Thinking in Systems

I struggle to give a good summary of this book. My take is how to see systems (a very generic word) in the big picture as most systems are too complex to understand how fully work (economy, stock market, etc). In general, once we see the relationship between structure and behaviour, we can start to understand the system and modify it. You can’t know a system just by its parts. Look for the interconnections of those parts.

A system is formed by “stock” (water in a reservoir, mineral deposits, etc) and the stock changes overtime due to the actions of “flows” (rain = inflow, evaporation = outflow, mining = outflow, etc) Inflow increases the stock. Outflow decreases the stock. If the rate of inflow and outflow is identical, you have a system in a state of dynamic equilibrium. You want to see the systems behaviour based on time. Generally, stocks change slowly compared with the rate of change of in flows. So stocks act like a “buffer” in systems. A feedback loop is formed when changes in a stock affect the flows into or out of that same stock. You have two types of feedback loops: balancing (seek stability and resistance to change) and amplifying/reinforcing (can cause healthy growth or destruction) (ie: learning piano, the more I practice, the more I learn, the more keep practicing and so on). Doubling time = 70/growth rate (It takes 14 years to double your money in a back at a rate of 5%) In real systems, a single stock can be influenced by several types of feedback loops (with different directions and strengths)

The information delivered by a feedback loop can only affect future behaviour (can’t have an impact fast enough to correct the behaviour triggered the current feedback). And there will always be delays in responding. As well, because systems often have competing feedback loops working at the same time, the loop that dominates the system will determine the behaviour. You can have shifting dominance of feedback loops (dead rate vs birth rate)

System dynamics models explore possible futures and ask “what if” questions. Testing the value of a model: 1) Are the driving factors likely to unfold this way? 2) If they did, would the system react this way? 3) What is driving the driving factors?

Dynamic systems studies are designed to explore what would happen if a number of driving factors unfold in a range of different ways.

Systems largely cause their own behaviour. Systems with similar feedback structures produce similar dynamic behaviours, even if the outward appearance is not similar (population vs industrial economy, coffee cup cooling vs radioactivity decay)

A delay in a balancing feedback loop makes a system likely to oscillate (ie: response of orders and deliveries in a car dealer). Delays are pervasive and are strong determinants of behaviour. Changing the length of a delay may (or nor) make a large change in the behaviour of a system.

Examples of two-stock systems:

  • A renewable stock (capital) constrained by a non-renewable stock (oil): oil company: Non-renewable resources are stock-limited. The entire stock (oil) is available at once and can be extracted at any rate (limited by extraction capital). The faster the extraction rate, the shorted the lifetime of the resource.
  • A renewable stock (capital) constrained by a renewable stock (fish): fishing company: Renewable resources are flow-limited. They can support extraction indefinitely but only at a finite flow rate equal to the regeneration rate;

No-physical system can grow forever in a finite environment.

— Part 2

  • 3) Why systems work so well?

Resilience: + dynamic -> learn. – sacrifice resilience for stability

Delf-organization: capability to make its own structure more complex. Produces heterogeneous + unpredictability

Hierarchy: evolve from bottom up. The top serves the purpose of the lower layers.

  • 4) Why systems surprise us?

World is greater than our knowledge. We can make only models in our heads (never exact to reality)

Behaviour = performance over time. System structure is the source of behavior.

The non-linear relationships: This is something we struggle to deal with (and to notice)

We need to create boundaries so we can ask question

What’s the limiting factor: there is always a limit to growth

Bounded rationality may not lead to the better decision that improve the system (this kills the idea of the market takes care by itself for the best – there is always somebody that makes a killing and can’t be good)

  • 5) System traps and opportunities?

Policy resistance (drugs): Seek mutual satisfactory for all goals from all parts

Tragedy of the commons (immigration): Educate users to understand consequences of abuse. Privatise or regulate.

Drift to low performance: Enforce standards by best actual performance.

Escalation (violence/war – nuclear heads): Not getting involve in first place or refuse to complete.

Success to the successful: Diversification: try something else. Limit the winner prize.

??? Solution to a systemic problem reduces (or disguises) the symptoms, but does nothing to solve the underlying problem: Focus on long-term restructuring instead of short-term relief.

?? Rule beating: perverse behavior that gives appearance of obeying the rules or achieving the goals, but that actually distorts the system. Design or redesign rules based on feedback, always aiming to achieve of the goal of the rule.

?? Seeking the wrong goal (GNP is not a good goal)

— Part 3

  • 6) Leverage points: Places to intervene

MIT’s Jay Forrester: The source of all problems is growth (populations and economic) Leverage points frequently are not intuitive

Numbers: constants and parameters such as subsidies, taxes, standards, etc

Buffers: the size of stabilizing stocks relative to their flows.

Stock-and-flow-structures: Physical systems and their nodes of intersection (energy conservation: straight out bent pipes and enlarge the too small ones)

Delays: the length of time relative to the rates of system changes.

Balancing Feedback loops: the strength of the feedbacks relative to the impacts they are trying to correct. Big mistake is to remove these “emergency response mechanisms because they are not used often and they look costly (ie: emergency cooling system in nuclear plant)

Reinforcing feedback loops: The strength of the gain of driving loops

Information flows: The structure of who does and doesn’t have access to information

Rules: Incentives, punishments, constraints

Self-Organization: The power to add, change or evolve system structure.

Goals: The purpose or function of the system.

Paradigms: The mindset out of which the system (its goals, structure, rules, delays, parameters, etc) arises

Transcending paradigms: Keep oneself unattached in the arena of paradigms, to stay flexible

  • 7) Living in a world of systems

Getting the behaviour of the system forces you to focus on facts, not theories.

Get your models outside of your head: discuss with others, this creates mental flexibility.

Honor, respect and distribute information: Information is power.

Keep your language as concrete, meaningful and truthful as possible.

Pay attention to what is important, not just what is quantifiable: how you measure justice, democracy, freedom, etc?

Make feedback policies for feedback systems: Jimmy Carter examples: oil tax depending on the import levels (more import, more tax), Mexico immigration (help Mexico to improve society instead of creating walls and putting more security in the border)

Improve a system as a whole (hierarchies exist to serve the bottom layer, not the top)

Listen to the Wisdom of the System (before trying to make any change): Example, Aid worker trying to improve things in Guatemala.

Locate and apply responsibility in the system.

Stay humble (you will make mistakes), stay a learner

Complexity is expected: it is part of evolution

Expand the time horizons: ie Native Americans think of the consequences for the 7th generation. We think too short-term

Seeing systems as a whole requires more than interdisciplinary. We need to learn and communicate

Dont weight the bad news more heavily than the good ones. Keep the standards absolute.

Born To Run

I can’t run for the last 4 months so reading this book has been a bit annoying… but increases my desire to get to it.

To be honest I didnt have a clue about the book apart of running. It started to get hooked slowly and at the end, I was eager to know if the race was going to happen, who was going to race and how was going to finish.

The center of the book is about the Tarahumara and their tradition of long distance running with basic kit (sandals) and frugal diet (mainly based on corn and beans). Thinking coldly, all looks a bit too romantic but it is a hard life.

Things I learned:

Tarahumara consume a lot fo Chia seeds. It seems it easy to grow (other) but I think I would need a big space to produce enough quantity for one year consumption?

Benefits of barefoot running (Daniel Liberman) and it seems that endurance running was the key difference with Neanderthals when the ice age ended and things got warmer and it was the only way to hunt in the savanna: outlasting your prey. Arthur Lydiard is the father of modern running training. Supports barefoot running. It interesting the data showing the increase of injuries with the advance of running shoes technologies… And the history about Nike and Lydiard and Bowerman (his mentor). Still getting to that level you need to make a slow transition. Need to research about this.

The crazy stories about Jenn Shelton and Billy. Party ultrahard and then ultrarun: epic.

Scott Jurek diet is vegan: vegetables, fruits, grains and legumes. recipes.

Caballo Blanco died at 58 running.

Be Useful

Completed this work today. Quick summary from the author himself: “Work works”. “Pain means growth”

I am not a fan of famous people as I think most of them are overrated. Although I will always say his movies were very important as a child/teenager: Terminator 2, Conan, Predator, Commando. They are my favourites. But it seems to me this book was about the person so gave it a go.

He starts the book with the end of his political career due to cheating to his wife and the 2008 crisis. That made him to start again…

He shows the seven rules he is using in his life and I think the order is important because they start with yourself and at the end is more about others. It builds so you can “Be useful”.

1) Have a clear vision : You dont have to have everything worked out but have a overall goal. It’s like, why are you going to the gym? What’s your mission? He had his vision very early in life, but still it works at any stage. Make the space to get that vision: just walking can be very good. And to be honest, I have found going for a walk quite revealing lately, although I just talk to myself, it feels good to think aloud. And when you look at the mirror, is what you see what you want to be?

    2) Never thing small: If you have an idea, go all in (no plan-b): “Wenn schon, denn schon” Ignore the naysayers, it is your dream, your life, your growth (whatever is the outcome). Seneca quote: “If you dont go through struggle, you don’t have a life”. There are several Stoics quote a long the book and that surprised me.

    3) Work your ass off: That works 100% of the time. He says one the bases of success is repetition, repetition, repetition so it makes perfect. Embrace the boring stuff (fundamentals) and do often. Pain is temporary, the outcome is permanent. And you need to follow up (something the reminds me of a Russian saying: Trust but check). And you have time for it, make the numbers!

    4) Sell, sell, sell: This makes sense obviously for business but personally, I need to do it in dating too. You can be a great catch, but if nobody knows about it, then…. So people need to know you and you need to know “who” is really the customer. And be yourself, own your (hi)story, for good and for bad. And in business , let them underestimate you, use it in your favor.

    5) Shift gears: This is about to learn to adapt to changing situations. From learning from mistakes to change your mind when required. And learn to find the positive in shit moments. This is “amor fati” as defined by Stoics. Complaining is too easy and doesn’t get you anywhere. You learn from hardship. If you win the lottery, you will not look at the money as if you had build a successful business. Reframe failure, it is part of the learning process (ie: WD40 – there were 39 failures before…) Break the rules, make things better and not because they are that way. Risk is relative, really, what do you have to lose?

    6) Shut your mouth and open your mind. This is about learning, always be open to learn (from anybody, any moment) So learn by listening. Be curious, as the “how” and “why”. Be that sponge. And with all that, put it in a good cause. It is interesting he criticises the current education systems as it seems you must have a degree to be successful and be rich. Firstly, you could have a good life being a baker that is fulfilling and do something good for the community.

    7) Break the mirrors: And this is where you destroy the ego (you are not self-made) because from most of the other rules, they look very individual but then, you get here and you realize is not about you. It is about giving back so everybody wins. Can be small or big, depends on your circumstances. So be useful.

    Leaders Eat Last

    I bought this ebook some months ago as a recommendation and then after watching a video (need to finish it) of the author, I went to the book.

    The main source of examples in the book are the military where he shows the success is based on people believing and action in a bigger goal than themselve: the mission and your team mates.

    As well, he put example of a few companies that have built a personality/culture where people feel identified and they survive the worst moments. And there are examples of the opposite, where companies like Goldman Sachs, GE, etc have a culture of immediate profit, individual success at any cost, that are negative in the long run.

    He mentions dopamine and oxytocin as hormones impacting our behaviour. Dopamine is the quick/easy hit satisfaction (watching youtuvideos….) and oxytocin is the making you happy with social interactions. In our modern world, dopamine is not the choice and oxytocin should be the long term aim.

    As well, he takes the AA as an example where people success if follow the rules, and the most important one is the last rule, to be a leader/mentor of another person.

    One of the disconnections we have at work is the abstract challenge (we want to be number 1, we want to be the best, etc) that doesnt really resonate with most people and doesnt create any connection. Without that connection, that meaning, you dont fight. So that put in context in another part of the book, that most of the times, our best memories at work are moments of straggle (that tough project, that bug at 2am, etc). So you go through that if you have a connection with the company, culture and people (that releases oxytocin). If not, you will not last long there.

    Another part talks about the destructive abundance. We live in a world where we have everything…. so we want it all. This part gives away some leadership leason:

    1- So goes the culture, so goes the company

    2- So goes the leader, so goes the culture

    3- Integrity matters

    4- Friends matters

    5- lead the people, not the numbers.

    In my personal view, at the end all looks very nice, but most of cases, it seems the solution or change needs to come from the top and can be overwhelming. But still we can “lead by example” in our small part. You can lose your job but you can’t lose your integrity.

    Good book. Again, I should read it again and take notes.

    Four Thousand Weeks

    That’s the amount of weeks you have if you live approximately 77-78 years. And this book is about time management those weeks. It is not the typical book about techniques to make more in the same amount of time but the psychological and philosophical reasons why we want to make more and how to live with that.

    We live in a world where everything, even time is a commodity and you want to squeeze the last drop of it. That goes deep into our society. The author has tried all possible techniques to be super productive but at the end, he is always defeated at some point.

    So you have a limited time, you have to choose, and not choosing is what makes us to try to cramp more and more things. So it is a lost battle. This reminds me the concept of how many f* you have.

    As well, we are always thinking in the future. Being more present helps you to get things in better perspective. The time we have in Earth is ridiculous compared with a stone or the universe so that should give you the freedom (instead of the fear of not having enough) of focusing in your correct things. We need meaningfulness and connection. And something I am reading/listening quite often, we need action (and not hopping).

    Questions offered in the book:

    1- Where in your life or your work are you currently pursuing comfort, when what’s called for is a little discomfort?

    — That hit me. Since my last move, I feel more comfortable because I have some discomfort/challenges. Before I felt uncomfortable and in theory “I have (nearly) all”

    2- Are you holding yourself to , and judging yourself by, standards of productivity or performance that are impossible to meet?

    — Somehow yes, I have so many books to read and so many things I would like to learn, so many certifications to get. Still I am pretty sure I would never be happy if achieved all that.

    3- In what ways have you yet to accept the fact that you are who you are, not the person you think you ought to be?

    — That helped, since I started to accept me and loving me as I am, I drop a lot of emotional weight. And to be honest, just telling me that I can do a hard route when climbing, pushes me to send it and improve. But this is not done, still lot to do, you know, dating….

    4- In which areas of life are you still holding back until you feel like you know what your are doing?

    — The winner is dating/relationships.

    5- How would you spend your days differently if you didnt care so much about seeing your actions reaching fruition?

    — I would like to live in the country side. Like this. Work in the fields and technology, and having a partner to share that life.

    It is not hopping, it is doing.

    I leave a lot of things away, I need to read it again.

    Blueprint: Build a bulletproof body

    I want to get fitter so I try to learn from experts who have proved themselves. And this is a good example. The author has done some amazing things. Quite jealous to be honest.

    For me, I just want to get stronger at climbing and get back to (proper) running, all without (more) injuries. I have read before about the different cycles that top athletes so it was interesting to read about it directly and all the science behind that. I know I need to add (more) strength training and endurance. I should create a proper work plan for each week, a bit of less climbing but better prepared? But I am not clear how to use the knowledge from the book to climbing, when, at the end of day, you want to climb hard every week, as I am not going to compete or anything like that. Or saying in a different, how to handle your ego and jealousy.

    Season:

    • Recover Mesocycle: low volume, low intensity. This is the chapter I liked the most from the book.

    — 2 strength-based rehab routines per week

    — 2 endurance-based rehab routines per week at low intensity and no more than 45 minutes.

    — 2 days rest

    • Base Mesocycle: increase volume, low intensity

    — 3 strength-based rehab routines per week

    — 4 low-intensity endurance-based rehab routines per week in zone 2 (aerobic).

    — 1 strongman strength session

    — 1 day rest

    • Build Mesocycle: reduce a bit volume, increase intensity

    — 3 strength and speed sessions per week (force-velocity curve)

    — 3 low and long (10km) open water swims operating in zone 2 (aerobic).

    — 3 high-intensity interval sessions in zone 4-5 (anaerobic) (separated by 48h)

    — 1 day rest

    • Peak Mesocycle: reduce volume, increase intensity:

    — 2 strength and speed sessions per week for maintenance of fitness

    — 2 low and long (5km) open water swims operating in zone 2 (aerobic). Focus in tecnique.

    — 3 high-intensity interval sessions in zone 4-5 (anaerobic)

    — 2 day rest

    Shoulder pain: Practice hangs from a bar. That’s what our “ancestors” did… Simple

    Eudaimonia: fulfilment. It’s different from happiness since it openly accepts that pain and struggling should form part of the process. Happiness without fulfilment is a failure.

    The greater the difficulty, the more glory in surmouting it. Skilful pilots gain their reputation from storms and tempests

    Epictetus

    Askesis: healthy hardship. “The comfort zone is the great enemy to creativity, moving beyond it necessitates intuition, which in turn configures new perspectives and conquers fears” Dan Stevens.

    Why we adventure to combat spiritual decay:

    A man has achieved his present position by being the most aggressive and enterprising creature on earth….. The comfortable life lowers a man’s resistance… the comfortable life causes spiritual decay

    From 1956 book “The Outsider” by Colin Wilson:

    Narconomics

    Very interesting book. It explains the mechanics of a drug cartel from the point of view of economics. I didnt think issues like supply chain, HR/PR, competition/merges, offshoring, R&D, online business, diversification, etc were part of drug cartel, as you only think of those as part of a licit business. There were many things that I didn’t know like the birth of “legal highs” in NZ (and Matt Bowden)

    The goal is to fully understand the “business” because the current laws/actions, etc against drugs are clearly not working. So this way you can really offer a different approach to tackle the issue. You are not going to destroy them 100%. Most of the actions are at the source of the drug business: growing the plant (decrease in growing area causes minimum increase in retail price). But the book shows that is not effective and prevention (done in the consumer’s land: like rehab, education in jails, etc) is much more productive (for the same investment). As well as legalization (ie marijuana) as that brings control (“safer drugs”, tax revenue, etc) and put out of the market the dealers/cartels.

    This is a difficult pill to swallow (punt intended) for governments and citizens but the writing is in the wall.

    The Three Body Problem

    This book was recommended by an ex-college and really enjoyed it. I didnt have any background of the book and it was interesting that there is actually a three body problem. I struggled a bit about the science at the end of the book but I was hooked from nearly the beginning.

    In general, I am surprised that this book wasn’t censured in China but still I am quite happy to read something coming from China. Taking into account that I meanly read books from Western countries (mainly USA and UK/EU) that is a small portion of the world.

    Range: How Generalists Triumph in a Specialized World

    I finished this ebook yesterday. With ebooks can’t hardly take notes so in this case was a pitty but as well a bit of a relief.

    Really good and better than I expected. As the title says, it is about having range, being generalist and not ultra specialized.

    It gives examples where specialized (at early age) is good because it is inside a domain of well-known rules and immediate feedback like golf (Tiger Woods) and chess. It was int

    But provide example of exceptional sports figures (Federer) who didnt commit to one sport to late age.

    And that affects not only to sport but to your career and the research. Teams with members from different backgrounds and knowledge produce more than specialized team. It provides examples from investing to solving science problems. So it is quite shocking.

    Although an early specialization will give you a head start, the general view will win in the long run. It is not bad to be very good at something, but trying different things can bring extra benefits. That’s the summary of the book.

    Personally, I buy it. I like networks, but I have interests in linux, automation, hardware, baking, etc. I will never win a Nobel prize (and I dont need it) but I think it gives me from options at the end of the day. You just need to see the job descriptions where they ask for everything.

    The Psychology of Money

    Really good book. Easy to digest and even easier to take home. And need to watch this video too. And funny enough, I was watching a bit this video too (that is quite related – interesting the investing fund points, I need to review)

    I highlighted a lot of sentences in the book and I think the summary below is too long but I still take the following as basic: save, get room from error, define what you want, get your freedom.

    0- Intro

    I think he is the summary of the whole book. He was a gast station attendant, janitor and investor who was over 8m$ worth when he died.

    Financial success is not a hard science. it is a soft skill, where how you behave is more important than what you know.

    Finance is overwhelmingly taught as a math-based field. But knowing what to do tells you nothing about what happens in your head when you try to do it.

    We think Finance follows laws like Physics but it is actually guide by people’s behaviour. And that follows to next point, how I behave may be sane for me but crazy to you.

    1- No One’s Crazy

    It is easy to say a investment decision was good/bad looking back. We make money decisions based on the information we have in the moment and plugged into the unique mental model of how the world works at that moment. So yes, it can look crazy. And investing for the masses, it is actually something very new… so we are newbies, we like it or not.

    Some lessons have to be experienced before they can be understood. So that can explain why looks like crazy if you haven’t gone through it.

    2 – Luck and Risk

    Bill Gates won the lottery attending one of the few schools in the world with a computer.. his friend Kent Evans died in a mountaineering accident. Both sides of the same coin.

    Robert Shiller (Economy Nobel Prize): What do you want to know about investing that we can’t know? The exact role of luck in successful outcomes.

    So we always read about the successful people/companies (extreme cases). What proportion of these outcomes were caused by actions that are repeatable vs the role of random risk and luck? So the questions is how to identify luck and skill.

    So focus less on specific individuals and case studies and more on broad patterns.

    To deal with failure, arrange your financial life in a way that those situations will not wipe you out you can keep playing until the odds fall in your side (room for error…) And be able to forgive yourself when judging failures.

    Nothing is as good as bad as it seems

    3- Never Enough

    Enough: “Yes, but I have something he will never have… enough.”

    I think that is another key about “wealth”.

    The hardest financial skill is getting the goalpost to stop moving.

    Social comparison is the problem here.

    Enough is not too little: is realizing that the opposite, an insatiable appetite for more, will make you no good.

    There are many things never worth risking

    4-Confounding Compounding

    There are over 2000 books written about Warren Buffer. But his success came from investing for over 75 years… His secret is time. That’s how compounding works.

    Compounding is not intuitive so it is easy to ignore.

    So good investment is about earning pretty good returns for the longest period of time.

    5- Getting Wealthy vs Staying Wealthy

    Million ways to get wealthy. But just one to stay wealthy: some combination of frugality and paranoia (a.k.a survival). So getting money and keeping money are two totally different skills.

    I like the note about Jesse Livermore (I read that book some time ago). He made the biggest fortune ever during the crash of 1929.

    And another quote from Nassim Taleb: Having an edge and surviving are two different things: the first requires the second. You need to avoid ruin. At all costs.

    Be financially unbreakable: you will get the biggest returns, because you will be able to stick around long enough for compounding to run its magic.

    The most important part of every plan is to plan on the plan not going according to plan (a.k.a backup plan or room for error). A plan is only useful if it can survive reality. And a future filled with unknowns is everybody’s reality. So it is anything that lets you live happily with a range of outcomes.

    Conservative is avoiding a certain level of risk. Room of error or margin of safety is raising the odds of success at a given level of risk by increasing your chances of survival. This is something I think I understand but I need some clear examples in my head.

    Optimistic about the future but paranoid about what will prevent you from getting to the future is vital: Being pessimistic is too easy.

    6- Tails, You Win.

    Another interesting notes about Heinz Berggruen. The great investors bought vast quantities of art. A subset of the collections turned out to be great investments, and they were held for a sufficiently long period of time to allow the portfolio return to converge on the return of the best elements. That’s all that happens.

    Anything that is huge, profitable, famous or influential, is the result of a tail event (Walt Disney, Brad Pitt winning an award, Venture Capitals, AWS, iPhone, MicroSoft, etc). Tails drive everything.

    Same in different ways: Few things account for most results (I think this is the easiest one to understand)

    Military genius based on Napoleon: The man who can do the average thing when all those around him are going crazy. So that applied to investing is, most of the time today is not that important. What matters are those number of days where everybody is going crazy… so what do you do???

    George Soros: It is not whether you are right or wrong that’s important, but how much money you make when you are right and how much you lose when you are wrong. You can be wrong halt of the time and still make a fortune.

    7- Freedom

    Controlling your time is the highest dividend money pays: control over doing what you want, when you want, with the people you want to, is the broadest lifestyle variable that makes people happy. Using your money to buy time and options has a lifestyle benefit that few luxury good can compete with. Most stuff we buy, means giving away most control of our time.

    Most workforce today are not “labored” so we need to use our head, and it is not that easy to switch off, so we are constantly working with our heads, and then we are losing control over our time.

    8- Man in the Car Paradox

    No one is impressed with your possessions as much as you are. Humility, kindness and empathy will bring you more respect than a Ferrari.

    9- Wealth is What You Don’t See

    Spending money to show off, it is the fastest way to have less money. Wealth is an option not yet taken to buy something later. It requires self-control. And because it is hidden, we have few models to learn from. It is much easier to follow the instagram show-off.

    10- Save Money

    For me this is they key of everything, without savings few things you can do.

    Building wealth is more related to your saving rate than income or investment returns.

    The value of wealth is relative to what you need: high savings rate -> having lower expenses.

    One of the most powerful ways to increase your savings is not to raise your income, it is to raise your humility: what you need is just what sits below you ego. Dont care about what others thing about you (and not just about money!)

    You spend less, if you desire less, then you care less about others -> so that goes back to the title of the book… money relies more on psychology than finance.

    You dont need any specific reason to save (car, house, holidays, etc): Savings without a spending goal gives you options and flexibility: ability to wait and opportunity to act = time for thinking. And that flexibility and control over your time is an unseen return on wealth. Savings at 0% earn rate can give you more in the sense of taking a lower pay and more satisfying job than you can think.

    Intelligence is no longer a sustainable advantage (software eats the world). Competitive advantages tilt toward nuanced and soft skills: flexibility is a main one. Again, it is being able to wait for a good opportunity (career, investment, etc). So having more control over your time and options is one of the most valuable currencies in the world: Just Save it.

    11- Reasonable -> Rational

    Aiming to be mostly reasonable works better than trying to be coldly rational. Reasonable is more realistic and you have a better chance of sticking with it for the long run, which is what matters at investing. Think of the fever. It is beneficial, but we fight it because it hurts! Minimizing future regret is hard to rationalize on paper but easy to justify in real life.

    12- Surprise!

    History is the study of change, is not a map of the future.

    Scott Sagan: Things that have never happened before happen all the time.

    Investing is a hard science. People making imperfect decisions with limited information.

    The majority of what’s happening at any given moment in the global economy can be tied back to a handful of past events that were nearly impossible to predict.

    History can be a misleading guide to the future of the economy and investment because it doesnt take into account the structural changes of today. For example, when did venture capital start? Before there was only (if lucky) risk aversed bankers.

    Historians are not prophets. Things change.

    13- Room for Error

    The most important part of every plan is planning on your plan not going according to plan. This similar to an earlier point.

    Kevin Lewis from Bringing Down the House: We have enough money to withstand any swings of bad luck (so you can fight another day)

    Benjamin Graham: The purpose o the margin of safety is to render the forecast unnecessary.

    Unknowns are always part of life.

    Having a gap between what you can technically endure versus what you can emotionally endure is an overlooked version of room for error. Use room for error when estimating your future returns.

    Charlie Munger: The best way to achieve felicity is to aim low. (and a paper)

    Nassim Taleb: You can be risk loving and yet completely averse to ruin. If you have 95% chance to be right, be sure that the other 5% is not going to wipe you out.

    Back to an earlier chapter, it is important to safe for the sake of it, for the unknowns.

    14- You’ll Change

    Long-term planning is harder than it seems because people’s goals and desires change over time. We are poor forecasters of our future selves. We really underestimate how much we will change.

    So avoid the extreme ends of financial planning (expending everything vs saving everything)

    Accept the reality of change and move on as soon as possible.

    Charlie Munger first rule of compounding is to never interrupt it unnecessarily.

    End of History Illusion: is a psychological illusion in which individuals of all ages believe that they have experienced significant personal growth and changes in tastes up to the present moment, but will not substantially grow or mature in the future.[1] Despite recognizing that their perceptions have evolved, individuals predict that their perceptions will remain roughly the same in the future.

    Daniel Kahneman: “I have no sunk costs”. book

    15- Nothing’s Free

    Everything has a price even if you don’t see it.

    You usually get what you pay for. Same for markets. The volatility/uncertainty fee (the price of returns) is the cost of admission to get returns greater than low-fee investments (ie: money in the bank, etc). Ticket to Disneyland vs local fair. You need to convince yourself the market’s fee is worth it. So find the price, then pay it.

    16- You & Me

    This relates to point 1 “Nobody is crazy”. This relates to economy bubbles too. The assets have one rational prize in a world where investors have different goals and time horizons. And that can trigger bubbles, when the momentum of short-term returns attracts enough money that the makeup of investors shifts from mostly long term to mostly short term. Then the process feeds itself on and on until it can’t be maintained. So find which game you are playing.

    17- The Seduction of Pessimism

    Optimism is the best bet for most people because the world tends to get better for most people most of the time.

    Optimism is a belief that the odds of a good outcome are in your favor over time, even when there will be setbacks along the way.

    But Pessimism sounds smarter and gets more attention. why?

    Based on Daniel Kahneman: It is the asymmetric aversion to loss in the evolution: losses loom larger than gains. Organisms that treat threats as more urgent than opportunities have a better chance to survive and reproduce.

    And again relates to point 1 “nobody’s crazy”.

    As well, bad news about economy can affects everybody so you pay attention.

    Progress happens too slowly to notice but setbacks happen too quickly to ignore.

    And finally, expecting things to be bad is the best way to be pleasantly surprised when they are not.

    18- When You’ll Believe Anything

    Stories are the most powerful force in the economy. Imagine venture capitalist that put money in things dont exist…. Another example in 2009, when we stopped believing house prices would keep rising.

    The more you want something to be true, the more likely you are to believe a story that overestimates the odds of it being true. For protecting you about that, you need a bigger gap between what you want to be true and what you need to be true to have an acceptable outcome.

    Everyone has an incomplete view of the world. But we form a complete narrative to fill the gapgs.

    Daniel Kahneman: The ability to explain the past, gives us the illusion that the world is understandable. It gives the illusion that the world makes sense, even when it doesnt. And that produces big mistakes.

    My Summary

    To be h