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.
https://bigthink.com/personal-growth/stockdale-paradox-confronting-reality-vital-success
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.”
https://barackobama.medium.com/how-i-approach-the-toughest-decisions-dc1b165cdf2d
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.
https://timharford.com/2020/11/the-power-of-negative-thinking/
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.
https://www.nytimes.com/2020/03/12/business/david-rubenstein-carlyle-corner-office.html
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.”
https://www.calnewport.com/blog/2021/02/05/on-beethoven-and-the-gifts-of-silence/
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.
https://awealthofcommonsense.com/2021/02/what-if-interest-rates-dont-matter-as-much-as-we-think/
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.
https://fs.blog/2015/08/how-to-think/
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.
https://dariusforoux.com/i-dont-have-time/
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.
https://moretothat.com/multi-tasking/
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.
https://hbr.org/2009/10/the-six-mistakes-executives-make-in-risk-management
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.
https://www.akrecapital.com/the-art-of-not-selling/
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?
https://thereformedbroker.com/2013/07/28/how-much-time-do-you-have/
