--:-- Go positive and go first, and be constant in doing it. There may be no better formula for living the best life you could possibly live. That's a quote from Peter Kaufman, and that's what we're going to talk about today. Welcome to The Knowledge Project. I'm your host, Shane Parrish. This podcast is all about learning from others, mastering the best of what they've So you can use their lessons in your life. Peter Kaufman is someone you probably never heard of, and that's by design. He's the chairman and CEO of Glenair, an aerospace company that he's led since 1977. Over that tenure, he's compiled one of the best track records in business history. Peter's also the editor of Poor Charlie's Almanac, the definitive collection of Charlie Munger's wisdom. He was one of Charlie's closest friends for decades. Peter is also a personal friend. I've learned more from him in the past decade than nearly anyone else in my life. Despite all of his wisdom, Peter rarely gives public talks or interviews. He prefers it that way. One of his favorite sayings is that the whale that surfaces gets harpooned. In 2018, he made an exception. He gave a speech that was never supposed to be recorded. But Peter believed the message was too important to keep private. As he put it, it was critical for anyone interested in living a full, meaningful life with minimal regret. So he allowed that talk to be transcribed. And I'm so glad he did because what he shared that day might be one of the most valuable frameworks for living I've ever encountered. We're going to talk about some of the lessons from that talk today using a lot of Peter's ideas and thinking. The complete transcript and audio are reproduced at fs.blog with the written permission of Peter. So you can find a link in the description for this episode or just Google the multidisciplinary approach to thinking. Let's dive in. Peter opens his talk by asking why multidisciplinary thinking is important. The answer comes from the Austrian philosopher Ludwig Wittenstein, who said, to understand is to know what to do. What a great way of putting it. When you truly understand something, you don't make mistakes. Think about it this way. Mistakes come from blind spots. They come from a lack of understanding. So the more we understand, the fewer mistakes we will make. This is why Peter believes multidisciplinary thinking is critical because we understand more. The world doesn't organize itself into neat academic departments. Problems don't come with labels like economics or psychology or biology. They come unlabeled and interconnected. They're usually super messy. The financial crisis of 2008, for example, wasn't really a financial problem. It was a psychology problem. An incentives problem wrapped in a complexity problem. The range of specialists couldn't see it because they could only see the world through one lens. Peter illustrates the danger of such specialization with a Japanese proverb, the frog in the well knows nothing of the mighty ocean. We see this constantly in our world today. A brilliant engineer builds a complex product nobody wants because they don't understand human behavior. A talented marketer destroys a brand because she doesn't understand its history or its relationship with customers. A skilled investor blows up because he understands spreadsheets, but not his own cognitive biases. Each one is a master in one area, but struggles in the complex systems of life. They know the well, not the ocean. So Peter advocates for learning the big ideas from all the different disciplines. The person who understands the big ideas is more likely to see the connections that the specialists miss. They spot risks that don't show up in any single department's models. They notice when something that works is theory is about to fail in practice. But Peter admits the problem is practical. There's just too many fields. The books are too numerous and too thick. And you don't have time to master everything the way Charlie Munger did in his 99 years. So Peter found a shortcut. Picture a middle-aged man walking into a coffee shop in Southern California. It's early, before the morning rush. He's carrying a binder full of paper, several hundred pages. He orders his usual, finds his seat by the window, and opens the binder and begins to read. And he does this every morning for six months. Peter had discovered that Discover Magazine had 12 years of archives posted online. And every single month, they interviewed an expert from some domain of science and published a six or seven page article for a general audience. These weren't dumbed down summaries. They were the experts of their field, the cream of the crop, bringing their A-game, using their best stories and their clearest language to communicate the most important ideas in their work. So Peter printed all of them. Then he read them in what he calls index fund style, which means he read them all. He didn't pick and choose, just one after another, every single day for six straight months. This is the universe, he said, and I'm going to own the whole universe. And if he had been left to his own preferences, he admits he probably only would have read a few of them. A few would have piqued his interest. He never would have voluntarily read six pages on nanoparticles. But after he had completed his reading, that's exactly where he found some of his best ideas. Over those six months reading across unfamiliar domains, Peter started to recognize something in each seemingly unrelated article. That's exactly how it works over here in biology. That's exactly how this works over here in human nature. These discovery articles are super hard to find today. And this is one of the reasons that I actually created the Great Mental Models series, was to help people learn and apply the big ideas from physics, chemistry, math, economics, and more. And you have to know them all, because if you pick and choose, you're going to miss the parabolic ideas that nobody sees. Reading broadly showed him the biggest ideas were hiding in arcane places. Nobody else was looking It why index fund reading beats selective reading because it allows you to capture the information that most people miss But being multidisciplinary created a new problem How do you know which ideas are actually true? And Peter came up with a clever solution to this problem that drew on statistics. As he put it, a statistician's best friend is a large relevant sample size. And why? Because a principle derived from a large relevant sample size can't be wrong. The only way it could be wrong is if the sample size is too small or the sample itself is not relevant. So Peter tested every important idea against what he calls his three buckets, the three largest relevant sample sizes he could think of. Bucket number one was 13.7 billion years of the inorganic universe. This is physics, geology, chemistry, everything that isn't alive. And this was the largest sample size in existence. And bucket number two is 3.5 billion years of biology on earth. As a biological creature, this is directly relevant to us. And bucket number three is sort of the 20,000 years or so of recorded human history. This is the most relevant of all. It's our stories, our species, our nature. When a principle shows up consistently across all three buckets, when it's true in physics and true in biology and true throughout human history, you can trust it completely. As Peter says, you see these things lined up like three bars on a slot machine, and boy, do you hit the jackpot. Peter tested his new framework with an ambitious question. Is there a simple two-word description that accurately describes how everything in the world works? And Peter says yes. And he proves it by checking it across all three of his buckets. So let's start with physics. Newton's third law states that for every action, there's an equal and opposite reaction. If you push down on a table, the table pushes back with equal force. If you push twice as hard, the table will push back twice as hard. This has been true for billions of years. So what's the pattern? Reciprocation. But not just any reciprocation, perfectly mirrored reciprocation. Now we turn to biology. And Peter references Mark Twain's observation that a man who picks up a cat by its tail will learn a lesson that he can learn in no other way. And I don't recommend doing this. Please just imagine it in your head. But if you pick up a cat by its tail, it will undeniably scratch you. If you treat the cat disagreeably, you get disagreeable back. But if you were to gently pick up the same cat, stroke it, pet it, it will start licking your hand soon after. Agreeable in is agreeable out. So what is this? This is mirrored reciprocation in action. And next we can turn to the third bucket. And Peter observes that your entire life, every interaction you've ever had with another being is merely mirrored reciprocation. And I know you're probably thinking it can't be this simple. And Peter sort of anticipates this objection. So he tells the audience, it is this simple. It doesn't mean it's not sophisticated. This is a very sophisticated model we just derived, isn't it? We looked into the three largest sample sizes that exist, the three most relevant, and they all said exactly the same thing. Do you think we can bank on that? Well, 100% we can bank on that. Simple does not mean simplistic. A principle verified across 13.7 billion years of evidence is as solid as knowledge as we can get. And Peter uses what he calls the elevator example to illustrate mirrored reciprocation. So you're standing in the front of an elevator, the door opens and inside walks a stranger you've never met. So you step in. You have three choices in that moment. Choice number one is you can smile and say good morning. Peter claims that in California, 98% of the time a stranger will smile and say good morning right back. Choice number two is you can scowl and hiss at the stranger for no reason. And 98% of the time, the stranger will scowl and hiss back at you. And choice three is you do nothing. And this is the choice that most people make. And you almost always get nothing back. Whatever you put out, you get back. But, and this is the crucial insight, you have to go first. Peter connects this to a pattern he sees everywhere. This is why these bars are full of people at 2am drowning their sorrows. They're knocking down these drinks. When's the world going to give me something, man? When am I going to get mine? Well, what did you ever do? Did you get up in the morning and smile at the world? No, you either did nothing or you scowled and hissed at the world and you're getting back exactly what you would expect to get back if you understood how the world really works. So why don't more people go positive first? Daniel Kahneman himself answered this and it's what won him the Nobel Prize. The human brain weighs potential losses far more heavily than they do equivalent gains. we'll sacrifice 98% upside to avoid a 2% chance of rejection or embarrassment. Peter also quotes baseball legend Lou Brock, show me a man who's afraid of appearing foolish and I'll show you a man who can be beat every time. Or you can think about this the same way that I do. So much advantage in life comes from being willing to look like an idiot in the short term, willing to be uncomfortable. My friend Harley Finkelstein has a great way of framing this too. he calls it cringe tolerance. And it's something most people can't get over. If you can get over the momentary fear of looking like an idiot, the uncomfortableness of that, then you can accomplish amazing things. For example, I send a lot of cold emails and text messages to anyone I'm interested in having on the show and learning from. And it works. And sure, I get rejected a lot. But I expect that going in and the amazing connections I develop are more than worth the few who don't reply. And Peter tests another question against his three buckets theory. What is the most powerful force in the world that we can harness? In the inorganic universe, he cites Einstein calling compound interest the most powerful force in the universe, the greatest mathematical discovery of all time, and the eighth wonder of the world. And Einstein observes that those who understand compound interest get paid by it and those who don pay for it Peter working definition of compound interest is dogged incremental constant progress over a long period of time So check bucket two, what about biology? Well, what's the most powerful force in the 3.5 billion years of life? Evolution. And how does it work? Dogged, incremental, constant progress over a very long time frame. And what about human achievement? Well, we have winning. We have Olympic gold medals. We have mastering an instrument, learning a language, and building Berkshire Hathaway. What's the formula? It's the exact same one. Dogged, incremental, constant progress over a long period of time. Three buckets, same answer. This is jackpot, compound interest. If compounding is such a powerful force, why doesn't everyone harness it? And Peter says it's because humans hate being constant. The picture he paints is very vivid. or the functional equivalent of Sisyphus pushing his boulder up the mountain. You push it halfway and you go, I'll come back and do this another time. And so the boulder rolls back down. I've got this great idea. I'm going to really work hard on it. And you'll push it halfway up. And, ah, you know, I'll get back to this next month. That is the human condition. And this is very in strain. Every interruption to constant progress breaks compounding. You fall off the exceptional curve and onto a linear one, or worse, you start sliding backwards. And when Peter asks how many people are truly constant, he names two from his own experience, Warren Buffett and Charlie Munger. I'm quoting him here. He says, everybody wants to be rich like Warren Buffett and Charlie Munger. And I'm telling you how they got rich. They were constant. They were not intermittent. I love that line. They were not intermittent. I use it as a lens of my own life now asking myself, where am I being intermittent and not constant? The workout routine that doesn't stick, the journaling habit that fills pages in January every year and goes silent by February, the book you were definitely going to start or finally finish, the language that you were absolutely going to learn and get better at before your trip. Each one of those is like a boulder partway up the hill that you walk away from. And then what happens? Well, what's humbling is that we know the math. We understand compounding. We can explain it to others, but knowing isn't the hard part. Being constant is the hard part. The line is haunting because it references success. It's not about intensity. It's not about that big push, that heroic effort, that all-nighter. It's about the thing you did yesterday and the day before and the day before that. It's all about what you'll do tomorrow and the day after that, mostly with no fanfare and no applause. You'll be doing it alone most of the time. Here's the key lesson. Intensity is overrated and consistency is underrated. Peter also believes that all humans are fundamentally identical in what they want. He asks his audience, how many of you want to be paid attention to, listened to, respected? How many want meaning, satisfaction, and fulfillment? The sense that you matter? How many want to be loved? and every single hand goes up. Everybody's exactly the same, Peter observes. The only difference is the strategy that they're employing to try to get to fulfill those needs. He illustrates this with what he calls the strategy that dogs use. In Peter's telling, your dog goes to the fence and tells the neighbor's dog, can you believe how easy it is to manipulate human beings and get them to do whatever you want them to do for you? And the neighboring dog agrees. I know, it's a piece of cake. The secret. All you have to do is every single time they come home, you greet them at the door with the biggest unconditional show of attention that they've ever gotten in their whole life. And you only have to do it for about 15 seconds. And then you can go back to doing whatever you were doing before and completely ignore them for the rest of the evening. However, you have to do this every single time they come home. And the result, the human will do anything for that dog. It will feed it. It will walk it. It will care for it completely. All for 15 seconds of genuine attention. Peter's lesson here is all you have to do if you want everything in life from everybody else is first pay attention, listen to them, show them respect, give them meaning, satisfaction, and fulfillment. Convey to them that they matter to you and show you love them. But you have to go first. And what are you going to get back? You're going to get back mere reciprocation. We did an episode on this where Mary Kay Ash had this amazing framing that I think about all the time now. And she said, everyone has an invisible sign hanging from his or her neck saying, make me feel important. Never forget this message when you're working with people. Peter did a demonstration for his audience using an $8 crystal ball from Amazon. He offers to do a psychic reading for anyone in the room, a complete stranger, and tell them what they've been searching for for their entire life. And his reading goes like this. Your entire life, you've been on a quest, an odyssey, a search for that individual. you can 100% absolutely and completely trust, but who's not just trustworthy, but principled and courageous and competent and kind and loyal and understanding and forgiving and unselfish. And of course, he's right every time because that's what every single one of us is looking for. So Peter adds a second prediction. If you ever think you may have encountered this person, you're going to probe and probe and test and test to make sure they are real, that you're not being fooled. And the paradox is that it looks like you're probing for weakness, but you're not. You're probing for strength. And the worst day of your life is if instead of strength, you get back weakness. And now you feel betrayed. You've got to start your search all over again. This brings Peter to what he calls the 22-second course in leadership. There's no business school required, no books, no seminars. The entire course, Take that list of things that we are searching for. Person who is trustworthy principled courageous competent loyal kind understanding forgiving and unselfish Take that list and in every single one of your future interactions with others be that list. Hang that invisible sign that says, make me feel important around everyone you meet as a reminder and go all in first with somebody and they will go all in with you too. Not because you manipulated them into it, because you became what they're searching for their whole lives. As Peter put it, most people spend all day long trying to get other people to like them. They do it wrong. You do this list, you won't be able to keep the people away. Everyone's going to want to attach to you. The next big idea Peter talks about is the biggest blind spot in business, people who are proud of their win-lose relationships. We see this everywhere where executives sort of brag about crushing suppliers or locking employees into unfavorable contracts. Peter frames this through Game 3. You take game theory and you insert the word lose in any scenario in game theory. And what do you have? A suboptimal outcome. What happens when you insert win-win in game theory scenario? What do you get? You get the optimal outcome every time. Achieving win-win requires understanding what Peter calls the basic axiom of clinical psychology. If you could see the world the way that I see it, you'd understand why I behave the way that I do. And so two things follow from this. first, to understand someone's behavior, you must see the world as they see it. Second, to change their behavior, you must change how they see the world. Peter gives a business example. Most employees see the world as employees. But what if you could shift their perspective to that of an owner? Do you think that's going to change how they behave? It totally changes how they behave. Employees don't care about waste. Owners care about waste. Employees don't self-police our place. Owners do. But if you want to listen to a case study on this example, check out the outliers episode with Les Schwab. He built a multi-billion dollar business selling tires by treating his employees like owners. His businesses out-competed every competitor simply because his employees cared more. Peter has a formula for ensuring you have zero blind spots. He says, the secret to leadership is to see through the eyes of all six important counterparty groups and make sure that everything you do is structured in such a way to be win-win with them. So here are the six, your customers, your suppliers, your employees, your owners, your regulators, and the communities you operate in. When I look back at some of the outliers episodes we've covered over the past year, I see repeatedly that the businesses they built almost uniformly had win-win relationships with all of these counterparties. And when they misstepped, their businesses stumbled. It's almost always because they reneged on one of these relationships. So if you master these, Peter argues, how many blind spots are you going to have? Zero. How many mistakes are you going to make? Zero. The next point Peter makes is about simplicity. Most people assume complexity is a signal for sophistication. And Peter argues that Albert Einstein disagreed. According to Peter, Einstein listed five ascending orders of cognitive prowess. At the bottom, the lowest level was smart. And then came intelligent. That was the second lowest level. and then you had brilliant and then genius. However, there is one level above genius, and that's simple. Why does simple beat genius? And Peter gives an epithetic answer because you can understand it. He contrasts a book by Spinoza on ethics, undeniably written by a genuine genius, but it's largely incomprehensible to 99% of us. He compares that with the principles he had just outlined to his audience in less than 30 minutes. Mere reciprocation, go positive and go first. dogged, incremental, constant progress. Everyone understands every word of his talk. Hardly anyone understands Spinoza. These ideas are simple enough to understand immediately and practical enough to apply today and every day. And that's not a weakness. That's the highest form of thinking. Peter grounds all of this in a stark reality. You have one lifetime. It's finite and it matters. And when something is both finite and important, opportunity costs must govern your decisions. Choosing option A means not choosing option B, C, D, or E. You have to pick carefully. So how do you want to spend your life? Peter's observation, most people spend it fighting with everybody around them. He's just explained how to avoid that. And in exchange, you get a celebratory life instead of an antagonistic fighting one. He cites an African proverb. If you want to go quickly, go alone. If you want to go far, go together. So his advice, live your life to go far together. Don't live it to go quickly alone. The alternative is becoming Ebenezer Scrooge and reaching the end of your life with wealth, power, fame, but wanting a do-over because you realize at the end of your life, I didn't live my life right. I don't have what really matters. And so the question is what really matters? And to Peter, it's to have people pay attention to you, listen to you, respect you, show you that you matter and to love you and have it be genuine. The talk closes with a Turkish proverb, No long is road with good company. The essence of a well-lived life is to surround yourself with good company as often as possible. But you have to earn that company. You have to deserve it. You can't buy good company. This reminds me of something that Charlie Munger said. To get what you want, you have to deserve what you want. The world is not yet a crazy enough place to reward a whole bunch of undeserving people. In Peter's words, this is my strategy for getting those five things. You can develop your own strategy, and I hope it involves going positive and going first. Go positive, go first, and be constant in doing it. There may be no better formula for living the best life you could possibly live. Thanks for listening. I'll see you next week.
