[The Weekend Bulletin] #155: Life Imprisonment vs Death Penalty, Darwin and Investing, Lessons from Industrial Titans and Chess Championship, ...
...Conviction Investing, Don Valentine, Four Big Decisions, and more.
A digest of some interesting reading material from around the world-wide-web. Your weekly dose of multi-disciplinary reading.
Investing Wisdom
A new book that draws parallels between evolution and investing is the talk of the town in India. The author - Pulak Prasad, founder of Nalanda Capital - has kept away from the public eyes for decades. This tradition breaks with the release of his book. His public appearances are now widely circulated, and rightly so. Here are two such appearances:
An interview - his first - where he talks about the inspiration behind the book, the founding principles of his firm, as well as his investment philosophy. Watch/Read here.
An article where he pens his thoughts around the kind of signals from company managements that investors should avoid, and lists the right signals that investors should seek. Of course, he connects all this to evolution.
This podcast is such a high density conversation. Patrick O'Shaugnessy interviews Scott Davis and Rob Wertheimer who are the authors of the book Lessons from the Titans. In the book, the authors draw lessons from the success and failure of some of the industrial giants. The conversation revolves around these lessons and covers the following:
Ian Cassel provides a very interesting perspective on microcap investing in this post. He contrasts between 'coffee-can investing' and what he calls 'conviction investing', and argues that most microcap investing is conviction investing. Likewise, most great investors are conviction investors.
"You have to go on a lot of dates before you find your spouse. You have to kiss a lot of frogs to find a prince. You have to turn over a lot of rocks to find a great one."
Investors of all types - public and private included - would do well in heeding to the advice in this letter by Don Valentine, the founder of Sequoia, written in the year 2000. In it, Don reiterates the role of the original VCs, and how the spring of copy-cats led to unsustainable excesses. Long-term focused investors will notice the similarities between the manias highlighted in the letter, as well as between public and private market investing.
Mental Models & Behavioral Biases
This article recounts a game from the 2021 World Chess Championship to highlight the importance of temperament during pressure. You could be one the most gifted players in the world, however, if you can't make rational choices under pressure, you will end up with sub-par results. This applies to investing as much as it applies to sports, as the author demonstrates.
Personal Development
Whether it is life or business, the 80-20 principle applies. Looking back, a few good decisions would have driven the majority of outcomes (good/bad) in life, business, and investing. However, we make plenty of choices daily. How do we differentiate between the ones that matter, and the ones that don't. This article provides the answer, which might be surprising.
Food for thought (courtesy Anshul Khare; edited for brevity):
Life imprisonment or death penalty - Which is better?
Two friends, a banker & a young lawyer, decided to figure out — in an unconventional way
No brainstorming. No research. No interviewing people.
They put to test the ultimate learning tool having Skin in The Game.
The banker wagered all his money and the lawyer bet his life.
The deal was that if the lawyer could spend 15 years in total isolation, the rich banker would pay him all his money.
...
The condition was that the lawyer would have no direct contact with any other person. Though he was allowed to write notes to communicate with the outside world.
Confined to a room, loneliness and depression ensue for the lawyer.
But he didn't want to feel like a victim.
He took advantage of the solitude and started reading. As years passed, the lawyer immersed himself in books from all corners of the world.
The more he read the more he wanted to read.
This flipped the game.
Completing 15 years would make him a very rich and WISE man.
As men become wiser, how they look at the world changes, and so do their plans.
Just a few hours before the 15 years period was about to expire, the lawyer forfeits the bet and runs away.
In his note to the banker he reasons that the wisdom he gained in those 15 years solitude, reading & reflection was far more than what the banker could ever pay him.
Banker's real gift to the lawyer was the gift of solitude.
But modern man avoids the solitude like a bubonic plague.
We have such low tolerance for loneliness that we allow any crap — soul-sapping work, toxic entertainment, hideous people — to encroach our time.
This Banker-Lawyer anecdote is inspired by Russian writer Anton Checkov's short story "The Bet" which he wrote in 1889.
So many influential thinkers from the past have vouched for the productivity of solitude that it's almost like a rule -> solitude = productivity
Mahatma Gandhi wrote:
"After 1894 all the time for sustained reading I got was in jails of South Africa. I had developed not only a taste for reading but for completing my knowledge of Sanskrit and studying Tamil, Hindi and Urdu...The South African jails had whetted my appetite and ... I was grieved when during my last incarceration in South Africa I was prematurely discharged."
Source: MK Gandhi, My Jail Experiences - X1, Young India 4th Sept. 1924
Even Jawahar Lal Nehru's famous book "Discovery of India" was mostly written when he was serving time in jail as political prisoner.
And if you've not read Jail Diary of Bhagat Singh then ... you don't know what you're missing out on.
The involuntary confinement to home during Covid-19 presented one such opportunity to me. I immersed my self in intense learning and reflection.
“Any year that you don't destroy one of your best-loved ideas is probably a wasted year.”
~ Charlie Munger.
2020 became that year of destruction for me. I saw my most cherished and long held beliefs, about the external as well the internal world, getting demolished.
It's not that I came out with renewed energy & 10x productivity to do my work.
What I defined as "as work" changed
In fact, everything changed — the work I do, the food I eat, the people I hangout with, the books I read, the movies I watch, the things I talk to my kids about
That's the transformative power of loneliness.
I hope you'll give that gift to yourself.
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 #80:
What would you do if you had a windfall large enough to make you wealthy(whatever your definition of wealthy was, but at the minimum, enough for you to not having to work for the rest of your life at current expenses)? The author of this article would have donated it all. Sounds absurd, doesn’t it! It won’t after you read why he would do so. Quite an eye opening read.
Usually, when two investing minds come together, the conversation revolves around investment journey, ideation process, market views, and the likes. This one, however, is different. While it does start off with a discussion around investments, it then turns towards philosophy - not investment philosophy, but the philosophy of life. The conversation draws from a number of eastern schools of philosophies like Buddhism, Vipassana, as well as Hinduism. A very enlightening conversation that you can watch/hear/read here. Below is a snippet from this conversation:
Life is evolution. It is like when the raindrop falls, and then it becomes part of the river, and the river goes to the sea, and the sea gives out steam and it becomes the cloud, and it comes back. So, it is a cycle, and discovery of how we are part of this grander cycle of life is really the purpose and the journey that we have. And if you tell the drop of water that you have had such a long journey from the Himalayas to the Bay of Bengal to join with the sea, it is not a journey but a flow which was meant to be. And you have choices along the way of whether to take this track or that track. Do I end up in Arabian Sea or Indian Ocean? But we are going to end up in the sea, one way or the other. It is part of nature’s design.
If you think of it, the way we are designed so beautifully that the first 25 years of your life you are only thinking about yourself – I, me, myself. And you are learning, growing, getting an education, and so on. Then you find your partner and suddenly you start transferring your thoughts and attention to that person. Then you have children, and it suddenly multiplies. Then it multiplies into your organisation, then it multiplies into your society, then into your country, your world, your universe.
That is the nature of the way we are designed to evolve, to get closer and closer and closer to what I call the sea. And you realise that, like the metaphor I used of the gamification of the world, you are the wire which is transmitting the electricity which is there in the world. We talk of solar power, but we are also solar powered in a sense, and a part of this circle of life. We have to be the flow.
We've discussed this in a coupe of issues in the past: being additive is easy, but being subtractive is being productive. When it comes to decisions, commitments, desires etc, Less is More. Here is an interesting story involving Pablo Picasso and Apple about how focus and simplicity can lead to outsized results in life and business. Food for thought:
Jony Ive says Steve Jobs key trait was “focus”.
And the way Jobs measured it in others was to ask “what thing that you truly care about have you said NO to?”
Quotable Quotes
"Even the best stock-pickers probably only generate alpha ~55-65% of the time on individual securities. In a world of prediction in which “certainty” is rare, and “more often than not” is the norm, ensuring that one maintains the flexibility to change their mind, and the liquidity to execute on this is critical. Never changing one’s mind on an investment may feel heroic, but is in opposition to the underlying statistical reality. Sign a prenup with every stock you invest in."
- Morgan Housel
"Human lives are brief and trivial. Yesterday a blob of semen; tomorrow embalming fluid, ash."
- Marcus Aurelius (Meditations)
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That's it for this weekend folks.
Have a wonderful week ahead!!
- Tejas Gutka
[Apr 22, 2023]