Antifragile (Updated)

This is a second update of the Antifragility mental model that were published long time ago. I will continue to update more models during the next year, but the next update may take a while.

Antifragile: ”A thing that is improved by variations, turmoil, stressors, mistakes, etc.” In this model, I use the word shocks as a common word for the aforementioned.

Fragile, resilient and antifragile

Shocks harm fragile items and persons. Shocks do not affect the resilient. Yet, you cannot invert fragile and get resilient. You get antifragile. It gets better with shocks. Antifragile wants you to abuse it within limits. These limits are high. Antifragile things are common in nature, but rare in man-made inorganic constructs. Genetic code and human bodies are antifragile. Buildings, bridges, and companies are fragile.

Antifragile systems need shocks to function. They finally die without them. These systems work better when you do not change them. Fragile systems get worse without changes. Bottom-up approaches increase antifragility in these systems. Top-up approaches diminish it or destroy them. Even though antifragile systems get better with shocks, they have limitations. Your body can handle hundreds of little rocks separately, but it cannot handle one rock that has the size of hundreds of little ones.

Noticing fragility and antifragility

Limited gains and unlimited harms are characteristics of fragile. The opposite is true for antifragile. For example, flight time is fragile. Your flight´s estimated time of arrival is never hours earlier than it should, but can be days later. Hydra in Greek mythology was antifragile. If you cut one of its heads, it grew two more. Acceleration of harm tells whether something is fragile. For example, when a shock is twice as large than another and it causes more than twice the harm, the victim is fragile.

Large, stable, and purposeful constructions are fragile. The opposite is true for small, but not too small, volatile, and inorganic systems with little parts like the restaurant business. When one part of the fragile breaks, the entire construction breaks. When this happens to the antifragile, it gets stronger. You cannot have antifragility without this characteristic.

Only time will tell you whether something is fragile or antifragile. You might have to wait centuries or millennia to find out. The longer something survives, the higher the odds it is antifragile. Books, genetic code, and even the idea of tablets have survived for millennia. Ideas usually remain, even though their executions can change. Models in this book look antifragile now, but nobody can be sure about the future.

Inorganic structures are more usually fragile and some of them are man-made. Organic structures have more common antifragile characteristics. Humans have existed only a short time compared to life on earth. Genetic code will thrive on earth long after humans face extinction. Nature develops bottom-up and humans usually create top-down approaches. Nature lets complex systems thrive on their own, and humans like to control them. The problem with the latter approach is that humans cannot understand the effects of their actions on complex systems.

Nature adapts to environmental changes, humans try to change the environment. It improves systems through elimination and humans through addition. The former creates better adaptability, the latter higher odds of destruction. Nature adapts to changes without effort, humans do anything to resist them. Nature approves the fact that failures are natural ways to improve the common good. You cannot say the same about humans.

Nothing has 100% efficiency in nature. It has slack and redundancy. They are signs of antifragility. Humans have two kidneys, instead of the one they need. Animals have useless body parts. Efficiency creates fragility. Even though there are no systems with 100% efficiency, the ones that aim for it have almost 100% certainty of destruction. All parts of these systems have to stay intact. Therefore, they are fragile. Systems that allow the destruction of some parts are antifragile like the restaurant business. If one restaurant goes bankrupt, others will stay alive. The system becomes stronger.

Commonalities of being less fragile

You will never be antifragile. It is not possible. Your body and brain will eventually decay. Your genetic code can be antifragile, but it depends on your offspring´s ability to reproduce. You can become more antifragile, but with opportunity costs. Sacrifice efficiency to make it happen. Here is how:

• Little short-term shocks are good for you. Increase their amount in your life and minimize the amount of long-term shocks. Deal with the latter first.

• Increase slack and redundancy. Faster and more efficient is never better after certain points.

• Focus on ideas that have survived the test of time.

• Larger downside than upside is the warning signal.

• Focus on survival. Never put your survival at stake, unless you have to. This applies to everything.

• Never listen to anyone who transfers part of your upside to himself, but not the downside.

• Favor the natural over the man-made.

• Favor simplicity over complexity. On average, reducing is better than adding.

• Build systems that do not have a single-part dependency.

• Do not interfere complex systems.

• Do not use statistics to approach power-law events.

• Favor practical knowledge instead of theoretical. Listen to practitioners, not academics.

• Use the rational trial-and-error approach and never repeat the same mistake

• Establish ways to learn from other people´s mistakes.

• Think about suckers. If you cannot find them, it is you.

• Have many reliable sources of income and data.

The amazing part of all is that you have to be less smart in most of these cases. You can also be more often wrong and still get higher odds of positive outcomes in life. These commonalities apply also to organizations. Most of them have negative first order effects, but in this complex world they do not matter much. The real advantages of those approaches apply to second- and higher order effects. Some of the opposites of the list have precisely inverse effects when talking about become more fragile.

Psychological tendencies related to financial bubbles, booms and crashes

The following text about the most common psychological tendencies that are related to financial bubbles, booms and crashes is an excerpt from my book Cycles for Investors.

Bubbles, booms and collapses are social epidemics and follow their principles. Epidemics have three components: the right people, the right message, and the right environment. They are influenced by several psychological factors such as social proof, authorities, scarcity principle, excessive self-regard, and the illusion of availability. They increase both the attractiveness of the message and the effects of the environment on bubbles, booms and collapses. Different people have different effects on both individuals and large crowds.

The messages from the bubbles and booms are simple and engaging. They say everyone gets rich easily and quickly without much effort as long as they invest in new ideas. The message includes attractive predictions of a rise in the pattern “Bitcoin rises to $ 500,000 (now about $ 40,000)” “This time it’s different” is another message available in large-scale bubbles and booms. They often also contain a message of a carefree tomorrow and the prosperity of the nation. The message often has some truth in it, but its significance is exaggerated. The realization of the message is often far in the future, even though the masses believe in sudden enrichment and rapid change. One message is that those who do not participate in the boom are stupid.

Bubbles, booms, and crashes will not occur without massive social proof in which herd behavior is rampant. During booms, it produces a desire to buy the same investments or consume like large crowds. Crashes create a desire to sell and reduce consumption while others do the same. In them, many have to do so because they do not have enough money to consume. Roughly speaking, the closer and more people produce social proof, the more confident the individual becomes and acts like others.

Even large numbers of people can be made to act like a small number of people as long as the latter has credibility. People have an inherent belief in authority. In bubbles and booms, a small number of lucky fools can make millions while believing in the goodness of nonsensical investments because they have happened to succeed fabulously for a short time. Usually these ”authorities” tell the general public what they want to hear. They can get rewards from people like them or the media. In addition, the masses are demanding so-called anti-authorities who tell them they are wrong. They are most often people who have been enriched by the old rules and have not agreed to pay the prices produced by the bubble or boom. They are considered losers during bubbles and booms.

The scarcity principle means that the less a person has something or the harder it is to obtain it, the higher the value. In addition, it works in the other direction. The bubbles and booms in some investments have a shortage of supply relative to demand. Large-scale bubbles are mainly affected by the other side of the coin, i.e. the fact that money moves fast and enriches a large crowd. The above raises both the prices of investments and increases absurd consumption. At the same time, the real economy is growing strongly which raises the above. Too much money significantly increases stupid investment and consumption decisions.

The excessive self-regard manifests itself as excessive faith to one’s own beliefs, qualities, skills, and possessions. Faith of an increasing mass of investors strengthens with the bubble or boom to the heights rarely seen, which raises the prices of “hot” investments. At the same time, larger and larger sums of money find the above items. Faith is not even shaken by failures or losses. They are explained by bad luck or some other absurd reason, and in the worst case, the ego is further inflated. Losses and failures increase the need for investors to look for sources of information that emphasize their own beliefs and skills. One major factor in the bubbles and booms is that investments become more valuable in price as soon as they are purchased.

The excessive self-regard also increases booms and bubbles, with big money portfolio managers acting as one of the reinforcing factors. One of the truths of their work is this: "It's better to lose money like others than to do something different." Many of them protect their own jobs. This is reflected in the so-called hidden indexation of funds, where the investments of the active portfolio manager resemble the benchmark index, differing slightly from it. This also applies to other moments, but the phenomenon is at its strongest in booms due to reflexivity.

The overemphasis on egos is not limited to investors. It manifests itself in central bankers and other regulators. The majority of central bankers have had a long career believing in the theories they have learned and the models they have used. They work well most of the time while increasing regulators’ confidence in them and themselves. The performance of theories and models in the short term increases the excesses of bubbles and booms as well as the devastation resulting from crashes. It is important to ask whether the actions of central bankers and the models they use have a positive net effect?

The illusion of availability means that people give more value to stimuli that are better available. Availability can be both an external and an internal stimulus. It can be improved by an increase in the number of stimuli, recency, or characteristics. Examples of the latter are surprise, novelty, ambiguity, and threat. The illusion of availability is reinforced by the media reporting on fortunate individuals who quickly enriched and took advantage of the new message. The media is full of half-truths or misunderstandings about the basic principles of investing. The illusion of availability is at its strongest when a bubble or boom reaches euphoria. It is also strengthened by other psychological factors.

Avoiding the negative effects of the psychological factors of bubbles, booms, and collapses is not easy. There are a few good rules of thumb to reduce the effects. When you find that a security or asset class is more popular in your immediate circle than others, it is a likely sign of bubble prices. Combining the former with a new economy or investment vehicle should be seen as a bigger alarm signal. Never believe words that contain the message, “It’s different now,” whoever tells you so.

Don’t listen to people who do not have a proven track-record of investing at least a decade above the market average talking about future returns or losses, or who promise high double-digit returns on investment, even in the medium term. Their numbers in public will increase during booms and bubbles. At the same time, the number of people who are wrong is growing. During booms and bubbles, it is even more important to listen to people who have done better than average for several decades. The same is true during a crash. Also, don’t believe people who predict the “end of the world” during them.

Don’t believe yourself if you do not have a better-than-average return rate, or think you’ll be able to achieve high double-digit returns in the medium term. Don’t let your ego make you believe you are right when the price of an investment collapses well below the amount you paid. This is especially true of the losses caused by the crash. You don’t have to prove you’re right by immediately putting more money into a losing investment. This is a mistake because there is no need to quickly return an erroneous investment with the same investment target. It is safer to take a breather and think about what went wrong.

Do not look at the price of a security before making a cash flow statement. Your subconscious can steer the end result towards it when its availability is high. Do not look at the price you paid when making a new cash flow statement for your investment. Your investment does not know how much you paid. The price you pay may not matter at this time.

 My new English book Cycles for Investors is published in Amazon. You can also purchase it in Finnish. It does not promise you superior investment returns, magic formulas to achieve them or help you make exact forecasts about the markets. Instead, it gives you tools to increase your odds to avoid greatest insanity in the markets like buying during bubbles on margin, or selling close to the markets bottoms. It helps you to better understand intermediate and long term cycles related to the financial markets.

About the content of the book

The main parts of the content are the deeper anatomy of the cycles, the cycles related to the national economies, the cycles related to the financial markets and the life cycles of companies. It also addresses the intersection of three important economic cycles and the real estate and commodity cycles. The deeper anatomy of the cycles deals with their psychological profile as well as the factors that shape extremes. National economic cycles include e.g. the cycle of economic development and the cycle of a leading economic country. Financial market cycles include e.g. long debt cycles and stock market cycles. Life cycles related to companies include e.g. technology adoption cycle and industry life cycle. Real estate and commodity cycles have been treated only superficially due to the author’s lack of understanding.

In addition, it explains how an investor can identify the conditions of booms and bubbles prior to collapses. Efforts have been made to present cycles by multiplying their course by cause-and-effect relationships, mostly without numbers. More important than numbers is to understand the course of the cycles and the factors that interact to drive the cycles consistently. The book has focused at least on medium cycles. In perceiving them, numbers can be more misleading if cause-and-effect relationships or the course of cycles are not properly understood.

In today’s world, everything affects everything, so the cycles in the book are more or less related. In particular, the cycles of the national economies and the financial markets are often highly interdependent. Business cycles are also dependent on national economies and financial markets. The latter do not decide the fate of individual companies. It can be said that some companies are not affected.

The book deals with the anatomy of cycles and the following cycles and life cycles:

• Long psychological / socioeconomic cycle

• Economic development cycle

• Leading economy cycle

• Reserve currency cycle

• Long and short debt cycles

• Stock market cycles

• Technology life cycle

• Industry life cycle

• Business life cycle

• Real estate cycle

The main purpose of the book is to improve the reader’s chances of increasing investment returns by better understanding the cycles related to economics and investments. Improving revenue is most likely to happen by reducing the number of stupid decisions made by readers than by providing magical insights. Warren Buffett and Charlie Munger have often mentioned that they are not particularly wise, but avoid stupidity better than others. This makes sense for the sake of mathematical facts alone. As most people know, a 50% decrease requires a 100% increase, and so on.

The focus is on the extremes and extremes of the cycles, i.e. mainly bubbles, peaks, bottoms, possible crashes, beginnings, and endings. Other parts are less important. One reason for emphasizing the extremes is that, in my view, many long-term cycles are at or near the end or just past them. The ends and the beginnings refer to those cycles without peaks and bottoms. This is the case, for example, with a long psychological / socioeconomic cycle. Extremes are also the moments when the biggest differences are made in investment returns.

In my experience, the book’s publishing platform doesn’t produce clear graphs, so I’ve left them out. I have reduced the time and effort of the reader by keeping the book short. The book is supposed to follow the principle: “the price is what you pay and the value is what you get” In my experience, the number of pages does not match the benefits of non-fiction books.

The book is not for novice investors. It does not explain everything in detail. The reader needs to know what the basic concepts like P / E ratio, Return on Equity and Earnings Per Share mean. A broader understanding of the economy is desirable but not essential. An open mind is also important because the book calls into question many things that at least economists consider true. Independent thinking is also essential. No book offers absolute truth about the economy because it cannot be found. The world is too complex for today’s computing power. This book does not offer it either, as the author knows his limitations.

The book contains a few investment ideas. If they are found, they are vague in the style of "substances used for intoxication can be a good investment in Awakening." (An explanation of the former can be found later.) The book does not contain exact predictions of what is to come, but it gives a broad explanation of what may happen or what is the most likely option for the future. It does not predict when anything will happen.

How some models intertwine and interact, in short part 2

This text is a second part of two-part text that shows how models interact and intertwine. It is a short education for the relationships of the models. This text helps you to edit your latticework of mental models when you read the text with deep thought. Be ready to disagree with me and discard any failed assumptions I might have. Enjoy the text

System structures like interconnections set out the paths of least resistance. For example, politicians do what they promise to people who finance them instead of what they promise to voters. Politicians cannot get elected without financiers, but voters matter less. Evolution is a complex adaptive system which corrects itself through the path of least resistance. The more competitive the field of expertise, the better systems you need to have an edge. Strategy is not only a system, its execution requires several of them.

Feedback loops work in increasing the odds of correct predictions. Successful predictions require continuous processes with balancing loops which produce additional information to improve last predictions. The evolution works through continuous feedback loops. During the lifetime of species, feedback loops must compound the best effects of genes first, and the worst effects last.

Understanding the daily cycle helps in motivating people. Motivation is strongest during the morning and fades toward the evening. Understanding cycles gives an edge in many fields of expertise. Most people have no clue about the existence of a long-term socioeconomic cycle, and they do not understand there are different seasons.

Better skills produce simplicity. Useless energy-consumption diminishes. Better skills help you produce faster reactions when they are necessary. Many skills have natural cycles. Understanding them accelerates learning. Which gives better odds to create an edge. Feedback loops in performing measurable skills work with adjusting your results of previous performance to next one.

Motivation or its absence are reactions to internal or external factors. It can compound after successful repetitions during the practice. Motivation has not only daily cycles, it fluctuates in shorter ones. When the edge becomes abundant, motivation to maintain it can disappear. Motivating is easier when you use psychological tendencies as leverages.

Deliberate practice requires simplicity of the process. It focuses on improving one thing at a time and discard others. Performer needs to a feedback loop between him and the skilled authority that helps him react to flaws in action sequences during practice. Deliberate practice requires a strategy for a long-term development of the performer.

Creating an edge requires a permutation of several factors including talent transferred through genes and most components of the deliberate practice. Edge does not create compounding effects unless people cannot notice the contrast between the skills of a performer with an edge and one without it.

Evolution is a chain reaction which has developed living beings throughout billions of years. It improves biological traits with a minuscule compounding rate. Cultural evolution requires a critical mass of people to develop their norms and actions with mutual understanding. Most psychological biases are the products of slowly developing brains and faster developing environments.

Figuring out opportunity costs of each added option after their optimal number compounds the unwanted effects of the decision process. The same process requires skill when it bases on facts you cannot easily measure.

Working psychological tendencies are reactions to stimuli. They can create edges with skilled exploitation. You learn most of them from authority figures who provide them on purpose or accidentally from random stimuli. Skilled execution of a strategy requires understanding psychological tendencies of each stakeholder.

Excessive self-regard is one of the most common reasons you lose an edge. You forget to be humble and become overconfident about your skills compared to other people. The greater the edge becomes, the higher the odds that your ego grows too much. It is also one of the most common weaknesses smart people have.

The availability of simplified actions others execute helps you to eliminate complexity. Availability of the skilled actions affects your chances to become more skilled during moments without practice. The availability of the reminders about weaknesses has to be minimal. You can improve the execution of a strategy by increasing its availability to all stakeholders.

Social groups work better when the roles in them are simple and clear. Social proof often compounds, but the rate variations are high. The rates increase when perceived authorities spread the message. Sometimes the scarcity of the message strengthens it. This happens when a tight group shares the common delusion and others are against it.

Persuasion professionals can increase need to reciprocate by increasing your path of least resistance by compounding the value of favors or gifts. The availability of other people reciprocating the favor you got, strengthens your need to do the same. When you choose from two similar authorities, your choice is one who did more favors or gave better gifts.

Authority positions imply edges, no matter whether they are real. They are often antifragile. When somebody attacks their credibility, their followers´ beliefs strengthen. Your mind can create a perception of you becoming an authority when excessive self-regard strengthens your beliefs after lots of effort to understand the topic. Authority figures in groups sometimes use invented antiauthorities to strengthen their ideology.

Scarcity of an edge offers leverage to increase its effectiveness. Scarcity is one of the strongest enemies of willpower. It destroys attention effectively. When you feel that the advice from the authority is scarce, it strengthens his status. Abundance of advice inverts the effect. The same effects apply to the scarcity and abundance of status symbols.

The contrast between the current path of least resistance and the preferable new one must often be big enough for recognition, but so small it requires minimal willpower. The contrast between authorities can make a difference in their believability. It increases the perception of importance of the stronger one and destroys the credibility of the weaker.

When your decision-making system confronts its limits and your brain loses willpower with too many decisions during the daily cycle, each added decision increases the odds of undesirable outcomes. The odds of good decisions grow when you use checklists as leverage in complex situations.

Successful strategy cannot produce too many irreversible reactions for stakeholders. Focus on your edges and weaknesses of opponents when you create a strategy for competitions. Strategies evolve when they confront obstacles in execution. Strategies need social proof and authority figures to maximize their effectiveness to stakeholders. Execution of a strategy improves when all stakeholders use the same checklists to apply shared tactics.

Checklists simplify the execution of complex actions. Their use requires willpower and rationality unless you program them to intuition. Checklist is seldom useful when a power-law event strikes. They are useful components of personal systems. Checklists have to be available to your senses and mind. Use contrast to make each item on the list more available.

How some models interact and intertwine, in short part 1

This text is a first part of two-part text that shows how models interact and intertwine. It is a short education for the relationships of the models. This text helps you to edit your latticework of mental models when you read the text with deep thought. Be ready to disagree with me and discard any failed assumptions I might have. Enjoy the text

Understanding requires seeing how models interact and intertwine. It is not enough to figure out each model by itself. I show you how few models interact and intertwine in this text. It focuses on a few direct relationships of each model. The number of combinations of models in the book is beyond the understanding of a human mind when you consider indirect effects of the models. I have limited the number of relationships of each model to a few because you learn more with figuring out them by yourself. This chapter focuses on relationships that you cannot find anywhere else in the book. This chapter helps you add some relationships between models and figure out more of them yourself. It is not for rote learning.

Data utilization, theory of constructed emotions, simplicity, and associations interact with all other models. Data utilization is a process to use the understanding of models to react to all stimuli and create the right response. Theory of constructed emotions shows you the process brain uses to create thoughts, sensations, actions, and decisions in form of concepts that are mental models. Simplicity forms guidelines to keep models as understandable as possible and increases odds to use them with the most efficient ways. Brain uses associations to establish links between all mental models. Therefore, all models are associations.

Long-term effects of reactions are often their inverted short-term effects. Inversion relates to probabilities and statistics because it makes them easier to use when certain conditions are in place. It helps you suffer less from excessive self-regard by changing the question ”what are the good points about my beliefs, facts, etc.?” to form ”what are the weaknesses of my beliefs, facts, etc.?” Inversion is a great way to produce a better strategy by starting from the end and moving to the beginning, etc.

Some parts of mental models are irreversible reactions to other models. For example, there are no power law events if the number of particles of a reaction do not reach a critical mass. Different elements of the system react to changes in one element. Chain reactions of interacting models happen. For example, there are no good high-stakes decisions without a great decision-making system in which simplifying leads to fewer options and better quality data that lead to smaller effect of psychological tendencies that can lead to better probability of the best decision.

Combinations of models often work to the same direction. You cannot have deliberate practice without motivation, an effective and fast feedback loop with skilled coach or instructor and willpower to endure with constant failures, etc. Permutations of models have similar characteristics than combinations, but they include path dependence. For example, you cannot have superb skills without the compounding effects of multiple correct repetitions.

Compounding effects do not happen without a feedback loop. Increasing inertia leads to stronger effects of compounding. Having a slight edge creates winner-take-all effects through compounding in the long term. Opportunity costs compound with increased complexity. Evolution also creates variety and extinctions through compounding effects of mutations in genes. Using leverage can increase the compounding effects.

Reaching critical mass requires inertia, compounding effects, feedback loops, and its acceleration fastens with leverage. Critical mass of repetitions is also a necessity to create the novel path of least resistance. You cannot have a latticework of models without enough of them. You cannot have an edge and use it to your advantage without the critical mass of skill.

Inertia that results from the critical mass of people, their psychological tendencies, simplified, sticky messages and the right environment, is a requirement to form enough social proof for social epidemics. Timing is crucial for components that provide inertia for social contagions. If the moment is wrong in the socio-economical long-term cycle, inertia does not have enough power.

The path of least resistance interacts tightly with some models like Inertia, critical mass, tendency to focus on the most available things, social proof, etc. When something has inertia, moving to the same direction and/or preserving the status quo are paths of least resistance. Social contagion grows naturally when it reaches critical mass and creates the path of least resistance. Your tendency to focus on what is the most available to you uses the path of least resistance. The same applies to your other psychological tendencies when the conditions are the most favorable. They often relate these conditions to the bottoms of your daily cycles.

Each decision compounds negatively after sleep against willpower toward the end of day. You need willpower to conscious creation of the path of least resistance. It fluctuates with the daily cycle, sharing its top, and slumps. High-stakes decision-making systems require willpower, and you need it to resist psychological tendencies when they are not beneficial.

Self-reinforcing feedback loops can create leverage, and self-balancing loops deleverage. You can increase the effects of leverage with higher availability. You can also get yourself to act by leveraging the power of your other psychological tendencies. You can create paths of least resistance to use levers, such as support systems. If you want to have an edge, use the leverage produced by compounded repetitions, help from other people, strong motivators, and deliberate practice. You will either have to hire a coach to create a feedback loop with instant inputs to your outputs or find how the greatest performers of all time have done things.

The probability of making the right conclusions, actions, and decisions increases with the proper use of all models in the book. The result you get depends also on randomness. Probabilities increase or decrease when the psychological tendencies affect decisions. You can use statistics to reveal your lack of skill compared to your existing beliefs. Statistics comprises useful tools to predict the evolution of genetic characteristics of the offspring.

Power law events follow the compounding rate changes of social contagions. They create results with extreme statistical distributions and unquantifiable expected payoffs. Self-reinforcing feedback loop can turn slight edges to extreme differences in results. The results apply to many things, including extinction of species.

Understanding antifragility separates skilled from lucky fools in many areas of expertise like investing. Antifragile is a characteristic of a system which gets stronger from the impacts of power law events like evolution by natural selection. Its understanding follows the extreme power law distribution in human population because most people believe that you get resiliency or robustness when you invert fragility. Strong beliefs that result from excessive self-regard are antifragile. They get stronger whenever you get evidence against them.

Strategy for Life

Most people have not created a strategy for life. It is easy to live day after day, doing things you have always done without a plan. It is time for you to create your plan. The majority of this text follows Rich Horwath´s book ”Strategy for you”. The key difference is that this strategy focuses on systems.

Lets begin from the end. Do this step alone. It is crucial to not let anyone affect it. Imagine your state of being after you have executed your strategy. Define what you want to be in terms of the four key components: mind, body, spirit, and relationships. Ask: ”What do they mean to you?” Think about your values related to these terms. For example, if you value freedom, the state of being signifies to be free. If you value health, the state of being is to be healthy, etc. Think about what your ideal life will look after you have achieved these states. Do not hold back. It is not a time to think about your chances to get the life you want. Reality checks will come later. The purpose is to start from the fundamentals.

If you cannot define what you want in terms of your values, think about the past. It is the best indicator in your deepest desires of the future state of being. What excited you then? Who was involved? After you have thought about the past, ask: ”What are things that feel great today regarding body, mind, spirit, and relationships?” If you do not know, keep a notebook or smartphone with you all the time. Write things that feel great. Eventually, you can notice and define your wanted states of being. These states are part of your strategic intent.

The next step is to define uniqueness. Find out the special understanding, skills, and personality traits you have. The best way to do this is to ask others. Ask friends and seek professional help if you can. Your ego is the worst enemy to discover why you are special. Therefore, you are not the best judge of uniqueness. Ask about the past and the present. Do the former if someone has known you for decades. Ask about your body, mind, spirit, and relationships. Ask what are different about them? Can others define your distinct style to express yourself? Your uniqueness has two components. You can have a special style to express similar actions as others or you can have special actions.

Resource allocation

It is time to focus on your resources. Lets get back to the four key components and think about the resources you allocate to them. They include time, talent, and financial assets. I will focus on time now. Once you have used it, you will never get it back. Time allocation is one of the most important tasks. If you have never found out how much time you use in a week for each action, it is time to do it.

Measure categories like sleep, work, exercise, learning, commute, relationships and parenting, spirituality, eating or preparing meals, other chores, TV, radio, and social media. There are 168 hours in the week. Finding out 150+ hours of them is enough. If you had a minute-by-minute schedule, you wasted lots of time. You could not say ”no” well enough. The highest odds are causes related to work. Modern knowledge workers are the prime examples.

Think about your major systems related to the four components and resources. Do you have any? It is likely that you have them but have not thought of them as systems. Think about their structures in terms of goals, feedback loops, interactions, etc. Anything from one to five main systems in each category is a reasonable number. Systems can interconnect many categories. Finally, think about how your major systems support the state of being you want to achieve. For example, if you want to be free, think about the systems that create your income streams. Single stream is not enough, unless you have enough money to last for decades.

SWOT analysis

A good source for the principles of SWOT-analysis is Albert Humphrey´s article in businessballs.com. Strengths and weaknesses are internal abilities. Opportunities and threats are external situations. The first two describe something you have and the second two are about future situations. Together they form a useful model to design a strategy. I prefer potential edges instead of strengths. Edges are the unique combinations of your talents. They create faster learning and higher peak potential. Weaknesses bring constraints. They complicate and slow chances to go where you want to be. Opportunities are beneficial and can help you increase odds to reach the wanted states of being. Threats have the potential to reduce odds to reach the wanted states.

You can have control over internal abilities. They include resources, understanding, internal systems, relationships, values, etc. Make shortlists of the edges with the highest potential and greatest weaknesses. Be concise, specific, and focus on causes, not results. For example, my live interactions with others are poor because I am shy.

You can influence opportunities and threats, but not control them. They include the actions of others, the supply and demand of your skills, economic situations, technological changes, etc. Quantify the odds of future situations and their expected payoffs when you list your opportunities and threats. Do not be specific. Use ranges. Think about the possible impact they have in reaching your states of being. Choose the ones with the largest effects. Deal with them in strategy. Use discovered uniqueness, resource allocation, and SWOT-analysis to create strategic visions for each component of life before you design your strategy.

Design and execution

After creating strategic visions, design strategies in terms of four key components of life. Define the current state, what you want to become, objectives, allocated resources, and vision to each strategy. Involve all stakeholders in each step. Without their approval, it is impossible to design strategies you can execute.

Start from the smallest difference between the desired result and the current situation to design the first strategy. It requires the least effort and has the highest odds of success. It creates inertia and helps you to move forward. Start from it and finish with the strategy that requires the hardest effort. Do not forget the time frames. They take years to execute. A complete change in some state of being can take up to ten years.

Objectives are a big part of the design. They focus on systems and their structures. This perspective is important because visions change. What you want today might change in a few years. Great systems can work with different states of being. The first objectives you design are crucial. Focus on new and simple systems with short time frames. Objectives with the longest time frames and highest complexity become later. After designing the first objectives, make a what-to-change list. Think about whether you have to add resources to the items in the second. A not-to have-list becomes last. It has all systems and system structures that create obstacles to execute strategies.

Each design must have a vision, current and desired states, resource allocation, objectives in the executing order, what-to-change and not-to-have lists, and time frames for execution. Most parts change during the execution. Time frames have the highest odds of change. Most people are too optimistic about them. The longer the frames and the more complex the objectives, the larger the changes. No strategy survives the whole execution. Be flexible, willing to eliminate, and change parts of the strategy when you have to.

Do not hide strategies from senses. They are hard to execute without availability. Execution also requires tactics. They are specific instructions on how you implement strategies. They are beyond this text.

Latticework for behavior change

The text below is from my book: Odds Favor the Prepared Mind. The first time each model appears, it is in bold text. It does not differ much from the texts in this blog before, but shows how much better the language and the grammar are in the book. I hope you enjoy it! 

You can divide behavior change into two components. You can create behaviors or change the existing ones. Some behaviors happen once, others more often, and some of them are consistent, repetitive sequences of actions, habits. All behaviors are chain reactions with three parts. These combinations are systems. You can apply all the chapter´s lessons to all behaviors. Behaviors are not only something you do, they can be something you discard.

Chain reactions have triggers, behaviors themselves, and motivators. You can call triggers also cues, clues, and prompts. You can call behaviors routine or actions. You can call motivators prizes or rewards. To be consistent, I will talk about trigger → behavior → motivator sequence.

First, you notice a trigger you associate with a behavior and a motivator, then you execute the behavior. Trigger is a stimulus or stimuli you can detect with senses. Behavior is the action sequence from start to finish. You can mix up motivators with the symbol value you give them. For example, motivators are not the food you eat or sweet drinks. They are emotions, hormone bursts, and feelings. Behaviors happen only when you can detect the trigger, you can execute behavior, and the motivator is strong enough to create a want to do the behavior.

Behavior creation

Your brain capacity is limited. Consistent and repetitive behaviors save it. They are the products of evolution. These behaviors are paths of least resistance. It is the most important model to understand behavior creation. Each repetition strengthens a reinforcing feedback loop which saves energy for the next repetition. The completed loop compound energy savings. Automatic behaviors follow when you have achieved a critical mass of repetitions. The key to the automatization of a behavior is several repetitions, not time. The more often you can repeat the chain reaction, the faster the behavior becomes recurring.

All novel behaviors require conscious efforts to repeat them. Rational decision-making system controls consciousness. This requires willpower. Once behavior becomes automated, it creates inertia, and intuitive system takes control, and it creates the path of least resistance. Here is a simple checklist to create behaviors:

• Trigger is available

• Behavior is possible

• Motivator is powerful enough and instant

Behavior does not happen without a trigger. Its availability to senses is crucial. The easier it is to sense the trigger, the higher the odds of executing a behavior. You can increase the availability of the trigger by using the finish of the existing behavior as a sign to execute the new one. For example, putting dental floss next to the place you keep your toothbrush. The number of daily repetitions of behaviors have to match. If the existing behavior happens twice a day, the same has to apply to the new one.

The ability to do the behavior is crucial too. It is easy to design the right trigger, but it is harder to estimate the ability to execute a behavior. When you want to create a behavior, execution has to follow the path of least resistance principle. The easier, the simpler the behavior itself is, the higher the odds it is sustainable and consistent. All behaviors begin with a small and simple step. Trust in gradual development is hard but worth it. Some exceptions can only think big and manage it, but they are rare.

If you want to create a behavior of eating vegetables, start with your favorite and eat one piece of it. After you have created a consistent behavior of eating one piece of your favorite vegetable, try to eat two of them. By slowly increasing the portion, you can reach the point where you want to be. Once you fail, diminish the number of pieces you want to eat, until you get back on track. Expect failures at some point. React to them, but do not give up.

Last, but not least, motivators have to be forceful enough. Do not depend on willpower. Focus on internal desires to create behaviors. Pleasant feelings and emotions are signs of desire. Do not create behaviors you hate, even though they are good for you. They have low odds of implementation. For example, eating healthy food is a respectful goal. Eating lots of vegetables you hate decreases the strength of motivator. The strongest motivators often relate to excessive self-regard. The strength of motivator go hand in hand with ability. The easier the behavior is, the weaker the motivator can be. It cannot wait and has to appear right after the behavior.

Invert the question: ”How can I produce a behavior?” Ask instead: ”How can I fail once I create it?” The answers are: failure to create an available trigger, the behavior is too hard to execute, or motivator is too weak or appears too late after the behavior itself. Sometimes the combination of these factors is the right answer. Seeing the points of failure in advance reduces its odds.

Four components of behavior change

Existing behavior is hard to eliminate but easier to change. The more repetitions you have, the harder it is to change, and the longer it takes. The number of repetitions has to be larger than it was before. Remember the path of least resistance model. Change one behavior at a time. Behavior change has four components:

1. Recognizing a behavior

2. Experimenting with symbols of motivator

3. Isolating a trigger

4. Creating a strategy

All three components of behavior are not self-evident. Behavior itself is the easiest to recognize. For example, you want to buy healthier food instead of crap. It is easy to recognize what you buy from groceries with low effort.

A real motivator is hard to recognize. Try several symbols of motivator. For example, buy different groceries every time. Ask for help from a friend or a partner, or anyone who is a part of your life. Use a notebook to record behavior and how you feel right after it. Keep a record of which feelings and emotions occur without delay. Share them with a person who helps. Do this until you are sure about your findings.

Triggers are hard to identify, but they have common characteristics. You can associate them with environments, persons, emotional or physical states, times of day, and previous behaviors. They can be combinations of associations. Notebook and help from others become handy again. Buying unhealthy groceries is an exemplary example:

• Environment (The nearest grocery store from your home)

• Company (With your partner)

• Emotional/Physical state (Frustrated and tired)

• Time (Between 4 and 5 pm.)

• Previous behavior (Commuting for half an hour)

Keep notes until you have noticed the trigger. Try what happens without it to be sure you are right. If you have identified a combination of characteristics, eliminate one and see what happens. If it does not trigger the behavior, eliminate this characteristic. Do this until the trigger is as simple as possible. You can try to hide the trigger of inappropriate behavior from your senses or diminish its availability. Sometimes you can eliminate the whole trigger. When part of it is an emotional or a physical state, elimination is next to impossible. When you have simplified components of the existing behavior, it is time to create a strategic plan to change the behavior. This plan could look like:

• When I am at the door of the grocery store at 4 pm, with my partner, frustrated and tired after commuting from work (trigger).

• I avoid shelves and stands with unhealthy food (changed behavior).

• I do this to buy healthy food that normalizes my blood glucose level (a better motivator that causes the same effect as bad food).

• Execute this plan as often as possible.

Changing the existing behavior takes longer and more repetitions than creating a novel one. You can also expect more frequent setbacks. The more the behavior has repeated, the higher the odds of failures.

Timing

Timing is important. Significant behavior changes start from the path of least resistance. The easier the behavior itself, the stronger the motivator, and the more available the trigger is, the least resistance you confront. Timing is best when you feel good about yourself, motivated, and able to execute the change. The effect of a motivator depends on a cycle. The daily cycle is the most important. Behavior change is the hardest during slumps. It is easiest during the top-part of the cycle. Change does not occur without an enormous quantity of conscious effort in the beginning, which requires the least amount of effort during tops. Behavior change is easier right after a vacation or during it. Change does not occur, unless the behavior is part of your vacation.

Gradual change is a reasonable path to follow. Do not change everything at once. Schedule new behaviors first, unless bad behaviors are lethal or produce fast destruction. When the environment changes, timing to change behavior is optimal. If you change location, be open to behavioral change. If you have to do the latter, choose the former. Triggers and abilities to behave can disappear. This is great when you have to reduce destructive behavior.

Sometimes changes are forced upon. Current Covid-19 pandemic has created significant chances to change behavior. Sudden changes in environments have hidden triggers and created obstacles to behaviors themselves. They have changed some motivators. Start changing now if you suffer from the pandemic. Do not despair if it causes you problems. Sudden events like the pandemic produce surprising changes that you can exploit to become the person you want to be. It is a favorable chance to create lasting changes.

Checklist for behavior change

Checklist of mental models that appear in this chapter:

• Reactions

• Combinations and permutations

• Systems

• Motivation

• Association

• Evolution

• The path of least resistance

• Feedback loops

• Compounding

• Critical mass

• Decision-making systems

• Inertia

• Checklist

• Availability

• Probabilities (Odds)

• Simplicity

• Willpower

• Excessive self-regard (ego)

• Inversion

You can understand behavior change better by using this checklist. Every time you think about it, go through the list with deep thought.