-
Notifications
You must be signed in to change notification settings - Fork 0
/
Judgment Is the Decisive Skill.html
207 lines (207 loc) · 9.41 KB
/
Judgment Is the Decisive Skill.html
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
41
42
43
44
45
46
47
48
49
50
51
52
53
54
55
56
57
58
59
60
61
62
63
64
65
66
67
68
69
70
71
72
73
74
75
76
77
78
79
80
81
82
83
84
85
86
87
88
89
90
91
92
93
94
95
96
97
98
99
100
101
102
103
104
105
106
107
108
109
110
111
112
113
114
115
116
117
118
119
120
121
122
123
124
125
126
127
128
129
130
131
132
133
134
135
136
137
138
139
140
141
142
143
144
145
146
147
148
149
150
151
152
153
154
155
156
157
158
159
160
161
162
163
164
165
166
167
168
169
170
171
172
173
174
175
176
177
178
179
180
181
182
183
184
185
186
187
188
189
190
191
192
193
194
195
196
197
198
199
200
201
202
203
204
205
206
207
<html>
<head>
<link rel="stylesheet" href="styles2.css" />
</head>
<body>
<p>![[Naval-Ep26.mp3]]</p>
<p>
In an age of nearly infinite leverage, judgment is the most important
skill
</p>
<p>
<strong>Nivi:</strong> We spoke about specific knowledge, we talked about
accountability, we talked about leverage. The last skill that Naval talks
about in his tweetstorm is judgment, where he says, that “Leverage is a
force multiplier for your judgment.”
</p>
<p>
<strong>Naval:</strong> We are now living in an age of nearly infinite
leverage, and all the great fortunes are created through leverage. Your
first job is to go and obtain leverage, and you can obtain leverage
through permission by getting people to work for you, or by raising
capital.
</p>
<p>
Or you can get leverage permissionlessly by learning how to code or
becoming good communicator and podcasting, broadcasting, creating videos,
writing, etc.
</p>
<p>
That’s how you get leverage, but once you have leverage, what do you do
with it? Well, the first part of your career’s spent hustling to get
leverage. Once you have the leverage, then you wanna slow down a bit,
because your judgment really matters.
</p>
<p>
It’s like you’ve gone from steering your sailboat around to now
you’re steering an ocean liner or a tanker. You have a lot more at risk,
but you have a lot more to gain as well. You’re carrying a much higher
payload. In an age of infinite leverage, judgment becomes the most
important skill.
</p>
<p>
Warren Buffett is so wealthy now because of his judgment. Even if you were
to take away all of Warren’s money, tomorrow, investors would come out of
the woodwork and hand him a $100 billion because they know his judgment is
so good, and they would give him a big chunk of that $100 billion to
invest.
</p>
<p>
<strong
>Everything else you do is setting you up to apply judgment</strong
>
</p>
<p>
Ultimately, everything else that you do is actually setting you up to
apply your judgment. One of the big things that people rail on is CEO pay.
For sure there’s crony capitalism that goes on where these CEOs control
their boards and the boards give them too much money.
</p>
<p>
But, there are certain CEOs who definitely earned their keep because their
judgment is better. If you’re steering a big ship, if you’re steering
Google or Apple, and your judgment is 10 or 20 percent better than the
next person’s, society will literally pay you hundreds of millions of
dollars more, because you’re steering a $100 billion ship.
</p>
<p>
If you’re on course 10 or 20 percent of the time more often than the other
person, the compounding results on that hundreds of billions of dollars
you’re managing will be so large that your CEO pay will be dwarfed in
comparison.
</p>
<p>
Demonstrated judgment, credibility around the judgment, is so critical.
Warren Buffett wins here because he has massive credibility. He’s been
highly accountable. He’s been right over and over in the public domain.
He’s built a reputation for very high integrity, so you can trust him.
</p>
<p>
A person like that, people will throw infinite leverage behind him because
of his judgment. Nobody asks him how hard he works; nobody asks him when
he wakes up or when he goes to sleep. They’re like, “Warren, just do your
thing.”
</p>
<p>
Judgment, especially demonstrated judgment, with high accountability,
clear track record, is critical.
</p>
<p>
<strong
>Judgment is knowing the long-term consequences of your actions</strong
>
</p>
<p>
<strong>Nivi:</strong> Let’s define judgment. I would define it as knowing
the long-term effects of your decisions, or being able to predict
the long-term effects of your decisions.
</p>
<p>
<strong>Naval:</strong> It’s funny. My definition of wisdom is knowing the
long term consequences of your actions, so they’re not all that different.
Wisdom is just judgment on a personal domain.
</p>
<p>
Wisdom applied to external problems I think is judgment. They’re highly
linked. But, yes, it’s knowing the long term consequences of your actions
and then making the right decision to capitalize on that.
</p>
<p>
<strong>Without experience, judgment is often less than useless</strong>
</p>
<p>
Judgment is very hard to build up. This is where both intellect and
experience come in play.
</p>
<p>
There are many problems with the so-called intellectuals in the ivory
tower, but one of the reasons why Nassim Taleb rails against them is
because they have no skin in the game. They have no real-world experience,
so they just apply purely intellect.
</p>
<p>
Intellect without any experience is often worse than useless because you
get the confidence that the intellect gives you, and you get some of the
credibility, but because you had no skin in the game, and you had no real
experience, and no real accountability, you’re just throwing darts.
</p>
<p>
The real world is always far, far more complex than we can
intellectualize. Especially all the interesting, fast-moving edge domains
and problems, you can’t get there without experience. If you are smart and
you iterate fast, it’s not even you put 10,000 hours into something, but
you take 10,000 tries at something.
</p>
<p>
<strong
>The people with the best judgment are among the least emotional</strong
>
</p>
<p>
If you are smart and you have a lot of quick iterations, and you try to
keep your emotions out of it, the people with the best judgment are
actually among the least emotional. A lot of the best investors are
considered almost robotic in that regard, but I wouldn’t be surprised if
even the best entrepreneurs often come across as unemotional.
</p>
<p>
There is sort of this archetype of the passionate entrepreneur, and yeah,
they have to care about what they’re doing, but they also have to see very
clearly what’s actually happening. The thing that prevents you from seeing
what’s actually happening are your emotions. Our emotions are constantly
clouding our judgment, and in investing, or in running companies, or in
building products, or being an entrepreneur, emotions really get in the
way.
</p>
<p>
Emotions are what prevent you from seeing what’s actually happening, until
you can no longer resist the truth of what’s happening, until it becomes
too sudden, and then you’re forced into suffering; which is sort of a
breaking of this fantasy that you had put together.
</p>
<p>
<strong>Nivi:</strong> To try and connect some of these concepts, I would
say that, first, you’re accountable for your judgment. Judgment is the
exercise of wisdom. Wisdom comes from experience; and that experience can
be accelerated through short iterations.
</p>
<p>
<strong>A lot of the top investors often sound like philosophers</strong>
</p>
<p>
<strong>Naval:</strong> And the reason why a lot of the top investors, a
lot of the value investors, like if you read Jeremy Grantham, or you read
Warren Buffet, or you read up on Michael Burry, these people sound like
philosophers, or they are philosophers, or they’re reading a lot of
history books or science books.
</p>
<p>
Like what are they doing, shouldn’t they be reading investment books. No.
Investment books are the worst place to learn about investment, because
investment is a real-world activity that is highly multi-variate, all the
advantages are always being competed away. It’s always on the
cutting-edge.
</p>
<p>
What you actually just need is very, very broad-based judgment and
thinking. The best way to do that is to study everything, including a lot
of philosophy. Philosophy also makes you more stoic, makes you less
emotional, and so you make better decisions; you have better judgment.
</p>
<p>
<strong>The more outraged someone is, the worse their judgment</strong>
</p>
<p>
One simple thing is I see … I go out on Twitter and it seems like half of
Twitter is outraged at something at all times. You can go within someone’s
Twitter feed and get at least some semblance of what it must be like to be
in their head all the time.
</p>
<p>
The more outraged somebody is, I guarantee you, the worse their judgment
is. If someone’s constantly tweeting political outrage, and just see like
an angry person getting into fights, you don’t want to hand this person
the keys to your car, let alone the keys to your company.
</p>
</body>
</html>