Learnings 2020 #4 contd.

 

                        NEERAJ  MAHAJAN

                                                                                                                  

BARBELL

We know what is a barbell and its use in weight training. Its USP is a perfect balance at two extreme ends of the bar; a wonderful technique to successfully navigate a risky world with frequent Black Swans.  And this can be achieved by removing fragilities in all walk of our lives through it. Think of our life as a Barbell with its extreme ends always in balance. Isn't that wonderful? At one extreme you are taking huge risks, sometimes losing( though small losses but winning big), and are excessively conservative on the other. To illustrate, if you are into Investments, you take the maximal risk (rational though) in one portfolio part and invest in T Bills the other part risk-free. This will keep you in balance always. Most fail if they digress from it. Second, if you aspire to good health, great physique, lift heavy weights once a week ( risky business ) on one end and walk as much as you can at a slow pace like our ancestors did on the other (risk-free). This way you eliminate all downside and keep only the upside. Biological systems are replete with Barbell strategies. To illustrate, Water the plants in soil copiously once and then they dont need it for days sometimes months. Yet they bloom. Ditto for Camels. They are in perfect harmony. Life is full of such systems.

Ever since I understood it, I practice it with diligence. It has helped my health and career by gradual weakening of fragilities.

PROCRASTINATION

We have all heard of the cliché, Don't Procrastinate its bad. Yes, it indeed is, but only in matters of life and death. Otherwise, it is a savior and works best with unnatural duties and procedures. And very very few can grasp the counterintuitive thought that one should lead a life in which procrastination should be a naturalistic risk-based form of decision making.

Why? Because the human brain can not think clearly for itself unless trained otherwise leading to deluded thinking most of the times . So are our actions. We often act in haste harming ourselves. Delaying affords us time to see things clearly before acting. We are spared from the consequences of reactions and overreactions. LAO TZU called it Passive Achievement. It also lets events take their natural course giving us chance to change our minds and our perspectives before committing to irreversible policies. The Ancient Romans worshipped it and called it Voluntary Omission. Delaying intervention and resisting action often averted Black Swans. I , in  person have benefitted by delaying actions and still continuing.  Morale is Please make haste slowly. and in investing parlance, BE MAXIMALLY SAFE AND MAXIMALLY SPECULATIVE aka BUFFET AND GRAHAM WAY.

BLACK SWAN

A rare unexpected, unpredictable event is a Black Swan. A sudden earthquake, the sudden death of a tall leader, sudden economic collapse, a sudden war, cyber warfare are some black swans. It has an exponential impact and is an outlier. It is called Black Swan after CYGNUS ATRATUS, the rare black swan in Australia. Until it was sighted all swans were white. Black Swans impact us in a big way either positive or negative depending upon the fragility and convexity of our systems. Debt-ridden systems are fragile and if there is a nationwide lockdown or a war, they get pulverized. Inter-caste marriages in Countries such as India lead to social ostracization of both families socially decimating them. Flipside, most of our financial gains are concentrated in two to three big events of our lifetimes like a huge inheriutance, lottery, or a sudden exponential gain in our investment.

Covid 19 is a grey swan as it was initially China-centric before it was permitted to go global. How does one insulate oneself against such rare events? By being convex to it. Follow the Barbell technique and remove fragility from your systems in all domains. Take no debts, don't avoid lifting weights, don't seek in relationships, don't offend nature, don't drink in excess, and many more. Instead, collect positive exposures to Black Swans by doing the opposite ie take small small risks . Thrive on Entropy, Uncertainty. No need for big knowledge, just know your edge, hone it leverage it. Avoid ruin at any cost. This can make us antifragile( small downside huge upside). eg the great Roman Stoic Seneca kept a record of what he gave and recorded it as a downside. If it didn't come he didn't lose anything and if it returned, he recorded it as gains. This way he ditched all downsides ( read black swans) and kept only the upside. Another example, invest diligently in a boutique of easy-to-understand businesses like Buffet to stay in balance. Most black swans can be defeated. For details, I recommend Taleb's THE BLACK SWAN

As always many thanks for reading me

PHOTO CREDIT: Max van den on Unsplash