:max_bytes(150000):strip_icc():gifv():format(webp)/reiff_headshot-5bfc2a60c9e77c00519a70bd.jpg)
Howey Test and Cryptocurrencies: 'Every ICO Is a Security'
What Is the Howey Test?
To determine whether a transaction qualifies as a "investment contract" and thus qualifies as a security, the Howey Test refers to the U.S. Supreme Court cass: the Securities Act of 1933 and the Securities Exchange Act of 1934. According to the Howey Test, an investment contract exists when "money is invested in a common enterprise with a reasonable expectation of profits from others' efforts."
The test applies to any contract, scheme, or transaction. The Howey Test helps investors and project backers understand blockchain and digital currency projects. ICOs and certain cryptocurrencies may be found to be "investment contracts" under the test.
Understanding the Howey Test
The Howey Test comes from the 1946 Supreme Court case SEC v. W.J. Howey Co. The Howey Company sold citrus groves to Florida buyers who leased them back to Howey. The company would maintain the groves and sell the fruit for the owners. Both parties benefited. Most buyers had no farming experience and were not required to farm the land.
The SEC intervened because Howey failed to register the transactions. The court ruled that the leaseback agreements were investment contracts.
This established four criteria for determining an investment contract. Investing contract:
- An investment of money
- n a common enterprise
- With the expectation of profit
- To be derived from the efforts of others
In the case of Howey, the buyers saw the transactions as valuable because others provided the labor and expertise. An income stream was obtained by only investing capital. As a result of the Howey Test, the transaction had to be registered with the SEC.
Howey Test and Cryptocurrencies
Bitcoin is notoriously difficult to categorize. Decentralized, they evade regulation in many ways. Regardless, the SEC is looking into digital assets and determining when their sale qualifies as an investment contract.
The SEC claims that selling digital assets meets the "investment of money" test because fiat money or other digital assets are being exchanged. Like the "common enterprise" test.
Whether a digital asset qualifies as an investment contract depends on whether there is a "expectation of profit from others' efforts."
For example, buyers of digital assets may be relying on others' efforts if they expect the project's backers to build and maintain the digital network, rather than a dispersed community of unaffiliated users. Also, if the project's backers create scarcity by burning tokens, the test is met. Another way the "efforts of others" test is met is if the project's backers continue to act in a managerial role.
These are just a few examples given by the SEC. If a project's success is dependent on ongoing support from backers, the buyer of the digital asset is likely relying on "others' efforts."
Special Considerations
If the SEC determines a cryptocurrency token is a security, many issues arise. It means the SEC can decide whether a token can be sold to US investors and forces the project to register.
In 2017, the SEC ruled that selling DAO tokens for Ether violated federal securities laws. Instead of enforcing securities laws, the SEC issued a warning to the cryptocurrency industry.
Due to the Howey Test, most ICOs today are likely inaccessible to US investors. After a year of ICOs, then-SEC Chair Jay Clayton declared them all securities.
SEC Chairman Gensler Agrees With Predecessor: 'Every ICO Is a Security'
Howey Test FAQs
How Do You Determine If Something Is a Security?
The Howey Test determines whether certain transactions are "investment contracts." Securities are transactions that qualify as "investment contracts" under the Securities Act of 1933 and the Securities Exchange Act of 1934.
The Howey Test looks for a "investment of money in a common enterprise with a reasonable expectation of profits from others' efforts." If so, the Securities Act of 1933 and the Securities Exchange Act of 1934 require disclosure and registration.
Why Is Bitcoin Not a Security?
Former SEC Chair Jay Clayton clarified in June 2018 that bitcoin is not a security: "Cryptocurrencies: Replace the dollar, euro, and yen with bitcoin. That type of currency is not a security," said Clayton.
Bitcoin, which has never sought public funding to develop its technology, fails the SEC's Howey Test. However, according to Clayton, ICO tokens are securities.
A Security Defined by the SEC
In the public and private markets, securities are fungible and tradeable financial instruments. The SEC regulates public securities sales.
The Supreme Court defined a security offering in SEC v. W.J. Howey Co. In its judgment, the court defines a security using four criteria:
- An investment contract's existence
- The formation of a common enterprise
- The issuer's profit promise
- Third-party promotion of the offering
Read original post.
More on Web3 & Crypto
Franz Schrepf
3 years ago
What I Wish I'd Known About Web3 Before Building
Cryptoland rollercoaster
I've lost money in crypto.
Unimportant.
The real issue: I didn’t understand how.
I'm surrounded with winners. To learn more, I created my own NFTs, currency, and DAO.
Web3 is a hilltop castle. Everything is valuable, decentralized, and on-chain.
The castle is Disneyland: beautiful in images, but chaotic with lengthy lines and kids spending too much money on dressed-up animals.
When the throng and businesses are gone, Disneyland still has enchantment.
The Real Story of Web3
NFTs
Scarcity. Scarce NFTs. That's their worth.
Skull. Rare-looking!
Nonsense.
Bored Ape Yacht Club vs. my NFTs?
Marketing.
BAYC is amazing, but not for the reasons people believe. Apecoin and Otherside's art, celebrity following, and innovation? Stunning.
No other endeavor captured the zeitgeist better. Yet how long did you think it took to actually mint the NFTs?
1 hour? Maybe a week for the website?
Minting NFTs is incredibly easy. Kid-friendly. Developers are rare. Think about that next time somebody posts “DevS dO SMt!?”
NFTs will remain popular. These projects are like our Van Goghs and Monets. Still, be wary. It still uses exclusivity and wash selling like the OG art market.
Not all NFTs are art-related.
Soulbound and anonymous NFTs could offer up new use cases. Property rights, privacy-focused ID, open-source project verification. Everything.
NFTs build online trust through ownership.
We just need to evolve from the apes first.
NFTs' superpower is marketing until then.
Crypto currency
What the hell is a token?
99% of people are clueless.
So I invested in both coins and tokens. Same same. Only that they are not.
Coins have their own blockchain and developer/validator community. It's hard.
Creating a token on top of a blockchain? Five minutes.
Most consumers don’t understand the difference, creating an arbitrage opportunity: pretend you’re a serious project without having developers on your payroll.
Few market sites help. Take a look. See any tokens?
There's a hint one click deeper.
Some tokens are legitimate. Some coins are bad investments.
Tokens are utilized for DAO governance and DApp payments. Still, know who's behind a token. They might be 12 years old.
Coins take time and money. The recent LUNA meltdown indicates that currency investing requires research.
DAOs
Decentralized Autonomous Organizations (DAOs) don't work as you assume.
Yes, members can vote.
A productive organization requires more.
I've observed two types of DAOs.
Total decentralization total dysfunction
Centralized just partially. Community-driven.
A core team executes the DAO's strategy and roadmap in successful DAOs. The community owns part of the organization, votes on decisions, and holds the team accountable.
DAOs are public companies.
Amazing.
A shareholder meeting's logistics are staggering. DAOs may hold anonymous, secure voting quickly. No need for intermediaries like banks to chase up every shareholder.
Successful DAOs aren't totally decentralized. Large-scale voting and collaboration have never been easier.
And that’s all that matters.
Scale, speed.
My Web3 learnings
Disneyland is enchanting. Web3 too.
In a few cycles, NFTs may be used to build trust, not clout. Not speculating with coins. DAOs run organizations, not themselves.
Finally, some final thoughts:
NFTs will be a very helpful tool for building trust online. NFTs are successful now because of excellent marketing.
Tokens are not the same as coins. Look into any project before making a purchase. Make sure it isn't run by three 9-year-olds piled on top of one another in a trench coat, at the very least.
Not entirely decentralized, DAOs. We shall see a future where community ownership becomes the rule rather than the exception once we acknowledge this fact.
Crypto Disneyland is a rollercoaster with loops that make you sick.
Always buckle up.
Have fun!
Crypto Zen Monk
2 years ago
How to DYOR in the world of cryptocurrency
RESEARCH
We must create separate ideas and handle our own risks to be better investors. DYOR is crucial.
The only thing unsustainable is your cluelessness.
DYOR: Why
On social media, there is a lot of false information and divergent viewpoints. All of these facts might be accurate, but they might not be appropriate for your portfolio and investment preferences.
You become a more knowledgeable investor thanks to DYOR.
DYOR improves your portfolio's risk management.
My DYOR resources are below.
Messari: Major Blockchains' Activities
New York-based Messari provides cryptocurrency open data libraries.
Major blockchains offer 24-hour on-chain volume. https://messari.io/screener/most-active-chains-DB01F96B
What to do
Invest in stable cryptocurrencies. Sort Messari by Real Volume (24H) or Reported Market Cap.
Coingecko: Research on Ecosystems
Top 10 Ecosystems by Coingecko are good.
What to do
Invest in quality.
Leading ten Ecosystems by Market Cap
There are a lot of coins in the ecosystem (second last column of above chart)
CoinGecko's Market Cap Crypto Categories Market capitalization-based cryptocurrency categories. Ethereum Ecosystem www.coingecko.com
Fear & Greed Index for Bitcoin (FGI)
The Bitcoin market sentiment index ranges from 0 (extreme dread) to 100. (extreme greed).
How to Apply
See market sentiment:
Extreme fright = opportunity to buy
Extreme greed creates sales opportunity (market due for correction).
Glassnode
Glassnode gives facts, information, and confidence to make better Bitcoin, Ethereum, and cryptocurrency investments and trades.
Explore free and paid metrics.
Stock to Flow Ratio: Application
The popular Stock to Flow Ratio concept believes scarcity drives value. Stock to flow is the ratio of circulating Bitcoin supply to fresh production (i.e. newly mined bitcoins). The S/F Ratio has historically predicted Bitcoin prices. PlanB invented this metric.
Utilization: Ethereum Hash Rate
Ethereum miners produce an estimated number of hashes per second.
ycharts: Hash rate of the Bitcoin network
TradingView
TradingView is your go-to tool for investment analysis, watch lists, technical analysis, and recommendations from other traders/investors.
Research for a cryptocurrency project
Two key questions every successful project must ask: Q1: What is this project trying to solve? Is it a big problem or minor? Q2: How does this project make money?
Each cryptocurrency:
Check out the white paper.
check out the project's internet presence on github, twitter, and medium.
the transparency of it
Verify the team structure and founders. Verify their LinkedIn profile, academic history, and other qualifications. Search for their names with scam.
Where to purchase and use cryptocurrencies Is it traded on trustworthy exchanges?
From CoinGecko and CoinMarketCap, we may learn about market cap, circulations, and other important data.
The project must solve a problem. Solving a problem is the goal of the founders.
Avoid projects that resemble multi-level marketing or ponzi schemes.
Your use of social media
Use social media carefully or ignore it: Twitter, TradingView, and YouTube
Someone said this before and there are some truth to it. Social media bullish => short.
Your Behavior
Investigate. Spend time. You decide. Worth it!
Only you have the best interest in your financial future.
Sam Bourgi
3 years ago
NFT was used to serve a restraining order on an anonymous hacker.
The international law firm Holland & Knight used an NFT built and airdropped by its asset recovery team to serve a defendant in a hacking case.
The law firms Holland & Knight and Bluestone used a nonfungible token to serve a defendant in a hacking case with a temporary restraining order, marking the first documented legal process assisted by an NFT.
The so-called "service token" or "service NFT" was served to an unknown defendant in a hacking case involving LCX, a cryptocurrency exchange based in Liechtenstein that was hacked for over $8 million in January. The attack compromised the platform's hot wallets, resulting in the loss of Ether (ETH), USD Coin (USDC), and other cryptocurrencies, according to Cointelegraph at the time.
On June 7, LCX claimed that around 60% of the stolen cash had been frozen, with investigations ongoing in Liechtenstein, Ireland, Spain, and the United States. Based on a court judgment from the New York Supreme Court, Centre Consortium, a company created by USDC issuer Circle and crypto exchange Coinbase, has frozen around $1.3 million in USDC.
The monies were laundered through Tornado Cash, according to LCX, but were later tracked using "algorithmic forensic analysis." The organization was also able to identify wallets linked to the hacker as a result of the investigation.
In light of these findings, the law firms representing LCX, Holland & Knight and Bluestone, served the unnamed defendant with a temporary restraining order issued on-chain using an NFT. According to LCX, this system "was allowed by the New York Supreme Court and is an example of how innovation can bring legitimacy and transparency to a market that some say is ungovernable."
You might also like
Hannah Elliott
3 years ago
Pebble Beach Auto Auctions Set $469M Record
The world's most prestigious vintage vehicle show included amazing autos and record-breaking sums.
This 1932 Duesenberg J Figoni Sports Torpedo earned Best of Show in 2022.
David Paul Morris (DPM)/Bloomberg
2022 Pebble Beach Concours d'Elegance winner was a pre-war roadster.
Lee Anderson's 1932 Duesenberg J Figoni Sports Torpedo won Best of Show at Pebble Beach Golf Links near Carmel, Calif., on Sunday. First American win since 2013.
Sandra Button, chairperson of the annual concours, said the car, whose chassis and body had been separated for years, "marries American force with European style." "Its resurrection story is passionate."
Pebble Beach Concours d'Elegance Auction
Since 1950, the Pebble Beach Concours d'Elegance has welcomed the world's most costly collectable vehicles for a week of parties, auctions, rallies, and high-roller meetings. The cold, dreary weather highlighted the automobiles' stunning lines and hues.
DPM/Bloomberg
A visitor photographs a 1948 Ferrari 166 MM Touring Barchetta. This is one of 25 Ferraris manufactured in the years after World War II. First shown at the 1948 Turin Salon. Others finished Mille Miglia and Le Mans, which set the tone for Ferrari racing for years.
DPM/Bloomberg
This year's frontrunners were ultra-rare pre-war and post-war automobiles with long and difficult titles, such a 1937 Talbot-Lago T150C-SS Figoni & Falaschi Teardrop Coupe and a 1951 Talbot-Lago T26 Grand Sport Stabilimenti Farina Cabriolet.
The hefty, enormous coaches inspire visions of golden pasts when mysterious saloons swept over the road with otherworldly style, speed, and grace. Only the richest and most powerful people, like Indian maharaja and Hollywood stars, owned such vehicles.
Antonio Chopitea, a Peruvian sugar tycoon, ordered a new Duesenberg in Paris. Hemmings says the two-tone blue beauty was moved to the US and dismantled in the 1960s. Body and chassis were sold separately and rejoined decades later in a three-year, prize-winning restoration.
The concours is the highlight of Monterey Car Week, a five-day Super Bowl for car enthusiasts. Early events included Porsche and Ferrari displays, antique automobile races, and new-vehicle debuts. Many auto executives call Monterey Car Week the "new auto show."
Many visitors were drawn to the record-breaking auctions.
A 1969 Porsche 908/02 auctioned for $4.185 million. Flat-eight air-cooled engine, 90.6-inch wheelbase, 1,320-pound weight. Vic Elford, Richard Attwood, Rudi Lins, Gérard Larrousse, Kurt Ahrens Jr., Masten Gregory, and Pedro Rodriguez drove it, according to Gooding.
DPM/Bloomberg
The 1931 Bentley Eight Liter Sports Tourer doesn't meet its reserve. Gooding & Co., the official auction house of the concours, made more than $105 million and had an 82% sell-through rate. This powerful open-top tourer is one of W.O. Bentley's 100 automobiles. Only 80 remain.
DPM/Bloomberg
The final auction on Aug. 21 brought in $456.1 million, breaking the previous high of $394.48 million established in 2015 in Monterey. “The week put an exclamation point on what has been an exceptional year for the collector automobile market,” Hagerty analyst John Wiley said.
Many cars that go unsold at public auction are sold privately in the days after. After-sales pushed the week's haul to $469 million on Aug. 22, up 18.9% from 2015's record.
In today's currencies, 2015's record sales amount to $490 million, Wiley noted. The dollar is degrading faster than old autos.
Still, 113 million-dollar automobiles sold. The average car sale price was $583,211, up from $446,042 last year, while multimillion-dollar hammer prices made up around 75% of total sales.
Industry insiders and market gurus expected that stock market volatility, the crisis in Ukraine, and the dollar-euro exchange rate wouldn't influence the world's biggest spenders.
Classic.com's CEO said there's no hint of a recession in an e-mail. Big sales and crowds.
Ticket-holders wore huge hats, flowery skirts, and other Kentucky Derby-esque attire. Coffee, beverages, and food are extra.
DPM/Bloomberg
Mercedes-Benz 300 SL Gullwing, 1955. Mercedes produced the two-seat gullwing coupe from 1954–1957 and the roadster from 1957–1963. It was once West Germany's fastest and most powerful automobile. You'd be hard-pressed to locate one for less $1 million.
DPM/Bloomberg
1955 Ferrari 410 Sport sold for $22 million at RM Sotheby's. It sold a 1937 Mercedes-Benz 540K Sindelfingen Roadster for $9.9 million and a 1924 Hispano-Suiza H6C Transformable Torpedo for $9.245 million. The family-run mansion sold $221.7 million with a 90% sell-through rate, up from $147 million in 2021. This year, RM Sotheby's cars averaged $1.3 million.
Not everyone saw such great benefits.
Gooding & Co., the official auction house of the concours, made more than $105 million and had an 82% sell-through rate. 1937 Bugatti Type 57SC Atalante, 1990 Ferrari F40, and 1994 Bugatti EB110 Super Sport were top sellers.
The 1969 Autobianchi A112 Bertone. This idea two-seater became a Hot Wheels toy but was never produced. It has a four-speed manual drive and an inline-four mid-engine arrangement like the Lamborghini Miura.
DPM/Bloomberg
1956 Porsche 356 A Speedster at Gooding & Co. The Porsche 356 is a lightweight, rear-engine, rear-wheel drive vehicle that lacks driving power but is loved for its rounded, Beetle-like hardtop coupé and open-top versions.
DPM/Bloomberg
Mecum sold $50.8 million with a 64% sell-through rate, down from $53.8 million and 77% in 2021. Its top lot, a 1958 Ferrari 250 GT 'Tour de France' Alloy Coupe, sold for $2.86 million, but its average price was $174,016.
Bonhams had $27.8 million in sales with an 88% sell-through rate. The same sell-through generated $35.9 million in 2021.
Gooding & Co. and RM Sotheby's posted all 10 top sales, leaving Bonhams, Mecum, and Hagerty-owned Broad Arrow fighting for leftovers. Six of the top 10 sellers were Ferraris, which remain the gold standard for collectable automobiles. Their prices have grown over decades.
Classic.com's Calle claimed RM Sotheby's "stole the show," but "BroadArrow will be a force to reckon with."
Although pre-war cars were hot, '80s and '90s cars showed the most appreciation and attention. Generational transition and new buyer profile."
2022 Pebble Beach Concours d'Elegance judges inspect 1953 Siata 208. The rounded coupe was introduced at the 1952 Turin Auto Show in Italy and is one of 18 ever produced. It sports a 120hp Fiat engine, five-speed manual transmission, and alloy drum brakes. Owners liked their style, but not their reliability.
DPM/Bloomberg
The Czinger 21 CV Max at Pebble Beach. Monterey Car Week concentrates on historic and classic automobiles, but modern versions like this Czinger hypercar also showed.
DPM/Bloomberg
The 1932 Duesenberg J Figoni Sports Torpedo won Best in Show in 2022. Lee and Penny Anderson of Naples, Fla., own the once-separate-chassis-from-body automobile.
DPM/Bloomberg
Antonio Neto
3 years ago
Should you skip the minimum viable product?
Are MVPs outdated and have no place in modern product culture?
Frank Robinson coined "MVP" in 2001. In the same year as the Agile Manifesto, the first Scrum experiment began. MVPs are old.
The concept was created to solve the waterfall problem at the time.
The market was still sour from the .com bubble. The tech industry needed a new approach. Product and Agile gained popularity because they weren't waterfall.
More than 20 years later, waterfall is dead as dead can be, but we are still talking about MVPs. Does that make sense?
What is an MVP?
Minimum viable product. You probably know that, so I'll be brief:
[…] The MVP fits your company and customer. It's big enough to cause adoption, satisfaction, and sales, but not bloated and risky. It's the product with the highest ROI/risk. […] — Frank Robinson, SyncDev
MVP is a complete product. It's not a prototype. It's your product's first iteration, which you'll improve. It must drive sales and be user-friendly.
At the MVP stage, you should know your product's core value, audience, and price. We are way deep into early adoption territory.
What about all the things that come before?
Modern product discovery
Eric Ries popularized the term with The Lean Startup in 2011. (Ries would work with the concept since 2008, but wide adoption came after the book was released).
Ries' definition of MVP was similar to Robinson's: "Test the market" before releasing anything. Ries never mentioned money, unlike Jobs. His MVP's goal was learning.
“Remove any feature, process, or effort that doesn't directly contribute to learning” — Eric Ries, The Lean Startup
Product has since become more about "what" to build than building it. What started as a learning tool is now a discovery discipline: fake doors, prototyping, lean inception, value proposition canvas, continuous interview, opportunity tree... These are cheap, effective learning tools.
Over time, companies realized that "maximum ROI divided by risk" started with discovery, not the MVP. MVPs are still considered discovery tools. What is the problem with that?
Time to Market vs Product Market Fit
Waterfall's Time to Market is its biggest flaw. Since projects are sliced horizontally rather than vertically, when there is nothing else to be done, it’s not because the product is ready, it’s because no one cares to buy it anymore.
MVPs were originally conceived as a way to cut corners and speed Time to Market by delivering more customer requests after they paid.
Original product development was waterfall-like.
Time to Market defines an optimal, specific window in which value should be delivered. It's impossible to predict how long or how often this window will be open.
Product Market Fit makes this window a "state." You don’t achieve Product Market Fit, you have it… and you may lose it.
Take, for example, Snapchat. They had a great time to market, but lost product-market fit later. They regained product-market fit in 2018 and have grown since.
An MVP couldn't handle this. What should Snapchat do? Launch Snapchat 2 and see what the market was expecting differently from the last time? MVPs are a snapshot in time that may be wrong in two weeks.
MVPs are mini-projects. Instead of spending a lot of time and money on waterfall, you spend less but are still unsure of the results.
MVPs aren't always wrong. When releasing your first product version, consider an MVP.
Minimum viable product became less of a thing on its own and more interchangeable with Alpha Release or V.1 release over time.
Modern discovery technics are more assertive and predictable than the MVP, but clarity comes only when you reach the market.
MVPs aren't the starting point, but they're the best way to validate your product concept.
Joseph Mavericks
3 years ago
The world's 36th richest man uses a 5-step system to get what he wants.
Ray Dalio's super-effective roadmap
Ray Dalio's $22 billion net worth ranks him 36th globally. From 1975 to 2011, he built the world's most successful hedge fund, never losing more than 4% from 1991 to 2020. (and only doing so during 3 calendar years).
Dalio describes a 5-step process in his best-selling book Principles. It's the playbook he's used to build his hedge fund, beat the markets, and face personal challenges.
This 5-step system is so valuable and well-explained that I didn't edit or change anything; I only added my own insights in the parts I found most relevant and/or relatable as a young entrepreneur. The system's overview:
Have clear goals
Identify and don’t tolerate problems
Diagnose problems to get at their root causes
Design plans that will get you around those problems
Do what is necessary to push through the plans to get results
If you follow these 5 steps in a virtuous loop, you'll almost always see results. Repeat the process for each goal you have.
1. Have clear goals
a) Prioritize: You can have almost anything, but not everything.
I started and never launched dozens of projects for 10 years because I was scattered. I opened a t-shirt store, traded algorithms, sold art on Instagram, painted skateboards, and tinkered with electronics. I decided to try blogging for 6 months to see where it took me. Still going after 3 years.
b) Don’t confuse goals with desires.
A goal inspires you to act. Unreasonable desires prevent you from achieving your goals.
c) Reconcile your goals and desires to decide what you want.
d) Don't confuse success with its trappings.
e) Never dismiss a goal as unattainable.
Always one path is best. Your perception of what's possible depends on what you know now. I never thought I'd make money writing online so quickly, and now I see a whole new horizon of business opportunities I didn't know about before.
f) Expectations create abilities.
Don't limit your abilities. More you strive, the more you'll achieve.
g) Flexibility and self-accountability can almost guarantee success.
Flexible people accept what reality or others teach them. Self-accountability is the ability to recognize your mistakes and be more creative, flexible, and determined.
h) Handling setbacks well is as important as moving forward.
Learn when to minimize losses and when to let go and move on.
2. Don't ignore problems
a) See painful problems as improvement opportunities.
Every problem, painful situation, and challenge is an opportunity. Read The Art of Happiness for more.
b) Don't avoid problems because of harsh realities.
Recognizing your weaknesses isn't the same as giving in. It's the first step in overcoming them.
c) Specify your issues.
There is no "one-size-fits-all" solution.
d) Don’t mistake a cause of a problem with the real problem.
"I can't sleep" is a cause, not a problem. "I'm underperforming" could be a problem.
e) Separate big from small problems.
You have limited time and energy, so focus on the biggest problems.
f) Don't ignore a problem.
Identifying a problem and tolerating it is like not identifying it.
3. Identify problems' root causes
a) Decide "what to do" after assessing "what is."
"A good diagnosis takes 15 to 60 minutes, depending on its accuracy and complexity. [...] Like principles, root causes recur in different situations.
b) Separate proximate and root causes.
"You can only solve problems by removing their root causes, and to do that, you must distinguish symptoms from disease."
c) Knowing someone's (or your own) personality can help you predict their behavior.
4. Design plans that will get you around the problems
a) Retrace your steps.
Analyze your past to determine your future.
b) Consider your problem a machine's output.
Consider how to improve your machine. It's a game then.
c) There are many ways to reach your goals.
Find a solution.
d) Visualize who will do what in your plan like a movie script.
Consider your movie's actors and script's turning points, then act accordingly. The game continues.
e) Document your plan so others can judge your progress.
Accountability boosts success.
f) Know that a good plan doesn't take much time.
The execution is usually the hardest part, but most people either don't have a plan or keep changing it. Don't drive while building the car. Build it first, because it'll be bumpy.
5. Do what is necessary to push through the plans to get results
a) Great planners without execution fail.
Life is won with more than just planning. Similarly, practice without talent beats talent without practice.
b) Work ethic is undervalued.
Hyper-productivity is praised in corporate America, even if it leads nowhere. To get things done, use checklists, fewer emails, and more desk time.
c) Set clear metrics to ensure plan adherence.
I've written about the OKR strategy for organizations with multiple people here. If you're on your own, I recommend the Wheel of Life approach. Both systems start with goals and tasks to achieve them. Then start executing on a realistic timeline.
If you find solutions, weaknesses don't matter.
Everyone's weak. You, me, Gates, Dalio, even Musk. Nobody will be great at all 5 steps of the system because no one can think in all the ways required. Some are good at analyzing and diagnosing but bad at executing. Some are good planners but poor communicators. Others lack self-discipline.
Stay humble and ask for help when needed. Nobody has ever succeeded 100% on their own, without anyone else's help. That's the paradox of individual success: teamwork is the only way to get there.
Most people won't have the skills to execute even the best plan. You can get missing skills in two ways:
Self-taught (time-consuming)
Others' (requires humility) light
On knowing what to do with your life
“Some people have good mental maps and know what to do on their own. Maybe they learned them or were blessed with common sense. They have more answers than others. Others are more humble and open-minded. […] Open-mindedness and mental maps are most powerful.” — Ray Dalio
I've always known what I wanted to do, so I'm lucky. I'm almost 30 and have always had trouble executing. Good thing I never stopped experimenting, but I never committed to anything long-term. I jumped between projects. I decided 3 years ago to stick to one project for at least 6 months and haven't looked back.
Maybe you're good at staying focused and executing, but you don't know what to do. Maybe you have none of these because you haven't found your purpose. Always try new projects and talk to as many people as possible. It will give you inspiration and ideas and set you up for success.
There is almost always a way to achieve a crazy goal or idea.
Enjoy the journey, whichever path you take.