Systematically Successful P1

Editors Note: This piece of writing was first published on one of my earlier blogs in May 2020. Reading through it again the piece resonated with me and I’ve decided to retain it and republish it. It has been edited slightly from the original. In particular it has been split into two different parts for clarity. This is Part One.

I’ve been thinking a lot about success recently, more precisely, why do some people seem to be more systematically successful than others. Here, I’m contrasting someone who is Systematically Successful versus someone who is Incidentally Successful. I’m not interested in thinking too deeply about the one hit wonders of the world, the people who manage to luck into a particular outcome by the graces of Fortuna. Instead, I am interested in people who have shown the ability to generate successful outcomes repeatedly. As such, we can define these two as:

• Systemically Successful - Someone who has been successful in multiple domains due to the application of a structured approach.
• Incidentally Successful - Someone who has been successful in a single domain, predominantly due to luck or a one off event.

In this vein I’ve been inspired by three schools of thought. Aristotelian Virtue Ethics, Serial Entrepreneurship and Optionality.

From Aristotelian Virtue Ethics I’ve been continuously thinking about the adage “We are what we repeatedly do. Excellence then, is not an act, but a habit”. Aristotle is implying that we can be excellent but that we will need to cultivate and deliberately practice this over time. This is an ethical statement in this case and refers to a characteristic of the individual.

The second vein has been inspired by serial entrepreneurs, the kind of person who has not just started one successful company but instead multiple. Some people amongst us seem to have the ability to bounce with whatever life throws at them. You chuck them on a deserted island and come back two years later and there is running water.

The third and final vein relates to the Optionality based approach of Nicholas Nassem Taleb who has repeatedly explored the role of positive (and negative) “Black Swan Events” in modern life.

My aim in this post is to explore concepts which I believe make the difference in whether someone will be able to achieve success over the longer term independent of luck. From my research and experience I’ve been able to nail this down to:

• Opportunity Flow - Defined as the number of qualified opportunities which come into your life over a period of time
• Exploratory Risk Taking - Defined as how willing you are to explore the opportunities and assess whether they will work
• Excellence as a Habit - Both the quantity and the quality of the work that you’re able to do

Opportunity Flow

First, let’s begin with Leonardo Dicaprio.

There’s quite a famous chart floating around the internet which depicts Leonardo Dicaprio’s dating over the years. To say the least, it’s a who’s who of some of the most beautiful women in the world and no matter what age Leo reaches there always appears to be another one waiting around the corner. So, the question is, what makes Leonardo Dicaprio different?

The thing that separates Leo’s dating from anybody else’s is the sheer number of dating opportunities that Leo is swimming in relative to the average male. He’s a good looking, wealthy, world famous actor who has his face plastered in some of the most obscure locations around the world. He can guarantee that he’ll be invited to the best parties, he’ll be on the short list for awards, his phone will always be blowing up with somebody who wants to offer him something.

In short, Leo has amazing opportunity flow, beautiful women will compete for him and not the other way around as is the case for most men. One of the main reasons that Leo is successful with women is his status affords him great opportunity flow.

Let’s think about a very different kind of individual now, Warren Buffet. The Oracle of Omaha is renowned for being one of the most consistent and impressive investors of all time. His track record at building wealth over a long period of time is, to say the least, unequaled. Most people claim that building wealth is all about luck but Warren Buffet has so consistently generated returns for his investors that there is something else that has come into play. Not only is Buffet intelligent and diligent, he also gets offered opportunities that most investors will never get to see (and has positioned himself to take advantage of those opportunities).

Take the Great Financial Crisis of 08/09. It was Warren Buffet who was being presented with opportunities by the likes of Goldman Sachs to invest at incredibly favourable rates. No other investor in the world was being presented with these opportunities. Buffet bought $5 billion worth of preferred Goldman shares during the crisis and just three years later in 2011 he was able to offload a number of them to net himself a multi billion dollar profit (sources put it at $3.7 billion). By cultivating and refining his reputation over the years Buffet now receives investment opportunities that are, in many senses, too good to be true.

Now, what’s interesting about this investment is that Buffet would have probably just been better off dumping it all into the S&P500 at that point in time, the market boomed following the recovery and Buffet could have made even more. Instead, he chose to invest it with Goldman. Looking into the deal more it’s interesting, not what the overall return was, but instead the terms that he was able to achieve on the deal and how much they added to the overall return of the investment. In essence, he barely had to throw down any cash due to the complicated financing arrangement. Buffet managed to make billions predominately by applying his name to the deal.

When the next financial crisis comes calling who do you think investors will be reaching out to? You can guarantee that on that shortlist will be Warren Buffet. Buffet has great opportunity flow beyond the likes of most other investors.

It is also possible to have too many opportunities. Opportunities take time, energy and skill to correctly evaluate. The best opportunities are often, to some degree, hidden. If they were easy to spot and identify then others would quickly capitalise on them.

Psychologically, having too many opportunities can also lead to apathy, why bother trying for this particular opportunity when another will be just around the corner. There needs to be a sweet spot between the two.

We want to have enough opportunities that missing out on one, while it will sting, is not the end of the world. Simultaneously, we don’t want to have so many opportunities that we cannot evaluate them all, or worse, stop caring about whether we succeed. I think about this using a diminishing returns curve like the one shown here.

Typically, having too many opportunities is one of the consequences of success. Success does, after all, tend to breed further success and this usually occurs from others wanting to be associated with you. In this scenario the correct approach is to go deeper into the areas that you’re truly interested in. At the surface level there are always a large number of generic opportunities. It is only by going deep into a domain that the quality of the opportunities will improve. Ultimately, it is the overall quality of the opportunities which will dictate our outcomes.

Exploratory Risk Taking

But great opportunity flow is not the only measure for success. Even if you see great opportunities each and every day of your life, if you just sit there and let them pass you by, you’ll never achieve any success at all. Exploratory Risk Taking is the internal element of Opportunity Flow. It’s how you approach the opportunities that occur.

To be systematically successful (as opposed to fortuitously successful) you need to have the type of mindset to capitalise on the opportunities that arise for you. I have termed this mindset exploratory risk taking because it captures the key components of what I’m interested in.

I distinguish exploratory risk taking from it’s more prevalent and unfortunately less valuable cousin, binary risk taking. An exploratory risk taker will, no matter what the odds look like, always have a crack at something. They’ll test the waters out on the off chance that they might be successful. A binary risk taker will only make an attempt if they think that they will win. They want the guaranteed payout.

Psychologically speaking, we don’t like to explore the opportunities that arise, instead, we want to over-commit to the “sure thing” due to a combination of Loss Aversion at the bottom end and Fear of Missing Out (FOMO) at the top end. This leads to areas of over investment or under investment.

The challenge is that most of us only explore a small number of options in our lives. We have very few jobs, we date and marry the girl from our home town, we take very few risks and end up falling into nice, safe, comfortable patterns. I mean, it’s not a bad life, but it is a very safe life. This is not a pattern which will lead to Systematic Success in this situation

We typically find a niche and then set down to exploit that, for better or for worse. In all fairness, most of society tries to push us this way, a bank won’t lend you money for a home unless you have a stable income. Many of us explicitly look for stability when we’re looking at romantic partners. Our parents push us to settle down and find a good job. We’re always told, be safe, be conservative, don’t run with scissors.

Most of the time this is incredibly good advice, it’s a safe and consistent strategy. But, we should still recognise that it is a strategy and that it is not the only possible strategy we can apply to our lives. The binary decision making strategy also comes with a number of downsides including:

• Missing almost every opportunity that we come across
• Never discovering our true preferences due to a lack of experience
• Able to be manipulated by the fear of missing out leading to over investment in bad opportunities
• Increased consequence of failure

The binary strategy also fails if we want to go outside of our current niche and reinvent ourselves. If we have to wait for conditions to be absolutely perfect before we make the attempt then it will need to exceed the FOMO threshold before we’ll entertain it. This leads to the world of “what might have been” and “if only” style of regretful thinking.

Where exploratory risk taking differs from straight risk taking is in the level of investment we put into each opportunity. For the avoidance of doubt. I am not suggesting that you bet your life savings on every single marginal opportunity that comes your way. This is not the same as heading down to the casino and putting it all on black.

To explore a risk does not imply that you will go full throttle and embrace it fully, instead, to begin with you just need to dip your toe in the waters and get a feel for the risk itself, is it profitable? Is it lucrative? Is it fun? Is it something that you want to continue doing in the future?

Excellence as a Habit

The final leg of the tripod in terms of being Systematically Successful has to do with your approach to life and your work ethic. To put it bluntly, if you’re lazy, don’t do the work and are always happy with mediocrity then you’re not likely to actually achieve anything spectacular. If you’re in the western world you’ll most likely be comfortable due to the sheer material abundance that is available but you’re unlikely to be great.

Since we are what we repeatedly do in this situation we must examine our own lives to look at what we repeatedly do. Are we spending a lot of time in Deep Work, giving ourselves the time and space to create or are we frittering away in the shallows? Are we publishing our work and getting it out into the world or are we leaving it to rot in the dark corner? Do we procrastinate consistently? Do we do the work itself? Do we overcome Resistance?

This leg of the tripod is actually the foundation of all of the other legs in this situation. Without it you have nothing, it doesn’t matter how many risks you explore or whether great opportunities are coming your way if the work itself that you’re doing is low quality in this situation. Everyone knows the individual who is productive but continuously delivering rubbish in this situation. Don’t be that person.

There is no quick fix here. You’re simply going to have to turn up each and every way to do the work.

Conclusion

In this first part of the two part series I’ve sought to explore the theoretical basis for what makes people Systematically Successful in life. In the second part I’ll be exploring practical examples of people who have achieved this and what they do differently to most people in this situation.

To summarise, your success rests upon three pillars, the number of opportunities you get, how frequently you explore those opportunities and the quality of your exploration. The order here is important. Having great opportunities trumps almost everything even if you explore very few of them and the work you do is poor. When you have a huge number of opportunities you’re increasing your luck surface area and even if you’re not Systemically Successful you’re still likely to be Incidentally Successful.

In the same vein if you’re doing fantastic work but it’s locked away in your basement then you’ll never be successful. You’re not taking enough risks and since you’re in your basement you’re never going to be exposed to the best opportunities. You won’t even be Incidentally Successful in this case.

What I haven’t discussed in this situation is how these activities tend to feed into each other. That will be for a later piece of writing.

• thoughts
• success
• risk taking