Using First Principles

When we face a difficult problem it is tempting to copy what others have done before us or stack new ideas on top of old assumptions. Long before modern science or business strategy, Aristotle suggested another way of thinking. Begin with first principles. A first principle is a basic and undeniable truth. It is something so fundamental that it cannot be broken down any further. Instead of accepting hand-me-down wisdom, Aristotle taught us to strip away assumptions until we find the core truths. Then we build our reasoning upward from there. I wanted to create a quick reference to use when I think about complex ideas and decided to make a post that I can return to when writing more formal papers. This approach is powerful because it helps us escape conventional thinking. Many great ideas in science, business, and everyday life have started with someone asking what is really true and then building a new answer from there.

Using First Principles in Everyday Problem-Solving

I wanted this guide to be something anyone could use, not just philosophers or business leaders. I often find myself facing complicated questions and wanting a clear way to think them through. These steps help me slow down and look for what is absolutely true. They separate facts from assumptions and untested ideas. They let me rebuild my thinking from the ground up with only reliable truths as the base. Doing this gives me a clearer view of the problem and shows hidden beliefs that might hold me back. It often leads to simple and creative answers that normal advice might miss.

First Principles Guideline

1. Define the Problem Clearly

• Write the problem in plain language.

• What exactly are you trying to understand or solve?

• Why does it matter to you?

• What would a good solution look like?

• How will you know when you have solved it?

2. List What You Know to Be True

• Write down the facts you can confirm.

• What are you currently assuming is true about this problem?

• Where did those assumptions come from, experience, tradition, or expert advice?

• Are there beliefs you have never tested?

3. Identify Assumptions

• Look for ideas you have accepted without proof.

• Ask yourself if you truly know something is true or if you have only assumed it.

• What facts can you confidently say are real and verifiable?

• Are there rules of nature, economics, or human behavior that always apply here?

• What limits cannot be changed, such as time, money, or physical constraints?

4. Separate Opinion From Evidence

• Pause if emotions or bias seem strong.

• Which parts of your thinking come from data or direct observation?

• Which parts are guesses or common wisdom?

• Is there anything you feel is true but have not proven?

5. Rebuild From the Ground Up

• Using only the facts, create a fresh solution.

• Imagine starting from nothing and building a new answer.

• What would you try if no one had solved this problem before?

• Could there be simpler, cheaper, or more direct ways to reach your goal?

6. Test and Adjust

• Try your new idea in the real world.

• Stay flexible and willing to learn.

• How will you know if your new approach is working?

• What small experiment or simple measure can confirm or disprove your idea?

7. Reflect and Refine

• Look at what worked and what failed.

• Decide if you should continue, change your approach, or go back and rethink earlier steps.

• Use what you learned to improve your solution and make your next move stronger.

First principles thinking works by clearing away the noise and forcing you to see reality as it is. Each step slows you down just enough to notice what is true and what is only habit or opinion. By rebuilding ideas from a solid base of facts, you avoid borrowed assumptions and open space for better answers. This process is about being honest with what you know and willing to rethink when the path is unclear. I created this guide so I can return to it whenever a complex idea feels tangled. You can use it the same way. Start small, move carefully, and let clear thinking guide your next decision.

Acknowledgment: Portions of this article were edited using AI assistance to improve sentence structure and grammar.

The Slow Business Idea

Ever since I took a business class in college decades ago, I have been sketching out business plan ideas in search of sustainable ways to create income. Again and again, those mock-ups failed because the numbers did not work. The biggest lesson I took away from those early attempts was that I did not want to carry debt before the first dollar of revenue even arrived (Moll, 2005).

So after turning the lens inward and reflecting, I chose to educate myself further on business management. Reading my first in-depth book on the subject opened my eyes to how much I did not know, and it was a lot. That realization sparked a hunger for knowledge and a determination not to fail again. I immersed myself in nearly a hundred books on investing, management, accounting, and the history of successful companies (Dalio, 2017; Munger, 1995). Through that process I began to see a different path. The strongest enterprises are not always the fastest growing. Many endure because they accept slower progress and focus on resilience (Collins, 2001). From this research I shaped a new idea. Instead of chasing rapid growth and short-term profit, I would build a company with a steady hand at the wheel.

This company is not designed to produce steady income for at least ten to fifteen years. It is a long-term project that allows me to keep working another job while slowly creating an enterprise that can sustain itself. The goal is not quick rewards but stability through all market cycles.

To achieve this, the company will be structured as an LLC with financial management conducted through an investment firm. The plan is to use pass-through taxation efficiently, cover expenses first with cash, second bonds, and third equities, and grow at a modest but consistent rate (Johnson, 2021). I will fund the company with five percent of my personal investment. As my personal wealth grows, so will the business. If my personal wealth declines, no additional funds will be contributed until it returns to the level required to meet the five percent rule.

The company’s funds will be allocated across different asset classes to balance growth and protection. Ten percent will remain liquid to cover annual costs, provide cash during bear markets, and acquire undervalued businesses in down cycles. Another ten percent will be invested in high-risk assets, twenty percent in high-yield bonds and treasuries, and sixty percent in equities. As an additional safeguard, the project will avoid investing in any area directly connected to its income-generating operations. This separation adds a layer of protection during down cycles in either the business itself or the broader market. In such times, the ten percent held in cash ensures the ability to make timely purchases and strengthen the overall position.

The long-term vision is twofold. First, the business provides me with a project to build now and slowly grow into retirement. Second, it creates something I can leave to my family should they decide to continue the business. Either choice would fulfill my hope of leaving behind a lasting foundation and teachable moments about patient and stewardship.

At the center of this plan are five categories that form the framework of the company:

• Investments with Assets — growing the balance sheet through disciplined compounding and patient allocation

• Research — studying past, current, and future market trends to guide decisions

• Business Generation — choosing a modest operating business that provides revenue to support the investment strategy

• Family Ownership — keeping direction and stewardship within the family so that decisions align with long-term values

• Strategy — maintaining a unique approach that prepares the business to weather market downturns and seize opportunities when others cannot

These five pillars give shape to what I call the slow business model. This approach accepts that growth may be smaller year to year, but the foundation will be far stronger over decades.

The slow business model also reflects broader principles:

1. Sustainability — pursuing practices that respect resources and remain viable for the long term

2. Quality over quantity — preferring excellence to mass production

3. Work life balance — creating a rhythm that supports health, focus, and endurance

4. Local focus — supporting communities and sourcing close to home when possible

5. Ethical practices — acting with integrity and transparency

The slow business movement is a response to fast-paced capitalism. It advocates for a more mindful way of building that allows a company to adapt, endure, and stay on course. While other businesses scramble to cover monthly revenue during downturns, a slow business relies on investment strength, patience in good times, and the ability to deploy cash in bad times.

In my view, this draft outline, informed by multiple business books and case studies, offers the best chance to create something lasting without sacrificing security or stability. It allows me to remain employed, avoid debt, and steadily grow a business that adapts with the cycles of the economy. The next step is to translate this conceptual framework into a working business plan. This will involve defining measurable milestones, refining investment policies, and selecting the income-generating venture that best complements the strategy. Over time, as research continues and personal investments compound, the slow business will progress from an idea to a realized enterprise.

Acknowledgment: Portions of this article were edited using AI assistance to improve sentence structure and grammar.

References

Collins, J. (2001). Good to Great: Why Some Companies Make the Leap and Others Don’t. New York: HarperCollins.

Dalio, R. (2017). Principles: Life and Work. New York: Simon & Schuster.

Johnson, K. (2021). Corporate Taxation and Business Structures. Cambridge: Cambridge University Press.

Moll, J. (2005). Business Structures and Tax Efficiency. Oxford: Oxford University Press.

Munger, C. (1995). Poor Charlie’s Almanack: The Wit and Wisdom of Charles T. Munger. California: Donning Company Publishers.

Writing Guidelines From Others

Writing has become more than just getting words down for me. It feels like a way to think things through, test ideas, and slowly learn how to be clearer in what I want to say. As I worked through my book lists, I started shaping them into longer essays. The process has changed me as much as the books themselves. I began to notice the habits I leaned on. I paid attention to how I read, how I took notes, how I reflected. Out of that came a set of simple guidelines that help me stay focused, intentional, connected to something bigger than the page in front of me.

These are not strict rules. They are reminders I return to. They encourage me to build discipline. They push me to form a clear thesis. They prompt me to ask deeper questions. They guide me to draw connections across different authors, different traditions. They remind me that writing is really a conversation. Clarity comes only with time, revision, patience. They help me see how resilience keeps the practice alive year after year. Taken together, these habits turn reading into reflection. Reflection grows into something I can share. Private thoughts grow into a conversation that reaches further than I expected.

Writing Guidelines

1. Begin with Habits and Discipline

Writing grows out of consistent habits. Even small daily efforts build momentum over time. As James Clear (2018) explains, discipline matters more than bursts of energy, and steady practice creates lasting results.

2. Establish a Thesis Before Writing

Every essay needs a central claim to guide it. A thesis acts as a compass that gives direction and focus. Booth, Colomb, and Williams (2008) argue that without it, writing becomes a summary rather than analysis.

3. Ask Follow-Up Questions

Depth comes from curiosity. Asking why something matters, how it applies, and what its consequences are transforms fragments into insights. These questions turn notes into arguments and ensure analytical engagement (Booth et al., 2008).

4. Outline Before Drafting

Planning sharpens ideas before words are written. Outlines map the structure of an essay, create order, and prevent digression. Comparative analysis across authors also strengthens clarity and connection (Booth et al., 2008).

5. Write Actively, Not Passively

Engagement comes from active effort. Annotating, reflecting, and rewriting in your own words helps ideas take root. Adler and Van Doren (1972) stress that ownership of knowledge only comes when you make it your own.

6. Balance Breadth with Depth

Reading widely creates perspective, while reading deeply builds understanding. Charles Munger (1995) and Peter Bevelin (2007) both note that breadth opens new fields of thought, while depth ensures learning is more than surface-level.

7. Anticipate Counterarguments

Writing is part of a conversation. Strength grows when you acknowledge and answer opposing views. Ken Binmore (2007) shows that judgment requires humility as well as persuasion.

8. Weave Across Authors, Not Just Quote Them

Quotations should not stand alone. Ideas gain strength when they are connected and compared. Building synthesis across thinkers creates coherence instead of fragmentation (Booth et al., 2008).

9. Revise as a Discipline of Humility

Revision is not failure but refinement. Each draft brings greater clarity. Bevelin (2007) emphasizes that accepting improvement as an ongoing process builds patience and strengthens the final work.

10. Seek Clarity Above All

Clarity means finding order within complexity. It is not about oversimplifying but about making ideas coherent. Meadows (2008) and Jha (2021) both highlight how clarity reveals the structure that lies beneath surface confusion.

11. Link Ideas to Systems and Practice

Writing should connect to the world beyond the page. Meadows (2008) reminds us that ideas are most meaningful when tied to systems and practice, while Dalio (2017) shows how principles gain force when applied to communities and markets.

12. Value Balance and Rhythm

Reading and writing require energy. Balancing heavy works with lighter ones sustains imagination and endurance. Alasdair MacIntyre (1984) provides rigor, while Andy Weir (2011) shows how lighter reading sustains creativity.

13. Treat Writing as Contribution, Not Just Expression

Writing is more than self-reflection. It becomes a contribution when it enters public dialogue. Essays and research sustain traditions and shape communities (Booth et al., 2008).

14. Recognize the Role of Resilience

Writing, like life, requires endurance. Progress depends on patience, structure, and consistent effort. Bevelin (2007) notes that resilience is built incrementally, through small actions over time.

15. Turn Inward, Then Outward

Writing begins as self-examination. Montaigne (1580/1993) used essays as a mirror for personal reflection. From there, insights can extend outward into community, business, and shared intellectual work.

16. Cultivate Attention as Discipline

Focus is the foundation of depth. Jha (2021) explains that guarding attention makes room for clarity and understanding. Without focus, even time spent writing can become scattered.

17. Synthesize Across Time and Tradition

Writing grows stronger when it traces the evolution of ideas. Sowell (2007) shows that putting authors into dialogue across history reveals both continuity and conflict. This adds depth to understanding.

Acknowledgment: Portions of this article were edited using AI assistance to improve sentence structure and grammar.

References

Adler, M.J. and Van Doren, C., 1972. How to Read a Book. New York: Simon and Schuster.

Bevelin, P., 2007. Seeking Wisdom: From Darwin to Munger. Petersfield: PCA Publications.

Binmore, K., 2007. Playing for Real: A Text on Game Theory. Oxford: Oxford University Press.

Booth, W.C., Colomb, G.G. and Williams, J.M., 2008. The Craft of Research. 3rd ed. Chicago: University of Chicago Press.

Clear, J., 2018. Atomic Habits. New York: Avery.

Dalio, R., 2017. Principles: Life and Work. New York: Simon & Schuster.

Jha, A., 2021. Peak Mind: Find Your Focus, Own Your Attention, Invest 12 Minutes a Day. New York: HarperOne.

MacIntyre, A., 1984. After Virtue: A Study in Moral Theory. 2nd ed. Notre Dame: University of Notre Dame Press.

Meadows, D., 2008. Thinking in Systems: A Primer. White River Junction: Chelsea Green Publishing.

Montaigne, M. de, 1580/1993. The Complete Essays. Translated by M.A. Screech. London: Penguin Classics.

Munger, C.T., 1995. Poor Charlie’s Almanack: The Wit and Wisdom of Charles T. Munger. Virginia Beach: Donning Company Publishers.

Sowell, T., 2007. A Conflict of Visions: Ideological Origins of Political Struggles. New York: Basic Books.

Weir, A., 2011. The Martian. New York: Crown.

Presidential Book Club

The Presidential Book Club began with a simple conversation over a meal with my friend Daniel. During that discussion, Daniel remarked that if I ever began a new reading list, I should let him know so that he could join. Out of that exchange emerged the idea of a focused project on the American presidency. Whether the suggestion originated with him or me is uncertain, but the outcome was clear. We agreed to launch a book club centered on the lives, leadership, and legacies of United States presidents, beginning with George Washington and progressing in chronological order (Ellis, 2004).

The group started in the summer of 2025 and is modest in size but strong in purpose. At present there are only four members who are committed to reading and reflecting on the readings when we get together. Though we often extend invitations to friends and acquaintances to join, none have taken up the offer. The prospect of reading multiple volumes on the lives of presidents does not appeal to everyone. For us, however, the challenge of understanding the evolution of the presidency and the broader context of American political life is both intellectually engaging and historically significant (Ferling, 2009).

The structure of the club is straightforward. We are progressing through the presidents in chronological order, beginning with George Washington, and examining both the individuals and the historical forces that defined their administrations. Each president is introduced with a concise overview, details of their cabinet and family, and a list of books connected to their time in office. By following this format, the club creates a consistent framework that balances structured study with open discussion. In doing so, it functions not merely as a reading group but as a collaborative exploration of the presidency and the political development of the United States (Meacham, 2018).

Presidents of The United States of America

George Washington

Served two terms between April 30th, 1789 - March 4, 1797

Book Read:

• George Washington at "Head Quarters, Dobbs Ferry", by Mary Donovan

Book Summary: This short historical work by Mary Donovan highlights a pivotal moment in 1781 when George Washington established his headquarters at Dobbs Ferry, New York. The book situates Washington’s leadership within the final stages of the Revolutionary War and emphasizes his ability to balance military necessity with political vision. Donovan illustrates how Washington’s presence at Dobbs Ferry underscored both his logistical command and his symbolic role as a unifying figure at a critical turning point in the struggle for independence (Donovan, 2007).

Cabinet:

• Sec of State: Thomas Jefferson, Edmund Randolph, Timothy Pickering

• Sec of Treasury: Alexander Hamilton, Oliver Wolcott

• Sec of War: Henry Knox, Timothy Pickering, James McHenry

• Attorney General: Edmund Randolph, William Bradford, Charles Lee

Family:

• Wife was Martha “Dandridge Custis” Washington

• Step childern were John Parke Custis, Martha Parke Custis

Other Notable Readings:

1. Washington: A Life by Ron Chernow

2. His Excellency: George Washington by Joseph J. Ellis

3. George Washington’s Secret Six: The Spy Ring That Saved the American Revolution by Brian Kilmeade & Don Yaeger

4. 1776 by David McCullough

5. George Washington: A Selection of Letters by George Washington

6. George Washington’s Rules of Civility and Decent Behavior by George Washington

7. George Washington’s Farewell Address by George Washington

John Adams

Served one term between March 4, 1797 - March 3, 1801

Book Read:

• First Family, by Joseph J. Ellis

Book Summary: This book explores the lives of John and Abigail Adams, highlighting their partnership as both a personal and political bond. Through their extensive correspondence, Ellis illustrates how their marriage provided a foundation for navigating the challenges of the Revolutionary era, shaping both domestic life and national politics. The book presents the Adamses as a model of intellectual companionship and resilience during America’s formative years (Ellis 2010).

Cabinet:

• VP: Thomas Jefferson

• Sec of State: Timothy Pickering; John Marshall

• Attorney General: Charles Lee

• Postmaster General: Joseph Habersham

• Sec of Treasury: Samuel Dexter, Oliver Wolcott

• Sec of Navy: Benjamin Stoddert

• Sec of War: James McHenry, Samuel Dexter

Family

• Wife was Abigail “Smith” Adams

• Children: John Quincy Adams, Charles Adams, Thomas Boylston Adams, Abigail Adams smith, Susanna Adams

Other Notable Readings:

1. A Reading of the Inaugural Address of President John Adams

2. John Adams, by David McCullough

3. Passion Sage, Joseph J. Ellis

4. Founding Brothers: The Revolutionary Generation by Joseph J. Ellis

5. John Adams Under Fire, by Dan Abrams

Thomas Jefferson

Served two terms between March 4, 1801 - March 4 1809

Book Read:

• Master of the Mountian, Thomas Jefferson and His Slaves, by Henry Wiencek

Book Summary: This book reexamines Jefferson’s legacy by confronting the stark contradictions between his political ideals and his practices as a slaveholder. Wiencek challenges the long-standing portrayal of Jefferson as a conflicted yet benevolent master, presenting evidence that Jefferson not only tolerated but also profited significantly from slavery at Monticello. Drawing from Jefferson’s own writings, plantation records, and contemporary accounts, Wiencek argues that Jefferson’s commitment to liberty coexisted with a pragmatic exploitation of enslaved labor, particularly in the form of nail-making enterprises and agricultural profits. The book underscores how Jefferson’s economic calculations reinforced the institution of slavery rather than undermined it, complicating his image as a founding father of freedom (Wiencek, 2012).

Cabinet:

VP: Aaron Burr, George Clinton

Sec of State: James Madison

Attorney General: Levi Lincoln, John Breckinridge, Caesar Rodney

Postmaster General: Joseph Habersham, Gideon Granger

Sec of Treasury: Samuel Dexter, Albert Gallatin

Sec of Navy: Benjamin Stoddert, Robert Smith, Henry Dearborn

Family:

Wife was Martha “Wayles Skelton” Jefferson (10/30/1748 - 9/06/1782)

First Ladies were Martha Jefferson Randolph, Maria Jerrerson Eppes, Dolley Madison because his wife had passed away before becoming President.

Children with Martha Jefferson: Martha “Patsy” Jefferson, Jane Jefferson, unnamed son, Mary “Maria or Polly” Jefferson, Lucy Jefferson (11/03/1780-4/15/1781) and Lucy Jefferson (5/08/1782-10/13/1784)

Children with Sally Hemings, Martha Jefferson half-sister: unnamed first son (1790), Harriet Hemings (1795), Beverly (1798), unnamed daughter (1799), Harriet Hemings (1801), Madison Hemings (1805) and Eston Hemings (1808)

Other Notable Readings:

1. American Sphinx: The Character of Thomas Jefferson by Joseph J. Ellis

2. Thomas Jefferson: The Art of Power by Jon Meacham

3. The Hemingses of Monticello: An American Family by Annette Gordon-Reed

4. Thomas Jefferson and Sally Hemings, by Annette Gordon-Reed

5. White Over Black by Jordan Winthrop

James Madison

Served two terms between March 4, 1809 - March 3, 1817

Book Read:

• Dolley and James Madison: An Unlikely Love Story that Saved America by Rodney Smith

Book Summary: This book portrays the partnership between James Madison and Dolley Madison as one of equal influence and mutual support. He emphasizes how Dolley’s social intelligence and grace complemented Madison’s political insight, and argues that her role in shaping Washington’s civic life was essential to the early republic’s survival and coherence. Smith presents their bond as not only personal but political, illustrating how their collaboration helped stabilize a young nation during tumultuous times (Smith 2019).

Cabinet:

VP: Elbridge Gerry, George Clinton

Sec of State: Robert Smith, James Monroe

Attorney General: Caesar Rodney, William Pinkney, Richard Rush,

Postmaster General: Gideon Granger, Return Meigs

Sec of Treasury: Albert Gallatin, George Campbell, Alexander Dallas, William Crawford

Sec of Navy: Paul Hamilton, William Jones, Benjamin Crowninshield

Sec of War: William Crawford, George Graham, William Eustis, John Armstrong, James Monroe, Alexander Dallas

Family:

Wife and First Lady: Dolley “Payne Todd” Madison, May 20, 1768 - July 12, 1849

Children from Dolley Madison’s first marriage, John Payne Todd, William Temple Todd

Other Notable Readings:

1. A Colored Man’s Reminiscences of James Madison by Paul Jennings

2. Founding Brothers by Joseph Ellis

3. Revolutionary Summer by Joseph Ellis

References

Donovan, M. (2007). George Washington at “Head Quarters, Dobbs Ferry”. Dobbs Ferry Historical Society.

Ellis, J.J. (2004). His Excellency: George Washington. New York: Vintage Books.

Ellis, J.J., 2010. First Family: Abigail and John Adams. New York: Knopf.

Ferling, J. (2009). Independence: The Struggle to Set America Free. New York: Bloomsbury Press.

Meacham, J. (2018). The Soul of America: The Battle for Our Better Angels. New York: Random House.

Smith, Rodney K. Dolley and James Madison: An Unlikely Love Story That Saved America. Outskirts Press, 2019.

Wiencek, H. (2012) Master of the Mountain: Thomas Jefferson and His Slaves. New York: Farrar, Straus and Giroux.

2025 Reading List

This years reading list is designed as a living document, one that grows and evolves each month as new books are added, old favorites are revisited, and themes begin to emerge from the year’s choices. With this approach I am trying to reflect both discipline and flexibility. Discipline in maintaining the habit of reading widely and carefully, and flexibility in allowing new interests to shape the direction of study. By updating monthly, I hope the list will capture not just what is being read but also the rhythm and progression of a year in books.

The first part of the year has been anchored by a series of re-reads. These are works that shaped my thinking in past years and continue renewed attention. From the moral vision of Thomas Paine and Martin Luther King Jr. to Alasdair MacIntyre’s critique of modern ethics, and to the practical wisdom of Ray Dalio and Charlie Munger, these months highlight the value of returning to foundational texts while engaging them through questions and critiques in writing. Alongside these, I revisited investment and strategy classics such as The Intelligent Investor and Chip War. Their lessons take on new meaning when read in light of current social and political realities. I plan to make this cycle of re-reading a deliberate annual practice at the start of each year.

At the same time new discoveries and focused studies have continue to enrich the year’s reading. February was shaped almost entirely by the philosophy of Leibniz, which deepened my engagement with questions of knowledge, metaphysics, and the origins of thought. Spring and summer brought explorations into history that included civilizational collapse, espionage, America’s founding generation, and the long legacy of slavery in early colonial and pre-colonial America. This mix of re-reads and new works in philosophy, history, and biography illustrates the balance I seek. I want to stay grounded in familiar texts, continue to build a foundation of knowledge while continuing to press outward into new thoughtful terrain.

January

1. The Name of God is Mercy, by Pope Francis (re-read)

2. Rights of Man, by Thomas Paine (re-read)

3. The Measure of a Man, by Martin Luther King, Jr. (re-read)

4. After Virtue, by Alasdair MacIntyre (re-read)

5. Principles for Dealing with the Changing World Order, by Ray Dalio (re-read)

6. Charlie’s Almanac, by Charles Munger (re-read)

7. The New Wine Rules, by Jon Bonne

February

1. Thoughts on Knowledge, Truth and Ideas, by Gottried W. Leibniz

2. Discourse on Metaphysics, by Gottried W. Leibniz

3. A New System, by Gottried W. Leibniz

4. Reflections on Locke’s Essay on Human Understanding, by Gottried W. Leibniz

5. On the Ultimate Origin of Things, by Gottried W. Leibniz

6. On Nature in Itself, or the Force Residing in Created Things, by Gottried W. Leibniz

7. The Monadology, by Gottried W. Leibniz

8. Epistemological Problems of Economics, by Ludwig Von Mises

9. What Would Frida Do? By Arianna Davis

10. Michelangelo and the Pope’s Ceiling, by Ross King

11. Idealism, by Hector Davis

12. My Inventions, by Nicolas Tesla

13. Three dialogues between Hylas and Philonous, by George Berkeley

March

1. 1177 B.C. The Year Civilization Collapsed, by Eric Cline

2. A Concise History of Turkey, by Charles Editors

3. Irreligion, by John Paulos

4. The Situation Room, by George Stephanopoulos

5. After 1177 B.C. The Survival of Civilization, by Eric Cline

6. The Spy, by Suzanne Kamata

7. The Reluctant Spy, by John Kiriakou

April

1. The Life of a Spy, by Rod Barton

2. The Firm, by John Grisham

3. Chip War, by Chris Miller (re-read)

4. The Intelligent Investor, Benjamin Graham (re-read)

5. Battle for the American Mind, by Pete Hegseth

6. For Love of Country, by Tulsi Gabbard

May

1. To Sail a Serious Ocean, by John Kretschmer (re-read)

2. Money, by Jacob Goldstein

3. George Washington at “Headquarter, Dobbs Ferry”, by Mary Donovan

4. George Washington: A Selection of Letters, by George Washington

5. George Washington’s Rules of Civility and Decent Behavior, by George Washington

6. George Washington’s Farewell Address, by George Washington

7. Flowers, Guns, and Money, by Lindsay Schakenbach (About Joel Poinsett, Van Buren’s Sec of War)

8. Patriotism and Profit, by Susan Nagel

June

1. Antifragile, by Nassim Nicholas Taleb

2. First Family, by Joseph J. Ellis

3. John Adams Under Fire, by Dan Abrams

4. Washington, by Ron Chernow

July

1. Rise and Kill First, Ronen Bergman (re-read)

2. Mark Twain, by Ron Chernow

3. Tom Sawyer, by Mark Twain (re-read)

4. American Sphinx, by Joesph J. Ellis

5. Eichmann in Jerusalem by Hannah Arendt

6. The Hundred Years War of Palestine, by Rashid Khalidi

August

1. Master of the Mountian, Thomas Jefferson and His Slaves, by Henry Wiencek

2. Trumps Triumph, by Newt Gingrich

3. Melting Point, by Rachel Cockerell

4. Master of the Mountian, Thomas Jefferson and His Slaves, by Henry Wiencek (re-read)

5. The Servile Wars: The History and Legacy of the Slave Uprisings against Rome, by Simon Webb

6. The Forgotten Slave Trade: The White European Slaves of Islam, by Simon Webb

7. American slavery, American freedom, By Edmund Morgan

8. The Haitian Revolution: The History and Legacy of the Slave Uprising that Led to Haiti's Independence, by Charles Editors

9. The Slave Ship: A Human History, by Marcus Rediker

10. To be a Slave, Julius Lester

Mountaineering and Investing

Mountaineering and investing are vastly different pursuits and through this article I will use transference to explain the similarities and differences between the two pursuits. One is a physical battle against nature, while the other is an intellectual challenge in financial markets. Yet, both require preparation, risk assessment, adaptability, and an ability to navigate uncertainty to conquer goals. My experiences in investing has shaped my perspective by teaching me patience, resilience, and the importance of long-term thinking. Similarly, my approach to mountaineering is shaped by a willingness to explore multiple viewpoints, much like how a climber must evaluate different routes to reach the summit. This article will explore how these disciplines intersect, illustrating how the lessons learned in one arena can apply to the other. I will explain how my broad perspective on investing has influenced my approach to risk, decision-making, and financial markets.

Shared Principles

Mountaineering and investing are both pursuits that demand careful preparation, discipline, and adaptability. A successful climb is like a well executed investment strategy, it begins long before the actual ascent or financial decision. In mountaineering this means studying the terrain, assessing weather conditions, and ensuring the right gear is packed. In investing, preparation involves researching markets, understanding economic indicators, and evaluating risk. Just as an unprepared climber faces heightened dangers, an investor who rushes into decisions without proper due diligence risks financial setbacks. Both fields require an appreciation for details. The weight of one’s pack on a climb can be as consequential as the fine print in an investment contract.

My experiences in mountaineering has directly influenced how I approach financial decisions. On challenging climbs I have learned patience and pacing are critical. Pushing too hard too soon can lead to exhaustion or moving too cautiously might mean getting caught in dangerous weather. Similarly, striking the right balance in investing between action and restraint is essential. I once made the mistake of investing too aggressively, much like taking on a climb I was not fully prepared for and learned firsthand the consequences of overconfidence. On the other hand, I have also hesitated at times when opportunities presented themselves, much like delaying a summit attempt only to find conditions deteriorate further. These experiences have reinforced a principle I apply to both mountaineering and investing: preparation is key, but adaptability in the face of changing conditions is what ultimately determines success.

Managing Unpredictable Risks

Both mountaineering and investing require navigating uncertainty. Even the best laid plans can be upended by forces beyond one’s control. In the mountains weather can shift unexpectedly, what begins as a clear promising ascent can quickly turn into a dangerous whiteout. Similarly, financial markets are subject to unpredictable swings, unforeseen economic events, policy changes, or even investor sentiment can alter market conditions overnight. In both pursuits, success is not about eliminating risk, it is about managing it effectively. A skilled climber assesses the likelihood of sudden storms by carrying extra gear and mapping out additional routes. Just as a prudent investor hedges against market downturns through diversification and risk mitigation strategies. Recognizing what can and cannot be controlled is fundamental to making sound decisions in both disciplines.

These parallels extend to the philosophical treatment of risk and uncertainty in economics. Frank Knight distinguished between risk (which can be quantified) and uncertainty (which cannot be precisely measured). In mountaineering, a climber may know from past data certain routes have a high failure rate, but they cannot predict the exact moment a rockslide will occur. In investing, historical volatility can inform decision-making, but it cannot predict the next financial crisis. Different economic schools approach uncertainty in distinct ways. Austrian economists emphasize the limits of prediction and the role of human action while behavioral economists study how cognitive biases influence decision-making under uncertainty. My experiences in both mountaineering and investing have reinforced it is impossible to foresee every outcome. Understanding risk and maintaining the flexibility to adapt is what ultimately separates success from failure.

Patience, Long-Term Thinking, and Mental Resilience

Both mountaineering and investing require a deep commitment to long-term thinking. In the mountains, the summit is never reached in a single step. Climbing requires hours or even days of sustained effort with often little immediate reward. The same is true for investing, wealth is built over years, not overnight. Just as a climber must endure grueling ascents, unpredictable conditions, and moments of doubt, an investor must weather market downturns, economic uncertainty, and the temptation to chase short-term gains at the expense of long-term growth. In mountaineering and investing those who focus too much on immediate discomfort or short-term setbacks are more likely to make rash decisions, such as, turning back too soon on a climb or panic-selling during a market dip. Success belongs to those who can maintain perspective and stay committed to their goals despite temporary challenges.

My experiences in both pursuits have reinforced the value of mental resilience and delayed gratification. In mountaineering some of the most rewarding summits have come after moments of extreme difficulty. Pushing through those moments required trust in my preparation and a belief that the struggle would be worthwhile. Investing operates on a similar principle. There have been times when I doubted a long-term strategy because the market seemed to be moving against me. However, just as I have learned to trust the process in climbing, I have also come to appreciate the compounding effect of patience in investing. This mindset aligns with economic theories that emphasize time preference. Austrian economists argue that those who defer consumption and invest in capital formation create long-term value, much like a climber who endures hardship to reach the peak. Ultimately, both disciplines reward those who can manage discomfort, maintain perspective, and stay the course when others might give up too soon.

Multiple Viewpoints in Economic Philosophy

Just as a mountaineer must evaluate multiple routes to the summit, I have found value in exploring a range of economic philosophies rather than adhering rigidly to one school of thought. No single perspective has all the answers when studying different economies of the past. Different conditions call for different approaches in mountianeering and investing. In the mountaineering factors like terrain, weather, group dynamics, and personal capability dictates which path is best. In economics, historical context, market dynamics, and policy decisions shape which theories offer the best insight. For example, Austrian economics emphasizes individual decision-making and the limits of central planning, which resonates with the independent judgment required in both investing and mountaineering. On the other hand, Keynesian ideas about economic cycles and the role of intervention provide useful tools for understanding short-term market fluctuations, much like how a climber adjusts their pace or strategy based on immediate conditions. Rather than seeing these schools as mutually exclusive, I view them as complementary, each offering valuable perspectives depending on the situation.

This openness to multiple viewpoints has strengthened my ability to navigate uncertainty. Just as a climber who insists on only one route risks failure if conditions change. An investor who dismisses alternative perspectives may struggle when their preferred model breaks down. Behavioral economics highlight the psychological biases that drive market behavior and concepts that traditional economic theories sometimes overlook. Recognizing these biases has helped me remain disciplined in both investing and mountaineering by avoiding impulsive decisions driven by fear or overconfidence. In the same way that understanding different climbing techniques can make someone a more capable mountaineer, integrating insights from various economic schools has given me a more well-rounded approach to financial decision-making. Ultimately, whether scaling a peak or analyzing markets, success comes from intellectual flexibility. One must have the willingness to learn, adapt, and respect the complexity of the terrain ahead.

The Interplay of Experience, Strategy, and Philosophy

My experiences in mountaineering and investing have reinforced a common truth: success in any uncertain and complex environment requires preparation, adaptability, a willingness to learn, and being open to multiple perspectives. Both pursuits demand an understanding of risk, patience in the face of setbacks, and the ability to make decisions with incomplete information. The mountains have taught me resilience and long-term thinking. It has taught me lessons that have shaped my investment philosophy and my broader approach to economic thought. Just as a climber must trust their training and judgment while remaining adaptable to changing conditions, an investor must develop a disciplined strategy while staying open to new information and alternative viewpoints.

Ultimately, the key to navigating both financial markets and mountain landscapes lies in intellectual and emotional flexibility. A climber who rigidly follows a planned route despite worsening conditions is just as vulnerable as an investor who refuses to adapt to shifting market dynamics. Likewise, adhering strictly to a single economic philosophy without considering its limitations can lead to blind spots in decision-making. Whether scaling a peak, managing investments, or engaging with economic ideas, I have found that true progress comes from balancing discipline with open-mindedness. Mountaineering and investing in the markets reward those who embrace uncertainty not as an obstacle, but as an integral part of the journey.

Acknowledgment: Portions of this article were edited using AI assistance to improve sentence structure and grammar.

Epistemological Problems in Economics

After reading Ludwig von Mises, Epistemological Problems in Economics, I chose to write a review of this book. In this work he details his philosophy in economics and shows how much it is still relevant today. As I learn from contemporary economists, I research the historical figures who influenced their ideas, allowing me to trace the evolution of their methodologies and theoretical foundations. Through this method I have discovered Leibniz, Smith, Wollstonecraft, Burke, Keynes, and many other economists and philosophers, each with unique perspectives in their own economies. Reading economist like Mises has naturally lead me to discovering other economists, creating a deeper and more comprehensive understanding to the complexities of economic thought.

This process has given me a well rounded view of different economic schools of thought, helping me critically assess the strengths, and weaknesses of various approaches. Mises’s work is foundational to the Austrian School of Economics making it essential for understanding the broader debates surrounding economic methodology, policy, and the role human actions have on markets.

A Review of Epistemological Problems in Economics, by Ludwig von Mises

Ludwig von Mises’s book, Epistemological Problems in Economics, written in 1933, stands as one of the foundational texts in the Austrian School of Economics. This book addresses the philosophical underpinnings of economic science. He wrote the book during the interwar period during World War 2, rising socialist policies, and the increasing dominance of empirical methods. Mises sought to defend economics as a deductive science rooted in praxeology. His arguments were formulated nearly a century ago and remain relevant today as debates over economic methodology, policy intervention, and the limits of data-driven analysis continue to shape public discourse.

The Nature of Economic Science

Mises's primary concern in his book is the epistemological status of economics. He argues economics is not an empirical science like physics or chemistry, but a logical system based on priori reasoning. His view on economics derive from the fundamental axiom that humans act purposefully. He builds a framework in market behaviors and price systems, while economic coordination emerge as a necessary consequences of human decision-making.

At the time of writing his book, many economists were shifting toward positivism, advocating for the use of statistical and mathematical methods to test economic hypotheses. Mises strongly opposed this trend, warning that economic realities were too complex, with too many interdependent variables to be reduced to simple empirical generalizations. Mises’s concern remains relevant today as modern economics continues to prioritize big data, econometric modeling, and artificial intelligence for predicting market behavior. Mises’s concern is often at the expense of understanding the subjective and unpredictable nature of human decision-making.

1933 vs. 2025

To fully appreciate Mises’s work, it is essential to compare the intellectual climate of his time with our present era. The 1930s were marked by the Great Depression, the rise of Keynesian economics, and the expansion of government intervention in markets. In 1933, the Federal Reserve played an increasing role in monetary policy while socialist and fascist governments experimented with planned economies. Mises's skepticism toward government control of the economy was sharpened by these developments, as he saw interventionism leading inevitably to more centralization and inefficiency.

Mises discusses how certain economic theories, despite their theoretical appeal, have been tested in the real world and have failed. Marxism is rooted in the belief that state controlled economies can eliminate class struggle and lead to prosperity. However, Mises argues these systems ignore fundamental economic principles, particularly the role of price signals and individual incentives. The Soviet Union’s centrally planned economy led to chronic shortages, inefficiencies, and widespread poverty, demonstrating the impracticality of eliminating market mechanisms. Mises warns without private property and a functioning price system, economic calculation becomes impossible, leading to misallocation of resources and economic collapse. History vindicates his critique, as the failures of Marxist economies in the 20th century provide proof of the flaws in these theories. This reinforces Mises’s philosophy that economic laws are not just theoretical constructs, but practical necessities for a functioning society.

Today, while outright socialism has declined in much of the world, interventionist policies remain widespread. The Federal Reserve dictates monetary policy through interest rate manipulation and quantitative easing while governments regulate industries and engage in large-scale deficit spending. The growing influence of Modern Monetary Theory argues governments can finance spending through money creation without immediate consequences, echoes the very debates Mises engaged in with early 20th-century interventionists. His warnings about inflationary policy and the unintended consequences of economic planning remain just as pressing now as they were in his time.

This ongoing trend of government intervention extends beyond traditional Keynesian policies and can be seen in recent Presidential Administrations, including those that claim to champion free markets. President Trump and previous administrations policies diverge significantly from Mises's philosophy, particularly in areas like trade and monetary policy. Mises was a strong proponent of free trade, whereas Trump’s economic policy is focused on nationalism, characterized by tariffs, stronger border enforcement, and other nationalism policies his administration has put into place. Mises would have viewed protectionist policies as harmful, distorting markets and reducing overall economic efficiency. Additionally, Mises was a fierce critic of government spending and monetary expansion. President Trump and President Biden presided over significant increases in federal spending and deficits created by the Covid-19 Pandemic and Federal Infrastructure Bills. President Trump’s continuing pressure on the Federal Reserve to keep interest rates low also contradicts Mises’s Austrian Business Cycle Theory, which warns that artificially low rates lead to economic distortions and financial bubbles.

Predictions for the Future

One of the more fascinating aspects of the book, Epistemological Problems in Economics, is Mises’s attempt to project how economics would evolve over the next century. He predicted the growing reliance on empirical methods would undermine the theoretical foundation of the discipline, leading to misguided policies and economic distortions. In many ways, his prediction was accurate. The dominance of econometrics and data driven policy has, at times, led economists to overestimate their ability to engineer economic outcomes. The 2008 financial crisis, for instance, exposed the limits of models that failed to account for human irrationality and systemic fragility.

Yet, despite his concerns, some of Mises’s ideas have gained traction in the modern era. The resurgence of Austrian economics in libertarian and free-market circles, as well as the increased interest in alternative economic theories critical of state intervention, suggest his work remains influential. The digital age has also introduced new dimensions to economic epistemology including cryptocurrency, decentralized finance, and blockchain technology. All three challenge traditional notions of monetary policy and government control which aligning with many of Mises’s philosophic principles.

His book, Epistemological Problems in Economics, is more than just a defense of Austrian economics, it is a critique of how economic thought evolves and the risks associated with detaching economic theory from its logical foundations. Mises’s work serves as both a historical document and a timeless argument against over reliance on empirical methods in a field where human behavior is the primary variable. While modern economics has embraced data driven analysis more than ever, Mises warns about the dangers of ignoring the deductive nature of economic science. As policymakers and economists navigate an increasingly complex global economy, Mises’s insights remain invaluable to understanding both the limits of economic intervention and the importance of preserving individual decision-making as the core of economic analysis.

Taking multiple viewpoints in economic philosophy is essential for developing a well-rounded understanding of how economies function. While Mises provides a rigorous and compelling defense of deductive reasoning in economics, his perspective is just one of many that contribute to ongoing debates in the field. Different schools of thought, from Keynesianism to behavioral economics, offer other valuable insights into market dynamics, government intervention, and human decision-making. By engaging with a variety of perspectives, we can critically assess economic policies, recognize their trade-offs, and apply the most effective tools to real-world problems. A balanced approach allows us to appreciate the strengths of Misesian logic while acknowledging the complexities and uncertainties that shape our modern economies.

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Mises, L. von. (1960). Epistemological problems in economics (G. Reisman, Trans.). D. Van Nostrand. (Original work published 1933)

2024 Reading List

This past year, I set a personal goal to read at least 30 books on business with a focus on finance to gauge my interest in this subject. Books on finance had been particularly influential in previous years and I wanted to explore and related topics further. As I continued reading, I found myself drawn to books by successful entrepreneurs to learn from their experiences, as well as case studies of failed businesses to understand common pitfalls.

Through this journey, I’ve deepened my understanding of business, accounting, and finance, which has only strengthened my desire to keep learning about these subjects. In 2024, I also took the first steps toward writing a business plan, applying what I have learned to shape my future venture’s mission and goals.

Beyond business and finance, I love reading books that expand my knowledge in various subjects. Of course, I can't forget my favorite genre—spy thrillers! This year I read 78 books. Check out my 2024 reading list below to see what I’ve read this year.

January

1. Project Hail Mary, by Andy Weir

2. Kissinger, by Walter Isaacson

3. Adventures of the wine trade, Kermit Lynch

February

1. Red Warning, by Matthew Quirk

2. What I Learned from Investing from Darwin, by Pulak Prasad

3. Value Averaging, by Michael Edleson

4. Endurance, by Alfred Lansing (re-read)

March

1. Relationships, by John Maxwell

2. Intimate Relationships, by Marianne Williams

3. Building Family Relationships, by Stephen Covey

4. 8 keys to Building Your Best Relationships, by Daniel Hughes

5. Seeking Wisdom: From Darwin to Munger, by Peter Bevelin

6. Emotional Intelligence, by Bob Mills

7. Inside threat, by Matthew Quirk

8. Retirement 101, by Michelle Cagan

9. Start Your Own Corporation: Why the Rich Own Their Own Companies and Everyone Else Works for Them, by Garrett Sutton

April

1. Accounting for Non-Accountants, by Wayne Label

2. A Random Walk Down Wall Street, by Burton G. Malkiel

3. How to Think about Money, by Jon Clements

4. The Investor Manifesto, by William Bernstein

5. Your Money and Your Brain, by Jason Zweig

6. The next millionaire next door, by Thomas and Sarah Stanley

7. Little Book of Big Dividends, by Charles Carlson

8. The Darwin Economy, by Robert Frank

9. The Nature of Investing, by Katharine Collins

May

1. The Lean Startup: How Today's Entrepreneurs Use Continuous Innovation to Create Radically Successful Businesses, by Eric Ries

2. The Origin of Species, by Charles Darwin

3. Warren Buffett and the Interpretation of Financial Statements, by Mary Buffett

4. Irrational Exuberance, by Robert Shiller

5. Narrative Economics, by Robert Shiller

6. Warren Buffett and the Art of Stock Arbitrage, by Mary Buffett

7. Ancient Japan: An Enthralling Overview of Ancient Japanese History, Starting From the Jomon Period, by Enthralling History

8. Family Trusts: A Guide for Beneficiaries, Trustees, Trust Protectors, and Trust Creators, by Hartley Goldstone, James Hughes, and Keith Whitaker

9. The Tao of Warren Buffett, by Mary Buffett & David Clark

June

1. Raising Kids in Today's Digital Age, by Bully Ekine-Ogunlana

2. History of Japan, by R. H. P. Mason & J. G. Caiger

July

1. Stocks for the Long Run, by Jeremy Siegel

2. Behavioral Finance and Your Portfolio, by Michael Pompian

3. The Theory of Human Motivation, by Abraham Maslow

4. Towards a Psychology of Being, by Abraham Maslow

5. Religions, Values, and Peak-Experiences, by Abraham Maslow

6. Taxes for Small Businesses, by Nicholas Regan

7. One Up on Wall Street, by Peter Lynch

8. Learn to Earn, by Peter Lynch and John Rothchild

9. Poor Charlie’s Almanack, by Charles Munger

August

1. Simply Schrodinger, by John Gribbin

2. Behavioral Economics, by David Orrell

3. The Economics consequences of Peace, by John Maynard Keynes

4. Economics in America, by Angus Deaton

5. Quantum Theory, by John Polkinghorne

6. Applied Economics, by Thomas Sowell

7. Quantum bullshit, Chris Ferrie

8. Quantum Computing, Brian Clegg

9. Faraday, Maxwell, and the Electromagnetic Field: How Two Men Revolutionized Physics, by Nancy Forbes & Basil Mahon

September

1. The Little Book of Valuation, by Aswath Damodaran

2. How the Scots Invented the Modern World: The True Story of How Western Europe's Poorest Nation Created Our World and Everything in It, by Arthur Herman

3. Genome: The Autobiography of a Species in 23 Chapters, by Matt Ridley

4. Chip Wars, by Chris Miller

October

1. Quantum Entanglement, by Jef Brody

2. LLC Beginners Guide, by Thomas Newton

3. Thinking in Systems, by Donells Meadows

4. How to Win with Machine Learning, by Ajay Agrawal, Joshua Gans, and Avi Goldfarb

5. The Big Three in Economics, By Mark Skousen

6. The World According to Physics, by Jim Al-Khalili

7. Guns, Germs, and Steel: The Fates of Human Societies, by Jared M. Diamond

8. Computational Thinking, by Peter Denning & Matti Tedre

9. DeFi and the Future of Finance, by Campbell R. Harvey, Ashwin Ramachandran, and Joey Santoro

November

1. The Power of Habit, by Charles Duhigg

2. Peak Mind, by Amishi Jha

3. M.B.A. in a Book, by Joel kurtzman

4. How to Prevent the Next Pandemic, by Bill Gates

5. The Bond King, by Mary Childs

6. How to do Nothing, by Jenny Odell

December

1. How to be Perfect, by Michael Schur

2. The Warren Buffett Portfolio: Mastering the Power of the Focus Investment Strategy, by Robert Hagstrom

3. Only the Paranoid Survive: How to Exploit the Crisis Points That Challenge Every Company, by Andrew S. Grove

4. Atomic Habits, by James Clear

5. The Wealth and Poverty of Nations, by David Landes

Probability and Outcome Assessment: Quantitative Analyst

Charles Munger places a significant emphasis on probability and outcome assessment as part of his decision-making process, reflecting his strong belief in rationality and the application of mathematical principles to assess risk and reward. He often draws on the ideas of probability theory and expected value to make more informed decisions, particularly in the context of investments, but also in broader life decisions. Here’s how Munger incorporates probability and outcome assessment.

Expected Value Calculation

Munger consistently advocates for thinking in terms of expected value (EV), which involves multiplying the probability of different outcomes by their potential payoff. This is especially useful in scenarios involving risk and uncertainty. Rather than being fixated on the most likely outcome, Munger focuses on weighing all possible outcomes by their likelihood and magnitude.

Formula

Expected Value = Probability of Gain × Magnitude of Gain − Probability of Loss × Magnitude of Loss

By thinking in terms of expected value, Munger can make decisions that have the best long-term payoff, even if the immediate probability of success isn’t overwhelmingly high.

Example of Investment Decisions

In investments, Munger uses expected value thinking to assess opportunities. If an investment has a 20% chance of a large payoff but an 80% chance of a small loss, he calculates the overall expected value of the decision rather than simply focusing on the likelihood of success or failure.

Probabilistic Thinking and Bayesian Updating

Munger uses probabilistic thinking to constantly update his view of the world as new information emerges. This approach is akin to Bayesian reasoning, where the probability of a hypothesis is updated based on incoming evidence.

Bayesian Updating


Involves adjusting your beliefs or estimates as more information becomes available. In the context of investing, for instance, new data about a company’s performance might lead Munger to revise his estimation of the company’s future prospects.

By updating probabilities as new information comes in, Munger avoids the trap of sticking to outdated assumptions or decisions that were initially based on incomplete data.

Margin of Safety

Munger borrows the concept of the margin of safety from his mentor, Benjamin Graham. This idea is closely tied to probability. Munger assesses the downside risk of an investment or decision and ensures there is a buffer in case things go wrong. The margin of safety is about recognizing that the world is uncertain and ensuring a person is protected from unexpected negative outcomes.

Example of Investing

In investing, this means buying assets at a significant discount to their intrinsic value so that even if something goes wrong, the potential downside is limited.

Assessing Low-Probability, High-Impact Events

Munger also takes into account low-probability, high-impact events. While these events might be rare, their consequences can be catastrophic or enormously beneficial. Munger tries to avoid catastrophic outcomes and seize opportunities for large gains, even when the probability is low.

He has referred to the need for "preparation for a few big opportunities," where careful analysis of the probability of massive success or failure helps guide decision-making. This aligns with his belief in, Lollapalooza effects, where several small favorable factors align, creating outsized results.

Avoiding Overconfidence and the Law of Large Numbers

One of Munger’s key principles is humility in estimating probabilities. He recognizes that humans are inherently overconfident in their ability to predict the future. To counter this, he often invokes the Law of Large Numbers, which says that outcomes will tend to average out as you increase the number of trials or decisions.

Munger doesn't place much faith in predictions based on a few data points. Instead, he prefers to look at larger sample sizes and longer-term trends to improve the accuracy of his probability assessments.

Decision Trees and Scenario Analysis

Munger uses decision trees and scenario analysis as tools to lay out different possible outcomes and their associated probabilities. These methods allow him to visualize and calculate the expected value of various paths, which helps in choosing the most rational course of action.

Decision Trees

Map out the possible consequences of different decisions, with probabilities assigned to each branch. Munger assesses not just the likelihood of each outcome but the ripple effects each decision might have.

Failure Analysis and Inversion

Munger often applies inversion to improve his probability assessments. Inversion involves thinking about a problem backward—imagining what would cause failure instead of success. By identifying potential causes of failure and assigning probabilities to those negative outcomes, Munger can better avoid errors and mitigate risks. This process also helps him determine where others might underestimate risks or overlook hidden dangers, allowing him to spot opportunities where others see only challenges.

Poker Analogy: Betting on Probabilities

Munger often compares decision-making to poker, where success over the long run depends on how well you understand probabilities, assess risks, and bet accordingly. He emphasizes the importance of asymmetric risk-reward ratios, where you have much more to gain than to lose, even if the probability of success isn’t particularly high.

Example of Poker

Professional players succeed not by winning every hand, but by maximizing their gains when the odds are in their favor and minimizing losses when they are not. Munger applies this same principle to business and investment decisions.

By using these probability-based methods, Munger aims to make decisions that are rational, calculated, and grounded in mathematical principles. His approach reduces emotional biases, limits overconfidence, and helps him achieve better outcomes over the long term.

Systems Thinking: Holistic Thought Method

A holistic thought method is an approach to thinking which considers the whole system, context, or situation rather than focusing solely on its individual components. This type of thinking emphasizes the interconnectedness and interdependence of all parts within a system, recognizing changes in one area can affect the entire system. Holistic thinking contrasts with reductionist approaches, which break down complex phenomena into their simplest parts for analysis, also known as first principles. By looking at the bigger picture, holistic thought methods aim to understand the relationships, patterns, and dynamics which define the system as a whole. The categories below can be used individually or grouped together when applying the holistic thought method.

Systems Thinking

This method involves understanding how different parts of a system interact and influence one another. It emphasizes the interconnectedness of components within a system and how changes in one area can impact the whole.

Contextual Analysis

This approach involves considering the broader context in which a decision is being made. It includes understanding cultural, social, economic, and environmental factors that may influence the decision and its outcomes.

Stakeholder Analysis

A holistic approach requires identifying all stakeholders involved and understanding their perspectives, needs, and potential impacts. This ensures that the decision takes into account the interests and concerns of all relevant parties.

Long-Term Perspective

Holistic decision-making often involves considering the long-term implications of a decision, rather than just immediate outcomes. This includes thinking about sustainability, future consequences, and the potential for unintended effects. Thomas Sowell calls this long-term perspective stage thinking. Sowell's analysis can be found in his book Applied Economic.

Multi-Criteria Decision Analysis

This method involves evaluating multiple criteria that are important for the decision, rather than focusing on a single factor. It allows for a balanced assessment of various aspects, such as cost, benefits, risks, and social impact.

Interdisciplinary Approach

Involving expertise from multiple disciplines can provide a more comprehensive understanding of the issue at hand. This method ensures different perspectives and areas of knowledge contribute to the decision-making method.

Scenario Planning

This involves envisioning different possible futures and how a decision might play out in various scenarios. It helps decision-makers consider a wide range of possibilities and prepares a person for different outcomes.

Root Cause Analysis

Instead of addressing symptoms, this method focuses on identifying and understanding the underlying causes of a problem. By addressing the root causes, the decision can lead to more effective and lasting solutions.

Reflective Practice

This involves regularly reflecting on one’s own thought processes, biases, and assumptions. It encourages self-awareness and critical thinking, which are essential for making well-rounded decisions.

Collaborative Decision-Making

Engaging a diverse group in the decision-making process allows for the integration of different perspectives and expertise, leading to more informed and holistic decisions.

Intuition and Gut Feeling

While data and analysis are important, holistic decision-making also values intuition and gut feelings, especially when dealing with complex, ambiguous situations where not all variables are known or quantifiable. This method should be used sparingly as it has a lot of risk.

Mind Mapping

Creating visual representations of the various components, relationships, and factors involved in a decision can help in understanding the full scope and interconnections, leading to more holistic thinking.

Using these methods together can help in making holistic decisions that are more comprehensive, balanced, and aligned with broader goals and values.

Checklists and Mental Models

Charles Munger's method of checklists and frameworks in decision-making stems from a multidisciplinary approach to thinking. The idea of lists and models comes from Munger’s recognition that human cognition is prone to biases, errors, and overconfidence. To counteract these weaknesses, he advocates for checklists as a practical tool to ensure thoroughness and minimize errors. This idea is also influenced by fields like aviation and medicine, where checklists are used to reduce mistakes in high-stakes situations. His use stems from his deep respect for learning and his belief in understanding the world through multiple lenses. Munger is known for saying, "To the man with only a hammer, every problem looks like a nail." By integrating a variety of frameworks, he advocates for better, more holistic problem-solving.

Checklists

To counter cognitive biases, Munger advocates the use of decision-making checklists, particularly in high-stakes decisions. A checklist helps ensure that we do not overlook key factors or fall prey to biases. It forces thoroughness and discipline.

Mental Models

Promotes the use of diverse mental models from multiple disciplines (physics, economics, psychology, etc.) to approach decisions from different perspectives. By using a broader view, a person will reduce the risk of tunnel vision or relying solely on one way of thinking. In essence, both checklists and mental models help us avoid common cognitive traps and ensure that decision-making is grounded in rationality, evidence, and diverse perspectives.

Avoiding Cognitive Biases

Charles Munger brings to light in his writings the understanding of human cognition being prone to biases, errors, and overconfidence that our brains are wired to take mental shortcuts to simplify complex decision-making. While these shortcuts can be efficient, they often lead to predictable mistakes and irrational behavior. Munger frequently draws from behavioral psychology to explain these cognitive biases. Below are the most notable biases he he has developed for his decision-making method.

Confirmation Bias

The tendency to seek out information that confirms our pre-existing beliefs and ignore or dismiss contradictory evidence.

Anchoring Bias

The human tendency to rely too heavily on the first piece of information encountered, the anchor, when making decisions.

Overconfidence Bias

Overestimating our knowledge, abilities, or control over outcomes, often leading to excessive risk-taking.

Loss Aversion

The tendency to prefer avoiding losses to acquiring equivalent gains, which can lead to risk-averse or irrational decisions.

Social Proof

The tendency to think and act like the people around us, often leading to groupthink or herd mentality.

Recency Bias

The tendency to give disproportionate weight to recent events or experiences over long-term trends.

Availability Bias

Overestimating the importance of information that is readily available or recent, even if it is not the most relevant or accurate.

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Identifying Biases

Throughout Munger’s writings he brings to light the steps needed to identify and counteract biases. His decision-making philosophy revolves around mitigating human biases through awareness, systematic thinking, and continuous learning. A key component of his approach is recognizing and educating oneself about cognitive biases by studying behavioral psychology and related disciplines. He advocates for inverse thinking, focusing not only on success, but also on avoiding mistakes that could lead to failure. He emphasizes delayed decision-making to allow time for reflection, reducing the risk of hasty, emotional decisions. By mimicking rational models from fields like engineering, Munger incorporates structured processes to reduce human error. His lifelong commitment to learning and rigorously testing assumptions allows him to challenge his own ideas and prevent overconfidence, making his approach highly disciplined and effective.

Awareness and Education

Munger emphasizes that understanding and acknowledging biases is the first critical step. By studying behavioral psychology, evolutionary biology, and other disciplines, he educates himself on how biases emerge in human thinking.

Inverse Thinking

Talks about the importance of inversion—thinking backward. Instead of only thinking about how to achieve success, he also considers what mistakes or pitfalls could lead to failure. This helps in avoiding overconfidence and anticipating potential problems.

Delayed Decision-Making

Suggests slowing down decision-making whenever possible. By pausing, you allow time for reflection and reduce the risk of snap judgments driven by emotions or biases.

Mimicking Rational Models

Frequently emphasizes the importance of copying rational decision-making processes from disciplines like engineering or physics, where there are clear, logical processes and checks. He believes that applying these methods can reduce the impact of human error.

Continuous Learning

He became a lifelong learner, always trying to expand his understanding of how the world works. By continuously learning, he is better equipped to recognize new types of biases or pitfalls in his thinking.

Rigorously Testing Assumptions

Munger tested his assumptions rigorously. He deliberately seek out information that contradicts his views in contrast to the natural tendency to seek confirmatory evidence. His approach is highly methodical, recognizing even the most intelligent and experienced individuals can fall prey to biases. His methods of using checklists, mental models, and deliberate thought processes help to mitigate these natural human tendencies toward error.

Munger’s approach to avoiding cognitive biases emphasizes the importance of self-awareness, systematic thinking, and continuous learning. By identifying common mental pitfalls he advocates for deliberate strategies such as inverse thinking, delayed decision-making, and mimicking rational models from fields like engineering. His shared disciplined, methodical approach—rooted in behavioral psychology and a lifelong commitment to learning—demonstrates that even the most inexperienced thinkers can reduce the impact of human error by rigorously testing assumptions and challenging their own perspectives.

Interdisciplinary Learning: Knowledge Transfer

First taught to me in college and later applied in wilderness expeditions, knowledge transfer is applying intelligence from one owns knowledgeable domain to another. This knowledge transfer refers to the ability to take insights, skills, or principles learned in one area and applying them effectively in a different context. This cognitive method is fundamental in problem-solving, innovation, and learning. A concept learned in mathematics, such as the idea of balance in an equation, can be transferred to understand economic equilibrium in finance. The ability to recognize similarities between different fields and applying known concepts to new situations is a critical aspect of interdisciplinary learning. The interdisciplinary learning methods below can be used individually or grouped together when applying this approach.

Analogical Reasoning

This involves finding similarities between the source context, where the knowledge was originally acquired, and the target context. By drawing parallels between these two or more domains, individuals can adapt their understanding to new situations.

Schema Development and Application

A schema is a mental structure organizing information. By developing schemas, individuals can apply general principles or latticeworks from one context to another, even when specific details are different.

Case-Based Reasoning

This method involves using specific examples or cases from the source domain to solve problems or understand situations in the target context. The knowledge from past situations is adapted to fit new situations.

Generalization and Abstraction

By abstracting the core principles or concepts from the source domain, individuals can apply these generalizations to different contexts. This method relies on recognizing the underlying patterns that can be applied universally.

Training and Simulation

Using controlled environments that mimic the target context, individuals can practice applying knowledge from one domain to another. This method is common in fields like aviation, medicine, and the military.

Mentorship and Coaching

Experienced individuals can guide others in applying knowledge from one context to another, offering insights, feedback, and support throughout the process.

Experiential Education

Hands-on experience in the new context allows individuals to experiment and adjust their knowledge, leading to a more effective transfer of knowledge.

Storytelling and Narrative

Using stories or narratives from the source domain can help individuals relate to and apply knowledge in the target context by providing relatable scenarios.

Cross-Training

This involves exposing individuals to different roles or contexts within an organization, allowing them to transfer knowledge and skills across different areas.

Technology and Tools

Utilizing technology, such as knowledge management systems, databases, or collaborative platforms, can facilitate the transfer of knowledge across contexts by providing access to information and resources.

Over time, the concept expanded to include a more sophisticated understandings of how abstract thinking, problem-solving strategies, and deep knowledge of an individuals domain can be adapted to new challenges. Interdisciplinary learning is a crucial skill in a rapidly evolving world, enabling individuals to adapt and innovate by applying what they know to new and unfamiliar situations.

Charles Munger's Decision-Making Methodology

Throughout my study of the philosophy of decision-making, I have noticed a recurring theme among great thinkers across the centuries. They exhibit a formidable approach to decision-making. These intellectual pioneers include Aristotle, Saint Augustine, Thomas Aquinas, Rene Descartes, John Locke, Charles Darwin, Albert Einstein, Richard Feynman, and Charles Munger. I have found each great thinker built off of the idea of first principles, a method rooted in Aristotelianism.

Charles Munger takes the methodology of first principles and is able to expand it into a complex decision making methodology. Munger’s decision making method is built on the great thinkers of history, has stood the test of time, and remains effective regardless of changing circumstances. Munger emphasizes the importance of developing a latticework of mental models. This approach involves integrating knowledge transfer from various disciplines, known as a generalist viewpoint which is a multidisciplinary approaches in using relatable ideas & principles in psychology, economics, physics, biology, and more. Applying the below latticework of decision-making methods creates a meticulous approach to better understand and solve complex problems.

Charles Munger's Decision-Making Methodology

1. Interdisciplinary Learning: Knowledge Transfer

To make sound decisions, one must draw from multiple disciplines, understanding the core principles of each. This broad knowledge base allows for a more comprehensive view of any situation, as known as, knowledge transfer and holding a multidisciplinary approaches called a generalist. Click here to learn more about interdisciplinary learning.

2. Avoiding Cognitive Biases

One must Recognize and mitigate cognitive biases that can cloud judgment. Diving into common biases such as anchoring, consistency bias, and the tendency to overvalue what we cannot have. Click here to learn more about avoiding cognitive biases.

3. Checklists and Mental Models

Munger advocates for using checklists to ensure thorough consideration of all relevant factors before making decisions. These checklists help in simplifying complex issues, evaluating consequences, and grounding decisions in solid evidence. Click here to learn more about checklists and mental models.

4. Systems Thinking: a Holistic Thought Method

These processes include understanding the broader system in which a problem exists. This means considering how different parts of a system interact and the potential long-term consequences of decisions. Click here to learn more about systems thinking.

5. Probability and Outcome Assessment: Quantitative Analyst

Munger stresses the importance of considering probabilities and the range of possible outcomes, which helps in making decisions not only logical but also account for uncertainty. Click here to learn more about probability and outcome assessment.

The above summarization of the decision-making methodology are designed to help individuals think more clearly and make better decisions, both in business and in life. This decision-making latticework serves as a guide to adopting these methods while offering practical advice for improving one’s cognitive processes and decision-making abilities.

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Munger, C. T. (2005). Poor Charlie's almanack: The wit and wisdom of Charles T. Munger. Expanded Third Edition. Donning Company Publishers.

Bevelin, P. (2005). Seeking wisdom: From Darwin to Munger. PCA Publications.

First Principles & Beyond

This concept dates back to Ancient Greek philosophy, particularly in the work of Aristotle. In Aristotle’s book Metaphysics, he discussed the idea of first principles as the foundational concepts or basic truths that form the basis of any knowledge system. By breaking down complex ideas into their most basic elements, one can understand the underlying nature of things. This approach of reasoning from first principles became fundamental to various fields, including science, mathematics, philosophy, and business.

The idea of first principles has been employed by many great thinkers over the centuries. In the scientific method, it is a way of reducing assumptions to their most basic, self-evident truths. René Descartes, a French philosopher, used first principles in his method of doubt, seeking to build knowledge on the most certain and indubitable foundations. In mathematics, Euclid's "Elements" is based on first principles, where he starts with axioms and builds up geometric principles logically. While first principles thinking has its roots in philosophy, science, and mathematics, its application extends far beyond these fields and continues to shape modern practices.

As we fast forward to the present, we see multiple businesses and influential individuals using this time-tested concept. One prime example is Ray Dalio, the founder of Bridgewater Associates, one of the largest hedge funds in the world. Dalio applied first principles thinking to both his personal and professional life. His book Principles, reflects this approach, outlining the series of principles he developed over his career.

Dalio’s use of first principles breaks down problems and decisions to their basic elements to understand and addresses them from a fundamental level. By identifying the underlying principles that govern reality and human behavior, one can make better decisions, avoid pitfalls, and achieve greater success.

Dalio’s "Principles" are a collection of rules and guidelines he developed based on his experiences and observations which is grounded in first principles thinking.

1. Radical Truth and Transparency: Dalio emphasizes the importance of confronting reality with honesty and openness. He encourages creating an environment where people can express their thoughts candidly, allowing the best ideas to rise to the surface.

2. Pain & Reflection Equal Progress: Failure and discomfort are essential for growth. By reflecting on mistakes and painful experiences, individuals can learn and make better decisions in the future.

3. Systematic Decision-Making: Advocates for removing emotions from decision-making and relying on data and logic. He uses algorithms and principles to make decisions, seeking objectivity and consistency.

4. Idea Meritocracy: At Bridgewater Associates, decisions are made based on the merit of ideas rather than hierarchy. Everyone's input is valued, and the best, most logical ideas win out.

5. First Principles Thinking: Stripping away assumptions and analyzing issues from the ground up to find the fundamental truths that can guide decision-making.

6. Principles as a System: Dalio organizes his lessons and rules into a system of "principles," which serve as a guide for handling various situations. These principles are well-documented in his book Principles, where he encourages readers to develop their own system based on their core values and experiences.

Ray Dalio's application of first principles thinking has become a powerful tool for both personal and professional success. By breaking down problems to their most basic elements and identifying core truths, he has created a system that fosters better decision-making, innovation, and growth. His approach emphasizes radical truth and transparency, systematic and data-driven decision-making, and an environment where the merit of ideas, not hierarchy, guides actions. Through his book Principles, Dalio shares the valuable insights he has gained, encouraging others to adopt a similar mindset—one that builds on foundational truths to navigate complex challenges and achieve lasting success.

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Dalio, R. (2017). Principles: Life and work. Simon & Schuster.

Dalio, R. (2021). Principles for dealing with the changing world order: Why nations succeed and fail. Avid Reader Press.

Aristotle. (2002). Metaphysics (H. Lawson-Tancred, Trans.). Penguin Books. (Original work published c. 350 B.C.E.)

Thomas Sowell on Economic Stage Thinking

Thomas Sowell's concept of "stage thinking" refers to a process by which policies and ideas are evaluated through different stages of their effects, rather than just their immediate outcomes. Sowell emphasizes many policymakers and economist often stop at the first stage, only considering the initial effects of a policy, without thinking through the subsequent consequences that unfold over time. Here’s a breakdown of the stages as Sowell describes them:

Stage 1: Immediate Effects

The focus is on the direct, visible, and often positive outcomes of a policy or action. A policy might provide immediate relief or benefit to a particular group. This stage is where most political debates and public discussions are focused, as the results are immediate and clear.

Stage 2: Subsequent Consequences

Requires thinking beyond the immediate effects to consider the secondary consequences that arise as a direct result of the first stage. These effects may be unintended and often negative, impacting groups or areas that were not initially considered. A policy that initially seems beneficial might lead to negative economic consequences in the long run, such as inflation or unemployment.

Stage 3: Long-Term Consequences

The focus shifts to the long-term implications of the policy, both positive and negative. This involves considering how the policy will evolve over time and how people will adapt to or be affected by these changes. This stage often reveals deeper systemic effects, such as changes in behavior, incentives, or societal structures.

Stage 4: Broad Social Impacts

The analysis expands to consider the broader societal impacts, including how the policy affects social norms, cultural values, and the overall functioning of society. It looks at how the policy may change the way people interact with each other or how institutions operate in the long run.

Stage 5: Generational and Cultural Effects

Involves looking at the generational and cultural shifts that may result from the policy. This includes changes in attitudes, beliefs, and practices that may persist across generations, potentially altering the trajectory of society. It requires a deep understanding of historical context and the ability to predict how today's decisions will shape the future.

By taking Sowell’s critique of many policymakers for failing to move beyond stage one thinking, where the focus is solely on immediate benefits without considering the cascading effects that may arise in later stages. We can deduce that a failure to consider these stages often leads to policies that are ultimately harmful, even if they appear beneficial at first glance.

In essence, Sowell’s evolution of "stage thinking" is a call for a more comprehensive and far-reaching approach to policy analysis and economic impact, urging people to think beyond the immediate and visible effects to understand the full spectrum of consequences that unfold over time.

Maslow's Hierarchy & Further Development of Theory

Maslow's Hierarchy of Needs

A psychological theory developed by Abraham Maslow in 1943. His theory suggests human needs can be arranged in a hierarchy, with basic needs at the bottom and more complex, psychological needs at the top. He proposed individuals must satisfy lower-level needs before they can graduate to address higher-level needs. The hierarchy is often depicted as a pyramid, with five levels, but we will discuss a sixth level he added later into his theory.

The Stages:

1. Physiological Needs:

   The most basic human needs, including food, water, warmth, rest, and other essential elements for survival. These needs are fundamental for sustaining life. Without meeting these needs, the body cannot function properly and dies.

2. Safety & Security Needs:

   Once physiological needs are met, individuals seek safety and security. This includes physical safety, financial security, health, and well-being. Feeling secure allows individuals to focus on higher-level needs without the constant threat of danger or instability.

3. Love and Belongingness Needs:

   Humans have an innate desire to belong and be loved. This stage includes friendships, romantic relationships, family bonds, and social connections. Relationships and social connections provide emotional support and a sense of community, which are crucial for mental health.

4. Self-Esteem Needs:

   At this stage, individuals seek self-esteem and the esteem of others. This includes self-respect, achievement, confidence, and recognition from others. Esteem needs are essential for building self-confidence and feeling valued in society.

5. Self-Actualization:

   The highest level of Maslow’s hierarchy, self-actualization refers to the realization of one's full potential. This includes creativity, problem-solving, authenticity, and personal growth. Self-actualization is about becoming the best version of oneself, achieving personal goals, and finding fulfillment in life.

6. Self-Transcendence

   Maslow later extended his hierarchy to include a stage beyond self-actualization called self-transcendence. This stage involves a focus beyond the self, where individuals seek to connect with something greater, whether it's through spiritual experiences, altruism, or a deep sense of purpose. In this state, individuals may strive to help others achieve their potential, engage in acts of kindness, or contribute to the betterment of society. Self-transcendence, in this context, is about transcending personal desires and finding deeper meaning in life and striving to contribute to the well-being of others or society as a whole.

By using his hierarchy theory in the field of physiologically, specifically group dynamics, we can determine and measure the outcome of performance in an individual operating within a group. Maslow’s hierarchy remains relevant today per its use of psychology within business and education by emphasizing the importance of addressing fundamental needs before pursuing higher aspirations.

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Relevancy in today society

Maslow's hierarchy of needs is still relevant and applied in various fields in society today including psychology, business, education, and healthcare. Within Business and Management companies use Maslow’s hierarchy to understand employee motivation and to create a work environment that satisfies their employees' needs at different levels. For example, ensuring fair pay and job security addresses physiological and safety needs, while opportunities for career advancement and recognition fulfill esteem and self-actualization needs.

Educators apply Maslow's theory to create supportive learning environments. By ensuring students' basic needs (food and a safe environment) are met, teachers can better facilitate higher-level learning. Schools often offer programs for mental health support, free meals, and extracurricular activities to address these various needs.

Healthcare providers use the hierarchy to prioritize patient care. Basic needs like food, water, and pain management are addressed first. Once these are met, providers focus on higher-level needs like emotional support and patient education.

Marketers use Maslow's hierarchy to appeal to consumers at different levels of need. Advertising for basic products like food or safety products targets physiological and safety needs, while luxury brands may appeal to esteem and self-actualization needs by promoting status or personal fulfillment.

Policymakers and social workers apply Maslow's hierarchy to design programs addressing the needs of vulnerable populations. For instance, housing initiatives for the homeless address basic physiological and safety needs, while job training programs help fulfill higher-level needs related to esteem and self-actualization.

Individuals use Maslow’s hierarchy as a framework for personal growth, aiming to meet their own needs in a balanced way. This might involve focusing on physical health, building strong relationships, or pursuing meaningful goals.

By adopting a holistic approach to Maslow’s Hierarchy, we can better understand the interconnectedness of its various levels and a persons growth over time. Instead of isolating individual components, this method considers the entire system, including relationships, patterns, and context. This perspective enables us to formulate creative questions through thought experiments. Can we apply Maslow’s Hierarchy Theory to address complex societal issues?

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Understanding Group Dynamics through the Lens of a Psychological and Sociological Perspective

In order for groups to achieve high functionality, we need to closely examine group dynamics and processes. This applies to groups operating across the spectrum of low-risk, low-reward scenarios to high-risk, high-reward situations.

To understand group dynamics in totality lets view the relationship between individuals (psychological) and groups (sociological) as a whole macro perspective.

Group dynamics, from a psychological perspective, refers to the study of how individuals interact, influence, and behave within a group. It explores the patterns of interaction between group members, the roles they assume, the formation of group norms, and how these elements affect group cohesion, decision-making, performance, and conflict resolution. Group dynamics also examines the effects of group structure, communication, and leadership on both the group and the individual members. Understanding these dynamics help in improving group effectiveness and addressing challenges that arise in collaborative settings.

Group dynamics from a sociological perspective involves the study of the social processes and structures that emerge within groups and how these affect the behavior, relationships, and identity of individuals within the group. It examines how social norms, power relations, social roles, and group cohesion influence group functioning. Sociologists also explore how groups form, evolve, and dissolve, as well as how they impact broader social institutions and societal change. Group dynamics are crucial in understanding how individuals collectively create, maintain, or challenge social order within various social settings.

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Group Dynamics

Individuals within a group may go through a five step holistic process. This means the individuals in a group can go through this process linearly, non-linearly and shows how these steps are interconnected in group dynamics.

Forming

The forming stage in group dynamics is the initial phase of group development, where members come together and begin to learn about each other and the group's purpose. During this stage, individuals are often polite and tentative as they try to understand their roles, establish relationships, and figure out the group's goals and structure. Trust is gradually built as members start to share information and ideas, but there may be uncertainty or anxiety as everyone adjusts to the new environment. This stage sets the foundation for how the group will function and interact moving forward.

Storming

The storming stage in group dynamics is the phase where conflicts and tensions typically emerge as group members begin to assert their opinions, challenge ideas, and vie for positions within the group. This stage is characterized by disagreements over roles, tasks, and goals, which can lead to frustration and competition among members. The storming stage is a critical part of group development, as it allows underlying issues to surface and be addressed. Successfully navigating this stage can lead to greater understanding, stronger relationships, and a clearer sense of purpose, ultimately contributing to the group's long-term cohesion and effectiveness.

Norming

The norming stage in group dynamics is the phase where the group begins to establish a sense of unity and cohesion. After working through conflicts in the storming stage, members start to develop shared norms, values, and expectations, leading to more harmonious and cooperative interactions. Roles and responsibilities become clearer, and group members are more likely to support each other and work collaboratively toward common goals. Communication improves, trust increases, and the group starts to function more smoothly as a cohesive unit. This stage helps to solidify the group's structure and sets the stage for effective performance in the next phase.

Performing

The performing stage in group dynamics is the phase where the group reaches a high level of functioning and productivity. In this stage, group members are fully engaged and work efficiently toward achieving their goals. Roles are well-defined, communication is open, and the group is able to solve problems and make decisions effectively. There is a strong sense of trust, collaboration, and mutual support among members, allowing the group to perform tasks with minimal friction. The performing stage represents the peak of group development, where the group operates smoothly and is capable of achieving its objectives successfully.

Adjourning

The adjourning stage in group dynamics is the final phase where the group prepares to disband after achieving its goals or completing its tasks. During this stage, members reflect on their accomplishments, assess the group's overall performance, and acknowledge the relationships and experiences they’ve shared. This phase can involve a mix of emotions, such as satisfaction from success or sadness over the group’s dissolution. Members may also experience a sense of closure as they transition out of their roles and move on to new endeavors. The adjourning stage is crucial for providing a sense of completion and helping members process the end of their group experience.

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Group Dynamics with Friends, Family, & Business

Three overall group categories on how group dynamics benefit the individuals, while helping the group becoming more productive.

Friends: Understanding group dynamics can strengthen friendships by helping individuals navigate the natural ups and downs in group interactions. Knowing how to move from conflict (storming) to harmony (norming) can deepen relationships and foster mutual support, leading to more meaningful and lasting connections.

Families: Families benefit from group dynamics as they navigate daily life and challenges together. Recognizing these stages helps family members understand and respect each other’s roles and emotions, improving communication and collaboration. It also helps in resolving conflicts (storming) and creating a strong family bond (norming and performing).

Businesses: In a business setting, understanding group dynamics is crucial for successful teamwork. By recognizing and effectively managing each stage, teams can move through conflicts, establish productive work habits, and ultimately achieve high performance. This leads to more effective project completion, better team morale, and improved overall results for the business. The adjourning stage also helps in providing closure and celebrating success, which is important for maintaining motivation in future projects.

30 Books about Finance and the Economy

This year, I set an ambitious goal for myself: to read 30 books related to finance and the economy. I’m pleased to share that I met this goal within the year by the end of August. This reading challenge allowed me to dive deeply into a range of topics, from the historical evolution of capitalism and the intricate relationship between the economy and investing, to the influential works of prominent authors like Charles Munger. Each book provided valuable insights and broadened my understanding of economic principles and financial systems, contributing significantly to my personal and professional growth.

Here are the books with a short summary:

1. Seeking Wisdom: From Darwin to Munger, by Peter Bevelin

   A deep exploration of decision-making and critical thinking, drawing insights from disciplines such as biology, psychology, and economics. Through a blend of wisdom from Charles Darwin, Warren Buffett, and Charlie Munger, the book encourages readers to cultivate a multidisciplinary approach to understanding and improving their thought processes.

2. Poor Charlie’s Almanack, by Charles Munger

   Is an exceptional collection of the wisdom and insights of one of the most respected investors of our time. Munger provides a deep dive into a multidisciplinary approach to investing, emphasizing the importance of critical thinking, rational decision-making, and learning from a diverse range of disciplines. Its engaging anecdotes, philosophical reflections, and practical advice offer readers invaluable lessons on achieving success and understanding complex concepts. The book’s combination of Munger’s wit and profound insights makes it not just an investment guide, but a source of inspiration for thoughtful decision-making in all areas of life. Poor Charlie’s Almanack is a must-read for anyone seeking to elevate their understanding of investing and personal growth.

3. Irrational Exuberance, by Robert Shiller

   A critical analysis of financial markets, emphasizing the psychological and behavioral factors driving market bubbles and crashes. Shiller argues that investor sentiment and speculative behavior often lead to market overvaluations, which can have significant economic consequences. He provides valuable insights into understanding and mitigating the risks associated with market volatility, making it essential reading for anyone interested in finance and economics.

4. Narrative Economics, by Robert Shiller

   Explores the powerful role that stories and narratives play in shaping economic events and influencing market behavior. Shiller argues that economic outcomes are heavily influenced by popular stories and public sentiments, which can drive financial bubbles and crashes. He combines historical analysis with contemporary examples to illustrate how narratives impact economic decisions and policy. By highlighting the importance of understanding these narratives, Shiller provides a unique perspective on how economic dynamics unfold and offers insights for both policymakers and investors.

5. Economics in America, by Angus Deaton
   A critical analysis of the American economy, focusing on issues like inequality, healthcare, and the often-overlooked consequences of economic policies. Deaton, with the perspective of an outsider who has spent significant time within the United States, provides a nuanced view of how American economic practices impact both its citizens and the broader global economy. Foreigners observing the American economy from within the U.S. often see a paradox: a nation with immense wealth and innovation but also stark disparities and systemic challenges that contradict its ideals of opportunity and fairness. Deaton’s work echoes this duality, capturing the complexities and contradictions that are apparent to those who experience the American economy from both within and without.

6. The Economics consequences of Peace, by John Maynard Keynes

   Keynes offers a profound analysis of the economic impacts of post-war treaties, emphasizing how punitive reparations and economic imbalances can sow the seeds of future conflict. Similarly, the ongoing wars in Israel and Ukraine reflect the complexities of economic and geopolitical tensions, where unresolved grievances and power struggles have escalated into full-blown conflicts. Just as Keynes warned that the harsh terms of the Treaty of Versailles would lead to instability, the current wars highlight how economic pressures, historical animosities, and the lack of equitable resolutions can perpetuate cycles of violence. Both the book and these conflicts underscore the critical importance of considering long-term economic and political consequences when addressing the aftermath of war.

7. Applied Economics, by Thomas Sowell

   Sowell explores the practical effects of economic policies, advocating for a thorough understanding of the broader and often unintended consequences that may arise. A key aspect of Sowell's analysis is his concept of "stage thinking," where he critiques the common tendency to focus solely on the immediate impact of policies—the first stage—without considering the longer-term effects that may emerge in subsequent stages.

   For instance, Sowell examines rent control as a policy that, in the first stage, appears to make housing more affordable by capping rental prices. However, he pushes readers to think beyond this initial effect to the later stages, where the reduced incentive for landlords to maintain or build new housing can lead to a deterioration in housing quality and a shortage of available units. Sowell’s thought process in "stage thinking" highlights the importance of considering these later stages, where the negative repercussions of a policy may undermine its initial goals. His approach encourages a more comprehensive and critical evaluation of economic policies, emphasizing that what seems beneficial in the short term may lead to adverse outcomes in the long run.

8. Retirement 101, by Michelle  Cagan

   A practical guide that breaks down the complexities of retirement planning into accessible steps. Covering topics from saving strategies to investment options, it provides clear advice for securing a financially stable retirement.

9. Start Your Own Corporation: Why the Rich Own Their Own Companies and Everyone Else Works for Them" by Garrett Sutton

   A comprehensive guide to the benefits of incorporating, explaining how owning a business can protect assets and provide financial advantages. The book emphasizes the importance of legal structures in wealth building, making a strong case for entrepreneurship as a path to financial independence.

10. What I Learned from Investing from Darwin, by Pulak Prasad

    Draws intriguing parallels between evolutionary theory and investment strategies. It offers unique insights into how principles of natural selection can be applied to make better investment decisions, providing readers with innovative approaches to managing their portfolios.

11. Accounting for Non-Accountants, by Wayne Label, CPA

    An accessible introduction to the fundamentals of accounting, designed for those without a background in finance. Label simplifies complex concepts, making it easier for readers to understand financial statements, balance sheets, and basic accounting principles.

12. A Random Walk Down Wall Street, by Burton G. Malkiel

    A thorough examination of investment strategies and market behavior, advocating for the efficiency of markets and the benefits of index investing. The book's clear, evidence-based analysis challenges traditional investment approaches and offers practical advice for both novice and experienced investors.

13. How to Think about Money, by Jon Clements

    A straightforward approach to personal finance, emphasizing the importance of understanding one's financial goals and making informed decisions. Clements provides practical advice and strategies for managing money effectively, making complex financial concepts accessible to readers.

14. The Investor Manifesto, by William Bernstein

    A compelling argument for a disciplined, evidence-based approach to investing. Bernstein distills complex financial concepts into practical advice, advocating for long-term strategies and the importance of understanding market history and behavioral finance.

15. Your Money and Your Brain, by Jason Zweig

    Explores the intersection of neuroscience and personal finance, revealing how cognitive biases and emotional responses impact investment decisions. The book provides insightful analysis and practical advice for overcoming mental pitfalls and making more rational financial choices.

16. The next millionaire next door, by Thomas and Sarah Stanley

    This builds on the original Millionaire Next Door to offer updated insights into the habits and characteristics of wealthy individuals. Stanley provides a detailed analysis through data of how emerging millionaires achieve financial success through disciplined saving, smart investing, and living below their means.

17. Little Book of Big Dividends, by Charles Carlson

    Offers practical strategies for building wealth through dividend investing. Carlson provides actionable advice on selecting high-quality dividend stocks through businesses themselves and constructing a portfolio that generates reliable income, making it a valuable resource for both novice and experienced investors.

18. The Darwin Economy, by Robert Frank

    Attempts to apply evolutionary theory to economic behavior, but its arguments are overly abstract and lack practical application for financial decisions. Frank’s theoretical approach leaves readers struggling to connect his insights to real-world economic issues, making it less actionable than other economic texts.

19. The nature of investing, by Katharine Collins

    A refreshing perspective by blending investment principles with insights from nature and systems thinking. Collins encourages readers to embrace a holistic approach to investing, emphasizing the importance of understanding the interconnectedness of markets and making decisions that align with long-term goals and values.

20. The Lean Startup: How Today's Entrepreneurs Use Continuous Innovation to Create Radically Successful Businesses by Eric Ries

    Emphasizes the importance of rapid experimentation and iterative development for startup success. Ries provides a framework for entrepreneurs to quickly test ideas, pivot when necessary, and build businesses that adapt swiftly to market feedback, making it essential for navigating the fast-paced startup environment.

21. Warren Buffett and the Interpretation of Financial Statements, by Mary Buffett

    A clear and practical guide to understanding the financial metrics used by Warren Buffett in his investment decisions. Buffett demystifies key financial statements, providing readers with the tools to analyze companies like Buffett and make informed investment choices.

22. Warren Buffett and the art of stock arbitrage, by Mary Buffett

    Mary Buffett dives right into Warren Buffett's investment strategies, focusing on his use of stock arbitrage as a tool for value investing. She provides a detailed look at how Buffett identifies and capitalizes on market inefficiencies, offering readers practical insights into his disciplined approach to investing.

23. Family Trusts: A Guide for Beneficiaries, Trustees, Trust Protectors, and Trust Creators, by Hartley Goldstone, James Hughes, and Keith Whitaker

    A comprehensive overview of the complexities involved in managing and benefiting from family trusts. The book provides practical guidance for various roles within the trust structure, including beneficiaries, trustees, and trust protectors, helping them navigate legal and administrative challenges. By addressing both the technical and interpersonal aspects of trust management, it offers valuable insights for maintaining family harmony and achieving trust objectives. This guide is essential for anyone involved in the creation or administration of family trusts, offering clarity and actionable advice.

24. The Tao of Warren Buffett, by Mary Buffett & David Clark

    This distills Warren Buffett's investment wisdom into accessible principles and aphorisms. The book provides practical insights into Buffett's approach to investing and business, making it a valuable resource for both aspiring investors and those seeking to understand Buffett's philosophy.

25. Stocks for the long run, by Jeremy Siegel

    A compelling argument for investing in equities as a reliable strategy for long-term wealth accumulation. Siegel combines historical data with detailed analysis to demonstrate how stocks outperform other asset classes over extended periods, making it an essential read for investors seeking to build sustainable portfolios.

26. Behavioral Finance and Your Portfolio, by Michael Pompian

    Pompian explores how psychological biases and irrational behaviors can impact investment decisions and portfolio performance. He provides a detailed analysis of common cognitive errors and offers strategies for mitigating their effects, helping investors make more rational and informed choices. By integrating behavioral finance concepts with practical portfolio management advice, Pompian offers valuable insights for improving investment outcomes. This guide is particularly useful for both individual investors and financial professionals seeking to understand and address behavioral challenges in investment planning.

27. Taxes for Small Businesses, by Nicholas Regan

    Provides a clear and practical guide to navigating the complexities of tax regulations for small business owners. Regan offers actionable advice on tax planning, deductions, and compliance, making it an essential resource for managing tax responsibilities effectively and optimizing financial outcomes.

28. One Up on Wall Street, by Peter Lynch

    Offers valuable insights into Lynch's successful investment strategy, emphasizing the importance of investing in what one knows and observing everyday trends. Lynch provides practical advice on identifying promising stocks and understanding market fundamentals, drawing from Lynch's experiences managing the Fidelity Magellan Fund. With its accessible writing and actionable tips, this classic investment guide remains a vital resource for investors.

29. Learn to Earn, by Peter Lynch and John Rothchild

    A straightforward introduction to investing and financial literacy, aimed at beginners. The book explains key concepts of stock market investing, the importance of long-term planning, and practical strategies for building wealth. Through engaging examples and clear explanations, it provides a solid foundation for those looking to start their investment journey.

30. Behavioral Economics, by David Orrell

    A compelling exploration of how human psychology shapes economic decisions, challenging traditional economic theories with real-world insights. Orrell’s thought-provoking book blends scientific research with accessible explanations, making complex concepts engaging and relevant to everyday life.

Idea to Reality

This year I set an ambitious goal of reading 30 books relating to finance and business to see if I wanted to change my career path. I was able to achieve this goal and able to answer, yes, to my question about changing careers.

While I slowly chipped away at this goal of reading I started to realize the past businesses I have created or worked for go through certain inflection points where every business goes through short-term struggles. Through this realization, I learned what I could do differently to create another successful business with its focus on long term growth and be well positioned during economic and market downturns. I took the first steps towards starting a new business by slowly and methodically writing a working business plan. This plan helped me formulate my ideas and test them through thought experiments, research, and peer collaboration.

This lead me to a idea for this project, long-term survival in both nature and markets depends less on constant activity and more on minimizing mistakes, preserving resilience, and allowing compounding to work over time. This insight aligns closely with the Law of Least Effort in psychology, philosophy, and biology, which suggests that systems naturally seek the path requiring the least unnecessary resistance. This Law becomes a framework for directing resources toward strategies that maximize endurance and minimize costly errors. In this way, psychology (decision-making), philosophy (principled orientation), and biology (natural selection) can converge into a resilient business mission.

This project is designed as a way to continue learning about business and finance through a hands-on approach. The aim is to follow a steady and methodical path, allowing a part-time venture to grow into a full-time business once sufficient capital has been built. In the meantime, maintaining a full-time role outside of this project will provide both stability and an ongoing opportunity to gain practical knowledge and experience in business and finance.

Below is a draft overview of my project. Co-owners are constructing a durable business model through a strategic framework grounded in five interrelated pillars, each influencing the others. This comprehensive approach ensures resilience and adaptability, allowing this project to navigate and thrive across market and industry cycles.

Business Structure

HLP’s business model is distinct from conventional approaches, allowing us to adapt seamlessly to market cycles. Our objective is to foster slow, organic growth over time, alleviating short-term pressures that often lead businesses astray. This 'slow business model' prioritizes steady, sustainable expansion, enabling us to make thoughtful decisions without the need for rapid scaling. Over the long term, consistent monthly income from our income-generating business will be reinvested into our portfolio, fueling further growth and strengthening HLP's investment strategy. By maintaining this long-term focus, HLP remains resilient through market fluctuations, giving us the freedom to apply our investment philosophy of sustainable growth over an extended time horizon.

Investment Portfolio

Our investment philosophy is grounded in simplicity, patience, and resilience, drawing inspiration from evolutionary principles of adaptation. Rather than chasing short-term gains, the project will focus on enhancing portfolio value by minimizing mistakes and steadily compounding returns. This long-term orientation allows the project to remain resilient in the face of market uncertainty and positions us to acquire high-quality assets and businesses during economic downturns, when opportunities are most favorable.

Income Generating Business

In alignment with our investment portfolio, the projects future business operations will generate revenue that fuels our long-term growth strategy. Starting small, this income-generating business will provide a steady passive income stream, which will be reinvested into expanding our portfolio or acquiring businesses outright when opportunities arise. By gradually scaling this revenue source, the project strengthens its financial foundation, ensuring it can continuously grow and reinvest in line with our patient, long-term approach. This strategy not only enhances our investment capabilities but also reinforces our focus on resilience and sustainable wealth generation.

Ownership

Our philosophy on project ownership is a multi-pronged approach designed to ensure longevity across multiple generations. We have built a business model that not only generates wealth for the present but also preserves and grows funds for future owners. By focusing on ownership that spans decades, the project strengthens one of its core strategies—durability through long-term planning and sustained growth. This extended ownership horizon is a key component of our strategy to weather market turbulence and ensure lasting financial stability for future generations.

Strategy

Is rooted in thorough research of past and current economies, economic cycles, and market trends. This research-driven approach informs our investment-first methodology, guiding us to make slow, deliberate decisions that align with our long-term goals. By setting clear objectives and consistently assessing our progress, we can identify the strategies that deliver sustainable growth over time. Additionally, we analyze a broad set of economic indicators, including government and industry reports, to build a well-rounded understanding of the market and its potential impacts. This comprehensive view enables the project to adapt and thrive in changing economic environments, ensuring that our strategy remains aligned with our core mission of building long-term, multi-generational wealth.

The projects five-pillar business strategy establishes a durable and resilient model designed for long-term growth. By prioritizing slow, organic development, an adaptive investment portfolio, and a sustainable income-generating business, The project is well-positioned to navigate market fluctuations with confidence. Its multi-generational ownership structure ensures lasting stability, while a strategy grounded in thorough research and methodical decision-making keeps the company focused on its long-term goals. This comprehensive approach positions the project to endure economic cycles with minimal effort and steadily build value across generations.