Some amazing stuff we are reading, watching, and observing at the start of this weekend…
- One of the most dangerous places to be as an investor is…
…when you’re the smartest person in the room. Smarts, when not combined with a heavy dose of humility, can get you into trouble because it can lead to overconfidence. Overconfidence can lead to overthinking which can be a deadly combination when managing money.
- Do you know about the most overlooked trait of investing success, especially when you are managing other people’s money? Hint – It’s a trait not directly related to investing. Go, figure. 🙂
- Many investors and investment managers have taken to copying Buffett’s approach, but is it really possible to become a value investor by reading a few books and desiring to make money? In a letter to investors several years ago, Seth Klarman of The Baupost Group warned of value pretenders, investors who brand themselves as value investors but actually miss the essence of value investing. So are you one i.e., a value pretender? Here’s a nice post from John Mihaljevic on ways to determine if you are a value investor or pretender. One of the ways John writes about is…
If you base your purchase decisions on the likelihood that the market will assign a higher P/E or other multiple to a stock in the future, you may not be a value investor. You may instead be engaging in John Maynard Keynes’s “beauty contest”, an exercise centered on guessing the behavior of others. Value investors independently appraise the value of businesses in order to make an informed investment decision.
- Bill Gurley of Benchmark, a Silicon Valley venture capital firm failed to pursue Google in 2002. His reasons, as he talked about in May 2016, were…
…a lot of the reasons we didn’t chase it were rule-of-thumb things that we all had assumed were true about venture. Things like: “You can’t have two Ph.D.s running it,” “Search is a mature business,” “Yahoo has just gone from $82 a share to $10,” “Excite got sold for nothing, or went bankrupt.” I learned that if you use rules of thumb, you can actually get yourself in trouble.
In September, he talked more about the error of his reasoning…
I think it came down to the price at the time was remarkably high and the team was remarkably self-confident in a way that would cause you to question whether they could pull it off, but they did.
I go back, and the learning is that if you have remarkably asymmetric returns you have to ask yourself, ‘how high could up be and what could go right?’ because it’s not a 50/50 thing. If you thought there was a 20% chance you should still do it because the upside is so high.
Now, that’s the tricky part about investing. Sometimes it makes sense to bet on a long shot or pay a lot because the rewards are so high. Worth pondering.
- Charlie Munger says, “…an ounce of prevention is worth a pound of cure—except it really isn’t often a mere pound. An ounce of prevention is often worth a ton of cure.” Read this book that explains this idea, and similar others, at length. After all, all you may want to know is where you’re going to die so you’ll never go there.
- You can debate about the numbers — whether it’s 60%, 80% or even up to 100% of fund managers who underperform indices and benchmarks. But the verdict is in: The overwhelming majority of active fund managers can’t beat the market. And why? Read here.
- Recent breakthroughs in artificial intelligence and machine learning are enabling computers to understand the world and respond intelligently to it. Google is already embracing these technologies for Android, but they’re poised to have bigger implications, touching everything from drones to medical diagnosis. At least that’s the view of Marc Andreessen, a prominent venture capitalist at the firm Andreessen Horowitz.
- A generation ago, a “Kodak moment” meant something that was worth saving and savoring. Today, the term increasingly serves as a corporate bogeyman that warns executives of the need to stand up and respond when disruptive developments encroach on their market. Unfortunately, as time marches on the subtleties of what actually happened to Eastman Kodak are being forgotten, leading executives to draw the wrong conclusions from its struggles. After all, Kodak’s downfall was NOT about technology.
- Like what you eat makes a huge difference in how optimally your body operates, what you spend time reading changes your brain. So it’s terribly important to know what you’re feeding the library of your mind. As the saying goes, “Garbage-in equals garbage-out.”
- When it comes to money, the secret is to have as much as you need – or maybe a little more, and then share what you have. Snapshot from Ruskin Bond’s A Book of Simple Living…
- Develop a more flexible mind, writes Leo Babauta of Zen Habits…
…a flexible mind helps us to deal with chaos, loss, big life changes, small frustrations, and all that life throws our way.
A flexible mind leads to more peace. You’re not as stuck in your ways, and can adapt to change. You don’t always think you’re right but are curious about other people. You can take on new challenges with a smile.
- Even as you work hard to achieve financial and career success, know where your loved ones stand in your priority list. If your family isn’t near your top priorities, you may be living a hollow life. Great performers make their personal lives a priority…
There are many truly successful people in our midst who have achieved greatness not by forsaking their families, communities, and private selves, but, rather, by embracing these parts of their lives. They have found creative ways to reduce conflict and replace it with a sense of harmony between work and the rest of life. Not only does this reduce stress and its discontents, it is the very source of the strength that enables their admirable accomplishments.
- Life is easy. Why do we make it so hard?
- We’ve have grown up in and live in a culture where adults are embarrassed about children’s voices. It’s time to change that. We need to understand the value of conversations with our children.
- Practice matters, but in many fields it matters much less than you might think…
For some things, like games, practice explained about a quarter of variance in expertise. For music and sports, the explanatory power accounted for about a fifth. But for education and professions like computer science, military-aircraft piloting, and sales, the effect ranged from small to tiny. For all of these professions, you obviously need to practice, but natural abilities matter more.
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