Understanding Memory

In the recommended reading section, you’ll find three authors that have helped me realize the limits, and benefits, of memory (Cialdini, Kahneman, Munger). Understanding how memory works is helpful for:

  • Creating systems to avoid repeating mistakes
  • Creating schedules to refresh one’s self in the memories of key individuals
  • Understanding how the recent past will skew current decision making
  • ‘Tricking’ yourself into satisfaction

My main system for personal planning is my annual review (an extract from my plan). In my extract, you’ll find notes (some dating back to ancient times) that show how I sustain memories.

A handful of individuals have had a disproportionately positive impact on my life. It’s near impossible to know which situations are going to be “big winners” (hopefully, your spouse and kids score well). Focusing on my “winners” is a strategy that’s served me well.

Two weeks ago, I shared how I map my family eco-system. I’ve found that having fun once a quarter is what it takes to have a strong relationship with people (I don’t live with). Between the quarterly “fun,” I like to work on projects with the key people in my life.

Understanding the impact of the recent past is what I want to discuss today. Specifically, how past memories influence current investment decisions. 

I’ve found that my memory is dominated by the last three years and this is very dangerous for my decision making. An example can been found in our perception of public figures – cast your mind back to:

  • Bill Clinton (impeached in December 1998)
  • Yahoo (peak market cap in January 2000)
  • Tiger Woods (infidelity scandal in November 2009)

The value in understanding the flaws of memory, lies not in keeping ourselves vigilant towards others! The value lies in avoiding traps in our own lives.

Since 2009:

  • the yield on low-risk assets has disappeared
  • investment capital has been tough to find
  • most of us have experienced very low inflation
  • long-term interest rates are the lowest for 150 years

Despite the unique nature of all-of-the-above, most of us expect these situations to prevail for the next three years. In my cognitive world, three-years-backwards and three-years-forwards seems very close to the definition of forever. Some big mistakes are going to be made over the next decade!

Whether I’m feeling stressed about the rate of return on my portfolio, or worried that my kids will never mature… I’m going to give too much weight to the last 18 months and expectations for the next 18 months.

My family history tells me that the near-future (measured ten years out) is going to be nothing like we expect. For 20 years out, we’re totally clueless! 

I would encourage you to pause and consider how the recent past may be skewing current judgements. I’ve been finding mistakes in my own thinking (some potentially worth a lot of money to my family).

I’m going to share a couple of mantras that I use when I’m unsure. The present is so different from the last 50 years that I’m returning to basics:

  • If in doubt then wait
  • The most important part of investing is saving
  • Be patient, wait for panics and mean reversion
  • Collect experiences, not possessions

To end, remember that we can favorably skew the memories of others by having fun with them quarterly!

Finally, ask your spouse (or kids) how often they have fun with you. With the holidays coming up, we can get strategic benefit from fun and strategic gifting (small, frequent and unexpected).

Athletic Illusions

Question from a reader:

Why do we tend to crave/desire/pursue a path that doesn’t necessarily makes us happy? How come the external success (money, speed- race results, etc.) we work so hard for (both mentally and physically) does not lead to us being happier? Why does that disconnect which you wrote about it exist? How come external success is an illusion?


I’m going to share some insights but much better would be to read Thinking, Fast and Slow as well as Seeking Wisdom. It takes effort (that most will never make!) to understand those books. The knowledge you gain will serve you, and your family, very well. Applying the knowledge in the books has saved my family time, money and suffering.

To kick off, not everyone makes poor decisions – I make poor decisions in some areas and excellent decisions in other areas. So consider the specific area where you’d like to improve. The areas where I make poor decisions (trusting too much, character) have been the same for many years. Knowing my blind spots, I make those decisions more slowly and take advice from my wife (much stronger in that area than me).

I accept the fact that my family is going to make mistakes – what we want to do is share the knowledge from our mistakes, write it down, and remind ourselves of the mistakes in our family’s history. I also want to make sure that we evaluate decisions based on the information we had when we made the decision. Written records such as file notes, investment summaries, budgets and strategic plans are essential to learn from decisions and evaluate the quality of those choices.

You mention happiness – my most important technique is to write down the characteristics of my “good days.” The simplicity of these days amazed me – because they were so simple, nothing stood out and nothing was remembered! The pleasure of quiet serenity disappears into the background stress of a busy life. 

Because I know that the media doesn’t understand what makes me happy, I do my best to limit media sources. If you look deeply at the source of the goals that leave you most disatisfied then you’ll often find a root in our popular culture, reflected in all sources of media (most toxic are popular culture, anonymous forums and tabloid journalism – we must ditch these when self-esteem is an issue).

The happiest weeks of my life are when I disconnect and exercise with my wife in nature. I share this observation because it is the purest form of my athletic motivation and I don’t need to win, or even attend races, to achieve this goal! A big motivator for my current restructuring is arriving at a point where I can greatly reduce connectivity. So far, I’ve managed to break free from Facebook and greatly reduce email time – thousands of (serene) hours will flow into my life from these two changes.

Think deeply about endurance sports and you may see that it is the time alone, and the exercise, that drives the psychic reward. It’s not the achievement. 

With athletic goals, I’ve released myself from the expectation that ANY goal will ever make me happy. This is very different from focusing on a thought that achieving goals will never make me happy. I’ll explain.

If the goal is happiness then focus on what makes you happy… …working towards goals that create a life with meaning.

Goals provide incentives to create a way of life via structure. Structure, routine and directed work (resulting in progress) create meaning. Making the transition to seeing “a way of life” enabled me to take a holistic approach to athletics. If the goal is an incentive to follow a path then the game is about the “how.” I have many roles… husband, father, teacher, coach, writer, employee, custodian, fiduciary… I meet my commitments to those roles while working towards my goals. I’m cautious about making commitments and stubborn about keeping them.

Even if goals are illusory, even if they won’t bring happiness in themselves, even if I’m going to want something different in ten years times… my current life is far better when I am engaged in a project that creates value for myself, and my inner circle.

The key is to think deeply so that I choose wisely.

That’s the purpose of my writings.


A Family Web

One of the great things about having friends that are older than me is the ability to access their experience. The things that bring me satisfaction in my 20s, 30s and 40s are similar but not identical. I’m not great at predicting what I’ll value in ten years time and need to be cautious with major decisions.

I’ve never had strong attachment to geography, or possessions. Earlier this year, I created a plan to move my family from Colorado to California. I started with the numbers… primarily a budget and a real estate search. The numbers showed a significant increase in my cost of living. Given that I wasn’t cash flow positive at the time, I made the decision to downsize, then reassess.

As part of my review, I considered the people in my life. A common “problem” of old age is loneliness and constantly hopping around the world makes it tougher to establish roots. Given that we have three kids, a strategic goal for my 50s is to create a life where my kids will visit, at least occassionally.

So I drew a picture – I’ve generalized into categories for this article. My original chart started with the people who are important to me and the people with whom I spend a lot of time. It took me a couple of iterations to get to what you see below.


I’ll chat you through the key parts of the wheel:

Spouse – my wife is “me” both legally and practically. That’s how we’ve set up our marriage and how I manage my life. Full disclosure and unity exposes us to risk but greatly increases our likelihood of success. Also makes it easy for me to explain my relationship, “just assume we’re, effectively, the same person.”

Kids – I’ve changed my life to spend a ton of time with my kids. With preschoolers, and spouses, I’ve found that near daily involvement works best. That said, we schedule breaks from each other. It’s always tempting not to take a break.

Friends & Mentors – I ask myself, “Who are the people that I’d travel to visit?” Even for people in your hometown, this is a good test of how much you value the relationship. If you don’t care enough to travel then you probably don’t care. Most my friends are mentors, helping me improve an aspect of my life. 

Key Family – same test as Friends & Mentors – if I won’t travel then they aren’t key.

Secondary Family – even if people aren’t key to me, they might be key for educating my kids, important to my wife or essential for the overall strength of my family. It is worth making an effort to maintain a relationship with these people.

Career / Work / Education – how do I fully utilize my skills and create a life with meaning outside of my friends and family?

Family & Business Support – I run a number of functions within my family and work life. Who are the key people that help me achieve my family and business goals?

Succession Plan – Who replaces me if I die suddenly? In thinking about the sudden death role, I consider: acceptable to spouse and family; independence; known to spouse for a long time; family connections between generations; and alignment with family values. If I live a long life then it’s up to my wife and me to guide the education of our kids (an important legacy that we will leave behind).

Community – this is an area where most of my friends have deeper ties. I suspect that community roots will become more important as I age. My strongest community is virtual yet my older pals value their face-to-face community most highly.

Once I had all the names down on paper, I wrote everyone’s country and state beside their name. As an international man of mystery, it surprised me that 90% of my spokes were Colorado-based. Most of the out-of-state connections were likely to move over a ten-year time horizon. Further, many of my non-Boulder buddies tell me that they are likely to move within five years. 

I’ve made a similar chart for places (rather than people) in my hometown. I like my life to have a high walkability index with easy access to childcare, schools, groceries, coffee, restaurants, weight training and bike routes.

This was a surprisingly useful tool to explain my life to the key people in my web. Within a family, it is surprising how little we know about the other members.

In private, I asked myself if my actual time allocation matched my life’s priorities, and those of my family. I’m laying out my next 12 months and my chart helped me set priorities.

Take time to consider who’s truly important.