Reasoning Via Amplification

A few days ago, something made me get out of bed at 11PM at night and rush to the gym. And trust me, it wasn’t the sudden desire to work out.

So what was it? A simple video on YouTube.

It said that if you want to tell whether you’ve had a good day or not, multiply the day you just lived by 1000 and imagine what the result would be.

That day, I had eaten junk for both lunch and dinner, and had not set one foot in the gym. If I multiplied this day by 1000, my bodyweight would probably multiply by 2. The thought of that gave me enough emotional leverage to literally burn the midnight oil.

Although you probably won’t see Warren Buffett in the gym at 12AM, this is a potent method of reasoning he often uses to filter his investment decisions. For the sake of this article, let’s call it ‘reasoning via amplification’.

The idea is simple — instead of taking the characteristics of something at face value, you put it to the test by amplifying it to see if the characteristic holds.

You can either amplify quantity or time.

Here is a quick example. Let’s take the question “Is the Apple stock volatile?”

Characteristic: Volatility.

Amplification: Time.

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Looking at the 5-day chart, the answer could be ‘yes’.

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Looking at the YTD chart, the answer could be ‘no’.

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Looking at the lifetime chart, the answer could be either ‘yes’ or ‘no’.

As you can see, the characteristic i.e volatility of Apple stock changes with the degree of time amplification. This is also true for the stock market as a whole. This is why in the book “Fooled by Randomness”, essayist Nassim Nicholas Taleb says that it is foolish and meaningless to look at stock charts every hour.

Generally speaking, the true characteristic of something will only be revealed once you amplify it.

Warren Buffett expressed this when he said “If you aren’t willing to own a stock for ten years, don’t even think about owning it for ten minutes”.

Looking at the long term forces you to consider what truly matters, which is the fundamentals of the actual company beneath the stock price. The same goes for real estate investments.

Conservative men have an intimidate (no pun intended) understanding of this thought pattern. “If you aren’t willing to be with her for a lifetime, don’t be with her for a single night”. It won’t make for a very exiting dating life, but rest assured these men make sure that their due diligence process on potential romantic partners is airtight.

Obviously, reasoning by amplification does not apply to everything. A Christmas dinner amplified would not be a pretty picture, but it does not mean that Christmas dinners once a year are bad. Some things are valuable and meaningful as a standalone event.

But for events/characteristics/behaviours that are recurring and/or extend across a long period of time (such as the quality of a day, or the value of an investment) reasoning via amplification is a useful tool to cut through the ambiguity and confusion caused by the paradoxical nature of things.

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I was able to expose the true, ugly face of what appeared to be a benign choice to eat junk food through reasoning via amplification.

What appears to be a decent investment in the immediate term will be exposed as an infatuated speculation based on wobbly foundations.

Next time you are unsure about a decision, amplify it — and you might just find yourself doing bench presses well into midnight.

“Chains of habit are too light to be felt until they are too heavy to be broken.” — Warren Buffett

Stay EPIC,

Sam Lee

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