Principle 4: Bumpers

Level 1...And That's Okay

Many of our readers and paid members are considered high-net worth and “Bumpers” is one of the concepts that gets referenced the most frequently. That means it might be a good idea to bookmark it and come back to it often. It’s one of those things that is designed to be revisited a few times year.

“Bumpers” is also one of the Guardian Academy core principles. No, we didn't come up with that name, it’s the name of Nic Peterson’s book we extracted the principle from. You can get a free copy here.

Below we’re going to set the framework on how to apply Bumpers to investing, building a business, or whatever you are doing to achieve your personal definition fo wealth. It starts with the first chapter of the book, which Nic gave us permission to paste it word for word:

Bumpers

Chapter one of Bumpers:

“All I want to know is where I’m going to die so that I do not go there.”
-Charlie Munger

Humans are incredible. Both solo endeavors and unified efforts can yield incredible, previously unimaginable things. We are also flawed. And one of our greatest flaws is:

We fail to appreciate when bad things don’t happen.

Let that sink in for a moment.

Consider both the excitement and the relief of digging yourself out of a hole. Whether paying off debt, losing weight or regaining your health, these are all things we celebrate.

Now think about how it feels when a close friend loses 50 pounds and gets off all their medication. It’s exciting. You get a hit of dopamine when you hear the news. They get a hit of dopamine when you congratu- late them. Everyone experiences an emotional high. These moments are worth appreciating. Like you, I want good things to happen to people I care about.

But consider this:

How much time, effort, and suffering went into digging out of that hole? That’s a tremendous amount of resources spent to get back to baseline. Resources expended and time spent to get back to baseline are resources that are not used to move forward or make progress. How much progress would that person have made if instead of allocating all those resources to recovery, they allocated them to forward progress?

After doing the math, you’d think it would be easy to appreciate when bad things don’t happen. But when is the last time you celebrated avoiding something negative? Have you thrown a party for your friends who never faced bankruptcy? Have you congratulated your sister for never gaining any excess weight?

Doubtful.

And I don’t blame you. That would be super weird. Not only would it be weird, it doesn’t feel rewarding. Getting rescued feels more rewarding than avoiding danger does. Saving people looks a lot sexier than pointing out potholes for them to avoid. This creates an insidious incentive problem.

You’re probably aware that big pharma makes a lot more money from selling the cure than it does from selling prevention. Why?

Are they evil? Maybe. But: windows and mirrors. Let’s not forgot our role in this.

It’s easier to sell the cure than it is to sell the prevention because it feels better to buy it.

It was the most terrifying sound I’d ever heard.

I was finishing up a workout session with a group of friends. They gathered around the bench press as I finished my last set. All I could hear was the blaring music echoing through an otherwise empty gym. Until it happened. It sounded like my spotter had started ripping through sheets of bubble wrap in my left ear. A few pops, a rip and a suddenly numb upper body. I had torn both of my hamstrings before, but I’d never heard the sound of a muscle tearing before. Not like this.

It didn’t take long for my spotters to realize something was wrong and take the weight from me. To this day, I think about how grateful I am they were paying attention. By that point, I knew I had torn something. It was my left pec. As the bruising started to show, I asked myself, Now what?

There are two people I trusted most with this kind of thing. One of them lived with me, and the other would always answer a call from a friend. After asking some questions, both said a version of the same thing:

“Given what I see/hear, you likely won’t need surgery. The tendon is still attached.”

Each gave me a plan and things to look out for. If I was not able to make progress according to plan, an MRI and/or surgery might be necessary. If I was on track with my rehab plan, it wouldn’t be.

The next day, four different doctors told me I needed to get an MRI and have surgery immediately. They offered to do the MRI, make referrals to specialists and help in any way possible. They went above and beyond to get me to take action. I told one of my two trusted friends that I was thinking I should go get an MRI and surgery.

He told me he would support me either way—and then he reminded me of the danger of seeking “positive action” when non-action will get the job done.

I didn’t get an MRI. I didn’t get surgery. A successful surgery would have taken longer to recover from than my actual recovery time was, and that doesn’t include the cost and potential complications of surgery. Through that process, I gained a new appreciation for the “prevention people.”

Even with my newfound appreciation for preven- tion, I know that I have to continue to actively prac- tice appreciation for non-action. It prevents me from falling into the trap of the “good feels” of positive action.

Sometimes the best action is no action.

At the time, all the specialists trying to help me do something seemed more heroic than my friends who suggested doing nothing—but they were also introducing me to something that was far riskier.

It’s easy to appreciate the heroic surgeon. It’s not so easy to appreciate doing nothing.

Prevention and non-action do not come with cheap, easy dopamine. Our brains’ cravings for dopamine cause us to seek emotional highs. Seeking emotional highs, we overvalue rescuers and “positive action.”

Imagine for a moment that you fall off a ladder hanging Christmas lights. That night, you go get two opinions from back specialists. The first tells you that you can take some aspirin and a nap and you’ll be fine; if not, he will get some imaging done, but it’s best to reserve judgment for a night. The second says he can put you on the operating table right now and save your back!

If you elect to get surgery and it’s successful, that surgeon gets paid more than the one who told you to wait a day. He also looks like more of a hero. Once you recover from your surgery and can walk again, it feels like a miracle. You feel great, your surgeon feels great and your friends celebrate your recovery.

But what if the first dude was right and sleeping it off would have been enough? The surgeon that “did nothing” and sent you home exposed you to far less risk. And the cost to you? A couple of bucks for aspirin. The resources that went into recovery could have gone to making progress in important areas of your life.

Instead, the bias toward positive action made the second surgeon seem more exciting, more helpful and more heroic. He got the business, he got paid and then everyone got congratulated for their part. The collective dopamine surge is far greater choosing the rescuer over the preventer.

To be clear, I am not suggesting we should not appreciate when good things happen. The firefighter that risks his life to save your child is a hero and deserves acknowledgment. But what about the guy who builds fireproof houses? Would we celebrate him the same way? And what are the long-term consequences of not doing so?

Humans are hardwired to seek attention, recognition and rewards. Dopamine is a helluva chemical. It’s human nature, and human nature is not wrong. The hardwiring is not the problem. Where I see an issue is the difference between the incentives to put out fires and the incentives to prevent them. The chemical, financial and social rewards of the rescue or recovery are massive—so massive and rewarding that they can blind us to the long-term consequences.

In a state of sobriety, it’s clear that prevention is the most efficient path forward. But it’s not the path most traveled. There is little short-term reward on that path because there is little short-term incentive for preventing fires.

In fact, if we want a quick dopamine hit, we can start a fire real quick and then rush to put it out to get our fix. Ask any entrepreneur. Entrepreneurs hate boring stuff. To avoid it, we’ll start fires all over the place so we can put them out and go home with a win. We can end the day in the same place or worse than we started it and call it a win.

Ridiculous on one level, and very real on another.

It’s also very real to someone who is celebrating their 50-pound weight loss—for the fifth time. I have empathy for yo-yo dieters because I know many of them, and their struggle is real. Their pain is real. I have had thousands of conversations with men and women who can’t get off the yo-yo treadmill. The whole incentive structure makes it nearly impossible.

Let’s play this out:

If this is the fifth time Sally has lost the same 50 pounds, she has done a tremendous amount of work. Losing 50 pounds five times means she put in the effort to lose 250 pounds in her lifetime. That is a ton of effort and time committed. Her brain has also logged a bunch of wins. A win for each time she hit her goal, that’s five. A win for each time someone congrat- ulated her for reaching her goal, at least another five. Depending on how many people she knows, her brain could have registered hundreds of wins.

A lot of effort toward weight loss? Check.

A lot of wins about weight loss? Check.

A lot of recognition from others? Check.

Results:

Sally’s brain is registering wins and society is reinforcing them.
She is still in the same place she was decades ago when she started this journey. She put in significant effort over the years just to be in the same place or worse.

Contrast that with what would have happened had Sally never gained the weight to begin with. The efforts that went into losing weight could have gone into making incremental progress. It would never be drastic, but over the years, it would be progress.

A lot of effort toward weight loss? No. The effort went into forward progress or was redirected to something else important.

A lot of wins about weight loss? No. The brain isn’t registering maintenance as a win.

A lot of recognition from others? No. Other humans aren’t celebrating Sally’s maintenance.

Results:

Sally’s brain is registering fewer wins, maybe none. Society is not reinforcing Sally’s decisions even though she is, on the whole, in a much better place.

She is in a much better place than she was decades ago when she started.
On average, she is improving.

In scenario one, Sally is in a worse place than scenario two. However, scenario two provided little for her, her friends and her family to celebrate, whereas scenario one had hundreds of celebrations. See the disconnect?

We get greater short-term rewards for recovering from bad things than we do for avoiding them. It adds up and then compounds when others reinforce our recovery with celebration.

This is one of the paradoxical qualities of good things happening. Recognizing progress is healthy in and of itself. But we must include the consequences of bad things and the benefits of avoiding them in our mental math.

My favorite way of doing this is simple: expand the time horizon.

If Sally had started with a 30-year time horizon, the incentive would have been more aligned. The weight loss would have happened slower, and the longer timeline would allow her to measure a trend and test different things without urgency.

Expanding the time horizon is difficult for people. It requires forfeiting short-term wins for long-term wins: delayed gratification.

Our dopamine-addicted brains are looking for quick hits. The more expedient the win, the bigger the hit. The fastest path to emotional highs is to manufacture them:

Dig hole → climb out of hole → celebrate → repeat.

Emotional high on tap.

An emotional high does not represent happiness. Let’s not forget that on either side of a peak is always a valley. The more emotional highs manufactured, the more valleys manufactured. We use the “honeymoon phase” as a warning for a reason. Happiness is closing the gap between where you are now and where you want to be, and the pursuit of quick dopamine will decrease the probability of closing that gap.

The pursuit of emotional highs requires resources.

Resources are finite. With Sally, we have seen how easy it can be to sink our resources into staying in the same place by seeking short-term wins, which makes it harder to close the gap. If we can learn to appreciate when bad things don’t happen, we can recapture those resources. Once recaptured, we can reallocate them to the things that actually matter. My experience has validated what people smarter than me have told me for a long time:

The path forward is not about more wins. Or bigger wins. It’s about living the life that you want to live. To do that, we must stay out of the gutter. Avoiding bad things will take you further faster than finding more good things will.

This is the crux of Bumpers. Like bumpers in a bowling alley, they keep us out of the gutter. It’s a fundamental shift toward appreciating when bad things don’t happen. A shift toward avoiding naive intervention. And a shift toward focusing on the things that matter most.

When your bumpers are up, you can play all-in without blowing yourself up. You can move at any speed you want. You can move at an aggressive pace or choose a pace that’s slow and methodical. Resources aren’t wasted digging out of holes. Every move you make is getting you closer to what matters most.

It’s important to remember that everyone’s bumpers are going to look different. Some people like to travel; some people like to stay home. Parents will have different bumpers than bachelors. Quality of life is a preference-based thing. There is no right or wrong. No morality, no judgment. You don’t need permission to march to the beat of your own drum, but I’m going to give it to you anyway, because...

NOBODY WINS A RACE THEY DON'T WANT TO BE IN

I’ve been fortunate to work with legendary athletes and business tycoons. I’ve spent time with thousands of entrepreneurs, some on the ascent and others going the other direction. I’ve learned a lot, but here is the lesson that has been most impactful for me:

People that know themselves and play by their own rules are weirdos—until they are billionaires, then they are “eccentric.”

In other words, eccentric people have always had an advantage. They’ve always been weird. They can ignore conventional wisdom because they are clear on who they are, who they are not and what race they want to be in, and they have their bumpers up. I’ve also observed that:

The level of success you can sustain depends on how aligned your pursuits stay with your unique disposition.

There will be plenty of obstacles on your path.

There is no sense in facing them off balance. Align- ment precedes balance. Balance precedes focus. Bumpers allow you to direct your focus to what matters most to you. If you have defined where you want to be and are honest about where you’re at, success becomes inevitable.”

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Foundational Principle

We spend so much time digging ourselves out of holes because we failed to appreciate not falling into one in the first place. Another way to think about this is:

“Before pushing harder on the gas, take your foot off the brake.”

Where Are The Brakes?

When it comes to investing or building anything involving improving your financial position, these are the most common “brakes”:

1. Working With Intractable Problems [problems that can’t be solved for].

What it sounds like:

“I want more…”

“More” isn’t something that can be solved for. Everything in life is a multi-variable equation. Each undefined variables makes the others more difficult to solve for.

Try this:

X * Y= Z

What is X?

There are infinite correct answers, but only a few would end up as outcomes you actually want. If you define what you are solving for:

X * Y = 20

There are still numerous correct answers, but all of them lead to the outcome you are looking for; in this case, 20.

Step one is to get clear on what you are solving for. “More” is not good enough.

This is expanded upon in the Solvable Problem series.

2. Strategies Diametrically Opposed To Espoused Beliefs [Watering The Weeds].

Espoused value (what you say you want): “I want to spend more time with the kids.”

If you make decisions that lead you to spend less time with your kids, your strategies are diametrically opposed to y our espoused beliefs.

You can’t win a race you don’t want to be in and you can’t win a race against yourself.

To release this brake you need to align your beliefs with what you say that you want.

Here’s the kicker:

You have to examine both your espoused values and your behaviors. We are not here to tell you which one is the right choice - this is no morality or judgement here. If making more money or spending more time with friends is actually more important than spending more time with your kids, that’s fine.

But until you are honest with yourself, you’re pushing harder on the gas with the e-break still on.

Align your strategies with your values.

3. Maximizing Before Optimizing [Resource Allocation].

Maximizing is trying to fund too many things at once because you refuse to prioritize. Optimizing is prioritizing and then directing all resources to the most immediate or top priority. “We optimize before we maximize” is a principles borrowed from Dan Nicholson and the CCA program.

It’s focusing on the very next step, which will unlock the resources to take the following step. There are deeper dives on this concept in the Solvable Problem article and resource allocation articles.

4. Thinking Best Case Instead of Base Case [what can possibly be achieved vs. what is probable to maintain].

“Your maximum achievability is not your maximum maintainability.”
Nic Peterson, Bumpers

The best case is assuming you will play at your best and achieve your best every single time. “Best case” thinking is dogmatic, rigid and leaves little room for error.

Time optimism and optimization is a good example of this.

You fill up your calendar so that you can look and feel productive, but if anything unexpected happens to you this throws off your entire day and rhythm.

“Best case” thinking assumes that we live in a vacuum. Alas, we do not.

To release this brake you would instead work from a base case -the most probable thing that we can sustain to build a rolling average over time. A base case is a scientific orientation and leaves room for multiple acceptable outcomes.

A “base case” can be expressed as an expected value or expectancy score. Expected value, expect scores and risk adjusted returns are forthcoming paid articles.

More on the the scientific orientation vs the dogmatic orientation in the Adaptive Dilemma series.

These are the four most common “bad things” that will prevent someone from getting what they want out of life. By recognizing them ahead of time, we can build “Bumpers” or “guard rails” around them to keep us from falling into the trap(s).

Watch: YouTube
Listen: Apple Podcasts | Spotify

Resources

Bumpers– Check out the book where this article got the inspiration from. Paid subscribers can download a free digital copy. Founding members and above are invited to a monthly Bumpers workshop. Details below.

Science Orientation vs Dogmatic Orientation:
Read: Article Watch: YouTube Listen: Apple Podcasts | Spotify

BONUS: BUMPERS WORKSHOPS/INTENSIVE

Bumpers Workshop 1 (Replay):
Introduction, The Devil You Know and Breaking The Delusion

Get a free copy of Bumpers, the bumpers Accelerator and watch the introductory Workshop to see the structure of future workshops: