Investing Lessons from Mole Rats: Resilience, Adaptability, and Survival

During their recent episode, Taylor, Carlisle, and Ian Cassel discussed Investing Lessons from Mole Rats: Resilience, Adaptability, and Survival. Here’s an excerpt from the episode:

Jake: -I wanted to stick with something animal themed for this week with Ian coming on. I actually received inspiration for this segment on a daily walk while I was listening to Warren and Charlie, as I’m want to do. At the 1996 Berkshire Annual Meeting, Buffett tells this funny little story. I’ll quote right here. He says, “I made the mistake of taking Charlie up to Microsoft in December. He became friends with Nathan Myhrvold. They were corresponding back and forth with increasing fervor and enthusiasm about mole rats. They copy me on all these communications, so I’m getting to see this flow back and forth on the habits of mole rats. I haven’t really found a way to apply it at Berkshire, but I’m sure Charlie has got something he’s working on.”

So, just to keep it fresh with everybody, because we’re on Season 7 at this point. [Tobias laughs] For today’s veggie segment, we’re going to learn about mole rats together. The way we’re going to do it is a little bit novel. But first, I’m going to tell you a little bit about Nathan Myhrvold. I think that’s how you say his name. He’s quite the polymath, actually. Showed a lot of expertise in different disciplines. At the time, in 1996 of this recording, he was the chief technology officer at Microsoft. And so, he’s, obviously, fairly instrumental in shaping the world of information technologies that we live in today.

He left Microsoft in 1999, and he founded Intellectual Ventures, which was a company focused on developing and licensing IP. He’s made contributions in paleontology, actively participating in dinosaur research, like coauthoring papers on topics like the biomechanics of dinosaur’s tails, even going on field expeditions to excavate fossils. He had an artistic side. He’s an accomplished wildlife photographer, which is probably where these mole rats come in.

Tobias: Has he also written a cookbook?

Jake: Yes. So, he wrote a cookbook called Modernist Cuisine. That’s a deep dive into the science of foods, and including the role that animals play in agriculture and sustainability.

Tobias: One of the things that he was doing in that was trying to find the perfect French fry, and he decided that you had to cavitate the inside of each French fry using sound waves, I think. So, it gives you a mash inside the French fry.

Jake: Liquify it, huh?

Tobias: -and then you fry the outside. Sorry. So, the man’s doing incredible work out there, just to [crosstalk] where he is.

Jake: That’s doing the Lord’s work is making the perfect French fry.

[laughter]

Jake: He even led efforts to combat mosquito borne diseases like malaria by building this laser system that would target and shoot mosquitoes midflight basically.

Tobias: Practical.

Jake: Yeah, quite practical. So, you could see why Nathan and Charlie might hit it off and have quite the correspondence. So, to keep things fresh, I wrote a little play as if Nathan, Warren and Charlie were discussing mole rats, and investing and how they combine together. And so, we’re going to do a little live table read for you. This could be an absolute, unmitigated total disaster. We haven’t even practiced this at all. So, it’s a blind read. So, buckle your seatbelts, put on your crash helmets, but we’re trying to keep things fresh.

So, I will start off things as the narrator saying. The year is 1996. It’s mid-May, shortly after the Berkshire meeting. Warren Buffett, Charlie Munger and Nathan Myhrvold are seated in a cozy study surrounded by bookshelves filled with biographies, biology texts and a few war worn copies of The Intelligent Investor.

A coffee table holds a large box of peanut brittle encircled by a rainbow of aluminum cans of Coke, Diet and cherry Coke. And in the air is a sugar high mixed with intellectual curiosity. There’s a taxidermored naked mole rat. It’s just sitting on the coffee table, ugly as sin. And you guys should look up a picture of what the mole rats look like to really bring this home.

All right. So, with that, we’re going to kick off this conversation.

Ian: Well, I’m Buffett.

Jake: Yes. Sorry. So, Ian is playing the role of Warren Buffett, I’m Nathan and Toby’s going to be–

Tobias: This is more [unintelligible [00:34:53] Munger’s has ever had in his entire life, but [Jake laughs] I’ll do my best.

Ian: All right. I don’t know if you can see this, but here’s the Coke. So, I’m Buffett. “You know, fellas, I’ve been enjoying the fascinating correspondence between you, although it’s been cutting in my bridge playing time. When you were talking about mole rats, I didn’t realize how hideous these little creatures are. These things are soggy cigar butts of the animal kingdom.”

Tobias: “Ah, yes, mole rats. Nature’s little contrarians. Most animals are fighting it out on the surface, but they go underground where no one else wants to be. Nathan thinks that it the ideal metaphor for resilience, adaptability and teamwork. Warren, you must agree, as you’re smart and he’s right.”

Jake: “Thanks, Charlie. Mole rats might not be conventionally beautiful, but they’re a highly successful species. Just start with longevity. These little creatures live over 30 years, which is particularly unheard of for a rodent.”

Ian: “30 years? That’s a lot for compounding from a rat.”

Tobias: “We’ve come across a few rats in our days, haven’t we, Warren?”

Ian: “We’d better cut you off here, Charlie. We criticize by category, not by name.”

Tobias: “Longevity in nature, just like investing, comes down to survival. Mole rats are built to last and that’s what every great investor should aim for, durability. It’s why we focus on businesses with strong motes and avoid chasing fads.”

Jake: “Yeah. You know, Charlie, their longevity is tied to their cellular resilience. They’ve developed unique DNA repair mechanisms which prevents and protects them from cancer and age-related diseases.”

Ian: “That sounds like Coca Cola. Durable, steady and beloved, no matter the environment. Cases sold goes up, share count goes down.”

Jake: “Mole rats thrive underground in some of the harshest conditions imaginable. Low oxygen, scarce food, high acidity. They’ve evolved to conserve energy and share resources efficiently, ensuring the colony survives. Mole rats store food in underground caches for the lean times.”

Ian: “We do the same thing, but with gobs of cash.”

Tobias: “I celebrate frugality in all its forms. As Ben Franklin said, ‘A penny saved is a penny earned. The name of the game is conserving capital, avoiding stupid risks and focusing on quality.’ Mole rats don’t waste resources going for minutes without oxygen.”

Ian: “Cash is the oxygen in a business. When it’s around, you don’t notice it. But as soon as it’s gone, it’s the only thing you notice.”

Jake: “You know, living underground, mole rats can tolerate extreme heat.”

Ian: “Ah, like a value investor in an overheated market like 1999. They don’t let the outside temperature get them overly excited. I regularly have to check Charlie for a pause. He’s such a hyperkinetic fellow.”

Tobias: Munger makes a face for those people listening at home.”

[laughter]

Ian: Do we still have an audience?

Jake: “Yeah. No, everyone hung up by now. “Mole rats use social behavior as another standout trait. Each colony is highly organized with the queen, workers and soldiers. Every individual has a specific role, and they collaborate to keep the colony functioning.”

Tobias: “Well, as Adam Smith taught us with his Pin Factory, ‘Specialization is also how humans have created so much material wealth.’”

Ian: “There are more synergies in a mole rat colony than there are in corporate America’s M&A.”

Jake: “Here’s another fascinating fact. Mole rats are nearly insensitive to pain. They don’t feel the effect of the acidic environment.”

Tobias: “That’s an enviable trait for an investor. If you can’t stomach a 50% drawdown with some equanimity, you don’t deserve equity like returns. I remember Warren in 1973. He wasn’t feeling the pain. In fact, he was like a kid in a candy store.”

Ian: “I think the analogy I used was an oversexed man in a whorehouse, but Charlie is usually the one using colorful language. So, Nathan, should all investors be taking mole rats as their new spirit animals?”

Jake: “Well, maybe. But at the very least, they remind us that survival, resilience and adaptability are universal principles, whether you’re a rodent or an investor.”

Tobias: I have nothing to add and seen.

Jake: All right. I appreciate you guys for humoring me on this. This was probably a terrible idea. Honestly, the show, if I’m not keeping myself a little entertained, then what’s the point? So, I appreciate– [crosstalk]

Tobias: It was like playing Glengarry Glen Ross. This is incredible.

[laughter]

Tobias: Sign on the line. Sign on the line that is dotted.

Jake: Yeah. Always be closing.

Tobias: Good job, JT.

Jake: That was the fanfiction.

Ian: Sorry, guys. I realized I could barely read.

[laughter]

Jake: That was the Berkshire fanfiction that no one was asking for.

Ian: Right.

[laughter]

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