📚 Psychology of human misjudgment, Tragedy of the uncommon, Why CM2 matters, Question behind question

+ Salt shaker theory of leadership and a lot of fun finds from across the net

Hi & welcome to the post #135. 

I’m picking up some themes in my exploration - history, fintech and urban planning. If you’ve any recommendations on these topics – blog, newsletter, podcast etc – please do send across. 

Here’s what we’re going to cover:

🧠 Psychology of Human Misjudgment

🏖️ Tragedy of the Uncommon

💵 Why CM2 Matters?

🪪 Org Design for Encouraging Innovation

❓ Question Behind Question

🧂 Salt Shaker Theory of Leadership

And much more

Let’s get to it right away.

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1. Psychology of Human Misjudgment

I made a big discovery today. It’s been 134 weeks since I’ve been curating this newsletter, but I’ve shared very little from Charlie Munger. Not just that, I have not really read his work except for a couple of popular anecdotes of his wisdom. 

So I’m changing that now. FS Blog has a revised transcript of his Psychology of Human Misjudgment speech. It’s a super long read, I’m just half way through it. But I can vouch that, this is one of the best pieces I’ve read in a long time.

Bookmark it and enjoy it in your free time. As some wise folks suggested, this one can be cherished multiple times, I am sure I am going to do that.

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2. Tragedy of the Uncommon

Dror Poleg defines the term “tragedy of the uncommon,” picks up some lessons from AI and urban planning on why it pays to keep things open — and how exclusivity destroys value.

Here’s a quick definition for you.

In short, the tragedy of the commons describes situations where unrestricted use of a resource leads to its destruction and a sub-optimal economic outcome. This is a well-established concept in economics. But its opposite is less explored. The tragedy of the uncommon describes situations where the restricted use of a resource leads to its destruction and a sub-optimal outcome.  This usually happens when a resource is in private hands.

His examples from urban planning are very interesting and got me reading this article to the end. The bit about AI is too raw to make any insightful observation, but you can read this for his observations from urban planning.

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3. Why CM2 Matters?

Sajith Pai’s LinkedIn feed shares some useful snippets on a startup journey. A recent post talked about why CM2 matters for a startup. 

CM1/2/3 are terms that many of us have heard or may be used. Still, it can get confusing sometimes. Sajith points out why -

“This is because these are not accounting terms from the field of corporate finance, but rather metrics from the field of startups and ventures. In fact these terms CM1, CM2, CM3 are not frequently encountered outside the startup world.”

This snippet shares the definition, if you want to revisit them.

Towards the end of the post, Sajith suggests that “CM2+ is kinda akin to PMF”. I can agree with that with an emphasis on ‘kinda’. Scaling a CM2 negative business has clear implications on the burn & longevity aspect, but CM2+ may not be a ‘clear’ sign of PMF.

What do you think?

And talking of PMF, Sajith’s conversion with Vinay Hiremath (of Loom) is a good one. I loved Vinay’s ideas around the early days of building a product.

And that's built off of hypotheses you have about the world because in order to solve problems for people, you have to have an idea about how the world works and you have to have an insight about how the world works, that other people don't have or haven't tackled for some reason. And if you want to be successful, that idea has to be more and more contrarian. It has to be so contrarian that people don't want to go after it or don't even think it is possible.

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4. Org Design for Encouraging Innovation

Satyajit Rout published a short post suggesting how to build your organization to innovate. He lists three key ingredients:

1️⃣ Assign projects, not designations

2️⃣ Lower the burden of proof (for new sauce ideas)

3️⃣ Reset incentive structure

First two ideas are very interesting and may not be top of the mind for most folks. I’ve seen the benefits of ‘project based roles’ in managing challenges associated with ‘designation creep’ fairly well. However, using them to drive innovation in the org is a new perspective for me and I find it worth trying out.

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5. Question Behind Question

Wes Kao’s Question behind the question aka QBQ model shares an interesting approach to increase one’s effectiveness in answering questions. Here’s a small background to the topic:

If you relate to the problem, give this post a read. If you’re in a hurry, here’s a quick summary of her recommendations.

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6. Light reads & videos

1. 📃 The Full Reset by Morgan Housel 

Anything that evolves – markets, technology, careers, etc – has to be approached with the mindset that once-great ideas can expire, and when they expire you’re better off walking away rather than attempting to repair them.

2. 📃 Text for Proofing Fonts by Jonathan Hoefler

Pangrams, of course, are sentences that contain each letter of the alphabet at least once, of which the quick brown fox jumps over the lazy dog is surely the most famous.

The far more pernicious issue with pangrams, as a means for evaluating typefaces, is how poorly they portray what text actually looks like. Every language has a natural distribution of letters, from most to least common, English famously beginning with the E that accounts for one eighth of what we read, and ending with the Z that appears just once every 1,111 letters. 

3. 📃 The Salt Shaker Theory of Leadership by Paul Stansik 

I slid it back. Then he explained his point. “Listen, luvah. Your staff and your guests are always moving your saltshaker off center. That’s their job. It is the job of life. It’s the law of entropy! Until you understand that, you’re going to get pissed off every time someone moves the saltshaker off center. It is not your job to get upset. You just need to understand: that’s what they do. Your job is just to move the shaker back each time and let them know exactly what you stand for. Let them know what excellence looks like to you. And if you’re ever willing to let them decide where the center is, then I want you to give them the keys to the store. Just give away the fuckin’ restaurant!”

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7. Everything else

Some random goodness from the internet:

1. Two Years With Hotshots, Elite U.S. Firefighters. A good photo essay describing one of the toughest crew of firefighters in the USA.

2. Why I spent 3 years working on a coat hanger - I have not faced this problem firsthand. However, this video tells me that even those behind-the-door hooks that we use in our homes can be improved.

3. Is This the World’s Highest-Grossing Photograph? A fascinating story behind “Girls in the Windows” and how it has become a favorite of auction houses & galleries. 

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Finally, if you’re up for some more thoughtful ideas, James Clear’s latest 3-2-1 Tuesday post is worth a quick read and bookmarking.

That's all for this week, folks!  

I hope I've earned the privilege of your time.

Please leave a comment or send a message with your feedback. It’s highly helpful & encouraging. If that’s too much of an effort (or not required), at least hit the ❤️ at the start or end of the post to show your love. 

Pritesh