Thinking process over outcomes is one of those simple, yet difficult pieces of advice that is useful in many areas of your life. It’s difficult because we’re so obsessed keeping score and thinking in binary right or wrong terms. Since luck and randomness play such a large role in a complex world it’s more important to distinguish between good or bad decisions not being right or wrong every single time.
The first step is designing a system to make good decisions again and again. I think it helps to define what a good process is in the first place.
I was recently sent a copy of 101 Things I Learned in Architecture School by Matthew Frederick. I’m not exactly an architecture connoisseur, but Frederick had a great description of the learning process involved:
Certainties for architecture students are few. The architecture curriculum is a perplexing and unruly beast, involving long hours, dense texts, and frequently obtuse instruction. If the lessons of architecture are fascinating (and they are), they are also fraught with so many exceptions and caveats that students can easily wonder if there is anything concrete to learn about architecture at all. […]
The resulting open-endedness provides students a ride down many fascinating new avenues, but often with a feeling that architecture is built of quicksand rather than on solid earth.
The way you get around this “open-endedness” is by being process-driven, not outcome or product-driven. Frederick explains:
Being process-oriented, not product-driven, is the most important and difficult skill for a designer to develop.
Being process-oriented means:
1. Seeking to understand a design problem before chasing after solutions.
2. Not force-fitting solutions to old problems onto new problems.
3. Removing yourself from prideful investment in your projects and being slow to fall in love with your ideas.
4. Making design investigations and decisions holistically (that address several aspects of a design problem at once) rather than sequentially (that finalize one aspect of a solution before investigating the next).
5. Making design decisions conditionally — that is, with the awareness that they may or may not work out as you continue toward a final solution.
6. Knowing when to change and when to stick with previous decisions.
7. Accepting as normal the anxiety that comes from not knowing what to do.
8. Working fluidly between concept-scale and detail-scale to see how each informs the other.
9. Always asking “What if…?” regardless of how satisfied your are with your solution.
I love this description. The comparison of process versus product is extremely relevant to the financial services industry where it can be tough for clients to tell the difference between useful advisors and glorified salespeople. Here’s my attempt at putting these nine issues into a context of financial advice:
1. Never prescribe before first diagnosing a problem.
2. Don’t focus on fighting the last war and avoid hindsight bias.
3. Strong opinions, weakly held.
4. Tactics are over-rated. Think in terms of a comprehensive plan rather than always focusing on the individual parts.
5. Understanding what you’ll do in advance by making high probability decisions is how you prepare for a wide range of market environments.
6. This is one of the hardest aspects of investing — am I being disciplined in something that’s not working right now or stubborn about something that’s not going to work anymore?
7. It’s okay to admit we don’t always know exactly how things are going to work out. That’s half the battle.
8. It’s important to define your overall philosophy to see how it can guide your actual strategy.
9. You have to remain humble, especially when things are going well because no one knows what’s going to happen or how long success will last.
What They Don’t Teach You in Business School
Now here’s what I’ve been reading lately:
- Being smart about money begins with how it’s taught (A Teachable Moment)
- Don’t try to invest like a billionaire (Bloomberg)
- 3 proven steps to instant alpha (Abnormal Returns)
- Tom Brakke: “Money is often made by moving across the existing lines and into new territory” (Research Puzzle)
- 4 rules to get wealthy (White Coat Investor)
- Moving the goalposts (Irrelevant Investor)
- Evidence is not enough (Above the Market)
- Financial doping (bps & pieces)
- Danny Kahneman & Barry Ritholtz is a must listen on behavioral biases (Big Picture)
- A checklist for investing in alternative investments (Irrelevant Investor)