The idea of this stream is to introduce and extract some interesting ideas, insights, inspiration that popped up from our readings.
The second derivative attempt is to see if we can deliberately discuss and improve the idea or insight such that it becomes one more useful tool in our backpack as we go about living our (investment and otherwise) lives.
It’s in the spirit of latticework that Charlie Munger talks about.
One of the best interviews that I have come across in the recent past is farnamstreetblogs intervew with Naval Ravikant
It offers extraordinary learnings on multitude of topics and I would urge you to take time to go though the podcast. It will be well worth your time.
It might well be worth it to deconstruct the interview to go deeper in areas that appeal to us.
Naval is the CEO and Co-founder of AngelList, a platform for startups, investors, and job seekers dedicated to democratizing the investment process. In addition to building AngelList, he’s also actively invested in over 200 startups to date, including: Twitter, Uber, Yammer, and Shyp.
His style of investing is quite unique as he gets involved with large number of companies at a very early stage in their life cycle ( in startup world called seed stage )
He answered this question in a prior interview…
How do you pick the companies you invest in?
“I wish I could say that it was some beautifully designed checklist process, but every great company is unique and every deal / investment has unique challenges and opportunities. So it does come down to gut feel and signals extracted from team / traction / product / social proof.”
In the present interview he talks about…
“…as an investor, my system is I want to see 10,000 companies and I want to pick 500 that have a shot of being huge. Then I want the option to double down on the five winners. I don’t want to just look at 100 companies and pick 10 that I think are winners and go all in on those. I don’t think I have that capability.”
Here’s the complete transcript of the interview with Naval. ( if you prefer to read it. Personally, I have heard it 2 times and now reading the transcript making my own notes:) )
On the importance of reading:
"I think that’s probably because of all of these societal and personal rules that we’ve put up, like you must finish a book and you must read books that are good for you, and you can’t read junk food books. This is a hot book right now and so on. The reality is I don’t actually read that much compared to what people think. I probably read one to two hours a day. That puts me in the top .00001%. I think that alone accounts for any material success that I’ve had in my life and any intelligence that I might have. Real people don’t read an hour a day. Real people, I think, read a minute a day or less. Making it an actual habit is the most important thing. "
“It almost doesn’t matter what you read. Eventually you will read enough things, and your interests will lead your there, that it will dramatically improve your life. Just like the best workout for you is the one that you’re excited enough to do every day, the same way I would say the books or blogs or Twitter or whatever, anything with ideas and information and learning, the best ones to read are the ones that you’re excited about reading all the time.”
He urges us to free oneself from reading norms and read freely whatever one wants to read and in whatever way one wants. The important thing is make reading a habit.
Thanks @deepinsight for getting us started on this in a structured manner. Among our friends, you are among the ones with the discipline of reading voraciously - so obviously Naval’s interview resonates a lot with you.
It is because of the above trait, that - you are the one who has pointed me to some very fine reading material, relevant to the times, over the last few years! Leaving me free to focus only on “Incremental Learning” 
. All that heavy-lifting is left to those who bring special energy to that. I love asking you (and others) irritating questions like "So, what’s new? Naya kya sikha boss? 
Grateful. Please keep pouring in.
The quality of your carefully selected posts will surely inspire other voracious readers in the group to pitch in. I hope you will not only find the time to keep posting stuff that you come across in your regular reading, but also find the time to dig into your archives, and give us many more distilled gems from past readings.
Some points that have remained as “to ponder deeply and explore further”…
Make habits deliberate and un-condion habits that do not serve me anymore.
A big habit to change: turn off the monkey mind. Break the habit of uncontrolled thinking. To make it weaker so that one can live in the present every day reality.
Big impact habit: daily workout regimen in the morning.
Making more explicit what are ones priority as concentric circles and deliberately working on them daily.
Look for personal answers to the most important questions, on things like happiness, being present, accepting reality of the moment.
Run the brain in debugging mode as much as possible. i.e. Keep an eye on the internal monologue.
The mind is a muscle and it can be trained and it can be conditioned. Unpack and reconfigure.
Define what foundational values are important to you such that you won’t compromise on them and what you can live your life by.
I think all the benefits in life come from compound interest, wether in money or in relationships or love or health or activities or habits.
I only want to work on things that I know have long term payouts.
I think everybody has values and a lot of finding great relationships, great coworkers, great lovers, wives, husbands, is finding other people where your values line up and then the little things don’t matter.
Freedom as a value; however it’s changed from freedom to…, to, freedom from…!
Contemplate what mistakes one has made in ones life and make the change. Inspired by the question what advise would I give my younger self?
We know we can control our internal state. Now there are many more techniques ranging from cognitive therapy to behavioural psychology to meditation to taking long walks in nature. Meditation brings forth the recognition that how out of control your mind is. You then develop a distaste toward it, separating yourself from it.
Inner work is a singer player game. It’s a lonely kind of task. One cannot get social affirmation, no external progress, no external validation, 100% one is competing against oneself.
Your personal answer is going to be different. It’s important to discover your own personal answer.
Microeconomics ( versus Macroeconomics ) and game theory are fundamental in business. Micro is also important in environmentalism, charity, changing the world…
It can literally destroy your happiness if you spend all your time living in the delusions of the future. Live the life you have.
The ability to learn, the means of learning, the tools of learning, are abundant and infinite, its the desire that’s incredibly scarce.
Learning should be about learning the basics in all fields and learning them really well over and over.
Science to me is the study of truth. The Most devotional thing I can do is study the laws of the universe. I get the same feeling of awe and that same small sense of self when I study science.
You have to read the stuff you are reading because you are into it and that’s it. You don’t need any other reason. There’s no mission here to accomplish. Just read because you enjoy it.
Social approval is inside the herd. If you want social approval, definitely go read what the herd is reading. It takes a level of contrarianism is saying, “Nope. I am just going to do my own thing…”
I’m both lazy and I’m really focused on being present ( when I am reading).
I just don’t believe in anything from the past. Anything. No memories. No regrets. No people. No trips. Nothing.
Decision making is everything (in business and as an investor). In fact, someone who makes decisions right 80% of the time instead of 70% of the time will be valued and compensated in the market hundreds of times more.
If you can be more right, more rational, then you’re going to get nonlinear returns in your life.
The brain is is a memory prediction machine. It has a memory of things that worked in the past and what it’s read and it’s trying to predict the future…What you want is you want principles, you want mental models.
I basically load my head full of mental models. Different ones apply to every situation.
I don’t believe that I have the ability to say what’s going to work. Rather, what I try to do is to eliminate what’s not going to work.
Angel bets and venture bets are great because they have nonlinear outcomes in the positive, but on the downside you can only use one X. On the upside, you can make 10,000X. I’ve tried to rig the game.
Use your judgement to figure out what kinds of environments you can thrive in and then build a system to create that environment around you so that you’re statistically likely to succeed. Set up systems that you fail in very few places.
I set up good systems and then the individual decisions don’t matter that much.
I want to be the most successful version of me.
Money is just a piece of paper. There is huge diminishing returns to money after a certain point. specially now that I am more into freedom from rather than freedom to…
A lot of listeners are right now beating themselves up and scribbling notes and saying, " I need to do this and I need to do that and I need to do…" No, you don’t need to do anything. All you should do is what you want to do. Listen to the little voice of your head that wants to do things a certain way and then you get to be you.
Your goal in life is to find out the people who need you the most, to find out the business that needs you the most. There is something out there just for you. You’ll never be good at being somebody else.
If you have too many moral shortcomings, you will not respect yourself. The worst outcome in the world is not having self esteem. If you don’t love yourself who will?
The smartest people can explain things to a child.
Easy choices, hard life. Hard choices, easy life.
Real knowledge is intrinsic and it’s built from the ground up. True understanding is about algorithms. It’s about how things connect to each other.
I would rather understand the basics very well, than have memorised all kind of complicated concepts.
The smaller you can make your ego, the less conditioned you can make your reactions., the less desires you can have about the outcomes you want, the easier it is to see the reality.
The best founders I’ve found are the ones who are very long term thinkers.
Go find the thing you can commit to for 10 years because that’s how long it’s going to take, minimum, to get a good outcome.
I have to reject all the pieces that I can’t verify for myself.
If I had one wish, the most important thing to me would be I would constantly be running my mind in debug mode.
The most common mistake is the idea or the belief that you’re going to be made happy because of some external circumstances.
You should do what you are meant to do.
On what is the meaning of life…I think fundamentally you just have to find it for yourself, so important part is not the answer, it’s the question. You just have to sit there and dig with the question.
The core idea of taking the amazing benefits that percolate from compound interest in all aspects of life
Naval talked about the idea of compound interest in all aspects of life, as an example of building health through daily exercise, building a business, relationships etc.
"Here’s a simple idea for your life: If something compounds at 1% a day, it will be 37 times better in a year. If something loses 1% a day, it will be 0.03% of what it was in a year.
If you want to get better at investing, try to get 1% better every day. Then, in a year, you will be 37 times better. If you want to get better at being more outgoing, try to be 1% more outgoing each day.
I know it’s hard to quantify. It’s impossible. But the direction is what is important."
“You can use the power of compounding in every area of your life.”
Read more at the article link below…
Source:
Incidentally, just yesterday I was reading about this UK bicycle coach who had used this “aggregation of incremental difference” model to coach his team. I think it’s a very powerful concept.
Converting to investing, basically, he is saying that if you improve your buying process 1%, your holding process 1% , your selling process 1% the aggregate is much more than 3%… Sometimes it’s a quantum jump.
Super Article Abhishek.
Articulates very well the aggregation impact ( compounding effect ) coming from small actions.
“In the beginning, there is basically no difference between making a choice that is 1 percent better or 1 percent worse. (In other words, it won’t impact you very much today.) But as time goes on, these small improvements or declines compound and you suddenly find a very big gap between people who make slightly better decisions on a daily basis and those who don’t. This is why small choices don’t make much of a difference at the time, but add up over the long-term.”
Super.
This article introduces us to Pareto Principle, popularly known as the 80/20 rule and connects it to the 1% rule ( accumulative advantage )
"Pareto found that the numbers were never quite the same, but the trend was remarkably consistent. The majority of rewards always seemed to accrue to a small percentage of people. This idea that a small number of things account for the majority of the results became known as the Pareto Principle or, more commonly, the 80/20 Rule. "
Further…
"From this advantageous position, the winning plant has a better ability to spread seeds and reproduce, which gives the species an even bigger footprint in the next generation. This process gets repeated again and again until the plants that are slightly better than the competition dominate the entire forest.
Scientists refer to this effect as “accumulative advantage.” What begins as a small advantage gets bigger over time. One plant only needs a slight edge in the beginning to crowd out the competition and take over the entire forest."
Read more here…
The Difference Between Goals and Systems
“Goals can provide direction and even push you forward in the short-term, but eventually a well-designed system will always win. Having a system is what matters. Committing to the process is what makes the difference.”
The Difference Between Goals and Systems
What’s the difference between goals and systems?
“If you’re a coach, your goal is to win a championship. Your system is what your team does at practice each day.
If you’re a writer, your goal is to write a book. Your system is the writing schedule that you follow each week.
If you’re a runner, your goal is to run a marathon. Your system is your training schedule for the month.
If you’re an entrepreneur, your goal is to build a million dollar business. Your system is your sales and marketing process.”
Read more here…
An interesting article from economist on Amazon and its business model…
“Amazon’s e-commerce site and Amazon Web Services (AWS), which provides cloud computing, both benefit from virtuous cycles. The more sellers use the e-commerce site, the more buyers it attracts, the more Amazon invests to improve its offerings, which lures more sellers and buyers. Similarly, the more AWS invests in software (more than 1,000 new tools last year), the more enticing it becomes for developers and corporate customers, the more it can invest, which makes companies ever less likely to move their data.”
The self reinforcing loop is an extremely interesting model to learn from…
India’s Digital Infrastructure
"It is very rare indeed that a country develops an outsized technological infrastructure breakthrough that leaves the rest of the world far behind.
But exactly this has just happened in India… and no one noticed.
India is now the most attractive major investment opportunity in the world."
Read further:
Superlatives aside gives an interesting context and the possibilities that it opens up…
In an interview to Vishal Chhabria, he says that there are incipient signs of the economy turning for the better and shares his thoughts on the investment avenues in the current market scenario.
Interesting perspectives from a market veteran
Read Slowly to Benefit Your Brain and Cut Stress
Members of a Wellington, New Zealand, club gather weekly to read slowly. ENLARGE
Members of a Wellington, New Zealand, club gather weekly to read slowly. Frida Sakaj
By
Jeanne Whalen
Updated Sept. 16, 2014 7:40 a.m. ET
Once a week, members of a Wellington, New Zealand, book club arrive at a cafe, grab a drink and shut off their cellphones. Then they sink into cozy chairs and read in silence for an hour.
The point of the club isn’t to talk about literature, but to get away from pinging electronic devices and read, uninterrupted. The group calls itself the Slow Reading Club, and it is at the forefront of a movement populated by frazzled book lovers who miss old-school reading.
Slow reading advocates seek a return to the focused reading habits of years gone by, before Google, smartphones and social media started fracturing our time and attention spans. Many of its advocates say they embraced the concept after realizing they couldn’t make it through a book anymore.
“I wasn’t reading fiction the way I used to,” said Meg Williams, a 31-year-old marketing manager for an annual arts festival who started the club. “I was really sad I’d lost the thing I used to really, really enjoy.”
Slow readers list numerous benefits to a regular reading habit, saying it improves their ability to concentrate, reduces stress levels and deepens their ability to think, listen and empathize. The movement echoes a resurgence in other old-fashioned, time-consuming pursuits that offset the ever-faster pace of life, such as cooking the “slow-food” way or knitting by hand.
The benefits of reading from an early age through late adulthood have been documented by researchers. A study of 300 elderly people published by the journal Neurology last year showed that regular engagement in mentally challenging activities, including reading, slowed rates of memory loss in participants’ later years.
A study published last year in Science showed that reading literary fiction helps people understand others’ mental states and beliefs, a crucial skill in building relationships. A piece of research published in Developmental Psychology in 1997 showed first-grade reading ability was closely linked to 11th grade academic achievements.
Yet reading habits have declined in recent years. In a survey this year, about 76% of Americans 18 and older said they read at least one book in the past year, down from 79% in 2011, according to the Pew Research Center.
ENLARGE
Attempts to revive reading are cropping up in many places. Groups in Seattle, Brooklyn, Boston and Minneapolis have hosted so-called silent reading parties, with comfortable chairs, wine and classical music.
Diana La Counte of Orange County, Calif., set up what she called a virtual slow-reading group a few years ago, with members discussing the group’s book selection online, mostly on Facebook. “When I realized I read Twitter more than a book, I knew it was time for action,” she says.
Screens have changed our reading patterns from the linear, left-to-right sequence of years past to a wild skimming and skipping pattern as we hunt for important words and information.
More academics and writers are advocating a return to absorbing, uninterrupted reading—slow reading, as they call it. WSJ’s Jeanne Whalen discusses with Tanya Rivero. Photo: Getty
One 2006 study of the eye movements of 232 people looking at Web pages found they read in an “F” pattern, scanning all the way across the top line of text but only halfway across the next few lines, eventually sliding their eyes down the left side of the page in a vertical movement toward the bottom.
None of this is good for our ability to comprehend deeply, scientists say. Reading text punctuated with links leads to weaker comprehension than reading plain text, several studies have shown. A 2007 study involving 100 people found that a multimedia presentation mixing words, sounds and moving pictures resulted in lower comprehension than reading plain text did.
Slow reading means a return to a continuous, linear pattern, in a quiet environment free of distractions. Advocates recommend setting aside at least 30 to 45 minutes in a comfortable chair far from cellphones and computers. Some suggest scheduling time like an exercise session. Many recommend taking occasional notes to deepen engagement with the text.
ENLARGE
F. Martin Ramin/The Wall Street Journal
Some hard-core proponents say printed books are best, in part because they’re more visible around the house and serve as a reminder to read. But most slow readers say e-readers and tablets are just fine, particularly if they’re disconnected from the Internet.
Abeer Hoque, who has attended a few of the silent reading parties in Brooklyn, N.Y., said she plans to read a book on her phone next time, but turn it to airplane mode to stop new emails and social-media notifications from distracting her.
When Ms. Williams, who majored in literature in college, convened her first slow reading club in Wellington, she handed out tips for productive reading and notebooks for jotting down favorite words and passages. Each time they meet, the group gathers for a few minutes to slowly breathe in and out to clear their minds before cracking open their books, as in yoga.
Roughly 20 to 30 readers have shown up for Sunday evening sessions, Ms. Williams says. Most new members fill out a brief survey on their experience with many describing it as calm, peaceful and meditative, she says.
This is an excellent article by Malcolm Gladwell on entrepreneurs, entrepreneurship and perceived risk taking by entrepreneurs.
How entrepreneurs are perceived to be big risk takes while actually they are doing something opposite by capitalising on the “sure thing”.
I would recommend adopting this mental model for ourselves as investors too…
http://gladwell.com/the-sure-thing/
Excerpts…
“When the sociologists Hongwei Xu and Martin Ruef asked a large sample of entrepreneurs and non-entrepreneurs to choose among three alternatives—a business with a potential profit of five million dollars with a twenty-per-cent chance of success, or one with a profit of two million with a fifty-per-cent chance of success, or one with a profit of $1.25 million with an eighty-per-cent chance of success—it was the entrepreneurs who were more likely to go with the third, safe choice. They weren’t dazzled by the chance of making five million dollars. They were drawn to the eighty-per-cent chance of getting to do what they love doing. The predator is a supremely rational actor. But, deep down, he is also a romantic, motivated by the simple joy he finds in his work.”
“All were supremely confident of their decision. All had done their homework. All had swooped down, like perfect predators, on a marketplace anomaly. But these were not men temperamentally suited to risk-taking. They worked so hard to find the sure thing because anything short of that gave them ulcers.”
How do we become better investors? Better decision makers? Having a latticework of mental models to hang our thoughts and choices on is a great start.
I liked this article and the suggestion… “The goal is to hang these models on a latticework of mental models with concrete examples in our head to help us remember them. And apply them in our life.”
