Collective Learning

Imagine an alien inside a spaceship which is orbiting planet earth. The entire life of the earth is unfolded to the alien as a movie and every second in the movie will cover one million year of earth’s age. The movie will run for 75 minutes as the total age of earth is 4.5 billion years. What would the alien see?

During the first one hour it will see a brown continent moving around the surface of the earth. Occasionally it will turn white during ice ages. It won’t find anything interesting. Eight minutes before the end of the movie the earth will turn green and it will see plants and forests popping out. Sixty five seconds before the end a huge asteroid will hit earth and wipe out all the dinosaurs. Earth will momentarily turn black because of the smoke created by the impact. In the last 100th of a second it will see forests replaced by cities, towns, skyscrapers, and highways snaking across all the continents. It will see human beings dominating the entire planet.

After watching the movie the alien will be awed by the supreme power of the humans. Being a curious alien it would want to know the secret behind the human dominance. Unable to answer the question by itself, it goes to Pasadena, California to meet Charlie Munger. The rest of this post is an imaginary conversation between Munger and the Alien.

Alien: Earth has millions of species. How come it’s entirely dominated by a single species; humans?

Munger: Most of the worldly outcomes can be explained by using mental models. If you apply power law then you should not be surprised by this result. Milky Way galaxy contains 100 billion planets. Complex life forms exist only in earth. The odds are one-in-100-billion. Compared to this the odds of humans dominating earth is 100,000 times higher.

Alien: Does the genetic make up of humans give them the power?

Munger: Humans have 46 chromosomes but potatoes have 48. Also a single celled organism amoeba has 670 billion units of DNA compared to 3 billion units in humans. So genetic make does not explain this outcome.

Alien: Does the size of the human brain give them the power?

Munger: Elephant’s brain weighs around 5 kilograms compared to human brain which weighs around 1.5 kilograms. Bigger needn’t be better.

Alien: Then what gives them the power?

Munger: Extreme outcomes like this happens due to confluence of several things. Trying to find out a single cause will lead to man-with-a-hammer. There are few reasons which I can think of (1) powerful brains; but so does chimpanzee, dolphins, and crows (2) development of symbolic language enabled humans to share knowledge and ideas very efficiently (3) knowledge is stored and passed down to next generations so that they can build upon the existing ideas instead of starting all over again. We should all thank Gutenberg whose printing press made mass production of books possible and knowledge got passed down generations after generations without any errors. All of this enabled humans to learn collectively which is the secret behind human dominance.

Alien: Can you give some examples for collective learning?

Munger: Sure there are many. Let us start with something that’s common to both of us; atoms. In 1803 John Dalton came up with his atomic theory. It stated that matter is made up of atoms that are indivisible and it can neither be created nor destroyed. To come up with his theory, he used Antoine Lavoisier’s law of conservation of mass. In 1897, almost 100 years after Dalton proposed his atomic theory, J.J.Thomson working with the cathode ray tubes recognized the existence of a negatively charge particle. Also he figured out that this particle existed in several other elements. Thomson was not able to fully identify the electron. But he was able to determine the mass to charge ratio of the particle.

After 10 years, Robert Millikan performed an oil drop experiment and he was able to find out the charge of a single electron. Using the mass to charge ratio from Thomson’s experiment he was able to calculate the mass of an electron. Thus the first subatomic particle electron was found. Since atoms were neutral (if not everything will stick to electromagnets) there must be a positively charge particle to balance out that electron. Using this knowledge, Ernest Rutherford, student of Thomson, conducted a gold foil experiment and discovered the existence of a positively charge particle called protons.

Hydrogen has one proton, and Helium two, and everyone thought that helium would weigh twice as much as hydrogen. But it had a mass four times as that of hydrogen and everyone suspected an existence of another particle. Using this knowledge, James Chadwick conducted a paraffin experiment and discovered an uncharged subatomic particle called as neutron.

To discover the existence of atoms and subatomic particles, it took 6 scientists and 144 years. Each scientist built upon the knowledge of their predecessors. Isaac Newton was absolutely correct when he said – If I have seen a little further it is by standing on the shoulders of giants.

Alien: I can see the power of collective learning. Do you have another example?

Munger: Let us look at the field of investing. Before the stock market crash of 1929, there was no structure and logic for investing in stocks. Benjamin Graham’s two major works, Security Analysis and The Intelligent Investor created an intellectual framework for sound investment. His framework had two key ideas (1) Mr Market (2) Margin of Safety. Even today Buffett and I use Graham’s two key ideas for investing in securities. Graham was using net working capital to find out the intrinsic value of a business. It worked for him as he was operating when the world was in shell shock from the 1930s. But in today’s world this approach will not work and we changed the way in which we calculate the intrinsic value. But we are still standing on his two key ideas for every investment decision and this will not change for a very long time.

Unfortunately for the would-be Grahamite, however, net current asset value situations do not exist in any quantity today – nor have they existed for most of the years since the late 50s, with exceptions in the early 70s. Therefore, Buffett prefers to give companies “a complete physical exam and then [tries] to buy the ones that are going to outlive the actuarial tables. But Ben’s approach was just to buy a group of statistically very cheap stocks. And…it is harder to find those stocks today. However, Ben would not quarrel with buying stocks that appear cheap based on the present value of their future cash flows. – Evolution from Graham to Buffett


Alien: This is terrific. Do you have any other example?

Munger: Let’s look at the human brain from an evolutionary standpoint. Human brain has three parts and each one evolved during different time periods. But evolution did not throw away the older parts. Instead it built the new parts to perform higher order functions while retaining the old parts to perform the existing functions. Thus evolution was blindly following collective learning.

At the bottom of the brain is the brain stem. It’s about five hundred million years old and is called the reptilian brain (and in fact it does look like an alligator’s whole brain). The reptilian brain wakes you up in the morning, sends you off to sleep at night, and reminds your heart to beat. Sitting on top of the brain stem is the midbrain, also known as the mammalian brain. Roughly three hundred million years old, this is the brain possessed in one form or another by all mammals. The midbrain regulates the body’s internal temperature, houses our emotions, and governs the fight-or-flight response that keeps us alive in the face of danger. The third part of the brain is the cortex, which began to develop about one hundred million years ago. The cortex, which wraps around the rest of the brain, is responsible for the miracle of being human. Civilization, art, science, and music all reside there. It’s where our rational thoughts and creative impulses take place. – The Kaizen Way


Alien: Munger you are a genius and I can see why human beings dominate planet earth. Long live collective learning.


7 thoughts on “Collective Learning

  1. Another great article! Janav, you opened my eyes about the world of Value Investing, for which I will always be grateful to you. With this comment, I’d like to take the opportunity and ask you what career advice would you give to a recent graduate who wants to do Value Investing? Graduate position in an investment firm will be pretty much impossible due to lack of previous experience. I was thinking about starting own business, accumulating capital and later buying established franchises, whereby accumulating more capital and at the age of 30 start value investing. Your advice will be highly appreciated. Thanks!

    • Dino,

      Thanks for your comments. While you are running your own business do value investing on the side even though you have limited capital. This way you will learn a lot and gained tons of experience and you will ready to invest more money when you turn 30.


  2. Brilliant article. Very well thought out. Another interesting perspective is: The universe of events that hasnt unfolded. Humans were lucky in many respects – not being hit by a mass extinction event (virus, asteroid, etc.), finding fossil fuels underground (which accelerated our advances), not blowing ourselves up with nuclear bombs – and of course the lollapalooza effect of having so many things/ resources/ events to our advantage. (and to the earth’s disadvantage).
    As Charlie said: A man was able to brainwash/ influence a very civilized country (Germany) – and things could have gone horribly wrong.
    The universe of events that hasnt unfolded is quite a powerful tool 🙂

  3. Wonderful article Jana. I enjoyed the creativity you brought into this article. Alien (probably Martian) interviewing Charlie is great imagination.

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