[The Weekend Bulletin] #115: Seven Virtues, Being Chased, Mentors,...
...Creative Destruction, 2x2 Matrices, Bear Markets, Hedges, and more.
A digest of some interesting reading material from around the world-wide-web. Your weekly dose of multi-disciplinary reading.
Here’s a postcard for you from my recent travels:
Section 1: Investing Wisdom
Some resources to become a better investor:
Jason Zweig lists seven cardinal virtues that great investors possess (Look for the section titled 'The Seven Virtues of Great Investors' in the below links):
A useful collection of five 2x2 matrixes that can help you become a better investor.
Two interesting write-ups by Ben Carlson (A Wealth of Common Sense):
While I usually avoid sharing material that is time sensitive, every once in a while I make an exception. These exceptions are usually good analysis of some current event. This one, for instance, provides good insights in the current state of software stocks.
Section 2: Mental Models & Behavioral Biases
This short note explains why businesses, and investors - in turn - should think about Creative Destruction. Failing to do so may lead to obsolescence for businesses, and the possibility of permanent loss of capital for investors.
Section 3: Personal Development
We often complain when things don't work out the way we like. We detest pain and suffering, not realising that this pain and suffering is what shapes us. As Victor Hugo said, 'Adversity makes men, and prosperity makes monsters'. Let this article explain: What is Chasing You?
The above article reminded me of this story shared by Morgan Housel:
"Gabby Gingras was born unable to feel pain. She has a full sense of touch. But a rare genetic condition left her completely unable to sense physical pain.
She can fall off her bike and get up like nothing happened.
Stub her toe and not even notice.
You might think this is a superpower, or an incredible gift. But her life – profiled several times in the last decade – is dreadful.
The inability to feel pain left Gabby unable to distinguish right from wrong in the physical world. It’s one of those things that’s easy to take for granted until you see what happens when it’s gone. One profile summarized a fraction of it:
As Gabby’s baby teeth came in, she mutilated the inside of her mouth. Gabby was unaware of the damage she was causing because she didn’t feel the pain that would tell her to stop. Her parents watch helplessly.
“She would chew her fingers bloody, she would chew on her tongue like it was bubble gum,” Steve Gingras, Gabby’s father, explained. “She ended up in the hospital for 10 days because her tongue was so swelled up she couldn’t drink.”
Pain also keeps babies from putting their fingers in their eyes. Without pain to stop her, Gabby scratched her eyes so badly doctors temporarily sewed them shut. Today she is legally blind because of self-inflicted childhood injuries.
Pain is miserable. Life without pain is a disaster."
Among the many pursuits of a professional, an important one is having a good mentor. Having a sounding board and receiving good advice can not only advance a career, but also help avoid pitfalls. Here is one way in which you can have a meaningful relationship with a mentor.
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 #41:
He has managed a low profile for over two decades. He runs a highly concentrated smallcap strategy only for institutional clients, limits the amount of asset that he manages, and mostly favours qualitative assessment over quantitative screening. Brian Bares of Bares Capital Management talks about why he chose to stick to small and micro-cap investing, why he believes that quantitative screens are not a good starting point, and how picks his investments. You can hear about him talk here and here, or read his interview here.
I love listening to the wisdom of the ages. Here is one such in the form of investing advice from an investor to his younger self. Very crisp and to the point.
When we picture original thinkers - Leonardo da Vinci, Thomas Edison, Charles Darwin - we see them as extremely intelligent, diligent, and productive. But that is not what they are. Original thinkers are Non-confirmists (of course they are, that's how they are original). But they are also procrastinators, fearful and full of doubts. How then do these people come up with such great work in their respective fields? This 15 minute talk will tell you how. Its witty, its entertaining, and above all, its educating.
Section 5: Readworthy Passage
Let's read together a random, but read-worthy, passage from a randomly picked book.
SOMETIMES YOU HAVE TO LET THE SOLUTION COME TO YOU
The McKinsey rules of problem solving, like all rules, have their exceptions. You will not be able to form an initial hypothesis every time. Sometimes, the client will not know what the problem is, just that there is a problem. Other times, the scope of your project will be so large—or so vague—that starting with an IH will be worthless. Still other times, you will be breaking new ground and nothing in your experience will point to a solution. Don’t panic! If you get your facts together and do your analyses, the solution will come to you.
Hamish McDermott, former EM at the Firm, recounted this story:
I was on a study where we were trying to improve the performance of the foreign exchange business of a major bank; we were supposed to reduce costs in the back-office operation by 30 percent. I had nothing at that stage that I could point to, no initial hypothesis about how to get those costs out of the organization. Frankly, we knew very little about how the back-office processing worked.
I had to interview the woman in charge of back-office processing along with her senior staff. She didn’t mean to be unpleasant, although it certainly felt that way, but she came right out and said, “You’ve never done this before and you know nothing about this business. One of two things is going to happen. Either you’ll come back with something we don’t agree with, which will necessarily be wrong, or you’ll listen to us and come back with what we already know, in which case you’ve added no value. We understand that you’re here and that you’re working on this, but from our point of view it’s a total waste of our time and the bank’s money.”
Still, she gave us the data we asked for. It turned out that one product, which represented about 5 percent of their business, was producing about 50 percent of their costs. We were able to fix that. They’d had no idea this was going on. In subsequent stages of the engagement, we were able to extend this analysis to other parts of the business and we easily exceeded our targets.
The moral of this story is that an initial hypothesis is not a pre-requisite for successful problem solving. Having one will help organize and forward your thinking, but if you can’t come up with one, don’t despair. Any McKinsey-ite will tell you that no business problem is immune to the power of fact-based analysis. Put together enough facts, combine them with some creative thinking, and you will come up with a solution.
- From THE MCKINSEY WAY by ETHAN M. RASIEL
Care for some fiction? Here is an interesting short story from Andy Weir, the writer of The Martian.
Care for some more fiction? Check out my recent tweets about a sci-fi fiction novel that I picked up during my travels.
Quotable Quotes
"It is good for a professional to be reminded that his professionalism is only a husk, that the real person must remain an amateur, a lover of the work."
“The world contains far more information than any single person can learn in their lifetime.
The question is not whether you are ignorant, but what you choose to be ignorant about.
Few topics are worth your precious time. Choose what you pay attention to with great care.”
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That's it for this weekend folks.
Have a wonderful week ahead!!
- Tejas Gutka
[Mar 26, 2022]
Marvelous, the power of rejuvenation.