Adam Robinson: Searching For Secrets – North Star Podcast

Check out the North Star Podcast Episode Page & Show Notes

Key Takeaways

  • Life is a game of incomplete information
  • Adam’s favorite quote of all time is from Charlie Munger: “Take a simple idea and take it seriously”
    • Any of the greats you can think of took a simple idea and worked it to death
  • Look for things that don’t make sense within a domain (an anomaly)
    • When you fixate on anomalies, it opens up a whole new world that no one’s investigating – that’s how you separate yourself from the crowd
  • Debt works as long as there’s growth, but growth has stagnated
    • The two levers of global growth are:
      • Consumption per capita (which is decreasing)
      • Population growth (global population has started to decline)
  • Doctors (mainly surgeons) have no way of knowing whether they’re improving and rarely suffer the consequences of errors
  • Urgency is a hallmark of failure and warning sign of stupidity
  • In life, wait for the FAT pitch opportunities and then pounce on them

Intro

  • Host – David Perell (@david_perell)
  • Adam Robinson (@IAMAdamRobinson) is an author, educator, hedge fund manager, and co-founder of The Princeton Review
  • Check out the Podcast Notes from Adam’s appearance on The Knowledge Project (Part IPart II)

Chess Analogies for Life

  • Chess is a game of complete information (there’s nothing hidden), but life is far different
    • In life, information is always incomplete – “I don’t know what you see, and you don’t know what I see. Moreover, I don’t know whether my information, which certainly isn’t complete, is accurate.”
      • But on the chessboard, you have no doubt that the information you’re seeing is accurate
    • In life, we plan with incomplete information. In chess, we plan with complete information.
  • In chess, the rules are always the same. In life, the rules are continually changing (and without notice).
    • To boot – sometimes you don’t even know what the rules are!
  • So – “Games like chess, or sports in general, don’t prepare you for life because life is MESSY. It’s anything but a game.”
  • Chess players are always wondering whether or not they made the right move and know that they’re thinking is fallible
    • Similarly – “The greatest investors of our time, like Warren Buffet and Charlie Munger, are all over the fallibility of their thinking”
      • Related: Warren Buffet’s rules:
        • Rule #1: Don’t lose money (the equivalent in chess: before you decide on your move, think about your opponent’s previous move and how it might draw a threat to you)
        • Rule #2: Don’t forget rule #1 

Look Out for the Near-crashes

  • A single mistake will take you out of the game
    • “Chess masters know this, race car drivers know this, football players do not. Fighter pilots know this, tennis players do not. Speed skaters know this, swimmers do not.” 
    • When Mario Andretti told his dad he wanted to be a race car driver just like him, his father told him – “I have one piece of advice for you: win the race as slowly as you can. Don’t take chances.”
      • Mario Andretti has famously said – “The crowd remembers the crashes, the drivers remember the near-crashes.”

Life Advice

  • “My superpower is I know that if I want to get better results than everybody else, I have to do things differently”
    • Doing what everyone else does won’t give you an edge
  • Adam’s favorite quote of all time is from Charlie Munger: “Take a simple idea and take it seriously”
    • Any of the greats you can think of took a simple idea and worked it to death
    • “When you look at Buffet and Munger and the things they say, you might think it’s kind of obvious… but it’s NOT obvious because you don’t take it as deeply as they have.” 
  • Look for things that don’t make sense within a domain (an anomaly)
    • Keep asking: “What does that mean?”
    • When you fixate on anomalies, it opens up a whole new world that no one’s investigating – that’s how you separate yourself from the crowd

The Game Has Changed

  • “I think we are in the early stages of a historic global shift. The engine of global growth has changed. Central bankers and politicians don’t realize this.”
    • Global growth since World War II has relied on the willingness of the American consumer to go into debt and buy things he/she didn’t need. Whatever someone’s parents wanted, that person wanted more.
      • But millennials and Gen Zs were the first generations in to put a stop to this
        • The millennial mindset: “Not only do we not want a bigger home, we’re not sure we want at home at all”
  • Debt works as long as there’s growth
    • If you go into debt to buy a house, it’s “okay” because you know the house will be worth more in X years
      • But this is changing
    • The two levers of global growth are:
      • Consumption per capita
      • Population growth
    • BUT – both of the above are decreasing 
      • The entire developed world is shrinking in population (more people are dying than being born)
      • AND people are consuming less (Adam doesn’t think this will change anytime soon)
        • “Millennials and Gen Zs have realized things don’t make you happier… not one bit”
  • To make matters worse, debt is growing
    • Central bankers are piling up millions of dollars in debt and indebting millennials and Gen Zs
    • To add – debt on an individual level is also increasing

So, what can we do knowing the rules have changed?

  • First, know – “Economists are ALWAYS wrong”
    • Stop listening to them 
    • And to add – “Almost every central banker in the world is currently or was an economist”
      • “They’re experimenting with other people at risk, and that’s a big problem!”
  • “Central bankers are taking risks. They’re taking risks but they’re not taking the risk. America is taking the risk. Taxpayers are taking the risk. And by the taxpayer, I mean the people! Their economic futures are being exposed to risks.”
  • So…
    • “The game has changed. Economists are sure they’re right when in fact they’re often wrong… I don’t think there’s any other profession where you’re allowed to always be wrong and still have a job.”
    • Racecar drivers/chess players live with the consequences of their decisions
      • The central bankers… not so much!

Doctors Lack Skin in the Game

  • Adam recalls a study that asked doctors (surgeons and anesthesiologists) and pilots a series of questions about risk. Here are some highlights:
    • 1/4 pilots said they perform effectively when tired (in reality, this is untrue for everybody)
      • 2/3 doctors said they perform effectively when tired (AKA 1/3 doctors acknowledge that being tired affects their performance)
        • “When a surgeon makes a mistake, the patient pays the penalty. When a pilot makes a mistake, he goes down with the plane.”
    • 2/5 doctors said they would appreciate assistance from junior members of their team when operating/doing their jobs 
      • 97% of pilots said they’d gladly accept help from others when flying a plane
        • Why so high? – If a pilot makes a mistake, they go down with the plane
  • Adam adds:
    • Doctors lack a feedback process which encourages them to improve
      • They also have no way of knowing whether they’re improving/how they’re performing
    • Doctors escape risk all the time because they don’t suffer the consequences of errors

Urgency is a Hallmark of Failure and a Warning Sign of Stupidity

  • Take the infamous Challenger space shuttle disaster:
    • Freezing temperatures had been reached the night before and the launch entry was COVERED in ice.
      • But, they still went ahead with the launch… why? Two reasons:
        • They needed to launch that day because it was being televised in classrooms across America. (AKA they were rushing) (also, the launch had been postponed for multiple days prior)
        • NASA was losing funding and wanted to show that going into space was extremely safe, so they got a high school teacher to hop on board the space shuttle
  • Adam adds – “That sense of urgency… it’s one of the hallmarks of failure and one of the warning signs of stupidity.”
  • Boeing did the same thing with their 737 MAX plane
    • ~10 years ago, American Airlines told Boeing they needed a new jet which Boeing promised to deliver in an extremely rushed 6 years
      • And here we are… two 737 crashes later
        • A New York Times article reported that the day before the 2nd crash, a 3rd crash had been narrowly adverted

Wait for the Fat Pitch

  • Warren Buffet has a metaphor: “Every day the stock market is going to pitch thousands of pitches to you and unlike a baseball game, you don’t have to swing at any of them”
    • Wait for a pitch you know you can knock out of the park and swing for the fences – this is a key to both investing and life
      • Apply this broadly – from which people you choose to spend time to the restaurants you choose to visit, wait for the FAT PITCH
        • “This is a key to life, knowing how to wait for the fat pitch opportunities because life pitches you opportunities ALL THE TIME”

Additional Notes

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