Read More, Become More

Fiction is a very powerful idea. I can't say that any other life form on our planet has ever graduated to using the full power of fiction like we have. The most they can rely on is the immediate knowledge from their genes and what they learn vicariously. 

But we have an unique advantage. We can put all our working knowledge of our culture, our traditions, things of practical importance into a tidy little capsule called a story. Once all this knowledge is filled in that capsule it is only a matter of time someone will come along and swallow it. It may not profoundly affect that person's world view but it will surely make a dent. How big a dent it can make depends on how potent the capsule is & how often he swallows it. 

Fiction in the form of books has changed the way people perceive the world. It has made our existence a lot more colourful and has added flavour to our experience which, at that moment, we couldn't have added on our own. A lot of times writers dissect their character's thought processes. This helps the readers clearly understand a character's actions. If a reader looks up to that character then the thought process seems like an incentive to improve ourselves to that standard. Even if we read of some character behaving disagreeably, we can always feel it and it reflects our own cultural & social upbringing. It brings out our ideas about good & evil & allows us to express them in our thoughts.

These thoughts wouldn't have come out on their own unless we were subjected to that experience directly. Fiction speeds up this process minus the pain of living through it.

The structure of fiction is also unique. There's no contents page, no acknowledgments, no introductions. We plunge directly into the narrative right from page one. This puts us front and centre of the events that unfold. No other form of correspondence or form of knowledge transmission works that effectively. Every other form needs some sort of qualifying introduction to set the tone for what's to come. Even a brilliant piece of music needs a right setting.

Since we humans are a bag full of feelings and emotions, whether we like to admit or not, fiction brings out the best and the worst of our feelings. We feel for the characters, we feel for their outcomes. Perhaps we feel for them more strongly than we feel for our own outcomes. That's because in fiction the characters' actions are always motivated by some thought. There's no room for purposeless actions. This is contrary to the way we humans go through life. We usually do a lot of things that are motivated by some thought but largely there are a lot of other things we do automatically. We have a subconscious drive that pushes us to do things we wouldn't do if we carefully consider them. Sometimes we are not even conscious of the purpose of our actions and are made aware only after someone or some event brings it to our attention. This possibility opens up a whole new world of exploration for us. Fiction can help us see the motivations behind the characters' actions & can make us question ours as well. Without fiction for our aid we would pay an hour's fee to a therapist to help us understand & untangle the subconscious intentions behind what we do. But the joy to figure it out on our own is totally different and it's much more vivid. 

We generally have these self biographies running in our head. They tell us who we are, what we must do, what we are like. These biographies change with our experience & knowledge of ourselves & the world around us. These biographies seem remarkably similar to reading character profiles in fiction. They are highly imaginative & very colourful. They make us look either good or bad in our own eyes which in turn determine the kind of mood they put us in. We have this remarkable tendency to observe our behaviour & deduce what kind of a person we are. Fiction is a similar process where the character is written & presented in front of us to figure out the labyrinthine thought behind each action. Fiction can helps us question what our biographies should be like. 

Aristotle said that "We acquire virtues by first having put them into action ... we become just by the practice of just actions, self-controlled by exercising self-control, and courageous by performing acts of courage." What better way to get acquainted with our actions than to see us emotionally respond to what the characters do? Better yet, they can also change us into who we wish to become. A good story invokes all these thoughts & puts us in an inevitable position to answer these questions about ourselves. That's why reading novels involving existential themes are very difficult to accept. They force us to ask what is our purpose & may force us to consider that there may not be any.

Read More, Become More.

The Sport of Investing

Cross posted from our company blog - The Sport of Investing

I have always wondered if investing is a sport or a profession. What I mean to say is that should investing be about competition or should investing be about generating good returns on investment. Although a lot that an investor does, especially a very public one, can be qualified as a sport when we use league tables to judge fund managers, private equity investors, etc. But is investing really a sport or just another professional activity?

Well professional sportsmen will surely differ here, saying, ‘hey, even we are professionals.’ Sure they are, but the context is different when emotions are involved. It is weird since both investing & sporting involve the same level of emotional demands from the player. (S)He has to make decisions in a cold and calculated way which can make the difference between glory & defeat. An investor faces the same emotional dilemma, but not with glory or defeat (entirely), but with money & worse – other people’s money. So the emotional motivation to get glory at all costs is the fundamental difference between sporting & investing, because an investor can’t bet the ranch when the odds are not in favour (at least that’s what should happen in a rational universe).

The reason I compare these two activities is because I watched a documentary about the legendary (late) Formula One driver, Aryton Senna. Its called “Senna“. A wonderfully made, heart wrenching film about the driver’s meteoric rise, the sport of formula one & his untimely death in an accident. The end reminded me much about how investors & traders can also feel the colossal effect of a fatality (not with life but with money) of a decision gone wrong. But you still live another day for the next round, unlike in Senna’s case. In his interviews which have been restored from archived footage, he talks about what he feels of the sport & his skill as a racing driver.

To give some background, Senna had been penalized for an accident while he nicked his car against team-mate & arch rival Alain Prost (of McLaren) which meant the end of the race for Prost & Senna continued with relatively less damage to win the race & the championship title. The race victory was stripped away from him as a penalty. In an interview later, the former Formula One driver Jackie Stewart asked Senna how was it that he was the most accident prone driver in any given stretch of 36 month period in the history of the sport? (which in fact is not a relevant comparison since nobody really drives in a race for causing accidents). To which Senna replied very emotionally that, “When we call ourselves racing drivers we see a gap, we take it. If we fail to do that, we can no longer call ourselves racing drivers”.

Isn’t this what investing is all about? We try to find gaps in the value of an asset, a security & we try to take advantage by acting on the gap. The gaps in the race are chances to move & exist only for a limited time frame of a second or two. But in investing the gaps have been known to exist for a lot longer than that & also some exist for a very short time. But this gives us even more reasons to rejoice so that we can keep on taking advantage of the gap as long as it exists.

Investing is not a sport, although its risks are real just like any sport. It isn’t necessary to compare one investor with the rest because all we are dealing with is past performance based on situations which had existed at those times. Its really the process that comes to work in the end. A racing driver can have a few fluke victories, but a sustainable, long term great performance is only possible when the driver has developed a process with which he uses his ability to race.

Buffett used to say in his partnership letters that our only benchmark is the S&P 500 index & Dow Jones Index, & that he would be glad if he could consistently beat it with a few percentage points difference over the long term. Well, he has done a lot more than that, but the point is taken. How any investor will perform in the future depends on a lot of factors and skill & luck are a very large part of them.