Have you ever read something that fundamentally changed the way you view the world?
These books all have a telltale sign — not only do you want to read them again, you have to read them again. Because they’re not easily summarized, the ideas are woven in a way that sends you into rabbit holes of thought, and the book seems completely different with each read.
As follows is the list of my favorites that changed the way I viewed the world forever.
Zero to One – A Note On Startups, or How to Build the Future
Peter Thiel — angel investor to Facebook, Paypal co-founder, and serial entrepreneur — taught an entrepreneurship class at Stanford. Blake Masters — one of his students — started sharing notes from the class online. The notes went viral and the two turned them into a book.
The concept of going from zero to one is about making vertical progress, which means creating new technology that isn’t just an incremental improvement.
We’ve become complacent. We experience rapid technological advances in the 20th century, tons of vertical progress, which led us to become “indefinite optimists.” We saw the world advancing, from our individual perspectives, more or less on its own. This caused us to continue to believe things would get better without exactly knowing how they’d get better.
We stopped looking for secrets — about people, about (non IT) technology, about society.
We stopped being definite optimists — people who made bold, definite, long-term plans to move business and society forward, e.g., the space race to Steve Jobs.
The smart bet on our future is to put money and effort into those who want to create zero to one technology.
Some of my favorite ideas from the book are below.
Competition destroys profits
Thiel rails against the idea that competition is healthy. Instead, he says that you should seek to create a monopoly business — not one with a bureaucratic stranglehold, but a technological one, a branding one, a naturally derived one.
Last mover advantage
Being first to market isn’t always best. Instead, seek to be the last move in the market with a superior monopolistic edge, e.g., Facebook wasn’t the first social media company, but it became the social media company.
Definite optimism
Put a large majority of your eggs in one basket, watch the basket for years, and put stake in something long-term. Try to get really really good at something and hope that something is valuable.
Power Law
Hedge fund investors invest, for example, in ten companies with the hopes that maybe one pays off so well it pays for all the other failed investments tenfold.
The power of the power law is represented by the fact that venture-backed companies are very very very low in number but account for a disproportionate amount of GDP. This is a result of investors hunting for innovative companies with 10x potential.
Power laws and ‘winner take all’ effects are a feature of distribution across a number of different examples (sorry, the 1% will always exist).
When you see the world through power laws, exponential > linear, 80/20 , etc, the world makes a little more sense.
Favorite Quotes:
“If your goal is to never make a mistake in your life, you shouldn’t look for secrets. The prospect of being lonely but right—dedicating your life to something that no one else believes in—is already hard. The prospect of being lonely and wrong can be unbearable.”
“All Rhodes Scholars had a great future in their past.”
“In the most dysfunctional organizations, signaling that work is being done becomes a better strategy for career advancement than actually doing work (if this describes your company, you should quit now).”
The INCERTO – The Bed of Procrustes, The Black Swan, Fooled by Randomness, Antifragile, and Skin in the Game
A quote a reader provided for the back cover of Taleb’s most recent book — Skin in the Game — sums Taleb up perfectly.
“The problem with Taleb is not that he’s an asshole. He is an asshole. The problem with Taleb is that he is right.”
Taleb has made a career of being right when other people were wrong. In the years leading up to the financial collapse, he warned his colleagues of the hidden systemic risk in the market.
The bet he made was based on the phenomenon known as a black swan. Black swans are basically improbable events that happen in the tails of a normal distribution.
Taleb argues that these tails are actually much larger than the standard Gaussian distribution most economists, traders, bankers, government officials, financial journalists and the like use to make their decisions.
These ‘fat tails’ indicate that these black swan events, although rare, happen more regularly than one would think. The more advanced and complex the world becomes, the fatter the tails.
Also, mechanisms used to smooth out volatility in markets — or in anything really — increases the likelihood of “tail risks.” A good analogy for this — if you try to prevent small brush fires, even larger fires will occur because occasional small fires clear that brush.
His entire work focuses on probability, risk, and how we should interact with both make smart decisions in systems we may not ever understand.
These works are difficult to separate from one another. You should read all of them several times. In fact, this is a volume of books you could read once per year for the rest of your life and learn something new.
Difficult to categorize, I’m just going to highlight some of the best ideas and concepts I’ve learned from these books.
Survivorship bias
We only see the winners of a given field or industry. We also attribute their success to certain traits they have when chance could’ve played a large role in their success. The losers — the ones who followed the same steps as the winners and caught bad luck — are erased from the story, giving you the impression the winners were destined to win when they weren’t.
The Green Lumber Fallacy
A trader who successfully traded green lumber believed the lumber was actually the color green when the term green had to do with the freshness of the lumber. The key here – he didn’t need to know the intricate details of wood to trade it. He just needed useful trading heuristics — rules of thumb developed over time through experience.
Inverted Arrows
We tend to look at certain paths backward when the truth is the reverse. Societies get wealthy first then education improves, not vice versa. We make technological innovations through tinkering first then universities take the credit. Birds evolve mechanisms to fly then we explain them in detail as if they read a book on “how to fly.”
Skin in the Game
The concept of skin in the game means you should carry disincentives for your actions because without them you can harm a lot of people. You shouldn’t be a warmonger if you won’t go to war yourself. You shouldn’t fragilize the economy, suffer no downside, get a multi-million dollar bonus, and then get appointed to lead the recovery effort. Most of our problems in society stem from rent-seeking and risk transfer, which are products of no skin in the game. People with asymmetrical access to resources or information jump through loopholes that transfer the risk onto the masses, e.g., the normal taxpayer bails out the banks.
Irrationality rationalized
Taleb hates people who make conclusions without putting them into the context of complex systems. Take the idea of loss aversion — people are more sensitive to losses than gains. And mental accounting — people separate money into buckets for different situations. According to a behavioral economist, these behaviors are ‘irrational,’ but in a complex domain or life, they’re not, because the goal is to “keep from going bust.” Loss aversion and mental account don’t make sense in one variable experiments, but they make a ton of sense in real life.
The “Intellectual Yet Idiot”
The IYI doesn’t understand anything beyond the first order effect of an action. They’re the type that sees the step of “remove a dictator,” without seeing the natural consequence of “create a terror vacuum.” They opt to do something for the sake of doing something when often leaving things the way they are works better, e.g., try to smooth out the economy to have no volatility, thus creating even more risk. The IYI is the arrogant intellectual who never comes to the conclusion that it might be his or her thinking that is off, not everyone else’s. You can blame the IYI for Brexit, Trump, and the rise of populism. People are fed up with these experts who are insulated from the real world consequences of their ideas and have no clue what they’re talking about.
Antifragility
Fragile = glass. You introduce volatility — you drop it — it breaks.
Robust = rocks. You introduce volatility — you drop it — it doesn’t care.
Antifragile = evolution. You introduce volatility — chaos, food chain, mutations, selection — and it loves it.
The ‘fragalistas’ harm the system by trying to eliminate randomness and controlling what shouldn’t be controlled. The market is antifragile because individual successes and failures push the market forward — trying to eliminate failure in the market is counterproductive because the market needs individual failure as a filter to produce the top companies, products, and industries.
To become more antifragile — construct your life in a way that likes volatility but doesn’t expose you personally to ‘blowing up.’ Examples include low-overhead test businesses, writing books (can’t sell negative books), barbell investing (save 90 percent of your savings very conservatively and aggressively speculate with ten percent of it), randomly fasting, putting your muscles through stress (volatility) through exercise.
For society — localize, decentralize, basically the opposite of globalization and one overarching government to rule all nations and nations with overarching governments to rule all states.
I have to stop listing my favorite ideas because it would become a book. Read the whole series.
Favorite Quotes
“The irony of the process of thought control: the more energy you put into trying to control your ideas and what you think about, the more your ideas end up controlling you.”
“Further, my characterization of a loser is someone who, after making a mistake, doesn’t introspect, doesn’t exploit it, feels embarrassed and defensive rather than enriched with a new piece of information, and tries to explain why he made the mistake rather than moving on. These types often consider themselves the “victims” of some large plot, a bad boss, or bad weather. Finally, a thought. He who has never sinned is less reliable than he who has only sinned once. And someone who has made plenty of errors—though never the same error more than once—is more reliable than someone who has never made any.”
“Trust none of what you hear, half of what you read, most of what you see.”
The Meditations by Marcus Aurelius
The author Ryan Holiday — rightfully credited with bringing stoicism to a modern audience — introduced me to this book.
Imagine a book that had every answer to every problem in the history of ever.
The Meditations is that book. I read it every time I feel upset, slighted, anxious, neurotic, or any of the other complimentary negative emotions.
Marcus Aurelius wrote the meditations as prescriptions to himself. He wanted to learn how to live.
And how do you learn how to live? According to Aurelius and other Stoics, you have to take full responsibility for your reaction to circumstances.
Good and bad are just labels. They aren’t intrinsic to anything. It’s on you to keep yourself untroubled in a world seemingly filled with trouble.
Stoicism applies cold rationality to the world. You can see this when Aurelius describes food this way:
“How good it is, when you have roast meat or suchlike foods before you, to impress on your mind that this is the dead body of a fish, this the dead body of a bird or pig.”
Or sex this way:
“Something rubbing against your penis, a brief seizure and a little cloudy liquid”.
With that segue, let’s look at some of the core ideas I love. Actually, the quotes themselves kill two birds — the core idea and the quote itself.
Quotes/Concepts I Love
“Everything we hear is an opinion, not a fact. Everything we see is a perspective, not the truth.”
“If you are distressed by anything external, the pain is not due to the thing itself, but to your estimate of it; and this you have the power to revoke at any moment.”
“The best revenge is to be unlike him who performed the injury.”
“If it is not right do not do it; if it is not true do not say it.”
“I have often wondered how it is that every man loves himself more than all the rest of men, but yet sets less value on his own opinion of himself than on the opinion of others.”
“Whenever you are about to find fault with someone, ask yourself the following question: What fault of mine most nearly resembles the one I am about to criticize?”
I could go on. As a writer, it pains me to say this book contains single aphorisms more profound than the sum total of everything I’ve ever written. But that’s okay because I’m only focusing on how good I can become. I’ll let the world praise or quibble with the output.
What About You?
What are some of the books that altered the course of your life or gave you profound insights? Let me know in the comments.