In a recent conversation, I was struck by the practical wisdom and unconventional approach of the individual I was speaking with. This person, a successful investor and businessman, has a unique way of analyzing situations and making decisions that has served him well throughout his career.
One of the key principles he follows is to consider the risks and vulnerabilities on the other side of a situation and to avoid those risks. This approach, he explained, is similar to solving certain algebraic problems: by inverting the problem, one can often find a solution more easily.
This investor also has a "bag of tricks" that he has developed and refined over the years. These tricks, or mental models, allow him to quickly understand complex situations and make informed decisions. He credits his time in the ROTC, where he learned to fire mortar shells with precision, as the source of one of his most valuable tricks. This "one shot over, one shot short" approach has helped him determine the right size to make something, whether it's a business decision or a physical product.
Another key aspect of this investor's decision-making process is his ability to quickly assess the intelligence and capabilities of the people involved in a situation. He believes that, in many cases, a 96% certainty is all that is needed to make a decision, and that doing excessive due diligence can often be a sign of inner insecurity.
This investor's approach to decision-making is particularly evident in his business deals. For example, when he recently purchased a large oil company, he did not conduct extensive research or analytics. Instead, he used his "bag of tricks" and his understanding of the oil industry to quickly assess the value of the company and make a deal. He was able to complete the deal in just a few days, with the help of a trusted partner.
In contrast, this investor often observes that less intelligent or capable thinkers will often engage in excessive due diligence as a way to alleviate their own insecurities. He believes that this approach is ultimately ineffective, and that the key to making good decisions is to quickly and accurately assess the situation and the people involved.
Overall, this investor's approach to decision-making is a testament to the power of practical wisdom, mental models, and a deep understanding of the situation at hand. By avoiding risks, using his "bag of tricks," and quickly assessing the intelligence and capabilities of those involved, he is able to make informed decisions and achieve success in his business dealings.