The Rushmore Yardstick
How to ignore all-pervasive noise? Whom to learn from? My answer: stick to those who make it to Mount Rushmore of their respective domains.
I achieved my lifelong dream of titling an essay like a Robert Ludlum novel. Isosceles Triangle. Bangalore Cantonment. Voltage Stabilizer. Bridgewater Associates. Red-herring Prospectus.
Bad jokes apart, this essay is about isolating signal from noise. Whenever I hear how great it is that everyone has access to all information at their thumb tips, I cringe. It’s terrible, not amazing. Noise overload is like choice overload. It leads to disastrous decisions, mental health problems and day trading. Buggy humans can’t even handle Maggi variants (just give me the one from childhood and burn that atta ragi desiccated veggies added crap). How to weed out nonsense and absorb sense?
My method, which has served me well, is to apply the Rushmore Yardstick: who would make it to Mount Rushmore of the domain I am trying to understand? Answer is usually apparent, in a I-know-it-when-I-see-it sense. I obsessively study how Rushmoreans think about their domain, while ignoring everyone and everything else. Let me explain using investing as example.
Investing’s Rushmore list is easy: Graham, Buffett, Munger, Bogle. Graham said three things. Market’s nuts, ignore it. Since real businesses underlie market nuttiness, gauge what they’re worth. Act only if you spot a good deal, but don’t cut it too fine. Buffett and Munger added a tweak. Apply Guruji’s method only to businesses whose worth increases over time. You can make higher returns on larger sums over longer periods for less work. Case closed. Rest is detail.
Bogle approached the problem from a better angle. He said “Not so fast”. Those three fellows are freaks of nature. Most of you aren’t. You’ll mess it up, as you always have. Plus, there’s a kutti problem called fees. Bogle’s advice to most: don’t even try. Regularly buy everything without giving us scamsters a cut. You’ll get a fairer deal and better businesses will automatically grow on you. All four clarified that it takes a long time for good things to happen and it can get very ugly on the way.
After nearly two decades at it, that’s all I know about investing. New-age folks claim to be lifelong learners and expand their circle of competence every forty-five minutes. Not me. I haven’t learnt one damn thing outside of what’s mentioned above. My circle has shrunk over time as hard knocks made me more aware of my limitations. Any success has been a function of remembering the obvious, not reaching out for the esoteric. I keep revisiting Big Four’s timeless writings to better appreciate nuances and not to get ahead of myself.
Rushmore Yardstick is at the heart of my noise filter. I go through life one business at a time. Any info that helps me assess the business is signal. Rest is noise. I parse whatever info I gather though an unchanging framework. Can I understand this? Is this safe and sustainably good? What’s it roughly worth? Every few years, I look back and ask the Bogle question “Should I even bother”.
How about others outside of Big Four? I do read other stuff because it’s interesting or funny (mostly latter). But I don’t take it seriously, in the sense that it doesn’t change my basic way of thinking about investing. Rushmore yardstick lets me view experts with a sense of proportion. Once reference point is Big Four, contrast makes it easy to spot astrologers, charlatans and finance academics. I can be discerning about what I process and how I process it.
If you got my point, you would stop reading now. If you’re still here, I’m sorry. There’s nothing I can say that Big Four haven’t already said. I’ll definitely say it worse. In some fields, popularizers are useful. It’s easier to appreciate science from Carl Sagan than try to work out Maxwell’s equations. But, in social domains, Rushmoreans tend to be excellent communicators. Their clear thinking and simple prose obviate the need for interpreters. Since human nature is unchanging, their tenets tend to be timeless. I’m redundant. My essays certainly are. Just go to Annual Letters and work your way in chronological order.
Rushmore Yardstick applies to neighboring domains. To understand financial services, absorb everything Aditya Puri and TT Srinivasaraghavan have said. My newspaper screen is whether any Rushmoreans (of respective industries) have given interviews. Yardstick even applies to economics, the domain with maximum noise. Keynes made the case for why we need government and Hayek for why we don’t. Since world is messy, both are right. All of policy is about striking a balance between the two, or having a pendulum clumsily swing back and forth. Ignore seventy-two blokes who crawl out of the woodwork one day after Union Budget. In behavioral science, stick to Kahneman, Tversky and Schelling. To appreciate mental aspect of the game, overdose on Rahul Dravid and Eliud Kipchoge. Comedy, my other passion, lets me appreciate human frailty. I spend disproportionate time on Wodehouse, Tina Fey, Seinfeld and Crazy Mohan. There are other worthies in every domain and your list will differ from mine. However, most of the territory in each domain can be covered through a low single-digit number of Rushmoreans.
Rushmore Yardstick divides world into core coursework and electives. My core is a small set of Rushmoreans from investing and business world, with an occasional sportsperson, comedian or psychologist thrown in. I keep revisiting the core to make sure I don’t forget basics. I treat electives as light, optional, entertaining reading that doesn’t change my worldview in any fundamental way. Occasionally, I may stumble on something profound, but I’m not counting on it. Most important, I totally block out those at the opposite end of this spectrum: talking heads, anyone talking their book, stock tippers, crypto evangelists, macrostrologers. Viewing most of the world as comedy or counterparties takes internet from overwhelming to tolerable.
Rushmore Yardstick is arrogant. All, except a small number, are downgraded if not dismissed. Unfortunately, I haven’t found any other way to survive a messy world that’s always on. Unicorn market froth is not a patch on bubble in ‘experts’ on the internet. While this arrogant filter is essential to survive all that goop, a few clarifications are in order. Even within investing, your Rushmoreans will differ from mine. If your method is different, you may create a Mount Rushmore out of factor, algorithmic or quantitative investors (I wonder who’s on day-traders’ Mount Rushmore. Am guessing it rests on an active volcano). Even if your investing approach is similar, your role models needn’t be. The best investor I know binges on Darwin more than anyone else (talk of someone who deserves to be on all of humanity’s Mount Rushmore). If you’re investing at the cutting edge of technology, your Rushmore list may be younger and fast-changing. If you’re a business manager, you’ll have very different consideration set and criteria.
I am not recommending same Mount Rushmore for every investor, let alone folks from other domains. However, I am recommending a similar stringent yardstick. In any domain, there is a short list of people who truly have first-principles understanding of how to navigate that part of the messy world. They understand, what Graham calls “The nature of the beast”. They’re like Neo in Matrix, seeing the 1s and 0s through all that Maya. There’s disproportionate learning from obsessively studying such folks, and disproportionate sanity from ignoring nearly everyone else. That’s the Rushmore Yardstick.