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. If you like this collection, consider forwarding
it to someone who you think will appreciate it.
Slow down to make better
When the product of
your job is your decisions, you might find yourself wanting to be able to make
more decisions more quickly so you can be more productive overall. Chasing
speed is a flawed approach. Because decisions—at least good ones—don’t come out
of thin air. They’re supported by a lot of thinking.
You’re still going
to need to schedule time to do nothing but think. You can’t force yourself to
think faster. Our brains just don’t work that way. The rate at which you make
mental discernments is fixed. Speeding up often results in poor decisions that create
future problems. The reason more pressure doesn’t mean better productivity is
that the rate at which we think is fixed. We can’t force ourselves to start
making faster decisions right now just because we’re faced with an unrealistic
The dilemma of CRISPR
biochemist had helped to invent a powerful new technology that made it possible
to edit the human genome—an achievement that made her the recipient of a
Nobel Prize in 2020.
The innovation was based on a trick that bacteria have used for more than a
billion years to fight off viruses, a talent very relevant to us humans these
days. In their DNA, bacteria develop clustered, repeated sequences (what scientists
call CRISPRs) that can recognize and then chop up viruses that attack them. Dr.
Doudna and others adapted the system to create a tool that can edit DNA—opening
up the potential for curing genetic
diseases, creating healthier babies, inventing new vaccines, and helping humans
to fight their own wars against viruses.
The supposed promise
of CRISPR is that we may someday pick which of these traits we want in our
children and all our descendants. It took nature millions of years to weave
together three billion base pairs of DNA into a complex—and often imperfect—way
to permit all the wondrous diversity within our species. Are we right to think
that we should now edit that genome to eliminate what we see as imperfections?
Will we lose our diversity? Our humility and empathy? Will we become less
flavorful, like our tomatoes?
Lower your expectations for
a happier life
In the book
Engineering Happiness, economists Manel Baucells and Rakesh Sarin cite the
fundamental equation of wellbeing: happiness equals reality minus expectations.
I’m sure you’ve all heard this notion before.
- If you expect more from life
than you currently have, you’ll be unhappy.
- Conversely, if your current
experience exceeds your expectations, you’ll be happy.
So, just as you can
increase your saving rate by improving income and/or lowering expenses, you can
deliberately increase your happiness by improving your circumstances and/or
lowering your expectations. But it’s usually easier to lower your expectations.
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
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.
You have to be on your toes,
even if you are a very long term investor
Good businesses by
definition earned good returns on capital, but the names of those businesses
change over time. So when I look back and think about a company that actually
fits the test of being a good business today, with the way that the world is
changing and the way that the pace of change is accelerated and the forces
unleashed by technological change, there are businesses that were fine
businesses five, 10, 20, 30 years ago that aren’t anymore.
So you always need
to be on your toes and you always need to be thoughtful about what businesses
are in fact fit that definition of good businesses or not, because returns on
capital typically don’t go straight line. They’re either getting better or they’re
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