Ten interesting things we read this week

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At Ambit, we spend a lot of time reading articles that cover a wide gamut of topics, ranging from zeitgeist to futuristic, and encapsulate them in our weekly ‘Ten Interesting Things’ product. Some of the most fascinating topics covered this week are: Investing (No one knows what will happen next; Old style value investing doesn’t work anymore, says Damodaran), Human Evolution (It’s happening faster than you think), Business (Jim Collins on luck, leadership and business longevity), Movies (When ‘Rambo’ tightened his grip on the American psyche), Lifestyle (India’s youth don’t want to get married!) and Education (He built a school for future economists in a country where there were no economists).

Here are the ten most interesting pieces that we read this week, ended June 05, 2020-

1) Why we’re ignorant of our own ignorance [Source: Safal Niveshak]
In this short but thoughtful piece, the author talks about the Dunning Kruger effect. What’s that? A man robbed a bank without wearing a face mask, which is ideally used to hide identity. When caught, he was amused as he said that he had applied lemon juice on face, which should have made him invisible! The episode caught the eye of the psychologist David Dunning at Cornell University, who along with his graduate student, Justin Kruger, went on to study what was going on. 

They reasoned that, while almost everyone holds favourable views of their competence in various domains, some people mistakenly assess their competence as being much higher than they actually are. This “illusion of confidence” is now called the Dunning-Kruger Effect, and describes the cognitive bias to inflate self-assessment. Most of us think that we know everything. In tasks where we lack expertise, like stock market investing or economic forecasting, we often overestimate our actual knowledge.

Sometimes, our actions lead to favourable outcomes. But, other times, like the lemon juice idea, our approaches are imperfect, irrational, inept or just plain stupid. 

When we are unskilled, we can’t see our own faults. When we are exceptionally competent, we don’t perceive how unusual our abilities are. So, if the Dunning Kruger effect is invisible to those experiencing it, what can you do to find out how good you actually are at various things? Mr. Dunning himself answers: 1) Ask for feedback from other people, and consider it, even if it’s hard to hear. 2) More important, keep learning. The more knowledgeable we become, the less likely we are to have invisible holes in our competence. Perhaps it all boils down to that old proverb: When arguing with a fool, first make sure the other person isn’t doing the same thing. It’s time to ask yourself, what tasks should I stop doing?

2) Howard Marks: No one knows what’s going to happen [Source: Oaktree Capital]
In this memo, Howard Marks talks about an article by Mark Lilla, a professor of Humanities at Columbia University. The article says how we are always in search of that expert or the best forecaster. And no one knows what the future holds. The person/expert who best guesses an event, people start to follow him/her. If not, they go looking for the next to anoint. Mr. Marks highlights the point that we rarely will fully accept that we must make decisions regarding the future without knowing it. 

In Lilla’s article he states that, “…the post-Covid future doesn’t exist. It will exist only after we have made it.” That’s a very important concept. We might predict the future today, and we might even correctly assess what today’s conditions and actions are likely to produce in the future. But that prediction will be shown to have been right only if no one and nothing causes the future to become different between now and the day it arrives. Thus, how many people fall ill with [the coronavirus] depends on how they behave, how we test them, how we treat them and how lucky we are in developing a vaccine. In such uncertain times, whom should you follow? And how will you know that the person you are following is an expert? Well, as per Mr. Marks, you may have to be an expert in a field in order to be able to figure out who the true experts are. That’s why research in most fields is subjected to “peer review”, meaning a review by experts. Lastly, he shares an incident in the life of Morgan Housel, of Collaborative Fund, and how there are three sides of risk (we had covered this in our last edition): 1) The odds you will get hit; 2) The average consequences of getting hit; 3) The tail-end consequences of getting hit. The first two are easy to grasp. It’s the third that’s hardest to learn, and can often only be learned through experience.

3) Human evolution is still happening – Possibly faster than ever [Source: getpocket.com]
They say evolution is the only constant thing in the world. Better healthcare disrupts a key driving force of evolution by keeping some people alive longer, making them more likely to pass on their genes. But if we look at the rate of our DNA’s evolution, we can see that human evolution hasn’t stopped – it may even be happening faster than before. Evolution is a gradual change to the DNA of a species over many generations. It can occur by natural selection, when certain traits created by genetic mutations help an organism survive or reproduce.

By looking at global studies of our DNA, we can see evidence that natural selection has recently made changes and continues to do so. Though modern healthcare frees us from many causes of death, in countries without access to good healthcare, populations are continuing to evolve. That’s why we have some people living even in extreme conditions of cold and in high altitude. Diet is another source for adaptations. Like high altitude adaptation, selection to digest milk has evolved more than once in humans and may be the strongest kind of recent selection. Despite these changes, natural selection only affects about 8% of our genome. 

Though scientists can see these changes are happening, and how quickly, we still don’t fully understand why fast evolution happens to some genes but not others. Realising evolution doesn’t only happen by natural selection makes it clear the process isn’t likely to ever stop. Freeing our genomes from the pressures of natural selection only opens them up to other evolutionary processes – making it even harder to predict what future humans will be like.

4) Jim Collins: Keeping the flywheel in motion [Source: Farnam Street]
In this longish podcast, Jim Collins, a world-renowned lecturer, consultant, and the author or co-author of 6 books, talks about luck, leadership, and business longevity. He describes the inner workings of companies that are outstanding, how they got there, and what they can do to ensure longevity. Mr. Collins feels that people need to think about luck as “who” luck than “what” luck. “Who” luck is when you come across somebody who changes your trajectory or invests in you, bets on you, gives you guidance and key points. 

He also talks about his experience and discussions with Steve Jobs. They talked about how one can be a level 5 leader. The level 5 idea came from the research for his book, Good to Great. It came from a question of how a good company can become a great company. In business, he says separating good decision–adverse outcome, is a better approach than bad decision process–good outcome. Because bad decision process with good outcome reinforces bad process, which then ends up producing compounding in the wrong direction. Lastly, talking about how we develop young leaders, he says that leadership has to do more with learning than teaching. You can’t teach leadership, but you can learn it. And there are two important factors to it: 1) Embracing the idea of seeing what has to be done, and 2) Exercising the art of getting people to join you in getting it done. He also emphasizes on why leaders need to stop thinking about their careers and concentrate on people. He sums it up by saying, “if you take care of your people, they won’t let you fail.”

5) 1985: When ‘Rambo’ Tightened His Grip on the American Psyche [Source: NT Times]
There’s no one who doesn’t love Sylvester Stallone’s Rambo series of movies. And this piece is a tribute to “Rambo: First Blood Part II”. In 1985, the movie opened alongside a flaccid 14th Bond film (“A View to a Kill”) and a confusing Richard Pryor comedy (“Brewster’s Millions”); it crushed both. This was a great Top 10 week. You had the country’s two most important comedians, Pryor and Eddie Murphy, at the back half and the beginning of their careers, movies with Cher, Madonna and Grace Jones; and Harrison Ford aligning his stardom with excellent, non-franchise filmmaking.

People paid to see Stallone as an underdog. They paid a lot more to see him as a god. Rambo started out as a fascinating character, and like Rocky Balboa, was engulfed by Stallone. In the opening minutes, he wanders around the fancy control room that Murdock oversees, sneering at all the blurping screens. His arms are straight at his sides and his chest puffed out for the entire scene. You don’t know whether the army made him or Mattel. We know the government’s going to re-stab him in the back. His patriotism constitutes an abusive marriage he won’t leave. But what’s Stallone supposed to be acting in “Part II”? The first time it was principle. Now it’s attitude. The movie transmutes his seething into action. His bulging, veiny body is, on the one hand, a rictus of rage.

What Rambo stood for was almost instantly less important than how steroidally American he’s made every American feel — never mind that Stallone has astonishingly sad eyes; that all America did was break Rambo’s heart. The credits roll after “Rambo: First Blood Part II,” with a ballad written and bench-pressed by Stallone’s brother Frank, and the mind does wander, to a future sequel, perhaps. John Rambo was born in 1947. This would be his 73rd year. And maybe he’d excel in the current, viral straits, leading a protest at some state capital (just last fall he was exterminating Mexican drug cartels in “Rambo: Last Blood”). Or maybe he’d eventually find himself in a veterans’ home, felled, alas, by these decades of trauma, on the cusp of having his heart broken again, possibly forever.

6) Are India's youth giving up on marriage? [Source: Livemint]   
Millenials are known for starting new trends. One trend that can be seen in future is millennials choosing not to get married. One in four young adults in India do not want to marry, fresh data from the YouGov-Mint-CPR Millennial Survey shows. The YouGov-Mint-CPR Millennial Survey was conducted online between 12 March and 2 April’2020, and covered a sample of 10,005 respondents across 184 towns and cities. Of these, 4,957 were millennials, 2,983 post-millennials, and 2,065 pre-millennials.

Among millennials, 19% aren’t interested in either children or marriage. Another 8% want children but are not interested in marriage. Among post-millennials (or Gen Z adults), 23% aren’t interested in either children or marriage. As in the case of millennials, 8% want children but are not interested in marriage. There is very little gender-wise differences in these trends. Financial insecurity appears to be a key driver of such decisions. Among households with monthly income less than Rs10,000, 40% millennials said they were unwilling to marry. In richer households (with income more than Rs60,000), the survey finds only 20% to be disinclined. 

Nearly four of ten millennials who wished to get married said they were fine with an arranged marriage. Only three of ten post-millennials said the same. Among post-millennials, those living in metros expressed a greater desire for having a ‘love marriage’. Among millennials, women were more averse to an arranged marriage than men. Of the non-married millennials, 49% of women said they wanted to have a ‘love marriage’. Only 41% of men from the same cohort expressed a similar preference. This proportion was lower for those with only a college degree or a vocational education. Nearly a third of those with only school education said they wanted to marry after 30.

7) 9 Life Lessons - Tim Minchin UWA Address [Source: YouTube; University of Western Australia] Tim Minchin, a comedian, music composer, lyricist, actor and writer, joined 225 graduates receiving their degrees in historic Winthrop Hall, marking one of the highlights of the University of Western Australia’s 2013 Centenary year celebrations. He delivered the Occasional Address to graduates and was awarded the Honorary Degree of Doctor of Letters for his contribution to the arts. In his address, he highlights 9 life lessons that are essential for anyone and everyone. 

1) You don’t have to have a dream: He suggests being micro-ambitious and work with pride on whatever is in front of you. You never know where you might end up. 2) Don’t seek happiness: We didn’t evolve to be constantly content. 3) It’s all luck: He says that every student sitting in the hall is lucky to be brought up by a nice family who encouraged them to go to university. Understanding that you truly can’t take credit for your successes nor truly blame others for their failures will humble you and make you more compassionate. 4) Exercise: This life is bound to be long for most of us, and luxurious (at least by normal standards) as well. So it’s better to take care of your health in order to enjoy life. 

5) Be hard on your opinions: We must think critically and not just about the ideas of others. Be hard on your beliefs. Identify your biases, your prejudices, your privileges. 6) Be a teacher! Teachers are the most admirable and important people in the world. Share your ideas, and don’t take your education for granted. 7) Define yourself by what you love: We have a tendency to define ourselves in opposition to stuff. But try to also express your passion for things you love. Be demonstrative and generous in your praise of those you admire. 8) Respect people with less power than you: You can tell about a person by seeing how he/she treats someone who is least powerful. 9) Don’t rush! You don’t need to know what you’re going to do with the rest of your life. Take pride in whatever you do and learn as much as you can.

8) Old style value investing doesn’t work anymore, says Damodaran [Source: Economic Times] 
They say nothing is here to stay forever. And that’s what Aswath Damodaran, Professor of Finance at Stern School of Business at New York University (NYU) says. He says that value and growth investing has become a very lazy categorisation of investing. “The former style lost out to the latter over the last decade. Stocks with low price-to-earnings (P/E) ratios and high dividend yields have been hurt the most,” he said.

As an investor, one should not convince oneself that he is right and the rest of the world is wrong. “I think book value has completely lost its meaning. Value investing is not just buying low P/E and price-to-book stocks. I describe valuation as a craft. The Covid-19 crisis has humbled me further. There is so much to learn,” he said. Guru Aswath Damordaran, who has just released his book Narrative and Numbers, where he argues that “we would need stories, not mechanical valuations, to truly evaluate companies this year,” said the virus has clearly affected corporate operations and some services will face permanent loss. “Hotels, aviation, global travel have lost revenues. Startups that are into crisis will be snapped up by the biggies,” he said.

He believes such crises will also produce big players like Amazon. “People forget how close Amazon was to getting bankrupt before recovering,” Damodaran, who teaches teaches corporate finance and equity valuation, recalled. He called the market a consensus of optimists and pessimists. “You can disagree with the market, but you have to respect it,” he said. Damodaran said the US Fed has played its cards very well in this crisis. "Central banks must not act heavy-handedly in this round," he cautioned.      

9) Trust, slavery and the African School of Economics [Source: The Economist]
Education is everyone’s right. That’s what Leonard Wantchekon, a professor at Princeton University believes. Mr. Wantchekon is one of just a few African economists at elite Western universities. Most scholarship about Africa is done by academics who are neither African-born nor based in Africa. Influential development journals have few African scholars on their boards. Most major conferences about Africa do not take place there. 

Also, higher education is not a priority for politicians, who often send their children abroad, or donors, who prefer to fund schools. The result is underfunded and overcrowded universities that do not equip enough African graduates with the skills required to get into world-class doctoral programmes. The consequence is a profound loss, argues Mr. Wantchekon. Countless young African intellectuals do not get a fair chance. The world gets a skewed picture of African countries because many of the best researchers come from elsewhere.

But that’s changing now. In 2014 Mr. Wantchekon founded the African School of Economics in Abomey-Calavi, Benin. Its aim is to offer African students the highest standards of mathematics and economics teaching, ensuring they can compete with graduates overseas. Mr. Wantchekon argues that any student of politics must read Rousseau and Madison. The aim is to add to the sum of human knowledge, not subtract from it. “Be angry but also be thoughtful,” he says.   
  
10) Now, NLSIU alumni plan second flight for migrants to Jharkhand on Sunday [Source: Livemint]
As the Covid has left many jobless in India, many migrant workers want to return to their homes. In such a situation, there are a group of lawyers, NGOs and individuals who are trying to make the migrants reach home safely. When the group of friends from the National Law School of India University (NLSIU) class of 2000 began brainstorming about how they could help the millions stranded in cities because of the lockdown, they were surprised by what they found. The cost of hiring a bus for the roughly 2,000km journey from Mumbai to Ranchi was as much as hiring a 180-seater A320 aeroplane. Both options cost approximately ₹12 lakh.

Workers who suddenly found themselves without a job, money or any transport home had begun walking home. Along the way, they faced exhaustion, hunger, death and police brutality. “Our systems have to develop empathy. They are supposed to deliver welfare and provide care. If they had empathy, we wouldn’t be beating up migrants, denying them rations," says Suhaan Mukerji, a graduate of the 2001 batch, who was drawn in to help because he was familiar with how government worked. In his day job, he drafts legislation and writes policy. “You have to shift from the perspective that everyone is out to game the system to are you delivering effective relief?" 

Jharkhand chief minister Hemant Soren called Mukerji and assured him of support. In fact, likely inspired by the success of the first flight on 28 May, the next day, Soren’s government flew 60 workers who were stranded in Batalik in Kargil from Leh to Ranchi. Actor Sonu Sood, who was coordinating his own effort to help women labourers return home to Odisha from Kerala, also switched to a chartered flight after he learned about the costing. The story didn’t end when people boarded the flight. Volunteers—all former classmates—had been assigned to various families and they stayed in touch even after the plane had landed.