Anthony Eden had just finished resigning as prime minister of the United Kingdom. His role in the Suez Canal crisis destroyed his reputation and put Britain’s economy in ruin.

In The Crown – dramatized but directionally accurate – Queen Elizabeth takes pity on Eden for his experience with risk:

To do nothing is often the best course of action. But history was not made by those who did nothing. So I suppose it’s only natural that ambitious and driven men want to go down in history.

The first sentence is great. The second gets it a little wrong, even if it’s intuitively right.

Most of history is made by those who mastered the art of doing nothing when nothing needed to be done. This is especially true for business leaders and investors. Their do-nothingness can be more important than their inclination to do something. We just pay more attention to the somethings because they’re more obvious and exciting. My basic idea is 99% of investing is doing nothing, 1% will change your life, and that 1% is the only visible part so it’s all we talk about.

Doing something contrarian is required to overcome mediocrity, or even to get off the ground in some fields. But bold action alone rarely makes business history, especially big enough for people to remember. Capitalism’s job is to allocate competition towards success, which means big and correct ideas plant the seeds of their own decline. Surviving that decline long enough to let compounding do something meaningful requires enough buffer – in both money and reputation – to endure trouble, regroup, and find new opportunities. And those buffers tend to come from strategically doing nothing in a way that builds up cash, prevents rash decisions, and avoid reputational damage. This is the difference between getting rich and staying rich.

Good strategies are rarely black and white. Swinging for the fences and being conservative are not mutually exclusive, and the most enduring businesses and investors have elements of both, usually at the same time, often feeding off each other.

Take Microsoft’s early days. Bill Gates chased a bolder vision than almost anyone else in the 20th century. Yet he swung for the fences and focused relentlessly on downside risk at the same time. Gates once talked about how he handled cash management:

I came up with this incredibly conservative approach that I wanted to have enough money in the bank to pay a year’s worth of payroll even if we didn’t get any payments coming in. I’ve been almost true to that the whole time.

It’s a barbell: Huge investments in the future of computing on one hand while piling up treasury bonds on the other. And the doing-nothing was as important as the doing something, because it buffered against the risk of recession and competition that, if not defended again, would have stop the doing something dead in its tracks. There is a graveyard of promising companies whose demise was caused by not accepting this cognitive dissonance.

Charlie Munger explained something similar in investing. His dealmaking philosophy is “Look at lots of deals and don’t do almost all of them.” Combine these two quotes:

“In my personal portfolio I’ve sat for years at a time with $10 million to $12 million in treasuries. Just waiting, waiting. A lot of people can’t stand to wait. It takes character to sit there with all that cash and do nothing.”

“The wise ones bet heavily when the world offers them opportunity. They bet big when they have the odds. And the rest of the time, they don’t.”

Doing nothing most of the time is what makes doing something big some of the time possible.

This might make sense on paper but it is maddeningly hard in practice because of the queen’s observation: People want to make history and do something. It’s mental torture to match hands-off patience with decisive action. They are opposite skills, even if they rely on one another. It’s why the Mungers of the world are rare. His not-investing has been as important as his investing.

There’s a passive version of this. Dollar cost averaging means actively doing something (buying every month) while strategically doing nothing (selling in an attempt to get a better price). Neither works without the other, but because of how compounding works the latter (waiting, hands off, doing nothing) becomes more important over time than the act of buying. When you hear rare stories about mom-and-pop investors letting their investments compound for decades, you are witnessing people making history by doing nothing.

A couple things stick out here.

Strategically doing nothing diversifies against a dangerous ego. As Jason Zweig says, “Being right is the enemy of staying right, partly because it makes you overconfident, even more importantly because it leads you to forget the way the world works.” Constant actions increase the odds of occasional luck, which increases the odds of being fooled by randomness in a way that saying no in the name of humility or waiting for bigger payoffs helps prevent. This is why day trading is so difficult.

The pull toward constant action implicitly assumes the best opportunities are constantly presenting themselves to you at every moment. It’s hard to think of living in bigger bubble. Doing nothing gives you options to do something different in the future. And options can be one of the most valuable assets in world that’s constantly changing and breaking down old rules.

1. The Study Set from “The Haunted Mansion”

 

The Haunted Mansion is a 2003 American fantasy comedy horror film starring Eddie Murphy based on the Disney theme park attraction of the same name. Found on

To wrap your head around how good we are at solving hard problems with simple solutions, consider how much of a mathematician you need to be to catch a baseball.

What do you need to do to see a ball fly through the air, run to its location, and extend your hand to the exact spot it’s going to land?

You have to know the exact speed the ball is traveling. You have to know its precise amount of spin. You have to know the exact moment the ball stops rising, loses momentum, and begins to fall toward the ground. You have to calculate how the wind changes its travel. And you have to do this in a few seconds.

The formula necessary to know how to catch a ball looks like this:

Stephen Hawking could not do this math in under five seconds. But Lenny Dykstra did, thousands of time.

How?

No one actually does the math, of course. Everyone catching a baseball uses a rule of thumb that incorporates all the complicated math into a three-step action:

• Align a flying ball in the center of your gaze.

• Run.

• Adjust your run so the angle of the ball stays at the same spot in your gaze.

Every bit of the complex formula is buried in that rule of thumb. People take an impossibly complicated action and distill it into a manageable action that does a good enough job. And it’s not only good enough, it’s the best action, because trying to get more accurate – Lenny Dykstra with a radar gun and a calculator – isn’t a marginal improvement on the good-enough strategy. It’s a blundered stumble into a new strategy with little chance of success.

I love this example because it applies to almost anything complex. If you’re going to act on a problem that is monstrously complex and uncertain, the stripped-down, rules-of-thumb response is not only good enough. It can be superior to tripping over yourself in pursuit of something that appears marginally more accurate.

Chess players do this too.

Adriaan de Groot studied chess masters in the 1960s. He was one himself. He wanted to pinpoint traits that separate good players from extraordinary ones.

de Groot knew that what made a chess master had to be something soft and instinctual like psychology, rather than hard and learned like math, if only because there are more 12-year-old chess prodigies than there are 12-year-old physics pioneers.

After four moves apiece there are a quarter trillion possible chess combinations. No one, of course, can calculate a meaningful percentage of them. So the masters don’t even try. In his book Thought and Choice in Chess, de Groot showed that pretty good chess players attempt to calculate multiple moves in their head, while masters simply contextualize moves into a broad, rules-of-thumb strategy that zeros in on the board’s top few challenges. He wrote:

Although master level players – as one would expect – more often selected winning moves than lesser players, their thinking and decision making followed similar procedural lines. The main difference between grandmasters and players of average strength is the speed of recognizing the central issue in each position. Where lesser players tend to spend considerable time on unimportant options, the best players almost immediately see what the real problem is. That’s their talent. … knowledge and experience rather than a strong computational competence or an exceptional memory.

Chess masters are basically running with the ball in their gaze, while amateurs attempt to calculate the ball’s trajectory.

It seems counterintuitive that the masters take a humbler approach than amateurs. But we see it all the time.

We see it in investing, where dollar cost averaging with index funds beats most active strategies. Indexing is not dumbed down or giving up. It’s a rule-of-thumb approach that incorporates the complexities of diversification, weighting, power laws, bear-market predictions, and portfolio selection into a run-with-the-ball-in-your gaze strategy.

We see it in business, where pretty good products that are consistent can be superior to those constantly trying to improve on the past version. Familiarity captures a lot of the complexities of what consumers want.

We see it in management, where Google found that SAT scores had no predictive ability on an employee’s future performance, but being well-liked by your coworkers does. “People like working with me” is a rule of thumb that can capture the complexities of someone’s technical ability, work ethic, and problem-solving capabilities better than more complex metrics.

Charlie Munger was once asked why more people haven’t copied Berkshire Hathaway’s strategy. “More investors don’t copy our model because our model is too simple,” he said. “Most people believe you can’t be an expert if it’s too simple.”

Berkshire’s model is actually massively complex. But Buffett and Munger have distilled it down to a handful of rules of thumb, acquired over decades of experience, that appear simple yet capture some of the most complex attributes of business and market behavior. By choosing rules of thumb over an attempt at mastering complexity, they’ve actually been able to execute on the strategy in an industry where others trip over themselves.

If you’re going to act in a field with complexity and uncertainty, man, act like that.

***

There are few practical takeaways to the rule-of-thumb-vs.-complexity approach.

One is accepting the difference between an expectation and a forecast. An expectation is the belief that certain events will occur over time. Rule of thumb: Expect one or two recessions per decade. A forecast is a complex attempt to merge expectations with the calendar: Expect a recession in Q3 2018. They are totally different things. An expectation forces you to prepare for an inevitability without requiring near-term actions – often counterproductive – that forecasts push you towards. Try surrounding yourself with more expectations and fewer forecasts.

Another is realizing that using rules of thumb frees up time compared to digging into complex solutions, and that time can be spent learning about even more helpful rules of thumb. Munger again: “How did Berkshire’s track record happen? If you were an observer you’d see that Warren did most of it sitting on his ass and reading.” The key is that he’s had the time to sit on his ass and read because he hasn’t been bogged down by trying to control the minute details of his strategy. Rules of thumb give you time to learn, and learning gives you rules of thumb.

Most important is accepting that when you’re dealing with uncertainty and complexity, simple ideas are not dumbed-down ideas. They are often complex solutions gift wrapped for you in a way that makes their application practical and sustainable.

How to become a millionaire is much easier than many believe. In fact, one a modest income one can accumulate $1 million in wealth in just 20 years. Here's how.

Editor’s note: This is an editorial from The Oregonian newspaper, from June 21, 1928. Its author offers a poetic tribute to mowing the lawn…or at least watching someone else mow it!

It is passing difficult to arouse in the younger generation the slightest enthusiasm for the mowing of lawns. This proves, if anything, that the mechanical age is far advanced. There was a time, and well within the memory of men whose hair is but slightly frosted, when a lawn-mower would have seemed to any boy the most desirable of mechanical marvels, conferring great prestige upon its possessor. But, look you, a lad leaps into his plane and rides the wind to Europe or Australia. A girl is wafted to Wales. You turn a knob here and press a button there and you hear the crew of the Italia calling from the far northern ice, where white bears come shuffling down the bergs. Youth simply isn’t interested in lawn-mowers any longer. As novelties, as triumphs of the mechanic’s exacting science, they are outworn. But still the lawn needs cutting, for grass will grow. It is a marked trait of lawns to require mowing.

In certain lands, so one has read, the labor of human hands is so cheaply priced that lawns are plucked, not cut. Blade by blade the grass is broken away, while the bronze backs of the toiling coolies glisten in the sun. And, of course, there is the epic story of the calf, whose bucolic owner, lately domiciled in town, vowed his intent to “hitch his calf right here in this front lawn, and let him chaw, and chaw, and chaw, till the hull darn thing is chawn.” Neither of these otherwise excellent methods is quite suited to the times, and our standards of living, we beg of you to observe. Labor is not held so cheaply here, heaven be thanked, while as for calves, and we intend no pun, they aren’t hitched anywhere any longer, least of all at home on the lawn. So naught remains to us save the neglected lawn-mower which, even though it be dulled by neighborly borrowings, is nevertheless a considerable improvement upon the coolie and calf methods.

It is possible to derive a great deal of beneficial exercise and philosophical satisfaction from the mowing of lawns. The grass lies in straight, clean swaths, and the humming of the blades hath ever a drowsy, slumberous sound. The mower is skillfully piloted around flower beds and shrubs, and it answers the helm as nervously as a racing yacht. The operator bends honestly to the handle, while beads of joyous perspiration shape on his brow, and follows the device with hasty step. He is a good man, or a loyal boy, who can keep up with a lawn-mower in full career. It is eager to be yonder. It hungers for the clover down wind. Aye, a goodly and philosophic exercise and pastime, and all the more so if it be viewed from the shade of a maple, by one inclined to reverie. There is nothing so conducive to day dreaming, to a certain fondness and gentleness of thought, as the meditative viewing of a lawn-mower actively operated by another. In an hour the lawn will be all level and slightly, having a texture as of velvet. Let him take his happiness while he may, and let him thank providence that within a week or some such matter the grass shall have its stature again.

There is a perfectly impossible bumble bee in the delphinium. That flash of molten color was a humming bird in passage. Is there aught to compare with the scent of blossomed clover, when one is near to it – when one plays the idler? Nevertheless it is a hard life, for the lawn-mower has turned the corner and now is cutting grass to westward of the house. And, really to enjoy the mowing of the lawn, one must up and loiter after.

“I was born for a storm and a calm does not suit me.”

While his countenance graces our $20 bill, many Americans do not know much about the life of Andrew Jackson. He is often remembered as the hero of the Battle of New Orleans or condemned as the man responsible for the Trail of Tears. He was in truth a man of many contradictions: impetuous and reckless frontiersman and charming gentleman; enforcer of the Indian Removal Act and devoted father of an adopted Indian orphan; champion of freedom and the preservation of the Union and unrepentant slave holder. He was described as both a quintessential man’s man, “fond of well-cut clothes, racehorses, dueling, newspapers, gambling, whiskey, coffee, a pipe, pretty women, children, and good company,” and a gentleman with a soft side: “there was more of the woman in his nature than in that of any man I ever knew — more of a woman’s tenderness toward children, and sympathy with them.”

He was the first president to come from the common people and break the Virginia aristocracy’s hold on that office. After his inauguration, he threw open the doors of the White House for a public reception; the crowd of drunken well-wishers who attended grew so huge and unruly they had to be lured back out with large tubs of spiked punch placed on the front lawn. He was the first president to see himself as the direct representative of the people and thus to believe that his office should have great power and authority in shaping national affairs.

There is much to find repugnant in Andrew Jackson’s life and career as it pertains to slavery and Native Americans. But that a man is flawed in some ways does not mean he cannot be inspiring in others, and it would be a shame not to learn from the high points of the life of “The Old Lion”:

Don’t Let Your Circumstances Determine Your Fate

Andrew Jackson’s life story could have been torn straight from a Horatio Alger novel. Jackson’s father died just 2 months before he was born. His mother could not keep the family farm going herself and moved in with her sister. So began a life of dependency for young Andrew. His aunt put his mother to work like a housekeeper, and the boy was always keenly aware of his inferior place in the household. Growing up without a father, he developed a propensity towards anger, recklessness, and defensiveness.

Yet Jackson’s troubles had just begun. The Revolutionary War would grant the country independence, but exact a heavy price on this future president. Hugh, his 16-year-old brother who had gone off to fight, became the first casualty, dying of heat exhaustion at the Battle of Stono Ferry. Andrew, who at age 13 had joined a local militia to serve as a courier, was then captured by British soldiers and imprisoned along with his other brother, Robert. Jackson’s mother successfully pled for the boys to be released, but Robert, who had contracted smallpox while in jail, died two days later. Andrew was also sick, but his mother, assured he was doing well, decided to travel to Charleston to tend to prisoners of war who had become stricken with cholera. Jackson would never see her again; she soon fell ill and passed away. Andrew Jackson, only 14 years old, was now an orphan.

Jackson now had no immediate family and only a few years of education. He lived with a series of relatives, chafed at feeling like an inferior houseguest, squandered an inheritance from his grandfather, and sowed his wild oats. His relatives feared he would become a great embarrassment to his family. He described his situation during this time as “homeless and friendless.”

Jackson felt deeply adrift, but his mother’s last advice to him before she departed for Charleston kept returning to his mind, urging him to turn things around and live a proper and successful life:

“Andrew, if I should not see you again, I wish you to remember and treasure up some things I have already said to you: in this world you will have to make your own way. To do that you must have friends. You can make friends by being honest, and you can keep them by being steadfast. You must keep in mind that friends worth having will in the long run expect as much from you as they give to you. To forget an obligation or be ungrateful for a kindness is a base crime — not merely a fault or a sin, but an actual crime. Men guilty of it sooner or later must suffer the penalty. In personal conduct be always polite but never obsequious. None will respect you more than you respect yourself. Avoid quarrels as long as you can without yielding to imposition. But sustain your manhood always. Never bring a suit in law for assault and battery or for defamation. The law affords no remedy for such outrages that can satisfy the feelings of a true man. Never wound the feelings of others. Never brook wanton outrage upon your own feelings. If you ever have to vindicate your feelings or defend your honor, do it calmly. If angry at first, wait until your wrath cools before you proceed.”

Desiring to honor the memory of his mother, Jackson tried to get back on track and decided to study and apprentice to become a lawyer. He was still living a rowdy life at that point –“I was a raw lad then, but I did my best,” Jackson would later recall — but he began to mark out a path for himself.

He was able to gain admittance to the bar but could not find any clients to represent; he had no clout or experience. So he leveraged the one quality that would help carry him all the way to the White House: his magnetic bearing and charisma. It was a time where connection to great and prosperous families was essential to success, and Jackson used his charm to insinuate himself into these families’ good graces. He was never considered attractive, but his gentlemanly manners, steely, attentive blue eyes, and ability to converse with and warmly engage with people from all walks of life drew others to him. While his rowdy reputation would often precede him, Jackson would instantly disarm those he met and absolutely confound their expectations.

Jackson made the right connections, worked hard, and moved up in the world. With vast stores of personal strength, self-confidence, and perseverance as his only resources, he set out to make a name for himself. His biographer, Jon Meacham, details his astonishing and unexpected rise: “An uneducated boy from the Carolina backwoods, the son of Scots-Irish immigrants…became a practicing lawyer, a public prosecutor, a US attorney, a delegate to the founding Tennessee Constitutional Convention, a US Congressman, a US Senator, a judge of the state Superior Court, and a major general, first of the state militia and then of the US Army.” And then, of course, he would reach the very top of the ladder – attaining the highest office in the land.

Instead of letting adversity break him, Andrew Jackson gathered a gritty strength from his experiences that would enable him to make it through all the tests and trials of his life.

Cultivate Your Leadership

Before he became a politician, Jackson was a great and storied war hero. He was the kind of leader that men would gladly follow to the ends of the earth. Having grown up without a father, Jackson sought to be a father to the men under his command. He treated his men as sons, and in so doing, won their undying loyalty.

When the war with Britain began in the winter of 1812-13, Major General Jackson gathered together 2,000 volunteers and marched them from Tennessee towards New Orleans in anticipation of action. The men had picked up and left behind their professions and families — their entire lives, really — in hopes of being of service to the country. But after journeying for 500 cold miles and reaching Mississippi, the Secretary of War ordered them to disband and return. Jackson refused to leave his volunteers adrift and force the men to find their own way back home. He promised to keep them together, and even use his own money to furnish the supplies necessary for the return trip.

Many of the men had by then fallen ill and could not make the long journey unaided. Yet there were only 11 wagons for the 150 sick men. The regiment’s doctor, Samuel Hogg, asked Jackson what he should do with the sick. “To do sir? You are not to leave a man on the ground.” “But the wagons are full and they will convey not more than half,” Hogg countered. “Then let some of the troops dismount, and the officers must give up their horses to the sick. Not a man, sir, must be left behind,” Jackson declared. The general set the example by immediately turning over his own horses. He walked alongside his men all the way back to Tennessee. By the time the weary troops arrived in Nashville, the men had taken to calling their tender but tough leader “Old Hickory,” a tree whose wood is described thusly: “Very hard, stiff, dense, and shock resistant. There are woods that are stronger than hickory and woods that are harder, but the combination of strength, toughness, hardness, and stiffness found in hickory wood is not found in any other.”

Prize Your Honor and the Honor of Your Loved Ones

One’s honor was a central occupation of all men during this period, but starting from a young age, Andrew Jackson took it even more seriously than most. During the Revolutionary War, when he and his brother were captured by the red coats, a British officer ordered Jackson to polish his boots. The nervy boy refused, declaring, “Sir, I am a prisoner of war and claim to be treated as such.” Enraged, the officer swung his sword at Jackson. Though he tried to block the blow, it left a scar on his hand and a dent in his head.

Jackson was also ferocious in his desire to protect the honor and well-being of his loved ones. The orphan drew his extended family to him and greatly valued their loyalty. Above all, he valued the bond and honor of his wife of 40 years, Rachel. Because their marriage began under a cloud of controversy (Rachel was not yet divorced when their relationship began), she was subject to attack from Jackson’s political opponents. To Jackson, the slanderer was “worse than a murderer. The murderer only takes the life of the parent and leaves his character as a goodly heritage to his children, whilst the slanderer takes away his good reputation and leaves him a living monument to his children’s disgrace.” Defaming his wife was, as a contemporary recalled, “like sinning against the Holy Ghost: unpardonable.” Biographer James Parton claimed that Jackson “kept pistols in perfect condition for thirty-seven years” to use whenever someone “dared breathe her name except in honor.”

They were dueling pistols. For a southern gentleman of this time, dueling was the honorable way to resolve quarrels and insults. Jackson took his mother’s maxim “that the law affords no remedy for such outrages that can satisfy the feelings of a true man” to heart, and involved himself in more than 13 “affairs of honor.” These showdowns left his body so filled with lead that people said he “rattled like a bag of marbles.”

Practice Stoic Self-Discipline

Jackson’s anger, born from his troubled youth, constantly threatened his ability to reach his goals. He knew he had to get it under control if he wished to find success. He was never able to entirely subdue his temper, but he was largely able to transform himself from reckless hothead to cool and calculating leader.

During his presidential campaigns, his opponents were constantly trying to provoke Jackson, goading him to lose control and reveal himself as exactly what some voters feared him to be: a knuckle-dragging, unhinged frontiersmen, unfit for the highest office in the land. Though they besmirched the character of his wife, Jackson’s great Achilles’ heel, he would not give them the satisfaction of an embarrassing outburst.

The election of 1824 was a particularly bitter contest. Jackson had won the popular vote, but without a majority from the electoral college, the decision was thrown to the House, which chose John Quincy Adams to be the next president. On the night he lost the election, Jackson attended a party at the White House where he came face-to-face with Adams. The moment was tense as the two men stared at one another. With his wife on his arm, it was Jackson who made the first move, extending his hand to the president-elect and cheerfully inquiring, “How do you do, Mr. Adams? I give you my left hand, for the right, as you see, is devoted to the fair. I hope you are very well, sir.” Answering with what an eyewitness recalled as “chilling coldness” Adams responded: “Very well, sir; I hope General Jackson is well.” A party guest was struck by the irony of the exchange: “It was curious to see the western planter, the Indian fighter, the stern soldier, who had written his country’s glory in the blood of the enemy at New Orleans, genial and gracious in the midst of a court, while the old courtier and diplomat was stiff, rigid, cold as a statue!”

Be a Badass

Andrew Jackson was the first president on which an assassination attempt was made. And he is the only one who gave his would-be assassin a thorough thumping.

In 1835, Jackson was leaving a funeral when a deranged man, Richard Lawrence, approached the president wielding two pistols. Lawrence leveled one of his guns and pulled the trigger. It failed to fire. He pointed at Jackson with the other pistol, but it misfired as well. Without blinking, the 68-year-old president went after Lawrence with his cane, striking him several times before others in the crowd subdued the would-be assassin.

But Jackson’s greatest claim to badass status actually came years earlier. In 1806, in a dispute over a horse race and an insult made about his wife, Charles Dickinson challenged Jackson to a duel. Dickinson was a well-known sharpshooter and Jackson felt his only chance to kill him would be to allow himself enough time to take an accurate shot. So as the two faced off along the banks of the Red River in Kentucky, Jackson purposely allowed Dickinson to shoot him first. He hardly quivered as the bullet lodged in his ribs. Jackson then calmly leveled his pistol, took aim, and knocked Dickinson off. It was only then that he took heed of the fact that blood was dripping into his boot. Dickinson’s musket ball was too close to his heart to be removed and forever remained lodged in Jackson’s chest. The wound would lend him a perpetual hacking cough, cause him persistent pain, and compound the many health problems that would beleaguer him throughout life.

Yet Jackson never regretted the decision, saying, “If he had shot me through the brain, sir, I should still have killed him.”

__________

Sources:

American Lion by Jon Meacham

Andrew Jackson by James Curtis