Investing lessons from the scrapyard
In another lifetime, I was a labourer at a scrap metal yard. And when I was there, I met a bloke we’ll call ‘Dave’. I’ve always wanted to write about him but have never quite had the platform or the context. Now I do, and a little piece of Dave will be immortal forever. He was a real character.
Dave had left school at grade 6 and worked a lifetime of backbreaking manual labour, marrying an Aboriginal woman along the way and raising a bunch of kids. Dave’s marriage came during the White Australia Policy era, making it what we might call an “extremely non-consensus” approach – to say the least! Nearly 60, he was spry and fit, and could outwork anyone I’d ever met – but not surprisingly, he wasn’t book smart.
Although embarrassed about it, he’d tell you quietly, with disarming frankness, that he was dumb. To his everlasting credit, he was quick to get help with things he couldn’t do, like addition or multiplication (e.g. of incoming scrap volumes). A lesser man might have tried to hide it, with negative consequences for everyone.
44-gallon drums were the main storage medium at the scrapyard. We used to get excess drums full of oil products, chemicals, industrial solvents, you name it (ask me about the time I spilled flocculant on the concrete). Dave loved cutting open mostly-empty drums of old diesel with an oxytorch (for the uninitiated: they explode when you do this). I was once working about two metres away from Dave – wearing earmuffs! – when there was a massive explosion – the drum he was cutting had more diesel left in it than was usual. The difference between a 95% empty and a 93% empty drum is hard to tell from touch alone, but it makes a significant difference to the size of the detonation…
Believe you me, it was not a mild “bang” type explosion – think “FUCKING BOOOOOOOOOOOMMMMMMMM”. The explosion occurred so quickly that I almost didn’t “hear” it – I heard the ringing in my ears before becoming aware of the noise from the explosion, which “arrived” a few seconds later (despite the noise definitely preceding the ringing sound, I experienced them in the reverse order). Everything moved in slow motion and signals from my body became disrupted. I distinctly remember tilting my head to understand why my vision was suddenly weird while my body sent signals that weren’t being processed. It’s hard to explain but I remember looking down at my hands and not recognising the object I was holding (I was disassembling a water meter at the time). I received the sensory information like reading a morse code signal, it came in intermittently over the course of a couple of seconds:
IS MY VISION BLURRY
EVERYTHING IS SLOW MOTION
I FEEL WEIRD (disorientation, ringing sound)
DID SOMETHING TOUCH ME (the building shook)
LOUD BOOMING SOUND
??????? (thinking for a few seconds)
AH, DAVE WAS CUTTING A DRUM
Cutting open drums of fuel with a three-thousand-degree flame spoke volumes to Dave’s intelligence, although the fact that he’d reached the age of 60 with such a dangerous hobby might suggest he was smarter than he let on.
Lesson #1: On knowing your boundaries
I said to him one day as he walked into the shed ‘Whaddaya know, Dave?’, this being a common greeting at the shop, roughly equivalent to ‘how is your day going?’ or ‘what’s new with you?’.
“Mate,” he announced, “I know fuck all about fuck all. I know what I know.”
Which is a typical piece of Australian double talk that tells you fuck all about fuck all and won’t make sense to a student of traditional English, but conveys a surprising amount of information to those familiar with the lingo.
What Dave meant was that he was good at the things he knew how to do, and not so good at the other things.
This is the first of two crucial lessons about life I learned from Dave. So much has been said about acknowledging your weaknesses and having a ‘too hard basket’ that I won’t go over it again. Suffice to say that he taught me not only that it was OK to say that you don’t know, but there are benefits for everybody when you are strong enough to acknowledge your weaknesses and seek assistance to compensate for them.
Lesson #2: On the value of experience
The second lesson was even better; it was a vivid demonstration of the value of experience.
Contrary to what he believed about himself, Dave had a very high IQ, which is largely a separate construct from the ability to read or count. I had at the time a substantial amount of experience with intelligence tests, and a fellow labourer was a psychologist by trade, so we knew the signs. And we agreed; Dave was one switched-on fella.
If I am reasonably good at some things, like pattern recognition, believe me when I say that Dave was light years ahead, especially when it came to spatial awareness.
He would blow my mind on a daily basis when we were storing scrap output. This is not rocket science – you stack it so that it is accessible via forklift for loading onto a truck, and try to do it in a way that requires minimal space. The dimensions of the storage bins are fixed (many were old 44-gallon drums; see Dave’s hobby above), so the room for exercising ‘skill’ here is limited – or so you might think.
It is a boring and simple job and not very interesting. So you can imagine how special Dave’s skills must have been to generate awe in people who watched him work. Even if he wasn’t directly involved, he would often just wander past and rattle off half a dozen suggestions.
‘What about if you do X, Y, Z, put B there, take A out, put Q in that spot and put C on top.’
And then he would come and show you what he meant, since I and co-workers typically couldn’t see it. And blow me down if we didn’t routinely end up with 40% more space than we would have had if left to our own devices. Literally, 40%. And it would take 50% less time to load on the truck. I know that because I was so impressed that I measured it. Simplistically, there are two variables. First is simply the size of the containers (height, width, depth, weight) and optimising those for space. Second is the complexity of the containers, as some items were stored loose (e.g. crushed hot water systems).
So you had to balance 3d space & weight as well as the complexity of storing (loose items slide off each other & can take up more space, plus you don’t want your load moving around during transportation). When you break it down there is a fair bit involved; you are definitely working across more than four dimensions.
Dave’s pattern matching abilities were off the charts. How do you stack 6 medium sized cubes, 12 irregularly shaped rhomboids and 9 large cylinders in a space-saving way? It takes some thought to figure it out, but once you’ve done it there is an easily recognisable “right way” that Dave absolutely nailed.
A lifetime of labouring, most of it at the same workplace, had made him phenomenally, mind-blowingly good at the things he knew how to do. It was not just skill. His brain had shaped itself to increasingly specialise in and support his well-practiced skills. Normal people physically could not see the things that Dave could see, until he showed them.
To repurpose an Isaac Asimov quote; ‘highly advanced skills, to outsiders, are almost impossible to distinguish from magic.‘
That was Dave to a T. And after he finished helping and went back to his own tasks, the people that were around would shake their head in amazement and go ‘geez he’s good.’
But back to investing lessons. How well adapted do you think Warren Buffett’s brain must be after a lifetime of looking for moats and not reacting to negative news?
(See the 10,000 hour theory of excellence, and then figure out how many thousands of hours you can squeeze into a 60-year investing career – or a 40-year labouring one.)
Yeah but…what’s the second lesson?
Point is, it’s not just what you can see that is important in investing. You have to consider the things that you can’t see. It’s often the unseen risk that bites you on the buttocks. And by definition, if you can’t see it and don’t know it exists, you can’t compensate for it.
You need to seek out people with a different opinion to you, find out why their opinion is different and if you can, get them to justify it. This is hard in finance because people are at least partly incentivised (to ensure access to hidden opportunities and to avoid looking like an idiot if proven wrong) not to share their thoughts. That’s one of the reasons I started this blog. Hopefully you, dear readers, will be able to share your thoughts on some of my investments and help me see the light if I’m in the dark.
But for now I’ll leave you with a Dave-ism, which like many of his sayings, took on a life of its own:
“E’s a fucken deviant cunt….Good bloke though”
And next time you meet a bloke like Dave, consider there’s probably more to him than meets the eye.