[The Weekend Bulletin] #89: Montier on 7 Sins, Kaufman on Culture, DA/DC, Perspectives
A digest of some interesting reading material from around the world-wide-web. Your weekly dose of multi-disciplinary reading.
Section 1: Investing Wisdom
Seven Sins of Fund Management: This paper discusses seven commonly observed behavioural biases amongst investors. James Montier provides research backed as well as anecdotal data to help us avoid making these mistakes. If you haven't read his 'Little Book of Behavioural Biases' then this paper (100 pages - a mini book in itself) is definitely a must read. For others, the first 5 pages will serve as a good reminder. Either ways, a good resource to have in your library.
Traditionally, well known consumer brands are considered to be a moat. Such moats are thought to be everlasting. However, what is a cool brand for one generation, may not be so for the next one - Rasna vs Tang if you've been around in India for over 30 years. Putting the above in context, this article asks if your company is demographically advantaged, or demographically challenged? An interesting perspective.
The strength of an interview lies not just in the answers of the interviewee, but more so in the questions of the interviewer. A combination of interesting guests and well-thought questions makes Vishal Khandewal's podcast one of best bang for the buck (your time). This conversation with Radhika Gupta (CEO, Edelweiss AMC) makes for a very interesting listen.
Section 2:Â Mental Models & Behavioral Biases
When it comes to corporate success, strategy gets more attention than culture. In reality however, culture trumps strategy (or to quote Peter Drucker, Culture Eats Strategy for Lunch). More often than not, the difference between the number one and number two in most industries is defined by culture. Strategy can be replicated, but culture is unique. Taking this thought forward, Peter Kaufman (whom we met last weekend and in issue #33) talks about the fourteen critical aspects (mental models) behind the culture at his firm Glenair (which Charlie Munger considers as one of three best operating companies) in this presentation.
If you've been following Kaufman's work, you know that there is ton of wisdom in here. (h/t Investment Masters Class)Â
Section 3: Personal Development
Perspectives define everything. A problem can be an obstacle, or an opportunity, depending on your perspective. The following narrative provides an interesting perspective to adopt: following the engineering mindset - problems exist to be solved.
Here is an interesting story from the Mahabharata (a conversation between Karna and Lord Krishna) to cement this perspective.
"Destiny is not created by the shoes we wear but by the steps we take"
Another Matter of Perspective: The grass is always greener on the other side. From a distance, everything looks good; it is only when we have an inside view that we realise that even the moon has dark spots. All stories of success are like the tip of an ice-berg. A lot of it remains hidden from plain sight. The lessons: avoid envy, don't overvalue success, and know that we all have our vanities.Â
Section 4: Blast From The Past
We consume a lot interesting text in our quest for knowledge. However, with each new byte of data that we feed into our memory, we lose some bit of old information that was held. Even without the addition of new information, our memory regularly cleans our information that is held deep and not often retrieved. If is for this reason that re-reading old texts (books/articles/notes) is highly recommended.
There are other advantages to re-reading. Spaced repetition for one - when we revisit some old material, it is etched better into our long term memory. More importantly, as we gain more experiences in life, re-reading an old text can provide some fresh perspectives that we may have missed while reading earlier.
It is to reap these benefits that this section revisits article/s from an earlier issue. Below are articles that first appeared in the seventeenth issue of TWB:
A general temptation during falling markets is catching a falling knife - averaging down your existing holdings. The usual argument in favor of averaging down is that if you liked something at 100, then you should definitely like it at 80 or 60. However, reality is never straight-forward - averaging down has been a destroyer of value in many a cases. Having said that, averaging down is not bad in and of itself; one only needs to be cognizant of when to average down. This article elaborates further.
[P.S.: one of the best articles on the subject]
Our mental model this week is a type of a Network Effect that explains hows things spread: from a disease in a population, to a wildfire in a forest, to a meme on social media. Called Simple Diffusion, it is the way things move somewhat chaotically across a network. While a little long and slightly technical, I would urge you to slowly consume this article and play around with the interactive charts. It will be well worth your time.
Quotable Quotes
Isn't it true that in the modern world today changing your DP can be more important than changing yourself. Change your DPs, no problem. But do not forget to change yourself, because a good life is about a changed you.
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That's it for this weekend folks.
Have a wonderful week ahead!!
- Tejas Gutka
[Aug 28, 2021]
Superb! Thank you for sharing Peter Kaufman stuff Tejas. He is a legend.