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Friday 31 December 2021

Weekend Reading - Best of 2021


Today is the last day of the year 2021, a year that will forever be etched in our minds as the one where the pandemic took its biggest toll on human lives. Every weekend, I share with you five of the best articles I read during the week. Today I bring to you twelve articles from the collection of the year which I think are worth re-reading and re-thinking.

Reading across disciplines is one of the best ways to improve our investment acumen that I know of. At times, while reading we may not be able to understand the value of a particular piece, but it comes back in the future to help connect the dots.

I hope you enjoy the rather long weekend reading for this week.

Wishing you Season's Greetings and a very Happy New Year to you and your family.

1. 2021 - The year of the Stockdale Paradox

The Stockdale Paradox is a concept that author Jim Collins found a perfect example of in James Stockdale, former vice-presidential candidate, who, during the Vietnam War, was held captive as a prisoner of war for over seven years. He was one of the highest-ranking naval officers at the time.

During this horrific period, Stockdale was repeatedly tortured and had no reason to believe he'd make it out alive. Held in the clutches of the grim reality of his hell world, he found a way to stay alive by embracing both the harshness of his situation with a balance of healthy optimism.


Stockdale explained this idea as the following: "You must never confuse faith that you will prevail in the end — which you can never afford to lose — with the discipline to confront the most brutal facts of your current reality, whatever they might be."

In the most simplest explanation of this paradox, it's the idea of hoping for the best, but acknowledging and preparing for the worst.



2. How to make decisions - By Barack Obama

I think you should read the whole article and not just the below snippet.


In just a few short weeks on the job, I had already realized that because every tough decision came down to a probability, then certainty was an impossibility — which could leave me encumbered by the sense that I could never get it quite right. So rather than let myself get paralyzed in the quest for a perfect solution, or succumb to the temptation to just go with my gut every time, I created a sound decision-making process — one where I really listened to the experts, followed the facts, considered my goals and weighed all of that against my principles. Then, no matter how things turned out, I would at least know I had done my level best with the information in front of me.


Even in situations where you have to act relatively quickly, as was frequently the case during the financial crisis, it helps to build in time to let your thoughts marinate.

It’s not always clean and straightforward. But as my mother would say to me, “The world is complicated, Bar. That’s why it’s interesting.”



3. The power of negative thinking

We should all spend more time thinking about the prospect of failure and what we might do about it. It is a useful mental habit but it is neither easy nor enjoyable. We humans thrive on optimism. We must be careful, then, when we allow ourselves to stare steadily at the prospect of failure. Stare too long, or with eyes too wide, and we will be so paralysed with anxiety that success, too, becomes impossible. Care is also needed in the steps we take to prevent disaster. Some precautions cause more trouble than they prevent.


But just because it is hard to think productively about the risk of failure does not mean we should give up. One gain is that of contingency planning: if you anticipate possible problems, you have the opportunity to prevent them or to prepare the ideal response.


A second advantage is the possibility of rapid learning. The third advantage of thinking seriously about failure is that we may turn away from projects that are doomed from the outset.

All around us are failures — of business models, of pandemic planning, even of our democratic institutions. It is fanciful to imagine designing slip bases for everything. Still: most things fail, sooner or later. Some fail gracefully, some disgracefully. It is worth giving that some thought.



4. You should not be very rich - for the sake of your children

Growing up in a family where your father’s pretty wealthy is much more complicated than growing up in a family where your father is not wealthy. When your family is not wealthy, you’ve got to really achieve something or you’re not going to get anywhere. You’re on your own.


Whereas my own children, and the children of families like mine, I think have a bit of a disadvantage. As a general rule of thumb, the people running the world are people from blue-collar families who are lower middle class. It’s rarely the case that somebody whose father was a billionaire turns out to be better than his father, becoming a multibillionaire or running the world.



5. Remove "society's soundtrack" from your ears to be successful

By the age 45, Beethoven was completely deaf. He considered suicide, one friend reported, but was held back only by the force of “moral rectitude.” It’s here that Beethoven’s story veers toward legend. Cut off from the world of sound around him, working only with musical structures dancing through his imagination, at times holding a pencil in his mouth against his piano’s soundboard to feel the consonance of his chords, Beethoven produced the best music of his career, culminating in his incomparable Ninth Symphony, a composition so daringly new that it reinvented classical musical altogether.


Beethoven’s diminished hearing limited the influence of “prevailing compositional fashions.” Whereas his earlier work was “pleasantly reminiscent” of his instructor, Josef Haydn, his later work was spectacularly innovative. “Deafness freed Beethoven as a composer because he no longer had society’s soundtrack in his ears.”



6. And maybe, just maybe, interest rates don’t matter as much as we all think

It may come as a shock to investors in the day-and-age of low and even negative interest rates that this growth stock orgy of Nifty Fifty blue-chip stocks in the early-1970s took place in an environment of high and rising interest rates. The 10-year yield was moving higher for much of the Go-Go Years in the 1960s and averaged more than 5% from 1962-1972. And it’s worth noting, inflation was moving ever-higher during this period as well. Interest rates were even higher during the dot-com bubble of the mid-to-late 1990s.


There are so many other factors at play that determine why investors do what they do with their money — demographics, demand, risk appetite, past experiences and a whole host of psychological and market-related dynamics.


Sure, it’s certainly possible investors could freak out because interest rates have been so low for so long.


Just because stocks have done fine when rates have risen in the past doesn’t mean it will happen in the future. But interest rate levels, in and of themselves, aren’t the sole cause of every market movement. They are just one factor among many that impact how people allocate their assets.



7. How to think?

Thinking means concentrating on one thing long enough to develop an idea about it. Not learning other people’s ideas, or memorizing a body of information, however much those may sometimes be useful. Developing your own ideas. In short, thinking for yourself. You simply cannot do that in bursts of 20 seconds at a time, constantly interrupted by Facebook messages or Twitter tweets, or fiddling with your iPod, or watching something on YouTube.


I find for myself that my first thought is never my best thought. My first thought is always someone else’s; it’s always what I’ve already heard about the subject, always the conventional wisdom. It’s only by concentrating, sticking to the question, being patient, letting all the parts of my mind come into play, that I arrive at an original idea. By giving my brain a chance to make associations, draw connections, take me by surprise. And often even that idea doesn’t turn out to be very good. I need time to think about it, too, to make mistakes and recognize them, to make false starts and correct them, to outlast my impulses, to defeat my desire to declare the job done and move on to the next thing.



8. Busy-ness is an excuse for lack of direction

Sometimes we say, “I just don’t have time! I’m so busy!” But that’s not true. We can always make time for important things. The problem isn’t time, it’s something else. “Lack of direction, not lack of time, is the problem. We all have twenty-four hour days.”


If you want to change your life and make progress, you have to embrace uncertainty. You can’t know everything about tomorrow. And that makes a lot of people uncomfortable. But here’s the thing. You have to get comfortable with being uncomfortable.


One of the best things you can do for yourself is to recognize when you’re making excuses. The only way to have a good life is to stay active. Work out. Enjoy your job. Find pleasure in small things. Make yourself useful. That’s how we function as human beings, and that’s what gives us joy.



9. Control your attention instead of controlling your time

Despite the fact that we all have 24 hours a day, we realized that the way we spent those hours resulted in dramatic differences in outcomes. Person A and Person B both experience the same duration of day, but Person A may be much healthier, much wealthier, and much happier at the end of that day than Person B.


With this realization, we figured out how to hack time. How to temporarily cheat the expiration date that we all have. And it can summed up this way: Control your attention instead of controlling your time.


Time follows laws that we have no say over. An hour will be an hour, no matter what. Attention, on the other hand, can be stretched and contracted upon will. We have agency over how we use it, and it gives us a godlike ability to shift our perception of time. An hour may feel like a minute, or it may feel like a day. It all depends on how we use the hour in question.


By using our attention in innovative ways, we learned how to extract incredible value out of preset blocks of time. We used concentration as a tool to power technological progress.



10. Mistakes while managing risk (an old but relevant article by NN Taleb)

Instead of trying to anticipate low-probability, high-impact events, we should reduce our vulnerability to them. Risk management, we believe, should be about lessening the impact of what we don’t understand—not a futile attempt to develop sophisticated techniques and stories that perpetuate our illusions of being able to understand and predict the social and economic environment.


To change the way we think about risk, we must avoid making six mistakes:

1. We think we can manage risk by predicting extreme events.

2. We are convinced that studying the past will help us manage risk.

3. We don’t listen to advice about what we shouldn’t do.

4. We assume that risk can be measured by standard deviation.

5. We don’t appreciate that what’s mathematically equivalent isn’t psychologically so.

6. We are taught that efficiency and maximizing shareholder value don’t tolerate redundancy.


No one should have a piece of the upside without a share of the downside.



11. The art of not selling

“Of our most costly mistakes over the years, almost all have been sell decisions. The mistake, in virtually every instance, has been selling too soon. Reflecting on these mistakes gave rise to this letter, and its title, “The Art of (Not) Selling.”


Taking a step back, our investment philosophy involves concentrating our capital in a small number of what we believe to be growing and competitively advantaged businesses. These kinds of businesses are rare and are only periodically available for purchase at attractive valuations. With that in mind, we do our best to hold on for the long term, so that our capital may compound as the businesses grow.


Holding on means resisting the temptations to sell — and there are many. We tune out politics and macroeconomics. To the surprise of many, neither valuation nor price targets play a role in our sell decisions.


To be clear, there may be times when we believe it is appropriate to sell. In these instances, it is typically because of an adverse change in the business itself.




12. Perspective on life

If you had twenty-five years left to live, how much time would you spend worrying about the daily ups and downs of the stock market?

If you had fifteen years left to live, how much time would you spend trying to buy or sell a specific stock at the perfect price?

If you had five years left to live, how much of it would you spend obsessing over financial news and its unforeseeable impact on your portfolio?

If you had one month left to live, with whom would you spend those final days? What activities would you pursue?

If you had 24 hours to live, what would you want the people who knew you to remember most?

How much time do you think you have left?

Take a guess….

Okay, let’s assume you’ve guessed right. Now what?

What do you want to do today?




Thursday 30 December 2021

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.

You can sign up to https://www.getrevue.co/profile/intelsense to receive all blogs from me directly into your inbox.

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.



Thursday 16 December 2021

Weekend Reading - 17-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.

You can sign up to https://www.getrevue.co/profile/intelsense to receive all blogs from me directly into your inbox.

1. The elements of effective thinking

We’re seduced into believing that brilliant thinkers are born that way. We think they magically produce brilliant ideas.


Nothing could be further from the truth while there are likely genetic exceptions, the vast majority of the people we consider brilliant use their minds differently.


Often, these geniuses practice learnable habits of thinking that allow them to see the world differently. By doing so, they avoid much of the folly that so often ensnares others. Eliminating stupidity is easier than seeking brilliance.


The five habits are:

1. Understand deeply

2. Make mistakes

3. Raise questions

4. Follow the flow of ideas

5. Change




2. How chemistry is part of the solution to climate change – and not just part of the problem

Chemical-based products often have a harmful impact on the environment, including their CO2 emissions toll. Green chemistry minimizes the use of hazardous substances when designing products and processes. Resulting in more efficient manufacturing processes, green chemistry is also good for business.


The chemical industry is also the largest industrial consumer of both oil and gas, using these as the building blocks to create products. This is not only energy-intensive, but it also produces potentially hazardous waste. Green chemistry looks to replace the use of these non-renewable, depleting resources with renewable materials that are less harmful to humans and the environment.


One of the most exciting innovations to emerge is the use of CO2 itself as a feedstock for making products such as building materials, chemicals and fuels. Scientists have also developed a process to use CO2 in computer chip preparation, significantly reducing the quantities of chemicals, energy and water required. Turning CO2 into a useful resource rather than just a harmful by-product is a crucial step towards decarbonizing the economy.


Besides being better for the environment, green chemistry is also well-placed to benefit the bottom line, with less waste and faster, more energy-efficient manufacturing processes. Add to this higher yields and a move away from a reliance on depleting resources like petroleum products – slowing their depletion – and it avoids the hazards and price fluctuations associated with the use of hydrocarbons.



3. Toyota vs Tesla - the difference in developmental approach

The auto industry owes Toyota a debt of gratitude. The giant Japanese automaker taught the industry how to run its manufacturing operations to their utmost efficiency, it set the industry standard for product development and it showed that corporate strategy should be measured in decades, not quarters.


It took the rest of the auto industry nearly 30 years to accept, learn and finally adopt what Toyota was doing. But they did it and it served them well. They improved their productivity, quality and profitability.


One reason the old-time players move slowly is because they copied Toyota’s product development process. Toyota freezes the specifications of a vehicle a year before Job One. And then it typically doesn’t make design changes until two years after the start of production. Under the Toyota doctrine, design changes introduce variability, and variability leads to quality problems. So, by freezing the specs, Toyota and its suppliers have the time to SPC their manufacturing ops to Six Sigma quality.


Not Tesla. It doesn’t freeze specs. Just the opposite. It makes design changes on the fly. And it mainly makes those changes – this is a key point – to take cost out of its cars.


Tesla’s electronic architecture is a prime example. The architecture in the Model X worked just fine, but two years after it came out the Model 3 debuted with an entirely new architecture.




4. Reimagining photosynthesis

The more that was discovered about the intricacies of photosynthesis, the more was revealed about its inefficiency. The comparison is often made to photovoltaic cells. Those on the market today convert about twenty per cent of the sunlight that strikes them into electricity, and, in labs, researchers have achieved rates of almost fifty per cent. Plants convert only about one per cent of the sunlight that hits them into growth. In the case of crop plants, on average only about half of one per cent of the light is converted into energy that people can use.


The rate of yield growth for crops like wheat, rice, and corn appears to be plateauing, and the number of people who are hungry is once again on the rise. The world’s population, meanwhile, continues to increase; now almost eight billion, it’s projected to reach nearly ten billion by 2050. Income gains in countries like China are increasing the consumption of meat, which requires ever more grain and forage to produce.


To meet the expected demand, global agricultural output will have to rise by almost seventy per cent during the next thirty years. Such an increase would be tough to achieve in the best of times, which the coming decades are not likely to be. Recent research suggests that climate change has already begun to cut into yields, and, as the planet warms, the bite will only get bigger. (Agriculture itself is a major contributor to climate change.) Devoting more land to farming isn’t really an option, or, at least, not a good one. Most of the world’s best soils are already under cultivation, and mowing down forests to plant corn or soybeans would lead to still more warming.




5. Volatility takes a bite

Feeding stock prices into your brain every day (or worse, multiples times a day) invariably compresses timeframes and makes every day seem important. Then before you know it, you are one of those people who go around with explanations for why such-and-such stock was up (or down) that day. Seems a recipe for madness.


“You sit in an ivory tower and think, ‘Oh, all I care about are returns over 5 to 10 years and I don't care about the path to get there. I don't care about volatility.’ That is true in an idealistic sense – the most important risk is always going to be permanent loss of capital. But your clients care about volatility…”


Well, I’m not going to say “I don’t care about volatility.” I’d rather have a smooth ride! Who wouldn’t? But that’s not realistic. I will say that I don’t actively manage volatility.


What I found most interesting about this interview was its blunt talk about the difference between running a portfolio as a professional and running your own personal portfolio. (I don’t have a personal portfolio anymore. It’s in the fund). At one point he says, “maximize your Sharpe and your Sortino ratios because that is your job as a professional investor. As an individual investor, you should not care at all about those ratios.”




Thursday 9 December 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. Robots that can reproduce

Now scientists have discovered an entirely new form of biological reproduction—and applied their discovery to create the first-ever, self-replicating living robots.


The same team that built the first living robots ("Xenobots," assembled from frog cells—reported in 2020) has discovered that these computer-designed and hand-assembled organisms can swim out into their tiny dish, find single cells, gather hundreds of them together, and assemble "baby" Xenobots inside their Pac-Man-shaped "mouth"—that, a few days later, become new Xenobots that look and move just like themselves.


And then these new Xenobots can go out, find cells, and build copies of themselves. Again and again.


"With the right design—they will spontaneously self-replicate," says Joshua Bongard, a computer scientist and robotics expert at the University of Vermont who co-led the new research.



2. Animals are already coping with climate change

The author of a new book has seen first-hand the effects of climate change on plants and animals in the wild: the green macaws of Central America migrating along with their food sources, the brown bears of Alaska fattening up on early-ripening berry crops, the conifers of New England seeking refuge from vanishing habitats.


Biologists monitoring the lizard species, which survived back-to-back Caribbean hurricanes in 2017, noticed that after the hurricanes, the lizard populations had longer front legs, shorter back legs and grippier toe pads on average than they had before. An experiment with a leaf blower showed that these traits help the lizards cling to branches better — survival of the fittest in action.


In the end, the outcomes for species will probably be as varied as their circumstances. Some organisms have already moved, adapted or died as a result of the warming, and many more will face challenges from changes that are yet to come.


The author Thor Hanson points out how plants and animals are responding to climate change: by doing everything they can.




3. Why Meat Delivery Remains a Tough Market To Crack Online

Several meat-delivery start-ups like Licious, FreshToHome are unleashing disruptions to redefine how Indians consume meat. With this fillip, meat delivery startups have chalked up lofty plans. Many are looking to expand to more cities and also go overseas, while others are looking at opening offline stores.


Licious touched the coveted $1 billion valuation mark in October 2021. Naturally, with this sudden turnaround in fortunes—fuelled, in part, by the pandemic—competition in the meat delivery space is intensifying. Experts say that the segment will continue to be dominated by Licious and FreshToHome, making it a two-horse race between them for market leadership, but other players will also make a noticeable mark, considering the massive size that the fish, meat and poultry market represents: $50 billion currently and poised to touch $80 billion by 2024.


Despite all the positives, Online meat delivery currently accounts for less than 1% of the overall meat industry, which is still held together by local stores, wet markets and business-to-business suppliers and exporters. Organized offline players in the space—such as Suguna, Venky’s and Godrej Agrovet—have managed to create a Rs. 280 crore ‘processed frozen’ segment in the poultry space, according to a Hindu Businessline report. Complex supply chain is another challenge that online meat delivery startups have to manage.




4. The Good & Bad of Daylight Saving Time

On the first Sunday of every November, Americans wake up an hour later than usual. At 2 am, while everyone remains asleep, clocks add an extra hour and reset to 1 am. They now have a 25 hour day!


At the start of spring/summer in March every year, countries like America move the clocks ahead. Clocks jump from 2 am to 3 am and in the process, they forego an hour of sleep. They do this because it fundamentally alters the way each day works from that point onwards. For instance, if the sun were to rise at 6 am, right about when spring approaches, you’d be sleeping until 7 or 8 am and “wasting” sunlight. But imagine if it rose an hour later — at 7 am instead? Then you could wake up right around sunrise and feel like you did a lot more. And guess what? This jugglery would also mean the sun would set an hour later — 8 pm instead of 7 pm. So with this one move, you’d have felt like you put all that sunlight to good use.


However, by winter, you’d have to undo this change because by then, you’d see the sun rising at 8 am for instance — which is counterproductive. You’d be waking at 7 am and it would be pitch dark outside. So they add an extra hour at 2 am (in some places).


But it turns out that moving the clock doesn’t just affect the economy, it also affects health and wellbeing. And this happens because moving the clock ahead affects our natural sleep cycle. It takes time for people to reacquaint themselves with this new order of business and it can be catastrophic in some cases.


Studies show that this disruption to sleep increases the risk of stroke and heart attack. Heart attacks increase by 24% in the week after clocks move ahead in March. It even leads to more accidents. In the US, car crashes caused by “sleepy daylight-saving drivers” may have killed at least 30 extra people during 2002–2011. In the mining industry, there’s a 6% rise in injuries which leads to a 67% increase in workdays that are lost. 




5. The Chinese desperation for semiconductor chip tech

The three industry leaders in IC manufacturing – TSMC, Samsung, and Intel – have announced plans to invest over $300 Billion in the next ten years. That’s a big number even for Beijing. (Despite its government support, SMIC has not been able to commit the full amount of the $8.8 billion its 28-nm foundry will require. They’ll still be looking to raise billions from outside investors.)


These are all symptoms of China’s structural inability to compete in this industry, to solve the semiconductor problem organically, through internal development. With such a massive investment deficit, it is virtually certain that the technology gap will widen. China will likely fall further behind. 


The last few years have added new pressure, as the U.S. has slowly choked off the IC pipeline. American policies directed against unfair trade, technology theft, national security risks, and complicated by geopolitical rivalries and diplomatic conflicts, have tightened the noose. For example, Huawei – China’s champion in the telecommunications sector – has been crippled by the denial of access to American semiconductors. 


Thursday 2 December 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.

Why staring at screens is making your eyeballs elongate

New research from ophthalmologists shows that our constant screen time is radically changing our eyes. Just like the rest of our bodies, the human eye is supposed to stop growing after our teens. Now it keeps growing.


When our eyes spend more time focusing on near objects, like phones, screens or even paperbacks, it makes our eyeballs elongate, which prevents the eye from bending light the way it should. This elongation increases nearsightedness, called myopia, which causes distant objects to appear blurred.


Last spring, Chinese researchers tested over 120,000 Covid-quarantined students aged six to eight and found myopia and other vision issues linked to home confinement increased up to three times compared with the previous five years – that’s with as little as 2.5 more hours of e-learning (not counting video games, social media, etc).


Most important is taking breaks which help eyes rest, blink and lubricate. Then there’s the 20-20-20 model. “Every 20 minutes, look at a distance 20 feet away, for 20 seconds,” Hariharan advises. “Being on the computer for hours on end isn’t good for your health. Don’t break to play video games or pick up another screen. Go outside!”



The lure of nationalised banks

“Banks were nationalised at the whim of a Prime Minister, they will be de-nationalised at the whim of another Prime Minister.” ~ Y.V. Reddy, former Governor, RBI.


It has now been 50 years since Indira Gandhi, then prime minister of India, took a decision to nationalise 14 private banks. The decision, Reddy says, gave the central government powers that were never envisaged in the constitution. “Suddenly you found that the Union Government had access to public deposits, access to huge financial resources, not contemplated in the constitution. Second, they got huge financial resources outside parliamentary control. Third, they got access to huge administrative machinery in different states, which was not contemplated in the constitution,” Reddy explains.


These powers continue to be a big lure for politicians, who may have debated and discussed privatisation of government-owned banks but have stayed far away from giving up control of these lenders.


Even today, public sector banks command 66 percent of credit and 65.7 percent of deposits. This network continues to be used by each successive government to push both political and economic objectives.




Five mistakes people make that keep them from becoming millionaires

There are a few things to learn from people who have achieved a net worth of over $1 million.


While there are many articles, books, podcast episodes and thought-leaders preaching what to do if you want to have over seven figures in assets, I recently found myself curious about something not many people speak about: the biggest mistakes people like me make that can keep us from becoming millionaires. Financial advisors list the following reasons:


1. Relying on one source of income - focusing on just making income from one source makes it very hard to make millions.


2. Not tracking your spending – “Like a leaking pipe can cause massive damage if not found early on, a leaky budget can deprive you from accumulating meaningful savings over your life...”


3. Being scared to invest - investing can be integral to making your money grow.


4. Not utilizing retirement accounts to their full potential - maximize your retirement accounts and investing your funds wisely so you can add to your portfolio and get the tax advantages.


5. Not investing early – make sure to start your investment journey as early as possible.



The Indiana Jones of Egyptology to harness satellites to uncover long-buried treasures

Exploiting subtle and, to the naked eye, often invisible differences in topog-raphy, geology and plant life, Parcak, a 38-year-old University of Alabama at Birmingham professor of anthropology, has used satellite imagery and other remote sensing tools to expose a stunning array of forgotten sites from multiple lost cultures.


In Egypt, her specialty area, she and her team have expanded the civilization’s known scope, spotting more than 3,000 ancient settlements, more than a dozen pyramids and over a thousand lost tombs, and uncovered the city grid of Tanis, of Raiders of the Lost Ark fame. After the Arab Spring, in 2011, she created, via satellite, a first-of-its-kind countrywide looting map, documenting how plundered tombs first appeared as little black pimples on the landscape and then spread like a rash. She has pointed out the ruins of an amphitheater at the Roman harbor of Portus to archaeologists who had spent their whole careers digging above it, mapped the ancient Dacian capital of what is now Romania, and—using hyperspectral camera data—aided in the ongoing search for prehistoric hominid fossils in eroded Kenyan lake beds.


This year alone, her satellite images revealed, in desolate Newfoundland, what many believe to be the second-known Viking site in North America, as well as a mammoth ceremonial platform in Petra that millions of visitors to the famous Jordanian city, not a few of them professional excavators, completely missed. She is now busy satellite-mapping the whole of Peru for a crowd-sourcing project called GlobalXplorer, set to debut in early 2017, that may yield her most audacious set of revelations yet.



What Happens When You’re the Investment

So Masmej did something few 23-year-olds would think to do: He tokenized himself. That is, he created a financial instrument known as a social token, a form of cryptocurrency whose value revolves around a person, to sell shares in himself. Holders of $ALEX would receive 15 percent of Masmej’s income for the next three years, capped at $100,000 overall, and would be able to exchange tokens for special privileges: 10,000 $ALEX bought a retweet from Masmej on Twitter; 20,000 $ALEX, a one-on-one conversation with him; 30,000 $ALEX, an introduction to someone in his network. In five days, Masmej raised $20,092, enough to send him across the Atlantic to San Francisco to launch his start-up.


To be clear, the financialization of everything isn’t an unalloyed benefit. The phenomenon has a dark side. If everyone becomes an investor, the inverse is also true: Everything—and everyone—becomes a potential investment. As part of $ALEX, Alex Masmej designed a “Control My Life” component. Token-holders could vote on his life decisions—whether he should run three miles every day, stop eating red meat, wake up at 6 a.m. Token-holders had a financial stake in his success, so Masmej followed through on their commands. (To be fair, Masmej admits this was just “a fun experiment.”)


We’ll have to answer two key questions. First, at what point does human agency give way to financial obligation? And second, at what point does a relationship become a transaction?




Tuesday 30 November 2021

Revision of Quantamental Subscription

More Options. Better Options

Hoping to bring you some good news at the end of the year :-)

Since launching Quantamental, a number of investors had suggested that I have a two-year option for it. Since, both the long term and Hitpicks, have both one and two-year subscription offerings, that idea made sense to me. 

My only issue was that since Quant was priced slightly higher, a two-year subscription might actually end up being very expensive for a lot of people. And it is difficult to afford it if one had a smaller capital to invest in the strategies.

Considering that I am making the following changes:

1. Quantamental package from www.intelsense.in (Direct subscription) - This is going to be Rs 20,000 for a year and Rs 35,000 for two years. This includes access to both the Q30 and Q10 strategies.

2. Q30 on smallcase - I am reducing the price to Rs 15,000 for 1 year. Smallcase does not have a 2-year option.

3. Q10 on smallcase - The price continues to remain at Rs 15,000 for 1 year.

For all existing direct subscribers, you will get a 3-month free extension on renewal
For all smallcase Q30 annual subscribers, we will be giving you access to Q10 on intelsense.in for a proportionate duration.

Thursday 25 November 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. Retrofitting Older Cars with Electric Motors Could Transform Transport

The higher purchase price of electric vehicles is one reason that they are still a small fraction of all cars sold, but retrofitting older cars and trucks with electric motors could be the fix needed to turbo-charge electric vehicle uptake.


Ford and General Motors are among the big names offering electric conversion kits for drivers looking to keep their current car on the road while drastically lowering its emissions. General Motors announced its motor, battery, and converter kit in 2020. Ford is readying a drop-in 281 horsepower electric crate motor for sale.


Transitioning from fossil fuel cars to electric will take time and retrofitting needs regulation oversight for it to be safe and effective. Electrification of car stock brings its own complications. Carmakers are in the midst of a chip shortage, better rapid charging infrastructure needs to be put in place, and the national electric grid will need an upgrade likely costing more than $100 billion.


On top of that, there are likely to be shortages of essential metallic elements like nickel and lithium used in EV batteries. Analysts say that forces EV makers to look at alternative battery technologies, including solid-state batteries with faster charging times and longer life, and the auto industry has invested heavily to find solutions.



2. Carbon Pricing: Social cost of CO2 emission

Carbon pricing is an instrument that captures the external costs of greenhouse gas (GHG) emissions—the costs of emissions that the public pays for, such as damage to crops, health care costs from heat waves and droughts, and loss of property from flooding and sea level rise—and ties them to their sources through a price, usually in the form of a price on the carbon dioxide (CO2) emitted.


A price on carbon helps shift the burden for the damage from GHG emissions back to those who are responsible for it and who can avoid it. Instead of dictating who should reduce emissions where and how, a carbon price provides an economic signal to emitters, and allows them to decide to either transform their activities and lower their emissions, or continue emitting and paying for their emissions. In this way, the overall environmental goal is achieved in the most flexible and least-cost way to society


When damages from sea level rise, extreme weather and other effects are taken into account, the global social cost of carbon is $180 to $800 per tonne, rather than the $12 to $62 range used by the US Environmental Protection Agency.


India’s country-level social cost of carbon emission was estimated to be the highest at $86 per tonne of CO2. It means the Indian economy will lose $86 by emitting each additional tonne of CO2. India is followed by the US, where the economic damages would be $48 per tonne of CO2 emission. Saudi Arabia is close behind at $47 per tonne of CO2 emission.




3. The End of Trust

Trust is to capitalism what alcohol is to wedding receptions: a social lubricant. In low-trust societies (Russia, southern Italy), economic growth is constrained. People who don’t trust other people think twice before investing in, collaborating with, or hiring someone who isn’t a family member (or a member of their criminal gang). The concept may sound squishy, but the effect isn’t.


The economists Paul Zak and Stephen Knack found, in a study published in 1998, that a 15 percent bump in a nation’s belief that “most people can be trusted” adds a full percentage point to economic growth each year. That means that if, for the past 20 years, Americans had trusted one another like Ukrainians did, our annual GDP per capita would be $11,000 lower; if we had trusted like New Zealanders did, it’d be $16,000 higher. “If trust is sufficiently low,” they wrote, “economic growth is unachievable.”



4. Why Investors’ Memories May Be Bad for Their Wealth

Overconfidence can be bad for markets and bad for investors. You just need to look at the recent crash in cryptocurrencies to see what can happen when investors believe they simply can’t lose. It’s certainly not a new phenomenon in the world of investing. From Tulip Mania in 17th-century Holland, to the dot-com bubble of the late 1990s, history is littered with examples of investor bravado leading them blindly into big losses when their sure-fire bet goes south.


Yet the reality is that overconfident investors don’t really make for good investors. They tend to trade more frequently despite losing money doing so, over-react to market signals and suffer from the “winner’s curse” in which they purchase overpriced investments. They are also more likely to commit investment errors such as under-diversification and overconcentration on familiar stocks. 


The good news is our research was also able to identify a relatively straightforward way of tackling the issue. In the final part of our study, we split our investors into two groups. Half were asked to look up the results of their past investments at the start of the experiment. This showed them exactly how they had previously fared. The other half had to rely on their memory as before.


Those who had seen their past results behaved much more cautiously. They made fewer trades and spent less of the US$500 stake they had received than those just relying on their memory. While not removing memory bias and overconfidence completely, this simple step did go a long way towards minimising their impact.




5. The Perils of Social Media

Social media has addictive qualities that I think surface primarily in two ways. First, as a passive consumer of information, social media platforms are skilled at “curating” your feed in a way that learns your interests and presents a never-ending stream of content tuned to what you have proven you will click on in the past. This can result in a consumer of information falling into an echo chamber resembling an intellectual monoculture — a recipe for confirmation bias. Second, once a user starts posting on social media, the feedback loop comes into play. Human beings like attention, and the likes and retweets become addictive.


From the standpoint of a consumer of information, I am convinced that the worst aspect of technology in general is that interrupts the state of flow by leading to endless context switching.4 All meaningful productivity occurs in a flow state. If you are picking up your phone a dozen times an hour to check how many likes you got on your latest tweet, there is zero chance of entering a state of flow.