Almanack

Have you ever noticed that finding an available spot in the multilevel car parking in any mall or shopping complex is an interesting exercise in mental maths? Let me explain.

Whenever I enter the parking area, I often try to optimize, i.e., find a spot near the lift lobby/staircase. Which means the moment I enter the parking area, I have to forego the easily available spots and keep driving towards the lift lobby and then hope that there’s a spot available near it. If there isn’t, then I would have to drive up to the next floor, which is kind of worse than the case where I would have taken the first few available spots near the parking entrance. So how many first available spots should I pass before I decide to stop searching?

It turns out that mathematicians have spent centuries thinking about this class of problems. They call it The Optimal Stopping problem.
[Read more…] about Picking Stocks Like a Mathematician

During World War II, the United States created a classified program called The Statistical Research Group (SRG). Its purpose was to help the US army solve problems using equations and formulae. In other words, SRG was into wartime math.

One interesting problem military gave SRG was about making sense of bullet holes in American planes. When those fighter planes came back from the battle, they were usually covered with bullet holes inflicted by the enemy guns. The military wanted to figure out the most optimum way to put the armor on the plane.

Well, couldn’t they armor the whole plane?
[Read more…] about Behaviouronomics: The Case of Missing Bullet Holes

This is the fourth leaf of the multi-part series based on Peter Bevelin’s excellent book — All I Want to Know Know is Where I’m Going to Die, So I’ll Never Go There. The goal is to cover 27 insights on “what should be avoided” in business, investing, and in life.

The greatest — and most robust — contribution to knowledge consists in removing what we think is wrong — subtractive epistemology, writes Nassim Taleb in his book Antifragile.
[Read more…] about Special Report: 27 Ideas on What Doesn’t Work — Part Four

The problem with Taleb is not that he’s an a**hole. He as an a**hole. The problem with Taleb is that he is right.

Those are not my words. It’s from one of the blurbs for Taleb’s book Skin in The Game. And among many other surprising things about the book, one is that all the blurbs that appear on the jacket aren’t from other famous authors. Taleb took the testimonials from ordinary readers and printed it on the back of the book. Not because other famous authors weren’t willing to offer their testimonials — many of them would be honoured to do that — but it’s because Taleb doesn’t care.

Those who have read his books agree on one thing — Taleb is idiosyncratic and he is a genius.

In out bookworm series we have already reviewed Nassim Taleb’s earlier books — Fooled by Randomness, The Black Swan, The Bed of Procrustes, and Antifragile. Skin in the Game is Taleb’s latest book. It came out last year (2018) and I had been sitting on it for quite a while. Last month I finally managed to finish reading it. Like all Taleb’s books, this one also needs to be read at least twice (perhaps thrice) to be able to absorb all the wisdom in a meaningful way.
[Read more…] about Bookworm: Skin in The Game by Nassim Nicholas Taleb

In 1999 when Warren Buffett bought a 75% stake in MidAmerican Energy Holdings Company, David Sokol was its CEO. He retained his position till 2008. Apart from managing MidAmerican, Sokol played a crucial role in turning around Berkshire’s other investments like NetJets and Johns Manville. Over the years he established a reputation inside Berkshire Hathaway as Mr. Fixit.

In his annual letters, Buffett often referred to Sokol as a terrific manager, a brilliant dealmaker and a huge asset to Berkshire. In his 2008 letter, he wrote —
[Read more…] about It’s Not Supposed to Be Fair

[Read more…] about StockTalk (June 2019)

Abhishek is the founder and chief investment advisor at Intelsense Capital (www.intelsense.in). He is a value investor with nearly two decades in the market. He is a keen observer of the economy and shifts in technological trends across industries. He is a proponent of behavioural finance and a long-term orientation while investing.

In this interview, Abhishek shares his evolution as an investor, key lessons learned, his investment process, and how he tries to minimize decision making mistakes.

[Read more…] about Investor Insights: Abhishek Basumallick

In 1983, Daniel Kahneman — the famous behavioural scientist — and his colleague Amos Tversky, published this example in Psychology Review. The example is about a fictitious character called Linda.

Linda is 31 years old, single, outspoken and very bright. She majored in philosophy. As a student, she was deeply concerned with issues of discrimination and social justice, and also participated in anti-nuclear demonstrations. Based on this information about Linda, you have to estimate which of the following statements about Linda are more likely to be true.
[Read more…] about Behaviouronomics: The Conjunction Fallacy

In today’s world, we’re all designers. Whether it’s creating a powerpoint presentation, designing a website for your startup, creating a flyer for your kid’s school event or even taking a decision about your home interiors — we’re always dealing with design problems.

Most people believe that design skills are reserved for the creative lot — those who have a talent for art. But it’s not commonly known that a lot of aspects of design are actually rule-based. There’s a science to it; a formula if you will. And one doesn’t need to have an “eye” for design. Knowing the rules is good enough for us civilians.

Let me give you a few examples to make it more concrete what I mean by rules.

The L-shaped Layout

If you talk to landscape designers, they will tell you that it’s better to put three of the same kind of vertical structures — they could be pillars or trees — in your land, rather than four. Odd numbers just look better in that context. Now, why is it so is a matter of deeper investigation of human perception, but if you know this rule, you can instantly become an above average designer.
[Read more…] about Bookworm: Universal Principles of Design

In this series we’re distilling few ideas from Peter Bevelin’s book — All I Want to Know Know is Where I’m Going to Die, So I’ll Never Go There. A mouthful of a title, isn’t it? But if you’re familiar with Charlie Munger, you’d instantly recognize the title as Munger’s favourite saying. Hidden inside this wisecrack is a profound philosophy on how to make important decisions in life and business to ensure better outcomes.

What has been reinforced in writing this memo, writes Bevelin in the introduction, “is efficiency, simplicity, clarity and common sense or judgement that are the hallmarks of Buffett and Munger. Both have remarkable ability to eliminate folly, simplify things and boil down issues to their essence and get right to the point — and focus on simple and timeless truths. They are the Einsteins of business and wisdom. So if there is one goal of this book, it is simplicity and to better understand how they think.”
[Read more…] about Special Report: 27 Ideas on What Doesn’t Work — Part Three