Archives for March 2018

How Much is Enough, and A Few Other Questions

March 9, 2018 | 27 Comments

Note: I gave this talk to a group of friends working in Silicon Valley during my recent trip to the US. Surprisingly, they liked what I spoke and wanted me to share the transcript, which I am doing today in a deeper and more refined form.

Hi Friends,

Thanks for inviting me to speak to you today. I have nothing intelligent to say. You guys score much higher than me on the IQ charts. And it’ll be for the benefit of us all that I speak less and that you keep your expectations from me low. In fact, very low.

So, given that I have been given the freedom to talk whatever I want to today, I have smartly avoided intelligent stuff because I completely believe in what Mark Twain said and I quote, “It is better to keep your mouth shut and be thought a fool than to open your mouth and prove it.”

Instead of talking intelligent stuff around stock market, investing, human behaviour, etc., let me focus on a few important questions I have tried to seek answers to at various stages of my life, and that have helped me tremendously in choosing a path that, when I look back at, I am glad I chose.

Latticework of Mental Models: Thinking From First Principles

March 7, 2018 | 1 Comment

First principles thinking is one of the most effective mental tools for solving problems, especially the hard ones. And no one embodies this philosophy of first principles thinking better than Elon Musk, founder of PayPal, SpaceX, Tesla Motors and SolarCity.

Musk, in one of his interviews, said –

It’s most important to reason from first principles rather than by analogy. The normal way we conduct our lives is we reason by analogy. We’re doing this because it’s like something else which was done or it’s like other people are doing. It’s mentally easy to reason by analogy rather than by first principles. First principles is the Physics-way of looking at the world. What that really means is that you boil things down to the most fundamental truths and then reason up from there. That takes a lot more mental energy.

For example, somebody could say that battery packs are really expensive and that’s just the way they’ll always be because that’s the way they’ve always been in the past. No! That’s pretty dumb. If you apply that reasoning (analogy) to anything new then you won’t be able to get to that new thing.

For batteries people say, historically it has cost $600 per kilowatt hour and it’s not going to be much better than that in the future. First principles thinking would say, what is the market price of the basic constituents of the battery? It’s got Carbon, Nickel, Aluminium, and some polymers for separation. So breakdown on the material basis and ask, “If we bought that in London metal exchange, what each of those things cost?” Oh! It’s like $80 per kilowatt hour. Clearly, you need clever ways to take those material and combine them into the shape of a battery cell and you can have batteries much much cheaper than anyone realized.

Spotlight: Investing and the Power of Simple Ideas

March 5, 2018 | Leave a Comment

The world today is obsessed with the idea that every problem can be and should be solved efficiently and accurately. Mother nature, on the other hand, believes in simple solutions. We explore, what an investor can learn from the most successful ditching in aviation history.

Chesley “Sully” Sullenberger had 208 seconds to land his plane from the time both the engines caught fire.

On January 15, 2009, US Airways Flight 1549 took off from LaGuardia Airport, New York with 155 people on board including five cabin crew members. Four minutes after the take-off, passengers heard very loud bangs and saw flames from the engines, followed by silence and an odor of jet fuel. Apparently, the plane was struck by a large flock of Canadian geese. A Canadian goose can be as large as ten kgs, big enough to cause serious damage to the airplane engine. On this occasion, the impact killed both the engines.

Realizing that both engines had shut down, Sully assumed manual control of the plane while his co-pilot, Skiles, worked the checklist for engine restart. Twenty seconds after the bird strike, a voice crackled on the radio at the New York Air Traffic Control (ATC).

How to Get Rich

March 5, 2018 | 7 Comments

“What’s keeping you from being rich? In most cases, it’s simply a lack of belief. In order to become rich, you must believe you can do it, and you must take the actions necessary to achieve your goal.” – Suze Orman

Well, that was the theory of getting rich. Here are the pratical tips, the actions necessary to get rich –

Also Read –
1. Getting Rich vs. Staying Rich
2. How to Get Rich, Stay Rich And Be Happy

My Notes on Warren Buffett’s 2017 Letter to Shareholders

March 1, 2018 | 6 Comments

Warren Buffett recently released his 2017 letter to shareholders of Berkshire Hathaway. As outlined on the first page of the letter, Berkshire’s share price has increased by, hold your breath, 2,404,748% over the last 53 years.

The big idea worth noting here is that the annualized return Berkshire’s stock has earned for its shareholders to achieve such magnificent result over 53 years is less than 21% – something people basking in the limelight of current bull run would discard as too less!

Anyways, I have prepared some notes on Buffett’s 2017 letter. Click on the image below or click here to download the document.

Notes on Warren Buffett's 2017 Letter to Shareholders - Safalniveshak.com

I suggest you read the original letter in its entirety by downloading it from here.

Archives for March 2018

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