing to live-in and help, let them, even if it means gritting your teeth when they interact with your child in unapproved ways, or do annoying things like treat your kitchen the way they treat their own, etc.

Most parents think they’re doing the best they can, know they don’t have all the answers, but really don’t have the bandwidth (emotional, physical, or otherwise) or desire to compare notes and try to “optimize” the parenting function. Beyond the odd sharing of “tips and tricks”, you might be surprised to learn that other parents really don’t want to explain their philosophy (or defend it), don’t want to learn what you do and why and they most certainly don’t want to be judged in any way, shape or form for the parenting choices they make. Having a new child gives one a completely new perspective on “live and let live” about a subject that comes to be deeply meaningful and personal, the perfect kind of subject for making one anxious about how others perform!

Your life has completely changed at this point, and there’s no going back to the way things were. For the father, this may or may not be a shock, but if the act of creating a child was willful and intentional, it probably doesn’t feel like a big loss and if anything is quite a profound and exciting realization to have. Life Before Child is relatively meaningless and boring by comparison. But for the mother, whether she thinks she was ready to be one or not, it is likely to prove quite devastating for her to accept that she’s never going to be a “maiden” again, as one friend puts it, and even if her LBC was equally meaningless (clubbing, being “young and sexy”, etc.), the stakes are perceived as higher for a variety of reasons for the woman and so this identity crisis can be quite sudden and jarring. Empathy is called for, if you have the little extra energy required to give it.

Your friendships will change with people. You now have friends with kids, who you understand a lot better and vice versa, friends without kids who are planning to have them, and friends without kids who don’t want them and will seem to be going their own way.

Back to the time sink thing– say goodbye to your library, your writing habit, and perhaps even your gym membership and anything else you do for recreation, at least for a little while. You’re just not going to find time for these things on a consistent basis and the more you try to, the more frustrated you will become. Let it go. They’ll be waiting for you when you get back.

Infants are very similar to puppies. Extremely needy. Extremely cute. But easy to trick yourself into thinking you made some kind of mistake if you project the present level of care (and lack of meaningful feedback) forward infinitely into the future and not expecting things to change and develop, as they will.

You will develop all kinds of arcane knowledge related to your infant’s cues and behavior signals which will essentially be useless 12-18 months later when their cognitive ability has significantly improved and they can verbalize most of their needs to you without confusion. The good news is your memory is so shot from lack of sleep that you probably weren’t going to have a solid long-term memory of any of this stuff taking up space anyway. This is probably why most people who have parented infants but are now in their middle age don’t seem to have many useful memories to draw upon about this period of time that can help you navigate it via best practices.

Also like raising a puppy, people around you will project their needs and most awkward insecurities onto your child (tabula rasa?) and it can be both terrifying and annoying to watch this adult “misbehavior” unfold. Your infant, who is new to everything around them and understands very little of not only what is going on, but its own behavioral responses to it, will nonetheless manage to “be angry with”, “be happy with”, “be faking crying (intentional emotional manipulation)”, “be so smart”, “be a little crowd pleaser,” “be so in love with”, etc., your parents, siblings, relatives, friends, neighbors and perfect strangers. Yet, none of these things are true besides these people wanting them to be so!

It does seem to be good, for you and your infant, to get on some kind of a predictable schedule… but it won’t always work and you can’t fool yourself into believing there is one when there isn’t one, or the infant into cooperating when they don’t want to.

It takes longer to do everything (time sink x3!), you can still get to where you need to be on time, you just need to start earlier and build in some time for a sudden diaper change, etc.

If you have any health concerns with your child, it’s worth seeking multiple opinions before acting, especially if the recommended action is rather drastic.

Infants follow Murphy’s Law, especially with regards to needing to feed at unplanned times or devastating diapers and outerwear when you least expect it.

You can get into a real dark place, really quick, if you start convincing yourself you can’t do simple caregiving things for yourself before tending to your child such as eating, peeing, taking a 5 minute shower, etc. That being said, get used to holding your pee, finishing your meals in increments (and/or starting them late), and so on.

And now that the Little Lion has awoken from his nap, this post has found it’s most logical endpoint!