Georges Cuvier is credited with the theory of extinction being a natural part of Earth’s evolutionary process.

He did so by establishing the theory of catastrophism, that stated how sudden, violent event shaped the structure and types of life on earth.

He cited Biblical events, like the flood in the story of Noah’s Ark, and explained that those types of catastrophes were responsible for eliminating many species of organisms. He thought that such events supported the theory of catastrophism and explained how organisms went extinct and how the Earth was changed.

On the other hand, Charles Darwin was a proponent of Uniformitarianism, that stated how Earth’s processes slowly change the environment over time through uniform and continuous processes.

Same or different

While Catastrophism and Uniformitarianism seem different to me, they seem to 2 sides of the same coin.

The slow and evolving situation getting aggravated by the sudden and violent event leading to a change in the landscape.

Think about, how post the 2008 crisis, the world got used to ultra-loose monetary policy and low to zero interest rates.

This combined with over 15% of world’s supply chain getting concentrated in 1 country.

And then Covid happened, where all the administrators wanted was to protect the financial interest of their populations leading to support being extended to businesses to individuals along with rates being slashed from zero to negative.

This extra cash in hand and savings due to work from home, etc., etc., led to some unusual behaviors:

• Savings went through the roof
• Individual and business balance sheets strengthened
• This led to demand exploding
• As re-opening came, people vent out their frustration by spending

Hey, but China wanted zero covid leading to closures and lockdown in 1 country that was supposed to provide a large proportion of these goods that were being demanded.

Supply chain disruptions led the world to recession.

Building up the Crescendo

This building up took time, but a sudden event tested the whole evolutionary process violently leading to disastrous consequences.

When the going is good, who cares about process.

Everyone is a genius.

When the chips are down, process becomes your friend.

But why can’t the process remain a friend whether the going is good, or the chips are down.

At-least it prepares you for the worst and stops you from making mistakes of getting carried away.

Remember, the slow evolution or the sudden event are both out of our control, however, he we react to them is in our hands, and that’s defined by our process.

Discipline, principles, and processes are the long-term friends that help you survive the worst and leverage the best.

You will still make mistake but probably will survive to see another day.

So-remember that and Stay the Course

Even as showrooms in Europe prepared for the arrival of 2014 vehicles, authorities in France sparked controversy with a drastic action: blocking the registration — effectively shutting down sales — of some popular new Mercedes-Benz cars, including the A-Class, B-Class, CLA and SL models.

The French environment ministry ordered the ban in response to the German carmaker’s defiance of a European Union regulation on the refrigerants permitted in automotive air-conditioning systems, and the ministry says that it won’t back down until Daimler, the parent of Mercedes, complies. 

However, subsequent Independent testing by Germany’s Kraftfahrt-Bundesamt (Federal Motor Transport Authority) found that there is “no sufficient evidence of a serious risk” as defined by the Product Safety Act (ProdSG) related to the use of the low global warming potential (GWP) refrigerant R-1234yf.

The ban led to loss of 60% of its sales were affected in France due to the ban.

Value of Evidence

Evidence based decision aim for quantification in terms of risk or cost benefit to optimize one among several alternative courses.

Often this can lead to over-simplification of the available perceptions and can lead to other alternative legitimate stakeholders.

This can generate controversies instead of resolving them.

The attempt instead of being confirmatory, should be to refute frames that violate feasibility, viability and desirability.

Challenge of telling a Story

All of us tell stories about ourselves. Stories define us. To know someone well is to know her story—the experiences that have shaped her, the trials and turning points that have tested her. When we want someone to know us, we share stories of our childhoods, our families, our school years, our first loves, the development of our political views, and so on.

Telling a compelling story inspires belief in our motives, character, and capacity to reach the goals we’ve set.

Evidence to support not to make up Story

Let’s be clear: In urging the use of effective narrative, we’re not opening the door to tall tales. By “story” we don’t mean “something made up to make a bad situation look good.” Rather, we’re talking about accounts that are deeply true and so engaging that listeners feel they have a stake in our success. 

Narratives, numbers, outcomes that we share to support our story are engines of taking it forward.

However, because they can be so compelling, it is easier to add flimsy evidence to support the story which can have disastrous consequences.

What to Believe?

Often the story well told and supported by evidence can seem very compelling.

Our idea as listeners or those who have to take a call to action is to test and not just believe.

X is doing so and X is expert so lets’ follow and do it.

Numbers look compelling and so I should go ahead.

Easy peasy, however for X this might be an insignificant part of their overall game s even if it goes wrong their impact might be too small, maybe they have a side deal or right we are not aware.

Numbers seem compelling, however what is the quality of the numbers.

The point I am trying to bring home is, the decision has to be based on right reasons.

Would I take this decision if X was not involved with the deal?

Would I take this decision even if numbers had been pushed by excessive spending or inter-party transactions?

What is my right reason to take this decision?

Unless, that’s in place, think twice.

Thanks for reading

Our universe began with a big bang.

The explosion stretched the very fabric of spacetime, sending superheated matter in all directions.

As it expanded, the mater cooled and started to aggregate, forming atoms, elements, star, galaxies and eventually all we see today.

However, the question remains “what was it that banged?”

According to the theories, for less than a millionth of a trillionth of a trillionth of a second after the Universe’s birth, an exotic form of matter exerted a counterintuitive force: gravitational repulsion.

Under the conditions present in the early universe, when temperatures were extraordinarily high, the existence of such a material is very likely.

It might just have been a speck, but when that speck starts to inflate, the expansion is exponential.

Universe is eternal

The Universe always existed, so there is no beginning to explain.

As the universe evolves its disorder will grow.

What we call the future is simply the direction of higher disorder and the state of lower disorder is the past.

But a curious thing happens if you take this state of low disorder and starts travelling backwards, the disorder starts to grow in that direction.

While people might not feel anything differently.

Everybody will think that they’re living from the past towards the future, except what they call the future will be what we call the past.

Benjamin Button

In the movie the curious case of Benjamin button, the lead protagonist grows backwards from being “old to young”.

It is curious indeed.

When you start something, there is disorder of a magnitude, as you evolve and grow bigger, the level of that disorder changes as circumstances become different.

So, if you go backwards, the disorder is there but you might experience it differently.

Let’s say a business founder must retrace his/her journey, the disorder the experience is the same that they experienced, however the tolerance that they might have for that same disorder might be of different level.

Some of the basic level challenges that you took in your stride when you begin might seem like intolerable inefficiencies.

You might feel, do people still have to go through this?

And the disorders that your surmounted without giving much of a thought might now seem like larger than they are and that’s exactly what would happen if you went towards a lower state of disorder in the universe.

The disorder starts growing in the same direction.

The Steps are same-the journey still seems longer

That’s why history has lessons that are eternal.

Your experiences make you who you are.

However, experiences of those who have lived through the challenges, can teach you even more.

Every time, you feel evolution has given you all the answers, hubris will come back to haunt you.

15-17 years of low interest rates and monetary solutions raised a generation that had not experienced anything different.

However, the same high deficit, combined with disrupted supply chains and war became a combustible big bang making you go back to higher rates to solve the problems for which you thought you have already found the solution.

No right/no wrong

There is no right/no wrong, only consequences and bills and bills you will have to pay.

That’s perhaps the reason you must sharpen the saw regularly even when you might not need to.

History teaches us that we need to be vigilant, not because we will avert all disasters, but perhaps we will leave through it a bit more smoothly then otherwise.

Whether, you are a businessman, a professional or an investor, you got to remember this eternal lesson and “Stay the course”.

Provided of-course that you know what that course is in the 1^st place.

You can’t manage  what you can’t measure.

Setting goals helps trigger new behaviours, helps guides your focus and helps you sustain that momentum in life.

Goals also help align your focus and promote a sense of self-mastery. In the end, you can’t manage what you don’t measure and you can’t improve upon something that you don’t properly manage. 

That’s why organizations push goal settings and achievement as a measure of success.

Stretch goals is another mechanism to go over and above what you think you can achieve and exceed yourself.

Does it Really work?

While goals help you focus, they can also make the focus narrow.

It changes your behaviour and creates incentive to reach the end while means become inconsequential.

Your risk preferences become distorted and you lose sight of the larger picture.

In a marathon, the goal is to win.

Not everyone who competes is going to win, so should you even have the marathon.

Everyone is training and taking coaching but chances of winning still remain low.

So what do you really need to succeed-is it skills, practice, process?

How do you bring it all together?

You have skills like everyone else.

Have you identified them?

Do you practice enough to hone the skills?

Is the practice enough?

You need to integrate this all into a system that can give you results.

See winning the marathon is goal, however preparation for the marathon is a system.

The House always wins

If you want to be in gambling, be the house and not the gambler because the house always wins.

Same is the case for investors, the benchmark invariably beats almost all investors irrespective.

Warren Buffett developed a system of buying undervalued good companies and holding them for decades and that worked for him.

A lot of individual investors however want to buy a stock that will g up 20% tomorrow.

That’s a goal and not a system.

You will win a lottery once in a while, however the probability of winning a lottery is 1 in 25.

So you know it’s not going to happen every day.

Bottomline, whether its work, sport or investing-system will win over short-cut almost everytime.

So align your focus and “Stay the Course”

The one key lesson from nature is creative collaboration.

It is cross-pollination.

Cyanobacteria, also known as blue-green algae, started out on Earth quite a while ago. Possible fossil examples have been found in rocks that are around 3500 million years old, in Western Australia.

Choanoflagellates are single-celled plankton and the closest living relatives of animals, including humans. Molecular biologists have found that these organisms form colonies only when triggered by previously unknown bacteria. The discovery suggests that early single-celled organisms may originally have come together in the presence of bacteria, perhaps to make more efficient feeding machines that eventually evolved into multicellular life leading to the evolution of life as we know today.

None of this happened in isolation.

This was a change that took millions of years.

Today we measure time, and it is sometimes difficult to imagine waiting for things to happen.

It doesn’t take us even minutes to get impatient and then there was life that took its own sweet time to evolve.

Complex moves for a simple outcome

All the animals including humans look like very efficiently put together machines that are self-sustainable for survival.

However, what goes behind in the factory is much more complex as you can imagine from the text above explaining how bacteria evolved through a process of collaboration.

Herein lies the secret.

We take several decisions every day from simple ones like what to wear or eat to complex ones related to our job, relationships etc.,

There is always a heuristic that guides us take some decisions quickly.

The decision is made quickly, however the picture can be missed.

Every decision is a learning opportunity to improve the heuristic but that requires us to break the heuristic which is contradictory.

The only way of-course to know is to do.

Imagine if human had 3 legs because bacteria used a heuristic that showed 3 legs being more efficient than 2.

The reason evolution took so long was because instead of using heuristic, evolution went for detailing.

Knowing what you are building is the foundation for building it well and while it might be iterative, the results will be more satisfactory even if not perfect all the time.

The Grind-Hard but necessary

When you don’t know where you are going any road will take you there.

That’s what happens when decisions are made slave to heuristics.

Good news is you have a choice.

You can change you unwanted outcomes into good choices in the future.

Whether it is life, relationships or investing.

Bottomline is that no sustainable way to journey has been created through a shortcut.

While Leonardo Da Vinci was a genius, he cultivated intense curiosity about everyone he met and everything he came across.

Da Vinci asked difficult questions and used the answers to inform his inventions, ideas and creations.

He kept dozens of notebooks and journals throughout his life, many of which still exist. In these, he recorded how he spent days roaming the countryside searching for answers to things he didn’t understand.

He wanted to know why shells existed on top of mountains, why lightning is visible immediately, but the sound of thunder takes longer to travel; how a bird sustains itself up in the air and so much more.

This was a man who knew how to interrogate a book.

What are you looking for?

Think about Leonardo’s method and imagine how every time you had a questions, you had to go and do something yourself to figure out the answer, there was no source that you could go to and search it up.

Today 1^st thing that you do as soon as soon there is a need to check out any details or find any information is to tap on the chrome/safari tab and go to Google.

The reasons that drive internet searches come down to four main categories. It doesn’t matter if they’re searching on YouTube, on social media, on Google, on Amazon, Best Buy, or anywhere on the Internet.

The intent behind nearly every search will fit into one of these categories of need as per Think with Google published in 2015:

• I-want-to-know moments. This includes searches for news, general knowledge, how to return an item you bought online, etc.
• I-want-to-go moments. These are searches that are location-specific when a user wants to find something nearby.
• I-want-to-do moments. These include searches for how to fix your dishwasher, how to grow tomatoes, a new recipe for tonight, etc.
• I-want-to-buy moments. This can be anything related to reading reviews or searching for information on buying something large or small.

The Need States

Google also identified the 6 need states as:

Surprise me

Help me,

Reassure me

Educate me

Impress me and

Thrill me

The Q&A

Every time there is a need, there is a state you are in ideally and you keep searching till the time the answer is in.

The question in front of me is whether there is an inquisitiveness that drives you till you find a satisfactory answer or you are ok with whatever the web throws at you 1^st or the simplest explanation to something.

Would you for example take the trouble the way Da Vinci did and dissect bodies to understand how our bags of flesh and bones work before you create a painting or would you rather just paint what’s visible.

If you consider the Occam’s razor the simplest explanation is the best, however just because it is simple, it need not be the best.

Veins are visible on the body and you can depict them in a painting just the way you see them, however a painting is an expression and unless you what makes the veins tick when that particular expression takes place, you would not have an accurate description.

That’s the difference between a master piece and a product.

What are you going for?

Simple works because it is easy to understand and justify to ourselves that yes you understood before you accepted.

When a product is being sold, there is utility and then there is the X factor.

X factor gives you the margin that utility wouldn’t.

4 walls and a functioning environment (water, electricity) is enough to live.

However that wouldn’t fetch you a high margin, for that you have to introduce other elements like amenities, standard of living, brand etc., etc.,. That’s why narrative works in selling-anything from a home to a phone to an investment product.

So What are you searching for?

Life need not be complex till you have your definition of utility ready before looking for the right fit.

So looks like you are searching for who you are rather than a product.

Who you are would tell you what you are looking for.

Whether it’s a home, a phone or an investment product.

However buying something to understand who you are might be an expensive proposition.

You probably will need to do your homework like Da Vinci did and then go out shopping.

And then remember this:

Irregular Rule #1: “If you don’t know who you are, this is an expensive place to find out.”

                                                               The Money Game, Adam Smith

The correct lesson to learn from surprises: the world is surprising.“ – 

Daniel Kahneman.

You are late for an appointment, however on your way you get all green lights, and you make for the appointment on time.

Walking along the lake you see an eagle swooping on a tortoise and riding on its back.

Sounds amazing but are the odds really that miraculous.

John Littlewood, the Math Professor proposed the Law of miracles.

According to Littlewood, there is a one in million chance of sighting a miracle and that it can happen once every 35 days.

This is based on the assumptions that humans are awake and alert 8 hours in a day and that events occur once every second.

The real point

What Prof. Littlewood was trying to prove was not the probability of experiencing a miracle but the fact that events happen all the time and some of them will surprise you which would mean that they are mere coincidences, which by the way happen all the time.

If I throw a fair coin twenty times and note down the result, then with mathematical certainty the odds of me having got  this exact sequence THHHTTHHHTTTHHTHHHTT is 1:1048,575.

Now, you may consider this as a miracle that surprises you or a mere coincidence or probability playing its role.

Surprises follow unanticipated paths

There are intended consequences and then there are unintended consequences.

While you plan the intended consequences, the unintended one are often a result of what we don’t anticipate.

It might surprise you that the whale (largest fish in the ocean) once lived and walked on 4 legs.

It might surprise you that the whale (largest fish in the ocean) once lived and walked on 4 legs.

In fact, its land-dwelling ancestors, Pakicetus (the name is a giveaway) were found in the Indian sub-continent around 50 Mn years ago.

These ancestors could survive underwater and eventually because of series of evolutionary actions evolved into what we see today as the largest sea animal.

Illusions around reality

The ex-Reserve Bank of India Governor, Mr. Subbarao once said in a press-conference

That every policy action has unintended consequences along with the intended ones.

However, we often take the gains from an action without thinking about the other side of the coin.

Hindsight makes us all seem wise; however, it doesn’t help if we don’t learn from it.

The cycle of optimism/pessimism is known but not appreciated.

You are playing a cricket match and your strategy is to attack from the ball one and keep attacking irrespective of how it goes.

What would you do if you lose quick wickets or as a bowling side get hammered all over the place.

How would you adjust your game.

China’s “zero-covid” policy is an example.

You shut down the economy, what do you think will happen.

Businesses will suffer, supply chain will get disrupted and economy will shrink causing wide-spread distress which is not limited to you own country.

Nothing will ever prepare you

Preparing for a surprise can be adopted as a strategy, however you don’t know what’s a surprise so how you would ever prepare yourself.

For years investors blamed Fed for propping up asset prices beyond fair price and at the 1st sight of Fed tightening, they are all on the other side of table criticising Fed for negative impact on the asset prices.

You can’t keep worrying about surprises, they will come maybe once in a month or once in a year-you don’t know when.

However what you can do is to have a plan and stick to it.

The plan always reflects your risk-profile and your circumstances and anchors your investments to the same.

Account for the fact that there will be a periodic surprise and have a little cash set aside to take advantage instead of getting scared.

In the end-Stay the course and you will be fine

“For most of my life, I’ve felt that there must be more to our existence…it’s strange to think that you accumulate all this experience, and maybe a little wisdom, and it just goes away.

So, I really want to believe that something survives, that maybe your consciousness endures. Nut on the other hand, perhaps it’s like an on-off switch. Click and you are gone. Maybe that’s why I did not put an on-off button on the iPhone”

• Steve Jobs

Yes, most of what you do, what you experience, what you go through, people, relationships, experiences, memories, will go once you are gone.

The questions then are how you center yourself and focus on the purpose of your journey.

What’s Important?

The ability of the illusion to win over the real is larger than what anyone can imagine.

Ultimately, we all see ourselves as rational being.

It’s always the other side of the debate that is irrational.

The thing becomes the center over what makes the thing worthwhile.

The outcome drives the journey more than the journey itself.

The false notion of personal satisfaction becomes more important than what gives work true meaning.

Unfortunately, this has not changed and is hardly likely to change because you are reading this blog.

Cause ultimately the world can only see the on/off button and not what’s behind it and till that doesn’t change we will keep chasing the last mile even though the joy that comes with the achievement might not last the mile.

The Lifecycle

Business focuses on gradual accumulation of intrinsic value, derived from the ability of our publicly owned corporations to produce the goods and services that our consumers and savers demand, to compete effectively, to thrive on entrepreneurship, and to capitalize on change. Business adds value to our society, and to the wealth of our investors.

When you think about investing your time and your money in this way, it gives you a lot answers.

The key words are-gradual, accumulation, intrinsic, produce, effectively.

Are we thinking about what we do in this fashion-gradual accumulation of intrinsic value to produce effectively

There is the key.

The tangible “Outcome” is a moment in this journey.

Rest all is work which creates the meaning that results into this outcome but is mostly “intangible”.

Enough

At a party given by a billionaire on Shelter Island, Kurt Vonnegut informs his pal, Joseph Heller, that their host, a hedge fund manager, had made more money in a single day than Heller had earned from his wildly popular novel catch-22 over its whole history. Heller responds, “Yes, but I have something he will never have… enough

Thank you for reading

Think about 2 persons getting arrested by police and kept in 2 separate cells.

Each is being given a choice to either remain silent or blame the other person.

Here are the scenarios:

• If both remain silent, the sentence is 1 year
• If one remains silent and the other blames him, the accuser goes free while the one remaining silent gets sentenced to 5 years
• If both blame each other, both get 3 years in jail

What’s the most rational thing to do?

Obviously, act in self-interest.

However, acting in self-interest still gets you 3 years in jail, while remaining silent gets you free in 1 year.

Again, you don’t know what the other person is going to do so the rational choice will be to blame the other person and hope for the best.

That ladies and gentlemen is the prisoner’s dilemma when presented with choices whose outcome can depend upon how others will react.

Think of Elections

In any election where there are more than 2 choices, it is very difficult to get a free, fair and rational choice that is elected by actual majority.

In effect, the candidate with highest votes might have been rejected by the majority but gets the highest number of votes and hence gets elected.

This is Arrow’s impossibility theorem refers to.

The Invisible Hand

The laissez faire theory propounded by Adam Smith proposed that everyone acting in their self-interest shall create the maximum social benefit.

Because as you start thinking of cooperation, it can soon become collusion benefiting a few.

Countries have made elaborate rules to tackle collusion.

As collusion benefits only a few.

Who does it hit?

The individual small guy.

Mafia

“Oh, private equity is a mafia”.

That’s what an investor told me a few days back.

The best of the deals only goes to the same people and all we are served is sloppy seconds.

That’s what regulated markets try to prevent but can they.

Individuals think they can beat the market by doing research, uncovering hidden gems, and accumulating positions before the big fish.

However, the markets are unique in the way that big fish create liquidity.

They move the tide and the broaden the interest in prices to go up.

So, you need the big guys, however the big guys will enter before you and would have cornered the fat gains so you might be the one holding the can at the end of the run or you might get in early and wait forever because the big guys don’t get in at all.

What to do?

No one can make anyone believe that they can’t achieve something.

In fact, the mere suggestion becomes an ego battle.

So, what’s the way to think about it as an individual investor:

• Segregate your portfolio
• Have 1 part in quality or index funds
• Have a small part to play the ego game and make yourself believe that you are a great investor

Remember, investing and driving is same.

In driving an accident will not only hurt the other person but also you plus the repair expenses.

Similarly, ego investing decision might help your ego but not your wealth.

Acting in your self-interest will mean balancing your ego with your need to grow your wealth.

Ultimately, you don’t have anything to prove anyone through your personal portfolio.

Remember that.

Thanks for Reading

Recently while watching CNBC during their Bazaar Morning call, I came across an old colleague who had been called to give his market view on various stocks.

The segment started with the anchor conveying his and the team’s condolences to the individual for the loss of his wife and his words were.

“None of us knew that you have been carrying this pain since last 1 year”.

His wife was suffering from cancer that was detected last year.

All these months as a routine he was on TV almost every day on one or the other channel.

And not even once you would have got the impression that his wife was on death bed, and he was going through this stress.

The Mumbai Spirit

The famous Mumbai Spirit is invoked every time the city goes through a crisis- floods of 26/07/2005 or the siege of 26/11/2008 or the multiple bomb blasts in the city.

Each time the next day people of Mumbai are back to work doing what they must.

While people outside of one’s realm would dispassionately require you to be professional, is it that easy?

It is said that people don’t care for who you are, they only care for what you can do for them.

There are all kinds of worries around us all the time.

• Income/job stability
• Office politics
• Loan payments.
• Health/sickness-self or someone in the family
• Kid’s education

While these are the near to home worries, we also worry about the world in general:

• Wars
• Geopolitics
• Domestic Politics
• Religion
• Economy
• Inequalities

However, you still must put your head down and achieve every day what people expect you to achieve.

Separating what’s going on around you or what you are going through emotionally, mentally to maintain your composure and doing your job the way it needs to be done is least appreciated trait of human beings.

Always Something to be Skeptical About

There is so much negativity around and the noise from social media amplifying it that your head will spin, and you will question your very existence.

As an investor, I have realized that you can’t let the negativity cloud your investing judgement.

Humans and the world have survived all kinds of crisis including the times when people thought world’s resources will be over soon and human race will be wiped out due to malnourishment and hunger or decades of cold war when people feared that nuclear bomb shall finish the world.

And closer still the pandemic when investors quit the market fearing the worst.

However, we came out on the top each time.

Maintaining that composure and separating your investment decision from how the world around you are operating at any instance is part of the investing discipline that you build.

Each negative spiral has the potential for something positive and each positive action that sent market soaring can bring it down.

Nothing is more illustrative of this than the covid period.

Everything was shut, people were sitting at home.

The Govt.’s came gave stimulus, cash cheques and supported the economy to the extent that we saw the shortest bear market and a huge bull run.

And eventually the glut that the Govt’s created and the supply chain disruptions due to covid closures followed by Russia Ukraine war created the perfect storm for a large correction.

So getting lost in these negativities instead of choosing to stick to your investment discipline is the biggest mistake that you can make.

Hope the next time you will do things differently.

Thank you for reading