A Mental Model for Building an Inner Scorecard
Recently, I have been looking for a good article on how to build an inner scorecard and, surprisingly, I have not been able to really nail one down. But, as I was reading Charlie Munger: The Complete Investor by Tren Griffin, an analogous framework developed from economic moats to help build a personal moat for sustained individual growth.
To help us build the analogy, let’s review the five primary elements of an economic moat as outlined by Griffin:
- Supply-side Economies of Scale: When a company begins to produce a larger volume, the fixes costs per unit decrease with scale. Basically, a company is able to become more efficient on utilizing fixed cost resources to produce large scale.
- Demand-side Economies of Scale: Also know as “network effects”, this is a theory that a business’s product becomes more valuable or likable as more people use it. Think of the telephone or Facebook; as more people have phones or use Facebook, the experience is much better. This can be attributed to good marketing, excellent product design or integration into an ecosystem of products.
- Brand: A business’s reputation that is built over years can create a barrier to other businesses trying to steal customers with similar products. Brands like Coke, one that is associated with people being happy around the world, actually invoke that feeling when their brand is mentioned related to their product.
- Regulation: Sometimes a business can benefit by government regulations to protect “natural monopolies”. In order for electric utility companies to maximize guaranteed profits under the regulatory framework, they must execute their operational plan with extreme discipline.
- Patent & Intellectual Property: When a business has made innovative breakthroughs and moves the needle within the industry, they will solidify their proven accomplishments with patents to sustain their competitive advantage.
“Your time is limited, so don’t waste it living someone else’s life. Don’t be trapped by dogma — which is living with the results of other people’s thinking. Don’t let the noise of others’ opinions drown out your own inner voice. And most important, have the courage to follow your heart and intuition.” — Steve Jobs
Let’s see if we can extrapolate on these economic characteristics of a strong business to those of an example inner scorecard:
- Efficiency: Focus on a few things rather than trying to do too many. It helps to work on smaller ideas and build upon them versus trying to tackle the big ones. And, focusing on the small ideas one at a time give us an opportunity for more frequent accomplishments.
- Likability: Judgement is the leading vice out there now with so many outlets to offer up your opinions (likes, favorites, comments, etc.). Reserve judgement about anything or anyone and simply stay curious. When conflicted on what to say, ask a question to learn something new and engage a pleasant conversation.
- Reputation: Building a reputation takes a long time. When tied with living with a discipline of virtues and integrity, you will no doubt be consistent and your reputation will build positively. So, be consistent. And, consistently use Ben Franklin’s 13 Virtues in your daily life.
- Extreme Discipline: Discipline comes from occupying yourself with activities you choose to take on and control. When we are motivated by desires or fears, we have let the outer scorecard come into influence. You can probably bore yourself on the amount of posts there are about getting up early, but following Jocko Willink is a good motivational reminder to begin your day with the discipline of securing an early morning accomplishment.
- Accomplishments: Focusing on actually accomplishing goals — small or large — is a key component of the inner scorecard. Without actually having something of value to show for yourself, you are just another bozo. Make sure that you are building towards something, otherwise, you are most likely simply living in someone else’s agenda.
These seem straightforward and very obvious, but it is the practice of them, the recognition when we forget, and the reaction to gently bring us back to these core principles that is the key. It is a process that does not show immediate results and will take time to reap the benefits.
“It takes 20 years to build a reputation and five minutes to ruin it. If you think about that, you’ll do things differently.” — Warren Buffett