Wednesday, June 15, 2016

Small thoughts and actions, consistently applied, leading to great insights

“The way to win is to work, work, work, work and hope to have a few insights.” —Charlie Munger

One of the things I find most enjoyable about being both an investor and taking Charlie Munger’s multidisciplinary approach to life and learning is when I come across overlapping ideas or descriptions that help explain how the world works, especially when they can be applied to investing. When these mental models show up in more than one discipline they seem enduring and valuable and worth remembering.

Siddhartha Mukherjee’s description of Mendel’s discovery of heredity, as told in his excellent book The Gene, is one such example. As with many discoveries, including Charles Darwin and evolution shortly before Mendel and heredity, the process involved making tiny daily steps, continually repeated, that eventually led to a leaping synthesis of discovery:

Mendel’s notebook was filled with tables and scribblings, with data from thousands of crosses. His thumbs were getting numb from the shelling.  

“How small a thought it takes to fill someone’s whole life,” the philosopher Ludwig Wittgenstein wrote. Indeed, at first glance, Mendel’s life seemed to be filled with the smallest thoughts. Sow, pollinate, bloom, pluck, shell, count, repeat. The process was excruciatingly dull—but small thoughts, Mendel knew, often bloomed into large principles. If the powerful scientific revolution that had swept through Europe in the eighteenth century had one legacy, it was this: the laws that ran through nature were uniform and pervasive. The force that drove Newton’s apple from the branch to his head was the same force that guided planets along their celestial orbits. If heredity too had a universal natural law, then it was likely influencing the genesis of peas as much as the genesis of humans. Mendel’s garden plot may have been small—but he did not confuse its size with that of his scientific ambition.

“The experiments progress slowly,” Mendel wrote. “At first a certain amount of patience was needed, but I soon found that matters went better when I was conducting several experiments simultaneously.” With multiple crosses in parallel, the production of data accelerated. Gradually, he began to discern patterns in the data—unanticipated constancies, conserved ratios, numerical rhythms. He had tapped, at last, into heredity’s inner logic.

Darwin is well known to have been an average student, and Mendel probably wouldn’t have even earned the title average in his time, having failed the exam he needed to pass in order to become a teacher twice before giving up. But while having a broad knowledge base about many things is often the path to success in an endeavor, the world is also apt to reward specialization. Mendel’s hard work, tinkering and, to use an investing term, ability to stay within his circle of competence—his garden—produced insights that led to major breakthroughs in the understanding of inheritance (though his work wasn't appreciated in his own lifetime for him to receive praise):

Between 1857 and 1864, Mendel shelled bushel upon bushel of peas, compulsively tabulating the results for each hybrid cross (“yellow seeds, green cotyledons, white flowers”). The results remained strikingly consistent. The small patch of land in the monastery garden produced an overwhelming volume of data to analyze—twenty-eight thousand plants, forty thousand flowers, and nearly four hundred thousand seeds. “It requires indeed some courage to undertake a labor of such far-reaching extent,” Mendel would write later. But courage is the wrong word here. More than courage, something else is evident in that work—a quality that one can only describe as tenderness.

It is a word not typically used to describe science, or scientists. It shares roots, of course, with tending—a farmer's or gardener's activity—but also with tension, the stretching of a pea tendril to incline it toward sunlight or to train it on an arbor. Mendel was, first and foremost, a gardener. His genius was not fueled by deep knowledge of the conventions of biology (thankfully, he had failed that exam—twice). Rather, it was his instinctual knowledge of the garden, coupled with an incisive power of observation—the laborious cross-pollination of seedlings, the meticulous tabulation of the colors of the cotyledons—that soon led him to findings that could not be explained by the traditional understanding of inheritance.

To me, much of the above can be compared to the investing process. We compile lists of businesses we like, own and would like to own, and then study them deeply in order to gain insights into what the information we gather says about the past and current states of those businesses and their management teams. And we use that information to try and gain further insight into what the future may hold. Often, progress comes slowly, but when one is a focused investor who doesn't swing at many pitches, the occasional deep insight that leads to a big idea, assuming one has the gumption to act on it, can make all the difference.