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”.