SPEAKER: 0:02

The cosmos is within us. We are made of starstuff. We are a way for the universe to know itself. Carl Sagan. Welcome to the lessons from nature podcast,

Mark Rubin: 0:16

modeling the secrets of the bees, hosted by Mark Rubin. If you hear my voice, you're alive. And if you're alive, you've been successful in planning to have enough money to survive. Congratulations. Planning is helpful in improving the chances that we have enough food, shelter, water and safety to make it one more day. Some people plan for multiple generations and some people plan for what they're going to have for lunch on the same day. But planning is part of being alive. Today on the lessons from nature podcast, we'll be discussing secret 13 from honey as money planning saves honey. It's about the benefits of planning to optimize time, work and resources in a local habitat. I'd like to introduce my co host, David Doerr. David is the co founder and chief investment officer of door asset management, a global macro investment management and principal trading firm. He has more than 25 years in global macroeconomics experience with a special focus on investments in planetary health. David will co host for episodes with me where we will discuss the economical secrets of the bees through the lens of the human business of making money, and the bee business of making honey. David is great to have you here. Welcome to the lessons from nature podcast.

David Dorr: 1:42

Thank you, Mark, pleasure to be here with you. Great.

Mark Rubin: 1:45

So today, we're talking about planning, and how planning can save honey, or how planning can save money. And I'm gonna start this off by telling you a story about the bees in my backyard. And all the things I learned from them. And this is this is a timely story because it's a story from yesterday. Like humans, bees plan ahead to help improve the chances for their survival. And in human terms, this is just like micro economics. In episode four. I talked with my friend first Sparrow about the idea of a time as honey, which means that time is energy. And in the human world. This is Time is money. What the bees are doing is is maximizing their rate of energy collection by understanding the energy availability around them, their capacity for storage and their burn rate, which is basically related to how many bees are currently alive. today. I'm playing a game of optimization. And here's the story. I have two beehives in my backyard. And by the way, I'm a new beekeeper to all the beekeepers out there. I am not an expert beekeeper. And they're right next to each other same habitat, same weather conditions, same temperature, but they have different queens and one of the beehives this time of year, it is early July. And the nectar flow is now behind us where I live. And that means that the flowers are just fading away now fading away from from this habitat. And the sugar has been extracted from them and the flowers are at the end of their lifecycle. And the bees have done the bee work of moving the genetic information around the pollen around. And in exchange for that the flowers traded them energy called sugar that keeps them alive to do the work. It was a trade a reward. And but the Tubi has an extra one is full of profit, be profit, lots of honey, and the other one is completely empty right next to each other in terms of pounds of one probably has I'm gonna guess 40 pounds of honey and one might have like one pound of honey in it. I didn't realize this until yesterday because I'm getting ready to have a honey party. Okay, so basically people that are coming over to check out what's going on in my backyard in about a week. I have a kind of a hive back here that's called a Flow Hive. But basically you put a key in and you turn the key. And then the honey comes out of a tube. And it's clear you can see in there so I can see with my eyes. That one is full of honey and one has no honey in it. And I was like what's going on? Same habitat, same flower, same temperature, same conditions. And now I have half as much as I plan to have what I learned yesterday. Is that in the hive that is that did well. Everything looks good. Not a big surprise the business is functioning as I imagined it would. But in the second hive, something happened to the Queen. I believe that the Queen died. It must have been within the last two months. What I think happened is there is a replacement Queen that is either a queen bee that is laying unfertilized eggs, or a worker bee, which is a female bee that like jumps in like to substitute like in an emergency situation, a female worker bee that will lay eggs, but those eggs are also unfertilized. And what's happening is when when a bee lays unfertilized eggs, they only produce males, which are called drones. And the males don't do any work. They don't forage, their only job is to mate with a virgin queen. So what's happening is basically, in a business, all of the workers that would go to the customer's houses to get the money, they're not there. And I was left his office staff. And they're just burning through all that money in the hive. Okay, this is burdens that are not there, they're productive doing stuff, but they're not gathering any energy. And as a result of this, the second hive will die if I don't intervene, because winter's always coming. And there's no more opportunity this year to gather energy, because the flowers are fading away, there's nothing left. So what I did yesterday was I have a box that goes on top that has a place to put a couple gallons of sugar water in this setup. And what I'm doing is I fed them, I traded money I pride traded, I'm gonna say $40 worth of money, and one hour of time and won't be staying on my elbow. I'm feeding them because the bees will eventually hopefully recognize that something's wrong. And if it is a laying worker, female, so she her lifespan is only 40 days. And when she dies, they'll replace her with a with a hopefully a productive queen, and trying to buy them time. So I did work, I inserted a cash infusion. So what it is an energy infusion into this system, to buy them time to solve the problem on their own. And part of the reason I didn't catch it sooner, is because I put on the honey box, which is this special box that I have two months ago. And I don't like to disturb them. Once it's on, that's my own, like, I guess I could take it off and look and whatever, but it's heavy. And I'm old, and it's hard. But you guys let it go. Anyway, the point of it is, and this long story about about the bees in my backyard, is that this is a micro economics problem that's occurring in this habitat. And there's two hives that compete for resources. And one of them the leader was was strong and one of them the leader for whatever reason wasn't. And so we're going to talk about these ideas.

David Dorr: 7:31

It's very telling because it's absolutely, you know, a microcosm of the macrocosm in that you know, what happened in your backyard is applicable to two ice cream shops that are are right next door to each other or to large tech competitors. It's all applicable, you know, the planning the leadership, the you know, the organization, it's, it's all connected and fundamental.

Mark Rubin: 7:54

I'm glad you're here. Perfect person. For this. I'm gonna get through some specific examples. And I'm then I'm going to ask you business questions about them based on your experience. So the first one is about diversification. Some B's, the way it works is at different times in the year there's different resources available and habitat and the two main resources are nectar and pollen. And nectar for bees is energy, and that is used to power them. And pollen is a protein, which is used to create baby bees, they need protein to create life. So energy powers the life but the pollen is like the building blocks of life. And so what happens is in the springtime, there's lots of pollen and lots of energy. And then they ramp up that signals the Queen to ramp up the number of bees, this sort of spreads out risk, because what happens is some bees are gathering pollen, and some bees are gathering the energy in different proportions. So there's diversification of resources in the habitat, but then there's diversification of work in the hive to maximize that rate of collection. So let's talk about how from your experience about diversification because I know you have portfolios. And I understand that there must be imagining some kind of thinking about risk, and some kind of thinking about the value of of diversifying in a way to reduce risk but maximize returns. So what do you have?

David Dorr: 9:25

Absolutely, you know, diversification is the cornerstone of good portfolio management and as well taught, although I think many of the principles get over overlooked, because really, if we take a moment to think about diversification, it's a survival strategy. It's fundamental, it's found everywhere in nature. So again, to your analogy with the bees, because the future is inherently uncertain. We don't know exactly what will happen we may be able to forecast and good business people do that, but we don't know with certainty 100% certainty and so it's prudent to diversify. So just like bees would not go to a single flower, they send out a fleet to lots of flowers. And everything that they do is diversified and good portfolios operate the same way. In our world, we take that to an enhanced level. So typical portfolio management may be a basket of stocks, a basket of bonds. For us, we go beyond that, and we even diversify across asset classes. So as a global macro investment firm, we look at all asset classes. So we look at stocks, bonds, currencies, environmental commodities, which is a is a new area and field. And then we also diversify in in across countries and economies. So it gives us a footprint that it's all about survival. If some of the investments don't work out, the idea is that you have others that that do or if some are slow or having a bad season, then you have other productive assets that are taking care of you during those tougher times. And this is a theme that is as ancient as civilization. And we have learned that diversification is a wise thing to do follow nature.

Mark Rubin: 11:11

And nature, I like that strategy. Let's talk about foraging efficiency maximization because now we have the idea in the previous example, that the bees are out gathering resources in a diversified way. They're also maximizing the routes that they take to minimize the energy expenditure, and increase the number of resources they bring in per second. And this is very similar to a supply chain optimizing a supply chain, there are resources coming in to a business, a business that's creating something making something and they need supplies, materials, trying to minimize the cost it takes to bring these resources in, minimize the time it takes to move the resources around within their organization. Because time is money because time to move things around. And we saw during the pandemic big supply chain disruptions, how globally connected we are. And the more efficiently we run supply chains, the less ability we have to react to changes or disruptions in those supply chains because they're so tightly wound.

David Dorr: 12:17

That's a great segue because the danger to optimization is lack of diversification. They're actually complementary concepts, right? And so what we learned is through the advancement of just in time delivery, which is both art and science, when you look at the best companies around the world, the Amazons, the Walmart's, you know, some of the logistics companies, they're extraordinarily optimized. It's beautiful. I mean, they can you know, that. It's almost like we have magic apps. You know, having Amazon, you know, prime delivery is like having magic elves, that you're at your fingertips, the danger. And the lesson that came from the crisis of COVID was that those supply chains were vulnerable to not having backups. They built one really good supply chain, but they didn't build multiple supply chains. And this two offers, you know, that lesson of diversifying had they had alternates have they had backups, they would have been just fine. And I think of a lesson that I learned recently that fascinated me about the way that plants use photosynthesis, they did a study looking at how photons are optimized and used for, you know, energy and nutrition by by plants, the process of photosynthesis. And what they discovered was that it uses the principles of quantum physics that a photon arrives simultaneously evaluates all the most efficient methods to be used by the plant. And then it collapses into the singular best route for that plant to use it. And not surprisingly, what do we know about quantum physics, it's the physics of nature

Mark Rubin: 13:53

of energy optimization for organic life is occurring at the quantum level in ways that's not just statistical, then there has to be a connection between living things and the deterministic mechanical nature of like a marble rolling down a ramp or whatever. So this is a fascinating area for future future podcasts. The next series of bees will forage based on their nutrient needs. And they they different flowers have different nutrients at different times of the year. And so the bees are optimizing because the flowers are growing in the ground and the ground has different nutrients in different parts of the ground and so on. And the bees are tuned to that as well as not just where's the most sugar but what nutrients do we need now to balance out this hive and this is very similar to a business adjusting production based on individual customer demand, like the profiles and preferences of individual customers.

David Dorr: 14:56

The best businesses are the best forecasters in and their interest in forecasting is not simply to have a higher probability hit rate with what comes to pass, but to adapt towards it. Right. So all that information, all the data analysis, analytics that companies do these days, which is immense, it's so that they can adapt their products to what their customers desires and needs are. And again, Amazon's a fantastic example because they've got some of the most sophisticated, you know, algorithms on the planet to predict what you want almost like their their psychic, but this applies to all types of businesses in and there's many learning lessons from not being adaptable. You know, there's evolutionary examples of that in the commodity sector. I was just reading an article yesterday about the 1000s of gallons of milk that are being dumped out in Wisconsin right now. Because there's an oversupply of milk and dairy production. The reason for that is poor forecasting, poor adaptability, because the trend has been clear, regardless of anybody's personal dietary preferences, but the trend has been clear that plant based milks have become popular, and those companies are doing very well whereas, you know, some dairy farms are now going going bankrupt. So it's a perfect case in point that whether it's any business you have to embrace change, that changes is part of it. Customers tastes change, fashion trends, change, everything changes. And and and forecasting that and being prepared and willing to adapt making it part of your your strategies is really important.

Mark Rubin: 16:36

Let's talk about seasonal adjustments, and how seasonality which is really weather comes into play where I live it snows maybe like once or twice a year, but they don't sell a lot of snow shovels in the summer. And somewhere down the supply chain. People aren't making shovels those companies that were making shovels were making I don't know you'd make in this summer pool floats. I don't know, whatever. Just different different things that would be more available in the summertime. Can you think of how seasonality and also the changes in our weather patterns and on the extremes are affecting the business of money?

David Dorr: 17:10

Absolutely. And I use two examples that both involve New York, one where they planned, adapted and anticipated correctly. And another one where they did not the first one is that anybody that spent time in New York when it rains it's incredible. All the shops, you know, umbrellas pop up everywhere. You don't see the umbrellas at first, but the second it starts raining. Within 10 steps you can procure an umbrella. In example, zooming out that's a little bit bigger of not being prepared for for the rain and specifically the storm was several years back was it was it Hurricane Sandy

Mark Rubin: 17:45

that hit InfraStop Superstorm Sandy, perfect example.

David Dorr: 17:47

This was a this was an interesting trade that we did. If you look at we trade lumber futures as an example. And normally when you get into hurricane season in the for the golf and you know, for the lower east coast, it's not uncommon that when a hurricane starts to approach, you know, an impact zone, you see the price of lumber go up. Why? Because people will have to protect their homes and and or rebuild. And what's interesting is Superstorm Sandy, is that was heading to New York, New York's not New York, New Jersey is not accustomed to getting hit by storms like that. And so what happened was is we were watching lumber futures, and lumber futures were actually just kind of, you know, trending downwards. So we bought up a bunch of options on on lumber futures contracts. And our thesis was very simple. They're not prepared because they're not accustomed to these changes in nature, this will have a outsized impact, because population densities there. And that's exactly what happened. As hit shore, people had the lightbulb moment and the futures contracts went berserk. It was a great investment trade simply by paying attention to these things, what we call weather volatility, kind of climate volatility, not just climate change. But we think in terms of the volatility, and the way that that impacts businesses and markets is without a doubt, increasing significantly. And that makes it very challenging. Anybody that does not have adapting plantain is going to have a lot more difficulty.

Mark Rubin: 19:18

The range of adaptability of organic life is narrower, both in terms of temperature, humidity, pressure, different things, UV light, UV exposure, whatever the amount of hours of sunlight per day. He has, we are living things on this planet. And we are consuming resources in different ways, cutting down trees, destroying habitat, and destroying ecosystems. We're destroying our own ecosystem. I mean, I've said this before on this podcast a few times, but we're on one rock going 90 miles per second around the star that's keeping us alive. With energy, the energy from the star is powering all living things and in pretty much everything else,

David Dorr: 20:01

when you take a step back, It's patently obvious that we're, we're harming the planet, that we're consuming it beyond its its carrying capacity, we've taken a very close look at what drives shifts and temporal thinking. Because, yeah, it's an interesting phenomenon that that, that a lot of people have not really kind of tied together. And we have a working thesis on it, because you're exactly right. People are not that they're just stuck in the now. And, you know, not not really planning. So here's the theme that I think you'll find, you'll find of interest, there is a direct correlation between inflation and devaluation of money and a shortening in temporal thinking, Oh, yeah. And it actually makes sense that it goes together. So I'll use the example of Venezuela, which was our use case. If you have inflation going double, triple digits a day, you can't think about, you know, buying something in a month, whatever you need, and think that you might need, you're going to try and buy right now. Yeah. And that's why grocery shelves get cleared out, you have a unit of account, that is no longer the unit of account of store value and a medium of exchange that is no longer functional. And so it's no longer harnessing that that energy that it was supposed to. It's, it's dissipating rapidly in your hands. And so with that, you have to take action right now. And you don't plan versus if we go back in time. And this is you see this across stock markets to where you have CEOs and executive boards, they're focused on quarterly earnings. Yeah, they're not thinking about the business from the, you know, the perspective of what does it look like 10 years out, in many Asian cultures, they do 50 or 100 year business plan, right? You have Native American cultures in the US where the actions that you take, you should consider the next seven generations.

Mark Rubin: 22:01

That's right. Part of the reason I'm doing honey as money is object, one of my objectives to create 10,000 beekeepers over the next five years, just to connect people to the cycles of nature and knowing like what flowers are around, when are the flowers around? How many flowers do I need to plant to keep these bees healthy? Where should I plant them? All these kinds of things, to put in people's minds the idea that we're connected to nature in this way. And I think money leads into the next topic here is the speed of money. And decision making is was disconnects us from long term planning is that is what your your example was perfect. But really what it is, is at some point, you realize I can't work 500 hours a week. So given the rate of inflation, how am I gonna survive? And so that creates situations where people hoard supplies.

David Dorr: 22:53

Yeah, and it also creates situations where people, ordinary working people turn to crime, yes, this is survived. It's a survival thing. They they come to that same calculus that you pointed out, and realize it's impossible. I'm a hard worker, I'm willing to work, I'm willing to work, you know, pretty much every day. But there's a point where that math crosses and you realize it doesn't matter. I can't possibly work enough, there's not enough of me, right enough hours in a day to do it. And you get that decay, and you get, you know, you get crime and lots of it very quick.

Mark Rubin: 23:26

And that's why this is a systems design problem. More than more than we have to plan like you're just perfect with you. Because if a business can plan for periods of destabilization, so it can suicide. So in the planet, like it's part, we're just a micro of the bigger of the bigger of the bigger like, we can solve this by planning for it. And that's the topic here. Let's talk about being nimble jerks, quick response to resources, in periods of abundance and scarcity. So bees adjust their behavior incredibly quickly, based on availability of resources. So I'll give you an example from yesterday is on the hive that I fed, though there are not a lot of worker bees coming and going from the entrance. Because there weren't it was mostly males in this hive, and the females are the ones that are the foragers. And so what happened is just by observation, just by watching the hive that was healthy or unhealthy high with bees are coming and going all the time. But this high that had fewer bees and mostly males, when I put the sugar on no one left the high. Okay, because they were all moving in the hive. Bees are highly tuned to these real time analysis real time decision making. Can you talk a little bit about about things that you react to in real time and how those analysis inform your decisions?

David Dorr: 24:53

I'm reminded of the the analogy of being a good sailor so I hoping to have on our team or my colleague that runs our operations in Mexico is a former world class, you know, champion sailor. And being a good sailor is being very nimble. Yeah, if the wind shifts shift to the wind, you pivot, you tack left, right, you know, so on, you have to be nimble. And again, it's a survivability thing I view a lot of these concepts is for me, in my head, I see a lot of yin yang that goes together. So on one side, you know, as the sailor, you need to know where your destination is, if you're sailing across the Atlantic, and you know, you're going from New England to the UK, you need to know what that looks like on a map and how to get there long term planning and forecasting, you also need to be very nimble, in being able to, you know, to adapt to changes and things that that happen in our business. Most of our our trading and investments are on time horizons, that could be, you know, three months to, you know, three years where we stay with the position. But there are inputs that we pay attention to that could change, you know, how we're, we're sailing that course, and adapt around it very quickly. So we look at things like inflation is one of those, we look at exchange rates. One of the things that we do as a macro firm, we monitor global conflict. So the situation in Ukraine and Russia, for example, markets are not priced for nuclear conflict. And yet, it's not as a zero probability outcome.

Mark Rubin: 26:33

So what I'm what I'm hearing you say is you don't day trade. And that would be like the instantaneous reaction. But what you do is you plan to react, so that when they occur, you can react quickly, you can be nimble to the things that you plan to react. Can you talk about about the competitive navigation in business and what you've seen companies reacting either in defensibility, or offense to preserve their market or money?

David Dorr: 27:00

Two things that come to mind on that one? Here? This conversation makes me think of Somali pirates. Oh, in which this is interesting, because what most people don't know, in the West, you know, we hear that, you know, piracy is a big issue, that that's a more and more dangerous area. You know, we see the movies. But what's interesting is understanding what drives Somali piracy? And if you watch interviews with Somali pirates, they're fishermen. Yeah. And what they'll tell you is like, we don't want to like that's not our gig, we're not, we didn't grow up and be like, hey, we want to be pirates. What they're saying is they're hungry. Because the resources they there's been gigantic, you know, fishing fleets, many, you know, mostly from China, they come in, they just completely stripped the fish out of their waters. And so they're stripped of resources that that are theirs, that they normally work those those natural resources. And they're left without any other options. So it's a messy situation. But sticking with our navigation piece, I think, you know, what we try to do is we say you need to understand technological competition and how to use it. But you also need to, you need to understand things like critical thinking things like orienteering, you need to have some, some basic work knowledge and constantly sharpening that saw, you can't become complacent and then say, Okay, well, I'm going to just leave it to the, to the systems and the computers to take all the decisions because you don't stay sharp that way. And so we encourage our team to always like, so if they thought through something, and it's a bad trade, that they wouldn't even think twice. But if they do something without like putting thought and trying to apply critical thinking, then they get to experience my wrath on that, you know, critical thinking is important. So I think the best businesses try and you know, maximize their competition by critical thinking and you know, using the best, which will lead to using the best tools, you know, around you as well, rather than just depending on those tools. The secret to that is making a work environment where mistakes are totally fine. Yeah, there's a lot of corporate cultures where you're just not allowed to make mistakes. Yeah, that's just that's not how we learn.

Mark Rubin: 29:16

Since it's possible to store energy. And since both bees and people work as a team in a variable habitat, planning is essential for preparing to survive in the future. The fact that you're alive means that you plan to make it this far. Keep up the good work. If you enjoyed this discussion about planning, please subscribe to this podcast lessons from nature modeling the secrets of the bees. The next three episodes of economics series, covers storage, buying time, and the near future. David and I will see you there. Visit project honey Lake dot life for more information about living in harmony with the rest of nature.