Quote of the week: 

“If you can’t explain it simply, you don’t understand it well enough.” – Albert Einstein


Learning as the key to compounding

Charlie Munger has often attributed Berkshire Hathaway’s long-term success to a simple idea: He and Warren are obsessed with learning. “I constantly see people rise in life who are not the smartest, sometimes not even the most diligent, but they are learning machines,” Munger has said. 

Paul Buser and Rick Buhrman—founders of Sator Grove, a permanent capital investment holding company—discuss this concept in a recent Colossus podcast. “I think all of the greats who have figured out how to continue to compound their knowledge and compound their capital alongside it, have this insatiable curiosity behind them,” Rick says. “And it doesn’t end when they get out of school. It doesn’t end when they make their first $100 million. If anything, it accelerates.”

“I’m not a neuroscientist, but think about the way in which the human brain develops. My understanding is that it’s really over the course of the first 15 to 20 years where most of the development occurs… What happens in that back end of life, it starts to become much more difficult to create new neural pathways to learn. And yet, there are habits that you can form, disciplines that you can embrace, to push back against that and to keep that compounding of knowledge going… I think a lot of the time, it comes back to starting with the motivation, but then formulating the disciplines and creating the daily habits that are going to perpetuate compounding. I don’t think it’s any different when it comes to capital.”


The enduring value of inaction

To continue with the theme above, there is no doubt that curiosity is an integral part of investing: It encourages you to be open to new ideas, which, in turn, exposes you to opportunities others might not be able to see. 

But there’s an even simpler rule to follow if you want to achieve extraordinary results over long periods of time: Make fewer decisions. “The best investors are the ones who have an unnatural ability to choose inactivity,” Brandon Beylo writes in his essay, Boredom: An Investor’s Last Remaining Edge? “As crazy as it sounds, boredom is an investor’s last remaining competitive advantage.”

“People say they want to make money in the stock market. But in reality, it’s far more complicated. Humans crave action. Whether it’s running from a big cat in the African Sahara or buying that hot new stock your gym buddy can’t stop mentioning. In our brains: action = good, inaction = bad. So much so that we’d rather harm ourselves than sit alone with our thoughts. Read that sentence again. It’s easy to see how we (investors) harm ourselves to compound investment capital over the long term. Yet, there are countless examples of great investors choosing to do nothing. Their ability to do nothing hangs on three principles: 1. Set The Highest Bar For New Ideas 2. Preoccupy Yourself with Other Work 3. Bet Only On The Highest Asymmetric Ideas.”

A few more links I enjoyed:

“But we have to bet on people, and I place my bets more often on high motivation than on any other quality except judgment. There is not perfection of techniques that will substitute for the lift of spirit and heightened performance that comes from strong motivation. The world is moved by highly motivated people, by enthusiasts, by men and women who want something very much or believe very much. I’m not talking about anything as narrow as ambition. After all, ambition eventually wears out and probably should. But you can keep your zest until the day you die. If I may offer you a simple maxim, ‘Be interested.’ Everyone wants to be interesting but the vitalizing thing is to be interested. Keep a sense of curiosity. Discover new things. Care. Risk failure. Reach out.”
“Tunneling is an important technology for modern civilization, as a tunnel is often the only reasonable way to create a direct path between two points. When the Hoosac tunnel was completed in 1875, it turned a difficult, 20-mile railroad route along ‘precipitous grades’ into a direct 5 mile route, connecting Boston with the Upper Hudson Valley. Large infrastructure projects such as hydroelectric dams often require tunnels to function. The Hoover Dam required more than 3 miles of tunnels 56 feet in diameter to divert the Colorado River around the construction site. And a tunnel can be used to create new land beneath dense urban areas, making it possible to build large-scale horizontal infrastructure like sewers or mass transit that wouldn’t be feasible to build above ground.”

This information should not be considered a recommendation to purchase or sell any particular security. It should not be assumed that any of the investments or strategies referenced were or will be profitable, or that investment recommendations or decisions we make in the future will be profitable. This article contains links to 3rd party websites and is used for informational purposes only. This does not constitute as an endorsement of any kind. While Nightview uses sources it considers to be reliable, no guarantee is made regarding the accuracy of information or data provided by third-party sources. Nightview Capital Management, LLC (Nightview Capital) is an independent investment adviser registered under the Investment Advisers Act of 1940, as amended. Registration does not imply a certain level of skill or training. More information about Nightview Capital including our investment strategies and objectives can be found in our ADV Part 2, which is available upon request.