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Poke the Box: Focus on Process, Get Worldly Wisdom, and Buy Happiness

Let’s Start with Safal Niveshak
Just in case you missed any of this on Safal Niveshak over the last few days…

  • Released first StockTalk 2.0 report…on India’s leading automotive battery maker, Amara Raja Batteries. See some interesting discussion in the Comments section of the report.
  • Here’s the Safal Niveshak Investor Manifesto that I shared recently on my Facebook Wall. Print it. Stick it. Follow it. Or simply junk it.
  • Can money buy happiness? A tribesman, Jana Vembunarayanan, writes that it can…and explains how to get more happiness when spending your money. On a side note, given that Jana resides in the US and the rupee has touched 60 to a US dollar, he certainly seems to be happier sending money home. 🙂
Mental Model of the Week: Process vs Outcome

“Individual decisions can be badly thought through, and yet be successful, or exceedingly well thought through, but be unsuccessful, because the recognized possibility of failure in fact occurs. But over time, more thoughtful decision-making will lead to better overall results, and more thoughtful decision making can be encouraged by evaluating decisions on how well they were made rather than on outcome.” ~ Robert Rubin, American economist.

Research has identified a common trait amongst successful performers in fields where probabilities play a big role – they all emphasize process over outcome.

Look at investing, and look around you. Most investment experts selling their services always highlight the outcome – so much return in so many months or years – and never the process they used to get this outcome. This is simply because, while the outcome is there for everyone to see (availability bias), investors rarely ask the question whether that outcome was due to the skill of the expert (a proper investment process) or merely luck!

This is not to say that results don’t matter; obviously they are extremely important in measuring success. But if the results have been largely thanks to luck, they may not come in as expected in the future.

What is more, if you focus only on the outcome, you are less likely to achieve it. Instead, if you focus on the process, the outcome will take care of itself.

Thus, judge decisions – especially yours – not only on results, but also on how they were made. This matrix may be of some help to you…

Book Worm
Seeking Wisdom from Peter Bevelin is one of the most amazing books I’ve ever come across on human behaviour and mental models. Here is an excerpt that Bevelin carries in this book where Charlie Munger is talking to students of Stanford Law School in 1997, about how to get worldly wisdom

I’ve long believed that a certain system – which almost any intelligent person can learn – works way better than the systems that most people use. What you need is a latticework of mental models in your head. And you hang your actual experience and your vicarious experience (that you get from reading and so forth) on this latticework of powerful models. And, with that system, things gradually get to fit together in a way that enhances cognition.

And you need the models – not just from one or two disciplines, but from all the important disciplines. You need the best 100 or so models from microeconomics, physiology, psychology particularly, elementary mathematics, hard science and engineering [and so on].

You don’t have to be a huge expert in any of those fields. All you’ve got to do is take the really big ideas and learn them early and well. You can’t learn those 100 big ideas you really need the way many students do – where you learn ’em well enough to bang ’em back to the professor and get your grade and then you empty them out as though you were emptying a bathtub so you can take in more water next time.

If that’s the way you learn the 100 big models you’re going to need, [you’ll be] an “also ran” in the game of life. You have to learn the models so that they become part of your everused repertoire.

Stimulate Your Mind
Here’s some amazing content I read during the week gone by…

  • Coffee did not boost my creativity, so I opened a coffee shop that does. (Keep your speakers on)
  • Bill Gates writes about three things he has learned from Warren Buffett…things that are not just about investing but more important in life, like time.
  • Charlie Munger has long talked about the importance of knowing where you are going to die so that you don’t go there. Here’s another proof that eliminating stupidity is easier than creating brilliance.
  • In order to find success as an investor, the question you must ask isn’t “Am I smart enough to be a good investor?” but rather “Am I rational enough to be a good investor?” Why? Here’s a framework from Daniel Kahneman, one of the best thinkers of our times, that will help you condition your brain (hopefully!) for a better investment behaviour it the future.
  • Email seems pervasive in your lives. You check email on the bus. You check it first thing in the morning, and last thing at night. You even check it while reading Safal Niveshak’s posts. 🙂 In short, you suffer the tyranny of email, but here are a few simple yet effective ways to save you.
  • Amartya Sen writes a hard-hitting piece on why India trails China. Things are just getting worse here, he says.
  • Stop giving excuses for not exercising for the lack of time. Here’s a 4-minute workout for you.
Poke of the Week – Reverse

Often in life, when you are seeking solution to a challenge or problem, it pays to reverse your perspective, and look at things from a different angle.

Like in investing, when you are searching for successful businesses, it pays to study what makes business fail.

In his book “A Whack on the Side of the Head”, Roger Von Oech advocates that “reversing your perspective” is an effective technique for expanding your thinking. He provides the following example…

“For many years, 19th century English physician Edward Jenner worked to find a cure for small pox. After studying many cases, he reached an impasse in his thinking. Then he reversed his perception of the problem. Instead of focusing on people who had small pox, he switched his attention to people who never had small pox. He found that dairy maids rarely got the disease. It turned out that most dairy maids had had cow pox, a similar but usually nonfatal affliction. Cow pox had served to ‘vaccinate’ its victims against the more dangerous small pox. This led to Jenner’s concept of ‘vaccinating’ people.”

Von Oech then shares a wonderful quote by innovator Andrew Mercer – “You can’t see the good ideas behind you by looking twice as hard at what’s in front of you.”

You would relate to what Charlie Munger says when he quotes Carl Jacobi – “Invert, always invert.”

For Munger as an investor, this means stacking up all the reasons you like a stock. But then, before considering purchase, invert i.e., list all the reasons to dislike that same stock.

In a 1986 speech, Munger elaborated, “It is in the nature of things, as Jacobi knew, that many hard problems are best solved only when they are addressed backwards.”

Like the Greek philosopher Heraclitus said, “It is disease that makes health pleasant, hunger that makes fullness good, and weariness that makes rest sweet.”

You see, there is real value in “reverse experiences,” that is, we don’t fully appreciate something until we have thought about or experienced its opposite.

For example, just pull out experiences from your life and you would realize that…

  • Success is sweeter after you’ve tasted defeat.
  • Life seems more precious after having a near-death experience.
  • You love someone more after you lose him/her and then regain him/her.

If you are married, here’s a way to use the ‘reverse’ strategy to bring peace to your household. Spend a minute describing a current problem. If you’re the husband, describe it from your wife’s viewpoint. If you’re the wife, do the reverse. From my personal experience, it’s a great way to live happily ever after. 🙂

Watch this small video for how reverse thinking can completely change your perspective in life…


If you can’t see the video above, see here.

If you haven’t done it already, sign up here to receive Poke the Box in your email…and get ready for stimulating Saturday mornings.

Keep poking.

Exercise for four minutes.

Buy some happiness.

Till next weekend…

Vishal Khandelwal
Chief Poker – Poke the Box

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About the Author

Vishal Khandelwal is the founder of Safal Niveshak. He works with small investors to help them become smart and independent in their stock market investing decisions. He is a SEBI registered Research Analyst. Connect with Vishal on Twitter.

Comments

  1. Karthik Rajeshwaran says:

    One of the best posts!

    Thanks a ton

  2. Ranjan S says:

    Hi Vishal,

    I have been a silent spectator all this while and thought I will drop in a quick note today. Thanks for the fantastic content and the stimulate your mind articles. Looking forward to more such mails in the days to come.

    Have a great weekend. Cheers, Shiva

  3. Bhuvan Sehgal says:

    Wisdom thoughts (like the one below) that you send apart from the investment ideas, are simply superb.

    Regards,
    Bhuvan Sehgal

  4. Santosh Thomas says:

    Good one Vishal!

  5. “Amazing” is the word Vishal, especially like the parts on “poke of the week” and “mental model of the week”.

    It’s great to see the amount of energy and dedication you bring to your content day after day.

    Thanks a lot for it. Keep going. Cheers!

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