[The Weekend Bulletin] #193: Why Fall in Quality of Goods and Services is a Good Sign, Knowledge Alone Doesn't Change Behaviour, ...
... Market Share and Profitability, Toughest Decision in Investing, The Stories We Are Sold, The Riddle of Happiness, and More.
A digest of some interesting reading material from around the world-wide-web. Your weekly dose of multi-disciplinary reading.
Investing Wisdom
Business operators often obsess over market shares. It is commonly believed that a larger market share equates to a larger share of the industry profit pool. However, that is usually not the case, as this study explains. The author provides insights into the complexities of assessing profitability in relation to market share (including the short-comings of popular theories like that of Michael Porter), offering valuable perspectives for investors and business analysts alike.
Famed investor Seth Klarman believes that investors face two tough decisions. While buying into a business is one of them, it is not the toughest. This article expands on what Klarman defines as the toughest decision that investors face, why he thinks so, and how can investors overcome this challenge. The article also lists strategies used by some other investors.
This article is economics 101 about the relationship of time, money, price, and income levels. It explains why rising income levels lead to a fall in quality of mass consumed goods and services, and why that is a good sign for an economy.
Mental Models & Behavioral Biases
What stories do we believe about finance, and how do they impact our decisions? That's the question that this post tries to answer using personal anecdotes. It explores the narratives shaping investment decisions and market perceptions. It prompts readers to question the influence of storytelling on financial behavior.
This article explores the relationship between knowledge and behavior change, particularly in the realm of personal finance. It discusses how simply acquiring knowledge isn't always sufficient to induce behavioral changes, citing examples and research findings. The author emphasizes the importance of understanding psychological factors that influence behavior and suggests practical strategies for implementing financial knowledge effectively. It explains the personal aspect of personal finance.
Personal Development
This article explores the concept of happiness through various metaphors and philosophical perspectives. It explains the happiness paradox: true happiness arises when one stops seeking it and simply embraces the present experience.
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 116:
"Price momentum is one of the strongest anomalies in stock markets. We know momentum strategies create excess returns over the market and these excess returns are similar in size or even larger than the value or the small cap premium. Momentum effects have also been documented across asset classes and it can be shown that momentum in one asset class creates momentum in another." But what really creates this momentum, and like most anomalies, why hasn't it been arbitraged away? This article explains.
The benefits of investing in good quality businesses are widely known. However, quality investing has two shortcomings and an important tradeoffthat investors today need to think of. This article explains.
Quotable Quotes
"When I was a young kid there was a widowed man that lived up the street and he was in his 80s. He's a little scary looking and I got to know him a little bit; I think he might have paid me to mow his lawn or something.
And one day he said come on into my garage, I want to show you something. And he pulled out this Dusty old rock tumbler, it was a motor and a coffee can and a little band between them. And he said come on with me. We went out to the back and and we got some just some rocks some regular old ugly rocks and we put them in the can with a little bit of liquid and a little bit of grit powder and we closed the can up. And he turned this motor on. He said come back tomorrow, and this can was making a racket as the stones went around.
And I came back the next day and we took we open the can and we took out these amazingly beautiful polished rocks. The same common stones that had gone in through rubbing against each other like this creating a little bit of friction creating a little bit of noise had come out these beautiful polished rocks.
And that's always been in my mind my metaphor for a team working really hard on something they're passionate about is that it's through the team through that group of incredibly talented people bumping up against each, other having arguments, having fights, sometimes making some noise, and working together they polish each other and they polish the ideas and what comes out are these really beautiful stones"
- Steve Jobs
[this entire 3 mins clip on the difference between a great idea and a great product is a very good listen]
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That's it for this weekend folks.
Have a wonderful week ahead!!
- Tejas Gutka
[Apr 14, 2024]