Special Report

I have two stories for you today.

Mafias of Silicon Valley

In 2002, eBay acquired Paypal, an online payments company, for $1.5 billion. Unfortunately, the founding members and early employees of PayPal couldn’t adjust to the new corporate culture. Shortly after the acquisition, they left eBay. A number of these ex-PayPal employees worked together to form wildly successful companies in subsequent years. You may recognize some of these names – Elon Musk founded Tesla and SpaceX, Reid Hoffman created LinkedIn, and Steven Chen built YouTube. This group of PayPal alumni became so prolific that a new term was coined for them –PayPal Mafia.

Fortune magazine popularised the term when it published a photo of these former PayPal employees in gangster attire.

The PayPal Mafia (Image Source: Wikipedia)

But PayPal mafia wasn’t the first Mafia group of Silicon Valley. The history goes back to a time when the Silicon Valley didn’t exist.

<!–more–>

Want to Read More? This content is exclusive for members of Value Investing Almanack. Login to read if you are a member. Else, click here to subscribe.

I recently bumped into a college friend at the supermarket who told me how frustrated he was with his “fat body”. My interest was sparked when he told me how he has “tried everything” over the years but nothing worked. Curious, I wanted to know what “everything” was. Here’s the list as I remember it: several gym memberships, expensive personal trainers, exercise bike for home, tennis lessons, health retreats, and big weight loss targets.

Well, it didn’t take me long to discover that my friend –

• Liked the idea of physical change more than the practical reality of creating it;
• Had an aversion to discomfort;
• Was awesome at excuses and denial; and
• Didn’t persevere with anything for longer than four weeks.

I also learned that he had used his two-year-old exercise bike once (it’s uncomfortable), never went back for a second tennis lesson (his back hurt) and didn’t really enjoy the gym.

<!–more–>

Want to Read More? This content is exclusive for members of Value Investing Almanack. Login to read if you are a member. Else, click here to subscribe.

If I ask you, “Are you unhappy?” what kind of thoughts have I triggered in your mind?

For most people presented with this question, the mind invariably wanders off to some of the unpleasant episodes in life. There’s nothing to worry if this was a question asked in a happiness survey by an innocent volunteer. But such questions are typically framed by people who are in the business of persuasion or manipulation. This is a trick question which is designed to lead your mind precisely to those thoughts which the questioner wants you to think.

Robert Cialdini, in his new book Pre-Suasion, has termed this persuasion strategy as Target Chuting. He writes –

If I inquired whether you were unhappy in, let’s say, the social arena, your natural tendency to hunt for confirmations rather than for disconfirmations of the possibility would lead you to find more proof of discontent than if I asked whether you were happy there. This was the outcome when members of a sample of Canadians were asked either if they were unhappy or happy with their social lives. Those asked if they were unhappy were far more likely to encounter dissatisfactions as they thought about it and, consequently, were 375 percent more likely to declare themselves unhappy.

And the reason for such tendency is our good old confirmation bias. Its scientific name is positive test strategy, writes Cialdini, “But it comes down to this: in deciding whether a possibility is correct, people typically look for hits rather than misses; for confirmations of the idea rather than for disconfirmations. It is easier to register the presence of something than its absence.”

And once your attention has been drawn towards a specific set of thoughts, the mind tends to assign unnecessarily high weightage to those thoughts.

<!–more–>

Want to Read More? This content is exclusive for members of Value Investing Almanack. Login to read if you are a member. Else, click here to subscribe.

In our journey of sharing the investing wisdom with Safal Niveshak tribe, we’ve always highlighted the importance of reading books. We are an ardent subscriber to Charlie Munger’s idea of minimizing the stupidity and mistakes in life. And a big part of the quest to avoid mistakes is to learn from others’ mistakes. That’s where books come into the picture. They’re the best source of vicarious knowledge.

Reading books involves the use of eyes which engages a certain part of the brain which in turn exercises a specific section of neural machinery. However, when it comes to learning, one should be open to the idea of absorbing knowledge through multiple senses. Involving multiple senses fires up neurons in different locations of our brain. This creates the possibility of brand new connections between previously unrelated brain cells. These unprecedented linkages give you brain an enhanced ability to perceive the world and generate brand new insights.

Guy Spier, in his book The Education of Value Investor, mentions that someone gifted him an audio CD of Charlie Munger’s talk at Harvard on the 24 standard causes of human misjudgment. And there was an 18-month period, writes Guy, “during which this was the only CD in my car’s entertainment system.” He probably listened to Charlie’s talk hundreds of times.

So, to experiment with this idea, I have been trying to learn through my ears. One way to do that is to listen to the audio versions of the books. For that, I subscribed to Audible and listened to quite a few audio books. My experience with audiobooks led me to the conclusion that listening to biographies and fiction is quite enjoyable. And there are evolutionary reasons behind it. The technology of writing and reading came into existence quite late in the history of human evolution. The human brain hasn’t yet adapted naturally to the idea of learning things by reading. However, for millions of years, the knowledge was transferred from one person to another by narrating stories. So, sound was the primary mode of sharing and propagating information for majority of human evolution timeline.

Which confirms my personal observation about my inability to absorb any information in audio form if the content is not in a story format. The human brain was able to think about complex matters precisely because of the invention of written word. We learn to do complex algebra and calculus in school because the process involves delegating all the steps to paper. If you had to do it all in your head, 99.99 percent of the people would find it almost impossible. Our brains aren’t wired to do that.

<!–more–>

Want to Read More? This content is exclusive for members of Value Investing Almanack. Login to read if you are a member. Else, click here to subscribe.