Flourishing Tree Book Club, Part Two: Love What You Read, Read What You Love

Today is once again the year’s “World Book Day.” The pandemic in Shanghai continues; people are held still in their homes, facing hardships of one kind or another.

The Stoics’ “dichotomy of control” tells us: in life, some things are within your power and some are not, and you should attend to the things within your power.

Let us seek from books our strength, our solace, or the lovely flowers of a spring day—flowers we cannot touch, yet so long as we plant flowers in the heart, a life will never lie barren.

Every month at Flourishing Tree we hold a book club, where our companions share the good books they have read that month, and the emotion, the gains, and the inspiration those books have brought.

Reading itself has almost no value. It is the thinking after reading, the choosing after thinking, and the acting after choosing that hold value.

Joyce: Underlying Logic

Underlying Logic is a book given to me by an alumnus. Its author, Liu Run, is one of the strongest names on the Dedao app lately. The central idea of the book is how to see the world clearly through underlying logic.

In truth, each of us lives in this world, and the disputes that arise between us come down to nothing more than points of sameness and points of difference. The “how-to” tricks—the methodologies—taught in every trade are “giving a man a fish”; once the environment changes in any way, the “tricks” no longer apply. So one must “teach a man to fish”: through an unchanging underlying logic, one can deduce a methodology that fits the moment. Parts of the book are quite grounded. I especially like this line: I hope that, having seen a world of endless change, I can still keep a calm mind, free of anxiety—that through “underlying logic + environmental variables = methodology” I can keep creating new methodologies, see through the world’s hidden cards, and, in the end, move through it like a fish through water.

The book is divided into five modules of underlying logic: right and wrong, thinking through problems, individual evolution, understanding others, and social cooperation. This time I want to share four key points:

First: Process

There is a story I find quite interesting—monks in a temple dividing porridge. At first one person is put in charge of the dividing, and he ladles his own bowl especially thick while the others’ are thin, creating unfairness. In the second method, a monk of high virtue and prestige is sent to divide the porridge, and then bribery and corruption begin. In the third method, a dividing committee and a supervising committee are set up, and then everyone disagrees, and by the time the arguing is over the porridge has gone cold and cannot be eaten. In the fourth method, the dividing is done in turns, and whoever divides the porridge takes his own bowl last—this way every bowl is sure to be divided fairly.

Summing up from the ground of the work itself, I draw three points:

The first is human nature: you start from human nature, and then design a reasonable process.

The second: everything has a process; it is only that processes differ in efficiency. Within any process, what counts as high or low efficiency is a crucial point indeed.

The third: MECE all the details. To the client it looks simple, but in fact a great deal of detailed breaking-down has been done, and only the simplest thing is left for the client at the end.

Second: System

Most people look at what a company’s product is, what help it offers us, or the satisfaction its service brings. As for how it is produced, that is like a “black box”—we pay it no attention. It is like looking at a watch: we look only at the time, but never at how the gears inside the watch turn.

And this unattended “black box” is the very system that produces the product. So one must study the relationships among the various components, and the whole formed by their interaction; only by learning to see problems from the standpoint of the system can one stand in the future and look at today.

The ordinary person changes the result (changes the rules); the excellent person changes the cause (changes the process); the top-tier person changes the model (changes the system). Take the porridge-dividing story above: it looks like changing the process, but in fact it is changing the relationships among people, porridge, and bowls in the first three processes.

There is a line in the film The Godfather: “The man who can see through the nature of things in half a second and the man who spends a lifetime unable to see clearly are destined for wholly different fates.”

Logical thinking and closed logical loops: when you meet with something, you are not satisfied with the surface explanation, but keep tracing back until you find the root.

Third: Probabilistic Thinking

The book gives an example, a question for everyone: two buttons. The red one lets you walk away with a million right now; the blue one gives you a 50 percent chance of walking away with a hundred million. Which button would people choose? Most would first choose “red”—“two birds in the woods are not worth one in the hand”—most people love the “certainty effect.” But in fact, in the “blue” probability, 50% × 100 million + 50% × 0 = 50 million.

One of the most important factors in entrepreneurship is luck. Luck is probability, only with a little emotional coloring added. Sometimes 95 percent is right, but you still have to rely on the 5 percent of luck—and sometimes it is even a 95 percent probability of luck.

Many books on the science of success say that as long as you rely on effort you can succeed; in this book, by contrast, that is regarded as a kind of failing mindset. From the very first day of a venture, we face countless decisions each day—some seem momentous, some trivial—but sometimes the ones that seem momentous are not truly so; perhaps they only hurt a great deal.

One needs to acknowledge this probability with a calm heart, and yet one can find some methods to hedge against probability, to lower its impact on us.

The book gives various relevant cases as well, sorting the ways of hedging into four main points; the first two of these resonate deeply with me in the current process of building a venture:

1. The thousands place: the market. It cites how the mobile share of orders placed on Double 11 reached 90 percent; one must see the tenfold-speed dividend.

2. The hundreds place: strategy. You must have your own independent strategy and firmly execute your own model. Winning does not come from tips and news; it comes from model, strategy, and judgment. Strategy, too, exists precisely to hedge against luck. In the fund strategy of a certain doctor we all know, for instance, a certain proportion is set aside to hedge against black-swan probabilities.

3. The tens place: governance. The structural design of the whole company’s management—such as the equity system and the partnership system.

4. The units place: management. The right people, good incentives, culture and team-building, communication mechanisms, and the like are also ways of hedging against probability.

Fourth: The Business Model of a Life

The Business Model of a Life = Ability × Efficiency × Leverage

Ability:

I recall that our clients, too, often speak of the most important ability a person can have: the ability to acquire ability. This is a kind of superpower. How can one acquire in two years the ability others take five years to gain?

I sum it up in three points: first, one needs a “fearsome” diligence; second, one needs efficiency; third, one needs, in the process, a mechanism of efficient feedback—also called “deliberate practice.” But there are two preconditions I strongly endorse: one is a very direct, very strong desire to possess the ability to acquire ability; the other is to make sure that all one’s diligence stays within the bounds of what one’s body and one’s family can bear.

Efficiency:

It is not about saving 17 seconds out of 17 minutes, but about saving 17 hours out of 17 minutes. And to make, within those 17 minutes, a decision about a task that would take 17 hours, one must ask: is it truly worth doing at all? So choice is the first principle of raising efficiency. Next, to truly raise the efficiency of doing a thing, one must draw on methods and tools.

Leverage:

The precondition for using leverage is that one must first possess a powerful core of ability.

Team leverage, product leverage, capital leverage, influence leverage.

To sum up all the above:

The most fearsome ability is the ability to acquire ability;

The most fearsome efficiency is the efficiency of stretching and compressing time;

The most fearsome leverage is the leverage that moves the human heart.

Finally, in the underlying logic of understanding others: “Let yourself change, and you will find that all around you are good people; for the one who creates value with heart, time will give you the answer.” Put the center of gravity on serving users well and creating value; the truest words spoken by users about their real experience are the most powerful form of transmission. Serve with heart; make products with sincerity.

Andy: The Compound Interest of a Life and of a Family

A recent article on the WeChat account “Lonely Brain” set off a great deal of thought in me. It is called “The Essence of Compound Interest.”

Compound interest, called the “eighth wonder of the world,” has a very simple formula:

FV = PV (1 + i)^n

Lao Yu, the author of “Lonely Brain,” says: “A person’s achievement comes from a set of ‘core algorithms’ multiplied by ‘a large number of repeated actions to the nth power.’”

We have two methods of success. One is “holding out for the big move,” and after it succeeds, expecting to succeed by “holding out for the big move” again. The other is “advancing one pawn a day,” making a little progress every day. Which method is sustainable? I believe it is the second. If I were to choose a way to succeed, I would choose the second.

There is a joke: “We earned our money by luck and lost it by skill.” I do not refuse the dividends that luck brings, but I hope I have the skill and the strength of heart to “advance one pawn a day.”

Forty-five is quite an interesting age. I wonder whether I might reorganize my own core algorithm—make it a little simpler—and then repeat the action over and over, bringing the fruits of compound interest.

As for the compound-interest formula, looked at from the formula there are three elements:

One: Principal Thinking

The first time I heard of principal thinking was when Buffett said the true secret of investing is not to lose your principal. At the time I did not think it so important; I still felt the rate of return was what mattered most, that you could make big money from it.

In fact it is not so. When we consider things through the lens of compound interest, PV is the most important element. Even if the positive rate of return, i, is very low, so long as one relies on the repetition of n, in the end one will win an enormous profit—but one must also endure the hardship of low growth in the early stage.

Yet if i is sometimes positive and sometimes negative, so that the principal is lost, you will find that the compound-interest model is broken. The simple pattern of repetition ceases to exist, and at this point most people may choose to end the investment.

The principal spoken of here means all of our principal. Some people say their stock returns are 100 percent, but they invested only 10 percent of their principal; for the whole of their assets, the total return is in fact 10 percent. So in the logic of principal thinking and compound interest, one takes all of one’s assets as a single principal base: after gaining a return, one puts it back into the total assets, and reinvests to gain a further return.

For a life, our IP, our social relationships, our understanding, our financial assets—everything we possess—are the total principal of our life. This even includes the resources we can integrate and put to use, including those of our partners and our suppliers.

Allocate the principal according to importance. The essence of allocation is to get the broad direction right first. Only once the direction is chosen correctly does it come to how, specifically, to operate. If the direction is not even chosen right, then whatever you do is wrong.

We are still in a youthful state, still in the process of striving hard; we must find the space in which to allocate our core assets. The risk of decision-making is the greatest risk in life. Still, we can iterate on feedback and adjust in time.

The greatest principal is oneself. To keep raising one’s understanding—the most worthwhile investment is the one made in oneself.

There is another thing easy to be muddled about: telling assets from expenses. Assets accumulate principal; expenses consume it. But some money that appears to be spent is, with the passage of time, raising the moat and making the principal ever thicker; such spending feels like an expense but is in fact an investment. Unless it is used once and thrown away—that is an expense.

The security architecture the family office helps clients build is the moat of the principal; this is a kind of investment.

Two: Replicating Value

The brain is a money-printing machine; it is born to replicate. So one must keep training the brain. We ourselves are our greatest asset. A lifetime is a company, and we are always running this company. The company’s name is A Lifetime.

In running the company, one must find the dumb methods that can be repeated on a large scale, and had best not do the things of high difficulty. Because things of high difficulty are very hard to repeat. People often love to do things of high difficulty, because conquering something difficult brings more endorphins and feels good—but it is very hard to replicate.

It is like rolling a snowball: what sticks are all small grains. Suddenly striking a big block of snow may smash the snowball to pieces. So find the simple, repeatable things, and rely on time and on the system to gain great growth. Simple things, then, require the building of a system.

With a system in place, exponential growth becomes possible. The exponential effect is also called the flywheel effect. Turning a still flywheel at the very start is very hard; one must spend great effort, and every turn is laborious. But once it is turning, it grows faster and faster.

Three: Iterating on Feedback

Rolling a snowball is a most important instance of “reflexive” iteration on feedback. Keep pushing forward, so that the grains added each time are minimized and stick on most easily. And it is self-correcting: each press-down makes the shape rounder, so it turns faster and picks up more snow.

When the base is small, the growth rate is usually very fast. Things with a large rate of increase are hard to sustain. So the important thing is to keep iterating on feedback—advancing one pawn a day, making a little progress every day.

For iterating on feedback, the best method is to learn from life itself. The finest replication is life, from a single cell to 2.7 billion different cells. Only when money comes “alive” will it create value and realize compound interest.

The “Three Great Wealths” system that Flourishing Tree currently builds for its clients is just such a living organism, letting wealth take the person as its end and serve the person. This system, too, evolves lifelong: “in repeated interaction with the environment, it changes its own structure and mode of behavior.” This is a living, “reflexive” effect.

The most important thing in compound interest is to be “a friend of time.” Keep yourself always at the table; live long enough, and you can witness miracles, take part in miracles, create miracles. And the way to live long is: do not go all in.

Having passed the age of forty-five, with a certain foundation of life’s principal, find the “core algorithm,” multiply it by “a large number of repeated actions to the nth power,” advance one pawn a day—simple and effective—and accompany our clients as they grow.

Richard: The Courage to Be Disliked

The author of this book is Ichiro Kishimi, a hugely influential Japanese philosopher. In the year he turned thirty, Kishimi encountered Adlerian psychology, and from then on threw himself wholly into the study of Adler’s thought. This book, The Courage to Be Disliked, presents the fruits of Kishimi’s study of Adlerian psychology.

Adler’s full name is Alfred Adler, an Austrian psychologist. He belonged to the same generation as the psychologist Freud and was once a follower of Freud’s thought. But later he became the first to oppose the system of Freudian doctrine, and the two, at odds in their views, parted ways. Put simply, Freud held that your present condition comes from your past experience, from your environment and the other people around you. But Adler did not agree; he held that your present condition has to do only with yourself. Adler set out on his own and founded “individual psychology.”

In this book, Kishimi also adopts the form of philosophical classics like The Analects and The Republic—the dialogue. The whole book is a conversation between a youth and a philosopher: the youth asks questions, and the philosopher answers them. Kishimi used this form to present Adler’s thought partly because it is relaxed and easy to grasp, but more importantly because he wanted to tell us that Adler’s thought belongs not only to the domain of clinical psychology—Adler was, still more, a thinker and a philosopher. What this book discusses is, for the most part, questions on the philosophical plane.

Do you remember the Stoics we spoke of? I feel that Adler’s doctrine has much of the Stoic flavor, and was likely influenced by it. Let us get a sense of the titles of the book’s five chapters: 1. Whose fault is our unhappiness? 2. All troubles come from interpersonal relationships. 3. Let those who interfere with your life go to blazes. 4. Have the courage to be disliked. 5. An earnest life “lives in the here and now.”

The Philosophy of the Strong:

Adler held that in human life there are three pursuits that are self-evident. These three pursuits are the starting point of the philosophical deduction—the “first principles,” in other words.

First, everyone wants to progress. To want to make oneself better through effort is a wholly healthy tendency, with nothing wrong in it at all. But if you not only want to progress but also make a point of comparing yourself with others—feeling ashamed and inferior before those more skilled, even wishing that everyone were worse than you—that is an unhealthy state of mind.

Second, everyone pursues happiness. Adler made an assertion: the key to happiness and unhappiness lies in interpersonal relationships. Good relationships will make you feel happy, and the root of all troubles is likewise interpersonal relationships. Adler held that happiness does indeed depend on relationships, but a “good relationship” is by no means the same as “others’ recognition of you.”

Third, everyone pursues freedom.

Progress, happiness, freedom—everyone wants them. The weak person’s route is to achieve progress first, and only then win happiness, with no particular demand for freedom—perhaps freedom is merely one of the feelings of happiness, a result of progress.

Adlerian doctrine, by contrast, is the route of the strong. This route requires freedom first. Only happiness under the premise of freedom is true happiness. When you know what happiness is, you know how a person ought to handle the question of progress.

What Is True Freedom

If you live everywhere for the sake of others’ recognition, then you are driven everywhere, you are not free, and you will suffer.

Adler held that the root of all human troubles is interpersonal relationships. Why the trouble? Because you always want to gain others’ recognition.

You can treat recognition as a by-product: do well, and others will naturally recognize you—but you should not pursue recognition directly, should not be led by the nose by recognition.

The person driven by recognition loves to compare with others in everything they do.

If you feel you fall short of others, inferiority arises. Now, if you were to compare yourself with the “ideal self,” feel dissatisfied with your present self, and strive hard, that would be a very healthy state of mind. But to compare with others is not only unhealthy; it may also turn inferiority into an “inferiority complex.”

There is another, more common thing called a “superiority complex”—flaunting a sense of superiority everywhere. Such a person in fact wants to lean on others’ misfortune to show that they are “special.” They always want, in everything, to get one up on others. Do you think such a person is happy? Of course not. So long as they feel that someone has surpassed them, they will feel anxious and uneasy, and may even resort to any means to seize back their superiority.

The person driven by others’ recognition compares with others all day long; the interpersonal relationships in their mind are vertical—people ranked high to low by status. They always want to prove that their own status is higher than others’; even if they have reached the very top, they will worry that someone else will bring them down.

To gain freedom in interpersonal relationships, you need to build horizontal relationships.

In Adler’s thought, if you are a person who truly believes in freedom and believes that all are equal, then you should neither criticize nor praise the conduct of others! Because whether it is criticism or praise, both are inequality, both are attempts to manipulate others.

Both Criticism and Praise Are Bad

In educating children or cultivating subordinates, it is generally thought that there are two methods: the method of educating by criticism and the method of educating by praise. Regarding all communication with others, child-rearing foremost, Adlerian psychology takes the stance that “one must not praise.” Naturally, at the same time, it opposes corporal punishment and does not endorse criticism. One must not criticize and one must not praise—this is the stance of Adlerian psychology.

The act of praise carries the character of “an evaluation made by the able of the less able.” That is to say, the mother who praises her child with words like “You’re amazing,” “Well done,” or “How capable you are” has, without realizing it, created a superior-subordinate relationship—seeing the child as lower than herself. The aim of a person praising another lies in “manipulating the other, who is of lower ability than oneself”; in it there is neither gratitude nor respect.

When we praise or criticize others, there is only the difference of “using sugar or using the whip”; the aim behind both is manipulation. The reason Adlerian psychology so strongly rejects reward-and-punishment education is precisely that it is for the sake of manipulating the child.

To wish to be praised by others, or conversely to wish to praise others, is proof of understanding all interpersonal relationships as “vertical relationships.” You wish to be praised precisely because you live within vertical relationships. Adlerian psychology opposes all “vertical relationships” and advocates seeing all interpersonal relationships as “horizontal relationships.” In a sense, this can be called the basic principle of Adlerian psychology. It may be expressed as “different, yet equal.”

The feeling of inferiority is, to begin with, a consciousness arising from vertical relationships. So long as one can build with all people a horizontal relationship of “different, yet equal,” no inferiority complex will arise at all.

Conclusion

If you want to choose “freedom,” then you must choose the road of not fearing to be disliked, not living for others, living only for yourself. To live only for yourself does not mean to be selfish. Viktor Frankl, author of Man’s Search for Meaning, held that one of the values of life is to create value for others. To give influence to others as one’s companions, to make a contribution—this is what Adler calls “contribution to others.” Contribution to others does not mean self-sacrifice. On the contrary, Adler called those who sacrifice their own lives for others “people over-adapted to society,” and gave a warning against it. That is to say, contribution to others is not the casting aside of “the self” to labor for others; it is, rather, a means adopted precisely so that one may feel the worth of “the self.”

Therefore, however fleeting the moment you live, even if someone dislikes you, so long as you have not lost sight of this guiding star of “contribution to others,” you will not lose your way, and whatever you do will be all right. Even while being disliked by those who dislike you, you can still live freely. And we should, like dancers, earnestly live well the fleeting moment of “here and now”—looking neither to the past nor to the future—needing only to live each present well. There is no need to compete with anyone, and no need for a destination; so long as you keep dancing, you will surely arrive at some place you wish to go.

The greatest freedom of life does not come from having, but from setting down the attachment to the known world and the fear of the unknown—setting down the attachment to gaining others’ recognition and the fear of being disliked by others.