“Everything should be made as simple as possible, but not simpler.” — Albert Einstein
Most people will be surprised to learn humans can only evaluate about seven things at a time. That’s it.
Let me ask you this: How many pieces of information do you need to consider when purchasing an investment? What if you’re evaluating several properties? Does the human brain have the capacity to make these decisions effectively, given its limitations?
Picture a puzzle of the Grand Canyon laid out on your kitchen table. If it had less than seven pieces, most of us could arrange them in our head. Our brains are capable of handling that much complexity. What about a 1,000 piece puzzle? While we couldn’t put it together in our heads, we could easily put it together if we organized the pieces by color and focused on one section at a time.
Most of the decisions we need to make in real estate investing are similar to the puzzle problem. They are way too complex to handle all at once, but easily managed if the complexity is broken up into smaller, more manageable pieces using a system. Our brains aren’t capable of doing it any other way. So, it should come as no surprise that the top business books of our time are simply guides to creating systems. Guides that help us overcome our brains’ limited abilities to deal with complex problems.
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7 Top Resources on Effective Systems
Here is a short list of some of the top business/investing books and the systems they teach.
- 4-Hour Workweek by Tim Ferriss: Create a product and develop a systematic process of selling it. Once the system is in place, hire someone to repeat it so you don’t have too work much.
- The E Myth by Michael E. Gerber: Create a business and a system of running it. Sell that system (franchises, i.e. McDonalds, Starbucks etc.) and use the income to continually develop and make the system better.
- Getting Things Done by David Allen: Create a system to organize your work so you don’t have to waste time and energy thinking about what you’re doing next. This frees your mind to be more focused and efficient.
- The One Thing by Gary Keller: Create a system of actions to do every day that answers the following question asked by Gary Keller: “What can I do today such that everything else will be easier or unnecessary?”
- The Lean Startup by Eric Ries: Create a product and a systematic way of measuring its success. Use the feedback to continually make the product better.
- Landlording on Auto-Pilot by Mike Butler: A step-by-step system you can repeat to save yourself time, stress and money as a landlord.
- The Compound Effect by Darren Hardy: You can only reach your goals if you have a system in place that keeps you focused on the little actions that will result in you achieving your goals.
If you want to succeed in real estate investing, you’ll have to create a system — a step-by-step process you’ll use to find, evaluate and buy property. It won’t be great or extensive when you first start, but it will give you the foundation needed to evaluate the system and continually make it better.
Every successful investor and business person I’ve met has a system. They know exactly what they do, the order they need to do it in and why they do each step. There is no guessing. They are successful because they have a system in place.
I like to think of systems as having a sail in the open ocean. As the winds change, so does the direction of the sail. It’s not perfect, and it requires a lot of adjustment. But it’s the only thing you have to keep you going in the right direction. Don’t hope the tides will get you to where you want to be.
Investors: Which of these reads was your favorite? What books would you add to my list?
Leave a comment below!