Sunil Shah has 25-years experience in the Indian equity markets. He started his career in the equity markets in 1994 and worked with Securities Capital before moving to Indsec Securities as Director Equities. In 2003, he moved to ABN AMRO, where he along with his team managed a PMS corpus of Rs 1,500 crore. Then in 2010, he joined Enam Securities Direct as Head of Research. Sunil is currently partners with Turtle Star Portfolio Managers. He qualified as CFA (ICFAI) and CWA (ICWAI) way back in 1997.
Almanack
StockTalk (May 2019)
Behaviouronomics: More Thoughts on Cognitive Dissonance
I had written about Cognitive Dissonance a few years back. You can read it here. Over the years, I have collected some more insights on the topic.
For the uninitiated, here’s a definition from Wikipedia —
In psychology, Cognitive Dissonance is the mental stress or discomfort experienced by an individual who holds two or more contradictory beliefs, ideas, or values at the same time; performs an action that is contradictory to their beliefs, ideas, or values; or is confronted by new information that conflicts with existing beliefs, ideas, or values.
Leon Festinger, the psychologist who developed the theory of Cognitive Dissonance, figured that human beings do not deal with conflicting beliefs and perceptions by testing them against facts. They reduce the conflict by reinterpreting facts that challenge the beliefs to which they are most attached.
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The Risk of Worrying About the Non-Risk
On December 24, 2014, AirAsia Flight 8501 took off from Surabaya (Indonesia) at 5.30 am local time. With 155 passengers and 7 crew members onboard, the flight was headed to Singapore. About 43 minutes into its flight, the Airbus A320 disappeared from the radar. The worst had come to pass. Two days later, the rescue team discovered the plane wreckage in Java sea. All 162 people onboard perished in the crash.
The crash investigation revealed that it was a pilot error. The in command Captain Iriyanto — a 53-year old former Indonesian Air Force pilot — performed a non-standard reset of the onboard flight control computers. Which means he did something which was not mentioned anywhere in any of the operating manuals. Why would someone with an experience of more than 20,000 flight hours do such a thing?
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Bookworm: Revisiting How to Fail at Almost Everything and Still Win Big
If you’ve been a long time reader of Value Investing Almanack, you’d have guessed that I am a big fan of Scott Adams. For the uninitiated, Scott Adams is the creator of Dilbert, one of the most popular and widely distributed comic strips of the past century. He has been a full-time cartoonist since 1995, after sixteen years as a technology worker for companies like Crocker National Bank and Pacific Bell. Apart from being a cartoonist he has written many bestselling books and is sought after speaker in corporate circles.
I had written about this book in December 2015 issue of VIA. However, some books are so good that they deserved to be read multiple times. This book falls in the category of those “must re-reads.” Don’t let the slipshod title fool you. I can vouch for the tremendous utility of Scott’s methods.
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Special Report: 27 Ideas on What Doesn’t Work — Part Two
Inspired by Charlie Munger’s super quote — All I want to know is where I’m going to die so I’ll never go there — Peter Bevelin wrote a book with the same title. Bevelin’s book distills the wisdom from Charlie Munger and Warren Buffett’s quotes from their speeches, interviews, and annual meetings. The book is an extraordinary compendium to learn how to make better decisions in life, investing, and business.
In this multi-part series, I am going to share some insights from this book. These ideas would be focused on identifying anti-patterns — things that one should do to increase the odds of undesired outcomes. Learning the anti-patterns is a more robust form of knowledge acquisition than focusing on success patterns. Anti-patterns are those patterns which consistently lead to poor outcomes and thus need to be avoided.
These ideas are like cautionary tales. Following these anti-patterns gives one a head start on the path to failure — which of course no one wants. That’s another way of saying that if one avoids these anti-patterns, then it increases the likelihood of living a highly satisfying life.
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StockTalk (April 2019)
Behaviouronomics: Motivated Reasoning
An oxymoron is a figure of speech in which apparently contradictory terms appear in conjunction. To me, the word motivated reasoning seems like an oxymoron. Let me explain.
Sound reasoning should be objective — devoid of any or all biases/motivations. Right?
But the human mind is a house of paradoxical features. As it tries to get rid of one bias, it leaves the backdoor open for the same bias. Motivated reasoning is a bias that affects that part of our mind which is often referred to as rational and objective.
Let me give you a quick refresher on System 1 Vs. System 2 concept.
World famous psychologist Daniel Kahneman has done revolutionary work in the field of understanding human cognition. His two systems framework is a brilliant mental construct to decode how our brain makes decisions. System 1 is the result of our reflexive brain — quick and eager to jump to conclusions. System 2 is our reflective brain — slower, effortful, logical, and less prone to error.
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Investor Insights: Jiten Parmar
Jiten is an entrepreneur and a passionate long-term investor. He has been investing in the market since 1993, starting with US equities and then Indian equities in 2002.
In this interview, Jiten shares his evolution as an investor, key lessons learned, his investment process especially in investing in cyclical industries, and how he tries to minimize decision making mistakes.
Wandering with a Beginner’s Mind
Among all the contemporary business leaders, very few come close to Jeff Bezos’ talent for communicating business strategies in a simplified manner. Like Warren Buffett, Bezos writes an open letter to Amazon’s shareholders every year. He’s been doing it for over two decades.
These letters have become an extraordinary source of insight into how Bezos (the world’s richest man) and his company (Amazon) think about customers, innovation, building products, and future.
Amazon started as an online bookselling platform and interestingly didn’t turn a profit for the first six years. Today it’s the second publicly traded company (after Apple) to ever hit a market capitalization of $1 trillion.
Like me, if you’re an admirer of Bezos, then you’re in the good company of people like Warren Buffett and Charlie Munger who are also big fans of the Amazon CEO. Buffett and Munger admit that they failed to see Bezos’ genius early on. Buffett called him the most remarkable business person of our age. Munger, in his nonchalant voice, said, “Jeff Bezos is a different species.”
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