A Few Things: Markets, Life Hacks, Luxury Strategy, Breaking Out of the X-Axis, Negotiating Like a Hostage Negotiator, The Future of Manufacturing & Digital Infrastructure, The Halfways
June 17 2022
I am sharing this weekly email with you because I count you in the group of people I learn from and enjoy being around.
“Troubles are often the tools by which God fashions us for better things.”
- Henry Ward Beecher
“To admit error and cut losses is rare among individuals, unknown among states. States function only in terms of what those in control perceive as power or personal ambition, and both of these wear blinkers.”
- Historian Barbara Tuchman
“The first step: Don’t be anxious. Nature controls it all. And before long you’ll be no one, nowhere—like Hadrian, like Augustus. The second step: Concentrate on what you have to do. Fix your eyes on it. Remind yourself that your task is to be a good human being; remind yourself what nature demands of people. Then do it, without hesitation, and speak the truth as you see it. But with kindness. With humility. Without hypocrisy.”
- Marcus Aurelius
A. A Few Things Worth Checking Out
1. We are in a bear market and one of the best guides we can have to it is Jim Chanos, President and Founder of Kynikos Associates.
Kynikos focuses on the short side and is known for finding financial frauds. He was on the Bloomberg Odd Lots Podcast: Why Some of the Worst Hit Parts of the Market Still Have More Pain Ahead.
2. Enjoyed these: “The Greatest Life Hacks In The World” by David Brooks of NYT.
The ones I nodded my head on:
When you get invited to something in the future, ask yourself, Would I do this tomorrow?
The thing that made you weird as a kid could make you great as an adult.
Just because it’s not your fault doesn’t mean it’s not your responsibility.
Ignore what they are thinking of you because they are not thinking of you.
Marriage is a 50-year conversation. Marry someone you want to talk with for the rest of your life.
Make the day; don’t let the day make you. Make sure you are setting your schedule, not just responding to invitations from others.
If you meet a jerk once a month, you’ve met a jerk. If you meet jerks every day, you’re a jerk.
Don’t try to figure out what your life is about. It’s too big a question. Just figure out what the next three years are about.
3. Last week I highlighted this great podcast with Prof. Aswath Damodaran, if you hadn’t had a chance to listen to it, here are key notes courtesy of Twitter.
4. The changing narrative on Inflation….
5. The Wertheimer family was in the news this week given the surging Chanel business. Their combined wealth surged to $90bn, of course Bernard Arnault (Louis Vuitton) is the top 3 richest person in the world.
Luxury is a very special business since it’s about selling a dream, a culture and a language, and not about selling a product or service.
One of the best books on understanding how luxury works is The Luxury Strategy by Kapferer and Bastien.
I did a twitter summary of the big ideas
Super because I have a habit of chasing shiny objects.
A few key paragraphs:
As my priorities have shifted, I’ve discovered a tradeoff between the shine of novelty and the consistency of commitment. Western culture over-indexes on novelty. It suffers from commitment phobia. I see this in our culture of digital nomadism, job-hopping among yuppies, and listening to books at 3x speed instead of reading them deeply. Anxiety is the driving force behind this game of hopscotch.
The problem is that a life without commitment is a life spent hugging the X-Axis.
Where does our culture of commitment phobia come from?
I have hypotheses, but no firm conclusions. Here, I’ll present three theories: a cultural one, a technological one, and a sociological one.
For a cultural explanation, I look at the rise of liberalism. In Why Liberalism Failed, Patrick Deneen argues that the project of liberalism seeks to detach us from the constraints that once tied us down — family, culture, place, identity, tradition. As liberalism grew more popular, the circumstances of kin and place became more malleable. Thus, today’s Westerners are increasingly free to shape their identity. I don’t think liberalism is inherently a bad thing, but like anything else, it has its tradeoffs.
For a technological explanation, I look at our culture of abundance. The “so muchness” of modern life has given us commitment anxiety. It’s a version of the Paradox of Choice, which argues that people can reduce anxiety by eliminating choice.
For a sociological explanation, I look at shortening time horizons. People in most Western countries are having kids at below replacement rate. People are getting married later too. Instead of thinking about building intergenerational family wealth, people are thinking about their own desires and their own freedom. People are more likely to grind for their own success instead of their family name. Furthermore, I worry about our culture of antinatalism because having children gives you a stake in the world of tomorrow, and that stake is driven by blood. What happens when our world leaders don’t have children? Here’s a guess: a culture of shortening time horizons where people value the present more and the future less.
As a result of these convergent trends — the rise of liberalism, technological abundance, and short time horizons — we’ve been overvaluing optionality at the expense of commitment.
People think they’ll be happy if they don’t have any obligations. In actuality, total optionality is a recipe for emptiness — and hugging the X-axis — because opportunity and optionality are often inversely correlated. The challenge is that the greatest rewards generally go to people who are tied down in certain ways. A real lifelong marriage is the deepest relationship you’ll ever have because you’ve committed to a lifetime of faithfulness. Likewise, you only get to raise money for a startup when investors are confident you’re committed for the long haul. The challenge is that people who treat their lives like a game of hot potato, always moving from thing to thing, can’t take advantage of exponential curves — and climb the Y-axis.
The bottom line is commitment is undervalued. If you have commitment phobia, you’re not taking control of your own life. You’re taking your hands off the wheel of reality and letting happenstance define your life. And yeah, you take a stand whenever you make a commitment and expose yourself to the potential for pain and criticism.
In matters of the heart, commitment brings meaning. In matters of the mind, commitment brings knowledge. And in matters of the material world, running towards the responsibility that comes with commitment takes courage — and with courage comes achievement. People can only become world-class at things they commit to. Ultimately, the more hesitant people are about making commitments, the higher the rewards are for people who do. The alternative is empty hedonism and hard work without the rewards to show for it.
Long story short, commitment is undervalued.
So here’s how I suggest responding to this trend: whatever your tolerance for commitment is, raise it.
If today you’re comfortable committing to something for two hours, try committing for a weekend. If you’re comfortable committing for two weeks, then raise it to two months; once you’re comfortable with two months, raise it to two years; and once you’re comfortable with two years, raise it to two decades. It’s okay to start small. All big things do. But they have to start somehow and with commitment comes momentum. Commitment happens in stages, and only by embracing it can you stop hugging the X-Axis and climb the compounding curve.
7. Watching Claire in 2019 changed my life. I was reminded of it this week when I met my friend James Morgon. Give it 10 mins, it will change your life.
It’s incredibly sad and uplifting at the same time.
Here’s a trailer:
B. How To Negotiate Like A FBI Hostage Negotiator
In Life, everything is a negotiation.
And the negotiation doesn’t stop when you get home either, because life is a just a big negotiation.
Most of us do it wrong.
Here are a couple of signs you’re doing it wrong.
- You know exactly what you want and you say it right at the beginning
- You think the other party is trying to screw you throughout the negotiation
- You have no idea what the other person wants, and don’t think that matters anyway
- You want to win the argument more than achieving your goal.
The price of negotiating badly is high.
It means, you’re probably getting paid less than you want, not getting the promotion you are looking for, and not getting your wife to watch the movie you like :-)
I read Chris Voss’ great book, Never Split The Difference a few years back. He spent a lot of time at the FBI, which culminated in him becoming their lead international kidnapping negotiator.
He was recently on the Capital Allocators podcast speaking to Ted Seides about Listening, Human Nature and Negotiations.
Here are three points on how to become a world class negotiator:
1. BUILD TRUST
The most important part of negotiation is building trust. You can’t let the person you are negotiating with feel threatened. It can’t be you versus them.
Most people who view negotiation as a battle of arguments, become overwhelmed by the voices in their head. They get emotional, they get angry and they get irrational.
Negotiation is not an act of battle it’s a process of discovery.
The goal is to discover as much information as possible. To quiet the voices in your head, make your sole and all-encompassing focus the other person and what they have to say.
With that in mind, remember that when deliberating on a negotiating strategy or approach, people tend to focus all their energies on what they say or do, but it’s how we act and look that is the easiest and most effective thing to focus on.
The first thing to do when you walk into a negotiation is SMILE.
Smiling puts the other person at ease and puts them in a positive frame of mind, rather than feeling that they are being threatened or attacked.
A positive frame of mind has been scientifically shown to lead people to think more quickly and more likely to collaborate and problem solve with you. Positivity creates mental agility in both you and your counterpart.
Another simple trick for building trust is mirroring — great sales people do it all the time.
Mirroring, is essentially imitation.
It’s a neuro-behaviour displayed when we copy each other to comfort each other. It can be done with speech patterns, body language, vocabulary tempo, and tone of voice.
It’s generally an unconscious behaviour and follows a profound biological principle: We fear what’s different and are drawn to what’s similar. Mirroring is the art of insinuating similarity.
The psychologist Richard Wiseman did an experiment with waiters, to identify what was the most effective method to build a connection with strangers: mirroring or positive reinforcement.
One group of waiters, using positive reinforcements, lavished praise and encouragement in patrons using words such as “great,” “no problem,” and “sure” in response to each order.
The other group of waiters mirrored their customers simply by repeating their orders back to them.
The results were stunning: the average tip of the waiters who mirrored was 70 percent more than of those who used positive reinforcement.
2. LABEL THEM
Most of us enter verbal combat unlikely to persuade anyone of anything because we only care about our own goals and perspective.
But the best negotiators, sales people and leaders are tuned into their audience. They know that if they empathise, they can mould their audience by how they approach and talk to them.
Empathy works wonders in a negotiation, whether with your boss, your girl friend or with someone selling you something. Once they see that you understand them, they will be much more open to listening to you.
Think of labelling as a short cut to intimacy, a time saving emotional hack.
Labelling is a way of validating someone’s emotion by acknowledging it. By giving someone’s emotions a name shows that you identify with how that person feels.
At the beginning of a negotiation with your boss about your bonus, you build trust by smiling and mirroring them, and then you label their emotions by saying something like:
“I’m sure this is probably a pretty stressful time for you and you have a lot to do. You are probably thinking that I am pretty ungrateful for what you already gave me”.
Now be silent and watch what happens.
Highlighting their negative emotions upfront is key because it shows that you understand where they are coming from and diffuses any anger they might be feeling.
In fact you can take this idea further using a system called an accusation audit.
List the worst things that the other party could say about you and say them before the other person can. Because the accusations often sound exaggerated when said aloud, speaking them will encourage the other person to claim that quite the opposite is true.
For example, you could say:
“I’m sure you’re still probably angry about how I screwed up the books in June”, or “I’m still disappointed by how I did in that presentation in August”.
Putting the negatives upfront on your own disarms the situation. Now the other person can’t use them against you and you clearly show that you understand their perspective.
3. GET THEM TO SAY NO
Jim Camp wrote a great book on negotiation called: “Start with NO”.
Most of the time we try to get people to say yes. Yes to more money, yes to a promotion, yes to a deal. But yes makes people unsafe. We’d rather say no. Scientific studies have proven this.
One of the first things to do in a negotiation is to get the other person to feel safe by having them say No.
“Feels like you thought I did a bad job this year” or “You probably think I didn’t do well this year”.
Most people are going to say “No” to this. And then they will go on to outline why you actually did well this year.
Or more simply, when you call someone, a lot of people say: “Do you have a few minutes?”, whereas it’s better to say: “Is now a bad time.”
Look for the question that allows them to say No.
When negotiating anything, and you hear No, it often means:
I’m not ready to agree yet
I need more information
I want to talk it over with someone
The trick is to train your self to hear “No” as something other than rejection.
A few great questions to ask when someone says “No”:
“What about this doesn’t work for you?” or “What would you need to make it work?”
Negotiation is a high stakes game, so you have to make sure you put the other person at ease. If they get to say “No” upfront, it makes the other party feel safety, security and in control.
When you’re discussing your bonus, rather than being angry, ask a No question. For example:
“Are you trying to tell me to leave the firm?” or “Seems like you guys are trying to push me out of here?” Or when you’re on your 2nd or 3rd interview for a job and want the other party to commit, try asking: “Seems like you guys aren’t sure I’m the right candidate?” or “What about my candidacy for the job aren’t you sure about?”
So there you have it, I hope these three techniques will make your negotiations a lot more successful:
Build Trust — Smile and Mirror there words
Label Them — show empathy by stating how they feel, and put the negatives out there
Get them to say No — Get them to feel safe by being able to say no early on
Here’s a quick MasterClass Chris did.
C. The Technology Section
1. Invest Like the Best Podcast: Josh Wolfe & Chris Power - Factories of the Future. Josh is the founder of Lux Capital and Chris is the founder of manufacturing start-up, Hadrian. Manufacturing isn’t something that sounds sexy or high tech, which is why this conversation is so interesting.
They covered the fragmented structure of precision manufacturing today, how Hadrian's factories can modernise the industry's supply chain, and the effect of a higher cost of capital on deep tech companies.
2. Martin Casado, General Partner at Andreessen Horowitz was on the Invest Like The Best podcast discussing digital infrastructure - data centres, cloud and SaaS. They discussed the state of the union of our digital world, API-first companies, red flags, and how differentiation has shifted from software to data.
Here’s a post from May 2021 by a16z on The Cost of Cloud, a Trillion Dollar Paradox.
3. What matters to different generations, from Bank of America. Thank you Vanja.
Can I ask you for a favour?
These weekly emails are free and I have never tried to sell you anything.
Next month my wife’s book: The Halfways is coming out. It’s a great novel.
You can read some early reviews here.
I’d really appreciate it if you’d consider pre-ordering it. It sends an important signal to the publishers and would mean a lot to us.