👋 Hi, I’m Abhishek. Welcome to Sunday Wisdom — a weekly advice column on decision-making, clear thinking, creativity, and everything else that’s stressing you out in business and life. I appreciate you being here. If you are here for the first time, please consider subscribing.
Q: Is investment advice really helpful?
In a game of cricket, all the “players” are playing the same game. They all follow the same rules, and have similar sets of goals. Taking cue from that, we call everyone who invests money “investors”. When you realise how wrong that notion is, you see how vital it is to identify what game you’re playing.
“Should I invest in Bitcoin, or Apple, or only in index funds?” All of us take stock tips from financial channels, newspapers, and YouTube videos. Amateurs ask experts for investment advice. But just because a stock is recommended by others has nothing to do with whether you should buy it or not. The answer depends upon who you are, and what game you are playing.
Do you have a 25-year horizon, or are you looking to cash out in 10 years? Are you planning to sell within a year, or are you a day trader?
The factors that a person with a 25-year horizon would pay attention to would look ridiculous to a day trader because they aren’t playing the same game.
The first person’s focus is on Apple’s discounted cash flows over the next 25 years, while the second person’s focus is to squeeze a few bucks out of whatever happens between now and lunchtime.
People from whom you take investment tips maybe rational, but they are looking at the world through a different lens than your own. Problems happen when you start playing other’s game without understanding them.
Few years back I had put some money into Bitcoin. I didn’t completely understand the technology behind it, but since it had been around for a decade, I reckoned it wouldn’t die in the next 10 years. And if half of what people were saying was true, I figured I would get a good return on my investment. But the price didn’t stop rising anytime soon. It broke records every day, long after my investment was complete.
If you know anything about the market, rising prices is a drug that can make conservative investors go in for the quick buck. And I was only an amateur.
Driven by greed I started putting a bit more money into it every day. If you know anything about it, greed makes us lose touch with reality. Most importantly, greed is driven by the actions of others who are playing different games than us. Fortunately, I stopped after a few days. Many didn’t, and lost a good deal eventually.
As Morgan Housel writes in The Psychology of Money, “The formation of bubbles isn’t so much about people irrationally participating in long-term investing. They’re about people somewhat rationally moving toward short-term trading to capture momentum that had been feeding on itself.”
That was December 2017 when the tiny Bitcoin bubble had burst. 3 years from then, we’re in a similar Bitcoin bubble today. Many would lose money in the coming weeks, especially those who are abandoning their games.
Being swayed by others who are playing different games can not only influence how you invest, but also how you spend. While you can see how much money “influencers” spend on cars, homes, clothes, and Instagram-worthy vacations, you don’t get to see behind the scenes—their goals, worries, and aspirations.
Most consumer spending is socially driven—influenced by people you either admire or compete with. Therefore, it’s important to know who you take your cues from—and what games they are playing.
For example, a model trying to break into the film industry needs to maintain an appearance that I—a creator who can work from my bedroom—have no need of. But when I start to let my expectations get influenced by their lifestyle, I’m spending the money without the career boost they are getting. That’s foolish! We don’t just have different lifestyles, we are playing different games.
Few things matter more than identifying what games you are playing. Go out of your way to identify them, and don’t get influenced by the actions of people who are playing different games than you are.
5 Rules to Become a Better Reader
Reading more is not about reading fast. It’s about reading at a comfortable pace; but doing it regularly. People have a hard time reading not due to lack of time, but due to lack of practice.
Only a couple of years ago I used to struggle to finish even one book a month. But now breezing through 3 or more books every month has become second nature to me. What changed? Nothing much, except that I’ve set up my system of reading books. That’s what I talk about in this video. My 5 rules to become a better reader.
What I’m Working On
If you are new here, here’s a bit of a background for context: I plan to do an online workshop with the readers of Sunday Wisdom within the next few months. I had floated a form to know your expectations. Thanks so much for sharing your ideas.
Many longtime readers have shared their ideas. It would be great if new readers fill it out as well. I’m lucky to have readers from 5 continents. It would be nice to explore all the cools things we can do together.
The strength of one workshop cohort will not be more than 8 people. This would allow maximum interaction between ourselves. We’ll not only learn from each other, but also make great friendships.
Workshops can be a big waste of time, especially those following a traditional format. This one won’t be like that. That’s a promise! I’ll put all the effort to make sure that you not only learn new things, but also have a great time.
This form will be open for submissions until next Sunday. Take 5 minutes to fill it out. Help us create an awesome workshop!
What I’m Learning
Mental Errors
Wishful Thinking: We put more weight on the present knowledge that is pleasant to us, and simultaneously ignore the knowledge that is not so nice.
Conservatism: We have an insufficient ability to change our common views and beliefs with new data or evidence.
Conformism: We weigh our knowledge in accordance with our community.
Binary Thinking: We think in binary terms. Our language reflects that. Good-evil, smart-stupid, beautiful-ugly, tall-short, fast-slow, and so on.
All-or-Nothing Thinking: Any result other than the best is considered a failure. It causes stress and depression in people.
Overgeneralisation: We put very broad types of information into the same category.
Self-Projecting Thinking: We use our way of thinking to deduce the thoughts of others.
Human-Centric Thinking: Humans are part of nature. We follow its laws. Despite that, we neglect nature and the life of other species at scale.
False Associations: We make connections very fast based on tiny data.
— Major Flaws of Human Thinking
The Benefits of Not Caring
Everyone cares what somebody thinks about them, but caring too much makes you a sheep. What you should do is trade being short-term low-status for being long-term high-status. You have to eventually be right about an important but deeply non-consensus bet.
As long as you are right, being misunderstood by most people is a strength. This gives you and a small group of rebels the opportunity to solve an important problem that might otherwise get ignored.
Most innovators don’t care much about what other people think. They spend time putting their head down, doing the work, and not worrying about consensus.
— The Strength of Being Misunderstood
Borrow Your Creativity
Most people think don’t think they are creative. They treat creativity as something innate that one has to be born with. It isn’t so.
Our creativity comes from without, not from within. We are influenced. We are not self-made. We are dependent on one another for ideas and inspiration. Admitting this to ourselves isn’t an embrace of mediocrity or derivativeness, it’s a liberation from our misconceptions. It’s an incentive to not expect so much from ourselves, and to simply begin creating.
Transfer of Knowledge
When you apply widely known techniques from one field to another, it can give you an unfair advantage over others.
Examples:
Obama’s campaign was the first to widely use A/B testing in their website and “modern” email marketing tactics to presidential elections, although these techniques were widely used by tech startups.
Donald Trump’s 2016 campaign implemented Twitter and Facebook ad targeting in a way that no other candidates had before. This playbook was being run by Silicon Valley for a decade beforehand.
Billy Beane applied statistics in baseball to create amazing teams at a fraction of the price in ways that defied the standard practices of the time.
The Black-Scholes options pricing model was a difficult and “unsolved” problem in finance until a chance encounter with a physicist, who immediately recognised it as a solved problem in physics: gas diffusion.
— Always Start a Food Business, Especially in a Pandemic
Makers v Managers
There are two types of schedule: the manager’s schedule and the maker’s schedule.
The manager’s schedule is for bosses where each day is cut into one hour intervals. You change what you’re doing every hour. Having meetings is the norm in this schedule. Find open slots, book them, and you’re done.
But when you’re operating on the maker’s schedule, meetings are a disaster. A single meeting can blow a whole afternoon. For example, if you know your schedule is about to be broken up by a meeting in the afternoon, you are less likely to start something ambitious in the morning.
Problems arise when these schedules crash. Makers know that they’ll have to compromise a bit, and attend some number of meetings. All that is required is for managers to understand the cost. That rarely happens.
— Maker’s Schedule, Manager’s Schedule
👋 That’s All!
One last thing. Reading this post won’t help, unless you swallow, chew, and digest these ideas. I urge you to become a demanding reader—one who questions the author, seeks answers, and doesn’t shy away from sharing opinions and interpretations.
If you wish to get in touch, DM me on Twitter, or Instagram, or simply reply to this email. I hope you have a great week, and thank you for making Sunday Wisdom a part of it.