How might you connect the dots? My story from natural sciences to investing

Connecting the dots. When you hear that phrase, doesn't your mind jump to images of Steve Jobs and his Stanford address? What a speech! Profound. Inspiring.

But there was only one Steve Jobs. And there won't be another till our memories fade. A stark reminder that there is only one life to live. So you better make it great!

A few years ago, I followed my intuition and started my career as an environmental engineer. All natural sciences, like environmental engineering, tend to be melting pots of biology, chemistry, physics, geology, engineering and law.

And today, a decade after a Wharton MBA and a couple Executive Office advisory roles at the intersection of strategy and finance, I run India's only* Global Multi-Asset portfolio. So how do you even begin to connect these dots?

First, let's answer two simple questions: (1) Do natural sciences resemble math or biology? (2) Does investing resemble math or biology? Then, let's see what patterns and traits emerge as common. And finally, let's bring it all together. Shall we?

1. Uncertainty and randomness are common.

In math, the system is linear. It's organized in a structure. Theories and theorems exist. Binary thinking (0 or 1) holds in general.

In biology and in nature, the system is non-linear. It's complex and difficult to bucket easily. Natural laws and rules of thumb exist. Things are more complicated than simply 0 or 1.

Assuming you broadly agree with the innate traits of math and biology, it is clear that both investing and natural science resemble biological systems more than mathematical ones.

The reality is that both natural sciences and investing are messy. There is uncertainty. There is randomness. In both these fields, one plus one does not necessarily equal two.

2. Broad diversity is common.

In math, there is broad uniformity within and across the system. In biology, there may be uniformity in pockets, but the defining characteristic is non-uniformity or broad diversity across the system.

Let me simplify. In nature, a particular plant species may exhibit uniform traits. For example, they may have similar size, shape and colour of leaves.

But in the overall context of the ecological system, there are many unique plant species, with wide variations across size, shape, colour, texture and smells of its leaves and stems. And therefore broad diversity.

Similarly, in investing, a particular asset class may exhibit uniform characteristics. For example, equities across the world may display similar business drivers, growth patterns and return profiles.

But in the overall investment universe, there are many distinct asset classes: equities, debt, real estate, commodities, currencies, alternative investments, and cash. With wide variations across volatility and return profiles, these asset classes put together exhibit broad diversity.

3. Optimization is common.

In math, we are taught the concepts of optimization and maximization theoretically but explicitly. As an aside, anyone who’s studied high school in India has forgettable memories of these words! In biology, we are left to observe these concepts practically but implicitly.

If you observe the real world closely, you’ll note that nature optimizes the survival of species, many a times at the expense of an individual. If you're unsure, just watch Animal Planet, National Geographic or Discovery.

After all, it's neither the strongest nor the most intelligent but the ones most responsive to change that survive. Remember Charles Darwin and his theory of evolutionary biology?

Well, prudent investing is no different. You optimize the performance of the overall portfolio at the expense of individual geographies, asset classes or securities. Both fields are naturally inclined towards optimization, not maximization.

Let's bring it together now. It seems that both investing and natural sciences share intrinsic traits – uncertainty, randomness, diversity, and optimization tendencies. Both fields require you to have a broad-based, multi-disciplinary approach to thinking and to life in general.

When I was embarking on my natural sciences journey, little did I know that I was conditioning my mind for thinking across disciplines. When I was an Executive Office advisor, little did I know that my obsession with balancing corporate strategy and finance would be key to identifying economic moats.

Today, I know for a fact that learnings from natural sciences and corporate strategy have made me a better investor. And learnings from investing have made me a better observer of businesses, nature and life.

But as Steve Jobs said, you can only connect the dots looking backwards. Till then, you have to trust your gut, destiny, or whatever larger force you believe in.

This is my attempt to connect the dots looking backwards. I encourage you to follow your heart, love yourself, do great work (and only great work), trust in a larger force, and then eventually connect your own dots.

As I leave you with Steve Jobs addressing the Stanford class of 2005 here, I hope that you have the courage to stay hungry and to stay foolish. To think differently. To expand your horizons. To own the world.

---

Kunal Mashruwala is a global investing practitioner and owns Mash Capital, a SEBI-registered firm that manages India's only* Global Multi-Asset portfolio. Please feel free to reach him at info@mashcap.com. Standard disclaimers apply.