Risk

If you take risks and face your fate with dignity, there is nothing you can do that makes you small; if you don’t take risks, there is nothing you can do to that makes you grand, nothing.  And when you take risks, insults by half-men (small men, those who don’t risk anything) are similar to barks by a dog: you can’t feel insulted by a dog.

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Life Isn’t Fair, But If You Don’t Get This Simple Point You’ll Always Be A Sucker

Life is very unfair.  As much as we all wish that the success we enjoy in life is a direct consequence of our well thought out actions and intentions, it probably isn’t.  If you were born poor in rural Bangladesh, could you still confidently say that your quality of life would be as good as it is now?

You’re not pretty enough, thin enough, tall enough, rich enough, you were born to poor parents, you went to a bad school, you were born in the wrong part of the country, you’re the wrong colour…This list of excuses is endless.  It’s undeniable that these characteristics and ones upbringing does indeed have a large impact on your life’s trajectory.

This post isn’t about “victimhood”.  Everyone is aware that you have to hustle to get ahead in life and that without hours of hard work, you simply won’t get anywhere.

This post also isn’t about being “stoic” and just accepting that you can work hard, toil away and yet still achieve very little in life.

This post is about how we can embrace the randomness and entropy that surrounds us every day and use it to our advantage.  In short, this post will teach you how to win at life.  But first, a few illustrations are necessary.

Estimated Time of Arrival

Google Maps has replaced my Sat Nav machine.  I don’t know when it happened, but it definitely beats using a stand alone machine.  I was particularly put off using stand alone Sat Navs ever since someone broke into my car to steal one!  The burglar probably sold it for £20 at the local pawn shop, but left me with a repair bill of £120 for my car.

A few days a week I make a 60 mile commute to my clinic to see patients and make sure everything is running properly.  Get in the car, put my phone in my phone holding thingy and set the destination; “Estimated time of arrival 10.30AM”, it says.

It seems that Google Maps and lots of other navigation apps try to figure out the “quickest route to destination”.  We’ve all probably had instances where we’ve put the navigation on in a familiar neighbourhood and have blindly followed its instructions, even though we just know that if we went our usual route we would have gotten to our destination quicker.

This minor gripe is merely annoying, but the worst kind of problem with Sat Navs is when we go on those longer journeys.  “Estimated time of arrival 10.30AM”, it says, but why is it that most of the time I get to my clinic a few minutes after the ETA?  The worst is when something unforeseen happens, such as an accident on the motorway and I end up at my destination an hour or more late!

Why is it that I never get to my destination an hour or more early?

In England we have roads called “M” roads, which are the largest roads with the highest speed limits.  We then have other major types of roads such as “A” roads and “B” roads.  As you can imagine “A” roads are the next quickest after “M” roads.  Interestingly enough, Sat Nav systems always tend to pick routes with “M” roads whenever possible.

This is an interesting way to get to your destination.  “M” roads are definitely faster, but if there is an accident, then you’re doomed to suffer hours stuck in traffic wondering why that annoying Audi behind you is driving so close when there’s clearly a traffic jam ahead.

“A” roads on the other hand have plenty of tributary roads.  Traffic jam?  No problem, just turn off and join another road and you’ll be on our way with a merely slight delay.

Satellite navigation systems are missing out on a trick in my opinion.  Instead of being able to pick the “fastest route” it should actually give you two options;  “Fastest route, but if something happens on the road you’ll be REALLY late” or “Slower route, but you don’t need to worry about being too late if something goes wrong.”

I wonder how many people would choose the slower route with less variability when it comes to important journeys such as getting to the airport on time to catch a flight?

The Doctor-Patient Relationship

When I used to work as an acute general surgical doctor, we used to quip that it would be more cost effective to carry out a whole body CT scan as patients were carted on to the ward.  Almost, like those body scans at the airport!  It certainly would have made our lives as doctors much easier if we could simply just get the scan done and see whether there was something worrying to operate on straight away, instead of having to sit down with the patient and get their history.

The acute surgical ward was a stressful place to work.  Patients got referred in by the Emergency Department or Community Doctors and then we had to assess the patients and figure out if they needed an emergency operation.

The problem on this ward was that it meant you would have to spend at least 30-40 minutes with the patient, listening to their story, taking blood tests and then you’d have to wait for several hours for the blood tests to come back.  Once the blood tests were back, unless it was an obvious appendicitis or cholecystitis, you would have to organise a CT scan.  If you consider that many patients end up staying in the hospital overnight at a cost of £400, only to be told the following morning that all the investigations were normal and that they can go home, then having a CT scanner placed at the door doesn’t sound like a bad idea as a scan costs around £100 per patient.

You might be thinking that all these tests sound totally unnecessary.  I would agree with you.  The problem in medicine is that when a patient gets referred to you by another doctor, the onus falls on the accepting physician to ensure that nothing is wrong.  In other words the buck stops with you.

What do physicians with this onus do?  Test, test, test!  Do all the blood tests under the sun.  Does this patient actually sound like she has a simple urinary tract infection which can be treated with three days of oral antibiotics?  Doesn’t matter!  We can’t risk it!  We must do all the blood tests which will make sure her bowels, kidneys, liver, pancreas, anaemia levels are all normal and if these all come back normal then she must have a scan of her abdomen as well (exposing her to more than 500 times the radiation of a chest x-ray) to just be safe.

How did medicine get this way?  There seemed to have been a simpler time in medicine, which I personally didn’t get to experience.  My father on the other hand reminisces about those times frequently.  “There used to be a time where doctors were respected and decisions were made mutually with the patient”.  I, unfortunately have been trained and continue to practice medicine in an era of litigation and suspicion.

The threat of litigation and the risk of potentially losing your medical licence with every patient you see causes you to practice medicine a lot more “defensively”.  Even if doing more is potentially harmful, it is often better to be seen to do something (which is defensible in court) than not carrying out an intervention (which is indefensible).  “We might as well as take out that gentleman’s appendix, just in case.”.  If you don’t take out the appendix and then it does turn out to be an appendicitis, then set aside a date for court my friend.

Is This a Good Idea??!!

“Is this a good idea”.  Every budding entrepreneur mutters those words.  Usually, so often that it drives loved ones near to the edge of sanity.

When they ask “is this a good idea?”, what thy are really asking is “will I make tons of money from this?!”.  Many entrepreneurs say ideas don’t mean a thing, but that the execution of the idea is the main thing.  I agree with this sentiment….to a certain extent.  If the person I’m talking to isn’t an action taker, then for definite it doesn’t matter what idea he has, because they’ll never do anything.  Ideas by themselves are meaningless.  But, if I’m talking to a really smart person, who consistently takes action, then yes ideas do matter.

The number of businesses is growing every year.  What’s interesting is how few are successful and how little money most businesses make.  I mean they’re all businesses after all and a lot of them do pretty much the same thing, but why is there such a large difference in revenue between them?

Why is Starbucks so profitable while that small cafe ran by that pleasant family down the road is struggling to make ends meet?

Or better yet, why will that coffee store never become the next Google?  Now obviously, Google are providing a completely different service, but what are the factors that set apart your average family run coffee store to an Internet company based in San Francisco?

The anatomy of a good idea goes a long way to explain whether an idea is worth pursuing or not.

The World Is More Random Than You Realise

The world is a very random place.  We as human beings are predisposed to create narratives to help us make sense of the world.  It gives us the feeling that we can predict the future.  Daniel Kahneman, the Nobel Prize winner, has written about how our brains are wired this way.

I remember when I was in high school and my music teacher played a piece of music to me.  It was a recording of a flute playing random notes, in a random order, with no time signature.  What was interesting about listening to this totally random barrage of notes was how my brain couldn’t help but construct melodies out of thin air.  It was the musical equivalent of “don’t think of a purple elephant!”.  Your mind will construct thoughts automatically and come to conclusions as a reflex.

Apart from my own anecdotes, there have been many studies which have proved how truly random the world is and how poor, we as humans are at predicting outcomes and making decisions.

Philip Tetlock, from the University of Pennsylvania made a landmark study: “Expert Political Judgement: How Good Is It?  Can We Know?”.  In this study he asked 284 political experts to make 80,000 predictions.  In the study he gave the political experts a topic to consider and then gave them three options to choose from.  He later looked at if the predictions were correct.

The experts turned out to be worse than random.  Meaning that if he had gotten a monkey to randomly pick an answer, the predictions would have been more accurate.  One of the reasons that expert predictors get it wrong so often seems to be a result of knowing too much.  Experts seem to over complicate their predictions by looking at too many factors and making too many outlandish correlations.

For business owners / CEO’s and entrepreneurs, the news isn’t too great either.  I love entrepreneur books and biographies of successful people.  But they do for the most part seem more like fairy tales, rather than scientific studies of success.  Which is fine if you’re into that sort of thing.  However, studies have shown that the strength of a CEO and the success of the company that they are running are not well correlated at all.

If CEO’s were really the rock stars they are made out to be in the popular press then there should be a direct correlation between the success of their companies and their skill level.  If you took a really bad CEO running a company in a certain industry and then took a really good CEO running a company in the same industry, you should expect to find that the better CEO’s company is always outperforming the one ran by the worse CEO.  But the correlation hardly exists!  If the correlation was perfect (i.e. a good CEO always producing the best outcomes and beating the competition) then the correlation coefficient would be 1.  In reality, the best estimates place the coefficient at around 0.3, which is only very slightly better than random!

My point is that skill and knowledge clearly exist, but the world is an incredibly random place.  Most people’s ability to make decisions affecting their future are random at best and worse than average at worst.

How To Not Be A Sucker

What do motorways, being an acute surgical doctor and good business ideas have in common?  One word: asymmetry.

Asymmetry means that there is an unequal relationship present.  To compound this, as the world is so random and unpredictable, you never know when the asymmetry is going to hit you and how much of an impact it will have in your life.

Motorways for example have an asymmetry in terms of getting to your destination on time.  Either you’ll be a little early, on time or if something goes wrong on the roads, such as an accident, then you’ll be extremely late i.e. an asymmetry is present here.

In the world of medicine / surgery, there is an asymmetrical relationship between the physician and the patient.  Theoretically if a doctor makes a mistake with any patient they ever see, they can lose their medical licence.  Patients may genuinely come to harm in some cases, however in the UK, the GMC (General Medical Council) have stated that over 90% patient of complaints / litigation made by patients is unwarranted and unfounded.  There is an asymmetry in the relationship as patients can make a complaint which may be false, but there are no repercussions if their complaint is found to be based on a lie.  Patients do not get any financial repercussions or penalties if their complaint doesn’t get upheld.

These asymmetries exist in a lot of different domains in life.  For whatever reason most people are blind to this and are unaware of such relationships.  But if you are aware of these relationships it will cause you to make better decisions.

The two examples we’ve talked about above are what I call negative asymmetries.  Meaning that if a random even occurs then it will make your life worse.  But, you can also use asymmetries to your advantage!

Take for example business ideas.  Good business ideas have asymmetries present which could result in exponential / unlimited financial returns.  Most business owners simply aren’t aware of these principles.  This is the reason why that small coffee store down your road will always continue to struggle and why that pleasant family will never be financially free – even though they could be.

I could speak a lot about great business ideas, but the two main principles in good business ideas are the ability to scale and detach your own time from your business.

Say that you open a coffee store.  Part of your business mission should be to put systems and protocols in place so that every cup of coffee is produced in the same way at the same standard, the store should always be cleaned in the same way up to a certain standard, the way items are procured and how much they should cost should be standardised, the way customers are greeted and treated should be standardised.

Basically every aspect of the business should be run with protocols in place.  This way, if you, the business owner decide to leave for a couple of months for a holiday, your business will keep on chugging along as usual.  In other words, you’ve created a system which is not attached to your time or presence – you’ve just created a money printing machine, which is exactly what businesses are meant to be.

If you can detach your time from your business, then inevitably you have created a business model that is scalable.  There is no reason why you can’t open up another coffee store usinng the exact same training protocols you have already created in your first store to expand your empire.

Business success is random as we have already demonstrated.  But, if you have a well thought out business which can be scaled then randomness can have a positive impact on your business and life.  As businesses which are designed to scale have asymmetrical returns then you could win big and be financially free.

In life if you don’t set yourself up to win and use randomness to your advantage, then you will always be at the mercy of randomness and asymetries.  You will always lose and be a sucker.

Baby Boomers Vs Millennials!! (They’re both wrong….)

I have seen this conversation played out many times.  Both in the press and in real life.

The Baby Boomer generation often accuse the younger generations of being lazy, flippant with their money and devoid of the grit that is needed to succeed in life.

The Baby Boomers often argue that leading a happy, financially stable life is not all that hard.  Just work at a job, work your way up the corporate ladder, put money aside for a rainy day, invest in a house and you’ll be set for life.

The Millenials on the other hand often talk about how things have changed compared to a few decades ago.  Jobs are harder to come by, you require a degree for most things nowadays, people also accrue a lot more debt due to going to University, the cost of living has gone up as well as house prices etc.

The public discourse is interesting.  The Baby Boomers are right to an extent.  There are millenials who are fine (like myself).  I worked a lot harder than most people of my age and I already feel financially stable.  I also made sure that I did a degree which would definitely lead to a stable job (medicine).  Others who I grew up with are in a much worse state and this could be partially explained by their laziness and extravagant expenditures even when being dirt poor.

However, I disagree with Baby Boomers on a lot of things.  Advice such as “work hard, save money, don’t spend money on silly things” is obvious advice.  Young people are aware of these sentiments and it doesn’t explain how a whole generation is financially so well off and another generation is doing so badly.

The Baby Boomers got used to a different world where wages increased year on year for doing the same work.  They got used to a world where with a small amount of effort they could buy a house due to their increasing wages.  But what Baby Boomers don’t seem to realise is that their increasing wages had very little to do with anything that they were actually doing.  The reason that they became wealthy was actually due to technological advancements and massive economic growth during their working years.

As older generations don’t realise that this was actually the reason they became financially stable, they keep giving the same advice; “Do well at school, get a degree, get a job, work your way up the corporate ladder, save money, invest in a house…”.

The millennials that follow the classic advice are obviously not getting the same results as the older generations.  But what no one ever talks about is where wealth comes from and how it is created.

This is what is missing from the argument that is always played out.  Millennials (such as myself) should not be demanding house prices to be reduced, or more handouts from the government – because this is unrealistic and economically non-viable.  Millennials should be concentrating on creating new wealth by creating value.  This is the answer that they’ve been looking for.