We Study Billionaires - The Investor’s Podcast Network

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

Jun 28, 2024

01:07:23

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Financial experts Clay and Kyle discuss implementing mental models in investing inspired by Charlie Munger. They explore concepts from physics, biology, and psychology to improve decision-making. Topics include market equilibrium, managing risks, evolution in investing, holding stocks of high-quality businesses, and overcoming psychological biases in investment decisions.

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Quick takeaways

Equilibrium analysis is crucial for understanding market cycles and seizing opportunities at varying stock prices.

Market efficiency thrives on diverse investor mindsets, surpassing individual insights for collective market wisdom.

Biology and sociology concepts mirror market selection mechanisms and human behavior's impact on investment decisions.

Incentive structures play a pivotal role in driving shareholder value and stability in successful companies.

Deep dives

Exploring Mental Models from Various Fields for Better Investing

Kyle and the speaker delve into Robert Hackstrom's book and the utilization of mental models, ingeniously applied by Charlie Munger in the investment realm. Concepts from physics, biology, sociology, and psychology form the basis of discussion, including equilibrium, market diversity, and loss aversion.

Intro

2min

Integrating Mental Models Across Disciplines

9min

Exploring Equilibrium in Physics and its Application to Investing

5min

Investing in Disequilibrium and Managing Risks

7min

Evolution of Investment Concepts and Market Dynamics

25min

Benefits of Holding Stocks of High-Quality Businesses and Psychological Biases in Investing

7min

Overcoming Myopic Loss Aversion in Investing

16min

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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