Welcome to The Nightcrawler, a weekly collection of thought-provoking articles and analysis on technology, innovation, and long-term investing. The Nightcrawler is written and published every Friday evening by Eric Markowitz, Nightview Capital’s Director of Research.

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Note: I’ll be in Omaha next week for the Berkshire meeting. The Nightcrawler will resume May 10. 

In this evening’s email… 

Quote of the week: “Any fool can know. The point is to understand.” ― Albert Einstein

The dangers of playing it safe

Chess is a game of strategy that demands sacrifices. As chess Grandmaster Maurice Ashley recently wrote, “Many positions cannot be won or saved without the exchange of something valuable.” Investing, much like chess, also involves a delicate balance: playing it safe can be just as perilous as being overly aggressive.

Howard Marks takes this insight further. Taking no risk is typically the riskiest long-term strategy: to earn above-average returns, an investor must sacrifice short-term discomfort in pursuit of long-term outperformance.

“Earning high returns,” Howard writes, “in absolute terms or relative to other investors in a market – requires that you bear meaningful risk – either the possibility of loss in the pursuit of absolute gain or the possibility of underperformance in the pursuit of outperformance. In each case, the two are inseparable. As Ashley says, no risk, no reward. No pain, no gain.” Howard continues: 

  • Key quote: “Like chess (and most card games), backgammon requires the calculation of when to take risk and when to avoid it. In backgammon, two players move their checkers around the board based on throws of a pair of dice. One player moves clockwise and the other counterclockwise. When players’ checkers come near each other, the player who’s moving often has a choice between (a) landing on one of the other player’s checkers, sending it back to the start (but at the risk of leaving the moving checker in a vulnerable position), and (b) avoiding doing so to play it safe. No one wants to be exposed and get hit. But most beginners play it too safe, and because they put so much emphasis on avoiding getting hit, they rarely win.”


A longevity revolution

Andrew J. Scott, a professor of economics at London Business School, believes that we’re entering a new longevity revolution: human lifespans have dramatically risen over the last 100 years, but business and government have yet to adapt to this new reality. In a new book, The Longevity Imperative, Andrew suggests that society must reckon with this new reality of aging “differently.”

“To ‘age differently’ is to invest more in our futures at every age,” says Andrew in a recent Q&A. “My book presents concrete ways to do that. We have to make sure that we prioritize our health, wealth, skills, relationships and sense of purpose. Society has not structured institutions, norms or policies to help us do that, so how can we make sure that aging has less of an impact on our health? How can we work or become educated differently?” Andrew continues: 

  • Key quote: “As we live longer, governments are trying to change the parameters of the three stage life. They’re saying, ‘Hey, retire later – I’ll give you a lower pension and you’ll put more in!’ I think that’s just a bad way of doing things. One of the challenges of living longer is that unless we get big productivity gains, we have to work for longer and retire later. Whereas in the 20th century we took ever more leisure after retirement, in the 21st century we take more leisure on the other side of it. That might mean starting work later or taking mid-career breaks. It could be working part time in the final few years before you retire, or a range of other things. For me that’s the big change.”

A few more links I enjoyed: 

Meir Statman: ‘The Biggest Risks in Life Are Not in the Stock Market’ – via Morningstar

  • Key quote: “I often note that the biggest risks in life are not in the stock market. I say, if you want real risk, get married, and if you want more risk, have children. And people laugh as you just did because, of course, the point is obvious, and yet that point is lost when we discuss financial well-being and overlook life well-being. And life well-being is really what we seek. And life well-being requires financial well-being. You cannot do things without money. You cannot support a family without money. But life well-being is also about family. It’s about friends. It’s about health. It’s about work. It’s about education and religion and society. And all of those things matter in life well-being. I don’t ignore financial well-being. You cannot have… life well-being without having money. But money, as anyone will tell you, is not everything.”

Filter, process, and build: learning actively – via Joel Cohen, MIT

  • Key quote: “Perhaps the overarching point of this essay is the importance of not just passively imbibing content, but putting real deliberate effort into thinking about what to read, how to read it, and how to process it. You can teach yourself a lot, but you need to put in about as much effort as a real teacher would. Just passively imbibing content is not going to lead to true learning that accumulates and compounds.”

The Future of Investing – via Bogumil Baranowski

  • Key quote: “Beyond all the noise, investing is all about owning businesses. They may come and go, emerge, grow, and fade away, but the essence and the goal are the same. We want to own businesses and benefit from their long-term value creation. Human nature that drives fear and greed remains the same.”

The Inner Scorecard: How Warren Buffett Mastered Life – via Shane Parrish

  • Key quote: “The pursuit of (deserved) admiration gives us energy to do more. It’s a part of the explanation for why the human world has moved along so far from where it started — we’re willing to do extraordinary things that are very difficult, like starting a company from scratch, inventing a new and better product, solving some ridiculously complicated theorem, or conquering unknown territory. All in an effort to gain acceptance and admiration. Problems arise when we start compromising our own standards, those we have set for ourselves, in order to earn the admiration of others. Problems come when we choose to focus on what others think and see versus reality.