Unknown: 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, modeling the secrets of the bees, hosted by Mark Rubin.

Mark Rubin: 0:22

If you hear my voice, you're alive. And if you're alive, you must have traded money for energy in the form of heat, transportation, refrigeration and work from other people. If you have some food on your refrigerator, you traded work for money and money for food. And even if you grew your own food, you still play the game to get resources you needed to grow your own food. I put a greenhouse in the middle of the woods in West Virginia to grow my own food. I spent 4000 hours setting this up, and I got a total of two cucumbers. So if you're going to play the game of growing your own food, you still need to invest money, and $2,000 on cucumber. That's not very efficient. Today on the lessons from nature podcast, we'll be discussing secret 15 from honey is money, which is called Honey saved is time earned. It's about trading energy for time. I'd like to introduce my co host David door. David door 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 macro economics. 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 money. Welcome, David. It's great to have you here. Thanks, Mark. Pleasure to be back with you. Okay, today we're going to be talking about a fascinating topic, trading energy for time, and trading energy for time in the B world and trading energy for time in the human world. The idea here is to have energy storage to buy buffers. And with these buffers, it makes it easier to make some decisions. I'm going to tell a little story from from honey as money, it goes like this. In this chapter in the book, The Queen reminisces about the past seasons, and she emphasizes the need to store honey for colder and leaner times. And she reinforces the lesson that storing honey equates to earning more time for survival. And this is an essential value of foresight and planning and nature. And all living things store energy, as we discussed last time, and Episode 14, which is stashing honey is storing or even in our bodies, we store energy in the form of fat and the benefit of that as we don't have to continuously eat, there are times in between eating that we can survive. And money in the bank is the same ideas there's times in between working to have money to survive. Well, I'm going to tell just a quick story about a practical thing is that it's honey season where I live. And that means it's time to harvest the honey and I harvested some honey from my backyard, I have two hives in my backyard from the hive that did make it I got enough honey out of this hive to power one human being for 6.1 days, or one honeybee for 409,000 days. And that is an example of the energy capacity that is stored in the hive in terms of calories to power a living thing, which could either be a big inefficient human, or a small, efficient honeybee. And the bees are allocating these resources to maximize their chances of survival by adjusting their population up and down depending on the availability of this energy, just like in a business. We've talked about this in the past. And I think it's important in terms of money to think about money in the same way, which is with the money that's in the money bank, how much time could I buy not working because at different ages, in a person's life, there's a period of time where they can't work when they're too little or too too young to work. And there's a time at the end when they can't work. This idea about about honey saved this time around is super critical for everything and businesses too. And capital markets too. So we're going to discuss this topic through the perspective of business and also organic things. And so the question as it relates to businesses is how can businesses build financial reserves or savings to weather economic downturns or unexpected challenges? What are some techniques for that?

David Dorr: 4:38

There's several one is good planning. Right? So a business needs to have that as actually part of their plan. And with a popularity for startup culture, especially in the United States. That gets overlooked a lot. And it's kind of like just burn it as fast as you can grow, grow grow. And and that's why you see such a high failure rate with with startup But prudent businesses take the time to really think about what is an uncertain future look like? Will I have enough reserves to make it through changes, you know, changes in my business sector changes in the economy? The one thing that is guaranteed is that the future is uncertain. Right? You can, you can bet on that. And so if you know that it's going to be uncertain, you need to have some buffers, and you need to incorporate that. So the first thing is that you have to have that as part of your plan. And I think that's, it sounds logical, but so many people skip that most fundamental first step.

Mark Rubin: 5:34

Is there any kind of metrics or numbers are thinking about how much time you need to buy at different stages of the development of a business? Or is it always the same amount of time, based on the burn rate?

David Dorr: 5:46

It depends. So you know, there's a lot of different formulas for crunching these types of things. A general rule that works pretty well for almost everybody is that you should have enough savings for your business, that you could weather two years without making$1. If you have that kind of buffer to business in and growing, right, then you're doing great, you're gonna be able to weather most most storms,

Mark Rubin: 6:12

I read that Apple has over a trillion dollars of cash, that's an incredible amount of energy storage for a business. Do you think that stashing that much honey to buy that much time? I mean, I don't know how much that time that will buy them if they had $0 in revenue, but I'm sure more than two years. But the point is, is like is there is there too much energy storage where that energy could be invested in innovation or new products, and that it's a detriment to a business?

David Dorr: 6:44

There is so if you're if you're stacking up money, and then you get past the, let's say, the safety zone, right, so whether that's two years, three years, whatever feels right for your your line of work. So once you're in the clear, and you've got a good buffer for safety and uncertainty, the next question is, is are you making the best choice of those excess reserves for your business. And this, you see this all the time, with older businesses, you know, let's take an IBM for an example. So IBM is still they still do innovation, but not at the pace that they did in the early years. And so the bigger the business, you see the innovation curve, and you see the kind of growth cycle fall off, in Apple's case sitting on such a large war chest, that's a very real issue. Could they deploy that if they even want it to? And the answer is no, otherwise they would. So you know, they're sitting on a lot of other things. And, and they're investing that in, you know, treasury bills and other you know, stocks, and they've got a basic portfolio. But that's probably not really the best use of that money. So that yes, you can have, you have to factor in I should say, the deployment of that, once you're past your safety,

Mark Rubin: 7:55

I think really what it comes down to, and I've seen this in my own business is trade off between generating free cash flow, spending it, extracting it from the business for like whatever, and then also investing it in innovation and things, r&d, things that don't have an immediate ROI, or maybe never have an ROI. But they're basically for investing in learning. And I just think it's been more honey you have, the more you can you take chances with learning and out compete people that aren't and that was your example with with IBM. Good. A good example, sir. Let's talk about long term financial planning, B's foresight, and storing honey reflects the value of long term financial planning to first securing their survival. And so a good example of that is, as I mentioned, I just took some honey from my hives, I also have some hives in West Virginia, in West Virginia, the hives are in their first season. And they produced just I'll do it in pounds, 120 pounds of honey, let's do that. And they only need given the size of these hives, 70 pounds of honey to make it through the winter. So I can take up to 50 pounds of honey out of high. But I only took 20 It's not just like, How much could I take now somebody just barely make it to the spring. So they just have enough to like cross your fingers survive, just like in a business is the bigger the buffer, the more opportunity you have for either either risk tolerance or faster growth, investment and growth. Those are the two just like the BS, how to businesses identify potential risks, and develop contingency plans see the impact of those adverse effects as it relates to their cash reserves.

David Dorr: 9:31

This is at the heart of what we do in macro research. And I think that it's one of the it's one of the most fundamental things that business owners should look into. You don't need to be you know, an economist and trade markets every day. There are basic things that you can learn from that that are are useful in sidestepping those types of risks. There is a business cycle, right. So there are things that we talk a lot we've been talking about the risk of uncertainty, but we can also To talk about the risk of certainty. And so, there are things that you, you know, I mean, you know, the sun's gonna come up tomorrow with with high probability, you know, maybe not 100% certainty, but 99.9999% certainty, the sun's gonna rise tomorrow, and the probability is you're gonna wake up tomorrow. And if that's the case, how do you plan for that? Right? So again, a lot of this comes back to planning, what are your inputs? And I think that this is very important, too. So what are the inputs for your your product? What are the inputs for your market? You know, who's your customer base? What are things that would drive changes? And one of the things that we ask ourselves all the time, I'll use this analogy, because I've used this a lot. When you go into a poker game, if you're sitting at the poker table, and you look around, and you don't know who the mark is, it's you.

Mark Rubin: 10:49

Yeah, actually, I literally, as my name is Mark, Mark.

David Dorr: 10:55

So what we do, is we actually take that presumption going into every scenario, we presume that we're the dummies at the table. And, and what it does is it it gives you a level of situational awareness that you wouldn't normally have. And so if you're always asking yourself, What am I missing, you're going to find lots of things that are gonna be informative for, for mitigating that risk. But a lot of people just don't, it's beautiful, that they're eternal optimist. But that's, that's not reality.

Mark Rubin: 11:30

That's true, because there's always competition for honey. So who better information is better results. And also, I think that's a very insightful lesson about knowing your own strengths and weaknesses and also biases. The older I get, the less I know,

David Dorr: 11:49

this feel exactly the same. Yeah,

Mark Rubin: 11:52

let's talk about the value of patience and delayed gratification, the bees delay consuming honey immediately to ensure they have enough for the future. This demonstrates the value of patience and delayed gratification. And something I've noticed in people, especially in long term planning for like retirement, for example, like it only costs 10 bucks a day from age 14 To like, 70, to have a couple million bucks. And that's less than lunch. Now, these days, the idea that people would like, like, make a peanut butter and jelly sandwich and then not go out to lunch so that they could have a couple million dollars. And, you know, 50 years, is, I think, a very hard concept for a lot of people. And we talked earlier in this about the idea that at some point, you can't work anymore. Creating these buffers is important. And so delay gratification is I think, rare in terms of business, how does practicing delayed gratification in financial decisions for like a company lead to better long term outcomes for the businesses and their investors.

David Dorr: 12:56

Such an important point, I'm glad you brought it up. Because, you know, delayed gratification, both at the personal level and the business level is fundamentally missing, you know, in in a lot of today's culture and business practices, for anybody young that's listening to this critical thinking, practice, delayed gratification, you know, resist the urge for immediate gratification because of all the social media systems and start saving right now. Use time while it's on your side. And most people don't understand this, I'll just make a comment on this. And then I'll get to the business side is that the challenge that most people have is that the human brain is not wired to think exponentially, right? It's why Einstein called compound interest, the eighth wonder of the world, we just don't think very well in those terms. You know, there's there's always the the fun example, that if I were to offer you a suitcase of cash today, with$100,000 in it, or I offered you the value of a penny doubled every day for 30 days, so a 30 day month, which would you rather have now, the fact that I'm asking you, the question implies that you're almost there's maybe some, some some trick question to it, and probably the delayed 30 Day payout is is greater. But if I asked you to calculate it, most people would not be able to calculate that that comes out to$5.3 million. This is the power of you know, things compounding and it's it's it's a fundamental lesson. And so this is exactly of course applicable to businesses as well, that if they delay, maybe an expansion, you know, this is one things that happens a lot is that businesses expand too fast. They just blow out their burn rate, taking choices carefully and say, Okay, should I do this expansion now? Or if I wait, what benefits come with waiting? And this is the problem. Nobody says, What are the benefits of waiting? They think too much about the advantages of doing it today, rather than the benefits of doing it tomorrow.

Mark Rubin: 14:52

Well said. Next, we're going to talk about creating a buffer for emergencies. Honey storage acts as a buffer. for bees during emergencies, providing them with the energy to overcome unexpected challenges. The bees can't leave the hive when it's raining. So imagine it rained for two months. And imagine that two months was the two months. That is the two months where I live, where there's flowers, where they're doing the work to get the energy, and they lost their entire production cycle, and entire years worth of money in the business world. How do businesses create emergency funds or reserve to handle these unforeseen circumstances and maintain operational continuity?

David Dorr: 15:33

Yeah, I think in terms a lot of you know, the, the word that comes to mind for me is resiliency. And resiliency is carefully planning to not let one single thing, take out your existence right now, as a trader, that's absolutely fundamental, core core core to what we do. And this is one of the biggest mistakes I see with portfolio managers and other traders, is that we're actually this is an expression, I didn't invent it, but the the best traders are the best losers. Meaning that we're really in the business of being professional losers, we know how to take a loss, because we've measured it, we've saved for it, we've anticipated that that's gonna happen, we know that it's a part of the everyday business, you know, a typical top trader is going to be losing half the time, maybe 60% of the time. That's a very different mindset when you face that kind of reality every day. And so you're going in knowing that, you know, it's a flip of a coin, whether or not you get punched in the head and lose money. And I think businesses would be well served to do the same thing. And good businesses do, by the way, right. And that might be by having backup supply chains. COVID was a perfect example, we heard a lot of the stories of businesses that you know, got crushed with their supply chains. But it wasn't all of them. And I'm going to give an example to the audience, Toyota, after the Fukushima accident that a lot of their manufacturing was in that region. And when the Fukushima accident after the tsunami hit over there, that affected and disrupted their business so severely that they put an entire team and division together at Toyota, whose mission in life was to track all their parts suppliers, their entire supply chain, and start building up backup systems. And what you saw from that after COVID, Toyota was the best prepared not because they prepared for COVID. But because they learned from the last disaster, that hey, we need to be resilient if something else happens.

Mark Rubin: 17:33

That's a great example, on financial decisions. I'm 100%, right? 25% of the time, okay, which means 75% of the time, I'm some degree of wrong on a bell curve, I have a plan to lose bucket of money, which is that it's the money that I'm willing to risk on things a different degrees of risk, because what I think, is that not everything's a 5050 deal. So in other words, so So layering in things that can give you like a 10 to one return with things that are like a 51 49% return, and understanding that you can be 100% right 25% of the time and still come out ahead. If you if you balance out these returns based on the risk and stuff. I think it's important to be comfortable losing. Okay, it's like relate to your boy. Very important. Yeah. So the next the next thing I want to say is learning from past experiences. So bees learn from past seasons, and they adapt their honey storage strategies based on their experiencing, showcasing the value of learning from history. And they're learning and they're communicating those lessons and stories through dances and those lessons live into future generations, even though a single B may only live like 4045 days in that range. But they're transmitting the stories, multigenerational stories, and humans do that too. We have multigenerational stories. We have stories that lasted for 1000s of years. And so how can businesses analyze past performance and experiences to make informed decisions and improve future outcomes not just in terms of disaster mitigation, but in opportunity pursuit?

David Dorr: 19:15

I'm reminded of the saying that history doesn't repeat, but it rhymes. History is so informative. And I think studying history for business is really important. Everybody gets excited about you know launching a new product and stuff. But there's so many great tips you can get for you know, determining opportunity by looking backwards rather than looking forwards. History is a great teacher. There are elements of history that again, they said they repeat, human psychology doesn't really change much as much as tech changes. human psychology is for the most part exactly the same since our civilization has been around. And if you know that you understand that you know and you're delivering you know new products or services to the market. Looking at different historical examples how people embrace new products. X or don't, can be really, really, really informative. The best businesses do that, by the way, the best businesses understand historical context, how this all ties together is that if you were to talk to any top C level executive at Toyota, I can guarantee you they, they do two things. One, they know the history of the company, and to the way they do planning going forward, there is they don't make five year plans, they make 50 year plans smart.

Mark Rubin: 20:27

The long game, that's a later chapter in this story is called the long game. I think what is important is we have to consider conceptualize that there was a period of time we were on alive, and there'll be a period of time in the future that we're on alive. And we're just passing through if the objective is to survive that duration, and also not harm the future generations, then we have to have these like 500 year plans, 1000 year plans for our planet, like planetary plans, high level milestones, like what do we want to accomplish, like every decade for the next, you know, 100 decades kind of a deal. The idea here in terms of creating long term plans is the impermanence of life and the impermanence of the stories we believe. And I never heard that expression that you said about history doesn't repeat, it rhymes. Is that what you said? Is that the way he said it? Yeah, that's correct. I'm gonna make that into a poem or something. And he is perfect. Yeah, that is such a perfect way to look at what we're talking about. So let's talk next about creating a competitive edge. Bees are kind of limited in their competitive edge abilities. Like, there's only six sides to Honeycomb. There's no seven sided Honeycomb, there's no hmm, maybe we could re architect like the geometric structure. There's like, is this optimal? And the reason is optimal is because of Survivor bias. Because every hive that tried to make square honeycomb didn't survive. So basically, so it's just like in a business, okay. I mean, it's, you're saying same ideas. So bees gain a competitive edge by storing honey and ensuring their survival and prosperity compared to less prepared to colonies. And so business is, and to your point about strategic financial planning. Ken, let's talk about how strategic planning, you talked a lot about planning on this episode, because this is this is the key to this whole thing.

David Dorr: 22:20

The best businesses of tomorrow are going to need to do something that is historically different. And here's why. Because throughout human history, there's basically been two categories of entrepreneurs. The first category is an entrepreneur that sees a need, you move to a new town, and you notice that it's a small town and nobody set up a pizza restaurant. Everybody loves pizza. So you set up a pizza restaurant, you're fulfilling something that's pretty intuitive. People need to eat people like restaurants, and most people like pizza. Okay, same thing goes for dry cleaners, you know, movie theaters, things like that, you kind of core businesses, then you have, you know, what fascinates a lot of people is the the innovators, you know, the Steve Jobs of the world, where they're like, Hey, how cool would it be if you know, you can hold 1000s of your your favorite songs, a little device that that slides in your pocket. So these are the people that are that are innovating and imagining. So those are kind of your two main categories of entrepreneurs. Because the acceleration in technological advancements, you now need a third type of entrepreneur. And so all businesses can benefit from taking note or what I'm going to say next, you now need to start building today, a solution for a problem that does not yet exist. And so here's the example I'll use drone parking garages. It's not a problem. It's not a problem today. Like there's nobody complaining that hey, I don't have a place to go park my drone. Right? It's also a form of thinking and anticipating, and seeing, okay, what are what are problems that don't exist today, but with a high degree of probability are going to be big problems tomorrow, climate is a huge one of those. So for a lot of people listening and going into career paths, climate is a big obvious one that's on the horizon, that's going to have a lot of implications that require a lot of anticipation and planning.

Mark Rubin: 24:12

I liked your story, I learned to predict the future. In 1976, playing catch with my dad, were sitting across from him and throwing the ball back and forth. And after like 1015 minutes, I was like, Okay, what's next? And he said, Stand next to me, and run in that direction. And I'll throw the ball to where you're going to be. And I said, going to be like, how do you know where I'm going to be? I could be anywhere. He's like, and he's like, What do you mean? I'm like, I was like, how do you know? Or I guess, like, can you predict the future? And he's like, what? And I was like, how do you know where I'm going to be anyway, he's like, just run and throw the ball right on the beat. So So I run and he throws this ball in the air. And I've never done this before. This was the first time ever catching a ball thrown to the free feature. So as zig and zag, and I Zig denies that. And I caught the ball. And my dad was like, yay. And I was like, Yeah, cuz it was far like it was like a far throw, my dad was really happy, I guess he thought I was gonna be like a baseball player or something. But I was happy for a few reasons. Number one, I learned that my dad could predict the future, because he knew where I was going to be. And second, I learned that I could predict the future, which meant I could look at the ball. And based on his position, velocity, momentum, friction, predict where it was going to be in a model that told me where it was going to be, could also feel the model through the feeling called intuition. But the point of it is, is that anybody that catches a ball, and anybody that moves their hand to catch a ball, or moves their body to catch a ball, anybody, everybody is predicting the future, and putting themselves in a position to intercept it. And I think that's a really important thing to think about in terms of ideas. Okay, because this project project Connie light is an example of intercepting the future because I plan this in 1985. And now I'm catching up to it. And I think we would be better if people thought about their future in terms of running to catch a ball. Okay, because there's balls all around us and your idea of like, what is the problem that we could solve later. So there's, this is what that was a great example of running to where the ball is going to be. So thanks for giving me that memory of your welcome. This one is fostering a culture of preparedness. So the bees emphasize storing honey, and it instills a culture of preparedness within the hive, promoting this idea of collective responsibility for survival, because they're all working together to make sure that they have enough energy. How can a business, foster a culture of preparedness and foresight among their employees or their management structures? To adapt to changing market conditions and challenges? Have you seen examples of companies that bake in the idea so that it's not an afterthought? Because one thing I've learned in life is you can either learn through trial and error. But you can also plan to learn what you can ask yourself in advance the question, I'm going to make this decision, and it will work or it won't, what can I learn if it works. And if you can plan to learn in advance from both decisions that work, and decisions that don't work, you can improve your rate of learning, and adapt quicker in the future to how can a business instill these ideas about like learning and planning and foresight into their, into their model,

David Dorr: 27:41

it's, unfortunately, not as common as it should be. Right? And, and it does get down to the cultural aspect. And part of the cultural aspect is personal ownership. So to be able to have that at a collaborative level, which is vital, it needs to start with personal ownership, and almost a pride in the participation, whatever somebody's role is in the business. And going back to Toyota, Toyota has just served as a great example for today's session that was wasn't what I was thinking about going in. But a lot of what they do that their leadership is pretty impressive. You know, I'm always impressed by what Toyota has done on the factory line. So Toyota empowers anybody on the factory line, I don't know if you've, you know, you've heard this, but this concept of being able to stop the factory line, anybody, because it's better to have somebody take responsibility, identify that there's a problem with that, spend all the money to fix it, right? And then make your things efficient than what most western manufacturers do is like, Oh, well, you know, that they scare their workers from, you know, stopping production, because it's enormously expensive. And then you get carved recalls, and everything like that. So to me to get that to work. The culture starts with personal empowerment, and having employees having a culture saying there's no problems and making the mistake, there's a problem and not bringing attention to it. And this is what only the best of the best businesses do. And so that's really, really, really, really important. That's that's how you build that culture from the ground up. Others would say, you know, it's something that comes down from the leadership and the way the CEO, yeah, those things are valuable, but it's really what are you instilling to, to personally Empower, have that as part of the culture where everybody at every level feels a responsibility. And that's how you also achieve alignment in a business as well.

Mark Rubin: 29:36

Basically, we play it back. It's, it's empowering, and empowering is the right word, but I think it's it's before empowering. It's having a shared vision for what success looks like. Absolutely. All living things trade stored energy for time, not working. And time not working is critical because energy is not always available in a habitat. The fact that you're alive means you traded enough energy in your body to survive. Until now. Congratulations on your decision making skills. If you enjoyed this discussion about trading energy for time, please subscribe to this podcast lessons from nature modeling the secrets of the bees. The next episodes of economic series cover the near future and system dynamics. David and I will see you there. Visit honey lights dot life for more information about living in harmony with the rest of nature.