Note to Readers: In Stream, we suggest worthwhile reading material on a variety of topics, not all of which are directly related to investing. Some of the articles require you to be paid subscriber of those sites. However, it is often possible to read such articles by going to Google News and searching for the article’s title.

Investing/Stock Market

• (3 minutes watch) Recently, government of India took a drastic step to invalidate the Rs. 1000 and Rs. 500 currency notes. We don’t have any opinion on how effective or ineffective this demonetization step would be in addressing the problem of black money and fake currency. However, it would be very interesting to see the unintended (positive and negative) consequences of this policy. One immediate effect was that people started hoarding Rs. 100 notes. Valid currency notes (1000s and 500s) suddenly turned into bad money and it drove out the good money (lower denomination notes i.e. 50s and 100s), perhaps temporarily, from the circulation. This is known as Gresham’s law. It is a monetary principle stating that “bad money drives out good.” Watch the latest episode of Latticework of Mental Models video series on Gresham’s Law.

   

  Click Here if you can’t see the video above.

• (6900 words / 30 minutes read) Guy Spier, in his recent interview, shares specific insights about his investment process.
  

   

  I think the right way to go about identifying stocks is to perhaps start with Warren Buffett’s statement, “Well, I start with the As” (alphabetically). I don’t think he really means he starts with the As. I think what he really means is he starts searching at the beginning, uses his rational intelligence to optimize the search, and improves his technique as he goes along…I don’t think there’s any right way to search for great investment ideas. You have to search intelligently, and part of searching intelligently is to vary your approach, and to keep trying and experimenting and to figure out what one should be doing next.

  What I did yesterday or in the last five years or the last twenty years, may not be what I’ll do tomorrow, what I ought to do…It’s important not to apply a formula, but to be intelligent by whatever approach one applies and obviously to do it diligently, with intelligence and with thought, but also with variance of the approach with a sense of experimentation.

  The nature of good investment ideas is that they haven’t been seen before by somebody else – somebody who sees the world in a new way, who looks at an investment in a new way, or looks in a place other people haven’t looked.

Reading/Thinking

• ( 1475 words / 6 minutes read) In the game of life, avoiding elimination in the early rounds is a good approach, writes Rory Sutherland. Sutherland’s article is about a mental model called Multiplicative Systems and how it relates to making important decisions in life.
  

   

  In some facets of life, all of your hard work, dedication to improvement and good fortune may still be worth nothing if there is a weak link in the chain…In deciding, say, whom to marry, aiming for the best may be less important than avoiding the worst. “Satisficing”, as polymath Herbert Simon named it, is the strategy whereby rather than trying to maximise an outcome, you seek a good solution with a low chance of disaster.

• Two cops were stuck in traffic. They were on a routine patrol. As they waited for the light to change, the younger cop glanced at the fancy new BMW in front of them. The driver took a long drag on his cigarette, took it out of his mouth and flicked the ashes onto the upholstery. The younger cop couldn’t believe it. He exclaimed, “That’s a new car and he just ashed his cigarette in that car. Who would ash his cigarette in a brand new car? Not the owner of the car. Not a friend who borrowed the car. Possibly a guy who had just stolen the car.” Upon quizzing the driver, it did turn out to be a stolen car. The cop noticed something which wasn’t obvious to others. He had a brilliant insight.

  How do these kinds of insights come to people? That’s the subject of investigation in Gary Klein’s book Seeing What Others Don’t. Needless to say that it’s a brilliant book and one should definitely add it to his or her to-read list.

Business

• As per data from Bain, founder-led public companies perform better than others. While this is US-centric data, the situation in India wouldn’t be much different given the long-standing culture of family ownership…
  
  
• (35 minutes audio) Airlines is perhaps the most competitive industry with abysmally poor economics. The commercial aviation industry, in its history of more than 100 years, has never made money for its shareholders. So when you find an airline which has been consistently profitable for last 43 years, the only reason could be an exceptional management. I am referring to Southwest Airlines which was founded by Herb Kelleher in 1966. Kelleher, 85 years old now, is an exceptional manager and in this podcast he shares his journey. A must listen. In fact, How I Built This, is one our favorite podcasts. Other than Herb’s episode, the ones I liked the most in this podcast were interviews of Sarah Blakely, Joe Gebbia (founder of AirBnb), and Kevin Systrom (founder of Instagram).

Life/Learning

• (1700 words / 7 minutes read) Seneca was one of the most important Stoic philosophers. A short introduction to Seneca and few insights from the mind of the world’s most interesting stoic.
  

   

  Seneca was another philosopher for whom the issue of wealth and riches took central stage—how can a so-called Stoic philosopher at one point be one of the richest people in the Roman Empire? This paradox alone makes Seneca one of the most fascinating figures from antiquity and worthy of our study.

• (1050 words / 4.5 minutes read) Stress is an unavoidable part of modern life. And to certain extent, occasional stress is good for improving performance. Pressure tends to brings out the most creative strategies. However, there’s a fine line between harnessing the pressure and ignoring it altogether. When an occasional stress turns into chronic one, it becomes toxic. In this BBC article, Alina Dizik writes –
  

   

  While bouts of workplace stress can help you better focus on tasks and increase efficiency, chronic stress can impact the quality of your work, jeopardising your employment, and your life outside of the office…It’s difficult to tell when the stress hits a breaking point, and you start suffering the effects of burnout. While stress is emotional or mental strain that can come and go, burnout is the physical, mental emotional exhaustion that occurs after prolonged stress. It emerges over time and can be more difficult to recover from.

  Warren Buffett and Charlie Munger aren’t known for their healthy eating habits but at the age of 86 and 92 respectively, they are at the peak of their mental abilities. And the credit goes to the fact that they’ve arranged their lives in such a manner that there’s no work related stress. They don’t do something they don’t want to do and they don’t work with people they don’t like. That probably explains why they continue to remain healthy and energetic.

Want to receive our reads in your inbox? Click here to sign up to The Safal Niveshak Stream.