Let’s Start with Safal Niveshak
Just in case you missed any of this on Safal Niveshak over the last few weeks…
- If you want to know anything and everything about what Safal Niveshak is and what it stands for, you will find in this presentation.
- Beware of the Curse of a Bull Market for it makes you forget the risk of losing money.
- Why good people do bad things: A Conversation With My Daughter.
- 5 Things I Learned from Elon Musk on life, business and investing.
If you are familiar with the terms ‘value investing’ and ‘behavioural biases’ then chances are that you have heard about ‘checklists’ too. The idea of checklist has been made popular in recent times by Dr. Atul Gawande through his book The Checklist Manifesto.
A surgeon by profession, Dr. Gawande is also a prolific writer and deep thinker. Charlie Munger was so impressed with one of his article that he mailed him a $20,000 cheque as a thank you.
The first insight that I found in his book is the important distinction between errors of ignorance and errors of ineptitude. Gawande writes …
We have two reasons that we may fail – The first is ignorance – we may err because science has given us only a partial understanding of the world and how it works. The second type of failure is because we fail to apply correctly the knowledge that exists. For nearly all of history, people’s lives have been governed primarily by ignorance. But in the modern world science has filled in enough knowledge to make ineptitude as much our struggle as ignorance…Knowhow and sophistication have increased remarkably across almost all our realms of endeavour.
The complexity of modern world has made us more prone to mistakes which are potentially avoidable. He argues …
Defeat under conditions of complexity occurs far more often despite great effort rather than from a lack of it …The capability of individuals isn’t proving to be our primary difficulty, whether in medicine or elsewhere…Yet the failures persist despite remarkable individual ability.
The solution to this problem came from a totally unexpected place. Airline industry. In 1930’s airlines started using checklists to eliminated human errors and it turned out to be a remarkably effective tool.
..Checklists remind us of the minimum necessary steps and make them explicit. They not only offer the possibility of verification but also instill a kind of discipline of higher performance.
This was a remarkable discovery and a brilliant example of cross pollination of ideas across unrelated disciplines.
When Dr. Gawande came to know about Mohnish Pabrai and Guy Spier, noted value investors and known for winning the auction to have lunch with Warren Buffett, and their success at using checklists, he interviewed them.
Mohnish had deviced a written checklist based on his personal mistakes and also mistakes by other investors like Warren Buffett and Charlie Munger. His checklist allowed him to move faster and systemically through investment decisions.
It’s difficult to accept that such a humble tool like a checklist can be so effective at improving the results but this book has numerous examples and case studies which support the premise that checklist do work. In the end, checklist is not a mere formula but a means of self awareness.
So nobody can create a checklist for you. You have to come up with your own checklist and then improve it constantly by analysing failures.
Atul Gawande is a master storyteller and his book is nothing less than a medical thriller. If you want to make your weekend useful, pick up Gawande’s book!
Stimulate Your Mind
Here’s some amazing content we read in recent times…
- The single best interview question you can ask. For that matter, Peter Thiel’s Zero to One is a must read.
- The value of ‘overvalued’ stocks. A very useful and though provoking post from Rohit Chauhan.
- The founder and CEO of Symphony Ltd., Achal Bakheri, was invited by Prof. Sanjay Bakshi to share his experience and insights with MDI students. Watch it here.
- Apart from greed and fear, there’s a third emotion of investing which requires constant management. It’s called boredom.
- An unconventional indian billionaire is spearheading the project to invent simple solutions which can impact lives of billions of people. He sounds like the indian version of Elon Musk.
Most lives are filled with too much stuff but what do you really need, not want, to live a happy life?
Let’s invert the question. What can you live without?
People think of constraints as giving something up instead of gaining something. But if you give away your TV, you gain back all the hours it used to suck from your life.
So embrace your constraints because they can weedout the non-essential noise from your life.
Consider Twitter. What makes it the world’s most effective communication medium? It’s the constraint of squeezing your thoughts into 140 characters.
“It was the constraint of the two-week hackathon that led to the creation of Twitter.”, Biz Stone, co-founder of Twitter, says, “One of the first decisions we made about Twitter, something that never changed, was that each message would be limited to 140 characters or fewer.”
In his book, Things a Little Bird Told Me, Stone writes …
“Constraint inspires creativity. Blank spaces are difficult to fill, but the smallest prompt can send us in fantastic new directions. In business, constraints emerge from the time you have to finish a project, the money you have to invest in it, the people you have to build it, or the space to you have complete it. These limitations, counterintuitively, can actually enhance productivity and creativity. Think about the question “How was your day?” The answer is almost always “Fine.” But putting constraints on the question—“How was your lunch with Steve?”—yields a much more interesting answer.
Embrace your constraints, whether they are creative, physical, economic, or self-imposed. They are provocative. They are challenging. They wake you up. They make you more creative. They make you better.”
As this whack-pack card suggests, setting a deadline is one of the most useful hack for creative artists. And don’t forget, every body is an artist.
Limiting the options gives you a place to start and scarce resources make you focus on the most important aspect of your work.
You think lack of money is stopping you? It may sound ironical but one of the most interesting problems that many rich people face is to control their urge to solve every problem by throwing money at it.
You see, too much money poses a threat for your creativity at being resourceful.
So take a look at your constraints. If they look like road blocks, look again! May be they have the potential to become the stepping stones of your future success.
Don’t ignore your mistakes. Learn from them.
Even better, learn from others mistakes also because mistakes are the raw material for an effective checklist.
Embrace your constraints.
Stay happy, stay blessed and keep poking.
Vishal & Anshul
What are the books with Indian scenario you suggest for people who want to start investing in stocks??
Very good article Vishal ji & Anshul ji.
Infact you both very rightly pointed out that lack of money is not a constraint but it’s a motivating force to innovate. As I hear from quite a few friend and colleages that they have a lot amount of good ideas but don’t have money to implement them. I think its just an excuse for not taking or not willing to take the plunge.
As warren buffet has confessed in one of his letters that he & Charlie are fortunate to have born in US, in the same line we should thank that we all are born in a family with optimal but not excess financial means. And this has proved to be a fertile ground for all of us to look for financial free and wealth creation.
As Bakshi sir mentioned in some interview of what Allen Greenberg calls “PSD’s” — poor, smart, and a deep desire to become rich. We all qualify in this category.