25min chapter

#659: Michael Mauboussin — How Great Investors Make Decisions, Harnessing The Wisdom (vs. Madness) of Crowds, Lessons from Race Horses, and More

The Tim Ferriss Show

notes

CHAPTER

The Power of Consilience in Decision-Making

This chapter explores the concept of 'consilience,' emphasizing the integration of knowledge from various disciplines to address complex global challenges. It highlights the significance of cognitive diversity in organizations and its impact on collective decision-making, using historical examples and experiments to illustrate the wisdom of crowds. The discussion connects principles from biology and complex systems to the functioning of markets, showcasing how emergent phenomena can influence investment strategies.

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Transcript

Episode notes

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Michael Mauboussin (@mjmauboussin) is Head of Consilient Research on Counterpoint Global at Morgan Stanley Investment Management.

Prior to joining Counterpoint Global, Michael was Director of Research at BlueMountain Capital, Head of Global Financial Strategies at Credit Suisse, and Chief Investment Strategist at Legg Mason Capital Management. Michael originally joined Credit Suisse in 1992 as a packaged food industry analyst and was named Chief U.S. Investment Strategist in 1999.

Michael is the author of The Success Equation: Untangling Skill and Luck in Business, Sports, and Investing, Think Twice: Harnessing the Power of Counterintuition, and More Than You Know: Finding Financial Wisdom in Unconventional Places. More Than You Know was named one of "The 100 Best Business Books of All Time" by 800-CEO-READ, one of the best business books by BusinessWeek (2006), and best economics book by Strategy+Business (2006). Michael is also co-author, with Alfred Rappaport, of Expectations Investing: Reading Stock Prices for Better Returns.

Michael has been an adjunct professor of finance at Columbia Business School since 1993 and is on the faculty of the Heilbrunn Center for Graham and Dodd Investing. He received the Dean's Award for Teaching Excellence in 2009 and 2016 and the Graham & Dodd, Murray, Greenwald Prize for Value Investing in 2021.

Michael earned an A.B. from Georgetown University. He is chairman emeritus of the board of trustees of the Santa Fe Institute, a leading center for multidisciplinary research in complex systems theory.

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[07:12] Latin roots.

[09:14] No business education? No problem!

[12:15] The best food industry analyst.

[15:36] Consilience.

[19:58] Complex adaptive systems.

[23:26] Diversity.

[26:23] The wisdom of crowds.

[32:42] The minimum effective dose of cognitive diversity.

[36:02] Designing experiments.

[43:49] Against the Gods and Complexity.

[49:56] Value investing and the Santa Fe Institute.

[53:57] A brief 21st-century asset class tour.