Gazing at the greasy moulding wrapping the restaurant ceiling, I yelped out a “Yes!”
The waitress jumped, spilling coffee over herself and, as is karmically appropriate, me.
A pair of white earbuds were dangling from my ears as I listened to the How to Start a Startup podcast when Y Combinator’s Sam Altman remarked: “Great founders get on planes in marginal situations.”
I stammered out an awkward apology and accepted that it was easier to be branded as mildly psychotic and leave a nice tip for an apology than explain to her what podcasts were, how startups worked, why I was sitting in a cafe by myself on a Sunday morning surrounded by families having brunch, or why the intersection of all those things caused me to scream involuntarily.
I screamed because Sam encapsulated a much broader concept I’d been trying to articulate concisely but couldn’t quite get at: You become what you do at the margins.
He was recounting a time when, as CEO, a major prospect emailed to say they were going with a competitor and signing the contract the next day. The customer refused to return calls. They got on a plane, flew to see the customer and sat in the lobby until finally a junior guy at the company agreed to see them. Then a senior guy agreed to see them. Then they convinced them to tear up the contract with the competitor and closed the deal a week later.
“Getting on the plane” is a good metaphor because the imagery is so accurate. You get on a metal tube hurtling at hundreds of miles an hour towards whatever it is that you’re most afraid of.
I suspect Sam didn’t get on planes to fly around the country in high school when he didn’t get a scholarship award. There was probably a long line of marginal situations where Sam could “get on the plane” and go make something happen. When confronted with these situations, he probably defaulted to the “get on the plane” option enough times that he eventually became the person that gets on the plane. He got on enough planes that he made it a habit to get on planes.1
I used to be terrified of making cold calls. Terrified enough that I never even considered doing it. I was brought in to work on a software product that had already been built and was about to be taken to market. I was in a marginal situation and started making cold calls. At the time, I think I mainly did it because I didn’t want people to think I was being a wimp.
But it worked. Though I still get the empty feeling sometimes in the pit of my stomach as the phone rings, I’m not so phased by having to sit down and make a few cold calls.
For the last four years, Saturday mornings were always marginal situations for me. Most of those Saturday mornings, I chose to write. Now I write pretty much every morning.
When you make a thinking at the margin, it changes the odds the next time the situation occurs. If you choose to get on the plane in a marginal situation, you eventually become the type of person (or company) that gets on the plane every time. It’s no longer a marginal decisions, it’s a personal or organizational habit.
You become what you do at the margins. Start thinking at the margin.
A Brief Introduction to Myelin
A basic understanding of how myelin works in the brain forms a helpful model for understanding how the mechanism seems to work at a micro level, before we expand it back out to more macro considerations.
The myelin sheath is part of what connects the neurons in your brain.
In his book, The Talent Code, Daniel Coyle explains that myelin is the foundation of skill:
“Skill is myelin insulation that wraps neural circuits and that grows according to certain signals. The story of skill and talent is the story of myelin…myelin is similar to another evolution-built mechanism you use every day: muscles.”
Many scientists believe that superstar athletes are so good because they build myelin around the right neuronal pathways as young athletes. Roger Federer and Rafael Nadal don’t have to think about how to swing a racket. They’ve built the myelin around the proper neurons so their brains just swing it the right way to hit a winner.
When I make a decision at the margins, I imagine that there are two myelin pathways in my brain, and after I make the decision, one is going to get bigger and stronger while the other is going to get smaller and weaker.1
The Problem with Myelin
The problem I’ve found with Coyle’s research is that it deals with skills in highly legible domains with mostly pre-written scripts.
If you want to be the best tennis player in theworld, the script is clear. You start playing at a very young age. You go to Bollettieri tennis camps and travel to a different tournament every weekend. You play three hours after school and all day on the weekends. If you’re in the U.S., you probably move to one of the hotbeds like California or Florida and attend a school where you play tennis for six hours a day.
The most profitable and fun career paths are not so legible.
Before Scott Adams started publishing the Dilbert comic strip, he wasn’t sitting around thinking, “I should get decent at drawing, develop a cynical sense of humor, and get familiar with corporate America—that will lead to me creating a $75 million comic strip.”
Even today, knowing that it worked, it sounds absurd. But that same pattern emerges in so many successful careers. In The Start-up of You, Ben Casnocha talks about developing a competitive advantage by intersecting three considerations: your assets (strengths), aspirations (values, passions, etc), and the market realities. That seems about right.
Figuring out the intersection is a very messy process. Frequently, we’re faced with decisions at the margins where it isn’t clear what pathway you’re reinforcing.
If it’s not clear what the path is, how do you“build myelin” in the right way to train yourself to “get on the plane?”
Daniel Kahneman, author of Thinking Fast and Slow, spent his life working on the development of prospect theory, which has undercut the notion of humans as rational actors in the traditional sense many economists see them. Imagine you have $1,000 and you must pick one of the following choices:
Choice A: You have a 50% chance of gaining $2,500, and a 50% chance of gaining $0.
Choice B: You have a 100% chance of gaining $1000.
From a purely rational perspective, the choice A is better, but a majority of people choose option B. Humans are more risk averse than gain prone and prefer certainty, even with a lesser outcome.
The rise of behavioral economics is due to our increasing understanding that markets are imperfect because they are made up of illogical actors: namely, humans.
In Liar’s Poker, Michael Lewis recounts institutional investors losing hundreds of millions of dollars, not because they made a rational decision to buy or sell, but because they made an irrational, emotionally driven one to “save face.”
At the end of Thinking Fast and Slow, Kahneman sums up the book by essentially saying: “I devoted my entire life to better understanding these phenomena and these psychological biases and I still mess them up all the time. I’m more loss averse than gain prone, and succumb to these same biases which I call irrational in the book on a day to day basis.”
This was, to say the least, disheartening. You got me to read this extremely dense, 600-page book only to arrive at the conclusion that I’m still screwed.
This had bothered me until I heard two things at around the same time which gave me a helpful way to approach many of Kahneman’s biases and others I’ve since discovered.
The first was a line from Steven Moody: “Transparency lowers the transaction cost of everything.” Being more open with people generally makes everything smoother. You don’t have to remember who you told what story to. You can just be transparent.
Buffer, the social media app company, has the slogan, “Default to Transparency.” When I heard that I thought, “That’s really cool.” Transparency lowers the transaction cost of everything and so, starting from that assumption, “default to” is a good heuristic for what to do at the margins.
There are many cases where you obviously wouldn’t choose transparency. I would never post my credit card information to the public. There’s no clear upside or benefit from doing so while there’s a lot of downside.
I default to being transparent with close friends about personal problems I’m having. If I’m trying to figure something out, telling them will help me sort it out. Since I trust them, it’s all upside with very little downside.
However, there’s a lot of gray area where it’s not clear what you should do. This is where the notion of having something to default to at the margins and Kahneman’s work becomes really helpful.
If you can accept that you’re an irrational creature, then understanding those psychological biases and irrationalities and defaulting away from them is a very effective strategy.
There’s a lot of debate on the intelligence of posting income reports online. My general perception is that, if you’re on the fence, it’s probably a good idea. Most people aren’t on the fence, though, and for good reason.
Buffer can publish income reports because their primary customer acquisition channels—content marketing and word of mouth—are highly defensible. If someone looks at their income report and says, “Wow, that’s a great business, we should copy it,” they have to spend the next five years writing amazing blog posts every day. That’s a big enough “moat” or sustainable competitive advantage to stop them. On the other hand, a business that is built on a customer acquisition strategy which is not widely understood, but once understood is easy to replicate, should probably not publish income reports.
There are a huge number of decisions in life and business which occupy a gray zone, not because of objective reality but because of psychological or cultural biases.
So while not even Kahneman could train himself out of experiencing the biases internally, you can figure out that you should default away from them at the margins.
To recap, the principal points here are:
1. Small changes compounded over time lead to significant results.
2. The easiest place to apply those changes is at the margin. It’s hard to change your entire worldview overnight, but you can make slight changes at the margins which will compound over time.
3. It’s easy to know which way to lean at the margin in legible domains with pre-written scripts like tennis, where you just put in your 10,000 hours the same way everyone else has. It’s harder to know in illegible domains without scripts (but they are the most fun and profitable).
4. In illegible domains, you can simply assume you’re biased in certain ways everyone else is and focus on identifying and default away from those biases.
It’s also a really low risk because, if you go slightly too far, you only go very slightly too far, which no one will hold against you. The repercussions will be low. If you get overly aggressive on one cold call, you’ve still got lots of other people to call, and you’ll know you were a tad aggressive, so you should proceed more towards the center.
Over time, you (or your organization) become what you do at the margins.
Here are some biases that I’ve figured added to my list beyond the ones Kahneman covers in Thinking Fast and Slow.
Thinking At The Margin – When in Doubt…
Default to Building Assets
Humans tend to undervalue the long term value of assets. (I’m using asset in a very broad sense – anything that compounds over time)
All the people I know who spent 5-10 years building a business and paying themselves relatively small amounts of money while investing in the asset, or the business, ended up with better outcomes than people who did the opposite. Even very moderate business growth for a small business (say 20% annually—most small businesses I see tend to grow much faster) when compounded over ten years is substantial.
If I’m trying to figure out what to do on a given day, week, or quarter, I always ask myself, “Is this a cash flow or an asset?” At the margin, default to building assets.
Default to Generating Optionality
There’s a strong human bias to overestimate short term capacity and underestimate long term capacity. We overestimate what we can get done in a day and underestimate what we can get done in a decade.
We also tend to overestimate the percentage of reality that we understand. We think we know all the opportunities that are out there. Five years ago, I thought I knew all the career opportunities that were available to me. Thankfully, I was wrong.
I never thought I could or would be working on the things I’m working on today.
It seems the way to do this is to increase your exposure to positive volatility and generate more options for yourself.
In an interview with Derek Halpern, Tim Ferriss said he transitioned from being an author to making a TV show because he didn’t know anything about the film or TV industry. He wasn’t sure what the outcome of the project would be, but he knew it would generate more optionality.
At the margin, default to generating optionality.
Default to Shipping
“Real artists ship.” – Steve Jobs
“Art is never finished, only abandoned.” – Leonardo da Vinci
People don’t like to ship. We evolved in a world where the downside of shipping was very high and the upside was moderate. If you’re in a tribe of fifty hunter/gatherers and you think that taking a different path might let you find buffalo to hunt, the downside is high and the upside is low. If you’re right, you eat better for the few weeks buffalo are migrating across your route. If you’re wrong about the path the buffalo take and you end up in an area with no food, everyone dies.
In the modern world, the downside is usually very mild while the upside is very large.
If you have a new idea and you ship it, no one is going to die, even if it feels that way on the inside.
The internet has made it easier than ever to ship. Ship a blog post. Ship a podcast. Ship a landing page. Ship a cold email. These things are easier and more accessible than they’ve ever been.
If you can’t figure out what to do in a marginal situation, it can be helpful to carry it to the absurd to figure out what the core principle is. Would a company that ships something every hour or once a year be more successful? Probably the one that ships something every hour. That might be a bit too much, but taking it all the way to the extreme makes it more obvious.
Shipping also increases your optionality. Action begets opportunities. At the margin, default to shipping.
Default to Focus: Do More of Less
Four hours spent on a single task almost always generates more value than an hour spent on four separate tasks. And yet, looking back at your to-do list and seeing one big four hour task checked off is far less satisfying than seeing four one hour tasks checked off.
The most accomplished I feel all week is usually on Friday afternoons where I check off a dozen administrative tasks I’ve been putting off all week even though it’s probably the least valuable thing I do all week.
Are you wrestling with putting one or two things on your list for this week, this month, this year?
At the margin, default to focusing on doing more of less.
Default to Being Generous
I’m not sure if it’s cultural or psychological, but the natural human instinct does seem to be geared towards quid pro quo – I’ll do something for you if you do something for me.
I was initially amazed at how generous entrepreneurs were with me, but I think they do it because they see the margin in it over the long run. There’s no transaction cost for free so at the margins, better to just be generous and let karma come back around.
At the margin, default to being generous.
Default to Taking Risks and Being More Gain Prone
Humans tend to be more risk averse than gain prone. So if you’re on the fence and something feels achievable and has positive expected value, but risky and ambitious, probably default towards the riskier feeling option. You’re likely being overly averse to risk and undervaluing the potential gain.
I debated between charging for my book when I released it and marketing it to my blog audience to make money off of it or releasing it for free and not bothering to do any marketing to get it in more people’s hands. I was leaning towards just giving it away for free when I talked with Tom Morkes. He told me that if I released it for free and marketed it hard, I could probably get it in more people’s hands and make more money.
That felt riskier and more ambitious than the other two options, so I picked that one. There’s no way that The End of Jobs would have hit #1 on Amazon and sold 5,000 copies in the first month if I had done either of the things I had planned for.
At the margin (where there’s positive expected value), default to taking risks.
Default to Choosing People over Opportunities
There also seems to be a natural tendency to overvalue opportunities and undervalue people. Probably the best advice I got in college was “take the professor, not the class.” It’s good advice for conferences too – picking the presenter, not the topic always seems to work out better.
I think about this whenever I’m going through a contract and trying to make sure the terms are perfect. Especially if it’s a contract in an industry I’m not familiar with, I figure there’s no way I’ll foresee all the situations that could arise and be able to cover them in the contract.
I am more focused on seeing how I feel about the people. Unlike all the other elements on this list, people are actually the one thing where you can always trust your gut. Everything else is counterintuitive; your initial feeling is probably wrong about how risky something is or how long it will take, but it’s probably dead on about people.
I suspect this is why apprenticeships and entrepreneurial “mafias” work. You choose to hang around with the right people for a few years just like future world class athletes are hanging out with the current top performers.
At the margins, pick people.
You become what you do at the margins
At the margins, get on the plane.
Last Updated on November 11, 2020 by Taylor Pearson