Book Worm

The investment management business is based on a single basic belief: Investors can beat the market. Unfortunately, when these investors are themselves the market they cannot, as a group, outperform themselves. They’re playing a loser’s game.

Good sense of humour and investment acumen don’t normally go hand in hand. Apart from Warren Buffett there are very few value investors who possess all the three qualities of candour, straight talk, and good humour. Charlie Ellis is one of them.

Ellis is a strong proponent of index funds. According to him, for an individual investor the best strategy to compound wealth over the long term is to shun the active money management and go with index funds. I don’t personally agree that index fund, especially for those who are willing to invest few hours every week in learning the game, is the right choice for all investors. Nevertheless, I find Ellis’ arguments very compelling.

Charles Ellis wrote a paper in 1975 which popularized the concept of loser’s game. The paper talked about how the approach taken by good and bad tennis players is also seen in investing. Ellis’ article was based on Dr. Simon Ramo’s research. The idea was later adopted into this book called Winning The Loser’s Game.

Loser’s Game

Dr. Ramo, in his book Extraordinary Tennis for the Ordinary Tennis Player, argues that in expert tennis the ultimate outcome is determined by the actions of the winner. Professional tennis players stroke the ball hard with laser-like precision through long and often exciting rallies until one player is able to drive the ball just out of reach or force the other player to make an error. These splendid players seldom make mistakes.
[Read more…] about BookWorm: Winning The Loser’s Game

Jason Zweig shows what happens in your brain when you think about money and tells investors how to take practical, simple steps to avoid common mistakes and become more successful.

Jason Zweig is an investment journalist and a long time investing columnist for Wall Street Journal. He is best known for editing and adding commentary to the revised edition of Benjamin Graham’s investment classic The Intelligent Investor. Graham’s book, considered as investing bible by many, was first published in 1949 and stays on top of every value investor’s reading list. In his commentary, Zweig has made Graham’s principles easier to understand and implement.

Your Money and Your Brain is Zweig’s attempt to demystify the subject of behavioural economics. The hypothesis that our emotions interfere with our rational thinking isn’t a hypothesis anymore. Zweig writes –

… over the past few years, scientists have made stunning discoveries about the ways the human brain evaluates rewards, sizes up risks, and calculates probabilities. With the wonders of imaging technology, we can now observe the precise neural circuitry that switches on and off in your brain when you invest.

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Behavioural biases are so deep wired in our brains that it takes tremendous will power and intelligent hacks to overcome its effects. This little book is a great reminder to all of us lest we become complacent and repeat the same mistakes.

Success in investing doesn’t correlate with IQ once you’re above the level of 100, writes Warren Buffett, “Once you have ordinary intelligence, what you need is the temperament to control the urges that get other people into trouble in investing.”
[Read more…] about BookWorm: The Little Book of Behavioural Investing

Today, anyone can be in business. You can do it without working miserable 80-hour weeks or depleting your life savings. That’s because tools that used to be out of reach are now easily accessible. Rework is about a new paradigm for anyone who’s ever dreamed of building something.

This is one book which can prove to be risky for you especially if you’re into a job and contemplating doing something of your own. I personally know few people who got so inspired from the book Rework by Jason Fried and David Hansson, that they actually quit their job. So before saying anything, let me issue this warning – read this book at your own risk. And let me also tell you this – ignore the book at your peril. 

The authors are people who run one of the most unconventional software company in the world – 37signals – known for their innovative products. It’s a company which has only sixteen employees who almost never see each other and are spread across 8 cities on two continents. And for the information of techies who are reading this, David Hansson is the creator of Ruby on Rails, an open-source web framework on which hundreds of thousands of web applications have been built – including Twitter.
[Read more…] about BookWorm: Rework

A book about Halo Effect and eight other business delusions that deceive managers. It attempts to answer the question why is it so hard to understand the high performance of an organization or individual.

Rajiv Bajaj, MD of Bajaj auto, said this in one of his talks –

I joined the company [Bajaj Auto] twenty years back. In my college I was trained to think ‘Just in Time’ because it was supposed to be one solution for all the problems. And then somebody said, Just in Time is not enough. They said there must be Kaizen, World class manufacturing, Toyota production system, Kawasaki system, automation and robotics. Then they said you must also know CAD, CAM, simultaneous engineering, re-engineering, six-sigma, TQM, and you must wear six hats, follow seven habits, look for blue oceans, be a bit of a maverick and indulge in management by walking around. Every time I learnt something I found myself back at the starting point. There was always the new book on the shelf, and there was always the new consultant on the seminar circuit. And these guys would do anything to keep themselves in demand and keep all of us confused. So I decided to ignore all of these.

Rajiv Bajaj turned around Bajaj Auto from a loss making company in the year 2000 to the most profitable auto company in world and it’s pretty clear from his talk that he didn’t do it by listening to those management experts and celebrity CEOs who claim to have the next new thing.
[Read more…] about BookWorm: The Halo Effect