What Really Matters

Jerry Seinfield recently published “Is this Anything”, a collection of notes written by him on his yellow pad over decades.

One of them stayed with me:

I gamble a little

I’d probably gamble more, but I don’t win so I stop.

I don’t understand gambling addictive.

My brain works like

LOSING MONEY:STOP ACTIVITY

MAKING MONEY:CONTINUE ACTIVITY

Gambling is an assortment of different games and bets you make on them.

Lot of people try to game the game and are serious about understanding the mechanics and over the years there have been several of them who have used mathematical/statistical models to excel.

Now they are playing a different kind of game and as is usual with people who indulge in these games.

Everyone has their own agenda.

Here is a list of different games that I have come across:

The Academic

The people who are building and using statistical models to understand and beat the game are playing not just to win but to show, how they are superior and can beat anything with their brainpower.

Of-course this is a small majority.

Egoist

Psychologists have singled out the human ego as a major influence on the negativity of gambling. It is the ego of the person that refuses to see defeat and refuses to let go of a losing situation.

The Competitor

This person has an innate need to compete and play to win.

They will go to any length to win the odds.

They will work to get a formulae-they might not even be academic but wouldn’t mind cheating also if they have to but winning is their mantra.

Charlatan

This is sometimes by design but often just a pretender who thinks of him/herself as an expert.

Gambling is game of chance, now as we saw above some people try to game it, however then there are others who think of their lucky streak or as they say “luck by chance” as expertise.

Inability to differentiate between expertise and chance gives them so much confidence that they not only want to play the game but even teach others how to.

The Investing Parallel

For those who come into equity markets, humility is the first lesson.

Beginner’s luck might make you feel confident, however accepting luck for what it is becomes very difficult.

As most real experts will tell you most of the time, they don’t have all the answers.

However, the person who posts their winning trade daily making it look like that they only have winning trades is fooling only him/herself.

Equity markets knows no one who wins every day, sometimes you lose and that’s OK but to pretend winning every day can lull you into looking at everything with a rosy tint.

The real deal is always to leave you ego out of the door, be humble every day.

Not everyone will be having the time to understand every business that they invest in but if that is the case, leave your money to professionals.

However, if you are going to invest yourself in the market, be humble, set-up objectives and process of your investing and then follow the same with rigour.

You might not have all the tools at your disposal, but you can seek help, experiment, and learn from others, not just by reading but also by talking, sharing and doing.

Yes, the most valuable lessons might come by losing but that’s OK till you don’t repeat the mistakes.

Remember again-your stocks don’t know you love them or that you even own them, and no one cares about your expertise.

Think only about your process and your XIRR and not about proving yourself to someone because frankly

“who cares”

Decision, consequences, Time

India’s first Home Minister post-independence and the man who unified India after the British left, Sardar Vallabh Bhai Patel, mused amongst all the chaos and decision-making demand that- “What we do today will have implications for the fate of this nation over decades”.

Every single decision that you take has this framing-isn’t it?

You decide you will exercise; it will have a short-term impact on your schedule, on how motivated/frustrated you are about your physical condition both in terms of how you look physically as well as stamina.

It could frustrate you, make you feel dispirited, or it could make you feel more energized.

How you feel will decide whether you continue or not.

However, over-time, if you continue, you will see the difference in stamina, motivation, and a greater push to yourself.

It will change your physical appearance and your ability to work-out.

And maybe over a few years, it will change the internals of your health, how your heart is, body mass index, immunity etc.,

So, there is a very short-term, a medium-term and a long-term for every decision.

Decision Making can’t be random

Suzy Welch, a best-selling author, and inventor of the 10-10-10 method said this, and I quote:

“A lot of people think that life is actually series of events that happens to us. Those people have a reactive mindset. Those with an ownership mindset think that life is a series of decisions we make and the events happen because of the decisions we have made.”

After having struggled with decision-making and wanting to have it all at the same time, Welch came up with this 10-10-10 technique. “Now I consider with every decision, what are the consequences in 10 minutes, in 10 months, and in 10 years. I put every decision in this frame.”

So, she considers every decision that she is making, what are the options and then puts it through the 10-10-10 lens and imagine outcomes and implications over time.

Consequences

Every decision has consequences. The former Reserve Bank of India Governor, Mr Subbarao said this in a post policy press conference- “there are always unintended consequences of our decisions that we need to be mindful of”

Imagining outcomes and consequences of your decisions over time help frame your thought process and prepares you to face these consequences.

Come to think of it, this is exactly you need to think about investing.

First, you think about why you are taking that particular decision in the first place which is a bit of art and science in itself.

Numbers will tell you a story, but it will not be complete, narrative will tell you but it would also not be complete.

Marriage of the 2 would also not be complete.

Ultimately it would be about-how convinced and committed you are and how much do you understand about the consequences and outcome of that decision.

This is true about a business investment or even a personal investment decision.

Applying the 10-10-10 rule:

  • How would you think about the investment decision in the shirt-term if it doesn’t work out?
  • What could the decision outcome be to keep you moving over the medium-term?
  • What possible outcomes, risk/reward are you staring at over the long-term?

No picture is complete, however imaging these scenarios and re-visiting them periodically will help you face and plan for the eventualities.

Ultimately, you don’t know and can’t plan for every eventual unintended consequence, however you can prepare yourself for facing them by putting a framework.

Remember not everything can be framed, clearly, we don’t always take decisions rationally, however the closer you get to a framework, the better prepared you will be eventually.

So make an effort.

What’s right-but aren’t it

Vikram Seth’s critically acclaimed book “A suitable boy” details the story of Lata and her mother’s search for “A suitable boy” for her in the post partition India.

Lata must choose between Kabir, the Exciting but unattainable Muslim boy, The not available gay poet Amit or the boring but stable Haresh.

The story to me is not so much about what she chooses finally but the fact that life presents you all these choices or the buffet of choices if you must and you need to decide.

Making the decision, resisting the temptation is the most difficult part.

Do I need all the choices?

Choices confuse, they can distract.

Lot of them are too difficult to understand but would you rather have a choice to decide or someone deciding for you.

Would you want to be empowered enough to make your own choices or be a puppet in someone’s hands?

Where is the Problem?

Every time something outside our comfort zone confronts us as a choice, it requires us to put in the hard work.

Most of the time, therein lies the challenge.

Most of the people I know want to be healthy, want to look good but you tell them wake up early and go to gym, the motivation drops several levels, and they would straight up admit, it’s not up their alley.

Scott Adams in his memoir, “How to fail at almost everything and still win big” talks about the fact that we have limited will-power in a day, and we need to decide how and where to use it more optimally.”

If running is not your thing but you use your willpower to run early in the morning, would you be left with enough will-power to go through whatever the rest of the day throws at you.

This is an important lesson, yes running is a good exercise, but you are not able to run, so what should you do.

Instead of trying to run, find a physical activity that works for you, for example yoga, a sport, hiking.
Whatever interests you.

That’s how choices unfold.

Not every choice in front of you is the right choice for you, but there is a “suitable choice” in there for you.

How would you know what’s suitable for you?

Now this would require some work again.

You would need to experiment a bit.

Get a mentor/advisor/coach/trainer whom you trust and seek their opinion.

Like go to the gym, try running, cross-training, Pilates, cycling, dancing and see what keeps you motivated and that will give you the maximum productivity.

That’s exactly how it works in Investing?

A friend made money in crypto, and another made money day-trading and the third one made money through systematic investment planning, yes all of them are legitimate ways to make money, however which one works for you.

Which risk are you most comfortable with?

There’s a great restaurant business, there is a great internet business, there is a great grocery business and there are countless people who have failed at each one.

Don’t get into something for the money but because it works for you and eventually it would.

Rest-Wish you all a Very Happy New Year.

See you on the other side

(Falling in)……………

2002 Hollywood movie “Enough” saw the lead character played by Jennifer Lopez endure constant physical abuse at the hands of her husband before taking control.

Similarly, the 1944 film “Gaslight” has the lead character manipulated by her husband till she teeters at the brink of madness.

In her memoir Crazy Love (2009), the American feminist writer Leslie Morgan Steiner details the domestic violence she suffered during her four-year relationship with her ex-husband Conor. He choked her, punched her, banged her against a wall, knocked her down the stairs, broke glass over her face, held a gun to her head, took the keys out of the ignition on the highway.

Steiner’s love for her husband was irrational. Steiner didn’t stay with her husband even after the abuse due to fear, it was love. Even when he broke a glass frame over her head, her only thoughts were: ‘Don’t let this happen. I do still love him. He is my family.’

Love is often viewed as an emotion that defies other emotions to the extent that other emotions are believed to be subject to justification or rationality while love is often irrational.

Reasons for love are often found to be vague or non-existent. Common answer being “I don’t know, I just do”.

Of-course push comes to shove people often rationalize their love and find reasons.

Its Chemical

Testosterone, estrogen, and dopamine are the chemicals that incite romantic entanglements.

So far so good hormones are released, making us feel good and rewarded. However, love is often accompanied by jealousy, erratic behavior, and irrationality.

So, you can see the downside behavior is a result of what causes the upside.

For example, Testosterone has been found to incite aggressive behavior while dopamine impacts virtue and vice equally and has been found to cause addiction.

The good comes with the bad and is unavoidable.

Love creates attachment, attachment can create overly protective feelings leading to the need for ownership and guarding the feelings even more strongly.

Falling in Love with your investment

“Never fall in love with a stock; always have an open mind.” Peter Lynch

For investors this can be dangerous attribute to have.

Falling in love with your stocks/investment is a very common phenomenon.

Investors can fall in love with a thesis.

If the thesis bears result in the short-term, the outcome becomes the process making a person feel even more attached to the thesis.

This leads to investment going beyond investment and becomes personal.

All sense of rationality needed so badly in any investing decision gets thrown out of the window.

Everything associated with the investment only looks rosy.

The meme-stock phenomenon is its best example.

What to do?

I will just present a few statements to clarify this (emphasis is mine):

“We document our analysis and valuation not only at the beginning, but also by formally revisiting everything in writing at least twice a year.

It’s easy to get married to something you own and if it’s not working to change the reason you are still in it.

We find this a very good exercise to help prevent that kind of thesis creep.”

David Hurwitz

“Never fall in love with anything! If facts change, re-evaluate your position!” James Dinan 

If we only confirm our beliefs, we will never discover if we’re wrong.

Be self-critical and unlearn your best-loved ideas.

Search for evidence that disconfirms ideas and assumptions. Consider alternative outcomes, viewpoints and answers.” Peter Bevelin

“Pride is a great banana peel, as are hope, fear and greed. My biggest slip-ups occurred shortly after I got emotionally involved with positions.” Ed Seykota

In a nutshell, once you own something basis your thesis, re-evaluating on a periodic basis while keeping your emotions aside can help take a better view on the security.

Remember the security doesn’t or care that you are in love with it.

So, keep your unrequited love out of the way of your investing journey

Happy Investing

Red or Blue

In the movie, Matrix 1, when Neo meets Morpheus for the first time, there exchange is highly enlightening:

MORPHEUS: [Takes out two pills, one of which is red, the other of which is blue] This is your last chance. After this there is no turning back. You take the blue pill, the story ends; you wake up in your bed and believe whatever you want to believe.

MORPHEUS (cont’d): You take the red pill, you stay in Wonderland and I show you how deep the rabbit hole goes.

MORPHEUS: Remember, all I’m offering is the truth, nothing more.

American psychologists Sheryl C. Wilson and Theodore X. Barber first identified Fantasy Prone Personality in 1981, said to apply to about 4% of the population.

Fantasy prone people are known to spend half of their time awake daydreaming. They will mix their fantasies with their real memories and often confusing one for the other.

The Matrix segment reminds me of such a fantasy prone situation offering an end to the fantasy.

“You take the Blue pill story end here”; however,

“You take the Red pill and I show you how deep the rabbit hole goes”.

Creating your Fantasy World

Human beings have been aspirational forever and that’s perhaps the genesis of all the progress that we have made through generations.

However, being aspirational and living in a fantasy world are 2 different things.

Xunzi, a follower of the Great Confucius said this to a man aspiring to follow the past great kings, but who had not taken any steps towards realizing his aspirations, -“For you to have such ambitions is like lying flat on your face and trying to lick the sky”.

What do you want to be?

Kids are asked these questions and so are grown-ups.

Candidates being interviewed for a job are asked what you aspire to be in 5 years’ time.

Right noises are made by the person being asked the question.

A kid might say-pilot, president etc.,

While an interview candidate might say-CEO/CFO/ or Head of whatever other department they are applying for.

What are they doing about it?

You would often see a blank face.

A response that conveys- “learn, develop my skills, add further education” might seem like the person doesn’t have a specific destination and are hence not acceptable and hence not even received.

Very few respondents are evolved enough to think about the “how to reach” their destination and not just “the destination”.

Comfort Zone

So many people are just happy replicating their 1st year experience because of which 10 years for them is not 10 but Year 1 ten times.

It’s easier to stay in the comfort zone while aspiring for big things.

People often think, this is not rocket science, whenever I want, I will change myself and reach where I want.

Success is what happen overnight in 10 Years

Aspire and then hope for things to happen is not a game plan.

Aspire and then progress to the destination is the only way out.

Overnight success is often just luck.

Real success majority times takes long and sustained efforts and patience.

Working through roadblocks and frustrations are key to reaching the destination.

Hope is the “red pill”-it will keep you in the fantasy world for too long for the fantasy to come true

If you keep at it, the blue pill will not end your story but keep you on path to success.

The meme stocks might be the “red pill”, popular and seen as a key to overnight wealth, but might take you deep in the rabbit hole.

When real wealth has been generated over decades by successful investors-whether it’s a Warren Buffett or a Rakesh Jhunjhunwala.

So Stay the Course and Put in the work

It Didn’t Work

Despite the consistent run, India have not been able to win an ICC tournament under the current Captain Virat Kohli and here is what the captain had to say about it:

“You could say winning an ICC tournament is like an obsession, he said, “But, in hindsight, you can look at a lot of things. We obviously have the desire to win big tournaments and big series and we want to give our best effort possible. But, if you focus on things which are only based on success and numbers and results, you don’t enjoy the process. We play well as a team because we enjoy the process.”

Indian cricket team is ranked number 1 or 2 in most formats of the game but has not won an ICC tournament in some time now.

Marcelo Rios was the first Latin American player to be ranked No. 1 in the ATP standings. He is also the only ATP player to never win a Grand Slam despite being ranked No. 1.

In spite of winning 18 ATP tour titles, he made it to the finals of a Grand Slam even on only one occasion, and that was in 1998, where he lost to Petr Korda.

He was in the No. 1 spot for over six weeks and never made it to the finals of a major again.

Journey or Destination

Does becoming no. 1 in the world but not being able to win the tournament considered the ultimate pinnacle in the sport make you less of a player/team.

You have to be really good to reach the number 1 spot.

You would have done a lot of things right; however you don’t have in the cabinet the ultimate proof of your success.

The Indian Cricket captain talked about process and doing it right.

Enjoying the game and doing well.

What can go wrong?

Now this might not be the case, all the time but this is way to think about the role of process and then some extraneous factors (which I have chosen to call “luck”).

Not Everything is under your Control

All this tells you is that you only control working out a good process and following it with discipline.

That’s all that you control-everything else is uncontrollable.

For example, in Cricket what kind of pitch you are playing on plays a critical role in the outcome.

You don’t decide the quality of pitch or whether it will work in your favor, however you can pray for good luck so that you win the toss and get to decide how to use the pitch in your favor.

Same goes for Investing

Here is a story from Mark Twain in his own words (emphasis is mine):

“General Hawley sent for me to come to the Courant office. There was a young fellow there [who] was with Graham Bell and was agent for a new invention called the telephone. He believed there was great fortune in store for it and wanted me to take some stock. I declined. 

[The price kept coming down until the man] said I could have a whole hatful for five hundred dollars. But I was the burnt child and I resisted all these temptations, resisted them easily, went off with my check intact, and next day lent five thousand of it on an unendorsed note to my friend who was going to go bankrupt three days later.

“The young man couldn’t sell me any stock, but he sold a few hatfuls of it to an old dry-goods clerk in Hartford for five thousand dollars. That was that clerk’s whole fortune. He had been half a lifetime saving it. It is strange how foolish people can be and what ruinous risks they can take….

“We sailed for Europe on the 10th of April, 1878. We were gone fourteen months and when we got back one of the first things, we saw was that clerk driving around in a sumptuous barouche with liveried servants all over it — and his telephone stock was emptying greenbacks into his premises at such a rate that he had to handle them with a shovel.

It is strange the way the ignorant and inexperienced so often and so undeservedly succeed when the informed and the experienced fail.”

The key lesson here is:

  • Neither Twain nor the clerk had a process;
  • They didn’t try to understand what the telephone could end up doing;
  • One declined and the other accepted;
  • One got “lucky”, other “rued” when he realised the lost fortune

Yes-the inexperienced will get lucky and yes despite the process and understanding the experienced, even experts, will sometime fail.

This is acceptable and part of the game.

What is not acceptable is, “not having done the due process before taking the decision”

That’s where the real failure is.

Invariably over a longer time-frame the one with the right process and behaviour will win the game much more than the person who just got lucky.

Luck is a lottery and its very rare for one lottery winner to win multiple times.

So do the process and stay the course

Confidence-The Double-Edged Sword

To succeed in life, you need 2 things-ignorance and confidence

Mark Twain

Sam Altman, CEO OpenAI wrote about Elon Musk, on his blog after visiting a Spacex factory:

The thing that sticks in memory was the look of absolute certainty on his face when he talked about sending large rockets to Mars. I left thinking “huh, so that’s the benchmark for what conviction looks like.”

Confidence is often considered a vital requirement for success in any field a person chooses.

However, it can also be a “double edged sword”.

The journey often starts with ignorance and those interested in excellence build upon their confidence by gathering knowledge through experiment, discovery or learning from the experience of others.

However, there are always people around who are confident even if ignorant.

Jimmy Kemmel, the late-night talk show would often catch unsuspecting people on his segment “lie witness news” and ask them questions with false premises.

For example-Whether the 2014 film “Godzilla” was insensitive to survivor’s of 1954 giant lizard attack on Tokyo (never happened) or whether Bill Clinton gets enough credit for ending the Korean war (which by the way ended much before Bill Clinton’s time).

Some of the people on the show would say just about anything to hide their cluelessness, others would say anything to please the host instead of saying- “I don’t know”.

There is obviously some psychology at work here.

Confidence masquerading as “knowledge”

Often working with investors, I have noticed that once something is explained, the investor always seems to convey that they already knew the details being shared when most of the time they don’t’.

Often people will nod vigorously to convey their understanding or knowledge even if they don’t know anything about the subject being discussed.

It is this false bravado and need to show-off that creates the “double-edged sword”.

When things go their way, it was always their decision, when they don’t its always the expert/advisor’s incompetence.

The Advisor Dilemma

In a poignant scene from the Hindi movie “Anand”, the lead character berates his doctor friend for playing the patient’s anxieties to make money and his friends tells him-If I don’t’ someone else will.

Advisors are often asked for predictions and are expected not to say- “I don’t’ know” which then results into literal bullshit that might not make any sense but sounds smart.

An expert/advisor who says “I don’t know” is considered incompetent.

The crook uses it knowing most will not remember the incorrect prediction, in the deluge of news and information that’s flowing by the minute, simply because they are playing to the confirmation bias.

They then rely on confidence to get away with the handicap of making predictions that often they themselves know will not come true.

And of-course if they don’t, they will not be called next time-so they might as well feed people what they want.

Pressure

And that’s where things go wrong for the person at the other end.

Overconfidence is persuasive, letting person get away with inaccuracies and if the information is not easy to verify or needs competence the recipient doesn’t have, confidence will win the day.

The expert’s confidence can create an environment where non-acceptance can be seen as a weakness coupled with the pressure to come across knowledgeable as a recipient of information.

What must you do?

While on one hand confidence is an issue, on the other hand ignorance can make people feel less confident internally and vulnerable to show-off.

Ultimately everyone has different set of priorities and so experts are needed, however that should not mean you should trust their expertise blindly.

Here are some tips:

  • No question is a stupid question
  • Don’t feel shy asking questions, even if it conveys your ignorance.
  • It is better to be seen as ignorant than losing your shirt

Asking meaningful even if simple questions is not disrespectful and even if the other person feels it is basic, you might come out of the discussion more enriched.

Thank you for reading

Easy as “Riding a Bike”

Often when it comes to learning new things, you are told, it is as easy as learning to “ride a bike” and when you have not done something for a while, you are told, “oh-its like riding a bike and one can never forget how to ride a bike”.

How long does it really take you to learn a bike?

Is it possible that you never forget to learn how to ride a bike?

How does the brain adjust to these biases?

Destin Sandlin, producer of “smarter everyday” video series on YouTube used the help of some welders to create the backward brain bike.

The bike operates in the opposite manner of how a normal bike operates i.e., the wheel turns left, if you move the handle right and vice-versa.

Anyone who has learnt to ride a traditional bike, finds it difficult to ride this one given the opposite movement.

Interestingly those who learnt to ride this bike found it difficult to ride a traditional bike.

When a person is younger it is easier for people to acquire new motor skills.

However, the backward brain cycle demonstrates, (see here:https://www.youtube.com/watch?v=MFzDaBzBlL0)

How complex is the movement to ride a bike and the amount of coordination and dexterity that it needs to ride a bike.

Mostly the movement becomes part of your sub conscious accounting for all the factors that work in riding a bike successfully.

Forgetting this sub-conscious movement and learning new way of operating is very difficult.

Qi Lu, the AI researcher wanted Microsoft to build a driverless car so that Microsoft can acquire technologies that can help them compete with the likes of Google, Facebook, and amazon.

The opportunity to solve different set of challenges would enhance Microsoft’s ability to acquire skills that they lack and make unlearn the old ways of operating.

Investing is “Similar”

Over the last 25 years 37 companies who were part of original Nifty 50 in India are no longer part of it.

That’s 75% of the composition having changed.

Part of what it reflects is how the business landscape has changed in India.

The businesses that were prominent in 1996 are no longer as big, powerful, or impactful as they were at that time.

There was for example hardly any IT representation in Nifty 25 years back and today the sector is almost 15% of Nifty 50.

These changes require investor to change their perspectives on how to evaluate and balance the old with the new.

With consumer-tech startups starting to list in India, everyone is talking about valuations and how they do not make sense.

Nykaa listed and doubled on the IPO day at a P/E of 1600.

On the other hand, PayTm tanked 27% on listing.

However, what it also reflects is a kind of maturity on behalf of the investors.

They valued Nykaa differently than PayTm.

While Nykaa was multi-times over-subscribed, PayTm was not.

Those who are in the camp that calls these valuations madness is taking one extreme position while the other camp is in its own extreme corner.

What the investors needs to appreciate is while exuberance needs to be avoided, it needs a different kind of lens through which such companies need to be seen.

Old rules of the game have value, but they might not apply as strictly as they used to apply in the past.

“Backward brain Cycle” is hence an important concept to learn and partly explains why some people find it difficult to relate to investing in the new environment.

However, shedding the baggage and keeping an open attitude to how things operate today will help the investors make a more informed decision that simple saying- “this is madness”.

Happy Investing

Long Short-Term Memory

This blog is not what you think that you are going read looking at the subject line.

Long short-term memory is a type of neural network that learns order dependence in sequence prediction problems.

It’s a complex process to get your head around because it doesn’t have 2 dimensions like a roadmap or 3 dimensions like gaming.

It has 1000’s of dimensions.

Think of how google makes its search intuitive to help you find what you are looking for.

So linguistically unrelated words can fall in the same space so that when you type one word, others appear intuitively for you to refine your search or search a bit quickly.

“Harvard” is closely related to “Ivy” and “university” as an example.

Come to think of it in real life this is exactly how human beings think when a sentence is being framed even though you might not pay attention to the process as it is deeply ingrained in our subconscious.

Yoshua Bengio, et al., wrote about this in their paper “Learning Long-Term Dependencies with Gradient Descent is Difficult in 1994.

The paper defines 3 basic requirements of a recurrent neural network:

  • That the system be able to store information for an arbitrary duration.
  • That the system be resistant to noise (i.e. fluctuations of the inputs that are random or irrelevant to predicting a correct output).
  • That the system parameters be trainable (in reasonable time).

Context is key.

Recurrent neural networks must use context when making predictions, but to this extent, the context required must also be learned.

… recurrent neural networks contain cycles that feed the network activations from a previous time step as inputs to the network to influence predictions at the current time step. These activations are stored in the internal states of the network which can in principle hold long-term temporal contextual information. This mechanism allows RNNs to exploit a dynamically changing contextual window over the input sequence history

— Hassim Sak, et al., Long Short-Term Memory Recurrent Neural Network Architectures for Large Scale Acoustic Modeling, 2014

Context is Key

This and the following statement- “Context needs to be learned too” are very powerful statements.

For a lot of us, getting information becomes important.

Yes, information is important, it is the starting point of how you will think, react, create, design, solve a situation.

However, the later part-think, react, create, design require context and context happens not by linear-single, 2 or even 3-dimension thinking but the ability to bring multiple dimensions into the picture.

Making “Complex simple”

Google made search simple.

Apple made its phone intuitive and interface simpler.

Warren Buffett made investing boring and simple.

Look behind any product, process, philosophy that has received positive audience reception or outcome over time and you will realise that it is the simplest that gained maximum ground.

However, to make things simple and intuitive needs complex steps and that’s as true for the apple products, google search or investing.

Understanding the context is not simple.

Whether it is the narrative, or numbers, business case or sentiments, everything comes together.

Nothing can be achieved by looking at one element and taking a call.

Think about an IPO company listing at a P/E of 1600 (NSE: NYKAA) and just looking at that one number might make you wonder what’s happening here till you look at multiple parameters, to arrive at a reasonable picture of the future, and whether this price makes sense or is it actually whacky.

The beauty of understanding neural networks or long short-term memory is that it is actually no different from how we actually think.

The difficult part is the realisation that this is how you think and then attempting to use that realisation to understand something, however, finding it tough to use.

It is like driving, initially you keep looking all around you, drive at a slower speed because you are not sure of your skills.

However, overtime however it becomes intuitive.

Like driving, you will need to learn the whole process and practice till it becomes intuitive.

There is no short-cut.

Cheers-Happy Investing

When the Twain Shall Meet?

“Oh, East is East and West is West, and never the twain shall meet”–Rudyard Kipling.


So the culture of the West (Europe and the Americas) will always be very different from that of the East (Asia). 

This has been true to a large extent over centuries.

The western countries were ruling the east and for them matching the culture was not important at all as they could rule through power.

Think about the working conditions of the 18th century.

Many people left their villages to work in mines and textile factories for 12- to 14-hour days, 6 to 7 days per week — with minor food breaks between.

They worked outdoors in extreme weather conditions with machinery that required incessant maintenance and in factories that were unkempt, dangerous, and held poor lighting.

It wasn’t uncommon for a worker to lose a limb from the machines or acquire a serious lung infection from the hot polluted factory air.

The mindset was I pay you, so I own you.

Today the situation is exactly the opposite as the employers in the US are not being able to get workers unless they advertise work from home options, flexibility, fair wages etc., etc.,.

What changed-what made the Twains meet?

The industries today are much different than those in the 18th century.

Manufacturing jobs are only 20% of total jobs from over 60% in the 1970’s.

Knowledge workers need time to unwind their thoughts so they can come up with fresh ideas.

If treated like bonded Labor, you can’t get creativity and productivity from them.

Google provide you 20% of time to do side projects, creating a culture that says, “You do at Google what you want to do and not what Google asks you to do”.

This has led to terrific innovations in how we experience the internet today.

The recognition that you can’t attract the best-in-class talent and if you do attract, you can’t retain it with oppressive working conditions changed the mindset.

Change prompted by either culture, markets or commerce can make the “twains” meet.

Remember KFC of the “Fried Chicken” fame has a vegetarian menu in India.

Can the “Fear” and “Greed” Twains evert meet?

When investor tell me that they are in it for the long term and then worry about short-term corrections, they are just oscillating between “Fear” and “Greed”.

Here is a sample of some headline from March 20 and then the later part of 2020 and now.

These headlines incite “epinephrine” and “dopamine” to play havoc on your system.

Having said that, this is my observation of what goes on:

  • Investors invest on advice and not understanding.
  • They trust the advisor and often ignore the role of due diligence.
  • They don’t have the competence (which is fair, not everyone will have competence), however often they don’t even make the effort to be able to ask the right questions.
  • “Fear/Greed” makes them “fit” news into their pre-conceived “narrative” fueling “bad decisions” that cause regret
  • In “good times” and in “bad”, ability to stick to your investing discipline and asset allocation is tested and it becomes challenging for investors to do so successfully.

So, what do you do, how do you make the “Twain” meet?

Well, read the above para again and the last point a couple of times.

  • Develop an approach.
  • Stick to it with discipline
  • Develop a playbook of questions that you will ask for every investment decision
  • Have a thesis for every decision
  • Take pre-conceived notions out of the equation

The point is “fear” and “greed” come largely due to lack of understanding of where the decisions are coming from.

As long as you try to bridge this gap-you might succeed in making the twains meet.

Finally practice what John McEnroe (the legendary tennis player) said-

“I neither get so happy about my wins nor too sad about my defeats”.

If you stick to your discipline and are a “long-term investor” results will come if you can stick to your process.

Finally, as always “Stay the course”