Weekly Summary

Quote, Mental Model, Weekly Thoughts.

Quote

“The optimist thinks this is the best of all possible worlds. The pessimist fears it is true. ”
― J. Robert Oppenheimer

Mental Model

Loss Aversion: Loss aversion is when you feel more pain when you lose something than happiness when you gain something. For example you would be more sad if you lose 100 rupees than if you gain 100 rupees. When we are afraid to lose we tend to try and convert the losses into wins. For example, if I lose my favourite cap which my mother gave in a lake with a crocodile who’s hungry. I will go in the lake to retrieve it but in the process I will get my leg bitten off. This is human behaviour. It happens in the markets as well when we try to convert our losers into winners by putting more money but we just end up losing more. So to sum up loss aversion is something that is built in and we have to keep it in the back of our head.

Weekly Thoughts

There are many ideas that Charlie Munger speaks about but he has a famous saying. Everything that has to be said has already been said. But it has to be repeated because nobody listens to those ideas. The best part is these ideas are all simple and easy to understand. Everyone knows what they have to do but they still don't do it. This is the most intriguing part of human behaviour. Everyone knows smoking cigarettes, overspending, having toxic friends, etc are bad. We still do these things. We know the consequences of our decisions but we end up doing the wrong thing. Then when we do the wrong thing and face the consequences we have something or someone to blame. Human behaviour is tricky. No matter how much you know you will make those mistakes, we must ensure that it is not a major mistake. Even psychology professors tend to fall to the biases that they have mastered. So at the end of the day, I guess it doesn't matter if you have an informational edge (high IQ) you have to act rational. The Outliers are the ones that take the information provided act on it and also have a behavioural edge.

That’s it for this week!