Afford Anything - Dr. Brian Klaas: The Secret to Financial Resilience

Episode Date: June 21, 2024

#516: Have you ever wondered how small, seemingly insignificant actions can have massive impacts on your financial life?  In today's episode, we talk to Dr. Brian Klaas, a Professor at University College London and an affiliate researcher at the University of Oxford.  He explains how our decisions can lead to unintended and unanticipated consequences.  He describes why resilience is more important than efficiency when it comes to protecting your investments and career from unexpected shocks. You'll learn how to tell the difference between predictable problems and those that are full of uncertainty, giving you a new way to think about your decision-making process. Key Takeaways: Embrace the unpredictability of life and recognize the interconnectedness of your actions. Prioritize resilience over efficiency to mitigate catastrophic risks. Understand the difference between predictable and uncertain challenges to make smarter decisions. For more information, visit the show notes at https://affordanything.com/episode516 Learn more about your ad choices. Visit podcastchoices.com/adchoices

You know, when you think about human systems in general, the reason why the Suez Canal or a terrorist attack or a financial meltdown is both unpredictable and also sometimes caused by very small tweaks in the system is because it has got chaotic elements to it. And it has an infinite number of possible outcomes with like 8 billion moving parts in it. When you think that way, you realize that money balling the world isn't possible. Our financial systems are built with enormous uncertainty. And in the last 25 years, we've seen everything from the dot-com burst to the Great Recession to the 2020 pandemic. We've seen multiple instances where everything in the markets fell apart in ways that we never predicted. So how do we understand something that is, by its very nature, so unpredictable? Well, today's guest is here to help us make sense of this chaos.

Welcome to the Afford Anything podcast, the show that understands, the show that understands, understands you can afford anything, but not everything. Every choice carries a trade-off. And that applies not just to your money, but to your time, focus, energy, attention to any limited resource you need to manage. This is a show about how to optimize your limited resources. I'm your host, Paula Pant. I trained in economic reporting at Columbia, and I help you build wealth and focus on what matters. Today's guest is Dr. Brian Klass, an associate professor in global politics at University College, London, an affiliate researcher at the University of Oxford and a writer for the Atlantic. Dr. Class is an expert in chaos theory and complex systems. Today,

he describes how chaos theory applies to our financial and professional lives. Dr. Class shares his views on how seemingly small actions can create huge downstream effects. He talks about the importance therefore, of resilience over mere efficiency, and he describes the critical distinction between predictable challenges versus uncertain challenges, rubber problems versus rice problems. So if you want a framework to help you navigate

the uncertainties of your career and your investments, and if you want a deeper understanding of how to insulate yourself from catastrophic risks, how to safeguard against the things you can't see, You'll enjoy this conversation with Dr. Brian class. Hi, Brian. Hey, it's lovely to be on the show. Brian, it is only because of a fluke of history,

a tragedy that unfolded decades before you were born, that paved the road to this conversation. Tell us about that. You know, I have a story about a woman in a farmhouse in Roll, Wisconsin, in 1905, who has a mental breakdown, and tragically decides to take the lives of her four young children. and take her own life. Her husband comes home and finds the whole family wiped out. And the reason I'm telling you this is because this was my great-grandfather's first wife. And he came home to discover

this entire tragedy. But he remarried to my great-grandmother. And she produced the lineage that became me. There's this very strange thing about reality that you and I would not be talking. Nobody would be listening to my voice on your podcast, but for a tragic mass murder in Wisconsin 119 years ago. One of the central arguments is that chaos theory, which is often applied to non-human systems, right, physical systems and so on, can help us make better sense of our own world and our own lives. And the fact that you have these ripple effects, some of them foreseeable, some of them completely unforeseen and potentially stretching way into the future, that's how everything that we do plays out, right?

And I think this is something that's both bewildering. It's a little overwhelming to think this way. But I think it's also scientifically true. I think that literally everything that we do has ripple effects that change the world in small ways. And so this conversation for someone who's listening, maybe it will only affect their brain chemistry slightly. Their neurons will shift a little bit. For other people, they might think differently about the world. And all of those things matter because we're in this whole system altogether.

Right. But these ripple effects are impossible to predict, right? We don't know if something will have what we would deem to be positive or negative consequences. Because, of course, something like a mass murder is obviously very. negative, but then the fact that your grandfather remarried and produced that lineage that produced you was what in hindsight we would call positive. So given the reality that we do not know the potential consequences of any of our actions, how do we then make decisions that are right or just? Yeah. So this is the really interesting philosophy that flows from chaos theory is you're completely

right. So I have this concept that I call the snooze button effect, which is where you imagine that you wake up one morning, you slap the snooze button, you go back to sleep. And now you're for wines by three seconds, and you don't slap this news button in sort of the second version of events. Your life will unfold differently forever more, right? And I don't mean that in some flippant way. I mean, it's literally true because you will meet different people that day. You'll have different conversations. There'll be slightly changed. Some of them might not be apparent to you. You'll still go to work potentially. You'll still have the same sort of, you know, lunch plans, whatever. But there'll be slight changes, and those can add up over time.

The point I always make to people is, you know, you probably haven't heard of Albert Einstein's great-great-grandmother, but she was a really important person, even if she wasn't famous, because the ripple effects of her life changed the world. Now, how do you actually make decisions with this? I don't sit in front of the snooze button crippled with doubt, imagining that I'm just, you know, changing my life forever. I still make decisions. I also don't walk into traffic thinking, oh, maybe a fluke will save me and I won't die. So we still make decisions probabilistically, right? We think about intended outcomes and chance and so on. What I think is interesting philosophically, though, is that first off, it's true that some very well-intentioned decisions can have negative

effects and vice versa, right? So you could plant a tree and two generations later, maybe a kid will fall out of it and hurt themselves or die. That doesn't mean you shouldn't plant the tree because probabilistically, more people planting trees is on balance a good thing. But the thing that I do think is beautiful about this, and this is where it links into the way that we make sense of our own lives and the narratives we tell ourselves about what it means to be a living person, is that because everything that is happy in my life and joyful is derived from this horrible tragedy of these children, that means that also every tragedy in my own life is inextricably linked to every piece of joy and every piece of joy is inextricably linked to every tragedy. They couldn't

exist without each other. So when I think about decisions, I think that it makes me sweat some of the stuff a little bit less, right? It also makes me cope a little bit easier because when I have a moment that's really, really sad in my life or really upsetting, I realize that the future joy that I'm going to experience could literally not exist. but for that moment because I'd be on a different trajectory. We're told something completely different. We're told that noise is meaningless, that you don't have to think about the small stuff. I think it's just fundamentally untrue.

I think it's scientifically untrue to imagine there's certain things that just don't have effects. I think everything has an effect. There's a lot of stuff we can get into and how you sort of deal with that in terms of resilience and experimentation. But the philosophy that I find really useful to understand is that you take a little bit less blame for the things that go wrong because it's not completely up to you. You take a little bit less credit for the success because also it's not completely up to you.

I mean, everything in my life is partly derived from an infinite number of causes that were out of my control. And it's also something where when you make decisions, you understand that everything you do has a ripple effect. One of the phrases that I like to come back to is this idea that we control nothing, but we influence everything. When you think about that, it's a really uplifting and empowering message because it's something that provides a sort of understanding that we have limits to how much we can control. not completely in charge for the trajectories of our own lives. But we also have to understand that

everything that we do has ripple effects. And I think this is something that is sort of hammered out of us by a lot of the mythology that I think is mythology, which is to say the idea that if you just want to be successful, you can. And also the mythology that when we think about signal and noise, which a lot of smart thinker type sort of divide the world into these two things, I don't think there is noise. I think that everything is signal. And I think that there's a real cognitive mistake people make when they think they can throw away certain parts of the world and imagine it's unimportant. But the statement that everything has an effect is different than the statement that everything happens for a reason. Those two expressions on the surface sound similar, but they are

subtly quite different. And the statement that everything happens for a reason really speaks to trying to imbue meaning into things that may or may not have meaning and also speaks to a convergent sense of a world. Can you elaborate a bit on the inherent convergent premise that is alluded to when we say that everything happens for a reason and how that differs from everything has an effect, which is more of a contingent phrase? So yeah, I don't believe that everything happens for a reason. I think that that saying when we use it is to try to make sense of a bewildering reality that is sometimes very, very strange. And it's comforting to believe that there's a grand purposed everything. And one of the things that I believe is that the world has a lot of

contingencies in which small changes have big effects. In other words, that things could have turned out radically differently, but for a tiny thing that seemed to be insignificant. When I contemplate those ideas, it feels actually to me much more uplifting. I think that sometimes when people experience tragedy and they're told everything happens for a reason, it sometimes compounds trauma. I mean, there's a person who I've interviewed previously who barely survive 9-11 but for a tie that was given to him at just the right time and he went to change his shirt while he was ironing his shirt, the plane hit the World Trade Center and he would have died. But in that instance, it was a situation where when people would say everything happens

for a reason, he would say, hold on, so my colleagues were supposed to die and I was supposed to live, and it put so much pressure on him to cope with that tragedy because there was supposed to be a grand purpose behind it. And so I think this stuff that we tell ourselves, that there's always an explanation is actually sometimes suffocating, right? Sometimes there's just things that happen. And I'm okay with that. I think that when you think about like the history of humanity, there was an oscillation in the orc cloud in the distant reaches of space. And this flung a space rock at the earth in a way that wiped out the dinosaurs and made the rise of humans possible. And if this space rock had been delayed by a second in either direction, it's highly unlikely

that mammals would have risen and humans would not have existed. Was that a grand thing? yeah, maybe if there's a God, then I think a lot of people make sense of it and say that God sent the asteroid. But for me, I think there's an arbitraryness to reality that if we process that for our own lives, what we start to imagine is that actually sometimes there's some random factors that we can't control. That's okay. I think it's okay to not be in control all the time. I think it's much more uplifting to be realistic about the fact that we can influence things, but we can't control much. The gentleman whose life was saved by the tie, that was quite a compelling story. And I'd love for you to go into the details of that story because certainly there was what happened on the morning of September 11th, which was that his colleague Elaine handed him a tie with a piece of artwork from the Impressionist painter Monet. That tie clashed with a green shirt that he was wearing, right? But then when you trace that back, the very fact that he was a fan of Monet and the very fact that he happened to walk by an art museum at a particular moment. And the very fact that he happened to walk by a art museum at a particular moment.

which led to the love of art, I mean, there are a near infinite number of things that had to go right. Yeah, exactly. So this man's name is Joseph Lott, and he was going on a conference, basically, to New York City. He was supposed to meet his colleague for dinner, and his flight was delayed because there were storms on September 10th, 2001. When this happened, he arrived in New York City late, and he said, look, we're going to have to reschedule. We'll meet for breakfast. So first off, if they had had dinner, things would have unfolded very differently. But because the flight was delayed, his shirt was crumpled. He arrives, he picks the other shirt, which is pastel green, which wasn't crumpled because he was in the plane for so long. And he wears it to the breakfast.

And she then gives him this art tie because she knew that he had liked Monet ties, Monet paintings on the ties. And the reason he liked them was because when he was waiting for a train and a trip in Europe many years earlier, he had to kill some time. So he walked into an art museum, found a love of Monet and told his colleagues about this because he wore, you know, impressionist, art ties. So she sees this tie and buys it for him, brings it to the breakfast, gives it to him, and he's so moved by this gesture that he says, look, I'm going to put this on right now. So he decides to go to the hotel room and iron his white shirt so he can wear the Monet tie with it. And as he's doing that, this is when the World Trade Center gets hit by the first plane. I met him in D.C. a few weeks ago. And when I talked to him, it was really moving because it was

one of these aspects where this thing happens to someone that's just utterly, utterly tragic. many of their colleagues die. And they have to make sense of what their life means when something so arbitrary as a tie given in just the right instant has made it so they survived and their colleagues didn't, right? So I went to the 9-11 Museum and I saw Elaine's name and I was looking at all this and just thinking about all these aspects that had to come together for that exact outcome to be produced. When you say everything happens for a reason, I think it puts so much pressure on someone. It puts this notion into our heads that if you are a fail,

or you feel like a failure, it's because you're supposed to. Or if you're successful, it's because you were supposed to. When I think about my own life and I have had some modest successes in my life, the most important things that produce those successes that were completely out of my control were where I was born, when I was born, who my parents were, and how my brain was structured. And I had nothing to do with any of those four decisions. I do field research for my own professional work in rural Madagascar sometimes, where the average person makes like $1.50 a day. And there's 40% of the island has electricity. And I can guarantee you that if I had been born there, we would not be talking. There's just no way you'd be hearing my voice on this podcast.

Because it's just impossible to imagine escaping that crippling poverty, whereas no matter how hard you work, you're still in rural Madagascar with no electricity in $1.50 a day. When you tell people that this happens for a reason, I think it gives us sometimes not just the pressure on people to say you have to find the reason, but also it provides excuses. for social injustices that are sometimes out of people's control. And I think for the person in rural Madagascar is saying the reason you're starving to death is because everything happens for a reason, I think it's a really brutal mentality that is, to me, is one that absolves us as any need to sort of rectify social injustices. So it would be better to say everything has an effect,

which is another way of saying everything that we do has an effect. It has an influence, but we don't necessarily have full control. Exactly. So this is the saying of we control nothing but influence everything. To me, I think there's a lot of people who have a problem with this because they're told, and I think we are told throughout my entire life I've been told that you want to be in control. The whole self-help industry is built on this premise because it is built on the idea of life hacks, manipulations, ever greater efficiency, that basically if there's anything wrong in your life, then all you have to do is apply these five principles and it'll be fixed. I don't think that's true. I think that there's a lot of stuff that is outside of our control. It doesn't mean we

shouldn't strive. I personally try to work hard. I try to do things that will better my situation in life. I try to be a better version of myself, as we all should. It's not so simple. There's not a checklist. And when you look at like a life hack list, it's as though there's a one size fits all manual to being human, which to me is just such a bizarre way of capturing the incredible diversity of experience that eight billion people have. And also the incredible different meanings that all those people get out of life. There's sort of the one size fits all mentality of the American and it's not always the right thing for everyone to strive in exactly the same way, nor is it always the right thing for people to be told that if you don't have the things

that you're told you're supposed to have, then it's your fault and your fault alone. You think about everyone who is systematically oppressed through history or faced injustice or faced even just extreme poverty in their upbringing. Some of those people could work really hard and be successful, but they're outliers. The idea that if you just conjure the right mental thoughts into existence, you will suddenly have all the things that you want out of life. I actually think it's a counterproductive message to a lot of people because it blames them for things that they can influence,

but they can't necessarily control. How do we, in the context of knowing that we have influence but not necessarily full control over our lives, how do we then find the motivation to do things that are hard? Well, I think we absolutely still should. I mean, this is something where there's a difference between talking about the nature of reality. So the nature of reality is that I honestly have no control over where I was born. But that doesn't really matter in the sense of what should I do with my day-to-day life.

There's a difference between the philosophical lessons of accepting the limitations of our control, which is to say, okay, like when I am successful in life, I have to understand there's like an infinite number of causes that produce this outcome. And I only had control over a very small number of them. When I think that way, it doesn't mean that I shouldn't try to influence the ones that I can. it's that I sort of think to myself, well, I also had a series of lucky things happened to me. I had a series of random things happened to me. You know, when I talk about my work, all of the people that I talk to have flukes in their own life.

It's obvious to us that there are these moments where you catch a break or you were working hard, but it wasn't really going anywhere. And then all of a sudden some random thing happens. You meet someone at a party and that snowballs. When we accept that this is the way reality is, it shifts our philosophy about life. I also think it's something where for some people, the hard work is mismatch with the goal, right? So, you know, I grew up in the U.S. I now live in the U.K., but the U.S. has a sort of paradigm in its culture, I think, which is that the way to a happy life is stuff and status. For some people, that's true.

I think for some people, they get extremely fulfilled by those aspects of life. For other people, I think it's not true. What you end up as a difficulty in the sort of self-help world sometimes is this notion that if you don't live the exact life, that is this one-size-fits-all mentality through the hard work, then you are there for a failure. There's a lot of people who would work harder in terms of automatic motivation within themselves if they were adapting themselves to the passion that they actually had for life, rather than one that they were told they were supposed to chase because of this sort of cultural mythology. The example that you gave of perhaps a chance meeting at a party might result in the big break

that allows your company to finally hit some huge success, for example, or allows a creative project to finally get made into a movie. That chance meeting at the party, it reminds me of that phrase that's attributed to Thomas Jefferson, the harder I work, the luckier I get. The idea behind it being that if you expose yourself, this gets back to probabilistic thinking, if you expose yourself to the chance of having a big break and you do that enough, one of them will come to fruition. How does that level of probabilistic thinking play into this? Of course, it's the case that if you just lie in bed all day, the odds of you having a big break is not going to be as high as if you are working hard and doing the right things.

The problem with modern life instead of the sort of aspects of hard work is the problem of the lack of reflection about what it's all for. When we think about why we're working hard, for me, for example, when I was working on anything that I write, you know, I sit in front of the computer and sometimes it's not. coming. I'm putting in the hours. And then occasionally, I just sort of give up for a bit, and I go and take my dog for a walk. In that moment, these sort of ideas come to me. There's this mismatch in modern life between, like, the hustle culture, which is tied to hours and, you know, discomfort and the aspect that, like, you have to be making yourself miserable in order to expose yourself to success. And the aspects of, like, self-reflection, which involves creativity, questioning why you're doing what you're doing. And also, I think this is a really

important point in the context of some of my arguments about contingency and randomness is experimentation as well. One of my favorite stories that I've come across in my professional work is the story around a man named Heath Jarrett, a professional jazz musician, coming to play a piano at the Cologne Opera House. He's about to go on stage and he finds out the piano he's ordered is just not there, right? Like he's got this very specific thing. It's a sort of control freak mentality. Like I have to have this exact piano to play my music. And someone screwed up and it's not there. So he's got this rickety piece of crap, basically, to play instead. And he decides not to cancel the concert. He decides to go ahead with the inferior piano. And because he adapts himself through forced experimentation of the

instrument, he produced what ultimately became the best-selling jazz album of all time. And it still is the best-selling jazz album of all time on this terrible instrument, right? I think the lesson for our individual lies is that very often when you get into the mentality of squeezing the last 3% of inefficiency out of your life, or optimizing perfectly with everything that you think will give you success, you lose sight of the questions and the experimentation. And I think this is the kind of stuff where Keith Jarrett thought he knew what made the perfect music, right? He thought, if I play with this piano, it would be perfect. It turned out he made something much more beautiful from a terrible piano. When I think about how do I incorporate that

into my own life, I think, well, okay, I have to experiment more because the idea that we're in control and we always know what we want leads us to pure optimization. And I don't think that always makes us the happiest. I also don't think it makes us the most successful because some of us are, and I think this is probably very, very familiar to many listeners and many people out there, is that very often you're working harder and harder, but you're losing the passion for it. And that's because you haven't had that moment of self-reflection to think, like, why am I doing this? And there's a huge number of people I do talk to who say something like this, which is that they've sort of lost that moment of self-reflection and experiment

which ultimately is, to me, the bedrock of future success. Often there's a trade-off between experimentation and going deep within a field. You could almost say experimentation and efficiency or efficiency being different, of course, than efficacy. How do we know when it is time to explore versus when it is time to pick one thing and double down and go deep? I think there's a few things where if you were certain about what you're, you know, you want it out of life. And if you actually knew the exact pathway to get there, then there's

no reason to explore. Because of course, that is the optimal pathway for you. But I think those two assumptions are very flawed right off the bat, right? I don't think that everyone knows exactly what they want out of life. I mean, when I look back on my trajectory through life, if I had to script my existence from when I was like 18 years old and when I was 25 years old, I would not have ended up where I did because there were these little moments that I didn't control that did divert my trajectory and then they turned out to be happier and better for me. So this myth that we always know what we want and we always know what we need out of life is wrong. The second assumption that we know the best path to get there, I mean, all of us have these moments where like sometimes we've had a

breakthrough and it was exactly the opposite or it was adjacent to what we thought was going to work. I've had loads of times where I've tried something. It's just completely backfired a blown up in my face because I was wrong. And it's partly because I didn't control the system. So it's identifying those areas of life where you know what you're doing and you know how to get there, which is in a job, sometimes that actually is the case, right? Like sometimes if you're trying to hit a metric and you know that that metric is important and you know exactly how to get there, then you should optimize to the absolute limit. So it's identifying the two kinds of situations. There's a great example this in the sort of difference between open systems and closed systems as well, which our lives are

full of. Moneyball is this idea that you sort of can use data analytics to optimize decision-making in baseball. And it's really, really good. It's exceptionally good. And it's because it's a closed system where there's only so many outcomes. Each team knows it wants to win, right? There's only like one outcome where you win and one where you lose. So like it's a very, very straightforward system. And in that, the data analytics work really, really well. The problem was it caused major league baseball to lose a ton of money and also a ton of viewers because people found it boring when two spreadsheets were basically battling out on the field. There were fewer home runs. It was not a very exciting game, and they realized they were optimizing for the wrong thing. They thought the teams were

supposed to optimize to win in the most straightforward way possible. What they should have been optimizing for is the maximum excitement in the games, because that's why people watch sports. When it comes to that in your life, if you think that Moneyball is a data analytics problem, then in your job or whatever it is, then absolutely you should use analytical thinking, probabilistic reasoning, and so on. But there's sort of that uncertainty also that we like as humans. There's some aspects of this where the experimentation about the bigger questions, what should I do with my life? Is this the right job for me? Is this the right career trajectory? Those questions are much more effectively answered through experimentation. Whereas once you are

certain that this is what you want to do, if you want to become a neurosurgeon, then yeah, like you shouldn't dabble in pediatrics because it doesn't make sense, right? You should become the best neurosurgeon. So it really just depends on whether you're trying to ask the question of what to do versus how do I exploit the system now that I'm already in it, and I know and I understand how it works. So Moneyball and the way that it made baseball more efficient but boring is, as you said, an example of a closed system. What happens when you have a system like you gave the example of fleas where you can have fleas on a board with 26 squares and each flea moving to a different square? And as you introduce new variables into that hypothetical situation, if you make even one of the fleas turn cannibalistic, right, you suddenly have, instead of a closed system with a very small number of potential outcomes, you have a system with infinite outcomes. You can't apply the money ball data analytics thinking in a system even as complex as flea life, much less human life.

You're completely right about this. And this is something where I think it is bewildering to understand this. And this is something I think is getting a lot of our societies in trouble. And I'll use this as an analogy for human life, right, for individual lives. One of the things that has happened in the modern world is that we have optimized the absolute limit. So we have just in time manufacturing. We have all these systems that are at their absolute limit. And then you get one gust of wind that turns a single boat sideways in the Suez Canal and it causes $50 billion of damage. Now, that was not a good, idea because it would have been less expensive to have a little bit more slack, a little bit more

given the system, and avoid those catastrophes. When you think about that in the context of an individual life, my grandfather's advice to me is the secret to a successful life is to avoid catastrophe. Those two words. And there's a lot of thinking that's exactly the opposite. It's about how to squeeze the last ounce of inefficiency out of life when a lot of it should be about resilience. It's a sort of an aspect of how do we protect ourselves from the big harms that can come our way. How do we make ourselves able to sort of survive or weather a storm when it does arrive? That is something where there actually is a tension between optimization and resilience. When you think about human systems in general, the reason why the Suez Canal or

a terrorist attack or a financial meltdown is both unpredictable and also sometimes caused by very small tweaks in the system is because it has got chaotic elements to it and it has an infinite number of possible outcomes with like eight billion moving parts in it, right? And that's, I'm just restricting to the humans. I mean, we can also talk about weather systems and all this other stuff. When you think that way, you realize that money balling the world isn't possible. It's not like there are just two teams with a very specific set of rules, with a very constrained set of outcomes. Life is infinitely more complex than that. So like machine learning is this great tool. It's incredibly useful on closed systems. It's going to revolutionize healthcare in terms of

diagnoses and all these sorts of things. In those closed systems, it will be revolutionary. But if we apply it to open systems uncritically, I think it could be really dangerous because it's this illusion of control that it gives us, which works really, really well in a money-balled system and really badly in the Suez Canal system, right? And this is the kind of stuff where we're developing a certain hubris that because we get this sort of pattern of regularity where like Starbucks is always the same every day, we've developed this idea that, oh, everything's unchanging. And then the big stuff wallops us. So you have, you know, all these meta-structure changes like financial crises and terrorist attacks and pandemics at the same time that Starbucks is the same.

And there's a sort of cognitive bias towards thinking that everything is sort of under control when in fact we're living in this very chaotic larger world, whereas our day-to-day life is something that we have regularity and patterns within that we cling to for some level of comfort. Fifth Third Bank's commercial payments are fast and efficient, but they're not just fast and efficient, they're also powered by the latest in payments technology, built to evolve with your business. Fifth Third Bank has the big bank muscle to handle payments for businesses of any size. But they also have the FinTech Hustle that got them named one of America's most innovative

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or build some more slack into your schedule, things like that. Yeah, exactly. So there's lots of ways that you can do this. Most of what we are told is about the upside. And it's not thinking carefully about the downside risk. The moments in my life where I've squeezed an extra 3% of efficiency out of my day, those aren't my happy days. The days that are the worst in my life are the ones where I've miscalculated

and I didn't have resilience and things fell apart. And so when I think about those lessons, I think, yeah, there are things I could do a little bit better. but are those the moments that were truly alive and truly living and so on? And I think this is the kind of stuff where, for me, philosophically at least, this idea that if I'm just another $50 ahead, that I'll be happy, in the grand scheme my life, I actually think it's the stuff where you lose lots of money or where you lose your job or where you get really sick and you all of a sudden everything falls apart. That's the stuff that really catastrophically impacts human life. So I want to see a little bit more focus on the sort of self-improvement literature that's about how do you deal with this problem

as opposed to the upside risk, how do you sort of think carefully about these aspects that are out of your control that might wallop you unexpectedly? And maybe the sort of meaning of life question is one that is part of what helps people process this, right? If everything happens for a reason, then when I get diagnosed with cancer or something terrible like that happens, then there has to be a way to sort of process that, like this was supposed to happen. Whereas when I feel, like there's sort of arbitrary forces. The resilience that I have is like, okay, that's something that happens to human beings, and I'm going to have to deal with it. And hopefully I've set up a financial fund and so on to sort of be possible to sort of weather it. This endless focus

on optimization to me is something that is causing us to basically drift towards catastrophe more and more frequently these days. What I'm hearing is a strong message of playing defense. So the lesson avoid catastrophe is a defensive lesson. Play a strong defense, avoid catastrophe. Similarly, the lesson of build slack into the system, don't try to overly optimize, that's also playing defense. Would that be a fair characterization? Yeah, well, it's not because you don't want to create good outcomes.

Like the other analogy that I use that's from a real world case in Latin America is where there was a power grid that was trying to decide how to set itself. up. There was one proposal that said, let's make a national grid because it will be slightly more efficient. It will be cheaper to build. And the alternative proposals make, let's make regional grids where they can be quickly decoupled from the national grid, but it's going to be more expensive and it's going to be less efficient because there's going to be these regional nodes. What they did was they did the regional plan. And it saved them a ton of money because when the node failed in one place, it didn't affect the rest of the economy. Now, at the time, it was expensive.

And at the time, it was inefficient. But the thing is, in uncertainty, it's actually much more offense to do that because they ended up better off than they would have. I think this is the kind of stuff where I think we have these sort of snapshot views of reality where it's like, was the financial crisis a bad thing? Yes, it wiped out a ton of money. Well, if we just look at growth before it, then it was great. And so when I think about what we could have done to play offense in the financial crisis before it, it's actually to do things quite differently there as well because we wiped out. a lot of the gains that were produced before the financial meltdown happened in 2008 and so on. The way that we frame these things is a question of timeframes as well.

Like over the course of my life, I think the things that are going to save me both money and lots of pain are building resilient systems into how I live. Whereas, you know, it will actually probably save me money to do that as well because catastrophic risk has huge downsides. These like iterative gains and efficiency sometimes can have big upsides. But actually, I think the stuff that really causes us to strike. strike at rich or to, you know, have huge breakthroughs is often through creativity. It's often through thinking differently. It's not through three minutes more of productivity in front of your

laptop, right? That's not the transformative stuff that makes the Bill Gates or the Steve Jobs. Are we talking about a snapshot in time or are we talking about the whole life? Most people, when they get to their deathbed, they're basically happy if they avoided catastrophe. And they're not necessarily happy if they had, you know, a 5% more efficient day-to-day life, which I think is sometimes what we're told is the pathway to success and happiness. How do you avoid catastrophe when major macro catastrophes befall you? I'd love for you to share the story, and this is, I think, a really perfect example of, if one thing were different, everything would be different.

In the 1920s, a gentleman named Stimson went on vacation, and the world is forever different because of it, and a lot of people suffered catastrophe due to that choice of vacation destination. Yeah, so this is a story about a couple that goes to Kyoto, Japan in 1926 for a vacation. They stay at this place called the Miyako Hotel, and they fall in love with the city. And 19 years later, the husband and the couple is Henry Stimson, who is the America's Secretary of War. And the generals on the target committee have decided that Kyoto is the best place to drop the first atomic bomb. And their target plan actually is right next to the Miyako Hotel where he stayed, the rail yard next door. And so Stimson springs into action and meets with President Truman twice.

and convinces him to take it off the list. And so this is where Hiroshima gets bombed instead. And the second bomb was supposed to go to a place called Kokura, and instead it ended up getting dropped on Nagasaki because there was briefly cloud cover over Kokura when the bomber arrived. Now, what you're alluding to, I think, in the question, which is a great way of framing it, is that for the people in Kokura who avoided catastrophe because of a cloud

or in Kyoto who avoided catastrophe because of a tourist vacation 19 years earlier, what choice did they have? Well, none is the answer, right? They were the playthings of chaos. The people who died in Hiroshima and Nagasaki were also the playthings of chaos and they died and the Kyoto and Kokura people lived. So some things we can't avoid. I'm hyper aware of the fact that there's a lot of stuff that can go catastrophically wrong in the world that I have very, very little control over. Now, beyond the stuff that I'm not, I'm not a personal finance expert, So beyond the stuff tied to the financial resilience and so on. For me, the way I make sense of this honestly is I think about what stuff do I need in my life

that is actually automatically resilient. So I found meaning, for example, in doing things that are pretty much free. Like one of the things I love to do is walk my dog and go camping. I also think about stuff where who are the people around me who give me meaning. And those things, you know, okay, there could be a financial crisis, but my family's still going to be there. my friends are still going to be there. It's a somewhat flippant response to it because, of course, there's nothing we can do. Of course, we want to vote for the right politicians and so on. But at some point, there was a very limited amount of stuff we could do to stop the pandemic.

A person gets infected in Wuhan and then the world changes for two years. When you process that, you accept this lack of control and the resilience is sometimes stuff you can plan for. And sometimes it's a mentality. Resilience is basically a way of having a worldview in which if stuff goes catastrophically wrong, are you still going to feel fine? For some people, the answer is no, because they put all their eggs in the basket of status and success exclusively. And I think for people who diversify that basket a little bit with stuff that gives them meaning in other parts of their lives, they're probably actually more well set up for the inevitable catastrophes. And they are happening, I think, more often because of how we've engineered the world, where a lot more

Black Swans affect our lives than they used to in the past. How does a person know if their worldview is resilient enough to be able to survive catastrophe? And what I mean by that is often you may think that your current worldview is resilient, but when catastrophe strikes, in hindsight, you realize that you had a previous way of thinking that actually proved detrimental. You were asking excellent and very tough questions, because this is something where we can never know. I mean, this is the case, right? Like, in the last few years of my research, I have changed how I think about the world. I think about the person I was a couple years ago and my worldviews shift. It's shifted because of experience. It's shifted because of learning and so on. Is my worldview that I have now going to be resilient in five years? I have no idea, right? I mean, the pandemic did shift my worldview a little bit as it did for a lot of people. You know, it's a sort of stress test. You do have stuff that gets stress tested through various aspects of misfortune outside of your control. I will say that there are certain things, though, that I think are fundamentally resilient, like

deriving meaning from stuff that is intrinsic to you. I've met a lot of really happy people who have very simple pleasures that make them happy. And the simple pleasures are resilient. I mean, I'm not trying to disagree with people who have a worldview that is fulfilled and genuinely is fulfilling for them for different values from me, right? That's something that's, it's a beautiful thing about humanity that all of us have different things that fulfill us. It would be super boring if we all have the exact same passions and preferences and so on. But for me, when I think about stuff that could get taken away, you know, a lot of it is actually physical objects. You know, so you could lose your money and then all of a sudden you have to sell things or you,

or something gets destroyed. Friends dying and so on. That's out of your control. There's nothing you can do about it. But what you can do is you can say, okay, I'm going to have a worldview in which the meaning for my life is something that no matter what happens, pandemics, whatever it is, I'm going to be able to derive something from it. For me, it's spending time with people I care about, and it's doing things that are intrinsically valuable to me, reading, going for walks with my dog. There's no one-size-fits-all answer. And I think you're raising a very astute critique of what I'm saying, which is that how can

I possibly know that this is the correct worldview? I can't. That uncertainty is something we all have to live with, that a lot of the stuff that we're told about how to live a better life is tied to the idea of stamping out uncertainty. It's tied to this notion that you have to control things because uncertainty is an enemy need to be slayed. And of course, uncertainty can be terrible. I mean, if you have a health diagnosis that you don't know what it is, it's horrific. But uncertainty is also where humans have their most exciting, awe-inspiring, mysterious moments of life, right? I mean, if you were told

you have a 12% probability of marrying this person and a 64% probability of marrying that person when you're like 12 years old, it would be terrible. We wouldn't like that. So I think rather than trying to stamp out uncertainty, it's about embracing it a little bit more and trying to think about how to be resilient in the face of that which you cannot control. To what extent are we even in control over our own minds? You know, when you were a kid, you were super into, what was it, the Civil War? Civil War. Yeah, you were super into it.

And that didn't feel like a choice. It was just a passion that overtook you that you didn't consciously one day sit down and say, I think this is going to be my new obsession. but when you were a child, that just became your obsession and it dominated your thoughts. To what extent are we all that kid? I sort of joke about this because it's like, I look back on this and I was like an eight-year-old Civil War aficionado who subscribed to like two Civil War magazines. I mean, I'm sure it comes as a shock that I'm a total nerd through and through.

This was not like a choice that was in some way top down where I thought, what could I be that would be cool in life? I want to be an eight-year-old Civil War officiado, right? I mean, that's not going to happen, right? So instead, I was just drawn to it. I went to the Gettysburg Battlefield and I was hooked and all I did. Like, still in my childhood bedroom or my, in my parents' house, there's like a rack of Civil War books, right? Just like, oh, this is the huge rack that I read as a child.

The reason I bring this up is because there's a lot of stuff that we don't think about, the degree to which our minds are not something that we can control from a top-down or independent sense. And there's a whole can of worms that I can't open and then, leave there in a relatively short answer. The kind of stuff that I think about that explains the basis of this is I don't understand where the difference between my mind and my brain would be, right? We use two different words for mind and brain. I think my brain is my mind and my mind is my brain. I'm what's called a physicalist, so I don't believe in any sort of inanimate spirit or anything like that that's providing independent control of my brain. And because of that, just as I can't

control cell division in my brain, the thoughts that I have to a certain extent are all also outside of my control. Now, this doesn't mean we should be nihilistic. I completely reject that idea that sometimes people who deny free will, you know, sort of end up concluding that, oh, nothing matters. I think exactly the opposite. I think I think literally everything that we do matters. But if I were to tell you that somebody murdered someone because they had a brain tumor, you would say, well, it was outside their control. And then I'd say, okay, but hold on, why is it that unhealthy tissue is different from healthy tissue? There's not some, like, magical property to healthy versus unhealthy tissue. Like a brain tumor affected the way his brain behaved, but like also

the brain structure of a healthy brain or quote unquote healthy brain also affects the way that I become a civil war officianto or I behave or how I frame sentences. That does give us a little bit of pause in how we think about the world. I don't think it functionally matters that much for how I actually make decisions on a day to day basis because I think it's the question of the origin story of my behavior. So the origin story of my behavior, I think is tied to my brain, which is a physical structure, but I still have to make decisions. So the question is, where are they coming from? Well, I don't know. I think they're coming from my brain. And so in a way, it's a sort of a semantic philosophical debate, whereas whether I have free will or not, I still have to navigate the world.

And so I'm still making decisions, whether it's an independent soul that's doing that or it's just my brain chemically processing the world and then helping me decide or deciding for me and so on. So, you know, this question about free will is one that I think is going to be a huge, huge discussion point for the 21st century as neuroscience advances and as machine learning gives us better understandings of how the brain works and so on. But the lessons from this are that if there is a little bit less control, then you also again, you still strive, but you accept that sometimes failure is outside of your control and sometimes success is outside of your control. And humans are very, very good at accepting that some sort of failure is outside of our control. We're less good

it's sort of saying that sometimes our success is also not fully deserved by our own independent actions. Black Friday is here at IKEA and the clock is ticking on savings you won't want to miss. Join IKEA family for free today and unlock deals on everything from holiday must-haves to cozy at-home essentials, all the little and big things you need to make this season shine. But don't wait. Like leftovers at midnight, our Black Friday offers won't last. Shop now at IKEA.ca.ca slash Black Friday.

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I think there's a lot of modern malaise that is tied to this idea that if I didn't exist, the world would just sort of keep turning over and so on. When you think about chaos theory and when you think about the sort of contingencies of what ifs, of small changes having big effects and a vacation causing an atomic bomb to get dropped in one city or another, or my existence being predicated on this terrible tragedy in a Wisconsin farmhouse, what I always say to people is everything that you do is important. That's the lesson. And that doesn't mean that everything that you do is going to conform to your idea or your narrative about how your life was supposed to unfold. But it does mean that

everything you do is going to affect the future trajectory of everybody else because we're all in an interconnected system, which I know sounds like, you know, sort of like a Zen guru, but it's also like scientific fact. Like the interconnected system of the world is something that like is totally uncontested by theoretical physicists and also Zen gurus sometimes. But it is the kind of stuff where when you think about that and take it seriously as the ripple effects of our actions always exist and we don't know how they're going to play out, I think it empowers people. This doesn't mean that you hover over the snooze button with sort of trepidation each day and wonder, am I going to make the wrong decision? There's some stuff that we can't foresee. There's a lot of misfortune in the

world that is not tied to people whose lives are three percent too inefficient or is not tied to the fact that they have not been able to achieve an endless array of goals on a checklist. I think it's more tied for a lot of people this notion of what is the point of all this? That's the stuff where when you contemplate it and think about it more deeply, it actually unlocks the sort of self-fulfillment that a lot of people are trying to find in a book or by sitting at their computer a little longer or whatever, because they're actually forced to confront the questions that are deeper and harder to answer.

And my answer to those questions is, I don't know how it's going to play out, but if I didn't do what I was going to do, if I didn't have this podcast conversation, if I didn't do all the things that I do in life, the world will be slightly different, some good, some bad. And that to me is an empowering feeling.

It's the exact antithesis to nihilism, which is the viewpoint that nothing we do is important or matters all that much. and even if we have money, what's the point and so on? There's a lot of aspects where you can think strategically about the aspects I was describing previously about experimentation or resilience. But there's also that deeper underlying question of like, what is this all for? And when people answer that, they actually become much more passionate. When they become more passionate, they become more successful. So I actually think that the two questions are linked, right? That you actually,

if you know why you're doing something and you know what the purpose of a sort of strategy you have is, it becomes much easier to actually fulfill it. So it's not a perfect answer to your question because there's not like a big aha moment where now we know how to make every decision. But I have thought differently about these questions having sort of incorporated a lack of control and the sort of elements of chaos theory into my thinking about how to live in the world. Well, we're coming to the end of our time. Are there any final messages that you would like to impart upon the audience?

I think the other takeaway that we haven't talked about is this aspect of, trying to figure out in your life what are problems that I describe as rubber problems and what are problems that I describe as rice problems. Now, there is a group of indigenous farmers that operates in Southeast Asia. They have rubber to plant and they have rice to plant. The rubber is basically a crop that if you know how it works and you plant it in the same place every year, it will just grow. It's always going to be fine. The rice is much more fickle. It sometimes fails based on weather patterns. it sometimes fails based on things that they don't understand. What some of the groups do is they just sort of try to do the same strategy over and over.

And the rice crop often fails for those groups. What one other group does is they decide to plant the rice based on the movement of what they view as sacred birds. So they have seven birds and they track their movements and they interpret them and then that's where they decide to plant the rice based on these birds. Now, when people came to study these different groups, they were astonished to find that the group that followed the movements of the sacred birds actually had much better rice crop output. And the reason for that was because they had effectively randomized in the face of uncertainty. They had experimented. And so they had figured out this very strange way of basically deciding randomly where to plant the rice. And because the constant uncertainty was existing and unfolding, it turned out to be the best strategy. It actually

was much smarter than the people around them who just said, I know what's going on and I'm just going to maximize my output by doing it the same way every year. That's the sort of stuff where when people are trying to be smarter decision makers, what they should really do is they should sit down and think what part of my world and what part of my life is a rubber problem and what part is a rice problem? What's the stuff that I can't control that has irreducible uncertainty where experimentation and some level of randomness

and some importance of resilience are going to be a huge part of my calculation? And what's the other bit where you're pretty sure you know what's going on, you understand the system, you understand exactly what you want, and you're just going to maximize it the way that the people did with planting rubber. in my view, a lot of what we're told is that the world is just rubber problems, that everything is a solvable issue with machine learning, with better technology, with better optimization, and so on. And that's not true.

There's a lot of rice problems out there, which are fundamentally uncertain and benefit from sometimes experimental, random decision making, trying new things, you know, exploring and so on. So that's my message to people who are trying to come up with a life strategy from this bewildering aspect of a little bit less control. As long as you're aware of the areas where uncertainty is most prominent, you can develop better strategies to deal with it. And as long as you're aware of this sort of money ball or rubber problem strategies where things are pretty constrained and confined and predictable, then by all means, go to the life hack checklist and the optimization and just

maximize everything you can in that system because they're not the same. And you get into really big problems when you mistake a rice problem for a rubber problem because you optimize the limit, and that's where the Suez Canal disaster happens because it's not a resilient system and something really unexpected happens and you lose $50 billion, which I do not recommend. We also know that there are farmers who believed that they had, metaphorically speaking, rubber when they actually had rice. And I'm thinking specifically about the plague of locusts, right? I'm thinking specifically about the farmers who year after year had quite a lot of consistency within their crop, but then the locust population hit an inflection point, turned into a plague and decimated their crops.

And so what do you do in a situation where you believe that you're dealing with the proverbial rubber, you're growing a rubber plant, when in fact a calamity, a black swan event, in this case being locusts, comes around and decimates your best laid plans? Well, that happens. That is what black swans often are, right? There are systems where we really think we understood them and it turned out we didn't. And that was what the financial crisis was. Everyone is sort of optimizing in these systems where we figured, oh, it's all going to be fine because we understand the way the financial markets work. We didn't. And we all got sort of wiped out the same way the plague of locusts can sort of wipe people out. There is some irreducible uncertainty. We cannot protect ourselves from plagues of locusts all the time. I think we cannot protect ourselves from black swans all the time. And I think the people who tell you that are just lying because it's absolutely the case. There are certain systems that are just fundamentally unpredictable and chaotic and very sometimes dangerous for us. And maybe the world of AI will produce another one of those.

We don't know. I mean, there is some risk that could exist in a fundamental reshaping of how the world works. What I think is important is what happens next. And what I worry about is that we don't learn the lessons of catastrophic failure very well. And the reasons we don't do that is because we don't audit decision making. we audit outcomes. My favorite example of this is from the Challenger explosion. You have the challenger blow up after an O-ring fails, this tiny little piece of the shuttle that fails. That exact O-ring existed multiple times before in space shuttle launches that were successful.

So actually what they had done is they had basically just gotten unlucky. Eventually, I think it was it got too cold and then finally it failed and this shuttle blew up. But what we always do is we always audit based on outcomes. And what you have to think about is, was the decision-making process that you use to get there actually smart? Because there's a lot of times where things that are stupid have produced good outcomes, right? There's also times where things that are really smart produce catastrophic outcomes. And so you learn the wrong lesson if you imagine that every time that something good happens, it is the result of wise strategic thought. And I think there's a lot of people who learn backwards this way around the sort of gurus of business as well, where it's like

one person made a billion dollars. Therefore, we should just like listen to everything that they have done. Like we should do their life, you know, exact same life strategy, exact same pattern. I should wear the same shirt. But it's like, no, sometimes people just get lucky. Sometimes there's randomness that produces these outcomes. And so thinking strategically about the decision making process and thinking also carefully, like, did you misdiagnose a rubber problem for a rice problem? That's the kind of stuff that does help you avoid catastrophe as well, because it makes you more resilient in your thinking. And I wish there were more audits for success.

I wish there were more times where organizations, individuals looked at something that worked out and did a forensic audit of what happened and especially focused on the stuff that wasn't smart. Because what we tend to do is every time a good outcome happens, we just say it was a genius decision. And there's always bad parts of genius decisions. So, you know, you can always get better and smarter about thinking about problems if you audit the process as opposed to the outcome. Right. And that, you know, that reminds me of that famous phrase from Warren Buffett, when the tide goes out, you see who's been swimming naked. So oftentimes, there are people

who are in the waters and they look like they're doing well, but they're not set up right. Yeah, no, exactly. A lot of people learn that lesson the hard way, unfortunately. So I think we can avoid some of those naked swimmers if we have a little bit more of the sort of thinking about auditing decisions rather than outcomes. Well, thank you so much for your time. Where can people find you if they'd like to hear more about you and your work? I have a newsletter called the Garden of Forking Paths, and I have a book where I read about these things called Fluke. Excellent. And you can find that Amazon, anywhere books are sold? Anywhere books are sold. It's all there. Excellent. Well, thank you so much. Thanks for having me on the show.

Thank you, Dr. Glass. What are three key takeaways that we got from this conversation? Key takeaway number one, embrace the unpredictability. Brian illustrates how even small, seemingly insignificant actions can have profound ripple effects on our lives and on the world around us. Every decision that we make, no matter how seemingly minor, can alter everything. And this perspective encourages us to appreciate the complexity of everything that unfolds. And it highlights the importance of being deliberate about our choices, choices about how we spend, our money, our time, our effort, our attention.

All of that being said, it's equally true that actions have downstream effects that we in no way can predict. This entire interview wouldn't have happened had it not been for the tragic story that Brian told about his great-grandfather's first wife's death at the start of the show. There's this very strange thing about reality that you and I would not be talking. nobody would be listening to my voice on your podcast, but for a tragic mass murder in Wisconsin 119 years ago. And so we need to embrace something that is seemingly a little bit of a contradiction, which is that we need to be deliberate about our choices while also letting go of the idea that we can control what happens downstream of those choices.

Wisdom comes from holding two seemingly contradictory ideas at the same time. those two ideas are that we, A, must be deliberate and conscious about our choices, but B, have no ultimate control over the outcome. So choice matters, but control is illusory. That's what I mean by embracing unpredictability. And embracing unpredictability is the first key takeaway. So where do we go from there? Well, that leads us to key takeaway number two. Optimize for resilience, not just efficiency.

Brian argues that our focus should shift away from squeezing out the last bit of efficiency and towards building resilience. And we should do this in our systems as well as in our personal lives. So he used the example of Latin America's regional power grids. And he talked about how these were designed to decouple easily in case of failure. And that decision ultimately saved the region from widespread blackouts. So that was an excellent act of foresight. But by contrast, there are also systems in which there is no resilience built in.

There's no margin for error. And while that may seem efficient, it can also turn on its side with a gust of wind. We have optimized the absolute limit in our economics. So we have just in time manufacturing. We have all these systems that are at their absolute limit. And then you get one gust of wind that turns a single boat sideways in the Suez Canal and it causes $50 billion of damage. build systems that can withstand unexpected shocks.

And that is a lesson not just for how we design electrical grids and canals at a social level, but it's also a lesson for us in our personal lives around how we design and manage our financial lives. Think about it this way. Remember 2018, 2019? At that time, we had been in a bull market for a decade. And a lot of people were starting to assume that a bull market. It lasts forever. A lot of people were kind of getting this idea that the stock market is a high-yield savings account. And so right around 2018, 2019, I started getting a lot of questions from people saying,

why should I bother keeping an emergency fund? Because in an emergency fund, my money is earning at that time in 2018, 2019, it was earning basically zero in a savings account. The APY on a savings account was abysmal. And meanwhile, money in the stock market was doing great. So those questions, I was hearing a lot back in 2018, 2019, you know, isn't it inefficient to keep money in a savings account? Why shouldn't it all just go into the market? Those were questions about trying to optimize efficiency, trying to deploy capital in the most quote-unquote efficient manner possible, but those were questions that didn't see the need for resilience. Fast forward to spring of 2020, and all of a sudden, everybody who maintained emergency funds,

We're really glad they did. That was a moment when everyone collectively realized, ah, this is why we have an emergency fund. It didn't feel efficient in the moment. It didn't feel efficient in 2019. But wow, in 2020, I'm so glad I have it. So now take that lesson. Apply it to today.

What are the areas in your financial life where you're being perhaps too efficient? I'm putting efficient in air quotes. Where are the areas where you're being efficient at the cost of resilience? In other words, where you're playing offense in an area where you really should be shoring up your defenses. That's a good question to ask yourself as you review all of your financial accounts. What are the ways in which you can bolster resilience and optimize not just for growth, but also for protection? That is key takeaway number two. Finally, key takeaway number three.

Differentiate between rubber and rice problems. Ryan uses the concept of rubber problems versus rice problems to distinguish between predictable issues and issues with a high level of uncertainty. So he shares a study of indigenous farmers in Southeast Asia who improved their rice yields by randomizing planting locations based on the movement of birds. And in that story, he demonstrated that by embracing randomness in the face of uncertainty, they actually stumbled upon a strategy that was more effective than rigid planning. When people came to study these different groups, they were astonished to find that the group that followed the movements of the sacred birds actually had much better rice crop output.

And the reason for that was because they had effectively randomized in the face of uncertainty. So then the question that we need to ask ourselves becomes, what are the areas in our lives where we are perhaps too fixed or too rigid? and what are the areas where we could embrace more flexibility or a willingness to experiment? What are the areas that might, in fact, benefit from a more flexible and experimental approach? How might that impact your investments, your career, your professional trajectory, the way you spend money, and the way you make money? This is an essential question because, to quote J.L. Collins, flexibility is the only true security. So those are three key takeaways that come from this conversation with Brian

class. Thank you so much for tuning in. If you enjoyed today's episode, please subscribe to our newsletter at afford anything.com slash newsletter where we share insights into the five pillars of fire, financial psychology, investing, increasing income, real estate, and entrepreneurship. Again, you can subscribe at no cost by going to afford anything.com slash newsletter. Also, please follow this podcast in both Apple Podcasts and Spotify, as well as on YouTube. While you are in your favorite podcast playing app, you can leave us up to a five-star review. And I greatly appreciate it if you do. Finally, please share this episode with a friend, a family member, a colleague, a neighbor's,

share it with someone who you think would benefit from learning about how to think critically about how they think. Thank you again for tuning in. My name is Paula Pant. This is the Afford Anything podcast. And I'll meet you in the next episode.