Start Your Day as a Producer, Not a Consumer

One of the big obstacles that I faced – and still face, to some degree – when I began working full-time was restructuring my every day routine. See, for about 16 years from kindergarten to the end of college, I would spend the morning and afternoon learning things, and then go home and work at night. I essentially conditioned myself to be in a passive state during the day, soaking up what others talked about or mindlessly taking notes in class. I was generally not one of those people who did much work at school.

In college, I took this model to the extreme. I would rarely wake up before noon, head to class, and would have the most energy around 4-5pm. I did my best studying and work in the evenings.

Unfortunately, this model doesn’t work too well in the real world. I’ve had to retrain myself to do work during the day. This was by no means an easy task, but one change in my daily routine helped me get on the right path.

Most of us have two modes: producer or consumer. The trick is to start your day as a producer, rather than a consumer. What this means is doing productive, beneficial tasks that are meaningful first thing in the morning, as opposed to checking and responding to email/social media. It doesn’t necessarily have to be work, although tackling your to-do list is great. It could be exercising, meditating, writing on your blog, cooking, etc.

The point is it should be an active activity. Passive activities like scrolling your newsfeed and skimming the news should be avoided. It’s about being proactive, rather than reactive. It’s knowing that you’re in control of your life, and are focusing on your needs first.

For me, I’ve found that journaling and writing first thing in the morning has been the most beneficial. For many others, it’s exercise. Whatever it is, once you repeat this routine long enough, it becomes one of those keystone habits that lock all your other productive habits into place.

On the days where I get something big accomplished right away, the rest of the day is that much more productive. The distractions that were once tempting feel like a waste of time. I can actually catch myself browsing Facebook, asking myself What am I doing?, and then closing the tab.

On the off days where I start off as a consumer, I’m trapped in that vortex of endlessly surfing Reddit or Elite Daily (is this you right now?) trying to fill a void, trying desperately to entertain myself but never feeling satisfied.

In fact, I’m convinced now that how you spend your morning is indicative of how you’ll spend the rest of the day, and there may be some science behind this. It’s hard to shift from the shallower, more transactional frontal cortex to the other parts of your brain that govern conceptual, deep thinking. It’s easier to start in the deep recesses of the brain and shift to the shallower parts. What this means is it’s easier to go from producer mode to consumer mode than vice versa.

And by starting your morning off doing something you enjoy, you elevate your mood for the rest of the day, which then positively impacts everything else you do.

All of the most successful people I know and have read about share this philosophy of starting their day off with an important, focused project.

There’s a great story about Charlie Munger that exemplifies this. As a very young lawyer, he was probably getting $20 an hour. He thought to himself, ‘Who’s my most valuable client?’ And he decided it was himself. So he decided to sell himself an hour each day. He did it early in the morning, working on construction projects and real estate deals. Over time, this one hour of self-learning compounded and ultimately allowed him to race past his peers.

OK, you’ve consumed enough of this. Try it for yourself. Start your mornings as a producer. You may be surprised at the difference it makes.

Experts

It’s amazing how much we trust “experts,” given how infallible they are sometimes.

In December 2000, the majority of investment banks forecasted that by the end of 2001 the dollar and the euro would be about equal in value. This list included Credit Suisse, Bank of Tokyo, RBC, UBS, and Deutsche Bank. The real exchange rate at the end of 2001 was only $0.88. Every bank overestimated.

In compensation for their overestimates the year before, the banks uniformly corrected their predictions downward. But the euro went up; the true exchange rate was 1.05, higher than any of the banks had foreseen. Surprised by the upward trend, the banks corrected their forecasts upward for 2003. Once again, the actual exchange rate was outside the range of estimates.

This continued on until 2010. Almost every year, the actual rate was outside the predicted rate.

Why do banks pay large amounts to entire departments for these meaningless predictions? For one, there’s an element of defensive decision making, where senior managers can point and say, “Well, this is what our mathematical models said would happen. It’s not our fault.” But two, there continues to be a large enough demand for these predictions that they’re supplied. Humans place an inordinate amount of trust in experts, and even desperately seek them out, so banks maintain the illusion.

The truth is anyone can become a market guru. Roger Babson is credited with correctly predicting the stock market crash of 1929, but what is less known is that he had been predicting the crash for years. Of course, no one remembered those misses after he was right once. Elaine Garzarelli predicted the stock market collapse in 1987, and four days later it really did crash. She became known as the Guru of Black Monday, but thereafter, her predictions about the market were right less often than a coin toss.

Warren Buffett often gives the following example: Consider 10,000 investment managers whose advice is equal to flipping a coin. After a year, 5,000 of them will have made a profit. The next year, 2500, and so on. After ten years, about ten managers will have gotten it right every single year. We would classify these ten people as gurus, attributing such a feat to their unique, deep insights of the market and some innate talent.

In my undergrad businesses school, we took a lot of complex finance classes teaching us the intricacies of portfolio optimization, where you have a chunk of money and want to invest it in a diversified portfolio. In the academic world, this involves fairly complex formulas and a host of assumptions to deal with. The professors promised us it would all come in handy on the job.

Well, it turns out there’s a one-line sentence that trumps all of these strategies, even beating a Nobel Prize-winning portfolio strategy. It’s this: Allocate your money equally to each of N funds. 

In a study, this rule of thumb was compared to a dozen complex investment methods. Seven situations were analyzed. In six of the seven tests, 1/N scored better than the others, and none of the other twelve were consistently better at predicting the future value of stocks.

The Nobel Prize-winning method isn’t a sham, it’s just that we live in a world of unknowns and uncertainties that can’t possibly be quantified in assumptions. Experts will tell you otherwise, but really, what is an expert?

Whose Fault Is It?

You’re 6 years old, playing with the class teddy bear. Your friend, who is also 6, comes up to you and asks to play with you. You don’t want to share your toy, so you say no. He grabs Teddy and begins tugging. You do the same. As the laws of physics would have it, Teddy rips.

The teacher comes running in and yells, “Whose fault is this?” and you and your friend both point at each other. Both of you concoct stories of the event, and the teacher spends an inordinate amount of time trying to figure out whose story is more true.

Whose fault is it? It’s a classic question parents and teachers ask children whenever something bad happens.

What purpose does this question serve – and could it even be a hazardous thing to say to a child? Seemingly, it trains children to find faults in anywhere but themselves, assigning blame to others and external factors. As these kids grow up, they continue along this path, blaming others for their own shortcomings. Personal responsibility is shunned.

Asking whose fault something is is almost like unnecessarily dwelling in the past. In the example above, it makes no difference who actually broke the class teddy bear. Both parties were probably responsible to a degree. It’s much more effective to consider the options going forward. What can you do to prevent this from happening in the future? What lessons can be taken away from the incident? Why did the mistake occur?

Thinking along these lines can save you a lot of energy trying to frivolously figure out who was right or wrong or good or bad. You also begin to stop looking for the victim in every situation, instead assigning everyone some degree of responsibility.

Taking personal responsibility for things gone awry, owning up to your mistakes, and being vulnerable are rare traits in people, precisely why those that exhibit these traits actually garner respect.

Just imagine these scenarios. If the CEO of your company took responsibility for the company’s problems instead of blaming others, wouldn’t you like him more? If your doctor told you she had screwed up a procedure, instead of trying to cover it up, wouldn’t you appreciate her honesty? If a politician revealed that their policy proposals had failed, wouldn’t you be more likely to trust him?

Objectively examining our own mistakes isn’t easy. Because we see the world from our own perspective, even our mistakes make sense from our perspective. When we screw up, it’s because of XYZ reasons. When others screw up, it’s because they’re stupid.

Instead of looking for faults and trying to blame the government, society, or your parents, look within yourself. Try to take the outside view. Embrace your failings. It’s much better to accept you’re bigoted and try to improve than sleepwalk through life ignorant to the fact. Failure to take responsibility for your own life almost guarantees your staganation in life.

How to Make $1 Million in Four Years After University

There’s an amazing answer on Quora in response to a question of how to make $250k/year in income.

Anonymous writes:

2010 (90k/yr):
Graduated from uPenn and went to work for Bloomberg (80k base and 10k bonus). Decided that was not enough at all so I started creating websites on the side. One site I made was called biteads.com, barely made anything out of it but the site introduced me to affiliate marketing.

2011 (105k/yr):
Quit my job in Bloomberg and went to Amazon (85k base and 20k bonus) because I was sick of fortran (30% of bloomberg’s code base). Bought a half completed vacant wreak house for dirt cheap with the intention of finishing it up and selling it.

2012 (200k/yr):
Still at amazon (90k with 20k bonus). Still building the house. Continued making websites, I used my affiliate marketing experience in biteads.com to make another site called mutex.me. Mutex was a small hit generated (5k-8k) a month which added up to around 90k a year.

2013 (215k):
Still at amazon (100k + 25k)
Mutex still making money (90k)
Finishing up the house.
Bought another house to finish and sell.

2014 (1.18MM)
Still at Amazon (110k + 30k)
Mutex still making money (90k)
Selling house with projected profit of 250k.
Nearly completed 2nd house with projected profit of 700k.
Using that money to buy/build 3rd house. Which based on the market should make around the same as the 2nd house.

It’s a great answer because of how frank he is revealing his path to creating wealth. These are relatively clear action steps that others can take themselves to replicate it. Obviously it takes a great deal of time to learn how to actually execute on them, but anyone could theoretically learn how to. Under this light, making $250k/year, which very few people ever do, seems much more attainable.

It’s worth the note that he did this all while maintaining his full-time job, which I think is great. Our society seems to admire the “all or nothing” approach to success. We love hearing stories of college dropouts who went on to achieve great success. We revel in stories of those who laid it all on the line by quitting their full-time job or mortgaging their house to start their entrepreneurial journey.

What’s hardly ever touted, arguably the less sexy route, is holding your full-time job while working on a side hustle. I’d argue that this route, however, is probably better suited for most people. The job provides you with a source of income that you can use to reinvest elsewhere (paying for the down payment of real estate, for example). It gives you much needed time to validate your idea, test the proof of concept, and acquire early leads and pre-sales, all while maintaining your current lifestyle. This mitigates risk early on in the business, which is conceivably when risk is highest.

The problem with working full-time and managing a side-hustle is if holding a safe corporate job inhibits you from taking any further risks or trying new things outside of work. We all know people who continue working jobs they hate while doing nothing about it because they’re complacent with their steady paycheck. I experienced this through a drop in dedication on my side projects immediately after I began work (although I’d like to think I’ve picked it back up now).  All else equal, the person with the job providing a steady income is going to work less hard on his time off than the entrepreneur who has to work just to pay the bills. This increase in risk-aversion can be profoundly  negative to future success. As late billionaire Felix Dennis said, the ability to live with and embrace risks is what sets apart the financial winners and losers in the world.

So the way around this complacency is to view your full-time job as a means to an end, rather than a permanent position. This doesn’t mean you can slack off at work. Ideally you’d work as hard as you can in your job, and then work just as hard at home (I’ve found that laziness has a way of easily seeping into everything you do, so it’s best to be avoided in general). But the idea is to one day have the freedom to quit the job and work full-time on your side-hustle-turned primary business.

This approach will essentially require you to work two jobs, resulting in 60-80+ hour weeks. This is what it’ll take if you want financial freedom though. Nobody ever gets rich working forty hours a week. Nobody ever gets rich complaining they don’t have time or don’t feel like working after a long day. While everyone else heads home from their 9-5 and turns on Netflix, people like Anon spend their nights coding side projects and closing real estate deals.

It’s a great story of hustle and one worth emulating.