Blog – Value Investing Almanack – Safal Niveshak

InvestorInsights: Morgan Housel

April 20, 2017

Morgan Housel is a partner at The Collaborative Fund and a former columnist at The Motley Fool and The Wall Street Journal.

He is a two-time winner of the Best in Business award from the Society of American Business Editors and Writers and a two-time finalist for the Gerald Loeb Award for Distinguished Business and Financial Journalism. He was selected by the Columbia Journalism Review for the Best Business Writing 2012 anthology. In 2013, he was a finalist for the Scripps Howard Award.

Safal Niveshak (SN): Tell us a little about your background, how you got interested in writing and investing, and how you have evolved in these fields over the years?

Morgan Housel (MH): I started in college in investment banking. I always loved investing and knew I wanted to do it as a career. But the culture of investment banking totally put me off. I like to have time to think things through, and any culture that emphasizes 24/7 speed and fixed process over deliberation is one where I wouldn’t do well at. So, I moved on pretty quickly from that.

I then got into private equity, which I enjoyed. But this was summer of 2007, and global credit markets started freezing up, which is devastating for private equity firms that own highly leveraged companies. So, I needed to do something else.

BookWorm: What I Learned Losing A Million Dollars

April 15, 2017

There are as many ways to make money in the markets as there are people participating in the markets, but there are relatively few ways to lose money in the markets. For a majority of the people, all the losses come from the same few source. Jim Paul’s cautionary tale is a testimony to the importance of studying the patterns of failure than the ways of success.

The backdrop of this book is the true story of a trader called Jim Paul. His career in stock market started with a string of unusual successes that vaulted him from a dirt-poor country boy to jet-setting-millionaire. However, after 15 years of uninterrupted success, all of Jim’s wealth was wiped out in a matter of few weeks when he lost $1.6 million in a speculative trade. This devastating failure led him to intense self-reflection and discovery of some unusual insights about success and failure.
[Read more…] about BookWorm: What I Learned Losing A Million Dollars

Behaviouronomics: Illusion of Free Choice

April 10, 2017

We human beings like to believe that we are able to choose and have control over our own destiny. But the choices we make aren’t always an outcome of our free will. A new breed of people, called choice architects, are intelligently and subtly making choices for us, without our realization.

In 1908 when Henry Ford introduced Ford’s Model T, it changed the landscape of American lifestyle for ever. Model T was the first affordable automobile that opened travel to the common middle-class American. It’s probably one of the most successful car in the history of automobile industry. Model T, a result of Ford’s innovation in the assembly line manufacturing, remained in production from 1908 until 1927. It literally sold like hot cakes.

Model T was available only in black color, so when people started demanding more options in colour, Henry Ford told his customers, “You can have your car painted any colour that your want so long as it is black.”

For a moment, Ford’s customers thought that they were going to get a lot of colour choices but the very next moment the realisation set in – all choices led to the colour black. A clever play of words, isn’t it? This anecdote is a sarcasm on one of the most successful persuasion strategy employed by the marketing industry. It’s called illusion of free choice.

The Magic of Choice Architecture

In fact, illusion of free choice is at the heart of performing magic tricks. Ask any magician and he’ll tell you that magic, apart from being an art, is a science of how human brain works. A large part of any magic trick is planning, preparation and setting up the stage before your audience walks in.

Spotlight: The Art of Asking Smart Questions

April 5, 2017

A good question makes it clear that the questioner is willing to participate in the process of developing the solution. It exhibits problem-solving intelligence rather than passively waiting for an answer to drop from above. Whereas a bad question is an act of an intellectual dishonesty on the part of the seeker and a huge time sink on those who have to answer it.

Two hunters are out in the woods when one of them collapses. He doesn’t seem to be breathing and his eyes are glazed. The other guy whips out his phone and calls the emergency services. He gasps, “My friend is dead! What can I do?” The operator says “Calm down. I can help. First, let’s make sure if he’s really dead.” There is a silence, then a gunshot is heard. Back on the phone, the guy says “OK, now what ?”

Well, the guy was a hunter. What else can you expect from him? In fact, you would agree that the blame can’t entirely be put on the poor hunter. The operator’s question wasn’t very clever either.

There’s some truth to the saying – the quality of your questions determine the quality of solutions you get. Computer programmers very well know the theory of GIGO i.e., garbage in garbage out. It’s true with questions too. Good question begets good answer. Bad question attracts a bad answer.

Life 2.0: How to Be Happy and Get Rich

March 30, 2017

If I were to rank the books that changed my life, Poor Charlie’s Almanack would be right up there. Even after reading the book a few times, every time I turn its pages, I can feel a sense of wonder and amazement at the immense wisdom these pages carry.

Unlike what many people think, this book is not a ready reckoner on how to become a successful investor. In fact, it’s much more than that.

It’s a book on how to live a happy, sensible and rich life and in the process become a better thinker and investor. As you read through the book, some of Munger’s ideas will inspire you, and some will make you uncomfortable. But all will challenge you to think outside the box.

The third chapter of Poor Charlie’s Almanack captures “Mungerisms”, where Munger dispels hundreds of ideas on subjects ranging from life, investing, academia, financial engineering, accounting, money management business, and managements.

Here are a few of those ideas I have pulled out verbatim about being happy and getting rich. These ideas have inspired me for years, and I am sure these will inspire generations of people that read this book in the future.

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