Ten interesting things that we read this week
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At Ambit we spend a lot of time reading articles that are not directly relevant to Indian stocks. However, since the Indian economy is now umbilically linked to its global counterparts, the articles that we come across have relevance for Indian stocks and the Indian economy. In that context, this report contains the ten most interesting pieces that we read this week.
Here are the ten most interesting pieces that we read this week, ended December 09, 2016.
1) The evolution of good investing ideas [Source: fool.com ]
Many investors think investing is like polio in the sense that once we find a solution – an investment technique, a formula, a pattern – we expect it will work forever. But solutions rarely do because markets are always adapting and morphing into something they didn't look like before, like the flu. If we expect our investment solutions to work, they need to be updated and revised to keep up with how the market adapts. There's a sound basis for emphasizing recent performance over antiquated performance in the evaluation of data. Recent performance is more likely to be an accurate guide to future performance, because it is more likely to have arisen out of causal conditions that are still there in the system, as opposed to conditions that have since fallen away. Even Benjamin Graham, widely considered the father of value investing was one of the rare investors who treated investing like a flu shot. In each revised edition of The Intelligent Investor, Graham discarded the formulas he presented in the previous edition and replaced them with new ones.
2) What the options market tells you about Donald Trump [Source: Financial Times ]
Nobel Laureate Myron Scholes says that years of ultra-low interest-rate policies by the US Federal Reserve have led to some head-scratching distortions, with US utilities commanding higher price-to-earnings ratios than high-growth Chinese tech companies and investors paying governments to lend to them. Before the US election, the options market had signalled a greater probability of a return to higher nominal interest rates in the US, led by inflation. Ten-year, break-even inflation in the US has surged 60 basis points since July and by a stunning 20 basis points since Donald Trump won the presidential election. Despite these moves, the options market continues to signal a greater probability of more inflation to come, making the chance of a rate rise in December more certain. Before the US election, the low expected tail loss that the options market assigned to US equities implied that fiscal stimulus would serve as a backstop to protect the economy from tipping over. The options market, however, wasn’t convinced such deficit spending could spur growth in the US and assigned a low probability to large equity gains. Now the options market has taken on a different view. Since the election, it has begun to signal more growth ahead and more upside for equities.
3) John Donahoe talks about his leanings on life! [Source: Stanford Business School ]
John Donahoe – the ex-CEO of ebay - debunks the myth of high achievers in this exceptional lecture at his alma mater, Stanford. Some of the key points mentioned by his in this talk were: a) to be a world class performer you have to invest in yourself. For every minute an elite athlete spends on the field, they’ve spent hours off the field, deliberately investing time in their mental, physical, and emotional health. Highly successful people do the same. That takes the form of small things, like eating well, exercising, and getting enough sleep b) do not look at careers and relationships as zero-sum equations but as a positive-sum equation. Try to get as much out of it as possible, and look for creative solutions along the way and c) get over your fear of failure. Giving baseball analogy he says “You can’t bat .900 in life. All you’ve got to do is bat .350 and don’t be afraid to get in there and swing.”
4) For the ‘new yellow journalists’, opportunity comes in clicks and bucks [Source: Washington Post ]
Consider this scenario - fewer than 2,000 readers are on his website when Paris Wade, 26, awakens from a nap, reaches for his laptop and begins typing the headline “CAN’T TRUST OBAMA…Look At Sick Thing He Just Did To STAB Trump In The Back… .” Ten minutes and nearly 200 words later, he is done with a story that is all opinion, innuendo and rumour. He pulls up the Facebook page he uses to promote the site LibertyWritersNews, which in six months has collected 805,000 followers and brought in tens of millions of page views. At a time of continuing discussion over the role that hyperpartisan websites, fake news and social media play in the divided America of 2016, LibertyWritersNews illustrates how websites can use Facebook to tap into a surging ideology, quickly go from nothing to influencing millions of people and make big profits in the process. Wade and his partner himself say “Violence and chaos and aggressive wording is what people are attracted to”. They are also not against using completely misleading content to attract user’s attention to the ‘news’.
5) Four lessons for silicon valley from its first startup [Source: technologyreview.com ]
This article shares four lessons that new age tech giant can learn from the book “Becoming Hewlett Packard: Why Strategic Leadership Matters”: a) Know when to shrink: Very few high-growth companies consider breaking themselves up when things are going well, even though doing so might give their individual businesses a better chance to prosper on their own. Google’s decision to reorganize as Alphabet shows it is thinking about the problem. Amazon too is expected to split off its fast-growing AWS cloud services business from its namesake online store b) Don’t let the board of directors get stale: Today’s companies are stacked with tech-savvy executives and venture capitalists, but they need to do a better job of bringing in new blood, given the rate at which these companies are moving into new industries—say, health care or cars c) Make sure “culture” is about values, not practices: The future leaders of today’s tech giants should be prepared for grumbling by employees on any cultural change if they have gotten them accustomed to such perks as on-site massages, laundry service, and climbing walls. (Dropbox said in a filing this year that it spent $25,000 in perks on every employee.) d) Groom successors—then groom more: For decades, HP was famed as a talent factory. It cranked out dozens of executives who went on to run other important companies. But as the business grew and became more complex, the company didn’t do enough to keep a stable of executives capable of becoming the next CEO. In today’s tech world few executives are getting the breadth of experience—both in the types of businesses they can run, and in the range of corporate functions—to be shoo-in candidates to run these huge companies. Making matters worse, many talented executives are no longer waiting around to climb the corporate ladder and often leave to try their own hand at company-building.
6) When education becomes a meaningless ritual [Source: LiveMint ]
The author, Anurag Behar, CEO of Azim Premji Foundation in this piece draws a parallel between our education system and the world of priests- with the latter following practice of uttering chants and mantras devoid of any meaning. In a similar manner, school education in India is afflicted by this at every level and on every dimension. The class echoing multiplication tables is a classic example of this phenomenon. The children repeating those tables (more often than not) do not understand the meaning of multiplication, nor its relationship to life. The teacher does not even attempt to develop this understanding; her purpose is the flawless mantra-like repetition. And this is part of the larger phenomenon of rote memorization being the primary pedagogical approach in our schools. The examinations only reinforce this emptiness. The text books are crammed with information with an expectation of regurgitation after reading. Education is the making of meaning and the development of thinking individuals. This culture of meaningless ritualism is the antithesis of that. Our education itself has become a meaningless ritual. Paradoxically the only social process for curing our culture of the malady of meaninglessness is good education. That is the wedge with which we can pry our culture open to embrace the making of meaning, and so that must be the focal point of our collective maximal force.
7) From low pay to imposter syndrome, the hidden perils of a new vocation [Source: Financial Times ]
The dream of quitting one career for something entirely different is an intoxicating one. Jane Clarke, director at Nicholson McBride, a business psychology consultancy, however says the most important thing is to “understand why you’re unhappy” in your job. “People don’t think hard about it. It’s important to see which bits you like and analyse the company, people at work, work-life balance.” It is also important, she says, to understand where you get your identity from. “For some people it is really important to say ‘I work for X’ or am a ‘Y’.” Ms Clarke suggests that those who want to make a move but have no idea where they want to go should scrutinise their entire career and pick out components that made them happy. Common catalysts for career change include having children, losing a parent and reaching an age milestone. Going forward, two macro trends should work in favour of older career changers. The first is that more people are expected to work for longer than previous generations due to longer lives and reduced pension savings. The second is the rise of self-employment and contract work, which allows some to inch their way into a new career as a freelancer.
8) China smashes world patent record with 1m filings in a year [Source: Financial Times ]
China has become the first country to receive more than 1m patent applications in a single year — a record that the World Intellectual Property Organisation said reflected “extraordinary” levels of innovation in the world’s most populous nation. While sceptics have long argued that China’s patent figures are skewed by state-driven filing targets, intellectual property lawyers argue that they also reflect the country’s growing inventiveness. “The Chinese government’s strategic policies are encouraging innovation,” said Zhang Xuemei at Janlea, a Beijing intellectual property agency. However, Yang Yuzhou, a Shanghai patent lawyer at Dacheng Law, noted that China, unlike the US, recognises “utility model” patents, which are typically easier to secure and protect inventions for a shorter period of time than standard patents. “It’s also much cheaper to file for patents in China than in the US and Japan,” he said. China is also becoming an increasingly attractive jurisdiction for patent infringement disputes given the speed with which its court system processes cases. Companies whose intellectual property has been stolen can also secure bans that prevent the infringing party from selling in China’s vast market or exporting from the country — a crippling blow given China’s centrality to global supply chains.
9) Microdosing [Source: Vice.com ]
Microdosing involves taking just enough of a psychedelic drug to boost productivity and creativity, without actually tripping. Its supposed benefits are well documented, and particularly among young startup types in Silicon Valley where microdosing became a bit of a thing. But it isn't just for cool dudes at Google. Microdosing, if you believe the hype, can potentially help anyone think outside the box, even in bland corporate jobs. Or so it seems looking at this interview of a guy who won a National Sales Award in corporate banking while dropping acid and shrooms.
10) Silicon valley’s techies would make terrible politicians [Source: Financial Times ]
Opinionated digital divas with odd-to-extreme traits have seemingly become the norm in the tech community. Think of Steve Jobs (walking round Palo Alto in bare feet with his famous temper), PayPal founder Peter Thiel (helping to bankrupt a website for outing him as gay), and Elon Musk (believing reality could be a computer simulation created by superior beings). Unlike “boffins” of gentler eras, today’s techies are not willing to remain in back rooms smoking pipes and being eccentric. The digerati want to save the world – thus raising the possibility of the next president of the US springing from the Silicon Valley. The author however warns against their culture of impatience and binary certainty. They favour tantrums over compromise. They combine the programmer’s “press A and B will happen” mindset with money and impulsiveness. Great for circuit boards and algorithms, less so when awkward stuff like opposition hinders your dynamic plans for “going forward”.
