25 Ideas That Changed My Life

№24 — Signalling theory is my current favorite

I thought I was a smartass.

Until life decided it was time to humble me for my poor decisions.

I thought I understood the world, but in reality, the lens through which I saw the world was broken.

Determined not to walk around so blind, I went about collecting principles to help guide me through life.

These ideas have impacted my thinking, resulting in me making fewer mistakes, and getting better results.

1. The Wisdom of Paradox — Logic, and rationality are the key to scientific truths, but paradoxes and irrationality are the keys to psychological ones. In science, the opposite of a good idea is a bad idea. In psychology, the opposite of a good idea is another good idea. When it comes to the human condition, the deepest truths are often counter-intuitive.

2. Inversion — Avoiding stupidity is far easier than trying to be great. Instead of asking, “How can I improve my business?” you should ask, “What’s hurting my business the most, and how can I avoid it?” You’re only as strong as your weakest link.

3. Competition is for suckers — Avoid competition. Stop comparing yourself to what everybody else is doing. Stop copying what others are doing. Life is easier when you don’t compete.

4. Opportunity Cost — By reading this article, you choose not to read something else. Everything we do is like this. Whenever you explicitly choose to do one thing, you implicitly decide not to do another thing. Choose wisely.

5. Goodhart’s Law — When a measure becomes a target, it ceases to be a good measure. In 1902, the French colonial government in Hanoi created a bounty that paid a reward for each rat killed. To collect the bounty, people would have to provide the severed tail of a rat as evidence. Vietnamese rat catchers would capture rats, sever their tails, and then release them so that they could procreate and produce more rats. Thereby increasing the rat catchers’ revenue.

6. Hock Principle — Simple, clear rules and principles give rise to complex and intelligent behavior. Complex rules and regulations give rise to simple and stupid behavior.

7. The Paradox of Specificity — In the age of the internet, being different is the best marketing. The more specific your goal, the more opportunities you’ll create for yourself.

8. Occam’s Razor — If there are multiple explanations for why something happened, assume the simplest one is true. Remove unnecessary assumptions. Trust the lowest-complexity answer.

9 . Hormesis — A small dose of something can have the opposite effect of a high dose. A bit of stress wakes you up, but a lot of stress is bad for you. Lifting weights for 30 minutes per day is good for you, but lifting weights for 6 hours will destroy your muscles.

10. Circle of Competence — Learn and understand the limits of your knowledge. It’s much smaller than you think. Being an expert in one area doesn’t make you an expert in anything else. Be clear about what you know and don’t know.

11. Convexity — Look for opportunities with huge upsides and low downsides. Convexity increases your luck surface area, improving your chances of success and innovation.

12. Via Negativa — When we have a problem, our instinct is to add a new habit or purchase a fix. But sometimes, you can improve your life by taking things away. For example, the foods you avoid are more important than the foods you eat.

13. Probabilistic Thinking —Estimating the likelihood of any specific outcome happening. In a complex multivariate world, probabilistic thinking helps us identify the most likely outcomes.

14. Second-Order Thinking — This means thinking further ahead and holistically. It requires us to not only consider our actions and their immediate consequences but the subsequent effects of those actions as well. Failing to consider the second and third-order effects can result in more damage being done.

15. Compounding —It is the process by which we add interest to a fixed sum, which then earns interest on the previous sum and the newly added interest, and then earns interest on that amount, and so on ad infinitum. It is an exponential effect. Money tends to be used to explain compounding, but it’s not the only thing that compounds; ideas and relationships do as well.

16. Randomness — The human brain has trouble comprehending the random, non-sequential, non-ordered events of the world. We are easily “fooled” by randomness because our brains like to assign a narrative to help simplify the complexity of life.

17. Social Proof (Safety in Numbers) — We are a social species. We’re wired to seek safety in numbers and will look to others on how to behave. This allows us to cooperate but can also lead us to do foolish things if our group is doing them as well.

18. Narrative Instinct — Our brains construct and seek meaning in narrative. Logic and numbers don’t persuade; stories and emotions do. All social organizations, from religion to corporations to countries, run on constructions of stories.

19. Availability Heuristic — We tend to easily recall what is salient, important, frequent, and recent.

20. Hindsight Bias — Once we know the outcome, our narrative instinct leads us to reason that we knew it all along (whatever “it” is), when we are often post rationalizing with information not available to us before the event.

21. Survivorship Bias — A major problem with historiography is that history is written by the victors. We do not see what Nassim Taleb calls the “silent grave” — the lottery ticket holders who did not win. We over-attribute success to the actions of the victors rather than to randomness or luck. We often learn false lessons by studying victors without looking at the accompanying losers who acted in the same way but were not lucky enough to succeed.

22. Confirmation Bias — What we believe is what we choose to see. We look for confirmations of our beliefs rather than the disproof of them.

23. Game Theory — It is the study of how people make decisions assuming that they are rational (doing what’s in their own best interest). It’s used both to understand why situations happen and also how to control situations by changing incentives.

24. Signalling theory — Signalling is the hidden language we use to communicate with each other. We do it all the time as a way to “prove” we are who and what we claim to be.

25. Framing — Framing a question or offer in a different way often generates a new response, particularly if it changes the comparison set it is viewed in. For example, “90% Fat-Free” vs “10% Fat.” Objectively, both are the same; but the former sounds more appealing than the latter.