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.
What we call
‘intelligence’ is as much about virtues such as honesty, integrity, and
bravery, as it is about ‘raw intellect’.
simply aren’t willing to accept answers that they don’t understand — no matter
how many other people try to convince them of it, or how many other people
believe it, if they aren’t able to convince themselves of it, they won’t accept
It’s also so easy to
think that you understand something, when you actually don’t. So even figuring
out whether you understand something or not requires you to attack the thing
from multiple angles and test your own understanding.
This requires a lot
of intrinsic motivation, because it’s so hard; so most people simply don’t do
Aging is mandatory, but
senescence is optional
EVERYONE WANTS TO
LIVE LONG, but no one wants to get old. So for centuries people have sought
ways to slow aging and defer death. Not long ago, quacks would have tried to
lure you to consume tobacco, mercury, or ground-up dog’s testicles to postpone
your eternal rest; today’s peddlers of immortality hawk human growth hormone,
melatonin, testosterone, mega-doses of vitamins, or alkaline food. For
millennia, however, the most sensible advice has always included exercise. Just
about everyone knows what countless studies confirm: regular physical activity
slows the aging process and helps prolong life. I doubt anyone was astounded
when Hippocrates wrote 2,500 years ago that “Eating alone will not make a man
well; he must also take exercise.”
The more physically
active women died at about one-third the rate of those who were unfit, and the
fitter men had mortality rates about one-third to one-fourth lower than those
who were least fit.
Aging is inexorable,
but senescence, the deterioration of function associated with advancing years,
correlates much less strongly with age. Instead, senescence is also influenced
strongly by environmental factors like diet, physical activity, or radiation,
and thus can be slowed, sometimes prevented, and even partly reversed.
The power of negative
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
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.
You can beat the fund
Investing is one of
those rare pursuits where amateurs can have an advantage over the
It happens in almost
no other field. If I competed against any professional sports person, I’d lose
every time. If I was asked to perform dentistry or heart surgery, I wouldn’t
know where to start. I don’t have the years of training needed to perform these
highly specialised tasks.
private investors, who know what they’re doing, out-perform the pros on a
investors bump up against liquidity restraints all the time. This is why most
professional investors tend to steer clear of very small businesses, or they
run excessively diverse portfolios to avoid owning too much of any one
business. The limitations of this approach should be evident.
fund managers can’t afford to have long time horizons. A year or two of poor
performance and they risk the sack. This problem is compounded by the
short-term behaviour of many private investors, who pile in to funds that have
recently performed well and sell those that are having a tougher time.
Short-termism is further fuelled by the incentive structures of professional
investors, which often do little to encourage long-term thinking.
Learning compounds due to
Memories are never
an exact representation of a moment in the past. They are not copied with
perfect fidelity, and they change over time. Some of our memories may not even
be ours, but rather something we saw in a film or a story someone else told to
us. We mix and combine memories, especially older ones, all the time. It can be
hard to accept the malleable nature of memories and the fact that they are not
just sitting in our brains waiting to be retrieved.
When we learn
something new, it’s against the backdrop of what we already know. All knowledge
that we pick up over the years is stored in memory. The authors suggest that
“how much you know in a broad sense determines what you understand of the new
things you learn.” Because it’s easier to remember something if it can hook
into context you already have, then the more you know, the more a new memory
can attach to. Thus, what we already know, what we remember, impacts what we
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