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Friday 8 July 2022

Weekend Reading


I had discussed four megatrends that will drive growth in businesses across the world in the next decade. It is worth revisiting this now to keep it at the top of the mind when looking for new investable ideas.
MegaTrends and Technofunda Outlook
MegaTrends and Technofunda Outlook
1. The naïve realist
“Have you ever noticed that anybody driving slower than you is an idiot, and anyone going faster than you is a maniac?” The late comedian perfectly captured our tendency to attribute the world’s problems to other people and not ourselves. I’m the only good driver on the road. Everybody else should drive like me.
In a 2016 Ted Talk, Ross joked that people “believe that their take on the world is the objective one, and what has to be understood or explained is, ‘What is it about those other people that seem to get it wrong?’” Ross came to call this “naïve realism,” the tendency for people to think they see the world objectively, as it is, free from personal bias. Ross established three characteristics of the “naïve realist.”
First, the naïve realist believes that their perceptions are realistic and “objective.” Accordingly, other people (at least, reasonable other people) should share their beliefs, preferences, and convictions. Second, the naïve realist expects that any reasonable, open-minded person will be persuaded to agree with the naïve realist if there is disagreement between parties. If there is disagreement, and if the disagreeing party is a reasonable person, presenting the “real facts” should restore harmony. Third, anyone who disagrees with the naïve realist after the presentation of real facts is unreasonable, biased, or irrational.
2. The longer your time horizon, the calmer life becomes.
Short time horizons may increase anxiety too. Consider the difference between a day trader and a buy-and-hold investor. The archetype of the day trader is something like Jordan Belfort from Wolf of Wall Street. He lives in a state of perpetual urgency, as his portfolio swings between immense highs and lows. Looking at my friends who used to trade, I swear their hairs have grayed a little faster. I contrast them with the buy-and-hold style of Warren Buffett, who is famous for sitting in his office and reading all day. Though he’s been investing for decades, his strategy’s never really changed: buy good companies at an under-valued price and hold them for a long time. Though his life is certainly more hectic than the one he projects, Buffett reminds us that a long-term outlook will narrow your emotional amplitude.
The cadence of your work shapes your temperament. When you’re a day trader, every phone notification matters. But when you’re a committed buy-and-hold investor, you can mostly ignore them. The longer your time horizon, the calmer life becomes. Zoom out far enough and once-gargantuan hurdles turn into tiny speed bumps on the road of life.
3. Are mobile phones responsible for loss of memory?
Does having more memory in our pockets mean there’s less in our heads? Am I losing my ability to remember things – from appointments to what I was about to do next – because I expect my phone to do it for me? Before smartphones, our heads would have held a cache of phone numbers and our memories would contain a cognitive map, built up over time, which would allow us to navigate – for smartphone users, that is no longer true.
Smartphone use can even change the brain, according to the ongoing ABCD study which is tracking over 10,000 American children through to adulthood. “It started by examining 10-year-olds both with paper and pencil measures and an MRI, and one of their most interesting early results was that there was a relationship between tech use and cortical thinning,” says Larry Rosen, who studies social media, technology and the brain. “Young children who use more tech had a thinner cortex, which is supposed to happen at an older age.”
4. Good procrastination
There are three variants of procrastination, depending on what you do instead of working on something: you could work on (a) nothing, (b) something less important, or © something more important. That last type, I’d argue, is good procrastination.
That’s the “absent-minded professor,” who forgets to shave, or eat, or even perhaps look where he’s going while he’s thinking about some interesting question. His mind is absent from the everyday world because it’s hard at work in another.
In fact, it may not be a difference in degree, but a difference in kind. There may be types of work that can only be done in long, uninterrupted stretches, when inspiration hits, rather than dutifully in scheduled little slices. Empirically it seems to be so. When I think of the people I know who’ve done great things, I don’t imagine them dutifully crossing items off to-do lists. I imagine them sneaking off to work on some new idea.
5. The greatest threat to results are boredom and impatience
The only way to become good at something is to practice the ordinary basics for an uncommon length of time. Most people get bored. They want excitement. They want something to talk about and no one talks about the boring basics. For example, we know that dollar-cost averaging into an index fund is likely to generate wealth, but cryptocurrency will give us a bigger thrill. Boredom encourages you to stop doing what you know works and do something that might work.
Another way to mess up a good thing is to try and accelerate the natural pace of things into an unnatural one. A good idea taken to the extreme is always a bad idea. Working out for 15 hours a day won’t make you healthier, it will get you injured. Investing with a lot of leverage won’t make you rich faster, it will wipe you out. A lack of patience changes the outcome.

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