Why Serendipity Is Important for Innovation, Creativity, and Success In Investing
And our everyday happiness
One of the most beautiful experiences in life is the stroke of serendipity, something pleasing or valuable we find without actively looking for it, the stumbling into something good by chance.
Last Sunday, after having lunch in Newark, the adjacent city to Fremont (selected as the happiest city in the US), I opened Google Maps to find a place for some iced boba tea but stumbled upon a lake tucked inside the Newark homes near us.
We were pleasantly surprised as we thought we knew the area well. So we spent two hours around the lake, circling the one-mile loop two times, and resting to take in the breeze. It was an afternoon well spent.
Creation of Serendipity
Horace Walpole, a member of the British House of Commons, had a knack for finding things unexpectedly. He likely invented the word based on the Persian fairy tale “The Travels and Adventures of Three Princes of Sarendip.” Sarendip (or Serendib) is the ancient name of Sri Lanka. He wrote in one of his letters in 1754:
This discovery, indeed, is almost of that kind which I call Serendipity, a very expressive word, which, as I have nothing better to tell you, I shall endeavor to explain to you.... I once read a silly fairy tale, called “The Three Princes of Serendip”: as their Highnesses travelled, they were always making discoveries, by accidents and sagacity, of things which they were not in quest of ... now do you understand Serendipity?
~ Horace Walpole
To Walpole, serendipity meant finding something by informed observation (he called it sagacity) and by accident, often happily and beneficially.
Serendipity results not from blind luck but “smart luck”— the serendipity mindset Professor Christian Busch called that the luck that you create based on how you react to unexpected moments and how you cope with unexpected moments.
Sagacity refers to the acuteness of mental discernment and soundness of judgment. It builds on the notion of an open mind.
Serendipity in Science and Innovation
Serendipity has played a significant role in scientific discoveries and innovation.
Numerous examples include Christopher Columbus’ discovery of America, the invention of the Post-It Note and microwave, the discovery of tea drinking and Penicillin, and when Isaac Newton got “hit” by an apple (or more accurately he was inspired by seeing the falling apples), leading to the discovery of gravity.
Researchers argue this requires more than being in the right place at the right time to make a serendipitous discovery.
Professor Matthew Grimes said there are three types of serendipities:
Thunderbolt: Unexpectedly finding a solution without actively searching, as in the accidental invention of the rolling suitcase.
Archimedes: Discovering a solution to a known problem from an unrelated source, exemplified by Archimedes' famous "Eureka" moment.
Post-it Note: Discovering a solution to a different or unrecognized problem while looking for another solution, like the creation of Post-it notes during an attempt to make stronger glue.
Attributes That Bring About Serendipity
Creative thinking is one such example. It involves seeing familiar phenomena in a new way, leading to innovation. Percy Spencer from Ratheon observed that microwaves melted a candy bar in his pocket, leading him to invent microwave cooking and transform a daily occurrence into a revolutionary technology.
An inquisitive mind is crucial for turning surprising observations into significant discoveries. X-ray discovery in 1895 began with a chance observation, but the inventor’s thorough investigation of the anomaly transformed it into a groundbreaking scientific advancement.
Related to the above is background knowledge. Serendipitous discoveries often occur due to the discoverer's specialized background knowledge, allowing them to recognize important breakthroughs. Alexander Fleming discovered penicillin when he returned from his holiday and accidentally found a mould growing on a Petri dish of Staphylococcus bacteria that prevented the bacteria around it from growing.
Having the right tools (big data and computing power have fuelled the rise of AI) and good timing (when the time is ripe for a new idea) greatly help.
Tom McCallum in his post “Are you a Serendipity or Zemblanity Person?” described serendipity well:
Serendipity is a word that some may call luck or coincidence. Perhaps, but I don’t believe in luck, I don’t believe in coincidence. I believe in serendipity. Perhaps it is a combination of clarity of purpose and creating the environment (both in structure and in belief and energy) to both allow serendipities to emerge and for you to see them in front of you and choose to make them part of your journey.
We need to enable our environments and structures to invite flow and serendipity to come into our lives through the new things we experience, the people we encounter, and the opportunities that follow. Importantly, we need to identify and embrace them when they come.
Cultivating Serendipity in Investing
An anecdote: How I entered into the investment management industry was “smart luck.”
As I was finishing my business school studies at UC Berkeley, I was still without a job, and I wanted to start in investment management. As a foreign student, I needed to find a sponsor for my H-1B visa so I could work in the United States. This had added complexity to my job search, while the economy had just emerged from a recession.
I casually mentioned my situation to one of my seniors who had already graduated. He told me he knew a trustee in a mutual fund company so why didn’t I pass on my resume? I knew nothing about the mutual fund company, or what a trustee did, and the trustee had not met me even once, but I surely sent it in.
It turned out the mutual fund was a British company (founded by two Oxford and Cambridge graduates). In their uppity way, they only accepted investment management applicants either from the Oxbridge Universities or the top 5 universities from the US!! I happened to graduate from the former, so my resume got the first cut.
The trustee kindly forwarded my resume to the head of equity and fixed income, and I got interviews from both. I was accepted into the global fixed-income group to start as a bond analyst and received job sponsorship—the rest is history.
The trustee remained my best mentor till he passed away last year. To this day, my best friends in the industry and my current business partner are from this firm.
In investing, we keep our ears and eyes open to the market environment, macro economy, and the flows in the capital market, not necessarily because we need to trade or time the market, but to be aware when things change, how that can or cannot impact our investment positions and outlook, and then decide whether we need to take any actions.
The British economist, John Maynard Keynes, was credited with saying:
When the facts change, I change my mind. What do you do, sir?
Humans are not good at forecasting, not even the economists themselves, according to the New York Federal Reserve. Why, because the professionals become overconfident and underestimate how much the underlying conditions can change over long periods.
If we always go to the same place to eat, play, work, or travel the same route, we become too fixed in our ways and less able to invite new chances to happen in our lives. When we need to make a change, we easily freeze or hide our heads under our mattresses instead of seeing that change as an opportunity.
Try to connect the dots of what we have done before, where we have lived and travelled, and whom we have met, the chance is we already have what will help us or make us happy.
The same applies to investing. New ideas, themes, and investment products are evolving. I remember when I entered investment management, asset management firms welcomed applicants from a liberal arts or even music major background. Cross-pollination of ideas and experiences is important in money management. Imagine all the traders in an investment bank sitting in an office and hardly talking to each other, what will happen to the flow of information and activities? It does not happen.
One can identify an underrated story or undervalued investment idea if one reads up widely, gets interested in disciplines other than one’s own, and does her homework.
Fund manager Peter Lynch, who grew the Fidelity Magellan Fund from $20 million to $14 billion popularized the “buy-what-your-know” strategy. He has a keen eye on his daily surroundings and always asks questions like—where did you buy your coffee from, what brand of laundry are you using, who is your competitor? The answers open doors.
Lynch followed up on these ideas and selected stocks from companies he knew well and then deployed fundamental analysis, evaluating their business models, competitive landscapes, growth potential, and more before investing.
I believe the biggest mistake in investing is not that we do not make enough returns because we make money in some positions and lose some in others (and we should aim at winning (a lot) more than we lose) but instead (1) not seeing facts have changed and continue to be stubborn about what we already know and (2) following an investment strategy or picking a position just because many other people are doing the same.
Now that I have written about and am more aware of serendipity, I am positive there will be even more unplanned but blissful moments to come my way. However, I will also be cognizant when unfortunate and unhappy things happen, be open to solutions and help, and never be stuck in my thinking.
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Beautiful inspirational post! Thanks so much Marianne.
Thanks so much @Vicki Lee Dillard, etc. for restacking my post!!