Tim Ferriss recently had author and Jim Collins on his podcast to discuss his research and what he’s learned about business over the years. Collins has sold over 10 million books including Good to Great and Built to Last.
Collins mentioned he was lucky enough to be mentored by the late-Peter Drucker and shared two things he learned from one of the most well-known minds on business strategy. Drucker told Collins:
Don’t make a hundred decisions when one will do.
The idea here is life becomes easier when you make one big decision that can be replicated over and over again. Collins actually wrote the forward to the 50th-anniversary edition of Drucker’s book The Effective Executive where he shared 10 lessons he learned. This was his description of Drucker’s idea about big decisions:
We’re continually hit by a blizzard of situations, opportunities, problems, incidents—all of which seem to demand decisions. Yes. No. Go. No-go. Buy. Sell. Attack. Retreat. Accept. Reject. Reply. Ignore. Invest. Harvest. Hire. It can feel like chaos, but the most effective people find the patterns within the chaos. In Drucker’s view, we rarely face truly unique, one-off decisions. And there is an overhead cost to any good decision: it requires argument and debate, time for reflection and concentration, and energy expended to ensure superb execution. So, given this overhead cost, it’s far better to Zoom Out and make a few big generic decisions that can apply to a large number of specific situations, to find a pattern within—in short, to go from chaos to concept. Think of it as akin to Warren Buffett making investment decisions. Buffett learned to ignore the vast majority of possibilities almost as background noise. Instead, he made a few big decisions—such as the decision to shift from buying mediocre companies at very cheap prices to buying great earnings machines at good prices—and then replicated that generic decision over and over again. For Drucker, those who grasp Buffett’s point that “inactivity can be very intelligent behavior” are much more effective than those who make hundreds of decisions with no coherent concept.
One of the reasons it’s hard for many people to make important decisions is because they have no decision-making process in the first place. We focus our attention on minor, meaningless tactics while ignoring the big ideas that could actually have a lasting impact.
Life hacks make for good 90 second viral Internet videos but the minutiae will never help you get ahead in life. It’s the big picture systems, not short-term tactics that help you go from chaos to concept when making decisions.
And those overhead costs Collins talks about make it even hard to make good decisions because focusing on the small details all the time leads to decision fatigue. Your brain needs rest just like the muscles in your body need a break after strenuous activity.
Here are some ways to avoid making a hundred decisions when one will do:
Define the things you won’t invest in. Worldwide, there are something like 114,000 regulated funds available for investors to buy. This is a wonderful leap forward for investors in many ways because we now have access to geographies, asset classes, and strategies prior generations could only dream of. Better yet, these funds are easy to buy, diversified, and ultra-low-cost in many cases.
The downside to this smorgasbord of fund choices is that we’re constantly tempted to change our portfolio, strategy, or asset allocation. Investors are inundated with new funds, market opinions, and recommendations on a daily basis. No one has the ability to sift through all this noise to make an informed decision.
It’s best to stop trying to figure out if every investment option is right for your portfolio and instead define what you’ll never even look at in the first place to save yourself the mental strain.
Get the big purchases in your life right. Did you know if you avoid eating out for the rest of your life, cancel your Netflix subscription, and stop getting Starbucks once a day you could save $87,6831 by the time you retire? The catch is you’ll also be miserable because you’ve taken away all the small joys in your life.
If you want to know where your money is going, look at your housing and transportation costs. Brown bag lunches every day at your desk can make you feel like you’re making an impact, but if you want to get ahead financially, get the big purchases right up front so you don’t have to worry as much about the little ones.
Treat your savings like a subscription. Pay yourself first is basically the oldest personal finance trick in the book but that’s because it works. Jerry Seinfeld once said, “It’s amazing that the amount of news that happens in the world every day always just exactly fits the newspaper.” That’s the same way I look at spending money for most people.
If the money is there it will be spent so saving what’s leftover is a strategy that’s destined for failure. Pretend saving money is a bill that comes due once a month just like your utilities or subscriptions.
Figure out the types of people you won’t be friends with. The older I get, the less patience I have for negative people. I’ve made it a goal to weed these people out of my life as much as possible over the past few years. The people you hang around with can have a huge impact on your mood and outlook on life. This one seems harder to do when you’re younger but I wish I would have come to this conclusion sooner.
Eat the same meals over and over again. The secret to dieting is not finding the latest fad or the perfect nutrition guru; it’s repetition. You figure out the healthy meals you enjoy (or at least tolerate) and then eat them repeatedly. You plan out your meals in advance.
To break up the monotony, occasionally you have a cheat day or weekend or vacation. But since you’ve already defined the healthy meals that work, you can go right back to that list. Much like investing, choice is the enemy of a good diet.
Ten Lessons I Learned From Peter Drucker (Jim Collins)
1Okay, I made up this number.