The Weekend Bulletin (#39)
A digest of some interesting reading material from around the world-wide-web. Your weekly dose of multi-disciplinary reading.
Namaskar! 🙏
We remain deeply indebted to our freedom fighters, to our soldiers, to the heroes of our nation - they are the reason we live freely, and we will never forget their sacrifice.
jo shaheed hue hain unki, zara yaad karo kurbani
Happy Independence Day!!
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It’s another short issue - work pressures, you see. Tons to learn though…
Section 1: Investing Wisdom
Let's start of with where we left off last weekend. Remember the trivia? Below is a quick snapshot to refresh your memory. What this article reminded was of an article that was shared in Issue 23 (lot of other interesting stuff in that issue) surrounding the impermanence of moats. I have reproduced the article below the snapshot for a quick refresher.
Unpredictability of stock price movements in not the only reason that investing is difficult. It is also difficult because MOAT - regarded as one of the more important factors in fundamental investing - is not always reliable. For, as this article highlights, seemingly infallible moats can be filled, or an altogether new fort with different moat may come up elsewhere, leading to investors completely bypassing your fort.
Every once in a while, the market catches a fancy. A theme, sector, or set of stocks are set on fire on the belief that their short term performance can be extended ad infinitum. Global examples include the tech bubble and the nifty-fifty (check out 'Lessons from History' in Issues 27 and 34), while back home, we had the infrastructure boom. Behind all these varied themes, was a common culprit called 'GROWTH', one that was overestimated and overpaid for [On a related note: A couple of sectors have been in spotlight recently for their 'growth potential'. At least one of these sectors has seen a huge wave of euphoria, taking valuations higher across the board.]. Here are a few reads on this subject:
"Growth is a numerical outcome, knowable only with hindsight. It is singularly unhelpful, if not outright harmful in an investment process. Compounding is a holistic construct, controllable in advance. It is fuzzy and multi-faceted. It is imprecise and unmeasurable. Mixing up growth and compounding is one of the biggest mistakes investors make. Yes, compounders have delivered growth. No, (chasing) growth did not deliver compounding."
"...Mr. Market often thinks growthy, glamorous, names are much smarter to own. They definitely are smarter looking. And it is surely more entertaining to own these stocks. It’s also easier to sleep at night. They are obviously more dynamic companies and, in many cases, they indeed are better companies...And there are periods where these growthy, good and glamorous names do tremendously, well. During these episodes, it downright sucks to be a fundamentally-driven value investor."
We usually measure success in personal finance using NETWORTH. However, just as a company's networth tells us little about its financial health on its own, similarly networth has very little use in personal finance. Just as we use ROE and ROIC to measure a company's financial health, this article suggests a few formulas to measure personal financial health.
Section 2: Mental Models & Behavioral Biases
Joshua Waitzkin was recognised as a child prodigy. He won the U.S. Junior Chess Championship in 1993 and 1994 (In 1993 Paramount Pictures released the film Searching for Bobby Fischer, based on the highly acclaimed book of the same title written by Fred Waitzkin, documenting Josh's journey to winning his first National Championship). At the age of eleven, he drew a game with World Champion Garry Kasparov in a simultaneous exhibition. At age 13, Josh earned the title of National Master, and at age 16 became an International Master. As a young adult, Waitzkin's focus shifted to the martial art Aikido. He holds several US national medals and a 2004 world champion title in the competitive sport of Taiji Push Hands. Waitzkin is also a black belt in Brazilian Jiu-Jitsu, a performance coach and an author of two books. He is all of 44 years old. How does one achieve so much in life? Well you'd have to dig into this books, movie, talks, and life to get a detailed grip on the subject, but here are his methods summarised into five broad mental models.
Section 3: Personal Development
We often lament how difficult our lives are. Or how many constraints we live within. Some, however, can slice through these difficulties and use the constraints to their advantage. Here is an interesting story that will motivate you to look at difficulties and constraints as opportunities. Some background:
René's father was an Albanian born Macedonian who immigrated to Denmark and worked as a taxi driver. His Danish mother worked as a cashier and cleaning woman. In Denmark's tightly knit population, his Muslim dad was a permanent outsider.
René often went to bed hungry having dined only on toast. People in Denmark called him a "Balkan dog." At 11, he begins to work as a paperboy to help his parents pay for rent and send money back to family in Macedonia.
He's expelled from school at 15, and with no idea what to do next, he follows his best friend and signs up for cooking school. Soon, he falls in love with cooking and follows his passion to the kitchens of El Bulli in Spain and The French Laundry in California.
This is where the story gets interesting. A fairy tale ending would have been for Rene be to a world class chef, which he did become. However, the path that he chose to get there, was no bed of roses. Read his story here.
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That's it for this weekend folks. I hope you enjoyed this issue; let me know your thoughts/feedbacks by commenting below or simply hitting the reply button in your email client.
Have a wonderful week ahead!!
- Tejas Gutka
[Aug 15, 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.