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 exist somewhere on a timeline between your birth and your eventual death. It's great to spend some time with you as we fly around the star together at a speed of 90 miles per second. Today on the lessons from nature podcast, we'll be discussing secret 16 from honey as money, future bees do future work. It's about the critical balance between the number of people or bees and available resources and a habitat and emphasizing the importance of strategic planning for the future to optimize energy production and energy storage. 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 macro economics with a special focus on investments in planetary health. David will co host four episodes with me, where we will discuss the economical secrets of the bees to the lens of the human business of making money, and the big business of making honey. Welcome, David is great to have you here.

David Dorr: 1:33

Thank you, Mark, pleasure to be back with you.

Mark Rubin: 1:36

So today I'm going to start off with a continuation of a story of the bees in my backyard and how that relates to macro economics. And the situations that they have faced this year, challenging year. I might have mentioned in the US last year about 50% of honeybee colonies didn't make it that's due to a variety of factors. So one of the reasons that honey bees thrive is because of beekeepers, and beekeepers intervene at different times to do different things to try to keep the health of the bee business going. And in this case, something happened. And due to timing, I wasn't able to jump in fast enough, so I lost the hive. So I have two hives next to each other. And they're pretty much the same age, the boxes that they're in is the same, the habitat that they're in is the same in the beginning of the season. This year, both were going strong, going strong, and I fed them sugar, water and pollen patties and all the special things that like nutrients and like probiotics like I tried my best to like, do everything I could do. Where I live, I was only flowers for about 60 days. And going into the season where the flowers were everything was good. And then I put a box on top of the hives called the honey super, which is where they put the honey the honey bank. And immediately when I did that the population of one of the hive started to dwindle, I just think it was it was just the timing of it wasn't that I did anything but just that's the way it works. I believe what happened is the Queen died. If this happens at the worst time of the year, which apparently this did, there won't be enough worker bees available when the flowers are here. In that window of time, when there are flowers, when there's money to get, there's no workers to get it. And now I have a choice to make. But here's the choice, I can take half the bees from the hive that strong and put them in the other hive and put some honey frames from the hive that strong into the other hive and give them some energy and feed them and cross my fingers that That'll buy them enough time to make a new queen that they can start populating that hive. Again, the risk of that is now I have two hives with 50%. Okay of resources and workers. So this time of year, there was no more flowers. And so I would have to either continuously feed those bees, like all through the fall or through the winter or through the spring. Or I can purchase a queen who's ready now from somebody else who already has like an extra queen, and then try to nurse that colony backup to a population. And the risk of that is first of all cost money. And second of all, the chances of it working this time of year are low. And also whatever happened in that hive could be in that hive, like a disease or a virus and it could still be there. And so by spending money and risk and introducing new leadership and new workers and new resources without understanding the systemic problem that caused this to happen, which could have just been like old age or who knows what, it's risky. So it's like so it's like should I invest the money and risk and time to read to try to get a new queen in there or not. And then the third component of that is if I do that the genetics of the of the bees that are in that hive the male bees, they're still alive. And so like if there was something genetically wrong, like when they mate with a virgin queen in the future, okay, then potentially could perpetuate whatever happened that didn't work out. And so what I decided to do was just let nature take its course and let that hive fail and start over in the spring fresh with a new genetic, you know, be from somebody else and cross my fingers. I wanted to tell that story because like the the great thing about Viki, because it has many examples for this. Every week, there's like an updated version of a. So let's talk about the the business of making honey and the human business of making money. In terms of macroeconomics. Let's talk about national income and output, which would be in this case, the production of honey, just as countries monitor GDP, gross domestic product, bee colonies measure their national income, through the production of honey, how does the company's output relate to its overall financial health and profitability is output, like the best indicator of health of a company?

David Dorr: 6:06

It's a key indicator, right? So you know, a company that is, you know, hopefully producing and, and has output is key, there's additional factors for that is the is the output profitable? Right, so you have companies that maybe they manufacture a lot of stuff, you know, Tesla, Tesla's been, you know, controversial, and that, and that, you know, some of the cars they manufacture, they don't really make any profit on. And this happens with all types of companies not to pick on Tesla, it happens all the time. So output is key, because it does show that, you know, at least a company has the capacity, and has the skills and the operations to produce whatever it is, their their goods are. But putting that in context is, is whether or not that's actually you know, optimized, right. And optimization becomes a big part of that too, to actually drive to the bottom line and generate profits.

Mark Rubin: 6:55

So in the B world, that would be the equivalent of having a lot of workers coming and going and gathering the nectar. But having so many workers that they can't store it, because they have to consume it while they're getting it. So the game is the same kind of balance of resources in and out that determined so basically, a healthy hive is a hive that's gathering energy and storing it.

David Dorr: 7:20

Indeed, and and there's, there's a piece that I think is worth touching on because there's a there's a valuable lesson embedded in it. You know, the story that you shared with the the hives at the beginning of this, when I reflect on the two, two sides of my career. So one being in FinTech and being an entrepreneur running a business and the other side being a trader, there's a lesson that comes from trading, that I think is applicable for everybody, especially entrepreneurs or people that are running businesses. And I have made this mistake in not carrying this over to to the business world, even though it served me tremendously well in the investment world. And that's that when you go in to any decision making process, is that you've defined the risk where you say, hey, if I lose X, I'm going to stop. This is such a valuable lesson. Because in business, we get very caught up in the sunk cost fallacy, right? So we're like, oh, well, I've spent time and resources on this, and then you just keep chasing something that turns out, you know, bad. So you know, I wanted to insert that because your story was so good from the beehive. That that is, to me one of the most powerful lessons that comes from markets, because in trading, that's just not a luxury you can afford, you have to have very defined anything that you go into, you got to know that, hey, I leave at this point. This is my defined risk point. And you know, I cut it short here.

Mark Rubin: 8:44

I hadn't thought of it that way. But that's why you're here. So thanks for you know, like that. Thanks for sharing that. And I think, to your point about risk, all decisions have risk. But making a decision intentionally. I will add one more thing to that I plan in advance for learning. So I asked when I make a decision, I think what what will I learn if it works? Usually you learn Oh, great for me. Yeah. But if it what will I learn if it doesn't work, and in advance, define like three to five things that I could learn from the situation that at least I could get something out of it? If you plan. Basically, if you plan your learning in advance, then you don't only learn from trial and error you learn from from trial and success. Well said, Thanks. Let's talk about employment and unemployment. Worker bees maintain full employment in the hive, because a worker bees lifecycle is always contributing to the hive. And this parallels the idea of one macroeconomic goal of achieving full employment in a country. And so let's talk about that. So how does full employment influence a country's economic performance and overall GDP? Do we have enough workers in the world or like would it be better if there are more workers or like how does the number of workers and their their productivity like effect this idea?

David Dorr: 10:02

Yeah, key idea. And when you look at the decision making functions for pretty much any central banker, well, in the United States as part of their mandate, they have a target employment rate that they want to see, basically, as far as possible and a target inflation rate. The challenge with it is to best optimize, you need to let those things flow when we try and fix them and say, oh, okay, well, there's not enough people employed, we'll allocate resources to the government, and the government is the worst allocator in the world, and they're gonna hire people, and then try and use that to help the economy and messes things up. So, yeah, there's no doubt that there's a direct correlation between employment and production, and you know, an economy booming. The best recipe to get there, though, is to let nature kind of take its course, nature is such a good instructor because there's a cycle to life and death, your intro to today's podcast, you know, with, with if you're alive, you're somewhere between birth and death. Yeah, what we fail to think about with businesses is that it's okay, if a business doesn't make it. Yeah, it's not to say that it's not going to be painful. But that's part of the natural process. And when governments intervene in that, and they bail out businesses that really shouldn't have made it anyways, it distorts the entire economy, and you're just prolonging the inevitable and you make it worse,

Mark Rubin: 11:27

let's talk about inflation and monetary policy, the quantity of honey produces or can be equated to a country's money supply. If honey is abundant, bees might inflate their consumption of soy in terms of like the idea of abundance or perception of abundance, because there are periods of the year where they cannot bring it in fast enough. And there's not enough places to put it. And they're competing with other bees that are playing the same game. But even because of the way the way the cycles work. There's enough honey for everyone for like, two weeks. Okay, so it's like so like in that period of time, but also, the good thing about those two weeks is the bees are very calm, because they have enough energy. So they don't need to fight and they don't need to defend. So how does controlling the money supply help manage inflation in an economy, there's two

David Dorr: 12:15

primary schools of thought on this one is that that's the role of the central bank to control the money supply. The other school of thought is that the money supply should really be driven. It shouldn't be controlled and created out of thin air effectively, right. And so with, with fiat monetary systems, which is what we have all over the world, currently, they're not backed by anything, you can have this just ever expanding credit, and that creates bubbles, and it creates collapses. So in a normal scenario, let's use an example and compare honey to gold. Right? So if we go back in time, and we look at it, and they look similar to you know, when when gold is melted, it's not not a coincidence, it used to be that you looked at the quantity of gold that was available. And you said, Okay, that's our honey, you know, that's the currency that is the you know, the the stored savings and energy of the economies exactly like that. And so what would happen is that if there was more gold produced, I would accelerate velocity, a lot of times of spending and drive inflation. And if there are periods where it's a little bit more limited, you would see that, you know, create a deflationary impact. What's been unique about gold is that it has a very just kind of steady historic growth rate. And, and it keeps those things in check. It's almost perfectly optimized to be the right amount of supply to promote growth. So those are different lenses through which to look at it, but it's it definitely money supply and inflation go hand in hand.

Mark Rubin: 13:44

Let's I'm afraid and finance, bees actually trade between hives, sometimes they exchange resources between eyes. And sometimes they exchange genetic information between hives and sometimes they exchange operational information between hives. So how does international trade contribute or not contribute to a nation's economic prosperity?

David Dorr: 14:07

It's a balance of competition and cooperation. And it depends when things are going well. Everybody's happy trade flows, you know, you sell me you know, bananas, I sell you, you know, oranges. And, and everybody's happy. When friction gets tight and not a coincidence. It's usually when the economic cycle turns down. Right? These things go hand in hand, then resource competition starts to rise to the top of, of everybody's concerned, should we not export critical goods, rice, palm oil, rare earth minerals, as you know, is China's now starting to pull back on their exportation of that. So it's a balance and the healthier balance is that again, in general, free trade has helped humanity and has lifted hundreds of millions arguably, you know, billion people out of poverty. At, because free trade allows the opportunity for goods and services to flow across borders. And what it is, is really, you know, same as we would look at specialization, their specialization at the country level to write their their countries that specialize in exporting commodities, their countries that specialize in exporting services and technology. And when you let everybody do what they do best, everybody benefits. It's good until you have a downturn. And then resources become reevaluated happens in human nature as much as it does in regular nature.

Mark Rubin: 15:35

We are nature, there's only one nature, and we're on one rock together. So it's like it would be better to design systems around maximizing the flow of energy and eliminating as much as possible restrictions that reduce it or create bottlenecks. Because there are periods of abundance, and there are periods of scarcity and there are periods of natural disaster, and there are periods of calm. And this is life. These are the cycles we're in this is humanity. This is every living thing. Our energy is money, their energy is honey, but it's cheaper war is more expensive than peace. So it's like, why would we pick the most expensive option? Okay, let's talk about specialization, employment and unemployment. And Job specialization. So I mentioned that within a bee colony, there are specialized roles that happen inside the hive. And those roles actually correspond completely with the roles inside a business, a specialization enables efficient markets and efficient operations. Because it's more efficient for a B or person to be really good at a couple things than to create generalists, because generalists will never be good at everything. So if you have the opportunity to let people specialize, you get more optimizations. And the downside of this in the human world. And specialization is that most people don't grow their own food or produce their own electricity. And so this abstracts us from the growing cycles around us. And the idea that we are connected to nature, through the energy from the sun that we consume, in the form of food, that we trade for money that we trade for work. And so since we're abstracted from these ideas, we make short term decisions and don't think through the costs of our decisions to future generations or even our own at this point, our own later years. And so how does Job specialization contribute to a nation's productivity and economic output?

David Dorr: 17:30

It's definitely a sign of a healthy economy. So the the more specialists that you have, it's indicative that you you have an economy that can support that type of diversification. And where I think that we we get it wrong is exactly what you articulated is that specialization in general is a good thing. If, and this is the key, if that perspective is maintained in context of the whole ecosystem, right, and that there are basic skill sets that are valuable, whatever kind of specialist you are. So you know, if you're a knee surgeon, it's a highly specialized field, and your time operating on people's knees is going to be more valuable than, you know, operating a farm. That being said, you don't want to lose the, you know, the context of where it all fits together. And that, hey, the farmers role is valuable, and that, hey, maybe having a hydroponic, you know, garden in my house wouldn't hurt, you know, maybe I don't need to grow all my food, but I might want to at least understand how that works. How the threat of interconnectivity is strengthened, and am I a contributor to that? Or do I view myself as the specialist that's just siloed. And so what's happened is because you get these distortions in the economic cycles from printing money is that specialization gets almost isolated, like I do this, people get so attached to that identity, I do this, I only do this. And therefore I don't even understand anything outside of my my little miniature, you know, bubble of specialization. And that's not good. And you see the reverse effect happen when you go into recessions, and even depressions. And you can see this all over the world. It's the same cycle that repeats over and over when economies blow up, they overheat and then crash is that you see specialization, the number of specializations collapses, and then you see competent competition for the most basic services explode, and real examples. So you have an economy crash, and you might have that same knee surgeon and he's like, nobody has money to fix their knees anymore. Because this is an expensive process. The economy's blown up. I still need to make money for my household. There's no other jobs. I guess I'll work as a waiter. Yeah, oh, well, guess what everybody else, you know, the programmer and everything else. It just collapses down into, you know, five or six sectors that are get overcrowded. So it's very powerful, dynamic. Specialization increases and decreases and so we want to be aware of how it flows.

Mark Rubin: 19:59

I was talking to my A friend of mine last night, I was talking to him about one of the mistakes that I've observed is the concept we asking kids, what do they want to be when they grow up? Be? What does that mean? What does it mean to be a knee surgeon? Like, if you think about I want to be a nice urgent user example. What percent of the time are you operating on? Nice, like in the course of a year? Is it 3% of the minutes? Is it 1% of the minutes? Like, what percent of the time is anyone being anything that they imagine they're supposed to be? or want to be like? What a ridiculous question, okay to put in someone's mind that they have to be something. So going back to your point of specialization, I think part of the problem, I think, instead of being a thing that someone imagines, but I think what's more important, my philosophy is about creating the world that I imagined. And so fill in the blank sentence. And I think this is a better question to ask a kid like, what do you want to be is, is a fill in the blank question. The role I imagine is a world where people blank, what are people doing in the world you imagine? And then you can be something that creates that world but being like a noun? What does that even mean? Thanks. I thought there was some philosophy in this

David Dorr: 21:17

very, very philosophical and well said,

Mark Rubin: 21:20

Thanks, man. Let's talk about fiscal policy and public debt. So and this relates in the beehive to managing resources. And you know, we've talked about the idea of different resources in hive, there's honey pollen, which is used to create babies, there's eggs, there's cells, there's wax, there's space, okay, and always trying to optimize all this, depending on what's available in the habitat and what's coming soon, you know, moving things around and sort of like optimize the flow of these things. So how does government fiscal policy relate to the management of public debt and future economic growth?

David Dorr: 21:58

Oh, it's a huge factor, right? So there's a dance there. Because, you know, what you see happen is not surprisingly, as government debt rises, the inclinations of most fiscal policy is to let's raise taxes. Yeah, right. Not a surprise, what a shocker. debt loads are higher. Okay, well, what's our business model is a government. So governments don't really have a business model. They have an extortion model. It's how do they get more resources? Well, their, their main method of resources is, of course, through through taxation. So you see that as debt levels rise, it's not uncommon to see taxes rise, they pretty much go hand in hand. And the problem with that is that you're now trying to pay down these large debt loads, you've borrowed and, and sold off the future. Yeah. And now you're gonna start robbing the present. So you start taking excess savings and making it harder to even get to that future. It's a it's a toxic combination, there's not say that it can't be done. Right. It could be, but it requires some tremendous constraints that history has taught us that, for the most part, governments in general have a lot of difficulty constraining themselves. When it comes to borrowing, spending and, and taxing.

Mark Rubin: 23:20

I was gonna say, human nature, but its nature, when we borrow from the future, our babies pay the debt, running out of honey is a natural be made threat. So it's like, it's our thinking is so localized. In time, instead of thinking over 1000s of years, we think about like, you know, like next weekend. And so I think part of the problem in hearing you talk about economics from human behavior is not conceptualizing that we're just passing through, is like in this cycle, that they have to work to be productive to have whatever they want is they're going to maximize their position and work we create these structures through the stock market and compensation plans that basically create the situations where we're making these decisions based on short term things. I don't think parents, people with children, or at least, that have children and their family in some way, whatever, intentionally do things to harm them. But we do a lot of unintentional harm with our economic decisions, and also environmental decisions. Because your example was great, which is that we borrow from the future, which robs the future energy and then we increase the taxes in the president, which robs the president energy. At some point, these lines will cross Okay, and there won't be enough honey. Okay. There's not enough. And the people that were interesting with these decisions are on elections like that are paid for by marketing dollars. And so like the game that we've created, is like the worst case scenario of planning.

David Dorr: 24:57

Yeah, and it should be no surprise that we get those out. comes no surprise, that surprises because when you look at it, you see it clearly. And that's why it just seems so ripe to be to be overhauled. This is something that we do need to, you know, advance past as a civilization and see the whole system's thinking

Mark Rubin: 25:16

it will be wise to model the secrets of the bees. Very. That's the entire point of this is that the bees have been playing this game for 100 million years. Right. Okay. So they've done it for 100 million years he civilizations only been around for who knows 5000 years or something. And money's been around for just a part of that. In our tokenization of this process, if we just traded honey, I mean, this is the thing is like, if we let you have honey was the currency, we'd have a lot of flowers. We'd have a lot of pollinators. Okay, we will destroy habitats, but it costs honey to make honey and it costs honey to move honey, and it costs less honey to dig up gold. And it costs less honey to like wire money. And so basically, we're optimizing the transfer to reduce transaction fees that it costs to gather and store. But it since it abstracts us from nature, we're making these terrible decisions. So like Abby a favor of the of the honey economy. Django honey in a bag you go to you go to the gas station with like, five gallons of honey, and then you get like a tank of gas, actually honey powered cars, let's reconfigure civilization to be run on on each and every way. Yeah, totally. So we I talked earlier about inter hive transactions, and interactions. But let's talk about that, in terms of international finance and world influence and economic decision. So how does the exchange of information and international finance influence, you know, economic decisions and move markets? And would it be better if instead of like patenting things and keeping things secret, and instead of creating advantages locally for countries, do you think it'd be better if if things were were shared more openly, like about advances in technology or solutions to problems?

David Dorr: 27:05

Wow, how fascinating you would ask that I quite literally was doing research on this this very topic. Yes, yesterday. The reason for this is there's a profound question. There's a lot of different thoughts on it. First of all, let me tackle your question from the information side. So So information is now its own asset information has tremendous value, right? So as we enter into this kind of world of you know, big data, data and information is extraordinarily valuable. And when we look at our biggest cost as an investment management firm, it's information we pay for information. So yes, it is valuable. The concept of intellectual property today I think is ripe for a different approach. We're borrowing from what we've seen in the open source, you know, programming community, and open source code is applying that to a broader set of intellectual property is, is actually really, really important. Because the patent system, in many ways actually stifles innovation, when somebody can monopolize an idea. And we can't continue to build off of that it creates a problem, and I'm reminded of I believe this quote was attributed to, I think it was attributed to Lincoln, somebody can fact check this later and see, but it was a quote that always stood out in my mind. And it basically said, if I give you one penny, and you give me one penny, we both still have one penny. But if I give you an idea, and you give me an idea, we now both have two ideas. That's a really important concept. When we think about, you know, effectively what we would call intellectual property and innovation, is that we do need a better collaborative model for that, especially as you know, we're accelerating in so many areas, quantum physics, for example, there's a lot of news about potential breakthroughs and superconductivity, and all the teams, you know, racing to defend their intellectual property or to collaborate with it. So this is a timely, timely question. So yes, answer to that. Information is important and, and collaboratively rethinking how we deal with intellectual property, I believe is, is a ripe opportunity for for this generation and future ones.

Mark Rubin: 29:12

That matches my understanding too busy goes data, information, knowledge, and then wisdom and then character. So information is structured data knowledge is is that structured data over time, like basically sampling that structured data over time to get trends? And wisdom is the clarification. Basically, now that you have the trends, can you simplify it into like one sentence? And then character is the application of wisdom to meaning in a person's life and that that's how characters pursued? And I think that you know, because we're in this like, digital age of like data and information. That's good, but sharing knowledge or dance is safe, honey, what an amazing core. When we dance to share our knowledge. We all do much less work and And so like if the objective is creating efficiencies, then sharing knowledge, which is after information will get us closer to wisdom. And I think that was a really, I'm happy we covered this one today. Yeah, all living things that can move through their own decisions or making decisions based on macro economics. The fact that you're alive means you've been successful in playing this game. If you've enjoyed this discussion about trading energy for time, and macroeconomics, please subscribe to this podcast lessons from nature modeling the secrets of the bees. The next four episodes will cover anthropology and I'll be discussing the game of survival, the abundance of resources, the idea that cooperating cost less than fighting, and the idea that most things cost more later. Visit project honey lay down life for more information about living in harmony with the rest of nature.