Book Worm

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

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.

[Read more…] about Bookworm: A Man for All Markets

Prof. Sanjay Bakshi once observed —

People in the investment community are often too judgmental about developments. They forget the Pari-mutuel nature of markets where the behaviour of others changes the odds. They indulge in first level thinking and don’t pause, reflect and ask questions like “and then what?” If the development is unfavourable, the pain avoidance mechanisms in their brains make them run away from a situation which is getting even more attractive because others are running away.

And Then What?

“And then what?” is a very important filter for robust decision making.

Every action has consequences: intended and unintended. No matter how carefully we plan, we can’t anticipate everything. We live in a universe governed by multi-variate cause-effect network. Focusing on one variable can almost always distract you from the unexpected side effects.

[Read more…] about 📚 On Filters And Rules – Part 3

We don’t really bother memorizing the facts and figures with google at fingertips, and we don’t need to. But when our misconceptions about truth are rooted in strong intuitions and the ubiquitous expert opinion, then we expose ourselves to a risk that’s hard to see.

Filters are like a defence mechanism. Defence against so called experts who are increasingly becoming dominant in our world. Anywhere you look, you find some expert dispensing his advice for us novices.

[Read more…] about 📚 On Filters And Rules – Part 2

Peter Bevelin’s book, All I Want to Know Is Where I’m Going to Die So I’ll Never Go There, is a compendium of life-changing wisdom. A must-have book for anyone who wants to avoid living a regretful life. Bevelin’s volume is based on the teachings of Charlie Munger.

On 1st January 2021, Charlie Munger turned 97 years old. Being a nonagenarian is a rarity, especially when the subject is a billionaire too. But Charlie Munger isn’t just a very-old-rich-guy, he’s also mentally the sharpest. Even at this age, in just a few seconds he can cut through the noisy balderdash and arrive at decisive insights that most other smart people would miss.

[Read more…] about 📚 On Filters And Rules – Part 1