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Weekly 3: The limits of long-term plans

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Summary: Consider the unexpected. Choose reality over rigidity. Pick the right industry and people. (
 

Idea Journal Weekly 3

August 11 · Issue #99 · View online
We combine 3 ideas to help you think differently and be more creative.

Summary: Consider the unexpected. Choose reality over rigidity. Pick the right industry and people. (~6 min read)

#1. How often do you actually achieve your plans?
In his book The Art of Thinking Clearly, author and entrepreneur Rolf Dobelli writes that if you’re like many people, you create a to-do list every morning.
But how often is it that everything is checked off by the end of the day? 
Every other day? Perhaps once a week?
As Dobelli puts it, most people reach this rare state of achievement just once a month.
The problem is that our plans are often “absurdly ambitious” – we systematically take on more than we can handle. This would be understandable if making plans were a new skill, but you’ve probably been doing some version of a planning process for years, maybe decades. 
This tendency toward unrealistic planning is what the economist and psychologist Daniel Kahneman calls the “planning fallacy”: even though you realize that your previous efforts were overly optimistic, you believe that, today, the same workload or more is completely doable.
The planning fallacy gets exacerbated as you increase the timeframe of the planning process, and the number of people involved.
Dobelli gives the example of the construction of the Sydney Opera House. The conch-shaped structure was planned in 1957, and it was supposed to be completed in 1963 at a cost of $7 million. By the time the Sydney Opera House opened its doors in 1973, the project had cost $102 million – 14 times the original estimate. 
Why are we so bad at planning?
Dobelli offers the following reasons: 
  • Wishful thinking: we want to be successful and achieve everything we set out to do.
  • Ignoring external factors: we tend to focus too much on the project itself, and overlook outside influences. For example, a family member ends up in the hospital. Or a new technology disrupts your industry – and your job.
For Dobelli, there are 2 practices you can do to increase the odds of your plans succeeding: 
1. Pay attention to external factors: For example, look at similar projects and consult the past: “If other ventures of the same type lasted three years and devoured $5 million, this will probably apply to your project, too – no matter how carefully you plan.”
2. Perform a premortem (“before death”) session shortly before you make key decisions. Dobelli cites psychologist Gary Klein’s guidance on what to say to your team before doing the premortem: “Imagine it is a year from today. We have followed the plan to the letter. The result is a disaster. Take five or ten minutes to write about the disaster.” These stories will illuminate how things might turn out.
#2. When reality changes, so should your plan
Entrepreneurs Jason Fried and David Heinemeier Hansson write in their book Rework that unless you’re a fortune-teller, long-term business planning is a fantasy. 
There are just too many factors that are out of your control: from competitors and customers, to market conditions and the broader economy.
Writing a plan is seductive because it “makes you feel in control of things you can’t actually control.”
But for Fried and Heinemeier Hansson, it’s more accurate and less stressful to call plans what they really are: guesses. Your financial plans are really financial guesses. Your strategic plans are really strategic guesses. 
When you take guesses and turn them into plans, “you enter a danger zone.” Plans put blinders on you, and give the past too much control over the future. Plans make you think: “This is where we’re going because, well, that’s where we said we were going.”
In Fried and Heinemeier Hansson’s view, there are 2 main problems with long-term plans: 
1. They’re inconsistent with improvisation: You need to be able to take advantage of opportunities as they come up. Sometimes you need to say: “We’re going in a new direction because that’s what makes sense today.”
2. Their timing: “You have the most information when you’re doing something, not before you’ve done it.” But you write a plan before you’ve begun, and that’s the worst time to make a big decision.
They acknowledge that it’s of course important to think about the future, and to consider how you might address upcoming challenges. But you shouldn’t feel pressured to create some complicated plan, which you’ll likely never look at again anyway: “Plans more than a few pages long just wind up as fossils in your file cabinet.”
Instead, figure out what you’re going to do this week – not next year. Then decide on the next most important thing, and do that. 
Working without a formal long-term plan may seem scary, but as Fried and Heinemeier Hansson put it, “blindly following a plan that has no relationship with reality is even scarier.”
#3. Your industry and colleagues may matter more than your plan
For entrepreneur and investor Naval Ravikant, the dynamics of the industry you work in, and the type of people you work with, can have more influence over your long-term success than any particular plan.
Speaking on his podcast, he recommends that you aim to “play long-term games with long-term people.” That’s because all the benefits in life come from compound interest – whether in learning, making money, or relationships.
For Ravikant, this is an insight into what makes Silicon Valley work. 
In a long-term game context like Silicon Valley, where people become more familiar with each other as they do more business together, there’s an incentive to treat others fairly because you know they “will be around for the next game.” 
Long-term games are positive-sum: we’re all baking the pie together, and the goal is to make it as big as possible. On the other hand, short-term games are focused on cutting up the pie, and earning as big a slice as possible for yourself.
Ravikant acknowledges that such positive long-term game dynamics don’t always work. For example, in Silicon Valley, where you can make a lot of money in a single move, sometimes people will betray each other, thinking: “I’m going to get rich enough off this that I don’t care.”
This is why you want to work with long-term people wherever possible – people you can trust over a long period of time. That way, you can keep playing the game with them, allowing compound interest and mutual trust to build over time.
In a separate podcast, Ravikant gives the example of working with his AngelList co-founder Babak Nivi: 
“If Nivi and I start another company and things aren’t working out, I know we’re both going to be extremely reasonable about deciding what to do — how to exit or shut it down. Or if we’re scaling it, how to bring in new people. We have mutual trust, and that allows us to start businesses more easily and compounds the effect.”
Quote of the Week
“How we spend our days is, of course, how we spend our lives. What we do with this hour, and that one, is what we are doing.”
- Author Annie Dillard in her book The Writing Life
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