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A Few Things: The Ways The World Works, Building A Good Life, Mauboussin on Investing, The Case For Optimism
August 11 2022
I am sharing this weekly email with you because I count you in the group of people I learn from and enjoy being around.
You can check out last week’s edition here: Signal vs Noise, The Best Career Decision, 10 Habits of Successful VC's, Dalio on Cycles of History, Understanding the Energy Crisis, How Not To Die, The Future of Facebook......
Quotes of the week:
“The only reason people do not know much is because they do not care much. They are incurious. Incuriosity is the oddest and most foolish failing there is."
- Stephen Fry
“A wise man does at once, a fool does at last.”
- Baltasar Gracian
“Do not spoil what you have by desiring what you have not; remember that what you have was once among the things only hoped for.”
- Epicurus
"Being a contrarian is actually very easy. The problem is being a contrarian that makes money.”
- Steven Peak
“We are drowning in information while starving for wisdom. The world henceforth will be run by synthesizers, people able to put together the right information at the right time, think critically about it, and make important choices wisely.”
- E. O. Wilson (thank you Tom White)
A. A Few Things Worth Checking Out:
1. I am a big fan of mental models, and this essay from Morgan Housel: “Little Ways the World Works” discusses a number I hadn’t thought of.
Morgan identifies ideas and concepts that recur across multiple domains:
“If you find something that is true in more than one field, you’ve probably uncovered something particularly important. The more fields it shows up in, the more likely it is to be a fundamental and recurring driver of how the world works.”
Here are my three favourite:
Orgel’s rule (evolutionary biology): “Evolution is cleverer than you are.” Whenever a critic says, “evolution could never do that” they usually just lack imagination. When trillions of organisms among millions of species interact for billions of years, the results can be indistinguishable from magic. Same with technology and social trends.
Benford’s law of controversy (astrophysics): Passion is inversely proportional to the amount of real information available. When given the opportunity to fill information gaps with rumor, theory, and imagination, people cling to what they want to be true, which tends to be something they are passionate about. The real world is often very boring.
Emergence (complexity): When two plus two equals ten. A little cool air from the north is no big deal. A little warm breeze from the south is pleasant. But when they mix together over Missouri you get a tornado. The same thing happens in careers, when someone with a few mediocre skills mixed together at the right time becomes multiple times more successful than someone who’s an expert in one thing.
If you haven’t read Morgan’s book The Psychology of Money yet, it’s a definite read.
He was also on the Ryan Holiday podcast discussing Building Wealth and Happiness.
2. Sam Harris spoke with Arthur C. Brooks about what it takes to build a good life. Brooks is a fascinating guy, and currently a professor at the Harvard Kennedy School and the Harvard Business School, where he teaches courses on leadership and happiness.
He is also a columnist at The Atlantic, where he writes the popular “How to Build a Life” column. Brooks is the author of 12 books, including the 2022 #1 New York Times bestseller From Strength to Strength: Finding Success, Happiness, and Deep Purpose in the Second Half of Life.
Brooks began his career as a classical musician, leaving college at 19, and performing with ensembles in the United States and Spain. In his late twenties, while still performing, he returned to school, earning a BA in economics through distance learning. At 31, he left music and earned an MPhil and PhD in public policy analysis, during which time he worked as a military analyst for the Rand Corporation. Brooks then spent the next 10 years as a university professor at Syracuse University, where he taught economics and nonprofit management.
In 2009, Brooks became the president of the American Enterprise Institute in Washington, DC, one of the world’s most influential think tanks, which he led for a decade. During this period, he was selected as one of Fortune Magazine’s “50 World’s Greatest Leaders” and was awarded seven honorary doctorates.
It was a super multi-faceted discussion, covering everything from the power of social comparison, the intelligence taboo, political dignity and ethical hierarchy, the Dalai Lama, the nature of love, fluid and crystallised intelligences, the limits of identity, atheism and religious faith, fear of death, psychedelics, existentialism, St. Thomas Aquinas, and other topics.
Here is a 90 second snippet to give you a flavour:

3. Reflections on the Investing Process with Michael Mauboussin.
Mauboussin has spent more than three decades studying companies and the investment process. He has published a voluminous body of work combining traditional security analysis, corporate strategy, and concepts from a wide variety of disciplines (a new full archive is now available). In 2020, he joined Morgan Stanley’s Counterpoint Global unit and serves as Head of Consilient Research, a reference to the idea of consilience, the “linking together of principles from different disciplines.”
He spoke with Frederik Gieschen about the investing process.
Some snippets that stood out:
"Great investors do two things that most of us do not. They seek information or views that are different than their own and they update their beliefs when the evidence suggests they should. Neither task is easy."
On common mistakes among analysts. “There was a letter from Seth Klarman at Baupost to his shareholders. He said, we aspire to the idea that if you lifted the roof off our organization and peered in and saw our investors operating, that they would be doing precisely what you thought they would be doing, given what we've said, we're going to do. It's this idea of congruence.”
On feedback and learning. “In every domain elite performers tend to practice. Every sports team practices, every musician practices, every comedian practices. What is practice in investment management? How much time should we be allocating to that?”
My favourite research piece of his is on Base Rates.
4. The new climate and spending bill is a big deal, here’s a quick overview of what’s in it:

and an NPR article on it.
5. Everything is clearer once you write it down and have to explain your thinking to others. A great reminder on what Bezos has been doing at Amazon for years:

6. Most books could easily be essays. Here are a number of essays that became books.
B. The Case For Optimism
We have discussed a number of depressing books recently. Everything from Niall Ferguson’s Doom to Peter Zeihan’s End Of The World is Just The Beginning. And the media baths us in depressing news everyday…COVID, War in Ukraine, Climate Change, Crisis in China, Politics in the US. Sometimes it feels like the world is ending. No wonder we have millions of people wishing for a return to the “Good Old Days”.
I am an optimist, and while there may be challenges, I believe that the world is getting better and that we can overcome our challenges.
Check out humanity’s track record if you have any doubt. When we apply our minds to it, we can accomplish anything.
I’ve been reading Steven Pinker’s “Enlightenment Now”. It made me remember both Hans Rosling’s “Factfulness” and David Deutsch’s “The Beginning of Infinity”.
This week I’ll discuss Factfulness, and we can cover the others next week.
The big idea from the book is that our view of the world is wrong.
Here are a few ideas that stayed with me from the book:
1. He describes our evolutionary bias to think in dichotomies: good versus evil, heroes versus villains, us versus them.
A quick model from the book, on how to view the world - rather than rich vs poor, us vs them or emerging vs developed. The entire world lives in four income groups:
Level 1: One billion people live here. This is what we think of as extreme poverty. You survive on less than $2 a day and get around by walking barefoot. Your food is cooked over an open fire, and you spend most of your day traveling to fetch water. At night, you and your children sleep on a dirt floor.
Level 2: Three billion people live on level 2, between $2 and $8 a day. You can buy shoes and maybe a bike, so it doesn’t take so long to get water. Your kids go to school instead of working all day. Dinner is made over a gas stove, and your family sleeps on mattresses instead of the floor.
Level 3: Two billion people live on level 3, between $8 and $32 a day. You have running water and a fridge in your home. You can also afford a motorbike to make getting around easier. Some of your kids start (and even finish) high school.
Level 4: One billion people live on level 4. If you spend more than $32 a day, you’re on level 4. You have at least a high school education and can probably afford to buy a car and take a vacation once in a while. Most of us spend our entire life thinking about and interacting with people in this level. This is the only world we know.
2. He shows the enormous negative bias humans have about the world around them. We consistently assume things are worse than they actually are, while ignoring progress like the huge drop in global poverty. Child mortality is down significantly, as is the number of people without an improved drinking water source. Life expectancy is up everywhere (except for middle-age white males in the US). Genocide and war deaths are down significantly. So is crime in the US. The number of deaths from natural disasters plummeted well over 90% in the last hundred years. Death rates from air pollution are down significantly in the last 25 years.
But you won’t hear the good news, and it’s not the media’s fault either, bad news is just what the human brain reacts to. The good news doesn’t make its way to people because most of it’s slow. Positive changes happen slowly while bad stuff happens quickly.
3. The World is complex and multi variate. Don’t look for someone to punch - single blame situations. Blame game doesn’t solve problems. There is usually not one bad guy. When we want to fix something, first we have to understand the system it lives in. Can we improve it? Can we change biases?
Identifying bad guys is a short cut to stop thinking. To understand and change the world you have to actually see how a complex machine. Look for causes, systems and ideas that are causing this to happen. Systems and processes fix problems.
Here are 10 human instincts and how we can counter them in our daily thinking:
You can get a lot of the book’s ideas from this amazing TED Talk, viewed 3mm times.
I really love spending time on Dollar Street with my kids.
It really gives perspective.
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