Critical Chance

Tag: success

  • The Power of Consistency

    The Power of Consistency

    Warren Buffet has an interesting principal he follows. 

    At the end of each year, a company gets to decide what to do with their earnings. Some companies issue a portion of the money to their shareholders; this is called a dividend. Most investors love it, in fact some design their portfolios to exclusively invest in companies that provide annual dividends. Warren on the other hand? He HATES investing in these companies.

    Why? When you receive a dividend, you realize gains, which means you have to pay taxes each year.

    Warren would rather the money was reinvested into the business to help it grow.

    First off, this allows him to avoid taxes for as long as he can.  But if we remember the rules of compounding, it allows his money to stay in the system and work even harder. Warren wants to be taxed only once, at the very end when the journey is over, not throughout.

    Buffett principal #2: Never take your money out

    The Aggregation of Gains

    The first rule of compounding is to start as early as you can. 

    But once your money is in, we want to optimize towards growth – this means paying as little as possible. 

    “The objective is to buy a non-dividend-paying stock that compounds for 30 years at 15% a year and pay only a single tax at the end of the period. After taxes this works out to a 13.4% annual rate of return.

    Charlie Munger, 1998

    If you invested $10,000 with Warren Buffett, at his annual rate of return of 23%, the following chart shows you the amount you’d have in 30 years, based off if you paid taxes each year versus allowed the money to keep compounding. 


    Assumes 23% compounding annual rate, blue line allows money to compound, red line removes taxes at 35% rate each year
    It’s worth noting that these are extremely high rates of return, and the average investor can expect to get closer to 8% ARR

    Breaks vs BRAKES

    Breaks are healthy – they allow us to recover and admire our results.

    Trouble comes when we allow a short break to turn into hitting the brakes (that is, stopping completely). 

    Here’s what what I mean:

    • Health – When we feel physically in shape, we decide to stop exercising – a few days becomes a few weeks
    • Learning – When we believe we’ve mastered enough, we decide to stop learning – binge reading becomes binge television
    • Relationships – When we sense our connections are strong, we decide to stop building them – personal texting becomes singular social media posting 

    Warren’s principal reminds us of the power of pausing too often or for too long.

    Once you stop showing up, you stop gaining. 

    Keep It Going

    You’ve decided to start (that’s great!), but don’t underestimate the importance of continued hustle. The laws of compounding don’t care if you’ve had a bad day, or it’s a busy week.

    When we decide to follow through, we continue to gain, period.

    So wherever you are, keep it up, and just like Warren you too will enjoy the aggregation, not of a single year, but an exponential 30 years. 

    Getting up when others won’t is what makes all the difference. 

    And who knows, that determination might be worth an extra $2.8M dollars, in whichever domain you’re compounding.

    Post inspired by:

    Buffettology: Unexplained Techniques That Have Made Warren Buffett by Mary Buffett

  • How this billionaire predicted the future

    Steve Jobs gave a commencement speech at Berkley in 2005.

    By this time, Apple had become one of the most successful enterprises of the new Millennium. Jobs was famous for having a set of unique experiences – he believed these were critical in forming his opinions and ideas at Apple.

    So how did he know that his past experiences would help create Apple?

    Well, he didn’t.

    Here’s Steve on predicting the future:

    “You can’t connect the dots looking forward; you can only connect them looking backwards.

    So you have to trust that the dots will somehow connect. You have to trust in something – your gut, destiny, life, karma, whatever.

    This approach has never let me down, and it has made all the difference in my life.”

    -Steve Jobs

    From Apple to Chess

    When I was a kid, Chess was one of my favorite games.

    In Chess you spend most of your energy trying to guess your opponents next move. When they play a knight, your brain visualizes the new locations on the board. You work to understand the updated positions, as each move creates an entirely new game.

    “How will this help or hurt me?” you wonder.

    Well, Chess is shockingly similar to another game: the game of life.

    Unpredictable Paths

    Humans are terrible at seeing the future.

    We tend to believe that our ability to predict leads to success, however that’s not quite true.

    Preventing yourself from making a critical mistake allows you to keep playing the game, but it’s usually the unpredicted events which lead to your victory.

    This is the same in businesses as it is in personal development. Odds are that a critical component of you (as you are today) did not exist when you first started. Whether that’s your newfound interest in running 5K races, or the way you pitch to clients.

    With this hunch, The New York Times wanted to better understand which career paths most executives took before becoming CEOs.

    After interviewing across all fields, one pattern emerged: there was no path.

    From musical theater to religion, CEOs were less concerned about their current trajectory in the moment and more focused on learning from each experience.

    “Rather than wondering if they are on the right career path, they make the most of whatever path they’re on, wringing lessons from all their experiences.” 

    New York Times

    What about you?

    This week, pay more attention to novel differences. While hidden in the background, these may lead to your future successes.

    As Steve Jobs points out, you have to trust your gut.

    Plus, we all know it’s your unwavering curiosity that really checkmates the King.

    Now go setup your board.

  • Is failure holding you back?

    “If you want to become whole, let yourself be partial.

    If you want to become straight, let yourself be crooked.

    If you want to become full, let yourself be empty.

    If you want to be reborn, let yourself die.

    If you want to be given everything, give everything up.”

    – Lao Tzu

    Who turned setbacks into success?

    J.K. Rowling spent her post-college years lost.

    Since her parents grew up poor, they strongly encouraged her to get a vocational degree instead of studying Literature in college. When she decided to ignore their advice, J.K developed a fear that her parents were right and she would end up a failure.

    It was seven years after graduating when she hit rock bottom; her short marriage ended, she lost her job, and she was a single parent (not to mention nearly homeless).

    “The fears that my parents had had for me, and that I had had for myself, had both come to pass, and by every usual standard, I was the biggest failure I knew,”

    -J.K. Rowling

    Yet it was experiencing this failure, which freed her to write Harry Potter.

    Fifteen years later, Rowling highlighted this integral life moment in her commencement speech delivered to Harvard graduates:

    “So why do I talk about the benefits of failure?

    Simply because failure meant a stripping away of all the inessential. I stopped pretending to myself that I was anything other than what I was, and began to direct all my energy into finishing the only work that mattered to me.

    Had I really succeeded at anything else, I might never have found the determination to succeed at the one area I believed I truly belonged.

    I was set free, because my greatest fear had been realized and I was still alive… And so rock bottom became the solid foundation on which I rebuilt my life.”

    -J.K. Rowling
    WATCH HER SPEECH HERE.

    Is your obstacle instead an advantage?

    Our instinct is to run away from uncomfortable experiences but that’s a mistake.

    It’s our journey that informs us of our true selves; including the downs as much as the ups.

    It isn’t until you lose that you realize how badly you wanted to win… or, perhaps, that the score never mattered at all.

    To succeed, let yourself fail.

    When we hit rock bottom we have the opportunity to remodel and embrace our full potential.

    Are you striving towards yours?

  • Do you need this to succeed?

    In 1987, Paulo Coelho had something special to share; he had completed a story which followed a boy searching for his destiny.

    After pitching the book to various publishing houses, it was accepted and printed to sell that same year.

    Over the next 6 months, he would go on to sell……. 2 books.

    The publishing company revoked the rights, and the books were removed from their untouched shelves.

    But Coelho was convinced it was a great book, “It was written from my soul,” he said. So, instead of giving up, he started knocking on doors.

    A year later, he was given a break; a new publisher decided to give Paulo a second chance and the book was published again. Slowly, through word of mouth, it finally began selling; first one-thousand, then three-thousand, then ten-thousand book by book.

    Today, The Alchemist has sold more than 115 million copies worldwide and has been translated into over 71 languages.

    Paulo Coelho later said, “I’ve been rejected many times (from publishers to girlfriends). This lead me to the best publishers in the world, and to the perfect wife.”

    We tend to focus on the strengths of those who succeed, but what about their setbacks?

    • A young entrepreneur has a coding gift, but what about the times investors laughed at their pitch?
    • An olympic athlete has the perfect body-type, but what about the countless personal injuries they trained through?

    Perhaps, it’s really the obstacles that are the most critical component to our success.

    Not one, not two, but many, many obstacles.

    The setbacks we encounter give us the opportunity for our true selves to develop. When we tough it out, we end up learning new lessons, which are applied in the final act of our stories.

    There’s a tremendous power to feeling something deep within your soul. It’s only when we keep moving forward, over and over again, that we achieve our full destiny.

    What’s your setback?

    Believe in yourself – get out there and start knocking on doors.

    You’re just one break away from becoming a worldwide hit.

  • Would you help?

    In 1973, John Darley ran an interesting study. His main goal was to understand if religion has any effect on “helping behavior.” The results uncovered the fundamental reasons we choose to act.

    The study went like this:

    Forty students were divided into two groups.

    The first group was given a sermon to memorize on the importance of being a Good Samaritan (helping others etc). They were told that soon after reading it, they would need to present the speech at another building across campus.

    The second group was given a talk on job opportunities and the same instructions. They too would need to walk across campus and present their speech in another building.

    There were two twists:

    Subjects were given different times that they had to deliver the sermon so that some would be in a hurry and others not.

    On the way to the building, everyone would pass the same stranger slumped in an alleyway, who looked to be in need of help.

    Q: Which group would be more likely to help the person in need?

    A: It wasn’t the Good Samaritan group. In fact, neither group stopped more often than the other to help.

    It turns out, the only factor that made a difference was how much of a hurry the students were in. 

    When we feel rushed, we are less likely to notice what’s going on around us. When it comes to living by our moral code, that can also fall by the wayside.

    How many times have you walked the same city block or taken the same route to work? When was the last time you really noticed what was going on right in front of you?

    Science is now gleaning more about human potential than ever before.

    Top performers notice the subtle factors in their environment, which leads them to faster and more creative solutions. It’s not their IQ or EQ (though those help), but instead their ability to perceive the situation that truly sets them apart.

    Are you preparing a Good Samaritan speech in your head, but ironically ignoring those who need help right in front of you?

  • Good luck or bad?

    Once upon the time there was an old farmer who had worked his crops for many years.

    One day his horse ran away. Upon hearing the news, his neighbors came to visit. “Such bad luck,” they said sympathetically.

    “Perhaps,” the farmer replied.

    The next morning the horse returned, bringing with it three other wild horses. “What great luck!” the neighbors exclaimed.

    “Perhaps,” replied the old man.

    The following day, his son tried to ride one of the untamed horses, was thrown, and broke his leg. The neighbors again came to offer their sympathy on his misfortune.

    “Perhaps,” answered the farmer.

    The day after, military officials came to the village to draft young men into the army. Seeing that the son’s leg was broken, they passed him by. The neighbors congratulated the farmer on how well things had turned out.

    “Perhaps,” said the farmer.

    Human nature has wired our brains to judge achievement and setbacks on an immediate basis. When things go wrong, we throw our hands up right away. This leads to these sort of “half stories,” which limit our potential.

         Half story: I was turned away from +10 companies my senior year of college.

    …Bad luck.

         Full story: The week of graduation, a role opened and I got a job at Google.

    …Good luck.

    Same story, different luck.

    This extends itself beyond setbacks; what about the way we consume news? Most headlines may as well read, “We don’t know all the details, but we’re confident this is bad.”

    Immediate judgement prohibits us from seeing the full picture, when in reality, the story isn’t complete.

    Before we’re able to declare luck (good or bad), our stories need time to develop.

    Which story have you ended too quickly?

    Is that setback actually the beginning to a great luck tale of your own?

    “Perhaps.”

  • Forward vs. backward looking goals

     

    Written on February 22nd, 2018

8 minute read

    Forward vs. Backward Looking Goals

     

    We tend to confuse the two and that’s a big mistake.

    If you’re like myself, when you set your most ambitious personal goals, they tend to sound something like this:

    • Appear on the Forbes, ‘[insert age] Under [insert age] List’
    • Get promoted at work
    • Increase my net worth to $XX

    What do they all have in common? These are all backward looking indicators. In other words, they are signals that you’re doing well, but in the past. While achieving these accolades does correlate with success, they aren’t predictive of future success. Rather, they are proof that success has already happened, in the past.

    Your goals should really sound more like this:

    • Learn a new (seemingly unrelated) discipline
    • Embrace a new positive habit backed by science
    • Reach out to non-local friends more regularly

    The difference? These are all forward looking indicators; they don’t show off as accomplishments in the typical way we view “success.” Yet, if you do any of these things, it’s easier to predict your performance in the future. Following through on these goals won’t get you a celebrated medal, but they are the positive tactics that actually get you there.

    Learning from successful people 

     

    What do Warren Buffett, Mark Cuban, and Bill Gates have in common? They are vivacious learners. They dedicate many hours each day to reading about new subjects, because it challenges their mindset and allows them to connect independent ideas. That’s a forward indicator – agile mental models produce novel ideas but will never receive an accolade for habit itself.

    What do they also have in common? They are all Billionaires. Their net worth continues to climb and is a testament to their consistent ability to keep growing as individuals, entrepreneurs, and thought-leaders. That’s a backwards indicator – it reflects back on their total economic output to date, in the past.

    That’s the formula.

    The most powerful forward indicator is happiness

     

    Compared to their neutral or stressed counterparts:

    • Doctors are 19% more accurate at diagnosing their patients
    • Sales people are 37% better at closing
    • Operationally, we can be up to 31% more productive

    That’s just the beginning; there are studies that show we are more creative, better at problem solving, and more resilient and innovative when we are happy versus neutral or stressed. *

    When we increase wellbeing in the present, all of our our future outputs rise. We are a product of our environments. So, elevating these inputs also helps those around you; your family, friends, and co-workers. Start with happiness and finish with more success.

    We should be challenging our employees and organizations to set forward looking predictors

     

    • How are you going to push yourself to self-learn this year?
    • What’s the one positive habit you will commit to practicing this quarter?
    • When will you find time to connect with your network this week?

    Ignore the accolades, because they come later.

    Remember, when our team commits and crushes the small stuff, we need to celebrate too. Our brains are wired for short-term feedback loops, which makes forward predictors hard to set and follow through on. It’s easy to choose a well-known award to gauge success, but it’s the abstract and consistent daily habits that really produce it.

    By adjusting our measuring stick of success, we can elevate everyone around us. Eventually producing more backward predictors that we know and love.