[The Weekend Bulletin] #166: Corporate Demographics, Working without Working, Nuances in Investing,...
...Traits of the Best Investors, 50 powerful investing visuals, operating manual for the nervous system, and more.
A digest of some interesting reading material from around the world-wide-web. Your weekly dose of multi-disciplinary reading.
Investing Wisdom
Michael Mauboussin and Dan Callahan collate the findings of various studies on corporates in their latest paper. They present data around corporate demographics - how are public companies born, how long they live, how do they die, and how / how much wealth they create. Understanding this data has important implications for how we value companies, since a large part of the DCF value of a company comes from its longevity (assumptions around terminal growth rate). For instance, while we assume that all companies will live forever, data reveals that nearly half the companies die within the first ten years. On the other hand, while it is generally believed that new listed companies are usually overvalued, data shows that their future profit potential is slightly undervalued - this data has high skewness if dissected further.
We are pattern seekers in life. In the game of investing, we often compare a new small thing to a big past winner. But most of the time we oversimplify the comparison and forget about all the nuances. This is not to say that pattern recognition does not help, but to highlight that there is more to the game than that. This short note explains.
This article posits that becoming an excellent investor does not require off-the-charts intelligence or some highly proprietary model that leads to an edge that nobody else can replicate. Rather, certain traits and behaviors have allowed investors to excel over the long-term. It list five traits that really differentiate the best from the rest.
Here is a nice collection of 50 of the most powerful investing visuals.
Mental Models & Behavioral Biases
There is work that happens when we are working, and there is work that happens when we are not working, at least not consciously. This post highlights the power of the subconscious mind. It encourages individuals to find ways to creatively engage with their minds aside from the typical grind of daily work. The author advocates taking time away from distractions and allowing your unconventional unconscious mind to work. The author also lists a few interesting practices that can help leverage the power of the subconscious to enhance creativity, produce answers to problems, and get unstuck.
Personal Development
A lot has been said and written about mindfulness as a practice. The act of positive self-talk, or journalling, is known to help overcome stress and anxiety. However, the author of this article claims that while these 'top-down' approaches work, there is a simpler 'bottom-up' solution that one can look at - an operating manual for the nervous system, of sorts. The solution lies in the regulation of the one of the most autonomous functions of the human-body: breathing. The author goes on to explain how to regulate our energy, feel more calm, and be more present, and offers two breathing techniques to help up- or down-regulate the nervous system in real-time: the "breath of calm" and "espresso breath."
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 #91:
"Arnold Van Den Berg on Five Decades of Investing and Life Lessons" by MOI Global & William Green: An extra-ordinary life story of AVDB, from having to escape to a foster home where he almost died, to his parents being taken to Auschwitz where they were the only people out of 39 family members to survive, to being beaten up and dealing with depression, to not making enough money, to being a successful investor. This is one topsy-turvy story of sheer resistance and a strong mental framework. It is also unlike any other investor story that you would have read.
The importance of focus and the perils of distraction have never mattered as much as they do today. Every minute a ping and ding of notification is waiting to grab your attention. On the other hand, as work has transcended from physical to mental, there is an increasingly higher return on the ability to focus. So how does one tilt the scale from distraction towards focus? This segment from a conversation of Nir Eyal with Shane Parish of Farnam Street provides some answer. Nir suggests that the triggers to distraction are more internal than external. He therefore proposes that we look within with curiosity rather than contempt to understand what triggers the urge. He also suggests that rather than denying these urges, we should simply delay them.
Readworthy Passage
Let's read together a random, but read-worthy, passage from a randomly picked book.
What I began to understand is that the greatest investors are intellectual mavericks. They’re not afraid to question and defy conventional wisdom. They profit from the misperceptions and mistakes of people who think less rationally, rigorously, and objectively. In fact, one of the best reasons to study the investors spotlighted in this book is that they can teach us not only how to become rich, but how to improve the way we think and reach decisions.
The rewards for investing intelligently are so extravagant that the business attracts many brilliant minds. But there can also be a devastating price to pay for being wrong, which is rarely the case for professors, politicians, and pundits. The stakes involved may explain why the best investors tend to be open-minded pragmatists who search relentlessly for ways to improve their thinking.
This mindset is embodied by Buffett’s frighteningly clever partner, Charlie Munger, who once remarked, “I observe what works and what doesn’t and why.” Munger, who is one of the central figures in this book, has roamed far and wide in his quest for better ways to think, borrowing analytical tools from disciplines as diverse as mathematics, biology, and behavioral psychology. His role models include Charles Darwin, Albert Einstein, Benjamin Franklin, and a nineteenth-century algebraist named Carl Gustav Jacobi. “I learned a lot from a lot of dead people,” Munger told me. “I always realized that there were a lot of dead people I ought to get to know.”
I’ve come to think of the best investors as an idiosyncratic breed of practical philosophers. They aren’t trying to solve those abstruse puzzles that mesmerize many real philosophers, such as “Does this chair exist?” Rather, they are seekers of what the economist John Maynard Keynes called “worldly wisdom,” which they deploy to attack more pressing problems, such as “How can I make smart decisions about the future if the future is unknowable?” They look for advantages wherever they can and them: economic history, neuroscience, literature, Stoicism, Buddhism, sports, the science of habit formation, meditation, or anything else that can help. Their unconstrained willingness to explore “what works” makes them powerful role models to study in our own pursuit of success, not only in markets but in every area of life.
Another way to think about the most skillful investors is as consummate game players. It’s no coincidence that many top-notch money managers play cards for pleasure and profit.
- From the Introduction of RICHER, WISER, HAPPIER by William Green
Quotable Quotes
"Being good at what you do is partially about competence, but not exclusively.
Two other things that matter:
Reliability. You do what you say you're going to do—on time and as expected.
Enthusiasm. You're excited to be here and eager to work on this problem.
Skills matter, but in many cases it's your reliability or attitude that separates you from the pack."
- James Clear
"If you are depressed, you are living in the past.
If you are anxious, you are living in the future.
If you are at peace, you are living in the present."
- Jen Sincero
(You Are a Badass)
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That's it for this weekend folks.
Have a wonderful week ahead!!
- Tejas Gutka
[Jul 29, 2023]