Wednesday, July 25, 2007

Success Podcasts: Senturia on Decision Making

One of my favorite podcasts is I’m there for you Baby, featuring husband-and-wife entrepreneur team Neil Senturia and Barbara Bry.

Early in each podcast is a segment entitled “A Piece of Neil’s Mind”, filled with trenchant observations from business and entrepreneurship. Highly experienced , with a rascally wit, Senturia knows his stuff, and in this week’s rant, on decision making, he reminds me a lot of Charlie Munger, whose wealth of wisdom I have been commenting on lately (here, here, and here).

I am guessing that the podcast I am discussing will be archived here .

I strongly recommend going to the source, and listening to the podcast. Here are a few of the points Sentutia makes:

Making Decisions

All of us need to overcome two strong obstacles to good decision making:

1. An inordinate belief in our own talents

2. The tendency toward overly quick resolution, due to unwillingness to “sit” with multiple alternatives. Chalie Munger has referred to this as “bias from consistency and commitment tendency” in The Psychology of Human Misjudgment.

The Solutions:

1. Slow down your thinking.

2. Be ready to hold multiple (opposing) ideas in your mind simultaneously.

3. Work toward a superior (new) solution, not merely the “least bad” current solution.

4. Practice Integrative Thinking.

Senturia on Integrative Thinking:

1. Determine Salience (Which factors are relevant?) As many as you can tolerate.

2. Analyze causality (What is the true cause?) Keep many factors in play. Don’t rush to a single cause

3. Use decision trees. Determine the "archictecture" of how the decision will be made. The alternatives. The branches.

4. Determine not only the decisions, but the order of decisions to be made (which first?).

5. Achieve resolution. “Mix and match” until a winning concept emerges. Don’t be afraid to live with complexity until you have a great solution. Don’t settle.

In my previous career, I had the privilege of watching many great advertising creative directors at work, and I noticed that the best ones were those who could wait for a truly great idea to emerge. In my service-oriented role back then, I always wanted to rush to a solution, and , especially, to bill the job! But I can now see how my efficiency may have been misplaced.

After all, if Brahms could ruminate for decades before finally releasing his first symphony…surely we can take a few extra minutes to make a good decision.

On a personal note, we were planning a vacation recently, which had a lot of requirements: (scenic beauty, wi-fi, shopping, within automobile range). Weeks passed debating between Pennsylvania and Denver. But it was worth waiting for the superior solution to emerge, and we had a great time in Boulder.


Tuesday, July 24, 2007

Success Secrets: Charlie Munger on Reducing Risk

This series of posts studies the concepts of billionaire Charlie Munger, associate of Warren Buffet. One source (among many on the internet) is this Morningstar article:

Concept: Deliberately remove risk from your life

What do we think about when we imagine someone who is making a lot of money? Buying new houses? Boats? Planes? How about buying more insurance? Sounds pretty boring. And yet, as Charlie Munger mentions, deliberately reducing risk is one of the key methods of staying wealthy. Microsoft founders Bill Gates and Paul Allen regularly sell portions of their Microsoft stock so they can diversify their risk. Modern portfolio theory also states that holding uncorrelated asset classes (stocks bonds, commodities, real estate, etc) greatly reduce risk. Over time, your portfolio will grow in a more stable fashion, with smaller overall downdrafts. But you need to have enough investable assets to do so.

Proper asset allocation also dictates selling portions of the assets that appreciate most. Are your stocks having a great year? Then it’s time to reduce those holdings. Did you get a windfall? How about paying off the mortgage?

Even the great Warren Buffett, in his search for a successor mentions, as a key quality he looks for, the ability to recognize unusual risk: In a recent Berkshire Hathaway annual report he posts a “want ad” for a successor. Here is a portion:

Over time, markets will do extraordinary, even bizarre, things. A single, big
mistake could wipe out a long string of successes. We therefore need someone
genetically programmed to recognize and avoid serious risks, including those
never before encountered. Certain perils that lurk in investment strategies
cannot be spotted by use of the models commonly employed today by financial

The very wealthy probably have less exposure to the stock market than you and I. Maybe none at all. They only need bond income, and probably municipal bonds or government bonds at that.

And another risk-reducing investment which is very “expensive” (to the uninitiated) is cash. That’s right. Just plain cash in the bank. Does it feel like you want to spend it? Invest it? Can’t stand seeing it just sit there? Wait till you’re downsized. Or the car dies. Or the kids need braces. You’ll be happy it’s there.

A friend of mine’s father had a business. After years of hard work, he landed a huge account. The profits from this account were enough to fulfill anyone’s dreams. One possible course of action was, first and foremost, to secure the future for him and his family. Buy annuities. Buy bonds. Pay off all mortgages. Set up trust funds for all the kids.

But this person bought boats, cars, and houses. His generosity to all around him came first, while Charlie Munger’s idea of removing risk from his life was not heeded. Unfortunately, the “big account” eventually went away (as most big accounts eventually do) and the man had to sell most of his acquisitions at “fire sale” prices, and eventually found himself in very humble circumstances.

Removing risk is boring. It seems a bad use for money. But if it is good enough for Charlie Munger, it is good enough for me.


Friday, July 13, 2007

Success Secrets: Munger on Mistakes

I am continually delighted to find much material on the wisdom of billionaire Charlie Munger so freely available eon the Internet. Munger is a rarity: a master in his field who also reflects on his own methodology and thought patterns. Rather than just “catch more fish”, he focuses continually on “how to make better nets”.

How often do any of us examine and improve the processes behind the actions we take? Yet small changes in our methodologies and thought patterns will create huge changes in he patterns of our lives.

Here is the first installment of an ongoing analysis of Munger’s concepts.

Concept : Keep Track of Mistakes

This is derived from a short article about Charlie Munger from Morningstar

In the Army they call it an After Action Review. For fighter pilots it’ s a Debrief. Some investors, says Munger, keep a “Temple of Shame”. Whatever you call it, a constant review of your mistakes (and your successes) creates a laser-focused target for individual improvement in all areas. As a trader, I have a debrief form which I fill out for any significant event in my trading. I review the debriefs once per month and keep a “lessons learned” file to refer to. (See also: Murphy’s “Flawless Execution") .

It is also helpful to review one’s life in the light of various success principles. For instance, if you are reviewing a list of interpersonal skills , the goal would be to reflect: “How did I fail in reference to these skills?” What opportunities did I miss because I lacked empathy? Self-control? Couldn’t keep my mouth shut?” etc. I have ample oppportunities for this type of reflection. Unfortunately.

The good news about this is that, since we are keeping our own list, the lessons “hit hard” and sink in quickly. Also, a lot of mistakes don’t have to happen twice. Once we install a f"eedback loop" to recognize a mistake, and actually benefit from it, we begin to see that we can improve our results, and we enjoy finding new ways to improve.

Keeping track of mistakes is a humbling experience. But much less humbling than making them over and over again.


Tuesday, July 10, 2007

Success Podcasts - Entrepreneurship from

I recently discovered a bunch of great podcasts at including a soup-to-nuts entrepreneurship course by Carnegie Mellon adjunct professor Mark Juliano. This generous lecture series is a priceless overview of the entire subject of starting a business, and should be part of any entrepreneur’s collection. Some of the topics covered:

Business Plan

….but the entire gamut of starting an enterprise is here.

With 23 lessons in all. Juliano takes pains to explain these lessons are sized at” podcast length” but are similar to the course he gives at Carnegie Mellon. Juliano knows whereof he speaks as he has been a part of several startups, and is a founder of, his podcasting host.

As if the lectures weren’t enough, the good Professor has provided Powerpoint slides, handouts, case studies, links, and a companion blog. This series is a paradigm of what an instructional podcast course should be.

Talkshoe also hostts several other extraordinary podcasts which I’ll be reviewing.