On Knowledge, Ignorance and Misperception

Many times we, research analysts, think we have completed the puzzle. Actually we NEVER do. What we actually do is think we have completed it. At the end of the day we are just tricking ourselves. If you think twice, our job is like playing the Jigsaw game - do you remember the movie? Things are getting scary, right? So, don't freak out and let me explain it.

Analysts are flood with information from companies, sell-side analysts and stockholders - to name a few. This is just like playing Jigsaw's game. The game is set up, someone controls your attention. You have to figure out  by yourself, just like a CIA agent, what the actual facts are. Distraction is across the corner, but the facts are buried down there. You will have to triangulate information across different sources in order to reach somewhere. Well, "somewhere" is a place where there are a lot more questions to be answered and that's what knowledge means: knowing what you DON'T know. In other words, knowledge is ignorance acknowledgement. And so the game goes on. It's an infinite game. Thus when you get home at night I suggest you to upgrade Munger's lesson "Make sure you learn something new every single day" to "Make sure you end your day with more questions than when you woke up."

Want to dig further?

Ignorance: How it drives science by Stuart Firestein

Finite and Infinite Games by James Carse

Holmes on the Brain - "A Study in Scarlet"

"I consider that a man's brain originally is like a little empty attic, and you have to stock it with such furniture as you choose. A fool takes in all the lumber of every sort that he comes across, so that the knowledge which might be useful to him gets crowded out, or at best is jumbled up with a lot of other things so that he has a difficulty in laying his hands upon it. Now the skillful workman is very careful indeed as to what he takes into his brain-attic. He will have nothing but the tools which may help him in doing his work, but of these he has a large assortment, and all in the most perfect order. It is a mistake to think that that little room has elastic walls and can distend to any extent. Depend upon it there comes a time when for every addition of knowledge you forget something that you knew before. It is of the highest importance, therefore, not to have useless facts elbowing out the useful ones."

- Sherlock Holmes

Sherlock Holmes & Thought Improvement

I just came across Peter Bevelin's new book "A Few Lessons From Sherlock Holmes" and Farnam Street post on the book. I'd rather point out these links than trying to outsmart incredibly intelligent people. Though I shall recommend you Sherlock Holmes complete collection for 88 cents.

How can David defeat Goliath? Gladwell Proposes an Answer

Malcolm Gladwell has just released his new book "David and Goliath: Underdogs, Misfits, and the Art of Battling Giants". The book is all about winning asymmetrical wars, defeating giants, you name it. By using the "anchor & twist" strategy, making the unexpected move (pressing Goliath for example), using the advantage of being an outsider who doesn't have anchored references or, simplifying, using the art of what I call "wise effort" one can win tough wars. For those who don't have the time to read the entire book, below you can find an '09 article published in the New Yorker by Malcolm himself on the same topic.

Malcolm Gladwell - How David Beats Goliath by Igor Chalhub

Yvon Chouinard - Patagonia Founder- Speech at UCSB

Financial analysts usually use sophisticated terms - almost another dialect - to describe and analyze businesses. The thing is: in the real world stuff is simpler. The world is made by givers, doers and shakers, not takers.  

Besides, when analyzing a business it's important to consider the open-ended story with "infinite duration" (using financial wizards' terms). Sustainability is a key word, not on the environmental aspect solely, but one should understand if the company's culture is sustainable and what are its drivers - to mention one aspect only. Another buzz-wordy question would be: Is the moat widening or at least maintaining its original width?

His speech is easy to watch due to his sense of humor and amazing story. Main takeaways were: (i) despite his amazing trajectory, most things happened naturally or by accident; (ii) common values among people is key; (iii) sustainability concept came from a financial crisis, not from environmental causes - later on they made the term widespread in different spectrums; (iv) let people free to create and express themselves; (v) do not grow just for getting bigger - grow if it's the best option for all your stakeholders.


Below follows his two published books:

• The Responsible Company: What we've Learned in Patagonia's First 40 years

http://www.amazon.com/The-Responsible-Company-Learned-Patagonias/dp/0980122783/ref=reg_hu-rd_add_1_dp

• Let My People Go Surfing: The Education of A Reluctant Businessman

http://www.amazon.com/Let-People-Surfing-Education-Businessman/dp/0143037838/ref=reg_hu-rd_dp_img