But What For Newsletter - No. 016

Charlie Munger, Superforecasting, Fancy Surgeons, Life-Long Dreams, Investing, and Sitting Alone in a Room

Apologies for the late send today - I got hit with either the flu or COVID late last week. 0 out of 5 stars review, for sure. Would not recommend it, especially right before you were supposed to see your family for Christmas… Stay healthy out there and keep wearing those masks (I was in a situation without a mask 4 days before I got sick - don’t make that same mistake)!

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Latest from But What For?

(Underlined titles are links to full articles)

I just try and avoid being stupid. I have a way of handling a lot of problems. I put them on what I call my too-hard pile and I just leave them there. I’m not trying to succeed in my too-hard pile.

I don’t think we want the whole world trying to get rich by outsmarting the rest of the world in marketable securities, but that’s what’s happened. There’s been frenzies of speculation and so on, so it’s been very interesting, but it’s not been all good.

Well, over the long-term, the companies of America behave more like biology than they do anything else. And biology, all the individuals die and so do all the species, it’s just a question of time. And that’s pretty well what happens in the economy, too. All the things that were really great when I were young have receded enormously, and new things have come up and some of them started to die.

You can’t live a successful life without taking some, doing some different things that go wrong. That’s just the nature of the game. And you wouldn’t be sufficiently courageous if you tried to avoid every single reverse.


(Underlined titles are links to sources)

Superforcasting, by Philip Tetlock and Dan Gardner [Book]

  • Takeaway: Words have many meanings, so don’t assume the listener is always using your definition

Disturbed, Kent went back to his team. They had all agreed to use “serious possibility” in the NIE so Kent asked each person, in turn, what he thought it meant. One analyst said it meant odds of about 80 to 20, or four times more likely than not that there would be an invasion. Another thought it meant odds of 20 to 80 - exactly the opposite. Other answers were scattered between those extremes. Kent was floored. A phrase that looked informative was so vague as to be almost useless. Or perhaps it was worse than useless, as it had created dangerous misunderstandings.

Consider that if an intelligence agency says there is a 65% chance that an event will happen, it risks being pilloried if it does not - and because the forecast itself says there is a 35% chance it will not happen, that’s a big risk. So what’s the safe thing to do? Stick with elastic language.

  • Takeaway: Don’t let appearances trick you

Say you had the choice between two surgeons of similar rank in the same department in some hospital. The first is highly refined in appearance; he wears silver-rimmed glasses, has a thin built, delicate hands, a measured speech, and elegant gestures. His hair is silver and well combed. He is the person you would put in a movie if you needed to impersonate a surgeon. His office prominently boasts an Ivy League diploma, both for his undergraduate and medical schools.

The second one looks like a butcher; he is overweight, with large hands, uncouth speech and an unkempt appearance. His shirt is dangling from the back. No known tailor in the East Coast of the U.S. is capable of making his shirt button at the neck. He speaks unapologetically with a strong New Yawk accent, as if he wasn’t aware of it. He even has a gold tooth showing when he opens his mouth. The absence of diploma on the wall hints at the lack of pride in his education: he perhaps went to some local college. In a movie, you would expect him to impersonate a retired bodyguard for a junior congressman, or a third-generation cook in a New Jersey cafeteria.

Now if I had to pick, I would overcome my suckerproneness and take the butcher any minute.

  • Takeaway: Letting go of something you should no longer be chasing is better than achieving it

Given this dominant narrative of the virtues of perseverance, and considering how our ambitions can become a core part of our sense of self, it’s understandable that you might be finding it difficult and unsettling to face the prospect of losing your dream. You can take comfort, though, in knowing that being adaptable and flexible in one’s ambitions is just as important as being gritty or determined. ‘By definition, if you cannot achieve what you want to achieve, you will fail repeatedly if you don’t stop,’ says Carsten Wrosch, a psychology professor at Concordia University in Montreal, who has been studying the construct of ‘goal adjustment capacity’ for more than 20 years…

By having the wisdom and flexibility to know when to let go, or when to redirect your passion, you’ll be following in the footsteps of many who have achieved greatness. David Foster Wallace let go of his tennis-greatness dreams and became an acclaimed novelist and writer instead. Meanwhile, Roger Federer’s dreams of tennis greatness came true, but only at the expense of his dream of becoming a professional footballer. And Maryam Mirzakhani let go her childhood dream of becoming a novelist but went on to be awarded the Fields Medal for mathematics in 2014 – the first and only woman ever to receive the honour.

These are dramatic examples, but they show that the path to fulfillment isn’t always smooth or direct. Once you’ve come to terms with your loss, you’ll find other passions. New dreams await.

  • Takeaway: Don’t pursue something where you lose the resources to try again if you are wrong about the outcome

“Risk for a long-term investor is permanent loss of capital, and probably the most tried and true way to think about that is Ben Graham’s concept of margin of safety.”  Volatility measures volatility, which is only one type of risk. The longer the period being considered the less volatility matters. Rather than focusing on volatility investors are better off building in a “margin of safety” (a discount to expected value) to deal with “all in” risk. A margin of safety is helpful insurance against being wrong…

“When you see something occur in a complex adaptive system, your mind is going to create a narrative to explain what happened—even though cause and effect are not comprehensible in that kind of system.”  People love stories and great story tellers can earn a huge premium in financial markets as promoters.  Getting rich as a promoter is very different than getting rich as an investor…

  • Takeaway: We find comfort in distractions because our own thoughts can feel too honest

"All of humanity's problems stem from man's inability to sit quietly in a room alone," wrote the French philosopher Blaise Pascal. It's a line repeated so frequently, in the era of smartphones and social media, that it's easy to forget how striking it is that he wrote it in the 1600s. Back then, a sentence such as "Yo is a messaging app that enables iPhone and Android users to say 'Yo' to their friends" might have got you burned as a witch.

Yet even in 17th-century France, apparently, people hated being alone with their thoughts so intensely, they'd do almost anything else: play boules, start the Franco-Spanish war, and so on. Still, I'd wager even Pascal would have been disturbed by a study published recently in Science, showing that people detest being made to spend six to 15 minutes in a room by themselves with nothing to do but think – even to the extent of being willing to give themselves mild electric shocks instead. It's natural to conclude that there's something wrong with such people. Which means, all else being equal, that something's probably wrong with you, too

Stoic’s Corner

Take care and have a great week,

— EJ

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