The muscles in her face contracted and distorted into a howling grimace.

Unable to bear the sight, she wrenched her head to the side and began to sob. The mirror bounced once on her hospital bed then crashed to the floor. Her mother, instincts engaged, rushed to comfort her. Her father and sister, standing bewildered beside her hospital bed, looked at each other, the creases of worry on their cheeks rising up towards their quizzically raised eyebrows.

All three turned to look at the surgeon at the foot of the bed. Smiling just moments ago, his eyes now started to open following a knowing sigh.

The surgeon now slowly stroking his chin had performed extensive reconstructive surgery on Charlene. By all objective accounts, the family’s included, the surgery had been a success. Charlene looked almost indistinguishable now from pictures of her before the accident.

When Charlene had looked at the mirror however, she had seen only her unreconstructed image.

A small percentage of patients who undergo reconstructive plastic surgery, despite all objective measures, find themselves unable to see the external change. Despite external appearances, their internal identity has remained the same.

The impact of identity is not constrained to plastic surgery.

In 1995, economist Rachel Kranton wrote future Nobel Prize-winning economist George Akerlof a letter insisting that his most recent paper was entirely offbase.

Identity, she argued, was the missing element that would help to explain why people – facing the same economic circumstances – would make different choices.

Increasingly, it’s clear that classical economics blundered in labeling humans rational actors. I don’t know who these economists were hanging out with, but it certainly wasn’t the humans I’m hanging out with. Nothing about my own personal experience or observations indicates to me that I or anyone else is a fundamentally rational being.

We are instinctually driven to load up a third plate at the Thanksgiving feast despite already feeling full. In fact, I just realized that as I’m writing this, I’m eating a bag of Peanut M&M’s. Am I hungry? No. Are they healthy? No. Do I like Peanut M&M’s. Yea, but not that much. Does it give me a brief neurochemical burst to offset the fact that I’m self-conscious when I write. YAY Peanut M&M’s! Look how rational I am.

Indeed, Wikipedia has compiled a massive list of all the cognitive biases that make you not rational.

One of the most effective mindset shifts I’ve ever made was abandoning the view of myself as a rational individual. Doing so brought my mental model of the world in closer alignment with reality which has allowed me to make much better decisions.

Identity-Based Decision Making

Realizing that I only rationally controlled percentage of my decisions forces me to focus on applying my rationality only to the most important decisions.

While I can’t consciously be “a good person”, or a more productive person or anything else, I can set my irrational self to behave in that way.

That is, I can consciously shape my identity.

Of the factors controlling the 99.9% of my decisions over which I don’t exert conscious, rational control, identity stands as the most important one. There’s certainly lots of others that  we could argue for, from what we consume (from food to books) to who we hang out with, but those are extensions and manifestations of identity.

My identity affects who I choose to hang out with and what books I choose to read, or if I choose to read at all.

A wide gap exists between reading a book and being a person who reads book. The former is an action and won’t necessary create a habit or pattern of behavior. That latter, being a person who reads books, is an identity level change that will create a pattern of behavior.

If we’re trying to shape our future and achieve certain outcomes, the highest leverage thing to focus on is not actions, but identity, using our scarce rational decision making to shape our identity.

This is identity-based decision making: Leveraging our conscious choices to shape our unconscious identity.

If we get the identity component right, then everything else takes care of itself in a cascading down effect.

Once you become a person that reads a lot of books, then you just keep reading a lot of books. You don’t have to consciously force yourself into it.

From Primordial Ooze to Walmart Shoppers

Identity is often used synonymously with mindset. Mindset implies we can just reset it as opposed to an identity which needs to be transformed. Advice like “change your mindset,” though well-intentioned, is often unhelpful.

Mindsets don’t change in the sense a traffic light changes from red to green – they evolve.

They can evolve faster or slower and in different directions but there is no magic switch to flip, it’s a process. Identity is a better word for evoking evolutionary imagery, so I’ll stick to it.

Evolution serves as the most effective way to think about changing identity. Identity change operates in the same principal ways as evolution – it can go in any direction, relative to its starting point.

Evolution has resulted in amazing changes. Our ancestors from four billion years ago were single cell organisms wriggling around  in primordial ooze after all. But it took 4 billion years (and, going from video footage of Walmart shoppers I was just forwarded, it’s still unclear in which direction we’ve moved.)

Steaks, Red Wine, and the Secret to Weight Loss

The first time I ever lived outside of the U.S was a six month semester abroad program that I attended in Argentina. When I came back, I stepped on a scale in my parents house to see that I had lost 30 pounds. It wasn’t intentional.  I didn’t go to the gym once. Hefty servings of steaks, french fries and bottles of red wine didn’t seem like much of a weight loss diet either.

It turns out that if you’re overweight and you start walking everywhere and get out of the American food system, you’re almost guaranteed to lose weight.

Ever since I lived in Argentina, I’ve loved going on long walks. Even when I moved back to the U.S. I still go on long walks now, albeit not as much as when I’m travelling.

Many people after they go live in another culture for an extended period of time deal with reverse culture shock when they come back. They’ve changed profoundly but their environment in their home country hasn’t.

Extended foreign travel does a hard reset on identity. Everyone I’ve talked to who lived abroad had so much of their core identity affected by their first trip because it challenges so many fundamental assumptions about who they were and are.

Put in a totally different environment, they start acting in ways incongruent with their inner identity, often one they’ve had for decades. Forced to accept the principle that their identity is malleable, many come to realize that they can make decisions that have a permanent affect on their Identity. That’s a substantial insight into the mechanisms of identity change.

Environment

When you change your environment, you change your identity.

I’m a fundamentally different person depending on where I’m living at the time and the cumulative effect of all those places has shaped my identity over the years.

Do you ever beat yourself up for being unproductive when you’re travelling or go back home to visit family?

I always get frustrated with myself when I go home to visit my family because I don’t feel like I ever get anything done. My inbox keeps piling up and I can barely make any progress on other projects.

I’ve increasingly realized it’s just not a good environment for being productive. The physical space of my room itself is cramped with all the notebooks and knick knack clutter from two decades of my life that I’ve never cleaned out. It makes me feel claustrophobic and I don’t get a lot done there, so I usually end up at Starbucks where there’s more open space and less clutter.

What does this have to do with identity?

If it’s all based on environment then our identity isn’t really changing in any substantive way, we’re just reacting to our environments.

It’s both yes and no for this.

Even though I feel unproductive when I go home now, I would estimate I’m probably 10 times more productive when I go home now than when I used to go home five years ago. I can crank out a decent three to five thousand word article in two days now, even at home. It took me months to do that half a decade ago.

The cumulative effect of my environments over the past five years has wired a certain level of productivity into my identity. Because I’m now the kind of person that can pump out a three thousand word article out in two days, that’s my baseline now. My new baseline is ten times what it used to be so even though I dip down when I go home, it’s still far above what it was five years ago.

Take the image of a cross section end of a large cable that’s been cut. It’s not one strip. It’s a bundle of very small strips of wire bound tightly together. When we make a decision, we move a strip from one cable to another.

Every decision or act is not as a single occurrence, but the laying down of a cable. When an environment supports a certain behavior, it lays cable along that pathway.

As Aristotle says, “we are what we repeatedly do.”

When I can get in an environment where it’s easy to lay the cable on the right pathway, the cumulative effect of that shapes my identity. I used to have to live really close to the gym to get myself to go. It’s more or less ingrained now, even if the closest gym is a 20 minute drive, I’ll still go. That cable is relatively thick. My cable for eating Peanut M&M’s is wearing dangerously thin.

If something is wrong with me or my business, it’s never an external issue, it’s an identity issue. I’ve laid cable along the wrong pathways.

A lot of times I catch myself sending friends messages that I can’t hang out, that I’m working. One way to look at that is that I have too much stuff to do. What’s actually going on is that I’ve laid a lot of cable around getting-validation-from-work and I’m too insecure to pull some of that up and go lay it down on the hang-out-with-friends pathway.

The cumulative effect of setting up environments where it’s easy to be productive has shaped my identity in a way that has substantially increased my productivity and output even in suboptimal conditions.

Incentives

Physical environment is one aspect. The other major component of environment is in incentives.

Many people misunderstand and underestimate incentives because we believe incentives work consciously. A lot of people probably imagine that there’s a bunch of guys at Goldman Sachs sitting around consciously thinking about how to suck more money out of the financial system. They don’t deserve that much credit.

Because the incentives are set up for them to report the highest possible quarterly earnings, that’s always subconsciously in the back of their mind when they’re making decisions. A part of their identity is maximizing quarterly earnings.

We believe we’re rational creatures, really we’re rationalizing creatures. We decide overwhelmingly based on existing incentives and our environment and then backwards rationalize.

Until recently, I’ve never done as much to market this site in the past as I could have because I’ve always been nervous to mess up the incentives. I want the incentive to be that in order for it to grow, my writing has to get better, not just my blog marketing skills.

Having both get better is optimal, but if I’m going to fall of the wagon one way or the other, I’d rather fall of on the side of the writing getting better.

In his autobiography, Lee Iacocca, who engineered the Chrysler turnaround in the 80’s, always advises entrepreneurs to “write it down”. If you hear someone speak, don’t be persuaded by the sweetness of their voice and the emotion – write it down first. There are a lot of sweet talkers that are full of fluff and a lot of great thinkers that are terrible speakers.

If you’ve ever watched Paul Graham speak, he’s not very good at it. The first time I watched a video of him speaking, I was really surprised at how bad he was at public speaking. His writing is so good. I’ve had similar experiences with other writers I admire that I’ve met or seen speak. I think that’s good though. While ideally I’d like to be equally as interesting in person as I am in writing, if I’m going to fall short, I’d rather fall short in person because the thinking and writing is more important to me than the sweetness of my voice so I try to structure the incentives that way.

There is fundamental truth in the saying “anything measured improves.” Whether it’s finances, fitness or revenue, I’ve never put a number in a spreadsheet week after week to not see it improve over time. Albeit not consciously thinking of the spreadsheet in every moment, I’ve built that incentive into my subconscious.

I suspect part of the reason everyone that publishes an income report online tends to sees numbers go up and to the right is that the pain of having to write an income report that says basically “we didn’t grow because I wasn’t willing to make hard decisions or have hard conversations” is way more embarrassing and painful to their identity, than just making the hard decisions and having the hard conversations.

Controlling the incentives and environment lets us expend our .1% on controlling those and then the wires shaping your identity will be laid down on the right pathways.

So the question then becomes how do you set up the environment and incentives properly?

The Black Box Theory

In any complex domain (which seems to be the most interesting ones, from business to relationships), we usually run into this nasty little issue called causal opacity.

It’s particularly dangerous if you’re smart, because smart people tend to understand complicated (not complex) systems. In a complicated system, like a building’s electrical wiring, the cause and effect are complicated, but knowable. If I push the power button and the lights turns on, I can explain why that happens. It may be complicated, but I can work backwards to figure it out.

This leads us to believe we can understand and control causes and effects in complex systems.

Though unlike complicated systems, complex systems are rife with inter-dependencies. If you remove a single animal from a food chain, the whole chain is disrupted. When the Romans exterminated lions in the Middle East it led to a proliferation of goats who ate tree roots which caused deforestation and erosion. It was a hard to foresee consequence of getting rid of lions.

It’s better than to adhere to the Black Box Theory in choosing our environment and incentives.

Given that the mechanisms themselves are unclear, what’s going on inside the box is unknown. We’re better off focusing on controlling the environment and incentives and letting the results take care of themselves.

The Pillars of the Black Box

While it’s helpful at the end of the year to sit down and look at accomplishments and failures of the past year and set goals for next year – and I’ll certainly do it – it’s more important to take a look at our environment.

Einstein famously quipped that insanity is defined as “doing the same thing over and over and expecting a different result.”

I think he’s perhaps one layer of abstraction short. Doing the same thing over and over is usually a result of staying in the same environment.

Instead of thinking about goals and what you’re going to do differently next year, it’s worth thinking  more about your environment.

Considering the identity you’d like to have and the person you’d like to be, what’s the environment to set yourself up for that? What incentives are you going to set up?

These are the inputs I’ve found to be most effective for deriving principles with which to shape my identity.

Goal Setting

While we can’t fully control our external environment, and you can’t simply go sit in a mentor’s office all day, we do have control over our internal environments.

I have two notes in Evernote that I constantly update and read each morning.

One is my ideal day, and the other is a list of 5 year goals.

I re-write these at the beginning of each year and will go through and tweak them over the course of the year.

Here’s a copy of what my business note looks like so you have an idea.

• I confront The Resistance everyday and channel it into doing meaningful work. I move slowly and deliberately and do one thing at a time.
• Every day, I execute ruthlessly with unrelenting grit and determination. I think 10x.
• When confronted with a problem or opportunity, I think how can I 10 times this?
• What would a brand do?
• I take risks – I act boldly to get what I want with authority, poise and self-confidence.
• I focus – I say Fuck Yes or No to new opportunities.  
• I am a creator and connector.
• I spend all my time on sales, marketing, managing, hiring, and business systems creation.
• I under promise and over deliver – We aim to provide 10x value to ourselves and our customers.
• We have a culture built around transparency, integrity, and grit.
• We esteem grit and character to confront and overcome harsh truths.

Is it all true all the time? No, but it gives me an identity to aim at.

Network

Many of the ‘mafias’ people associate with startups are extensions of cultural identity.

The Paypal mafia is the most well known. All of the guys that worked at Paypal went on to found other huge companies like Youtube, LinkedIn, Palantir, and Tesla.

Once “I am a person who works in a successful high growth startup” becomes your identity, what do you think you’ll do in your next company?

You also see this with coaching trees in professional sports. Bill Walsh, a legendary San Francisco football coach and winner of three Super Bowls ended up spawning another eleven Super Bowl wins, seventeen conference championships, and twenty-five conference championship appearances among his assistants.

Once the identity of his coaches was “I’m the kind of guy that wins Super Bowls”, they started acting like that.

You can move somewhere new, join a niche forum, or get into a masterminding group that the person you want to be would be in (or, even better, is in.)

When Reid Hoffman looked back at his career, he said that the biggest mistake he made was staying as a project manager at Microsoft, instead of going to going to Netscape as a mail clerk.

At the time, Netscape was where all the action was. Surrounding himself with people that were on the bleeding edge of technology would have been more valuable than just learning product management.

Books

In his most recent essay, Paul Graham posited:

“reading helps us to construct models of the world. Even after we’ve forgotten exactly what we’ve read, it’s effect of your model of the world persists.”

In relatively few cases can I go back and pinpoint how certain books I read led to certain outcomes in my life, but if I go back and look at the books I’ve read over the last year, it forms a trail leading me to what I’m doing now.

“You will be the same person in five years as you are today except for the people you meet and the books you read.” ― Charlie Jones

Perhaps the better question isn’t what will you do next year, but who will you do it with? and what will you read along the way?

Last Updated on July 30, 2019 by Taylor Pearson