4Q 2021 Quarterly Review
Habit Formation, Cumulative Advantage, The Glass Hotel, and Selling Sunset
Hi ❄️ - Happy holidays to you and your family. I hope that you have some time to rest and relax over the next few weeks. Below are four of my favorite reads and listens from the fourth quarter. I’ll be turning my attention to Christmas cookies for the rest of December, but will run two of the year’s most popular posts. Fresh content will be back in January 2022. As always, thanks for reading!
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Podcast: James Clear: Building & Changing Habits, The Peter Attia Drive
Over long time horizons, your results bend in the direction of your habits. However, changing habits is hard. The cost of good habits is experienced in the present while the cost of bad habits is deferred to the future. For example, going to the gym today might make you sore and won’t change your body composition while smoking a cigarette will give you an immediate nicotine hit. It’s only over time that the benefits of exercise and the damage of smoking become evident. This podcast with James Clear, author of Atomic Habits, provides a great overview of habit formation. Clear lays out a four step framework for building new habits: make it obvious (cue), make it attractive (craving), make it easy (response), and make it satisfying (reward). A few other highlights:
Environmental design: Environment is the invisible hand that guides our behavior. Like gravity, you can’t overcome it indefinitely. If your pantry is stocked with chips and cookies, at some point you’re going to crack. Because willpower is a finite resource, environmental design matters. This is why Google added smaller plates and serving utensils to its cafeterias. Clear recommends putting your desired behavior on the path of least resistance. If you want to exercise more, move your dumbbells from your basement to your bedroom where you’ll see them everyday. Similarly, social norms and pressure matters. Clear suggests joining groups where your desired behavior is the norm. Unlike relying on willpower, which is a daily struggle, changing your environment only requires you to be motivated once. A one-time action can produce a long-tail of benefits. It’s a sneaky form of leverage.
To change your results, change your habits: Your current habits are perfectly calibrated to your current results. If you want different outcomes, you need to change your habits.
Never miss twice: Clear believes that every action you take is a vote for the type of person you want to become. He also acknowledges that no one is perfect. It’s rarely the first mistake that kills you. The key is not letting one mistake become another mistake. Maybe you one too many beers and missed an early morning workout. That’s ok. Just don’t let it happen the next day. Never miss twice. Keep failures small and limit the damage.
The heaviest weight at the gym is the front door.
Article: Is Justin Timberlake a Product of Cumulative Advantage?, Duncan Watts for The New York Times Magazine
Popular culture is dominated by superstar economics. Profits disproportionately accrue to a few blockbuster movies and best-selling authors. Yet predicting hits is impossible. Who saw Squid Games coming? In this article, Duncan Watts, who specializes in social networks and collective dynamics breaks down why. First, humans are social creatures. We don’t make decisions independently. People tend to like what other people like. Popularity is subject to cumulative advantage, whereby small initial differences can compound into large differences. The rich get richer. This means that small changes in initial conditions can have huge impacts, the pop culture equivalent of a butterfly flapping its wings in Brazil causing a hurricane in Texas. Watts’ experiments show that introducing social influence into decision making makes hits larger and more unpredictable. Additionally, what people like is sensitive to history, meaning that markets both reveal and modify preferences. In Excel, that’s a circular reference. Predictions are hard, especially about the future.
Our desire to believe in an orderly universe leads us to interpret the uncertainty we feel about the future as nothing but a consequence of our current state of ignorance, to be dispelled by greater knowledge or better analysis. But even a modest amount of randomness can play havoc with our intuitions. Because it is always possible, after the fact, to come up with a story about why things worked out the way they did — that the first “Harry Potter” really was a brilliant book, even if the eight publishers who rejected it didn’t know that at the time — our belief in determinism is rarely shaken, no matter how often we are surprised. But just because we now know that something happened doesn’t imply that we could have known it was going to happen at the time, even in principle, because at the time, it wasn’t necessarily going to happen at all.
Book: The Glass Hotel, Emily St. John Mandel
A book I didn’t want to put down. The Glass Hotel is about money and escapes (or at least escape attempts) and ghosts. Told from multiple perspectives, the plot centers on the collapse of a Ponzi scheme and its far-flung impact on the many people involved, ranging from a bartender to the scheme’s perpetrator. Haunting, but beautifully written.
What kept her in the kingdom was the previously unimaginable condition of not having to think about money, because that’s what money gives you: the freedom to stop thinking about money. If you’ve never been without, then you won’t understand the profundity of this, how absolutely this changes your life.
Article: ‘Quality” Is a Distraction - If It Exists at All (Netflix Misunderstandings, Pt. 6), Matthew Ball
How many people do you know who admit to liking Nickelback? Probably not many. But Nickelback was one of the top selling musical groups of the 2000s. In this essay, VC Matthew Ball argues that quality doesn’t matter for Netflix. Over half of TV viewing is background consumption. It’s helping people pass time while cooking dinner, folding laundry, or running on the treadmill. Additionally, two-thirds of primetime TV viewership is unscripted content like Duck Dynasty or The Masked Singer. These shows will never be nominated for an Emmy, but that’s the point. If you only target a portion of consumption, you’ll only get a portion of the audience. Netflix is targeting all time spent watching video. Most videos won’t win an Emmy or an Oscar. You need to give the people what they want. And so, Selling Sunset.
In fact, most TV is “bad”. If Netflix made more The Crowns and less overall content, it would be less popular, less watched, and slower growing.
Most Popular on Below the Line in Q4
The most viewed post this quarter was an autopsy on mattress-in-a-box company Casper. Business Casual, a look at Rent The Runway’s troublesome business model and creative accounting got the most shares. Thank you! Lastly, this post on Blank Street’s business model and strategy of counter positioning got the most new signups.
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