Look for the Tailwinds

I never fully appreciated the impact of tailwinds and headwinds until I started cycling. I couldn’t believe the difference they make. Even when the winds are light, a tailwind does wonders. I wish I’d better understood this phenomenon earlier in life — not with respect to cycling, but with respect to life generally.

Recently, I read some comments by Warren Buffett about tailwinds and headwinds. Buffett stressed the importance of being in a business where tailwinds prevail.

“There are some businesses that are inherently far more opportunity than others,” he said. “So you want to give a lot of thought to which train you’re getting on.” It’s important to be “in businesses where tailwinds prevail rather than headwinds,” he added.

Take Mr. Buffett’s advice seriously, Vera. It will make life so much easier.

Twice in my life I joined businesses with headwinds: once with a chemical company and once with a small private college.

It’s not that either experience was bad. It’s just that there were limited opportunities. And the job was so much harder than it needed to be.

From an employment perspective, the chemical industry had been contracting for quite some time (still is). Technology, competition, demographics, globalization and commoditization had taken a heavy toll. It’s also a capital intensive business, which presents its own challenges, especially in this era of high-margin, capital-light businesses. In short, it’s an industry with headwinds, particularly with respect to employment and career opportunities.

That doesn’t mean you can’t have a satisfying successful career there. It just means there are industries with far more opportunity. And which are more exciting and dynamic. Why deal with headwinds if you can avoid them? (Of course, if you’re a chemical engineer, perhaps it’s the right place to be.)

The headwinds at the college were even stiffer. The 20th century was the century of colleges; the 21st is the century of universities. For a myriad of reasons, the vast majority of students want to attend a university, not a small college, especially one that is nestled in a rural community far from centers of commerce and industry.

Small, under-resourced colleges have a tough go of it these days. Most are struggling financially. There’s never enough money. Many are struggling academically, too.

Maintenance ends up being deferred. Salaries can’t keep pace with wealthier institutions and research universities, and it’s tough to compete for the best talent. The colleges have a hard time competing for the strongest academic students, too. It’s a constant struggle.

Again, it doesn’t mean you can’t have a satisfying career there. But it does mean the opportunities will be limited. And it means the environment is one of scarcity and not abundance.

Why deal with such headwinds? Why not go where tailwinds prevail?

One of my faults (there are many) is that I’m a sucker for a challenge. It’s a fault because it makes life harder than it needs to be. Looking back, I’m convinced I’d had been much better off looking for tailwinds instead of being attracted to headwinds, even though, from a career standpoint, things worked out pretty well for me. But perhaps not as well as they would have if I’d ridden more with tailwinds.

Don’t make the same mistake, Vera. Life is hard enough. Strive to ride with the wind, not against it. It will make the ride so much easier.

Marrying the Right Person

I don’t know if you’ll marry anyone, Vera. But if you do, think about it.

One of the keys to a happy life is avoiding big mistakes. Marrying the wrong person can be one of the biggest mistakes you could possibly make. So, naturally, try not to get it wrong.

I was lucky. I stumbled into a great marriage. Well, perhaps it wasn’t entirely a stumble. I wasn’t nearly as smart when I was 16 (when I started dating your grandmother) as I thought I was — or at 21 when I married your grandmother — but I was smart enough to marry up. That’s my first suggestion: marry up.

Your grandmother was and is smarter than me. And a better person in almost — no, in every — respect. That’s what I mean by marrying up.

Your great grandmother probably also would tell you to marry into a good family. I used to scoff as such advice, but, frankly, experience has proved my mother right more often than not. You’ll be marrying not only a spouse but marrying into a family. Never underestimate the power of genetics. Or engrained familial dysfunctionality. In short, be sure the family passes muster.

That’s about all I could come up with, so now I’m turning to two guys from the investment world who are two of the wisest people I’ve encountered (by reading and listening, not personally): Warren Buffett and Charlie Munger. Here is some of what they’ve said about the keys to a good marriage:

“If you really want a marriage that will last, look for someone with low expectations.”

“Make sure your spouse has the same thoughts on the same big things.” I’m not totally sold on this one, mainly because James Carville (ardent Democrat) and Mary Matalin (Republican operative turned Libertarian) seem so happy together. But it’s probably best to err on the side of caution. I have to admit, I don’t think I could live with anyone who thought Donald Trump was a decent human being or remotely fit to be president. Or who thought Roberto Clemente wasn’t God’s gift to Pittsburgh (hell, to all of humanity) and one of the greatest ballplayers to ever play the game.

“Don’t marry someone to change them.” I’ve seen people try to change their spouses over the years. I can’t recall it ever working out well.

“Don’t keep score.” (Thank goodness your grandmother heeded this advice.)

“Look for someone who will love you unconditionally.” Come to think of it, I’m not sure that anything else is truly love.

“Marry someone who is a better person than you are.” (I did!) Warren takes it even further: “Always associate with people who are better than you.”

“Choose a spouse who believes in you.” And why would you be tempted to marry anyone who doesn’t? I don’t know, but it happens.

I could go one, but you get the point: it’s an important decision. Perhaps the most important of your life. Treat it as such.

Oh, I left out one important criterion: choose someone your pap-pap likes.


Don’t Waste Your Time Taking History Courses

Don’t waste your time taking history courses, Vera.

That’s not to suggest you should remain ignorant of history. You shouldn’t. As George Santayana wrote, “Those who cannot remember the past are condemned to repeat it.” It’s just that there are a lot of better ways of learning the lessons of history than sitting in most high school or college lectures. Continue reading

We Live In an Irrational World

I like to think I’m rational. To a degree, I am; to a larger degree, I’m not. Neither is anyone else.

It took me a long time to realize this. It’s scary how slow I am to learn certain things. It makes me think I’m stupider than I like to think. I suppose no one likes to think they’re stupid. Indeed, studies reveal the vast majority of us think we’re above average. The fact of the matter is, for most of us our brains don’t have to work overtime to fool us. We are much better at rationalizing our decisions than making rational decisions.

When I worked at Bridgewater College, I had a vice president tell me I was the most rational person that person had known. I didn’t say it, but I thought to myself, how ironic? My decision to accept the offer of the board to become their president was one of the most irrational decisions I’d ever made. Perhaps I seemed rational because college campuses are some of the most irrational places in our culture. There, sentimentality reigns.

My list of irrational decisions would be long. I’m not proud of it; in fact, it’s embarrassing. They expose me for what I am: a bundle of emotions, biases, preconceptions, and self-delusions.

If you want to understand the psychological explanations for all this irrationality, I suggest you begin by reading Thinking, Fast and Slow by Daniel Kahneman. There is a lot of other research on the subject. Suffice it to say that, the more you read, the less confident you will be in your own rational capabilities. And the more concerned we’d be with people who claim to make decisions from their gut or by intuition.

Irrationality is a major impediment to being a good investor. In the current phase of my life, I spend quite a bit of time studying investments and making related decisions. Warren Buffett’s partner, Charlie Munger (like me, a lawyer by trade), has said his goal is to become the most rational person possible. Since taking over responsibility for my own investments, I can understand his point more fully. It’s not easy being completely rational. We bring so many preconceptions and biases to the table that get in the way.

Of course, there is no way to become completely rational. Humans aren’t constructed for total rationality. Inside our thought processes are embedded all kinds of experiences that, for better or for worse, we extrapolate and generalize. And inside our DNA is embedded millennial of survival biases and mental shortcuts. Unfortunately, some of these are more pertinent to years long gone; they don’t necessarily translate well to 21st-century living.

I also wonder if irrationality is a defense against what might otherwise seem to be a sense of purposeless and insignificance. Most of us desire to find meaning in life. Most of us don’t like to think of ourselves as being insignificant. Yet perhaps that’s where rationality would take us. Perhaps it’s too disquieting a place to live for most of us.

But perhaps we expect too much.

Sometimes I think the main contribution of religion is the concept that none of us is the center. Despite what we might say we believe, we do in fact view the world from our center. But how rational is that? Not so much I suspect.

I wonder what the world would look like if rationality reigned. Not that it’s ever gone to happen. It won’t. Or at least not in my lifetime.

As Kahneman’s work and its progeny have persuasively shown, we make irrational decisions even when we’re aware of the internal biases and predispositions that pull us from rational thought. So, knowledge and self-awareness are not antidotes for what ails us. I wonder how the academics who think education is the be-all and end-all of everything wrap their heads around that.

Yet I can’t help but think knowledge and self-awareness help. But is such thinking grounded in reality or my own self-delusional tendencies?

Accepting the fact I’ll never be completely rational yields at least three byproducts, I suppose. First, it undermines one’s confidence, which, if I’m honest with myself, is probably a good thing.

I tend to be overconfident — too smug about the soundness of my judgment and decisions. A little less confidence is probably a good thing.

Second, a realization of my own irrationality engenders a healthy dose of humility. I could use more humility.

Finally, it makes one less impulsive and more contemplative, slower to make decisions. Decisions made in haste tend to be flawed. Some have to be made quickly. Others don’t. Taking one’s time is probably a good thing.

I don’t know what my life would have been if I’d been as rational as I thought I was. It would have been different, that much is sure. Better or more interesting? That is far from certain.

What I do know is that I would have tried harder to see problems from a different perspective. I’d given more consideration to the perspectives and opinions of others. I’d been slower to reach conclusions. And I’d been less dismissive of others. I’d also be a better investor.

What else would I have realized at an earlier age?

  • The power of propaganda – I minimized the power of propaganda earlier in my life. I had the misguided impression that humans were more rational than we are. The past 15 years have demonstrated the power of propaganda beyond anything I could have imaged during my naive young years. It’s one of the things that scares me. Where it could take us is anyone’s guess, but it’s not likely to be a good place. It rarely is.
  • The threat posed by arrogance – People who don’t understand the limitations of the human mind are particularly dangerous. Their arrogance can lead people astray under the guise of decisiveness and strength. That’s one of the paradoxical aspects of humanity: our perceived strengths can sometimes be our greatest weaknesses.
  • The power of rationalization – Rationalization usually appears as rationality. But they’re very different things. I realize that today. When younger, I would have said I knew it. But I truly didn’t. Perhaps I still don’t perceive the differences to the degree I should.
  • The art of persuasion – My misconception about the power of rational thought limited my effectiveness in certain roles. If I’d better understood better the art of persuasion and the means to get people to think and act as you want them to, I’d been more effective and accomplished more. Every college student should read the books by Robert B. Cialdini. Unfortunately, most don’t. Why? Because most academics think the world is a more rational place than it really is.

So here I am, at the ripe age of 61, with the relatively new-found awareness of the depth of my own irrationality, determined to embrace Charlie Munger’s goal of becoming a rational person. Is it achievable? Not entirely. More completely? I don’t know. That’s the strange thing about the human mind: its power of deception is vast.

But I do think I’d have been a better decision maker. And a better CEO. And husband. And father.

If you want to be a good decision maker, Vera, be mindful of the illusion of understanding. Don’t fall for the idea that the world is more rational than it truly is.