No. of Recommendations: 25
As I mentioned somewhere above, I gave the new edition of
Poor Charlie’s Almanack to my sons for Christmas.
Between that and his centenary tomorrow, Mr Munger has recently been on my mind.
In particular, late last week I was thinking of his advice to have multiple models:
"
If the facts don't hang together on a latticework of theory, you don't have them in a usable form…. the first rule is that you've got to have multiple models - because if you just have one or two that you're using, the nature of human psychology is such that you'll torture reality so that it fits your models, or at least you'll think it does. …And the models have to come from multiple disciplines - because all the wisdom of the world is not to be found in one little academic department. (1)
…which had been prompted by my musing on albatross flight, and mungofitch.
---------------------------------
Until recently, the biophysics of the domestic economy of the albatross didn’t add up. In particular, the wandering albatross,
Diomedea exulans, lives for decades (2) while maintaining a twelve-foot wingspan and traveling up to 75,000 km/year (not a typo). Its realm is the great Southern Ocean, where icy temperatures, perpetual high winds and giant waves are the norm. The wandering albatross spends almost all of its time in flight, rarely touching the ground (there
is no ground), but despite all of this somehow gets by principally on a diet of small squid and fish, and dead stuff, that can be scooped up mid-flight on or near the surface. That’s an energy budget associated with a small and/or sedentary bird, not a perpetual flying machine with a wingspan half again as great as an NBA guard.
In 1883, Lord Rayleigh published a hypothesis in
Nature, but one problem was that his dynamic soaring model (while presumably on the right track) didn’t, uh, correspond well to how the albatrosses were actually observed to fly. But six years ago, a group from MIT did a much more detailed and accurate analysis (3), which was paraphrased elsewhere by the senior author as “
it turns out that the important metric is the ratio between gains and losses. So it is more efficient to gain a little, often, as is the case with small turns, rather than a lot, but rarely, such as with half turns” (4) (
bolding mine)
-------------------------------------------
…which brings me to mungo (5): “
I just pump some money out of the portfolio as the strikes I'm using gradually ratchet higher, though they're all "in the money" by around the same percentage. This fun will all end when I no longer find calls that are available at implied interest rates that seem attractive relative to my expectations for the stock price trajectory. Then it will be back to simple stock again. But while it lasts, it's great. One interesting thought is that, to the extent that I'm making a living from the option market rather than actually being an owner of Berkshire Hathaway the company, I am playing in the zero-sum part of the markets: it's just a side bet on how Berkshire stock is doing.” (bolding again mine)
So, the trick seems to be:
from a complex dynamic system extract a little, frequently, while at the same time not appearing to work at it very hard. And you can go on for decades that way, while the feared and maligned Southern Ocean howls and churns around you. (6)
-- sutton
(1) OID May 5, 1995
(2) There’s a crank theory that their natural lifespan is unknown, and may in fact be a century or more. But injuries to wild birds can be unforgiving – hollow-boned wings are delicate – and with no port in a storm, a 2-3% annual chance of a crippling misjudgment make survival past fifty or so unlikely.
(3)
Optimal dynamic soaring consists of successive shallow arcs. Bousquet GD, et al. J R Soc Interface. 2017. PMID: 28978747
(4)
https://news.mit.edu/2017/engineers-identify-key-a...(5)
https://www.shrewdm.com/MB?pid=790103941(6) Also, it's handy to have pitot tubes in your beak. AFAIK, this has nothing to do with my point (we could check with Jim), but just another cool albatross fact ("
The tubes of all albatrosses are along the sides of the bill...(t)hese tubes allow the albatrosses to measure the exact airspeed in flight; the nostrils are analogous to the pitot tubes in modern aircraft. The albatross needs accurate airspeed measurement to perform dynamic soaring. https://en.wikipedia.org/wiki/Albatross 