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Preparation, panic, paranoia

I’ll admit it. I bought the extra toilet paper. And peanut butter. It seemed prudent.

It was Sunday, March first when I went to the grocery store and stocked up. The night before my wife and I had talked about what to do and what might happen if cases grew from the 87,000 globally and 62 in the United States. Grew they did, to 118,000 globally and 696 in the United States. Reasoning that this might get bad and that hurricane season lasts half the year in Florida, we should stock up on basics. We’ll use this eventually.

From the sounds of the news, it was a good choice. The investing community seemed to be quoting a lot of Nassim Taleb who wrote about taking a hint from nature and the advantages of redundancy. Eyes, some organs, fingers and so-on. Just-in-time deliveries may be optimized and function well when times are good but any kind of disruption and the potential for trouble arises. Taleb calls these ideas fragility, robustness, and antifragility. 

Preparation is the most like Taleb’s antifragility/robustness metric. The thinking goes that because we won’t need to worry about trips the store for food during two-weeks of social distancing, we’ll be more likely to remain healthy and that will be an advantage in our personal and professional lives.

However, where is the line between preparation, panic, and paranoia? Here’s one crack at answering:

  • Preparation: taking infrequent actions with little costs but which may have slightly to very positive effects. i.e. stocking up on TP & PB.
  • Panic: taking infrequent actions with high costs but which may have small or no effects. i.e. searching for supplies but settling.
  • Paranoia: taking frequent actions with low to high costs and may have small, medium, or large effects. i.e. storing excess goods in physical and mind space.

With these definitions it seems like buying TP and PB was a smart step of preparation on our part. If our household were a business we might be criticized for a failure of ‘capital allocation’ by not deploying the few hundred dollars of supplies towards a couple of shares of Berkshire B stocks ($180 as of this writing). However the cost in efficiency is a benefit in redundancy.

An investing plan fits this model too. Preparation is having a plan to be an investor and not a trader. In an Infinite Loops podcast with Arthena CEO Madeleine D’Angelo, she distinguished between being an art collector and an art investor. They are different types, with the latter not “giving a shit about what it looks like.” D’Agnelo said most of her investors self-select, that means they have a plan and are preparers. 

In thinking this through though I realized that I was a bit paranoid. I spent a lot more time on Twitter rather than work which made the constant news-you-can-use consumption a medium cost for little effect.

What’s most surprising is how easy this is to see now. What’s most challenging is to remember it later.