Friday, April 3, 2020

The Lucretius problem

Indeed, our bodies discover probabilities in a very sophisticated manner and assess risks much better than our intellects do. To take one example, risk management professionals look in the past for information on the so-called worst-case scenario and use it to estimate future risks—this method is called “stress testing.” They take the worst historical recession, the worst war, the worst historical move in interest rates, or the worst point in unemployment as an exact estimate for the worst future outcome. But they never notice the following inconsistency: this so-called worst-case event, when it happened, exceeded the worst case at the time. 
I have called this mental defect the Lucretius problem, after the Latin poetic philosopher who wrote that the fool believes that the tallest mountain in the world will be equal to the tallest one he has observed. We consider the biggest object of any kind that we have seen in our lives or hear about as the largest item that can possibly exist. And we have been doing this for millennia. In Pharaonic Egypt, which happens to be the first complete top-down nation-state managed by bureaucrats, scribes tracked the high-water mark of the Nile and used it as an estimate for a future worst-case scenario. 
The same can be seen in the Fukushima nuclear reactor, which experienced a catastrophic failure in 2011 when a tsunami struck. It had been built to withstand the worst past historical earthquake, with the builders not imagining much worse—and not thinking that the worst past event had to be a surprise, as it had no precedent. Likewise, the former chairman of the Federal Reserve, Fragilista Doctor Alan Greenspan, in his apology to Congress offered the classic “It never happened before.” Well, nature, unlike Fragilista Greenspan, prepares for what has not happened before, assuming worse harm is possible
If humans fight the last war, nature fights the next one.

Directly-related links:

The Lucretius Problem: How History Blinds Us

Latticework Of Mental Models: Lucretius Problem

Indirectly-related link:

The man who's tutoring Bill Gates (2010 article)
Prof. Smil's 24th book, Global Catastrophes and Trends: The Next 50 Years, has just been published in Canada. It offers a numbers-heavy but compact guide to all the main things we should be worrying about (or not), from natural disasters to population trends. Although he deliberately stays away from predictions, he concludes from the evidence that climate change is nowhere near the top of the list. What is? A genuine flu pandemic, which, he says, is a 100 per cent certainty. What we can't predict is how bad it will be. Prof. Smil is no alarmist, but he warns that even a least-worst-case epidemic "would pose challenges unseen in most countries for generations." 
Bill Gates has read it, and says it's great.

Thursday, April 2, 2020


My Learning Process - by Blas Moros (LINK)

Why Time Has Slowed - by Morgan Housel (LINK)

Bill Miller On Why Coronavirus Sell Off Is Buying Opportunity Of Generation (video) (LINK)

A Viral Market Meltdown V: Back to Basics! - by Aswath Damodaran (LINK)

Given the news on the company today, this may be worth revisiting (from a couple of months ago): An anonymous, detailed short thesis on Luckin Coffee

Jim Chanos on CNBC (video) (LINK)

Steve Bregman on Energy (audio) (LINK)

Invest Like the Best Podcast: Gavin Baker – Investing Through a Bear Market (LINK)

Grant’s Current Yield Podcast: The Grice Man cometh (LINK)

Freakonomics Radio: 411. Is $2 Trillion the Right Medicine for a Sick Economy? (LINK)

How I Built This with Guy Raz (podcast): Live with Guy Online: Jeni Britton Bauer (LINK)

The Peter Attia Drive (podcast): #102 - Michael Osterholm, Ph.D.: COVID-19—Lessons learned, challenges ahead, and reasons for optimism and concern (LINK)

The Four Rules of Pandemic Economics - by Derek Thompson (LINK)

Private Labs Are Fueling a New Coronavirus Testing Crisis (LINK)

A Coronavirus Fix That Passes the Smell Test - by Michael Lewis (LINK)

Is the Coronavirus Airborne? Should We All Wear Masks? - by Ed Yong (LINK)

Longform Podcast: 386: Ed Yong (LINK)
Related articles: 1) "How a Pandemic Might Play Out Under Trump" (December 2016); 2) "The Next Plague Is Coming. Is America Ready?" (July 2018); 3) "How the Pandemic Will End" (March 2020)

Wednesday, April 1, 2020

Bill Gates op-ed: Here’s how to make up for lost time on covid-19

Link to: Bill Gates: Here’s how to make up for lost time on covid-19
There’s no question the United States missed the opportunity to get ahead of the novel coronavirus. But the window for making important decisions hasn’t closed. The choices we and our leaders make now will have an enormous impact on how soon case numbers start to go down, how long the economy remains shut down and how many Americans will have to bury a loved one because of covid-19. 
Through my work with the Gates Foundation, I’ve spoken with experts and leaders in Washington and across the country. It’s become clear to me that we must take three steps.

Howard Marks Memo: Which Way Now?

Link to Memo: Which Way Now?
How should investors think about the economy and asset values when faced with unprecedented uncertainty surrounding the effects of the coronavirus and a complete absence of guidance from analogies to the past? Read Howard Marks’s latest memo, in which he lays out the views of both the optimist and the worrier.

Tuesday, March 31, 2020


"I think it’s hugely a mistake to think only about your probable misfortunes. You should also think about what’s good about your situation." --Charlie Munger (2009)

We Can’t Prevent Market Panics. We Can Control How We React. - by Jason Zweig ($) (LINK)

The Corona Crisis is Not a Black Swan: Nassim Nicholas Taleb (video) (LINK)

Viral Prohibition, Eminent Domain, and the Path Ahead - by Brent Beshore (LINK)

COVID Impacts [on media & entertainment businesses] - by Matthew Ball (LINK)

Unmasking Twitter - by Ben Thompson (LINK)

Socializing Corporate Risk-taking: Moral hazard 2.0 - by Frank K. Martin (LINK)

Absolute Return Letter, March 2020: The Economic Cost of Social Distancing (LINK)

The Oil Glut Is Getting Critical ($) (LINK)

Pressure Mounts on Insurance Companies to Pay Out for Coronavirus ($) (LINK)
Lawmakers and regulators are pressuring insurers to go beyond the legal language of policies to get cash to Americans amid the mounting cost of shutdowns from the coronavirus pandemic.
What happens to mortgage-investment firms will shed light on what may be in store for the rest of the market ($) (LINK)

The Acquirers Podcast: Long Term: Tweedy Browne (LINK)

Capital Allocators Podcast: Ben Inker – Value Investing at GMO (LINK)

Invest Like the Best Podcast: D.A. Wallach – Investing in Healthcare (LINK)

Political Economy Podcast: Ben Thompson: Big Tech monopoly, data privacy, and the rise of China (LINK)

Acquired Podcast: Adapting Episode 2: Sequoia’s Black Swan Memo (LINK)

As research progresses, the nature of our enemy is becoming ever clearer - by Matt Ridley (LINK)

Saturday, March 28, 2020


MOI Global: Chris Bloomstran at Intelligent Investing in Crisis Mode 2020 (audio) (LINK)
Related previous post: Semper Augustus Investments Group: 2019 Annual Letter
What The "CARES Act" Paycheck Protection Program Means For Small Business (LINK)

Lessons from Italy’s Response to Coronavirus [H/T @Atul_Gawande] (LINK)

The Wit and Wisdom of Lee Kuan Yew (LINK)

Friday, March 27, 2020


CNN coronavirus town hall Part 4: Bill Gates explains why he sounded the alarm about an impeding pandemic in 2015 and lessons the US can learn from responses in other countries. (video) (LINK)

Ed Yong was on both the Social Distance podcast and the Reset podcast discussing his article, "How the Pandemic Will End," and other things.

Wounds Heal, Scars Last - by Morgan Housel (LINK)

Steve Bregman on What to Make of the Market Right Now (audio) (LINK)

Oaktree Conversations with Portfolio Managers - Emerging Markets (video) (LINK)

The Oil Glut Is Filling Up the World’s Supertankers Fast (LINK)

Policy in a World of Pandemics, Social Media and Passive Investing (LINK)

Yaron Brook Interviews: Matt Ridley on his New Book -- How Innovation Works (video) (LINK)

A Spur to the Biotech Century Ahead - by Walter Isaacson ($) (LINK)

Carolina Stories with Steve Vafier (podcast): 2: Mills Snell – Learning in the Trenches (LINK)

Thursday, March 26, 2020


Here's what's in the $2T stimulus package — and what's next (LINK)

GMO White Paper | Memo to the (Virtual) Investment Committee II: Fear and the Psychology of Bear Markets - by James Montier (LINK)

Q&A with Murray Stahl (audio recorded March 24, 2020) (LINK)

MOI Global: Isaac Schwartz on Intelligent Investing in Crisis Mode (video) (LINK)

Corporate Socialism: The Government is Bailing Out Investors & Managers Not You - by Nassim Taleb (with Mark Spitznagel) (LINK)

The curious age discrimination of coronavirus - by Matt Ridley (LINK)

The Pandemic in My Neighborhood - by Michael Lewis (LINK)

How Does the Coronavirus Behave Inside a Patient? - by Siddhartha Mukherjee (LINK)

Wednesday, March 25, 2020


Bill Gates speaks with TED's Chris Anderson about COVID-19 (video) (LINK)

How Will the Coronavirus End? - by Ed Yong (LINK)

Atul Gawande on PBS NewsHour (video) (LINK)
Related article: "Keeping the Coronavirus from Infecting Health-Care Workers"
Against the Rules with Michael Lewis (podcast): Bonus Against the Rules: Help in a Crisis (LINK)

Masters of Scale with Reid Hoffman (podcast): Special: Danny Meyer on the wrenching decision to do layoffs (LINK)

David Remnick speaks to the historian John M. Barry, the author of “The Great Influenza,” about parallels between the Spanish-flu outbreak of 1918 and the current coronavirus crisis. (video) (LINK)

Marc Andreessen’s Blog Archives (LINK)

Tuesday, March 24, 2020

Client-Only Memo from Howard Marks: "Latest Update"

Link to Memo: Latest Update -- March 19, 2020
After giving our clients a few days to digest it, we’d like to share this memo from Thursday with all of our readers. We hope you’ll find it helpful.