The 3 Second "No"

Welcome to another edition of Bitcoin Wisdom!

This week we’re diving into the importance of saying “no”, a practice implemented by Charlie Munger to accrue billions as Warren Buffet’s 2nd in command.

In this article, we’ll cover 👇

1. Why humans are preconditioned to hate saying the word “no”.

2. Recognizing sh**ty information (a few examples to raise self awareness).

3. Saying “no” to misinformation.

Let’s dive in⚡

1. Why We Hate Saying “No”

Charlie Munger’s rule was simple - say “no” as quickly and as often as possible to avoid making poor decisions. He said it so many times when at Berkshire Hathaway, that he became known at the firm as the “Abominable 'No-Man’”.

But by taking a moment (technically measured as ~3 seconds), Charlie was able to significantly improve his decision making process, allowing him to compound his capital faster than his competitors.

His thesis was based on overcoming the pitfalls of evolutionary psychology, which predisposed as humans to favor saying “yes” more often than say “no”. This often leads to sub-optimal regretful decisions that waste our time and impair our capital.

So why are we inclined to say “yes” all the time? Turns out its actually deeply rooted in our evolutionary DNA (reasons below).

1. Cognitive Bias:

   The brain has multiple cognitive biases which it has developed over millions of years to increase the chances of human survival. Our brain thus responds more favorably to positive stimuli words (“yes” and “can”) than negative stimuli words (“no” and “cannot”).

2. Social Cohesion:

   When humans lived as hunter gathers, they lived in small groups and relied on collaboration with other tribe members to survive. Saying ‘yes’ helped maintain group order and internal harmony.

3. Reciprocity:

   Early human survival was based on what Richard Trivers dubbed “reciprocal altrusim” i.e. I help you now, you return the favor later on when I’m in need. Responding with “yes” would help build trust within the group and increase your odds of survival.

2. Recognizing S**tty Information [Examples]

We live in a world that is constantly peppering us with new information all the time (most of which is useless and should be discarded). In order to fortify ourselves against this barrage of misinformation, we first need the self-awareness to correctly recognize it.

This may sound simple and intuitive, but is often complex in practice because we’re all extremely busy. We get distracted and find ourselves endlessly doom scrolling through social media without any regard for the quality of information we’re ingesting.

Below are a few prime examples of this in action - s**tty information (aka “noise”) that I wanted to share to raise self awareness of the schemes that brands and influencers play to artificially attract our attention.

Price Predictions:

This is by FAR the most common and deceptive piece of s**ty information out there. The best way to illustrate this is with a clickbait example I recently came across on X (Twitter) where an influencer shared the below (manipulative practices highlighted in green below).

This is a prime example of sh**ty information as it includes:

1. Unrealistic Price Anchoring: Only the higher of the long term $5M Bitcoin price was mentioned - what about the other 3 equally-as-likely outcomes by 2031 ($2M, $2.5M and 3M)?); and

2. Manipulative Wording: Capitalized and emotional trigger words such as “MOST” and “suffocation” to draw out curiosity, and inaccurate framing (“that gets overlooked by most”) to trick the reader into thinking they are accessing privileged information (they’re not - this report is public data).

These tactics suggest the author hasn’t really read the report and is using clickbait price predictions to bait engagement.

The reality is that Bitcoin’s price action is backward-looking data that provides no new data on whether Bitcoin is more or less likely to succeed in the future.

Yes, the habitual dopamine hit you get may be fun, but it isn’t contributing in any meaningful way to the quality of your investment decision making process.

Indicators/Models:

“All models are wrong, some are useful” is the famous quote by statistician George Box. However some models, such as the Fear and Greed Index, are not even useful.

Not only is the the data itself backward looking (we can’t use it to infer future price direction with any statistical significance) but its also highly inaccurate.

Their X account openly admits to being “sometimes accurate” (see yellow arrow below), while their website also lists that 15% of their data sources are currently “paused” (and has been for years).

In summary, the index is at best a fun meme, at worst a misleading technical indicator that bears no reflection on the state of Bitcoin’s long term fundamentals.

Similar to price predictions, saying “no” to the fear and greed index (i.e. explicitly ignoring it as a data source) will only help you more rationally assess the strength of Bitcoin’s long term fundamental value proposition.

3. Saying “No” to Sh**ty Information

Having the self-awareness to identify useless information is only half the battle though. We also need to be able to implement a successful response mechanism to say “no” more often, thus protecting ourselves from the sea of misinformation.

The most effective way to do this is to replicate Charlie Munger’s approach of putting information through a quick 3-second filtration process.

The process includes these two questions:

1. Question 1: “Do I understand the incentives of the author?”

2. Question 2: “Is this quality information that will positively impact my decision making process?”

If the answer to both of the above are not a resounding “yes” within the first three seconds, then you should immediately discard the information and move on, as you’re very likely being unconsciously manipulated.

Note that the key word here is “unconsciously” - there’s nothing wrong with you supporting a YouTuber by engaging in their sponsored post, or using their referral code to acquire their product if you trust them, but only if they’ve communicated this with you so you can choose to assess whether their recommendation / information is unbiased or not.

Key Takeaway

If you implement the above, the result is likely you’ll be saying “no” a LOT more often (which is a good thing - don’t worry if it feels awkward at first, that’s what it feels like to effectively combat millions of years of social conditioning).

In doing so, you’re fighting back by leveraging human psychology to your advantage - congrats!

One additional step you can take to say “no” more often is to mute clickbaity, emotion-triggering terms from your social media feed (see below a few words I’ve used to clean up my own X feed which hopefully provide a useful starting point).

That’s it for this week folks! Good luck recognizing and guarding yourself from misinformation by saying “no” more often - hopefully it’ll help you improve the quality of your long-term investment decisions.

Friend of the People

@Publius256