Multi-Disciplinary Reading - Book Reviews

Fortune’s Formula, William Poundstone, 2006 - What a fascinating storyteller the author is! The narrative spans across decades over the common theme of embracing risk, teasing out the odds mathematically based on the relativity of randomness and betting - in casinos, wall street, in the mafia and in life. The way some of the characters like illegal bookie and mafioso Manny Kimmel resurface later towards the end of the book owning businesses like Warner Communications from owning parking lots would make this a fantastic Scorsese flick. In fact I had the mental image of reading the script of Casino/Goodfellas

Bulk of the book deals with Claude Shannon and Ed Thorp in their endeavors to develop an edge against the house, be it in blackjack through card-counting or in roulette through a device that could convey odds based tilt and speed of rotation and later on in the stock market. The importance of the geometric mean and Kelly criterion and how information becomes money (fantastic use of information theory and Kelly criterion to the markets) were the most beautiful parts of the book.

The fine art of position-sizing and portfolio rebalancing (half-Kelly bets, constant-proportion rebalancing, utility functions)is discussed in some serious depth here in the second half of the book, all in the context of work done by Thorp and Shannon. Not many books get the proportion of biographical and technical content right and also still weave a coherent narrative as good as this one does. 10/10

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The Psychology of Money, Morgan Housel, 2020 - This is a well-written behavioral finance book for those that don’t have time for a ‘thinking, fast & slow’ which is far more academic in comparison to the practicality of this book. This is behavioral finance for practitioners and by that measure, it covers everything you would need to understand from loss aversion, luck vs skill, utility, rationality and risk, manias, time horizons and compounding and long tails in life.

Some of the relatable parts I had highlighted in the book

  • On what Buffett didn’t do - He didn’t get carried away with debt. He didn’t panic sell during the 14 recessions he’s lived through. He didn’t sully his business reputation. He didn’t attach himself to one strategy, one world view, or one passing trend.

  • By age 10 the average person can lose roughly half the synaptic connections they had in their brain at age 2, as inefficient and redundant neural pathways are cleared out.

  • The people working on these tail projects that drive tail returns have tail careers (On FANG businesses)

  • Hours and hours of boredom punctuated by moments of sheer terror (piloting analogy to investing)

  • Doing something you love on a schedule you can’t control can feel the same as something you hate.

  • Reactance - People like to feel like they are in control - in the drivers’ seat. When we try to get them to do something, they feel disempowered. Rather than feeling like they made the choice, they feel like we made it for them. So they say no or do something else, even when they might have originally been happy to go along.

  • On Rockefeller - He rarely spoke, deliberately making himself inaccessible and staying quiet when you caught his attention. “He lets everybody talk while he sits back and says nothing”.

  • A poem Rockefeller would often recite went thus,

“A wise old owl lived in a oak,
The more he saw the less he spoke
The less he spoke, the more he heard
Why aren’t we all like that wise old bird?”

  • What you want is respect and admiration from other people, and you think having expensive stuff will bring it. It almost never does - especially from the people you want to respect and admire you.

  • Humility, kindness and empathy will bring you more respect than horsepower ever will (On buying expensive cars for societal approval)

  • Wealth is financial assets that haven’t yet been converted into the stuff you see.

  • People overestimate the number of calories they burned in a workout by a factor of four. They also then consumed, on average, about twice as many calories as they had just burned off. (Bill Bryson in his book ‘The Body’)

  • Learning to be happy with less money creates gap between what you have and what you want - similar to growing your paycheck but easier and more in your control.

  • One of the most powerful ways to increase your savings isn’t to raise your income. It’s to raise your humility (What a phenomenal thought)

  • Save for saving’s sake (Don’t have savings goals)

  • What is the return on cash in the bank that gives you an option of changing careers, or retiring early, or freedom from worry? (On the incalculable returns of savings)

  • Despite millions of years of evolution as a defense mechanism, no parent, no patient, few doctors, and certainly no drug company views fever as anything but a misfortune that should be eliminated.

  • People do not want the mathematically optimal strategy. They want a strategy that maximizes how well they sleep at night. (Reasonable > Rational)

  • I visualized my grief if the market went way up and I wasn’t in it - or if it went way down and I was completely in it. My intention was to minimize future regret (Harry Markowitz)

  • The most important driver of anything tied to money is the stories people tell themselves

  • The correct lesson to learn from surprises is that the world is surprising

  • The time between US recessions has changed dramatically over the last 150 years (longer and longer gaps between recessions) - heavy industry is more prone to boom-and-bust overproduction than service industries from the last 50 years.

  • People from age 18-68 underestimate how much they will change in the future (Daniel Gilbert’s research). Its the equivalent of a stranger making major life decisions for you.

  • Money chases returns to the greatest extent it can (Iron rule of finance)

  • Bubbles aren’t so much about valuations rising. That’s just a symptom of something else: time horizons shrinking as more short-term traders enter the playing field

  • Profits will always be chased. And short-term traders operate in an area where the rules governing long-term investing - particularly around valuation - are ignored, because they’re irrelevant to the game being played

  • Bubbles do their damage when long-term investors playing one game start taking cues from those short-term traders playing another (Identify what game you’re playing)

  • In 2007 we told a story about the stability of housing prices, the prudence of bankers, and the ability of financial markets to accurately price risk. In 2009 we stopped believing that story (narrative damage rather than tangible economic damage)

  • We own our house without mortgage which is the worst financial decision we’ve ever made but the best money decision we’ve ever made (Housel on his own financial decisions. Freedom from not being in debt better than numerical difference in returns. Reasonable > Rational again)

Lot of things in the book that were relatable to what I have been trying to do last few years, so there wasn’t much that was new but this is a book that read itself and those are generally the well-written ones. 9/10

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I read this book recently and thoroughly enjoyed it. Already marked it for re-read. I’m impressed by his conviction and clarity (Buying his own house without debt) of decisions.

Review of Pat Dorsey’s The Five Rules For Successful Stock Investing
Definitely one of the best beginner’s book, truly a DIY book.

Summarizing it below:

Chapter 1- The Five Rules for Successful Investing

  1. Do Your Homework-Unless you know the business inside out, you shouldn’t buy the stock. Sit down and read annual reports, check out competition, go through past financial statements.

  2. Find Economic Moats- It is used to describe a firm’s competitive advantage and allows companies to retain above-average levels of profitability for many years by fending off competitors. Question this exact thing to find the moat

  3. Have a Margin of Safety- The difference between the market price and our estimate of value is Margin of Safety.
    -The advantage of having a MoS is that if you overestimated the company’s prospects, you’ll have a cushion.
    -MoS should be larger for shakier firms and can be less (maybe 20%) for big firms.
    -If a company is trading at P/E of 30 and historically it has been trading between 15 and 33, you should be confident enough that the company’s outlook is better today than it was the past 10 years

  4. Hold for the Long Haul- In trading frequently, both the taxes and brokerage costs really begin to add up

  5. Know When to Sell- The key is to constantly monitor the companies you own instead of the stocks. When to sell:
    a. Did you make a mistake?- If you bought the stock for a reason that’s no longer valid or your initial analysis was wrong, sell it
    b. Have the fundamentals deteriorated?- After several years of success, maybe the fast-growing company has slowed down and cash is piling up, competition is eating away profits, no new investment opportunities etc
    c. Has the stock risen too far above its intrinsic value?- Even the greatest companies should be sold if they are overpriced
    d. Is there something better you can do with the money?
    e. Do you have too much in one stock?- Try not to make your investment in one stock be more than 10-15% of your portfolio

Chapter 2- Seven Mistakes to Avoid

  1. Swinging for the fences- Don’t load up your portfolio with all risky stocks
  2. Believing that it’s different this time- News like certain industries are now cyclical/ not cyclical from now on
  3. Falling in Love with Products- Palm made a great device that was bought by millions of people but the poor economics of the industry caught up in the end. Ask yourself “Is this a great business? Would I buy the whole company if I could”?
  4. Panicking when the market is down- Going against the market takes courage but you’ll do better as an investor when you seek out bargains when the market is down
  5. Trying to time the market- Biggest myth, no one can do that
  6. Ignoring valuation- Buy a stock only if you think its value is more than the current, not because some fool will pay more for it
  7. Relying on Earnings for the whole story- Many times, earnings can be cooked up and Cash Flow actually provides a stronger story. If CFO (operations) shrinks and earnings grow, there’s something fishy

Chapter 3: Economic Moats
-Judging a firm only by its past financial performance is very risky because success attracts competition and the company performs poorly

To analyze a company’s economic moat, follow these four steps:

Step 1: Evaluating Profitability:
–We are looking for firms that can earn profits in excess of their cost of capital
-Firms that look great can wind up performing poorly because big margins attract competition. Although analyzing moats is complicated, it is what makes it interesting and the following pointers help:

a. Does the firm generate FCF? How much?
FCF is basically the money that can be extracted every year without affecting the business. (FCF = CFO - Capex), next find FCF/Revenue to see for $1 revenue, how much is FCF, as a benchmark 5% or better is strong
b. Net Margins = (Net Income/Revenue) i.e how much profit the firm generates for $1 of revenue (above 15% is strong)
c. ROE = (Net Income/Equity) i.e how much profit the firm is generating per dollar of the capital that shareholders have invested (above 15% is strong)
d. ROA = (Net Income/Assets) i.e how efficient a firm is in translating assets into profits (above 7% is good)

*Consistency is important, so calculate these metrics for at least 5 years, 10 if you can. Also, these are rules of thumb, not hard-and-fast rules. Comparing firms with industry averages is a good idea and so is examining the trend in profitability metrics- are they getting higher or lower?

Step 2: Building an Economic Moat:
Next, we need to see why a firm has done such a great job of holding on to its profits and fending competition. Although being in an attractive industry can help, the strategy pursued at the company level is even more important. When you’re explaining the sources of a firm’s economic moat, the key thing is to never stop asking “Why?”. In general, there are five ways that an individual firm can build sustainable competitive advantage:

  1. Product Differentiation through better technology or more features- Simply by doing this, a company can only have an advantage for a short time. Also, generally these better features come at a high price, companies often limit their target market size.
    The lesson here is that although occasionally firms can generate excess profits by staying one step ahead, be wary of firms that rely solely on this factor for a sustainable advantage

  2. Perceived Product Differentiation- Think about Sony and Ford, both are well-known brands but failed to generate solid brands because customers simply won’t pay extra for a Sony Stereo or a Ford car because there isn’t really a product differentiation.
    Whereas think about Abercrombie & Fitch managed to get $25 for T-shirt and generate solid returns. The durability of a brand is a critical component and some brands are temporary but some are everlasting like Disney or Coca Cola.

  3. Driving Costs Down- Think of Southwest and Dell, which have lower costs compared to the competition because there isn’t much product differentiation in this commodity industry.
    Firms can create cost advantages either by better process (Dell, because it assembles computers after taking orders) or scale (like Intel, which has huge factories, or FedEx because it has huge fleets of truck to deliver parcel even in the most remote places)

  4. Locking In Customers- If a customer will have to spend a lot of time or money in changing a certain product/service, it is an advantage. Example Apple devices or Microsoft Windows

  5. Locking Out Competitors- Possible in case of Pharma Companies through patents or Casinos by having local agreement with state governments.
    Network Effect works well to lock out competitors in the case of eBay, where there are so many buyers and sellers that it’s difficult for competitors to replicate it also because of First Mover Advantage.
    Same in case of Western Union, which was the first company to help people move money, as it kept adding hundreds of thousands of locations worldwide with a growing number of agents, it’s difficult to beat it.

Step 3: How long will it last?
Think about an economic moat in two dimensions:
Width- How long can the firm sustain its profits
Depth- How much money the firm can make
Eg. Tech companies generally have deep moat but less wide

-Estimating a moat is tough, so for width, even categories such as none, few years and many years is useful
Step 4: Industry Analysis
Surely some industries are easier to make money in than others, but Southwest still outperformed its competitors.
First, get a rough sense of the industry- are sales rising? Is it cyclical? How are the players doing in terms of net margins, profitability etc. Just glance at 5-10 companies to get a feel of the industry

Chapter 4: The Language of Investing
Balance Sheet- Tells you how much a company owns and owes at a specific point in time
Income Statement- How much the company made or lost in accounting profits during a set period
Cash Flow Statement- Records all the cash that comes and goes into/from a company
*IS vs CF = accrual accounting, in IS a company can record revenue even when the customer hasn’t paid but CF deals only with actual cash and that’s why it is important to study both the statements

Chapter 5: Financial Statements

Balance Sheet

  • Comparing growth rate of Accounts Receivable with growth rate of sales to see if a company is doing a good job in collecting its money
  • Inventory Turnover = Revenue/Inventory, in the given example Dell had a ratio of 92 vs 6 for that of HP, by which we can see that Dell replaced its inventory 92 times in a year and is therefore managing inventories better
  • We can get a ratio of PP&E to total assets to see how capital intensive a firm is when compared to competitors
  • Investments- Represents the money invested in either longer term bonds or in the stocks of other companies
  • Intangible Assets(goodwill)- View this account with extreme skepticism because most companies tend to overpay for their targets. In this case, if you have been counting on an overpaid goodwill as an asset, you’d be disappointed
  • Stockholders’ Equity- Know that Retained Earnings is a cumulative account, so each year the company makes a profit and doesn’t pay it all as dividends, retained earnings increase. If retained earnings turn negative, it is often renamed as ‘accumulated deficit’. Retained earnings does not include stock buybacks and dividends

Income Statement

  • Revenue- Be sure to check the revenue recognition policies, because a software firm might record a big chunk of revenue when a product is shipped to a customer, whereas a service firm might record revenue smoothly over the life of the service contract

  • Cost of Sales might be sometimes broken into Cost of Goods Sold and Cost of Services

  • Gross Profit= Revenue - Cost of Sales

  • Gross Margin = Gross Profit/Revenue i.e it tells how much a company can mark up its goods. The more differentiated a company’s products are (iPhones), the more a company’s Gross Margin

  • SG&A aka operating expenses- includes marketing, salaries, sometimes R&D
    Firms that charge more for their products (Apple) generally have to pay more for their salespeople etc and so have high SG&A. Try to compare (SG&A/Revenue) across competitors and also how it is changing for a company over the years

  • Operating Income = Revenue - Cost of Sales - Operating Expenses
    This is a good number to see how much money the company made from its operations and since it contains non recurring expenses, add that back (or subtract) as per the case

  • Interest Income/Expense- They are sometimes listed separately or combined into one. You can calculate interest coverage ratio

  • Net Income is the most widely reported number but can be wildly distorted by one-time charges and/or investment income

  • Number of Shares (Basic and Diluted)- You want to look at the diluted number to see how much your stake in the firm can be shrunk

  • EPS (Basic and Diluted)- It’s not the end-all of financial performance without looking at cash flow and many other factors, it’s mostly meaningless

Cash Flow Statement
This statement is the true touchstone for corporate value creation because cash is what counts. This is the first statement you should look at then BS and then IS.
The CF statement removes all the noncash items such as depreciation and tells you how much actual cash the company has generated

  • Depreciation and Amortization- This is not a cash charge so we need to add it back to net income
  • Tax Benefit from ESOPs- They are tax deductible so we need to add back the benefit which company gets to the already taxed income. If this number is too large compared to CFO and company’s stock is rising, don’t count this cash to be there for a long time. When the shares sink, few employees will use ESOPs.
  • Changes in Working Capital- Important, should be positive. It is the main difference between net income and cash flow from operations
  • Capital Expenditures (Capex)- Represents money spent on items that last a long time such as Plant, Property & Equipment.
  • Cash flow from financing activities include company’s transactions with its creditors or owners
  • Issuance/Purchase of Common Stock- Although share repurchase is a shareholder-friendly use of excess cash but view them with caution when they come from companies that already grant ESOPs.

Chapter 6: Analyzing a company- the basics

1. Growth
It’s critical to investigate the sources of a company’s growth rate and assess the quality of the growth. High-quality growth that come from selling more goods and entering new markets is more sustainable compared to Low-quality growth that comes from cost-cutting

There can be four sources of revenue growth:
1. Selling more goods or services- A smartphone maker like OnePlus increasing its market share
2. Raising Prices- A company like Anheuser-Busch increase beer prices every year by 1-3% or even cable companies earlier
3. Selling new goods or services- Like Walmart expanding intro groceries in the 80’s
4. Buying Another company- Be wary because most acquisitions fail to produce a significant return for shareholders

  • The goal of this type of analysis is to simply know why a company is growing. For example in the case of Anheuser-Busch, we’d want to know if the number of beer drinkers is growing or if Budweiser drinkers are growing or if the growth is coming from price increases. After we know this, we can figure out how much growth is sustainable/can happen in the future.
  • In general, any time the earnings growth (operating income) outstrips sales growth over a long period, dig into the numbers to see if something is fishy.

2. Profitability

We want to see how much profit the company is generating relative to the amount of money invested in the business.
Our 2 tools for assessing corporate profitability are Return on Capital and Free Cash Flow:
Return on Capital
a) Return on Assets (ROA) = Net Margin x Asset Turnover
= (Net Income/Revenue) x (Revenue/Assets)
Companies with high ROA have a high efficiency of translating assets into profits
ROA also tells us that there are 2 measures to increase efficiency.

  • Companies with lower profit margins such as grocery stores and discount retailers emphasize high asset turnover to achieve solid ROA whereas Luxury retailer store Tiffany can afford to have more money tied up in inventory and charge higher margins to achieve solid ROA
  • We need a better measure than ROA (which is ROE) because not all companies are piles of assets, but many are financed with debt so we need to consider LEVERAGE.

b) Return on Assets (ROE) = Net Margin x Asset Turnover x Financial Leverage
Where Financial Leverage = (Assets/Shareholder’s Equity)

  • ROE measures how good a firm is at translating shareholder’s money to profits

  • Leverage can be tricky if it is too high when business conditions get tough or if the company is small, so be cautious about that.

  • In general, if a nonfinancial firm that can generate consistent ROE > 10% without excessive leverage is at least worth investigating and if ROE> 20%, good chance you’re onto something. ROE >40% are meaningless because they’ve probably been distorted (spin off firms, share buyback, less equity)

c) Return on Invested Capital = NOPAT/Invested Capital
ROIC improves on ROE because it puts equity and debt financing on an equal footing and also uses NOPAT instead of operating income
ROIC= OPM x Asset Turnover

Free Cash Flow
Sometimes FCF is referred to as ‘owner’s earnings’ rightly as the name implies

  • As a benchmark, if (FCF/Revenue) >5%, the firm is efficient

3. Financial Health
The crux of this subtopic is that when a firm increases its debt, its fixed cost increases sharply.
a) Debt to Equity Ratio
b) Times Interest Earned = EBIT/Interest Expense
If a firm has this ratio =15, it means it has enough money to cover its interest obligation 15 times over, which is a pretty safe margin
c) Current Ratio = Current Assets/ Current Liabilities
d) Quick Ratio = (Current Assets-Inventories)/ Current Liabilities

4. Risks
Here, list down all the negative factors associated with stock, what could go wrong with your investment thesis and why might someone be a seller of the stock.

5. Management (Chapter 7)
Biggest myth is that you can’t evaluate management without actually meeting them face to face. We can evaluate them based on the following factors:

a) Compensation (found in proxy statement)- Big bonuses based on performance should be preferred wrt big base salaries and restricted stock grants are preferred to generous option packages.
-Compare salaries to competing firms if they look awfully large
-At many companies ‘Pay for Performance’ is a joke because the goals are often changed by the board of directors
-Firms with good corporate governance won’t hesitate to pay less to managers in bad times

Some red flags:
1. Were executives given loans that were subsequently forgiven? (disclosed in ‘other compensation’ column of executive compensation table in proxy statements)
2. Do executives get perks paid for by the company that they should really be paying for themselves? Like country club memberships etc.
3. Does management hog most of the stock options or do middle order employees also get them?
4. Does management use stock options excessively? (in the range of 1-2% of all shares every year). Also, issuing restricted stock is far better than issuing stock options)
5. If a founder or large owner is still involved in the company, does he/she also get a big stock option grant each year?
6. Do executives have some skin in the game? i.e do they also own shares of the company?

b) Character
1. Does management use its position to enrich friends and relatives? (check in related party transactions in annual report)
2. Is the board of directors stacked with management’s family members/former members?
3. Is management candid about its mistakes? (check in the letter to shareholders)
4. Does management often brag about how its stock is undervalued?
5. Can the CEO retain high quality talent?
c) Operations/Running the business
1. Financial Performance- ROE etc
2. Follow-Through: When the management admits a problem and promises a solution, does it actually try to solve it?
3. Candor- Does the firm provide enough information to analyze its business or often say “We don’t disclose that”?

Chapter 8: Avoiding Financial Fakery
Six Red Flags:

  1. Declining Cash Flow
    Over time, increases in a company’s cash flow from operations should roughly match the net income. If the net income is large compared to CFO, dig in the numbers. Maybe the company has loosened its credit terms or is recording a lot of revenue without actually getting the cash. Eg, Lucent in 1997-1999 (Accounts Receivables were swelling up)
  2. Companies who record one-time charges too often
  3. Companies who acquire too many companies
  4. The CFO or Auditors leave the company (these 2 are considered the watchmen of finances)
  5. The Bills are not being paid- Track how fast Accounts Rec. are increasing relatives to sales, the two should roughly be equal. If A/R is faster compared to sales, it means the company is not collecting cash
    Also, allowance for doubtful accounts should increase proportionate to A/R
  6. Gains from Investments- Sometimes companies put this into other categories like net income, which is misleading
  7. Pension Pitfalls- underfunded vs overfunded (check difference between ‘Projected Benefit Obligation’ vs ‘Fair Value of plan assets at end of year’
  8. Pension Padding
  9. Company keeps changing ‘Allowance for doubtful accounts’ / ‘Depreciation Expense’ etc
  10. Expensing (short-term) vs Capitalizing (long-term)
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The Model Thinker, Scott E. Page, 2018 - If you are bored of the usual “mental models” that sound more like just common sense, and ready to take on something more challenging, this is your best bet. This book covers models that are simplifications of the world, mathematical analogies and sometimes more abstract constructs. The idea is to have and apply as many of these models as possible so that data transforms into information (rain falling on your head is data while rainfall statistics is information) and that further into knowledge (correlative, causal, logical relationships) and subsequently to wisdom (by applying multiple models - because the average of many models will be considerably better than one, like having a jury arrive at a decision). The idea is to take and apply models from diverse disciplines - like models from epidemiology to visualize spread of ideas in twitter.

Some of my notes follow (mostly paraphrased/simplified by me)

  • With four parameters I can fit an elephant, and with five, I can make him wriggle his trunk (John Von Neuman on overfitting)
  • People are diverse, socially influenced, purposive and we learn. In addition we possess agency - the capacity to act (On the challenge of modeling humans)
  • Equilibrium, Cycles, Randomness or Complexity (Outcomes of rule-based, optimization-based or adaptive rule based agent models)
  • If people learn, we cannot rely on past data to predict outcomes
  • Human behaviour occurs within extremes of zero intelligence and full rationality (so use models in which humans adapt using rules)
  • Large populations have much lower standard deviations than small ones (reason why small populations appear to have higher crime or cancer)
  • Tail of Log-normal distributions depend on variance of random variables. High variance - very long tails (multiplying together sequence of large numbers produces, a very large number) - Eg. Income distributions, mineral deposits, time between infection & symptoms (In general things that change every period based on percentage of initial value)
  • In a power-law distribution, probability of an event is proportional to its size raised to the negative exponent. Larger the event, less likely its occurrence . Eg. earthquakes, forest fires, traffic jams, city sizes, book sales. (Things that get into self-organized criticality or have preferential attachment)
  • Not all long-tails are power laws. Plotting in a log-log plot and getting a straight-line is the confirmation. Others could be simply log-normal
  • For power laws with an exponent of 2, Event Rank * Event Size = Constant.(Zipf’s law). Interesting application - Each city’s population rank multiplied by population is roughly same.
  • Preferential Attachment model - Entities grow at rates relative to their proportions. (More begets more). We know this in equities of course that the big will get bigger (due to the same reasons).
  • Social influence creates inequality
  • Wealthier people will choose riskier professions on average (Applying power law to number of opportunities someone can afford to fail at and grab at long-tail opportunities)
  • Linear explanations are easy but mostly lies
  • Mauboussin’s skill-luck equation - Success = a * Skill + (1 - a) * Luck - Where a lies between 0 and 1 (Pure luck to pure skill). Every profession has a different “a”. Figure this “a” out first - Dentists and Fund Managers don’t have the same “a”. (Corollary: In some professions, variance of skills across peers is miniscule, so variations in luck matters more)*
  • Linear Regression and big-coefficient thinking dictates most policies (Twiddle parameters that will bring the most change). However, new-reality thinking may have higher impact but often ignored. (Building wider roads as that correlates with less traffic vs building a mass-transit train system)
  • Growth and positive feedbacks produce convexity while diminishing returns and negative feedbacks produce concavity (Logistics and inventory costs are convex while utility value of consumption is concave)
  • Exponential growth model - Model variable based on intial value, growth rate and number of time periods (Similar to compound interest formula).
  • Rule of 72 - If a variable grows by r% where r < 15%, then 72/r gives an approximation for time period to double. (At 15% interest, capital would double every 72/15 = 5 years - 6% - 72/6 = 12 years)
  • Convex func with +ve slope increases at increasing value - one with large negative slope will flatten (half-life model for decomposition, depreciation and forgetting memories)
  • Concave func with +ve slope - diminishing returns (marginal utility of most things from money to ice-creams to even leisure)
  • Concavity implies pref for diversity and risk-aversion (if happiness is concave to leisure and money, we prefer some leisure and some money to all leisure and no money or no leisure and all money)
  • Convexity implies risk-loving - we prefer extremes to avg. Eg. Prices of equities - more transactions happen at extremes.
  • Cobb-Douglas model - Through constant investment, economy grows at a decreasing rate because Output is a concave function (Labor driven economics). In non-labor driven economies, growth is a only a function of capital and technology (ring any bells?)
  • Solow Growth Model (Appears to be a corollary of Cobb-Douglas model with an economy that has 50% labor importance) - Long run equilibrium economic output increases as the square of the technological improvements (industrial revolution, internet), linearly with labor and savings and inversely with depreciation. Without technological improvements, growth stops eventually.
  • A backward country with less physical capital that could jump the technological frontier with new capital outlays could experience incredible growth
  • Corollary to Solow’s model - Taking of output from economy for govt. use (extraction, corruption) will reduce growth through reduced savings
  • Last on the Bus (LOTB) - Useful for ascertaining value of individual contribution in a team (If a business had three employees - one who could speak French, another German and a third both and it needed both translators to operate, if any two employees showed up to work, the last is not needed - So LOTB value for all is zero)
  • Shapley value - Avg., value of individual contribution across all possible orderings (This would put a value of bilingual speaker in above eg. at twice the sum of other two employees’ values)
  • Adding extra workers makes existing workers expendable, driving their LOTB value to zero. Firms do this all the time to reduce worker power
  • In a close election with a slim majority, every member has a large LOTB value while in a strong majority, no individual has much power
  • Clustering coeff (in a network) - proportion of a node’s pairs of neighbors who are also neigbours of each other (If a person with 10 friends has 45 pairs of friends and 15 of those are themselves friends, the person’s clustering coeff will be 1/3)
  • Community detection algos - Are people living in online bubbles getting their news from similar sources
  • Type of networks - Random, geographic, power-law (Typical of twitter followers), small-world
  • People who occupy high-betweenness positions in a network fill structural holes between communities (There’s a lot of depth to this statement)
  • Broadcast Model - Informed at time t+1 = Informed at time t + Broadcast prob * Susceptible. Result is a r-shaped adoption curve.
  • Diffusion model - Diffusion prob = Contact Prob * Spread Prob. (Diseases and ideas). Typically a s-curve.
  • Bass Model - Combines Broadcast & Diffusion model - (Typical of stock ideas that originate in Twitter)
  • SIR Model - Susceptible, Infected, Recovered - (all pandemics including Covid are modeled this way).
  • R0 for an infection - (spread prob * contact prob)/recovery prob
  • Vaccination threshold - (R0 - 1)/R0 (If R0 is 2, 50% people have to be vaccinated to contain spread)
  • Justin Beiber had a R0 of 24, making him more virulent than measles (jeez)
  • Information is resolution of uncertainty (Shannon)
  • Equilibrium, Periodicity, Complexity and Randomness (4 classes of outcomes that can be distinguished with Entropy) - Pencil on a desk is in equilibrium, planets around the sun are in a cycle, coin flips are random, neurons firing in the brain are complex
  • Entropy and Variance are similar but not same - (What maximizes entropy doesn’t maximize variance)
  • Information entropy corresponds to expected number of yes-no questions
  • From the perspective of entropy - uniform dist. maximizes entropy given range (a,b), exponential dist. maximizes entropy given mean and normal dist. given a mean and variance
  • If investors believe in efficient market hypothesis, they stop analyzing, making markets inefficient (Grossman and Stiglitz paradox)

Stopping here as this is roughly the summary of the first half of the book. Will transcribe the rest of the notes over the weekend if there’s interest. This is a book that I loved beyond words. It slowed down my reading down to an absolute crawl because I was running several simulations in Jupyter while reading to get a feel of things (always better to learn this through intuition so formulas make better sense) and it took me over 2 months to finish this book. It can be a challenging read in several parts but also equally rewarding. 11/10

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Gut, Giulia Enders, 2014 - Enlightening read on what is essentially a neglected aspect of the human body (compared to the cardiovascular or nervous system). The author is a doctor and scientist who certainly knows how to entertain her audience while handling what could be a drab subject. I learnt quite a lot from this book. In no specific order

• Gut accounts for two-thirds of our immune system
• It has its own nervous system that functions autonomously while keeping the brain informed infrequently about only the important stuff
• People with certain digestive problems could be suffering from nervous disorders of the gut and the uneasiness and mental imbalance could be a result of this
• Two sphincters control pooing - outer one we control consciously while the inner one is controlled by the gut, both communicating harmoniously for the most part. When this communication breaks down, constipation can result
• Squatting is a better position for doing the business (incidence of diverticula and hemorrhoids is low among squatters). Raising feet with a foot stool could bring about a similar position in a sitting toilet
• Calcium in the saliva comes from unfiltered blood through the sublingual papillae under the tongue. This deposits on teeth and causes tartar which isn’t a problem in itself (in fact makes teeth harder) but the rough surface lends itself to bacterial breeding easily
• Opiorphin in the saliva is a painkiller that’s stronger than morphine (small concentrations)
• We produce very little saliva in the night which is why its party time for microbes (sore throat or bad breath can result)
• Tonsils inspect the foreign substances and train immune system (until age 7)
• esophagus connects to the stomach through a bend that stops food from plopping into the tummy (Hence, when we sit straight, its easier to burp - While sleeping, turning left can help).
• Excess energy is converted into longer complex molecules like glycogen and fat and stored in the liver and fatty tissue
• Fat can concentrate twice as much energy per gram as carbs or protein
• Fat must be absorbed through the lymphatic system which in turn dumps it into the bloodstream to be pumped by the heart (Hence, good or bad fat, everything ends up there)
• Good fat like olive oil can help get rid of the spare tyre :slight_smile: as it blocks an enzyme in the fatty tissue
• Good fat like olive oil should not be used for cooking as they are unstable with heat (butter is a better option). Also exposure to air causes them to capture free radicals, so closing the lid is very important to preserve.
• Lactose intolerance is not an allergy but a deficiency of lactose digesting enzymes. The flatulence is caused by the microbes that make merry with the undigested lactose proteins
• Most of our digestion is done with the help of gut flora in the intestines
• Vomiting caused by motion sickness is due to conflicting signals from the eyes and ears
• Gut microbes can affect our mood and disposition
• Almost every smell in the human body is produced by bacteria
• We could be carrying about 2 kg microbes with us right this moment (2 trillion bacteria)
• Gut bacteria are responsible for blood types (what!)
• Children born by c-section can take months to develop gut bacteria
• Gut bacteria might be one of the major influencers of one’s weight
• Yoghurt is milk pre-digested by bacteria
• Our satiety-signals might be linked to what our bacteria prefers - in other words, our bacteria might be dictating what we prefer to eat
• Higher the hygiene standards in a country, higher the allergies and auto-immune diseases

Needless to say, I like books where I find a lot of things I had no clue about and this was one of them. Its a small, entertaining and informative. 9/10

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The Future is faster than you think, Diamandis/Kotler, 2020 - Future disruption often reads like science fiction in the present, so this is that - on steroids. Except this isn’t all science, or all fiction, it leans strongly towards technology and consequently towards the realm of the highly probable than merely possible. Most of what’s discussed in the book are already in the works, some for years and maturing, some even ready for prime time.

What’s driving the disruption is a convergence of computation (while Moore’s law may die a heat death, quantum computing will take over and we have Rose’s law), digitisation (every business model known to man is now either partly or fully digital), advances in material sciences (lighter, stronger materials), AI (GPUs and TPUs are enabling dramatic progress), robotics, sensors, biotech, 3D printing, AR/VR and blockchain. Also the amount of time saved by humanity doing the mundane is being used productively, ease of capital availability through venture and crowdfunding, ability to mine exabytes of data, longer, healthier lives etc is aiding the convergence.

Some of the stuff that’s discussed in the book

  • Flying cars (eVTOLs)
  • Autonomous cars
  • Hyperloop
  • Boring Company
  • Terrestrial travel on rockets ( SpaceX’s Starship)
  • 3D printing (can disrupt the 10 trillion manufacturing industry)
  • Blockchain and Smart-contracts
  • Smart objects (bridging the gap between the real and virtual worlds)
  • Perovskite (light-sensitive material that can displace silion solar panels)
  • Drug discovery through simulations and AI
  • Biotechnology - Using our genes, proteins, cells into tools for manipulating life
  • CRISPR-Cas9 for editing/repairing DNA
  • Specifically designed N-of-1 medicine

The second half of the book focuses on specifics of how each industry as we know it from shopping, advertising, entertainment, education, healthcare, insurance, finance, real-estate and food will get disrupted by the convergence of technologies (along with specific businesses and what they are currently working on).

It is very hard for our linear thinking brains to digest such exponentials but if you have to, just think if you would have imagined paying the street vegetable vendor with your phone even as far back as 2016. Once you digest the individual pieces of technology that’s maturing and acceleration of acceleration that’s happening in the last 10 years, it becomes easier to appreciate. Past a point economic growth can only come out of technological disruption and we are probably where we were in 1920s before semi-conductors in the current convergence so have quite a lot to look forward to. 9/10

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Headspace guide to meditation & mindfulness, Andy Puddicombe, 2011 - When an idea comes with a complete suite of book, app and Netflix docuseries, you have to approach it with skepticism, even if its about meditation. It is with that I approached this book. I have near zero knowledge on the subject and have never meditated ever. I very much liked the way the book is written. It is genial, genuine and very approachable. Doesn’t alienate you with mumbo-jumbo and is straight-forward and practical.

It talks a fair bit about the benefits, clinically proven but somehow didn’t inspire me to try or keep up the practice. My favorite part hence was the “Approach” bit where some misconceptions that meditation is a state of mind to be created and maintained are cleared. I liked the analogy of sitting by the side of the road watching thoughts and emotions pass by, not trying to stop them but just acknowledging them. This idea by itself was worth my time spent reading it. The other ideas of mind being a wild horse, or blue sky with clouds as well was equally powerful and relatable.

There are several small incidents/stories from the author’s life as a monk around the world in several monasteries and various countries, told like parables to convey simple ideas which make the reading less tedious and more engaging. Bulk of the book is on practice and integrating meditation and mindfulness into everyday life (take10), the usefulness of which it would be too early for me to vouch for. As a naturally calm and mostly unstressed person, its a bit hard for me to push myself to try it. Maybe I will over time as it is something I have been wanting to integrate into my life as well, especially the mindfulness bit.

This book might be for people like me who have no clue about meditation than for others who are already practicing. I think this may even be hated as it tries to take something considered spiritual and personal, mainstream to the masses, in the process probably watering it down like what Bryan Adams did to rock (take10 is meditation 10 mins a day using a specific procedure) - but it would have achieved its purpose if it brings it to more people who benefit. 8/10

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Not sure if this is appropriate thread for the query, but Can anyone suggest any good books to read on recession\crash of 1974?

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Thanks for such lovely notes. Please share the remaining highlights when you get a chance.

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Six Easy Pieces, Richard Feynman, 1963 - These six lectures are a part of Feynman’s Lectures on Physics delivered between 1961 and 1963 - The choice of these isn’t arbitrary and is perhaps based on accessibility. Before buying the 3 volume edition of his lectures, I wanted to sample it and this book was a perfect way to do the same.

The lectures cover atoms in motion (intuitively understanding gases, pressure, temperature, chemical reactions from properties of atoms) , basic physics (a lay of the land from past to present, from classical to quantum physics, understanding electricity and magnetism, sub-atomic particles and mass), relation of physics to other sciences (in other words, how Feynman makes chemistry, biology, astrology, geology, psychology as just higher abstractions of physics), conservation of energy (has some of the best thought experiments that Feynman was famous for), theory of gravitation (Kepler’s laws, Newton’s laws, gravity in the universe between stars, galaxies and a fantastic discourse on how the gravitational constant could be related to the age of the universe and then bringing in Einstein’s modification of Newton’s laws of gravity to be consistent with speed of light and theory of relativity) and the final chapter on quantum behavior (beautiful chapter covering waves and particles using experiments with bullets vs ripples of water and how light behaves and all the strangeness and closing with the uncertainty principle).

I liked how openly Feynman agrees on the several things we don’t know - like how gravity works (we know how it behaves but not the why and how) and also how he grapples at scale of things to understand intuitively how big an atom is, or how big a nucleus is within an atom or how much open space is there in each atom or in a drop of water or a crystal lattice using real world objects for reference like apple or earth. I never really grasped the size differential of sub-atomic things until I read this book. He is also very open about the fallibility of science (very Karl Popper in his approach with “What’s true is merely awaiting falsification”) and his own humbleness and fallibility as well in the Preface of the book where he thinks his lectures were a failure. For the love of science, read this book - its short, engaging and fun. 10/10

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Early Indians, Tony Joseph, 2018 - A lot of who we think we are could be very incorrect and in that the book deals with a lot of contentious issues. It analyses the arrival of Earliest Indians 65000 years ago, roots of the Harappan civilization 4500 years ago, the arrival of Aryans 4000 years ago, what happened after and when the Caste system came into practice (~2000 years ago) and so on.

This is a great work of science and is backed strongly by the scientific method as it uses inductive reasoning to form hypothesis (migration of agriculturalists from Zagros mountains in current day Iran for eg.) as well as deductive reasoning to strike out ones that don’t add up (Vedas being around during the Harappan civilization) and also uses abductive reasoning wherever necessary to provide likeliest causes.

Unification of anthropology, genetics, linguistics with reasoning supported by geology and mythology is what this work is based on and it makes for some gripping Sherlock Holmes-ish reading which I most definitely did not expect. It goes to great length to instruct the reader on the basics of the human genome and some basic genetics (Y-chromosome being passed from male-to-male undisturbed across generations and mitochondrial DNA on the maternal side similarly). Also most interesting was the comparison of Elamite language words with Dravidian languages.

Long story short, Early Indians arrived from Africa almost 65000 years ago before the last ice age and displaced other homo- species (probably similar to Neanderthals) before Holocene (after last ice age about 11000 years ago). They should have been hunter-gatherer societies around the time agricultural people from Zagros mountains mingled with Early Indians to form the great Harappan civilization (the size and development is mindboggling if you read in depth). When the Aryans came from the Steppes, they displaced the Harappans (maybe not causal) who moved southward (Dravidian place names along the Arabian sea coast) and form most of the Dravidian population as we know it south of the Vindhyas. This explains the similarities between Dravidian languages of Tamil, Malayalam, Kannada, Telugu and Tulu with ancient Elamite language.

The lineage from the Harappans is what could have formed the Chera, Chola, Pandya dynasties. The Aryans mingled with the Early Indians and Harappans for almost 2000 years (giving rise to the Maurya empire, Jainas and Buddhists), so there is no pure Aryan line per se. but something changed around 2000 years ago where they took up priestly roles and imposed the caste system. Rigveda (the oldest of the vedas) is something that could have been told and re-told vocally (perhaps like the Old Testament) before it got put into text and it carries the sacrificial and ritual methods followed by the Aryans before they came into India.

If you are at all interested in ancient history and anthropology, you are bound to enjoy this great work. This book deserves be a lot more famous. 11/10

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The “theory” of the Aryan invasion (or migration) was first put forward by Western scholars during the colonial age for their own reasons.

Is the theory which has been taught in Indian school textbooks true? For better understanding
one may go through the following for starters.

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This post was made because phreakv asked for references which I’ve duly provided. The post is on point and I don’t see any reason to modify it.

Really really hope I’m not derailing this thread. We can take it to DMs if needed.

I’ll answer the 2nd one first.
Tamil Text: https://projectmadurai.org/pm_etexts/pdf/pm0001.pdf
English Translation: https://www.projectmadurai.org/pm_etexts/pdf/pm0153.pdf



Talks about categorization of people based on six occupations. I wouldn’t use caste system and other terms which don’t quite capture the concepts at play.

வான் ஊர் மதியம் சகடு அணைய, வானத்துச்
சாலி ஒரு மீன் தகையாளைக் கோவலன்
மா முது பார்ப்பான் மறை வழி காட்டிட
தீ வலம் செய்வது காண்பார் கண் நோன்பு என்னை

This is Silambu, a Sangam epic that talks about Kovalan and Kannagi the protagonists getting married as directed by Vedas, performing rites watched by sacrificial fire (Vedaagni), performing Panigraha under guidance of very old Brahmin Pandits.

These are just a small sample of the close connection of Tamil culture with Vedic culture (aka Aryan culture as currently being portrayed). So when actually Aryans came in? When Dravidians came down South? How did they internalize Vedic traditions then? The timelines of 2500 BCE to 1500 BCE simply don’t match.

There are 1000s of such references from Sangam literature right from Tholkappiyam to Etthu Thogai to PathinenKeezhkanakku to Five Big Epics and Five Small Epics.

Tamil Nadu - The Land of Vedas, Mirror of Tamil and Sanskrit by Dr. Nagaswamy, one of the foremost Indian archaeologists, epigraphist, historian and the authority on Tamil Nadu history goes into it as well.

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Yes, the book is superb, enjoyed it.

There are a couple of great articles by Razib Khan (behind paywall) which traces the history of Indians from 10000 bc to present using the various genes discovered.

This image captures the whole migration in short

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This post was made because phreakv asked for references which I’ve duly provided. The post is on point and I don’t see any reason to modify it.

If it’s considered irrelevant as a reply, consider it review of my book.

Now I’ll tackle the 1st point here.

  1. I’ll restrict myself to Thangaraj and Gyaneshwar Chaubey alone. There are multiple other reviews, articles written by geneticists, scientists including (Anand Ranganathan, Anil Kumar Suri, Abhijit Chavda and numerous others) that question the claims made by Joseph.

You can look at the categorical sweeping claim made here.

The actual refutation by Thangaraj & Chaubey is captured here.

The silent backtrack from the sweeping claim by Joseph is here.

And the claim that Rakhigarhi studies might just hold the key as recorded by Joseph led only to this.

And we need to keep in mind that genetics might not hold key to history as well due to cremation practised large scale and also archaeological studies of Ganga civilization tell their own story too.

https://www.currentscience.ac.in/Volumes/114/10/2106.pdf

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Agree with you.
I remember this book was called a part of Propaganda.
Another proponent of aryan invasion theory, also promoted by The Wire and Hindu before 2019 elections.
Wait till August for Prachyan documentaries that debunks these historians and their theories.

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After watching wonderful and inspiring ‘Daughters of Destiny’ documentary (highly recommend) on Netflix, I picked this book “Elephant Chasers Daughter” - which is a personal memoir of one of the girls Shilpa Raj who featured in it.

An engaging and compelling read with splendid narration. What struck me most is her immense courage to be brutally honest in opening up to her personal world, sharing her innermost thoughts and feelings with such elan! And, the book apart from capturing her lived experiences of two worlds is well interspersed with her questions and reflections on the patriarchal and caste conscious society.

Such a wise work from an young author! Salute!

Although this book may not shape views on investing, it opened my eyes on society around us and how one can contribute to society. Abraham George life is an inspiration to all!

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Book Review - Master class with Super-investors – by Vishal Mittal and Saurabh Basrar.

This book has interview of 11 great investors in India equity name like Ramesh Damani, Ramdeo A, Hiren Ved, Vijay K etc. The interviews are lengthy and provide useful insight. One interview is of 40 + pages. Typical interview starts with their initial investments. That will be on ear of 1980-90 type. The book has investors’ best idea and details why he selected those stocks (case studies). It gives us idea of history of Indian stock market, with broader and stock specific market. After reading the book one get idea of how investor evolved from his initial investment. Also investors discuss their mistakes and logic behind that.

Common takes are as follow:

  1. All are absolute bullish on India story
  2. Most suggest to back up great idea with significant allocations
  3. All are humble and consider market is right
  4. Contrary to point 4, many have successfully timed market right as bullish and bearish and did allocations accordingly
  5. Most are very avid reader

Below I find interesting:

A. Ramesh Damani has interesting takes on top and bottom of bull and bear market.
“At the top of the bull market, news headlines will be very positive. It will say that investors are flocking to India; sensex makes new highs, corporate records high profits etc. But market will go down those days. It reacts negatively despite the good news coming out. It indicates there is selling going there; smart money is going out in anticipation of bad times.
Typically at the bottom of bear market, headlines will be very negative like Rs. At 70 to a dollar, India has payment crisis, corporate profits are dismal, issues with government etc. Despite that individual stocks are going up instead of down.

B. Rajashekar Iyer – He breaks valuation in 3 parts, Like If co is making 1000 cr profits, to do that you need to invest 16000 cr in bank @ 6%. Second part if growth, if you think it may grow at minimal nominal GDP @ 12-15% than add another 15000-20000 cr of value. 3rd is other opportunities co can exploit. Sometime 3rd component is negative in depressed market. In extreme bear market, mkt cap is lower than 1st component.

C. Hiren Ved: Interplay between PE and EPS is beautiful. Most people tend to just look at the earnings. But PE is the leading indicator whereas EPS is a lagging indicator. PE goes up is due to liquidity or confidence about future or pre-empting an earnings recovery. In 2008 downturns, initially companies not much affected in terms of earnings but PE got compressed. Companies was said that there is no problem in India, it’s in USA. Actual earnings fall happened in last Quarter of FY 2009 but market bottomed out much before the earnings fell.

D. Hiren ved on cash call: In Mid 2008 we realize valuations becomes expensive however we realized that sweetest money is made in the final lap of bull rally. We didn’t sell at the top but started selling when market falls to 18500-19000 from 21000. And we were 55% cash, we looked like hero. On up side we started putting money from March 2009. Market was locked up in 20% up post elections in April-May 2009. We couldn’t deploy full cash and underperformed the market that year. For aggressive cash call you need to be right at both ends. After that we made policy to take out maximum of 15% cash call.

End…

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Range, David Epstein, 2019 - So a full book got written on the subject of specialists vs generalists - it was a long-time coming. There are fields where being a specialist helps and ones where being a specialist is almost a curse. These are what the author calls kind vs wicked environments. Kind environments can produce a Tiger Woods or Polgar sisters (Golf and Chess) with early specialization and deliberate practice (like the 10,000 hour rule).

A lot of what we encounter in life however are wicked environments - ones that don’t play by fixed rules but instead adapt - and it is in these that the author thinks generalists thrive. Even in kind environments like Tennis, some take on a sampling period like trying different sports and only much later specializing - like Roger Federer.

In kind environments patterns repeat over and over, more practice yields accurate feedback and correction cycle and continuous improvement (poker, chess, firefighting). In wicked environments, there are no fixed rules, they are often unclear or incomplete, may not have reliable repeating patterns and feedback is often delayed, inaccurate or both (financial or political trends, employee or patient outcomes). Wicked environments need abstract thinking, drawing upon many disciplines for analogues (far transfer).

There are several examples in the book from the figlie, Kepler, Van Gogh, Yokoi, Darwin and several important concepts like “far transfer”, “match quality” (simply having a vocabulary for these things somehow makes them more usable).

Some parts I liked, in no specific order

  • When doctors joke about left-ear surgeons, we have to check to be sure they weren’t joking (Atul Gawande on specialists)
  • The most-effective learning looks inefficient, it looks like falling behind
  • Highly credentialed experts can get narrow-minded and confident and hence get worse with experience
  • Chunking - the ability to bucket patterns for faster retrieval (Anyone who has worked with sorting and searching algos can relate) is useful in faster pattern recognition (in the context of chess)
  • In narrow-enough worlds, humans may not have much to contribute for longer (AI)
  • Flynn effect - Apparently IQ keeps increasing with every passing generation (due to our increased ability for abstraction)
  • Pre-modern people miss the forest for the trees, modern people miss the trees for the forest
  • Fermi-problems - Quick back of the envelope calculations to approach problems with no prior experience
  • Sampling period is integral and not incidental to the development of great performers
  • Brain areas associated with focused attention, inhibition and self-censoring were turned off when musicians were creating. While improvising musicians do the opposite of consciously identifying errors and correcting them (classically trained musicians hence struggle to play jazz which is creative while classical is re-creative)
  • In classroom environments, conceptual problems are turned into procedural ones that can be executed (teachers giving hints). Japanese do this better (bansho)
  • Struggling to generate an answer on your own, even a wrong one, enhances subsequent learning
  • Interleaving improves inductive reasoning
  • Knowledge structure that’s so flexible that it can be applied in different domains and novel situations (far transfer)
  • Each time Kepler got stuck, he unleashed a fusillade of analogies (light, heat, odor, boatmen and currents, brooms, magnets etc.) to understand planetary motion
  • Evaluating an array of options before letting intuition reign is a trick of the wicked world
  • A problem well put is half-solved (best problem solvers begin with typing the problem up)
  • Degree of fit between the work someone does and their abelites and proclivities is “Match quality”
  • knowing when to quit is a big strategic advantage
  • I have been obsessed with an idea for a short time but later lost interest (Van Gogh in a nutshell)
  • Our work and life preferences do not stay the same because we do not stay the same
  • the further the problem was from the solver’s expertise, the more likely they were to solve it
  • People who win in Kaggle health competition more often have no medical or biology background and no ML expertise either
  • Academic departments no longer merely fracture into subspecialities, they elevate narrowness into an ideal
  • Generalists tended to get bored working in one area for too long. They added value by integrating domains, taking technology from one area and applying it to others.
  • Higher the domain’s uncertainty, the more important it was to have a high-breadth team member
  • Most cause-effect relationships in the wicked world are probabilistic
  • Dropping one’s tools is a proxy for unlearning. Experienced groups became rigid under pressure and regressed to what they knew best
  • Consensus is a nice to have but we shouldn’t be optimizing happiness but our decisions
  • Take your skills and apply to a new problem (across domains) or take your problem and apply new skills

For someone like me who has always had one foot outside of whatever it is I have been doing, trying completely unrelated skills/domains every 3-5 years, this book only confirmed my beliefs and hence isn’t a good read but if you believed the contrary, it may be worth your time. 9/10

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