Warren Buffett’s “2 List” strategy – part five

With well over 50 billion dollars to his name, Warren Buffett is consistently ranked among the wealthiest people in the world. Out of all the investors in the 20th century, Buffett was the most successful and in the following text, I will introduce you Warren Buffett’s “2 List” strategy.

Given his success, it stands to reason that Buffett has an excellent understanding of how to spend his time each day. From a monetary perspective, you could say that he manages his time better than anyone else.

And that’s why the story below, which was shared directly from Buffett’s employee to my good friend Scott Dinsmore, caught my attention.

Let’s talk about the simple 3-step productivity strategy that Warren Buffett uses to help his employees determine their priorities and actions.

The power of elimination

I believe in minimalism and simplicity. I like getting rid of waste. I think that eliminating the inessential is one of the best ways to make life easier, make good habits more automatic, and make you grateful for what you do have.

That said, getting rid of wasteful items and decisions is relatively easy. It’s eliminating things you care about that is difficult. It is hard to prevent using your time on things that are easy to rationalize, but that have little payoff. The tasks that have the greatest likelihood of derailing your progress are the ones you care about, but that aren’t truly important.

Every behavior has a cost. Even neutral behaviors aren’t really neutral. They take up time, energy, and space that could be put toward better behaviors or more important tasks. We are often spinning in motion instead of taking action.

This is why Buffett’s strategy is particularly brilliant. Items 6 through 25 on your list are things you care about. They are important to you. It is very easy to justify spending your time on them. But when you compare them to your top 5 goals, these items are distractions. Spending time on secondary priorities is the reason you have 20 half-finished projects instead of 5 completed ones.

Eliminate ruthlessly. Force yourself to focus. Complete a task or kill it.

The most dangerous distractions are the ones you love, but that don’t love you back.

The reason why our brain likes to procrastinate

Sometime around 2006, two Harvard professors began to study why we procrastinate. Why do we avoid doing the things we know we should do, even when it’s clear that they are good for us?

To answer this question, the two professors — Todd Rogers and Max Bazerman — conducted a study where participants were asked whether they would agree to enroll in a savings plan that automatically placed two percent of their paycheck in a savings account.

Nearly every participant agreed that saving money was a good idea, but their behavior said otherwise:

  • One version of the question asked participants to enroll in the savings plan as soon as possible. In this scenario, only 30 percent of people said they would agree to enroll in the plan.
  • In another version of the question, participants were asked to enroll in a savings plan in the distant future (like a year from today). In this scenario, 77 percent of people said they would agree to enroll in the plan.

Why did the timeline alter their responses so much?

As it turns out, this little experiment can tell us a lot about why we procrastinate on behaviors that we know we should do.

We have a tendency to care too much about our present selves and not enough about our future selves. We like to enjoy immediate benefits in the present, especially if the costs of our choices don’t become apparent until far in the future.

For example:

  • The payoff of eating a donut is immediate (sugar!) and the cost of skipping workouts won’t show up until you’ve skipped for months.
  • The payoff of spending money today is immediate (new iPhone!) and the cost of forgetting to save for retirement won’t show up until you’re years behind.
  • The payoff of unhindered fossil fuel usage is immediate (more energy! more heat! more electricity!) and the cost of climate change won’t reveal itself until decades of damage have been done.

However, when we consider these problems in the distant future, our choices usually change. In one year, would you rather be overweight and eating donuts or healthy and exercising consistently? In the long-run the choice is easy, but when it comes time to make the choice today, in this very moment, we discount the long-term costs and overvalue the immediate benefits of unproductive behaviors.

Behavioral economists refer to this concept “time inconsistency” because when we think about the future we want to make choices that lead to long-term benefits (“Yes, I’ll save more!”), but when we think about today, we want to make choices that lead to short-term benefits (“I’ll spend it right now.”).

I like to call this the Present Your vs. Future Your problem. Future Your know you should do things that lead to the highest benefit in the long-term, but Present Your tend to overvalue things that lead to immediate benefit right now.

Alright, so we know why we procrastinate. What can we do about all of this?

The answer to inconsistency

If you want to beat procrastination and make better long-term choices, then you have to find a way to make your present self act in the best interest of your future self.

Your have three primary options:

  1. Make the rewards of long-term behavior more immediate.
  2. Make the costs of procrastination more immediate.
  3. Remove procrastination triggers from your environment.

Let’s break down each one.

1. Make the rewards of long-term behavior more immediate. The reason why we procrastinate is that our mind wants an immediate benefit. If you can find a way to make the benefits of good long-term choices more immediate, then it becomes easier to avoid procrastination. One way to do this is to simply imagine the benefits your future self will enjoy. Visualize what your life will be like if you lose those 30 pounds. Think about why saving money now is important to your future. Pull the future payoff into the present moment in your mind’s eye.

2. Make the costs of procrastination more immediate. There are many ways to force you to pay the costs of procrastination sooner rather than later. For example, if you are exercising alone, skipping your workout next week won’t impact your life much at all. Your health won’t deteriorate immediately because you missed that one workout. The cost of procrastinating on exercise only becomes painful after weeks and months of lazy behavior. However, if you pre-commit to working out with a friend at 7 a.m. next Monday, then the cost of skipping your workout becomes more immediate. Miss this one workout and you look like a jerk.

Here are some other ways to make procrastination more costly:

  • Set a public deadline for your behavior. (“I am going to publish a new article every Monday.”)
  • Place an expensive bet on your behavior. (“For each workout I miss, I will pay my friend $50.)
  • Make a physical consequence for your behavior. (“For each dish I leave unwashed in the sink, I have to do 25 push ups.”)

3. Remove procrastination triggers from your environment. The most powerful way to change your behavior is to change your environment. It doesn’t take much guesswork to figure out why this is true. In a normal situation, you might choose to eat a cookie rather than eat vegetables. What if the cookie wasn’t there to begin with? It is much easier to make the right choice if you’re surrounded by better choices. Remove the distractions from your environment and create a space with better choice architecture.

Want to take it a step further? Your can add triggers to your environment that prompt the good behaviors.

The way forward

Each day, we are faced with hundreds of tiny decisions. The option to either take the easy way out and jump at instant gratification or to say no to temptation and commit to a long-term behavior.

These daily choices end up defining our reality. It is increasingly the distractions we avoid that define our capacity for success.

 

I hope you enjoyed the content about Warren Buffett and his “2 List” strategy?

If you have any questions or suggestions, please leave them in the comments!

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