Warren Buffett Investment Process Commentary

[This post is incomplete, and was intended as a collection of Buffett investment process remarks along with my own commentary. It is instead a disjointed collection of Buffett investment process remarks and nothing more.]

Forecasts usually tell us more of the forecaster than of the future

There is nothing at all conservative, in my opinion, about speculating as to just how high a multiplier a greedy and capricious public will put on earnings.

our unwillingness to fix a price now for a pound of See’s candy or a yard of Berkshire cloth to be delivered in 2010 or 2020 makes us equally unwilling to buy bonds which set a price on money now for use in those years. Overall, we opt for Polonius (slightly restated): “Neither a short-term borrower nor a long-term lender be.”

the auction nature of security markets often allows finely-run companies the opportunity to purchase portions of their own businesses at a price under 50% of that needed to acquire the same earning power through the negotiated acquisition of another enterprise.)

we evaluate single-year corporate performance by comparing operating earnings to shareholders’ equity with securities valued at cost.

However attractive the earnings numbers, we remain leery of businesses that never seem able to convert such pretty numbers into no-strings-attached cash.

Small portions of exceptionally good businesses are usually available in the securities markets at reasonable prices. But such businesses are available for purchase in their entirety only rarely, and then almost always at high prices.

For personal as well as more objective reasons, however, we generally have been able to correct such mistakes far more quickly in the case of non-controlled businesses (marketable securities) than in the case of controlled subsidiaries. Lack of control, in effect, often has turned out to be an economic plus.

Logically, a company with historic and prospective high returns on equity should retain much or all of its earnings so that shareholders can earn premium returns on enhanced capital. Conversely, low returns on corporate equity would suggest a very high dividend payout so that owners could direct capital toward more attractive areas.

Beware of “dividends” that can be paid out only if someone promises to replace the capital distributed

we regard the most important measure of retail trends to be units sold per store rather than dollar volume

Any unleveraged business that requires some net tangible assets to operate (and almost all do) is hurt by inflation. Businesses needing little in the way of tangible assets simply are hurt the least.

Asset-heavy businesses generally earn low rates of return – rates that often barely provide enough capital to fund the inflationary needs of the existing business, with nothing left over for real growth, for distribution to owners, or for acquisition of new businesses.

In contrast, a disproportionate number of the great business fortunes built up during the inflationary years arose from ownership of operations that combined intangibles of lasting value with relatively minor requirements for tangible assets. In such cases earnings have bounded upward in nominal dollars, and these dollars have been largely available for the acquisition of additional businesses.

During inflation, Goodwill is the gift that keeps giving. But that statement applies, naturally, only to true economic Goodwill.

The buying and selling of securities is a competitive business, and even a modest amount of added competition on either side can cost us a great deal of money

we think an all-bond portfolio carries a small but unacceptable “wipe out” risk, and we require any purchase of long-term bonds to clear a special hurdle. Only when bond purchases appear decidedly superior to other business opportunities will we engage in them. Those occasions are likely to be few and far between.

In many businesses particularly those that have high asset/profit ratios – inflation causes some or all of the reported earnings to become ersatz. The ersatz portion – let’s call these earnings “restricted” – cannot, if the business is to retain its economic position, be distributed as dividends. Were these earnings to be paid out, the business would lose ground in one or more of the following areas: its ability to maintain its unit volume of sales, its long-term competitive position, its financial strength. No matter how conservative its payout ratio, a company that consistently distributes restricted earnings is destined for oblivion unless equity capital is otherwise infused.

Unrestricted earnings should be retained only when there is a reasonable prospect – backed preferably by historical evidence or, when appropriate, by a thoughtful analysis of the future – that for every dollar retained by the corporation, at least one dollar of market value will be created for owners

you should wish your earnings to be reinvested if they can be expected to earn high returns, and you should wish them paid to you if low returns are the likely outcome of reinvestment.

Since the long-term corporate outlook changes only infrequently, dividend patterns should change no more often. But over time distributable earnings that have been withheld by managers should earn their keep. If earnings have been unwisely retained, it is likely that managers, too, have been unwisely retained.

Only by committing available funds to much better businesses were we able to overcome these origins. (It’s been like overcoming a misspent youth.) Clearly, diversification has served us well.

You must first make sure that earnings were not severely depressed in the base year. If they were instead substantial in relation to capital employed, an even more important point must be examined: how much additional capital was required to produce the additional earnings?

retirement announcements regularly sing the praises of CEOs who have, say, quadrupled earnings of their widget company during their reign – with no one examining whether this gain was attributable simply to many years of retained earnings and the workings of compound interest.

Many stock options in the corporate world have worked in exactly that fashion: they have gained in value simply because management retained earnings, not because it did well with the capital in its hands.

No owner has ever escaped the burden of capital costs, whereas a holder of a fixed-price option bears no capital costs at all. An owner must weigh upside potential against downside risk; an option holder has no downside

First, stock options are inevitably tied to the overall performance of a corporation. Logically, therefore, they should be awarded only to those managers with overall responsibility

owners are not well served by the sale of part of their business at a bargain price – whether the sale is to outsiders or to insiders. The obvious conclusion: options should be priced at true business value

all Berkshire managers can use their bonus money (or other funds, including borrowed money) to buy our stock in the market. Many have done just that – and some now have large holdings. By accepting both the risks and the carrying costs that go with outright purchases, these managers truly walk in the shoes of owners

Berkshire’s strong capital position – the best in the industry – should one day allow us to claim a distinct competitive advantage in the insurance market

we prefer to finance in anticipation of need rather than in reaction to it

Tight money conditions, which translate into high costs for liabilities, will create the best opportunities for acquisitions, and cheap money will cause assets to be bid to the sky. Our conclusion: Action on the liability side should sometimes be taken independent of any action on the asset side

The primary factors bearing upon this evaluation are:

1) The certainty with which the long-term economic characteristics of the business can be evaluated;

2) The certainty with which management can be evaluated, both as to its ability to realize the full potential of the business and to wisely employ its cash flows;

3) The certainty with which management can be counted on to channel the rewards from the business to the shareholders rather than to itself;

4) The purchase price of the business;

5) The levels of taxation and inflation that will be experienced and that will determine the degree by which an investor’s purchasing-power return is reduced from his gross return.

The might of their brand names, the attributes of their products, and the strength of their distribution systems give them an enormous competitive advantage

Thirty years ago, I bought silver because I anticipated its demonetization by the U.S. Government. Ever since, I have followed the metal’s fundamentals but not owned it. In recent years, bullion inventories have fallen materially, and last summer Charlie and I concluded that a higher price would be needed to establish equilibrium between supply and demand. Inflation expectations, it should be noted, play no part in our calculation of silver’s value.

If the choice is between a questionable business at a comfortable price or a comfortable business at a questionable price, we much prefer the latter.

Charlie and I look for companies that have a) a business we understand; b) favorable long-term economics; c) able and trustworthy management; and d) a sensible price tag.

Truly great businesses, earning huge returns on tangible assets, can’t for any extended period reinvest a large portion of their earnings internally at high rates of return.

It’s far better to have an ever-increasing stream of earnings with virtually no major capital requirements

The worst sort of business is one that grows rapidly, requires significant capital to engender the growth, and then earns little or no money.

Taking Charlie Munger Down A Notch (#criticism, #Buffett)

Next to Warren Buffett, Charlie Munger is the closest thing to a god amongst men that you can find if you speak to the average value investor. A brilliant investor like his partner, Munger is also known and appreciated for his acerbic wit, outspoken, curmudgeonly personality and especially his famed “multi-disciplinary” approach to knowledge and auto-didacticism. Munger’s big idea is that to be a truly swift thinker, one must familiarize oneself, at a minimum, with all the big ideas of major intellectual disciplines and categories of scientific inquiry so that one can see how the pieces intertwine and thereby utilize multiple mental models for solving problems.

Problems arise when one relies on ideology or one mental framework to solve all problems, even all the problems within one discipline, because reality is multivariate and dynamic and rarely conforms to the models (which are usually abstractions simplified for the very purpose of making them more useful for explaining the model’s own conception of reality) in an accurate fashion.

On it’s face, Munger’s insight is a valuable one, and well said. He’s generally correct that many scientists, academics, investors, politicians and other “problem solvers” become the victims of their own inability to see beyond the narrow confines of their chosen models. There’s just one problem.

Munger himself doesn’t really get as many “big ideas” as he advocates and as a result he tends to personify that caricature of an armchair theorist who can think circles around the focused folk that they so passionately despise. He attempts to speak in a conversant fashion with ideas he hasn’t taken the time to seriously inquire upon, and his constant reuse of a limited number of examples and names-dropped serve to highlight that, while Munger may know enough to be dangerous in his chosen field of investing, he is far from knowing enough to pull off the polymath at which he plays. The result is an embarrassing schtick that, if you’ve heard it once you’ve heard it a million times– even if it’s well polished schtick, it’s nothing more than a sales pitch.

True creative thinkers come up with different things to talk about each time you have a discussion with them. Sales people toe the line and repeat their mantra.

To give a few examples of what I mean, I refer to a recently transcribed lecture Munger gave at Harvard-Westlake (a prep school in Southern California) in early 2010 in which he managed, in my opinion, to intellectually embarrass himself numerous times in one evening.

Let’s start with Munger’s take on the regulatory sins committed during the Greenspan era:

With academia failing us, now we turn to what happened with our regulators. Well, Alan Greenspan at the Federal Reserve overdosed on Ayn Rand. Basically he kind of thought anythingthat happened in the free market, even if it was an axe murder, had to be ok. He’s a smart man and [a] good man, but he got it wrong. Generally, an over-belief in any one ideology is going to do you in if you extrapolate it too hard, and that’s what happened in economics.

Where to begin? First, Rand

[This post was never finished.]

Notes – The Snowball, By Alice Schroeder: Part V, Chap. 43-52

The following are reading notes for The Snowball: Warren Buffett and the Business of Life, by Alice Schroeder (buy on Amazon.com). This post covers Part V: The King of Wall Street, Chap. 43-52

[These notes were never published on time. They may be incomplete as posted now.]

The modern Buffett

In Part V of the Snowball, we see Buffett’s transformation from the early, cigar butt-picking, Grahamian value-minded Buffett, through the filter of his Fisherite partner, Charlie Munger, into the mega cap conglomerator and franchise-buyer Buffett who is popularly known to investors and the public the world round.

It is in this part that we also see Buffett make one of his biggest missteps, a stumble which almost turns into a fall and which either way appears to shock and humble the maturing Buffett. It is in this era of his investing life that we see Buffett make some of his biggest rationalizations, become entangled in numerous scandals he never would’ve tolerated in his past and dive ever deeper into the world of “elephant bumping” and gross philanthropy, partly under the tutelage of his new best friend and Microsoft-founder, Bill Gates.

The lesson

Buffett made a series of poor investments but ultimately survived them all because of MoS. There will be challenges, struggles, and stress. But after the storm, comes the calm.

The keys to the fortress

From the late seventies until the late nineties, despite numerous economic and financial cycles Buffett’s fortune grew relentlessly under a seemingly unstoppable torrent of new capital:

Much of the money used for Buffett’s late seventies spending spree came from a bonanza of float from insurance and trading stamps

This “float” (negative working capital which was paid to Buffett’s companies in advance of services rendered, which he was able to invest at a profit in the meantime) was market agnostic, meaning that its volume was not much affected by the financial market booming or crashing. For example, if you owe premiums on your homeowner’s insurance, you don’t get to suspend payment on your coverage just because the Dow Jones has sold off or the economy is officially in a recession.

The growth in Buffett’s fortune, the wilting of his family

Between 1978 and the end of 1983, the Buffetts’ net worth had increased by a stunning amount, from $89 million to $680 million

Meanwhile Buffett proves he’s ever the worthless parent:

he handed the kids their Berkshire stock without stressing how important it might be to them someday, explaining compounding, or mentioning that they could borrow against the stock without selling it

Buffett had once written to a friend when his children were toddlers that he wanted to see “what the tree has produced” before deciding what to do about giving them money

(he didn’t actively parent though)

Buffett’s private equity shop

Another tool in Buffett’s investment arsenal was to purchase small private companies with dominant franchises and little need for capital reinvestment whose excess earnings could be siphoned off and used to make other investments in the public financial markets.

Continuing on with his success in acquiring the See’s Candy company, Buffett’s next private equity-style buyout involved the Nebraska Furniture Mart, run by a devoted Russian immigrant named Rose Blumkin and her family. And, much like the department store chain he once bought for a song from an emotionally-motivated seller, Buffett beat out a German group offering Rose Blumkin over $90M for her company, instead settling with Buffett on $55M for 90% of the company, quite a discount for a “fair valuation” of practically an entire business in the private market, especially considering the competing bid.

An audit of the company after purchase showed that the store was worth $85M. According to Rose Blumkin, the store earned $15M a year, meaning Buffett got it for 4x earnings. But Rose had buyers remorse and she eventually opened up a competing shop across the street from the one she had sold, waging war on the NFM until Buffett offered to buy her out for $5M, including the use of her name and her lease.

One secret to Buffett’s success in the private equity field? Personality:

“She really liked and trusted me. She would make up her mind about people and that was that.”

Buffett’s special priveleges

On hiding Rose Blumkin’s financial privacy: Buffet had no worries about getting a waiver from the SEC

Buffett got special dispensation from the SEC to not disclose his trades until the end of the year “to avoid moving markets”

The gorilla escapes its cage

Another theme of Buffett’s investing in the late 1980s and 1990s was his continual role as a “gorilla” investor who could protect potential LBO-targets from hostile takeover bids. The first of these was his $517M investment for 15% of Tom Murphy-controlled Cap Cities/ABC, a media conglomerate. Buffett left the board of the Washington Post to join the board of his latest investment.

Another white knight scenario involved Buffett’s investment in Ohio conglomerate Scott Fetzer, which Berkshire purchased for $410M.

Then Buffett got into Salomon Brothers, a Wall Street arbitrage shop that was being hunted by private equity boss Ron Perelman. Buffett bought $700M of preferred stock w/ a 9% coupon that was convertible into common stock at $38/share, for a total return potential of about 15%. It even came with a put option to return it to Salomon and get his money back.

But Buffett had stepped outside of his circle of competence:

He seemed to understand little of the details of how the business was run, and adjusting to a business that wasn’t literally made of bricks-and-mortar or run like an assembly line was not easy for him… he had made the investment in Salomon purely because of Gutfreund

Buffett’s disgusting ignorance and hypocrisy

Buffett:

I would force you to give back a huge chunk to society, so that hospitals get built and kids get educated too

Buffett decides to sell the assets of Berkshire’s textile mills– on the books for $50M, he gets $163,122 at the auction. He refused to face his workers and then had the gall to say

“The market isn’t perfect. You can’t rely on the market to give every single person a decent living.”

Buffett on John Gutfreund:

an outstanding, honorable man of integrity

Assorted quotes

Peter Kiewit, a wealthy businessman from Omaha, on reputation:

A reputation is like fine china: expensive to acquire, and easily broken… If you’re not sure if something is right or wrong, consider whether you’d want it reported in the morning paper

Buffett on Wall St:

Wall Street is the only place people ride to in a Rolls-Royce to get advice from people who take the subway

Exploring My Personality – The HEXACO Personality Inventory (#psychology)

[This post was a draft and was never completed.]

Recently I took a personality exam from a Predictive Index outfit that was hoping to do business with our company. The exam was four columns of adjectives, about 15-20 each (don’t remember precisely) and first you were supposed to check all the adjectives you think described “the way people expect you to be” and the second page was the same adjectives but you were then supposed to choose the ones that described “how you actually believe you are”.

Somehow, from that, this representative from the firm was able to describe not only my personality profile (which he says is 50% rigid by age 7 and most of the rest of it is in place by age 14, on average) but also created a narrative about present efforts I’ve been making to try to change my personality, which he said was becoming a source of distraction and sapping my energy.

I just let the guy babble for about 20 minutes or so about all of this before interjecting because I was skeptical and didn’t want to feed him stuff he could use to validate his claims or make his narrative seem more credible, like a fortune teller or magician might do. But when all was said and done, he was accurate. Frightfully accurate. How could he have such a good understanding of my personality by the selection of a bunch of adjectives?

The Predictive Index is used around the world, in private companies and non-profits, large and small. It’s rooted in a profiling system developed around WW2 to serve the military in determining the right role for individuals being conscripted into the armed forces. It’s also Jungian in philosophy, so it’s oriented around the goal of placing people into profile boxes which are fairly simplistic, for example, mine was called “Persuasive-Leadership” (numerous Myers-Briggs testing in my youth told me I was “INTJ,” quite similar). As a result, the system’s output is supposed to be helpful in establishing hierarchies, not necessarily better understanding one’s self. Most users of PI are trying to figure out whether or not to hire someone for a particular position, or whether or not a person can be trusted, etc.

I was and am more interested in knowing myself better. And I wanted to confirm or deny the results of this PI exam by comparing it to another standard. I asked around a bit for second opinions from a friend who is involved in academic-level psychology studies and was pointed to the HEXACO Personality Inventory exam as a highly-regarded academic alternative which markets itself as “a measure of the six major dimensions of personality”. I opted for the 100-question self-reported exam and graded my results. Below are the “scale descriptions” and my total scores, along with my comments on their accuracy or other thoughts I had when considering them.

Domain-Level Scales

Domain-level scales are the “six major dimensions of personality” referred to above, each of which has four “facet-level” scales which are traits within the macro traits.

Honesty-Humility:  Persons with very high scores on the Honesty-Humility scale avoid manipulating others for personal gain, feel little temptation to break rules, are uninterested in lavish wealth and luxuries, and feel no special entitlement to elevated social status.  Conversely, persons with very low scores on this scale will flatter others to get what they want, are inclined to break rules for personal profit, are motivated by material gain, and feel a strong sense of self-importance.

My score: 60/80

It’s flattering to have a “high” score in this area so I’ll be careful about commenting in too much detail at the domain-level and focus my thoughts on the facet-level traits but this made sense to me. I’m not a manipulator, though I do work feverishly to persuade and otherwise cajole people to do or think things that will benefit me. However, my persuasion is always logical and open and in front of the person for them to see and judge themselves. I don’t try to control people behind their back or with other deceptive practices. The ostentatiousness of material comforts dynamic is also particularly descriptive of me. If I ever attain any level of affluence I’ll likely be one of those people who still drives a modest car and lives in a modest home, for example. No Gucci and Prada and Lamborghinis for me.

Emotionality: Persons with very high scores on the Emotionality scale experience fear of physical dangers, experience anxiety in response to life’s stresses, feel a need for emotional support from others, and feel empathy and sentimental attachments with others.  Conversely, persons with very low scores on this scale are not deterred by the prospect of physical harm, feel little worry even in stressful situations, have little need to share their concerns with others, and feel emotionally detached from others.

My score: 50/80

Scoring above the median in this area was surprising to me. I do have a tendency to talk through emotions or stressful situations with trusted friends and I definitely fear physical harm, I think about all the nasty things that can happen to a person physically more often than I should and manage to creep myself out every time I do. I tend to be high anxiety as well. However, I also have a keen ability to experience heavy emotion in solitude and find no comfort in “support groups” (versus supportive individuals). And I’ve had occasional gruesome physical mishaps (such as plunging a knife into my thumb, plunging same thumb into a blender blade, etc.) and I don’t even wince.

eXtraversion: Persons with very high scores on the Extraversion scale feel positively about themselves, feel confident when leading or addressing groups of people, enjoy social gatherings and interactions, and experience positive feelings of enthusiasm and energy.  Conversely, persons with very low scores on this scale consider themselves unpopular, feel awkward when they are the center of social attention, are indifferent to social activities, and feel less lively and optimistic than others do.

My score: 53/80

The Extraversion criterion are a little confusing because it’s hard to tell how many of the traits listed are personality-related versus self esteem-related. And because it’s a composite, I think my high extraversion in some areas is masked by my concomitantly low extraversion in others (for example, leading groups vs. social gatherings).

Agreeableness (versus Anger): Persons with very high scores on the Agreeableness scale forgive the wrongs that they suffered, are lenient in judging others, are willing to compromise and cooperate with others, and can easily control their temper.  Conversely, persons with very low scores on this scale hold grudges against those who have harmed them, are rather critical of others’ shortcomings, are stubborn in defending their point of view, and feel anger readily in response to mistreatment.

My score: 21/80

I was troubled by this score, which is funny because I expected it to be low. Anyone who knows me or who has dealt with me in an argument knows I am pretty impatient and that I don’t go out of my way to be agreeable. I am a “bottom line” thinker and a “get with the program” talker. I am extremely stubborn (of course, I always think rightfully so) and I can be quick tempered when frustrated. I’ve always been known as and thought of myself as judgmental and leniency has never been a strength.

But, while I used to be a big holder of grudges, and I do think this characterizes my personality in a general sense (again, I always believe rightfully so), I believe I’ve made big strides in the “forgive and forget” era over the last 5 years of my life, so much so that I sometimes wonder if I am going soft. Not a healthy way to look at it, probably, and I am exaggerating for effect, but I figured that’d come through a bit in the score. And maybe it did, and that’s where the 20 points I managed to capture came from!

Conscientiousness: Persons with very high scores on the Conscientiousness scale organize their time and their physical surroundings, work in a disciplined way toward their goals, strive for accuracy and perfection in their tasks, and deliberate carefully when making decisions.  Conversely, persons with very low scores on this scale tend to be unconcerned with orderly surroundings or schedules, avoid difficult tasks or challenging goals, are satisfied with work that contains some errors, and make decisions on impulse or with little reflection.

My score: 72/80

Again, a pretty flattering thing to get a high score on, though of course the point of this personality profile is not to see if you’re good or bad but merely to describe. The trouble is, no one really seems to consider being disorganized or careless in thought to be a “good.” I think what is interesting about this particular domain is how much conflict there is between people on the opposite ends of the spectrum. The psychologist Marshall Rosenberg said in a lecture on Non-Violent Communication (NVC) once that he believed most of the problems in the world centered around “slobs” and “neats” being in too close proximity to one another! He suggested world peace would arrive the moment the slobs and neats were isolated to their respective hemispheres of the globe.

He was kidding, but there is truth to every joke or else it wouldn’t be funny.

I’m a decided “neat” and can’t suffer a “slob” for a billion dollars.

Openness to Experience: Persons with very high scores on the Openness to Experience scale become absorbed in the beauty of art and nature, are inquisitive about various domains of knowledge, use their imagination freely in everyday life, and take an interest in unusual ideas or people.  Conversely, persons with very low scores on this scale are rather unimpressed by most works of art, feel little intellectual curiosity, avoid creative pursuits, and feel little attraction toward ideas that may seem radical or unconventional.

My score: 56/80

I think this area explains my love of learning, philosophy and my contrarianism.

Facet-Level Scales

Honesty-Humility Domain

The Sincerity scale assesses a tendency to be genuine in interpersonal relations. Low scorers will flatter others or pretend to like them in order to obtain favors, whereas high scorers are unwilling to manipulate others.

My score: 15/20

I’m just shocked it wasn’t 20! I see myself as entirely sincere. Whether I say something nice or something nasty, you can trust I sincerely meant it. But I think I’ve tried over the years to hold my tongue when it comes to the nasty and maybe the exam questions picked up on that willingness, which it considers manipulative (and perhaps it is!)

The Fairness scale assesses a tendency to avoid fraud and corruption. Low scorers are willing to gain by cheating or stealing, whereas high scorers are unwilling to take advantage of other individuals or of society at large.

My score: 20/20

The “Fairness”

The Greed Avoidance scale assesses a tendency to be uninterested in possessing lavish wealth, luxury goods, and signs of high social status. Low scorers want to enjoy and to display wealth and privilege, whereas high scorers are not especially motivated by monetary or social-status considerations.

My score: 16/20

The Modesty scale assesses a tendency to be modest and unassuming. Low scorers consider themselves as superior and as entitled to privileges that others do not have, whereas high scorers view themselves as ordinary people without any claim to special treatment.

My score: 9/20

Emotionality Domain

The Fearfulness scale assesses a tendency to experience fear. Low scorers feel little fear of injury and are relatively tough, brave, and insensitive to physical pain, whereas high scorers are strongly inclined to avoid physical harm.

My score: 14/20

The Anxiety scale assesses a tendency to worry in a variety of contexts. Low scorers feel little stress in response to difficulties, whereas high scorers tend to become preoccupied even by relatively minor problems.

My score: 17/20

The Dependence scale assesses one’s need for emotional support from others. Low scorers feel self-assured and able to deal with problems without any help or advice, whereas high scorers want to share their difficulties with those who will provide encouragement and comfort.

My score: 11/20

The Sentimentality scale assesses a tendency to feel strong emotional bonds with others. Low scorers feel little emotion when saying good-bye or in reaction to the concerns of others, whereas high scorers feel strong emotional attachments and an empathic sensitivity to the feelings of others.

My score: 8/20

Extraversion Domain

The Social Self-Esteem scale assesses a tendency to have positive self-regard, particularly in social contexts. High scorers are generally satisfied with themselves and consider themselves to have likable qualities, whereas low scorers tend to have a sense of personal worthlessness and to see themselves as unpopular.

My score: 17/20

The Social Boldness scale assesses one’s comfort or confidence within a variety of social situations. Low scorers feel shy or awkward in positions of leadership or when speaking in public, whereas high scorers are willing to approach strangers and are willing to speak up within group settings.

My score: 17/20

The Sociability scale assesses a tendency to enjoy conversation, social interaction, and parties. Low scorers generally prefer solitary activities and do not seek out conversation, whereas high scorers enjoy talking, visiting, and celebrating with others.

My score: 9/20

The Liveliness scale assesses one’s typical enthusiasm and energy. Low scorers tend not to feel especially cheerful or dynamic, whereas high scorers usually experience a sense of optimism and high spirits.

My score: 10/20

Agreeableness Domain

The Forgivingness scale assesses one’s willingness to feel trust and liking toward those who may have caused one harm. Low scorers tend “hold a grudge” against those who have offended them, whereas high scorers are usually ready to trust others again and to re-establish friendly relations after having been treated badly.

My score: 6/20

The Gentleness scale assesses a tendency to be mild and lenient in dealings with other people. Low scorers tend to be critical in their evaluations of others, whereas high scorers are reluctant to judge others harshly.

My score: 4/20

The Flexibility scale assesses one’s willingness to compromise and cooperate with others. Low scorers are seen as stubborn and are willing to argue, whereas high scorers avoid arguments and accommodate others’ suggestions, even when these may be unreasonable.

My score: 4/20

The Patience scale assesses a tendency to remain calm rather than to become angry. Low scorers tend to lose their tempers quickly, whereas high scorers have a high threshold for feeling or expressing anger.

My score: 7/20

Conscientiousness Domain

The Organization scale assesses a tendency to seek order, particularly in one’s physical surroundings. Low scorers tend to be sloppy and haphazard, whereas high scorers keep things tidy and prefer a structured approach to tasks.

My score: 19/20

The Diligence scale assesses a tendency to work hard. Low scorers have little self-discipline and are not strongly motivated to achieve, whereas high scorers have a strong “‘work ethic” and are willing to exert themselves.

My score: 19/20

The Perfectionism scale assesses a tendency to be thorough and concerned with details. Low scorers tolerate some errors in their work and tend to neglect details, whereas high scorers check carefully for mistakes and potential improvements.

My score: 19/20

The Prudence scale assesses a tendency to deliberate carefully and to inhibit impulses. Low scorers act on impulse and tend not to consider consequences, whereas high scorers consider their options carefully and tend to be cautious and self-controlled.

My score: 15/20

Openness to Experience Domain

The Aesthetic Appreciation scale assesses one’s enjoyment of beauty in art and in nature. Low scorers tend not to become absorbed in works of art or in natural wonders, whereas high scorers have a strong appreciation of various art forms and of natural wonders.

My score: 15/20

The Inquisitiveness scale assesses a tendency to seek information about, and experience with, the natural and human world. Low scorers have little curiosity about the natural or social sciences, whereas high scorers read widely and are interested in travel.

My score: 20/20

The Creativity scale assesses one’s preference for innovation and experiment. Low scorers have little inclination for original thought, whereas high scorers actively seek new solutions to problems and express themselves in art.

My score: 13/20

The Unconventionality scale assesses a tendency to accept the unusual. Low scorers avoid eccentric or nonconforming persons, whereas high scorers are receptive to ideas that might seem strange or radical.

My score: 18/20

Interstitial Scale

The Altruism (versus Antagonism) scale assesses a tendency to be sympathetic and soft-hearted toward others. High scorers avoid causing harm and react with generosity toward those who are weak or in need of help, whereas low scorers are not upset by the prospect of hurting others and may be seen as hard-hearted.

My score: 10/20

Review – Nonviolent Communication (#peace, #psychology)

Nonviolent Communication: A Language of Life (buy on Amazon.com)

by Marshall B. Rosenberg, Ph.D., published 2003

A “valueprax” review always serves two purposes: to inform the reader, and to remind the writer. Find more reviews by visiting the Virtual Library.

What is all this hippie nonsense?

A common question

VIDEO http://www.youtube.com/watch?v=XBGlF7-MPFI&noredirect=1

The NVC Process

To practice the Nonviolent Communication (NVC) process involves four components, which are:

  1. observations – the concrete actions that affect our well-being
  2. feelings – the emotions we experience in relation to what we observe
  3. needs – values, desires, etc., that generate our feelings
  4. requests – the concrete actions we’d like to see others take in order to enrich our lives

The NVC process is not a new way to manipulate other people; it involves giving and receiving a level of respect and empathy common to ourselves and others which entails:

  • expressing honestly through the 4 components
  • receiving empathetically through the 4 components

Obstacles to needs-based communication

There are many pitfalls that trap us in our efforts to communicate our unique needs. One common communication style which serves to hinder compassionate communication is moralistic judgment, an impersonal way of communicating the focuses on the “wrongness” of the actions of others rather than on revealing what a person thinks and feels inside of themselves. In truth, analyzing and judging the behavior of others is actually a reflection of our own needs and values. For example, “The rich are so selfish!” might be an attempt to communicate something closer to, “When I witness poverty, I feel sad; I value living in a community where everyone seems to have enough to take care of themselves.” The danger of moralistic judgments is that the act of classifying can promote violence by creating adversarial, us-them attitudes toward others– people become obstacles to satisfying our needs and values rather than potential partners.

Another problematic approach to communication involves making comparisons, which are simply another form of judgment. When we make comparisons, we block compassion– for ourselves and for others. It is another way to build walls and separateness.

Compassion is similarly difficult to achieve when we engage in denial of responsibility by using language which obscures the connection between our own thoughts, feelings and actions. In Nazi Germany, officers responsible for the Holocaust and other atrocities relied on Amtssprache, or “office talk/bureaucratese”, to deny responsibility for their actions because everything they did, they did because of “superiors’ orders” or “company policy” or “just following the law/doing my job.”

There are many ways in which we can deny responsibility for our actions by attributing their cause to factors external to the self:

  • vague, impersonal forces; “I did X because I had to”
  • condition, diagnosis or personal history; “I do X because I am Y”
  • actions of others; “I did X because Y did Z”
  • dictates of authority; “I did X because Y told me to” (Amtssprache)
  • group pressure; “I did X because everyone in group T does X”
  • institutional policies, regulations or rules; “I did X because those are the rules around here when people do Y”
  • gender, social or age roles; “I hate X, but I do it because I am a good Y”
  • uncontrollable impulses; “I was overcome by my urge to do X”

History is rife with examples,

We are dangerous when we are not conscious of our responsibility for how we behave, think and feel

Two other ways we create obstacles to life-enriching communication are by stating our desires as demands, and speaking in terms of “who deserves what”.

A demand explicitly or implicitly threatens listeners with blame or punishment if they fail to comply

Similarly, speaking in terms of “deserving” creates the impression of “badness” or “wrongness” and promotes behavior based upon fear and punishment-avoidance (a negative philosophy) rather than goal-seeking and personal benefit (a positive philosophy). In other words,

it’s in everyone’s interest that people change, not in order to avoid punishment, but because they see the change as benefitting themselves

Implementing NVC: nuances and complexities

At this point you might be thinking, “NVC sounds interesting, but how do I actually use it?” Even the first element, observation, can hang people up.

The reason that the NVC process stresses observing without evaluating is that when people hear evaluation, they are less likely to hear our intended message and instead hear criticism which puts them on the defensive rather than being receptive to what we have to say. However, the NVC process doesn’t require complete objectivity and detachment from emotional realities, only that when evaluations are made they are based on observations specific to time and context. In other words, evaluations must be about specific actions taken within specific time periods. For example, “John is a great guy” is a generalized evaluation whereas, “John helped the little old lady cross the street yesterday afternoon” is an observation without evaluation.

Another element of NVC that new adoptees struggle with is separating feelings from non-feelings (thoughts). It is a common construct of the modern English language (and many others) to use “feel” in place of “think”. Red flags for feel/think confusion are the use of the following after the word “feel” when making a statement:

  • words such as “that,” “like,” and “as if”; “I feel like a failure” or “I feel that you shouldn’t do that”
  • the pronouns “I,” “you,” “he,” “she,” “they,” and “it”; “I feel it is useless”, “I feel I am always running around”
  • names or nouns referring to people; “I feel my boss doesn’t like me” or “I feel Jeff is doing a great job”

In NVC, there is a difference between expressing how we feel, and expressing what we think we are (self-evaluation):

  • feeling; “I feel disappointed/sad/frustrated with myself as an X”
  • evaluation; “I feel pathetic as an X”, which is better stated, “I am a pathetic X”

Part of developing our ability to accurately express feelings entails developing our feelings vocabulary, and learning which words connote states of being or evaluations of capability, and which words can authentically convey an emotional response to such values or needs.

The other critical component involved in accurately expressing out feelings is taking responsibility for their cause. The common misconception is that external factors cause internal emotional reactions. The reality that, while external factors may provide a stimulus, the direct cause is our internal values, beliefs, expectations and needs; when they are satisfied, we have one set of feelings (positive) and when they are violated or negated, we experience a different set of feelings (negative).

When we receive a negative message from another person, we have four options for choosing how to react to it:

  1. blame ourselves
  2. blame others
  3. sense our own feelings and needs
  4. sense others’ feelings and needs

Accepting responsibility for our feelings involves acknowledging our needs, desires, expectations, values or thoughts. We commonly mask these things by using unaccountable language such as:

  • use of impersonal pronouns such as “it” or “that”; “It makes me so X when Y” or “That makes me feel Z”
  • use of the expression “I feel X because…” followed by a person or personal pronoun other than “I”; “I feel X because you…” or “I feel X when Z…”
  • statements which only mention the actions of others; “When Y does X, I feel Z”

The simplest remedy is to adopt use of the phrase “I feel… because I need…” which connects our own feelings to our own needs. This can improve our communication with others, as well, because when people hear things that sound like criticism they invest their energy in self-defense, whereas when we directly connect our feelings to our needs we give people an opportunity to behave compassionately toward us.

If we express our needs, we have a better chance of getting them met

The liberation cometh

Emotional liberation is the state of being achievable through disciplined and consistent practice of the NVC process wherein an individual is able to freely and safely express his authentic feelings and needs to others, and to similarly be free and secure in receiving these authentic feelings and needs from others. The movement from emotional slavery to emotional freedom typically involves three transformational stages:

  1. emotional slavery; we see ourselves as responsible for others’ feelings
  2. obnoxious observation; we feel reluctant as we realize we no longer want to be responsible for others’ feelings
  3. emotional liberation; we take responsibility for our intentions and actions

Implementing NVC: the final step, making requests

The fourth component of NVC, making requests, is in some ways the most challenging of all. To practice effective request-making it is important to be in the habit of utilizing positive language as it is hard to “do a don’t.” Thinking of a way to express your request in the form of “Would you be willing to do X?” instead of “Please stop Y” serves to remove incentives for resistance and fighting and gives the other person an opportunity to make a positive contribution to your well being.

Similarly, the focus should be on making specific, concrete, actionable requests rather than something general, ambiguous, vague or abstract.

We often use vague and abstract language to indicate how we want other people to feel or be without naming a concrete action they could take to reach that state

Being clear about what you’re requesting from another person makes it more likely they’ll be willing and able to comply with your request– how can a person satisfy your needs if they don’t know what they are and don’t know what they could do to help you with them? Don’t make people guess!

Additionally, expressing feelings without providing a request can confuse people and lead them to believe you are trying to pin guilt for your emotions on them, rather than prompting them to take some corrective action. For example, “It bothers me that you forgot to do X” is not a clear request for a person to do X and may be interpreted as “You make me feel bad!” which is antagonistic and inspires self-defensive reactions.

Whenever we say something to another person, we are requesting something in return

Another guideline for making requests is to ask for a reflection– ask the person you just made a request of to reflect the request back to you to confirm you have been understood.

After we’ve communicated a request, we’re often interested in knowing how our the other person has reacted. We can get a better understanding of this by soliciting honest feedback through one of three ways:

  1. inquiring about what the listener is feeling
  2. inquiring about what the listener is thinking
  3. inquiring as to whether the listener is willing to take a particular action

A key here is to specify which thoughts or feelings we’d have to have shared; without specificity, the other person may reply at length with thoughts and feelings that are not the ones we’re seeking. Particularly challenging situations arise when making requests of a group.

When we address a group without being clear what we are wanting back, unproductive discussions will often follow

Keep in mind that there is a difference between making a request and making a demand. The difference is that when a person hears a demand, they believe they will be punished or blamed if they don’t comply. This leaves them with two options:

  • submit
  • rebel

Notice how “respond with compassion and seek resolution” is not one of the options. If the speaker criticizes or judges the listener’s response, it is a demand, not a request. A request implies that a person is free to disregard it if they don’t want to comply; that’s their right as a free individual with their own needs and wants.

Making a request implies we are prepared to show empathetic understanding of another when they are unwilling to comply with our request. However, if someone doesn’t comply with our request, we don’t have to give up. We do have an obligation, though, to empathize with their reasons for not complying before attempting to persuade.

(pg.80)

[This review is currently incomplete. 6/9/15]