I’m going to let you in on a secret.
You win an argument the same way you win a nuclear war: by avoiding one.
Disagreement is ever-present in life. The trick is stopping disagreement from turning into an argument.
Like saving money, investing better or losing weight, avoiding arguments is simple but not always easy.
These skills rely on using our Slow thinking system rather than our Fast emotional response system (see book Thinking Fast and Slow).
To illustrate these 2 systems*, I’m going to put a glass box containing a cobra snake on the table in front of you. Lean forward and concentrate on the snake.
If it rears up hissing, you will jump back. That’s because your F (fast) system is keeping you safe. The instant your brain perceived the snake was moving, a signal was sent on 2 different paths – imagine a low road and a high road.
The low road is part of the F system and sends the information straight to the amygdala (the part of the brain for fear and risk) which reacts quickly and forces your body to jump backwards.
The signal also takes the high road on a long loop via the S (Slow) system to your prefrontal cortex which processes the information to rationally assess the threat. It takes into account the secure glass box. But by the time your S system sounds the all clear, you have already jumped back.
To avoid arguments, we need to use this Slow system a bit more (and the Fast system a bit less). This is like training a muscle, it takes time and the only way to get better is to do the reps.
In my earlier years at work, I was often naïve and a bit of a slow learner. I wondered why there was always so much conflict. Then, after a few years working in corporate finance, I had a lightbulb moment.
I realised that conflict was inevitable at work. It might be conflict with counter-parties to a deal, it might be with clients, it might be with colleagues. But conflict is inevitable because our wants are endless yet resources are often finite.
After I realised this, work got a bit easier. Not because conflict stopped : it didn’t. Nor because I was particularly good at dealing with conflict : I wasn’t. But when conflict arose, I stopped trying to allocate blame for it and tried to focus on resolving it.
Why is this relevant to financial independence? Because, one way or another, all your income comes from other people. It comes from bosses, customers, clients, colleagues, employees, contacts and friends. The better you can deal with other people, the better your chances of increasing your income.
Yes, frugality is important. It’s important not to waste money. But you can’t just penny pinch your way to riches. At the risk of stating the obvious, the higher your income, the easier it is to get your savings rate up above 50%.
So it helps to be good at recognising other people’s point of view. Let’s look at 2 broad types of conflict resolution:
Think of an adversarial contest between 2 gladiators. Conflict is not an unfortunate side effect, it’s the whole point of the exercise. It’s a zero sum game where a contestant can only win if the other loses.
No agreement is required between the parties. The contest is either decided by one of the gladiators killing the other one or by some judging mechanism (e.g. the Emperor or the crowd).
Other examples include:
- Boxing, duels, martial arts
- Criminal trials
- Rap battles
- Academic debates
- The Monty Python argument clinic
This type of situation is rare in normal life and yet it’s the default frame that many people have when it comes to disagreement. But unless you are actually a gladiator, its probably best to give this approach a miss.
All other types of disagreement are about two or more people with differing interests trying to get to a mutually acceptable outcome. Both sides have to agree to the deal for it to work.
These are positive sum games. In other words, the right deal can create additional value and synergy where 2+2 = 5.
This is the situation that most of us often find ourselves in. Examples relevant to financial independence include:
- Employment (e.g. you and your boss discussing pay / promotion / perks)
- Spouse (e.g. discussing the Escape Plan with your significant other)
- Business (e.g. discussing fees or work products with a client)
Sometimes the distinction is not clear. Blog comments can range from constructive additions that advance the sum of human knowledge at one end of the spectrum to internet troll-fuckery at the other. Politics spans both categories. Political debates in front of a crowd or TV audience are gladiatorial. But private discussions about coalitions are negotiations.
Gladiators provide entertainment but if we want to achieve financial independence, we are more interested in negotiations and how to get better at these.
I recently read Dale Carnegie’s classic book How to Win Friends and Influence People. It’s interesting that it took me so long to get round to reading this. After all, I have long known that Warren Buffett credits Carnegie’s coaching with his people skills and easy going charm. God knows, I could have done with some of that myself when I was younger.
I could say that I was always too busy to have read it before. But then I always seemed to find plenty of time to watch shit on TV, so who am I trying to fool?
I found time to read all Buffett’s letters to Berkshire Hathaway shareholders and his lengthy biography The Snowball years ago. Yet I was always a bit suspicious of the title of How to Win etc and the idea that I might need help in that department. Surely reading a book like that would be like admitting that you need help making friends. Which is tantamount to admitting that you are a social leper.
I’m glad I finally read the book though. In it, Carnegie makes the point that most arguments end with each of the participants more firmly convinced than ever that they are absolutely right. So you can win in a negotiation but you can’t win an argument.
If you lose an argument, you lose. And if you win it, you lose it because the other person feels inferior and will resent your triumph. In ongoing relationships, this is a disaster because they will make a mental note to get you back next time. In a world where co-operation can make lots of cakes, we need to focus a bit more on baking and a bit less on how the existing cake gets cut up.
The book contains a great checklist for how to deal with disagreement:
Welcome the disagreement
If handled correctly, disagreement can strengthen your case. If there is some point you haven’t thought about before, be thankful if it is brought to your attention. Perhaps this is your opportunity to be corrected before you make a serious mistake.
Distrust your first instinctive impression
Our first natural reaction in a disagreement situation is to be defensive. Be careful. Keep calm and watch out for your first reaction. It may be you at your worst, not your best.
Control your temper
Remember, you can measure the size of a person by what makes him or her angry.
Give your opponents a chance to talk. Let them finish. Do not resist, defend or debate. This only raises barriers. Try to build bridges of understanding.
Look for areas of agreement
When you have heard your opponents out, dwell first on the points and areas on which you agree.
Look for areas where you can admit error and say so. Apologise for your mistakes. It will help disarm your opponents and reduce defensiveness.
Promise to think over your opponents’ ideas and study them carefully
And mean it. Your opponents may be right. It is a lot easier at this stage to agree to think about their points than to move rapidly ahead and find yourself in a position where your opponents can say: “We tried to tell you, but you wouldn’t listen”
Thank your opponents sincerely for their interest
Anyone who takes the time to disagree with you is interested in the same things you are. Think of them as people who really want to help you, and you may turn your opponents into friends.
Postpone action to give both sides time to think through the problem
Suggest that a new meeting be held later that day or the next day, when all facts may be brought to bear. In preparation for this meeting, ask yourself some hard questions: could my opponents be right? Partly right? Is there some truth or merit in their position or argument? Is my reaction one that will relieve the problem, or will it just relieve any frustration? Will my reaction drive my opponents further away or draw them closer to me?
This leads to Carnegie’s next point which is that one of the surest ways to create an argument is to tell people that they are Wrong. Phew! It’s a good job The Escape Artist has never fallen into that trap! 😉
One of the great things about learning to be a better investor is that it teaches you humility. I’ve come to accept that I’ll usually be wrong about some of the shares in my portfolio. The good news is that you don’t need to always be right to make a lot of money.
If your first reaction is to distrust anything that sounds like self help or positive thinking bullshit, I get that. Perhaps that’s why I avoided reading Carnegie’s book for many years?
But ask yourself why Warren Buffett described Dale Carnegie’s coaching as “life changing” for him. Is it possible that Warren Buffett knows a trick or two that you don’t?
The Little Book of Behavioral Investing (*the source of the snake example)