[The Weekend Bulletin] #203: Bad Assets / Good Liabilities, Two Calves and Adversity, Finding Ideas Before Others, ...

... Batting Average vs Slugging Percentage, Persistent vs Stubborn, Active vs Passive Mindset, and more.

A digest of some interesting reading material from around the world-wide-web. Your weekly dose of multi-disciplinary reading.

Investing Wisdom

• Using the analogy of baseball, this article makes the case of focusing not just on batting average but also on slugging percentage. It makes the case for considering both the frequency of success as well as the magnitude of returns when successful in determining outcomes. It further explains how there is a tradeoff between the two and how your investment style is defined by which component you focus on.

• Long term success in investing, especially in small stocks, depends on your ability to identify ideas before others. After all, undiscovered stocks benefit from a rise in earnings as well as an expansion in multiples once they are better known. But how do we ensure that we can repeatedly find ideas before others? This article lists three ways in which we can be ahead of the crowd. It also lists two ways in which ideas can find us before they become more widely known.

• This is an interesting meditation by Prof Sanjay Bakshi. He discusses the idea of the bad assets and good liabilitieson company balance sheets. Contrary to general accounting principles, he argues that not all assets are good assets, and not all liabilities are bad especially from the perspective of minority investors. 

Mental Models & Behavioral Biases

• This article asserts that 'yes, its all your fault'. It argues in favor of adopting this mindset, which it calls 'active mindset', vs one where you blame life for everything that happens to you ('passive mindset'). It goes on to explain why owning your failures is the right way to go about life.

Personal Development

• Adversity is inescapable. We all face it at some point. Thats the common factor. The uncommon factor is how we face it - what we do in the face of adversity. Using the example of two different calves that both lose their mothers, this article highlights the one factor that keeps us from reaching what we want most.

• Persisting in the face of adversity is important as we saw above. However, equally important is knowing when to give up. Persisting all the time is akin to being stubborn - there is a thin line of differentiation between the two. This article meditates on the difference between persistent and stubborn, and how to choose to the right kind. A very insightful read. 

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 126:

• In their latest, Michael Mauboussin and Dan Callahan explore how industries develop. They, very interestingly, liken an industry cycle with that of the neural connections in the brain of a child. The report posits that just as the neural network develops a lot of connections and then prunes then, so do companies in an industry. They go on to explain why this happens, and why investors should take interest in it. This is a timely read at a time when the existence of a lot of start-ups is being questioned.

• This personal account of a 'military spouse' encourages us to live each moment to the fullest. A very nice read (and no, its not about death). Some quotes from the article:

"Live like you're running out of time—because you are."

"Being human is to exist in a world of finite time, vulnerability, risk, and uncertainty. In this milieu, you have to make a choice—play it safe and live small or go all in."

"All we have is now. Take nothing for granted and make it count. Build a life that would make goodbye hurt and leaving hard."

"if the ending hurts, it usually means something went right."

• This short video conversation between Shane Parish of Farnam Street and Andrew Huberman talks about the relationship of stress with our field of vision (physically and cognitively) and what we can do to quickly release stress.

Quotable Quotes

”Most financial mistakes come when you try to force things to happen faster than is required. Compounding doesn’t like when you try to use a cheat code.”

- Morgan Housel

“The riskiest moment is when you’re right. That’s when you’re in the most trouble, because you tend to overstay the good decisions.”

— Peter Bernstein

* * *

That's it for this weekend folks.

Have a wonderful week ahead!!

- Tejas Gutka

[Jul 13, 2024]