Here’s some stuff I am reading, watching, and thinking about this weekend…
Book I’m Reading – Thinking in Bets
In this book, Poker champion turned business consultant Annie Duke shares insights on how we can get comfortable with uncertainty and make better decisions as a result. It’s a lively read that presents a useful and novel framework for analyzing decisions when we are faced with less than perfect information: that is, the situation we likely find ourselves in daily. Annie writes –
Life, like poker, is one long game, and there are going to be a lot of losses, even after making the best possible bets. We are going to do better, and be happier, if we start by recognizing that we’ll never be sure of the future. That changes our task from trying to right every time, and impossible job, to navigating our way through the uncertainty by calibrating our beliefs to move toward, little by little, a more accurate and objective representation of the world.
The most charming parts of the book are where the principles presented can be applied in much of my daily life, from those facing me as a father of two kids to better considering possible outcomes when making investment decisions.
It’s a nice, practical book – Thinking in Bets.
Articles I’m Reading
The NY Times carries a crisp interview of Howard Marks who talks about how investors are often their own worst enemy. When asked if investors have become smarter in the 50 years Marks has been investing himself, he replies –
They’ve gotten more information. They know more about more asset classes. There are fewer secrets in the world today. On the other hand, I think they are more shortsighted, more short term oriented than they used to be.
And while people now understand more about contrarianism and counterintuitiveness, I don’t think the human race has become less emotional.
On how to succeed in investing, Marks suggests –
Superior investing is taking advantage of the errors of others. In order to get an above-average return in the long run, you have to buy things for less than they’re worth, which is to say that the other people out there have to be selling that thing for less than its worth.
They’re making a mistake and you need to act in a contrarian way to take advantage of that.
Check out his latest book Mastering the Market Cycle, where the legendary investor shows how to identify and, well, master the cycles that govern the markets.
Haste makes waste, writes Morgan Housel in another thoughtful post. This time on how forced growth, accelerated growth, and artificial growth tends to backfire. He cites examples of fishes, companies, venture capitalists, and people in general. He writes –
There is a graveyard of companies whose early success pushed them to grow as fast as they could, right past the point where growth killed them … Each had something going for them, but ruined it by saying, “How can we get more of it ‘faster’.”
He then adds –
Everyone knows the investing duo of Warren Buffett and Charlie Munger. But 40 years ago there was a third member, Rick Guerin. Warren, Charlie, and Rick made investments together. Then Rick kind of disappeared. Turns out he was highly leveraged with margin loans, and during the 1974 recession had to sell his Berkshire Hathaway stock to Warren for less than $40 a share.
CNBC carries a nice interview of Neville Noronha, the CEO of Avenue Supermarts (D-Mart). Among other things, Noronha indicates that D-Mart is not looking aggressively to expand the stores in new states (welcome contrast to the kind of story Morgan has written above about companies chasing rapid growth).
One question centres around the lessons he has learned from the company’s founder RK Damani –
A) Patience: This has been reinforced in all aspects of the business. It’s quite a contradiction to our day to day operations. This business doesn’t tolerate patience in a lot of things. Things have to get done with a lot of swift speed. But in a lot of other things patience is a virtue that is quite powerful.
B) Word is stronger than a contract document is another of his strong dictums. A lot of his past knowledge and experience in the investing business has been imbibed into D-Mart in its formative years. He would always remind us “it takes years and decades to build reputation and very little time and effort to squander it all.” A lot of what we do is based on this principle.
C) Silence if disagreement on a point. This one is the most powerful. In the initial days, when I would make a point that he disagreed on, he would pause and reflect. He would almost never object. Over time I would realise that his active participation in an idea meant his complete agreement while unenthusiastic reverts meant he didn’t agree. But he never prevented us from executing it.
The interview is a nice read in its entirety and contains a lot of insights on the retail industry in general and D-Mart’s business in particular.
Can money buy happiness? Well, as per researchers, money can help you find more happiness so long as you know just what you can and can’t expect from it. But they also suggest that once you get basic human needs met, a lot more money doesn’t make a lot more happiness.
So, while the rich are happier than the poor, the enormous rise in living standards over the past 50 years hasn’t made us happier. Why?
One, we overestimate how much pleasure we’ll get from having more money. Two, more money can also lead to more stress –
The big salary you pull in from your high-paying job may not buy you much in the way of happiness. But it can buy you a spacious house in the suburbs. Trouble is, that also means a long trip to and from work, and study after study confirms what you sense daily: even if you love your job, the little slice of everyday hell you call the commute can wear you down.
Also…you endlessly compare yourself with the family next door. H.L. Mencken once quipped that the happy man is one who earns $100 more than his wife’s sister’s husband. He was right. Happiness scholars have found that how you stand relative to others makes a much bigger difference in your sense of well-being than how much you make in an absolute sense.
Mint carried a nice piece on whether the way we work is killing us. It talks about how the impact of work stress on our well-being, both mental and physical, is immense.
Stanford professor Jeffrey Pfeffer estimates there are 120,000 extra deaths each year directly resulting from harmful management practices in the US, and puts the extra healthcare costs at $190 billion (around ₹14 trillion). Workplaces were the fifth-leading cause of death.
Though these are US numbers, they emphatically apply here too. India stands to lose $4.58 trillion due to stress-related chronic diseases before 2030, as reported by a 2014 World Economic Forum (WEF)/Harvard School of Public Health study. Asked about the Indian context, Prof. Pfeffer says over email, “The health and other consequences are almost certainly the same across cultures, as the etiology of the stress-induced diseases and the psychological impact of work is likely to be identical.”
If you can relate to this grave problem at hand, the first thing is to try to do is not to feel overwhelmed by the toxic situation. Acknowledge it. And then figure out what you’re going to do next to get the happiness and better health you deserve.
Thought I’m Meditating On
…this life we’re living — this world we inhabit — is a scary place. If you peer over the side of a narrow bridge, you can lose your heart to continue. You freeze up. You sit down. So too with life. If we think too much about the journey we have to make, the one that begins with the trauma of birth and ends with the tragedy of death, the one that is so perilous and unpredictable, we’ll never make it.
The important thing is that we are not afraid. That we don’t overthink things. That we don’t give way to fear. Just repeat it to yourself — The world is a narrow bridge and I will not be afraid — and keep going. Like the thousands of generations who have come before you. ~ Daily Stoic
Video I’m Watching
Here is one video I have watched often, and each time it leaves me a little inspired. It’s the commencement speech from Admiral William H. McRaven, ninth commander of US Special Operations Command, at the University of Texas at Austin in 2014. The beauty of the speech lies in the fact that it is on point and offers some fantastic life and business lessons. McRaven shares the ten lessons he learned during his 34-years career as a navy SEAL.
Enjoy your weekend (avoid thinking about your stocks),