Welcome to The Nightcrawler, a weekly collection of thought-provoking articles and analysis on technology, innovation, and long-term investing. The Nightcrawler is published every Friday evening by Eric Markowitz, Nightview Capital’s Director of Research.

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Quote of the week:

“Human beings, it seems, are at their best when immersed deeply in something challenging.” — Cal Newport

The link between music and business

One fascinating anecdote from this Farnam Street conversation with Brad Jacobs was that Brad views himself primarily as a musician who just so happens to be extraordinarily successful at building companies: “I self-identify as a musician more than as a businessperson,” he says. “You might find [this] odd, because I’ve spent a lot of time building big businesses and running large enterprises.” 

For the uninitiated, Jacobs is a serial founder and CEO who has started, built, and operated multiple billion-dollar publicly-traded firms. But it was his obsession with music—and studying with jazz greats like Milford Graves—that gave him the foundation of improvisational skills to be successful in business. Jacobs is a fantastic example of a multidisciplinary operator; he takes his cues from the world of art, psychology, math, and music to make decisions in a highly dynamic environment. 

“It’s being able to improvise,” he says. “Part of that whole [jazz] training was to be spontaneous and to be improvising and to be in the moment. And there is no wrong note. If someone plays a note, that’s just a new note; it’s not the wrong note.” He continues: 

  • Key Quote: “That ability to go with the flow in music, you need to have that in business. A lot of people have a rigid business plan that’s spelled out for many years and it’s very non-flexible. That doesn’t usually work. Why? Because life changes, markets change, economies change, people change, results change. You get opportunities that you hadn’t even thought of at the beginning. You need to improvise; you need to capitalize on them and to make money from them. And if your thinking is rigid, if you’re not a musical businessperson, you’re going to lose opportunities. You’re going to have things come your way to make money for shareholders and feel, ‘Well, it’s nice, it’s great, but it’s really not our thing.’ Well, that’s a bad way of thinking.”[/big-key-quote]

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What investors can learn about independent thinking from Moby Dick

Moby Dick was a novel ostensibly about a ship captain obsessed with hunting down a whale. But it’s an allegory about so much more: mania, obsession, blindly following a leader, and taking on too much risk. That is to say, there is a good lesson in there for stock market investors.

Jonny Thomson explores this concept—and particularly the idea of “pluralistic ignorance”—in a recent essay for Big Think. At its core, Thomson’s essay is about the importance of avoiding groupthink and learning to question the status quo.

Referencing Moby Dick, Thomson writes: “The sailors of the Pequod were trapped by a great many things. They were entranced by the spell of Ahab’s personal charisma and anesthetized by a heady potion of loyalty, stirred through with fear. But more than anything else, the crew were caught in a condition known as ‘pluralistic ignorance.'” He continues:

  • Key quote: “Pluralistic ignorance, or the ‘Abilene paradox,’ is when almost everyone in a group thinks one way but doesn’t voice or act upon it because they think everyone else thinks another. It’s the modern name for ‘the emperor’s new clothes,’ where everyone knew the emperor’s new suit didn’t exist, but they didn’t say anything because they thought everyone else knew something they didn’t.”[/big-key-quote]

A few more links I enjoyed: 

Can an A.I. Make Plans? – via The New Yorker

“When holding a serious conversation, we simulate how different replies might shift the mood—just as, when navigating a supermarket checkout, we predict how slowly the various lines will likely progress. Goal-directed behavior more generally almost always requires us to look into the future to test how much various actions might move us closer to our objectives. This holds true whether we’re pondering life’s big decisions, such as whether to move or have kids, or answering the small but insistent queries that propel our workdays forward, such as which to-do-list item to tackle next.”

The king of buy and hold: Nick Train – via Value Research 

“It is wrong to think that stock markets exist in order to make investors wealthy. This is a possible but by no means certain outcome. No, markets have evolved as the most efficient means so far to test and finance new ideas about how to satisfy human needs and wants. Investors fret about the cyclical wobbles of economies and periodic spikes and dips in equity prices but these are irrelevant to this central function of stock markets and to their long term trajectory.” (H/T Alex Morris) 

Balancing Risk and Return: The Simple Statistics of Investing – via Speedwell Research 

“As an investor, it is your job to find opportunities where you deem the probabilistic return to be satisfactory and the potential downside to be remote enough to be acceptable. To paraphrase Seth Klarman on Buffett’s Two Rules comment, ‘the aim isn’t that you will never lose money, but rather that your portfolio will never lose money’ Now this can all feel hypothetical, but how can we practically implement this?”

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