Links

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)

Links

I released my year-end letter over the weekend. For those not yet on that email list, you can find it at this link: Sorfis 2019 Year-End Letter.

**********

There are also some good collections of Q4 and year-end letters HERE and HERE.

Why Invest? A 22-Year-Old’s Tough Questions About Capitalism - by Jason Zweig ($) (LINK)

2019 Project Punch Card Conference notes (LINK)

Data Update 2 for 2020: Retrospective on a Disruptive Decade - by Aswath Damodaran (LINK)

Exiting Stage Left… - by Harris Kupperman (LINK)

Systemic Risk of Pandemic via Novel Pathogens – Coronavirus: A Note [Taleb, et al.] (LINK)

The Recycling of Ships [H/T @the5hippingman] (LINK)

Related link (book PDF): Maritime Economics 3rd Edition

Business Wars Podcast: Boeing vs. Airbus (Part 1, Part 2, Part 3, Part 4, Part 5, Part 6, Part 7)

Alpha Exchange Podcast: Michael Green, Chief Strategist, Logica Capital Advisers (LINK)

September stress in dollar repo markets: passing or structural? (BIS - December 2019) (LINK)

DoubleLine Round Table - Segment 3: Best Ideas (video) (LINK)

The Sherman Show (podcast video): David Rosenberg (LINK)

The Peter Attia Drive: #90 - Ryan Holiday: Stillness, stoicism, and suffering less (LINK)

Related book: Stillness Is the Key

The Positive Side of Shame (LINK)

The (simple) secrets of superconnectors - by Khe Hy (LINK)

Jim Lehrer’s 16 Rules for Practicing Journalism with Integrity (LINK)

Clay Christensen on Business and Life (LINK)

From the archives.... How Will You Measure Your Life? - by Clayton M. Christensen

"I have self-doubt. I have insecurity. I have fear of failure. I have nights when I show up at the arena and I'm like, 'My back hurts, my feet hurt, my knees hurt. I don't have it. I just want to chill.' We all have self-doubt. You don't deny it, but you also don't capitulate to it. You embrace it." --Kobe Bryant

"Have a good time. Life is too short to get bogged down and be discouraged. You have to keep moving. You have to keep going. Put one foot in front of the other, smile and just keep on rolling." --Kobe Bryant

Links

"I'm not saying there's no such thing as genius. But if you're trying to choose between two theories and one gives you an excuse for being lazy, the other one is probably right." --Paul Graham ("What You'll Wish You'd Known")

Overconfidence: An Autobiography - by Jason Zweig (LINK)

How to Read: Lots of Inputs and a Strong Filter - by Morgan Housel (LINK)

Survivorship Bias: The Tale of Forgotten Failures (LINK)

Yes, You Can Get Free Trading. But There’s Often a Catch. (LINK)

Startups and Uncertainty - by Jerry Neumann (LINK)

Blood and Soil in Narendra Modi’s India - by Dexter Filkins (LINK)

Masters in Business Podcast: Joe Ricketts Discusses Trade and Deregulation (LINK)

Starting Greatness Podcast: Sarah Leary of Nextdoor: “The Moment You Know You’ve Created Something Valuable” (LINK)

EconTalk Podcast: Gerd Gigerenzer on Gut Feelings (LINK)

COMPLEXITY Podcast: Olivia Judson on Major Energy Transitions in Evolutionary History (LINK)

Links

The Bus Ticket Theory of Genius - by Paul Graham (LINK)

It’s Slow Going, but Stuff Like Wheat and Oil Can Spice Up Your Returns - by Jason Zweig ($) (LINK)

The best time to get interested in an investing strategy is when its performance is at its worst. By that standard, commodities are starting to look intriguing.

Everyone Gets Paid in CBS-Viacom Except Shareholders [H/T @JohnHuber72] (LINK)

Health Care Without (much) Government - by Russ Roberts (LINK)

How to Reverse Engineer Biology (LINK)

Full Disclosure Podcast: The Overachieving Underwriter [H/T @rationalwalk] (LINK)

Markel Corp vice chairman Steve Markel on the insurer and investment shop as it approaches its 90th year in business. Worth $15 million when its shares debuted on Wall Street in 1986, Markel Corp is now a Fortune 500 member in 18 countries that is valued at more than $16 billion.

Grant’s Current Yield Podcast: It’s a gusher (LINK)

Exponent Podcast: 178 — More Ergonomic (LINK)

The Knowledge Project Podcast -- Scott Adams: Avoiding Loserthink (LINK)

One Man's Wild Quest to Reach the Bottom of Every Ocean [H/T @MebFaber] (LINK)

David Goggins quote

From the audiobook version of Can't Hurt Me:

You have to turn that around yourself. No one is coming to save you. We have this mentality of "I'm going to wait to be saved. I'm going to wait for someone to come and help me." And I'm telling you right now, I believe in God—a lot of us believe in praying on it and stuff like that. Yeah, you can pray on it. But if you sit in a room and pray on it and do nothing about it, nothing's gonna happen. You have to put work behind everything in life. You have to put effort. You have to put friction behind something for something to change.

Links

"Wealth is not his that has it, but his that enjoys it." --Benjamin Franklin

Jeff Bezos’s Master Plan (LINK)

Fall 2019 issue of Graham & Doddsville (LINK)

The Heilbrunn Center's Schloss Archive is also worth going back and checking out periodically (LINK)

The Knowledge Project Podcast: #68 Daniel Kahneman: Putting Your Intuition on Ice (LINK)

Exponent Podcast: 175 — The Abyss Stares Back (LINK)

The Next Big Idea Podcast: Malcolm Gladwell and David Epstein on the Keys to Success (LINK)

Related book: Range: Why Generalists Triumph in a Specialized World

David Abrams on the “Great Illusion of the Stock Market"

From his introduction to Part VII of Security Analysis: Sixth Edition (published in 2008):

I am optimistic about the future of value investing. To be sure, there are many bright and savvy people in the financial markets employing Graham and Dodd’s techniques, but the markets themselves have grown exponentially. The chunk of capital being invested by the value-investing crowd is a small percentage of the overall capitalization of global financial markets. Having observed the markets for more than two decades, my sense is that, rather than a glut of Graham and Dodd acolytes picking through scarce opportunities to find a place for their cash, money is ever more prone to sloshing around in giant waves, flowing from one fad to the next. If anything, it seems that the people controlling these megasums have become less intelligent and less sophisticated over time. The last decade alone has brought incredible extremes in valuation, starting in 1999 and 2000 with the high-altitude Internet bubble that was followed in short order by the utter collapse of the tech market. In the summer of 2002, we witnessed a tremendous corporate debt meltdown. But soon, these excessively low valuations were pushed off the front pages by the most generous and lax lending standards of all time. Now, as I write this introduction, the mortgage market is imploding, creating perhaps yet another new set of opportunities. That we’ve seen the last of these extreme swings seems doubtful. 

What is driving this manic phenomenon? The explanation is something I call the “Great Illusion of the Stock Market.” Investing looks easy, particularly in a world of inexpensive software and online trading. Buying a stock is no more difficult than buying a book on Amazon.com. And because a great many people have gotten wealthy in the stock market, lots of others have come to believe that anyone can get rich with very little effort. They are wrong. All the people I know who’ve built wealth in the stock market have worked very hard at it. Graham and Dodd understood the effort it took to be successful in the market. They wrote: 

Since we have emphasized that analysis will lead to a positive conclusion only in the exceptional case, it follows that many securities must be examined before one is found that has real possibilities for the analyst. By what practical means does he proceed to make his discoveries? Mainly by hard and systematic work. (p. 669) 

So, yes, you can get rich buying and selling stocks, but, as the authors well knew, it takes hard work and patience. Nevertheless, the Great Illusion persists, maybe because, like Woody Allen’s film character Zelig, the market is a chameleon that changes its appearance to suit the times. Sometimes, it shows up as a tech stock bubble. Other times, it manifests itself as a ludicrously overvalued stock market as seen in the late 1980s in Japan. In a current incarnation, a raft of financial institutions across America are trying to emulate the success of David Swensen and his colleagues who manage Yale University’s endowment by allocating large percentages of the capital to “alternative investment managers.” 

But the Great Illusion is just that—an illusion. If you want to get wealthy in the financial markets, you’ll need to engage in “hard and systematic work.” 

Links

"You don’t get paid for what’s already happened. You only get paid for what’s going to happen in the future. The past is only useful to you in the extent to which it gives you insights into the future, and sometimes the past doesn’t give you any insights into the future." --Warren Buffett (2007)

Being Ethical Is Long-term Greedy (LINK)

Markel Omaha brunch 2019 (video) (LINK)

Use Your Edge (LINK)

Why Things Break: Easy Causes of Business and Investing Failure (LINK)

Tim Wu Explains Why He Thinks Facebook Should Be Broken Up (LINK)

Related book: The Curse of Bigness

The Absolute Return Letter - July 2019: Energy Misconceptions (LINK)

A Return to Tiananmen - by Peter Zeihan (Part I: The Evolution of China, Part II: The Ending of Hong Kong)

Grant’s Current Yield Podcast: Middle Kingdom microscope (LINK)

Eric Cinnamond talks small cap, absolute return value investing with Tobias Carlisle on The Acquirers Podcast (LINK)

The James Altucher Show (podcast): 468 - David Epstein: Proof That It’s Never Too Late to Master Something New (LINK)

Related book: Range: Why Generalists Triumph in a Specialized World

Revisionist History Podcast: Tempest in a Teacup (LINK)

American Innovations Podcast: Biologist Timothy Mousseau Can’t Stop Going Back To Chernobyl (LINK)

AI: Hype vs. Reality: Doctor AI (LINK)

Eric Topol on the Making Sense podcast (LINK)

Related book: Deep Medicine: How Artificial Intelligence Can Make Healthcare Human Again

(Re)Building the Good Society (video) (LINK)

Humanization, Dehumanization and Other Things Psychologists Do (video) (LINK)

Alex Honnold: A Soul Freed (video) (LINK)

Edge #545: Collaboration and the Evolution of Disciplines - A Talk By Robert Axelrod (LINK)

Related book: The Evolution of Cooperation

Why Waves of Seaweed Have Been Smothering Caribbean Beaches - by Ed Yong (LINK)

For Smart Animals, Octopuses Are Very Weird - by Ed Yong (LINK)

Book of the day: The Last Pirate of New York: A Ghost Ship, a Killer, and the Birth of a Gangster Nation - by Rich Cohen

"We learn who we are in practice, not in theory." --Herminia Ibarra

The investor as an investigative journalist...

From Warren Buffett at the 1999 Berkshire Hathaway Annual Meeting:

Essentially, you’re being a reporter. I mean, it’s very much like journalism. And if you ask enough questions — Andy Grove has in his book — he talks about the silver bullet, you know.  

You talk to the competitor and you say, “If you had a silver bullet and you could only put it through the head of one of your competitors, which one would it be and why?” Well, you learn a lot if you ask questions like that over time.  

And you ask somebody in the XYZ industry and you say, “If you were going to go away for 10 years and you had to put all of your money into one of your competitors — the stock of one of your competitors, not your own — which one would it be and why?” Just keep asking, and asking, and asking.  

And you’ll have to discount the answers you get in certain ways, but you will be getting things poured into your head that then you can use to reformulate and do your own thinking about why you evaluate this business at this or that.  

The accounting, you know, you just sort of have to labor your way through that. I mean, you may be able to take some courses, even, in that. But the biggest thing is to find out how businesses operate.  

And, you know, who am I afraid of? If we’re running GEICO, you know, who do we worry about? Why do we worry about them? Who would we like to put that silver bullet through? I’m not going to tell you. (Laughter)  

You keep asking those questions. And then you go to the guy they want to put the silver bullet through and find out who he wants to put the silver bullet through. It’s like who wakes up the bugler, you know, in the Irving Berlin song?  

And that’s the way you approach it. And you’ll be learning all the time.  

You can talk to current employees, ex-employees, vendors, supplies, distributors, retailers, customers, all kinds of people and you’ll learn.  

But it’s an investigative process. It’s a journalistic process. And in the end, you want to write the story. I mean, you’re doing a journalistic enterprise. And six months later, you want to say the XYZ Company is worth this amount because, and you just start in and write the story.  

And some companies are easy to write stories about, and other companies are much tougher to write stories about. We try to look for the ones that are easy. 

Links

"If we put the problem further back, and ask what determines whether a challenge will or will not be met, the answer is that this depends upon the presence or absence of initiative and of creative individuals with clarity of mind and energy of will (which is almost a definition of genius), capable of effective responses to new situations (which is almost a definition of intelligence). If we ask what makes a creative individual, we are thrown back from history to psychology and biology—to the influence of environment and the gamble and secret of the chromosomes." --Will and Ariel Durant (The Lessons of History)

A lesson for the Democratic left from Adam Smith - by Roger Lowenstein (LINK)

Amazon’s Pullout From Queens, N.Y., Stuns Real-Estate Industry (LINK)

When Investing on Auto-Pilot Isn’t Enough - by Jason Zweig ($) (LINK)

Rocket Ships - by Ian Cassel (LINK)

The final installment (Part 4) of the Money Control interview with Sanjay Bakshi (LINK) [PDF of Parts 1-4]

Managing Technological Innovation: Industry Analysis (LINK)

Exponent Podcast: Publishers vs Apple News (LINK)

Brex Founder Henrique Dubugras on The Twenty Minute VC Podcast [H/T @anuhariharan] (LINK)

American Innovations Podcast: Making Decisions with Malcolm Gladwell (LINK)

Edge #529: Alzheimer's Prevention - A Conversation with Lisa Mosconi (LINK)

TED Talk: The age of genetic wonder | Juan Enriquez (LINK)

Strategies for Seizing the Day - by Ryan Holiday (LINK)

A Kindle Daily Deal today ($1.99) is a book I've heard several people recommend: Shadow Divers: The True Adventure of Two Americans Who Risked Everything to Solve One of the Last Mysteries of World War II 

Charlie Munger on learning to be a great investor

From Damn Right: Behind the Scenes with Berkshire Hathaway Billionaire Charlie Munger:

A frequently asked question is, how do you learn to be a great investor? 

First of all, you have to understand your own nature, said Munger. "Each person has to play the game given his own marginal utility considerations and in a way that takes into account his own psychology. If losses are going to make you miserable—and some losses are inevitable—you might be wise to utilize a very conservative pattern of investment and saving all your life. So you have to adapt your strategy to your own nature and your own talents. I don't think there's a one-size-fits-all investment strategy that I can give you."   

Then, says Munger, you have to gather information. "I think both Warren and I learn more from the great business magazines than we do anywhere else," said Charlie. "It's such an easy, shorthand way of getting a vast variety of business experience just to riffle through issue after issue covering a great variety of businesses. And if you get into the mental habit of relating what you're reading to the basic structure of the underlying ideas being demonstrated, you gradually accumulate some wisdom about investing. I don't think you can get to be a really good investor over a broad range without doing a massive amount of reading. I don't think any one book will do it for you." 

...Munger explained that a person's reading should not be random: "...you have to have some idea of why you're looking for the information. Don't read annual reports the way Francis Bacon said you do science—which, by the way, is not the way you do science—where you just collect endless data and then only later do you try to make sense of it. You have to start with some ideas about reality. And then you have to look to see whether what you're seeing fits in with proven basic concepts. 

"Frequently, you'll look at a business having fabulous results. And the question is, How long can this continue?' Well, there's only one way I know to answer that. And that's to think about why the results are occurring now—and then to figure out the forces that could cause those results to stop occurring."  

This is the method of thinking that helps Munger and Buffett spot a company that has a franchise on a certain product, a so-called "moat" around its business. There are several examples of companies that have such a strong name brand that they seem invincible. Coca Cola has been such a company, though the challenges are relentless. Munger also uses the example of Wrigley's Chewing Gum.  

"It's such a huge advantage to be by far the best-known gum company in the world. Just think of how hard it would be to replace that image. If you know you like Wrigley's Gum and you see it there for two bits, are you really going to reach for Glotz's Gum because it's 20 cents and put something you don't know in your mouth? It's not worth it for you to think about buying an alternative gum. So it's easy to understand why Wrigley's Gum has such a huge advantage."  

Once you grasp the value of a company, then you have to decide how much the company is worth if you were buying it outright, or as in the case of the typical investor, simply buying a portion of the company on the stock market.  

"The trouble with the Wrigley Gum-type investments is that everybody can see that they're wonderful businesses. So you look at it and you think, My God! The thing's at eight times book value or something. And everything else is at three times book value.' So you think, 'I know it's wonderful, but is it wonderful enough to justify that big a premium?'"  

The ability to answer such questions explains why some people are successful investors and others are not.  

"On the other hand, if it weren't a little difficult, everybody would be rich," Munger insisted.

Links

"The only way to be loved is to be lovable.... But the nice thing about it, of course, is that...you always get back more than you give. I don’t know whether it was Oscar Hammerstein or who said,... 'A bell’s not a bell till you ring it, a song’s not a song till you sing it. Love in the heart isn’t put there to stay. Love isn’t love till you give it away.' And basically you’ll always get back more than you give away. And if you don’t give any, you don’t get any. It’s very simple." --Warren Buffett (2003)

Things I’m Pretty Sure About - by Morgan Housel (LINK)

Managing reputation in the age of infinity - by Seth Godin (LINK)

Why Regulators Went Soft on Monopolies - by Jonathan Tepper (LINK)

Strong and Weak Technologies - by Chris Dixon (LINK)

a16z Podcast: What’s Next for Marketplace Startups (Hint: Services) (LINK)

Vinod Khosla on How to Build the Future (video) (LINK)

10% Happier Podcast: Oliver Burkeman, The Power of Negative Thinking (LINK)

The French Burglar Who Pulled Off His Generation’s Biggest Art Heist [H/T @oraunak] (LINK)

The World Shifts When a Black Widow Squats - by Ed Yong (LINK)

I finally got around to listening to Joe Rogan's podcast with Matthew Walker discussing his book Why We Sleep, and there is a bunch of interesting information and tips in the episode. It also looks like there are some good notes on the key ideas from the podcast HERE.

"It's not just that you...go to sleep and you replay and you hit the save button on these new memories;  you actually sculpt out those memories and you improve them. And we've done some of these with motor skill learning, critical for athletic performance, and practice does not make perfect—practice with a night of sleep is what makes perfect, because you come back the next day and you're 20 to 30% better in terms of your skilled performance than where you were at the end of your practice session the day before. Sleep is the greatest, legal performance-enhancing drug that most people are probably neglecting in sport.... Skill learning, memory and then also...in the body all over—the recuperative benefits. And you can flip a coin, by the way, if you're getting 6 hours of sleep or less, your time to physical exhaustion drops by up to 30%.... [You should get] somewhere between 7 to 9 hours [of sleep]. Once you get below 7 hours of sleep we can measure objective impairments in your brain and your body " --Matthew Walker

Links

"When things go bad, all kinds of things correlate that no one ever dreamed correlated.... And there’s nothing more deadly than unrecognized concentrations of risk, but it happens all the time." --Warren Buffett (2003)

Only two things matter for the stock market. Donald Trump is not one of them. - by Roger Lowenstein (LINK)

Have I Got a Fund For You! Why Brokers Push Some Investments - by Jason Zweig (LINK)

The 20%-a-Year Stock Picker Who Wishes His Edge Would Disappear (LINK)

Jeff Bezos and Jamie Dimon: Best of Frenemies (LINK)

How to Lose Tens of Thousands of Dollars on Amazon (LINK)

A growing number of self-proclaimed experts promise they can teach anyone how to make a passive income selling cheap Chinese goods in the internet's largest store. Not everyone’s getting rich quick.

The $9 Billion Upcharge: How Insurers Kept Extra Cash from Medicare (LINK)

The Race to Diagnose Cancer With a Simple Blood Test (LINK)

The Bond That’s Still Paying Interest, 280 Years Later (LINK)

Looking Back on the Last 40 Years of Reforms in China - by Ray Dalio (LINK)

A Dearth of Physician Innovators Can Derail New Biomedical Startups (LINK)

Naval Ravikant and Kapil Gupta: The truth about hard work (podcast) (LINK)

How Millennials Became The Burnout Generation (LINK)

Three big insights into our African origins - by John Hawks (LINK)

Links

Accomplishing True Mastery - by Ian Cassel (LINK)

Can the Wi-Fi chip in your phone help feed the world? - By Bill Gates (LINK)

Greenlight Capital's Q3 Letter (LINK)

Pershing Square's presentation on Starbucks (LINK)

Kevin Warsh, former Federal Reserve governor, on the Grant’s Current Yield Podcast (LINK)

Exponential Wisdom Podcast: AI Disrupting the Middleman (LINK)

Peter and Dan discuss the disintermediation of the insurance industry, and specifically how AI will disrupt the middleman in all industries.

NPR Planet Monday re-released a podcast from 2014, "The History of Light," that featured Bill Nordhaus, who just won the economics Nobel. Josh Wolfe also re-tweeted some things he wrote about the other economics Nobel winner, Paul Romer, from back in 2015. Romer was also on EconTalk three times and gave a Long Now talk in 2009, for those interested. 

Everyday Discrimination Literally Raises Women’s Blood Pressure - by Ed Yong (LINK)

Links

"We’ve done a lot of that, scrambled out of wrong decisions. I’d argue that’s a big part of having a reasonable record in life. You can’t avoid the wrong decisions. But if you recognize them promptly and do something about them, you can frequently turn the lemon into lemonade." --Charlie Munger

"We do find, if you just show up every day, like Woody Allen said, and you answer the phone and read the paper, every now and then, you see something that makes sense to do." --Warren Buffett

Bill Gates' Goalkeepers presentation: Is poverty inevitable? (video) (LINK)

Oaktree's Howard Marks Calls for Caution in the Markets (video) (LINK)

Related memo: The Seven Worst Words in the World

Howard Marks talks with Meb Faber (podcast) (LINK)

Related book: Mastering the Market Cycle

Offering Inspiration and Advice, Real Vision Is HGTV for Hedge Fund Hopefuls (LINK)

Is Amazon Woke Now? - by Derek Thompson (LINK)

Patrick Collison, the founder Stripe, on running a startup company for success (video) (LINK)

Fantastic Beasts and How to Rank Them - by Kathryn Schulz (LINK)

The relative plausibility of impossible beings tells you a lot about how the mind works.

Fruit has become so sugary that animals at one zoo can no longer eat it [H/T @B3_MillerValue] (LINK)

The Game-Changing Technique Behind an Amazing New Archaeological Discovery - by Ed Yong (LINK)

Kelly, the Sassy Dolphin [H/T @edyong209] (LINK)

"I think curiosity and character are the two most important attributes to have. I’m not sure how to best build curiosity in people, but I’d say the habit of asking a lot of questions like “why” in order to make sense of things is good. As for character, the most important habit is to go to the pain because it will strengthen you which will give you the power you need to be successful. Pain + Reflection = Progress.  With practice the pain won’t be as painful and you will begin to see the pleasures of the successes so that going to the pain will make you feel good rather than bad." --Ray Dalio (Source)

Chris Hadfield on getting ready to do his job, and getting better at life

The quote below is from Hadfield's May 2015 appearance on The James Altucher Show. While he was referring to the difficult job of being an astronaut and training for all of the things that can happen in space, this advice is applicable to gaining expertise in many fields:

So how do you get ready for that? What it all boils down to is an insatiable, permanent necessity for personal competence—to always become better. Because even if you completely master some part of it, some subtle thing is going to change.... All you can do is continually try and improve your understanding of how things work. 

...I think if you're not studying something at all times to improve your ability to do things, then I kind of ask: Why not? What's the other thing that you're doing that is more important than getting better at life?

..........

Related book: An Astronaut's Guide to Life on Earth: What Going to Space Taught Me About Ingenuity, Determination, and Being Prepared for Anything

Excerpt from the book:

Over the years, I’ve realized that in any new situation, whether it involves an elevator or a rocket ship, you will almost certainly be viewed in one of three ways. As a minus one: actively harmful, someone who creates problems. Or as a zero: your impact is neutral and doesn’t tip the balance one way or the other. Or you’ll be seen as a plus one: someone who actively adds value. Everyone wants to be a plus one, of course. But proclaiming your plus-oneness at the outset almost guarantees you'll be perceived as a minus one, regardless of the skills you bring to the table or how you actually perform. This might seem self-evident, but it can't be, because so many people do it. 

...When you have some skills but don't fully understand your environment, there is no way you can be a plus one. At best, you can be a zero. But a zero isn't a bad thing to be. You're competent enough not to create problems or make more work for everyone else. And you have to be competent, and prove to others that you are, before you can be extraordinary. There are no shortcuts, unfortunately. 

Even later, when you do understand the environment and can make an outstanding contribution, there's considerable wisdom in practicing humility. If you really are a plus one, people will notice—and they're even more likely to give you credit for it if you're not trying to rub their noses in your greatness.

[H/T Tamas]

Warren Buffett on looking at the downside first...

"I always start from a position of fear. And then when I see something that looks attractive, I start getting greedy.... But I'm always looking at the downside on something first. I mean, if you can't lose money, you're going to make money. One reason we've done reasonably well, and this really goes back to when I was age 20 and learned from Graham, because my first 10 years were the best, is we've never lost a lot of money as a percentage of our net worth...in terms of permanent loss. Now, things may go down 50 percent. Berkshire's stock has gone down 50 percent four times in the time that I've owned it. But in terms of permanent loss....we've had plenty of losses, but they've never been the kind that really are destructive. And I always look at the downside first in anything." --Warren Buffett (March 1, 2010)

..........

Related quote:

"If a catastrophic outcome is possible or you can’t judge the downside, stay away." --Peter Bevelin 

[via the Librarian character in All I Want To Know Is Where I'm Going To Die So I'll Never Go There, and a complementary quote to the story about Buffett and Mid-Continent Tab from Friday]

Filters, Beliefs, Survival and Crotchets

One of the most interesting things for me in Nassim Taleb's book Skin in the Game was his discussion on the importance of filters and rules that lead to survival. Much of his discussion centered around religion, and how "beliefs" that may seem irrational to many who take them literally are actually rational because they aid in survival, which should be the true test: 

So when we look at religion, and, to some extent, ancestral superstitions, we should consider what purpose they serve, rather than focusing on the notion of “belief,” epistemic belief in its strict scientific definition. In science, belief is literal belief; it is right or wrong, never metaphorical. In real life, belief is an instrument to do things, not the end product. This is similar to vision: the purpose of your eyes is to orient you in the best possible way, and get you out of trouble when needed, or help you find prey at a distance. Your eyes are not sensors designed to capture the electromagnetic spectrum. Their job description is not to produce the most accurate scientific representation of reality; rather the most useful one for survival. 

...Survival comes first, truth, understanding, and science later. 

In other words, you do not need science to survive (we’ve survived for several hundred million years or more, depending on how you define the “we”), but you must survive to do science. As your grandmother would have said, better safe than sorry. Or as per the expression attributed to Hobbes: Primum vivere, deinde philosophari (First, live; then philosophize). This logical precedence is well understood by traders and people in the real world, as per the Warren Buffett truism “to make money you must first survive”— skin in the game again; those of us who take risks have their priorities firmer than vague textbook pseudo-rationalism.

And then Taleb gets back to Buffett a little later in the book:

Let us return to Warren Buffett. He did not make his billions by cost-benefit analysis; rather, he did so simply by establishing a high filter, then picking opportunities that pass such a threshold. “The difference between successful people and really successful people is that really successful people say no to almost everything,” he said. Likewise our wiring might be adapted to “say no” to tail risk. For there are a zillion ways to make money without taking tail risk.

Those excerpts reminded me of the comments Warren Buffett and Charlie Munger have made over the years relating to filters, which I've mentioned several times on this blog. My favorite examples from Buffett are probably a comment he made in 2015: 

At Berkshire we have certain filters that have been developed. If in the course of a presentation or evaluation part of a proposal an idea hits a filter, then there is no way I will invest. Charlie has similar filters. We don’t worry about a lot of things as we only have to be right about a certain number of things – things that are within our circle of competence.

And a description by Alice Schroeder on Buffett’s filtering process:

Typically, and this is not well understood, his way of thinking is that there are disqualifying features to an investment. So he rifles through and as soon as you hit one of those it’s done. Doesn’t like the CEO, forget it. Too much tail risk, forget it. Low-margin business, forget it. Many people would try to see whether a balance of other factors made up for these things. He doesn’t analyze from A to Z; it’s a time-waster.

I'm also grateful to Taleb for his discussion on this topic because it has made me think more clearly about a comment Charlie Munger made at the 2014 Daily Journal Annual Meeting:

There's no rule I can't have crotchets [crotchet: a perverse or unfounded belief or notion]. I don't have to be totally rational.  Don't we all do that?  We probably should, as a matter of fact.  Certainly a crotchet that says this is too hard for me, I'm not going to try to understand it.  That's a very useful crotchet.

And while Munger was using the word 'rational' as might be defined by the economics profession, his crotchets would fit Taleb's definition of rational:

Rationality does not depend on explicit verbalistic explanatory factors; it is only what aids survival, what avoids ruin. 

Why? Clearly as we saw in the Lindy discussion: 

Not everything that happens happens for a reason, but everything that survives survives for a reason. 

Rationality is risk management, period.

Links

“Adapt what is useful, reject what is useless, and add what is specifically your own.” --Bruce Lee [H/T Latticework]

Jeff Bezos: ‘We will have to leave this planet … and it’s going to make this planet better’ [H/T @MarceloPLima] (LINK)

Atul Gawande's commencement address at U.C.L.A. Medical School: Curiosity and What Equality Really Means (LINK)

Saving As Many Lives As Penicillin - Dr. Atul Gawande & Malcolm Gladwell (video) [From October of last year, but not sure I had previously seen this one.] (LINK)

Mohnish Pabrai's latest appearance on ET Now (video) (LINK)

The Psychology of Money - by Morgan Housel (LINK)

“Proprietary Product Distribution” is Better than Sliced Bread - by Tren Griffin (LINK)

De Beers to Sell Diamonds Made in a Lab (LINK)

Your Next Glass of Wine Might Be a Fake—and You'll Love It (LINK)

Worried About Big Tech? Chinese Giants Make America’s Look Tame (LINK)

In Conversation: Netflix' Ted Sarandos and Marc Andreessen (video) (LINK)

Why Your Brain Hates Other People (And how to make it think differently.) (LINK)

The Myth of 'Learning Styles' [H/T @AdamMGrant, who summarizes in his Tweet: "Your learning style is about how you like to learn, not how you learn best. Although you might enjoy listening, reading, or doing, there's no evidence that you learn better that way. We all learn through a combo of auditory, visual, and kinesthetic modes."] (LINK)

Rules vs. Habits

From Dan Ariely and Shane Parrish's chat on The Knowledge Project:

Dan Ariely: Having rules actually protects us. Imagine you invited me to do something and I said, “I’m sorry. I have a rule. I don’t give more than 10 talks a year, or I don’t do X, or Y, or Z.” You would not feel good saying, “Oh, would you please break your rules once for me?” The moment you have a rule, you basically are elevating something for yourself and for other people. You are creating a standard from it and it helps you protect yourself. 

If you think about religions—religions basically create rules and that’s incredibly important for the survival of the decision. So, I think we do need to think about the areas in our life where we don’t behave well and try to create rules for them. 

Shane Parrish: Why rules and not habits? 

Dan Ariely: Actually, you can think about habits, rules, and rituals as a continuum. Habits are those things that we do without thinking. When you think about the standard definition, a habit is something you do without thinking. You bite your nails, or slouch, or whatever it is. You can’t have a habit of running. You don’t go running and then you say, “Oh, where am I? I have no idea. I was running.” 

So, for things that are deliberate and take action, you need something more than a habit, but now you have rules and you have rituals, and there are differences between them. Rituals basically create a higher order meaning. Actually, both rules and rituals have one nice feature, which is that violating them one time, violates the principle. Right? 

So, imagine you have a rule that says, “I always recycle.” If you always recycle, one day not recycling is breaking your rule. Or think about somebody like a vegetarian. If you are vegetarian, you never eat meat. It’s not that you say, “I mostly don’t eat meat.” You create this rule that says, “I never do, I always do.” 

That helps you understand better where you are on this range. It helps you live according to your standards. 

If you said, for example, “I’m going to eat dessert on only one out of every four days,” odds are that you would cheat yourself. You will end up eating more dessert that you wanted. But if you have the rule that says, “I never eat dessert,” or, “I only eat dessert on Saturday,” that would be easier for you to keep. 

Then the most interesting one is rituals. Where rituals are, it’s not that they’re—the behavior itself becomes rewarding. If you think about ritualistic handwashing, for example, or whatever it is. You don’t have to wait for the outcome, but the ritual itself makes the behavior better. 

Shane Parrish: I think I’ve seen that with just anecdotally with friends, the difference between people who say, “Oh, I’m trying to eat healthier,” versus, “I don’t eat dessert.” Then, so if you’re saying, you don’t, you’re trying to eat healthier then every time you have to make this decision to eat healthier. Whereas, if your rule is, “I don’t eat dessert,” it’s almost like the decision is made for you, and then your default path changes and you have to make the exception to it. 

Dan Ariely: Exactly. That’s why it’s so much easier. Right? Whenever you can create the rule for behavior, and even if you give up some flexibility, it’s probably a good idea. 

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Related link: The Farnam Street Learning Community