Investing

Let’s Start with Safal Niveshak
Just in case you missed any of this on Safal Niveshak over the last few days…

• Restarted my analysis of Warren Buffett’s letters to shareholders…this time covering his views on what makes a business great.
• Launched a new section on the website, titled “Mental Models”, which is aimed to become a repository from which you can create your own latticework of mental models and reframe your investment thought process.
• Shared the secrets of the world’s best business, and how can you also start one of your own.
• Nokia got sold to Microsoft, and here are 10 lessons from the mobile giant’s fall.
• Manish Sharma wrote a comprehensive StockTalk analysis on Bata India, explaining why the business is good but the stock isn’t.

“Nothing is easier than self-deceit. For what each man wishes, that he also believes to be true.” ~ Demosthenes

Denial, as the old joke goes, is not just a river in Egypt. It’s proof of modern society’s deepest sins like irrationality and cynicism.

Eric Beinhocker in ‘The Origin of Wealth’ writes – “People have a general bias toward spinning their reality in positive ways and ignoring uncomfortable facts. It takes a real jolt to make them see that everything is not OK.

Jack Welch was infamous for popping the unduly optimistic bubbles of his people, and one of his dicta was that managers must ‘face reality [and] see things as they are…not the way they wished it would be.”

But most of us live a life of constant denial, which is a failure on our part to be able to tell fact from fiction, and, worse, the devastating failure to know ourselves.

In his famous 1974 commencement address at Caltech, American physicist Richard Feynman warned against self-deception: “The first principle is that you must not fool yourself – and you are the easiest person to fool.”

Austrian philosopher Ludwig Wittgenstein said in ‘Culture and Value’: “Nothing is so difficult as not deceiving oneself.”

You see, we have to see the world as it is. Not for what it was or for what we want it to be. Refusing to look at unpleasant facts doesn’t make them disappear.

Often, bad news that is true (like you have lost money on a bad business) is better than good news that is wrong (like you have made money on a bad business that you think is a good business).

So please get over your denial…and stop deceiving yourself!

Book Worm
I am currently reading Daniel Kahneman’s amazing book Thinking, Fast and Slow, and came across his thoughts on Availability Bias…

People tend to assess the relative importance of issues by the ease with which they are retrieved from memory – and this is largely determined by the extent of coverage in the media. Frequently mentioned topics populate the mind even as others slip away from awareness.

In turn, what the media choose to report corresponds to their view of what is currently on the public’s mind. It is no accident that authoritarian regimes exert substantial pressure on independent media. Because public interest is most easily aroused by dramatic events and by celebrities, media feeding frenzies are common.

For several weeks after Michael Jackson’s death, for example, it was virtually impossible to find a television channel reporting on another topic. In contrast, there is little coverage of critical but unexciting issues that provide less drama, such as declining educational standards or overinvestment of medical resources in the last year of life. (As I write this, I notice that my choice of “little-covered” examples was guided by availability. The topics I chose as examples are mentioned often; equally important issues that are less available did not come to my mind.)

Stimulate Your Mind
Here’s some amazing content I read during the week gone by…

• If you are in a hurry to do something or get somewhere, you ought to stop and read this.
• Prof. Sanjay Bakshi shared the amazing transcript of his first lecture on behavioural finance to his students at MDI this year.
• Farnam Street reviews Gary Klein’s book The Remarkable Ways We Gain Insights, which Prof. Bakshi also recommended in his transcript mentioned in the above link.

“The Mind is its own place, and in itself can make a heaven of hell, a hell of heaven.” ~ John Milton

I’m a pretty positive person — I consider it one of the keys to the modest success I’ve had in creating new habits and achieving things in the last few years.

Without seeing the positives in my actions, I couldn’t have begun on my journey of living my passion. I couldn’t have eliminated my debt, or quit my job.

So, I don’t feel that I’m particularly “incredible” – just lucky that I live with a positive attitude towards my life and actions.

Here is what Roger von Oech writes in one of his creative whack pack cards…

Most people have a warning device in their minds to alert them to new ideas. Unless the idea cleanly dovetails into what they’re doing, they’ll react by saying:

“It won’t work.”
“It’s dumb.”
“I don’t get it.”

When you evaluate new ideas, however, remember that your purpose is to help get good ideas produced — not to revel in the beauty of your criticism.

Thus, when you judge new ideas, focus initially on their positive and interesting features. This will counteract a natural negative bias, and help you to develop more ideas.

When you start feeling like the idea of being a positive person is hard to achieve, remind yourself that all it takes is one small step in the right direction to move yourself toward a more positive attitude.

Believe in yourself and remember the most important lesson of all: A positive outlook is a choice that you can always make.

Finally, Herm Albright said – “A positive attitude may not solve all your problems, but it will annoy enough people to make it worth the effort.” 🙂

Well, if you haven’t done it already, sign up here to receive Poke the Box in your email…and get ready for stimulating Saturday mornings.

Keep poking.

Stop denying the obvious.

Stop deceiving yourself.

See the positive.

Be kind to your heart.

Till next weekend…

Vishal Khandelwal
Chief Poker – Poke the Box