Please enjoy this transcript of my interview with Shane Parrish (@ShaneAParrish), the entrepreneur and wisdom seeker behind Farnam Street and the host of The Knowledge Project podcast, where he focuses on mastering the best of what other people have already figured out. Shane’s popular online course, Decision by Design, has helped thousands of executives, leaders, and managers around the world learn the repeatable behaviors that improve results. His work has been featured in nearly every major publication, including The New York Times, The Wall Street Journal, and Forbes.
Shane is the author of Clear Thinking: Turning Ordinary Moments into Extraordinary Results.
Transcripts may contain a few typos. With many episodes lasting 2+ hours, it can be difficult to catch minor errors. Enjoy!
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Tim Ferriss: So Shane, there are a million and one places we could start. So my understanding is you were a straight D student till grade 10, if I’m getting that right. And maybe this is a segue, maybe it isn’t, but why was the book The Stopwatch Gang important to you and could you provide some context for how that appeared in your life?
Shane Parrish: So my parents were in the military. I lived with my mom and my stepfather, my biological father lived somewhere else, and we moved every year. So every year I had a new school. I think the first school that I went to two years in a row was grade 10 and 11, to put things in context, same school, two years in a row. For grade eight, I decided I was going to live with my biological father. So I moved across the country, lived with him, and for various reasons, this was a disaster. Somebody who really didn’t have a lot of experience parenting me growing up all of a sudden has a teenager, my stepmother all of a sudden inheriting a teenager, living in the middle of nowhere. I’m already a borderline delinquent. I almost got kicked out of school in grade seven for skipping school. I skipped school for seven or eight weeks, had to go see a child psychologist to make sure, as a condition of not being expelled, that there was nothing seriously wrong with me.
And so in grade eight, I just started getting in more and more trouble. I started hanging around the wrong people. Your environment sort of determines your behavior a lot, not only your physical environment, but the people you surround yourself with. And it’s just the slow escalation. And if somebody said, “Hey, you’re going to go break into somebody’s house,” you’d never do it. But if you start with vandalism, and you start staying out late, and you start doing things that you’re not supposed to, all of a sudden vandalism or breaking into a house is the next logical step.
So we’re doing this book report for grade eight, and I go to the library, and I’m not interested in reading, I’m not even interested in doing my schoolwork at all. And I just happened to land in this true crime section at this elementary school, which is like four books long. And there’s one book called The Stopwatch Gang. And I was like, what’s this about? I pick it up and it’s about a bunch of bank robbers. And I was like, oh, this is awesome. This is my kind of book. Why has nobody shown me that you can read about this stuff? So I get home, and I’m reading this book, and a few days later, my friends knock on the door. And we all had dirt bikes. So we’re all living on 20 acres. You’re commuting by dirt bike to your friend’s house. They knock on the door —
Tim Ferriss: And where are you at this point in time?
Shane Parrish: This is in Carp, Ontario, Canada.
Tim Ferriss: Got it. Okay. Just to place it for people.
Shane Parrish: So they knock on the door, and they’re like, “Come out with us and let’s have some fun.” And I was one chapter away from the end, and I don’t know, you’ve probably read a really good book, and you want nothing to interrupt you in that moment. You’re like, no, the world doesn’t exist. I need to finish this book. There’s nothing more important. So I lied because if I told them I was reading a book that would go over a lead balloon, but I was like, “I’m not really feeling that well tonight. I’m going to stay in. I’m sorry about that.” And so they go out, and they end up breaking into somebody’s house and getting caught and a whole bunch of bad things happened as a result of that. And if I was there, I probably would’ve been doing that with them, but luckily I wasn’t there.
I didn’t do that with them. I found out about what happened, and this is a chance event. This wasn’t me thinking about anything and saying no to this thing. It was just pure 100 percent luck. But I sort of got a little bit scared straight after that, not in terms of “I’m going to devote myself to schoolwork and get better grades,” but straight in the sense of “I don’t want to do this. I don’t want to get into this trouble.” And then from that moment on, books sort of became an outlet for me to live in an imaginary world and to escape the world I was actually in and to sort of be part of something else. Have you ever had a book do that to you?
Tim Ferriss: Oh, for sure. I literally, yesterday, this is not something I should probably advertise broadly. I’m not proud of it, but I was listening to the second of three books in this trilogy by Joe Abercrombie, and I had six minutes left in this very, very good chapter, and my mom had arrived a little bit early to go to dinner. And so I was banking on having that extra time before the pickup to finish this chapter. And it bothered me so much that I got up, I said I really had to go to the bathroom, and I went to the bathroom, and I just walked around outside the restaurant for six minutes and finished this chapter in the audiobook. That was last night. So yes, I definitely know the feeling.
Shane Parrish: That’s awesome. And you’re like, “How dare you show up early?”
Tim Ferriss: Yeah, which is not the tone I want to take with my mom, but I was like, oh, okay, yeah, I forgot my OCD as it applies to time should not be imposed on all other people, so that’s okay. Took a little loitering meander as a bathroom break at dinner. That’s okay. Got it done.
Shane Parrish: And then in grade nine, my grade nine teacher wrote in my report card that “Shane would be lucky to graduate from high school.”
Tim Ferriss: So what happened? A couple of observations. Number one, if you had been convicted of, I’m not sure what the legal equivalent is, something like a felony or whatever that was with your friends, that certainly, I would imagine, would’ve complicated later work in government on some level.
Shane Parrish: Oh, totally.
Tim Ferriss: Or it could have. What were the inflection points that led to you being employable, especially at an intelligence agency, in 2001?
Shane Parrish: Okay, so that is also a crazy story because intelligence agencies, they vet people up, down. They interviewed neighbors, they interviewed teachers, they interviewed the references that I put down. They talked to people that I didn’t put down. They want to know about your life. They want to know who you are as a person, especially for students and for people like me who have a bit more of a, I would say, troubled background. I’m not a straight-A student. I didn’t go to the best schools in life. I had a clean record, but if you look at this sort of supporting evidence, it’s like, well, this person’s been in trouble over the course of their life, and they talked to my professors, and one of my professors hated me. And so that conversation was like, it was just so weird.
We had this, I don’t know if other people had this, but in physics, first-year physics, they had this computer program that generated your assignments for you. So everybody in the class literally had this different assignment and each question was different. There was 10 versions of question one, and then all the numbers were different. So even if you had the same version of question one, that you could find somebody else with it, you had the same version, you would have different numbers, so you couldn’t just copy the answer. So all the kids in school, all the rich kids basically, bought the same tutor, and this tutor for 20 bucks or whatever, you gave him your sheet and he spit out the answers for you because he had all the 10 versions of the question. He would just plug in your numbers, and you’d go to school.
And the way to submit your assignment wasn’t you actually submitted paper. This is the dawn of the internet, like 1998-ish. And so you would submit your assignment almost like over Telnet. You would log in and it would say, “What’s your answer to question one?” And you would submit your answer. And I was like, this takes a lot of time. I’ve got to work full-time. I don’t know if I can spend the 20 hours a week it actually takes to do this. But I was in computer science, so it was like I’ll write a little program that just sort of goes from -1000 to 1000 and guesses in increments of 0.1.
And so I did this little program and it worked great. I got 20 out of 20 on every assignment until March of my first year. The teacher comes in and he used one of those transparencies, and I don’t know if people remember transparencies, but basically —
Tim Ferriss: The overhead projectors.
Shane Parrish: So it’s like a PowerPoint graph that he puts on this projector, and it’s like average guesses on the y-axis and student number on the x-axis. And the average number of guesses per question was, I don’t know, 17 or something. And mine was in the millions.
So he’s like, “I want to see this student after class.” And I was careful. I had read all the policies and procedures, and it says, “Unlimited guessing.”
Tim Ferriss: So you’re submitting like a million guesses via Telnet, is that right?
Shane Parrish: Yeah, I’m not doing anything. I just basically —
Tim Ferriss: So there’s no downside for number of guesses. You’re only rewarded for getting the answer right in one of those guesses.
Shane Parrish: Exactly.
Tim Ferriss: Oh, so why not? Yeah.
Shane Parrish: I read all the policies and procedures. I was very careful about reading all the rules to make sure I wasn’t violating any rules. But I would go to bed, and I would just basically hit run on this program, and I would wake up, and I would have my full assignments submitted, 20 out of 20.
Tim Ferriss: So Shane gets retained after class. Was it to discipline you and wag a finger at you, or was there something else that came with the conversation?
Shane Parrish: Oh, so he was like, “You’re going to get zero on all your assignments.” And I was like, “What? That’s not fair at all.” And he’s like, “Well, we’re sort of retroactively changing the rules.” And I was like, “That doesn’t make any sense. That’s not fair. All the rich kids are hiring tutors. I can’t do that. It doesn’t make sense. Just go with my exam mark as my mark,” sort of thing. And he said “No.” And basically, the assignments were so heavily weighted that I ended up failing physics because of this. It was so crazy. And so when I’m getting my job, they actually talked to this teacher.
Tim Ferriss: Now how did you come in touch with — I understand why he would have an ax to grind or at least it sounds like the kind of guy who would have maybe something scornful and spiteful to say. How did you even get connected with an intelligence agency? Were they recruiting in certain centers nearby? Did they canvas the whole country? I don’t know how it works.
Shane Parrish: It was just sort of luck. I was doing computer science at a time when the rise of the internet. I didn’t want to work for Nortel or any of these big companies. I really wanted to work for an intelligence agency. I thought that would be really fun and coincidence that they happen to be at my school. I like problems that are not really solvable, that are intractable, that are big and gnarly and that you can never quite solve, but you can get better at. My parents were in the military, so I had a patriotic sense of giving back to my country. How fortunate am I to be born into a country with freedom and good school system and a good healthcare system? And I was taught and brought up in a way that you have an obligation to give back.
And for anybody that knows me, I’m not going to give back standing on the front lines with a machine gun. That’s just dangerous for everybody involved. But if I could use my brain in a way that was giving back to the people and the community and the country in which I grew up, I thought that that was a really good win-win, interesting problems, giving back at the same time. They came to the school, I applied for a job, and if I didn’t get it, I was basically going to go back and do my MBA right away and do something else. But I ended up getting it, ended up working with an incredible group of talented people starting what then went on to become the largest part of the intelligence agency I think now, or the most valuable part of it.
Tim Ferriss: And for people in the US what would that agency be comparable to, if you can say? Would it be comparable to the NSA, comparable to CIA, comparable to other three-letter acronym?
Shane Parrish: Yeah, that would be the NSA.
Tim Ferriss: Okay, got it. And I am going to take a hard left here to ask you about, maybe since you like intractable problems, to ask you about one that I know a lot of my friends are contending with, which is thinking about how moving around helps or handicaps their kids. You moved around a ton. You have kids. How do you think that experience of moving from place to place, school to school, affected you positively and negatively, or in the pro and con columns, so to speak? And how do you think about that or how would you suggest other people think about that if they currently have very mobile lives and are wondering how that will affect their kids?
Shane Parrish: There’s a couple different ways to think about that as it relates to my experience, which is I knew I was moving, so I knew at the end of the year I was going to be in a different school. That became apparent at least by grade six or seven. And so every year I could experiment with myself and not consciously, but I could emphasize different parts of myself. Do I fit in with the jocks? Do I fit in with the nerds? What is my group of people? And I could play a role for a year.
The downside is I knew that I was moving in a year, and so I knew all of these relationships were sort of transitory. So I think the biggest impact it had on me is, even in adulthood, it took me a long time to sort of develop “This person’s going to be in my life for a long period of time. This isn’t like a transitory relationship,” and transitory means it is just going to go. And so you don’t invest in it. You don’t invest in it the same way that you would invest in your best friend or somebody like that because you knew the closer you got to that person at the end of the year, the harder it would be to leave.
And so at that point in time, it was really difficult for me coming out of that, becoming a university student, and then joining the workforce, to not have this mental default of this is going to go away or I might not see this person? But on the flipside, it’s like, I’m going to work with this person for the next 15 years. And I think that was really hard for me to sort of catch on to. It took a few years for me to really start investing in those friendships and those relationships in the way that I wanted to.
Tim Ferriss: If you were sitting at a dinner table with some, let’s say they’re relatively new parents, they have kids under the age of two, so the kids aren’t going to school for a little bit, but it’s not the distant future. And they have a life where they spend X number of months in one place and Y number of months in another, and maybe they’re thinking about living in a different state or a different country, but they don’t want to screw their kids up in maybe indulging those explorations. At the same time, they’re not sure if they want to be in one place in a fixed way. What would you say to those people?
Shane Parrish: My advice, for what it’s worth, is I don’t think it really matters much until they’re sort of grade seven and eight, and certainly in high school. It matters a lot in high school, the consistency, the friend group, the sort of knowing what to expect. Because if I map myself to just my kids and their age, there’s a lot of uncertainty in their life. There’s a lot of things going on that we don’t see. And then adding on to that sort of like you’re going to be in a different school with a different system with the different teachers, you can’t really thrive in that environment easily. That doesn’t mean you can’t thrive. It just means you’re making it harder than it has to be.
But before that, I would say up until grade six, again, just going on my experience with my kids, what they’re really learning in school and from friendships is how do we be social? How do we interact with other people? How do we get in the habit of going to school? How do we learn to read and learn to do basic math? And that you can sort of get anywhere in the world really, really easily. Grade seven, at least for my kids, is when it started to change, and that’s in part because of the schools that I sent them to. I think it starts to matter in grade seven increasingly and definitely in high school.
Tim Ferriss: What type of schools did you send them to?
Shane Parrish: I’m a big believer that kids should be challenged. And I don’t think that the schools around my house challenged the kids. So I found a school in Ottawa that I had to drive to and drop off my kids. And I’m the type of parent that’s like, “You can do things you don’t believe you’re capable of.” And so starting in grade seven, my kids were getting 90 minutes of homework a night, they were taking school in a different language, and they were pushed and challenged. And the standards of this school, and I take a lot of flack for this even from friends of mine, but the standards of this school are unrelenting. They don’t care how you feel. And that is very counter-cultural in today’s message. But if you go in there and you haven’t done your homework, it does not matter. You get a zero.
And to put things in context, we went to my grandmother’s funeral in May, and they were one day late getting their essay in, and they were one day late, and they got 10 percent off their essay because they were one day late. And the school’s approach to this is like, look, we want to produce effective adults, and that means you’re going to fail in grade seven. You’re not going to fail academically because everybody there is really smart. You’re going to fail at these little life things that you should have taken that into account when you planned your essay submission. And they put it on the students, and they do it in such a way that the kids, at first, my son was crying every night because he is naturally really, really smart. And he goes to the school, and it’s in a different language, and now it’s 90 minutes of work a night and they’re —
Tim Ferriss: Is it French? What is the language?
Shane Parrish: Yeah, so it’s French. And so I don’t speak French. I didn’t speak French to him at home. He hasn’t spoken French in two and a half years because of COVID basically. And all of a sudden, he’s thrust into a French school, and they’re unrelenting. So he was so naturally smart that he didn’t have to work for anything, and that school eliminates that. They’re like, “No, you have to work and if you don’t work, you can’t get good grades.” And it was so hard on him, and I’m the parent who’s like, “Hey, I love you. I know this is really hard. I know you can do it. Let’s shift our mindset around this.” And by the end of, I would say, December, he was loving it. He loved being challenged. And when it came time to pick a high school, he literally, his filter was what school is going to challenge me the most?
And I was like, “Oh, that school did an awesome job.” I’m so happy that that’s the way he’s thinking about this. It’s not about grades. I would rather him basically fail at doing something hard than really succeed at doing something easy because I feel like we get wrapped up as parents, our kids’ success is our success, and so their grades become our success. But really, what we want to do is produce independent adults who are capable of handling the ups and downs of life. And that means that they’re going to fail, they’re going to struggle, they’re going to have teachers they don’t like, they’re going to get grades that maybe they do or don’t deserve. And so I think about all of these things.
Tim Ferriss: I would say an example of a similar experience in the sense that I went to a very easy, reasonably disorganized set of schools up until the end of my freshman year in high school and then was transferred, and this was my idea, but I transferred to a very difficult school, for me at least, in New Hampshire, boarding school. And I got absolutely crushed, schooling six days a week, mandatory sports every semester. You had classes, also, sixth period, I think it was, after sports, and then you would have seated meals with coat and tie and so on several times a week and the whole nine, and was so challenging. I went from being easily top of the pack to maybe bottom of the middle of the pack, maybe lower, right? I was suddenly undistinguished from any intellectual perspective. And kids who were at this school, St. Paul’s, knew how to work, too, a lot of them.
And I’m so grateful for it because they were incredibly tough, discipline was demanded, and everything after that was relatively easy, even Princeton and so on, the workload, no problem. And I think in retrospect that it was really critical to my formation. That’s also where I was introduced to Japanese and other languages and had my exchange experience, which changed everything for me. But being taught early that the world will not conform to all of your unique needs and preferences is, like you said, it’s very counter-cultural. I don’t think if you train a child to expect, this is true, train anyone to expect they are going to drive decisions, what they want is always going to be taken into account, what they like is always going to be at the top of other priority lists, it’s setting them up for a lifetime of disappointment and disorder and depression probably, all at once. Anyway, that’s maybe a strong response, but I agree with the approach.
Shane Parrish: Pause for one sec. I want to know, you said this was your decision. What made you decide that? Where did that come from?
Tim Ferriss: Yeah, I guess it was informed by a couple of other inputs. So one was, I was very lucky. Luck plays into all of this so much. One friend of mine had escaped Long Island, and he had gone to St. Paul’s, and he came back, and he basically said, “You’ve got to get out of here. You have to escape.” And it happened that around the same time, I think it was a math teacher and one other teacher effectively said the same thing. They’re like, “Tim, I can’t go any faster, but you’re not going to get what you need here.” And there wasn’t really a strong suggestion as to a solution in that case. But those things all combined to piquing my curiosity about these things called boarding school. I didn’t know what boarding schools were, outside of a few stories from my friend’s experience. So I went to the local library back when you had to do this and took out these really thick guides to boarding schools, tried to figure things out, and ultimately got a few scholarships. And then my whole extended family helped pay for this thing because it’s expensive. And my immediate family didn’t have very much money. So I was very lucky that my grandparents and other people also chipped in to make it happen. And I think that fundamentally, I had also been competing in sports. And I recognized in sports, if you’re not losing routinely, you’re not training with the right people. Does that make sense? At least in wrestling. It’s like if you were to train on a tennis team and your goal was to become the best tennis player possible, if you are just annihilating the team, you’re kind of on the wrong team if your goal is to compete in larger and larger arenas. So I appreciated that and enjoyed that with respect to competition. I was very competitive. But I couldn’t really apply that to the academics in any meaningful way until I went to St. Paul’s and then I got my ass kicked. But it was the beneficial adaptive ass-kicking that I think I really needed.
Shane Parrish: I think we miss that, right? School has become almost too easy. We’re not challenging the kids and we’re not holding them to a high enough standard, and it’s causing all these downstream problems later on in life. At least that’s my view. And I want my kids to be challenged. I want them to fail. I want them to learn how to overcome these obstacles. And you must’ve gone through something similar when you’re going from sort of lead dog to maybe bottom, middle of the pack. “Where’s my identity?” You’re not just dealing with, “How do I develop the systems to study and get the work done? And all these people already know it, so I’m behind.” But you’re dealing with all these identity crises in terms of your ego and how you think about yourself.
Tim Ferriss: Oh, totally. For the first six months, I felt like I was always behind. I was always behind. I was always having to choose what I wouldn’t finish because I just was not fast enough. I was not organized enough. I did not have the time management skills and figuring out when I could take a 20-minute nap so that I could then stay up an extra hour and a half after dinner to finish A, B, and C, and then manage to do this other thing in preparation so that I’d be well-prepared for athletic practice the next day after a full day of coursework, after chapel every morning just about. I think it was six days a week we had chapel, either five or six days, which is mostly roll call of sorts and announcements. But there were also hymns and this, that, and the other thing.
It was a very, very full schedule. And I’m grateful for that. And people listening have probably heard the expression, “If you want something done, give it to a busy man.” It could be woman, of course. But the idea being if someone is busy and they have a full schedule, they learn how to juggle that full schedule. And if you have an incomplete schedule, I think especially in those formative years in high school, you do not by necessity develop the time management skills that if you really want to charge hard later in life, you are going to need. And I feel lucky, very, very lucky. If I hadn’t had that friend who was the proof of concept, who knows? Who knows where I would be?
So let’s come back to your life story. What was 68131, I think it was .blogger.com if I’m getting that right. What was that?
Shane Parrish: So when I was working at the intelligence agency, I started two weeks before September 11th. Literally, two weeks later, the world changed and everybody was thrust into roles and responsibilities over the coming decade, basically, that they weren’t ready for, nobody could have prepared you for, you just had to do your best. And I remember being put in charge of something that I didn’t feel like I could quite handle. And I’m making decisions that sort of impact myself and impact my team and impact my country and impact troops in theater. And I have no idea what I’m doing. And so I went to my boss one day after a particularly challenging operation. I said, “Here’s how I thought about it. I don’t think I’m ready for this job. I don’t think I can do this.”
And he basically just looked at me and he was like, “You’re all we’ve got. What else are we going to do? We’re all just doing the best we can. Get back to work.” And I was like, “That’s the worst pep talk I have ever heard in my life.” And so I was like, “I think people deserve better than me. And what can I do if I can’t sort get out of this role?” So I started following people around in the organization. I was like, “How do these people make decisions? What can I learn from them?” And I went back and did an MBA. And when I was doing my MBA, I just rediscovered Charlie Munger and Warren Buffett. And part of my MBA, it was so useless. And I don’t mean that in a negative way, it just wasn’t giving me what I needed at that particular moment to get better at the things that I wanted to get better at. But Charlie Munger and Warren Buffett were.
And so I created this website, which was 68131-1440.blogger.com, which I don’t own today. Somebody else has, like, taken this over, probably because I talk about it a lot. But the website was basically the ZIP code for Berkshire Hathaway, dash, the unit number of Berkshire Hathaway in Kiewit Plaza. And it was my online journal. Now keep in mind, this is like — I don’t know what year it is, but I’m not allowed to have a LinkedIn profile. I’m not allowed to have any social — you Google me, I do not exist. The intelligence agency would be livid if you had any sort of public profile, any sort of anything at all. And here I am, I’m like, “Oh, I’m just going to create this online journal and this is how I’m going to chronicle my learning and development. I’m just going to take notes and I’m going to connect these ideas and I’m going to synthesize them and I’m going to compress them. And that is the act of reflection. So I’m going to basically learn things on my own. I’m going to reflect on them, and then I’m going to write about them.”
And so I started this website. And then eventually, I don’t even know how at this point, we got to, I think it was like 25,000 readers or something. And then all of a sudden I started getting these emails, which is like, “I hate typing in the name of your website. Can you basically change the name?” And I was like, “Fine. I’ll just call it Farnam Street,” which was the homage to Buffett and Munger, who I know have played such a critical role in your life too.
Tim Ferriss: Yeah, they have. I remember somebody, I can’t recall who it was, but dug up the video of my wavering voice at the Berkshire Hathaway shareholder meeting when I asked my question from the nosebleed seats. I have been informed by them for sure. I have incredible respect for both of them. Were you introduced to them by Buffett: The Making of an American Capitalist, or how did you get introduced to them?
Shane Parrish: Yeah, so I read Buffett: The Making of an American Capitalist, I think in university. But everything got put on the back burner once I joined the intelligence agency and the world changed. September 11th changed everything. I didn’t really come up. I worked six days a week, 12 hours a day for years, didn’t really have a lot of vacations, didn’t have a lot of long weekends, and everybody else was doing the exact same thing. And it was the best time of my life if that makes sense too. Not only you’re working incredibly hard, you’re working on amazing problems that you’re really attracted to, and you’re working with a group of highly intelligent, dedicated people. It doesn’t really get much better than that from a quality-of-life point of view.
But everything, all these outside interests got put on hold. I’m coming home, I’m spending a little bit of time with the woman who was my girlfriend at the time. And then I’m going to bed and I’m waking up and just repeating on rinse. And then the MBA was sort of a way for me to step back from that for a couple years, do a less intensive role there while doing a full-time MBA. And that was when I got reconnected. I was like, “Oh, yeah, this Warren Buffett guy and Charlie Munger. But what are they doing? They’re making decisions in the real world and they seem really good at it. So what can I learn from that?”
Tim Ferriss: When you had the somewhat awkward numerical string, right, when you had the ZIP code as the URL, if you remember, were there any particular pieces that struck a chord with folks? Those are nontrivial numbers you’re talking about in terms of readership. Were there any particular threads or pieces that come to mind that really struck a chord in the early days?
Shane Parrish: I’d have to go back to be sure, but I think there’s stuff about — I was trying to figure out how Daniel Kahneman came up with cognitive biases. And Warren Buffett and Charlie Munger didn’t really talk about cognitive biases, but seemed to avoid them. And so I spent a lot of time trying to reconcile how cognitive biases can help you in the real world.
And so what I sort of hit on, at least from my point of view, is cognitive biases are really good at explaining why you made a mistake in the past, but they’re really poor at preventing you from making mistakes in the future. So they’re intellectually very satisfying, but they don’t really prevent you — if you create a checklist of cognitive biases and you’re a smart person, you’re just basically going to outsmart yourself. “Am I overconfident? No, I’m not overconfident,” right? “I’ve got this, I did the work.” And so the story you tell yourself, you sort of talk yourself out of them in a lot of ways, which is a bit of an irony to them.
Tim Ferriss: Now tell me more about that. What do you mean by talking yourself out of them?
Shane Parrish: Well, you come up with a checklist. A lot of people have tried this. They come up with a checklist of cognitive biases and they’re like, “Okay, I’m going to see if this applies to me.”
Tim Ferriss: So sunk cost fallacy, this, that, and the other thing, expectancy bias, or whatever it might be. Just putting together a list of things that one is intending to avoid.
Shane Parrish: Yes, yeah. But considers sunk cost. So you make a decision and then you pull out your checklist and you’re like, “Am I considering sunk cost or am I just making this fresh?” And you’ve already decided at this moment. So you’re just justifying and rationalizing the decision you already have.
Tim Ferriss: I see what you’re saying.
Shane Parrish: You tell yourself a story about why sunk cost doesn’t apply in this situation or why you’re not overconfident in this situation. And the smarter you are —
Tim Ferriss: Use confirmation bias to address your other biases.
Shane Parrish: Exactly, right? And the smarter you are, the better those stories get and the more believable they get.
Tim Ferriss: Actually, I’d love to get your help defining a phrase, just I suppose explaining a phrase and then segueing into a conversation around mental models and cognitive biases and so on. So ordinary moments determine your position, and your position determines your results. So what is meant by that line and what is meant by position?
Shane Parrish: So the counterintuitive insight that I had about decision-making from studying sort of Buffett and Munger and Peter Kaufman and a host of other people who’ve influenced my thinking is that they almost never find themselves out of position. And if you want to think of it as position as your circumstances, they’re never forced by circumstances into doing something that they don’t want to do. And often that means they look like an idiot in the short term, but in the long term, they win. If you consider Buffett, for example, we’ve talked about he closes down his partnership during a bull market in the ’60s because he doesn’t know how to invest anymore. He’s lost touch. He can’t find what worked for him. He reopens it later in terms of Berkshire Hathaway.
Time magazine, I think it was 1999, he’s on the cover as being out of touch. 2001, stock market burst. Right now, as of today, I think as of last quarter, he’s got 150 billion dollars on the balance sheet. And so what he’s always doing is everybody thinks he’s out of touch and he looks like an idiot. But he always wins because no matter what the outcome is, he wins. If the stock market goes up, he wins. If the stock market crashes, he wins because he’s put himself in a position where no matter what happens, he can take advantage of circumstances rather than having circumstances take advantage of him. And I think that that’s a key element we don’t realize. If you put Warren Buffett in a bad position where all of his options are bad, it doesn’t matter how smart he is, it doesn’t matter how Warren Buffett he is.
Everybody looks like an idiot when they’re in a bad position and everybody looks like a genius when they’re in a good position.
Tim Ferriss: Do you then create that position by having a handful of commandments? And I’m making these up. I’m not saying this is what Buffett does because I haven’t tracked him as closely as you have. But for instance, I know someone who’s cut from a similar cloth. And he’s like, “No short positions, no leverage.” And he has four or five rules that he follows, which means he doesn’t always beat the S&P 500, let’s say, but he’s very rarely in a position where he’s a distressed seller or is forced into a bad position. So he’s able to play a very long game. So I guess please keep going. But I’m wondering how you consistently create that type of position, if that makes sense.
Shane Parrish: So let me talk about it in terms of finance and then apply it to something else that’s totally — you would think it doesn’t apply to. So in finance, you can think of low debt, you can think of saving money, you can think of always having dry powder. It doesn’t matter if you have the best idea in the world. If you can’t take advantage of that idea, you might as well not have the idea. You have to be in a position to take advantage of the ideas that you have. And you have to be in a position where somebody can’t call you in at the exact wrong moment because that’s really expensive, as everybody sort of learned during the great financial crisis and has now forgotten. We seem to relearn these lessons over and over again. But positioning applies to so many other things that we don’t think about.
And you can think about it basically as in your sleep. Did you work out? Are you healthy? Are you eating well? Are you investing in your relationship with your partner? What position am I in the moment that I get into a fight or argument or disagreement with my partner or my spouse? And we don’t think about the position we’re in at that moment. But if you imagine that there’s a patch of grass between you and them, is that grass dry or is it wet? Have I watered that for months, in which case the spark isn’t going to light it on fire, or is the smallest little spark going to start this forest fire? And the position that we bring into those arguments matters a lot in terms of the quality of the outcomes that we get.
And I’ll give you another example. We were talking about kids earlier, and I assume a lot of people listening have kids. One of my kids came home with an exam and he got a really terrible mark. And he hands it to me. And he’s like a teenager, so he hands it to me, he’s like, “I did the best I could,” walks away. And normally the conversation ends there. And I was like, “Okay. Now is not the moment that we’re going to talk about this because I know we’ve got this teenage attitude thing going on, but we’re going to circle back to this.” And so later that night I was like, “Talk to me about what it means to do the best you can.” And what he told me about the best he could was when he sat down to write that test from 10:00 to 11:00, he focused all of his energy and all of his effort on it. He made the best decisions possible from 10:00 to 11:00.
But what he forgot or didn’t really appreciate is what position was he in at 10:00 a.m. when he sat down to write that test? Did he fight with his brother in the morning? Yep, he did. Did he eat a healthy breakfast? Nope, he didn’t. Did he get a good night’s sleep? Nope. He was up late. Did he study? No, he sort of half-assed it. And so what happened was he was in a bad position at the moment he sat down to write that test. He was ill-prepared to write the test, but yes, he did the best he could in that moment. And so often we think about life in terms of, “How do I do the best I can in this particular moment?” rather than, “How do I put myself in the best position?”
And part of that is we’re always predicting, we’re predicting creatures. And so we’re always trying to gauge what the outcome is and maximize towards that outcome. “I want to go all in on Tesla, I want to go all in on whatever I want to maximize my return.” And what we don’t think about is like, “Okay. Well, what is the cost of doing that? And what if I’m wrong? And how do I position myself for multiple possible futures where, what if my idea is not correct? Can I still survive and can I thrive on that?” And if you look back and you sort of look back at Carnegie and Rockefeller and all these historical people who built these great businesses, including Buffett, they always take advantage of a weakness in somebody else’s position when their position is strong.
Tim Ferriss: Who else would you, and I know you mentioned a few names, but outside of Buffett and Munger, who else would you put on your shortlist? And not to make you pick favorites, I’m sure you give a very long list. But just off the cuff, if you had to pick five to 10 people let’s just say, could be four, but let’s aim for five or slightly more people who you really respect as incisive, deliberate decision-makers. Who would make that list?
Shane Parrish: So we have a mutual friend, Naval Ravikant. He could be up there. Patrick Collison would sort of be up there. Kat Cole, who works at Athletic Greens.
Tim Ferriss: Yeah, totally.
Shane Parrish: One of my favorite people. She’s always one step ahead. She’s amazing. I think that there’s very few people who are well-positioned in everything. If you look at somebody who’s extremely good at one thing like Buffett, that comes with extreme weaknesses. But you can have a list of exemplars in your head almost of different people who are good at different positions. But you have to pick what direction you’re going. And then what positions do you need to be good at to be good in that direction? And so for me, I circle back to core things which people don’t really think about, but they’re core to everything we do in terms of health and relationships and friendship and purpose and community. Am I working on something that I want to be working on? Am I moving closer to my destination and is my destination the place I want to go?
And I think those questions are stuff that we don’t really ask ourselves. We’re always so focused on, “How do we accomplish the outcome we want?” rather than, “What are the key elements to this process that allow me to play for a long time? Am I going in the right direction and do I want to get to where I’m going?”
Tim Ferriss: So I am going to come back to just the broad question of how to incorporate thinking about cognitive biases if I’m saying that correctly and/or mental. I guess those are different. I’d love to have you — let’s begin there. How would you distinguish or define mental models? And then I’m going to go micro and then we’ll zoom out.
Shane Parrish: So a great way to think about mental models is the source of all bad decisions is blind spots. Mental models allow you to see a problem through a different lens. You can adopt a different persona. A great example of a mental model is like, “How would Tim Ferriss think about this?” And then I adapt what I know about you and I try to see the problem from your perspective. And if I can see the problem from your perspective, now I’ve done the one thing that actually gets me out of cognitive biases, which is the source of all cognitive biases are basically we believe that what we see is all there is.
And we learned about this sort of in physics in grade nine I think where you’re standing on this train and you’re carrying this ball. And the train is moving at 60 miles an hour, and how fast is the ball moving? Well, relative to you, the ball’s not moving. But if you’re watching the train go by, the ball’s moving at 60 miles an hour. And so the source of all of our problems is that we only see that we’re this person on the train holding this ball, and we can’t see that there’s a person outside who has a completely different view into the exact same situation that we see. So we can mentally use these tools to sort of accommodate how we can look into the world from a different person’s eyes or through a different lens, be that biology or through thinking or through — the most useful ones tend to be like, “And then what?”
Just asking yourself that simple question, “I accomplish this and then what happens?” Inversion, “How do I avoid all these negative outcomes that I don’t want to get?” And the Stoics, you’ve talked about this in the past, the Stoics have been doing this for a long time. They call it a pre-mortem. I think that those are just really helpful ways. And what they’re really doing is they’re just allowing us to put a different lens onto the problem and see it through a different light. And by seeing it through a different light, we slightly reduce our blind spots into the problem.
Tim Ferriss: Yeah, totally. I haven’t read these in decades, so caveat lector for anyone who picks these up. But some of Edward de Bono’s work, I think he’s originally Maltese, so de Bono’s two words, or actually he may just be a Maltese citizen. I can’t peg the nationality. It doesn’t really matter. He wrote a book called Lateral Thinking. He has another one, I think it’s called The Six Thinking Hats or something along those lines, which similarly, very helpful just for forcing yourself as a portion of a practice to look at the same situation with a different lens, a different set of questions, a different perspective. I’d love to talk to you about Farnam Street, but more broadly building a business/life/businesses on content, on advice, on writing, and also certainly audio. But if you look back post-intelligence agency on what you have built, what are some of the more important decisions that you have made or more important experiments that you have run, whether they turned out as you had hoped or not?
Shane Parrish: I think building a business on content is really hard. I think I never set out to build a media company. What I set out to do was learn timeless ideas from other people and master the best of what other people have figured out and share that with the world as a means of giving back. And part of what I want to do in life is leave the world a better place than I found it. And I believe in equal opportunity and not equal outcome. But how can we have equal opportunity if we don’t share information with people and make it accessible? So that’s how I stumbled into Farnam Street. And there’s been these pivotal moments along the way, and some are intentional and some are just completely random. An example of which is I never had email. I never got people to sign up for email until FeedBurner. Remember when FeedBurner went away?
Tim Ferriss: Oh, I do, I do.
Shane Parrish: Right. So I lost three-quarters of my audience overnight because Google decided to shut down this thing. And then at that moment it dawned on me, “How can somebody else take away my audience from me? No, that’s not cool. How do I solve for this problem?” And so I started an email list and now we have 600,000 or 700,000 people on the email list, and I sent out an email every Sunday, basically what I’m learning. But that was the moment. I’d never thought about, “How do I create an email list?” Or, “I need this.” It was like somebody took away my — Facebook has done the same thing. Twitter to varying extents has done the same thing. They basically take your audience away from you and then you become platform-dependent. And I don’t want to be platform-dependent. I don’t want anybody to be between me and the people who’ve chosen to read me and get my ideas.
Tim Ferriss: So what are the components of your business as it exists today? And then I’m happy to have a conversation about this. I’m just fascinated how different people approach things, especially since we’re talking about, among other things, decision-making and so on. So I’d love to know how it breaks down currently because you’ve got online courses, you have the podcast, you have other things. How does the business, so to speak, breakdown as it stands right now?
Shane Parrish: So we do a few things. You remember that diagram from Disney in the ’60s and they have theme parks and merchandise and how it all interconnects? You can look this up on the internet.
Tim Ferriss: I don’t, but I would love to find it. All right, I’ll find it.
Shane Parrish: So with Farnam Street —
Tim Ferriss: And we’ll put it in the show notes.
Shane Parrish: Yeah. So my idea with Farnam Street was sort of, how do I create more surface area for people to discover timeless content or that they master the best of what other people have figured out? So it’s literally not about me, it’s about other people’s ideas. I don’t really have any original ideas. I sort of, if anything, maybe compress other people’s ideas in an interesting way. And so we started with a website and then we went to a podcast and then the podcast, interesting side note here, Naval Ravikant saved the podcast because I was doing this podcast and I was like, “Nobody’s listening to this podcast.” And I had just recorded with Naval. And I was like, “That’s the last episode I’m going to do.” And then of course that episode goes parabolic. And I’m like —
Tim Ferriss: All roads lead to Naval.
Shane Parrish: And I was like, “Oh, my God, I can’t give up on this anymore,” because at the time, I wasn’t having fun doing it. Now I’m having a lot of fun doing it. Then we created these series of books called The Great Mental Models. And the idea behind The Great Mental Models was basically, what are the big ideas you would’ve learned in university and can you apply those outside of the context of the domain that they were learned in?
And so I think that we’ve talked about one in terms of the frame of reference that you’re using to look at a problem matters a lot in terms of what you see. So we wanted to make that accessible for people. And then we branched into a course called Decision by Design. We used to have an in-person workshop on decision making and we learned a lot about how people make decisions in the real world, but COVID shut down all of these online events. And so we created Decision by Design as a means to not take the same material we were doing in person, because what we were doing in person was very specific to being in person.
It was learning from the people at your table. It was nontransferable in a way to online. So we took a more prescriptive approach, which are like, “What are the things, the practical tools that people use in the real world to make decisions?” And we share it with people. And an example of that is separating problem definition from problem solution, having two separate meetings for that. And a lot of people go into these meetings and they have one meeting and they’re like, “What’s the problem?” And then of course, we work with incredibly intelligent people and most of them are type A. And so you come in and the first problem statement that sounds reasonable, everybody jumps into, “Okay, here’s how we solve for that.” Nobody takes a step back and is like, “Wait, is this problem worth solving? Is this problem the real problem?” because we jump into these solutions.
Tim Ferriss: Could you give an example, could be hypothetical, could be real-life, of scrutinizing the problem statement? I think this is really important. I don’t do it nearly as much as I should. Could you maybe walk through what that process looks like? If you have an example, great. Otherwise, it could be in the more abstract.
Shane Parrish: So my belief is that the person who makes the decision has to come up with a problem statement for the decision. And that does a couple things. That forces the person who’s making the decision to really understand the problem. They can take input from everybody else, but ultimately they’re accountable for taking the problem statement and determining what that problem is and communicating what that problem is, and also identifying which solutions work and fit for that. When we don’t do that and we just sort of throw a problem on the table, it really backfires.
Tim Ferriss: I’ll give you one on my own. So maybe we can workshop that. So for instance, I have tons of legacy email addresses, inboxes, and at least at face value, the story that I tell is that it is a huge pain in the and there are different maybe security vulnerabilities and issues with having different platforms and things scattered all over the place. The problem in a sense has not been that well-defined. It’s just overall kind of angsty hand-wringing and a couple of identified risks. Then we’ve jumped straight into solutions. And there are any host of different solutions that I won’t bore you with, but it’s going to take some time. And I think I have a pretty good beat on what the right direction is for this. But just for purposes of using the exercise, how would you scrutinize that?
I come in, I say, “Hey, this is a problem. We don’t have things centralized in one modern inbox with all of the enterprise-level security that that would include. Therefore, we should decommission these following inboxes and blah, blah, blah.” Right? But I’m taking for granted that is the right definition of the problem.
Shane Parrish: Right, exactly. So it’s like, who’s the check and balance on, what are we solving for? And it goes back to something we talked about earlier. What direction? Am I getting closer to the destination and is the destination the one that I want to get to? So in this case, is the problem that you’re solving, “I want access to all of these materials through one inbox,” or is the problem something different, which is, “I don’t feel these inboxes are really that secure and I don’t know how to manage them.” And the way that you frame that problem will determine in a large part what solutions you see as available. And maybe it’s something different. We’re just sort of spitballing this on the spot here.
Tim Ferriss: Yeah, totally.
Shane Parrish: But your surface area is large, right? So all these email addresses increase your surface area of attack if that’s the way that you’re thinking about it. And if your goal is to reduce it, one way of reducing it might be to consolidate it. One way of reducing it might be to eliminate them. One way of reducing it might be something completely different.
Tim Ferriss: Yeah, totally. And this is timely for me because as I was walking through recording a screen flow for my team related to this, I realized about halfway through, because I was talking about next actions, and I said, “Actually wait a second, my ultimate objective here is to spend substantially less time in email.” And I think maybe compared to a reference point that would be, say, an average of my friends, I do spend a lot less time in email, but I would like to spend more time on certain creative projects and larger needle-moving dedicated blocks of time, three to four hours for fill-in-the-blank project or experiment. I realized pretty quickly that if my advice were implemented directly, it would just be taking this burden. It’s not just attack vectors, it’s also just lots of unsolicited inbound. It would be taking all of that and just moving it to a different mailing address.
And I was like, “Okay, that partially solves one issue, but it does not at all address this separate issue, which is maybe on some level the bigger issue, even though I tend to run a little paranoid, the unsolicited inbound is probably a bigger problem currently than the attack factor stuff.” I have pretty good security as it stands, probably excessive security in a lot of respects. But I realized halfway through trying to prescribe the solution, I was like, “Wait a fucking second. I might be giving the best advice possible for solving the wrong thing.”
Shane Parrish: Yeah, totally. Right. And that is in and of itself a good reason to separate these things. But also when you’re the boss, your suggestions become direction. So you might be just thinking out loud, but the people hearing that are like, “Oh, Tim wants this. Here’s how we solve for this.” And then in your head you’re like, “Oh, that sounds like a good solution,” but you’ve solved the wrong problem. And so this is why separating these meetings between what is the problem, can we get clear on what the problem is? And here’s what — you don’t have to go first, but whatever your process is to get that information out to people in terms of what they see as the problem, you can take that, mull it over and be like, “We’ll have another meeting tomorrow and we’ll determine solutions. Or maybe next week if it’s not timely.” And people think this slows you down, this is the biggest thing that I hear when I talk to people about this is they’re like, “Well, that’ll just slow us down and prevent us from taking action.”
Actually, the exact opposite is true because it increases — it’s sort of like you’re thinking in terms of speed, but speed doesn’t have a direction. It doesn’t matter how fast you’re going. If you’re running in circles, you really want to get to the best outcome possible in the shortest amount of time with the least amount of effort. And that means you’re allowing your team to maximize their thinking. A lot of people don’t think well on the spot. So having these group meetings where everybody’s required to contribute — a lot of people mull it over. They go for a walk after, or they’re walking home after work that night, and then they get this idea, this spark and they’re like, “No, I don’t see it that way.” And then they can’t contribute at that point. So you’ve tied one hand behind your back in terms of maximizing the talent on your team to figure out what the problem is and then to solve it.
And so it makes a lot more sense to be like, “Hey, we’re going to have a 30-minute meeting here and a 30-minute meeting here instead of one 60-minute meeting, and these meetings are going to be highly structured and we’re just going to talk about what the problem is. Can we agree on what the problem is? What do you see as the problem? What do you see into this lens that I don’t see? I am not you. I can’t see it.” And that’s a way also to get out of this — I don’t know. People like to posture in meetings. It drives me crazy. They basically repeat the executive summary in their own words and meetings go nowhere. And so a good way to avoid that is just to assume that everybody has read the required material and ask them what their unique contribution to this problem is that they don’t think anybody else sees. And so now instead of rewarding just airtime, now you’re rewarding unique contribution to the problem and you get social signal out of having a unique lens into the problem, which is much more effective.
Tim Ferriss: That makes perfect sense. And are there other questions that you find useful in the problem-defining sessions? For instance, I can imagine one of the questions that I would want to ask my team in addition to emphasizing what you just emphasized, individual perspective and contribution over restating the executive summary that was sent as reading for the meeting to begin with. Is this really a problem? We’re assuming this is a problem that needs to be solved, but is this significant enough for us to allocate attention and resources to it compared to other things? I’m probably using very clumsy wording, but what other types of — are there any other questions that you’ve seen be very helpful in these problem-defining meetings?
Shane Parrish: “And then what?” is a great question, right?
Tim Ferriss: Mm-hmm.
Shane Parrish: “If we switch to a new email platform, and then what?” You can imagine, you can do a thought experiment on what your day would look like, but we often neglect all of these other things, which is like, “This software doesn’t do this thing that I actually do a lot. So therefore now we have to develop a workaround or the software’s completely different and everybody has to be trained on it or the software’s not as supported and doesn’t update as much.” There’s all these lenses. But I love the, “And then what” question because it’s like, “Okay, if we solve this problem, what state are we in and what is the cost in terms of time, money, effort, brain drain?” We don’t think about brain drain very often to solve this problem. And the bigger your team is, the more you tend to solve these problems that aren’t really problems because you’re like creating busy work for you.
And I think we both run very small teams. And so we think through, “Okay, if we solve this problem, then what happens? How do we develop the most leverage possible?” But I think a lot of people don’t tend to think through that. I’ve seen this all the time where organizations I’ve worked with have switched out software and they switch out the software to solve one problem and they’re ignorant to the 67 other problems they just created by solving that one problem. And it feels good. It feels like you’re doing work, but at the end of the day, you’re in a worse position than you were in because you didn’t ask yourself, “And then what?”
Tim Ferriss: All right. I’d love to segue for a minute to automatic rules because for myself at least, especially running a small team where the default, I suppose, flow of things is that a lot of decisions flow to me and I try not to be an unnecessary bottleneck, but I have a very small team, a few employees, and automatic rules and policies are very helpful here. For instance, I have a blog post I put up, it’s like I’m not reading any new books this year, which solves a lot of issues as you might imagine.
And I have these blanket policies for at least five to eight years. I did no speaking engagements effectively. I’ve made a few exceptions recently, but for a long period of time I did none of that. For another, I think I want to say probably three to four years, no angel investing. And these were rules that prevented decision fatigue and just allowed me a lot more cognitive bandwidth and emotional and physical bandwidth. So what are some of your automatic rules? I’ve got a few here: work out every day, no days off, invest in an index fund every month, no meetings before 12. Do you want to spend maybe a few minutes on those and then any other examples that come to mind?
Shane Parrish: Before I get into a few more examples, let’s back up for a second. Automatic rules turn your desired behavior into your default behavior, and they do it when you’re at your best. And so you can pre-decide a lot of things. And why are rules effective instead of just a pre-decision? You need it to be a rule. And the word rule is very specific and very useful. And I got this idea from Daniel Kahneman and we were talking and he said, “I have a rule. I never say ‘Yes’ on the phone.” And he was explaining why he had just told somebody that he’d talk to them again tomorrow and follow up with them and they had asked him to do something. And I was like, “That’s really interesting. Why do you have that rule?” And he said, “That rule is so that I don’t end up saying ‘Yes,’ because I feel social pressure to say ‘Yes’ to these things and I want to please other people.”
All of us want to please other people. And he’s like, “I learned over years…” and this is fascinating, will blow your mind, will change your life. He’s like, “I learned over years, people don’t argue with rules and I follow them.” So we’re taught our whole life to follow rules, but we’ve never thought of how can we create rules for ourself that we just follow when we’re at our worst when we’re in the worst situation possible? We all know no matter how bad our day is, we shouldn’t speed on the highway because it’s against the rules. What we don’t think about is how do we use rules to our advantage? A great example, I had a friend who basically lost a whole bunch of weight using this rule and he basically said, “Every time I go out for dinner…” and he ate out for dinner a lot in his life for work. He’s like, “My rule is I order the healthiest thing on the menu and I don’t drink.”
Tim Ferriss: Meaning no alcohol.
Shane Parrish: Meaning no alcohol, right?
Tim Ferriss: Yeah.
Shane Parrish: And he didn’t order dessert. That was his third rule. And if you think about dessert, dessert’s an interesting one because I think we can all relate to it. You go out, you celebrate with your friends, the wine comes out, the champagne comes out, the dessert comes out, and all of a sudden you’re doing things that maybe the best version of you doesn’t want to do, but you’re in a social situation, you feel pressure. You can tell people, I’m not eating dessert, I don’t want dessert tonight. But that relies on willpower. So every time you say, “I don’t want dessert tonight,” you’re using willpower to get out of that situation. And eventually, everybody loses the battle with willpower. So how can you create a system to get out of this willpower thing where it’s like, “I’m not using willpower, I create an automatic rule. I don’t eat dessert. That’s my rule.”
And when you say that to your friends, you might have to say it twice, but they definitely push back a lot less as long as you’re consistent with that rule. But that rule puts you in the best position possible for success. And I have a couple of these rules. When I am out after a talk with the people who organize the talk, my rule is I stopped drinking at 9:00, nothing could happen after 9:00. And so you just choose in advance. And a great way to think about this again is going back to what we talked about earlier, direction, destination. What does a person who achieves this destination, what do they behave like? Can I create automatic rules in my life? And they’re so context-specific, they’re so specific to you because they’re also things you don’t do naturally.
I hate working out, but I want to be healthy. It’s really important to me to be healthy. And I was struggling, and this is where the work out every day rule came in. I was struggling to go three times a week because I would get into this negotiation with myself. And that negotiation was like, “I normally work out on Wednesdays,” but that little voice in my head is like, “You didn’t sleep well last night. You have a lot of work on your plate.” And then all of a sudden I’m like, “I’ll do extra tomorrow.” I’ll catch myself doing this sort of talk and I’m, “Why am I negotiating with myself? Who’s in charge here? I’m in charge of this situation.” And so I changed it and I’m like, “I am going to work out every day. And it doesn’t mean I go to the gym every day and it doesn’t mean I go for 60 minutes. I can reduce the scope or duration of my workout, but I’m going to work out every single day.”
And that workout might be a five-mile walk, it might be something else, it doesn’t matter. But there’s going to be some form of exercise involved. And that single rule has changed so many people’s lives that I’ve shared it with you because you start exercising every day because the negotiation in your head now is like, “What do I fit in today? How can I fit this in?” It’s not, “Should I work out?” It’s like, “Oh, I don’t have a lot of time. Maybe I’ll just do 20 minutes. Maybe I’ll just go to the gym and do squats.” And all of a sudden you get in this habit, you’re consistently working out, so your health starts to get a lot better. It’s mind-blowing how this simple principle can have profound impact. Do you have any rules for yourself?
Tim Ferriss: Oh, I have so many.
Shane Parrish: I want to hear some of yours.
Tim Ferriss: Yeah. Well, I will say that as you’re talking, my father for instance has in the last — it’s been very fast actually, maybe in the last two to three months has lost 50 pounds. And he’s done that by following the slow-carb diet in The 4-Hour Body as described by The 4-Hour Body. People can find it online, certainly without having to buy any book. But the key there, one of the keys, is having a very straightforward rule. And the rule is you don’t have to give up your favorite foods for the rest of your life. You just have to give up your favorite foods for six days at a time and you have a set cheat day every week. And that also allows you to get off the hook or to successfully negotiate with yourself or with your friends because you say, “It’s my policy that I only have cheat day once a week on Saturday.”
So if you want to have dessert, booze, whatever it might be — not in my dad’s case with those two, but I’m happy to do it, but it’s got to be on a Saturday. And then all of a sudden the negotiation is over. There is no negotiation. I would say when I am my best self, which I am right now — let’s see. Another rule would be if I want to follow the slow-carb diet, have pre-made meals ready to go in the refrigerator for at least three to four days at a time. So I did that today for instance, because if I start to run out of food and I’m picking at the dregs of whatever I have sitting around and I’m starting to starve, but lo and behold I have a podcast to do, I’m going to go buy something fast that is not going to conform to the diet.
Batch-processing buying or having bought food so that it’s ready to go. I mean I have a lot of policies. So as it relates to inbound, and I have an autoresponder that kicks back a lot of this stuff, I’ll tell you some of the rules that have existed for a while, generally speaking, no speaking engagements, and I could explain why that is. That was a particularly hard one when I made the decision because speaking engagements for authors who have bestselling books is very lucrative and it is, in fact, the main source of income for a lot of authors. And I just realized categorically I had to say “No” because it was very hard to moderate my commitments with speaking engagements.
Shane Parrish: Yeah. And it’s addictive, right?
Tim Ferriss: It is addictive.
Shane Parrish: You hop on a plane, you get this big check, and then you could do it all over again.
Tim Ferriss: And then you end up booking your life out nine months in advance and it crowds out a lot of other things. Like the metaphor of this apocryphal story of — the professor asks the students to fit the two rocks and a handful of pebbles and then the sand into the jar. And the lesson is you’ve got to put in the big rocks first and then the pebbles and then the sand. But you can’t do it the other way around. You can’t do it in any other order or the big rocks won’t fit. And I realized for myself that was true with speaking engagements. What I did do as an interim for that is when I would say yes to speaking engagements, I had a complete barbell approach.
So I would either do free, so it had to be so incredibly compelling. Maybe that’s because it’s cause-based and really aligned with a very narrow band of things that I commit myself to on that side, or it had to be a paid gig matching or above my previous high watermark. So whatever the highest amount that I had been paid was, it had to match or exceed that never below. And that automatically constrained the volume of things that I could commit to and made it manageable. And by the way, the people who are willing to do that were always the easiest to deal with. You would think maybe intuitively that the people who pay the most would be the most demanding and the most difficult. That has not been my experience at all. It’s actually completely the opposite.
I have many other rules. So the “No new books” would be another one. If anyone tries to rush me into a decision via email or on the phone, the answer is “No.” It’s not just that I postpone giving an answer, the answer’s “No.” If I feel like someone is rushing me into a decision, the answer is “No.” If someone’s rushing me because reading between the lines, they don’t want me to have enough time for a proper legal review — a lot of startups do this. It’s very annoying where they’ll send you docs on Friday afternoon and say, “Well, we need to close this round and we need to get signatures back by 10:00 a.m. on Monday.” And I’m like, “Then it’s a fucking ‘No,’ I’m sorry. I’m an adult and I don’t play these games.” So there are a handful of things like that.
I’ll give you another one for the podcast and I’m going to ask you a similar question for the business side of things for you and the creative side, but I’d love to hear any. So for instance, for the podcast, everything is prepaid, all invoices are prepaid, and that is something that very few podcasts can do. It’s something that very few podcasts can manage given the business norms. Generally, it’s net 30 or net 60 or some type of net payment terms. But to manage that, you either need to have a reasonably large team, you need to have someone fully dedicated to chasing down payment or you need to work with outside agencies to pick up that burden. I didn’t want to deal with any of that. And so I said, “Look, this is…” I recognize a tradeoff. And with these rules, I think you would probably agree there are tradeoffs. There always are going to be trade-offs.
But if decision is like de-cision, kind of like incision, like the cutting away, that’s fine. So you’re cutting away certain possible outcomes. But if I make a rule that everyone has to prepay, a few things happen. Number one, the universe of possible sponsors we need to consider goes down dramatically. Secondly, the people who are willing to do that, again, counterintuitively, are generally people who are measuring twice, cutting once, and are going to be the easiest to deal with later. And we don’t always bat a thousand, but we do pretty well. So those would be some of the rules. I’ve got all sorts of other ones.
Shane Parrish: As you were saying that, there’s a couple of things that came to mind. One is, I can often determine from an initial outreach of an investment whether I want to do the deal before I even know the specifics because it’s like, “How fair is this to me?” And if the deal is one-sided towards you, an example of which is like, “Hey, I need this by…” you can’t get it legally reviewed, or you have to get your lawyers working overtime, “I need it by Monday.” Well, I don’t want to be a partner with that person. And so that’s —
Tim Ferriss: That’s the honeymoon. That’s the honeymoon phase.
Shane Parrish: I know.
Tim Ferriss: Should be easier.
Shane Parrish: So that’s an easy “No.” But often when we’re investing in a lot of private businesses that aren’t necessarily startups that are profitable businesses, I can tell by the valuation, the pitch, what people are looking for, what their optimal scenario is, if I want to be a partner with that, because if you’re presenting a deal that isn’t fair to me right now, you’re never going to be fair to me in the future. It has to be win-win. And people don’t understand. There’s literally four permutations of a relationship. There’s win-win, win-lose, lose-win, and lose-lose. And only one of those permutations can survive time. And what do we want with time? We want to compound relationships. You want to invest in companies where you don’t have to review the legal documents because you trust the people involved, you’ve worked with them before, they’re consistent, they show up, they do what they say they’re going to do, and maybe the investment doesn’t work out, but that’s not what you’re thinking, but you’re not worried about them stabbing you in the back.
And so often we do things that just take us off this compounding train, and I think it was Naval who said, “One of the big lessons from compounding is that all the gains come at the end. They don’t come at the start.” And so you have to stay on this timeline. So every relationship has to be win-win. And for the podcast we do like no paid speaking, which is — it’s so interesting. I’m sure you get these pitches too. It’s like, “Here, I’ll give you 100 grand to come on your show, I’ll pay in advance, yada yada.” And then I always look up these people and I’m like, “Oh, now I know the podcasts that accept money for guest speakers.” But we do the same thing with this prepaid stuff, and this came back to bug us because I’m a high-trust person. I operate on trust. I don’t want to be in business with you if we need a contract. That’s generally my motto. It doesn’t mean we don’t have contracts, but it means if I feel the need of a contract, it’s an easy “No” for me. And so —
Tim Ferriss: If you need a contract to protect you from someone you don’t really trust, you’re playing a gambler’s game.
Shane Parrish: But often you don’t even think that you don’t trust them, but you’ll think of the contract and then you’ll need a contract. And that’s the first indication that something’s amiss in this relationship. And so, we’ve never used advertising contracts, but during COVID, this came back to bite us because we would invoice a lot of our advertisers once a year and we invoiced them on March 31st — after we have delivered all of their advertising for the past year. And we’ve worked with people for years and then all of a sudden we’re delivering these invoices March 31st, 2020. And people are like, “We’re not paying that.” And I’m like, “Whoa, what do you mean we’re not paying this? That doesn’t make any sense. We’ve worked together for four years. How is this even possible? Am I missing something?” And they’re like, “Basically, sue me.” And I’m like, “Ooh.”
Tim Ferriss: Fun.
Shane Parrish: “What is going on here? This is crazy.” Interestingly enough, a few of them have come back and tried to advertise with us and they’re like, “We’ll pay our old invoice.” And I’m like, “You should pay that and then we’ll talk, but there’s no way I’m going to sign up to work with you again.”
Tim Ferriss: Yeah. No, thanks.
Shane Parrish: The speaking thing — again, that comes back to, “Where do I want to get to in life?” I do the exact same thing except I sort of limit it. I’m like, “Here’s the number of speaking engagements I can do this year. It’s like six or 10 depending on the year, depending on what I want to do that year.” And then we use price as a function to modulate that in the sense of — I love your high watermark idea. I think that’s really important, and that’s a great way that I had never thought about doing it, and I just use, “Hey, I only do six a year. Here’s the cost.” And it just eliminates most people, and to your point, the people that say “Yes” are the easiest freaking people to deal with in the world, and they want you there and there’s no 16 hours of pre-calls and all of this other stuff.
Tim Ferriss: No.
Shane Parrish: Yeah.
Tim Ferriss: No. They’ve decided they want you as a speaker. You’re not one of 10. They will gladly accept. That’s when you get into all sorts of comms overload and brain damage. If you had to double down on one or two things you are already doing, what would you double down on?
Shane Parrish: Oh, definitely the email list. I think that that is the key, right? If you can pick one primary focus for this, you need to be able to reach your audience, you need to be able to communicate with them. And however you do that, whether you do it building it through Twitter or Instagram, you want all past to lead back to your email list. And the person who does this the best is James Clear. He constantly —
Tim Ferriss: Yeah, he is a machine.
Shane Parrish: He’s a machine, right? Instagram points back to his website, Facebook points back to his website, Twitter — he’s just really, really smart at this. So if you’re going to model yourself off somebody and you want to build an email list, he’s the person to sort of think about. You also have a huge audience for email.
Tim Ferriss: I do, yes. I’m very, very grateful. Very methodical too. I’ve thought about it. Although, like you, didn’t think about it at all until a few things happened, including feed burner, sending a notification, “We were about to turn off everything,” and then began emailing however long ago it was, which has been a great, actually a really fun process for me because 5-Bullet Friday serves as my diary effectively.
Shane Parrish: Yes, totally.
Tim Ferriss: I don’t have a separate diary, so it’s fun to look back two years ago. It’s like there’s one that comes out every week and I can look back two years and go, “Oh, yeah, I remember that.” That exact week’s locked in the amber. It’s like some prehistoric mosquito or something, and I can revisit.
Shane Parrish: And you also realize how stupid you were, or at least I do when I look back at some of my old newsletters, I was like, “Oh, what was that?” But that’s also a really positive sign because you’re growing. But going back to the question, I would focus on email and I would ditch podcasts at this point and just double down on email and long-form content counterintuitively on the web.
Tim Ferriss: How would you do — can you give — let’s just say, I was like, wish granted, boom, poof podcast just dissolves into the ether with a rainbow and some whinnying of unicorns and it’s all wonderful, but that has come to a close and then you’re doubling down on email and — what was the phrasing that you just used? But it was sort of online —
Shane Parrish: Long-form content.
Tim Ferriss: Long-form content. How would you do that? What might things look like in the next three months if you were doubling down on those things?
Shane Parrish: Yeah, so just for context, I was operating under the guise of starting from scratch.
Tim Ferriss: Okay. Got it.
Shane Parrish: I would pick a vector, and that vector would be sort of creating content that people find useful and timeless, and it’s super important. The word timeless is really important there because you want the compounding effect. You want the cumulative effect to work to your advantage. So if you’re creating content that is easily consumed but no longer relevant in a week, a month, even a year, then that content can’t work for you when you’re not working. But a lot of the stuff that you do on your blog, and definitely the stuff that we do on FS Blog is — it’s always relevant. It’s evergreen. We just re-aired that interview with Naval Ravikant. We recorded it six years ago. People thought it was recorded yesterday. We don’t talk politics. We avoid these certain subjects.
I think what I would do is I would focus on creating the best content I could. I would get people who come to the website to give me their email address, and I would think about not expanding that surface area, just creating better, “How do I write the next article? How do I make it useful?” And then spending a lot of time thinking about, “How do I share that? Where do people who are like me, who will find this interesting, where do they hang out? How can I let them know about it?” But I wouldn’t go in — what people tend to do is, the two mistakes I see in, I guess if people are trying to do what we’ve done or we’re doing, is they spread themselves too thin. So they’re like, “Oh, I’m going to start a blog. I’m going to create a podcast. I’m going to just do an email newsletter.”
And it’s like, “Man, you have no idea how much work all that stuff is, good luck.” And the other thing that I see a lot of people doing is just thinking it’s going to be easy. And so they get into this trap of like, “Oh, I said something that’s really popular. I wrote an article that’s really popular, and now I’m going to write another one on the same thing and another one on the same thing.” And by the end of the year, it’s like you’re just posting the same stuff. And whether that’s aggressive tweets or something, you become something you wouldn’t read. And so I don’t look at stats on the website. I look at the email stats once a week, but I never look at what’s the most popular article.
I never want that to guide the next article. I just really want to follow what I’m interested in, what I’m curious about, and where my energy is. And I feel like that a cohort of people will find that and be like, “Oh, I found my tribe. This is my person. I’m so glad that there’s somebody else interested in this other than me.” And that’s how I think about building it. But you have to find that thing for you, and I think it’s really, really critical that you don’t spread yourself too thin and try to do everything.
And then you can create these systems in your life that allow you to do that, which is — let’s say you want to do that and you want to work full time at the same time, but you want to slowly build up this body of content that works for you while you’re working. Well, one way to do that is write every morning from 5:00 until 6:00. And so you just block off the best hour of your day for writing. Most people do it the other way. They block off the worst hour of their day, which might be at night. And so they come home after all this baggage and all this work, and then they spend all their time and effort trying to focus, instead of actually just letting it flow and writing.
Tim Ferriss: Yeah. I mean as far as rules go, the evergreen/timeless piece has always been important to me for all the reasons that you’re mentioning, including the energy-giving, because if we were to look at it from a different perspective, if you are competing for attention — and I don’t want to make it seem zero-sum, but if you are trying to draw people to what you are producing in some capacity, if you choose timely, news-driven topics, or people, or stuff that’s getting sensationalized, or stuff that’s really controversial and polarizing, you are stepping into the bloodiest, most crowded arena imaginable. The timeless stuff, or the evergreen stuff, is hard to do. You’re also capping, I think, a lot of your growth, frankly. But that’s okay.
Shane Parrish: Well, you grow slower, but you increase the timeline you have for growth, right?
Tim Ferriss: Yeah.
Shane Parrish: The runway becomes longer even if you’re growing slower in the short term.
Tim Ferriss: Exactly. You have compounding gains in the form of audience growth and so on that will be more sustained as opposed to fair-weather readers or listeners who are just chasing whatever the algorithm serves them on any given day, in any given minute. So question just on the compounding thing because Naval, of course, is an incredible investor. I’d love to know a bit about how you personally think about investing.
It seems like you do some private deals. Also seems like you invest in an index fund or index funds. Could you say more about that? And could you also speak to whether or not you think investing indices, I guess it is, has substantially changed now that, as I understand it, big tech factors vary heavily into at least some of the indices or indexes, I’m not sure which the proper word is to use here. But how do you personally think about investing?
Shane Parrish: So I use the cash flows from Farnam Street to invest. And one of the advantages to being you or me that a lot of people don’t have is deal flow. So you get deal flow that the best VCs in the world would be envious of and to some extent, so do I. And so you’ve created this vehicle that wasn’t primarily for investing, but has this big benefit to it where you’re able to get deal flow because of all the other things you do, not because you’re focused on deal flow every day. And so I wanted to use that to my advantage in terms of how do we get into good deals? How do I create something sustainable? How do I create something long-term, and how do I apply this knowledge that I’m having fun applying? I like investing. I don’t do a ton of VC investing. I try to invest mostly —
In terms of check size, it’s almost all allocated to companies that are making money or something that I really understand the path of. I occasionally invest with friends. But when I invest with friends, my rule is — go back to rules. I write that investment off to zero the minute I write the check, because I never want my investment with friends to affect our friendship. So in my head, it’s just a zero the minute the check —
Tim Ferriss: It’s a donation.
Shane Parrish: Yeah, it’s a donation to them. And I’d rather be wrong supporting a friend than right not supporting them. That doesn’t do anything for our friendship. And so I think about the things that I understand and then diversifying — because I don’t use outside money. There’s no outside investors, there’s Shane. And so I think about how do I survive? Not how do I maximize my returns in the short term? How do I maximize my returns in the long term? Rule number one for Warren Buffett, don’t lose money. Rule number two is, see rule number one. So I want to diversify when it makes sense, but I also want to be in a position where I can flow to whatever makes sense. We have a real estate company where we invest in real estate, but we’ll wait until there’s a lot of distress until we put more money into that, and then I can be patient, I can go years without making an investment.
Tim Ferriss: Is that mostly residential, commercial? What kind of stuff?
Shane Parrish: All residential.
Tim Ferriss: All residential?
Shane Parrish: Yeah. So it’s multifamily at scale. And so I just want to do things where there’s a long runway, I’m working with people I trust, the financial returns are sort of justifying the investment. But also the advantage to being you or I or this one-person team, is you can put yourself in a position where you don’t have to — like you said, you stopped VC investing for years. You don’t have to make an investment. Nobody is emailing you going, “Tim, why haven’t you made an investment?” Nobody is emailing you going, “What are you doing with my money?” All of a sudden you can just let cash pile up on the balance sheet. You can just let it accumulate in the bank account. And then when you see an opportunity where the risks and rewards sort of indicate that this is favorable and you have an edge in this particular investment, then you can write a large check in 12 hours. There’s no investment committee to go through, there’s nothing to do, it’s just you making a decision.
And so I like that aspect of it, and I think about it that way. I do the index fund thing, it’s sort of outside all of that, which is just — I like fail safes. I don’t know about you, but I hide money from myself at times. So the real estate company, when I log into my bank, it doesn’t even show up on the list of companies we have, it’s just this separate entity that I log into once a year to get the financial statements for the accountants. But mentally I’ve convinced myself it doesn’t exist, which I think is a really powerful way for me because I don’t want to convince myself that I’m smarter than I am at any of this stuff, and I also always want to think that I’m in a worse position than I am because I really want to increase and improve my position.
Tim Ferriss: And has your thinking on index investing changed over the years or is it like I see oftentimes, people saying “It’s not timing the markets, it’s time in the markets,” so just keep buying, right? Just keep buying, with respect to an index or any number of different index funds. How has your thinking remained the same or changed with respect to index investing?
Shane Parrish: Well, the weighting of the top companies has definitely caused me a little bit of hesitation. What I do with indexing is, while I invest in an index fund every month, I don’t always invest the same amount of money in the index fund. So if you want to think of this sort of very simplistically, when there’s panic and nobody wants to invest, I tend to put more money in. And when everybody’s investing and we’re reaching all-time highs, I tend to put less in. I don’t know if that’s an effective strategy for everybody else, it’s just sort of what I do to regulate money going into index funds. But what we haven’t seen with index funds that worries me is with the rise of index funds, we haven’t seen massive forced selling of index funds and how that impacts the funds. And so I’m actually sort of counterintuitively thinking the rise of activist investors, they just went through this 10-year spell where they didn’t outperform and they’re really smart.
I’m kind of thinking, “Oh, now might be the time to allocate more money into that pocket.” Because I think that there might be an opportunity when index funds are no longer what we’re thinking of as index funds, and they always go up and all of a sudden stock picking comes back in vogue. And you can buy some of them. You can buy Perishing Square at — I don’t know what today’s price is, but a 30 percent discount to its net asset value.
And I remember doing this during COVID. So March 2020, Bill Ackman got on TV and he’s like, “I have these asymmetric bets.” And I was like, “Oh, Bill is a really smart guy. I know him.” So I started looking at the net asset value of Pershing Square, and it’s like the market’s tanking at the same time the net asset value is going parabolic. So I was just buying all the shares I could, and that’s all publicly available information. But you have to be in a position to take advantage of that information with cash, otherwise, you’re for selling something to do it. How do you think of an index fund investment? What do you do with your money?
Tim Ferriss: Oh, my God. Yeah, I’m in the process of tremendously — I don’t want to say de-risking because that would presume that I accurately can identify and understand all the various risks out there, which kind of would be a ridiculous thing for me to claim. But I have realized that many, many, many of my investments are highly correlated. And I’ve always been growth first. And I have friends, I’m not going to name names, but friends who are like, “Look, there is no role for bonds in your portfolio. You don’t need the cash. You should be 100 percent go, go, go.” And these are very smart people who have done very, very well over long periods of time. And intellectually, let’s first of all say I’m not a financial advisor, I do not recommend anyone take that advice, but this is advice that a few of my friends were giving to me based on their understanding of my life.
And what I came to realize is that while academically that might be true, it actually makes it harder for me to sleep. So I am making a number of decisions right now, that for anyone who is type A super-driven, successful, growth-minded investor would look at askance and consider probably pretty stupid. But for me, I’m realizing number one, I don’t need to chase extra gains, necessarily. I mean, I have areas where I feel like I have informational advantage with early-stage stuff. If I decided two years from now I want to double, triple down, or 10 x down on that sector, I could do that pretty easily.
So I’m going to try and experiment for a few years. I’m in the process of doing this right now where I’m going to be moving a lot of my cash from growth positions. I can’t do that in all cases because a lot of my stuff is locked up in privates, but I’ll be moving a lot from areas that are high growth, but that are high complexity and difficult for me to understand. That applies to a bunch of stuff overseas where I don’t think the world is as siloed as it once was. I mean, Nassim Taleb and I were talking about this recently, where the idea that you’re protected from the ups and downs of say, the US by being in Western Europe is kind of ridiculous. And that’s true even further afield. So I’m trying to, I suppose at this point, optimize for sleep. That’s it.
And I’m sure I’m going to look back a few years from now and say, “Fuck, man, the opportunity cost was so high.” But there are periods of time where I’ve been red hot and I’ve been able to strike. Most notably when I had much less cash in sort of 2008 to 2012, let’s say, which was an incredible vintage and a period for startup investing. If someone were to give me my starting capital that I had then now, even adjusted for inflation, say, “Go get them, tiger,” I would not succeed. I really don’t think I would be able to do what I did then. The world has just changed. The valuations and the deal structuring, all of these things have changed.
However, there have been these pockets where I’ve been able to make good decisions only because I have extra powder. And right now I feel like I’m, or at least over the last handful of years, pretty fully deployed where I could get in a position if I screw up my planning where I’m a forced seller or at least a distress seller. Not in any kind of bet the farm way, but it adds stress and I think that after so long and really focusing so hard and for periods of time working so hard to get to a point where I don’t need to, fortunately, and there’s a lot of luck involved, but worry about my expenses. To manufacture complicated strategies for life that add that stress back in is kind of ridiculous, it’s completely absurd. So I’m trying not to do that. And I noticed among my friends, almost all of them do this and we laugh about it. It’s like, “Oh, yeah, I managed to remove this stress.” And they figure out a really sophisticated self-sabotaging, subconscious way to add all that stress right back in. So that’s a long answer to a short question.
Shane Parrish: Well, it’s so interesting because you hit on a couple things there that really resonate with me in how I approach things. The first was you were like, “The opportunity cost is huge.” Well, no, because you’re only considering the measurable opportunity cost. You can’t measure your sleep at night as easily.
Tim Ferriss: Yeah.
Shane Parrish: Right?
Tim Ferriss: Right, right.
Shane Parrish: And so that decision makes perfect sense. Why risk what you have and don’t need for what you don’t have and don’t want to begin with? It doesn’t make sense to take those risks. When you’re young, it makes sense to take a lot of risk in order to sort of get ahead, but as you get older and you have more to lose, sure, you can keep pushing that button as long as you want, but at some point it doesn’t always have to be a pure financial decision.
An example of that is when I left working for the intelligence agency, I had this amazing pension, and they’re like, “Well, starting at 55, we’re going to pay you this much money every year.” And it’s a pretty big sum of money. I worked a lot of years there and got a really decent salary. And I was like, “No, cash it in.” And my accountant was like, “What do you mean cash it in? That is the worst financial decision you can make.” And I’m like, “It’s the worst financial decision, but it’s the best psychological decision because if I know somebody’s coming to save me, I’m going to behave differently. I need all the chips on the table in front of me and I need to know it’s on me. And I know that doesn’t make sense to you, but for me, that’s the only way that I’m going to have a shot at being successful at this.”
Tim Ferriss: Also, not to state the obvious, but let’s go for it. Past shelter, food, all the basics, and then a couple of extracurricular fun things here and there. Beyond that — even for that, the extracurriculars. Presumably, the money is used to improve your quality of life. So if you’re doing things to make money that are decreasing your quality of life, it’s sort of antithetical to the whole name of the game —
Shane Parrish: 100 percent.
Tim Ferriss: — in some respect. Which I’m saying in part to remind myself of, because making a lot of decisions right now, which for me provoke a visceral angst because I have been so — during periods, I’ve made some terrible decisions too, let’s be very clear. I’ve made some very terrible, very expensive decisions, but there have been these sprints of say, four or five years where I’ve made a series of very good decisions that tend to be opportunistic.
The podcast is a great example. That was nowhere in a three, five, or 10-year plan. It was very opportunistic and the timing was really fortunate. And therefore, when I start moving as I am right now, quite a bit into, let’s just call it safer stuff. That’s up for debate, but let’s just call it safer stuff. It’s very counter to my conditioned way of being in the world. Do you know what I mean?
So it’s an experiment. I’m also viewing it like, look, yeah, I’m going to pay a bunch of hits here and there, and I’m blah, blah, blah, tax this, tax that. Let’s not let that tail wag the dog if we can avoid it. But I’m going to do it for, let’s just call it two years and see how I feel, right? If I’m happy I did it, great. And if I’m sleeping better, great. And if I’m like, “Okay, that was an interesting experiment, but actually I want to get back in the fray and roll up my sleeves and really go at it in this full contact sport known as all this early stage stuff,” then fine. It’s not a permanent decision.
Shane Parrish: Yeah. I think that’s an interesting way to think about it. I, mean you could also — if you feel the need to keep going, you’ve accomplished so much and you’ve done really well, you could also just put enough money aside that if everything else went to zero, you’d be okay. Hide that bank account from yourself, basically invest it in sort of safe, reliable stuff, and then pretend it doesn’t exist and then go nuts. And then with all the other stuff, you can sort of play these little mind games on yourself where it’s, oh, all of a sudden I’m worth less. I’ve got to make more. Right? And if that’s your goal is to do that — but I’m totally with you in money should improve the quality of life that you’re living. And a lot of things that that looks like, it’s counterintuitive to most people because it looks like time. It looks like you’re buying time.
Tim Ferriss: I know we’re winding to a close shortly, but I want to ask you perhaps just broad strokes, how should people think about becoming better at making decisions? And here’s the backdrop for that. In the room next door, I have Poor Charlie’s Almanack. I love reading about mental models. However, I sometimes run into this cognitive indigestion when I try to force-feed myself too many rules, cognitive biases, fill in the blank. I get to a point where I fail from too much information, not too little information. Just like if a friend of mine, and this has happened a lot, who has no exercise habit, no controlled diet to speak of, comes to me and says, “Hey, give me an index card with the 20 things I should do to get whatever, six pack abs by the end of the year.” It never works. It works exactly zero percent of the time.
And I have found that sometimes I try to take on too much at once. Sometimes I find looking at decisions retroactively to be helpful, but I’m not sure — there are people who would say, well, we don’t actually learn that much from our failures. I think Peter Thiel would probably underscore that. How would you suggest people go about getting better at making decisions? What are some of the approaches or tools in the toolkit?
Shane Parrish: I think we hit on a couple things during this episode, and I’ll tie this in a second. So most of the time when we know we’re making a decision, we tend to do fairly well in that moment given the information we have because we’re rational about the sense that — we’re mostly rational. We don’t get it perfect, but we’re directionally correct. If you’re thinking about marrying your partner, you know you’re making a decision. If you’re thinking about buying a house, you know you’re making a decision. In those moments, we tend to be more rational. And so we might be wrong in the end, but we’re not really wrong, especially given the information we have at the time. We’re generally correct. So when it comes back to general decision making, here’s how you undo yourself, you can marry the best person in the world for you, but if you don’t invest in that relationship, it all multiplies by zero.
And investing in that relationship becomes not a decision, right? Because you’re not thinking about it as a decision. You start living with somebody and then all of a sudden you’re arguing over how you loaded the dishwasher and it turns into not talking to each other. Well, if I tap you on the shoulder in that moment and I say, “Hey, Tim, you’re about to put gas or water onto this situation, what would you like to choose?” And this is what I do with my kids, and they’re always like, “Oh, water.”` But what I’m really doing is, “Hey, you’re making a decision to escalate here. Is that the decision you want to be making?” No judgment on my part, but I’m just going to alert you to the fact you’re making a decision. And that tends to help a lot in terms of making better decisions.
So the moments that happen in everyday life, how do we recognize that they are decisions? And I would say the biggest aid to judgment in decision-making is the position you’re in at the time you’re making a decision. It comes back to a lot of what we talked about today. There’s three sort of aspects to decision-making that I think about that are very counterintuitive, which is the position you’re in at the time you make the decision. Can you manage your emotions? Not eliminate them, manage them. Your temperament. You don’t want to be making a decision when you’re hungry, angry, lonely, tired. You don’t want to be making a decision when you’re focused on proving yourself right rather than getting the best outcome.
I have this phrase I remind myself with, which is “Outcome over ego.” Am I focused on getting the best outcome or am I focused on satisfying myself and proving myself right? Because the minute I’m proving myself right, what tends to happen is I ignore all this information that says that I’m not right, and then all of a sudden I’m not focused on the outcome. So by reminding yourself to focus on the outcome, you sort of open your idea. And you get this when you run a business, it tends to be a little easier in some ways because you’re so tied and wed to this outcome that you’re looking for ideas no matter where they come from, you’re looking for the best idea to get you to the outcome you want.
And the third aspect is sort of thinking independently. Are you thinking independent of the circumstances, or are the circumstances thinking for you? Are you thinking independently of what the crowd is doing or is the crowd thinking for you? Because if those are happening, if circumstances or the crowd are thinking for you, you’re not really thinking at all. But what do you have to do to think independently? You have to be well-positioned so that you can think independently.
Tim Ferriss: All right. One last question before we land the plane, and that is if it’s possible, what is the short explanation for why we should write in the age of AI?
Shane Parrish: Writing is the process by which we realize we don’t understand what we’re talking about. And it’s only when you sit down and put pen to paper or even type out an idea that you have, a decision you’re making, an idea you’re wrestling with, that you sort of see where you don’t understand it. And the process of writing is not only refining that idea and helping you reflect on it, but you actually generate new ideas in the process of writing. And I think it’s so easy— My kids do this, right? They’re just like, “Oh, insert these little variables into ChatGPT, out comes an essay.” And I’m like, “You can’t use that. You can feed it your essay and ask it where the weak points are. That’s a different way of using it than getting it to write these essays for you.” But the question they have is, “Why would I write? This doesn’t make sense. This thing will do it for me and I’ll get a good grade.”
And the other aspect I would say that’s important to writing is you learn humility, right? You learn to give up on an idea that you have. You keep trying to fit this idea in, and you’ve probably experienced this too, and you really want this idea to work. Maybe you have a great opening sentence to a paragraph, but it just doesn’t make sense and you can’t make it make sense. So you have to give up on it, you have to delete it. You literally have to delete something from your mind and be like, “No, that doesn’t make sense.” “No, that’s not good enough.” And I feel like there’s a certain humility to that that we’re almost lacking in today.
Tim Ferriss: Yeah, you’re not going to be able to examine your own thinking if the source material is produced by ChatGPT.
Shane Parrish: Yeah. Well, what you’re really doing is you have all these thoughts and you’re making the invisible visible. And by making the invisible visible, now I can see it. Now I can play with it. Now I can see where it’s weak and where it’s strong and how it interacts with other ideas I have. But when it’s just in your head, then you can’t see it, so you can’t reason with it. You can’t play with it. You just end up playing these mental games with yourself where you trick yourself into thinking something that you don’t actually think.
Tim Ferriss: Yeah. I mean, I’m bullish on so many facets of AI, so I’m not a Luddite who’s trying to keep the horse and buggy at its pinnacle or anything like that. However, I do think there’s a risk of us subjugating our own faculties in the same way that most of us have lost the ability to navigate without Google Maps or some equivalent. If you remove your long-form thinking and remove the habit of putting that down in some form such that you can cross-examine it and identify where you’re just not making any sense. Or maybe there’s a shred of something that comes out spontaneously that makes a whole lot of sense, but if you hadn’t captured it, you would never would’ve noticed it as it passed through your mind. I can’t help but think that you’ll be incredibly weakened over time, and if we’re either getting stronger or weaker, I’d say directionally we want to go towards the former when possible.
Shane Parrish: Yeah, definitely. One of the crazy things is writing is often the process by which we learn to think.
Tim Ferriss: Yeah. Yeah, for sure. Yeah, you’re not writing down what you think, you’re writing in order to think.
Shane Parrish: Right.
Tim Ferriss: And I was just journaling this morning, in fact, and one of my lines, which was borrowed from some of my friends in the military — super simple. I mean, this is not an incredibly granular rule, but just as a guiding philosophy, “Slow is smooth, and smooth is fast.” Do not fucking rush, in other words. When I rush, I make mistakes. Those mistakes cost me more time in the long run, just trying to make decisions quickly before defining the problem correctly. It’s like if you want to be fast in the long term, it’s for me at least, “Slow is smooth, and smooth is fast.” Shane, the new book is — yeah, it’s a good one. Clear Thinking: Turning Ordinary Moments into Extraordinary Results. People can find that wherever fine books are sold and people can find the Farnam Street website at fs.blog, if I’m not mistaken.
Shane Parrish: Yeah.
Tim Ferriss: Anything else that you would like to mention? Anything you would like to add? Maybe recommendations or requests of the audience before we come to a close?
Shane Parrish: Yeah. I mean, I’d love to — if you want to email me, it’s email@example.com. I read everything, but I don’t respond to everything. I would love to know about sort of the ideas from this episode that connect to ideas that you have in terms of decision-making and positioning, and what your best ideas are for how you position yourself to sort of survive in different environments and adapt to whatever the situation requires.
Tim Ferriss: I dig it. All right, folks. You’ve got it. God be with you, Shane and your inbox, firstname.lastname@example.org. And really nice to spend some time together, Shane. Thank you for blocking it out and making the time to get together. I really appreciate it.
Shane Parrish: This was awesome. Looking forward to getting together in person soon.
Tim Ferriss: Yeah, definitely. And for people listening, as always, thank you for tuning in. You can find the show notes including the Disney diagram we’ll hunt down, and everything else we referred to at tim.blog/podcast. And until next time, just be a bit kinder than is necessary. Not only to others, but to yourself.
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