Chapter 77 - The Path: Find Fulfillment Through Prosperity From Japan’s Father of Management
Today’s Chapter is based on the book “The Path: Find Fulfillment Through Prosperity From Japan’s Father of Management” by Konosuke Matsushita, the founder of Panasonic, and known as the “God of Management” in Japan.
Here’s what I have learned:
Embracing Adversity
“When everything seems to be going against you, remember that the airplane takes off against the wind, not with it.”
– Henry Ford
At the heart of Konosuke Matsushita’s teachings lies in the fact that there is an inextricable link between facing adversity and achieving success both in business and in life. As Matsushita once said, “the great figures of history are those who have been buffeted by adversity and whose dauntless spirit has helped them overcome countless difficulties.”
This belief stands in contrast to the common perception that success is a linear journey free from setbacks. In reality however, adversity is key to progress and innovation. Matsushita believes that challenges are great opportunities to gain wisdom and to improve. As he once said, “We should strive to be the kind of person who learns something with every fall."
However, it takes resiliency and perseverance in order to face adversities as you may need to fall seven times before you can reach success. Matsushita compares this process to mountain climbing as he believes that life is a series of mountains that we must climb in other to prosper both in business and in life. As he once said, "Just as you have reached the summit of one mountain in your journey and caught your breath, there lies before you another mountain. You trudge upward, and when you gain the next peak, there lies yet another ridge, and then another, endlessly along the path. This is one of the truths of our lives as well."
As such, Matsushita mentions that it is important to cultivate a strong mindset in order to have the will to continue fighting despite so many adversities. In his opinion, this can be achieved by approaching life as if one was constantly in a sword fight. It is only with this sort of approach that we may have the mental fortitude to survive and thrive when facing challenges that end up in our path toward success.
"Life itself is essentially a fight with a real sword: you take your life in your hands whatever you do. No matter how small the matter, you have to undertake it as if your life depended on it."
— Konosuke Matsushita
As Matsushita mentions, “The course of your life is determined each time you make a decision to use real swords or not.” If we aren’t ready to face adversities, then we are not growing and not innovating as a person which is considered a waste in Matsushita’s opinion. He explains that “It is your own precious life you are living—valuable beyond price. Even now, it is not too late: renew your resolve to live each day as if you are fighting with real swords.”
This concept reminds me of the idea that innovation and growth often comes from challenges. As we have previously learned, Peter Kiewit, the founder of the Kiewit Corporation, often purposely took challenging projects in order for his company to avoid becoming fat, lazy and complacent. As he once said, “There is no progress without risk. You can’t hope to develop your maximum potential without taking some risks.”
In fact, Peter Kiewit, was well-known for consistently putting his company into difficult positions in order to encourage innovation and continual improvement among Kiewit Corporation; he would often require his employees to find solutions to complete projects at the lowest cost possible as he was often taking in projects at an extremely low budget.
“Just as a rock is not shaken by a strong or sudden gust of wind, neither should we be affected by praise or success. We must not be satisfied with our past accomplishments, and we should make every effort possible to improve and expand our operations-but only in an orderly and beneficial manner. I believe that a company cannot stand still for long—either it goes ahead or slides back.”
— Peter Kiewit
Humility
“Progress is impossible without change; and those who cannot change their minds cannot change anything.”
— Bernard Shaw
Konosuke Matsushita, as we have mentioned previously, believes that it is important to learn from the adversities we’ve faced in order to grow as a person. To do so, it is mandatory for one to embrace humility and to be open-minded about learning. As he once said, "Nothing is more dangerous than to go through life assuming that we understand everything. Rather, we should presume we do not understand at all, and let others teach us and lead us by the hand, moving forward step by step, with humility and commitment."
In fact, Matsushita mentions in his book that wise men are those that are “always receptive to new ways of thinking, always ready to learn new things and see from fresh perspectives.” He explains that the ability to change perspectives “once or twice a day is the sign of a progressive person and changing three or four times a day is even better.”
As a matter of fact, Konosuke Matsushita says that the main reason why children are learning machines is due to the fact that they are constantly asking the question “why?” with an open mind. As Matsushita once said, “Prosperity is born out of our constant asking of "why?"” As adults, Matsushita believes that we should also have this open-mindness in order to progress as human beings.
This constant questioning of “why” reminds me of first-principles thinking. As we have previously learned, children instinctively think in first principles by consistently asking “why?”. Thinking in first principles is a great way to reverse engineer complicated problems and to find creative yet simple solutions to tackle them.
As we have previously learned, Elon Musk loved to question every requirements, especially when it came from regulators. In fact, a big reason why rocket components were expensive is due to the fact that they are subject to hundreds of specifications and requirements mandated by the military and NASA. Elon Musk would often asks his engineers, both at Tesla and at SpaceX, to always question these “requirements” through first-principle thinking. By doing so, one realises that more often than not, these requirements are not necessary.
As Musk would say, “Step one should be to question the requirements, make them less wrong and dumb, because all requirements are somewhat wrong and dumb. And then delete, delete, delete.”
By questioning requirements and seeing them as mere recommendations, Musk was not only able to save money, but he was also able to make his manufacturing of rockets and cars much more efficient.
“The only rules are the ones dictated by the laws of physics. Everything else is a recommendation.”
— Elon Musk
Elon Musk was so serious about this concept of questioning all requirements that he implemented a five-point checklist that was dubbed “the algorithm”. Here’s a summary of it:
1. Question every requirement. Each should come with the name of the person who made it. You should never accept that a requirement came from a department, such as from “the legal department” or “the safety department.” You need to know the name of the real person who made that requirement. Then you should question it, no matter how smart that person is. Requirements from smart people are the most dangerous, because people are less likely to question them. Always do so, even if the requirement came from me. Then make the requirements less dumb.
2. Delete any part or process you can. You may have to add them back later. In fact, if you do not end up adding back at least 10% of them, then you didn’t delete enough.
3. Simplify and optimize. This should come after step two. A common mistake is to simplify and optimize a part or a process that should not exist.
4. Accelerate cycle time. Every process can be speeded up. But only do this after you have followed the first three steps. In the Tesla factory, I mistakenly spent a lot of time accelerating processes that I later realized should have been deleted.
5. Automate. That comes last. The big mistake in Nevada and at Fremont was that I began by trying to automate every step. We should have waited until all the requirements had been questioned, parts and processes deleted, and the bugs were shaken out.
Decision-Making & Delayed Gratification
“You need to be thinking two or three years in advance, and if you are, then why do I need to make a hundred decisions today? If I make, like, three good decisions a day, that’s enough, and they should just be as high quality as I can make them.”
— Jeff Bezos
As we have previously learned from Jeff Bezos, the founder of Amazon, most decisions should be made with 70% of the data you wish you had. If you need to wait for more information before making a decision, you are probably being too slow.
Furthermore, if these decisions are two-way doors, meaning they are reversible, you will always have the chance to course correct a bad decision. As Bezos once said, “If you’re good at course correcting, being wrong may be less costly than you think, whereas being slow is going to be expensive for sure.”
Similarly, Konosuke Matsushita has a similar approach to Jeff Bezos in terms of decision-making. As a matter of fact, in his book, Matsushita mentions that “We human beings can probably come roughly 60 percent close to accurately assessing a situation. If you can see even 60 percent of how things will turn out with clarity, your judgment can be considered quite good.”
Matsushita explains that “Even 60 percent certainty is enough if we consider things humbly and earnestly and equip ourselves with the courage and capacity to turn it into 100 percent success.” In fact, for Matsushita, the importance isn’t about how good and accurate our judgment is, but about if we have the courage and capacity to follow through on our decision. As Steve Jobs once said, "To me, ideas are worth nothing unless executed. They are just a multiplier. Execution is worth millions.”
“Courage and capability are what make it possible to achieve a 100 percent result even when the decision may be only 60 percent certain to have been the right one.”
— Konosuke Matsushita
Furthermore, Konosuke Matsushita’s decision-making policy reminds me of the importance of delayed gratification. As a matter of fact, Matsushita warns us about the temptation of making short-term decisions that are detriment 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, Jeff Bezos understood the importance of long-term thinking as an owner. As the majority shareholder and CEO of Amazon, Bezos constantly reminded in his letters of shareholders the importance of long-term thinking. In fact, he often reminded that the stock price is not reflective of the value of the company, but it would be in the long-run if the company continues to increase its future cash flows. As Bezos once said, “Why focus on cash flows? Because a share of stock is a share of a company’s future cash flows, and, as a result, cash flows more than any other single variable seem to do the best job of explaining a company’s stock price over the long term.”
Furthermore, Bezos understood that he had to take long-term decisions in order to align both the interests of Amazon’s customers and shareholders; he needed to invest heavily in order to make constant innovations despite the high rate of failure. As he once explained, “We like to invent and do new things, and I know for sure that long-term orientation is essential for invention because you’re going to have a lot of failures along the way.”
“Outsized returns often come from betting against conventional wisdom, and conventional wisdom is usually right. Given a ten percent chance of a one hundred times payoff, you should take that bet every time. But you’re still going to be wrong nine times out of ten. We all know that if you swing for the fences, you’re going to strike out a lot, but you’re also going to hit some home runs. The difference between baseball and business, however, is that baseball has a truncated outcome distribution. When you swing, no matter how well you connect with the ball, the most runs you can get is four. In business, every once in a while, when you step up to the plate, you can score one thousand runs. This long-tailed distribution of returns is why it’s important to be bold. Big winners pay for so many experiments.”
— Jeff Bezos
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
Beyond the Book
Read "Turning Adversity Into Advantage" by Farnam Street
Read "First Principles: The Building Blocks of True Knowledge" by Farnam Street
Read "Reversible and Irreversible Decisions" by Farnam Street
If you enjoy reading my newsletter, please consider becoming a paid subscriber. You’ll be able to keep this newsletter going! Here’s what you get when you upgrade:
Voting on polls: you’ll get to vote on who I should write about next.
Requesting biographies: you can request a biography for me to read and write about next.
Supporting my next book purchase: all payments received will be used to purchase a new biography.