Clutter and the Clean Slate.
“To attain wisdom, subtract things every day.” -Lao Tzu
“If Berkshire has made modest progress, a good deal of it is because Warren and I are very good at destroying our own best-loved ideas. Any year that you don’t destroy one of your best-loved ideas is probably a wasted year.” -Charlie Munger
How often does one get a fresh start at anything in life? How long does empty space last?
I tend to collect stuff. Sometimes that’s helpful, like when someone asks about that time Seth Klarman, now managing one of the largest hedge funds, told Barron’s that he wanted to keep the fund small. And I can tell them that it was in 1991 and produce a pdf of the article. But it leads to clutter: to stacks of books and notepads, to piles of pens, and boxes full of things that are “zu schade zum Wegwerfen” – it would be a shame to throw them out.
I worry that I collect ideas and beliefs the same way. I find one, pick it up, take it home with me. I move it around a bit until it finds a place on a shelf. Then it starts collecting dust. It has no expiration date and is not subject to regular examination. Who knows, it might be useful at some point?
But not only might it become outdated and wrong, it also blocks space for new ideas.
Calendar? Busy. Bookshelf? Bursting. Portfolio? Invested. Answers? Ready. Mind? Full. Openness for new ideas? Crickets.
Nick Sleep wrote that an investor’s worst mistake was “to sell a stock that goes on to rise tenfold, not from owning something into bankruptcy.” That people looked at “actual costs, not opportunity costs.” What he didn’t mention was that the two could be related. Holding on to the stock careening towards bankruptcy can block you from even having the bandwidth to find the next winner, let alone the cash. Holding on to a bad idea might be less costly than missing out on a great idea – except if it prevents you from investing in the great idea.
Chris Dixon illustrated this when he wrote about the hill climbing problem: climbing the highest hill without visibility requires some randomness in order to avoid getting stuck at a lower peak (a local maximum). Getting to the “best” ideas similarly requires some slack, some empty space and time for exploration lest we settle for ideas that are just good enough.
We can make space in two ways: by subtracting things or by creating a blank slate. If we don’t do the former, we may end up having to do the latter.
Stephen King wrote in his book On Writing about his editing process. After writing a first draft with the “door closed,” just him and his muse in attendance, he edited his second draft with the “door open,” that is with his audience in mind and feedback from the outside world. In this rewriting process, he chiseled away all that was not important to the story (or at least a lot of it, thinking of works like The Stand). King implored writers to not get emotionally attached to ideas expressed in the first draft. “Kill your darlings,” he wrote, “kill your darlings, even when it breaks your egocentric little scribbler’s heart, kill your darlings.”
Jeff Bezos once observed that “the smartest people are constantly revising their understanding, reconsidering a problem they thought they’d already solved.” My friend Tom Morgan wrote that “your old model needs to be destroyed before it can be replaced.”
Honestly, this sounds exhausting and unpleasant. I can feel the resistance creeping up. We’re comfortable with what we know. We’ve invested time and energy and now we’re attached. We may be afraid of the implications of letting go. Without this belief, this idea, this habit, who am I?
But if you don’t kill a dearly-held belief now and then, the world may force you to take a more radical approach. If we allow our thinking to get cluttered and outdated, we may find ourselves so out of touch that hitting reset is our only hope.
Hedge fund manager Michael Steinhardt, for example, would sell his entire portfolio if he felt completely out of touch. He wrote in No Bull:
“Irregularly, my substantial turnover of the portfolio was itself exacerbated by my decision to 'start all over again.' I would decide I did not like the portfolio writ large. I did not think we were in sync with the market, and while there were various degrees of conviction on individual securities, I concluded we would be better off with a clean slate. I would call either Bob Mnuchin at Goldman Sachs or Stanley Shopkorn at Salomon Brothers and ask to have us taken out of the entire portfolio. In one swift trade, one of these firms would buy our longs and cover our shorts, often after extensive negotiation. In an instant, I would have a clean position sheet. Sometimes it felt refreshing to start over, all in cash, and to build a portfolio of names that represented our strongest convictions and cut us free from wishy-washy holdings.”
In 1994, his worst year, his fund was down 31 per cent. The failure dominated his life and he “could focus on nothing else.” He needed the clean slate to reset.
“The only redeeming part about ending an awful year is that you wipe the slate clean and start all over again.”
In his risk manual for traders, Paul Tudor Jones incorporated a similar approach:
“We have found it necessary to force traders to sit out of the market when these drawdown levels are reached for many reasons, including the following: a chance to cool off and detach … time to evaluate their goals and objectives, reasons for failure and trading methodology … time to do some psychological self-evaluation … a chance to interrupt negative behavior patterns.”
Furthermore, “drawdowns will be accompanied by reduction in trading size, trading for liquidation only, and vacations.” At a certain drawdown level, traders did not just have to time out but be subject to “a complete liquidation of all trades.” Jones recognized the need for a clean slate if a trader found himself too deep in a failing idea.
A better way.
That sounds even less fun, doesn’t it? Is there middle way? Perhaps it’s a deliberate and scheduled clean slate.
During an evening honoring the late George Carlin, comedian Louis C.K. recalled his early career when he had found himself in “a really bad place” with a tired and unsuccessful standup routine.
“I had been going in a circle that didn't take me anywhere. Nobody gave a shit who I was and I didn't either. I honestly didn't. I used to hear my act and go ‘this is shit and I hate it.’ But I've been doing it for 15 years and stopping it now is like getting out of prison. What do you do after 15 years of stand-up comedy? How do you re-enter the workforce? I had been doing the same hour of comedy for 15 years and it was shit, I promise you.”
One day he heard Carlin, his idol, discuss the habit of throwing out all of his material at the end of every year. C.K.’s first reaction was consternation, “that's crazy how do you throw away — it took me 15 years to build this shitty hour. If I throw it away I got nothing.” He was scared and desperately clinging to what he had, even though it wasn’t working. Carlin, however, gave him the courage to start fresh on a regular basis, to reinvent himself over and over again.
This hit me hard because I was that person holding onto a failing act. I spent a decade thinking if only I wore the right suit and tried to fit in, surely I could mold myself into the character I wanted to be. I struggled from job to job without excelling and without ever feeling resonance with my mission in life. I knew that what I was doing was not working. But I didn’t have the courage to kill my darlings. I held on to the safety of income and the status that came with a good job. And unlike Michael Steinhardt, I never dumped all my positions to start from scratch. Nope. Not me. I was hanging on.
I was, at last, stopped out by life. By my last boss to be precise. At the time, it felt like the final failure, the moment in which I realized “I got nothing.” But in the shambles of my career I found a thread that led me to a new path. I had failed in a conventional sense. But at least I was free. Free to fumble my way forward in the fog of my new life.
Still, I worry that I may repeat the same mistakes of accumulating clutter and not investing enough in exploration.
I have four tall bookshelves and two cube organizers filled with books. Not that I’ve read them all. In fact, some of those books look a lot less exciting today than when I bought them. But I resist removing those books. They still hold the promise of secrets to be uncovered. And yet, their presence restrains my openness. Why buy a new book when I have stacks of works unread? Why investigate a new idea when I have notebooks filled with threads unfollowed? This is how clutter works.
I’m not suggesting to go all Marie Kondo, throw everything in a big pile and remove everything that doesn’t spark joy. Then again, it’s not the worst idea I’ve heard. And I started removing some books. Some will go into boxes first. And if I don’t miss them, if I forget I ever had them, I will be able to let go. I see this as a first step in a new practice of conscious elimination.
Do you know where clutter accumulates in your life? In your beliefs, your mental models, your portfolio, your home, in closets, the garage, under the bed, on your calendar, in your wallet? How often do you examine this? How difficult is it for you to let go? What are you holding on to that you no longer need? And why?
Do you have a process to regain your space before life forces you to wipe your entire slate clean?
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