[The Weekend Bulletin] #194: Investment Bubbles and Frauds Have A Lot In Common, Indispensability of Risk, Shelf Life of Investments ....
... A Few Different Perspectives on Luck, 7 Rules 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
In his latest memo, Howard Marks discusses the paradox of risk. He explains how taking no risk is a risky strategy, and so is taking too much risk. He also explains through examples the importance of calculated sacrifices for potential gains - thus making risk an indispensable part of the game. He professes that success in investing requires accepting losses and taking well-reasoned risks to achieve long-term gains.
This article explores the concept of 'shelf life' in investing, focusing on how the longevity of a company's competitive advantage affects its investment potential. The author highlights how investors have misunderstood Warren Buffett's advice of holding stocks forever, explaining that holding forever is a mindset rather than a rigid rule.
This post makes a very interesting claim: 'investment bubbles and frauds have a lot in common'. The author delves into the similarities between investment bubbles and frauds, elaborating on the three necessary conditions that define both.
Mental Models & Behavioral Biases
The following three articles on the role of luck/randomness are some of the best meditation that I have come across over the years:
'what if you could create multiple worlds? And what if, within them, you could not just control what happens inside but also control time? Imagine the ability to play God, pressing pause at will, even rewinding and replaying key moments.'
A group of scientists made the above possible through research on bacteria. This article talks about this experiment, and the learnings thereof. These experiments help us understand how events of historical significance could just be a random outcome. A very insightful read.
In this article, the author explains the difference between blind luck and circumstantial luck. The former is akin to winning a lottery, while the later is when someone with exception skills finds an opportunity that most people wouldn't (on the lines of 'opportunity meets the prepared mind'). The author emapsizes the importance of differentiating between the two as we tend to draw the wrong lessons from past success. In order to draw the right lessons, it is imperative that we ask what is repeatable and then seek to understand that.
The above article reminded me of this dated article that talks about the four different kinds of luck. Drawing from the book 'Chase, Chance, Creativity', the article explains how the interplay of randomness and skills can create four different kinds of luck. This is important to understand as it has implications in how we design our lives.
Personal Development
We started with a paradox, we end with another. Happiness is an elusive goal - the more you pursue it, the more evasive it feels. While that shouldn't dissuade you from chasing it, there is probably some method to the madness here. The author of this article presents seven simple and practical rules for finding happiness in life. Some of them are more widely known, like focusing on the process over outcome, avoiding social media etc. Some, on the other hand, are refreshingly different like meeting others more than halfway, apologising often, thinking of life in terms of seasons and embracing them all, etc.
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 117:
The Legend of Li Lu - this biographical article traces the early life and journey of famed investor Li Lu towards investing. Not a lot of material is available on Li and that makes this well researched article even more prized. In case you didnt know, Li Lu's fund is one of the only three investments that Charlie Munger holds.
Ben Graham was a great investor, a good teacher, and a very talented writer. Amongst all investors, he is probably the most published. Here are some impressive snippets from Ben's varied writings (I really enjoyed reading these).
If you heard last week’s podcast of Joel Greenblatt, you would have heard him saying that he sizes his position not based on the upside potential but on the downside risk. This article elaborates on that using one of Bill Miller’s biggest losing trades.
Most of us consume a lot of literature on personal development and productivity. While there is no harm in wanting to improve oneself, the problem with this approach is that you end with a lot of advice and trying to do too many things at the same time. The end result is that we usually fall back to where we started. That’s where this article helps.
Firstly, it suggests that instead of working on multiple habits, we should focus on one, and incrementally improve on it. Small changes can go long. Secondly, and more importantly, it lists three major habits and the ideal order that most of us should focus on. Mastering these three habits will make it easy to work on the others in the future.
Quotable Quotes
“Success is more of a function of consistent common sense than it is of genius.”
"Powerful combination = Hate being bad at stuff + Willing to look like a beginner.
People who hate being bad at stuff are driven to improve. However, if they are unwilling to look like a beginner from time to time, they will avoid new challenges and struggle to reinvent themselves.
Meanwhile, people who are willing to try new things, but lack a thirst to improve will settle for mediocre results.
It's the willingness to look foolish for a short time—but not for a long time—that leads to jumps in performance."
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That's it for this weekend folks.
Have a wonderful week ahead!!
- Tejas Gutka
[Apr 27, 2024]