2020-03-23

“Science is nothing but trained and organised common sense.”
Thomas Huxley

In investment, as in other endeavours in life, it is a good idea, when in stress situations, to pause & think. In light of recent developments, namely the spread of COVID-19, the US primaries and a panicky Mr. Market, one is naturally tempted to cling to the latest piece of information, as if this will disclose some eternal truth.  Instead it is driving us mad and I must confess that I abhor the sight of  CNBC well-dressed & perfectly-groomed anchor persons giving us another episode of “Markets in turmoil”. I am rather tempted to do what Travis Bickle (Robert de Niro) did in “Taxi Driver” in the cult scene “Breaking TV”:

https://www.youtube.com/watch?v=cChMqt-wR1k

Before I do that though, let us indeed pause & think(!) and dwell on “Seeking Wisdom: from Darwin to Munger” by Peter Bevelin.

1. Keep it simple: former General Electric CEO Jack Welch said: “You can’t believe how hard it is for people to be simple, how much they fear being simple. They worry that if they’re simple, people will think that they are simple-minded. In reality, of course, it’s just the reverse. Clear tough-minded people are the most simple.”
Be problem-oriented, not method-oriented. Use whatever works. Why? Because the result is what matters, not the method we use to arrive at it.

2. Avoid certain things: Charlie Munger, Warren Buffett’s partner, says it clearly: “There are things that we stay away from. We’re like the man who said he had three baskets on his desk: in, out and too tough. We have such baskets – mental baskets – in our office. An awful lot of stuff goes in the “too tough” basket.”
“Because the art of being wise is the art of knowing what to overlook”: said William James, the American philosopher, psychologist and a leading thinker.

3. Simplify the way to do things:
First question to Charlie Munger : “Is there still enormous gain to be made with OCS (organised common sense) that doesn’t require a computer? The answer is “yes””.
Last question: “Are there dangers in getting too caught up in the minutiae of using a computer so that you miss the OCS? The answer is “huge dangers””.
People calculate too much and think too little.

4. Patience: “It is not that I’m so smart; it’s just that I stay with problems longer”:said Albert Einstein.
In other words, thinking takes time.

To be continued…