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Thursday 23 December 2021

Weekend Reading - 24-Dec-21


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.

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How to Convince Yourself to Do Hard Things?

How do we do hard things when our brains are constantly telling us to avoid effort?


First, tackle them when we’re in a good mood. A 2016 study found that when people are upset, they’re less likely to try to do hard things. When they’re feeling upbeat, however, they’re more likely to take on the hard-but-essential tasks that ultimately make life better.


Second, we must give our brains the right amount of autonomy. When we have a choice, our brains often want to default to something easy. But we can mitigate that response by challenging ourselves to be innovative and provide incentives.


Finally, we can accomplish hard things by practicing the habits of a growth mindset and notice when we revert to old ways of thinking and behaving. To challenge patterns or systems that enable or inhibit new habits from taking hold, it’s helpful to have the support of others. One way to do that is by sharing stories of trying, in a setting where attempts are prized as much as the results.




Private space travel pioneers explain why space exploration is about more than putting people into orbit

Space is being democratized. That began with the Ansari X Prize, a $10 million prize for the first nongovernment spaceflight, which came in 2004.


Private industry can be phenomenal allocators of capital. Their fresh perspective is what’s making things that were previously only contemplated in science fiction a reality now.


As SpaceX and others in the private sector are demonstrating, space is literally open for business.


Lowering the cost of access will further spur innovation that can benefit humanity, said Anousheh Ansari, who sponsored the X Prize with her husband, Hamid Ansari, and her brother-in-law Amir Ansari. She is currently applying that competition’s crowd-sourcing approach to some of humanity’s biggest challenges, such as a $100 million purse for a sustainable way to pull carbon from the atmosphere or ocean.


Low-orbit satellites could bring high-speed wireless connectivity to the hundreds of millions of people currently in areas with slow or no access. In 2018, SpaceX carried Bangabandhu Satellite-1 into orbit, significantly increasing wireless connectivity to Bangladesh.




What Know-It-Alls Don’t Know, Or The Illusion of Competence

After hearing about a bank robbery incident, psychologist David Dunning at Cornell University enlisted his graduate student, Justin Kruger found that, while almost everyone holds favourable views of their abilities in various social and intellectual domains, some people mistakenly assess their abilities as being much higher than they actually are. This ‘illusion of confidence’ is now called the ‘Dunning-Kruger effect’, and describes the cognitive bias to inflate self-assessment.


Sure, it’s typical for people to overestimate their abilities. One study found that 80 per cent of drivers rate themselves as above average – a statistical impossibility. And similar trends have been found when people rate their relative popularity and cognitive abilities. The problem is that when people are incompetent, not only do they reach wrong conclusions and make unfortunate choices but, also, they are robbed of the ability to realize their mistakes.


Interestingly, really smart people also fail to accurately self-assess their abilities. As much as D- and F-grade students overestimate their abilities, A-grade students underestimate theirs.



How Your Mind, Under Stress, Gets Better At Processing Bad News

Some of the most important decisions you will make in your lifetime will occur while you feel stressed and anxious. From medical decisions to financial and professional ones, we are often required to weigh up information under stressful conditions.


Research has shown that people are normally quite optimistic – they will ignore the bad news and embrace the good.  When you experience stressful events, whether personal (waiting for a medical diagnosis) or public (political turmoil), a physiological change is triggered that can cause you to take in any sort of warning and become fixated on what might go wrong.


A study using brain imaging to look at the neural activity of people under stress revealed that this ‘switch’ was related to a sudden boost in a neural signal important for learning (known as a prediction error), specifically in response to unexpected signs of danger (such as faces expressing fear). This signal relies on dopamine – a neurotransmitter found in the brain – and, under stress, dopamine function is altered by another molecule called corticotropin-releasing factor.


It is important to realise that stress travels rapidly from one person to the next. If your co-worker is stressed, you are more likely to tense up and feel stressed yourself. Our brains are designed to transmit emotions quickly to one another, because they often convey important information.


The good news, however, is that positive emotions, such as hope, are contagious too, and are powerful in inducing people to act to find solutions. Being aware of the close relationship between people’s emotional state and how they process information can help us frame our messages more effectively and become conscientious agents of change.



Power to the absurd

There’s no kind way to say it. Unicorner of stock market is batshit crazy. No amount of FY41 estimates can paper over this self-evident truth. Bull case is euphemism for fairy-tale. Revenue multiples for philanthropic organizations look more egregious than PE multiples. Path to profitability requires Pixar-esque imagination, especially as management thinks it’s optional. Absurdity isn’t limited to IPOs, stock markets or valuations. Unlisted market is crazier. Amounts raised and burnt are nuts. Frequency of fund raising is dizzying, as is deployment of funds. Some iffy company with an unproven core business making a transformational acquisition every Amavasya gets cheers, not therapy.


Absurdity is neither new nor rare. We see it all the time, not just in tech where ‘this time is different’ sounds more plausible every time, at least until the crash. We’ve seen it in shitty old sectors like real estate, infra and global commodities. Some segment of lending is frothy all the time. It’s always BNPL somewhere. Fin-tech is just a label for this iteration of shoddy lending. In calling Mr Market manic-depressive, the smartest among us merely pointed out the obvious: absurdity, not normalcy, is the default.



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