Last week, I listened to an interview in which Howard Marks, cofounder of Oaktree Capital, shared his views on dealing with change. He referred to his 2006 “It Is What It Is” memo (see here). In that memo, he said that “mujo means cycles will rise and fall, things will come and go, and our environment will change in ways beyond our control. Thus we must recognize, accept, cope and respond. Isn’t that the essence of investing?”

What jumped out to me was his four steps for dealing with change:

• Recognize
• Accept
• Cope
• Respond

Change is inevitable and beyond our control. We can’t change our reality. As Marks said in the interview, “what we can’t do as investors—we can’t say ‘Please sir, I'd like a different environment.’ The environment is what it is, and it’s this one we have to cope with . . . .”

Change is the only constant in life. That being true, having a rational process for dealing with change is key (fighting it usually doesn’t end well). That’s why I like Marks’s four-step process. It’s simple, easy, and something anyone can follow. If something is happening that creates uneasiness, it’s not difficult to go through each of these steps to deal with the change and hopefully become at ease with it.

Marks elaborated more on this topic in the interview. To listen to his comments, go to that section of the interview here.

The entire interview contains other great nuggets of wisdom. If you want to watch it from the beginning, take a look here.

I’m reading a book this week about understanding the impact of luck and skill on successful (and unsuccessful) outcomes. It’s called The Success Equation, and it’s by Michael J. Mauboussin. It outlines a framework for assessing the influence of skill and luck on your decisions (many life outcomes are a combination of both) so you can increase the chances of getting a successful outcome. Very interesting book so far.

One section is called “Why Smart People Do Dumb Things.” I’ve been thinking about it a lot today. The key premise of this section is that intelligence tests measure some cognitive abilities but fail to measure others. One area these tests miss is decision-making ability. Smart people sometimes make stupid decisions.

The book goes on to distinguish between intelligence and rationality. Most would think they’re related, but this isn’t necessarily true, the book argues. There are two ways to evaluate someone’s cognitive ability:

• Intelligence quotient (IQ) – This is what traditional intelligence tests measure. It’s a rating of someone’s ability adjusted for their age and compared to the rest of the population. Think mental processing speed, memory, vocabulary, etc.
• Rationality quotient (RQ) – This is the ability to think and behave rationally. RQ attributes include “adaptive behavioral acts, judicious decision making, efficient behavioral regulation, sensible goal prioritization, reflectivity, and the proper calibration of evidence.” This is what interests me most.

The book highlights that many people with high IQs cannot act or think rationally and gives examples.

This section resonated with me for a few reasons. First, if decision-making is what matters most in life, then RQ is most important. IQ can’t be changed (as far as I know), but anyone can learn to act and think rationally through hard work and focus. So, if you didn’t win the ovarian lottery and don’t have a rocket-scientist IQ (I fall into this category), you can still have outsize success if you’re intentional about thinking and acting rationally. It’s not easy and takes work—e.g., I read this book—but I feel it’s definitely something that be learned and improved materially.

Second, this section mirrored something Warren Buffett said (I read it in The Warren Buffett Way last year). I wrote a post on the quote; see here. The gist is that rational behavior is what enabled Warren Buffett to achieve outsize success, not his IQ (which is very high, too). It’s not how smart you are, but how effectively you use the intelligence you have. Buffett says some smart people have a 400-horsepower brain but only get 100-horsepower output from it because of the decisions they make. He argues that by being rational, you can have a 200-horsepower brain and get 200-horsepower of output, which puts you ahead of the 400-horsepower “genius” who can’t act rationally.

When two wise people say the same thing, it catches my attention because they reached the same conclusion independently. The probability that both are wrong is low.

I’m excited to finish reading this book. Understanding IQ and RQ, and recognizing when luck heavily influences what I’m doing, has already changed some of my thinking and decision-making.

Last week I listened to a friend explain a problem he’s trying to solve and the solution he’s considering. His solution solves 100% of his problem but is expensive and creates another problem. I asked questions during our conversation and was intrigued. I kept thinking, There must be a better and cheaper solution. I decided to think about this problem more after our call.

The next day I read an article related to the problem. The information in the article got me thinking about the problem in a different way. A light bulb blinked on. I came up with an unconventional idea for how to solve the problem. It would solve 90% of the problem, cost 25% less than his proposed solution, and not create additional problems. I shared my idea with my friend, who was intrigued. He wasn’t aware of the information I’d read about and therefore hadn’t thought of solving the problem using it. He did more research and ended up loving the solution. Today he told me he executed the solution and is happy with the result.  

Had this friend never shared his problem with me, he would have likely come up with a good solution on his own, given his smarts. But because he did share it, I uncovered information that was new to him and used it to craft a unique solution.

Talking through problems with people who are familiar with the area in question is a great way to come up with better solutions. Explaining the issue helps you crystallize your own thinking, and it can result in more brains thinking about and sometimes solving the problem. The downside is minimal and the upside is massive.

The next time you’re trying to solve a hard problem, consider talking it through with credible people you trust.

I read a quote today that I like:

"Every morning in Africa, a gazelle wakes up, it knows it must outrun the fastest lion or it will be killed. Every morning in Africa, a lion wakes up. It knows it must run faster than the slowest gazelle, or it will starve. It doesn’t matter whether you’re the lion or a gazelle—when the sun comes up, you’d better be running."

~ Christopher McDougall

I like this quote because it does a good job of illustrating how complacency can negatively affect anyone, regardless of their advantage or lack thereof.

A friend shared a quote today that caught my eye:

“People do not decide their futures, they decide their habits and their habits decide their futures.”

~ F. M. Alexander

This statement is simple, clear, and true. We have the power to increase the probability that the future we desire will become reality. If you want a particular outcome, consistently act in a way that aligns with that outcome. It will be more likely to happen.  

I read a quote today from Henry Ford that stuck with me:

If there is any one secret of success, it lies in the ability to get the other person’s point of view and see things from his angle as well as from your own.

I try to see things from other people’s perspectives, and I’ve gotten better at it, but I’m not where I want to be. The Ford quote was a good nudge; it reminded me of the importance of mastering this skill. I’m committed to working on this until I’ve mastered it.

I read a quote today from the German missionary Albert Schweitzer that caught my attention:

An optimist is a person who sees a green light everywhere, while the pessimist sees only the red stoplight . The truly wise person is colorblind.

This got me thinking about my experience. I’ve learned to balance my thinking in any situation by considering the counter to my natural instincts. For example, if I’m super excited and see lots of upside, I try to think about the downside. Conversely, if I’m hesitant and see lots of risk, I try to think What could go right? and see the upside potential.

As an early-stage founder, I was part of an entrepreneurial group that taught new founders about key business functions. Each quarter we went deep into a specific business function: marketing, finances, HR, marketing, etc. At the end of each of those sessions, I better understood functions that didn’t come naturally to me (e.g., marketing). I felt educated. But I still had a problem: What do I do with this new knowledge? How do I use it in my business? I’d learned what I needed to do, but I still had no idea how to do it.

This experience highlighted the difference between knowledge and wisdom.

Knowledge is acquired by learning new information or being made aware of something. Learning about marketing is an example of acquiring knowledge. Knowledge acquisition doesn’t always equate to adding value. There’s another step.

Wisdom is the ability to apply knowledge in a manner that aligns with the outcome you desire. Wisdom means changed behavior and improved decision-making—knowing what to do and when to do it. Wisdom is acquired from experience (yours or someone else’s). Growing your company through marketing execution is the result of wisdom.

Through trial and error and talking with other successful entrepreneurs (who shared their experiences), I learned how to apply the concepts I learned in those sessions to grow my business. My problem was solved.

This experience showed me that knowledge is important. You can’t apply something if you aren’t aware of it, which is why continuous learning is so important. But wisdom is what I value most because applying knowledge well is how I achieve the outcomes I desire.

Friends and family joke that I have no shame about asking for what I want, especially when traveling and in other service-related situations. They’re right, and I own it.

I view knowing what you want and asking for it as a positive trait. So many people accept what’s offered to them in life. Life happens to them. They may want more, but they never take action to try to get more. I’m not wired like that. By taking the step of saying what I want and asking for it, I’m increasing the chances of getting the outcome I’m aiming for. I’m also making others aware of my goal or expectation.

I want to be clear that I’m not saying it’s okay to bully people into doing what you want or ask in a negative or nasty way. I don’t believe in that. I try to ask for what I want in a manner and tone that mirror how I would want someone to treat me.

I’ve explained to family and friend that I think about this in terms of risk and reward. In many of these situations, the upside dwarfs the downside. The upside is often a more enjoyable experience or a positive impact on you and those with you. The downside is just hearing no.

Family and friends still joke with me about this. When they do, I remind them of the famous Wayne Gretzky quote: “You miss 100% of the shots you don't take.”

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I was listening to a podcast today that mentioned a quote from Bruce Lee that I hadn’t heard before:

If you always put limits on everything you do, physical or anything else, it will spread into your work and into your life. There are no limits. There are only plateaus, and you must not stay there, you must go beyond them.

I like this quote. It speaks to the power of mindset in what you can achieve. If you believe there are limits to what you can accomplish, then you will unknowingly limit yourself in everything you do in life. When you’re trying to accomplish anything hard, periods when you feel your progress has stalled are inevitable. But you have a choice in how you handle them. You can view them as your having reached your limit, or you can persevere and push through them and go further.

Over the years, I’ve learned that mindset matters a lot. For example, when exercising, I’ve always been able to lift more or run farther or faster than I thought possible. I learned that limits hinder my growth. I learned to keep pushing as hard and as far as I can (without hurting myself). It’s hard and painful in the moment, but when it’s done, I’ve always been glad I kept pushing. This approach led to achieving new personal fitness goals and realizing I’m physically capable of much more than I thought.