Archives for May 2018

The Art of Asking Good Questions

Two hunters are out in the jungle when suddenly one of them collapses. His pulse is gone and his eyes are glazed. The other guy yanks out his cell phone and calls the emergency services.

He gasps, “My friend is dead! What should I do?”

The operator says “Calm down, sir. I can help. First, let’s make sure if he’s really dead.”

After few moments of silence, the operator hears a loud gunshot. Back on the phone, the guy says “OK, now what?”

The hunter was dumb but given the high adrenalin and panicky situation, the operator’s question wasn’t brilliant either, was it?

There’s some truth to the saying – the quality of your questions determine the quality of solutions. Computer programmers know this very well. They call it GIGO, i.e., garbage in garbage out.

Good question begets good answer. Bad question leads to bad answer.

Consistency, the Playground of Dull Minds

Two men went to a priest to resolve a dispute.

Having listened to the first, the priest said, “You are right.” When the second man insisted on being heard, the priest listened to him and said, “You’re also right.”

The priest’s wife was overhearing the conversation from the next room. She called out, “But they can’t both be right!” The priest paused for a moment, reflected on what the wife said and then concluded, “And you’re right too.”

How wonderful that we’ve met with a paradox, observed Great Danish physicist Niels Bohr, “Now we have a hope of making some progress.” Bohr wasn’t the only one who thrived on contradictions. It’s said that Einstein discovered relativity by way of resolving an apparent conflict between electromagnetism and mechanics.

A physicist is only too happy, writes Carlo Rovelli in his book Seven Brief Lessons on Physics, “when he finds a conflict of between successful theories: it’s an extraordinary opportunity.”

Investor Insights: Shane Parrish

Note: This is an excerpt of my interview with Shane Parrish that was originally published in the December 2017 issue of Value Investing Almanack (VIA). To read the entire interview and more such interviews and other deep thoughts on value investing, business analysis and behavioral finance, click here to subscribe to VIA.

Shane Parrish is the curator behind Farnam Street, a website aimed at mastering the best of what other people have already figured out. Shane is the founding partner of Syrus Partners, a holding company that acquires and operates businesses in North America. Before Syrus, Shane worked as an executive in the Canadian government, where he led the creation and execution of key cyber-defense initiatives.

This isn’t your typical value investing interview, but one around topics of reading, learning, and multidisciplinary thinking.

Over to Shane!
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The Books That Made Me – Part 2

In the first part of this series, I profiled books on life and living that have inspired me the most. In this second part, I cover books on learning, thinking, and decision making (more coming in the third part).

Before I begin, here’s something worth reiterating. You should not read good books for the sake of talking about them. Mentioning them by name may give you the appearance of literacy, but you do not have to read them to outshine someone else at a dinner party. Reading is a means toward living a good human life. It’s a means toward living the life of a free man/woman.

Anyways, what follows below is not an exhaustive list but is made up of books I go back to time and again, and return wiser.

The Books That Made Me – Part 2 - Safal Niveshak

Let’s start right away with my favourite books on learning, thinking, and decision making.

StockTalk (May 2018)

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Investor Insights: Revisiting Lessons from 2008

This isn’t your typical VIA interview, but a collection of wisdom from a few investors we have interviewed in the past. The topic is – lessons from the 2008 crisis. A decade has passed since this crisis (time flew, again!), and most lessons would have been forgotten (we have short memories).

As we see around, investors – especially new than old – are practicing speculative behavior. Not many investors who felt the pain in 2008 would possibly think this is a good idea even if no major crisis may be lurking around the corner. And this is exactly what came out from the questions we asked a few seasoned value investors, who were close witness to the crisis in 2008.

Below are their lessons from the crisis, how has their thought process changed (if it has) in this past decade, and their advice to new investors on dealing with similar such crisis in the future.

Shyam Sekhar

Shyam is a value investor and the Chief Ideator and Founder of iThought.

Where is the Stock Market Headed: A Conversation With My Friend

“What is happening with the stock market, Vishal?” my very concerned trader-who-thinks-he-is-an-investor friend Ravi asked me on phone.

“Why Ravi, what happened?” I asked in my usual show of ignorance.

“Hey, haven’t you seen the crash in small and midcap stocks?”

“Okay, so you already know what is happening with the stock market, right?” I asked.

“Vishal, I have already lost all my profits in this crash, which I made during the past two years.”

“Oh! Were you playing around with stuff like Vakrangee, or PNB, or Suzlon?”

“I know I am bad at investing, but not so bad Vishal. Luckily, I never got into these stocks.”

“Wonderful. Now tell me how I can help you,” I asked.

“Tell me if you have any clue where the stock market is headed?” Ravi asked.

BookWorm: The Drunkard’s Walk

All through our lives, we’re incessantly nudged in unexpected directions by random events. The Drunkard’s Walk is a deep exploration of the subjects of chance, uncertainty, luck, randomness, and probability. It offers useful mental models that will give you a totally new vantage point to look at many aspects of our everyday lives.

Investing and the Art of Cloning

My friend Ravi was home for lunch on weekend. After food, as we went out for a stroll, he told me a story of a famous motivational speaker.

At a huge gathering once, the speaker proclaimed, “The best years of my life were spent in the arms of a woman, who wasn’t my wife.”

The audience was in a state of shock and silence at thus revelation, especially because it was coming from someone they looked up to.

The speaker than added, “She was my mother.”

What followed then was a huge round of applause and laughter.

Ravi then told me the story of a male participant at this event who was his friend from school. This gentleman tried to trick his wife with a similar joke.

Warren Buffett, Humility, and 25 Other Lessons in Investing

This is going to be the shortest post on Safal Niveshak, but one with the most amount of wisdom (it doesn’t come from me, of course).

What follows below is a series of tweets from James O’Shaughnessy, the chairman and founder of O’Shaughnessy Asset Management, and the author of What Works on Wall Street.

The entire thread is worth reading, given that it contains the most important things an investor in stocks must understand, appreciate and tie into his/her investment philosophy.

It’s a gem of a tweetstorm, and I suggest you read through this and, maybe, print this out as it can serve as a wonderful reminder when you feel lost in the world of investing and the information overload that’s a part of it.

1/ I have been a professional investor for over 30 years. What follows is some things I think I know and some things I know I don’t know. Let’s start with some things I know I don’t know.

— Jim OShaughnessy (@jposhaughnessy) May 10, 2018

Click on the tweet above to read the entire series, or click here.