I mentioned in my last post two secrets to adding positive convexity to our lives:
1. Hard Work and
2. Exploratory behavior.
3.Margin of Safety
For us to “spread our wings” in our chosen field, to take advantage of the many opportunities for positive convexity (strings of good outcomes building on each other), each step should be taken only after the worst-case scenario is considered.’’
A simple example would be buying a house. If you, for instance, were to buy the house with 100% cash, you could take full advantage of the positive convexity of the purchase: the potential that your investment would increase over time. Furthermore, if you paid with cash, you would have no worries about meeting the mortgage, ever, thus you would have the absolute minimum chance of losing that house. This would meet our laymen’s definition of convexity of maximizing the planned and unplanned positive outcomes, while cutting off the risk of outsized negative outcomes.
Do the scheduled maintenance on your car. Get your checkup. Eat your bran flakes. File your taxes on time. Why? Because these actions generate margins of safety, allowing you to “blossom” the rest of the time. They “cut off the tails” of the “bad” side of the “curve”. They limit your downside, and then your creativity and drive can generate the”upside”.
4.Noticing and recording
Noticing and recording is an amazingly effective method of creating positive convexity. Walking around with a notebook or voice recorder will exponentially increase the number of “positive inputs” that you experience everyday. In a moment, a million-dollar idea can be captured before it disappears into your unconscious. Or you may see something: a book, a piece of property, a new product, etc and note it down for future reference. Many of us get terrific inspiration when we are out walking or driving…the kind of inspiration that might change your life. If you take 3 notes a day that’s over a thousand new inputs per year. One out of a hundred might even be a breakthrough. And ten breakthroughs a year is a lot of positive convexity.