How To Be Right a Lot

October 22, 2012
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“Jeff Bezos stopped by our office yesterday and spent about 90 minutes with us talking product strategy. Before he left, he spent about 45 minutes taking general Q&A from everyone at the office.

“During one of his answers, he shared an enlightened observation about people who are “right a lot”.

“He said people who were right a lot of the time were people who often changed their minds. He doesn’t think consistency of thought is a particularly positive trait. It’s perfectly healthy — encouraged, even — to have an idea tomorrow that contradicted your idea today.

“He’s observed that the smartest people are constantly revising their understanding, reconsidering a problem they thought they’d already solved. They’re open to new points of view, new information, new ideas, contradictions, and challenges to their own way of thinking.

“This doesn’t mean you shouldn’t have a well formed point of view, but it means you should consider your point of view as temporary.

“What trait signified someone who was wrong a lot of the time? Someone obsessed with details that only support one point of view. If someone can’t climb out of the details, and see the bigger picture from multiple angles, they’re often wrong most of the time.

- Jason Fried, Some Advice From Jeff Bezos

JS Comment:

Jeff Bezos, the founder of Amazon.com, is a Fortune 100 CEO and e-commerce empire builder, not a trader. Yet his perspective makes perfect sense for traders too: Mental flexibility and viewpoint adaptability are prized. Excess rigidity is frowned upon.

Trading legends like George Soros and Paul Tudor Jones embody this mental flexibility. They can have a table-pounding opinion on a market one day… and yet completely change their minds 36 hours later, possibly reversing from long to short or vice versa.

Those traders and investors who blow up, on the other hand, often do so by taking a rigid view, refusing to budge an inch, and following the position down like a boat anchor…

Are you flexible and open-minded in your market views, with little fear of self-contradiction? How does one cultivate such traits without becoming a wishy washy Charlie Brown type?

What are the key differences between a trader who is smart and sharp in their adaptive decision making capability, and the shallow flip-flopper who blows with the wind and rarely has a firm grasp on anything?

JS (jack@mercenarytrader.com)

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9 Responses to How To Be Right a Lot

  1. Roger on October 22, 2012 at 1:44 pm

    There is an excellent book – “Think and Grow Rich” written in 1936 of the world’s most successful capitalist of that time: Ford, Carnegie, Edison, etc. The author researched his book for 25 years and studied thousands of individuals. The author found that successful people reach decisions promptly, and change them very slowly, if at all. Failures reach decisions very slowly & change them frequently/quickly. Ford was said to be this way to the point of being obstinate.

    How times change, or really don’t change at all.

    • Jack Sparrow on October 24, 2012 at 10:09 am

      “Successful people reach decisions promptly, and change them very slowly, if it all” — that sounds absolutely backwards and, in general terms, a recipe for disaster. The finding on failures does not sound right either — someone who reaches a decision “very slowly” but then changes their mind “frequently / quickly” is a contradiction in terms. I would love to see the sourcing on this too, because what you describe sounds so fantastically wrong I wonder if you are misremembering the findings.

      • Bill Porter on October 27, 2012 at 12:39 pm

        It sounds backward and contradictory perhaps to those watching from the sidelines. Based on 30 years experience in business [yes, admittedly a subjective perspective and therefore anecdotal in nature],I believe Roger’s quote a killshot.
        Also, sometimes the best and easiest way to gain insight is to turn to the definitions of basic terms; an “executive” executes and action reqires a decision upon which to be based. Those who recoil from decision-making at the one crucial moment are forever second-guessing themselves, as a consequence

        • Jack Sparrow on October 28, 2012 at 8:57 am

          Well, we can agree to disagree on this one… I don’t have 30 years experience in business, but I do have +15 years of experience as a trader and +5 years experience as a business owner / CEO / entrepreneur who has successfully launched more than one business, not including additional years spent working in startup-like environments and once being parachuted in to help turn around a failing operation…

          I think part of the problem is that the quote (the one you deem as a “kill shot”) is way too oversimplified to hold true. The concreteness exists in the wrong places, and the implications thus do not make sense. The idea that successful people reach decisions promptly and then rarely change their minds as a general rule does not fit the iterative process of responding fluidly to new information, nor does it address the fact that optimal decision making speed is not a fixed thing, but falls along a continuum depending on the decision in question and the available time window for action. Some smaller scale decisions are best made quickly because extra time and effort is not worth the candle, “try it and see” being the best motto; other, much bigger decisions make themselves quickly because years of experience and well-honed intuition make the correct path instantly obvious (whereas it might not be such to the less seasoned individual); and still other large decisions require a significant degree of mulling and deliberation, with benefit going to he who does not give up the flexibility advantage before it is necessary to do so (taking in as much information as possible before being required by events to move at some optimal point).

          And then of course, there are many instances in business as well as trading where a major pivot was the exact right thing to do — one of the most famous and impactful, from the business world, being Intel’s key decision to completely get out of one line of business and start up in another. Essentially, when all is added up, “Decide quickly and rarely change your mind” is absolutely terrible advice. Far better is the converse, “Don’t decide before you have to and don’t be overly rigid.” Both are too simplistic to act as anything more than extremely general guidelines, but for the beginner the second is less likely to lead to disaster than the first, and also represents an attitude of humility and resource maximization (time to make a decision, if one needs to think about it and has the ability to do so, is in itself a resource).

          As for those who “recoil from decision-making at the one crucial moment,” of course… the player who chokes in the clutch will never be champion… but that is a complete red herring in respect to the discussion at hand. The fact that it is wise to take one’s time in decision making as a general rule, when time is available, in no way precludes the master practitioner’s ability to make a decision quickly, instantly even, when years of experience have made the optimal path 100% clear — this is similar to the chess grandmaster who only needs two minutes to see the right move where it would take the lesser player an hour to spot it, because all the other paths are so obviously suboptimal. Given what was just said, however, only some decisions allow for instantaneous decision making – others require mulling and proper consideration. Einstein once said “Things should be made as simple as possible, but not simpler.” A possible application of that concept here could be “Decisions should be made as quickly as possible, but not quicker,” with the standard being optimality in terms of speed vs depth of analysis trade-off. The above nuances are not only missed in the quote you deem a kill shot, the opposite is actually suggested, which is why I find such detrimental.

          Thanks for bringing up this line of thought though, thinking it through has added clarity…

  2. Fred on October 23, 2012 at 9:38 am

    I’ve read that the reason the Amazon.com home page is the way it is (kind of a mess actually) because Mr. Bezos likes it that way and no one has been able to convince him otherwise. So there is some contridiction in his statement about changing his mind.

    • Jack Sparrow on October 24, 2012 at 10:05 am

      I would love to see the source of that comment because it does not ring true at all. Bezos is a technical genius, a ruthless competitor and a consummate capitalist – Amazon spends tens if not hundreds of millions of dollars on testing various iterations of product layouts, offer types, feedback mechanisms etcetera to achieve maximum results. So the idea that something as fuzzy as a personal bias from the chief would be tolerated sounds like pure apocrypha.

  3. Fred on October 24, 2012 at 4:41 pm

    I’m surprised I found it
    https://plus.google.com/112678702228711889851/posts/eVeouesvaVX

    He has lots of good things to say about Amazon and Bezos. There was a few things tho that suggest Mr Bezos is not as flexible as stated in the above article.

    • Jack Sparrow on October 26, 2012 at 8:44 am

      Good stuff, thanks for that. I’ve read other long form Steve Yegge posts but hadn’t seen that one… agree there is more than a bit of “do as I say not as I do” in Bezos. Balanced against that, however, is the visionaries’ need to follow his own light – part of the reason men like Jobs and Bezos are the way they are, yours truly theorizes, is because if they were more reasonable in listening to others’ strong opinions their own vision might be diluted, whereas the purity of self belief results in the good maximized along with the bad (the net spread between good and bad being the key thing).

  4. GHlen48 on October 26, 2012 at 3:25 am

    Pity Amazon didn’t have away to purchase online via bank transfers , they would do more business.

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