Tren Griffin+ Your Authors @trengriffin I work for Microsoft. Previously I was a partner at Eagle River, a private equity firm established by Craig McCaw. I am on the board of directors of Kymeta. Nov. 24, 2019 2 min read + Your Authors

1/ a. "There are heterogeneous agents. These can be ants in an ant colony, neurons in your brain, or investors in a market."

b. "These agents interact leading to a process called 'emergence.'"

c. "Reductionism doesn’t work." 

2/ "When you lose diversity the system can become very inefficient. And that’s also what we see in markets—diversity loss leads to booms and crashes. This framework accommodates the fact that markets are pretty darned good with the fact that they periodically go haywire."

3/ "Munger is a big advocate for thinking backwards. You observe that something is where it is: How did it get there? Why did it get there? We know, for example, that the sizes of cities and companies follow power laws. Why? By what mechanism does this happen?" Michael Mauboussin

4/ "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." 

5/ "We have a tendency to think certain causes will lead to particular effects.

When information is diverse and aggregation and incentives are healthy, you get very good answers to problems. That’s what nature is doing, and that’s what we have to learn to do more effectively."

6/ "It's important to constantly learn and expose yourself to diverse points of view. But it’s work to do that. Typically the work is reading, but it’s also speaking to people who are interesting and exposing yourself to realms that you’re not familiar with."

7/ A friend of mine describes playing blackjack in Las Vegas, when the guy sitting next to him is dealt a 17. If you know standard blackjack strategy you know that the right thing to do is to sit on a 17. But this man asked for a hit. The dealer revealed a 4, making his hand...."

8/ "For good measure, the dealer said, 'good hit, sir.' That’s an example of a bad process and a good outcome. If you pursue that strategy over time you are sure to lose. So focus on the process."

9/ "Investing is a probabilistic exercise. In any probabilistic field, you have to recognize that even great decisions won’t work out all of the time, and sometimes poor decisions will work out well." 

10/ "You’d never dream of interviewing an ant to understand the colony. Likewise, it’s important to recognize that investment experts aren’t much better off than ants. They come with their own perceptions and biases. If you want to understand a market, look at the market itself."

11/ When asked in a SiriusXM radio interview recently about the biggest challenge in teaching investing I channeled Mauboussin: "Most investors get caught up in busy work such as excessive trading or trying to absorb the torrent of information the financial community produces."

You can follow @trengriffin.


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