Archives for September 2016

Safal Niveshak Stream – September 22, 2016

Some great stuff we read this morning…

The big fight is on – interesting perspectives on Flipkart vs Amazon.
Benjamin Franklin did this one hour a day, five hours a week. Read what it is and why you should do it too.
10 things found in Warren Buffett’s office.
Stunning videos of evolution in action. Harvard scientists designed a fascinating experiment that enabled them to watch bacteria adapting to antibiotics before their eyes.
If you can recreate the material that you’ve digested then you truly understand it. A wonderful read on power of writing what you read.
Collection of words of wisdom to aspiring value investors from some of the more experienced value investing practitioners.
Bruce Lee on willpower, emotion, reason, memory, imagination, and confidence.
Michael Mauboussin reflects on ten attributes of great investors.
Insight from Howard Schultz’s book Pour Your Heart Into It. Schultz is the creator of the super brand Starbucks…

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Safal Niveshak Stream – September 21, 2016

Some nice stuff we read this morning…

What a time to be alive!
Ways to apply the lessons from Howard Marks’ “The Most Important Thing.”
Does Uber’s US$ 69 billion valuation makes sense only in a world where it’s the only player in town? Some nice insights here.
22 lessons from Stephen King on how to be a great writer.
Where creativity comes from: Studies of humans and other animals indicate that inventiveness often stems from factors other than need.
Rule No. 1 – Never LOSE money. (Image Source – Nassim Taleb’s Logic of Risk Taking)

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Investing and the Paradox of Perfection

A lot of people I meet in the startup world and in investing are aiming for that perfect start when all their stars will align to take them off to the moon.

So, some keep waiting for their “best product” or “best design” before starting up their businesses, and others wait for the “perfect business to invest in” or “perfect price to invest at” before starting to invest their money.

The reason? They don’t want to be criticized for any mistake – like not getting business, or temporarily losing money in the stock market – they may make due to not being perfect at the start.

If you think about why we feel the need to be perfect in the first place, it all goes back to how we think about ourselves and our self-worth. If we have a strong desire to be perfect, then we may use the idea of perfection as a way to validate ourselves as worthy and valuable human beings.

Latticework of Mental Models: Hawthorne Effect

The Hawthorne plant of the Western Electric Company in Cicero, Illinois, figured out, albeit accidentally that increasing lighting in the plant made workers more productive. Then someone pointed out a confusing detail. Productivity also improved when they dimmed the lighting. In fact, making any change at all seemed to result in increased productivity. That was a surprising finding.

It turned out that the workers seemed to be responding more to the attention they were receiving from management than to any physical change in their environment. With each change, the workers suspected (consciously or unconsciously) they were being observed and therefore worked harder.

This phenomenon came to be known as the Hawthorne Effect. It states that the very fact that people are under study, observation or investigation can have an effect on them and the results.

An Advice to CEOs: Plain English, Please

In August 1998, the US stock market regulator, Securities and Exchange Commission (SEC) released a book called A Plain English Handbook.

You may wonder, “What business does a stock market regulator has to focus on plain English?”

The SEC released this handbook to show corporate managers, especially CEOs, how they could use well-established techniques for writing in plain English to create clearer and more informative disclosure documents like annual reports, while meeting all legal requirements.

The preface of the handbook was written by none other than Warren Buffett – the man who writes the world’s best shareholders letters – and this is what he wrote –

For more than forty years, I’ve studied the documents that public companies file. Too often, I’ve been unable to decipher just what is being said or, worse yet, had to conclude that nothing was being said.

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Investing and Fear of Missing Out

We conducted our Value Investing Workshop in Ahmedabad yesterday, and here are the tribe members…

Let’s get to today’s post…

“You know I saved 50 rupees today,” declares the husband to his wife as he enters the house in the evening.

“And how did you do that?” the surprised wife asks.

“I missed the bus and ran behind it all the way from office to home.” The air of pride was palpable in the husband’s voice.

“Well, then you should have chased a taxi and saved 200 bucks!” the wife said. And her logic was spot on, wasn’t it?

Here is question for you – how much do you think the poor husband saved? Rs 50 or Rs 200? Extending the wife’s argument, the guy could have chased a Limousine and saved Rs 2,000. Do you see the absurdity of the logic?

The Wisdom of Intelligent Investors (Special E-Book)

If the history of stock market is anything to go by, investors often make decisions that can undermine their ability to build long-term wealth. As such, it is often very valuable to look back in history and study closely the principles that have guided the investment decisions of some of the best minds and practitioners in this field through both good and bad markets.

By studying these experienced investors, we can learn many important lessons about the mindset required to build long-term wealth.

With this goal in mind, here is a special e-book that aims to offer the wisdom of some of the best investment minds of current times from India and abroad.

Investing Lessons I Learned from Tic-Tac-Toe

If you have sat in a classroom dragging your feet through an uninteresting lecture, you must be familiar with the game of tic-tac-toe, also known as noughts and crosses or Xs and Os.

The game’s simplicity lies in fact that it takes not more than a minute to learn it and it can be played anywhere. All you need is a piece of paper, a pen/pencil and some time to kill. Like chess, it needs two players, but some people don’t mind it playing alone by taking turns and becoming their own opponent.

When I was a kid I even had a water bottle which had the grid of tic-tac-toe built on one of its side and plastic pieces (crosses and circles) to play.

In case, you’ve forgotten how the game is played, here’s a crash course to refresh your memory. A 3X3 grid is drawn on the paper and each player chooses their mark i.e. X or 0. The player who succeeds in placing three of their marks in a horizontal, vertical, or diagonal row wins the game.

Latticework of Mental Models: Asymmetric Information

Exactly eleven days after buying my windows smartphone, I realized my mistake. Unfortunately, the ten day return window (no pun intended) had already closed.

So I listed it for sale on couple of online used item marketplaces (OLX, Quikr etc.). To my utter surprise no one was willing to pay more than 70 percent of the original cost for my brand new phone. Was my phone model so bad?

But I found that almost all the other similar deals for used electronic gadgets (which were only few days old) were being sold at significant discount to MRP. I was quite sure that many of those sellers, like me, were selling because they didn’t like the product, and not because there was some defect in it.

Then why was the used-item-market heavily discounting the price for an item which was almost brand new? I also noticed that there wasn’t much difference between the price of a 1 year old phone a 1 month old phone of the exactly same brand and model.

Another observation – the number of listings for relatively newer items were very few as compared to the ones for 1-2 years old items. Why so?