Weekly Summary
A quote, A mental model, Lecture review pt2. , Twitter Thread
A quote
"Do not impose on others what you yourself do not desire." ~ Confucius
A Mental Model
Redundancy: Redundancy is another way to achieve the same task. It is similar to having a backup system. This model is something we all follow. Look at your car you have a spare tyre ready in case you have a puncture. We all have backup keys for our houses, cars, etc this is redundancy. Simply redundancy is, having a backup when our first option is not there. When it comes to investing we all are said to follow the "margin of safety" to have safety as we do not know what is going to happen. This is redundancy. We should also keep an Emergency Fund for ourselves which can cover 5-8 months of expenses to keep it for our safety in case any bad time comes our way.
Lecture Review Pt2.
This is a continuation of last week. If you haven't read last week's newsletter check it out here and then come back.
Pendulums: Markets are like pendulums. They go from underpriced to overpriced. The company will not be at fair value. The pendulum will always be swinging from one side to the other.
Ice Skating: A deep lake in winter which freezes is a spot where you want to ice skate but you don't because it can break easily. One person successfully skates on the ice and seeing that person two more join in and seeing three people skate causes everyone to forget that it is a deep lake. When everyone comes to skate on the lake is when it breaks. This is similar to the markets. The more people that join the party the more the bubble enlarges and the risk increases not the other way around.
Knowledge: Multidisciplinary knowledge in investing is important. History and psychology help a lot. The important thing to do after reading and meeting new people is to think about it and connect the dots. If you do not connect the dots from your learnings then your knowledge becomes a liability, not an asset. Your confidence will kill you.
Contrarian: Herd mentality is dangerous as seen in the Ice Skating example. When everyone is doing the same thing it feels safe to be with them even if they are wrong. Independent thinking is really important. Be fearless in being contrarian if you know you are right.
Happiness= Success/Regrets.
The pain of losing money is way more than the happiness of making money
Twitter Thread
That’s it for this week! Thank you for reading.