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.
The interconnectedness of
financial systems
Many people did not
realise how interconnected the financial system was. For instance, brokers in
the equity market, who rely on customers buying and selling, did not realise
how much of this trading business was driven by leveraged investors in the debt
market. The brokers were always good at creating noise, but now it is very
quiet on the trading side. But we do know that the City never stays the same
for very long. History suggests that finance will always go through cycles. My
model suggests we tend to overweight recent events, and tend to play down the
longer-term, historical context.
Specific curiosity is what
makes the difference
Curiosity predicts
creativity when it is deployed within narrow parameters, to solve a particular
problem or puzzle – or, as scholars term it, specific curiosity. Creativity
scholars usually focus on the curiosity that freely flits from subject to subject,
tracing novel trajectories as it goes. Specific curiosity is more discomfiting,
resembling an itch to resolve a highly localised point of uncertainty or
challenge.
This form of
curiosity can be harnessed for creative purposes through a technique known as
idea linking. When people are high on specific curiosity, they don’t just
generate whatever ideas come to their mind randomly. Rather, they would have an
initial idea and their next idea would be built upon the initial idea without
abandoning it.
The idea that
stepping outside your comfort zone is a good way to liberate the creative
juices provided the context is sufficiently forgiving
Do less to achieve more
To “do less” is to
slow down. Focus on one activity at a time. Do less total activities. Be
willing to pass through occasional interludes of full non-productivity. To “do
better” is to direct your focused energy toward quality activities, when
possible. Finally, to “know why” is to get at the very core of the deep life
mindset. Working backwards from your values to determine your activities
creates a lifestyle dramatically more meaningful than working forward from
whatever seems appealing in the moment. It’s the difference between resilience
and anxiety; satisfaction and distraction.
The deep life is not
an ambitious one-shot goal, like completing a marathon, that you work hard at
until you one day obtain it all at once. It’s a state of being with which you
become increasingly comfortable. A process that starts with your mind.
Role of luck in our lives
An interview worth reading on the role of luck in our
lives.
The whole process of
constructing life narratives is biased in ways that almost guarantee that
people won’t recognize the role of chance events adequately. So, you’ve been
successful, you’ve been at it 30 years. It’s true that you’ve worked hard all
that time, you got up early, you put in a lot of effort, those memories are all
very plentiful and available in your memory bank. You’ve solved lots of
difficult problems. You remember examples of those, too. You know the
formidable opponents that you’ve vanquished along the way. How can you forget
them? So, if somebody says, “Why did you
succeed?” those things are going to get top billing in your story.
Maybe there was a
teacher who helped steer you through trouble in the 11th grade. You don’t
remember that. Maybe you got a promotion early on when one of your colleagues
who were slightly better qualified had to turn it down because he had to stay
and take care of an ailing parent. You don’t remember that either. Then there’s
all this work on the asymmetry of memory.
You’re running into
the wind, you’re keenly aware of it every second. You turn the corner and the
wind is at your back. That’s good. You like that. But then two minutes into the
return course you’ve forgotten completely about the fact that you’ve got something
helping you along. Because a headwind is something that you have to work
actively to overcome, you almost can’t fail to notice it. But a tailwind helps
you along; it’s out of your field of vision mostly. You don’t think about it
because you don’t have to think about it.
The best appreciation is
when your competitors applaud
Over 20 years of
watching different businesses -- incumbents like Blockbuster and Walmart and
all these companies -- I’ve never seen such a good execution of the incumbent
learning the new way and mastering it.
Netflix CEO Reed
Hastings is a big fan of Disney+.
Disney announced its
flagship subscription video service, Disney+, has gained more than 50 million
subscribers in just six months since the service debuted in November. Hastings
called the rapid accumulation of subscribers “stunning.” Disney+ costs $6.99
per month and is the home for Disney’s large archive of movies, including
Marvel, Pixar, and Star Wars films, along with other original content.
“To see both the
execution and the numbers line up, my hat’s off to them,” Hastings said. “Great
execution, clarity around brand and focus really makes a difference.”
