Wit. Wisdom. Value Investing.
People come in different shades, and managers are people.
Here are three different types of management (there may be more, but let’s go with these three for now), and my thoughts on how you may want to deal with them when it comes to investing in the businesses they manage.
Every Saturday, I plan to send out this special post with a few ideas I am reading and thinking about. Plus, a question I am meditating on.
If you wish to receive this post – apart from others I write regularly on investing, decision making, behavioral finance – please sign up below.
Book I’m Reading – A More Beautiful Question
Since early childhood, most of us learned that our parents did not like us asking many questions and that only authority figures – most grown-ups – had the right to ask them. The result was that we stopped questioning things and accepted what we saw, heard, and were told with meek acceptance.
Sadly, this approach worked well in the industrial era, but proves futile in the knowledge era, because it compromises our ability to think and understand deeply.
The company WeWork has been in the recent news for a lot of reasons — many of them not so comforting for the company’s private investors. Those who haven’t heard of WeWork or don’t know much about it, here’s a primer on Wework’s business model.
In one line, WeWork leases out large office spaces, upgrades them, makes them look cool and upscale, and rents them out on per seat basis to either individuals or other companies. In case you’ve heard of the term coworking spaces, WeWork is that.
[Read more…] about Of Good Stories and Bad Businesses
Businesses die, like we do.
However, in contrast to us (I mean, humans…because some bots and aliens may also be reading this post) gradually increasing our average life expectancy over decades, more businesses are dying faster than any time in history.
While there is no real research done on Indian businesses, as per Credit Suisse, the average life span of S&P 500 companies in the US, which stood at 60 years in the 1950s, has now fallen to under 20 years.
The biggest culprit for this is the disruptive force of technology, which is killing off older companies earlier and at a much faster rate than decades ago.
Anyways, today’s post is not about what businesses can do to stave off their deaths, which is mostly inevitable in these rapidly changing times.
I wrote yesterday about five ways to destroy wealth in the stock market.
As an antidote, and especially as you may be sailing through the vicissitudes of ecstasy (after seeing your stocks surge yesterday) and, at the same time, misery (for not buying more stocks before yesterday), today I share with you one way to win at the game of investing, or at anything in life.
That way, my dear friend, is of equanimity, which is calmness and composure, especially in a difficult situation.
Indian scriptures define it better as samabhaav, which means “sameness of things” or samatvam, which means “evenness of mind.”
[Read more…] about How to Win At Investing (And At Anything in Life)
It’s common if you are wealthy to worry about losing your fortune due to forces beyond your control. Like market meltdowns or economic stagnation.
But what many of us don’t realize is that our own behavior may be the root of significant losses.
Yesterday did not start on a good note for me.
I broke three cups.
Sunday is when I usually prepare tea for the house. As I was pulling out three teacups from the cabinet, all with a single hand while holding the cabinet door with another, one of them slipped.
I watched, aghast, wanting time to stop. But it didn’t. In fact, it seemed to move faster. The cup was lost.
However, if that was not all, as I vainly attempted to catch it in that millisecond, the other two cups also dropped out of my hand.
All three were gone.
As I was cleaning up the mess, a realization struck. Maybe the second-best thing for me to do to save the two other cups was to let the first one go. The best thing, of course, would have been to not try pulling them out of the cabinet with one hand.
Life teaches us lessons almost all the time. We only need to observe well, and sometimes be prepared to hear the sound of breaking glass.
[Read more…] about Doing the Work is NOT EnoughNote: This is an excerpt from the article Where Do Great (Investment) Ideas Come From, which I wrote for the May 2015 issue of our premium newsletter, Value Investing Almanack. To read the complete article and our vast archives spanning 4+ years, please click here to subscribe.
Consider that you are looking to buy a stock and the two that you come across on your screen are, say, Company A and Company B. Here are a few data points about the two companies, which are the only factors you would look at while making your decision. Look at them and think which one you would rather purchase –
January 11 2013 was a sad day for the Internet world. That day, Internet pioneer and open information activist Aaron Swartz committed suicide at a young age of 26.
Swartz’s “crime” – he had logged into JSTOR (Journal Storage), a database of scholarly articles, and rapidly downloaded those articles with the intent to make them public.
He didn’t “hack” the network to secure those downloads. MIT is anyways an open network.
He didn’t crack any special password system to get behind JSTOR’s digital walls. All he did was figure out how JSTOR was filing the articles that he wanted and wrote a simple script to quickly gather those articles and then copy them to his computer.
If Swartz had lived to be convicted of the charges against him, he either had to accept the label of a criminal and go to jail for 50 years or fight a million-dollar lawsuit.
Aaron decided to take a third option. He hanged himself!
Here is my attempt to answers a few key questions I have received from Safal Niveshak readers on the current turmoil in the stock market.
You won’t find perfect answers below, but this is just my attempt to help you get over your fears, which may otherwise lead you to act in haste, which can cause some damage to your process of long term wealth creation.
Let’s start right here.
1. Why is the market crashing?
It hasn’t crashed…so far! The BSE-Sensex is down just 6% from its peak this year. BSE-Smallcap is down 14%. BSE-Midcap is down 11%. This isn’t a crash!
If you think it is, you maybe be suffering from ‘denominator blindness’, which is the tendency to focus on the absolute number then the percentage decline. Or you just seem to have been spoilt by rising markets over the past few years and were not investing in 2008 when the last real crash happened. That was painful for people who experienced it with their money (and not just their eyes and ears). We have not seen anything like that since then.
[Read more…] about Stock Market Crisis: Your Big Questions…Answered