[The Weekend Bulletin] #101: Betting Against Buffett; Learning from Yen Liow, Ray Dalio, and Dyson;...
...paradoxes, valuing time, and more.
A digest of some interesting reading material from around the world-wide-web. Your weekly dose of multi-disciplinary reading.
Section 1: Investing Wisdom
Consider this: you have the choice of investing between a market portfolio (index fund) and that designed by an active investor. You know that over 1 year periods, there is an equal chance of either portfolio doing better than the other. You also know that over 3 year periods, the active investor's portfolio does slightly better than the market (say 60%). Which portfolio will you choose to invest in, if you had to lock in your money for over 10 years? This article will tell you which one does better over 10 years and also give you some important lessons on luck, skill, and time horizon.
“Wealth = Buying Power
Wealth ≠ Financial Wealth
Making Wealth = Being Productive
Wealth Decline = Power Decline”
Ray Dalio explains the difference between money and wealth in this note, and goes on to explain what nations and individuals need to do to remain wealthy.
“You can make a lot of money on businesses that are in plain sight, meeting consensus numbers”
“…if you were one of these people and were inventing something that could be potentially momentous and change things forever, at what point would you give up after encountering multiple failures? After 10 attempts? 50? What about 1,000? You’d have to think you were on a road to nowhere if you had failed that many times. So how about 5,127 times? How does that grab you?
Incredibly, that’s the number of hand-made prototypes James Dyson built over a four year period before he finally achieved success with his cyclonic vacuum cleaner. Labouring through trial and error, Dyson overcame a brutal patent abuse, endless rejections from both venture capitalists and the world’s leading appliance manufacturers whilst managing an ever expanding overdraft he didn’t extinguish until the age of forty-eight. Contrast that with today, Sir James Dyson is the UK’s fourth richest resident with a net worth of c.US$9.7 billion.”
Here are some incredible lessons from James Dyson.
Section 2: Mental Models & Behavioral Biases
Life is full of paradoxes. Here is a nifty list of 20+ powerful paradoxes on growth, business, investing, and life.
Section 3: Personal Development
We all know that time is valuable, but can't really figure an exact value of time. If time is money, how much is it really worth? For instance, how much would you pay to save an hour - 10/100/1000/10000? This article will help you put a tangible value on your time (free excel sheet included).
Section 4: Blast From The Past
Revisiting articles from a past issue for the benefits of refreshing memory and spaced repetition, as well as for a fresh perspective. Below are articles from #29:
“We’ve only owned 123 companies in 31 years and that includes the 21 we own today. The compounding is really what drive the returns. You align yourself with 20 or 25 great companies that can compound for not just years but decades oftentimes and they do the hard work for you.” This is a great conversation between Dan Davidowitz & Jeff Mueller of Polen Capital and Tanos Santo of Columbia Business School on their investment philosophy and approach.
“The Equity Yield Curve, a phrase of our choosing, is one tool – and one of the most powerful – for identifying and visualizing the enormous level of return often available from securities that have been ‘discarded’ or ignored by conventional investment practices. It is all about a rather insubstantial thing: time or, more accurately, time risk.”
This article talks about our inability to understand the convexity of the future - a concept similar to 'hyperbolic discounting' that we saw in Issue 12. (This ties in well with the first article of this issue).
Section 5: Readworthy Passage
Let's read together a random, but read-worthy, passage from a randomly picked book.
We often assume that additional choices will make us happier. Up to a point, it may even be true. But I’m hardly alone in nding all of this added complexity overwhelming. The psychologist Barry Schwartz argues in The Paradox of Choice: Why More Is Less that many shoppers become paralyzed by the rst world problem of supermarket shelves heaving under the weight of twenty-four types of gourmet jam.
When it comes to investing, the proliferation of choices can make your head spin. Should you buy individual stocks, ETFs, hedge funds, or mutual funds? Actively managed funds or index funds? Should you favor one investment style or mix and match among such categories as growth, value, growth at a reasonable price, deep value, momentum, macro, or market neutral? And how should you divide your money between domestic and foreign stocks, bonds, cash, and “alternatives” such as private equity, venture capital, REITs, gold, and pork-belly futures?
In practical terms, the ability to reduce complexity is immensely valuable. Just think for a moment about the Old Testament, which contains no fewer than 613 commandments. Who can remember so many rules, let alone obey them all? Maybe that’s why we needed a top ten list. But when I tried to jot down the Ten Commandments just now, I got only six of them right—and that was with the assistance of some dishonest grading.
Still, I do remember this: About two thousand years ago, a sage named Hillel was asked to teach the entire Old Testament while standing on one leg. He replied, “What is hateful to you, do not do to your neighbor. All the rest is commentary.” The Old Testament requires just three words to convey this overriding rule: Veahavta lereacha kamocha, which is translated from the Hebrew as “And you shall love your neighbor as yourself.”
Likewise, when Jesus was asked about the most important of all the commandments, he opted for deep simplicity, declaring, “Thou shalt love the Lord thy God with all thy heart, and with all thy soul, and with all thy strength, and with all thy mind; and thy neighbor as thyself.”
I’m also partial to this wonderfully concise exhortation from the Buddha: “Refrain from what is unwholesome. Do good. Purify the mind.” As an instruction manual for life, how much more do we need than those ten words? Like Hillel and Jesus, the Buddha presumably recognized that we lesser mortals are acutely vulnerable to confusion in the face of complexity—and that a minimal number of simple, memorable guideposts can steer us pretty eectively in the general direction of nirvana.
Simplication is an equally important strategy in more worldly realms such as science and business. For example, scientists often invoke the Occam’s razor principle, which is attributed to a fourteenth-century English friar and philosopher named William of Occam. His principle holds that “all things being equal, the simplest solution tends to be the best one.”
- From RICHER, WISER, HAPPIER by William Green
“It's not how much money you make, but how much money you keep, how hard it works for you, and how many generations you keep it for.”
- Robert Kiyosaki
“You act like mortals in all that you fear, and like immortals in all that you desire”
- Lucius Annaeus Seneca (On the Shortness of Life)
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That's it for this weekend folks.
Have a wonderful week ahead!!
- Tejas Gutka
[Nov 27, 2021]