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Poke the Box: Wish Warren Buffett, and Embrace Your Failures

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

  • Warren Buffett completes 83 years on this planet today. A good way to wish the legend is to get inspired by a few amazing words of wisdom he has said over these years. Here are 10 Buffett quotes – Part 1 and Part 2 – to inspire you.
  • As markets continue their fall, here are five stocks I’m watching. (Statutory Warning: Acting on any of these stocks without doing your homework may be injurious to your wealth and health).
  • I mentally sold off all my stocks, and loved the entire process of doing it. Try selling your own stocks mentally. Believe me, it’ll be an enlightening experience.
  • Closed admissions to the first batch of The Safal Niveshak Mastermind after an over-whelming response. Thank you tribesmen! In case you missed out joining, you can now pre-register for the second batch that will open in a few months.
Mental Model of the Week: Cumulative Error

Do you remember playing the “telephone game” in your childhood where a secret message was whispered from child to child until it was announced out loud by the final recipient?

To the delight of all, the message was typically transformed into something new and bizarre, no matter the sincerity and care given to each retelling.

You see, when information travels through multiple channels – like in the telephone game – it’s easy for some elements of the message to get distorted — by biases, or simple human error.

The effect of the spread of misinformation is called “cumulative error”, like you see in this stock market cartoon…


Living in an age where information can travel across the world in nanoseconds, this concept has never been more real or dangerous.

So, when a company’s management says something, the lead analyst hears something else, his report to the fund manager says something else, the fund manager understands something else, his broker understands something else, the broker’s analyst assumes something else, he blurts out something else to the TV anchor, the anchor – thinking how smart she is – shouts out something else, and you – enamoured with the anchor – understand something else.

If I were to condense the history of stock investing mistakes in a few words, those will be what you just read!

Somehow, we expect information to be faithful to its origin, no matter what history might have corrupted it. And that’s why it is so important to cut yourself from the noise – that create cumulative errors – and concentrate on independent thinking.

This is especially true while investing your hard-earned money, where you don’t just need to minimize mistakes, but minimize cumulative mistakes – those that add up to wreak havoc on your savings.

A joke isn’t funny anymore if it’s repeated too much. The same goes with information. The more you hear the same things, the more they get dangerous.

So please be careful!

Book Worm
I was re-reading Warren Buffett’s 1962 letter to shareholders and came across these words…

A lot of value can be obtained for the price paid. This substantial excess of value creates a comfortable margin of safety in each transaction. This individual margin of safety, coupled with a diversity of commitments creates a most attractive package of safety and appreciation potential.

Here is something from his 1992 letter that must be the cornerstone of every value investor’s philosophy…

We insist on a margin of safety in our purchase price. If we calculate the value of a common stock to be only slightly higher than its price, we’re not interested in buying. We believe this margin-of-safety principle, so strongly emphasized by Ben Graham, to be the cornerstone of investment success.

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

Poke of the Week – Failure Liberates Success

“Failure is not something to be avoided but something to be cultivated. … It is a sign of weakness and often a stigma that prohibits second chances. … Yet the rise in the West is in many respects due to the rise in tolerating failure. Indeed, many immigrants trained in a failure-intolerant culture may blossom out of stagnancy once moved into a failure-tolerant culture. Failure liberates success.” ~ Kevin Kelly, author of What Technology Wants.

I have learned a lot of life lessons just seeing my daughter grow up. Like when she was just a year old and was trying to take her first steps and repeatedly fell down, she tried again…and again…and again.

Sometimes she laughed. Sometimes she cried. Sometimes she laughed and cried at the same time.

But she kept trying and trying…laughing and crying. She did not labelled her experience as a “failure”. She just enjoyed it.

Unlike us adults, our babies don’t know the possibility of a failure, so they happily keep falling down until one day they take a few steps, and then a few more. Before long, they’re jumping and running. All their trying pays off.

They fall but never fail.

As grown-ups, what if we also simply choose not to fail?

What if we treat our mistakes and failures as not things to be avoided but things to be cultivated?

Like Warren Buffett said…

“You’re going to make mistakes. You can’t play in the game without making any mistakes. I don’t think about it, I just move on. Most business mistakes are irreversible setbacks, but you get another chance. There are two things in life that you don’t get another chance at – marrying the wrong person and what you do with your children. Business, you just go on. It’s a mistake to dwell on mistakes, it’s unproductive. It’s like Mark Twain’s story about the cat that sat on a hot stove – he never sat on a hot stove again, but he never sat on a cold one again either.”

Life teaches us each day that stuff happens (and sometimes shit happens!), but we don’t need to give each of our experiences a label.

Good, bad, hard, easy, success, failure etc. do not exist but as labels in our minds.

All we need to do to hold our head high is to break through these labels.

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

Keep poking.

Embrace your failures.

Be nice to your family.

Be kind to your heart.

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. Akhilesh Pathak says:

    Dear Vishal,

    First of all, may Warren Buffet achieve another personal milestone in his life- working beyond the age of Rose Blumkin 🙂

    Secondly, congratulations to you for the great response that you got for the Mastermind Course, you deserve every bit of it.

    Just wanted to share few good thoughts on curiosity and life from two of my favorite authors

    Stephen Hawking-

    “Remember to look up at the stars and not down at your feet. Try to make sense of what you see and wonder about what makes the universe exist. Be curious. And however difficult life may seem, there is always something you can do and succeed at. It matters that you don’t just give up.”

    “It surprises me how disinterested we are today about things like physics, space, the universe and philosophy of our existence, our purpose, our final destination. Its a crazy world out there. Be curious.”

    Neale Donald Walsch, Conversations With God: An Uncommon Dialogue –

    “Life (as you call it) is an opportunity for you to know experientially what you already know conceptually. You need learn nothing to do this. You need merely remember what you already know, and act on it. ” ―

    “True masters are those who’ve chosen to make a life rather than a living.”

    May ” Mastermind” transform the tribesmen into True Masters…Godspeed !!

    With warm regards

    Akhilesh

    • Dear Akhilesh,

      Thanks for your kind words….and thanks also for sharing the great thoughts from Stephen Hawking and Neale Donald Walsch.

      I wish you all the best in your Mastermind journey!

      Regards,
      Vishal

  2. Hi Vishal,

    What a post to start the day. The forbes 100 quotes to inspire you is a great article. I am going to copy it for my regular dose. I need this when everyone arounds me start questioning about my goals and tries to make me feel down. Very difficult to find the people who thinks likewise. And thats when I feel to come back here (on your site) and get my dose of inspiration. As one of the quote on the site says :

    “People often say that motivation doesn’t last. Well, neither does bathing. That’s why we recommend it daily. –Zig Ziglar”

    Regards
    Manish

    • Dear Manish,

      Thanks for your feedback! Yeah, each of those quotes is really inspirational and strikes a deep chord.

      Good that you mentioned Zig’s quote. 🙂

      Here’s the one for you when people around you question your goals – “Your time is limited, so don’t waste it living someone else’s life.” (Steve Jobs)

      Regards,
      Vishal

  3. Hi Vishal,

    Thanks for sharing the article on Buffet’s analysis of GEICO when he was 21.
    It is a terrific one.

    Regards,
    Jana

  4. Thank you for sharing.
    Each of the links is very interesting.
    Each of the 100 quotes are gems.

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