Safal Niveshak is now on Telegram, where I plan to share byte-sized ideas, insights, and stuff I am reading and thinking about on the subjects of investing, personal finance, human behaviour, and the pursuit of a happy life. Basically, stuff that may be too short for a blog post and too long for a tweet. Click here or here to join my channel.
Here is your weekly Saturday newsletter, where I share the latest updates from the site, a new idea worth thinking about, few stories you shouldn’t miss, and a question for you. Let’s get started.
On SN This Week
Idea: Beware the Excel Spreadsheet
Staying on with excel spreadsheets, in The Black Swan, Nassim Taleb has a section titled – The Beauty of Technology: Excel Spreadsheets – where he writes this –
In the not too distant past, say the precomputer days, projections remained vague and qualitative, one had to make a mental effort to keep track of them, and it was a strain to push scenarios into the future. It took pencils, erasers, reams of paper, and huge wastebaskets to engage in the activity. Add to that an accountant’s love for tedious, slow work. The activity of projecting, in short, was effortful, undesirable, and marred with self-doubt.
But things changed with the intrusion of the spreadsheet. When you put an Excel spreadsheet into computer-literate hands you get a “sales projection” effortlessly extending ad infinitum! Once on a page or on a computer screen, or, worse, in a PowerPoint presentation, the projection takes on a life of its own, losing its vagueness and abstraction and becoming what philosophers call reified, invested with concreteness; it takes on a new life as a tangible object.
My friend Brian Hinchcliffe suggested the following idea when we were both sweating at the local gym. Perhaps the ease with which one can project into the future by dragging cells in these spreadsheet programs is responsible for the armies of forecasters confidently producing longer-term forecasts (all the while tunneling on their assumptions). We have become worse planners than the Soviet Russians thanks to these potent computer programs given to those who are incapable of handling their knowledge.
“Investing is simple, but not easy,” said Charlie Munger.
Understanding that sensible investing is about buying a thing worth Rs 100 at Rs 50 is simple, but actually buying something worth Rs 100 that falls to Rs 50 is not easy.
In the same way, working on excel spreadsheets is simple, but not twisting spreadsheets to fit your version of reality is not easy.
See this as an example of how we twist spreadsheets to fit our versions of reality when it comes to investing in stocks –
Leaving you with the work of excel-wielding analysts working for a leading investment bank who wrote this on a much-sought after Indian company two years back. Just see how they tried to justify their recommendation by forecasting 10-years into the future.
Exactly as Taleb wrote –
Once on a page or on a computer screen, or, worse, in a PowerPoint presentation, the projection takes on a life of its own, losing its vagueness and abstraction and becoming what philosophers call reified, invested with concreteness; it takes on a new life as a tangible object.
The way the world or businesses work can never be embodied in rows and columns of numbers and formulas. You must remember this while using the excel spreadsheet I shared recently, or any such fiction-writing software.
A Few Stories You Shouldn’t Miss
- 5 Stories That Got Us To Now (Morgan Housel)
- The Greatest Danger Investors Face (A Wealth of Common Sense)
- What Risk Isn’t (Of Dollars and Data)
- How Pandemics Wreak Havoc — and Open Minds (New Yorker)
- Children and Technology (The Convivial Society)
- Valuation Debate: P/E, Cycles and Expensive Stocks (Barry Ritholtz)
- Interview with Christopher Begg of East Coast Asset Management (Medium)
- Indian banks are in for a ₹20-trillion hole (Mint)
A Question for You
There are a lot of things in the universe that we don’t know that we don’t know. This is especially because there are a lot of questions we do not ask to ourselves. And that is why we should learn to keep questioning everything — all the time.
So ask yourself – What questions am I not asking myself?
That’s about it from me for today.
Have a great weekend. Keep an open mind.
Stay safe from excel spreadsheets, and the virus.