Saturday Serendipity
Quote, Mental Model, Interesting find, Question to ask.
Hi there,
Reading time: About 4 minutes
Quote
“When you win, you survive another day. When you lose, it is as if someone has torn out your heart and stepped on it. No exaggeration. Losing is brutal.” ~ Josh Waitzkin (The Art of Learning )
Mental Model
Friction and Viscosity
I hope I don’t bore you with these weekly physics mental models. But this week again we have a physics mental model, my hate for it in school is now gone completely.
What is friction and what is viscosity?
Friction: In simple words it is the resistance that you face when you move on surface or when you move from one surface to another. It opposes the movement of objects that are in contact with one another. For example, when you try to move in sand compared to the road the friction levels are different. When you want to move your feet in sand friction is the force that slows you down. F1 car tyres face a lot of friction because of the speed that they drive at and they way they turn.
Viscosity: Viscosity is how hard it is for a liquid or fluid to move around. How smooth a fluid moves from one place to another is known as viscosity. For example, Water has a low viscosity as it moves around freely. On the other hand, Honey has high viscosity as it is not as smooth as water when it moves. It is sticky. It is the resistive force between the layers of liquids.
In life
Friction and Viscosity are both factors for things which restrict/impede movement. They describe how difficult movement is. Similarly if we are to correlate this to normal situations in life whenever we want to progress we face setbacks and we also face a lot of challenges. Everything isn’t smooth like water somethings are sticky like honey.
For instance lets take a simple example of the gym. Everyone expects their gym journey to be simple and in 1-2 years of consistent growth they will be muscular. The thing that I think most people do not realise is that in this 1-2 year journey there are going to be a lot of setbacks. Sometimes when you miss gym for a few weeks due to some reason you go back and hit the gym and you realise that you cannot lift the same weights you could do with ease.
But every single journey in life has its ups and downs. Some people have more some people have less. Friction and viscosity are the forces that make it harder to succeed but also the forces that make success all the more rewarding.
Same way I want to correlate friction to friendships and the social circle that we are a part of. The force of friction differs from friend to friend. Many friends end up being a huge setback for us in our journey. If I want to achieve something great I do not want people who hold me back. This friction can either be very high which could end up in becoming a problem or it could end up being a huge bonus for us as friends push us to be better. Sad thing is we often misunderstand the good ones and feel the bad ones are our real friends.
In Investing
Similarly in investing friction can be the setbacks that we face while investing in the form of stock market crashes, bad news, bad economic conditions ,etc. It is not only the stock price but even the business faces setbacks. There are no businesses to my knowledge which have never faced a downturn/bad time.
Investing is an environment where you also have bad stocks which reduce your overall returns. When a portfolio has too many stocks this is what happens. As munger says it is very rare to find great companies and great companies are the ones which get us great returns. So if you buy too many stocks, you end up buying a lot of bad ones. These affect your returns and set you back.
Another thing which happens which proves to be a setback and a force to reduce our returns is when we buy and sell too much. If the activity increases in the markets we have a lot of costs such as brokerage costs, tax costs, etc. these slow down the process and harm our long term returns. This is why trading is bad.
Interesting find
Jack Raines on reputations worth
Question to ask
I have one question investors can ask themselves and one for everyone to ask themselves.
Investing : Are the companies I own fundamentally still the same as the time that I bought?
Normal : What are you doing currently that you know you should not be doing but still continue doing?
(Try and act as soon as you know what the answer to the question is. The more you delay it the worse it will get.)
That’s it for this week!
Enjoy the weekend and Stay curious!