The Value of A Working Theory

Life and business are filled with open ended questions. There is a natural tendency to treat problems as discrete. On close examination, there will be patterns connecting decisions and outcomes. A working theory starts as a way to discover those patterns. A thesis eventually helps exploit them.

In the pattern discovery phase, I rapidly iterate through working theories. They guide thoughtful exploration. With enough feedback, I build conviction. At that point, I call it a thesis. A thesis enables me to be scalably thoughtful. Once I develop a thesis I can apply all of that thought to a new problem at a low marginal cost. It is a framework to quickly make confident decisions.

I split the remainder of this post into two sections. The first is how I iterate through working theories to build conviction. The second is about the benefits of a thesis.

Pattern Discovery (A Working Theory)

By making one off decisions, I wrestle with the same issues again and again. I can miss the patterns if I view each choice in a vacuum. By reflecting on deeper concepts, it is possible to use each decision to build and refine a framework. It is a lot of upfront work.

A novel situation usually calls for novel thought. In the pattern discovery phase, I try to have as many novel experience as possible. You don’t know what will be valuable or cause an insight beforehand. So it’s best to explore. A few names for this process are opportunistic wandering (Gary Chou), convex tinkering (Nassim Taleb), maximizing entropy (Gary Chou again), lean ideology (Eric Ries, et al) and fertile chaos (me).

Whatever the name, ideas need to collide in unpredictable ways. One way I do that is by reading in parallel. I also seek out new experiences and alternative points of view. Perhaps the most important thing is to learn by doing. Following intense periods of doing new things, I try to spend time thinking.

When a new experience offers cognitive dissonance, I evolve my working theory. The Talmud is 6200 pages of Jewish law. It has an unusual format. It starts by presenting a law. Then there are questions about edge cases and contradictions. These questions lead to discussions. Those discussions usually clarify and evolve the law. Life’s events and others’ ideas do the same to my working theories.

[optional example] In consulting case interviews, people suggest being “hypothesis driven”. The interviewer usually asks an open ended problem like, “A lumber company is experiencing declining profits – what should they do?”. Being hypothesis driven means force picking an almost arbitrary starting point. Such as, “I believe revenue has gone down”. This working theory (hypothesis in consultant-speak) is not meant to be correct. However, it is empirically falsifiable and gives you a clear next step (ask about revenue). Usually, you iterate through different theories quickly. However, you start to converge on a promising one. For example, you learn that revenue is stable, prices are unchanged and volume is the same. So you switch your hypothesis to “costs have gone up”. The data confirms this is correct. Now you hypothesize that it is variable costs, which is again confirmed. Now you zoom in to discover that the price of labor has gone up since the state raised the minimum wage. Having a working theory guided the exploration.

This blog is my place to write down theories and evolve them. They might not be right, but they are helpful. Hence my blog’s name, “A Working Theory”.

Pattern Exploitation (Thesis)

A working theory can become a thesis. The difference is conviction. A future post will discuss how I form habits. The cornerstone of every difficult habit I’ve formed is conviction. The effort of pattern discovery pays off as soon as I have conviction. Of course, developing theses isn’t a linear process. There are feedback loops and revised ideas.

There are many advantages to having theses about life. One is quick decision making in relevant situations. Theses are like habits for complex decisions. Life’s biggest opportunities come rarely and with short time windows. Even if you could thoughtfully arrive at the right decision, it’s worthless if you can’t do it quickly. Theses help with that.

Most complex decisions come with lots of noise. Life often presents choices with familiar signal, but new noise. Theses focus on the key issues. Theses are the result of sifting through a lot signal and noise.

Theses help spot diamonds in the rough. Sometimes, new choices look superficially bad. However, a thesis focuses on the key issues (see above). If those issues match your thesis, you can confidently take action. You don’t need social approval if you have conviction in your thesis and its application to this decision.

A surprising benefit of a thesis is the management of anxiety and fear of missing out (FOMO). There are many careers, hobbies, people and ideas worthy of time. However, they are mutually exclusive to each individual. The “best”choice is nonexistent. Instead, I want to make choices that are good enough for me. Thoughtful theses give me that conviction. There are enormous benefits of focus. Theses give me conviction that what I am focusing on is good enough.

A thesis with conviction allows its believers to make quick, possibly contrarian decisions by focusing on the key issues without FOMO. That’s powerful. It’s why I’m willing to wrestle with working theories on this blog and in life.

I articulated a couple of my current life theses here.

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