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 earths 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 wont 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 its 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: Elephants brain weighs around 5 kilograms compared to human brain
which weighs around 1.5 kilograms. Bigger neednt 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 tolearn
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 thats common to both
of us; atoms. In 1803 John Daltoncame 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 Lavoisiers 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 Thomsons 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 Grahams
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 Grahams
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 todays 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 Bens approach was just to
buy a group of statistically very cheap stocks. Andit 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: Lets 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. Its about five hundred million years
old and is called the reptilian brain (and in fact it does look like an alligators

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 bodys 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 thecortex, 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. Its 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.

Regards