I spent years hiring and firing people… before realizing the problem was me.

Photo: I spent years hiring and firing people… before realizing the problem was me.

We want to watch the movie where Keanu Reeves is presented with a red pill and a blue pill and makes a choice that immediately changes the rest of his life.

We don’t want to watch the movie where Keanu wakes up every day at 5:30 am, meditates, studies, works out and eats healthy for thirty years while achieving small, incremental gains. That is not a good movie.

But we live in one of these worlds and not the other.

One hundred twenty-two years ago, a young Italian man was pruning his garden in Celingy, Italy. His wife had recently left him for his manservant. He lived alone, with 18 Angora cats.

While inspecting his vegetables, he noticed a trend - a small minority of his pea pods always delivered the majority of his peas. He continued looking and determined that this trend was consistent throughout his garden - the abundance of his crop always came from a few key plants.

A trained mathematician, this young man became obsessed with disproportionate returns. He found similar results as he sifted through Italian land ownership, British tax receipts and European business productivity. The exact ratio would change, but he found consistent and predictable imbalances occur almost everywhere, where a small number of inputs create the majority of results.

His name was Vilfredo Pareto. Today, his finding is known as The Pareto Principle or the 80/20 rule.

Any business owner is familiar with this concept. 20% of their sales team likely generates 80% of the revenue.

Investors with a critical eye will often see that 80% of their gains come from 20% of their positions.

The speculative side of my portfolio is skewed even more, with over 90% of my winnings coming from 10% of my positions.

But Pareto’s Principle is inhibited by certain natural laws.

In his book, Black Swan, author Nassim Taleb describes two worlds that can and cannot contain Pareto-style effects: Mediocristan (where natural laws prevent extreme results) and Extremistan (where extreme results are the norm).

For example:

If you were to gather a random group of 1000 people into a room and have them line up according to height, there would be a noticeable difference between the tallest and the shortest. Still, it would be a biological impossibility for 20% of the participants to make up 80% of the total height. The same would apply to weight.

You could even add the tallest or heaviest person to have ever lived to the group, and still, their proportion of height or weight would be a negligible percent of the whole.

This is mediocristan. Natural laws prevent extreme results.

However, if you had the same group lineup accruing to net worth, you would have a very different outcome. Inevitably, the disparity between the wealthiest and the poorest individual could be many magnitudes of difference. And applying the same experiment as above, should you add Elon Musk to the group, suddenly you have one individual whose net worth would account for 99.9% of the total pie - to the naked eye, the entire pie chart.

This is extremistan, where extreme results are the norm.

Total billable hours by the world's hardest-working lawyer compared to the average?


Total record sales by artists compared to the average?

Absolute Extremistan.

The seven best-selling artists of all time have collectively sold over two billion records.

They are The Beatles, Elvis Presley, Michael Jackson, Queen, Elton John, Madonna and Led Zeppelin.

You could pull a list of the 100 top-selling artists, and without question, you would recognize the first name (The Beatles), the 100th name (Tom Petty) and probably every single artist in between. Not only would you recognize the names, but you could more than likely sing (or at least hum) along to a song or two from each of them.

Compare this to the millions of artists trying to land a record deal this year, and you have another Elon vs the world pie chart.

Understanding where the Pareto Principle works versus where it doesn’t - and, more importantly, where you can put it to work is a massive opportunity.

I am always searching for disruptions I can apply that offer outsized returns. I want my red pill.

Here is what I’ve learned.

I look at the most significant changes I’ve made, those that have transformed my quality of life, health, wealth and happiness to a considerable extent. I can always pinpoint the decision or activity I engaged in making that change occur.

In hindsight, it is always as clear as day.

For example, six years ago, I quit drinking alcohol. I remember this as a massive change that immediately delivered a result. I felt healthier, more confident and clear-headed, and my body composition improved dramatically.

But this is hindsight bias. In reality, there was no massive change and no immediate result.

At the time, I had no idea whether or not removing alcohol would affect my life. I had a question - “If I quit drinking for a year, would my life change for the better?”. I did not know if it would.

I didn’t make a significant change that delivered an outsized result. I adopted a simple daily habit and let it compound over time.

After six months, I noticed higher productivity; I no longer had down days that disrupted my momentum. Within nine months, I had markedly improved my mental and physical health. When I hit my first year, I felt pride and confidence; I had won a battle between discipline and temptation. During years two through four, I still received compounded returns - a more evolved sense of identity and a natural contrarian outlook.

I should mention that I was a very enthusiastic drinker. I was never an everyday guy, but when I went in, I went hard. Sometimes a friend would call and ask if I wanted to grab “a quick beer.” I would laugh and tell them to call me when they meant business.

But the point is that I didn’t swallow a red pill. There was no quick result with immediate gains. The benefit was colossal but resulted from a monotonous daily habit that compounded over years.

Every amazing thing in my life has come from a similar process.

I have a powerful marriage. But my wife almost left me twice in the first year. I was slow to mature into what a good life partner needed to be. Seven years and three kids later, we are better than ever.

I manage an investment portfolio that has given my family much comfort. But when I first started investing, my average order size was $1000. I was using a broker. He called me one day and said that I was wasting my money - I hadn’t calculated his commissions on my trades and failed to realize that I was giving away my first 20% gain to his commission—rookie mistake.

I run a business that allows me to be anywhere. I just wrapped up a month in Indonesia with the family, nothing stopped, and nothing slowed. We are headed back shortly, and this time for a year. But believe me; I spent years hiring and firing people, skirting insolvency, and thinking that if only I could find the right team, all of this would be easier… before realizing that the problem was me. I needed to grow into a leader and hold myself accountable before I could expect the same from anybody else.

My red pill moments have come from years of compounded returns and big mistakes. I am a hard-way learner - I need a lesson five or six times before it sticks.

But that is how extremistan works in our personal lives. Those willing to put the work in, month after month and year after year, pull far ahead of the crowd - or, more importantly, pull far ahead of their younger selves.

So here is the important part:

A man's mind may be likened to a garden, which may be intelligently cultivated or allowed to run wild, but whether cultivated or neglected, it must, and will, bring forth. If no useful seeds are put into it, then an abundance of useless weed seeds will fall therein, and will continue to produce their kind.

James Allen, As a Man Thinketh

Whether or not you choose, your life will compound something.

This is why we must be conscious about how we spend our time and what we dedicate our lives to. And I don’t mean what we set our eyes on at the end of the race; I mean what we commit to this morning, this afternoon and evening. These activities will grow and compound into something that serves us or something that does not.

I have a tool to keep myself accountable for what I commit to doing and to ensure that my daily habits align with what I want my life to become over the next ten years.

I call it my Sovereign Life Blueprint...