Category: Thought and Opinion

Charlie Munger on the Medical System

Long a fount of wisdom, Charlie Munger provided us fascinating insight on everything from energy policy and mental models to how good gamblers think and making effective decisions.

At the Daily Journal Meeting (held March 25th, 2015), Munger answered a question on Obamacare:

Of course the system of medical care, as evolved under the United States, has much wrong with it.

On the other hand, it has much that's good about it. All the new drugs and devices, and new operations, medicine has taken more territory in my lifetime than it took in the whole previous history of mankind. It's just amazing what's been done.

A lot of it is obvious and simple, like inoculating the children against infantile paralysis, scraping the tartar off your teeth so you don't wear plates when you're 55 years old, and so on. People now take those benefits for granted, but I lived in a world where a lot of children died. Every city had a tuberculosis sanitarium, and half the people who got tuberculosis died. It's amazing how well medicine has worked.

On the other hand, compared to the best it can possibly be, the American system is pretty peculiar. It's very hard to fix. One kind of insanity is to say, “We'll pay you so much a month for taking care of the people, and everything you save is yours.”

That is the system the government uses in dealing with the convalescent homes. That's a great name, a convalescent home. You convalesce in heaven. You don't convalesce them at home. [laughs] It's attempting to have a euphemistic name.

That creates huge incentives to delay care and keep the money. The government has strict rules, compliance systems, and so forth. If we didn't have that system, the cost of taking care of the old people in convalescent homes would be 10 times what it is. It was the only feasible solution.

The rest of the world is going in that direction, because the costs just keep rising and rising and rising.

If the government is going to pay A anything he wants for selling services to B, who doesn't have to pay anything, of course the system is going to create a lot of unnecessary tests, unnecessary costs, unnecessary procedures, unnecessary interventions.

Psychiatrists that keep talking to a patient forever and ever with no improvement, of course that system is going to cause problems. The alternative system also causes problems.

Add the fact you've got politicians and add the fact you've got existing players who are enormously rich and powerful, who lobby you like crazy. A state legislature, now, is just 19 percent or whatever it is of GDP going to the medical system, imagine what the lobbying is like.

We get these Rube Goldberg systems. We get a lot of abuse of various kinds. There's hardly an ethical drug company that hasn't created multiple gross abuses, which are in substance growing through the bribery of doctors, which, of course, is illegal.

You have all these ethical companies. Ethical meaning it's the designation of a drug company that has patented drugs. They’ve all committed big follies. The device makers of anything have been worse. There's been a lot of abuse and craziness, and the costs, of course, just keep rising and rising.

That's in a system that every child has been the greatest achiever in the history of the world. It's very complicated. I think it will get addressed more because…We probably will end up with systems that are more like we do with the convalescent homes.

If you look at medicine, what's happening is that more and more they're going to a system where they pay somebody X dollars and everything they save, they keep. That system has some chance of controlling the cost. If you go into a great medical school hospital today, and you're within a day of dying of some obvious thing like advanced cancer, the admitting physician is very likely to ask for a test of your cholesterol or any other damn thing. All the bills go to the government. As long as the incentives allow that, people will do it and they'll rationalize their behavior. Something has to be done along that and more than is now being done.

I think the drift will be more in the direction of the block care. I don't see any other system that would have controlled cost in the convalescent homes.

By the way, your doctor can't just walk by every bed in the convalescent home and send the bill to the government. That's not allowed by the law. But if you transfer the patient into a hospital, he can walk by the bed five times every day and send a $45 bill to the government.

If the incentives are wrong, the behavior will be wrong. I guarantee it. Not by everybody, but by enough of a percentage that you won't like the system.

I think that's enough on a subject that's so difficult. I think we can see where it's going. We may end up with a whole system that's…In the Netherlands, they have a system where the same people are giving a free system to everybody and a concierge system to the others. It's working pretty well.

Transcript Source.

Garrett Hardin: The Other Side of Expertise

From Garrett Hardin's mind-blowingly awesome Filters Against Folly.

In our highly technological society we cannot do without experts. We accept this fact of life, but not without anxiety. There is much truth in the definition of the specialist as someone who “knows more and more about less and less.” But there is another side to the coin of expertise. A really great idea in science often has its birth as apparently no more than a particular answer to a narrow question; it is only later that it turns out that the ramifications of the answer reach out into the most surprising corners. What begins as knowledge about very little turns out to be wisdom about a great deal.

So it was with the development of the theory of probability. It all began in the seventeenth century, when one of the minor French nobility asked the philosopher-scientist Blaise Pascal to devise a fair way to divide the stakes in an interrupted gambling game. Pascal consulted with lawyer-mathematician friend Pierre de Fermat, and the two of them quickly laid the foundation of probability theory. Out of a trivial question about gambling came profound insights that later bore splendid fruit in physics and biology, in the verification of the causes of disease, the calculation of fair insurance premiums, and the achievement of quality control in manufacturing processes. And much more.

The service of experts is indispensable even if we are poor at ascertaining under which circumstances they add value, when they add noise, and when they are harmful. Hardin cautions that each new expertise introduces “new possibilities of error.”

“It is unfortunately true that experts are generally better at seeing their particular kinds of trees than the forest of all life.”

— Garrett Hardin

Thoughtful laymen — that's us — can, however, “become very good at seeing the forest, particularly if they lose their timidity about challenging the experts. … In the universal role of laymen we all have to learn to filter the essential meaning out of the too verbose, too aggressively technical statements of the experts. Fortunately this is not as difficult a task as some experts would have us believe.”

Filters Against Folly is Hardin's attempt “to show there …. (are) some rather simple methods of checking the validity of the statements of experts.”

Stress Management


I’ve come across this short story a few times recently but I can't track down the origins. If you know the source please contact me.

A psychologist walked around a room while teaching stress management to an audience. As she raised a glass of water, everyone expected they’d be asked the “half empty or half full” question. Instead, with a smile on her face, she inquired: “How heavy is this glass of water?”
Answers called out ranged from 8 oz. to 20 oz.

She replied, “The absolute weight doesn’t matter. It depends on how long I hold it. If I hold it for a minute, it’s not a problem. If I hold it for an hour, I’ll have an ache in my arm. If I hold it for a day, my arm will feel numb and paralyzed. In each case, the weight of the glass doesn’t change, but the longer I hold it, the heavier it becomes.” She continued, “The stresses and worries in life are like that glass of water. Think about them for a while and nothing happens. Think about them a bit longer and they begin to hurt. And if you think about them all day long, you will feel paralyzed – incapable of doing anything.”

It’s important to remember to let go of your stresses. As early in the evening as you can, put all your burdens down. Don’t carry them through the evening and into the night. Remember to put the glass down!

Carl Sagan: “The Earth is a very small stage in a vast cosmic arena.”


Carl Sagan's timeless and humbling Pale Blue Dot: A Vision of the Human Future in Space, based on the photograph above.

Here's an excerpt:

Look again at that dot. That's here. That's home. That's us. On it everyone you love, everyone you know, everyone you ever heard of, every human being who ever was, lived out their lives. The aggregate of our joy and suffering, thousands of confident religions, ideologies, and economic doctrines, every hunter and forager, every hero and coward, every creator and destroyer of civilization, every king and peasant, every young couple in love, every mother and father, hopeful child, inventor and explorer, every teacher of morals, every corrupt politician, every “superstar,” every “supreme leader,” every saint and sinner in the history of our species lived there-on a mote of dust suspended in a sunbeam.

The Earth is a very small stage in a vast cosmic arena. Think of the endless cruelties visited by the inhabitants of one corner of this pixel on the scarcely distinguishable inhabitants of some other corner, how frequent their misunderstandings, how eager they are to kill one another, how fervent their hatreds. Think of the rivers of blood spilled by all those generals and emperors so that, in glory and triumph, they could become the momentary masters of a fraction of a dot.

Our posturings, our imagined self-importance, the delusion that we have some privileged position in the Universe, are challenged by this point of pale light. Our planet is a lonely speck in the great enveloping cosmic dark. In our obscurity, in all this vastness, there is no hint that help will come from elsewhere to save us from ourselves.

The Earth is the only world known so far to harbor life. There is nowhere else, at least in the near future, to which our species could migrate. Visit, yes. Settle, not yet. Like it or not, for the moment the Earth is where we make our stand.

It has been said that astronomy is a humbling and character-building experience. There is perhaps no better demonstration of the folly of human conceits than this distant image of our tiny world. To me, it underscores our responsibility to deal more kindly with one another, and to preserve and cherish the pale blue dot, the only home we've ever known.

And here is an animated version by Adam Winnik:

A Few Lessons


Looking back on my first years out of school and the countless mistakes I made, I can't help but feel that any success I've enjoyed is more through dumb luck than any particular brilliance on my part.

Through Farnam Street, I detail my journey of self-discovery and learning. Basically, I explore two things in parallel:

First is the enduring search for how we should live and what it means to live a good life. And second, more practically, I explore things we can learn and connect that better equip us to solve problems by thinking.

While unqualified, I'm often asked to give advice to young people who are just beginning their own journey of self-discovery. With that disclaimer, let me share a few things that I've learned in the hopes that these help you navigate your journey.

1. Learn to say “I don't know.”
Being caught without an opinion on something can be the kiss of death for the modern knowledge worker. This fosters an environment where we borrow our opinions from others without doing the necessary thinking.

And to make matters worse, once blurted out, we feel the need to defend these borrowed opinions because we don't want to appear inconsistent. So we end up defending a superficial opinion based on the thoughts of others all because we couldn't say three simple words: “I don't know.”

2. Learn the difficult skill of changing your mind.
When was the last time you changed your mind on something? If you're honest, it was probably a long time ago. We tend to accumulate knowledge and assume, even in the face of evidence to the contrary, that we are right.

The point here is to re-examine your conclusions and attitudes. When someone has a better one, adopt it. Seek evidence that contradicts what you think and try to explain it.

3. Your reputation for helping others is the most important thing.
Harry Truman had a saying that resonates a lot with me: “It is amazing what you can accomplish if you do not care who gets the credit.”

The thirst for credit fuels our ego. When culturally reinforced, this leads to predictably disastrous outcomes. Ego often prevents us from being as generous as we would like. It causes us to show how smart we are by making others look bad rather than making them look good.

Ego causes us to withhold information. And so on. When your ego gets too big, people won't want to work with you. Help others achieve their goals and you'll be amazed at the places you'll go.

4. Knowing what to avoid is often more valuable than knowing what you think you want.
Sometimes the best thing you can do is invert the problem. It's often as helpful to know what you want to avoid as what you want. Things that ruin lives tend to be predictable over time.

Avoid debt or leverage as well as over-consumption of drugs and alcohol. But there are some less obvious things to avoid.

For instance, when you start out in the workforce you're looking for a cool place to work, but the person you work for is important, too.

Generally you want to work with people who have three traits: intelligence, energy and integrity. Avoid at all costs the seductive allure of smart people that lack integrity.

5. Mistakes.
Just because we’ve lost our way doesn’t mean that we are lost forever. In the end, it’s not the failures that define us so much as how we respond. Learn to recognize mistakes and correct them. (see #2.)

6. Goal-orientated people mostly fail.
Goal-oriented people mostly fail. What you really want is a system that increases your odds of success. Even if that system only improves the odds a little it adds up over a long life.

7. Friendships.
Friendship is more than just being there for your friends. Being a great friend means that you let your friends be there for you.