Some Takeaways From My Time At The D.School

I’m back from Stanford’s d.school and have a few ideas I jotted in my notebook while I was there:

  1. Learn to celebrate failure; watch how you react to it
  2. Let go of your desire to control outcomes; with humans involved, nothing ever goes according to plan
  3. Try things, practice, iterate
  4. Don’t build expense into prototyping; the more it costs, the harder it is to iterate and change and the less you can learn from your failures
  5. Don’t make insight generation complicated
  6. Where is the burning platform? Look for that place and work on the problems involved
  7. Innovation is the outcome of a process, and innovators are the people who do it
  8. The design thinking process: empathize, define, ideate, prototype, test and back again
  9. The answers are not in this building
  10. When empathizing, spend 15% of your time engaging, noticing and following-up and 85% of your time seeking stories
  11. The purpose of your empathy research is to capture emotion; what is it? where does it come from?
  12. Gravitate in your empathizing and your design thinking process between flaring and focusing
  13. When defining, start with an observation, make an inference, then form a hunch that can carry you to insight
  14. Solve one problem at a time
  15. POV essentials: preserve emotion and the individual, use strong language, sensical wording, non-obvious leaps and generate possibilities that lead to problems the team wants to help solve
  16. 5 users are sufficient to capture 85% of usability cases
  17. Tail-end users have explicit needs and better represent the implicit needs of median users
  18. The future is already here, but it’s not evenly distributed
  19. Trusting relationships are the foundation of generative work
  20. Learn how things fail before it matters, not when it does
  21. You can only learn by doing, not by planning
  22. Match prototyping resolution to idea certainty to allow yourself to hear the inevitable critical feedback
  23. Testing = empathy; your prototype is your empathy probe
  24. The value is in the user and their emotions, not in the prototype or experience model itself
  25. The goal is to develop empathy with the user, not the make the prototype perfect; seek understanding
  26. All action aims at advancing the frame and the concept towards convergence
  27. What do your users say about the concept? The users’ reactions and excitement indicate proximity to convergence and likely next steps
  28. 3 elements of storytelling: action, emotion and detail
  29. 100% of people who succeed, start
  30. Struggle and learning are complements; there is no learning without struggle, and the more one struggles, the more one has opportunity to learn; you can not master new knowledge from a place of comfort

Some or even many of these are probably difficult to make sense of or place without further context about the design thinking process.

Intro to Design Thinking

I have the privilege of attending the Stanford d.school’s Design Thinking Bootcamp, an opportunity I was turned on to by a friend in the venture capital community. In preparation for the program, attendees were asked to conduct an “Ideation” session at their place of work with other managers and decision-makers in their organization. This is an opportunity to not only get an introduction to the attitudes and tools used in design thinking, but also to begin practicing with these ideas immediately within one’s business as part of the design thinking meta is “a bias toward action.”

Here are some takeaways about thinking creatively and generating ideas in a collaborative environment that I’ve gained so far:

  • Adopt a “Yes, and…” Attitude
  • First generate, then evaluate
  • Don’t just find one idea
  • Think in terms of a specific problem
  • Focus on emotions
  • Use constraints to increase idea volume
  • Use analogous thinking to go some place else
  • Use “QBD” to evaluate ideas
  • Think about the “headline”, not the “article”
  • If it doesn’t get written down, it didn’t happen

More details on each of these ideas, and impressions from my actual ideation sessions, follow:

Adopt a “Yes, and…” Attitude

When people come together to create ideas, they have a habit of seeking to find what is wrong with their collaborators thinking, rather than what is right. The goal in design thinking is to first come up with a lot of ideas, not to find the “right” idea as quickly as possible. A helpful attitude to adopt is “Yes, and…” which means, whenever your collaborators come up with an idea, reply “Yes, and…” and then build off of their idea, either with an additional flourish or iteration, or with another idea you have in mind that their idea has led you to think. Don’t try to make yourself look smart, try to make your partners look brilliant.

First generate, then evaluate

Another intuitive habit most people bring with them to creative sessions is to try to evaluate ideas as fast as they’re generated. No sooner does someone have a new idea than does that person, or a collaborator, try to figure out if the idea “fits” with the constraints of the project. Many ideas that are either excellent on their own, or could lead to an excellent and realizable idea, are tossed out in the instant evaluation before they’ve had a chance to make an impact. Get in the habit of separating the generation of ideas and the thinking through the merits of the ideas generated. Never confuse the two or allow the processes to mingle in your thoughts or practice.

Don’t just find one idea

When you’ve got a problem, you only need ONE solution. And ultimately, you can only implement one solution– time, resources, etc. are scarce. So it’s easy to think the goal is to “just come up with one idea.” But trying to find the right idea means evaluating as you generate, and it also means pre-qualifying your own thinking before you even generate ideas. Your goal in ideation is actually to generate as many ideas as you can, regardless of whether they make sense, actually solve your problem, are feasible, etc. Go for quantity, not quality, when generating ideas.

Think in terms of a specific problem

It helps to come up with ideas when your problem is specific enough to be solved by an idea you come up with. This means thinking in terms of a specific group of people and in terms of a specific change you want to bring about, either an action or a state of mind. A prompt that can help is to frame your problem with this ad lib– “What can we create for… [specific group of people] that makes them/that helps them [choose one] … [a physical action you want them to take, or a state of mind you want them to adopt]?” An example would be, “What can we create for 10 to 12 year old kids that makes them excited to eat vegetables?” The problem is specific– it is about 10 to 12 year old kids, a group of people with distinct qualities. And what the solution provides is also specific– it will generate a feeling of excitement in them in relation to their eating vegetables.

Focus on emotions

You’ve got your problem. It’s important to think of the mental state of the “user” you’re solving for. Almost inevitably, finding a solution will involve focusing on the change in the mental state that is necessary to motivate action. Sometimes, the change in the mental state by itself is the goal, for example, “What can we create for customers who are angry with us that will make them love us and tell all their friends?” Translating the problem during the ideation process into an emotional state creates a valuable constraint (discussed below) for increasing idea volume.

Use constraints to increase idea volume

It is counterintuitive, but putting constraints on your idea process actually allows you to be even more creative because it focuses the mind in specific ways. Some constraints used as examples in the ideation workshop were “Every idea must cost $1 million” or “Every idea must get you in trouble with your boss”. Imagine you actually have a budget constraint– you only have $50,000 to spend on a solution. Coming with the REAL budget as a constraint is likely to limit your thinking because you’ll immediately begin pre-qualifying and evaluating ideas as you try to generate them.

But if you invert the real constraint into an imaginary one where you must SPEND a large sum of money on your idea as a minimum, you will end up with a sense of much more freedom. Later, you can take those high dollar ideas and figure out how to reduce the cost to something that is actually affordable. The inversion process allows you to hurdle over your real constraint which would limit your creativity and therefore your ability to find a real solution.

You could think of arbitrary constraints, simply to inspire creative and offbeat thinking, or you could try inverting real constraints to trick yourself into thinking past them. The d.school profs use the metaphor of the thumb over the garden hose, which forces high pressure jets of water to spray over a larger area versus just using the innate pressure of the hose which tends to dribble out.

Use analogous thinking to go some place else

Another tool for successful ideation is to create analogous situations and imagine how those people or institutions would handle the creation of a solution for your problem. To find analogies, you translate your problem into the emotional state, mentioned earlier. Sometimes it’s easy and obvious, because you already have an emotional change as a condition of your solution. But if you don’t, this can take some creativity in and of itself to figure out what the emotion is you’re searching for. As an example, if your problem was “What can we create for our hiring department that helps them to only hire people who exceed our standards?” the emotional state might be “confidence.”

Once you have your emotional state, you must ask yourself, “What kind of person, group or place is superb at generating this kind of emotion?” Once you have a list of such entities that excel at generating this emotion, you can do an iterative process of asking yourself, “What would X create for… that helps them/that makes them…?”

Now you are in someone else’s shoes, thinking about the world the way they do and you have unlocked an entirely different form of creativity from your own.

Use “QBD” to evaluate ideas

Okay, you’ve got a ton of ideas at this point. Now it’s (finally) time to evaluate them. But you’re not just going to start deciding which are possible and which are insane. Instead, you’re going to use more creativity to evaluate your ideas. You’re going to think about which ideas are Quick, Breakthrough or Delightful.

Quick ideas may not be full or perfect solutions, but they could be reasonably implemented right away and this incremental progress would have an immediate impact– things would get better as far as your problem is concerned. This is an important way of thinking about selecting solutions because often no solution is found in search of a holistic or perfect one, which either doesn’t exist or can’t be accessed in a linear way of thinking. By selecting a Quick solution, you can take steps toward what might be a final, perfect solution and get a win in the meantime.

Breakthrough ideas might not work, but if they did, they’d be a game changer. They’d be an all new way of solving the problem, or they’d give the group who employs them a distinct competitive advantage, or greatly leverage their efforts. Breakthrough ideas help us think about how to shift paradigms and find solutions that don’t just work, but work insanely well.

Delightful ideas are just that– if we implement them, people feel GREAT. And feeling great is an important part of solving problems and making progress in our work or business. When we find Delightful ideas, we find ways to inspire, motivate and energize people that can lead to other creativity or effectiveness that we can’t imagine or anticipate in simply solving the problem.

Think about the “headline”, not the “article”

When generating and sharing ideas, it’s important to think and communicate in terms of the big impact, high level concept of the idea and not get bogged down in the nitty gritty details– that way lies the habit of criticizing, condemning and evaluating before a good idea can take root, or inspire another. The instructors refer to this as thinking about the “headline” and not the “article.” An example would be, “Hire an expert interviewer” versus “Find a person with X years of experience interviewing people, pay them $Y per year, assign them duties of A, B and C, they will report to Z and will be measured in their performance by E, F and G.” You can find any number of things in the article version that might be unrealistic or impractical, if you can even come up with all the necessary details. It is putting the cart before the horse. You first have to come up with the big idea and see how it could lead to a Quick, Breakthrough or Delightful improvement for your problem, and then you can go about fleshing it out and figuring out how to make it practically work.

If it doesn’t get written down, it didn’t happen

This idea is a good practice for any meeting or information-sharing activity of any kind but it seems to be especially relevant to the process of ideation– if you aren’t writing ideas down as you’re coming up with them, they may as well not exist. By the end of a 1hr long ideation session, you might have come up with fifty or sixty different ideas and concepts as a team. Who can remember what those were by the end of it? So it is important to write them down as you go. The instructors recommend using sticky notes and slapping them on the wall as you go, which not only serves to keep things written down and makes it easy to move ideas around as you review and ideate, but the small amount of space necessarily forces one to think in “headline” terms.

Another thing that should be written down, repeatedly, is the prompt of the problem you are trying to solve (“What can we create for…?”) as well as the specific constraints, analogies, etc., that you are bringing to bear on them as you focus your ideation in different ways.

Our experience with ideation as a team

My ideation workshop involved 5 other people in our organization in addition to myself, all group managers or individuals with lead authority at the operating unit level. We split up into 2 teams of three to work through our ideation process.

One takeaway is that collaborative idea generation is FUN. We genuinely had a good time working together to come up with solutions to our organization’s problems. There was a lot of laughter, spirited talking and debate and enthusiasm. Often times a team would race ahead with a prompt or keep working after designated time was up because they were so caught up in their thinking and idea generation.

Another takeaway is that anyone can be creative. Most of the operating managers were selected because they tend to experiment and try new things in their operations, but what really makes them excellent in their roles is that they relentlessly stick to a proven system of processes and procedures. There may have been some fear that people who are really good enforcing a set of orders might not be able to come up with creative new ideas. This just wasn’t the case. They all had a ton of ideas and I think one thing that was clear by the end of the session was that everyone would’ve liked to have selected their individual problem they brought to the group for ideation work when we could only pick one at a time.

A third takeaway is that the trail one follows to arrive at workable solutions often starts in an unpredictable and highly abstract place. It highlighted for us the value of every idea generated, and the importance of separating generation from evaluation. Where you start is rarely where you will end and if you can embrace the idea of accepting all ideas as valuable and disregarding their merit or feasibility at the outset, you can let those ideas unlock all kinds of interesting solutions you otherwise may not have accessed.

Finally, we realized that even when we came up with an idea that we thought was Breakthrough or Delightful, but lacked obvious practical application, we could begin “trimming” and paring down the idea from there to find something we COULD do with it that still tapped into the essence or principle of the original idea. For example, one group came up with the idea of hiring a professional athlete to be a motivational coach to our organization’s managers. We don’t have the budget for that, nor is that athlete necessarily available for hire, but we can think about what kind of qualities we believe he would bring to such a role and look for a person we could hire that can bring those qualities, or the way we could change processes or definitions of roles within the organization to incorporate those values we now realize are essential to helping us solve a known problem. I think of this as “analogizing from the analogy”.

I can see how the ideation process, which we are just being introduced to through this practice work, can add value for all people at all levels of responsibility within our organization. It is inspiring and motivating, it creates the “bias towards action” in the person doing it and it yields real results which can actually make things better for us, our customers and our team. I am sold!

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

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.

Blast From The Past: Mike Cernovich’s “Epistemological” Problems With 60 Minutes (@Cernovich)

This is from 2008, from the now defunct “Mencius Moldbug” blog:

In 1933, public opinion could still be positively impressed by group calisthenics displaying the face of the Leader, eagles shooting lightning bolts, etc, etc. By today’s standards, the public of 1933 (both German and American) was a seven-year-old boy. Today’s public is more of a thirteen-year-old girl (a smart, plucky, well-meaning girl), and guiding it demands a very different tone.

You are not a thirteen-year-old girl. So how did you fall for this bizarre circus? How can any mature, intelligent, and educated person put their faith in this gigantic festival of phoniness?

Think about it. You read the New York Times, or similar, on a regular basis. It tells you this, it tells you that, it reports that “scientists say” X or Y or Z. And there is always a name at the top of the article. It might be “Michael Luo” or “Celia Dugger” or “Heather Timmons” or “Marc Lacey” or… the list, is, of course, endless.

Do you know Michael or Celia or Heather or Marc? Are they your personal friends? How do you know that they aren’t pulling your chain? How do you know that the impression you get from reading their stories is the same impression that you would have if you, personally, saw everything that Michael or Celia or Heather or Marc saw? Why in God’s green earth do you see their “stories” as anything but an attempt to “manipulate procedural outcomes” by guiding you, dear citizen, to interpret the world in a certain way and deliver your vote accordingly?

The answer is that you do not trust them, personally. Bylines are not there for you. They are there for the journalists themselves. If the Times, like the Economist, lost its bylines and attributed all its stories to “a New York Times reporter,” your faith would not change one iota. You trust Michael and Celia and Heather and Marc, in other words, because they are speaking (quite literally) ex cathedra.

So you trust the institution, not the people. Very well. Let’s repeat the question: what is it about the New York Times that you find trustworthy? The old blackletter logo? The motto? Suppose that instead of being “reporters” of “the New York Times,” Michael and Celia and Heather and Marc were “cardinals” of “the One, Holy, Catholic and Apostolic Church?” Would this render them more credible, less credible, or about as credible? Suppose, instead, they were “professors” at “Stanford University?” Would this increase or decrease your trust?

For a hardened denialist such as myself, who has completely lost his faith in all these institutions, attempting to understand the world through the reports and analysis produced by the Cathedral is like trying to watch a circus through the camera on a cell phone duct-taped to the elephant’s trunk. It can be done, but it helps to have plenty of external perspective.

And for anyone starting from a position of absolute faith in the Cathedral, there is simply no other source of information against which to test it. You are certainly not going to discredit the Times or Stanford by reading the Times or going to Stanford, any more than you will learn about the historical Jesus by attending a Latin Mass.

Of Enemies Abroad, And At Home (#politics, #America, @realDonaldTrump, #loyalty)

We are now being told that the election of Donald Trump represents a virulent strain of tyrannical fascism in American politics, which was before lying under the surface but is now unapologetically out in the open. Certain agitators and political commentators are claiming that they don’t feel safe in a world where Trump is president, implying that there may be physical threats against their life, property or lifestyle under his regime. The conclusion is that Trump is to blame for a politics of potentially open, physical violence across partisan lines.

But if this is what Trump represents, Trump is the necessary response to an earlier dynamic, not the initiator of it. You see, the Left has been successful in its quest to control politically-acceptable speech. The world of man can be controlled by arms, or by words and ideas. If certain words and ideas can not be uttered, then the people who believe in them have no choice but to take up arms in their support. What choice but violence does a person have to convince another of his views, if his views are considered unutterable in society?

We are also told that Trump is committing what amounts to treason in warring with political factions in his own country while buddying up to autocrats in other countries, such as Russia. If the right way, and the only way, to conduct a political strategy is to play by your opponent’s rules, then this criticism may have merit. But politics is war by other means, a game of domination and annihilation. If you are a globalist after global control, you might call a truce here and there with domestic factions to enhance your projection of power outside your borders.

But what if you are a “nationalist” or “patriot”, like Mr. Trump?

If your primary political concern is dominance within your own borders, it is clear who your enemies and your friends are. Your enemies are any domestic political factions which question, criticize or otherwise restrain your full use of power inside your borders. And your friends are any parties, inside or outside your borders, that can either help you defeat your domestic opponents in some way, or who can agree to some kind of truce that lets you focus on defeating your opponents at home.

Make no mistake about it– Mr. Trump is in a war for his political (and potentially even vital) life, such is the nature of politics which has no rules but that which each opponent might individually observe. And looking at the world as he claims to, it seems not only not treasonous, but completely rational, to find friends where they can be found in order to quell the domestic disturbance represented by the Democrats and the American Left. And we can sense the truth of this proposition in observing that while critics of Mr. Trump argue that he should make peace with his domestic opponents to fight external enemies, these critics are not suggesting these opponents make peace with Mr. Trump, nor are these opponents themselves voluntarily laying down arms against Mr. Trump for the time being to take them up against the Great Alien Menace. Actions speak louder than words here.

And what about the spat with the domestic spy agencies? Ignoring the fact that they were un-American and not to be trusted under the Bush regime, and were clearly un-American and autistically-focused on studying the communication patterns of those people they nominally serve under the Obama regime (and when did these people face election and change under any of the last three administrations?), they are supposed to be answerable to the Congress, which supervises them, and the President, who leads the nation they serve.

To raise the claim that Mr. Trump is playing a “dangerous game” in challenging their methods, claim and authority, is to belie the very corruption his opposition to these organizations so far engenders– this may be a hard metaphor for many to understand these days, but it would be as if the appointed chief executive of the owner of a company was playing a dangerous game in challenging the actions and attitudes of the company’s hired employees. This argument has the theoretical cause-effect relationship of American civics exactly reversed.

In case anyone needs reminding these days, why is it exactly that the American intelligence “community” (note: for their to be a community, there by definition must be some who are inside it and some who are outside, that is, citizens of the domain and barbarians at the gates…) is to be considered trustworthy?

Have they demonstrated gross competence at their appointed tasks? Anyone who has not forgotten the failures of September 11th, 2001, must puzzle at the question.

Have they any kind of record of their activities and thinking that is examinable by the public? No, only the Congress and the President have access to that information (if the intelligence agencies are honest in presenting it in the first place!) and there is a clear principal-agent problem in electoral politics presented by these defined secrets.

And what kind of people are they who join these secret cabals, whose jobs seem to consist of lying for a living, trafficking in arms and illicit substances and occasionally murdering people deemed to be strategic problems for themselves or the government they represent?

Well, just that– liars, murderers, professional criminals and reckless thrill-seekers.

A better question than “Why should they be trusted?” is “Why should they be tolerated in a society that claims to have an open government?” Speaking of tyranny and autocratic rule, is there any model more noble in form than the modern spook cartels?

Technological Change And Social Inertia

Isn’t it interesting how people develop a sense of entitlement over things that, until only a few years ago, did not exist?

And isn’t even more curious that people will become defensive about protecting outmoded jobs they hate?

I read an article about NYC taxi and limo drivers seeking to ban the implementation of autonomous vehicles in NYC to protect their jobs. But how many taxi and limo drivers even like their jobs, or love them? Do these people wake up every morning, breathe deeply and say to themselves, “I am so grateful to get to drive people around again today!”

Technology marches on, and soon it will provide new things and new jobs for people to feel entitled about.

Review – Family Fortunes (#wealth, #family, #investing, #business)

Family Fortunes: How to Build Family Wealth and Hold on to It for 100 Years

by Bill Bonner, Will Bonner, published 2012

What kind of habits and modes of thought separate Old Money families from everyone else? How do you build a family fortune? How do you get a family to work together toward a single purpose as the “core” is continually invaded by new spouses and children? How do you invest your prodigious wealth at high rates of return? How do you hold on to your family fortune for 100 years? Why does 100 years seem like a long time when it’s really only 3-4 generations of people?

Frustratingly (maddeningly?), the answer most often given in this book to questions like these is, “We don’t know, but here’s our guess.”

What I didn’t get from this book, then, were many specific, useful ideas for implementing with my own family enterprise– or family-as-enterprise. What I did get, and what will be the focus of this review, are a lot of questions, principles to ponder, and general strategic problems in need of robust solutions. This is not a how-to manual for putting together the essential structure of long-lived family institutions such as tax and estate planning, family organization and branding, household management.

Most people will not have a family fortune to contend with. It is not something that can be acquired through a known formula, but rather it is the outcome of an entrepreneurial process that is, epistemologically speaking, random. Just as one can not predictably create a family fortune, one can not predictably control the size or scope of the family fortune, within certain bounds. In other words, your family may have the good fortune to stumble upon a business opportunity with a significant market capitalization. That’s the first hurdle, and there’s no formula for getting there. Then, that fortune might turn out to be worth $50M, $100M, or $5B. That’s another hurdle, and there’s no formula. Failing to seize every opportunity you are presented with might limit your total fortune, and being eager and observant for those opportunities might extend the limit. But there is no recipe for turning something that is worth $50M into $5B unless it was the kind of opportunity that can scale that big in the first place.

Some market opportunities are worth a lot to one person who owns them (“he made a fortune!”), but they’re still not worth a lot to the market or economy as a whole (limited scale). This is an important point because of the gilded cage nature of family fortunes– once you have one, you’re kind of stuck with it, but it’s really tempting to think you have a lot more control over it than you do, or that it’s a lot more durable than it might be.

Imagine you’re the guy with the $50M fortune. You’re pretty happy with your luck, assuming everything else is right in your life, but you’re aware of people with $5B fortunes. If you can generate a $50M fortune, why can’t you generate a $5B fortune? Are those people smarter? Better connected? More productive? What’s the difference?

Luck, and leverage, but using leverage without blowing up is really just a residue of luck.

So you’ve got this $50M fortune. What can you do with it? If you have it invested in the business that created it, you enjoy a nice income stream from it each year (maybe that’s worth $2.5M, maybe it’s worth $5M if you’re really lucky) and you reinvest where and when you can. If your business doesn’t scale easily though, you can’t put it back in and make more. You’re stuck at $50M. What if you take the $50M out by selling the business? Now you have $50M in cash with no annual return and an investment problem. Where are you going to put $50M to work such that you can, say, spend $5M per year and still have $50M left over to do it again next year? Know any hot stocks? You didn’t make your fortune in investing the first time around, what makes you think you’re going to make it there the second time around just because you have $50M now? (Note: you are statistically and logically unlikely to achieve this outcome if you so desire it.) Know any good businesses for sale? Oh, that’s right, you just sold one!

That’s the gilded cage. You’re stuck with a $50M fortune. It’s a nice problem to have, but it’s still a problem. And nothing changes at scale besides the difficulty of the problem. It isn’t easier but actually harder to achieve yield at higher increments of invested capital due to the economic phenomenon of diminishing marginal returns (if this were not the case, you could infinitely scale things by always adding more resources to every project; DMR ensures that the more you add over time, the less incremental gain you get to the point that you get no return or a negative return, ie, waste). If you had $5B, you’d have even fewer places to put it and you’d have given up an even rarer business opportunity in selling.

Unless your business value is about to become permanently impaired and you can see the writing on the wall when no one else can — technological change, regulatory change, some kind of disastrous political or economic event — your business will never be as valuable to you on the market as it is under your ownership, assuming you’re a competent operator. I’m not going to explore what you do if you’re incompetent because that’s a special case, although it follows the same general logic and leads to the same general investment problems.

I think what this means is that the primary challenge for a family with a fortune in terms of managing their business is to be sensitive to the innovation required over time to maintain the economic value of the assets, to manage the capital structure of their business intelligently (ie, not too much debt) so they don’t lose control because of the volatility of the business cycle, and to build cash up and keep their eyes peeled for a truly unique investment opportunity, the kind that made the first family fortune possible. That means it’s more important to avoid doing the wrong things than it is to try to be finding the right things to do. It also means it requires great patience. If we’re talking about building multi-generational wealth, patience is implied in the premise, but it’s still worth repeating. Bonner emphasizes this frequently– find ways to let time work for you, not against you. He believes luck, advantages and businesses all tend to grow over time so the idea is to set things up so those advantages will accumulate in your favor.

Smart investing is not the way to build a fortune. Some people will build a fortune building an investment business (ie, a wealth manager), but it will not be the investing itself that makes them rich but the operational leverage they gain through their fee structure. Because Bonner is a skeptic of “investing” as a tool for wealth building, he would land squarely on my side of the skeptic’s divide about the value public capital markets play in economic growth. Why should a person find it necessary or valuable to contribute capital to a company building things in other people’s towns instead of investing in opportunities in their own town, right “down the street”? Profit signals and differing equity returns will attract capital from disparate areas and thereby indicate relative value across an economy, but I am skeptical that this process and the capital markets in general would be as big a part of the economy overall as they are presently if we were in anything more closely approximating free market conditions without crony capitalist interventions.

So, you may get lucky and find yourself with a fortune, small or large, from a family business. If you do, hold on to it, appreciate it, care for it, tend to it responsibly and hope you or one of your descendants has an opportunity to take another swing at an uncertain point in the future. But don’t try to force it, and don’t think there’s anything you can do to greatly enhance your opportunity beyond what it is. And understand that it will never be as valuable to you as a pile of cash as it is invested in your business.

The other big topic in the book is building the institutional framework of a long-lived family that can participate in this family business over the generations and can also be “true” to the family culture and values. Family planning is an idea that attracts me, and I have spent considerable time on my own with the concept of creating a family brand (what the ancients’ termed a coat of arms) to identify the family and its enterprises.

The trouble I have with family planning is the same trouble I have with all planning, particularly that of the central variety– what if the individual members of your family don’t really find value in your plan? Obviously, raising them with certain values and viewpoints creates a better chance for a kind of coalescing around this identity and direction. But is that how I want to raise my children, by telling them what is important? I think they can figure that kind of stuff out on their own, just as I did. Hopefully I can lead by example, and provide a demonstration of the virtue of the family virtue. But I think a potentially frustrating consequence of putting this emphasis on building multi-generational institutions together is you might find out your family just doesn’t see the use in them. That’s kind of worse case, though, and doesn’t necessarily argue against the project in general.

Yet, what if you’re successful at this? Building a business and building wealth is a coordination problem resolved by growing trust. Who can you trust more than members of your own family? Creating a family organization based on shared values and common identity and linking that organization to a business entity could allow for a uniquely successful competitive strategy and management continuity over a significantly longer timeline than the average public or private competitor– in other words, huge competitive advantages over time. Simultaneously, this arrangement could solve one of the common problems of families and their constituent members, that being how each as an individual and the family as a whole can achieve security, success and satisfaction with one’s productive efforts and life. As I’ve argued in the past, I believe the family is the best institution for accomplishing this task and it is certainly far superior to the currently dominant model of public corporations (for-profit and nation-states/institutional gangsterism).

3/5