The Weekend Bulletin (#37)
A digest of some interesting reading material from around the world-wide-web. Your weekly dose of multi-disciplinary reading.
Section 1: Investing Wisdom
Remember Kat Cole from Issue 35? Well she is back in this issue. While the prior interview looked at her journey and personal traits, this one deals with her business lessons (specifically on brand, distribution, and leadership). If you haven't heard the first one, I would suggest you listen to it before you listen to this one as it provides some background to this conversation. While this interview has a number of business lessons, two of my favorites were Kat's perspective on brands being both relevant and different, and how price cuts can be used to increase revenues and margins. A very interesting conversation; highly recommended.
'Tell me where I am going to die, and I'll never go there' is a famous quip by Charlie Munger about knowing what to avoid. This worldly wisdom applies not just to your conduct in life, but also to investing. Building a negative list of businesses not to invest in, or having a mental model on the type of businesses to avoid, can provide downside protection to your portfolio. And if you manage the downside well, the upside will take care of itself. Therefore, I believe that every investor should spend some time in the graveyard - not where humans are buried but where unsustainable business ideas are.
This twitter thread about common mistakes that investors make can be a good place to start.
This post on why Toys are a bad business to invest in will provide some insights into what kind of businesses to avoid.
Lastly, this twitter thread will remind you to learn the right lessons from both your mistakes, and your successes.
Section 2:Â Mental Models & Behavioral Biases
As knowledge workers, one of the most important activities that we perform is that of making decisions. It is also one of the skills that we spend the least amount of time working on - at least consciously. Add to it the fact that our brains like to conserve energy by taking shortcuts, and we are looking at a potentially serious problem with our ability to consistently make good decisions. There are a number of ways in which we can improve our decision making skills, some of which are introduced in this article. In it you'll also find the answer to Issue 34's trivia.
One of the most dangerous periods in the stock market is when everybody is making money everyday. The lure of easy money is very difficult to ignore. However, as J P Morgan famously said, 'Nothing so undermines your financial judgement as the sight of your neighbor getting rich.' Here is a good reminder to not chase the next hot stock, but to remain within the boundaries of your competence. In it you'll also find the answer to last week's trivia.
Section 3: Lessons From History
This is not a lesson from history but a journey down the path of the evolution of the online travel industry. For those with an academic interest in the travel sector.
Section 4: Personal Development
We often confuse between intelligence and intellect. Intellect - ability to understand - is a gift, something that we are born with. Intelligence, on the other hand, is a like a muscle - something that can be improved with exercise. For example, between two people with the same intellect, one may be more intelligent simply because s/he spends more time thinking about problems. An easier way to understand this is in terms of sports - between two players with the same talent (hand-eye coordination), the person who practices more will have higher skills. Here is how you can improve your intelligence.
On a related note, here is one from the archive (Issue 11) that will help in understanding the above concept: Approaching the above concept in a slightly different manner is Carol Dweck's fixed vs growth mindset. A fixed mindset looks at tasks as doable or impossible. On the other hand, a growth mindset seeks to operate just outside the boundaries of current abilities, thereby stretching the boundaries over time. This seven minute read is a good place to start understanding this concept.
Section 5: Trivia
Fix your gaze on the black dot on the left side of this image. As you gaze at the left dot, try to answer this question: In what direction is the object on the right moving?
Is it drifting diagonally, or is it moving up and down? Leave your answer in a comment below.
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That's it for this weekend folks. I hope you enjoyed this issue. Have a wonderful week ahead!!
- Tejas Gutka
[Aug 01, 2020]
P.S.
If you would like to contribute to a future issue of The Weekend Bulletin, please email a link to the article along with a short summary/note on why you like the article to: share2TWB[at]gmail[dot]com.
Moving up and down