We Study Billionaires - The Investor’s Podcast Network

TIP640: Investing: The Last Liberal Art w/ Clay Finck & Kyle Grieve

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Jun 28, 2024

Dive into the world of investing with insights from various disciplines! Discover how concepts from physics and biology apply to market dynamics. Learn about psychological biases that lead to investment mistakes and explore the importance of interdisciplinary thinking. The discussion reveals how understanding human behavior can enhance decision-making in stock investments, and why aligning management incentives with shareholder interests is crucial for long-term success. Get ready to rethink your investment strategies!

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ADVICE

Learning Mental Models

Understand the basic disciplines you'll draw knowledge from.
Be aware of the use and benefit of metaphors to remember mental models.

insights

INSIGHT

Mental Models and Opportunities

Applying the right mental models reveals unseen opportunities.
Misunderstandings by others, using wrong models, create these opportunities.

insights

INSIGHT

Physics in Investing

Physics, though seemingly complex, offers valuable mental models for investors.
Equilibrium and disequilibrium exist within markets, impacting investment decisions.

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Unlocking Wisdom Through Interdisciplinary Learning

02:10 • 9min

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Understanding Market Dynamics Through Equilibrium

11:19 • 5min

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Navigating Market Dynamics

16:03 • 7min

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Understanding Market Dynamics

22:51 • 22min

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Investing in Quality: The Debate Between Trend Following and Value Investing

45:13 • 4min

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The Psychological Dimensions of Investing

49:13 • 6min

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Navigating Myopic Loss Aversion in Investing

54:51 • 16min

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Investing The Last Liberal Art

Robert G Hagstrom

In 'Investing: The Last Liberal Art', Robert G. Hagstrom delves into fundamental investing concepts by drawing from multiple fields outside of economics. Inspired by Charlie Munger's 'latticework of mental models', Hagstrom argues that good investment decisions cannot be made solely on finance theory. The book discusses how theories from physics, biology, sociology, psychology, philosophy, and literature can be applied to investing research. It also includes a new chapter on mathematics and updates reflecting the economic developments since 2008. The book emphasizes the importance of a broad education and critical thinking in investment performance[1][3][4].

On today’s episode, Clay and Kyle dive into Robert Hagstrom’s book — Investing: The Last Liberal Art. Charlie Munger is famous for popularizing the use of mental models and pulling key ideas from related fields and implementing them to the world of investing. In today’s episode, that’s exactly what we do, starting with the fields of physics, biology, sociology, and psychology.

IN THIS EPISODE YOU’LL LEARN:

00:00 - Intro

01:27 - How learning new mental models can help us be better investors.

10:49 - Concepts in physics that we can carry over to investing.

25:35 - Lessons we can learn from evolution and complex adaptive systems.

42:00 - What leads to a stock oscillating above and below the intrinsic value.

54:15 - The primary psychological biases as lead to investment mistakes.

01:05:43 - Why Lumine’s incentive structure is a structure worth studying.

And so much more!

Disclaimer: Slight discrepancies in the timestamps may occur due to podcast platform differences.

BOOKS AND RESOURCES

Join the exclusive TIP Mastermind Community to engage in meaningful stock investing discussions with Stig, Clay, Kyle, and the other community members.
Buy Investing: The Last Liberal Art here.
Read Seeking Winners blog here.
Buy What I Learned about Investing from Darwin here.
Buy The Uncertainty Solution here.
Learn more about Charlie Munger’s speech here.
Learn more about Mental Models here.
Read Li Lu’s write-up on value investing in China here.
Buy Poor Charlie’s Almanck here.
Follow Clay on Twitter and LinkedIn.
Follow Kyle on Twitter and LinkedIn.
Check out all the books mentioned and discussed in our podcast episodes here.
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