Archives for June 2018

The Paradox of Knowledge

Tourist: This is a dangerously steep road with a sharp bend. Why isn’t there a hazard sign for motorists to slow down?

Guide: We had a warning sign untill yesterday. But since accidents were rare, officials concluded that the spot isn’t that dangerous after all. So they removed the sign.

Tourist: Don’t you think the rarity of the accidents was precisely because of the warning sign?

Guide: Ugh..

Amused at the stupidity of the officials? That’s because it’s easy to spot the cause and effect relationship between ‘presence of warning sign’ and ‘frequency of accidents.’ You can test the hypothesis. Remove the warning sign and if too many cars start plunging down the valley, there we have it – a clear correlation between an action and its consequences.

High Quality Vs Low Price

If you pay peanuts, you get monkeys. ~ Old adage

If you remember the stock market crash of 2008, you also remember that it spared almost no stock. Companies, even the well-managed ones, lost half or more of their market capitalization in few months.

As an example, Pidilite (makers of Fevicol), which was one of those extremely well-managed businesses then, lost 55% between December 2007 (just before the crash started) and March 2009 (the bottom). Titan and HDFC Bank, two other stalwarts, lost 50% each. In short, the crash was like a bad dream for people even in these marquee stocks.

But for those who held on to their nerves, and to these stocks, the next decade was about to turn into a beautiful dream.

As an example, assume you were owning Pidilite near its peak in December 2007 and went into a deep sleep that continued till today (June 2018). Your return from the stock would have been around 1,000% (CAGR of 26%) over this decade!

How Much is Enough?

As I was talking with my daughter Kavya about the importance of making a living doing work she loves, and saving and investing well, she asked a question that trumped me. I was not prepared for it.

“How much is enough, Papa, to live a happy life?” she asked.

Kavya’s question reminded me of a recent post I did about my talk to a group of friends. The focus of my talk was on a few important questions I have tried to seek answers to at various stages of my life, and that have helped me tremendously in choosing a path that, when I look back at, I am glad I chose.

One of the questions that I talked about was – How much is enough?

[Read more…] about How Much is Enough?

Feynman’s Hack and the Map of the Cat

Richard Feynman, a celebrated scientist and the winner of Nobel prize in Theoretical Physics, was infamous for barging into any classroom (unrelated to Physics) in his university. He would then ask questions and make his fellow professors uncomfortable.

One day Feynman decided to attend a Biology class. Being aware of Feynman’s history of mischief, the Biology professor posed a condition to discourage him. Feynman could attend the class provided he would do all the assignments and write research papers like everyone else attending that class. To the professor’s surprise, Feynman agreed.

Feynman’s first assignment required him to study the nervous system of cats. So he went to the librarian in the biology section and asked her if she could give him a map of the cat.

“A map of the cat, sir?” she asked, horrified. “You mean a zoological chart!”

The Most Important Question We Never Ask

A few years ago, the key executives of Disney summoned a study of their theme parks to figure out what kids found most absorbing.

Were they more enticed by Mickey and Minnie Mouse, or were they more in awe of Cinderella’s castle? Were they attracted more by the sweet-smelling snacks or colourful toys that were sold at the parks?

The study revealed that it wasn’t the Disney magic that captured the young children’s attention the most. Instead, it was their parents’ cell phones, especially when the parents were using them. And because the parents were always staring at their phones, the kids wanted to as well – even when they were surrounded by giant mice, spinning teacups, and the magic of pumpkin turning into a carriage.

Today, more of us are hooked to our devices, which in turn keep us hooked to work…and away from the more important things in life. An average American spends over two hours on his or her smartphone every day.

An average Indian smartphone user spends almost three hours every day on his or her device. We check them first thing in the morning, and often the last thing at night.

Now, what are the consequences of such an addiction towards cell phones?