Soon after arriving to work today, my boss talked me through what could have been a stressful client situation he dealt with while traveling the day before. He was on the road prepping for Client 1 meeting when Client2 called requesting him to run a few new scenarios in our excel model and revert with results in the next 20 min.
While he trusted his team to accurately run the requested analysis, he still had to understand the key drivers that impact the outcome of each scenario and then be able to discuss results with Client2. So while the team ran the scenario in excel, my boss, as he’s done for years, ran the calcs by hand so that he could estimate the results, and then confirm / ask questions after reviewing the excel output.
The situation described above would normally be stressful for many of my colleagues. But it wasn’t for my boss because he’s been approaching every analysis with this process for the past 8 years.
I think the estimate / confirm process has wide spread applications as it’s an excellent way to continue to learn and hone a skillset.
Estimate / confirm process / steps:
- Summarize the facts: Prior to reviewing a report / analysis / argument, assemble facts available and quickly read them. Be sure to write down (not type) the most important assumptions / drivers / facts
- Estimate outcome: Based on assumptions / drivers / facts that your wrote down, write down an estimate of what you think the analysis should look like and why (play with up and downside scenarios to ensure you’re conducting sufficient diligence)
- Confirm estimates: Then review output to either confirm your estimate (or determine why you’re estimated results are different)
- Critique performance, write down lessons learned: Based on outcome, write down ways you can improve your estimates going forward
- Repeat: Get your reps in regularly
If steps above are put into regular practice, an improved understanding and confidence relating to area of focus is assured.
In David Goggin’s new book, “Can’t Hurt Me”, he describes Round 14 of Rocky 1 being his favorite scene of any movie and one that continues to motivate him still today.
Watch here: Rocky 1
Goggins wrote that he especially loved the look of disbelief and awe on Apollo Creed’s face after the round when Creed thought / hoped he won by knockout only to turn around to see Rocky, barely alive, but pulling himself up and finally when standing, motioning to Apollo to “bring it on”.
Goggins writes that he tries to model Rocky’s resilience in that Apollo Creed fight, especially in Round 14, where Rocky made the statement with his effort that Apollo can keep knocking him down, but when he gets up (and he will), he’s coming for you. He’s always coming for you.
Listened to a great episode on Patrick O’Shaughnessy’s podcast, Invest Like The Best. He interviews Saifedean Ammous, author of the book “Bitcoin Standard.” The episode is wide ranging but I found the first part of his interview about time preference interesting.
A few takeaways:
- Time preference (economics): Time preference is an economic term defined as the current relative valuation placed on receiving a good at an earlier date compared with receiving it at a later date. Said another way, a person with a high time preference is focused on their current well-being relative to the mean, while a person with low time preference places more emphasis on their well-being in the future (again, relative to mean).
- Origins: The time preference theory of interest was created by economists as an attempt to explain interest through the demand for immediate satisfaction.
- Why we pay interest: If I offered you $100 today vs. $100 one year from now, you’d take $100 today. The only way I can get you to take $100 one year from now is if I pay you interest on top of the $100. Interest rate is the price paid to lender so lender is willing to forego capital use.
- Time preference (psychology): As I discussed in a recent post about the “Marshmallow Test,” the delay of gratification literature was heavily influenced by the work of Walter Mischel, who showed that a simple experiment in which youngchildren were asked to choose between one cookie (or marshmallow) now and two in fifteen minutes could predict achievement later in life.
- This conclusion is logical. If a person has a low time preference, they then possess ability to delay gratification which means they are likely disciplined, patient, and thoughtful. These are all common traits of successful people.
- Potential ways to lower time preference:
- Educate communities on benefit of saving vs. spending
- Create policies that provides incentives for saving (or provide conditions for more and better paying jobs so people have the option to spend or save in the first place)