Читать книгу The Joys of Compounding - Gautam Baid - Страница 13

CHAPTER 3

OBTAINING WORLDLY WISDOM THROUGH A LATTICEWORK OF MENTAL MODELS

Study the science of art. Study the art of science. Develop your senses—especially learn how to see. Realize that everything connects to everything else.

—Leonardo da Vinci

Any field you enter, from finance to engineering, requires some degree of specialization. Once you land a job, the process of specialization is only amplified. You become a specialist in certain aspects of the organization you work for. This approach, however, doesn’t help solve problems. Because you don’t know about the big ideas from the key disciplines, you start making decisions that don’t take into account how the world really works. As in the story of the blind men and the elephant, you cannot see the whole picture. And investing is a liberal art that involves cross-pollination of ideas from multiple disciplines.

Marcel Proust said, “The real voyage of discovery consists not in seeing new sights, but in looking with new eyes.” Multidisciplinary thinking is what allows us to see with new eyes.

Charlie Munger uses a latticework of mental models to make more rational and effective decisions. (Shane Parrish’s summary compilation of the various mental models on the Farnam Street blog is an excellent resource to build up one’s latticework.¹) As the Chinese proverb goes, “I forget what I hear; I remember what I see; I know what I do.” Because the best way to learn something is by practicing it, we must routinely apply the mental models to different situations in our daily lives. One of Munger’s favorite authors is Herbert Simon, who gave him the idea of mental models. Simon wrote in his autobiography, Models of My Life:

The decision maker of experience has at his disposal a checklist of things to watch out for before finally accepting a decision….

If one could open the lid, so to speak, and see what was in the head of the experienced decision maker, one would find that he had at his disposal repertoires of possible actions; that he had checklists of things to think about before he acted; and that he had mechanisms in his mind to evoke these, and bring these to his conscious attention when the situations for decisions arose [emphasis added].²

In his book, Charlie Munger: The Complete Investor, Tren Griffin lays out Munger’s path to worldly wisdom:

Munger has adopted an approach to business and life that he refers to as worldly wisdom. Munger believes that by using a range of different models from many different disciplines—psychology, history, mathematics, physics, philosophy, biology, and so on—a person can use the combined output of the synthesis to produce something that has more value than the sum of its parts. Robert Hagstrom wrote a wonderful book on worldly wisdom entitled Investing: The Last Liberal Art, in which he states that “each discipline entwines with, and in the process strengthens, every other. From each discipline the thoughtful person draws significant mental models, the key ideas that combine to produce a cohesive understanding. Those who cultivate this broad view are well on their way to achieving worldly wisdom.”³

Munger chose the latticework model to convey this idea of interconnectedness. We need more than a deep understanding of just one discipline—we need a working knowledge of many disciplines and an understanding of how they interact with each other.

Worldly Wisdom

In Munger’s view, it is better to be worldly wise than to spend lots of time working with a single model that is precisely wrong. A multiple-model approach that is only approximately right will produce a far better outcome in anything that involves people or a social system.

—Tren Griffin

Munger would be what the Greek poet Archilochus called a fox.

Some 2,700 years ago, Archilochus wrote, “The fox knows many things, but the hedgehog knows one big thing.” In the 1950s, philosopher Isaiah Berlin used that sentence as the basis for his essay “The Hedgehog and the Fox.” In it, Berlin divides great thinkers into two categories: hedgehogs, who have one big overarching perspective on the world, and foxes, who have many different viewpoints. That essay, over time, has become a foundational part of thinking about the distinction between specialists and generalists.

Generalizing specialists have a core competency that they know a lot about. At the same time, they are always learning and have a working knowledge of other areas. Although a generalist has roughly the same knowledge for multiple areas, a generalizing specialist has one deep area of expertise and a few shallow ones. We have the option of developing a core competency while also building a base of interdisciplinary knowledge.

When Munger was asked at the 2017 Daily Journal Corporation meeting whether one should become a polymath or a specialist, his answer surprised a lot of people. Many people in the audience expected the answer to be obvious—of course he would recommend that people become generalists. But this is not what Munger said.

I don’t think operating over many disciplines, as I do, is a good idea for most people. I think it’s fun, that’s why I’ve done it. And I’m better at it than most people would be, and I don’t think I’m good at being the very best at handling differential equations. So, it’s been a wonderful path for me, but I think the correct path for everybody else is to specialize and get very good at something that society rewards, and then to get very efficient at doing it. But even if you do that, I think you should spend 10 to 20 percent of your time [on] trying to know all the big ideas in all the other disciplines [emphasis added].⁴

In Munger’s comments, we find the underlying approach most likely to yield exponential results: specialize most of the time, but spend some time understanding the broader ideas of the world. That is how one attains worldly wisdom.

This approach isn’t what most organizations and educational institutions advocate. Branching out into other disciplines outside one’s core is not what generally is taught in academia. It is a project we have to undertake ourselves, by reading a wide range of books, experimenting with different subject areas, and drawing ideas from them. A true education should cultivate, above all, a sense of enjoyment about the process of thinking things through.

Munger talked about the importance of cultivating a broad-based general awareness during his 1995 speech at Harvard University: “Man’s imperfect, limited-capacity brain easily drifts into working with what’s easily available to it, and the brain can’t use what it can’t remember or what it is blocked from recognizing because it’s heavily influenced by one or more psychological tendencies bearing strongly on it.”⁵

Where do we get to learn these models from? We let history be our guide. If one way to ensure that we make poor decisions is to use a small sample size, we can reason that we should seek the biggest sample sizes we can.

What crosses most of history? Peter Kaufman, CEO of Glenair, board member of the Daily Journal Corporation, and editor of Poor Charlie’s Almanack, has shared the answer in his “three-bucket” framework:

Every statistician knows that a large, relevant sample size is their best friend. What are the three largest, most relevant sample sizes for identifying universal principles? Bucket number one is inorganic systems, which are 13.7 billion years in size. It’s all the laws of math and physics, the entire physical universe. Bucket number two is organic systems, 3.5 billion years of biology on Earth. And bucket number three is human history, you can pick your own number, I picked 20,000 years of recorded human behavior. Those are the three largest sample sizes we can access and the most relevant.⁶

If we are to improve our learning, we should focus on things that change slowly. Kaufman’s approach provides a framework of general laws that have stood the test of time—invariant, unchanging lenses that we can use to focus and arrive at workable answers. A foundational principle that aligns with the world and is applicable across the geologic time scale of human, organic, and inorganic history is compounding. Compounding is one of the most powerful forces in the world. In fact, it is the only power law in the universe that exists with a variable in its exponent. The power law of compounding not only is applicable to investing but also, and more important, can be applied to continued learning. The fastest way to simplify things is to spot the symmetries, or invariances—that is, the fundamental properties that do not change from one object under study to another. Munger explains:

The models that come from hard science and engineering are the most reliable models on this Earth. And engineering quality control—at least the guts of it that matters to you and me and people who are not professional engineers—is very much based on the elementary mathematics of Fermat and Pascal…

And, of course, the engineering idea of a backup system is a very powerful idea. The engineering idea of breakpoints—that’s a very powerful model, too. The notion of a critical mass—that comes out of physics—is a very powerful model.⁷

But learning the big ideas from the key disciplines is not enough. We need to understand how these ideas interact and combine with each other, because this is what leads to “lollapalooza effects.” Munger explains:

You get lollapalooza effects when two, three or four forces are all operating in the same direction. And, frequently, you don’t get simple addition. It’s often like critical mass in physics where you get a nuclear explosion if you get to a certain point of mass—and you don’t get anything much worth seeing if you don’t reach the mass.

Sometimes the forces just add like ordinary quantities and sometimes they combine on a break point or critical mass basis…

More commonly, the forces coming out of…models are conflicting to some extent. And you get huge, miserable trade-offs.

…You have to realize the truth of biologist Julian Huxley’s idea that “Life is just one damn relatedness after another.” So you must have the models, and you must see the relatedness and the effects from the relatedness.⁸

Commenting on Munger, Bill Gates once said, “He is truly the broadest thinker I have ever encountered.”⁹ Warren Buffett has said that Munger has “the best thirty-second mind in the world. He goes from A to Z in one move. He sees the essence of everything before you even finish the sentence.”¹⁰

How is Munger able to do this?

Thinking

One of the advantages of a fellow like Buffett…is that he automatically thinks in terms of decision trees [emphasis added].

—Charlie Munger

The more models you have from outside your discipline, and the more you iterate through them in a checklist sort of fashion when faced with a challenge, the better you’ll be able to solve problems.

Models are additive. Like building blocks. The more you have, the more things you can build, the more connections you can make between them, and the more likely you are to be able to determine the relevant variables that govern a situation.

And when you learn these models, you need to ask yourself under what conditions this tool will fail. That way, you’re not only looking for situations in which the tool is useful but also for situations in which something interesting is happening that might warrant further attention.

We can improve our thinking process by taking out and devoting the necessary time for it. According to Tren Griffin,

Munger’s breadth of knowledge is something that is naturally part of his character but also something that he intentionally cultivates. In his view, to know nothing about an important subject is to invite problems. Both Munger and Buffett set aside plenty of time each day to just think. Anyone reading the news is provided with constant reminders of the consequences of not thinking. Thinking is a surprisingly underrated activity. Researchers published a study in 2014 that revealed that approximately a quarter of women and two-thirds of men chose electric shocks over spending time alone with their own thoughts.¹¹

Bertrand Russell rightly said, “Most people would rather die than think, and many of them do.”

Without great solitude no serious work is possible.

—Pablo Picasso

One of the finest essays on learning how to think better is “Solitude and Leadership” by William Deresiewicz:

Thinking means concentrating on one thing long enough to develop an idea about it. Not learning other people’s ideas, or memorizing a body of information, however much those may sometimes be useful. Developing your own ideas. In short, thinking for yourself. You simply cannot do that in bursts of 20 seconds at a time, constantly interrupted by Facebook messages or Twitter tweets, or fiddling with your iPod, or watching something on YouTube.

I find for myself that my first thought is never my best thought. My first thought is always someone else’s; it’s always what I’ve already heard about the subject, always the conventional wisdom. It’s only by concentrating, sticking to the question, being patient, letting all the parts of my mind come into play, that I arrive at an original idea. By giving my brain a chance to make associations, draw connections, take me by surprise…You do your best thinking by slowing down and concentrating.¹²

Look at this generation, with all of its electronic devices and multitasking. I will confidently predict less success than Warren, who just focused on reading. If you want wisdom, you’ll get it sitting on your ass. That’s the way it comes.

—Charlie Munger

Munger has often credited his success to having a long attention span, that is, his ability to stay focused for an extended period of time. Munger is able to block out the world when he is thinking, which has provided him a great advantage in solving problems and developing ideas. Long attention spans allow for a deep understanding of subjects. When combined with deliberate practice, it helps us identify our leverage points and focus our energies on them.

As you can see, actual thinking is really hard work. It is why Henry Ford said, “Thinking is the hardest work there is, which is probably why so few people engage in it.” The best ideas come to you in solitude. Introverts tend to be creative because, by spending more time alone, they are more susceptible to inspiration. Introverts are less susceptible to groupthink, and thus it is easier for them to go against the consensus.

Brilliant people aren’t a special breed—they just use their minds differently. They practice certain habits of thinking that allow them to see the world differently from others. In their book The 5 Elements of Effective Thinking, Dr. Edward B. Burger and Dr. Michael Starbird outline some practical ways for us to improve our thinking:¹³

1. Understand deeply. When you learn anything, go for depth and make it rock solid. Any concept that you are trying to master is a combination of simple core ideas. Identify the core ideas and learn them deeply. This deeply ingrained knowledge base can serve as a meaningful springboard for more advanced learning and action in your field. Be brutally honest with yourself. If you do not understand something, revisit the core concepts again and again. Remember that merely memorizing stuff is not deep learning.

2. Make mistakes. Mistakes highlight unforeseen opportunities as well as gaps in our understanding. And mistakes are great teachers. As Michael Jordan once said, “I’ve missed more than nine thousand shots in my career. I’ve lost almost three hundred games. Twenty-six times, I’ve been trusted to take the game-winning shot and missed. I’ve failed over and over and over again in my life. And that is why I succeed.” The takeaway is that we cannot come out with a correct solution on the first attempt. Start with a probable solution (hypothesis) and continue correcting the mistakes until you arrive at the right solution. Thomas Edison was famous for using this approach for his inventions. When he said that invention is 1 percent inspiration and 99 percent perspiration, the perspiration was the process of incrementally making mistakes and learning from them to make the next attempts apt to be closer to right. When Edison was asked how he felt about his countless failed attempts at making a light bulb, he replied, “I have not failed. I’ve just found ten thousand ways that won’t work.”

3. Raise questions. If you want to deepen your understanding, you need to raise questions. Do not be afraid to show your ignorance. If you do not understand, ask. The great philosopher Socrates would challenge his students, friends, and even enemies to make new discoveries by asking them uncomfortable, core questions, which often led to new insights.

4. Follow the flow of ideas. To truly understand a concept, discover how it evolved from simpler concepts. Recognizing that the present reality is a moment in a continuing evolution makes your understanding fit into a more coherent structure. You cannot discover everything on your own. You need to use the existing idea and improve it. Edison was supremely successful at inventing product after product, exploiting the maxim that every new idea has utility beyond its original intent. He is credited with having said, “I start where the last man left off.” More poignantly, he noted that “many of life’s failures are people who did not realize how close they were to success when they gave up.”

5. Change. You need to shrug off a lifetime’s habit of accepting a relatively superficial level of understanding and start learning more deeply. You need to let go of the constraining forces in your life and let yourself fail on the road to success. You should question all of the issues you have taken for granted all those years. View every aspect of your world as a stream of insights and ideas. Be amenable to change. Each of us forever remains a work in progress—always evolving, ever changing. We’re all rough drafts of the person we’re still becoming.

Learning is a lifelong journey.

Munger’s speeches and essays are filled with the thoughts of the great thinkers from many different domains. Munger reserves a lot of time in his schedule for reading and has read hundreds of biographies. He explains why he does so: “I believe in the discipline of mastering the best that other people have ever figured out. I don’t believe in just sitting down and trying to dream it all up yourself. Nobody’s that smart.”¹⁴

Munger provides a compelling argument for spending more time thinking, reading, learning, and obtaining worldly wisdom. And, in today’s digital age, there is no dearth of resources to further this endeavor.

The Internet is the best school ever created. The best peers are on the Internet. The best books are on the Internet. The best teachers are on the Internet. The tools for learning are abundant. It’s the desire to learn that’s scarce.

—Naval Ravikant