Life

Though I consider myself somewhat spiritual, I’m not typically drawn to pilgrimages. In fact, the last major pilgrimage I undertook was nearly 40 years ago, at age 5, when I accompanied my grandparents on the Chaar Dhaam Yatra (four places of pilgrimage) in the mountains of north India.

I still have vivid memories of that trip, not because of the spirituality those places invoke but because the mountains have always attracted me. In fact, it may sound unusual, but whenever I am in the mountains, I have an eerie feeling that I belong there. The air and the water remind me that at some moment in time, I lived there.

Anyway, forty years later, I am starting on a different pilgrimage. This time, not in the mountains, but I have this feeling that the experience shall be the same – I will feel that at some moment in time, in a previous birth, I had been there.

[Read more…] about My Pilgrimage

Before beginning today’s post, I have a brief announcement to make.

I am organising in-person workshops on Value Investing in –

• Bengaluru: Sunday, 7th April
• Mumbai: Sunday, 14th April
• Dallas (US): Saturday, 27th April
• New York (US): Saturday, 11th May

If you are in or around these cities and wish to attend, kindly register here.

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How Little We Know

Daniel Kahneman, a groundbreaking psychologist and behavioural economist who taught me that it’s perfectly fine to say “I don’t know” when faced with difficult questions in life and investing, passed away recently at the age of 90.

His bestselling book Thinking, Fast and Slow introduced me to his piercing observation that we, as humans, are generally blind to our blindness.

He wrote, “We have very little idea of how little we know. We’re not designed to know how little we know.”

While succinct, the profoundness of these words extends far beyond their brevity.

Despite its remarkable abilities, our brain is inherently limited in what it can perceive, process, and understand. These limitations aren’t merely gaps in knowledge that can be filled with more information or education. Instead, they represent fundamental constraints on our cognitive abilities.

As Kahneman explains in his book, one of the most significant barriers to our understanding is cognitive biases, which are like mental shortcuts or rules of thumb that our brain uses to quickly make sense of the world around us. They can be helpful because they allow us to make decisions quickly without having to stop and think about every little detail. But these shortcuts aren’t always accurate, and sometimes, they can lead us to make wrong or irrational decisions.

Another key aspect of our cognitive limitation, as per Kahneman, is overconfidence. Most people tend to overestimate their knowledge and abilities. This overconfidence bias can lead to disastrous decisions, as people act on incorrect assumptions and flawed information, believing they understand more than they actually do. Overconfidence in our knowledge not only impedes learning but can also lead to significant errors in judgment.

Anyway, the question is: Now that we know the flaws in our cognition, can we do something about them to make better decisions?

Kahneman advised that the first step is awareness. Recognizing that our understanding of the world – of investing and outside of it – is inherently limited, and that we are prone to cognitive biases, is crucial. This recognition can cultivate humility and openness to new perspectives, reducing the likelihood of falling prey to overconfidence.

Another effective strategy is openness in seeking views from diverse people. Being a loner, I have a lot of ground to cover here, but I understand that this can provide a broader range of insights and ideas, helping to fill the gaps in our understanding. This diversity can act as a counterbalance to our individual biases and overconfidence, leading to more informed, balanced decisions.

Also, education and lifelong learning play a crucial role in mitigating our cognitive limitations. While we can never fully overcome these limitations, being a lifelong learner can help us make better, more informed decisions. The pursuit of knowledge and wisdom should be seen as an ongoing journey, not a destination.

Before I end, here’s the crux of it all. The recognition of our cognitive limitations, as highlighted by Kahneman’s work, is not a cause for despair but a call to action.

By acknowledging and addressing these limitations, we can make more informed decisions, evolve into becoming lifelong learners and, ultimately, move forward through the complexities of life with greater wisdom and humility.

As Kahneman advised, the journey toward understanding and wisdom is endless, but it enriches our lives and broadens our horizons in profound ways.

Life’s passing by too fast, or so it seems. I complete 45 years in my present state of existence today. That’s more than three-fifths of the average life expectancy of an Indian male.

Now, while spiritualists would want me to believe that I have existed from anadi (before the beginning of cosmos) and will exist till ananta (infinity), I see forty-five years as a good enough time to find some meaning in one’s life. At least, my rapidly greying hair and receding hairline help me realize that.

Now, while it amazes me that I’ve been around that long — I feel like I’ve barely begun (except when I look at the actuarial table).

[Read more…] about The 45th Lesson

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You must have heard of Peter Lynch, right?

If not for his stellar fund management career, someone may have recommended you his book One Up on Wall Street as the first investment book you should read.

I assume this because that is how I started my stock market career in 2003, by reading One Up, and starting to believe that not only was investing easy, but also that I could be a master at it.

How wrong was I! But that’s a story for another day.

Coming back to Lynch, in case you didn’t know, he was the manager of the Magellan Fund at Fidelity Investments between 1977 and 1990, and averaged a 29% annual return, consistently more than double the S&P 500 stock market index. During his 13-year tenure, Magellan became the best-performing mutual fund in the world, and its assets under management increased from US$18 million to $14 billion. In all, it was a fairytale story for Lynch and his investors.

But then something happened.

Lynch, at what most people would call the “peak” of his career, retired from work, at age 46. He just walked away.

And what was the reason?

As he talked about openly in an interview after his retirement, his workaholism was taking a toll on his family life, and so he decided to walk away.

Lynch found thousands of people supporting him in his decision to quit his career early. But I am sure there would have been an equal number of others questioning him for his ‘unsmart’ decision.

The pursuit of success and recognition is, after all, a universal aspiration. We yearn for the validation of our efforts, the affirmation of our abilities, and the rewards that come with achieving our goals.

However, as Lynch and many like him have shown, there are times when walking away from the ‘brightness’ and into the ‘shadows,’ becomes the most profound choice one can make.

William Green, whom I interviewed for the 21st episode of The One Percent Show, has this passage in his wonderful book Richer, Wiser, Happier –

Early in his career, Bill Miller (another legendary investor) asked Lynch for advice. Lynch told him that the investment business is so rewarding financially and intellectually that it attracts an overabundance of intelligent people. “The only way you can beat them is to outwork them,” said Lynch, “because nobody is just so much smarter than the next person.” Lynch told Miller that he stayed ahead of the pack by reading investment research while he carpooled to the office at 6:30 a.m., working after dinner and on weekends, and taking no vacations for years. When Miller asked if it was possible to slow down as you got older, Lynch replied, “No. In this business, there are only two gears: overdrive and stop.”

In 1990, months before he announced his early retirement, Lynch said this to reporters from Financial World –

I’ve worked every Saturday for seven or eight years – I mean seven in the morning. In the last six months I’ve started working some Sunday mornings at home. … I haven’t gone to a Celtics game in five years. … You think I enjoy coming in here on Saturday mornings? Don’t you think I’d rather be playing with my kids or doing something with my wife?

“I loved what I was doing,” he told Time magazine in 1991, “but I came to a conclusion … What the hell are we doing this for? I don’t know anyone who wished on his deathbed that he had spent more time at the office.”

Now, I am sure a voice from within you must be saying, “Oh, it is easy to walk away from success and recognition once you have already made it, and have enough money to take care of yourself and your family for the rest of life.”

Your observation is indeed valid. It’s true that having financial security can provide the freedom and flexibility to make choices that might not have been possible otherwise.

However, the wisdom of walking away from success and recognition, and most of all you have worked so hard to achieve, is not solely dependent on financial stability. It is also about realizing that material wealth and external validation, while important, do not always equate to a truly fulfilling and well-rounded life.

Even those who have achieved financial success often come to the realization that there are other, equally important aspects of life, such as personal well-being, family, and personal fulfillment, that need attention and nurturing.

Recognizing when to walk away from the constant pursuit of success and recognition, even when you have the means to sustain your lifestyle – like Lynch – is a reflection of a deeper understanding of what truly matters in life.

It is not just about having the means to do so, but also about choosing a life that is in harmony with your authentic self, regardless of your financial status.

And, by the way, ‘walking away’ is not always about a complete exit from the larger game you are playing.

Like, you can walk away from an investment opportunity that you believe may cost you sleepless nights – maybe, an expensive stock, or a questionable business – and still remain in the investing game.

Or you can walk away from a business deal that does not match up to your levels of integrity, and still remain in that business.

It’s all about the choices we make in life, that determine the paths our lives will take. And then, it’s all about standing with those choices if we continue to believe in them, instead of worrying about what the outcomes may be.

Walking away is not a surrender or a resignation but a conscious choice to reevaluate one’s priorities and regain the balance between ambition and the intrinsic values of love, health, and inner peace.

It is an acknowledgment that the pursuit of external markers of success should never eclipse the fundamental facets of our existence – our bonds with family, our physical and mental health, and our overall well-being.

And the best part? When you learn to walk away from things you think may kill you – financially, mentally, otherwise – you also survive to play the long-term game, in investing or in life. And survival, as we understand, is the only path to true success and happiness.

What else are you here for?

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I recently announced admission to the January 2024 batch of my most comprehensive classroom course in Value Investing titled – Value Investing Blueprint.

This residential course is scheduled to be held from 11th to 14th January 2024, at the campus of Pune-based FLAME University. The last date to apply is 10th December, 2023.

Click here to read more and apply if you are interested in joining this course.

Since it’s a classroom course, seats are limited.

The course will take you through the entire process of practicing value investing to identify long term wealth creating stocks. This includes helping you:

• Create the right value investing mindset and build a behavioural framework to avoid biases and create the right investment thought process.
• Assess business quality – separating good from gruesome
• Analyze financial statements to find well-performing businesses
• Calculate intrinsic valuations using various methods
• Identify competitive moats and whether they are sustainable
• Build a portfolio of sound, wealth-creating businesses

Click here to read more and apply if you are interested in joining this course.

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I have started work on a series of short videos – titled The Inner Game – to share my thoughts around investing, decision making, learning, and just the practice of trying to live a good life. You can watch them on my YouTube channel, including these recent ones –

• The Eyes See What the Mind Knows
• It’s Harder to Be Kind than Clever
• The Most Stupid Sin
• What We Possess vs What We Pursue
• A Story of Courage and Hope, the Charlie Munger Way

You can also find these and all past sessions on Apple Podcasts, Spotify, and Amazon.

Hope you like these and find some value. Please let me know your feedback and/or suggestions for improvement. Thank you.

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That’s about it from me for today.

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Stay safe.

Regards, Vishal

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