Analogy
Advantageous Divergence is like unconventional wisdom.
Outperformance cannot come from doing the obvious. This is only natural because, otherwise, the concepts would be fully exploited and, by definition, result in average outcomes. However, conventional wisdom is usually right, so it takes some courage to bet on the unconventional. It is easy to follow the herd as this offers psychological safety, but it also offers no contrast, no potential in which to separate ourselves. This is not always a poor option, but you must acknowledge which game you are playing and be comfortable with the probable results. Electing to compete in cutthroat environments is always an option, but this is a grind! As Jeff Bezos so succinctly puts it: “your margin is my opportunity.” Zero-sum games abound.
The easy, safe, logical options have most likely all been tried, so our journey lies in finding and acting on ideas that are “contrarian and correct” as Peter Thiel would say – otherwise known as Advantageous Divergence. These ideas are advantageous because they are overlooked, discounted, misunderstood, “illogical,” too difficult to act on, psychologically uncomfortable, abstract, counter-intuitive, or have too long of a time frame to play out, and therefore few people understand or act on them. Those who can handle the natural discomfort of holding “two opposed ideas in mind at the same time and still retain the ability to function,” can take advantage of people’s natural tendency to conform and find ways to effectively create separation, giving themselves a better chance at achieving outlier results.
Non-consensus ideas have to be lonely. By definition, non-consensus ideas that are popular, widely held or intuitively obvious are an oxymoron. Thus, such ideas are uncomfortable; non-conformists don’t enjoy the warmth that comes with being at the center of the herd.
– Howard Marks, Dare to Be Great
The test of a first-rate intelligence is the ability to hold two opposed ideas in mind at the same time and still retain the ability to function.
Diagram
Example
If you dream of being an “outlier,” you must be willing to appear foolish.
Lou Brock, Hall of Fame base stealer once said, “Show me a man who’s afraid of appearing foolish, and I’ll show you a man you can beat every time.” Within his quote is the sad diagnosis of most people’s lives: to the extent you’re getting beat in life, it’s likely because you’re afraid of appearing foolish. Don’t assume that what is familiar and common is optimal.
These Advantageous Divergence tactics often take courage to act on because they are different than what the herd is doing. While difficult, this is a better set of problems to have. Most people choose conventionality over rationality, placing acceptance, conformity, tradition, or security above truth. Don’t fall into that trap. We must be willing to appear foolish to gain Advantageous Divergence, rather than following the crowd to achieve disadvantageous adherence.
Worldly wisdom teaches that it is better for reputation to fail conventionally than to succeed unconventionally.
In a separate example, Richard Feynman credits having different tools than everyone else for his outsized success. In Surely You’re Joking, Mr. Feynman!, he said:
“One thing I never did learn was contour integration. I had learned to do integrals by various methods shown in a book that my high school physics teacher Mr. Bader had given me. One day he told me to stay after class. “Feynman,” he said, “you talk too much, and you make too much noise. I know why. You’re bored. So, I’m going to give you a book. You go up there in back, in the corner, and study this book, and when you know everything that’s in this book, you can talk again.” So, every physics class, I paid no attention to what was going on with Pascal’s Law, or whatever they were doing. I was up in the back with this book: Advanced Calculus, by Woods. Bader knew that I had studied “Calculus for the Practical Man” a little bit, so he gave me the real works – It was for a junior or senior course in college. It had Fourier series, Bessel functions, determinants, elliptic functions – all kinds of wonderful stuff that I didn’t know anything about. That book also showed how to differentiate parameters under the integral sign – it’s a certain operation. It turns out that’s not taught very much in the universities; they don’t emphasize it. But I caught on how to use that method, and I used that one damn tool again and again. So, because I was self-taught using that book, I had peculiar methods of doing integrals. The result was, when guys at MIT or Princeton had trouble doing a certain integral, it was because they couldn’t do it with the standard methods they had learned in school. If it was contour integration, they would have found it; if it was a simple series expansion, they would have found it. Then I come along and try differentiating under the integral sign, and often it worked. So, I got a great reputation for doing integrals, only because my box of tools was different from everybody else’s, and they had tried all their tools on it before giving the problem to me.”
A last, beautiful example is given to us by Larry Bird. When Bird was preparing to get drafted, he sought an agent. He sent a letter to all potential agents asking them, “If you don’t get the job, whom would you recommend?” Almost all of them replied, “Bob Woolf.” Bird was really impressed with that and chose Woolf as his agent. This quickly paid off as Woolf got Bird the largest rookie contract in the history of basketball up to that point.
Plain English
The utopia we are after is “Advantageous Divergence” – finding ways to do things differently, yet correctly. This, in its purest form, is working smarter, not harder. These mental models are all about gaining Advantageous Divergence – by having a different (and correct!) set of tools than everyone else, you can succeed and prosper when others can’t. It is important to understand and honor the fact that reality doesn’t reward effort. It rewards utility and effectiveness.
In business, success manifests when you know something nobody else knows – when you do as everyone else does, don’t be surprised when you get what everyone else gets. This can be prohibitively difficult, and a more realistic corollary may be: do what other people know but don’t honor. People generally know that they should plan for the future, save money, and give more than they take, but many people don’t. They know these are the right things to do but find it difficult to honor them. You can take advantage of this by doing the obvious but difficult work of taking a long time horizon, planning for the future, prioritizing life-long learning, and consistently adding value to every relationship. (Compounding, Time Horizons).
The secret of business is to know something that nobody else knows.
– Aristotle Onassis
In business, there is nothing more valuable than a technical advantage your competitors don’t understand. In business, as in war, surprise is worth as much as force.
– Paul Graham, Beating the Averages
A reliable and effective way to gain some of the proper tools lies in studying the firsthand accounts of the eminent dead, learning how they thought and acted to gain Advantageous Divergence in their lives or business endeavors.
Technical Description
Advantageous Divergence is when you act correctly or rationally even if, especially if, others don’t. This mindset serves to create contrast for yourself, allowing for results different than the average.
What others think are the characteristics which make you an anomaly, eccentric or the exception to the rule, are in fact the very things which make you dominant – your competitors simply can’t understand them. Find and understand what these are for you, your relationships, your businesses, and do everything you can to leverage these misunderstood strengths.
Quotes
You can’t be normal and expect abnormal results.
Mike Moritz and John Doerr don’t behave like traditional VCs. But they work for the very best VC funds. And my theory explains why they’d tend to be different: just as the very most popular kids don’t have to persecute nerds, the very best VCs don’t have to act like VCs. They get the pick of all the best deals. So they don’t have to be paranoid and sneaky.
– Paul Graham, A Unified Theory of VC Suckage
Use difficulty as a guide not just in selecting the overall aim of your company, but also at decision points along the way. At Viaweb, one of our rules of thumb was “run upstairs.” Suppose you are a little, nimble guy being chased by a big, fat, bully. You open a door and find yourself a staircase. Do you go up or down? I say up. The bully can probably run downstairs as fast as you can. Going upstairs his bulk will be more of a disadvantage. Running upstairs is hard for you but even harder for him. What this meant in practice was that we deliberately sought hard problems, barriers to entry. Start by picking hard problems and then at every decision point, take the harder choice… I think this is a good plan for life in general. If you have two choices, choose the harder. If you’re trying to decide whether to go out running or sit home and watch TV, go running. Probably the reason this trick works so well is that when you have two choices and one is harder, the only reason you’re even considering the other is laziness. You know in the back of your mind what the right thing to do is, and this trick merely forces you to acknowledge it.
– Paul Graham, How to Make Wealth
If you discover something new, there’s a significant chance you’ll be accused of some form of heresy. To discover new things, you have to work on ideas that are good but non-obvious; if an idea is obviously good, other people are probably already working on it. One common way for a good idea to be non-obvious is for it to be hidden in the shadow of some mistaken assumption that people are very attached to. But anything you discover from working on such an idea will tend to contradict the mistaken assumption that was concealing it. And you will thus get a lot of heat from people attached to the mistaken assumption. Galileo and Darwin are famous examples of this phenomenon, but it’s probably always an ingredient in the resistance to new ideas.
– Paul Graham, Novelty and Heresy
When you choose technology, you have to ignore what other people are doing and consider only what will work the best. Big companies can elect to do what all other big companies are doing and generally be alright. Startups, however, can’t follow this same path. If they follow what every other startup is doing, they will go out of business as the survival rate is way less than 50%. So, if you’re running a startup, you had better be doing something odd. If not, you’re in trouble...A suspicious programmer might begin to wonder if there was some correlation here. A big chunk of our code was doing things that are very hard to do in other languages besides Lisp. The resulting software did things our competitors’ software couldn’t do. Maybe there was some kind of connection. I encourage you to follow that thread. There may be more to that old man hobbling along on his crutches than meets the eye. Lisp’s power is multiplied by the fact that your competitors don’t get it.
– Paul Graham, Beating the Averages
A business that thrives on being different requires different types of people.
– Yvon Chouinard, Let My People Go Surfing
To produce 1 pound of wood, they [beeches] need 22 gallons of water. Does this sound like a lot? Most other species of tree need up to 36 gallons, almost twice as much, and that is the deciding factor that enables beeches to shoot up quickly and suppress other species.
– Peter Wohlleben, The Hidden Life of Trees
The less prudence with which others conduct their affairs, the greater the prudence with which we should conduct our own affairs.
– Warren Buffett, Berkshire Hathaway 2017 Shareholder Letter
“Why don’t more people copy you?” It’s a good question. Our approach has worked for us. It’s not difficult, but it looks difficult because it’s unconventional – it isn’t the way things are normally done. It’s simple and common sense.
– Warren Buffett, Poor Charlie’s Almanack
When he [Lee Kuan Yew] took over, he was a very young man. He needed an army, he was surrounded by a bunch of Muslims that hated him. They’d spit him out. He asked all the other nations of the world to please help him get an army because the English just left and said, “Handle your own problems.” Every nation in the world refused to help him but one, and that was Israel. He said, “How am I going to take military aid surrounded by Muslims that hate me from Israel?” He finally figured it out. He accepted the aid and told everybody they were Mexicans. Well, you can see why he was so successful. He had a mantra, which doesn’t have any literary quality, but it has a lot of good sense in it. He’d say over and over again, “Figure out what works and do it.” That’s what built modern Singapore.
– Charlie Munger, Redlands Forum
History shows that the way out of trench warfare is the use of asymmetric weaponry. If you’re using basically the same strategy with basically the same resources as your competitor, you’re in a war of attrition. If, however, you choose a radically different strategy, with the same resources or fewer, you’re likely not to be in a war of attrition. Of course, if you’re right and your radically different strategy succeeds, you get the spoils. If you’re wrong and your strategy fails, you get the humiliation of being wrong. And since the world rewards conventional failure and not unconventional failure, you’ve got a difficult choice to make.
– Farnam Street, Attrition Warfare
To obtain better results than the others, you must do something different from the others.
The great snare of thought is the uncritical acceptance of traditional assumptions. Be willing to doubt almost everything.
– Will Durant, The Story of Philosophy
Extreme people get extreme results.
– Sam Altman, How to Be Successful
Play stupid games, win stupid prizes.
– Naval Ravikant, How to Get Rich
Most mathematicians know one method. For example, Norbert Wiener had mastered Fourier transforms. Some mathematicians have mastered two methods and might really impress someone who knows only one of them. John von Neumann had mastered three methods: 1) A facility for the symbolic manipulation of linear operators, 2) An intuitive feeling for the logical structure of any new mathematical theory; and 3) An intuitive feeling for the combinatorial superstructure of new theories.
– Stanislaw Ulam, The Unparalleled Genius of John von Neumann
Great companies have secrets – reasons for success that other people don’t see…Doing something different is what’s truly good for society – and it’s also what allows a business to profit by monopolizing a new market. The best projects are likely to be overlooked, not trumpeted by a crowd; the best problems to work on are often the ones nobody else even tries to solve.
– Peter Thiel, Zero to One
Every correct answer is necessarily a secret: something important and unknown, something hard to do but doable. There are two kinds of secrets: secrets about nature and secrets about people. Natural secrets exist all around us; to find them, one must study some undiscovered aspect of the physical world. Secrets about people are different: they are things that people don’t know about themselves or things they hide because they don’t want others to know. So, when thinking about what kind of company to build, there are two distinct questions to ask: what secrets is nature not telling you? What secrets are people not telling you.
– Peter Thiel, Zero to One
What fools we had been! But then there was this consolation we were not as great fools as our competitors. It was years after we are taking chemistry to guide us that it was said by the proprietors of some other furnaces that they could not afford to employ a chemist. Are they known the truth then they would have known that they could not afford to be without one. Looking back it seems pardonable to record that we were the first to employ a chemist a blast furnaces – something our competitors pronounced extravagant. The Lucy furnace became the most profitable branch of our business because we had almost the entire monopoly of scientific management.
– Andrew Carnegie, Autobiography
Well, I guess the only good strategy is one that no one else understands.
– Ed de Castro, Data General
You’ve got to go out on a limb sometimes because that’s where the fruit is.
“Fight fire with fire” is the old cliché. But as the late Howard Gossage used to say, “That’s silly. You fight fire with water.”
– Jack Trout and Al Ries, Positioning
Interconnected Ideas
Recommended Books & Resources
