Saturday Serendipity
Quote, Mental Model, Interesting find
Hi!
Reading time: About 4 minutes
Quote
“Anybody can become angry – that is easy, but to be angry with the right person and to the right degree and at the right time and for the right purpose, and in the right way – that is not within everybody’s power and it is not easy.” - Aristotle
Mental Model
Convergence
“Replay the tape a million times . . . and I doubt that anything like Homo sapiens would ever evolve again.” (Prasad, Pulak. What I Learned About Investing from Darwin (p. 228).)
The pattern of how we on earth have evolved is unlikely to happen. It is a very rare occurrence even if there is a planet out there exactly like us with a star at exactly the same distance as the Sun.
The way in which the planet has converged is remarkable and the odds of it all happening again is near impossible. Now this cannot be tested according to the person who conducted the study Stephen J Gould. (of course)
We see a lot of evidence of convergence in nature. We see it in animals, plants, businesses, humans, etc.
In Biology
'There are 700 Caribbean islands which are home to about 150 species of lizards called anoles. These anoles have been studied by Dr Jonathan Losos since the late 1980’s. He classified them into six groups. (Note the Caribbean species are all descendants to just two species ageing back millions of years old. ). His classification was based on their body length, tail length, limb length, toe pad lamellae (scales on the feet of the anoles that help them stick to a surface), colour, and habitat. He found out that the behaviour and physical traits of the anoles have adapted very well to their surroundings and local environment. What is surprising is that in the other large Caribbean islands the same pattern of adaptability of the six groups have been evolving in an identical manner. Now you may think that is because they are the same species. But the DNA analysis has demonstrated that they are not. “When presented with a specific problem, the Caribbean anoles on different islands have evolved the same solutions, such as tail length, body length, and colour. Amazingly, they have done it independently of one another.” (Pulak Prasad).
The anoles are a textbook example of evolutionary “convergence” wherein unrelated organisms in similar environments develop the same body form and adaptations independently.” ‘ (Pulak Prasad, What I learned about Investing from Darwin, pg 228-230)
Convergence is not an exception it is a rule. We see it happen again and again.
In Sports
There are certain patterns that follow success in sports. We see the same thing again and again with the successful people. We see someone like a Cristiano Ronaldo who practices day in and day out with a process based mindset. Then we see the outcome and glorify it. The other successful footballers do the same thing. Same thing in cricket.
In his book Outliers, Malcom Gladwell tried to find the patterns which create these successful people.
“Those three things - autonomy, complexity, and a connection between effort and reward - are, most people will agree, the three qualities that work has to have if it is to be satisfying.” Gladwell
I highly recommend you read the book.
In Investing
In finding good businesses looking at patterns is incredibly important.
In his book Pulak Prasad writes,
“We invest in convergent patterns. We seek patterns that repeat. As we saw, “replaying the tape of life” often yields the same result. We operate on the principle that the business world is no different. There is a big difference between asserting “I love this business” and “I love this business construct.” We are fans of the latter, not the former. We don’t care about a business; we are deeply attached to a business template.”
We should be thinking of business templates which are successful. The businesses which follow low cost models, pricing power, high switching costs, network effects, etc. are the ones which work. If you find those templates in an environment which it can work in you have a good company.
You should develop a convergent question model. Ask questions such as if the particular company is aiming to tap into a market, has it been explored by someone before if so has it failed or succeeded and why? Look for patterns even inside the business. When making projections many people assume that there will be growth in the market and the market can be easily tapped into. They forget to see the patterns.
A business template in the right environment with a good management will get you success.
Today’s mental model was hugely inspired by What I learned About Investing from Darwin. Do read the book.
Interesting find
Superlinear returns by Paul Graham
That’s it for this week!
Enjoy your weekend!
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