Chapter 102 - Get Smarter: Life and Business Lessons
Today’s Chapter is based on the book “Get Smarter: Life and Business Lessons” by Seymour Schulich.
Seymour Schulich is a prominent Canadian entrepreneur, investor, and philanthropist. He co-founded the Franco-Nevada Mining Corporation, which pioneered the royalty payment model in the mining industry, significantly transforming the sector. Schulich is also recognized for his extensive philanthropic contributions, having donated over $400 million to various educational institutions.
Here’s what I learned:
Decision-Making
“If I manage $1 billion and I’m right 10 percent more often than somebody else, my decision-making creates $100 million worth of value on a judgment call.”
— Naval Ravikant
Decision-making is at the heart of business and personal success, and Seymour Schulich presents a pragmatic framework for improving this critical skill. He emphasizes the necessity of simplifying decisions rather than allowing them to become complicated.
In fact, Schulich shares a practical method for decision-making: creating two lists—one for positives and one for negatives—associated with a decision. By scoring each item on these lists, one can objectively weight the potential outcomes. Schulich explains, “On one sheet of paper, list all the positive things you can about the issue in question, then give each one a score from zero to ten—the higher the score, the more important it is to you. On another sheet, list the negative points, and score them from zero to ten—only this time, ten means it's a major drawback. Then you add up the scores on each sheet.” This simple yet effective technique leads to clarity, ensuring that significant decisions rest on a solid foundation of analysis.
“If the positive score is at least double the negative score, you should do it—whatever ‘it’ is.”
— Seymour Schulich
Making investment decisions should be the same way. Schulich advises to evaluate both the potential upside and downside of an investment before making any decisions. As he explains, "You should approach investing in the same way. Always ask how much money you will lose if things don't go as planned, and how much you stand to make if things go very well. The potential upside should outweigh the downside by a wide margin."
Another vital aspect of decision-making is recognizing one’s personal advantages. He advises, “Always ask, where do I have the edge?” This introspection not only helps in making informed choices but also encourages one to only making decisions in area’s of one unique competencies. This reminds me of how Charlie Munger eagerly advices us to avoid stupidity and only play games where we have a significant advantage. As he once said, “I want to think about things where I have an advantage over other people. I don’t want to play a game where people have an advantage over me. I don’t play in a game where other people are wise and I am stupid. I look for a game where I am wise and they are stupid. And believe me it works better. God bless our stupid competitors. They make us rich.”
Schulich mentions that top poker players are great examples of this. He explains that “Top players usually play only 5 to 10 per cent of the hands they're dealt. Without patience, you can't win at either poker or business. People who win at business bet seldom and only when the odds are in their favour. Winners put themselves in a position of seeing a very large range of potential investments. Then they buy into or invest in perhaps one out of a hundred opportunities.” If you solely make decisions where odds are in your favour, you obviously improve your decision-making skills!
“Successful deal making requires only two things, really: an ability to assess odds, and the discipline to act only when the odds are heavily in your favour. That's it.” —
Seymour Schulich
This is obviously also true in investing. As we have previously learned from Warren Buffett, it pays off to be patient and to only swing at fat pitches within our circle of competence. As Schulich mentions, "Buffett has a great analogy to encourage patience in business and investing: it's like a baseball game in which there are no called strikes. You can stand at the plate and watch pitch after pitch go by, and swing at only the ones you think you can knock out of the park."
This reminds me of what we have learned from Ted Williams, the legendary baseball player. In his book “The Science of Hitting”, Williams explains that one of the main reasons for his success as a hitter is due to his discipline and selectiveness. As a hitter, Williams was known for his exceptional ability to wait for the right pitch, the one in his "happy zone" where he could maximize his chances of success. He believed that even the greatest hitters couldn’t be successful if they swung at bad pitches.
As a matter of fact, Williams notes that “a good hitter can hit a pitch that is over the plate three times better than a great hitter with a questionable ball in a tough spot. Pitchers still make enough mistakes to give you some in your happy zone. But the greatest hitter living can’t hit bad balls good."
“The first rule in the book... is to get a good ball to hit.”
— Ted Williams
Delayed Gratification
“Great investing requires a lot of delayed gratification.”
— Charlie Munger
One of the key lessons by Seymour Schulich is the importance of patience and resilience in order to achieve wealth. As a matter of fact, he believes that entrepreneurship is one of the most effective ways to build wealth and achieve financial independence. However, since it is quite challenging, people often prefer quick satisfaction by working as an employee. This is a mistake. Schulich mentions, "I don't think a person can ever get really rich working for someone else."
Even high-paying professionals will have an issue in becoming wealthy according to Schulich. He explains that “Doctors and lawyers get paid by the visit or hour. Therefore, their pay is limited to the number of hours in a day. You can make a very good living at these professions. However, you will never get truly rich being paid by the hour with a 50 percent marginal tax rate.”
As such, Schulich encourages us to become entrepreneurs. However, Schulich warns that it is important to be resilient and patient in order to succeed in business. He states that “It usually takes five to ten years to build a successful business, even in industries like oil or mining, where quick strikes can happen.” This perspective is crucial for aspiring entrepreneurs who may expect immediate results. Schulich’s wisdom reminds us that great businesses are not built overnight; they require time, effort, and resilience to flourish.
“He that has no patience has nothing at all.”
— italian proverb
As we have mentioned previously, great opportunities come to those who are patient, hence why Schulich prefers to take a delayed gratification approach even in entrepreneurship. He challenges us to adopt a long-term mindset, focusing on sustainable growth rather than quick wins. And in business, Schulich recommends in having a big cash reserve since you’ll never know when you have an opportunity to strike gold. As he states, “One other very important aspect of patience in business is maintaining a cash reserve, so you have the money on hand to exploit those opportunities when they occur.” This advice is particularly relevant in times of economic uncertainty, where having liquid assets can provide the flexibility needed to seize advantageous opportunities.
“The best opportunities come to those with patience, courage, and a cash reserve.”
— Seymour Schulich
This concept of running a business through delayed gratification reminds me of what we have learned from Konosuke Matsushita, the founder of Panasonic, who warned us about the temptation of making short-term decisions that are detrimental to to the long run of a company.
Matsushita explains that “we should avoid being fooled by the temptation of short-term gain is something we cannot repeat too often. In the final analysis, one can only appeal to people's conscience. So I will just keep reiterating, in hopes that some will hear: resist the temptation of short-term gain.”
Similarly, Charlie Munger is also a prominent figure that has always been a big proponent of delayed gratification. He believes in the importance of patience and being prepared to act at scale when a great opportunities arise. As he once said, “If you’re glued together and honorable and get up every morning and keep learning every day and you’re willing to go in for a lot of deferred gratification all your life, you’re going to succeed.”
Munger gave a great example of delayed gratification: How he earned $400 million from reading Barron’s magazine. Munger had been reading Barron’s magazine for more than fifty years, but found only one actionable idea in it. He bought a cheaply valued auto parts company at $1 per share and sold a few years later at $15 per share, earning him $80 million in profits. Munger then gave this $80 million to Li Lu who turned it into $400 million. This story is a great example of the significance of extreme patience, deferred gratification, and the display of strong decisiveness at the right moment.
“People who arbitrage time will almost always outperform. The first order thought of instant gratification is a crowded path, ensuring mediocre results at best. Delayed gratification, which requires second order thinking, is less crowded and more likely to get results.”
—Shane Parrish
Perpetual Learner
“I constantly see people rise in life who are not the smartest, sometimes not even the most diligent, but they are learning machines. They go to bed every night a little wiser than they were when they got up and boy does that help, particularly when you have a long run ahead of you.”
— Charlie Munger
In a rapidly changing world, the ability to learn continuously and adapt is essential for success. Schulich is another advocate for lifelong learning. In fact, he believes in keeping the mind active and engaged in order to live a long successful life. He once said, “Keeping yourself mentally stimulated is very important—maybe even critical—to a long life.” This commitment to learning not only enriches personal life but also enhances professional capabilities.
Furthermore, Schulich believes that education does not end with formal schooling. In fact, reading and self-education are central to Schulich’s perpetual learning philosophy. He argues that consistent reading is one of the most effective ways to build a knowledge base.
"If you read a page a minute, then set aside an hour a day, it's very easy to read a book a week. This habit contributed more to my knowledge base than my three university degrees."
— Seymour Schulich
Reading is especially important according Schulich because there’s a lot that can be learned from history. As Charlie Munger once said, “There is no better teacher than history in determining the future. There are answers worth billions of dollars in a $30 history book.” Similarly, Schulich believes that "Financial history keeps repeating itself—that's why it's among the most important subjects for any aspiring businessperson or investor to study. I'd say it's almost as critical as accounting, which is the language of business, and statistics, which teaches you to analyze probabilities and risks."
This reminds me of how Edward Thorp used his understanding of compounding interest to build a habit of perpetual learning. As we have learned previously, compound interest is not only important in investing but is also useful in terms of seeking wisdom and obtaining good habits. As a matter of fact, a one percent improvement every day leads to 37x improvement in a year. Similarly, it is very possible to become wealthy even if our investments grow at a small rate as long as it happens on a long period of time. As Thorp once said, “Over a sufficiently long time, compound growth at a small rate will vastly exceed any rate of arithmetic growth, no matter how large!”
The rules of compounding are very simple once you get the concept: start early and do not ever interrupt it. As Charlie Munger famously said, “The first rule of compounding: Never interrupt it unnecessarily.” Thorp understood the importance of compounding beyond the stock market. As a matter of fact, it is this principle that encouraged him to lead a healthier lifestyle. For every hour he spent on fitness was one less day he would spend in a hospital.
“If you are like me and want better health, you can invest time and money on medical care, diagnostic and preventive measures, and exercise and fitness. For decades I have spent six to eight hours a week running, hiking, walking, playing tennis, and working out in a gym. I think of each hour spent on fitness as one day less that I’ll spend in a hospital. Or you can trade money for time by working less and buying goods and services that save time. Hire household help, a personal assistant, and pay other people to do things you don’t want to do.”
— Edward Thorp
Beyond the Book
Read "Avoiding Stupidity is Easier than Seeking Brilliance" by Farnam Street
Read "The Cookie Monster Knows More About Willpower Than You" by Farnam Street
Read "Become A Learning Machine" by Farnam Street
Read "Compounding Knowledge" by Farnam Street
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