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.

I especially try to not post Corona related articles as that is all one gets to read in all traditional media.

 

If you like this collection, consider forwarding it to someone who you think will appreciate it.

Bio-manufactured material Hyaline can change our gadgets

Biology is the most advanced manufacturing technology on the planet. Hyaline may be the first fermented electronic products and is already in use in flexible circuits, display touch sensors, and printable electronics. The product merges the benefits of advanced bio-fabrication with traditionally manufactured materials.

Increasingly, companies are demonstrating fermentation can be used to make things like jet fuel, vanilla, nylon, beauty products, and other items that ordinarily depend on petrochemicals. In addition, the petrochemical toolbox is limited, expensive and is running up against manufacturing bottlenecks.

Hyaline can be used to create thinner films that are foldable, flexible, and more durable. It can be used to develop full-screen touch sensors with new mechanical, physical, and optical properties.

Performance-wise, Hyaline has high-temperature features that enable faster processing times in manufacturing. As a printed circuit board, Hyaline can be printed and used at high temperatures, while eliminating epoxy and acrylic adhesive layers to create systems that are thinner and more flexible.

https://www.forbes.com/sites/johncumbers/2020/04/12/inspired-by-nature-zymergen-brews-high-performance-bio-electronics

 

After meatless meat, here is fishless fish

Many of the most popular seafoods now suddenly face direct competition from dozens of startups offering animal-free alternatives. The industry is still tiny, but sales of plant-based foods have surged 29 percent in the past two years, compared with just 4 percent overall for U.S. retail foods, and many expect the category to follow the arc of plant-based milks, which now account for 14 percent of all retail milk sales.

Fish-Free Tuna was made using a blend of six legumes—soybeans, peas, chickpeas, fava beans, lentils, and navy beans—with some algal oil and seaweed powder mixed in for “Real Seafood Taste.”

https://www.outsideonline.com/2419099/plant-based-fish-seafood-good-catch

 

Distraction is not about tech

Plato complained about how distracting the world was 2,500 years ago. Clearly Plato never struggled with an iPhone, so I take issue with the current narrative that technology is hijacking your brain and that it’s addictive. It promotes learned helplessness: We stop trying to change something because we think there’s nothing we can do.

Most people don’t want to acknowledge the uncomfortable truth that distraction is always an unhealthy escape from reality; the drive to relieve that discomfort is at the root of all our behavior. So instead of blaming technology, look for the discomfort that precedes it. By identifying an uncomfortable internal trigger — for example, loneliness, boredom, anxiety, or discontentment — and exploring the sensation with curiosity, we can more easily disarm it.

https://www.gsb.stanford.edu/insights/super-power-tomorrow-being-indistractable

 

 

Of business longevity

Japan is an old-business superpower. The country is home to more than 33,000 with at least 100 years of history — over 40 percent of the world’s total, according to a study by the Tokyo-based Research Institute of Centennial Management. Over 3,100 have been running for at least two centuries. Around 140 have existed for more than 500 years. And at least 19 claim to have been continuously operating since the first millennium.

Most of these old businesses are, like Ichiwa, small, family-run enterprises that deal in traditional goods and services. To survive for a millennium, Ms. Hasegawa said, a business cannot just chase profits. It has to have a higher purpose.Those kinds of core values, known as “kakun,” or family precepts, have guided many companies’ business decisions through the generations. They look after their employees, support the community and strive to make a product that inspires pride.

The Japanese companies that have endured the longest have often been defined by an aversion to risk — shaped in part by past crises — and an accumulation of large cash reserves.

https://www.nytimes.com/2020/12/02/business/japan-old-companies.html

 

You’re only as good as your worst day

We tend to measure performance by what happens when things are going well. Yet how people, organizations, companies, leaders, and other things do on their best day isn’t all that instructive. To find the truth, we need to look at what happens on the worst day.

Products and services are only as good as they are when they break, not when everything is functioning fine. From a financial standpoint, companies prove their worth when they show how they cope when something fundamental changes in the market or there’s a financial crisis.

https://fs.blog/2020/12/worst-day/

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Some Interesting Charts

We started a new learning initiative for ourselves and our subscribers in Hitpicks, our technofunda advisory. Here the focus is on looking at some interesting medium to long term technical charts to identify interesting ideas for further exploration.

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For technofunda investing and positional trading, subscribe to our Hitpicks advisory service on www.intelsense.in

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. 

I especially try to not post Corona related articles as that is all one gets to read in all traditional media.

If you like this collection, consider forwarding it to someone who you think will appreciate.

Amazon spies on its own staff

Dozens of leaked documents from Amazon’s Global Security Operations Center reveal the company’s reliance on Pinkerton operatives to spy on warehouse workers and the extensive monitoring of labor unions, environmental activists, and other social movements.

The documents offer an unprecedented look inside the internal security and surveillance apparatus of a company that has vigorously attempted to tamp down employee dissent and has previously been caught smearing employees who attempted to organize their colleagues. Amazon's approach of dealing with its own workforce, labor unions, and social and environmental movements as a threat has grave implications for its workers' privacy and ability to join labor unions and collectively bargain.

Amazon intelligence analysts appear to gather information on labor organizing and social movements to prevent any disruptions to order fulfillment operations. 

https://www.vice.com/en/article/5dp3yn/amazon-leaked-reports-expose-spying-warehouse-workers-labor-union-environmental-groups-social-movements

How to think differently

It's not enough for a public market investor to predict correctly how a company will do. If a lot of other people make the same prediction, the stock price will already reflect it, and there's no room to make money. The only valuable insights are the ones most other investors don't share.

You see this pattern with startup founders too. You don't want to start a startup to do something that everyone agrees is a good idea, or there will already be other companies doing it. You have to do something that sounds to most other people like a bad idea, but that you know isn't — like writing software for a tiny computer used by a few thousand hobbyists, or starting a site to let people rent airbeds on strangers' floors.

http://paulgraham.com/think.html

Some Business & Leadership Lessons From Past US Presidents

• Temperament is the great separator. 
• Strong opinions, weakly held.
• Storytelling is more important than statistics. 
• Simple is better than complex.
• Patience is key.
• Timing and luck will always play a role.

All of the above are equally true for investors.

https://awealthofcommonsense.com/2020/11/some-business-leadership-lessons-from-past-presidents/

All that is wrong with VC funding

In 2008, Jeremy Neuner and Ryan Coonerty, two city-hall employees in Santa Cruz, California, decided to open a co-working space. They named their company NextSpace Coworking. But their company faced a big challenge, finding a venture capitalist (VC) to invest in their firm. All the VCs wanted to have a share of WeWork. When Jeremy Neuner began having meetings with venture capitalists, he said, “their first question was ‘How do you compete with WeWork? Why should we invest with you instead of them?’ ” WeWork was reportedly losing millions of dollars each month, but it was expanding to new locations at a feverish pace. Neumann’s promises to VCs were so wildly optimistic, bordering on ridiculous, that Neuner was convinced WeWork had to be a scam.

Mr. Neuner was building a solid business, but the VCs wanted fantasy. “All we needed was five million dollars a year in revenues, and we would have made money for everyone,” he told me. “That’s enough to earn a living and buy a house and put your kids through school. But no one wanted something that just made a healthy living. They all wanted to find the next Zuckerberg.” Critics of the venture-capital industry have observed that, lately, it has given one dubious startup after another gigantic infusions of money. Increasingly, the venture-capital industry has become fixated on creating “unicorns”: startups whose valuations exceed a billion dollars.

https://www.newyorker.com/magazine/2020/11/30/how-venture-capitalists-are-deforming-capitalism

Using Biology to create new materials

We are now looking to biological materials to solve challenges that were once thought to be engineering problems – for example, developing cellular processes to desalinate water more efficiently; creating biological molecules that will help us build more comfortable medical prosthetics; and engineering microbes that could clean up underwater oil spills. From this year, we will find the building blocks for these materials not in petroleum-based technologies, but in biology.

https://www.wired.co.uk/article/biological-molecules

For building a solid long term portfolio, look at subscribing to www.intelsense.in long term advisory.

For technofunda investing and positional trading, subscribe to our Hitpicks advisory service on www.intelsense.in

For momentum trend following systematic trading, subscribe to Quantamental at www.quantamental.in 

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. 

I especially try to not post Corona related articles as that is all one gets to read in all traditional media.

If you like this collection, consider forwarding it to someone who you think will appreciate.

How to make decisions the Jeff Bezos way

As a senior executive, what do you really get paid to do? You get paid to make a small number of high-quality decisions. Your job is not to make thousands of decisions every day. There are two types of decisions. There are decisions that are irreversible and highly consequential; we call them one-way doors, or Type 2 decisions. They need to be made slowly and carefully. I often find myself at Amazon acting as the chief slowdown officer: “Whoa, I want to see that decision analyzed seventeen more ways because it’s highly consequential and irreversible.” The problem is that most decisions aren’t like that. Most decisions are two-way doors.

https://www.fastcompany.com/90578272/how-jeff-bezos-makes-decisions

The fight for value investing to stay relevant

In an economy mostly made up of tangible assets you could perhaps rely on a growth stock that had got ahead of itself to be pulled back to earth, and a value stock that got left behind to eventually catch up. Reversion to the mean was the order of the day. But in a world of increasing returns to scale, a firm that rises quickly will often keep on rising. The appeal of old-style value investing is that it is tethered to something concrete. In contrast, forward-looking valuations are by their nature more speculative. Bubbles are perhaps unavoidable; some people will extrapolate too far. Nevertheless, were Ben Graham alive today he would probably be revising his thinking. No one, least of all the father of value investing, said stockpicking was easy.

https://amp-economist-com.cdn.ampproject.org/c/s/amp.economist.com/briefing/2020/11/12/value-investing-is-struggling-to-remain-relevant

How the internet changed our consumption pattern?

This point cannot be emphasized enough: the Internet is the single most disruptive force of our lifetimes because it does not evolve existing ways of doing things, but completely smashes the assumptions underlying them — assumptions we often didn’t even realize existed.

So it was with the Internet and the trade-off between reach and time: suddenly every single media entity on earth, no matter how large or small, and no matter its medium of choice, could reach anyone instantly. To put it another way, reach went to infinity, and time went to zero.

https://stratechery.com/2020/never-ending-niches/

The Road Ahead by Bill Gates - looking back after 25 years   

One thing I wrote about that hasn’t happened yet—but I still think will happen—is the way the Internet will affect the structure of our cities. Today the cost of living in a dense downtown, like Seattle’s, is so high that many workers (including teachers, police officers, and baristas) can’t afford to live there. Even high earners spend a disproportionate percentage of their income on rent. As a result, some cities are arguably too successful, and others are not successful enough. It’s a real problem for our country.

But as digital technology makes it easier to work at home, then you can commute less often. That, in turn, makes it more attractive to live father away from the office, where you can afford a bigger house than in the city center. It also reduces the number of cars on the road at any given time. Over time, these shifts would mean major changes in the ways our cities work and are built.

https://www.gatesnotes.com/About-Bill-Gates/The-Road-Ahead-after-25-years

100 Baggers: The Lost Chapter

The profiles in this chapter were originally collected for my book, 100 Baggers: Stocks That Return 100-to-1 and How to Find Them. They are the stories of 100-baggers... Brilliant thinkers... and mavericks who built fortunes with their wits – and a good bit of luck…

In the end, I felt the stories distracted from the main idea of the book. But these investing greats have important lessons to teach... as much from their failures as their successes.

https://drive.google.com/file/d/1_VLCiGPhVCPh9SsUowIX574KqzFCYzuh/view

For building a solid long term portfolio, look at subscribing to www.intelsense.in long term advisory.

For technofunda investing and positional trading, subscribe to our Hitpicks advisory service on www.intelsense.in

For momentum trend following systematic trading, subscribe to Quantamental at www.quantamental.in 

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. 

I especially try to not post Corona related articles as that is all one gets to read in all traditional media.

If you like this collection, consider forwarding it to someone who you think will appreciate.

Are economic forecasts any good?

How much stock should you place in the consensus macro forecasts generated by the experts? How much value should you place on the forecasts of an individual macro forecast from an expert?

They find that there is consistent under-reaction in the expectations of the consensus forecasts. The aggregated expectations and the slow revisions of economist means their forecasts are playing catch-up to reality. This conclusion is not new albeit still inconsistent with a rational expectations view of the world. Given this under-reaction to news, the consensus forecast revisions are positively correlated to forecast errors. The conclusion is that investors should discount these forecasts. 

While individuals may over-reaction, the use of different models, different information, and slow updating will lead to an under-reaction in aggregate. So, the investor should fade the forecast of the individual but assume that the group is slow to respond to the market realty. 

https://mrzepczynski.blogspot.com/2020/11/how-much-value-should-you-place-in.html?m=1

The pursuit of luxury products

Luxury consumption used to strictly mean the purchase and display of items from well-known luxury brands. It has now taken on diverse and sometimes unexpected forms – within the traditional luxury domain but also beyond and even outside of it. 

For instance, in the realm of traditional luxury, less experienced consumers (typically from lower socioeconomic status) prefer ‘loud’ luxury products with more prominent brand identifiers such as logos, as they seek a visible affiliation with affluent people. Meanwhile, more experienced luxury buyers, who chiefly aim at dissociating themselves from mainstream consumers, favour less conspicuous luxury products.

For the same purpose of differentiating themselves from the middle class, high-status individuals may mix and match traditional luxury products with non-luxury ones. 

Luxury consumers have also started looking outside of the traditional luxury categories and increasingly invest in education and health. Parents, for instance, face mounting pressure to send their children to elite kindergartens and schools. In Beijing, the fees for such kindergartens can be up to six times the cost of a top university education.

https://knowledge.insead.edu/marketing/the-tension-filled-world-of-luxury-consumption-15561

The secondhand clothing market is booming

According to a new report, the US secondhand clothing market is projected to more than triple in value in the next 10 years—from US$28 billion in 2019 to US$80 billion in 2029—in a US market currently worth $379 billion. In 2019, secondhand clothing expanded 21 times faster than conventional apparel retail did.

The secondhand clothing market is composed of two major categories, thrift stores and resale platforms. But it’s the latter that has largely fueled the recent boom. Secondhand clothing has long been perceived as worn out and tainted, mainly sought by bargain or treasure hunters. However, this perception has changed, and now many consumers consider secondhand clothing to be of identical or even superior quality to unworn clothing. A trend of “fashion flipping”—or buying secondhand clothes and reselling them—has also emerged, particularly among young consumers.

https://qz.com/1933900/can-secondhand-clothing-solve-fashions-sustainability-crisis/

The lessons from history

History is full of specific lessons that aren’t relevant to most people, and not fully applicable to future events because things rarely repeat exactly as they did in the past. An imperfect rule of thumb is that the more granular the lesson, the less useful it is to the future.

The second kind of history to learn from are the broad behaviors that show up again and again, in multiple fields and different eras. They are the 30,000-foot takeaways from events that hide layers below the main story, often going ignored.

How do people think about risk? How do they react to surprise? What motivates them, and causes them to be overconfident, or too pessimistic? Those broad lessons are important because we know they’ll be relevant in the future. They’ll apply to nearly everyone, and in many fields. The same rule of thumb works in the other direction: the broader the lesson, the more useful it is for the future.

https://www.collaborativefund.com/blog/the-big-lessons-from-history/

Is value investing dead?

The performance of value stocks is the worst it’s been in nearly 200 years.

The first problem with the above is that it doesn’t accurately portray the performance of actual value investors. What we are seeing here is the performance of the value ‘factor’. In this case, the value factor is measured using dividend yield between 1825-1871, price-to-earnings between 1871-1938 and book-to-market from 1927-2020. 

In other words, it portrays a simplistic view of how value stocks have actually performed over the last 200 years. It assumes that value stocks all fit into a neat category and by definition have a low p/e, p/b or high dividend.

As you probably know, there is a big difference between factor investing (which seeks to find small edges from financial indicators) to value investing which generally seeks to buy high quality companies for less than their intrinsic value.

https://decodingmarkets.com/is-value-investing-dead/

For building a solid long term portfolio, look at subscribing to www.intelsense.in long term advisory.

For technofunda investing and positional trading, subscribe to our Hitpicks advisory service on www.intelsense.in

For momentum trend following systematic trading, subscribe to Quantamental at www.quantamental.in 

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. 

I especially try to not post Corona related articles as that is all one gets to read in all traditional media.

If you like this collection, consider forwarding it to someone who you think will appreciate.

Has our luck finally run out?

The global economy has been extraordinarily lucky for 75 years. Food and energy have been cheap and abundant. 

In our complacency and hubris, we attribute this to our wonderful technologies, which we assume, guarantee us permanent surpluses of energy and food. The idea that technology has reached hard limits or that it could fail doesn’t occur to us. 

We’ve taken good luck to be our birthright because it’s all we’ve known. We attribute this good fortune to things within our control — technology, wise investments and policies, etc.

We are woefully unprepared for a long run of bad luck. My sense is the cycles have turned, and the good luck has drained from the hour-glass. Energy and food will no longer be cheap and abundant, our luck in leadership will vanish, and our vaunted technologies will fail to maintain an abundance so vast that we can squander the finite wealth of soil, water, resources and energy on mindless consumption.

https://dailyreckoning.com/has-our-luck-finally-run-out/

Lots of Overnight Tragedies, No Overnight Miracles

The most important things come from compounding. But compounding takes a while, so it’s easy to ignore.

New technologies take years or decades for people to even notice, then years or decades more for people to accept and put to use. Show me a new technology that was immediately recognized for its full potential and instantly adopted by the masses. It doesn’t exist. A lot of pessimism is fueled by the fact that it often looks like we haven’t innovated in a decade because it takes a decade to notice innovations.

Same for economic growth. Real GDP per capita increased eight-fold in the last 100 years. America of the 1920s has the same real per-capita GDP as Turkmenistan does today. 

Same for investments. Netflix stock returned 35,000% between 2002 and 2018. But it was below its previous all-time high on 94% of days, which made the progress easy to ignore, and the number of investors to actually hold Netflix from 2002 to 2018 round to zero.

Growth always fights against competition that slows its rise. New ideas fight for attention, business models fight incumbents, constructing a building fights gravity. There’s always a headwind. But everyone gets out of the way of decline. Insiders might try to stop it, but it doesn’t attract masses of outsiders who rush in to push back in the other direction like progress does.

https://www.collaborativefund.com/blog/lots-of-overnight-tragedies-no-overnight-miracles/

The need for an antilibrary

Tsundoku is a beautiful Japanese word describing the habit of acquiring books but letting them pile up without reading them. I used to feel guilty about this tendency, and would strive to only buy new books once I had finished the ones I owned. However, the concept of the antilibrary has completely changed my mindset when it comes to unread books. Unread books can be as powerful as the ones we have read, if we choose to consider them in the right light.

The goal of an antilibrary is not to collect books you have read so you can proudly display them on your shelf; instead, it is to curate a highly personal collection of resources around themes you are curious about. Instead of a celebration of everything you know, an antilibrary is an ode to everything you want to explore.

Remember that knowledge is a process, not a possession. In addition, building an antilibrary is an investment in yourself which should stay within your means. Even if you only have 3-5 books you haven’t read on your shelf, this is already a great step in expanding your intellectual horizon.

https://nesslabs.com/antilibrary

The story of Suguna Foods

B. Soundararajan, chairperson of Suguna Chicken, talks about building a billion-dollar company. Suguna Foods Pvt. Ltd is the largest company in commercial poultry farming in India, with an annual revenue of nearly a billion dollars.

https://lifestyle.livemint.com/news/big-story/how-two-brothers-from-coimbatore-created-india-s-biggest-poultry-company-111603377035018.html

Are vitamins a marketing a scam?

Today, there’s an explosion of vitamin startups that operate on the idea that vitamins can work their wonders for most anyone. Vitamins are vital, but most of us get the ones we need in our own diets. 

Eliseo Guallar, a professor at Johns Hopkins, sees vitamins as offering most people a “false sense of protection” and marvels at Americans’ commitment to taking them despite a lack of evidence that they should. 

Most are probably neither helpful nor harmful (he says, though, that some can be iffy in high doses, like vitamin E, which might increase the risk of prostate cancer).There are also many instances of supplements containing unapproved and potentially harmful ingredients.

https://slate.com/human-interest/2019/03/vitamins-careof-marketing-not-necessary-wellness-evidence.html

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The markets are at an all time high, should I invest now or wait?

Running an advisory for the last year and a half, I have had the opportunity to interact with a lot of investors. One question that keeps cropping up from time to time and has increased in the last few days is, “The markets are at an all-time-high, should I invest now or wait for it to fall?”

Here is what I usually tell them:

Mismatch of timeframes

One of the biggest mistakes we make is looking at the market through a short term lens when we are trying to invest for the long term. We say we want to invest for the long term, implying atleast five to ten years but keep looking at the markets on a day to day basis.

Two main drivers – FOBI & FOMO

Investors are driven by two primary thoughts – i) the fear of loss (FOBI – fear of being invested) and ii) fear of missing out (essentially greed).

When markets are falling people are scared about losing money in their investments. They try to look the other way or panic into selling at the most inopportune time.

When the markets are rising people become greedy and scared at the same time. Greedy because they want to participate in the gains. Scared because of their past experience of losing money in the markets, they are afraid it would be the same again.

Future is uncertain and unknowable

No one knows what tomorrow brings. All the great gurus use different techniques to interpret the conditions of the present and try to extrapolate to the future. They can use varying tools to do this – fundamental analysis and technical analysis are the two most prominent ones. People do use other tools as well, like macro analysis, astrology, numerology etc. The main point is no one knows.

Just as an example, when Bajaj Finance was at 2000 in late May 2020, investors were waiting for it to go to 1000. Or that they will buy it when it went to 1200-1400. Neither prices came. Today it is 4000+.

Invest regularly

If that is the fundamental truth, then the best course of action is to be conservative, prudent and systematic. That is why I like the concept of SIP (systematic investment plan). You invest NOW. You don’t wait for a better day. Because you never know if tomorrow will be a better day or worse.

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Disclaimer: Abhishek Basumallick is the Head of the equity advisory www.intelsense.in for long term wealth creation and a pure quant focused newsletter at www.quantamental.in. The blog posts should not be construed as investment advice. Please do your own due diligence before investing.