Unveiling Investment Truths from Antiquity: Lessons from Stonehenge

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During their latest episode of the VALUE: After Hours Podcast, Taylor, Carlisle, and Brewster discussed Unveiling Investment Truths from Antiquity: Lessons from Stonehenge. Here’s an excerpt from the episode:

Jake: All right, veggies. So, as you know, I was in London last week. While I was there, I took the family to see Stonehenge. So that’s what’s in my background here. I actually took this picture, and I have to say I was quite impressed with it. A lot of times, those things underwhelm. But the stones are a lot bigger than you might expect. There’s this feeling that you’re really on hallowed ground. I felt like I was part of some deeper history while I was there. There’s kind of an aura to it. So, a little bit about it.

It was built in several construction stages over 1,500 years and starting in 3000 BC. This is 5,000 years ago, which is absolutely insane. They really are a feat of ancient engineering. But we should probably also note that they weren’t smart enough to know that it was BC at that point. But we had this lovely tour guide, and shoutout to Lucy, and she taught us all kinds of historical facts while we were there. One involved a bit of magic. And so Geoffrey of Monmouth was a Catholic cleric from Wales who lived around 1000 AD. And Stonehenge, at that point, was actually like four-fifths of its known age by then, which is a crazy way to frame it. But Geoffrey is remembered for his– [crosstalk]

Bill: Wait, can you explain that to me?

Jake: 1000 AD-

Tobias: It was 4,000 years.

Bill: -was 1,000 years ago and then you had 4,000 more years before that when Stonehenge was built.

Bill: Ah, okay. I think I do follow.

Jake: Yeah.

Bill: Roger.

Jake: So, this Geoffrey, he’s remembered for his structuring and shaping of the Merlin and Arthur myths. His works created the vast popularity which still continues today. He’s viewed as the major establisher of the Arthurian canon. And so, before that, the stories were basically an oral tradition like Homer’s Iliad. One of Geoffrey’s stories in there was how Merlin moved Stonehenge. The legend goes that Merlin had giants pick up the stones and transport them to their current site on Salisbury Plain, and reassemble them there as a monument to Britons who were killed while fighting invading Saxons. And so, they were effectively like giant tombstones.

The odd thing is that Geoffrey was actually right, not about the giants and the magic, but that the stones were moved from far away. And in fact, they were moved 180 miles from Wales. And relatively, recently, we found out that the site where the stones like we found the actual site where they originated. And so, there’s this kernel of truth in the ancient story of Merlin that had been hiding there all along in plain sight that they had been moved. Taleb’s pointed out before that, “There’s often something smart that emerges from the crucible of history of kind of old wives’ tales.” Like, “Why does it keep getting passed down?” And for instance, it’s bad luck to put your hat on a bed, apparently. That’s not because it’s bad luck, but it’s because that increases the chances of you transmitting lice or bedbugs or whatever if you put your hat on the bed. And then there’s also the Lindy effect, which the longer that something’s been around, the more likely it is to persist.

There must be a reason why it existed for so long that it’s been able to survive volatility and stress for that whole time period. So, it’s probably able to survive future volatility. And this also harkens back to the segment we did on Chesterton’s fence, where like, “Don’t take down a fence that you don’t understand why it’s there to begin with.” There’s actually some math around the Lindy effect, where imagine that there’s an equal probability between something being 1% of its lifespan and then 99% of its lifespan. So, if you think on average there, 50% is the mathematical average, obviously. So, if you know nothing else, then halfway through the lifespan is the logical guess.

So anyway, hearing all these ancient stories got me thinking, “Are there investment truths from antiquity that we might be wise to explore?”

Tobias: Was anything carved on the like, value spread is wide hoping for value spread to close, any– [crosstalk]

Jake: Yeah. Actually, it said like sell and go away.


Jake: Yeah. So, the first one, we’ll talk about is Aesop’s Fables, and specifically his observation that a bird in the hand is worth two in the bush. This gets into appropriate discount rates, risk minimization, the time value of resources, maybe even a little bit of over certainty bias and variance drain if we squint hard enough. I think there’s something to be said about betting on sure things. It’s what Buffett would probably tell us.

Next, we have a verse from the Bible, and this is the Book of Ecclesiastes, Chapter 11, verses 1 and 2. And in this, King Solomon says, “Cast your bread on the surface of the waters, for you will find it after many days. Divide your portion among seven, or even eight, for you do not know what disaster may occur on the earth.” So after all this debate that the three of us have had over the years, we now know what the ideal position sizing is, and it’s apparently [Tobias laughs] seven or eight holdings.

Tobias: [laughs]

Jake: So, I’m glad that we could put that to bed. And then lastly, what we’ll cover is the Talmud Portfolio. The Babylonian Talmud was this book of ancient wisdom, and it was compiled around the year 500 AD. So this 1,500 year old wisdom is like, it’s old portfolio management and asset allocation strategy. I think this is the first time I heard about it was probably from our friend Meb Faber, who’s talked about this before. But the Talmud Portfolio is one-third in business, one-third in land, and then one-third in reserves at hand, you would call it. How would you break that up then, like one-third in business, what do you think that that counts?

Tobias: Yeah- [crosstalk]

Bill: No, I think that would be equity real estate.

Tobias: -one-third real estate, one-third cash.

Bill: Yeah.

Jake: Yeah.

Bill: That’s possibly true. Yeah. I like, what is it, the Markowitz portfolio. The 25-25-25-25?

Tobias: What’s the other 25?

Bill: You got like gold, cash, bonds, equities.

Jake: That’s not far off probably from what this is. Business, you would put private equity in stocks. Land, maybe more called like real assets, I would say like real estate, commodities, probably. I don’t know what else you might stick in there. And then the reserve is probably cash, bonds, gold,-

Tobias and Jake: Crypto.

Jake: Sure. Crypto, of course.

Bill: Got to do crypto.

Tobias: [laughs]

Jake: Yeah. Anytime you can get 12 years’ worth of lending effect for something. Stability of an asset, that’s what you want to go for. Anyway, so there’s a few pieces from antiquity that might be some ancient wisdom. This is what I was thinking about while I was wandering around Stonehenge.

Tobias: Did you have a look at the notch that lines up for the solstice?

Jake: I did. Yeah.

Tobias: There’s one that’s a peak and one that’s [crosstalk] something like that. Is that true?

Jake: Yeah. The other one I think is for the summer and there’s one for the winter supposedly, and they both are captured there.

Tobias: Is it not just–?

Jake: I think they’re different. I don’t remember exactly the specifics of it, but I just remember being impressed that they could figure out on this day that perfectly lines up.

Tobias: Yeah.

Jake: That’s pretty good.

Tobias: How’d they do that?

Jake: And also, I didn’t realize this either, but let’s say like two pillars and then a stone sitting on top of it. Well, on top of those pillars, there’ll be like a knob on top of it that had been carved into it, like a dome. And then on the top piece, it’s hollowed out to match that dome. So, almost like a Lego sits on top of it. So, they’re not just resting on it in a haphazard way. It’s perfectly designed to fit together, and that helps with the stability, which is how you probably needed to do it to keep it from falling over for 5,000 years.

Bill: It’s truly amazing.

Tobias: What if [crosstalk] somebody knocking it over?

Jake: Like by yourself, as a human? No way. [crosstalk]

Bill: Okay. But what about Toby and I after, I don’t know, kettlebells for two straight weeks and a whole bunch of protein?

Jake: Then yes, definitely.

Bill: Okay.

Jake: They weigh like 40 to 50 tons-

Tobias: All right, not going to move that -[crosstalk]

Jake: -each one. You’re not moving that.

Bill: We might need one NFL lineman, Toby and I. But we’d be good.

Jake: If you got a big enough running start.

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