153. Wisdom is Prevention
“It is remarkable how much long-term advantage people like us have gotten by trying to be consistently not stupid, instead of trying to be very intelligent.” — Charlie Munger
Would you indulge in a game if there is very small likelihood of a calamitous outcome. How about playing Russian Roulette using a special gun where the chamber can hold say 100 bullets (instead of the usual 6 bullets)? The chance of getting shot reduces significantly from 17% (1/6) to 1% (1/100). How about if the chamber has capacity for a million bullets i.e., the chance of getting shot reduces to a measly 0.00001% and let’s say the prize of winning is very high say, a billion US dollars (~Rs 8000 Crores). Would you play this game of extremely high pay off with extremely low likelihood of losing.
In my younger days, I used to ride a particularly sturdy motorcycle. The bike, a Royal Enfield Model, was a bit of status symbol too. They were not yet prevalent in those days and this relative rarity added to its allure. As a biker, I used to visit a popular website of the time called 60kph.com (I see that a site by that name still exists). Their central idea was that if one rides at an average speed of 60 kilometres per hour in long drives, one will be able to enjoy the ride by feeling the rush of an effervescent rush of air behind their ears, absorb the scenery around, while being fully confident that of being able to bring the bike to a sudden stop if such a need were to arise. For the roads we had more than two decades ago, 60kph was fast enough but the bike could be comfortably ridden at 100KPH without any jarring. Given this, it was hard to ride at a slow 60KPH. I failed to appreciate that 60KPH was slow enough to prevent any accidents, which was not the case at 100 KPH. Thankfully I did not get into any big accidents and that was largely down to luck. Now as I approach 50, I have finally started to appreciate Charlie Munger’s pithy suggestion that wisdom is, in fact, prevention.
“Outstanding long-term results are produced primarily by avoiding dumb decisions, rather than by making brilliant ones.” — Warren Buffett
Winning is generally a result of skill, hard work and luck. I believe that skill and hard work have a disproportionate contribution to winning. You may sharpen your skill as much as you can but even then, you still have to bide until the right opportunity (luck) comes your way. Luck does have a role to play but generally a subordinate one.
No matter how skilled you are, any number of unexpected factors may derail your best laid plans. Accidents happen not just to errant drivers. Often, even the skilled and careful drivers get into accidents for absolutely no fault of theirs. There are only so many ways in which you can succeed but you may fail for any number of reasons. Success offers very little learning potential but failure can transform you.
In the game of cricket, you may be a very talented batter and you may practice assiduously but as you go in to bat, anything from the weight of the occasion to an exceptional ball can get you out in the first few balls that you face. Even the most accomplished of batters have been golden ducks (getting out in the first ball they face) multiple times in their careers. Given that all it takes to take a batter out of equation is just one good ball, predominant prerogative for a batter should be not to get out. If a capable batter survives long enough in an innings, s/he will generally end up making a good score.
“Focus on prevention; would save $14B with diabetes.” — Newt Gingrich
Among the surest ways to amass financial wealth is to invest in the right kind of growth assets and then let them grow long enough. It is in their long survival that wealth accumulates. One of the extreme examples of this is Warren Buffet who started investing at the young age of 11. He made his first million at the age of 30, first billion at age of 56 and today at age 93, he is worth US$122 Billion. One key theme in his life has been focus on survival.
In complex environments, there are no deterministic formulae for success. There is no way to definitely say that by doing this you will achieve that. For example, by investing in mutual or index funds for the long term, there is no guarantee that you will be able to compound your money at a good rate. It is likely, but not definite. Then how do we inform our approach to thrive in complex environments? By accounting for survival once you set yourself up on a growth path.
Bottomline
“Intellectuals solve problems, geniuses prevent them.” — Albert Einstein
Many times, success is not so much about forcing a tenuous outcome as much as it is about avoiding failure. In the long road to success, surviving the length of the road needs to be one of the most important considerations — driving too fast or carelessly and getting into an accident will not get you anywhere. Taking on too much for too long is not sustainable. “Too much” will take a toll sooner or later and then one is forced out of the game.
Prevention, indeed, is wisdom.
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A bit on my background
I help people make better decisions.
I coach people on “Making Better Decisions”, “Financial Intuition” and “Building Great Careers”. I’m open to run sessions on these topics in institutions — this will help me create larger impact.
I’m also an Investment Advisor (RIA) registered with the Securities and the Exchange Board of India (SEBI). As an RIA, I analyze and prepare financial plans to help people achieve their financial goals.
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