You know a mental model is good if you continue returning to it. Taleb’s antifragility is like this. Munger’s emphasis on inversion. Another is Boyd’s OODA loop.
Run the numbers on a fifteen or thirty-year mortgage with the mindset to invest the difference and both are good choices. Avoiding mistakes is more than half-the-battle.
When I finished that post, I thought good choices were low variance. “Don’t be house rich and cash poor,” my dad advised. With too much house, a job loss would introduce a lot of volatility. Similarly, an emergency fund tempers variance. So does ‘living within your means.’
However, variance isn’t the first principle.
What matters more is response cadence. We’ll call this articulation of cadence and the OODA loop: Variance Response Time (VRT).
A public school teacher will have a high VRT due to the nature of hiring. With seasonal hiring and year-long contracts, a teacher must step into another industry or live off their savings. A large emergency fund (dollars are units of time) will make the transition more comfortable.
Medical providers will have a low VRT. While their emergency funds vary, a physician, nurse-practitioner, or medical assistant can immediately find work. With a lower VRT these people can recover from choosing from a mixed bag of good and bad choices.
A tree has the longest VRT. A force outside the normal ecosystem conditions and that’s it. Kaput.
While money, knowledge, and transfer (i.e. licensing requirements) will all affect VRT, so will complexity. It doesn’t matter how much money or knowledge someone has if they don’t know which question to ask first. Boyd’s first ‘O’ is Orient. Or as Steven Soderbergh put it, “If you don’t know where the camera should go it doesn’t matter what you’re shooting on.”
None of this is new but examples seem to help drive the point home. Catholic churches do read the same gospels each year. So, am I able to adapt quickly or am I setup so I won’t have to?
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