Archives for February 2018

Lessons From Jeff Bezos’ Letter to Shareholders

In our VIA Investor Insight section, recently we’ve started asking interviewees about their favourite business person (apart from Buffett and Munger). The last two people who we interviewed (Saurabh Madaan and Jana Vembunarayanan) unanimously agreed on their choice. Here’s what they said –

Jana:

Jeff Bezos. He’s extremely focused, super-rational, and contrarian (right more often). Some examples of being a contrarian and right are free shipping for prime, kindle, and AWS. There were times he was wrong. For example, he didn’t like the idea of launching Amazon Studios. Even though Bezos disagreed, he committed to the plan. Writing about it openly requires a lot of humility, and Bezos scores full marks on that.

Saurabh:

By far my favourite is Mr. Bezos. If you read his annual letters, they are also just like Mr. Buffett’s letters. They have a lot of lessons about life and thinking in life in general. When he says long term, he really means long term. It’s not even five or ten years. It’s really long term.
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Inattentional Blindness Bias

Note: This post was originally published in the July 2015 issue of Value Investing Almanack. To read more such posts and other deep thoughts on value investing, business analysis and behavioral finance, click here to subscribe to VIA.

“Where is it?” I asked my wife, while my eyes scanned the kitchen cupboard again. I was looking for the sugar jar. The plan was to impress her with my exceptional tea making skills which I acquired after watching few YouTube videos.

“It should be there. Right in front!” informed my wife from the other room.

“It’s not here. I can’t see it.” I again scanned all the shelves in the cupboard.

“Look again. I kept it there in the morning.” My wife sounded very sure about it.

“No! It’s not here. I am sure.” I confirmed while closing the cupboard. What happened next shouldn’t be surprising for you because most of you have experienced it before.

She came, opened the cupboard, grabbed the sugar jar which was obviously sitting right in front and handed over to me. I stood there flabbergasted. How could I miss it? What’s wrong with my eyes? Have I gone blind? It felt as if the jar manifested itself out of thin air. It was like…magic.
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StockTalk (February 2018)

InvestorInsights: Janardhanan Vembunarayanan

Janardhanan Vembunarayanan is a Senior Director of Engineering at LinkedIn. His work involves providing economic opportunity for every professional in the world. He is an ardent believer in the quote: Give a man a fish and you feed him for a day; teach a man to fish and you feed him for a lifetime. So, Jana is also a teacher and blogger, and blogs here.

In his interview with Anshul, he talks about his journey of self-learning and investing, and his experiences in compounding and multi-disciplinary thinking.

Anshul – Safal Niveshak (SN): Tell us about your background especially your education and career path.
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Charlie Munger on Bitcoins, Banking, AI, and Life

I recently attended the annual shareholder meeting of Daily Journal Corp, a publishing company based in Los Angeles, US. I am not a shareholder in DJCO, but this was a chance to hear the 94-year old Charlie Munger, who is its chairman and director.

Mr. Munger answered questions from the audience for around two hours – on wide-ranging topics like bitcoins, banking, artificial intelligence, and life – including one from me (see below). Here are excerpts from the notes prepared by Adam Blum (see the link to entire notes at the bottom of the post).

On searching for ideas – The two rules of fishing are to fish where the fish are, and don’t forget the first rule. Investing is the same thing. In some places, no matter how good a fisherman you are, you won’t do well. Life is a long game. Take it as comes and do the best you can, and if you live to an old age, you will get your full share of opportunities, which will be two in total, maybe, but seize one of the two, and you will be alright.

On personal success – Approach life like [Thomas] Carlyle, and get up every day doing the best you can. Marry the right person. Everyone here who’s your age will do well. You’re not that mad at the world; instead you’re trying to cope with how to make it a little better. If you were here with placards shouting, you wouldn’t have bright future. Avoid extremely intense ideology, because it ruins your mind. The kids with the placards are pounding the idiocy in instead of shouting it out.

Dealing with Failure in Life and Investing: Lessons from the Chaos Monkey

Note: This post was originally published in the June 2017 issue of Value Investing Almanack. To read more such posts and other deep thoughts on value investing, business analysis and behavioral finance, click here to subscribe to VIA.

Amazon Web Services (AWS) is the Titanic of cloud hosting. It provides on-demand cloud computing platforms to both individuals, companies, and governments, on a paid subscription basis. The platform is designed as a backup to the backups’ backups that prevents hosted websites – including some of the largest in the world – and applications from failing.

Yet, like the Titanic, AWS crashed in April 2011, taking with it popular websites like Reddit, Quora, FourSquare, HootSuite, and New York Times, among many others, for four days.

It faced another major outage in February 2017, which again brought a large number of key websites down on their knees.

There was, however, one site that kept chugging along well during both these instances, despite also having AWS as its host at both the occasions.

This was Netflix, the world’s leading streaming video website and one that owns a dominant share of downstream Internet traffic – almost 35%; double of YouTube – in North America during peak evening hours.

BookWorm: Poke the Box

When was the last time you did something for the first time? It’s a powerful question because it would make most people very uncomfortable. Poke the Box could be the wake-up call that you’ve been waiting for till now to start something new.

In last two decades, Java has emerged as the most widely used programming language. Developers at Sun Microsystem created Java and it was later acquired by Oracle Corporation. Java 9, the latest version, has something called REPL feature. It stands for Read, Evaluate, Print, and Loop. REPL facilitates a quicker way to test few lines of code with minimal keystrokes.

Behaviouronomics: Benjamin Franklin Effect

Doing a favour to someone, as per reciprocity principle, is a great persuasion tool. However, can asking for a favour turn a hater into a fan? Yes, it can. And this trick was pioneered by the famous eighteenth-century statesman, Benjamin Franklin.

It was a hot Sunday afternoon and I was experimenting with “diffused mode of thinking.” It’s a learning technique where you read for a while, then keep the book aside and let your mind drift aimlessly. In other words, I was dozing off in my tattered beanbag with a book on my face.

My experiment was interrupted by the doorbell. It was a young salesman.

During those days, I had recently read Robert Cialdini’s book – Influence: The Psychology of Persuasion. Cialdini, a professor of Psychology, argued that expert salespeople use many persuasion tricks to convince their customers and the best way to counter is to not give them a chance to talk to you at all.

Latticework of Mental Models: Hot Hand Fallacy

One of the most embarrassing moments of my childhood was the day when my class teacher asked me something about Sachin Tendulkar. I replied, “Who is Sachin Tendulkar?”

I was in 6th standard. The entire class, including the teacher, burst into laughter. That was the day when I started taking an active interest in cricket. Of course, the motivation was to avoid looking like a fool in a cricket crazy nation.

“Dravid is not in form these days.” Claimed one of my friends.

“I hope he comes back in form soon else they will drop him from the national team.” Argued other friend.

I nodded in agreement. I was faking because one thing that still baffled me was the idea of a player being “in-form” or “out-of-form.”

“What’s this in-form and out-of-form business?” I asked my best friend. Typically, looking-like-a-fool fear goes away when you’re with your best buddies, right? He was the only one who I didn’t feel the need to impress with my cricket knowledge.

Well, if a player plays consistently well for many innings, we say he is in good form. Otherwise, he is considered out of form, he explained, “An in-form player is always in demand because he’s expected to continue playing well.”

Why does an in-form player play well? If it’s the past performance that determines the present form then how does it ensure the future performance? Isn’t this form business based on circular logic?

Spotlight: Investing and the Fallacy of Hard Work

In investing, working hard hardly works. What works is thinking hard. Reading without adequate thinking turns a human mind into a storage device. A rather expensive storage device.

Two police officers were stuck in traffic. They were on a routine patrol, and not much was going on that morning. The older cop was driving. As they waited at the traffic signal for the lights to turn green, the younger officer glanced at the fancy new BMW in front of them. The BMW driver took a long drag on his cigarette and flicked the ashes onto the upholstery.

“What a careless guy!” mumbled the older cop. “Who ashes his new car?”
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