Anshul Khare

Latticework of Mental Models: The Rashomon Effect

June 14, 2019 | Reading Time: 12 minutes | 4 Comments |

The parable of six blind men and an elephant, goes like this —

When a group of blind men, who had never come across an elephant before, encounter the tusker for the first time, they try to conceptualize the animal by touching it. Each blind man feels a different part of the elephant’s body, but only one body part, such as the tail or the trunk. Then they discuss their understanding about the elephant.

The man who had touched the elephant’s side says, “It’s very much like a wall.”

The one who held the elephant’s tusk declares, “No! it’s like a smooth spear.”

“Not really. It’s like a python.” Claims the man who grabbed the trunk.

“You’re all mistaken.” shouts the man who got the elephant’s tail. “It’s like a thick rope.”

“I know we’re all blind but have you guys lost your mind also?” The fifth man who touched the animal’s ears says, “It’s like a big fan.”

“Come on, folks! What’s wrong with all of you?” Argues the sixth man who was leaning against the elephant’s knee, “It’s definitely like a tree.” [Read more…] about Latticework of Mental Models: The Rashomon Effect

How to Be A Fortunate Investor

April 8, 2019 | Reading Time: 8 minutes | 22 Comments |

If you think I am going to talk about some mystical way to increase your luck in stock market, then you’ll be disappointed. Being fortunate in life and in investing is largely about increasing your odds of success. And how do you increase your odds?

“Study the principles of sound investing and work hard to implement those principles,” you might say. But is that sufficient? Studying, reading and working hard are all necessarily conditions for being successful in the stock market, however they are not sufficient. You need one more thing.

Let’s turn to world’s greatest investor to give us some clue. In his 1982 letter to investors, talking about two of his managers Phil Liesche and Ben Rosner, Warren Buffett wrote –

Fighting the Last War

November 12, 2018 | Reading Time: 9 minutes | 1 Comment |

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

In Safal Niveshak’s Value Investing workshops, when we discuss the mental biases, we show the following video to our participants.

I would suggest that you pause here and watch this video before reading further.

It’s a test of your awareness so don’t cheat 🙂 [Read more…] about Fighting the Last War

On Stories We Tell

September 27, 2018 | Reading Time: 11 minutes | 6 Comments |

For my twin toddlers, the instant attention-grabbing words are — Once upon a time. They drop everything and dash to whoever uttered those words.

It’s my only weapon to break their fights and tantrums. But once those words slip out then there is no escape.

“Tell me the story, Papa. Please tell me the story.” To their relentless prodding, I give in every time.

It doesn’t matter how interesting or boring the story is. Neither does it matter if I am telling them the same narrative for the hundredth time. Fed up they’re not. Any pause to catch my breath is cut short by an impatient stare demanding an exciting twist in the tale. Their eyes widen as if it’s not the ears but eyes they’re listening with.

Kids are suckers for stories. So are adults. Aren’t we?

The content may change but the fascination for stories is deeply ingrained trait that evolution has bestowed on the human brain.
[Read more…] about On Stories We Tell

A Hidden Cost Called Rented Suit Liability

August 21, 2018 | Reading Time: 10 minutes | 13 Comments |

Lloyd’s of London, a 300-year-old insurance body, collects more than 33 billion pounds in gross premium every year. Its history goes back to the 17th century.

In 1906, when a major earthquake destroyed more than 80 percent of the Californian city of San Francisco, Lloyd paid out all the policyholder claims, irrespective of the terms of their policies. That cemented Lloyd’s reputation in the American market.

However, in the 1990s, this insurance behemoth was brought to its knees by a risk that had gone unnoticed for decades. After California earthquake episode, Lloyd started underwriting wide-ranging general liability cover to US businesses, including asbestos manufacturers.

Thousands of employees who had worked in asbestos plants were diagnosed with asbestosis, a deadly lung disease, twenty years later. These workers claimed the compensation from their former employer in 1990s. The employer, in turn, claimed it to the insurance companies like Lloyd who wrote the policy in the 1960s. Lloyd had failed to understand the nature of future risk and thus faced near bankruptcy.