IN THIS EPISODE, YOU’LL LEARN:

• How scarcity drives value and luxury brands engineer demand
• Why Costco wins by reducing scarcity and leveraging scale
• How supply and demand influence stock prices and volatility
• Why economic cycles impact nearly all businesses over time
• How COVID reshaped demand across industries and markets
• The risks of cyclical investing and the benefits of steady compounders
• How optimization can backfire in business and biology
• Why specialization has trade-offs and why investing legends often stay generalists
• The tension between competition, monopolies, and market structure
• How bubbles form through demand surges and investor psychology
• Why great management teams leverage audience building to build the right type of shareholder base
• How contrast framing and narrative shape investor decisions
• And so much more!

Disclosure: This episode and the resources on this page are for informational and educational purposes only and do not constitute financial, investment, tax, or legal advice. For full disclosures, see link.

TRANSCRIPT

Disclaimer: The transcript that follows has been generated using artificial intelligence. We strive to be as accurate as possible, but minor errors and slightly off timestamps may be present due to platform differences.

[00:00:02] Kyle Grieve: Most people believe that optimization is the key to success in many areas of life, but most people fail to see that optimization has led to catastrophic failures when the environment changes rapidly. Today we’re going to discuss mental models from both art and economics, and some more detail to help us build a better framework for thinking about the world and investing. These two categories work very well together, simply because successful investing relies on several economic forces. And while economics does a decent job of explaining how money flows in and out of a country, it doesn’t account for the art part of investing. Economics is more scientific, rigid, and reliant on numbers and calculations that you can really just see and feel while view businesses through the lens of efficiency, supply and demand optimization, and capital efficiency. We’ll look at why these economic principles are just so powerful, and how they can help you think of companies through a more global perspective. But while investors enjoy relying on numbers, KPIs, and compounded growth metrics that simply doesn’t tell the entire story of a business.

[00:01:06] Kyle Grieve: If you want to find wonderful investments, it really helps to align yourself with the right management team. And a good manager is like a skilled movie director. They tell a story specifically cultivated to attract the audience that they think would make the best viewers. Now, in terms of investing, a viewer is an investor. And if the business relies on long term thinking and transparency, it will want shareholders who also value long term thinking. So having the right audience is key. But to tell the best narrative, managers must also frame the story properly to highlight areas of their business that attract the right audience while repelling the wrong ones. So if you’ve ever wondered why monopolies exist or why markets can swing from euphoria to panic just so quickly, it’s simply because investing isn’t about just numbers. It’s about perception, narrative, and human behavior. Now, let’s dive right into this week’s episode on mental models from art and economics.

[00:02:03] Intro: Since 2014 and through more than one hundred and ninety million downloads. We break down the principles of value investing and sit down with some of the world’s best asset managers. We uncover potential opportunities in the market and explore the intersection between money, happiness, and the art of living a good life. This show is not investment advice. It’s intended for informational and entertainment purposes only. All opinions expressed by hosts and guests are solely their own, and they may have investments in the securities discussed. Now for your host, Kyle Grieve.

[00:02:45] Kyle Grieve: Welcome to the investor’s podcast. I’m your host, Kyle Grieve. And today I’m going to cover a variety of mental models from art and economics inspired by Shane Parrish’s book, The Great Mental Models Volume 4. Now, this book is interesting because at first glance, economics and art just don’t really seem to have that much in common. But Parrish did a great job explaining just why they interact so well. For instance, he writes that economics is as much science as it is an art, and that inside of economics, the laws don’t necessarily follow the laws of nature. Just as something such as biology or physics. Economics is largely influenced by things like narratives and culture, which are vital aspects of art.

HELP US OUT!

Help us reach new listeners by leaving us a rating and review on Apple Podcasts! It takes less than 30 seconds, and really helps our show grow, which allows us to bring on even better guests for you all! Thank you – we really appreciate it!

BOOKS AND RESOURCES

• Join the exclusive ⁠⁠⁠TIP Mastermind Community⁠⁠⁠ to engage in meaningful stock investing discussions with Stig, Clay, Kyle, and the other community members.
• Learn how to join us in Omaha for the Berkshire meeting ⁠⁠here⁠⁠.
• Buy The Great Mental Models Vol. 4 here.
• Related ⁠books⁠ mentioned in the podcast.
• Ad-free episodes on our Premium Feed⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠.

Some of the links on this page are affiliate links or relate to partners who support our show. If you choose to sign up or make a purchase through them, we may receive compensation at no additional cost to you.

NEW TO THE SHOW?

• Get smarter about valuing businesses in just a few minutes each week through our newsletter, ⁠⁠⁠The Intrinsic Value Newsletter⁠⁠⁠.
• Check out our ⁠⁠⁠We Study Billionaires Starter Packs⁠⁠⁠.
• Follow our official social media accounts: ⁠⁠⁠X (Twitter)⁠⁠⁠ | ⁠⁠⁠LinkedIn⁠⁠⁠ | ⁠⁠⁠Facebook⁠⁠⁠⁠⁠⁠.
• Browse through all our episodes (complete with transcripts) ⁠⁠⁠here⁠⁠⁠.
• Try our tool for picking stock winners and managing our portfolios: ⁠⁠⁠TIP Finance Tool⁠⁠⁠.
• Enjoy exclusive perks from our ⁠⁠⁠favorite Apps and Services⁠⁠⁠.
• Learn how to better start, manage, and grow your business with the ⁠⁠⁠best business podcasts⁠⁠⁠.

SPONSORS

Support our free podcast by supporting our sponsors:

• ⁠HardBlock⁠
• ⁠Human Rights Foundation⁠
• ⁠Vanta⁠
• ⁠Unchained⁠
• ⁠Netsuite⁠
• ⁠Shopify⁠
• ⁠Fundrise⁠

References to any third-party products, services, or advertisers do not constitute endorsements, and The Investor’s Podcast Network is not responsible for any claims made by them.