The 3 elements of high performance: Story, Strategy, State

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This is not a normal personal finance site, it’s a site about how to get rich.

One problem with boring traditional personal finance advice is that it tells you what to do with what’s left over at the end of the month.

The problem is that for most people there’s not much left over at the end of the month.

So here we’re more focused on the secrets of getting your savings WAY UP than we are exactly which fund or bank account you put your savings in.

 

People sometimes say there aren’t any secrets to financial independence: it’s just:

i) Earning more

ii) Spending less

iii) Investing the difference wisely

iv) Knowing how much is enough

Well yes, but…and its a BIG BUT…its not easy and the devil is in the details.

The execution of these elements is a big subject. So whilst its sort of true that there are no secrets, there are a huge number of facts, thought processes and techniques (you can call them hacks if you want) to learn during your journey.

These took me years to discover and internalise. And if you don’t know them and take action, they might as well be secrets. It’s the “doing” (the execution) that matters. Financial independence is not just an intellectual pursuit. You gotta pull the trigger instead of procrastinating.

So I think its important to understand the elements that go into achieving high performance. I’ll illustrate with investing examples. But these principles apply to any area of your life (including your career, your fitness and your relationships).

Tony Robbins talks about the 3 performance elements of i) Story ii) Strategy and iii) State. You can say that’s a simplification…but the whole point of mental models is to simplify reality. A map that included everything wouldn’t be useful and wouldn’t be a map.  The map is not the territory.

Let’s dive in to each one in turn:

1. Story

Story is the way you see the world. Its the story (actually multiple stories) you tell yourself about how the world works. In Secrets of The Millionaire Mind, T Harv Eker talks about this as your money blueprint.

But wait! How can stories in our head lead to real world results? On its own, your money blueprint can’t drive the results you get in life. There has to be a transmission mechanism:

Thoughts lead to Feelings. Feelings lead to Actions. Actions lead to Results.

Remember the 2 types of reality:

i. Objective reality

This reality is independent of what we think. It is the objective truth sought by scientists and engineers. An example would be the laws of physics…like if you jump out of a plane without a parachute, gravity pulls you downwards at a velocity increasing by 9.80665 metres per second per second. It doesn’t matter what you think.

ii. Subjective reality

Subjective reality, on the other hand, is shaped by what’s in our minds: our beliefs, expectations and perceptions.

This is the version of reality that operates in most of our life…anywhere where the human factor is at play.  Crucially, it’s subjective reality that applies in personal finance.

A classic example of a story that holds people back from investing would be the (incorrect) idea that the stockmarket is a giant casino or scam. If you believe that, you won’t invest…you’ll huddle in cash, with the value of your money slowly melting away like an ice sculpture at a party. And that would be a shame because the stockmarket has been the best place for building wealth for the last couple of hundred years.

Another unhelpful story is the idea that investing is really difficult and best left to the “experts”. The financial services industry loves to create more choice and more complexity because it has the helpful (for them) side effect of confusing the punters and distracting them from the fees.

If you still doubt that your mental stories matter, consider this classic Morgan Housel quote:

The best investors in the world have more of an edge in psychology than in finance

Other than in maths textbooks, there are few absolute truths. We’re all mortals struggling to live in an infinitely complex universe that we can’t fully understand. But we have to believe in something otherwise we’d never get anything done. Here’s Eker again:

If you’re like most people, you’re going to believe something, so you might as well adopt beliefs that support you, rich beliefs. Remember, thoughts lead to feelings, which lead to actions, which lead to results. You can choose to think and act like rich people do and therefore create the results that rich people create

Here are some useful stories to tell yourself:

  • most people are fundamentally decent
  • the harder you work, the more likely you are to get ahead
  • its not hard to be better than average
  • life is not fair but I’ll deal with whatever comes
  • what doesn’t kill you makes you stronger
  • karma is a thing: you get out what you put in

The point is not whether those stories are 100% objectively “true”. The point is that they are useful beliefs that will help you play the hand you’re dealt.

The more positive, realistic and constructive the stories in your head, the better your outcomes with other people and with money are likely to be.

2. Strategy

Strategy is the most obvious element of the three. Its pretty obvious that if you want to get something done, you need some sort of strategy. Strategy is your plan for how you will achieve whatever it is that you want.

An example of strategy from World War 2 was the Allied plan to invade Normandy on D-day.  That overall strategy contained many detailed tactics. But strategy alone is not enough. We needed a powerful story; a powerful “why” (e.g. stop the Nazis, survive, save the world). And we needed to hold on to that story even through the darkest hours when our emotional state may have been one of despair.

Back to investing. There are more than one investing strategies that can work, including:

  • Index tracking (passive equity investing)
  • Stockpicking (active equity investing)
  • Property / Real estate

Of the 3 elements, strategy is the one that normally gets all the attention. But that doesn’t makes much sense because investing strategy can be made super-simple. So the main purpose of this article is to shine a light on the other 2 elements.

3. State

When I talk about your state I mean your physiological and emotional state.

The state we are aiming for here is focused, confident, calm and above all else EFFECTIVE.

An easy way to visualise state is the difference between how your experience your life…how you feel…when you’re hungover versus when you’re feeling fresh after a good night’s sleep. You’re the same person in both scenarios. The fundamental realities of your life are exactly the same in both scenarios – you have the same advantages and disadvantages, the same opportunities and threats. But your reality feels very different.

Over Christmas I had a stomach bug that meant I couldn’t eat food for 24 hours and felt rough for several days afterwards. The way I experienced this was NOT:

“Everything in the world is as marvellous as ever, shame about the temporary stomach bug”

No, it FELT like the world was a bit more dangerous, a bit less benevolent. For a few days, my glass became half empty rather than half full.

Fear and anxiety are dangerous. The extreme form of fear is panic and the problem with panic is that its an ineffective state for anything other than running the fuck away. And if your job is provoking these feelings, it can be hard to run away (especially without FU money).

The power of State is under-estimated by almost everyone but particularly by logical people. Their “logic” tells them that because they feel depressed, the world must be a depressing place. There must be something wrong with the world rather than with them. They’d do better to take a look at themselves in the mirror.

The quickest way to improve your state is exercise. Just about any exercise has a positive effect on your State. I find walking, running and cycling and running both physically uplifting and mentally calming.

But, as I may have mentioned before, I think lifting weights is the most effective way to improve your state over time. It improves body composition (more muscle, less fat), improves your posture and your hormonal balance. Weight training has changed me physically. What’s more surprising is how it makes life just feel better. Weight training is one of the greatest “hacks” for eliminating anxiety and fear.

A word on time horizon: weight training takes years to achieve best results in terms of body composition. But the boost to your morale and to your state (and therefore to your effectiveness) from sprinting or a work out is immediate.

If you are worried about your finances or struggling to overcome procrastination and are trying to “logic” or “learn” your way out of this by reading, you may be looking in the wrong place.

The good news is that you can learn to manage your emotional state for greater effectiveness. If you are feeling low / stuck, its often far more effective to change your state before trying to figure out a logical answer to the problem.

Get off your screens, get outdoors, get active, get your heart rate up!


Further reading:

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  1. Understanding Your Money Blueprint
  2. Eliminating fear with bio-hacking
  3. Financial Coaching

 

6 comments

  1. Great post. Particularly resonates with me about hacking your “state” before tackling big decisions. One of my favourite actions is to save at the start of the month so I don’t even make a decision about it. I just don’t see the money in my current account.

  2. FI Warrior · · Reply

    So true, mental state or psychology must lead, look at drug addicts, the unthinking initial assumption people have is they’re lazy, before a string of other negative descriptives, But they hustle nearly every hour of the day for money to get the next hit, (irrespective of whether it’s begging or stealing, the effort is total) barely sleeping or eating, so actually, they work harder than nearly everyone else, just in the wrong way. Another cruel irony is that although they waste hundreds of £ a day on their habit, they probably out’earn’ most people, so if they were cured, they’ve already proved they have the potential to be relatively wealthy.

  3. I’m reading the book “Solve For Happiness” right now and he agrees about getting out of your state. The author claims the main reason people are not happy at any one time is because their mind is either in the past or the future, not the present. The more i think about it the more it seems true.

  4. Lucy Patterson · · Reply

    This is so good Barney! Such a lovely read. Really enjoyed it. Thank you.

  5. I like this post a lot as mindset is easily the most important factor. A lot of what you talk about in this post is reflected in the stoic philosophy, specifically, how you view the world and the control you have over your own thoughts and attitude. For more information I would recommend the book “The Daily Stoic” by Ryan Holliday.

  6. The tip about (effectively) telling yourself useful lies is one that I use all the time. The big one for me is to tell myself that no matter what someone says to me at work and how they say it they are on my side and don’t mean in personally. It’s very hard for someone to keep up a negative emotional state if they aren’t getting an emotional response back.

    Also agree on lifting. I did it for 6 months last year and loved it. I stopped as I was travelling for work and haven;t got back into it but I know that I will feel better when I do.

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