We've adopted and adapted the profound message in chapter 29 of what is possibly the best investment book of all time, Gerald M. Loeb's "The Battle For Investment Survival":
"...If there is an effective hedge against calamity, it is a combination of geographic diversification, retention of capital in mobile form and the keeping in personal touch with active businesses, both at home and in other centers...."
More after the jump, first though, some more recent research via the reposting of a 2017 article:
Lessons For Millenial Basement Dwellers From the Real Sharing Economy: "Social bet-hedging in vampire bats"
What a Vampire Bat Can Teach Us About the Economics of Friendship
A Smithsonian scientist says important
lessons about making friends and sharing can be learned from these
blood-sucking creatures
Seriously.
Not kidding.
"How the Superrich Hedge Their Bets"
The blood-sucking vampire bat may have a lesson to teach us on what sharing is all about. If you don't believe this, Gerald Carter can prove it with his new research paper, "Social Bet-Hedging in Vampire Bats." By observing how vampire bats make friends and share food, Carter has figured out some evolutionary facts of friendship that could potentially apply beyond the world of bats and blood.
“This is what we do every night,” he says, slipping through a screen door into a dark, wire enclosure with black plastic tacked up around the walls. Vampire bats dangle from the corners of the ceiling like fuzzy brown fruit. There is a strange, thick animal scent in the humid Panamanian air. At the Smithsonian Tropical Research Institute (STRI) facility in Gamboa, Panama, Carter, a behavioral ecologist, has been able to study vampire bats both in the wild and in captivity for years.
Wearing a special glove, he picks out one particular flapping little vampire bat and examines it. “We come in here and the bats have these little bands and their names are just their bands,” Carter says. “This one is Shiny, for the shiny band.”
Shiny looks annoyed. Also cute. Carter stretches Shiny's wing out to demonstrate the little grasping claws used to grip and climb. Shiny has a fuzzy belly and very soft, velvet-like wings. The captive bats have allowed Carter to ask a pretty big question about the bats and about living things in general.
Vampire bats, native to Central and South America, feed exclusively in the wild on blood from live animals. If they go about 48 hours without a meal, they die. These bats have a strategy for staying alive when food is scarce. They can regurgitate blood in order to feed one another, though they won't do this for just anyone. They will only feed certain family and friends.
Carter can take Shiny out of the bat enclosure for a night and keep him in a separate cage where he doesn't eat. Then on his return to the other bats, he can observe whether any other bats are willing to feed Shiny. Vampire bats tend to have very strong relationships with their mothers and daughters and other close family. Investing in those relationships through grooming and just hanging out together tends to mean that those family members will reliably provide food when needed. But what happens if Shiny's mom isn't around?
The act of feeding is inherently more dangerous for vampire bats than it is for, say, fruit bats. A piece of fruit doesn't roll over and squish you. Vampire bats seek out animals that are asleep and use their ability to sense heat to figure out the best place to take a bite. That bite is risky. If it hurts, the animal might fight back....MORE
To readers who might be thinking of regurgitating a little blood sausage or black pudding for me, I appreciate the kind intention, I really do, but I'm good....Carter's conclusion is that there is a real advantage to making friends, but that advantage is only observed when a starved bat doesn't have access to close family.
“I definitely look at it from an economic viewpoint,” Carter says. “The idea of this paper is how does a bat make a decision about the number of relationships it creates and the strength of those relationships? The idea I have is that if your mom is your only food sharing partner and she dies, or isn't there when you need her, then you're screwed. So you should not be putting all of your eggs in one basket. It's like stocks. You should diversify. . . You don't just want to consider the return rate. You want to minimize risk, as well.”...
Seriously.
Not kidding.
And back to Loeb's 1935 masterpiece:
From what is possibly the best personal finance/investing book of all time, Gerald M. Loeb's "The Battle For Investment Survival":
...If there is an effective hedge against calamity, it is a combination of geographic diversification, retention of capital in mobile form and the keeping in personal touch with active businesses, both at home and in other centers.
One must keep personally alert, active and in the swim. Retired businessmen, in my opinion haven't much chance. One must not tie up all one's assets in one's home town or in a form that is not liquid and subject to easy shifts. There are far too many people who have a small business in their home city, their own house in the same city, and if they own any securities, some shares perhaps of the local utility company.
In addition their friends and connections are all in a radius of 10 to 15 miles.
My real thought is that one's greatest assets are his mental competence to do something useful and his connections.
Therefore establish some emergency connections away from home. Establish a fund or funds away from home as well, both as a "calamity hoard" and as an aid to keeping your foreign interests alive....
...One ought to be able to move to several parts of this country and the world, and have enough friends to be happy and get a helping hand to start, and have ready at hand enough funds for a grubstake to start.
Ask yourself how many widely separated places you could go to and make a successful new start in life....
Excerpted from Chapter 29, "Travel as an Education for Investors" of Gerald M. Loeb's The Battle For Investment Survival, Simon & Schuster, 1935.
Considering what was going on in Germany at the time, and about to engulf all of Europe, it was pretty good advice.
What
you don't want is to be the Detroit pharmacist with his home and
business in the city along with a small income property and maybe some
stock in the local electric utility, The Detroit Edison Company (now
DTE).
See also:
Happy 75th Anniversary to one of the few MUST READ Investing Books: Gerald M. Loeb's "The Battle for Investment Survival" Chapters 1-3Ken Fisher's Forward to Gerald Loeb's The Battle For Investment Survival
"How the Superrich Hedge Their Bets"
