Matthew Frasetto

Introduction

This article is written as the only resource you’ll ever need, or I’ll ever need, on productivity. The concept has been beaten to death in the modern world — and after reading many articles — I’ve never found a satisfying mental model for thinking about it. So, I created one, and that’s what this article is about.

My strategy for getting to the bottom of productivity was to understand the concept at a deep level and to learn from the most productive individuals of all time. I found that productivity is much more than the concept is usually reduced to.

What is Productivity?

Productivity is a measure of how effectively inputs (time, labor, money, or materials) are converted into outputs (goods, services, or tasks completed).

The following equation can be used to measure productivity both in individuals and organizations:

Meaningful Outputs / Resource Inputs = Productivity

Let’s create an example at the individual level:

We have two writers. The first writes a thousand words in two hours, and the second, only a hundred.

The first writer is more productive, and if you run the math through the productivity equation, it would confirm. However, this is not the full picture of productivity, because quality of output also matters. If the first writer’s prose is garbage, he wouldn’t necessarily be considered more productive. For creative endeavorers, the quality of output is particularly important, and often tricky to measure.

Productivity can also be measured at the organizational level. The inputs organizations deal with are known as capital, which includes:

• Human capital (time and energy from workers)
• Financial capital (money)
• Physical capital (machinery, factories, vehicles, technology)
• Intellectual capital (patents, trademarks, copyrights, trade secrets)
• Social capital (professional networks, community groups, and industry coalitions).

Productivity for an organization is a measure of how effective it is at converting its available capital into valuable goods and services, or in the case of a government or non-profit organization, beneficial outcomes for society.

Some organizations are much more productive than others. One company could input one hundred dollars and output one thousand dollars in goods and services. Another could input the same hundred dollars and only output two hundred dollars in goods and services. The first company is more productive with their monetary capital. Now that we understand how to measure productivity, let’s look at another way to conceptualize it.

Productivity as an Algorithm

We can think of productivity as a sort of algorithm — a set of rules to obtain the expected output from the given input. I’m going to use the words principles, rules, and algorithms interchangeably throughout this article.

People with better algorithms obtain more desired outputs with the same, or even less inputs. We can think back to the two writers example to understand this. One writer wrote more words with the same amount of time input. The rules and principles of the more productive writer transform time into writing more effectively. He has a better algorithm.

To illustrate this algorithm concept one more time we could take two building companies:

Their primary goal is to build as many townhomes as possible, as fast as possible. Let’s say company one builds ten townhomes in a month and company two builds only five. Company one either has a better algorithm for building townhomes, or they have more inputs. Maybe they have more employees (human capital).

Productivity is measured by outputs divided by inputs, so if company one has more inputs than company two, productivity would account for that. Let’s say company one had exactly double the inputs that company two had. They would be equally productive, because company one did half the output, with half the input.

At the end of the day, if measured perfectly, productivity is only concerned with the algorithm portion. It’s concerned with the rules and principles that transform inputs into outputs. Now that we understand the essence of productivity, we can dive into the the principles and rules that lead to great productivity. These principles were shared by the most productive individuals of all time.

Principles of Productivity

The secrets to productivity lie in the following principles. They are the forces that shape basic inputs into magnificent outputs; they are the true drivers of productivity.

Opportunity Cost

A hidden force that directs individuals and organizations to pursue outputs which their inputs, and algorithms, are best suited for.

This is one of the most foundational concepts in all of economics. It’s the idea that every action comes with an opportunity cost, because with every action, resources get used up that could have been spent elsewhere. If someone goes to the movies, they’ve spent time and money they could have spent on say, reading a book. Everything else they’ve foregone to see that movie is opportunity cost. This is part of the reason why free markets are so efficient at optimizing outcomes. They incentivize everything and everyone, monetarily, to work towards the outputs they are most effective at generating. For example, if tomorrow, McDonalds decided to go from selling burgers, to selling dresses, they would lose large amounts of money. This is the market punishing McDonalds for not doing what McDonalds does best; you can’t make women’s clothing with a microwave, and I don’t think women would want to wear Big Mac sauce. The opportunity cost for McDonalds making dresses is monumental. It’s foregoing the billions of dollars in profit that McDonalds makes each year from selling fast food.

The concept of opportunity cost also applies at the individual level. If a successful engineer decides to stop using his brain for designing bridges, to write poetry, he misses out on engineering money for a period of time until he can get his new career in poetry up and running. To reiterate, markets drive individuals and organizations to become as productive as possible at the things they’re best suited for. People and organizations can also alter their algorithms to become more or less productive. Most rational actors are always trying to make their rules and processes better, but people and organizations obviously make mistakes. However, over long enough timescales, with the force of opportunity cost relentlessly pushing, algorithms tend to get optimized or eliminated.

One more thought on opportunity cost is that it’s been around since the dawn of complex life. Early complex organisms had to develop dynamic behavioral patterns in order to survive in chaotic environments. Every movement a complex organism makes has an opportunity cost, because the energy and time could be used for something else. Over millions of years of evolution, organisms that developed the best algorithms and sets of behaviors for minimizing opportunity cost succeeded, and their behaviors were passed down.

Scarcity

A hidden force that causes individuals to be very careful with how they input scarce resources.

A resource is scarce when demand for it is greater than the available supply. Every individual and organization must decide how they’re going to allocate scarce resources. Scarce resources are in limited supply relative to demand. For example, there’s a lot of demand for gold, but it’s in limited supply. Certain forms of human capital can also be considered a scarce resource. For example, highly talented indviduals are scarce, because there’s only so many of them, and organizations compete over them.

People and organizations put a higher value on scarce resources, and they’re more careful with how they allocate them. Time is a great example of a scarce resource, especially at the individual level. Individuals must be smart with how they spend their time, and organizations must be smart about how they direct their workers time, especially the time of exceptional workers, since it’s more scarce.

Any individual or organization with half a brain makes sure they have good algorithms and rules before using (inputing) scarce resources. This is why banks don’t lend money to thirteen year olds with their first business idea. The bank knows that these thirteen year olds do not have the proper principles and mental models required to produce valuable goods and services with monetary capital (a scarce resource). Banks lend money to people and organizations that they feel have solid algorithms.

This is another function of free market systems or what is called “the invisible hand”. Markets tend to shift money to the individuals and organizations with the most effective algorithms, rules, and principles. It’s analogous to the way large celestial bodies bend spacetime, pulling other bodies into their orbit. You can look at an individual like Warren Buffet to see this effect. Everyone wants to do business with Warren Buffet. He draws a lot of capital into his orbit, because he has a stellar track record, proving that he has highly effective principles for investing. Mr. Market has a way of gifting scarce resources to people with great algorithms.

Curiosity

A force that drives individuals to experiment with their algorithms to become more productive.

The prior two principles were economic principles. Now we’re going to take a look at some psychological principles that play a crucial role in productivity. Intense curiosity is one of the most common traits of highly productive people. As human beings, we all have a degree of curiosity, but highly productive individuals tend to have it in abundance and exercise it almost constantly.

It’s thought that curiosity evolved in life as a mechanism for better survival and reproductive success. Lifeforms that were curious would explore new areas and pick up on new patterns. Every once in a while, they would stumble upon new resources and unlock important information about the world. Unlocking new information allows you to create much better algorithms. Even though human beings are perhaps the most curious lifeforms on Earth, not everyone exhibits the same degree of curiosity. Many people are churned through school, shot into a 9–5 job, and lulled into exploiting the same patterns, over and over again: clock in — perform the same tasks — collect paycheck — and repeat. This is the standard algorithm that most people run. Very few people, on a daily basis, are aggressively seeking out new knowledge and information about the world.

Intensely productive individuals retain their curiosity, often for their entire lives. Einstein famously said: “I have no special talents. I am only passionately curious”. Deep curiosity is not just a fun thing to have — it supercharges productivity. It drives humanity into the unknown. It’s arguably the force that drove people to explore the Americas, an exploration that changed the world forever, and it currently drives individuals like Elon Musk to bring humanity to Mars. Such a deep part of the human spirit, the human will, is curiosity. Individuals that can strengthen this force, channel it, and deploy it, can achieve amazing things.

First Principles Thinking

Boiling down algorithms to their most fundamental components.

First principles thinking was deployed by Leonardo da Vinci, Aristotle, Elon Musk, Richard Feynman, Archimedes, Tesla, and Charlie Munger to name a few. If that list of individuals doesn’t illustrate its power, nothing does. You might be thinking, what’s first principles thinking? Well, we can start by looking at what it’s not. Most people operate within rules that they don’t even understand. For example, almost everybody spends a great deal of their life working for money, but if you asked them what money is, at the most fundamental level, they wouldn’t know. Another example: most people, as living beings, feel they know a thing or two about life. However, if you ask most people the simple question, what is life? — they would give you a very shaky definition, and you would quickly realize they don’t know about the deep nature of life. We have a situation where a lot of people are alive, and working every day for money, but they don’t know about life or money. Most people are not engaged in first principles thinking.

The individuals that I listed at the beginning of the last paragraph spent, or still spend great deals of time thinking about the fundamental nature of the world — whether it be the physical structure (physics) or the deep nature of the human mind, or in many cases, both. The majority of people can’t even explain the laws that make their computer or microwave work, but the individuals I mentioned could — why? — their intense curiosity lead them to try to understand as many first principles as they could. The human mind has the unbelievable ability to explore abstract concepts, and first principles thinking is the magic art of applying curiosity to abstraction.

First principles thinking requires boiling things down to their fundamental truths and building solutions from the ground up. For example, if someone wanted to deeply understand computers, or build their own, they could take a first principles approach by asking: what is a computer? What are the fundamental components and mechanisms that all computers share? How do these fundamental components function? What are the laws of physics that govern these components? This is a much more enlightening approach than say, pretending you already know about computers because you’ve used them your whole life.

First principles exploration requires curiosity. If you’re not actually curious about how computers work, you’re not going to take the time to understand them at a deep level. Individuals like Richard Feynman and Leonardo Da Vinci were curious about pretty much everything. Da Vinci jotted ideas in his journals about a vast number of seemingly unrelated topics, and Feynman would famously take brief departures from his intense exploration of physics to learn more about things like the art of picking up girls at bars.

Elon Musk currently uses first principles thinking for everything ranging from building rockets and electric vehicles — to designing artificial intelligence systems — to restructuring organizations and governments to make them more efficient. Instead of determining how much it costs to build an engine or battery based on current market prices for components, he boils them down to the price of their fundamental raw materials. People that don’t have a first principles mindset wouldn’t think to do this. They would likely just take market prices at face value. First principles thinkers do their best not to fall into this trap. They always assume that unless something breaks a deep law of nature, it can be done.

Imagination

A mental faculty that allows you to simulate inputs, algorithms, and outputs.

Imagination is the ability to create pictures in your mind; another mode of mind deployed by the most productive individuals of all time. Einstein’s discovery of relativity, Nietzsche’s construction of The Will to Power, and Darwin’s Theory of Evolution are all examples of world changing ideas that required imagination.

Physicists and philosophers are both famous for their thought experiments. Thought experiments, an application of imagination, serve as a testing ground for abstract ideas that can’t be easily tested in the physical world. Einstein famously fleshed out the theory of relativity through thought experiments, and thought experiments like the “trolley problem” are used in philosophical debates regarding ethics.

Engineers and entrepreneurs imagine new designs, physical structures, businesses, products, and services. They use their imagination to predict what technologies might be possible and what society may need in the future. Elon Musk channels his imagination to create a compelling future with self-driving cars, rapidly reusable rockets, and a space colony on Mars. Michael Saylor, a famous entrepreneur, imagines a world where Bitcoin reigns supreme, and the financial landscape is drastically transformed. Steve Jobs, famous founder of Apple, imagined a world where everyone had a personal computer in their pocket, provided by Apple, which eventually came true.

Investors and economists use the power of imagination to make investment decisions and create models that represent economic systems. Famous investors like Naval Ravikant and Peter Thiel harness their understanding of many different concepts to create mental models for making investment decisions. These mental models serve as a framework for interpreting information, predicting outcomes, and solving problems by simulating different scenarios in their mind. This is a form of structured imagination. Economists use a similar process to predict macro economic changes and behavior. Adam Smith leveraged his imagination to produce economic concepts like “the invisible hand” and the “division of labor”. Economists rely heavily on imaginary models that represent the real world, because it’s unfeasible to run macroeconomic experiments to confirm theories.

Artists and writers heavily utilize their imagination to create immersive works of art and fictional worlds. Fiction writers like Stephen King create imaginary worlds, rich with archetypes and human stories. Da Vinci — by constantly drawing, annotating, and brainstorming, kept his mind in a creative mode — leading him to create such great works of art.

Warriors and conquerers like Alexander the Great and Genghis Khan used their imagination to expand their power, legacy, and empire. They imagined how great their empire could become and used their imagination to predict the result of various military and political strategies.

Psychologists and psychoanalysts like Sigmund Freud and Carl Jung harnessed their imagination to uncover the deep nature of the human psyche. They imagined what forces might be operating below our conscious experience. They even analyzed dreams, a deeply mysterious imaginative capability, to identify archetypes and unconscious desires.

Individuals like Charles Darwin and Richard Dawkins leveraged their imagination to create new understandings of biology. Even though nature is observable, it often requires imaginative leaps to develop good theories for biology, as the theory of evolution did.

Finally, we have individuals that are considered polymaths. Their knowledge spans across a variety of different fields and areas of human knowledge. Many of the most productive individuals of all time were polymaths. They were able to apply their imagination in a stunning different number of areas. Modern polymaths include individuals like Elon Musk, Eric Weinstein, David Deutsch, Naval Ravikant, Charlie Munger, and Nassim Nicholas Taleb. Elon Musk uses his knowledge of economics, physics, and engineering to create innovative companies that change the world. Naval Ravikant has developed a broad understanding of the world by studying across many fields like physics, mathematics, philosophy, religion, history, and more, all of which can be applied to investing.

Polymaths are able to make connections between fields that anyone entrenched in a single field would likely miss. They bounce between different knowledge fields, returning to each with un-solidified mental connections, keeping their brain in a constant state of imagination and exploration. This quote feels apt for explaining this effect:

“The only true voyage would be not to travel through a hundred different lands with the same pair of eyes, but to see the same land through a hundred different pairs of eyes.” ― Marcel Proust.

When we change our understanding of the world, we change the way we see the same things. Our brains are constantly rewiring themselves, based on our experiences, and our knowledge. For example, when you go from thinking the Earth is the center of everything, to knowing the Sun is the center of the solar system, your entire understanding of the universe changes.

Ideas have the remarkable ability to alter the way we view very familiar things. Eric Weinstein, the great mathematician, refers to these kind of ideas as portals. They are new pieces of information that change the way we see everything. This is why books are so powerful for imagination. They provide our brains with a flux of novel ideas, changing our understanding of the world, and allowing our brains to make new connections, often rapidly. The faculties of imagination are a brutally essential component for productivity. Being able to imagine possibilities and execute on them is a fundamental process for generating priceless outputs.

Self-Examination and Virtue

A process of continuously examining one’s principles and making sure they are the best possible ones.

The ancient philosopher Socrates suggested that one invest their time in self-examination. He felt that this was one of the wisest possible uses of time. Self-examination is a very common activity among great individuals. Most of them write or speak extensively about themselves and use their inner world as a portal for understanding the the world. The stoics were great at this. Productivity, for them, was viewed in a virtuous framework. They were astutely aware of the danger of efficiency combined with malice. If outputs are evil, or destructive, productivity becomes twisted. This is why Socrates felt it was so important for one to self-examine — to avoid working towards morally corrupt outputs. In the modern, fast-paced western world, people rarely do a deep self-examination of the morality of their work — in fact — many people justify immoral actions as long as they increase monetary output.

The most productive individuals of history did not make the mistake of failing to self-examine, and many of them were deeply religious or had a strong philosophical framework for viewing the world. This lead them to develop deep meaning behind their work, meaning that they could articulate. You would have never caught them saying: I do what I do “just for the money” or “just to pay the bills”. They had a built in moral structure of virtues that determined their principles and processes.

Self-examination is an essential component of productivity, both for individuals and organizations. You must ask several questions:

• Are the outputs I’m pursuing morally sound?
• Are the principles and rules I’m using morally sound?
• Are the things I’m inputting morally sound?

Companies that use child labor as an input are morally corrupt. Individuals that pursue monetary output through theft or fraud are morally corrupt. Entities that output death and destruction are morally corrupt.

Risk- Taking

A force inside of individuals that drives them to experiment with different algorithms, regardless of the risks.

Individuals like Einstein, Feynman, and Da Vinci challenged the established beliefs of their times. By doing this, they transformed our understanding of the world.

Musk, Naval, and Munger have followed in their footsteps. By implementing first principles thinking, they stumble across new possibilities that may have never been discovered, or deployed before. When Musk started his electric car company and rocket company, he was taking a massive risk, because no one was sure if it was possible to successfully build these type of companies. However, with a conviction in his understanding of the first principles, Musk was able to build these companies successfully. Great investors such as Munger and Naval are willing to take risks with their money. They can never be one hundred percent sure that their investments will succeed, but what they can do is stick to their first principles understanding of the world and make decisions that best match their mental models, regardless of what the group is saying.

Individuals that can be considered polymaths also risk being labeled a “jack of all trades”. When they journey into new fields that they aren’t well established in, they face massive criticism from already established figures in those fields. All of the individuals we’ve discussed have been willing to take this risk. Munger famously wrote extensively about human psychology even though he wasn’t at all established in that field academically. Musk comments on things that he is not an expert on daily on the X platform, and he went into fields like aeronautics that he had no experience in when he first started his company Space X. Naval writes and comments on a wide variety of topics including philosophy, science, and health. He’s not afraid to explore areas that he is not considered an expert in.

Truth-Seeking

An internal force that drives individuals to implement principles closest to the true nature of reality.

All of these individuals had an obsession with the truth, regardless of what other people thought. They were not loyal to other people’s opinions or thoughts but to the truth, and the truth alone. This goes back to their first principles understanding of the world. As we see time and time again throughout human history, most people are willing to sacrifice the truth if it improves their social status or protects them from attacks from other people. This cannot be said about the most productive individuals of all time. They were willing to put up with attacks from other people, even from very powerful authorities of their time. They felt that if they were on the side of truth, it was better to embrace public scrutiny.

Socrates lost his life by sticking to his virtues and what he believed to be true. He refused to bend his philosophy because of untrue external pressure. The famous investors that we explored had to follow the truth, because “markets never lie”. Any person that is really trying to figure out the deep nature of reality, is in a way, subservient to the truth.

Final Thoughts

Now we understand the deep nature of productivity — a measurement of how effectively individuals or organizations are at converting meaningful inputs into meaningful outputs. The conversion occurs through what can be considered algorithms, principles, and rules. These are what ultimately determine the productivity of any entity.

In order to become a more productive individual, you want to consistently improve your algorithms, your rules for operating in the world, and now that you understand the deep nature of productivity, you have the foundation you need to do so.