Let’s Start with Safal Niveshak
Just in case you missed any of this on Safal Niveshak over the last few weeks…
- Introducing Safal Niveshak’s University of Value Investing and Multidisciplinary Thinking.
- Vishal interviews Terrible Mr. X – Lessons on What NOT To Do in Stock Market.
- We kick started Safal Niveshak’s Value Investing Meetups from Bangalore and Mumbai. The initiative aims to bring the tribe members together, face to face.
- Vishal recently delivered a lecture on Value Investing and Behavioral Finance at Goa Institute of Management. Click here to download the presentation slides.
- Vishal received an autographed (by Charlie Munger) copy of Poor Charlie’s Almanack and Anshul joins Safal Niveshak as full time partner. Click here to find out more.
In last fifty years Warren Buffett has recommended quite a few books in his lectures and writings. But there is one book that can boldly claim to have found its way to Warren Buffett’s reading desk. And that book is ‘The Success Equation’, authored by Michael Mauboussin.
Michael belongs to the breed of those rare investment strategists who have spent their life puzzling over the really crucial questions in the world of decision making. He is an expert in one of the most debatable topic in the field of business strategy i.e. role of luck in defining the success for an individual as well as an organization.
The central idea discussed in Mauboussin’s book is the spectrum called Skill Vs Luck Continuum.
The world we live in today has become terribly interconnected. This introduces a high degree of complexity which in turn leads to lot of randomness and unpredictability in the outcomes of events. When this randomness operates at an individual level, it translates to either good or bad luck.
Still there are many activities which are fairly simple and usually have predictable outcomes based on the level of skills exhibited by the participants.
So there are one set of activities dominated by luck and other set of activities ruled by skill. The real trick however is to not only differentiate between the two kind of situations but to acknowledge that this differentiation doesn’t usually come with recognizable boundaries. The complexion of reality is a blend of skill and luck both.
Skill-Luck continuum is an imaginary linear scale where on the far right are activities that rely purely on skill such as running, swimming, chess, etc. On the far left are activities that depend on luck and involve no skill. Roulette or the lottery are few examples.
Mauboussin argues that in skill dominated situations, following a good process almost always leads to a good outcome. On the other hand, in a luck dominated world a good process also leads to a good outcome but only over time.
It’s a fascinating book that forces you to reflect on your decision making process. If this book deserves to be on Buffett’s desk, there is no reason you shouldn’t have this in your bookshelf too.
Stimulate Your Mind
Here’s some amazing content we read in recent times…
- Chetan Parikh’s presentation on Moats Vs Boats at Indian School of Business.
- Jana Vembunarayanan, long time tribe member, has started a lecture series. Don’t miss his lecture notes.
- Why one should pursue a memorable life.
- I’ve not met an investor who’s a better listener and one who speaks with greater poise than Durgesh Shah. See here.
- I walk, and rarely run. Here’s why you need not run too.
- Prof. Bakshi’s note on Scalable Commodity Vs Scalable Moat.
Don’t forget the role of luck.
Don’t ignore skills either.
Connect the dots.
Don’t settle and don’t forget to keep learning.
Stay happy, stay blessed and keep poking.
Vishal & Anshul