The Weekend Bulletin (Vol. 1 | Iss. 28)
A digest of some interesting reading material from around the world-wide-web. Your weekly dose of multi-disciplinary reading.
Volume 1 | Issue 28 | May 30, 2020
Section 1: Investing Wisdom
When it comes to wisdom, no investor comes close to the percipient Charlie Munger. His intellect is not limited to investing, but spans across many facets of life. He is one of the best teachers that I have come across outside of school, so much so, that he inspired me to read widely rather than just focus on investing. Here’s the wisdom from the book 'Poor Charlie’s Almanack' summarised into bite size bullets.
This bulletin is a tribute to his wisdom, particularly, this one:
Investor letters make for an interesting read, as they offer a window into the mind of the investment manager. Usually, most letters touch upon larger holdings and some pertinent issue that the manager is thinking about. However, every once in a while you come across a letter that rather than touching upon an issue, details the managers investment philosophy. This is one such letter where David Poppe - who recently started a new fund - pens his investment philosophy drawing from his over 20 years of investing career.
What do PE multiples convey? Does a PE multiple of 10 imply cheapness over a PE multiple of 30? What conclusion should one draw by comparing historical average PE to current PE? More importantly, should two companies with the same earnings per share and similar growth rates be ascribed the same PE? While we widely use the PE multiple to value companies, our understanding of it is incomplete. This article serves as a primer on valuations and explains why different companies trade at different PEs.
Most of us grew up playing video games and quite enjoyed it, even to the annoyance of our parents. Little did our parents (or we) know that playing video games could make you a better business leader!! If studying business strategy interest you, then this interestingly-written analysis of the video game inspired strategy of Shopify and its CEO Tobi Lutke will serve as a very good read.
Video games are currently doing more than inspiring leaders to design business strategies. There is a silent wave rising across the globe on the back of video games. Subscribers of this bulletin will get a sneak-peak into this world next week. If you have not yet subscribed, then now would be a good time to do it.
Section 2: Mental Models & Behavioral Biases
We make decisions all the time. And all our decisions have a meaningful impact on our lives. Decisions, then, are the most important activity that we undertake in life. Thus, it is very important that we make good decisions. Good decision making, however, is not a trait (that always there), rather a quality that fluctuates over the course of the day, claims this long article. It decodes why sometimes with the exact same information, we take completely opposite decisions. Read it to understand:
What decision fatigue is, and how to reduce it
How salesperson use decision fatigue to make us spend more
Why the poor tend to make more bad choices than the rich
How sugar impacts our decisions, and how proteins can improve them
Why we should make decisions post meals, but avoid them after evenings
Taking too many decisions can be a stressful endeavor. However, not all stress is bad. Like good bacteria and bad bacteria, stress can be both good or both, depending on how much of it we feel, claims this article. Most of us will resonate with this mental model called ‘The Goldilocks Principle of Stress and Anxiety’, since we all work so well when deadlines are approaching ;-).
Section 3: Personal Development
We have just crossed the appraisal season. Strangely enough, appraisal discussions are seldom happy and fulfilling. Sometimes a long debate, sometimes a short monologue, and sometimes a rolled-over promise - they always leave more to be desired. Here is a powerful system that addresses most of the shortcomings of the common appraisal practice, and that if implemented in its entirety will be a holistic performance review.
A long work from home season may have brought to fore the advantages of working alone - a deep focus on work, much better effort to output etc. However, working behind a closed door work (metaphorically) is not good for society, especially from the perspective of the scientific branches. This excerpt from a speech explains why.
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Have a safe & secluded weekend!!
- Tejas Gutka.