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Thursday 4 February 2021

Weekend Reading

Reading across disciplines is one of the best ways to improve our investment acumen. Here is a summary of some of the best articles I read this week. If you like this collection, consider forwarding it to someone who you think will appreciate it.


Plants which send emails (& act as sensors)!!!

Through nanotechnology, engineers at MIT in the US have transformed spinach into sensors capable of detecting explosive materials. These plants are then able to wirelessly relay this information back to the scientists.

When the spinach roots detect the presence of nitroaromatics in groundwater, a compound often found in explosives like landmines, the carbon nanotubes within the plant leaves emit a signal. This signal is then read by an infrared camera, sending an email alert to the scientists.

This experiment is part of a wider field of research which involves engineering electronic components and systems into plants. The technology is known as “plant nanobionics”, and is effectively the process of giving plants new abilities.

While the purpose of this experiment was to detect explosives, Strano and other scientists believe it could be used to help warn researchers about pollution and other environmental conditions.

Because of the vast amount of data plants absorb from their surroundings, they are ideally situated to monitor ecological changes.



The power of feedback loops

The idea that people like (or hate) what other people like (or hate) is important, because it lets small ideas grow bigger than you’d guess if you assume everything is ranked by quality alone. Social momentum is hard to model on a spreadsheet, so it’s hard to predict or think about in terms that seem rational. But it’s so powerful.

A little momentum early on can grow into something enormous, well beyond what may have been predicted in the beginning. The same thing happens inside companies: Marc Andreessen says 80% of employee culture is just “winning.” The best employees want to work at companies that are winning, and when a company attracts the best employees it tends to win. If you don’t appreciate how powerful that feedback loop is you can be shocked at how dominant and wildly successful a few companies or products can become. Apple, Amazon, Tesla – they’re all enjoying the glorious feedback loop.



The difference of being right and being successful in investing

The difference between good advice and effective advice. Good advice is everywhere. You don’t have to look very hard. People generally know what they have to do to improve their health, finances, or lifestyle. But knowledge alone is never enough to change behavior.

Good advice tells you how to succeed at something while effective advice shows you how to succeed. Good advice is about tactics while effective advice helps you build systems.

When all else fails, the go-to excuse for underperformance is “this was a low-quality junk stock rally so our more high-quality businesses were left behind.”

The insinuation here is all those other investors who bid up low-quality businesses must be idiots. It’s the perfect excuse because it makes you feel smarter than everyone else even when they’re making more money than you.

But sometimes low-quality businesses can be a great investment at the right price or valuation. And sometimes high-quality businesses can be a terrible investment at the wrong price or valuation.

Everyone already knows who the great companies are. The challenge comes from figuring out the value of those great companies and the expectations embedded in their price.



Invert to solve big problems

Inversion is a powerful thinking tool because it puts a spotlight on errors and roadblocks that are not obvious at first glance. What if the opposite was true? What if I focused on a different side of this situation? Instead of asking how to do something, ask how to not do it.

Everyone wants to make more money. But what if you inverted the problem? How could you destroy your financial health? Before you worry too much about how to make more money make sure you have figured out how to not lose money. If you can manage to avoid these problems, you'll be far ahead of many folks and save yourself a lot of pain and anguish along the way.



Changing someone's mind

When we try to change a person’s mind, our first impulse is to preach about why we’re right and prosecute them for being wrong. Yet experiments show that preaching and prosecuting typically backfire — and what doesn’t sway people may strengthen their beliefs.

Instead of trying to force other people to change, you’re better off helping them find their own intrinsic motivation to change. You do that by interviewing them — asking open-ended questions and listening carefully — and holding up a mirror so they can see their own thoughts more clearly. If they express a desire to change, you guide them toward a plan.



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