The Lost Art of Understanding Deeply
“Peter Bevelin is one of the wisest people on the planet.”
— Nassim Taleb
Peter Bevelin wrote Seeking Wisdom, one of the books that profoundly changed my life. After reading it Peter became a hero of mine. Not only is he “one of the wisest men on the planet,” as Taleb mentions, but he’s incredibly kind and generous with his time.
When his most recent book came out, All I Want To Know Is Where I’m Going To Die So I’ll Never Go There: Buffett & Munger — A Study in Simplicity and Uncommon, Common Sense, I asked him if he’d be willing to do an interview with me so I could publish it on Farnam Street—a website dedicated to making better decisions, understanding time-tested ideas, and avoiding stupidity.
Thankfully, he agreed. The resulting wide-ranging interview is profound in its entirety.
One of the questions I asked him was about which things he’s come to understand more deeply in the past few years.
I want to annotate a few excerpts around three key ideas that emerged from his response: (1) you only need a few time-tested ideas; (2) rarely do you get an advantage for coming to conclusions quickly; and (3) checklists are no substitute for thinking.
1. You Only Need A Few Time-Tested Ideas
I don’t need hundreds of concepts, methods or tricks in my head — there are a few basic, time-filtered fundamental ones that are good enough. As Munger says, “The more basic knowledge you have the less new knowledge you have to get.” And when I look at something “new”, I try to connect it to something I already understand and if possible get a wider application of an already existing basic concept that I already have in my head.
Taking a time-filtered approach to learning is key. I talked about this in The Pot-Belly of Ignorance. We should focus our attention on understanding things that don’t change or change slowly. Farnam Street’s evolving list of mental models is a great place to start the journey. It’s not enough to just know there is a list.
Understanding that you have a time-tested idea is good but understanding the idea deeply is great. As Richard Feynman pointed out, there is a gulf between knowing the name of something and knowing something. Charlie Munger, the longtime business partner of Warren Buffett, calls this The Max Plank Test. When you understand something deeply it becomes clear.
Simplicity and clarity are things we have to work to achieve. It’s tempting to think simplicity and clarity are “free” or “easy.” They aren’t; they come from a long process of work. Simplicity almost always comes at the end, not the beginning. A good heuristic is to avoid people who offer simple solutions to problems they haven’t worked on for years.
You have to do the work. There are no shortcuts. Only people that have done the work and immersed themselves in the problems understand deeply enough to offer simple solutions. There is an old folk saying that seems apt: “The young man knows the rules, the old man knows the exceptions.” Hard work means eating the broccoli.
Clarity allows you to hone in on what’s important. Einstein’s success was powered by an ability to sift the essential from the inessential. “I soon learned,” he wrote, “to scent out what was able to lead to fundamentals and to turn aside from everything else, from the multitude of things that clutter up the mind.”
Individually these things are beneficial, however, in combination they become a modern superpower. We live in complicated world. One and one does not always equal two when you’re dealing with non-linear systems. In this case, when you combine (1) a time-tested idea and (2) understand it deeply enough to arrive at simplicity through doing the work you get a non-linear result. You get time.
Time is finite. Warren Buffett has said that “The rich invest in time, the poor invest in money.” Anything we can do to create time becomes important. Wasting time becomes something we should ruthlessly avoid. Time (and attention) are the true currency of life. Imagine you had lots of money and little time left: Would you part with the money to get the years back? The question answers itself.
One of the biggest wastes of time is poor decisions. I’ve worked in large bureaucratic organizations before. The ones where there is some sort of cultural badge of honor for “being busy.” Much of that “busy time” is spent cleaning up the problems caused by poor initial decisions.
The way out of this “busy trap” is to make better decisions. Bevelin alludes to how we should do this in his answer: deep understanding of a few basic time-tested models and methods of thought. This requires an initial investment on your part: you have to do the work. Most of us won’t do the work, because the payoff won’t come for a while. Therein lies your opportunity.
2. There are No Points for Fast Conclusions
While we live in a world that values speed, some things should take time.
How quick most of us are in drawing conclusions. For example, I am often too quick in being judgmental and forget how I myself behaved or would have behaved if put in another person’s shoes (and the importance of seeing things from many views).
The inability to see through the eyes of others costs. When we fail to see all the world through the eyes of others, we make decisions with blinders on. These blinders come back to bite you — we just don’t see it while it’s happening, only after it’s already bitten.
Framing changes everything. The ability to see through the world through the eyes of your spouse, children, boss, barista, suppliers, customers … you name it will save you a lot of time. (A great book that explains the importance of seeing through the eyes of others is called It’s Your Ship.)
When you step out of your frame you become closer to reality. If you want to understand reality, and who doesn’t really, you have to see the world from multiple perspectives or frames.
Proper framing encourages survival. Knowing how your customer, supplier or friend sees the world allows you to create win-win relationships, which are the only ones that stand the test of time. Of course this knowledge also allows you to avoid stupidity. Stupidity happens when you’re one of the blind men who can only feel one part of the elephant.
3. Checklists != Thinking
Buffett’s advice that “A checklist is no substitute for thinking.” And that sometimes it is easy to overestimate one’s competency in a) identifying or picking what the dominant or key factors are and b) evaluating them including their predictability. That I believe I need to know factor A when I really need to know B — the critical knowledge that counts in the situation with regards to what I want to achieve.
Checklists serve a purpose. They make sure we get the basics right, especially in the face of complexity, and avoid obvious sources of error that our mind might have lost at the time of the decision. Pilots use them to great effect. But in a complex domain, they can also encourage overconfidence. Knowing your “circle of competence” is thus incredibly important.
The danger comes in two variables (1) knowing to what extent you understand the variables that govern the problem, which is another way of asking yourself to what extent you’re in your circle of competence; and (2) understanding the predictability of those variables.
There are four permutations around making decisions in your circle of competence.
#1 You’re inside your circle of competence and don’t know it.
I’m not sure how you ended up here.
#2 You’re inside your circle of competence and know it.
This is the best scenario. Your focus in this circumstance should be ensuring “things haven’t changed” and understanding differences and similarities between this and other problems you’ve faced like it in the past.
Ask yourself (1) if the variables are still as predictable as you thought they were and (2) what information would cause you to change your mind.
#3 You’re outside your circle of competence and don’t know it.
Good luck. In the long-run you’re screwed, as you repeat these kinds of decisions over and over. In the short term you might get lucky.
#4 You’re outside your circle of competence and know it.
This is the second best scenario. Knowing you’re making a decision outside of your circle of competence allows you to approach it differently. You can, for instance, ask someone who has that circle of competence. At the very worst, you should focus on eliminating the outcomes you do not want.
In the end there is no substitute for doing the work and developing a deep fluency to develop and understand your circle of competence. Checklists won’t allow us to answer the next question.
When decisions go wrong we often blame the person and not the process. Inevitably we will be called upon to make decisions outside our circle of competence. While a good decision process matters more than good analysis in general, this advantage is amplified when we’re outside our circle of competence. It’s a bit of extra work to come up with a good process, but it’s an investment that will pay off. The feedback will not only allow you to get better at making decisions and understand your circle of competence, but it will improve the odds in a favorable outcome. As part of the feedback loop, I also recommend keeping a decision journal.
I highly recommend reading the entire interview with Peter Bevelin.
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