On May 22, 1968, the nuclear submarine USS Scorpion disappeared somewhere in the North Atlantic. John Craven, a naval scientist who specialized in finding objects lost at sea, put together a team to find out what happened.
As related in James Surowiecki’s “The Wisdom of Crowds,” his team was small but diverse, including mathematicians, submariners and salvage experts. Working with only fragments of information, Craven tasked each team member to develop independent scenarios about what might have happened, including an estimate of the likelihood of each scenario. To lighten things up, he set up the project as a competition, with bottles of Scotch as prizes.
Surowiecki writes that there was not enough information for anyone to know definitively where or why the submarine went down. “But Craven believed that if he put all the estimates together, building a composite picture of how the Scorpion died, he’d end up with a pretty good idea of where it was.” That turned out to be an incredible understatement.
Despite the fact that they were operating with “tiny scraps of data,” their collective estimate of where the submarine sank was just 220 yards from where it was found. Craven’s gathering of individuals with disparate backgrounds, adding a seemingly superficial incentive, and running everything through Bayes’ Theorem (to help eliminate pre-existing biases) helped the Navy find a sunken submarine in the middle of the ocean.
The story demonstrates that when information is perceived in a new and/or creative way, connections not previously understood (or valued) appear — and those now meaningful relationships increase our knowledge, with sometimes spectacular results.
The activity we call investing occurs within a framework of connections: relationships between people, institutions, ideas, emotions, behaviors, information and incentives — the list is almost endless.
Thinking only of my own experience: I have relationships with each of my clients, their ideas, their expectations and their trust. I have a connection with my professional drive for excellence, for performance and for the growth of my business. And (of course) I have important relationships with my family, my community and my friends.
I have a connection with my investment philosophy and my efforts to reflect it sensibly in my portfolio decisions. I have an ongoing connection to the financial markets, as they represent a window into the collective thinking of investors. I have a relationship with the news and all other sources of information, in my ongoing struggle to separate what’s truly important from that which may be more dramatic but temporary. It’s a lot to juggle, but we’re born with the capacity to handle it all, and then some.
In his book “A Universe of Consciousness,” Nobel laureate Gerald Edelman wrote of the brain’s amazing connective capacity: “If we considered the number of possible neural circuits, we would be dealing with hyper astronomical numbers: 10 followed by at least a million zeros. (There are 10 followed by 79 zeros, give or take, of particles in the known universe.)”
Making connections is easy; making sure they are good connections is another story. The brain exploits its connectivity with plasticity. That means it can create new pathways to replace old ones lost or damaged, or because you learned something new. But plasticity also means that if you have a bad habit (say, a drug habit) — the brain will gladly make pathways reinforcing that unhealthy behavior.