As we approach the end of the year, many of us would have made our resolutions and goals for the new year - to join a gym and visit it regularly, to pick-up that hobby we stopped pursuing several years ago, to start the new diet program, to learn that new language etc. Usually, each of these resolutions is about initiating a new action, adding a new habit - in the hope to improve our lives. However, as I'm sure all of us have experienced in the past, our efforts often lose steam. Our gym membership goes wasted, that hobby remains un-picked, the language largely unlearnt.
We have a bias for action. We want to do something to achieve something - and there is nothing wrong with that approach. However, there is a different, and a more effective way to do the same thing. And that is by subtracting - by not doing something, rather than by adding something new. And this is Via Negativa.
Via Negativa literally means the negative way. It is the study of what not to do. It is a Latin phrase, originally used in Theology to understand God, by understanding what God isn't (given our incapability to comprehend the divine with our limited senses). And this can be borrowed from theology, into our daily lives - by focusing on what not to do, rather than what to do, in order to have a better outcome.
Here is an excerpt from Nasim Nicholas Taleb's book Antifragile, on Via Negativa, which is where I first heard the term:
Michelangelo was asked by the pope about the secret of his genius, particularly how he carved the statue of David, largely considered the masterpiece of all masterpieces. His answer was: “It’s simple. I just remove everything that is not David.”
Removing the bad is better than adding the good
Sometimes it is so much more beneficial to focus on avoiding the downsides / actions that can harm us rather than focusing on actions which benefit us.
Quitting smoking is so much more beneficial for your health that joining a gym or starting a new diet. Cutting back on sugar (sugary drinks, sweets) can go a much longer way in helping you improve your overall health than eating any of the health supplements.
Reducing / removing the cause of stress - be it due to a toxic relationship, an issue with the boss or a client, upcoming project deadline etc. - is going to help us lead a better lifestyle than trying to fit in new lifestyle changes without attacking the source.
In our investment portfolios - focusing on removing the laggards - monitoring and addressing the investments where the actual performance pans out worse than our investment thesis - will help us more than trying to continuously find higher return investment opportunities. Also, just reducing the sheer number of stocks in a portfolio (which having a reasonable amount of diversification) will help reduce clutter and focus our efforts on what actually matters.
Playing the loser's game: Avoiding mistakes to win
We have all heard the fable with the tortoise and the hare - where despite being fast and having a lead in their race, the hare gets overconfident and takes a nap, and eventually loses the race. And the world is replete with such examples where despite being intelligent, skilled, even brilliant - people just make bad decisions, mistakes, screw-ups and eventually lose out!
In life there are 2 types of games - the winners game and the loser's game. A winners game is one where the outcome of a game is entirely determined by the players' ability. The one with better skill or talent, who plays the game better, wins. Examples include chess, weight lifting, sprinting, pro-tennis etc. In these games, you don't see the leaderboard change often. The top 5 chess players would generally remain in the top 5 for a decade, if not more. On the contrary, a loser's game is one where the player is competing against the game itself, and the only way to win is to not make mistakes (and not by superior play). Examples of loser's games include - betting in the casino, amatuer tennis (while pro-tennis is a winners game, in amatuer tennis, without the years of practice and learning of techniques, the best strategy one can apply is to avoid making mistakes, and let the opponent make mistakes), and of course, the game of investing.
When we invest, typically, we are always trying to find that investment Avenue - be it a stock or an option strategy or cryptocurrency - to make the highest return. We use leverage to improve our return. In the process we make ourselves vulnerable - make mistakes, and go bust. While the better strategy is to avoid losses - to not aim for the absolute highest returns, rather, focus on protecting the downside - having a margin of safety.
Another example of losers game would be business / marketplace - Corporations, in a particular sector, take on debt, expand aggressively when the times are good, and this is what makes them vulnerable to go bust when the tide turns. The companies which did not load up on these risks earlier, were the ones able to survive the lockdown induced by the corona virus.
Charlie Munger, the Vice Chairman of Berkshire Hathaway has realized the importance of :
It is remarkable how much long-term advantage people like us have gotten by trying to be consistently not stupid, instead of trying to be very intelligent
Eliminate the wrong and you will find the right
When I prepared for my competitive exams (a long time ago), with multiple-choice questions, one of the strategies we employed was that of elimination of options. Identify the options which are wrong, and eliminate them, to dramatically improve the odds of being right. It was an effective strategy, especially when there were negative scores for getting an answer wrong. Buffet recounts a similar example on his mentor, Ben Graham:
“He gave us a quiz. A true-false quiz. And there were all these guys who were very smart. He told us ahead of time that half were true and half were false. There were 20 questions. Most of us got less than 10 right. If we’d marked every one true or every one false, we would have gotten 10 right.” Graham made up the deceptively simple historical puzzler himself, Buffett explained. “It was to illustrate a point, that the smart fellow kind of rigs the game. It was 1968, when all this phoney accounting was going on. You’d think you could profit from it by riding along on the coattails, but (the quiz) was to illustrate that if you tried to play the other guy’s game, it was not easy to do. “Roy Tolles got the highest score, I remember that,” Buffett chuckled. “We had a great time. We decided to keep doing it.”
And finally, here is what Steve Jobs had to stay on elimination and focus:
People think focus means saying yes to the thing you’ve got to focus on. But that’s not what it means at all. It means saying no to the hundred other good ideas that there are. You have to pick carefully. I’m actually as proud of the things we haven’t done as the things I have done. Innovation is saying no to 1,000 things.
The power of elimination / disconfirmation is often underestimated (and the power of confirmation is often overestimated). A million positive observations of white swans one cannot confirm that all swans are white, but one negative observation of a black swan, can disprove the claim that all swans are not white. One small observation, which disproves a statement, takes us closer to the truth, while millions of positive / confirming observations really don't help much!
In the game of life, all of us are amatuers. All of us play a loser's game. To succeed (without debating about its definition), we will be better off removing the bad, avoiding mistakes, and eliminating the wrong.
I sure hope this article is out in time to influence your new year goals / resolutions to embrace Via Negativa!
Wish you a very happy new year!
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