Take a simple idea and take it seriously.— Charlie Munger
At first glance, this is going to seem too simple and obvious to be useful.
However, the war drum I have been beating for the past few years is that the simple and obvious is underrated. I will give some high stakes examples to make the point.
A reductionist approach has been useful in helping me learn new things quickly. It is especially helpful in asking questions. The big mental models here are disaggregation and accountability.
A simple box can be a powerful way to use them.
Step 1. Draw a box.
Step 2. Label the things in the box.
Step 3. Pay attention to:
- what goes into the box (“injections”)
- what stays in the box
- what goes out of the box (“leakages”)
Why would you want to do this? The short answer is to think clearly.
You can use it to break complex things down into easier and easier chunks. For those interested in the truth, it can put a spotlight on it. It can help you determine what is important and fence it off from the unimportant. The main point of the box is to pick something you want to understand better and focus on it until you do.
I will include a few different examples, but the key is the method, not the content of the specific examples.
This idea originated three years ago when I was negotiating the biggest deal of my life with people I had never met in-person. The other side was essentially saying: If the deal goes bad, we will make sure you get your money back, but we control when you get it.
We were dancing around the key issue: I didn’t trust them. In a perfect Australian accent, the main guy says, “Ohhhh. Yohr wooorried about the munny leakin’ out of the seestem.”
That was exactly what I was worried about: The money leaking out of the system before it got to me. That is why I use the terms leakages and injections instead of outflows and inflows. A leakage needs more attention than an outflow.
I will start with the easiest one to understand, but one that is perennially hard to implement.
Let’s say your paycheck is $5,000. You have been telling yourself you are going to save $2,000 from each one because you want to go to the Fyre Festival when Billy gets out of prison. Two weeks go by, you open your Wells Fargo app, and you see $1,000.
Obviously, you overspent by $1,000.
However, this is less about algebra and more about clarity. It illuminates assumptions and flows.
This same example can be used beyond personal budgeting. Let’s say you check your account and it shows $997 instead of $1,000. You know there is another leakage. You investigate. Wells Fargo “accidentally” charged you a $3 fee. It’s amazing how businesses never accidentally charge us less! A box can force transparency.
Critically, it can help determine whether a goal was met.
In the Netflix documentary Flint Town (highly recommended), the citizens of Flint, Michigan are asked to vote for a millage (property tax) to avoid layoffs at the police department. It is one of the most understaffed departments in the country with 98 officers for 100,000 people.
Seems like a no-brainer until you find out that last time this happened, the money never made it to the police officers. Surprise!
Due to decisions made by previous city officials including Emergency Managers, current city leaders are unable to speak with 100% certainty regarding the utilization of millage funds prior to accepting of appointment. However, we can ensure that as we move forward this administration will be accountable to the residents we serve and will work to do what’s in their best interest.— Kristin Moore, Communications Director for the City of Flint, 2016
…It is estimated that six (6) mills would raise approximately $3,503,464 in the first year of renewal.
Here is what is supposed to happen.
Here is what Flint citizens think is going to happen.
If the vote passes, a version of the two scenarios is going to happen. Either it is all going to go where it was promised, or the mayor is going to have $1,000,000 in the Cayman Islands.
The average person may not know forensic accounting, but every voter can draw a box.
Corruption is a vague word. Drawing lines around it helps define it, which is the first step in eliminating it. The second one is taxpayers demanding independent audits.
Money has helped us illustrate the point because it is easy to see the idea and it applies to everyone. Even Johnny Depp’s box has to be squared away.
A more abstract example is the iPhone. The iPhone is a box.
After a decade of isolated attention, advertisers were knocking Apple’s door down trying to get in the box. Injections: Push Notification Ads. Conceptually, by drawing a box around our attention (staring at our screens), you can predict that something is going to change. It will get more expensive to keep injections out, or there will be injections.
The box below is universal: time. We all have 24 hours in a day.
The box is the ultimate time management tool. If you feel like you never have the time to do something, it is time to draw a box around your day. Break the day down into 15-minute chunks and draw boxes around those.
When you account for your time this way (it only takes once), you inevitably realize you have more time than you thought. You have simply been choosing to spend it a certain way. You can ask yourself all sorts of questions: Is this how I want to be spend my time? Is this time well spent? Why do I do this? Why do I do it then?
While it is easy to pile onto social media, I generally think it fills gaps of boredom. The choice is still the user’s. There is something much worse than social media: distractions. As Cal Newport expands on in his book Deep Work, you can never get into a state of deep (thoughtful) work if you’re doing a million little things. Distraction is the destroyer of depth.
The most salient benefit I have seen from drawing boxes around my time is recognizing how valuable (and hard) it is to insulate myself from distraction to concentrate. It has also made me realize how time consuming things like cooking, cleaning, errands, and working out are.
Most people, especially employed ones with children, do not control their entire day. If you only have one or two hours of alone/personal time a day, every minute is valuable.
Houses & Cars — When most of us are shopping for houses or cars, we know how much we can spend…to buy it. We are also proud if and when we sell it for a profit. We usually do not like to count or include the dollars spent to maintain it. Does anyone you know include the cost of maintenance (like yard work) in calculating how much they made from selling a house?
After Day 1
- Costco — For customers, there is only one way in and one way out. When you leave, an employee famously ensures the items on the receipt match the items in the cart. By designing Costco stores this way and utilizing this idea, their shrinkage from theft is 0.2% of revenue, which is 80% less than Walmart’s. This is worth billions of dollars. They literally attribute it to this line of thinking in their 2019 10-K: “By strictly controlling the entrances and exits and using a membership format, we believe our inventory losses (shrinkage) are well below those of typical retail operations.”
- Negotiations — Have you ever gone into a conversation knowing exactly what you were going to say, then realized later you not only didn’t say everything you wanted to say, but you didn’t get what you originally wanted? Before you start the conversation, draw a box around what you want. Afterward, you will know whether you got what you wanted going in and whether you changed the narrative in your head.
- Conservation of Energy — In physics and chemistry, the law of conservation of energy states that the total energy of an isolated system (like a box) remains constant; it is said to be conserved over time. This law means that energy can neither be created nor destroyed; rather, it can only be transformed or transferred from one form to another.
- Promises — If someone tries to back out of a promise of any size with me, I usually get very quiet. Promises are immune to change. There is a box drawn around the promise and excuses fall on deaf ears. This idea has made me cautious in making firm commitments.
Lastly, NEVER put a girl or anything she says in a box.