In a departure from my usual style, I’m going to get a little deep with you guys in this post. If you’ve clicked here looking for my typical dumb jokes and contrarian opinions, you’ve still come to the right place. But you’ll get a different spin on this one.
I think the concepts discussed here can apply to a wide range of people and topics, including investing, self-improvement, skill-building, and relationships.
With 2019 in the books, a super-hot pregnant wife days from delivering, two happy, healthy kids, a new house, and some really strong success at work, I can certainly say last year was a good one. I’ve got a lot to be grateful for.
However, I’ve got a long way to go to get myself closer to where I want to be.
I’ve spent a lot of the past several months thinking about what I should be doing to build my wealth and improve my life and my family’s circumstances.
In that vein, I’ve fallen down a pretty deep rabbit hole of books, articles, TED talks, and conversations that I’ll draw from here, in hopes that maybe it’s useful. Most of it revolves around productivity, decision-making, and forming good habits.
I’ll refer to some of the information from these sources herein. I apologize that I haven’t been organized enough to remember exactly when or where I got a specific idea from. Suffice it to say that none of the following ideas you’ll read are original to my brain—just my interpretation.
I think my biggest mistake has been taking a piecemeal approach to improving aspects of my life. Focus a little here, a little there. Some things get better, others maybe worse. And I just sort of end up somewhere.
The main takeaway from the research I’ve done so far has been to establish larger over-arching ideas and processes to drive my actions.
I make tons of mistakes. My intention here is to share some of my thoughts and what I’ve learned. It’s certainly not to infer that I’ve somehow got it right or have all the answers. If anything, it’s the opposite.
How I Plan to Improve My Life This Year
If I could boil down my plan to three steps, here is how it would look:
- Face the truth.
- Decide what kind of person you want to be.
- Make intentional decisions that have the highest probability of achieving that outcome.
Facing the Truth
The first thing we need to do if we truly seek to improve ourselves is to face the truth. The truth is that, over the long run, our position in life is almost entirely attributed to the decisions we’ve made. We’re not victims of luck or some evil villain.
I don’t deny the existence of luck, and luck is actually an important component to every decision we make. I know there are some truly tragic cases of pure and simple bad luck in the world. I am speaking to the more typical person’s circumstances here.
Everything is going to contain some measure of luck and some measure of skill.
Luck may play an outsized role in the short-term, among a small sample size of outcomes—like winning $100 on a lottery ticket. However, play the lottery 10,000 times, and odds are overwhelmingly small that you’ll come out ahead.
Over time, and as our sample size grows, the skill portion of the equation for most people will be the long-term determinant of your situation in life.
That’s not to say that outliers won’t occur. Someone who’s made nothing but poor life decisions will win the lottery. An amazing athlete and health nut will suffer from some tragic disease. That is life.
Notwithstanding these outliers, we all know from our own life experiences, if we’re being truly honest, that most people’s success is earned, and most people who are struggling have made quite a few bad choices.
We’re biologically predisposed to deny this reality. It is well documented that people tend to blame others and bad luck for negative experiences, yet assume it is their skill when positive outcomes occur. This happens REGARDLESS of the actual impact of luck versus skill.
Likewise, if a competitor or peer achieves something great, we tend to attribute that to luck. If we see them fail, we say it’s because they’re not as smart or talented as us and they deserve it.
We also tend to try to warp facts to fit them into our preexisting beliefs rather than digest them and alter our worldview accordingly.
I’m guilty of this all the time. Here are some examples:
- Our competitor overvalued the property that they outbid us on and are going to lose money for their investors.
- I’m still extremely athletic and only carrying a few extra pounds because of my life circumstances.
- I know more about real estate than that huckster over there. He may be wealthier than me, but he got lucky and is riding cap rate compression.
- I’m making great sacrifices and working to the bone for my family and financial future.
- The Bears lost due to bad luck and are still a better team than the Packers.
It doesn’t mean that these things are completely untrue. I just need to recognize that these are responses from my lizard brain and maybe I need to examine them more carefully.
While it may be difficult and downright scary to admit that we’re more or less where we deserve to be, it is also quite liberating and inspiring.
If you accept that you’re not building wealth because you’re spending your spare time watching Netflix, partying, sleeping, or arguing on Facebook, you also discover that you can make better choices and improve your circumstances. You’re not somehow chained to your predetermined fate.
So, step one is to start telling yourself the truth. More accurately, we must allow for the possibility that our first opinions are wrong or that there is more unknown information available. We must be comfortable with the fact that we cannot be 100 percent sure of almost anything.
Maybe the proper way to frame it would be:
- While luck has played a role, the Bears didn’t make enough plays when it counted to earn a spot in the playoffs. (There, I said it. And it hurt.) Or maybe it was all luck.
- Maybe I missed something in our evaluation process that allowed our competitor to value the property more aggressively. Maybe I didn’t train the analyst well enough or communicate clearly enough about what our underwriting process should include. Maybe there are some sharp professionals at that other shop that are capable of finding great deals, too. Maybe I got beat on this one. Or maybe they did overpay.
- I do feel like I’ve “still got it,” but I spend far less time exercising and competing than I used to. Maybe I’m in worse shape than I’d prefer to be in because I’ve prioritized other things ahead of a quality diet and consistent exercise.
- The only way to know for sure if a real estate investor is “good” or not, would be to look at every deal they’ve done on a risk-adjusted basis and compare it only to nearly identical deals from other investors. It’s possible that they’re a blind squirrel that found a nut, but it is possible that they are great decision makers, who have stacked up a string of decisions with a high probability of success, which has led them to this point. Maybe they are wealthier than me because I’ve chosen to dedicate my time and resources to my family, work, and leisure activities.
- Maybe too much of my income comes from my employer and not enough from investments.
Which set of statements would allow for me to evaluate my process and improve my future outcomes?
The takeaway here isn’t necessarily that I am right or wrong about any of this. The idea is to start to look at everything on a spectrum and allow for other explanations outside of what our biased lizard brains tell us.
If I reframe the way I evaluate an opinion or decision, it allows for me to be open to the idea that maybe I made the wrong underlying assumption.
With that, I can change my decision-making process. The best decision makers I know, and more broadly, the most successful people I know, are the people who view the world in this way. Nothing is 0 percent or 100 percent. There is a spectrum of possible outcomes and probabilities, and always a measure of unknown information and luck, present in everything.
I’ve chosen to be less wealthy than I am capable of. I’ve chosen to carry 15 extra pounds in exchange for time with family, in a book, in front of a computer, or in bed. OK, fine—20 pounds.
Related: 6 Life Laws That Will Make You Rich
If I re-evaluate my decision-making process, I can make changes in the outcomes I seek. By removing the blame from society, or my kids, or my job demands and putting it on myself, I also allow myself to change the outcome.
So, as to not end this section as a complete bummer, the flip side of this coin is to practice gratitude and acknowledge your successes, as well.
We should all strive to be humble and gracious (a major fault of mine can be hubris), but it is OK in your own mind to tell yourself you deserve a lot of the good things in your life—while acknowledging that varying degrees of luck played a role.
- I’ve achieved a level of income and a net worth well above average for my age and background (20 percent luck).
- Spearheading billions of dollars of transactions, I’ve gained a level of experience and responsibility in the real estate industry that many people will never achieve (30 percent luck).
- I’ve got an absolute smoke show of a wife, who turned into a phenomenal mother and companion (either 100 percent skill in deceiving her into thinking I was in her league or a solid 60 percent luck—depends on how you look at it).
Deciding Who You Want to Be
It sounds simple, but I think a lot of us skip this step. We start adulting, and our life just starts to glide. We can be good parents, we can make good money, we can have good relationships but still maybe feel like things could be better.
I think this is because we’re not being intentional about who we want to be. When you let the world or your circumstances dictate how you react, that’s how you wake up one morning wondering how you got to this point. It doesn’t have to be that you woke up in a gutter covered in whiskey and glitter with no pants on.
Maybe you just realize that you’ve got a little more debt than you should. Your relationship with your spouse is fine but not fantastic. You’re raising good kids but maybe not imparting all the knowledge and behaviors that you envisioned into them. You don’t have as much knowledge of the world, or history, or art, or whatever interests you. You haven’t traveled enough.
The point is, we all can recognize things in ourselves that we wish we could improve. To get there, we must intend to be there—not just hope it works out that way.
With this, let’s realize we can’t have everything. If your intention is to be the most attentive and loving husband, wife, mom, or dad, while also being promoted at work and involved in your church and local charities, some other area of your life may have to be neglected. You end up being a little out of shape, or ignorant of world events, or sleep deprived, or devoid in some other area.
Be comfortable with the fact that you can’t have everything, that there are trade-offs to every decision, and that the goal is to move toward perfection while understanding we’ll never reach it.
For me, I’ve decided to keep it simple.
- Be a great husband and dad.
- Be healthy and in good athletic shape.
- Generate enough cash flow to be able to enjoy my job without needing my job.
That’s it. I think if I can make these statements honestly, I’ll be moving very close to the person I want to be. While these will be life-long goals, I’ll allow myself to re-evaluate and add in the future.
Now all that is left is to follow a solid process to get there.
Making Good Decisions
Every single day we make hundreds of decisions, whether we realize it or not. Even not deciding is a decision. Furthermore, when we decide, we are—by definition—deciding not to do all the other things we could have done.
Deciding to wake up at 6:30 when my kids get up means I’m deciding not to get up at 5:30 for a workout, shower, cup of coffee, and catching up with my network. Do I want to be a chubbier, dying-younger, less-connected but more well-rested guy? Or do I want to be a wake up early, exercising, healthy guy?
It’s a lot easier to decide when I frame it that way.
Deciding to stare at your phone is deciding not to engage with your wife or kids.
Deciding to swing through the fast food drive-thru on the way home is deciding to be a little less healthy and a little more fat.
Deciding to watch TV is deciding not to research a new investment opportunity.
None of these decisions are necessarily right or wrong. The question to ask yourself is, “Does this decision move me closer or further from being the person I’ve decided to be?”
At times, it could be enriching and beneficial to blow off some steam on social media or watch a TV show with your spouse. There’s nothing wrong with that. Just make sure when you do it, it’s because you’ve intended to do it and for a reason. If we all did nothing but “productive” things with all our time, we’d be miserable losers that no one would want to be around.
Hell yes there is a place in life for guzzling beer and screaming at the TV.
New Goal: Hone the Decision-Making Process
Looking only at the outcome of a decision turns out to be a really poor indication of whether the decision was good or bad.
You can choose to drive home after drinking and make it home safely. You’re still an idiot.
You can buy a house to flip that meets all the right criteria and still lose money on it if you tear down a wall and find extensive damage.
You can choose to take an Uber home after drinking and die in a fiery wreck.
In virtually every real-life decision, especially investment decisions, there is a measure of luck and unknown information. This ensures that there is always the possibility for a negative outcome, even when you’ve made a good decision.
That is why earning a return on investment greater than a treasury bond is even possible. Having the skill and experience needed for navigating the risks, unknown information, and outright luck involved is what keeps everyone from being able to strike it rich.
Making good decisions is about having a good process. A good process takes into account all of the possible information, how any relevant parties might react to that information, a healthy understanding of what unknown information might exist, confronting your own lizard brain biases, and being able to assign reasonable probabilities to all of the various outcomes.
Then you can choose the course of action that best fits your skill and experience. You can maximize the chances you’ll succeed but never guarantee it. After all of that, you still need to decide how much to risk on a given decision based on how good of a deal you think you’ve got.
For example, betting on a horse that is most likely to win may not take much skill, just bet on the horse with the best odds. But is that the best decision?
The horse with 3:2 odds versus the horse with 100:1 odds is clearly more likely to win. But which horse, if any, is the right one to put money on, and how much?
If you’ve watched a million horse races and follow it religiously, you may have the skill and experience to strongly believe that the first horse should actually win 50 percent of the time. In that case, getting paid 3 to 2 may be a great deal.
Or maybe the 100 to 1 horse, while still a long-shot, should actually be priced more like 50 to 1. In that case, you’re getting extremely attractive odds at 100 to 1. Nonetheless, that horse is still unlikely to win.
So, which horse to bet on, and how much?
It’s impossible to know with 100 percent certainty. The only thing we can do is create a high-quality process that makes sense to us and maximizes our skills and experience to make the highest quality decision that we can. If we can get 100 to 1 odds on a horse that we think should be 50 to 1 on a regular basis, over time we will make money.
For example, bet $1,000 on that race 100 times, and you’ll win roughly 2 percent of the time (if you’ve handicapped it right) or about $200,000. You will lose $1,000 the other 98 races, or $98,000. You make about $100K there.
But for that strategy to work, we’d have to be willing and able to gamble on a lot of races and expect to get more opportunities like this, while still being willing to lose the bet 98 percent of the time.
If you try that and end up breaking even or losing money, you need to go back and re-evaluate your process. You likely missed something that made you think the horse deserved better odds than it did.
Your process was wrong.
Even if you did win, you have to consider the fact that maybe you still handicapped it wrong but just got lucky.
Hopefully my point is becoming clear here.
Real-life decisions are cloudy, murky, and full of components within and outside of our control.
Making good decisions, which leads to more money, better health, or whatever outcome you are targeting, is about sticking to a process and constantly going back and re-evaluating that process, using the information you’ve gained in past decisions.
Simply looking at a small set of outcomes is insufficient to know if you’re making good decisions over the short-term. Long-term, however, outcomes will improve if a good decision-making process is being followed consistently.
The goal is not to make 100 percent good decisions, because that is impossible. The goal is to use what you know to give yourself the highest probability of success over time. Then you constantly re-evaluate your process and try to identify your weaknesses and biases objectively.
That entails accepting that sometimes you may have made the right decision and gotten unlucky, as well as accepting that the wrong decisions we’ve made in life can explain most of the negative outcomes we’re dealing with.
My goal for 2020 is to establish and hone a great decision-making process. I’ll use that process to try to stack good decisions and minimize bad ones. By focusing on the process and not the outcome, I can better accept the negative and embrace the positive things that come my way.
Over time, this should lead to more money, a happier family, and the ability to dunk again! On a nine-foot rim. OK, an eight-and-a-half-foot rim.
Here’s to a great year!
What are your goals for 2020?
Hold yourself accountable by sharing them below.