The One Percent Almanack

Wit and Wisdom on Investing, Business, and Life

Picking Stocks Like a Mathematician

Have you ever noticed that finding an available spot in the multilevel car parking in any mall or shopping complex is an interesting exercise in mental maths? Let me explain.

Whenever I enter the parking area, I often try to optimize, i.e., find a spot near the lift lobby/staircase. Which means the moment I enter the parking area, I have to forego the easily available spots and keep driving towards the lift lobby and then hope that there’s a spot available near it. If there isn’t, then I would have to drive up to the next floor, which is kind of worse than the case where I would have taken the first few available spots near the parking entrance. So how many first available spots should I pass before I decide to stop searching?

It turns out that mathematicians have spent centuries thinking about this class of problems. They call it The Optimal Stopping problem.
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Behaviouronomics: The Case of Missing Bullet Holes

During World War II, the United States created a classified program called The Statistical Research Group (SRG). Its purpose was to help the US army solve problems using equations and formulae. In other words, SRG was into wartime math.

One interesting problem military gave SRG was about making sense of bullet holes in American planes. When those fighter planes came back from the battle, they were usually covered with bullet holes inflicted by the enemy guns. The military wanted to figure out the most optimum way to put the armor on the plane.

Well, couldn’t they armor the whole plane?
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It’s Not Supposed to Be Fair

In 1999 when Warren Buffett bought a 75% stake in MidAmerican Energy Holdings Company, David Sokol was its CEO. He retained his position till 2008. Apart from managing MidAmerican, Sokol played a crucial role in turning around Berkshire’s other investments like NetJets and Johns Manville. Over the years he established a reputation inside Berkshire Hathaway as Mr. Fixit.

In his annual letters, Buffett often referred to Sokol as a terrific manager, a brilliant dealmaker and a huge asset to Berkshire. In his 2008 letter, he wrote —
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Special Report: 27 Ideas on What Doesn’t Work — Part Four

This is the fourth leaf of the multi-part series based on Peter Bevelin’s excellent book — All I Want to Know Know is Where I’m Going to Die, So I’ll Never Go There. The goal is to cover 27 insights on “what should be avoided” in business, investing, and in life.

The greatest — and most robust — contribution to knowledge consists in removing what we think is wrong — subtractive epistemology, writes Nassim Taleb in his book Antifragile.
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Investor Insights: Abhishek Basumallick

Abhishek is the founder and chief investment advisor at Intelsense Capital (www.intelsense.in). He is a value investor with nearly two decades in the market. He is a keen observer of the economy and shifts in technological trends across industries. He is a proponent of behavioural finance and a long-term orientation while investing.

In this interview, Abhishek shares his evolution as an investor, key lessons learned, his investment process, and how he tries to minimize decision making mistakes.

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