Saturday Serendipity
Quote, Mental Model, Interesting find.
Hi!
Reading time: About 4 minutes
Quote
“I regard it as perfectly normal to fail and make bad decisions. I think the tragedy in life is to be so timid that you don’t play hard enough so you have some reverses” Charlie Munger
Mental Model
Autocatalysis
What is autocatalysis?
“Autocatalytic reactions are those in which the reaction product acts as a catalyst for its own formation.” Science Direct
In Peter Bevelin’s book Seeking wisdom, Charlie Munger spoke about autocatalysis,
If you get a certain kind of process going in chemistry, it speeds up on its own. So you get this marvellous boost in what you’re trying to do that runs on and on. Now, the laws of physics are such that it doesn’t run on forever. But it runs on for a goodly while. So you get a huge boost. You accomplish A – and, all of a sudden, you’re getting A + B + C for awhile.
This is kind of similar to the feedback loops mental model. This is something we see that occurs again and again in life.
If you are a small business owner and you meet someone in a party or event who you didn’t know at all and then get to know this person who is a lawyer, you become friends and you get two people who are willing to help each other out. In continuation the lawyer might introduce you to people who can provide opportunities for your business. Maybe one of his clients would become your customer . This chain can keep going on. It compounds. But it does have a limit. Very similar to autocatalysis.
In Sports
In cricket as a batsman, let’s say you are practicing drives to improve your batting. After some time you see that your batting has improved you can middle the ball well. Usually you play drives the most often, so as you middle the ball well you keep getting better. This results in better performances in matches. As your performance in the match increases your confidence as a player increases. As your confidence increases your overall game increases. You become more confident in the field, you become more energetic, you get more active, in general everything becomes better.
I find this to be a parallel. As learning how to play drives (A), leads to better batting (B), which leads to better confidence overall (C).
Note again this is only for a while. Your batting form cannot practically last forever. But as you have good form you will notice that your overall game also improves.
This is the same in other sports as well. Learning about one thing can cause benefits in other things and leads to superior performance overall.
It is important to note that while it is a great thing to acknowledge don’t get trapped into the belief that it will last forever. That is wishful thinking. This mental model also teaches me that this form or patch will end. As the laws of physics state that things don’t last forever.
In Investing
Charlie Munger went on about autocatalysis and related it to disney,
Disney is an amazing example of autocatalysis … They had those movies in the can. They owned the copyright. And just as Coke could prosper when refrigeration came, when the videocassette was invented, Disney didn’t have to invent anything or do anything except take the thing out of the can and stick it on the cassette.
I hope I can relate all mental models like Charlie Munger when I am 85-90 but of course I cannot.
Anyways getting back to the point.
We see a lot of companies benefit like this. All the companies which had the capability to use capital to invest in the new age technology and gain more market share got a period where all they had to do was keep the business the same just advertise or do one thing more efficiently which gave great returns to the business.
Similarly all music companies are now prospering as they now have streaming platforms like Spotify. Companies like Saregama which own all the old labels have now simply transferred all of these songs to all streaming platforms.
Interesting find
Sanjay Bakshi on Munger’s death
That’s it!
Enjoy your weekend!