July 28, 2014

Mental Model: Social Loafing

If you were starting a project or business, common sense would tell you that you could produce 5x as much output if there were five people working on your goals than if there were just one person.  If you are running a counseling program, ten counselors should be able to do 10x the work as a single counselor, right?  If you are starting a candle company, twenty employees should be able to produce 4x the work as five employees, right?  If you are a mom cleaning out a garage, you should get more do … [Read more...]

The Strap on my Montblanc Star Chronograph Automatic Broke (Another Lesson in the Time Value of Money)

Montblanc Star Chronograph Automatic Watch

When I was 22 years old, or thereabouts, I bought a Swiss made Montblanc Star Chronograph Automatic stainless steel watch from Borsheim's during the Berkshire Hathaway shareholder meeting.  I wanted something that would last, God willing, for the rest of my life and would remind me of when I was young, just starting out, and successfully building my first businesses and got to hear Warren Buffett and Charlie Munger speak to me as an owner of one of the greatest companies in history.  It was an e … [Read more...]

Pornography Study Failed After Researchers Couldn’t Find a Single Man Who Hadn’t Viewed X-Rated Material

Pornography Statistics in the United States and World

Human behavior fascinates me to no end.  Today, I was reading through yet another batch of research papers and studies and one of them made me do a double-take.  Scientists in the United Kingdom wanted to research whether or not pornography degraded women by changing how men viewed them or treated them. The first task was to create a control group of men who had never looked at porn - and the scientists could not find a single man in his 20s that qualified. As Professor Simon Louis Lajeunesse … [Read more...]

Mental Model: Goldovsky Errors

Why We Make Mistakes by Joseph T. Hallinan

How can a dead body hang in a tree for nearly 14 hours and not be noticed by a town?  How can experts at one of the world's top scientific institutions miss an easy-to-spot mistake for almost 30 years yet a 5th grader spots in 2008 after only a few seconds?  Why can't you remember the name of someone from your kid's karate class if you run into them in the bank or supermarket? Congratulations!  You just discovered Goldovsky errors and how they play into context. There are special types of m … [Read more...]

Mental Model: The Dunning–Kruger Effect

Have you ever wondered why some people come to erroneous conclusions despite all the counter evidence, overestimate their abilities, and constantly make mistakes whereas other, more intelligent people often claim ignorance and throw things on the "too hard" pile? I mean, the reality is that 49.99% of people must be below average at any given time at any given skill.  Yet, studies have shown that 90% of Swedish drivers believe they are above average, which is absurd.  Most people believe they a … [Read more...]

Here Is One of My Secrets to Making Money (Or, How I Once Bribed Women to Code for Me with Diamonds, Rubies, and Chanel)

Diamond and Ruby Bracelet with Bottle of Coco Chanel Mademoiselle Perfume

The Secret: Strike Deals Where Everyone Has Limited Downside and Harness the Super Power of Incentive Some of you have been writing to me privately and asking about the early days when we started out and were trying to build our companies.  I thought it would be useful to share some of the things we did during that time that worked out well ... and maybe I'll even talk about those things that didn't work out so favorably.  I hope you find it useful in your own endeavors. When Aaron and I s … [Read more...]

Response to What Is Probably the Most Ignorant Message I’ve Received In 10 Years of Writing Finance Articles

A reader named Medusa wrote me and, to keep it short, explained that I shouldn't believe people should be rich because the Bible is against rich people, that I was going to die a miserable, lonely old man with no one who loved me because I saved my money instead of spending it, and that after reading a profile I wrote based on Federal Reserve data of the Capitalist Class in the United States, she was starting to consider the possibility that the rich were nothing but oppressors who steal from … [Read more...]

Voltaire the Investor

Bust of Voltaire

How One of History's Greatest Thinkers Amassed a Fortune One of the people upon whom I have based the way I live my life is Francois Marie Arouet de Voltaire, or Voltaire for short. Born on November 21st, 1694, he passed away on May 30th, 1778 after a long and extraordinarily successful life pushing for social reform and a more enlightened society, harshly criticizing superstition and slavery.  Besides the fact that we can thank him for heavily influencing the American Revolution and later, … [Read more...]

Why the iPhone Will Continue to Dominate the Smart Phone Market Even if It Doesn’t Have the Biggest Screen or Fastest Processor

iPhone Versus Other Smart Phones

It All Comes Down to the Existing Investment Consumers Have Made in their iTunes Library of Music, Movies, Games, Apps, and Television Shows It seems that a handful of tech folks and business bloggers - and, in fact, even my own brother - don't seem to understand that the reason people choose the iPhone over other smart phones, even if those other smart phones have bigger screens, more memory, and non-restricted applications, is because tens of millions of consumers now have a vested … [Read more...]

The Concept of Mental Models Goes Back Thousands of Years

You are only playing a single note. You should find others who can teach you how to use the other holes in your intellectual flute. - Zi Yu accuses Prince Mou of having a one-track mind, Zhou Dynasty When Charlie Munger talks about the importance of "mental models", he is espousing the same wisdom shown by Zi Yu thousands of years ago. The reality of the world is that the richest, most powerful, most influential, and most famous are often not the most intelligent.  Instead, they have … [Read more...]