How to Handle Market Uncertainty - Why Emotional Stability Beats IQ

The limiting factor for investors is not their IQ, but their temperament, rationality, and independent thinking. As Warren Buffet says, "You don't need to be a rocket scientist. Investing is not a game where the guy with the 160 IQ beats the guy with a 130 IQ. Rationality is essential. Even if you do have an IQ of 160, you should just give away 30 points to somebody else because you don't need a lot of brains to be in this business. What you do need is emotional stability. You have to be able to think independently."1

Investors who lack control over their temperament make foolish decisions during market extremes. They struggle to respond to unexpected events in a thoughtful way. Instead of approaching decisions in a calm and rational manner, they abandon their process and invest based on their gut. They can get lucky for a while, but eventually will fail. Even brilliant investors who get caught up in the euphoria of a market boom or the pessimism of a market crash will abandon what has worked so well for them. They can’t resist the overwhelming pressure to exert control and do something now, no matter how foolish in the long-run.

Some of this behavior may be heredity or genetic, but most is self-induced. Many investors obsess over every news story and try in vain to anticipate every new market development. Most of these are unpredictable and random, but that doesn’t stop investors with poor emotional control from trying to do the impossible. It leads to errors, overconfidence, and wasted energy.

Our temperament should not change based on market conditions. Ideally, we should have a stable foundation and a set of investment principles that guide us through any investment environment. There is uncertainty and doubt in most investment decisions, but that’s why we need to double down on our process and principles, and not panic and abandon what has worked for us.

It only takes one moment of weakness or irrationality to undo many good years of investing. For example, in the 2009 financial crisis, market panic overwhelmed previously successful investors. They made irrational decisions based on fear, conjecture and catastrophic thinking. Of course, investing during the crisis was not easy. Even the best investors would admit it was a gut-wrenching environment. But this was the difference – investors with poor emotional control abandoned their long-term investing principles and made decisions that devastated their investment portfolio.

For example, they gave up on regular rebalancing to their proper asset allocation. Instead of buying assets when they were exceptionally cheap, they bought into the idea that the financial world was ending and completely sold out of the market. By not staying the course and rebalancing, they not only missed an investment opportunity of a lifetime, but permanently locked in losses. Even some of the largest and most sophisticated investors sold assets at the bottom and went to cash. Some investors, especially underfunded pension plans, will never have enough time to recover from these mistakes.

It wasn’t a failure of IQ that doomed these investors. It was the inability to manage their emotions. If investors need to improve anything, it’s their rationality and temperament. Unfortunately, most investors are blind to the notion that they need help on their emotions. It’s an overconfidence and ego issue. Even investors who made every wrong decision during the 2009 financial crisis still blame the market or the government for their losses. Until they accept responsibility, they will continue to repeat these same mistakes.

Carefully Consider How You Allocate Your Time and Attention

Investors need to focus their mental energy in the right direction. Investors waste time trying to do impossible things- guessing where the market is going in the short-term, guessing the next economic news release, charting the markets, speculating in assets they don’t understand, etc. The amount of brilliance that is wasted on ineffective activities is astounding. It’s not just the average retail investor trapped by this behavior. Market professionals play the wrong game and lock themselves into a cycle of trying to predict impossible things.

The most important thing for us is to be extremely cautious as we allocate our time and energy. It’s a distracting world. Most of what gets reported as news is unimportant, distracting, and ultimately worthless. We fail to deliberately think about where we spend our time. It’s hard to avoid the seduction of the 24/7 news cycle. It traps us with intriguing story lines, delivered as if critically important to our investing success.

A rule of thumb – the more difficult the information to consume, the more valuable it is. For example, reading a 10-K is not an easy or light-hearted endeavor, but it’s probably one of the most worthwhile documents an investor can read. But it’s a long, tough read. Some 10-K’s are hundreds of pages long. But that’s where the critical detail sits. That’s where we develop the deep understanding of our investments and what price we should pay for them.

Many investors instead prefer CNBC and Twitter to catch investment headlines. This leads to a superficial, misleading understanding of our investments. It’s certainly a lot more fun but adds zero value to our process.

Objectivity, not Fate, Determines Investment Success

Investors do best when they view markets with a rational, objective lens. Investors who believe in fate, predetermined destiny, or divine intervention in the markets will always struggle to succeed. Because we don’t know exactly how the future will unfold, we need to think in terms of probabilities over many different future states of the world. It’s not a natural thought process and most investors just want a simple answer. Should I buy or sell? Is the market going up or down? They struggle to handle the uncertainty of the future, so they create a false sense of understanding and control by burying any notion of uncertainty.

We have control over a few things – our commitment to constantly improving our investment process, understanding the investments we own, and seeing the world through a rational and honest perspective. If we can do that, we can handle the future just fine. But if we can’t control our emotions, we will become frustrated when we consistently make poor investment decisions.


4 Secrets to Improve Your Workday: How to Build Career Success

#1 Routine, Not Willpower, is the Key to a Successful Workday

It was as if the first few times a rat explored the maze, its brain had to work at full power to make sense of all the new information. But after a few days of running the same route, the rat didn’t need to scratch the walls or smell the air anymore, and so the brain activity associated with scratching and smelling ceased. It didn’t need to choose which direction to turn, and so decision-making centers of the brain went quiet. All it had to do was recall the quickest path to the chocolate. Within a week, even the brain structures related to memory had quieted. The rat had internalized how to sprint through the maze to such a degree that it hardly needed to think at all. The key to a successful workday is to replace manual effort with habits and routines. Habits allow us to process more work without using extra energy that drains us by mid-afternoon. The attitude of hard work is great, but hard work has a downside because it depletes our energy levels when focused on low-value activities. We can’t produce quality work. -The Power of Habit, Duhigg

In his book, Power of Habit, Charles Duhigg explains how to channel habits into powerful assets to improve our lives.

How can we use these lessons to improve our workday?

The key to a productive workday is to substitute much of our “conscious” hard work into subconscious or automated habits that are less taxing on our energy systems.

Habits, scientists say, emerge because the brain is constantly looking for ways to save effort. -The Power of Habit, Duhigg

What type of work should become an automatic routine? Any repetitive and predictable activity. Emails. Office organization. Regular reports. Mundane transactions. Anything that has low variability is a good candidate for a habit.

What should not become habit? Any task that has high unpredictability or complexity. Because of the inherent variation in these tasks, automation will often lead to incomplete action and the wrong outcome. For example, hiring is a complex process that takes significant deliberate thought. It should not be automatic given the consequences of a bad hire and the variation of prospective employees.

Conserving mental effort is tricky, because if our brains power down at the wrong moment, we might fail to notice something important, such as a predator hiding in the bushes or a speeding car as we pull onto the street. -The Power of Habit, Duhigg

As mentioned above, we can’t power down our brains in high impact situations. It’s up to us to separate our day into routine habits and deliberate action, and not mix the two.

#2 Take a Step Back Before Judging Other’s Behavior

How do you react when a colleague makes a mistake that seems indefensible? Do you assume the person is just plain stupid? Do you assume they don’t care? Do you blame their work ethic or attention to detail?

Executives determined that, in some ways, they had been thinking about willpower all wrong. Employees with willpower lapses, it turned out, had no difficulty doing their jobs most of the time. On the average day, a willpower-challenged worker was no different from anyone else. But sometimes, particularly when faced with unexpected stresses or uncertainties, those employees would snap and their self-control would evaporate. A customer might begin yelling, for instance, and a normally calm employee would lose her composure. An impatient crowd might overwhelm a barista, and suddenly he was on the edge of tears. -The Power of Habit, Duhigg

There is constant tension between the effects of our environment and our ability to influence and control those effects. When we see other’s behavior, we often attribute 100% of that behavior to the person and completely neglect the role of environment. Seldom do we let the person off the hook and blame the environment. It *seems* to make intuitive sense that we are in 100% in control of our actions. Numerous studies have rebuked that belief, but it still persists in managerial behavior.

When we make a mistake, we are likely to blame outside factors instead of looking inward at ourselves. And when something goes right, we often take all the credit and assume the environment had nothing to do with it. We accept all praise and deflect all blame. It’s hard to overcome.

But when dealing with colleagues, hold your initial impression since you likely underestimate the power of the situation.

#3 Use a Crisis to Shake Things Up

After Barack Obama’s election, Rahm Emanuel said, “You never want a serious crisis to go to waste.”

You may not agree with his politics, but he had a powerful point.

All those leaders seized the possibilities created by a crisis. During turmoil, organizational habits become malleable enough to both assign responsibility and create a more equitable balance of power. Crises are so valuable, in fact, that sometimes it’s worth stirring up a sense of looming catastrophe rather than letting it die down. -The Power of Habit, Duhigg

Although a crisis is not a pleasant thing, many organizations waste the opportunity to improve their habits by learning from the crisis. The initial reaction is often hysteria and an ultra-short-term focus on the immediacy of the crisis, rather than improving long-term behavior.

Employees often follow the cues of their leaders. If leaders can’t separate the crisis from the learning, why should they expect employees to do the same? It takes a certain stoic mindset to compartmentalize the urgent crisis from the long-term lessons.

One a crisis has occurred, it’s a sunk cost and no amount of ruminating and stressing will undue the past. The best we can do is learn to modify our routines to ensure the same crisis doesn’t happen again.

#4 Corporate and Employee Behavior is Shaped by Social Convention

Your behavior mimics those around you.

Have you considered your behavior is significantly influenced by those around you? Do you believe you are 100% in control of your actions and habits?

…firms are guided by long-held organizational habits, patterns that often emerge from thousands of employees’ independent decisions. And these habits have more profound impacts than anyone previously understood. -The Power of Habit, Duhigg

It’s likely you have less control than you think. Unless you deliberately engage and understand your habits, you are bound to repeat the same patterns and actions. Your day to day activities are a consequence of the cues and expectations of those around you.

Many behaviors are not a result of deliberate thought but rather an evolving collection of haphazard and unexamined beliefs.

For example, companies often want employees to engage in deep thinking on breakthrough or revolutionary projects. However, they also expect constant and immediate email responses. Studies have shown that by interrupting deliberate effort, it takes 20-40 minutes to re-engage in deep learning.

While the company is hoping for one thing (deep thinking) they are getting something else (distracted workers handicapped by email). The actions of the company must match the words spoken by management. When there is conflict, the actions always win.

If you want to change behavior, don’t expect more information to alter deep-seated organization behavior. It’s not an information problem. It’s a habit and expectations problem.

A movement starts because of the social habits of friendship and the strong ties between close acquaintances. It grows because of the habits of a community, and the weak ties that hold neighborhoods and clans together. And it endures because a movement’s leaders give participants new habits that create a fresh sense of identity and a feeling of ownership. Usually, only when all three parts of this process are fulfilled can a movement become self-propelling and reach a critical mass. -The Power of Habit, Duhigg

Your focus should first start with company-wide behavior, then re-train organization behavior with systematic training, and finally reinforce with social proof.

A movement starts because of the social habits of friendship and the strong ties between close acquaintances. It grows because of the habits of a community, and the weak ties that hold neighborhoods and clans together. And it endures because a movement’s leaders give participants new habits that create a fresh sense of identity and a feeling of ownership. Usually, only when all three parts of this process are fulfilled can a movement become self-propelling and reach a critical mass. There are other recipes for successful social change and hundreds of details that differ between eras and struggles. -The Power of Habit, Duhigg

To Summarize:

#1 Routine, not willpower, is the key to a successful workday – Quit trying to force your way through bad habits. Re-train and eliminate them instead.

#2 Take a step back before judging other’s behavior – Before rushing to judgment, step back and reflect on situational factors that have shaped people’s behavior.

#3 Use a crisis to shake things up – Rise above the day-to-day challenges of a crisis and learn to modify behaviors instead of ruminating on past mistakes.

#4 Corporate and employee behavior is shaped by social convention – Employee behavior is often shaped by social factors, not rules and logic. If you want to change behavior, alter social expectations.

How Deep Work Can Transform Your Life: 7 Powerful Principles

Becoming exceptional is hard. The professional world is competitive, full of intelligent and ambitious people vying for the same top positions.

To make things more complicated, there isn’t one exact set of rules we can follow that guarantees success. Hundreds, if not thousands of books are published every year promoting magic formulas for success. But how many of these books create lasting change?

How many of us really achieve the success we expect?

Where do we go wrong?

What do we need to change if we don’t like the path we are on?

Do we practice becoming exceptional like we practice golf, triathlons, or public speaking?

No. We assume mastery is something that just happens. We go about it in a haphazard way while our frustration and struggles build when we don’t progress. We don’t treat mastery as a skill that can be improved. We just work hard and hope it happens.

Here’s the good news. There is a way to change your habits and behaviors that create lasting success and builds exceptional talent. The bad news is we must overcome significant mental and societal pressures to cultivate deep work.

If you are looking to make this shift from mediocre to exceptional, one of the best resources on creating success is Cal Newport. His blog,, is a must read if interested in practical principles to achieve success. His latest book, Deep Work: Rules for Focused Success in a Distracted World, is my best recommendation to create permanent changes to do great things. (Note: All italicized quotes in this article are from Newport’s book, Deep Work)

The following 7 Principles, based on Cal’s book, can be used by anyone to improve the odds of becoming truly exceptional.

Principle 1: Identify Shallow vs. Deep Work

A lot can be explained by another type of effort, which provides a counterpart to the idea of deep work: Shallow Work: Noncognitively demanding, logistical-style tasks, often performed while distracted. These efforts tend to not create much new value in the world and are easy to replicate…To remain valuable in our economy, therefore, you must master the art of quickly learning complicated things. This task requires deep work.

To set the stage for this discussion, we need to define what deep work is. Here’s Cal’s definition:

 “Professional activities performed in a state of distraction-free concentration that push your cognitive capabilities to their limit. These efforts create new value, improve your skill, and are hard to replicate.”

Why is this important? Ask Cal mentioned, to remain valuable in this economy, master the art of quickly learning complicated things. Mastery comes from deep, deliberate work applied in a consistent and focused manner. We erroneously assume mastery will just come to us if we show up regularly or get enough experience. Certainly, we will gain some knowledge that way. But to become truly exceptional and stand above the rest, apply deep work principles.

Distinguish between shallow and deep work. If we can’t, we will never be able to properly transition into deep work. By minimizing or compartmentalizing shallow work, we create a maximum focus on deep work.

This compressed schedule is possible because I’ve invested significant effort to minimize the shallow in my life while making sure I get the most out of the time this frees up. I build my days around a core of carefully chosen deep work, with the shallow activities I absolutely cannot avoid batched into smaller bursts at the peripheries of my schedule. Three to four hours a day, five days a week, of uninterrupted and carefully directed concentration, it turns out, can produce a lot of valuable output.

Shallow work is inevitable. As much as we hate busywork, there is a certain amount we must manage. So how do we manage through? As Cal advises, we batch our shallow work into blocks where we do nothing else but get through as much as possible. Think of this like a sprint – as soon as we start, we embrace the distracted nature and work to accomplish as much shallow work as possible. As soon as the sprint is over, we stop the shallow work and re-engage in deep work.

Principle 2: Produce Good Work

The second reason that deep work is valuable is because the impacts of the digital network revolution cut both ways. If you can create something useful, its reachable audience (e.g., employers or customers) is essentially limitless—which greatly magnifies your reward. On the other hand, if what you’re producing is mediocre, then you’re in trouble, as it’s too easy for your audience to find a better alternative online.

Because of social media and the internet, anything we do can be quickly disseminated throughout the world. This is the key to building our brand and reputation as a rare and exceptional talent. When we create valuable writing, advice, art, etc, we can share the work with the world. The more people that benefit from what we do, the more valuable we become and the more we control our destiny.

The flipside is also important. Our competition – especially people vying for your job, have the same opportunity to share valuable work. Competition has become meritocratic. We are judged on our actual ability rather than where we went to school or who we know. Anyone in the world can compete with us. There are no geographical or physical boundaries that apply. The brutal competitive environment just got tougher and wont get any easier for us.

The longer you wait to accept this the further back you will put yourself. Eventually, competition will arrive and we will be separated by who can deliver and prove their value and who can’t.

In a seminal 1981 paper, the economist Sherwin Rosen worked out the mathematics behind these “winner-take-all” markets. One of his key insights was to explicitly model talent—labeled, innocuously, with the variable q in his formulas—as a factor with “imperfect substitution,” which Rosen explains as follows: “Hearing a succession of mediocre singers does not add up to a single outstanding performance.” In other words, talent is not a commodity you can buy in bulk and combine to reach the needed levels: There’s a premium to being the best.

There really is a benefit to becoming exceptional at one thing. You don’t have to master every field or become an expert in everything. That’s impossible. The world will reward you if you are exceptional at one thing.

Just being “good enough” doesn’t set you apart. You are still a commodity and are expendable.

Two Core Abilities for Thriving in the New Economy

1. The ability to quickly master hard things.

2. The ability to produce at an elite level, in terms of both quality and speed.

As Cal states, once we master hard things, we then have to prove our mastery. If we keep our mastery inside our head and never tell anyone, no one will ever know. It’s our responsibility to show the world our talents and value. No one else will make sure we get what we deserve.

We see this with college graduates. Just because they have a degree, graduates assume the world will recognize their genius and reward them appropriately. But degrees are becoming totally irrelevant. 20 years ago, it was safe to assume that a college degree led to differentiated skills. It was so much rarer then as it is now. With the proliferation of colleges and the ease of getting a degree, employers are rightfully skeptical of new graduates providing value from day one.

It doesn’t matter where you are in your career. We must take the initiative and prove to world what we can do.

Once you do the hard work of becoming exceptional, don’t neglect to share your work.

Now consider the second core ability from the list shown earlier: producing at an elite level. If you want to become a superstar, mastering the relevant skills is necessary, but not sufficient. You must then transform that latent potential into tangible results that people value.

Principle 3: Utilize Deep Work to Magnify Results

This brings us to the question of what deliberate practice actually requires. Its core components are usually identified as follows:

(1) your attention is focused tightly on a specific skill you’re trying to improve or an idea you’re trying to master;

(2) you receive feedback so you can correct your approach to keep your attention exactly where it’s most productive.

Most people understand the first requirement, even though it’s often hard to put into practice. Deep work requires undivided and sustained attention to your skill. It’s an unnatural habit and mindset that doesn’t come easy. If you struggle at first to maintain focus, don’t give up. Today’s environment doesn’t favor deep work. You are not alone in this struggle. If needed, start with 15 minutes of focused activity, and then aim to increase that by 5 minutes the next time you study. Track your progress on your calendar. Tracking provides a solid record of your progress and provides valuable feedback on your progression.

Don’t think you can switch focus every 5 minutes over the course of a couple hours. This effort needs to be concentrated in one time period. As Cal stated, “…though Grant’s productivity depends on many factors, there’s one idea in particular that seems central to his method: the batching of hard but important intellectual work into long, uninterrupted stretches.”

It takes time to get into the flow with deliberate practice. It’s almost like we need a mental warmup like we would with a physical workout. If we only work for 5 or 10 minutes at a time and then switch our focus, we have to keep starting over every time we re-engage. So make it a habit to start once and continue for 30-60 minutes.

The second requirement is typically missed. We assume by showing up and working hard we will achieve success. But attaining mastery requires a different approach. This approach includes objective and unbiased feedback. Feedback delivers guidance and suggestion and what needs improvement and how to adjust. Without feedback, you are operating blind – you are just showing up and hoping that your actions are leading to improvement. Feedback connects the actions you take with the results you get. If there is no link, you can’t be sure how much success you are achieving and the source of that success.

If you remember one formula, remember this from Cal:

High-Quality Work Produced = (Time Spent) x (Intensity of Focus)

We need to clarify one possible point of confusion. We haven’t said anything about increasing the quantity of hours worked; we have focused just on quality. Quality is reflected in the intensity, focus, and deliberate nature of our practice. While we may need to allocate more time to our skill, first look to optimize the time we already invest. That alone should vault us to the top echelons of our skill. Afterwards, we can add in more time if necessary. But given our competing schedules, it’s not always possible to add more time. So remember, it’s always quality over quantity - focus on improving the time you already spend (quality) before thinking about adding more time (quantity). As Cal mentions below, top students don’t become best just by working longer, they work smarter.

The best students understood the role intensity plays in productivity and therefore went out of their way to maximize their concentration—radically reducing the time required to prepare for tests or write papers, without diminishing the quality of their results.

Principle 4: Design Your Environment to Enable Deep Work

The Principle of Least Resistance: In a business setting, without clear feedback on the impact of various behaviors to the bottom line, we will tend toward behaviors that are easiest in the moment.

Busyness as Proxy for Productivity: In the absence of clear indicators of what it means to be productive and valuable in their jobs, many knowledge workers turn back toward an industrial indicator of productivity: doing lots of stuff in a visible manner.

Cal’s two principles highlight a major roadblock against deep work. Our environments, especially professionally, are poorly designed to enable deep work. It’s a constant barrage of emails, interruptions, and scattered meetings. When we show up to work and attempt to “willpower” our way into deep work, we may find some short-term success, but will ultimately succumb to behaviors and actions that are the easiest and offer the least resistance. Instead of toughing this out, we need to rethink how we design our work environment to enable deep work, and not shallow work, to be the default mode of action.

As Cal stated, without clear feedback, we can’t separate deep work from shallow busywork. When we deliberately set up practice that delivers immediate feedback and results in clear, unambiguous progress indicators, we have begun engaging in deep work. There is an easy test to determine if work is shallow or deep:

Does our work:

1)     provide feedback?

2)     provide verified, measurable progress?

For example, email provides no feedback and no measurement of getting better at anything.

However, writing and publishing an article through an email list does – people will respond with comments and feedback. You can track open rates and other metrics to judge readership progress. The goal is to always engage in some project that allows you to receive feedback and measurable results.

Testing is another great example. For example, if you are studying for your CPA exam, practice tests provide both feedback (you’re able to compare your answer to the correct answer, often with explanations showing where you went wrong) and measurement (you can track your scores over time and see an unbiased measurement of your progress.

If you believe in the value of depth, this reality spells bad news for businesses in general, as it’s leading them to miss out on potentially massive increases in their value production. But for you, as an individual, good news lurks. The myopia of your peers and employers uncovers a great personal advantage. Assuming the trends outlined here continue, depth will become increasingly rare and therefore increasingly valuable.

Not only does deep work provide better engagement, it provides a huge advantage over your competition. The benefits are double. Deep work provides more long-term satisfaction on a personal level, and provides a sustainable competitive advantage in your career.

As Cal states, “Human beings, it seems, are at their best when immersed deeply in something challenging.”

Principle 5: Schedule Your Day

Seinfeld began his advice to Isaac with some common sense, noting “the way to be a better comic was to create better jokes,” and then explaining that the way to create better jokes was to write every day. Seinfeld continued by describing a specific technique he used to help maintain this discipline. He keeps a calendar on his wall. Every day that he writes jokes he crosses out the date on the calendar with a big red X. “After a few days you’ll have a chain,” Seinfeld said. “Just keep at it and the chain will grow longer every day. You’ll like seeing that chain, especially when you get a few weeks under your belt. Your only job next is to not break the chain.”

As the Seinfeld lesson shows, showing up every day, in a consistent manner, can produce incredible results. But how can you ensure that you show up every day? We’ve all resolved to stick to a diet or workout plan, but most of us fail after only a few days. How can we approach this differently?

One idea is to schedule out your day hour by hour. This may sound extreme, but top performers use specific schedules to thoroughly plan their day. Without an exact schedule, you simply fill in your day with whatever is convenient. Sure, there might be good days where you engage in deep work. But most days end up like we described in lesson 6. You fill your day with the activities that are the most painless, not the most productive. Deep work can be painful because it’s intense and focused. It takes a certain amount of dedication to commit the energy to focus. It doesn’t appear naturally or easily, which is why we must schedule our deep work sessions.

I should admit that I’m not pure in my application of the journalist philosophy. I don’t, for example, make all my deep work decisions on a moment-to-moment basis. I instead tend to map out when I’ll work deeply during each week at the beginning of the week, and then refine these decisions, as needed, at the beginning of each day (see Rule #4 for more details on my scheduling routines). By reducing the need to make decisions about deep work moment by moment, I can preserve more mental energy for the deep thinking itself.

At the beginning of each week, we map out our Monday through Friday hour by hour. This won’t be perfect. Changes are to be expected as the week won’t unfold exactly like we planned it. But this schedule gives us the best chance to prioritize deep work time instead of trying to fit it in. 

There is a popular notion that artists work from inspiration—that there is some strike or bolt or bubbling up of creative mojo from who knows where… but I hope [my work] makes clear that waiting for inspiration to strike is a terrible, terrible plan. In fact, perhaps the single best piece of advice I can offer to anyone trying to do creative work is to ignore inspiration. In a New York Times column on the topic, David Brooks summarizes this reality more bluntly: “[Great creative minds] think like artists but work like accountants.”

Scheduling doesn’t reduce our creativity or spontaneity. Scheduling deep work and creativity reinforce one another. By blocking off time for deep work, we stop worrying about how we will get everything done. Instead, we build contentment by actively choosing our schedule and not letting life choose our priorities.  

[J.K] Rowling’s decision to check into a luxurious hotel suite near Edinburgh Castle is an example of a curious but effective strategy in the world of deep work: the grand gesture. The concept is simple: By leveraging a radical change to your normal environment, coupled perhaps with a significant investment of effort or money, all dedicated toward supporting a deep work task, you increase the perceived importance of the task. This boost in importance reduces your mind’s instinct to procrastinate and delivers an injection of motivation and energy.

Copy Rowling’s habit of using a grand gesture – any environment or ritual that gets you in the right mindset to create deep work. Simplicity is key. A separate, dedicated room just for deep work. A sacred time, off limits to other activities. It can be working in the same coffee shop or library. Any activity or environment that triggers the mental state of deep work is fine. Don’t overthink this.

Principle 6: The 4 Disciplines of Deep Work

Cal referenced the book, The 4 Disciplines of Execution, which provided 4 disciplines to enhance deep work. Implement these immediately in your routines.

Discipline #1: Focus on the Wildly Important

As the authors of The 4 Disciplines of Execution explain, “The more you try to do, the less you actually accomplish.” They elaborate that execution should be aimed at a small number of “wildly important goals.”

If you try to do everything you will end up doing nothing. It’s hard to cutoff of choices and not do certain things. To become exceptional, you must focus your activities on the elite few.

Warren Buffet’s Advice

Warren Buffet once discussed career objectives with his personal pilot, Mike Flint. Flint wrote down his 25 top goals and Buffet had him circle his top 5. Flint described how he would begin working on his top 5 right away, but would work on the other 20 when he found time.

Buffet quickly admonished Flint, saying, “No, you’ve got it all wrong, Mike. Everything you didn’t circle became your Avoid-At-All-Cost list. No matter what, these things get no attention from you until you’ve succeeded with your top 5.”1

As Buffet makes clear, avoid spreading your attention to wide. You can’t do everything and attempting to do so will ensure failure.

Discipline #2: Act on the Lead Measures

Lead measures, on the other hand, “measure the new behaviors that will drive success on the lag measures.” In the bakery example, a good lead measure might be the number of customers who receive free samples…In other words, lead measures turn your attention to improving the behaviors you directly control in the near future that will then have a positive impact on your long-term goals…For an individual focused on deep work, it’s easy to identify the relevant lead measure: time spent in a state of deep work dedicated toward your wildly important goal.

Always measure the most direct actions you are taking towards your goal. If you are writing, it is time spend in deep writing. If it’s sports, it’s time spent in deep practice. These are the lead measures that will produce exceptional results. Focus on consistent progress on your lead measures, and you won’t have any trouble reaching your long-term goals.

Discipline #3: Keep a Compelling Scoreboard

As each week progressed, I kept track of the hours spent in deep work that week with a simple tally of tick marks in that week’s row. To maximize the motivation generated by this scoreboard, whenever I reached an important milestone in an academic paper (e.g., solving a key proof), I would circle the tally mark corresponding to the hour where I finished the result.* This served two purposes. First, it allowed me to connect, at a visceral level, accumulated deep work hours and tangible results. Second, it helped calibrate my expectations for how many hours of deep work were needed per result. This reality (which was larger than I first assumed) helped spur me to squeeze more such hours into each week.

A scorecard keeps an accurate tally of your deep work hours and tracks your major milestones. You never want to keep this in your head. A written record of your effort and progress is powerful. It forces you to track and analyze how well you are really doing. If you don’t write it down, it doesn’t count.

Discipline #4: Create a Cadence of Accountability

The 4DX [The 4 Disciplines of Execution] authors elaborate that the final step to help maintain a focus on lead measure is to put in place “a rhythm of regular and frequent meetings of any team that owns a wildly important goal.” During these meetings, the team members must confront their scorecard, commit to specific actions to help improve the score before the next meeting, and describe what happened with the commitments they made at the last meeting.

Your own personal accountability should be measured weekly by diligently assessing your progress and noting the success and failures. This exercise is meant to inform you of repeated, consistent roadblocks that hinder your progress. It’s not a judgment, it’s a reflection. It’s not meant to be personal, just to keep you unbiased and objective.

Principle 7: The Difference Between “What” vs. “How” (or why so much advice is worthless)

There is, however, a lesser-known piece to this story. As Christensen recalls, Grove asked him during a break in this meeting, “How do I do this?” Christensen responded with a discussion of business strategy, explaining how Grove could set up a new business unit and so on. Grove cut him off with a gruff reply: “You are such a naïve academic. I asked you how to do it, and you told me what I should do. I know what I need to do. I just don’t know how to do it.” As Christensen later explained, this division between what and how is crucial but is overlooked in the professional world. It’s often straightforward to identify a strategy needed to achieve a goal, but what trips up companies is figuring out how to execute the strategy once identified.

My biggest critique of self-help and management books is the focus on the “what” instead of the “how”. We all know we should be better leaders, more effective managers, more inspirational, more forward-looking, and so on. The challenge is how to actually do that in real life. Most advice never advises you on how to actually become a better leader or a master of your skill. They are full of clichés and vague one-liners. They never give you step-by-step instructions on practical steps. They seem to think by knowing what you need to do, you will just figure out how to do it. That’s exactly where progress stops. Most of the time, we know exactly what we need to do. It’s how to do it that’s the problem.

The goal of this article was to convert the “what” (7 principles) into the “how” (practical implementation steps). Here’s a quick summary of the 7 Principles:

Principle 1: Must Identify Shallow vs. Deep Work

Principle 2: Produce Good Work

Principle 3: Utilize Deep Work to Magnify Results

Principle 4: Design Your Environment to Enable Deep Work

Principle 5: Schedule Your Day

Principle 6: The 4 Disciplines of Deep Work

Principle 7: The Difference Between “What” vs. “How” (or why most advice is worthless)

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The Resilient Investor: 10 Habits of Mentally Tough Investors

Great investors develop mental toughness through proper mindset and habits. These are 10 guiding principles to condition the mind for investment success. 

1. They Don’t Worry About Issues Outside Their Control 

Much of investing and life is outside your control. Wise investors learn to recognize what they can control and what they can’t. The things that can’t be controlled are ignored. 

2. They Don’t Obsess Over Volatility

It’s a fact: every day markets go up and down. Trying to obsessively negate volatility usually worsens it. The value of every asset you own, including your own human capital, moves up and down every day. Only you don’t see it, so you normally don’t worry about it. Do the same for random market fluctuations. 

3. They Don’t Judge Success by Short-Term Results

Great things take time – going through medical school, becoming a professional athlete, or mastering chess. Investing is no different. The quick wins in investing are usually random and short-lived. Luck rules in the short term, process rules in the long term.

4. They Don’t Blindly Follow Popular Wisdom

Great ideas develop from an independent and thoughtful analysis – and may or may not conform to the crowd. While the crowd is often right, it spectacularly fails when you need it the most. The crowd is not the judge of a good vs. bad decision. Facts and reason are the judge.

5. They Don’t Abandon Their Strategy

All strategies temporarily fail at some time. Even the winningest coaches and athletes have losing seasons and rough periods. Thoughtful investing plans go through the same ups and downs. Investors constantly chase what is working today, only to get in at the peak and bail at the bottom.

6. They Don’t Feel the Market Owes Them Anything

Whatever insight or idea you believe is the next big thing is not as good as you think it is. At best it’s probably mediocre and at worst it’s a disaster. The market does not exist to guarantee a happy retirement. It doesn’t always work out. It doesn’t care how hard you work. Investing success is dependent on accepting that you are entirely responsible for your success or failure.

7. They Don’t Compare Results to Other Investors

There will always be investors richer than you so get over it. When most investors talk about their big winners they are either lying or selectively forgetting about all losers they’ve had. Comparisons to others only inflame ego and emotionally destructive decisions.

8. They Don’t Have Absolute Confidence

Great investors have an understated confidence: confident in their long-term process, humble in their short-term forecasts and market predictions.

9. They Don’t Stress Over Continuously Changing Conditions

As the saying goes, the only constant is change. Great investors embrace unpredictability, amateur investors are paralyzed by it. Success comes not from anticipating change, but adapting to change.

10. They Don’t Live in the Past

Of course the past is obvious in hindsight. Great investors accept their mistakes, omissions, and failures. The past is a sunk cost. All that matters is you learn from the past and then move forward. Focus on today and your plan going forward.