Archives for April 2017
Latticework of Mental Models: Physics Envy
A group of tourists was visiting a dinosaur museum. A guide was entertaining them with interesting trivia about various dinosaur species. Just when they were passing by a huge skeleton of an ancient carnivore, an inquisitive member of the tourist group asked the guide, “How old is this skeleton?”
“Oh, that big T-rex skeleton? It’s about 100 million and 5 years old.” quipped the guide.
“That’s quite an odd figure. I understand the 100 million part but how are you so sure about the last 5 years?”
With all earnestness, the guide replied, “Well, that’s the most accurate part of the figure because exactly 5 years ago a world famous expert on dinosaurs told me that the skeleton is 100 million years old.”
The guide was honest in his attempt to provide an accurate information but he confused accuracy with precision. His answer was precise but was it really accurate? In fact, a better question to ask would be – did the guide make expert’s answer anymore useful by making it more precise? I think no.
Sir John Maynard Keynes said, “Better roughly right than precisely wrong.”
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How to Analyze a Business, the Sherlock Holmes Way
Peter Bevelin has written a few amazing books, like Seeking Wisdom: From Darwin to Munger, A Few Lessons for Investors and Managers, and the latest All I Want To Know Is Where I’m Going To Die So I’ll Never Go There.
But one of his lesser-known books that I have on my all time favourites lists is A Few Lessons from Sherlock Holmes. Through this book, Bevelin has distilled Arthur Conan Doyle’s Sherlock Holmes into bite-sized principles and key quotes. In fact, this book is much more than a collection of quotes. It is a way to learn the powers of observation, understand the limits of our mind, and counter the narrative fallacy.
Bevelin writes in the book…
What distinguishes Holmes from most mortals is that he knows where to look and what questions to ask. He pays attention to the important things and he knows where to find them.
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InvestorInsights: Morgan Housel
Morgan Housel is a partner at The Collaborative Fund and a former columnist at The Motley Fool and The Wall Street Journal.
He is a two-time winner of the Best in Business award from the Society of American Business Editors and Writers and a two-time finalist for the Gerald Loeb Award for Distinguished Business and Financial Journalism. He was selected by the Columbia Journalism Review for the Best Business Writing 2012 anthology. In 2013, he was a finalist for the Scripps Howard Award.
Safal Niveshak (SN): Tell us a little about your background, how you got interested in writing and investing, and how you have evolved in these fields over the years?
Morgan Housel (MH): I started in college in investment banking. I always loved investing and knew I wanted to do it as a career. But the culture of investment banking totally put me off. I like to have time to think things through, and any culture that emphasizes 24/7 speed and fixed process over deliberation is one where I wouldn’t do well at. So, I moved on pretty quickly from that.
I then got into private equity, which I enjoyed. But this was summer of 2007, and global credit markets started freezing up, which is devastating for private equity firms that own highly leveraged companies. So, I needed to do something else.
BookWorm: What I Learned Losing A Million Dollars
There are as many ways to make money in the markets as there are people participating in the markets, but there are relatively few ways to lose money in the markets. For a majority of the people, all the losses come from the same few source. Jim Paul’s cautionary tale is a testimony to the importance of studying the patterns of failure than the ways of success.
The backdrop of this book is the true story of a trader called Jim Paul. His career in stock market started with a string of unusual successes that vaulted him from a dirt-poor country boy to jet-setting-millionaire. However, after 15 years of uninterrupted success, all of Jim’s wealth was wiped out in a matter of few weeks when he lost $1.6 million in a speculative trade. This devastating failure led him to intense self-reflection and discovery of some unusual insights about success and failure.
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