- Inversion is a mental model that involves flipping your outlook to prevent the opposite of what you want to happen from happening.
- Warren Buffett and his business partner Charlie Munger employed inversion as a business strategy to build Berkshire Hathaway into a powerhouse.
- In a recent podcast with Brandon of the Mad Fientist, who retired early at 34, productivity expert James Clear said the same strategy Buffett used can help set someone on the path for early retirement.
Some business strategies aren't just for the 9-to-5 — they're also applicable outside of office hours.
In a recent podcast hosted by Brandon of the Mad Fientist, who retired early at 34, productivity expert James Clear called a Warren Buffett-approved mental strategy, called inversion, a "lens for looking at the world."
"The way that inversion works is you take what you want to achieve, and you imagine the opposite," Clear said in the podcast. "Think through what the scenario would be like to try to fortify your mental outlook so that you could be able to handle when life throws something your way, and then also, and most importantly, to be able to prepare for that. So what can I do to prevent that from happening?"
Essentially, you're asking yourself: What stupid things should I avoid doing in order to achieve my goals?
Clear pointed out that it's the same mental model Buffett and his longtime business partner Charlie Munger used to build Berkshire Hathaway into a powerhouse.
"It is remarkable how much long-term advantage people like us have gotten by trying to be consistently not stupid, instead of trying to be very intelligent," Munger once said in a CNBC interview.
It can also help set you on the path to early retirement, if that's what you're after, Clear explained. All you have to do is flip, or invert, the typical question "What can I do to retire early?"
"The question you can ask yourself is: 'Alright! If I want to retire early, what would I do to make sure that I could never retire?'" Clear said. "Well, maybe I would buy a house that would be like, way beyond my ability to pay, or I would purchase more cars than I need, or I would spend money on frivolous things and not save automatically each month."
He continued: "And the point is, as you go through this exercise and get more deep with the details, you start to identify essentially what are the stupid things that you should make sure you don't do."
Clear said the practice is harder than it seems because of "lifestyle creep" — when one earns more money, they're likely to spend it on things they don't need rather than put it toward long-term goals like retiring early.
As he puts it: "I think it's important to practice inversion on a consistent basis just to try to see what is the other side, what would be the dumb decision that we don't want to make a mistake on, and how can we prepare and prevent that currently."
- A Hollywood producer who spent over a year following around early retirees has his own simple question to decide what's worth his money — and what isn't
- Warren Buffett is the world's third-richest man — see how the notoriously frugal billionaire spends his fortune
- 7 tips to help make saving for retirement easier, according to a financial planner