Shortly after Blue Fairy gives life to the eponymous wooden puppet in the 1940 classic animated film Pinocchio, she instructs him that he must, “Always let [his] conscience be [his] guide”. Were she a rationalist, she might have added an important addendum: “And make decisions based upon objective, high-quality, third-party-recorded data to remove your own bias as much as possible or else your decisions will be clouded by quirks of neurology. That new brain I gave you isn’t all it’s cracked up to be.”
Taking this approach lets you identify what is happening, rather than what you think is happening. It can change your life. It can change your business. It can give you freedom and affluence. That’s the reason I constantly remind myself of the twin gospels of Galileo (“Measure what is measurable, and make measurable what is not so.”) and Henry Ford (“That which can be measured can be managed.”); why Aaron and I love data. Whether it’s daily sales, annual dividend income, our share of look-through earnings of a particular business, measuring recipes by gram weight on a food scale, tracking our calories, comparing our daily steps, keeping tabs on our Internet usage for efficiency, home energy use patterns, minutes spoken on a phone every month, average text messages by line, hours logged in Civilization V, or average miles per gallon on the car, if it can be tracked, odds are we track it. We also review it periodically to find areas we can improve. Doing this empowers us to make trade-off decisions about what we actually want rather than what we want right now. Over time, things get better and better because inertia does most of the work. It gives us a mechanism to structure our lives so that we can be certain every night when we get into bed, we’ve ended the day, to borrow a sentiment, “a little richer, a little wiser”, and having done something we enjoyed.
This philosophy makes it easier to take control of situations because you can step outside of yourself and monitor your progress toward your primary mission as if you were a third-party. When you learn to think about objective data, you remember the lesson Benjamin Graham gave seventy years ago: “Criterion based upon adjectives are necessarily ambiguous.” You no longer say, “I type pretty fast”, you instead say, “I type around _____ words per minute with ___ percent accuracy.” You no longer say, “I should keep a little money in the bank for emergency funds,” you say, “Based on a worst-case scenario, I should have at least $_____ in the bank at all times to survive a six-month period with no income of any kind.” You no longer say, “I think sales were up around 20%”, you say, “We increased by $______ over last year, which is exactly ___%. The increase came ___% from higher volume, ___% from per product revenues, and ___% from increased customer conversions, with a ___% adjustment for currency translations.” Good data is like turning a light on the room when you are fumbling with a puzzle. It makes everything so much easier.
Your fellow man benefits, too. That clarity makes you a better citizen, a more effective leader, and less susceptible to manipulation because you’re working from a more accurate premise. Let’s look at just a few real-world examples.
Examples of How Data Can Reveal a Different Reality Than Perception Might Lead One to Believe
We’ve talked at least two dozen times over the past 5 years about the fact that murders, assaults, rapes, teen pregnancies, and abortions are near all-time lows. Yet, people don’t believe it because there is now widespread media so an event that would never have been noticed in the past is reported around the globe in real-time. In other words, the frequency of events is declining substantially but the frequency one hears about the events has increased, leading to a perception that is factually inaccurate. That can be a source of comfort; knowing that things are actually better and improving, not worse and declining.
In particular, the gun debate here in the United States is rife with irrational, non-data-driven beliefs, many of which we discussed in a post called Lies, Damned Lies, and Statistics. In fact, gun deaths are the lowest they have been in generations.
Another is the idea that white, middle class students are somehow disadvantaged when it comes to college financial aid. The real world data leads one to the opposite conclusion. Despite making up only 62% of the higher education student population, white students receive 76% of all merit-based scholarship. When you look beyond merit-based scholarship to need-based scholarship, minority students received more need-based assistance not because they were minorities but because their families were significantly poorer; race was inconsequential to how the checks were allocated, it was all about your family’s taxable income. To be specific, “83.0% of African-American students” and “79.6% of Latino students” were low-income. For the white students, only 55.3% were considered low income in the financial aid based calculations. Even among the poor, this advantage existed with poor white families earning $22,217 compared to $20,053 for poor minority students. (Source PDF)
How are you doing economically? A lot of people don’t have a clue where they fall even though you can pull the Federal Reserve and Census data to determine where your income and net worth put you in relation to your fellow citizens. For example, if the head of your household is 45-54 years old and you make less than $5,083 per month, you are in the bottom half of society when it comes to income; if you have a net worth of less than $117,900 you are in the bottom half of society when it comes to equity.
How are you doing health-wise? A lot of people have no idea what 2,000 calories looks like. As we discussed last month, this, in turn, has created a reference problem where obesity has become so common, many people have become desensitized to the point they believe severely fat people are normal or only slightly overweight; they’re literally unable to tell you what a healthy body size looks like! I didn’t mention it at the time but a couple of weeks prior, a study was published in the British Journal of General Practice that showed this extends to parent-child relationships. The situation is so bad it’s almost hard to believe. For a child in the 98th weight percentile – something that would have been considered grotesque and worthy of intervention not that long ago – an unfathomable 80 out of 100 parents believed the kid was normal weight. Because the parents are ranking their kids based on other kids and not on an impartial, mathematical standard, they are like a ship lost at sea, floating without a northern star to guide them. It’s like living in a mad house these days. If you’re a 5’4″ woman, and you weigh 175 pounds, you are not overweight. You are not a little chunky. You are not thick. You’re medically obese. No matter what you tell yourself, you will die younger than you should. Your life will be worse than it otherwise would have been. You will be paid less. You will be treated more poorly due to subconscious, evolutionary prejudices that happen before the conscious mind can even be aware it’s happening. (Doubt it? Ask someone who lost a large amount of weight, particularly a woman, how differently the world treated her before and after the transformation.) Just as relevant, there is a wide body of academic evidence with studies like this one going back decades that show overweight men and women, on the whole, do not have slower metabolisms, they just suck at math. They consistently under-estimate their own caloric intake and eat far more than they think they do. It’s a data problem. They aren’t measuring correctly.
Data can reveal all of the incorrect assumptions from which you might be operating. As odd as it seems, some truths are just outright counterintuitive, like boiling water freezing faster than cold water. Imagine your daughter in London came to you and said, “I want to start a business selling sand to Saudi Arabia!” or your son in Sydney called you and excitedly declared, “I want to start a farm that sells camels to Saudi Arabia!”. People operating from assumption wouldn’t realize this isn’t as crazy as it sounds because Saudi Arabia already imports its camels from Australia and most of its construction sand from England. It seems absurd on its face but Australian camels have a higher ratio of fat, making them better for culinary consumption, and English sand is better suited as a construction material, making it superior for building.
People today lament how they are busier than ever, but it’s not true. The average person living in the United States has an extra 5 hours of leisure time per week than their parents and 40 more hours of leisure time per week than their great grandparents. You can thank the lowly washing machine, electric stove, microwave, vacuum cleaner, coffee maker, and computer for that. In fact, the washing machine by itself has probably done more to increase human happiness than anything Congress has done in the past 50 years. It changed the world. Sadly, as most investors or employees with ties to media can tell you, the average American abuses this gift. He or she now spends an unfathomable 34 hours per week watching television and 6 hours a week watching DVR or other recorded shows, for a total of 40 hours a week. All of the gains given to the typical person as an inheritance on the efforts of our ancestors didn’t go to living a better, more productive life, but rather sitting on a couch and watching fake people live fake lives. They are completely blowing the 27,375 day trust fund they’ve been given. They could be leveling up their skills like a video game character; learning to cook, traveling, picking up another language, working on an invention, developing a hybrid plant, running, lifting weights, swimming, beekeeping, writing a visual novel for release on Steam, or even learning about history and performing in in accurate reenactments of Civil War battles; anything that made them, as a person, better.
Sure, watching television is fine occasionally – I, myself, make no secret of my must-be-managed addiction to Korean dramas and even occasionally fall off the wagon to binge for an entire afternoon (what can I say? Every once in awhile, I’m a sucker for love stories that revolve around corporate fights for shareholder control among closely held family corporations … what other culture routinely features grandparents extracting double-digit interest rates from their grandchildren when they make a mistake in inventory purchases, blowing through their working capital or demanding all inherited common stock plus accumulated past dividends back as punishment for marrying someone deemed non-suitable for the family’s social status?) – but we’re talking 2,080 hours per person, per year. That is an insane way to waste your life. A married couple committing this sin misemploys 4,160 hours per year. There is probably no worse, widely accepted way, to obliterate the potential of your two buckets. It’s nearly impossible to get ahead in life if you behave like this. Successful people tend to avoid it like the plague. The more affluent your family is, the less television you watch. If all you did was go for a run in a nearby park and listen to a non-fiction audiobook while you did, in several years, your life is going to be better; slowly, naturally improved as the good decisions compound in the same way money grows. You’ll know more. You’ll be healthier. You’ll feel better. You’ll look more attractive. All of these things reinforce themselves in a virtuous cycle, one victory amplifying another in a positive feedback loop.
The Interconnected Nature of Life Means You Can Spark Positive, or Negative, Feedback Loops
It’s all connected. Your life, right now, reflects the sum total culmination of your past life decisions. Of course, everyone has different starting positions at birth but as Volatire aptly observed, “Each player must accept the cards life deals him or her: but once they are in hand, he or she alone must decide how to play the cards in order to win the game”. If you don’t like your life, start making better decisions. Every action you take, no matter how small, puts you closer or further away from the man or woman you want to be. Nobody living in a free society – and practically all Western Democracies are at the moment – has any excuse unless they have some sort of severe mental illness that interferes with their functioning or suffer black swan event that wipes them off the board. By nearly every measurable historical metric, we won the lottery. Accept that there is no cavalry coming to save you. The world will be perfectly content to let you squander your potential and die completely miserable. It’s agnostic to your feelings. It will rarely give you more than you demand of it. The sooner you acknowledge, and internalize, that basic truth, the sooner you can begin arranging your life according to whatever vision you have, whether that’s living in a 900 square foot cabin off the grid in a self-sufficient mountain hideaway or working in high finance in one of the major global trade centers. You have to be both architect and CEO. If you don’t make some carefully calculated, driven, missile-guided decisions toward what it is you want, you probably aren’t going to get it. There are very few Chauncey Gardners walking around and you probably aren’t one of them.
That’s one of the secrets to getting what you want.
Why is this on my mind? For the past year, I’ve been going over a question posed to me by one of you (Angie) in this comment thread, asking, “you stress a lot on positive feedback loop, Joshua. And I understand why. Its power is incredible. What advice do you have for someone who is stuck in a negative feedback loop?”, as well as another, similar question to which I promised a response but the specific link eludes me at the moment.
Despite not serving as a complete answer, after all of this time, picking it up almost daily and reflecting on it, I’m convinced the most efficient way to kickstart the process, the very first step before you can actually do anything, is measurement. You have to know how, exactly, you are allocating your time, money, and other resources so you can acknowledge reality. Everything stems from that. Although I’ve restricted the construct to making money in the past, the two levers model is really true for most things. It’s inputs and outputs. Figuring out, specifically, where the imbalances are, and tweaking those, can set off the compounding cycle on the upside. I’d begin measuring all things that can be measured. How many hours a day are you in front of a computer and what are you actually doing when looking at the screen (buy software to track it so you can replay months’ worth of data logs to see yourself as if you were an employee)? What time do you wake up? What time do you go to bed? How many hours per week are you sleeping? How many times do you wake up in the middle of the night? What do you weigh? How many calories do you consume? How many hours of accelerated heart rate activity do you engage in per week? How many grams of sugar go into your body in a given day? How much alcohol do you consume? What are you commuting costs per mile and as a percentage of your after-tax earnings? What is the cost of capital for all of your debt balances? How many hours a month do you devote to educational reading (actually sitting in silence somewhere, with no distractions, and a book in front of you)? When was the last time – what, and how frequently – you engaged in “deliberate practice” to attain a skill?
With the technology available today, most of this requires almost no effort to answer. The frictional time loss for monitoring should be negligible or you’re doing it wrong.
Record it all. Let a 2-3 month pattern develop and you’ll see who you really are, not who you think you are. (What was it Aristotle said? “We are what we repeatedly do?”) This is true because it is the nature of the universe that you can’t accomplish a thing directly, you can only make decisions that kick start a process that, in turn, naturally leads to a given result. I’ve explain this concept in the past on the site; how you can’t, actually, bake a pie. Instead, you can combine butter, sugar, flour, and shortening to create a crust, fill it with apple slices, and put it in the oven. The pie is the outcome; the by-product of the process. Thus, to make the perfect pie, you have to focus on the sub-processes and the pie will take care of itself. Life is the same way. You can’t “get rich”, you have to let fewer dollars go out the door than flow in the door, building a surplus. The wealth that accumulates is the by-product of those decisions. You can’t “lose 100 pounds”. Rather, you have to eat fewer calories than your body burns. The deficit that arises naturally consumes your fat stores until you reach equilibrium. Make the right decision every day – and focus solely on today and today only – and the rest falls into place. You can’t beat a video game. You play through it, getting stronger battle by battle, level up by level up, with the “winning” being a by-product that happens as a result of all of those countless individual decisions along the journey. All of those little choices you make – every single one of them – nudges you closer or further away to the life you want to live. You have to know what choices you are making; the choices that your brain considers so inconsequential it doesn’t even remember them the next day. The answer to why your life is the way it is sits in that data. Everything from your home, your body, your education, your friends, your bank balance … those are all symptoms of the decisions.
Two final warnings, though:
- It is important that you are measuring the right things
- Not everything that is important or vital can be measured. Do not try to shove into quantitative statistics things that are too intangible.
That and mirrors. I don’t have time to explain at the moment (it’d make an interesting follow-up post someday) but there are all sorts of fascinating psychology studies on everything from increases in honesty to other behavioral changes that are tied to seeing your own reflection accidentally. It is an incredible behavioral modification technique that borders on hard to believe because it’s so simple but do it. Put full length mirrors everywhere in your home and office. See yourself how you are and you’ll change small things, without even realizing it, compounding them into big wins. It helps you get outside of your head.
I’m still working on my formal answer but this is step one; the basic foundation without which the rest is probably going to be useless. It will probably take me four or five different posts, each looking at a different aspect of the problem, sequentially, before I can write the final summary.
Licensed Image Credit: Macrovector / Shutterstock