Mar 20, 2013|
Lessons from Charlie Munger-XIX
In the previous article, we discussed how investors often make wrong investing decisions due to misguided influence from authority figures. Today we shall discuss yet another human tendency that often leads us into unproductive behaviour.
All creatures survive in groups. And the one factor that connects creatures of a species is communication. It goes without saying then that communication has been one of the most critical tools in the evolution and survival of all species. Broadly, communication facilitates sharing of information about food, attracting a mate, signaling danger and so on.
One of the things that differentiate human beings from other animals is our ability to think. The relatively larger size of our cerebral cortex is the reason for our creativity, language and logical deduction. As such, we have a highly advanced and complex language at our disposal.
But do we always make the most rational and productive use of words? The answer seems to be no. And this is where the 'twaddle tendency' fits in. An online dictionary defines 'twaddle' as silly, trivial or pretentious talk or writing. Being a social animal, man often indulges in petty small talks and chatter. No wonder the celebrity rumour and gossip pages are often the most widely viewed amongst all other news and editorial content!
Twaddle or nonsense talks are not such a bad thing by themselves. They only become a nuisance when they come in the way of some serious work that is in progress. And this is what we need to keep a check on.
Charlie Munger relates an interesting experiment on honeybees which can be used as an analogy to show how the twaddle tendency can lead to unproductive results. For those not very well-read in biology, honeybees have a peculiar dance language that they use to indicate to their fellow mates where the food is. After returning to the honey comb with pollen or nectar, the worker bee performs a dance with particular movements. Through this, it communicates to the other bees both the distance and the location of the food. The other worker bees then follow the directions suggested and set out to gather pollen and nectar.
A certain scientist was curious to know how the honeybees would respond if the nectar was placed in an unusual position. So he placed the nectar in a straight-up position at a significant height. As you would have guessed, no nectar exists in such a position in a natural setting. So, this baffles the honeybee. It does not have a genetic program that is capable of communicating this new position.
According to you, what should the honeybee ideally do in such a situation? It should just go back to the hive and pick a quiet corner, shouldn't it? But the honeybee does not do that. Instead, it comes back and attempts a dance. But the dance turns out to be incoherent. Just like twaddle!
Can this behavioural tendency of the honeybee also apply to human beings? In our next article of this series, we will analyse the twaddle tendency in human beings, particularly in the context of the stock markets and the economy. We will also discuss ways that could help investors to filter away all the useless twaddle.
||Ankit Shah (Research Analyst), has been a research analyst at Equitymaster for nearly 6 years. In the past, Ankit has been the driving force behind our learning initiative Equitymaster's Secrets. He has also travelled extensively across India with Richa and the Hidden Treasure team to identify winning small cap stocks. He now works closely with Vivek Kaul and his global network of independent thinkers, analysts, and economists.
Besides being an ardent follower of the Warren Buffett and Peter Lynch style of investing, he is a keen student of the Austrian school of economics. He is deeply fascinated and inquisitive about the workings of the human mind...and all the bizarre things that conspire when it comes in contact with money and power. He follows the multidisciplinarian approach to thinking and learning, drawing ideas and insights from fields as diverse as quantum physics, evolutionary biology, history, neuroscience, behavioural economics, and psychology...to the ancient arts and sciences of India and the rest of the world.
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