Let’s Start with Safal Niveshak
Here are some useful posts from Safal Niveshak archive which you might want to read again…
- When I took Warren Buffett’s advice very seriously and it’s wasn’t about investing.
- When I met the legends of investing – Part 4.
- How to find great businesses, the Peter Lynch Way.
- Investing and the art of due diligence.
Guy Spier’s The Education Of A Value Investor is a book that reads like having a friendly conversation with a wise friend. It’s one of those very few books where the authenticity is reflected on each page and you can tell that every word has come out straight from the heart.
One of the most important things required for long term investing success, as I have learnt so far, is following a sound investment process. According to Guy, a sound process is a robust set of rules that makes our investment decisions smarter and less vulnerable to the distortions of our irrational brains.
Guy has developed eight such rules to bring an analytical rigour to his process. Here is one rule which made a lot of sense to me and cleared my dilemma about the need to talk to the management. He writes –
“…my own experience is that close contact with management is is more likely to be detrimental to my investment returns. The trouble is, senior managers—particularly CEOs—tend to be highly skilled salespeople. No matter how their business is performing, they have a gift for making the listener feel optimistic about the company’s prospects…But this gift of the gab doesn’t necessarily make them a dependable source of information…This isn’t to say that CEOs, CFOs, and other top executives are malicious or immoral…They may be skewing information subconsciously, without any bad intent. But it doesn’t matter. Knowing my own rational limitations, I’d prefer not to expose myself to this potentially distorting influence.
If I want to assess the quality of the management, I’d rather do it in a detached and impersonal way by studying the annual reports and other public data, along with news stories.”
So the rule is: Beware of CEOs and other top management, no matter how charismatic, persuasive, and amiable they seem.
And of course there are always some exceptions to every rule. Guy Spier says –
“Exceptions to the rule: Berkshire’s chairman and CEO, Warren E. Buffett, and a small but growing minority of CEOs (at companies like Fairfax Financial, Leucadia National Corporation, and Markel Insurance) who take seriously the idea of sharing what they would like to know if they were in their shareholders’ shoes.”
Meeting with management can seriously distort your view and mess up with your mind. Do that only if you’re confident about your ability to keep your mind insulated from a host of biases (Liking, Authority etc.) coming from the charismatic personality of the CEO.
Stimulate Your Mind
Forget the stock market for now, and consider some amazing content we read in recent times…
- What counts is not what’s said, but what’s heard. The art of giving the right feedback.
- Great entrepreneurs have a different response to the fear of failure. Yes, they’re afraid of failing, but they’re even more afraid of failing to try.
- It turns out there was an Uber way before Uber. Much before, about 100 years back.
- Surprisingly, the limited-willpower theory may not be entirely true.
If you really want to find out the importance of daily news, just dig out some old copies of The Times of India or Economic Times (two most popular English newspapers in India) from, say, ten or twenty years ago and ask yourself whether the events that ultimately proved to be important in the long run were consistently receiving prominent coverage at that time.
Were there front-page articles in 1995 or 2005 on build-up of subsequent economic and financial crises, air pollution, weather changes, oil, rise/fall of industries, or the rise of the consumerist Indian middle class? Occasionally perhaps, but for the most part the coverage focused on stories of more momentary interest, just as it does today.
There is a huge difference between being well informed and being knowledgeable. And for long term investing success, what’s important is not how much you know, but what insights have you derived which can help you minimize the mistakes.
Today, the TV has dozens of business news channels and the Internet is full of thousands of business and financial websites. Our problem isn’t dearth of information but an abundance of it.
News creates an overload of unnecessary and mostly irrelevant information. Problem is that our brains are hardwired by nature (evolution) to like such noise. A typical piece of news is easy to digest and appeals to our gossip monger lizard brain.
Most of the TV and print media (including and especially financial media) offers us tiny bites of trivial matter, tidbits that don’t really matter and don’t require thinking. That’s why we experience almost no saturation. That’s why news is like sugar. It’s pleasurable and addictive, but very harmful.
The social media thrives because of our addiction to news – news about world, about stocks, about friends, about celebrities and even about strangers.
In fact the smartphone that you have isn’t smart, it’s merely hot. Throbbing with the next new thing – the breaking news, a hot stock tip, the latest viral (and utterly useless) video.[I know, you’re itching to check the text message you just received on your smartphone. Go check it, I’ll be here when you get back.]
The truth is that what is reported in the media is mostly noise rather than information, but most people do not realize that the media is paid to get your attention. Put simply, news is toxic.
You see, newspapers, and even most financial news channels, are like soap operas – you can go without seeing them for a few days and months and come right back in without missing a beat.
So the good news is that you don’t need the news.
What you need is reading good books and long, deep magazine articles (which requires thinking). And then you have to top it up with long session of deep thinking about what you’ve read.
That’s what gives you an edge in making not just an informed but a better decision.
Stay happy and stay blessed.
But don’t stay tuned to the news.
Be kind to others, and to yourself.
Vishal & Anshul
[…] signal. Essentially you should avoid news because most news doesn’t just distract but it can be toxic. Prof. Bakshi writes […]