Jungle, Munger, Nobel & Sneezing

Firstly, as noted in our quote of the week below from Ted Sullivan of research firm, Lux Research: there’s a massive solar shakeout coming. Efficiency this and dollar per watt that--absent cessation of the laws of economics: all those vaunts vaporize in vacuums—no technology is developed in isolation without competition. The lone jungle tree, (like the lone solar entrepreneur) seeks to grow its stalk taller and leaves wider than all others. But the crowded competition (for sunlight) leaves a twisted tangled thicket—and eventually Mr. Market sees the jungle for the trees and comes marching through with his machete. May the strongest and most adaptable survive…



If I gave a weekly prize, I’d give it this week to a scientist at Sun Microsystems: Ron Ho. Not because of any tech breakthrough, but because of how he spoke with the media. I think it’s irresponsible to give predictions without probabilities and time frames. But this scientist, in describing a silicon photonics effort (to connect chips with light) said, “This is a high-risk program. We expect a 50% chance of failure, but if we win we can have as much as a thousand times increase in performance.” While his assessment of success (1-p) was probably too high and he didn’t give a time frame, he did give an expected outcome. If more politicians and corporate leaders spoke like this, them and their constituents would have better judgment under uncertainty and make better decisions.



On prizes, William James said, “he who refuses to embrace a unique opportunity loses the prize as surely as if he had failed.” Then again comedian Steven Wright said, “I’d kill for a Nobel Peace Prize.”



Speaking of Nobel prizes, a few weeks ago I heard Charlie Munger give a talk (Warren Buffet’s partner at Berkshire Hathaway) while at Caltech. A story was recounted of Nobel Laureate William Shockley (he who co-invented the transistor). Shockley known for outrageous antics allegedly wanted to start a sperm bank of Nobel Prize winners, offering would-be clients prodigy progeny. As he went from fellow Nobel colleague to colleague, one of them said, “Shockley, you’ve got it all wrong. I’m a Nobel Prize winner and both my sons play guitar. What you want is the poor illiterate immigrant tailors like my parents were!”



Speaking of Munger, he’s fond of a phrase capturing a phenomenon called, “lollapalooza”. The first time I heard the word was actually 15 years ago, when I used to go to an annual rock concert called Lollapalooza (eating Red Hot Chili Peppers with Pearl Jam while Raging against the Machine).



But the lollapalooza to which Munger refers isn’t a concert, but instead when all kinds of psychological biases are working in concert. Take global warming hysteria. You’ve got at least three effects I’ve identified; availability bias, social proof and authority bias



1. Availability Bias, arising from the prevalence of a major [and inconvenient] movie and from incentive-caused bias of all kinds of media from cable TV to every magazine’s requisite Green Issue to every advertisement having a “Green” theme—after all, “if it bleeds it leads” has become “if it’s green it’s seen”;



2. Social Proof, arising from information cascades, seeing and imitating others who are imitating others and not wanting to be apart from the tribe. Recall my prior writings on a single individual pointing at nothing in particular on a corner, whereupon a crowd will form and grow exponentially all staring at precisely nothing. Going along with the crowd has been mostly adaptive for most of humanity and failing to do so can lead to being ostracized (or at least lead to fear of being ostracized, an emotionally motivating state to avoid). As Keynes noted begrudgingly, “It is better to fail conventionally than to succeed unconventionally". The tribal imperative is a powerful part of our genetic makeup. It’s the same reason by Brooklyn grandmother used to go temple though she knew not about religion.



3. Authority Bias and Halo Effect, men with Oscars and Nobels are the white lab-coat equivalents of Stanley Milgram’s shock experiment. We revere the rich, famous and infamous. But the faithful flocks have followed many a charlatan, hypocrite or huckster: Jim Jones, Jim Swaggart, Jim Cramer. I started with the J’s but am an equal opportunity quipping and whipping cynic, “On Prancer!…on Spitzer!…on Haggart!…on Clemens!”



Speaking of Authority Bias, consider the marketing tactics (now settled in lawsuits) of Airborne—that fashionably packaged over the counter hoax taken on the onset of sneeze. “But”, my friends would say as I cringed at their credulity, “it was created by a school teacher!” And I cringe tighter still knowing nowhere is the appeal to authority more penetratingly persuasive than in venture capital. Cringing upon news of the latest deal priced to the doctor and dentist crowd and groaning in vane as the sheep flock to the haloed shepherds, “But,” they appeal “it was created by a famous rich person!”



And speaking of sneezes, most quietly seethe at the thoughtless brute who doesn’t yield a “bless you” when in the presence of another’s flying germs--or worse yet, fails to offer a “thank you” upon receiving such a salutation—unsolicited though it may be. Why do we bless sneezes, but not coughs—which are far more probable to lead to death (whether from choking or critical pulmonary issues).In the Middle Ages, it was believed one’s breath interrupted could cause death—so a sneeze was believed to be fatal. Like countless others, the cultural anachronism remains.



Back to Munger: What I’ve observed is that Munger has three key factors to his success (not including knowing Buffett): being rational, inverting and collecting inanities. The first requires training and genetic luck to have the right disposition. The second draws from the mathematician Carl Jacobi, “invert, always invert”. And the third from Johnny Carson—who once returned to his high school to give a commencement speech called “How to Guarantee Misery” and tongue-in-cheek instructed listeners to have envy, resentment and ingest chemicals to alter mood and perception.. Anyway: the combination of these factors had me thinking of a corollary to Tolstoy’s famous opening of Anna Karenina ("Happy families are all alike, every unhappy family is unhappy in its own way").



So here’s an inverse corollary in business and politics. There are thousands of ways to fail and far fewer to succeed. Those who fall impale themselves upon the same sharp stakes of folly as those before them. But every ascending icon rich person got rich or lucky (or both) in their own way. The point is this: you can’t read biographies or playbooks and hope to copycat Bill Gates, Larry Ellison, Larry or Sergey, Richard Branson, Barry Diller or Michael Dell. Whatever they did through skill or happened upon by luck at the particular circumstance at that particular time was unique to them—it’s not repeatable. And the laws of capitalism (and profits reverting to the mean) insure that copycatting someone else won’t yield you success. But be sure, if they ever fall from grace it will be for the same fraud or vice or sin as many before them. See: Spitzer, Elliot. As Legg Mason’s Bill Miller quotes of securities, so too with reputations, “Many shall be restored that now are fallen and many shall fall that now are in honor.” It appears that throughout history, though the octaves may change, folly and ruin rhyme and resonate in key. And as someone said, every time history repeats itself, the price goes up.



Munger said he was a collector of inanities: of the foolhardiness and mistakes of others. The newspaper and the gossip pages, though in today’s times they’re indistinguishable are a rolling archive from which to study not for traits of success as much as avoidance of idiocy and failure.