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27 September 2023

#695: Shane Parrish on Wisdom from Warren Buffett, Rules for Better Thinking, How to Reduce Blind Spots, The Dangers of Mental Models, and More

9Frameworks
12Insights

Frameworks in this episode

Insights & moments

The myth-busts, hot takes, explainers, and tools worth keeping.

Myth Buster· 1

Myth Buster33:00

Bias checklists don't work — and the smarter you are, the worse they get

Parrish spent his early blogging years trying to reconcile Kahneman's cognitive biases with the fact that Buffett and Munger barely discuss them yet largely avoid them. His conclusion: biases are excellent post-hoc explanations of past errors and nearly useless as prevention, because you consult the checklist after deciding and then narrate your way clear of every item.

  • Biases are intellectually satisfying but do not prevent future mistakes
  • You pull out the checklist after the decision, so you are rationalising, not testing
  • The mechanism is self-defeating: you use confirmation bias to clear your other biases
  • The smarter the person, the more believable the exculpatory story
  • Ferriss adds the related failure mode of cognitive indigestion from too many rules at once

if you create a checklist of cognitive biases and you're a smart person you're just basically going to outsmart yourself

Shane Parrish · 33:30

use confirmation bias to address your other biases exactly right

Tim Ferriss · 34:30
#cognitive-bias#kahneman#decision-making#rationality

Hot Take· 2

Hot Take17:00

Why Parrish sends his kids to a school that doesn't care how they feel

Parrish drives his children to a French-language school in Ottawa with deliberately unrelenting standards: 90 minutes of homework a night, and a one-day-late essay loses 10 marks even after a family funeral. He takes criticism for it, including from friends. His son cried nightly at first, then by December was thriving and chose his high school on which would challenge him most.

  • The school's stated goal is producing effective adults, not protecting grades
  • Failure is designed to land on planning and life skills rather than academics
  • His son was naturally bright and had never had to work until this school
  • Parrish would rather his kids fail at something hard than succeed at something easy
  • Parents conflate their children's grades with their own success

the standards of the school are unrelenting they don't care how you feel and that you know is very counter-cultural in today's message

Shane Parrish · 17:30

I would rather him basically fail at doing something hard than really succeed at doing something easy

Shane Parrish · 19:30
#parenting#education#resilience#standards
Hot Take1:30:30

Hide money from yourself: Parrish's psychological fail-safes

Parrish deliberately keeps his real estate company off the list he sees when he logs into his bank, checking it once a year for the accountants, so he can convince himself it does not exist. The aim is to never believe he is smarter or better positioned than he is, which keeps him improving his position rather than coasting on it.

  • The real estate entity is structurally invisible in his day-to-day banking view
  • He wants to always think he is in a worse position than he actually is
  • The goal is avoiding the belief that he is smarter than he is at any of this
  • Ferriss and Parrish agree the same trick works in reverse: bank enough to be fine, forget it, then go nuts with the rest
  • Buffett's rule one — don't lose money — is the frame he operates under

I hide money from myself at times so like the real estate company when I log into my bank it doesn't even show up on…

Shane Parrish · 1:30:30

I also always want to think that I'm in a worse position than I am because I really want to increase and improve my position

Shane Parrish · 1:31:00
#personal-finance#psychology#self-deception#risk

Explainer· 2

Explainer12:30

Moving kids between schools: why grade seven is the inflection point

Ferriss asks what mobile families should do about their children. Parrish, who changed school almost every year, argues it matters little before roughly grade six because young children are mainly learning to socialise, read, and do basic maths — all portable. From grade seven, and decisively in high school, consistency of friend group and system starts to carry real weight.

  • Before grade six the learning is social habits and basics, transferable anywhere
  • Grade seven onwards, changing schools makes thriving harder than it needs to be
  • Teenagers already carry uncertainty adults do not see; new systems compound it
  • Constant moving left Parrish defaulting to treating relationships as transitory into adulthood
  • It took him years in the workforce to invest properly in long-term friendships

the closer you got to that person at the end of the year the harder it would be to leave

Shane Parrish · 14:00

that doesn't mean you can't Thrive it just means you're making it harder than it has to be

Shane Parrish · 16:00
#parenting#schooling#relationships
Explainer1:27:30

How Shane Parrish invests: counter-cyclical indexing and distress-only deals

Parrish funds investments from Farnam Street cash flow with no outside investors, which means he optimises for survival over short-term maximisation. He buys an index fund every month but varies the amount inversely with market euphoria, waits for distress before adding to multi-family residential, and mentally writes any investment with friends to zero the moment he signs the cheque.

  • More in during panic, less in at all-time highs — a personal regulator, not a recommendation
  • Mostly profitable businesses he understands, not venture-style bets
  • Investments with friends are treated as donations so they cannot damage the friendship
  • No outside money means no investment committee and no pressure to deploy
  • He can go years without investing, then write a large cheque in twelve hours
  • He worries index funds have never faced mass forced selling

when I invest with friends my rule is I write that investment off to zero the minute I write the check because I never want…

Shane Parrish · 1:28:30

when there's panic and nobody wants to invest I tend to put more money in and when everybody's investing and we're reaching all-time highs I…

Shane Parrish · 1:32:00
#investing#index-funds#real-estate#risk

Story· 6

Story00:30

The library book that kept Shane Parrish out of a break-in

Parrish was a borderline delinquent in grade eight, already escalating from skipping school to vandalism. A true-crime book called The Stopwatch Gang, picked at random from a four-book section, was the only reason he stayed home the night his friends broke into a house and were caught. He credits pure chance, not judgment, and dates his reading habit from that night.

  • Escalation is gradual: vandalism and staying out late make burglary the next logical step
  • He was one chapter from the end and lied about feeling unwell to keep reading
  • His friends were caught that night; he says he would have been with them
  • A grade-nine teacher wrote that he would be lucky to graduate high school
  • Books became an escape route rather than a discipline

if somebody said hey you're gonna go break into somebody's house you'd never do it but if you start with vandalism and you start staying…

Shane Parrish · 01:30

this is a chance event this wasn't me like thinking about anything and saying no to this thing it was just pure 100 luck

Shane Parrish · 03:30
#reading#luck#childhood#escalation
Story07:00

He brute-forced his physics homework, failed the class, got hired anyway

Parrish's first-year physics assignments were computer-generated and submitted over telnet with unlimited guesses. Working full time and unable to afford the tutor the wealthy students shared, he wrote a program to guess in 0.1 increments overnight and scored 20/20 every time. The professor retroactively zeroed his assignments and he failed the course — then that professor was interviewed when Canada's signals intelligence agency vetted him.

  • The published policies explicitly said unlimited guessing; he checked before writing the program
  • His average guess count was in the millions against a class average around 17
  • The assignments were weighted heavily enough that the zeros failed him
  • The agency interviewed neighbours, teachers, and references he had not listed
  • He wanted intractable problems and a way to give back without being on the front line

I read all the policies and procedures right like I was very careful about reading all the rules to make sure I wasn't violating any…

Shane Parrish · 09:00

he was like you're gonna get zero on all your assignments and I was like what that's not fair at all and he's like well…

Shane Parrish · 09:30
#hiring#vetting#rules#intelligence-agency
Story20:00

The boarding school that took Tim Ferriss from top of the pack to bottom

Ferriss engineered his own transfer to St Paul's after a friend who had escaped Long Island told him to get out and two teachers said they could not take him further. Classes six days a week, mandatory sport, seated meals in coat and tie, and chapel most mornings dropped him from easily top of the class to undistinguished. He calls it the beneficial adaptive ass-kicking that made everything afterwards, including Princeton, feel manageable.

  • He found boarding schools in thick library guides and assembled scholarships plus family help
  • The wrestling logic transferred: if you are not losing routinely you are on the wrong team
  • The first six months were an identity crisis, not just a workload problem
  • He learned time management by necessity — naps timed around late-night work blocks
  • An underfull schedule in the formative years fails to build the capacity you later need

if you're not losing routinely you're not training with the right people

Tim Ferriss · 24:00

it was it was the The Beneficial adaptive ass kicking that I think I really needed

Tim Ferriss · 24:30
#education#competition#time-management#identity
Story27:30

Farnam Street started as an anonymous blog named after Berkshire's zip code

Two weeks into his intelligence-agency career, 9/11 put Parrish in charge of decisions he felt unqualified to make. His boss's pep talk was 'you're all we got, get back to work.' He responded by studying how others decided, doing an MBA, and rediscovering Buffett and Munger — then started an anonymous online journal at a URL built from Berkshire Hathaway's zip code and Kiewit Plaza unit number.

  • He started two weeks before September 11th and was handed responsibility nobody was ready for
  • The MBA was not giving him what he needed; Munger and Buffett were
  • The agency forbade any public profile — no LinkedIn, nothing findable
  • Readers hated typing the numeric URL, so he renamed it Farnam Street as an homage
  • It reached roughly 25,000 readers before the rename

he was like you're all we got like what else are we gonna do like we're all just doing the best we can get back…

Shane Parrish · 28:00

I'm not allowed to have a LinkedIn profile I'm not allowed to have any social you Google me I do not exist

Shane Parrish · 29:30
#farnam-street#buffett#munger#origin-story
Story1:39:00

Cashing in the pension: worst financial call, best psychological one

Leaving the intelligence agency, Parrish had a substantial pension due from age 55. He cashed it in against his accountant's protest. His reasoning was not financial: knowing someone was coming to save him would change how he behaved, and he needed all the chips on the table in front of him with the outcome resting entirely on himself.

  • The accountant called it the worst financial decision he could make
  • Parrish agreed on the finance and overrode it on the psychology
  • A guaranteed safety net would have altered his effort and risk-taking
  • Ferriss's counterpart move: optimising for sleep over chasing further gains
  • Both frame it as money existing to improve quality of life, not the reverse

it's the worst financial decision but it's the best psychological decision because if I know somebody's coming to save me I'm gonna behave differently

Shane Parrish · 1:39:30

if you're doing things to make money that are decreasing your quality of life it's sort of antithetical to the whole name of the game

Tim Ferriss · 1:40:30
#incentives#psychology#career-change#personal-finance
Story1:34:00

Tim Ferriss on discovering his portfolio was one correlated bet

Ferriss realised most of his investments were highly correlated and that he had always been growth-first, on the advice of very successful friends who saw no role for bonds or cash. Academically defensible, it made sleeping harder. He is now moving deliberately out of high-growth, high-complexity positions for a two-year experiment, calling it counter to his conditioned way of being.

  • Friends advised 100% growth; he no longer takes it despite respecting them
  • He is exiting things he finds difficult to understand, including overseas exposure
  • Geographic diversification is weaker than assumed — a point Taleb also made to him
  • Being fully deployed risks becoming a distressed seller and adds unnecessary stress
  • Parrish's counter: the opportunity cost argument only counts the measurable side, never the sleep
  • Framed explicitly as a reversible two-year experiment, not a permanent identity

I'm trying to I suppose at this point optimize for sleep that's it

Tim Ferriss · 1:36:30

you're only considering the measurable opportunity cost you can't measure your sleep at night as easily

Shane Parrish · 1:38:30
#investing#risk#diversification#stress

Takeaway· 1

Takeaway1:51:30

Slow is smooth and smooth is fast

Ferriss closes with a line borrowed from military friends and recorded in that morning's journal. Rushing produces mistakes, and those mistakes cost more time than the speed ever saved — the same failure as trying to decide quickly before the problem has been correctly defined.

  • A guiding philosophy rather than a granular rule
  • Rushing creates errors whose correction costs more than the time gained
  • Directly parallel to solving before defining the problem
  • Being fast in the long term requires being deliberate in the short term
  • Sits alongside Ferriss's automatic no to anyone applying artificial urgency

slow is smooth and smooth is fast do not rush

Tim Ferriss · 1:51:30

when I rush I make mistakes those mistakes cost me more time in the long run

Tim Ferriss · 1:51:30
#speed#mistakes#philosophy#journaling