Pebbles of Perception is a book about wisdom. It covers a variety of life topics (e.g. investing, relationships) from three main aspects: curiosity, building character and making better choices.

Laurence Endersen was inspired to learn (and later, write this book) after he was exposed to the works of Charlie Munger—Warren Buffett’s business partner at Berkshire Hathaway.

If you’re already a fan of the work of Shane Parrish and other Buffett/Munger devotees, then this book will likely offer nothing new to you.

Though, many have said the book is a nice summary of what they’ve learnt from those sites themselves.

Let’s dive right into my notes for Pebbles of Perception.

Ask better questions

• We can be too quick to blurt out what we believe are the correct answers, when more value can be gained by searching for a better question. A questioning mentality is far more effective than a knowing mentality.
• Once we have declared an answer, our biases towards commitment and consistency cause us to defend our answer, wasting energy that would be better applied to exploring alternatives.
• A thoughtful colleague of mine sometimes responds to a question with: “I think a more useful question you might want to ask me is…”. His thought process shows an all too rare appreciation of why we need care in crafting our questions.
• While good managers ask how questions, innovators also ask why, why not and what if questions.
• First-level thinking focuses on the most visible and immediately obvious answer. It is clear to everyone. By contrast second-level thinking considers what else might be going on. This is not immediately obvious. Continually asking ourselves why allows us to go beyond first-level thinking.
• Richard Feynman liked to point out the difference between knowing what something is called and knowing what it is – that is, the difference between knowing the name of something and really knowing something.
• If we search for better questions, ultimately to lead to a better answer, we should be prepared to act on that answer even if it contradicts our view of the world, in fact especially if it contradicts our world view.
• Good if questions stimulate rich debate. For example, what would you do if you were not afraid? If you could be known for one thing, what would you like that to be? Why are we not enjoying life to the full? What if we did more of what we enjoy and less of what we find dreary or soul-destroying? How do we go about changing our priorities? This why, what-if and how sequence can be the key to possibility.

Lifelong Learning

• Why not make a conscious decision to learn something new every day? No matter how small the daily learning, it is significant when aggregated over a lifetime.
• There is no substitute for direct learning through experience – which we enhance through reflection.
• The process of thoughtful reflection makes our experiences more concrete, and helps with future recall and understanding. Reflecting about what we learned, how we felt, how we and others behaved, and what interests were at play, hardwires the learning in our brain and gives us a depth of context and relevance that would otherwise be absent.
• Unfortunately there isn’t enough time to learn everything through direct experience. Indeed, this is neither practical nor always desirable, especially when it comes to mistakes. Far better to learn from the mistakes of others, if we can.
• Being widely read is not the same as being well read. The more effort and skill we put into reading, the greater our understanding.

Listening

• To begin with, verbal communication represents just a small part of overall communication.
• Secondly, we are not always able to find the right words. Words are often not specific enough.
• Your lens and my lens will have been shaped by our individual histories and conditioning. Words, gestures or tones that may seem humorous and harmless to me could seem offensive to you.
• In addition to unique histories, everyone has a different current context and emotional state.
• When we communicate we expect that logic is what drives other people’s behaviour. The reality is that much more is at play and you will waste a lot of time in this world trying to move people through brute logic.
• I characterise those of us who are more likely to be talkers as wearing the lecturing lens. Gaps in conversation are simply periods during which we gather our thoughts to continue our lecture – me and my story.
• I suspect that good listeners are in the minority, which makes defaulting to the learning lens all the more effective. There can be no real understanding without listening. We feel honoured when others take a genuine interest in understanding our position. When people understand us we are psychologically validated. Our opinion matters. We matter.
• Make the learning lens your default setting. Approach every conversation with an open mind. OK, I have a view and I believe it to be the correct one, but, what might I be missing here? What if the other person has some insight that can illuminate my own? What if I am wrong? We listen intently not just with our ears, but with our eyes and our senses. We are paying attention, striving to perceive what is really going on in the other person’s mind.
• Make them a star. Try to bring out the best in other people. This is not false flattery, but helping people get their views properly heard and understood.
• Respect the right of someone to have a different opinion from yours. Leave unconstructive criticism at the door.
• Find your words. Once you have demonstrated a full understanding of the other person’s view, think carefully about what you want to say and then don’t say it! Try instead to figure out what the other person is likely to hear. In other words, try to make some allowance for the distortions in their lens. Your opinion on something is more credible when you can also clearly articulate the contrary view. Good communicators are thoughtful in how they choose and arrange their words.
• Words are never enough. Your tone and demeanour should be consistent with, and supportive of, the whole message.
• Choose quality over quantity. Don’t always feel there is a need to fill every moment with communication.

Incentives

• We can only see a situation with true clarity when we take the time to carefully consider the interests at hand. And we understand it even better when we consider how the situation might be different if the underlying interests were different.
• We get into trouble when we fail to recognise that incentives can overly focus our behaviour. Give a man a hammer and everything looks like a nail.
• The carrot is effective, but it is too pointed. We suddenly focus on the incentive and forget about the second order consequences. What we see is that narrow incentives influence performance, but they may not improve it.
• Understanding incentives is linked to second-level thinking. Many an incentive that was designed with a primary purpose in mind has backfired because the designers failed to consider what other interests might be affected, or how self-interest would manifest itself in a way that was contrary to what was expected.
• Considerable thought needs to be given to incentive design. Understanding the range and nature of interests involved is key. We should seek to design incentives to bring out the best in people and pay attention to actual behaviour as a warning alert for possible design flaws.

Context

• We should choose assessments over assertions.
• Conviction is assuring. Western society places a high value on certainty. Bring us the single-handed advisors – those people who are confident, articulate and assured.
• We are prone to misjudge the behaviour of others when we don’t fully consider the circumstances. If we are to be truly curious, we will carefully consider the context.
• Life is context-dependent. Problems arise when people don’t leave room for ambiguity.
• Very few “answers” are right in all circumstances.
• A close cousin of context dependency is absence blindness. Humans are reasonably adept at examining and judging what is in front of them. We are excellent at comparing alternatives yet terrible at considering what’s missing. Presented with a choice between A, B, C and D, we get very busy on the relative merits of each rather than suggesting a context-appropriate E. Out of sight, out of mind.
• For most things, “contextually confident” seems like where we should be spending most of our time. Just because we are not certain doesn’t mean we can’t proceed. Things are always in flux, and we under-appreciate the role of luck or mere randomness, so we should never let the lack of certainty hold us back from getting on with things. Be assured, yet open-minded.
• We can also be more careful and deliberate in our choice of words. “I know” is not the same as “I believe”. Or, how about: “In my experience of similar situations, I have frequently found…”

Consider the end and the opposite

• To build a foundation of good character on which we can make good choices, we need to look forward. Start by considering the end. Why are we here and what do we hope to achieve? I guess, for most of us, life is about personal fulfilment of some sort or another. Yet we rarely ask ourselves what makes a fulfilling life. What does it look like? How would we describe it? What does it feel like? What would represent a great life? These are not easy questions and our answers may change over time.
• Some insight may be found by posing the opposite question: What might an unfulfilled life look like? Or worse, what would a truly wasted life look like?
• The poignancy and beauty of the eulogies is always emotional. But why do we only say such nice things when someone is gone? It seems that funerals are for the living. Why not write now and let our loved ones know how much they matter to us?
• The only thing we know for certain is that the final day eventually arrives for us all. How we live our life between now and then will be our story. What epitaph would we aspire to? What will the eulogy say? How would you like to be remembered? No one aspires to an empty eulogy.
• In thinking about a life well lived we might ask whether we have maximised the best of what life has to offer. Is the world at least a slightly better place because of our presence? Have we made a positive difference?

Anytime we are tackling an important project or decision, we can get more clarity when we invert. Try the following thought process:

1. What am I hoping to achieve? Look beyond the first level: What am I really looking to achieve? Don’t just scratch the surface.

2. What does achievement look like to me? Express it in as much detail as possible.

3. What behaviour or actions would ensure that I failed?

4. What actions do I need to take to get to where I want to go (guided by avoiding the behaviours and actions in step 3)?

Fear

• Fact-based fear occurs when you face a present and immediate danger. You are walking home alone late at night when a menacing stranger threatens you with a knife.
• Then we have thought-based fear, which is another matter entirely. Here we are either worrying about the past or we are fearful for the future.
• In fact, the vast majority of our fears are simply thought-based time distortions attempting to impose either the past or our fearful perception of the future on the present moment. When understood for the impostors that they truly are, our fears dissolve.
• Fear is closely associated with anticipated loss. Change always brings the possibility of loss. The subtlety of loss is that it does not exist on its own. Loss must exist in relation to something, otherwise it has no meaning. We worry that we are losing out as compared to a present or perceived state. Comparison causes fear. Envy causes fear.
• All too often, our chosen scorecard is not an inner scorecard; it is an external comparative one, where we can never come out on top. The deep and difficult insight here is to stop comparing ourselves to others, to stop seeking to be “more than” others. Future fears melt away when we fully accept ourselves as we are, when we love ourselves, not in a narcissistic way, but in a compassionate way.
• Firstly, we can cultivate a wide range of interests and relationships. It is dangerous to define ourselves by any single thing.
• Whether it is a career, material wealth or a particular relationship, if we have defined ourselves by reference to one thing, our scaffolding falls apart if we lose it. We have no foundation to fall back on. A broad based, exploratory approach to life is more resilient to inevitable loss. Why linger on the loss when we can revel in the rebirth.
• Secondly, when things go wrong, the consequences are never as bad as our thought-based fears imagine them to be.
• Humans have an extraordinary capacity to adjust to circumstances, and numerous experiments have shown that we bounce back from difficulties far more easily than we think we will. This means we take far less risk than we should, based on the misjudged fear of how loss will impact us.
• Thirdly, irrespective of what happens, we always have the capacity to choose our reaction. Our capacity to choose our response is evergreen and can’t be taken from us.

Know Yourself

• Knowing ourselves gives context and clarity to the choices we make. Life is a series of choices; some are automatic (pulling your hand away from a hot object), others are conscious (choosing a meal at a restaurant). Many more are subconscious, like judgement. Our quality of life is heavily influenced by the quality of our choices.
• Knowing ourselves allows for more productive choices. It also helps with determination and resilience. If we understand why we choose a certain course of action we are more likely to see it through. Choice can also be one of inaction: the choice not to do something. Saying no is powerful when we clearly understand why we don’t want to do something: “No, I won’t work with that group of people because they have different values and different priorities to mine.”
• How do we get to know ourselves? Examining and reflecting on our feelings is one way.
• When someone makes us angry, sad, annoyed, bitter, jealous or joyful – our feelings are always about us rather than about the other person. Examined feelings are a treasure trove of personal understanding.
• Asking lots of exploratory questions also helps. If you could pick three attributes to describe who you really are, what would they be? If you could pick three qualities to aspire to, what would they be? Is there any difference between your answers to who you are and who you aspire to be? Why?
• Try to come up with other thought-provoking questions to pose to yourself. It helps to consider extremes. When am I at my very best? When am I at my worst? Given the choice, who would I love to spend a lot of time with? Of the people I know well, who would I like to spend the least amount of time with? Why? What does that say about me?
• It is hard to be yourself if you don’t know yourself, so knowing yourself is the first step. The second step is to accept yourself. So many of us have trouble accepting ourselves. We live in a culture that promotes the image of personal perfection – often with a perverse definition of perfection. There is more focus on having clean clothes than on having a clean conscience.

Negotiation

• A negotiation occurs any time there is a possible exchange between parties and both parties have a choice not to make the exchange.
• Successful negotiators prepare. They have very clear goals. In getting from A to B they understand the scale of the journey, the terrain and as many of the routes and modes of transport as possible. They seek to understand the terrain for both parties, not just their own. They know what their “best” and “walk away” options are, and they have a view on the corresponding options of the other party.
• Successful negotiators seek bigger pies, not bigger slices. By collaborating there are invariably ways for both parties to share in a much larger pie.
• Successful negotiators take their time. Time is your friend. You never want to be rushed, because the temptation is to accept less than a fair deal. Watch out for false deadlines. They can be abused to push you into a poor outcome.
• Successful negotiators focus on understanding the underlying interests of both parties. They distinguish between stated positions and underlying motivations. This requires a questioning mindset, a desire to get beneath the surface or under the bonnet. What is really motivating both parties? What are the real needs, and are there other ways of satisfying those real needs? If what the other party is suggesting doesn’t make sense, good negotiators don’t reject it, they reframe it.
• Successful negotiators understand perception. in negotiation is never let the facts get in the way of a fair outcome. The simple truth is that we have different perceptions of “facts”. We are emotional beings, and negotiations are an emotional engagement. Our goal is to satisfy both parties’ real needs. How you perceive the other person’s real needs is irrelevant. What matters is how they perceive them. What pictures are in their heads and how are you going to paint a picture that works for them?
• Successful negotiators maximise, but never overuse, their perceived power. We maximise our perceived power through: (i) having other options (i.e. not having to do this particular deal), (ii) understanding the nature of alternative solutions, (iii) a willingness to invest or commit resources, (iv) expertise, (v) third-party legitimacy, and (vi) our demeanour. Be relaxed, firm, patient and cooperative.
• Successful negotiators rarely ever accept the first offer. Why? Because by doing so the other person feels bad. They feel foolish. So even if the first offer is better than your original best case expectations, find a way to curb your enthusiasm and seek some improvement.
• Successful negotiators believe that virtually everything is negotiable.
• Successful negotiators delve into differences. Differences are a treasure trove of differing perceptions of value. People don’t value the same things in the same way. By trading things of different perceived value, we increase the pie. For example, we can give someone a deserved positive reference or introduction. This is virtually free to give but of large value to the other party.
• Successful negotiators incrementally and continually build on common ground. They constantly summarise what is agreed as the negotiations proceed, building brick by brick, towards a collaborative negotiated outcome. This slowly builds trust, and trust is the essential ingredient of successful negotiations.
• Those of good character add a critical further ingredient to their natural ability and their understanding of the science. That ingredient is integrity. Good Character = Principled Sellers = Natural Ability + Science + Integrity

Adversity

• Why do some people cope better than others when faced with adversity? Or consider a better question: How can we cope with adversity and perhaps even grow through adversity? I think there are three things that can help: Reflection on the nature of adversity, with a view to understanding; Recognition of when we personally face adversity, with a view to acceptance; and Re-writing our life story to account for the experience of adversity, with a view to personal growth.
• Through reflection we seek to understand the nature of adversity, for what is understood is less frightening when it arrives.
• Primarily, we learn that adversity is a natural part of life. Adversity is distributed neither in equal measure nor with reason. Bad things can and do happen to good people. The purpose of reflecting on adversity is to understand that it is inevitable, indiscriminate and arbitrary.
• Through recognition our goal is to truly face adversity when we come in contact with it, and not avoid it.
• What is life expecting of me now? Adversity places a fork in the road. Our previous assumptions about the way the world works and our place in it may need to be revised. Faced with this new fork in the road we can choose to take the high road or the low road. The low road appears easier, but it is downhill. It is the road of avoidance, social withdrawal, blaming, brooding, distraction and anger. The high road is harder, it is uphill, but the view from the top is clearer. Unlike the lonely low road where we tend to go it alone, on the high road we are accompanied by friends or professional helpers. The high road is the road of acceptance, awareness, perspective and perseverance.
• In re-writing we are tasked with updating our life story to incorporate the adversarial event. How we see ourselves and how we feel about ourselves are tightly bound with the life story we tell ourselves.
• The personal narrative that we attribute to adversity can have a tremendous impact on how we move on. A “victim narrative” can take us under, but a “survivor narrative” helps us to cope. Some go beyond a “survivor narrative” and take on a “growth narrative”. Through a “growth narrative” we are interpreting adversarial events as an opportunity to demonstrate our resilience, choose our response and take ownership of our future.

Be a True Friend

• How many non-family friends could you rely on in a time of need? If there is one – or, even better, a few – then you have something to truly treasure. Now, think a little more deeply and ask yourself this: How many of those people would call you if the tables were turned? To have true friends, you need to be a true friend.
• Friendship is WARM:
• Welcoming – When we see our friends we instinctively make them feel welcome with a smile and a warm greeting. Friends don’t need to make appointments. Indeed we can be even more welcoming of a surprise visit.
• Authentic – Friends are free to be themselves. And friends allow us to be ourselves.
• Reliable – Friendship requires effort. We may not always be in the mood to spend time with our friends, or to help them, but we do it anyway. Friends are reliably there for each other.
• Mutually Respectful – There is no friendship without mutual respect. In a balanced relationship, each friend respects the other for who they are.

Career

• Work smarter not harder. What does that mean? There is an implicit suggestion that work is hard and smart is easy. If smart were easy we would all be at it. It’s not. Being smart requires us to think long and hard about what really matters, understanding what we value most.
• An underappreciated aspect of life is that rewards received are not directly proportional to effort expended.
• When I talk about share of value I am referring to sharing in the profits of your employer’s enterprise.
• Broadly speaking there are two types of monetary reward system. Reward System A is what could be categorised as “power by the hour” where monetary rewards are broadly proportional to the number of hours we put in.
• I think of Reward System A as representing footwork, as the reward is largely proportional to the number of hours worked. To walk ten miles you must take a set number of steps.
• By contrast, Reward System B is categorised by what I call “share of value” or headwork. In this category financial rewards are in some way proportional to the value created.
• If you are lucky enough to find yourself in a “share of value” situation, it may be helpful to study the 80/20 principle, which posits that output is not proportionate to input, or value to effort.

Energy and Focus

• Do one thing at a time. Give it your full attention. Author Gary Keller reminds us that: “Until my ONE thing is done, everything else is a distraction”.
• Beyond focus, how can we make more productive use of personal energy? To answer this we can think about energy in three ascending levels. The base level of energy application is where we are reactive.
• At this level we sit back and observe what the world throws at us, habitually or subconsciously reacting with no motivation other than to react.
• A more productive, higher energy level is when we become proactive.
• Choose to do something on our initiative – starting new conversations for example, or coming up with better questions. Virtually all progress depends upon proactivity.
• Our most productive state is when we are enthusiastic. This combines being proactive with a real sense of purpose.

Experiences

• As you think about what to do with your precious spare time and hard-earned cash, carefully consider the choice between material goods and engaging experiences. People tend to derive more lasting happiness from experiences. Happiness from things is transitory, but the joy from experiences is enduring.
• Experiences are the essence of enjoyment or sometimes pain, depending on the situation. They are always at the root of wisdom. This may be one area where it is harder to put wise heads on young shoulders. It takes time to have a diverse range of experiences. Certain experiences simply can’t be rushed or accelerated.
• But we can give ourselves a head start by seeking out a diversity of experiences early in life and by savouring and reflecting on those experiences. We often don’t give enough time to reflecting on our experiences. It is worth asking ourselves questions like: What happened here? Why did I enjoy it? Why did I hate it? What did I learn about myself? What will I think about differently going forward? What will I do differently in future?

Marriage

• What is the essence of marriage? Two quotes from the German philosopher Nietzsche are relevant: “It is not a lack of love, but a lack of friendship that makes unhappy marriages”; and “When entering into a marriage one ought to ask oneself: do you believe you are going to enjoy talking with this woman up into your old age? Everything else in marriage is transitory, but most of the time you are together will be devoted to conversation.”
• So, when it comes to the question of whom to marry, perhaps we could rephrase the question as who would be a great long-term friend.
• Another way to explore the question of ‘who to marry’ is to look at the causes of breakups.
• Gottman’s methodology is to identify the balance between positive and negative emotional cues. Too much negativity, and a relationship is heading for the rocks. Defensiveness, stonewalling, criticism and contempt are particularly corrosive. Stonewalling is the worst of all. Watch for these characteristics in your potential partner and in yourself.
• Often we choose partners that we feel can fix us or vice versa. This leads to trouble. You can fix or change nobody but yourself. If we choose a partner based on fixing or filling what is lacking in ourselves it can create a power struggle within the relationship.
• Another important factor when choosing a partner is to ensure you both share a similar moral code. When it comes to difficulties later on in the relationship – and there will be some – a common moral code will help in deciding the best way forward. When the code is in sync it is easier to come to a fair understanding that will please both parties.

Savings and Investing

• Avoiding mistakes is also crucial to wealth preservation. The mathematics of mistakes is miserable. The two most common sources of mistakes are: (i) not knowing what you are doing; and (ii) leverage (i.e. borrowing or debt). At times leverage can be appropriate (e.g. an affordable level to purchase your home); however, more people have gone broke through excess borrowing than in any other way. Be extremely wary of it. On borrowing, Warren Buffet advised that if you are smart you don’t need it and if you are not you have no business using it.
• Maximise your capacity to save. This is about spending less than we earn. Simple as it sounds, our expenditure has a nasty habit of increasing to match, or worse exceed, our earnings. To maximise our savings capacity we need to spend less, earn more, or both.
• Commit to a regular and automatic savings plan. Decide that you will save a fixed amount of your monthly earnings from now on. It could be somewhere between 5% and 20%.
• If you have a genuine interest in investing then spending the time to manage your own investments is intellectually rewarding, and if you are good enough (few are), it is financially rewarding
• Minimise costs. Expenses are not just confined to annual management and administration fees. They also include transaction fees. All expenses are bad for your financial health.
• Tax can be a large cost that eats into returns. Tax efficiency is a crucial component in building long-term wealth. Get professional advice here. Look in particular at whether you are fully utilising the tax-free compounding capacity of pension or retirement plans for both you and, if married, your spouse. Many jurisdictions have especially favourable regimes to encourage saving for retirement.
• The third cost is inflation, in that it eats into your real purchasing power. That cost can’t be reduced; you need to rely on investment performance outpacing inflation.

Thinking

• Though we are supposed to be rational we are prone to all sorts of biases.
• Though illogical, this is not necessarily always a bad thing. To the extent that we can have a good story about ourselves, we can face the world with an optimistic resilience.
• The problem with stories is that they incorrectly weigh consistency over completeness and surprise over significance.
• There is a view that creativity is innate and cannot be learned or developed. We are either creative or not – like pregnancy, there is no in-between. This black-or-white view is partly explained by the limits of language. The word creativity can have different meanings. It is context dependent.
• Think of there being two types of creativity. “A-tivity” represents aesthetic creativity: art, design, music, film. “B-tivity” represents benefit creativity. This opens up a much more familiar world in which we all have contributions to make. With B-tivity we may think of anything we can do to improve things in either our work or personal lives. Any action that improves on something else demonstrates B-tivity.

---

Enjoyed this? Then buy the book or read more book summaries.