Vishal Khandelwal

Behaviouronomics: How to Win Russian Roulette

June 30, 2021

If you’ve been a reader of Safalniveshak for sometime you’d already be familiar with the game of Russian Roulette. For those who aren’t, here’s a quick explanation.

In fact I’ll let Nassim Taleb, author of Fooled By Randomness, do the explaining –

Imagine you are offered $10 million to play Russian roulette, i.e., to put a revolver containing one bullet in the six available chambers to your head and pull the trigger. Each realisation would count as one history, for a total of six possible histories of equal probabilities. Five out of these six histories would lead to enrichment; one would lead to a statistic, that is, an obituary with an embarrassing (but certainly original) cause of death.

Bookworm: Why We Sleep

May 30, 2021

Imagine you were born in the era of our ancient forebears. I wouldn’t need to remind you that life as hunter gatherer wasn’t as safe as it is today. You would spend the day plucking fruits and digging roots. Some days you’d be chasing a rabbit and on other you’d find yourself being chased by a saber toothed tiger.

However, the biggest risk wasn’t your adventures during the day. It was the night. And it wasn’t the darkness that made you vulnerable. It was something something else. It was sleep.

Going to sleep was an open invitation to all sorts of nasty predators. It was equivalent to screaming, ‘Come, eat me!’
[Read more…] about Bookworm: Why We Sleep

Behaviouronomics: On Intelligence

April 30, 2021

Yogi Berra famously said, “In theory there is no difference between theory and practice, but in practice there is.”

Whenever one starts learning about a new field of knowledge or begins acquiring a new skill, the first confusion is always this — what’s the right combination of theory and practice?

You can devour a hundred books on swimming but nothing happens until you jump in the water. At the same time, just splashing around won’t get you anywhere unless you know the theory about how humans swim, how to move in the right way.

We’ve all acquired many skills over our life time. Some basic skills like speaking and walking are either biological or a product of our environment. Other skills which might have looked impossible for pre-historic man — like reading, writing, cycling, driving — are also so common today that we rarely pause to deconstruct how we acquired those skills.

Bookworm: A Man for All Markets

April 26, 2021

In the wider value investing circle, Ed Thorp doesn’t enjoy as much fame as Warren Buffett or Peter Lynch, but he is held in awe by traders as a polymath, mathematician, and an extraordinary hedge fund manager.

Thorp’s fund, from 1969 to 1988, posted an annual compound return of 19.1% before fees, and 15.1% after fees. Not only was Thorp’s return higher than S&P 500’s annual return of 10.2%, but was much less volatile. For the 230 months that the Fund was in operation, it had only three losing months and that too only an under 1% loss.

Unlike most money managers, Thorp began his career as an academic mathematician, but his story is one man’s quest for understanding the world through scientific thinking, problem solving and playing games modeled through probabilities.

Behaviouronomics: Of Parachutes, Road Safety, and the Second Wave

March 31, 2021

As the second wave of Coronavirus is sweeping across our country, it has left many perplexed. With more than 6.5 crore people vaccinated and the new normal of masks and sanitizers, why does the pandemic seem to be taking a U-turn?

I recently saw a news about a doctor lamenting, “I treated thousands of patients with Covid 19 for the last several months and never caught the infection. But within days of taking the vaccine, I became positive.”

How come? Is vaccine reducing the immunity? That’s absurd.

Well, we have a behavioural bias to explain the phenomenon and it’s called the Peltzman Effect. But before I get into that, here’s an interesting trivia —

Statistics reveal that even though skydiving equipment has made huge leaps forward for improving reliability, the fatality rate has stayed roughly constant when adjusted for the increasing number of participants.

Think about that for a minute and see if you can come up with an explanation.