In this episode, Preston and Stig explain how they now look at the current market conditions after the best month for stocks in 4 years. Preston and Stig will also be talking about their favorite book recommendation for students and potential business leaders: 7 Habits of Highly Effective People that have sold more than 25 million copies. If you want to read our executive summary of, this book, view this page instead. If you would like to download all of our book summaries, click here.
In this episode, you’ll learn:
- Why Preston, Stig, and Vanguard Founder Jack Bogle think the expected return in the stock market is 4%
- Why the historic stock market rally in October 2015 doesn’t change Preston and Stig’s fundamental opinion about the market
- A brief discussion of each of the 7 habits of highly effective people
- Which of the 7 habits that is the most important
OUR SUMMARY OF THE 7 HABITS OF HIGHLY EFFECTIVE PEOPLE
If you would like to download the below summary of The 7 Habits of Highly Effective People in .pdf format, follow the link.
Habit 1 – Be Proactive: Principle of Personal Vision
Proactivity constitutes Covey’s first habit for an important reason: the following six habits depend on the development of “proactive muscles” and puts the responsibility on the individual to act. To be certain, proactivity is not merely positive thinking or maintaining an optimistic attitude until conditions improve. Rather, it is facing the reality of certain circumstances and choosing a positive response to them.
Interestingly, proactive people can often be identified by the language they use: “Let’s look at alternatives;” “I can choose a different approach;” “I choose;” “I will.” This is in stark contrast to reactive people who are more likely to say, “I can’t do that;” “I don’t have the time;” or, “That’s just the way I am.” The danger of reactive language, according to Covey, is that it can become a self-fulfilling prophecy leading people to believe that they are not in charge of their lives.
Another noticeable difference between proactive and reactive people is whether they focus their energies on the Circle of Concern or on the Circle of Influence. Everyone has a wide range of concerns, some we exercise no real control over, and others that we can do something about. The concerns we can address fall within the Circle of Influence, and it is here that proactive people invest their energies, while reactive people remain stuck in and thus overwhelmed by the Circle of Concern.
Habit 2 – Begin with the End in Mind: Principle of Personal Leadership
Understanding the importance of “Begin with the End in Mind” approach to life. A leader clarifies values and, beginning with the end in mind, prompts us to live according to the principles we value most. As your own personal leader, you are responsible for your first creation and any necessary rescripting (or paradigm shifting) that may be required throughout life in order to realign your attitudes and behaviors with your values. Life cannot merely be managed; it needs a leader.
Covey is so committed to the idea of beginning with the end in mind that he recommends developing a personal mission statement or philosophy, which focuses on what you want to be (character) and to do (contributions and achievements) and the values upon which both aspects are based. A personal mission statement can be a personal constitution which outlines your life-directing decisions and what is purposeful and meaningful to you.
Habit 3 – Put First Things First: Principle of Personal Management
With discipline, Covey raises the issue of time management and presents what he calls the fourth generation of time management in the form of the Time Management Matrix, which divides time in four ways: urgent, not urgent, important, not important. Urgent matters are usually visible and pressing, but they are not always important, while important matters are related to results, such as achieving your mission. Covey’s Matrix is divided into four quadrants with Quadrant I constituting urgent and important matters, Quadrant II important and not urgent concerns, Quadrant III urgent and not important, and Quadrant IV not important and not urgent. Effective people spend little time in Quadrants III and IV because they are not important; they limit their time in Quadrant I, which can consume people, and spend most of their time in Quadrant II, the core of successful personal management as it deals with concerns that are important, but not urgent (capacity-building activities like long-range planning, building relationships, writing a personal mission statement). By spending most of your time in Quadrant II, your problems decrease because you are thinking ahead and taking preventive measures that keep situations from developing into crises.
In order to find the time to stay in Quadrant II, you have to learn to say “no” to numerous activities, no matter how urgent they may seem. While staying in Quadrant II requires discipline, it can seem like a natural and exciting place to invest your time if your priorities are coming from a principle-centered paradigm and a personal mission. It represents the essence of putting first things first.
Covey acknowledges that moving into Quadrant II is not a simple task, especially for people caught in the “thick of thin things” in Quadrants III and IV. He suggests organizing on a weekly basis rather than a daily basis in order to achieve greater balance and carrying out four key organizing activities. The first is identifying the roles you play, whether mother, father, wife, husband, manager or leader. The second activity is selecting goals you would like to accomplish over the course of a given week. The third step is to schedule your time with your goals in mind, and the final step is daily adapting, or responding to unanticipated events in a meaningful way. For Covey, these steps will help you along the path to organizing your week as a principle-centered, Quadrant II manager.
Habit 4 – Think Win/Win: Principles of Interpersonal Leadership
Covey contrasts the Win/Win model with other dysfunctional paradigms, such as the Win/Lose in which winning means others must lose; or the Lose/Win in which people are quick to please or appease and seek strength through acceptance rather than through their own convictions. There is also the Lose/Lose in which two win/lose people interact and produce an adversarial conflict; and the pure Win mentality in which a person seeks only to get what he or she wants.
Covey acknowledges that there are circumstances in which each of these different paradigms may be useful; it all depends on reality. The key is interpreting reality accurately and not insisting on a single mentality for all situations in life. A good example of the usefulness of all models is the scenario when your child’s life is threatened. Here the win mentality is essential as all other people and circumstances become immediately less important. But most situations take place within an interdependent reality and here the win/win attitude becomes the most viable mentality among the five.
Covey’s belief in the effectiveness of the win/win attitude is evidenced in his faith in the Win/Win or No Deal standard. As he succinctly defines this notion, “No deal basically means that if we can’t find a solution that would benefit us both, we agree to disagree agreeably – no deal.” With a no deal option in mind, you can be open and fair in dealing with people and pursue with both vigor and honesty a win/win situation, for the no deal option means that no one will have to make a decision that is not right for them.
Habit 5 – Seek First to Understand, Then to Be Understood: Principles of Empathetic Communication
Covey believes it is common for most people to listen not with the intent of understanding, but with the intent of replying. Listening is frequently autobiographical as we seek to understand others words through our own paradigms. Empathic listening, however, is listening with the intent to understand, to get inside another person’s paradigm, and to fully understand that person both intellectually and emotionally. This requires not only comprehending someone’s spoken language, but his or her sounds and body language as well. When achieved, empathic listening constitutes a huge deposit in someone’s Emotional Bank Account, and it validates and affirms that person, contributing to the psychological survival. Moreover, it is impossible to experience successful interdependency without understanding where people are coming from. Covey warns that empathic listening is risky as it involves opening yourself up to be influenced thus making you vulnerable. But with a “changeless inner core” developed from Habits 1, 2, and 3, you can manage vulnerability.
In order to learn how to listen empathically, we first need to diagnose how most of us typically listen. Covey identifies four common ways of autobiographical listening: 1) we evaluate (either agreeing or disagreeing); 2) we probe (asking questions from our own frame of reference); 3) we advise (giving counsel based on our own experience); and 4) we interpret (trying to figure people out). None of the four ways leads to empathic listening.
So how do we move from autobiographical listening to empathic listening? Covey identifies four developmental stages for making this important transition. The first (and least effective) is to mimic content (repeating someone’s words in your head), which is often insulting to people but at least prompts us to listen to what is actually being said and hinders us from evaluating, probing, advising or interpreting. The second (and still limited) stage is to rephrase the content, or to restate in your head and in your own words what someone has said to you. The third stage is reflecting feeling, which involves identifying the feeling someone is expressing to you. Here you are paying attention not so much to what someone is saying but rather to the feelings that person is conveying. The fourth stage combines the second and third: rephrase the content and reflect the feeling. At this stage you are giving someone psychological air (affirmation) and you are helping this person work through his or her own thoughts and feelings. If maintained, empathic listening can lead to truly open and trusting communication, where someone communicates exactly what he or she is thinking and feeling.
Habit 6 – Synergize: Principles of Creative Cooperation
The key to achieving synergy is valuing differences and realizing that everyone sees the world “not as it is, but as they are.” Effective people are humble and reverent and thus able to see their perceptual limitations, and they value differences precisely because they comprehend that those differences can benefit them. As Covey notes, “When we’re left to our own experiences, we constantly suffer from a shortage of data.” When you value differences, Third Alternatives almost always exist. Indeed, in some cases, synergy can even work powerfully against negative forces that hinder growth and change.
Concluding this section, Covey champions synergy as the correct principle and the “crowning achievement of all the previous habits.” He also reminds readers that our own internal synergy is within our Circle of Influence. We can make choices that aid both our independent and interdependent selves: we can respect our own different tendencies; we can seek to avoid negative energy; we can look for the good in others; we can be courageous enough in interdependent situations to be open; and we can welcome different opinions and takes on life.
Habit 7 – Sharpen the Saw: Principles of Balanced Self-Renewal
“Habit 7 is personal PC,” writes Covey. Though it’s listed as the last habit, it’s actually the all-encompassing one, as it makes all the other habits possible because it renews and maintains you.
The physical dimension of renewal is taking care of our physical bodies—eating well, resting, relaxing, and exercising. Too often we assume we don’t have the time to do these things; our pressing schedules overwhelm us.
By spiritual dimension, Covey means our commitment to our value system. For some, this activity might involve reading great literature, philosophy, sacred texts, listening to great music, or enjoying nature. Whatever the activity, we need to refresh the leadership center of our lives and recommit to what is actually important to us. Here Covey sees the personal mission statement as especially helpful in achieving spiritual renewal because it gives us a deep understanding of our center and makes re-committal to that center a more focused exercise.
Renewing our mental dimension means engaging our mind and seeking mental stimulation. This can come from continuing education, which expands our mind, or from training the mind “to stand apart and examine its own program,” or from extensive reading and exposure to great minds. Covey particularly likes the idea of reading good literature as he considers it a way to get inside the best minds from today and from the past. Writing is also a powerful tool for mental renewal as it sharpens our ability to think clearly and to be understood.
Covey makes an intriguing suggestion regarding sharpening the saw of the first three dimensions by promoting a practice he calls the Daily Private Victory. This entails spending an hour a day, for the rest of your life, renewing yourself in the physical, spiritual, and mental dimensions.