Skepsis #42: The goal and the path
Doing things right vs doing the right thing. Also, bitcoin, NFTs, noise, and Matthew McConaughey.
Back with another edition of the Skepsis newsletter. This time I’m covering two important mental models, why bitcoin is valuable, as well as some interesting pieces of content I’ve come across during the past weeks.
Efficiency vs. effectiveness
A foundational mental model that applies to both personal and organizational productivity is the dichotomy between efficiency - doing things right - and effectiveness - doing the right thing. In other words, being efficient is concerned with the process used to achieve a result, and being effective is about the degree to which you achieved the result you actually wanted.
For example, say you're taking your car on a road trip across the country and you've planned to be on the road for 7 days; your goal is to see as many interesting places as possible. In this case, being efficient would mean taking the optimal path and getting to each city or place as fast as possible. Being effective is about whether or not you saw as many places as you wanted and then - perhaps retrospectively - whether or not those were the most fun places to visit. An inefficient route would be one that is needlessly long or requires many stops, whilst an ineffective route would be one that takes you to the wrong places or misses some places you'd have wanted to see.
It's a useful distinction to keep in mind. Either you can waste your time working on the wrong goal (being ineffective) even though you're doing the work itself very well (efficiently). Or you can be working in a suboptimal manner but towards the right goal: being inefficiently effective.
All things equal, you're probably better off trying to be effective rather than efficient, as that is what enables you to actually reach your goals. Of course, if you can be both that's always more desirable but sometimes there are tradeoffs you need to make. Knowing the difference between efficiency and effectiveness is useful so you can make sure that you're optimizing for the right thing.
Two modes of growth
A big mistake we make when we try to predict or think about the future is that we often project our current circumstances onto the future, neglecting various possible changes and improvements - especially compounding improvements.
Logarithmic growth - fast initial improvement, asymptotic (approaching zero) growth as time goes on.
Exponential growth - as you get more growth, growth increases more and more for every unit of time. This is compound growth.
Skill-building, learning, and personal development is an area of life that usually follows a logarithmic growth trajectory - fast initial improvements but slow or stagnant growth later. Business growth or investing is often more exponential if successful - slow growth early on with accelerating growth later through compounding returns.
This causes us to overestimate what we can do in one year, and underestimate what we can accomplish in 5-10 years. Equally, we overestimate what we can do in one day and underestimate what we can achieve in one year.
A clear example of faulty thinking about growth was the mistakes the media (and many public institutions) made in the early days of COVID-19, projecting linear rather than exponential growth. The increases were small and negligible in the beginning; 12, 20, 35, 50, 90 cases day after day. But we miss the looming explosion when we expect linear or logarithmic growth, even as exponential growth is staring us right in the face.
The case for bitcoin
As readers of this newsletter are very smart and well-read, I’m assuming you already have some familiarity with bitcoin. So I won't cover any basics for now. But if you like me, also have a lot of questions about cryptocurrencies Id be happy to dive deeper into the topic in a future edition of Skepsis. Let me know what you’d like to learn more about by replying to this email or in the comments!
All the problems and risks associated with cryptocurrencies notwithstanding, the best argument I’ve heard for the long-term viability, value, and need of an asset like bitcoin comes down to the fact that it is a globally accessible and decentralized store of value.
In the developed world, it’s a feature that doesn't strike most people as particularly useful as we already have well-functioning institutions and reliable currencies, banks, etc. But for a lot of people, arguably most people in the world, it’s a feature worth its weight in gold - literally.
The ability for anyone to save or store money in a globally accessible asset like bitcoin means that they can move from any country to any other country, all the while knowing that their assets are safe and that they can be exchanged for fiat (regular) money in the local market. And even more importantly, they don't need anyone's permission to do so.
Imagine that you're someone in a middle-class family living on the outskirts of Aleppo in 2011, your whole life and neighborhood are about to get completely destroyed. You have little hope of escaping with any material wealth except what you can carry with your bare hands. Even if you're lucky enough to have physical US dollars on hand, maybe it will get seized by border control or perhaps you'll get robbed in a refugee camp.
If you could store your savings as bitcoins, taking that money with you to any other place on earth is as easy as remembering a password. No domestic or foreign government can keep you from accessing your bitcoin. Exchanging your crypto for large amounts of fiat currencies is probably a little more difficult, but at the very least, the value isn't lost. Of course, this is also the dream of most organized criminal gangs and cartels, but it's also extremely valuable for people that need the same features but have more mundane or ethical reasons for it. Criminals also use our roads and highways, does that mean we shouldn't have them or fund them with taxes?
So it is the flexibility, long-term viability, and global acceptance of bitcoin that makes it so special. Gold and some other commodities may have similar properties but are much less accessible and portable in physical form. To access your bitcoin, all you need is a USB stick, a piece of paper, or a good password. We might not be buying our morning coffee with bitcoin any time soon - if ever - but bitcoin solves a problem no other commodity or money has been able to solve yet.
What is an NFT and how do you sell it?
On the topic of crypto; I recently came across this video on how to sell an NFT. NFTs are so-called Non-Fungible Tokens - cryptographic assets that represent some sort of unique tokens. They are distinct from each other and valued by which one you have. Like a piece of art or a collectible item. NFTs makes it possible to represent such things digitally, something that hasn’t really been possible with regular digital files that can be copied, like an mp3 song.
Noise is not bias
In Daniel Kahneman’s new book “Noise: A Flaw in Human Judgment” he outlines all the ways in which “noise” hampers our ability to make good decisions. Noise is distinct from bias in that biases are reliable errors we make based on the way our brains are wired or our cultural background. Noise is the discrepancy or the difference between people’s judgments due to other factors and randomness - even as they might display the same bias. In statistical terms, it’s the standard deviation among a distribution of results/decisions/judgments. In this interview, Micheal Shermer interviews Kahneman about the book and all the ways in which our judgments are irredeemably flawed.
How Matthew McConaughey reads a script
Good actors don't remember the lines, they understand the character they're portraying and the circumstances they are in so that they convey the story that the writer is trying to tell.
As someone that’s worked a lot with product management, I realized that there's a rather non-obvious similarity between what actors do and what you do in product development, in that your goal as a product manager is to translate an underlying need, a story, or a requirement into something that others can understand and make a reality.
As always, stay safe out there.
/Phil