Things to Ponder
- being outside your normal environment or routine
- being in the presence of a group
- being in the presence of an expert (or when you believe you’re the expert)
- doing any task that requires intense focus
- getting stuck in information overload
- being physically or emotionally stressed or fatigued
- rushing or feeling a sense of urgency
US
GDP is $19 trillion. China is 2nd at $12 trillion. Japan and Germany
are 3rd and 4th at about $5 trillion each. Together, these countries
account for half of global output.
Yet, other interpretations (here, here, and here) present different impressions. Perhaps it boils down to the metric you use.
In a Bloomberg piece titled Get Used to it America: We're No Longer #1, we see that China and the US are of comparable size, yet China is more likely to grow larger and more influential.
Expectation Versus Reality
Yet, other interpretations (here, here, and here) present different impressions. Perhaps it boils down to the metric you use.
In a Bloomberg piece titled Get Used to it America: We're No Longer #1, we see that China and the US are of comparable size, yet China is more likely to grow larger and more influential.
Expectation Versus Reality
We all face events (both positive and negative) that we did not
expect, but this doesn’t mean we are doomed. There are some
basic rules for survival and recovery:
We seek the ordered, the linear, and the smooth; the world gives us the chaotic, the curved, and the jagged. This dichotomy is as old as history itself—order versus chaos. So don’t be drowned by negativity when things don’t go as planned. This is the natural state of the universe. Sometimes you win. Sometimes you lose. The important thing is to not get consumed by the chaos.
December, 2018
Blind to Luck
December, 2018
- Have sufficient rations.
- Re-evaluate your plan and make needed changes.
- Don’t give up.
We seek the ordered, the linear, and the smooth; the world gives us the chaotic, the curved, and the jagged. This dichotomy is as old as history itself—order versus chaos. So don’t be drowned by negativity when things don’t go as planned. This is the natural state of the universe. Sometimes you win. Sometimes you lose. The important thing is to not get consumed by the chaos.
December, 2018
Blind to Luck
"Investors fail to understand that, in large
populations of mutual funds, a few will outperform by pure chance...In
addition, investors do not sufficiently account for volatility and are
thus likely to confuse risk taking with skill."
Basically, we all tend to attribute outcomes to skill where, in fact, luck matters most.
December, 2018
Late Cycle Lament: The Dual Economy, Minsky Moments, and Other Concerns
This excellent paper by James Montier at GMO delves into how overoptimism and overconfidence are particularly dangerous in the late stages of an economic cycle. Specifically, this leads to overestimating return and underestimating risk. Montier shows how the current US economy is the slowest and weakest in post WWII history. He describes the dual economy, where prosperity is reasonable in some sectors and totally absent in others. He further elaborates on systemic vulnerability and the potential making of a Minsky Moment. He then shows how all this is occurring against the backdrop of an extremely expensive US equity market. In the end, you have to ask yourself what your minimum and maximum exposure to the US stock market ought to be. GMO is essentially at zero in their unconstrained portfolios.
December, 2018
Historic Returns in Bonds
This excellent paper by James Montier at GMO delves into how overoptimism and overconfidence are particularly dangerous in the late stages of an economic cycle. Specifically, this leads to overestimating return and underestimating risk. Montier shows how the current US economy is the slowest and weakest in post WWII history. He describes the dual economy, where prosperity is reasonable in some sectors and totally absent in others. He further elaborates on systemic vulnerability and the potential making of a Minsky Moment. He then shows how all this is occurring against the backdrop of an extremely expensive US equity market. In the end, you have to ask yourself what your minimum and maximum exposure to the US stock market ought to be. GMO is essentially at zero in their unconstrained portfolios.
December, 2018
Historic Returns in Bonds
Investors would be wrong to always assume that bonds produce positive returns. Surely, negative returns do not happen with the frequency or severity seen in stocks, but even small losses can erase inflation-adjusted gains.
December, 2018
The Farnam Street Latticework of Mental Models
December, 2018
The Farnam Street Latticework of Mental Models
Mental models are how we understand the world. They are simple representations of how things work. We cannot keep all the details of the world in our brains, so we use models to simplify the complex into understandable and organizable chunks.
The quality of our thinking is proportional to the models in our head and their usefulness in the situation at hand. The more models you have—the bigger your toolbox—the more likely you are to have the right models to see reality. It turns out that when it comes to improving your ability to make decisions
variety matters.
Most of us, however, are specialists. Instead of a latticework of mental models, we have a few from our discipline. Engineer think in systems. Psychologists in terms of incentives. Biologists in terms of evolution. By using different systems we can wrap our minds around a problem in many different ways. If we only use one way, got a blind spots. And blind spots can kill you.
This essay is a collection of 109 mental models. Building your latticework is a lifelong project. Stick with it, and you’ll find that your ability to understand reality, make consistently good decisions, and help those you love will always be improving.
December, 2018
Twelve Lessons on Risk and Uncertainty
Long read. Worth it.
The Loud Impact of a Quiet Ego
Being a long-time meditator, I was pleasantly surprised at coming across this.
