Moontower #36


​In 1974 a researcher named Paul Slovic studied professional horse bettors. He let them each choose 5 pieces of information to make their predictions. Whatever they wanted from an extensive database. Horse’s age, jockey weight, etc. The bettors could each have a custom list of 5 variables.

The bettors turned out to be nearly 2x as good as chance in predicting winners 17% vs 10% since there were 10 horses running. Furthermore, the betters assigned a 19% confidence to their bets suggesting they were also well-calibrated.

As betting rounds continued, the bettors were allowed more pieces of information culminating in a final round where a bettor was allowed 40 variables.

What happened? Access to more variables had no effect on their accuracy but doubled their confidence. (Source: Adam Robinson interview)

1. Humans struggle to process too many sources of information effectively.

Psychologists and common sense suggest we simply can’t hold too much in our working memory. Since storage is upstream to processing it feels safe to conclude we can’t integrate too many variables in our reasoning.

2. Excessive information can lead to false confidence.

Humans are slaves to narratives, most of which are not rigorously tested. In Moneyball, old school scouts thought having a six-pack was predictive of a player’s success. This might be true if you are choosing from random people and have no other info. But when you are looking at a narrowed pool of baseball players, the sight of impressive abs loses its weight relative to the information file that was used winnow the candidates in the first place. The excess info can not only distract us from our proven model but, and this is diabolical, increase our confidence.

Implications for Reading

When reading to learn, as opposed to entertainment, search for the books that matter. The lessons that generalize. The handful of variables that do most of the explaining.

Probabilistically speaking, the non-fiction you picked up at Hudson News in Terminal 3 is best used to lined a birdcage.  The canon that has stood the test of time gives you perspective. You need perspective to judge. Perspective shifts in increments, while the latest study simply gets written over. A draft better off never seen.

Instead of filling your brain with the facts most likely to expire, let’s optimize our reading time.

What to read

Bill Gates has called Charlie Munger, Warren Buffet’s partner at Berkshire Hathaway, the “broadest thinker he’s ever met.” Heavily influenced by Ben Franklin and his almanac, “Poor Charlie’s Almanack is a collection of Charlie Munger’s best advice given over 30 years, in the form of 11 speeches given as commencement addresses and roundtable talks.” Allen Cheng’s notes are outstanding and sectioned by topic. (Link)

While I prefer to be cautious when drawing lessons from outliers such as Munger, his emphasis on multidisciplinary learning bears repeating.

By collecting a broad range of mental models you can more effectively pattern-match phenomena in one discipline with more general phenomena that you may have discovered in a different field. Farnum Street describes 109 handy mental models to add to your repertoire. (Link)

How will they help?

1. Improve your analysis and more importantly predictions

Many phenomena are just instances of a more general one. To analyze the phenomena at hand, we can study how the general one usually plays out. The general one will have a long history and wider sample set to draw from. Consider a hardware store and a candy shop. They seem very different but both are straightforward examples of brick and mortar retail. The underlying business principles are going to be more similar than the difference between Skittles and a chainsaw. In essence, we are collapsing many data points into the ones that mattered. Rather than study every type of brick and mortar we can reference our mental model for how brick and mortar businesses work. Remember the horse bettors. Isolate the information that matters.

2. Avoid misdiagnosing a problem 

When you are too narrow, you are the proverbial hammer to which everything looks like a nail.

Example in action

According to The Power of Mathematical Thinking, there was a year in which North Dakota had the lowest cancer rate and South Dakota had the highest. Explain how that can happen.

Reveal the answer

Where To Start

To get a start or reboot of a personal multidisciplinary education Naval Ravikant offers suggestions:

  • Stick to science and the basics
  • Generally, read the things that people agree on: “The longer something has been in print, the longer it will remain in print and the higher value it is.” What Nassim Taleb calls the “Lindy Effect”.
  • Read lots of microeconomics (NOT macroeconomics)

I’ve offered my own advice in the past. Avoid the news and information with a short half-life. (Link)

How to Read

There are different types of reading which depend on your intent. If you are not reading for entertainment or scanning for a specific piece of info, then you are reading for understanding, retention, and reuse. Mortimer Adler describes analytical and synoptical reading. (Link)

You must read actively which takes effort if you expect to absorb the information for later use. Some techniques for doing this include:

  • State what a chapter or book is about with the utmost brevity.
  • The Feynman technique — “the best way to learn anything”. (Link)

Reading Experiments 

  1. Cedric Shin’s Land and Expand strategy for fully conquering a topic. It assumes you are too tired to read difficult topics after a long day at the office. (Link with my highlights)
  2. The “Barbell”. Nassim Taleb and Marc Andreesen focus on very short term and very long term expiring information. Think social media and classic books.
  3. Dave Perell plunges into “atemporality
    • For days or weeks at a time, I will escape the present moment and only consume content published in a different decade. For example, if I want to learn about the 1970s, all my media consumption will consist of books, videos, and interviews published in the 1970s. By doing so, I’ll embody the mindset of people in a bygone era and gain new perspectives on the here and now. (Link)

The Money Angle

This week I asked about 25 people from my network of portfolio managers, CIOs, and independent investors for the books which have most impacted how they think about risk-taking, investing, and trading. Here’s the Investing Pro’s Library (Link).

Besides books, the web is teeming with analysis and discussion in finance. It wasn’t always this way. 20 years ago when I started at Susquehanna in the options and ETF world there the best places to learn online were not blogs. They were forums. You could come across brilliant gamblers and traders on sites like 2+2 and Wilmott. Fast forward to 2019 and you can gain a substantial education in finance if you follow the right authors. The problem is no longer discovery but curation.

Here’s my short list of who you can’t miss today:

For breaking down high finance topics:

Matt Levine
Byrne Hobart

Quantitative Investing

Philosophical Economics
O’Shaughnessy Asset Management 
Alpha Architect
Convexity Maven

Susquehanna’s Raise Your Game


Musings on Markets by Aswath Damodaran

General Investing

Of Dollars and Data
Movement Capital
Morgan Housel
Michael Mauboussin


Investor Amnesia
American Business History

A more extensive list of blogs to follow can be found on my site. Note that this is only a subset of all the feeds I think are worth subscribing to. If anybody is interested in that giant list, just reach out.

Climb Higher

“The best time to plant a tree is yesterday. The next best time is today”

Here are some tools to kickstart or augment your reading habit.

Free Books

  • Gutenberg is an online library with over 60,000 free ebooks that you can read online or on your device
  • The Libby app lets you access your local library’s ebooks and audiobooks
  • Bookbub alerts you for to the surprisingly common flash sales that slash books down to $1.99 on popular sites like Amazon and Barnes N’ Noble. You can create a wishlist, specify preferred formats and booksellers.

Curated Book ListsIt would make sense to consider the source when someone recommends a book to you.

  1. Is that a person an expert in the topic?
  2. Do they read deeply and widely enough to have good taste?
  3. Do you agree with what they think is good or insightful?
  4. Do you like their writing? If so, you’ll probably like their influences.
  5. The meta factor –do they think about their book selection or actual reading process?

The following people check those boxes for me, so I’m sharing their recommendation lists.

  • Patrick O’ Shaughnessy: The Best “Per Page” BooksLink
  • Venkatesh Rao: Current and All-Time Reading listLink
  • Scott H. Young: Best Books by Topic. Link
  • Shane Parrish: What Books Would You Recommend Someone Read to Improve their General Knowledge of the World? Link

List of lists: Bill Gates, Oprah, Carl Sagan, and many more

  • From How It Actually WorksLink
  • From Most Recommended BooksLink


MS One Note: It has the ability to convert image to text. So if you take a picture of a page from a physical book you can have a digital copy. Great for saving highlights, taking notes, stashing blurbs without needing to transcribe by hand.

Instanovels: The New York Public Library is using the slow-drip IV of Instagram to deliver classic novels. Story here.

Reading Speed

Speed reading is widely debunked as the converted Scott Young explains here. I took a reading test and despite my perfectly average reading speed of 400 wpm that still means reading a book every 1 to 2 weeks is possible. Here’s a test and reading times for various classics based on your speed.

Last Call

  1. How do music conductors actually lead? This Ted Talk by ItayTalgam is an insightful, charming breakdown of some of the greats’ style.
  2. Steve recently noticed that his house Zetimate changed. But Zillow also back-adjusted the whole time series! This falls under the category of what stats folks would call “data snooping” since they use knowledge they would not know at the time to calibrate the model. An old thread on Hacker News about it.
  3. I work on the investing side of the fund business. Yinh is on the marketing side. Adam’s tweet split the dinner table in half.
  4. In a fun fact thread, I learned Vin Diesel taught Judi Dench how to play Dungeons & Dragons on the set of THE CHRONICLES OF RIDDICK and she went on to become DM for her grandchildren. I did not play D&D growing up but got my nerd cred from playing Warhammer 40K type games and hosting a Blood Bowl league in HS. Whether you think it’s a nerd horoscope or a better Meyers Briggs, the D&D alignments are interesting to examine. If you want to take the test and learn about Chaotic Evil or Lawful Good personalities go here.
    • If you can’t guess what I am, here’s my results.
    • If you feel comfortable, share what you get. If I get enough replies I’ll compile the stats of Moontower readers.

From my actual life 

I recently took the kids to the Blackhawk Museum in Danville. There is always a vintage car exhibit. Currently, they have about 90 vehicles on display many of them are one of a kind prototypes. There are even autos from as early as 1902. The 2 other exhibits currently live are about African Art and History of California. The collection of Native American artifacts and exhibits are outstanding and the railroad landscape models are hundreds of feet long. If you ride in the carriage don’t forget these rules! Awesome for kids and adults and if you are under 7 years old admission is free.

Zak’s basketball season recently wrapped (although another one started this weekend). It was the first league he did which didn’t give participation trophies. He was very upset to not get a trophy so we had to have “the talk”. Obviously nothing about birds and bees but how the real world works. . We’ve had this discussion before but facing an empty trophy shelf may have made it a bit more real. It’s easy to lash out at participation trophies but that’s just the surface of the artificial world we create for our kids. The cost of giving kids those trophies is much higher than the plastic they are made out of.

Finally, Yinh and I crashed in NYC this weekend. Thanks for the hospitality Avi and Ivy. We got to visit with my mom before having an awesome dinner at Orale in Jersey City with my sis and brother-in-law on Saturday nite. Oh yeah, then Avi took us to Tool at the Prudential Center. Seeing them live is the best evidence that aliens from the future are speaking to us. We plan to see them again in January in Vegas or San Diego. Yinh called it religious.

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