Weekly I/O #42

Luck and Arena Razors, Stress-Reward Test, Listen and Opinion Razors, Young & Old Test, Rooms Razor

Weekly I/O is a project where I share my learning Input/Output. Every Sunday, I write an email newsletter with five things I discovered and learned that week.

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The below is extracted from the email sent on Aug 21, 2022

Here’s a list of what I’m exploring and pondering this week.

1. Luck and Arena Razors: When choosing between two paths, choose the one with a larger luck surface area and/or the one that puts you in the arena.

Article: The Most Powerful Decision Making Razors

When deciding between two options, we can use some heuristics to simplify our decision-making process. The Luck Razor and the Arena Razor are some of my favorites.

When choosing between two paths, choose the one with a larger luck surface area. This means choosing the option that makes us more likely to “get lucky”.

When we are stuck in some problems for a long time, it’s harder to get lucky if we just sit and hope that luck will find us. Conversely, getting lucky is easier when we ask for help since someone may happen to be friendly and help us.

Similarly, when we try to learn something new, it’s harder to get lucky if we just learn it all by ourselves and hope we can always get the right resources and direction. Conversely, it’s easier for us to get lucky if we learn in public and someone more experienced might give helpful and timely suggestions.

By getting more chances at situations exposed to luck, we are more likely to get lucky.

This is also similar to what is mentioned in The Almanack of Naval Ravikant. There are four levels of luck:

  1. Hope luck finds you.
  2. Hustle until you stumble into it.
  3. Prepare the mind and be sensitive to chances others miss.
  4. Become the best at what you do. Refine what you do until this is true. Opportunity will seek you out. Luck becomes your destiny.

The other heuristic when choosing between two paths is to pick the one that puts us in the arena. Putting ourselves out there is scary and lonely, but it’s where growth happens.

It also echos the Luck Razor. We increase our luck surface area by putting us out there in the arena. It’s easy to throw rocks from the sidelines. But once in the arena, we don’t have to take words from people too seriously on the sidelines since they don’t have skin in the game.

2. Stress-Reward Test: Take on stress only if the reward is valuable enough to justify the stress.

Article: The Most Powerful Decision Making Razors

When stressed, think about the upside of taking on that stress. Of course, we all know we should not be worried about uncontrollable things. However, even if the stressful things are controllable, we should still consider whether the reward is valuable enough to justify the stress.

I think this is applicable to risk too. Take risk only if the reward is valuable.

Higher risk doesn’t mean higher return. Higher risk often just means higher expected return, a wider range of possible outcomes, and the less-good outcomes become worse.

As we can see in one of my favorite charts in the book The Most Important Thing from Howard Marks:

However, if the less-good outcome from the higher risk is unbearable or the expected return isn’t even higher in some cases, we should not even consider taking the risk.

This also reminds me of a Tim Ferriss’ interview with Master Investor Ed Thorp I recently listened to where Ed Thorp talked about unnecessary risks. He has a laundry list of those risks that gets longer and longer as he thinks about them more such as COVID, non-direct flights, driving, and jaywalking.

You can search for unnecessary risks in the interview transcript and find the paragraphs.

3. Listen and Opinion Razors: Listen twice as much as we speak when encountering different perspectives and have opinions only after we can state the opposite one clearly.

Article: The Most Powerful Decision Making Razors

When encountering someone with a different opinion or perspective, we should listen twice as much as we speak. It’s easy and natural to refute and express our own opinion. It’s hard to drop the desire to respond and try to understand different perspectives first. As Charlie Munger said, “I never allow myself to have an opinion on anything that I don’t know the other side’s argument better than they do.” If we can’t state the opposite perspective clearly, we haven’t earned an opinion. Take pride in letting go of the desire to refute. Take pride in not always having an opinion. Do the work to listen first and earn opinions later.

4. Young & Old Test: Make decisions that your 80-year-old self and 10-year-old self would be proud of.

Article: The Most Powerful Decision Making Razors

Before making an important decision, we can ask whether our 80-year-old and 10-year-old selves would be proud of the decision.

Our 80-year-old self will take care of our decision’s long-term impact and the compounding effect.

Our 10-year-old self will ensure we still have some fun and excitement along the way.

This test also reminds me of what Terry Crews said in the book Tribe of Mentors about discussing with an imaginary grandson about his decision:

“Ask an imaginary grandson about decisions and relationships and whether to continue them or not. “Grandpa, you shouldn’t do this. You need to leave these people alone because we will be affected negatively” Those moments show me that this whole thing is bigger than me.”

5. Rooms Razor: When choosing between two rooms, choose the room where you’re more likely to be the dumbest one in the room.

Article: The Most Powerful Decision Making Razors

In the book Mindset, the author talked about the performance and learning zones. In the performance zone, we apply our skills and minimize mistakes to achieve our best results, while in the learning zone, we focus on what we don’t know and make mistakes to get better.

We feel comfortable when staying in the performance zone. However, it is crucial to switch to the learning zone sometimes. Therefore, this heuristic comes in handy: When choosing two rooms, choose the room where you’re more likely to be the dumbest one in the room.

I first heard about this a few years ago on the Tim Ferriss podcast. But this razor resonates with me again since I just joined a new team. It’s so energizing when I’m in an environment where I’m the least experienced, and everyone is so willing to share and help me grow.

That’s it. Thanks for reading and hope you enjoy it. If you would like to receive the content every Sunday, sign up below 😎

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