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Thursday, 20 May 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.

1. Align your goals to your habits to make lasting changes
A lot of organizations and individuals that are looking to create change just reach for off-the-shelf solutions that sound nice and that have been written about in other bestsellers before — books about setting big, audacious goals, for instance, or visualizing success. That sounds great, but what’s missing is a real appreciation of what is the barrier to change in your particular situation, because what’s going to work depends on what’s holding you back. That’s a key lesson.

If someone isn’t taking their medications regularly, you might not be able to get them to take those medications that they’re forgetting about by simply saying, “Hey, set a big, audacious goal.” If forgetting is the barrier, then you need to solve for that particular problem, probably with really effective reminders.

If you have a challenge of getting to the gym more regularly or staying off social media, then you probably have a completely different kind of problem. You don’t need reminders, you don’t need big, audacious goals. You need to find a way to make it so that the instantly gratifying choice is aligned with your goals.

2. If you overwork, you expose yourself to great health risk
People working 55 or more hours each week face an estimated 35% higher risk of a stroke and a 17% higher risk of dying from heart disease, compared to people following the widely accepted standard of working 35 to 40 hours in a week, the WHO says in a study. Between 2000 and 2016, the number of deaths from heart disease due to working long hours increased by 42%, and from stroke by 19%.

The study doesn't cover the past year, in which the COVID-19 pandemic thrust national economies into crisis and reshaped how millions of people work. But its authors note that overwork has been on the rise for years due to phenomena such as the gig economy and telework — and they say the pandemic will likely accelerate those trends.

3. When push buttons freaked out people - (People are always scared of the impact of new tech)
Electric push buttons, essentially on/off switches for circuits, came on the market in the 1880s. As with many technological innovations, they appeared in multiple places in different forms. Their predecessors were such mechanical and manual buttons as the keys of musical instruments and typewriters. Before electricity, buttons triggered a spring mechanism or a lever.

At the end of the nineteenth century, many laypeople had a “working knowledge not only of electricity, but also of the buttons they pushed and the relationship between the two,” according to Plotnick. Those who promoted electricity and sold electrical devices, however, wanted push-button interfaces to be “simplistic and worry-free.” They thought the world needed less thinking though and tinkering, and more automatic action. “You press the button, we do the rest”—the Eastman Company’s famous slogan for Kodak cameras—could be taken as the slogan for an entire way of life.

People worried that the electric push button would make human skills atrophy. They wondered if such devices would seal off the wonders of technology into a black box: “effortless, opaque, and therefore unquestioned by consumers.”

4. Entertainment companies are changing the way they do business
In the 1960s, Theodore Levitt, a resident economist and professor at Harvard Business School unveiled his theory of “marketing myopia”. Specifically, he postulated that too many companies define themselves through their products rather than the need(s) they fulfill. This mindset exposes these companies to displacement and disruption. The classic example here is the petroleum industry, which, in its obsession with fossil fuels, has missed out on solar, nuclear, geothermal, etc. Another focuses on the major railway companies of the early 20th century, which missed out on buses, cars, and trucking due to their focus on trains not transportation.

It’s clear today that these company definitions are no longer right. Disney’s theatrically-focused film studio is inarguably the best in the world (it had roughly twice the revenue and three times the margin of the #2 player in 2019). However, Disney’s parks division generated more than twice the revenue and profit of its studio division. Disney’s future, meanwhile, depends on a direct-to-consumer video platform that’s mostly growing through television series not feature films.

5. Why stock markets are not falling due to the pandemic
You would never know how terrible the past year has been for many Americans by looking at Wall Street, which has been going gangbusters since the early days of the pandemic. Even as hundreds of thousands of lives were lost, millions of people were laid off and businesses shuttered, protests against police violence erupted across the nation in the wake of George Floyd’s murder, and the outgoing president refused to accept the outcome of the 2020 election — supposedly the market’s nightmare scenario — for weeks, the stock market soared. After the jobs report from April 2021 revealed a much shakier labour recovery might be on the horizon, major indexes hit new highs.

To put it plainly, the stock market is not representative of the whole economy, much less American society. And what it is representative of did fine.

“No matter how many times we keep on saying the stock market is not the economy, people won’t believe it, but it isn’t,” said Paul Krugman, a Nobel Prize-winning economist and New York Times columnist. “The stock market is about one piece of the economy — corporate profits — and it’s not even about the current or near-future level of corporate profits, it’s about corporate profits over a somewhat longish horizon.”

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