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Preview Jocko Willink, Marcelo Garcia, Kurt Osiander, Joel Greenblatt, Seth Godin, Tim Ferriss, and Sun Tzu are all using the same strategic approach to drive their tactical decision-making. It’s a mental model called “catalysts and derivative decisions.” Let’s get into it. Introduction to the concept Warren Buffett says compounding is the 8th wonder of the world. He’s usually talking about the power of reinvestment. That’s either operating cash flow funding reinvestment in a business and creating more future cash flow—or interest from reinvested interest. But compounding exists outside of business and investing. Its mechanics define and drive viral growth, causing positives like agriculture and negatives like COVID-19. It’s something worth understanding. Either way, when we hear people talking about compounding or virality, they’re usually talking about “growth.” But compounding has another critical application: cascading effects—actions that influence later actions. High performers use compounding to create advantages by focusing on catalysts and ignoring “derivative decisions.” In turned-based, position-based, and time-sensitive strategic applications, it’s critical to get ahead and stay ahead. It’s like the saying “an ounce of prevention is worth a pound of cure.” Business, sports, combat—and much of life—falls into this bucket. Let’s explore how titans from different verticals leverage this concept. Jocko Willink Jocko Willink is a retired Navy SEAL Commander with 20 years of service experience. Since retiring, he’s focused on building an expansive business empire. Before leaving the Navy, he had already owned real estate properties and an MMA gym. Since then, he has created a blockbuster podcast on leadership, 10 books, a strategy consulting firm, and an All-American manufacturing company whose products run the gamut: jeans, boots, nutrition products, jiu-jitsu gis, and standard apparel. And he’s only been at it for a decade. If you’ve listened to the podcast, you’ll recognize a few omnipresent themes: “default aggressive” and “be first.” Both of these obey the law of “catalysts.” In true combat and in combat sports, this concept is critical. Being first creates a cascade of better opportunities. Two examples jump to mind: ambush situations and the first minutes of an MMA fight. First—let’s talk about an example of being on the wrong end of the rule. If you’re being ambushed, you’re on what Sun Tzu calls “death ground.” Think of a sinking ship or a burning building. The situation is bad, and it gets worse every second. Without even knowing it, you’ve found yourself several unfavorable steps into a decision tree. But things can and will deteriorate if you delay. Combat veterans call the position where the ambush is triggered the “X.” The idea: get off the X! Things have developed against you, but you can still stop your position from becoming even worse. On the other hand, we have the beginning of the fight. “Be first” means take the fight where you want it to go. If you’re a stronger striker, begin to dismantle the opponent with movement and traps. If you’re a stronger grappler, initiate with takedown pressure. Relentlessly force the opponent into worse positions. Even if you’re globally outmatched by the opponent, you can at the very least maneuver to a position you’re familiar with rather than a place of total confusion. Marcelo Garcia Marcelo Garcia uses the same approach when teaching. His lessons often begin with resetting—breaking the opponent’s initial controlling grips and funneling the fight to a place where you can dominate. Watch his matches—this is something he does relentlessly. A Marcelo Garcia highlight reel is like a technique DVD focused on a single technical pathway to submission. Why? Because he doesn’t accept what Tom DeBlass calls “the mutual agreement,” that the guard passer will (a) allow a guard to be established and then (b) try to dismantle it. Marcelo Garcia aggressively seeks advantage and aggressively breaks any tie that doesn’t favor him. Kurt Osiander As a counterexample, check out this video [ https://www.youtube.com/watch?v=4l9tP2gRuOo ]of Kurt Osiander explaining how to get out of bottom side control. For the non-BJJ crowd, bottom side control is extremely hard to escape—there are many variations that require different responses. As the bottom player, you’re constantly defending a diverse combination of attacks. For an extremely technical positional breakdown: “bro, you fucked up a long time ago!” Don’t let them get you there. But this theme extends well beyond combat and sports applications. Joel Greenblatt Joel Greenblatt is a legendary investor. Howard Marks—a legend in his own right—describes investment returns in the high teens as being very special. Anything above that level should be viewed as the territory of the very best of the experienced professional investing world. Joel Greenblatt returned 50% per annum for a decade, well over 50x returns. He’s written a deeply technical book about investing opportunity and deeply simple book about beating the market using a simple rule. The first book is called You Can Be a Stock Market Genius. Don’t let the goofy title fool you. It’s one of the best books on public markets investing, period. Joel attributes his success to his methodology—a hyper focus on “special situations” like spinoffs, rights offerings, restructurings, stub stocks, and much more. What’s so “special” about these situations? They are corners of the market where sophisticated players act like idiots for structural reasons. Reasons related to their investing mandates. I love the metaphor he uses for this choice on page 55: So, there I was, at perhaps the finest restaurant in the world, certainly in New York, looking over the menu. Over walks a gentleman in full chef’s garb to help with our order. Somehow, his outfit didn’t tip me off that this was actually Andre Soltner, proprietor and head chef. Pointing to one of the appetizers on the menu, I asked innocently, “Is this one any good?” “No, it stinks!” came Soltner’s reply. Even thought he was just kidding around, I did get the point. Pretty much everything on the menu was going to be good. Selecting Lutece was the important culinary decision, my particular menu choices were just fine tuning. … It’s great to look for investments in places other are not, but it’s not enough. You also have to look in the right places. If you preselect investment areas that put you ahead of the game even before you start (the “Luteces” of the investment world), the most important work is already done. You’ll still have plenty of decisions to make, but if you’re picking and choosing your spots from an already outstanding menu, your choices are less likely to result in indigestion. Seth Godin Continuing along with the “culinary metaphors” to explain the catalysts versus derivative decisions theme, we have some thoughts from Seth Godin in his post “Tires, Coffee, and People.” [ https://seths.blog/2015/09/tires-coffee-and-people/ ] The most important part of a cup of coffee is the beans. The grinder, the machine, the barista pale in comparison to the quality of what you start with. Tim Ferriss And finally, Tim Ferriss is a huge proponent of the concept. Tim calls these high-leverage actions “lead dominos” and describes them as things that “make everything else easier or irrelevant.” Threads to Pull So where does this leave us? I really enjoy the concept of “threads to pull.” Why? Circumstances vary widely, so the execution of certain strategies can become a no go. Specific application is crucial. So while it’s impossible to make blanket statements that will work for any situation, we can always ask ourselves good questions. · How can I “be first?” · When am I reactive? How can I transition to proactive? · What’s at the very beginning of my critical decision tree? · Where can I find structural causes of market dislocations? · How can I improve the quality of my fundamental building blocks? · What rules can I use so that my decision-making doesn’t matter? Support Links Rate and review the podcast at https://podcasts.apple.com/us/podcast/strategy-chain/id1492935567 Find Amazon affiliate links at http://strategychainpodcast.com/support Send me questions at http://strategychainpodcast.com/contact Sign up for the email list at http://strategychainpodcast.com/ Social Media @strategychain (Facebook, Twitter, Instagram, Medium)