[The Weekend Bulletin] #183: Two Sides of Doing Nothing, Capex & Opex Supercycles, Fads vs Trends, ...
...Thinking in Bets, Lessons from Peter Thiel, and more.
A digest of some interesting reading material from around the world-wide-web. Your weekly dose of multi-disciplinary reading.
Investing Wisdom
We've all read about long term investing and the benefits of doing nothing. Doing less, Sitting on Your Ass (SOYA), 20-slot punchcard - these are some of the ways in which not doing much in the portfolio has been marketed. However, as this article explains, doing nothing is a misunderstood concept. There are two sides to doing nothing - literally doing nothing (complacency), and doing a lot of work and then concluding that there is no need to do anything (patience). Investors often mistake long term investing as the former (and end up being complacent by resting on past laurels), while in its true essence, it is the latter.
This short article is a mini master-class in understanding super-cycles. It combines macro-economic theory with the evolution of oil, car, semiconductor, and software industries to explain how industries cycles through different phases over time. The author explains that understanding this evolution is important for investors to avoid making the wrong investment, or the right investment at the wrong time. He explains this through some more examples from the tech world over the past few decades. All in all, this article is a candidate for the 'articles you should re-read frequently' pile.
This article reminded me of some other interesting expositions of the business cycle, a few of which are linked here:
One of the things that you'd derive from reading the above articles on business cycles is that while a lot of trends look promising, only a few convert in mega-trends. More importantly, some of the mega-trends are also difficult to identify early because, as the title of one of the articles above says: The next big thing will start out looking like a toy. That is where this next article helps - it lays out the difference between a fad and a trend, and further differentiates a short term trend from a more sustainable one.
Mental Models & Behavioral Biases
Annie Duke (former professional poker player, best-selling author) joins veteran investor Howard Marks to discuss ideas from her book Thinking in Bets and Howard’s memo You Bet!. The conversation revolves around the subject of decision making, covering concepts like luck, decision quality, uncertainty, and more. The first half of the conversation defines the problem (which might sound repetitive if you have followed their writings) while the second half is more prescriptive and interesting. When two high quality decision makers talk, you better listen with a notepad and pen in your hand.
Personal Development
This short article lists nine lessons from Peter Thiel that the author picked up while working with him for years. Some real gems in this one.
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 106:
Samit Vartak (Founding Partner and Chief Investment Officer of SageOne Investment Managers) talks about his humble beginnings, success vs happiness, Vedanta philosophy, living through the stress of a down year, and the joy and pain of managing other people’s money, on The One Percent Show
We've all heard of value traps - a seemingly cheap stock that isn't. This short article draws a parallel to introduce us to 'Growth Traps' - when growth and disruption narratives falter. And if you want to dismiss growth traps as one offs, the article has some interesting data for you.
When Value disappoints, markets are mad. When Growth disappoints, they are merciless.
Which of these two will trouble you more: losing out on a multi-bagger, or accidentally dropping 10,000 bucks on the street? For most it would be the latter, even though the former is a bigger potential loss. The idea is not to regret losing out on a multi-bagger, but focusing on the right problem. This article provides some perspective.
"The roads not seen almost always matter more than the potholes we hit along the way."
Quotable Quotes
"Everything in life worth achieving requires practice. In fact, life itself is nothing more than one long practice session, an endless effort of refining our motions. When the proper mechanics of practice are understood, the task of learning something new becomes a stress-free experience of joy and calmness, a process which settles all areas in your life and promotes proper perspective on all of life’s difficulties.”
- Thomas Sterner
“Man is a deterministic device thrown in a probabilistic universe."
- Michael Lewis
"When you read biographies of people who've done great work, it's remarkable how much luck is involved. They discover what to work on as a result of a chance meeting, or by reading a book they happer to pick up. So you need to make yourself a big target for luck, and the way to do that is to be curious. Try lots of things, meet lots of people, read lots of books, ask lots of questions."
- Paul Graham
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That's it for this weekend folks.
Have a wonderful week ahead!!
- Tejas Gutka
[Jan 22, 2024]