The 10th Man

The movie 'World War Z' seemed to be just another Zombie movie to me. A very passable movie in fact. But one scene from the movie turned out to be a hidden gem.

The movie so far has gone like this....

World is infected by a virus that converts people into "undead" or zombies. These zombies bites the normal humans who then gets infected and turns into zombies. The virus has thus spread quickly across the world and remaining uninfected people are looking for a defense.

Our dude, the savior, here is Gerry (Brad Pitt), a former U.N. investigator. He has been called back by UN Secretary-General to find the source and cure of this trouble. The search takes him to South Korea where he learns that Israel knew about this potential crisis and had prepared themselves before hand by building walls around Jerusalem. Gerry wanted to know how did Israel knew about this crisis before others and were able to prepare themselves for that.

Gerry sets off for Jerusalem from Korea as his search for the solution widens. At Jerusalem he meets Jurgen Warmbrunn from Mossad. What follows next is a brilliant concept of "The 10th Man". Watch the below video...

As an equity market investor I have been learning about outliers and fat tails. The "10th" man to me signified the events that are outside the 90% confidence interval. These are the events that a normal human mind is not equipped with to think about. Events that his minds has not seen or assessed so far. These are black swan events as popularized by Naseem Nicolas Taleb, the fat tails.

"Most people don't believe something can happen until it already has. That's not stupidity or weakness, that's just human nature."

Are these events predictable? The answer can be yes and no. Yes, because based on conditions and evidences available one can assess higher probability of something happening and can prepare himself for that. No, because in my opinion it is very difficult to assess the timing as well as the magnitude of the impact that these events can cause. The turn of events are dependent on so many unknown factors. Who knows where the domino will be broken. Few people I know had assessed about the sub prime crisis, but even they were surprised at the magnitude of the financial meltdown it created.
(By the way, zombies did manage to breach the Jerusalem wall in the movie!)

Thus, one can just prepare themselves for this as much as possible. How to assess this? Well the 10th man concept. Critical thinking. If most indicators are telling you to buy something, wear the hat a 10th man. Assume that it is not a buy. Start your investigation with that notion. What can kill the company? Where can the current thesis go wrong? Of course, one will never be able to ascertain everything. But noting down these concerns can help in presetting your next decision making points about the company, avoiding interim behavioral swings.

Every people we save is one less zombie to fight. 

Of course, one needs to be mindful about creating a situation of "decision paralysis". If 9 men are saying something, there is only 10% probability that the 10th man will be right. Just note down what 10th man has to say and look for conditions where he can be right. Start building the wall (protecting your portfolio) when you see those conditions materialize. The more you think about possible fat tail scenarios, lower your probability of making a permanent loss of capital. 

Would just like to conclude with one of my favorite quote of all time...

When all men think alike, no one thinks very much - Walter Lippman