Investing Lessons From Tardigrades | The Acquirer's Multiple®

During their latest episode of the VALUE: After Hours Podcast, Travis, Taylor, and Carlisle discussed Investing Lessons From Tardigrades. Here’s an excerpt from the episode:

Tobias: JT, you want to do your–?

Jake: Yes.

Tobias: I’m being a little presumptuous, but you do have veggies for us today? You’ve never failed me yet.

Jake: Yeah, I was going to say, “What’s the streak? What do we have to get to–?” [crosstalk]

Tobias: I don’t want to just assume. I shouldn’t just assume.

Jake: All right, I’m changing my background, so that this will explain for this particular–

Tobias: That’s the tardigrade.

Jake: Yeah, I’m surprised I haven’t done a segment on this before, because we are talking about the ultimate in biological resilience when we talk about the tardigrade. I’m such a huge fan of resilience, and I like biological analogies. So, I feel like this has been one that’s such a layup. These little guys in the picture, as you can see, they’re colloquially referred to as water bears or moss piglets. For those who can’t see, they look like this little eight-legged kind of gummy bear or maybe a little tiny manatee with legs. They’ve been on Earth for about 600 million years, which precedes the dinosaurs by 400 million years. We’re talking such an incredibly long track record. They’re older than sharks, they’re older than trees. This is something that is really built to last.

Tobias: They can survive space as well, can’t they? They can survive– [crosstalk]

Jake: Toby, come on–

Tobias: Sorry, I don’t want to get stepping all over your work. Sorry, mate.

Jake: [laughs] So, the phylum that they inhabit is, within the animal kingdom is, much closer to lobsters or crabs or spiders than it is to bears. They’re these tiny little things. They’re 1 mm in size, which is about four one hundreds of an inch. Very, very small. They’re found all over the world, mountaintops and the Himalayas, the deepest sea, trenches, tropical rainforests, even Antarctica. It’s amazing.

They feed on plant cells, algae, and sometimes, other small invertebrates. Despite looking like they’re kind of squishy, they’re actually covered in this tough cuticle, it’s called that’s more similar to the exoskeleton of a grasshopper or some other insect. Just like other insects, they have to shed their cuticle in order to grow. So, they basically slough off their skin and then grow into a bigger one. I’m sure everyone at home was wondering about their mating habits. So, [Tobias laughs] let’s get into that.

Tobias: Finally.

Jake: Yeah, finally. So, these little water bears, they actually do some kind of courting before mating. I don’t think it’s buying flowers, because I don’t think this is all that romantic, because it turns out researchers have found that up to nine males aggregate around a female to mate.

Tobias: Just like humans at the clubs. I’ve seen it happen.

Jake: Oh, man. [laughs] So, to get into what Toby was referring to as far as their survival stats, which are absolutely mind boggling. So, these are conditions in which they’ve survived. -460 degrees Fahrenheit, which is just above absolute zero.

Tobias: Are they still moving at that level?

Jake: No. Plus 300 degrees Fahrenheit, pressure six times greater than the Mariana’s Trench, the vacuum of outer space as Toby stepped all over. Going without food or water for more than 30 years only to later rehydrate forage and reproduce. One report found a leg movement in a rehydrated 120-year-old specimen.

Tobias: Wow.

Jake: They can withstand 1,000 times more radiation than other animals. They handle these extreme conditions. They enter basically this state of suspended animation. They curl up into this little ball. It’s called a tun, when they’re in that state, T-U-N. Their metabolism lowers to one-100th of a percent of normal, and their water content drops to 1% of normal. So, they basically freeze dry themselves when conditions are difficult. And a study out of Tokyo in 2015 found that less than 1.2% of their genes are the result of horizontal gene transfer. Meaning that they really evolved as their own distinct creature. That same study found that this high expression of this novel tardigrades unique specific protein that has this suppressed like DNA suppressing or DNA damage suppression effectively. And so, these little moss piglets are basically Mother Nature’s ultimate and resilience. So, let’s see if we can torture some analogies back to and stick to landing.

Tobias: This is the best part.

Jake: Yeah. So, number one, one is reminded of Charlie Munger putting the Daily Journal portfolio into hibernation, lowering the metabolism of it, and into nothing but T bills. And then when the environment becomes more conducive to investment, he’s back at full strength, like, just the ultimate impatience, just like a tardigrade would. Being very small actually allows them to go nearly anywhere on Earth. There’s a similar advantage in managing money where you can go anywhere and exploit small pockets of inefficiencies when you’re very small.

From a life perspective, I think maybe Munger talks about this a lot, like, one of the greatest hacks for happiness and contentment are to lower your expectations. And likewise, from a personal finance point of view, I think your best defense against inflation is likely maintaining a low-cost structure, so, a low metabolism. Keep a low surface area for inflation to attack you. So, basically, living within your own your means is a great way to be resilient, kind of similar to what a tardigrade does when it’s facing a difficult as.

As John D. Rockefeller said, “Save when you can, not when you have.” So, tardigrades don’t share a lot of genetics with other species, and so they’re their own distinct creatures. I would say that the best investors are also their own unique creatures. They usually share some DNA with other successful investors, but they aren’t copycats. They usually find their own style that’s authentic to them. And then the last thing, tardigrades have that unique protein that we talked about that suppresses DNA damage. I think we can strive to control our environments as best we can to express the mental proteins of resilience which suppress investment related brain damage.

So, I often think that a lot of investments aren’t really worth the headache, and so maybe steering clear of some of those where the return on brain damage just doesn’t justify it. So, there’s Mother Nature’s ultimate resilient animal, and maybe a couple of things that we might be able to adopt from them.

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