Ten Lessons for the Post Pandemic World

The title of the book and the author's name was enough to compel me to put this on my To-Read list and go through it before the subject got outdated. I like the overall tone of the book. Agreed with most of the lessons, appreciated some nuance on thorny topics and definitely benefitted from Fareed Zakaria's international worldview.

Here is a basic summary of the ten lessons - 

Lesson 1 - Buckle up : There will be more pandemics

• Not sure if we will see any global regulation of wet markets and meat factories. What may come out will probably be a patchwork. Hopefully, plant based meats are cheap enough to replace meat to some extent.

Lesson 2 - What matters is Quality of Government

• With so many health departments at state, local and tribal level (2,684) and then add county health departments on top of it - is one reason why the Covid-19 Response was so bad in the U.S
  
  
• If you look at other areas - lobbying and other ills plague the system.
  
  
• It is kinda depressing. It doesn't look like the two political parties, the media and the population have the intention or the "attention span" to indulge in conversations on institutional reform.

Lesson 3 - Markets are not enough

• People specially the young generation has realized that the capitalism in its current form isn't working at all. For example - why is the effect of "government spending" not a concern when Federal Reserve provides support to those with stocks and bonds.
  
  
• Why should "Essential workers" be just respected and not rewarded by the markets?

Lesson 4 - People should listen to the Experts and Experts should listen to the People

• This was a brilliant chapter. It summarized the political, social trends. 
  
  
• Experts have fared badly and seem to be out of touch with the lives of an average person.  Looking down upon those who are non-college educated, not from fancy schools is only going to depend this "anti-elitism" sentiment.
  
  
• How those who are college educated (meritocrats) who rule the rest (technocrats/bureaucrats) - and invite disdain from the rest of population. In other words, two thirds of people stand by and watch as the other third run everything. Experts these days can be vaguely described as = highly educated living in cities, holding professional jobs, tend to be socially liberal.

• Power kills empathy.

Lesson 5 - Life is Digital

• People would naturally adapt to this new world differently, some feeling liberated, others trapped.
  
  
• The pandemic showed us that technological revolutions are further along than we would have thought but also digital life can feel cramped, a poor simulacrum of the real world.

Lesson 6 - We are social animals

• Here the author said that "well managed cities" will thrive -why? Because people will stay because of their friends or because what's easy for their pocket. He also mentioned the "fifteen minute city" model that is coming up.
  
  
• This was slightly confusing as he said in the earlier chapter that life will become digital and just like life was 200 years ago when people used to farm - professional and personal life intertwined together.
  
  
• Not clear how the "social" part will manifest itself in a digital world? Will it be in the form of social gatherings? Educational lessons? Work in person?

Lesson 7 - Inequality will get worse

• The pandemic will push millions back into poverty over the next few years.
  
  
• Growing inequalities if not addressed by reforms, may result in unrest and revolutions.

Lesson 8 - Globalization is not done

• Even if the West wants to move away from Chinese suppliers, the best and easy way is to move factories to places where production costs are low and no such politics like Vietnam, Bangladesh, Romania or even Mexico. In short, globalization is here to stay.
  
  

Lesson 9 - The World is becoming Bipolar

• I agree that the world will become bipolar. However, I feel like U.S may become the weaker of the two powers if current status quo remains. China looks way strong at the moment.

Lesson 10 - Sometimes the Greatest Realists are the Idealists

• It is considered to be an idealism to hope that countries all across the world co-operate but the author reminds us that the world has seen 70 years of peace with intermittent wars in some corners - which has led to a lot of development and people moving out from poverty.
  
  
• He reminds us that the broader view after World War II - that collective security, and collective endeavors were in each nation's self-interest -still holds true today.
  
  
• Somehow a dysfunctional dynamic has set in under which politicians use multi-lateral institutions for their benefit but turn on them whenever problems emerge - and it harms people's faith in institutions and a global rule based order. He gives the example of European Union. 
  
  
• In the author's words - It's not a flight of fancy to believe that co-operation can change the world. It is common sense.

New Deal

The motivation to pick this book was to actually know about the circumstances around and during the New Deal era and then try and draw some sort of comparison between then and now as the world recovers from the Covid-19 shock.

My main preference was a book that was comprehensive and did not have a few volumes - and this fit the bill. Also, I have noticed that the foundations of a lot of influential institutions were laid during that time and that era is supposed to be considered as a prime, rare example of how the government actively stepped in to help and rebuild the society after it was decimated by the 1930s depression. No wonder we hear terms thrown around like the “Green New Deal” - a New Deal’s 21st century version of what many believe should sound like. Also, this program helped cement F.D.R’s position as one of the most successful Presidents. Historical Rankings of presidents of United States

Here is my attempt of what I could find the main features of the New Deal, the similarities and differences between then and now.

Standouts -

• 100 days of any presidency are the most pivotal in terms of setting the tone and agenda for the 4 years.

• Under the New Deal the foundations of quite a few institutions and laws were laid - some of which remain like FDIC, Glass-Steagall Act, NRA, SEC, CWA, FSA.

• Organizations like NRA did standardize code and practices but ended up policing a lot more. It prevented things from getting worse but did little to speed recovery.

• Gold buying was a mistake from FDR. Eventually, he abandoned the Gold standard.

• The Social Security Act was conservative and inept in the context that at that time there was no other welfare system in which the state shirked all responsibility for old age indigency and insisted funds  be taken out of the current earnings of the workers. Sickness, in normal times the main cause of joblessness was disregarded.

• Laid the foundation of Social Security in the form of Old Age Revolving Pensions and later Social Security Act of 1935. 

• FDR’s comment is also remarkable that -  the employee share of taxes was to ensure that the contributors had a legal, moral and political right to collect it (a way of having skin in the game). And with taxes in there, no one could dare scrap it. 

• Building infrastructure helped give employment to so many people. Master-stroke!
  CWA built/improved 500,000 miles of roads, 40,000 schools, over 3,500 playgrounds and 1,000 airports and renovated multiple govt. buildings.
  Unfortunately, alarmed at how much CWA was costing - FDR ended it as quickly as he could.

• Initially, the African American community wasn’t supportive of the New Deal specially because the Congress at that time failed to pass Civil Rights Legislation.Not a single piece of Civil rights legislation was adopted in FDR’s four terms in the White House.

• The big Crossover happened between 1934-36 when they finally became pro-Democratic.

• Lots of tussle between Globalists v/s Isolationists w.r.t WWII. One faction wanted intervention, the other didn’t. The U.S did adopt the policy of indifference/neutrality which did play a little role in things getting out of hand. And ultimately the Pearl Harbor attack forced it to join the war.

• FDR was initially sympathetic to the cause of labor (unions).

• In the late 1930s, there were fears that fascism which was popping its head in Europe might raise its ugly head here in the U.S itself.

• The U.S was desperate to stay out of WWII.

• FDR interacted with the press freely. Monumental in changing the perception of the government - it made them think of the government.

  Similarities

• Heading into 1932, most Americans had come to a despair of the whole political process, a contempt for Congress and political institutions. The country was facing peak unemployment, run on the banks and stock market crash. 
  
  

• The stories in the newspapers of that time and remarks of the observers tell us about abundance for one half and the other half struggling. This is very similar to how the situation is post Covid-19 in the US except for the banks and the stock market. There however remains a high number of unemployment and the main street is reeling from the year that has gone by.

• Plus, the landscape of the world and how it conducts business might have changed forever putting lots of jobs in peril.

• Even in 1933 - the sentiment to forgive debt was very popular. Same as what it is now - in terms of student loan debt, housing.

• I saw some criticism that POTUS 46th took a long time to get the Stimulus Bill passed. But even back then, March 4th FDR was inaugurated and in May - Industrial Recovery Bill passed. Turns out passing legislation is a time consuming process!

• FDR surrounded himself with experts - something happening now too.

• Even in the 1930s - policies were being dictated by interest groups.

• Lots of struggle by the Unions - FDR was not sure about them.

• Same political playbook in elections - fear, exaggeration and distortion.

• Govt. help back in the 1930s was criticized by the same arguments that it violated traditional American assumptions of self-help, self-denial and individual responsibility.

• Met a lot of resistance to tax the inheritance and top 1% and regulate big companies (power utilities in those days).

• America First was still a thing back then. As the world political temperature grew hot and clouds of war assembled, a lot of advisors wanted the U.S to sit out (isolationism). FDR even in his inaugural address said “the putting of first things first”.

• Even back in the 1930s war was considered to be a willful distraction from troubles at home.

• Talk of packing the courts.

• The recession in 1937 - raised concerns of inflation and heavy taxation due to federal spending. FDR did cut WPA rolls and PWA funding being paranoid about inflation.

• Anti-monopoly sentiments.

• It was a widely believed perception in the 1930s that the decade before (1920s) had seen obscene wealth building.

• Quoting from the book verbatim - 

  During the upturn of 1935-37, conservatives argued that, since the crisis had passed, reforms were no longer appropriate.

  Sounds familiar to the rhetoric we are beginning to hear?

• Another line that caught my eye -

  In the early years of the depression, the nation was united by a common experience. People felt genuine compassion for the victims of hard times. By Roosevelt’s second term, as it seemed that the country might never wholly recover, the burden of the unemployed had become too exhausting a moral and economic weight to carry.
  Sounds familiar?

• Tussle over balancing immigration versus high rate of unemployment amongst U.S citizens.

Differences -

• 1934 elections were one-sided. Republicans were almost erased as a national party. Dominating the legislature helped FDR execute his policies without any opposition.

  It doesn't seem one-sided in 2020.

• Looking back from 2021 the jolt in 2020 seemed short-lived compared to how it was in the 1930s. Ofcourse, we don’t know what unknowns lie ahead - variants, inflation, debt-to-GDP ratio.

  
  

• Economics in the 21st century is quite different than 100 years ago.

Then v/s Now

Conclusion -

Finally, it is quite clear that the policies of the New Deal era were quite successful. Almost every big monument, bridge, institution was conceived as part of the New Deal. It is remarkable that it had something for everybody. It had a Federal Art Project under which the artists were paid to pain murals outside government buildings! 

If I were to pick 3 key-takeaways from then - 

1. Government spending is not as bad as it is made out to be.

It generates jobs and touches the lives of more people than we can imagine. The main thing is to go big and not timid in terms of vision.

2. Spending on infrastructure is worth it.

I say that because many of the bridges, highways built under that scheme are now the main tourist attractions and would have probably generated tonnes of jobs, and billions in revenues.

3. Fight the monopolies.

There was an active measure to fight the monopolies during that time and yes, it did face lot of pushback. It didn't do as well as other policies but this is something I wish would have happened.

Lockdown Reading - Golden Gates

Strongly recommend this book for anyone interested in housing. And of-course, everyone would be somewhat interested in it because it is such a basic "goal" on almost everyone's list.

The book talks about in detail the problems that are plaguing the housing market - why at some places rents and prices are exorbitantly high, through multiple interwoven stories.

Housing is such a vast and complex subject. It has so many aspects to consider. Some of them that I can think of are  - 

• Affordable Housing
• Gentrification
• Homelessness
• Climate Change (yes even climate change. Third of the greenhouse emissions are from transport. If people cannot afford close to live close to where they work, they drive to work daily. Let's be honest on an average public-transport is poor in most of the world).
• Zoning Laws (or laws governing how houses need to be built)
• NIMBY/YIMBY
• Redlining
• Evictions

Reading it I had moments of realizations and exasperations in equal measure.

• It seems quite unfair to me that the neighbors can bully the developers to build less housing on the pretext of it'd bring in more crime, spoil the nature of the neighborhood. A new excuse now is the effect on the environment. City councils often bow down to such pressures.
   
• The above ideas can be clubbed under NIMBYism. Also, common is that people objecting are already house owners and make claims like - "...I have no problems with affordable housing but it needs to be built in the right place." 
  Emphasis on right. Also, contributing is the perverse incentive of house price. The law of economics is that if something is in short supply it'll become more valuable and its prices will shoot up.   
• Listening to an interview of the author, the significance of title of the book GOLDEN GATES dawned on me. Remember how in ancient times people who were poor used to live outside the city gates? Similarly, now we have these tendencies to thwart new housing to be built so our "homogeneous, affluent" neighborhood vibe is not disturbed. 
   
• Local politics is scrappy but that is where decisions about approving/denying housing projects are made. Most people do not pay attention to it let alone attend those meetings. But that's what helps people with vested interests (shills) to get the council to do what they want. Also, would note that legislation or passing laws involves serious amount of paperwork and technicalities.
    
• To be realistic, the government alone cannot fix this problem. Cue innovation and technological disruption. Housing Construction is one of the industries that has not seen enough advancement and improvement in terms of productivity. 
  This is where lots of companies like Blokable building modular homes - can come in to help. Imagine a factory churning out houses which just need to be nailed together at the site. Such a process can help a great deal with the supply. However, there's another problem with these - the stigma!   
  Notice how there's a certain kind of perception on those living in trailer homes? What is to say it won't happen with modular homes? What if people from an affluent neighborhood object to modular homes being set up near their area? Do you think the VC or the founder of such modular homes companies would themselves live in this modular home? I think the only way this perception problem would get solved is perhaps if big giants like Amazon jump into this business and make it acceptable and we would see a change in perception in matter of a generation.  

Overall, it's a good read if you want to understand what plagues the housing market.

Lockdown Reading - Adaptive Markets

I don’t remember from where I picked up a recommendation for this book but what a great investment buying this turned out to be. It will not be an exaggeration to say that I really enjoyed this book. It was indeed informative but what made it enjoyable was how easily the transition was between points - concepts supported by anecdotes, stories and research studies and how beautifully in the end they all tie together to frame a powerful, optimistic call to action. The author’s work does make him sound like a good professor. 😃

The book is a collection of a lot of interesting concepts - 

• It talks about how human behavior, emotions influence our financial decisions. It is one of the reasons why the Efficient Market Hypothesis(E.M.H) doesn’t hold true.

• It does critique E.M.H and provides two strong points -

• If the market is really efficient with all the info priced in then what’s the point for any investor to do some work getting new info or numbers when everything is already priced in ?

• Also, if the market is really efficient with all the info priced in then how come George Soros’, Jim Simons’ and Warren Buffets of the world have made billions of dollars?

• It gives a good glimpse on how the concept of “money” has not been around forever and is relatively recent on an evolutionary scale. So the idea of losing money generates similar emotions as “fight or flight” in case of a physical attack.

• Using advanced technologies such as fMRI it has been found that similar centers in the brain are activated when there are prospects of making/losing money.

• Humans are not rational beings and are influenced by emotions of fear, panic and pleasure and thus that is what makes them take irrational decisions in the context of money.

• Concept of probability matching with the help of an experiment:

• Consider the game Psychic Hotline. Either letter A or B will be shown on the screen. If you get it right +$1 else -$1. 

• After a few rounds, the participants observe that A appears more often than B. Say 75% of the times it is A, and B appears 25% times.

• So the optimal strategy is to always pick A.

• But people try to mix it up which is called “Probability Matching” and that is sub-optimal thus reducing the earnings to only 62.5% times.

• It is definitely worth pondering that our DNA is 97% similar to an orangutan but the 3% difference is big enough to keep us on different sides of the fence.
  
  
• Emotion isn't the source of irrationality. The author's proposition is that we wrongly conclude that emotions are the reason for our irrational actions when infact they are the reason of rationality.
  
  
• The author reminds us that although there were so many attempts to draw inspiration from Physics to apply to Economics - it is infact more similar to Biology. Both are equally complicated fields.
  
  
• The author puts forward a new theory to beat the E.M.H. He talks of Adaptive Market Hypothesis.
  This theory is about revolving around heuristics.  It blends in the concept of "bounded rationality" too. A very good example of this is how we may have 10 shirts, 10 pants, 5 ties and 5 jackets. We don't try out every single of them every day before going to work. Because in our minds already have a heuristic/idea about which shirt will shirt well enough with a pant. 
  
  
• Also, going by the word "adaptive" we continue to adapt and learn from our experiences and surroundings (dressing appropriately is an example - while going to a function we don't try out running shorts - adapting and cutting down our choices. This is another example of bounded rationality).

The example that blew my mind was around Biological Evolution. It was fascinating to see how the concepts of risks - system

ic and idiosyncratic can be tied to evolution.

Here's my attempt to summarize it -

Let's say a hypothetical creature which could produce only 3 offsprings (Tribble) has a choice to dwell on a plateau or a valley. Odds are such that in the

a) Valley - 3 offsprings are guaranteed.

b) Plateau - 50% chance for 2; 50% chance for 4 offsprings. Net being still 3.

Now if everyone of the tribble chooses to live in the valley - they will be safe from sunshine but not from floods. If everyone of the tribble chooses to live in the plateau - they will be safe from the floods but not from sunshine.

So which option should they choose? Let, f be probability of choosing the valley. 1-f be probability of choosing the plateau.

Here, even though more tribbles chose to nest in the valley - all of them would be wiped out as soon as there is a heavy rainy season. So, what should be the optimal percentage of tribbles residing in a valley. This is where the principle of Probability Matching ties back in. f should be same as the probability of the sunlight. By probability matching, the reproductive bets will be hedged so that the expected number of offspring will be same, no matter whether it rains or shines. Sparing the complex maths behind it, so you've to trust this!

Another variation of this would be - every tribble family have their own individual experiences ie microclimate. Each family faces rain or shine in a separate and independent toss of a coin that is something like sunshine 75% of the time and rain 25%.

So the probability that all of them (say 10 tribble families) will be washed away is (1/4)^10 i.e 1 in a million. Basically, nature has diversified the risk of extinction via microclimates i.e diversification is necessary in an evolutionary cycle. It also explains why dinosaurs got extinct cause they didn't hedge their bets - they were all on one planet and got wiped out together when a meteor hit. Similarly, you can also argue why it's important for humans to inhabit some other planet too!

I thought this was a very cool thing I learned!

Something that gave me lot of optimism was how finance can actually help fund researches for life saving drugs or even the current Covid-19 crisis. We all are aware how governments are cutting funding for health and research. A cancer drug research takes 10 years and $200 million with a 5% chance of success. Clearly, no private investor would want to put their money in such a venture where they would lose their money 95% of the time. They would rather fund a tech startup and sell to FAANG later.

Better approach is to invest rather one project at a time than to invest in 150 such research projects. Even with 5% chance of success - you can to do the math to see that it is promising that atleast 3 of them will succeed. Now, the crucial part is funding $200mn x 150 i.e $30billion. Here's where you can issue bonds and finance more than half of the projects with long term debt; the intellectual property of 150 projects can be the collateral. And if you get fancy you can use derivatives - securitization, CDOs, Credit Default Swaps. Insurance companies can be invited to buy them too and it'd be a way for them to hedge their bets too considering they use an ugly term called "longevity risk". This $30 billion cancer bonds market will still be way smaller than the housing market. I wrote earlier here how this same principle can be used to fund Covid-19 research as well.

I'm still waiting to come across a logical argument of why this is not a feasible way to cure diseases like Cancer!

Overall, this was a fantastic book and worth my time reading during the lockdown. Hope it excited you to give it a try as well.

BookShop link - https://bookshop.org/books/adaptive-markets-financial-evolution-at-the-speed-of-thought/9780691191362

And the Weak Suffer What They Must

To be honest this book was not even on my reading list. I had my eyes for "The Adults in The Room" - considered to be one of the Top 100 books of the 2010s decade by The Guardian. But it wasn't available in my library. And researching about the author made me aware about this book. 

Besides the provocative title, the subtitle said "Europe's crisis and America's future" which piqued my curiosity as someone who is interested in learning and understanding more about how economies work and specially in this case Europe - of which my knowledge is next to zero.

The book is well-written, easy-to-understand which is not a surprise because the author was a professor at UT Austin and was also Greek finance minister during the most turbulent times. After reading the book I was able to understand why the European Union is a bad idea but the real takeaways for me were the crystal clear understanding of three fundamental questions. 

• How deficits and trade surplus work?
• What does it mean to devalue a currency?
• How lowering interesting rates (or the financial jargon QE) are not granted to work always?

How Deficits Happen?

First this basic principle - One person's debt is another person's asset. Similarly, one nation's surplus is another nation's deficit. 

• In an asymmetrical world, the money that surplus economies amass from selling more stuff to the deficit economies than they buy from them - accumulates in their banks.
• The way banks make money is by lending. With this surplus in their vaults, they are tempted to lend much of it back to the deficit countries where interests rates are always higher [because money is scarce there and, to invite investment those countries resort to increasing their interest rates. Investors love higher rate of returns.]

For example -

• One French family buys a Volkswagen car (a German company).
  Now there is a trade imbalance. To set it right, one German family will have to buy a French car (why would they when German cars are better) or a French wine. Think about competitive advantage here.
• But suppose this balance doesn't happen to the same matching degree i.e a trade imbalance occurs. Surplus (Germany) - Deficit (France)
• Now as soon as the whiff of this gets to the markets, currency traders and speculators will bet on the Franc to be devalued by the IMF.
• They will bet by taking out loans in Paris (in Francs) and buying Deutsche marks and whenever, in future Francs get devalued - sell those Deutsche marks back, repay the loan and make handsome profit.
• Interesting thing is - unlike sporting/weather events the bets here make the event more likely.
• This is how -
  With every Franc borrowed by speculators to buy Deutsche marks it will push Franc's value down. Now there are two exchange rates for Franc - one official and, the other unofficial rate in the markets run by the speculators.
• To defend the official exchange rate, France's Central bank would have to step in using its reserves of Deutsche marks to buy Francs and soak the excess Francs in circulation.
• But now a game of chicken is on and who will blink first.
  If speculators persist - the reserves of Deutsche marks will eventually start to run out.
• Finally, Central Bank will have to call its minister and tell them that they can no longer afford any more French families buying Volkswagen cars. Please call IMF and arrange for the devaluation of Franc.
• The only thing that now stand between speculators and their victory is Bundesbank (German Central Bank). If it prints more Deutsche marks and asks it "chosen traders" to buy more Francs and soak up the excess Francs in circulation thus bringing its price down and burning the speculators.
• But Bundesbank will not like to print more Deutsche marks to defend an exchange rate designed by politicians. As now there will be more Deutsche marks in the system it will cause domestic prices to rise (inflation).
• So the story unravels from here on then.

How does Quantitative Easing (QE) work?

• The Central Bank buys from commercial banks other people's debts.
• In exchange of these debts - the Central Bank deposits dollars to an account the commercial bank keeps at the Central Bank.
• It is hoped that the banks will pass on these huge sums of money to businesses wishing to invest.
• If it happens, the economy rises as the liquidity rushes in.
  
  But for it to work, lots of things have to align. Like,
• Customers for eg. have to believe that the real estate market has bottomed out and their jobs are secure. Only if they feel so they will ask a bank for a loan.
• Bank must be willing to lend the money.
• Companies which employ people must believe that since banks are lending money - the demands for their products will increase.
• Often, even when banks have done their job (under a directive) - companies hesitate to invest more in their operations fearing that demand is not there. So, instead they just buy back their own shares which increases the stock price and get a nice bonus for the execs for supposedly increasing the stock price. Shares rise and everyone thinks all is well while behind the scenes economy is not doing well.
• Mind you, this is not what QE was intended for. These benefits were supposed to trickle down. And for these failures, "trickle down economics" is now not very liked.

I have read bunch of books, articles on these topics and watched lots of videos explaining these concepts but I found the explanation in this book to be the best!

Other than these fundamental explanations, the author also makes a case that European Union essentially favors only a select few countries, likening them to a cartel and run by bureaucrats having plush jobs and perks in Brussels. Inspite of having a Maastricht treaty to draw inspiration from with some shady maneuvering few countries got admitted to the E.U. Read this. 

Yanis does make a good point when he points out that E.U tends to overrule and impose conditions on sovereign countries and democratically elected govts' arm-twisting to do things they weren't elected to do.

Another, interesting argument he makes is that after the end of Bretton Woods era United States propped up E.U with Germany as one surplus country in Europe and Japan in Asia. The way he explains this is that the plan was to entice the surplus nations to send their surpluses to WallStreet by -
i) Pushing American interest rates higher

ii) Make WallStreet more lucrative than its equivalents in London, Tokyo, Frankfurt, Paris etc.

And recycling those surpluses.

The analogy of the Greek fable: Minotaur and King Minos was quite striking here.
WallStreet = Crete

Minotaur = US' trade deficit that kept devouring R.O.W's net exports and their industries running. With profits being sent to WallStreet as a tribute to Minotaur.

To add context, he was the Greek finance minister during a tumultuous period and he resigned when Greece was asked to follow severe austerity measures by the E.U. So he definitely knows the inner-workings of the E.U as he had a seat at the table and was right in the middle of it. He also gives a fascinating account of how the concept of European Union took shape and gives lots of anecdotes.

Overall, I picked this up not entirely sure what this is going to be like but I definitely enjoyed reading and learning a few things!

Lessons from The Psychology of Money

In 2018, I came across this gem of an article "The Psychology of Money". This long article explains all the concepts and principles of money and investing into 20 nuggets. This is my distilled summary of it in a much easy digestible form. I have reordered them and also limited them to around 12.

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Investing is perhaps the only field where someone with no education, no relevant experience, no resources, and no connections can vastly outperform someone with the best education, the most relevant experiences, the best resources and the best connections.

The above can't happen in medicine or engineering.

1. In my opinion, the most important concept is Anchored-to-your-own-history-bias. 

Our personal experiences make up of only 0.00000001% of the total possible scenarios of the world. But we tend to think that's mostly how the world works.

Think of it like a video game (a simulation), where and what you are going through is possibly a fraction of the total possible paths the simulation could have taken you through. But you erroneously believe that it is "the" main path. And then we start developing our own false and simple narratives of how the world works.

Best way to get out of this bias is to read a lot, keep an open mind and be emotionally sound.

Also, when everyone has experienced a fraction of what's out there but uses those experiences to explain everything they expect to happen - a lot of people eventually become disappointed or confused at other's decisions.

2. An over-reliance on past data as a signal to future conditions in a field where innovation and change is the life blood of progress.

It essentially means past-performance is not a guarantee of future success. So, avoid over-admiration of people who have been there, done that or lived through "a recession or down-turn". With all due respect, experiencing specific events does not necessarily mean you qualify to know what will happen next. Writers/analysts who correctly predicted past recessions might not be correct on what's next coming.

This also does not mean you should ignore history. The further back in history you look, the more general your takeaways should be.

3. Extrapolation of recent past into the near-future and then over-estimating the extent to which whatever happens in the near future will impact your future.

What just happened, might not happen again soon and assuming that is a mistake!
The fact that there is a spate of negative news when chips are down are probably a sign of extrapolation of the recent past in the near short-term future and must be steered away from.

4. Under-estimating the role of luck in financial success (and life in general).

Since it is hard to quantify the default stance is to simple ignore luck as a factor. Sometimes things happen that influence outcomes more than effort alone can achieve.

5. Allure of pessimism in a world where optimism is the most reasonable stance. 

Historian McCloskey said - 

"For reasons I have never understood, people like to hear that the world is going to hell".

6. Investing based on what others are doing is dangerous.

You start thinking others are doing something that you don't and jump on the bandwagon but they were playing a different game all this time. And you get disappointed.

Also, you should not look at crowds as an evidence of accuracy or as a confirmation of your actions. If you do what everyone is doing, you will get average results. 

7. Underestimating the impact of financial mistakes on psyche and emotions. 

On spreadsheets it looks something you can survive like a 30% drop but then you look at the kids, your family, and you become weak, and start having second thoughts with emotions clouding your judgement.

8. Key to financial success is doing the same thing for decades and also doing nothing.

Compounding remains the key to success and somehow the human mind cannot fully visualize and appreciate its power.
Also, do not stop/break compounding investments. 

9. Do not make "overly optimistic bets" where downside is utter ruin.


Some investment bets have an unacceptable downside in any circumstance. 
Think of it as Russian Roulette - a bullet is only in one chamber out of the 8 (or whatever the number is) and the odds are in your favor but the downside is complete ruin. 

You have to survive/stay in the game to have a chance to succeed.

Ability to do what you want, when you want, with who you want and why you want - is priceless, has infinite ROI and should not be put at stake for any investment bet.

10. Political beliefs need to be kept separate from investing.

Co-relation between politics & economics isn't clear and is very messy.
This graph tells everything 

11. Every money reward has a price beyond the financial fee.
See if you are prepared to pay for it. It could be emotional, material or inconvenience.

12. Wealth is what you don't see, the things not purchased.

Wealth is to control your time and provide you with more opportunities and options not to be used as a status symbol.

Leadership in Turbulent Times - Crying Need of The Hour

I had been meaning to read this book ever since I came across it and found it engrossing and a page-turner. Was able to finish it in a space of 3-4 days. The title is particularly captivating at first glance because you are reminded that there seems to be a huge void when you look for great leaders on the public sphere -no one comes close to the stature of four key men mentioned in this book. And they faced gigantic challenges and led and inspired the way out. So I definitely wanted to read and see what are those qualities that have gone missing over the period of time.

This book provides a great glimpse into the lives of arguably four of the Top 10 rankings presidents of the USA by public opinion. All of them had different upbringings, different challenges but all of them left an indelible mark on history. There are some common qualities among all four of them but then there are very contradicting qualities in all of them too. So it is very important to see and spot the pattern of what is it that helped shape them into the great leaders they turned out to be. 

The premise of this book is so captivating because it provides enough evidence to ponder over some classic questions like -

• Are leaders born or made?

• Where does ambition come from?

• How does adversity affect the growth of leadership?

• Do times shape the leader or the leader shape the times?
• Why some people are able to extract wisdom from experience? 

• While others in the face of adversity - they lose their bearing and their lives forever stunted?

Picked some of the sentences directly from the book as they were so well-written

Three of them on facing difficult times - withdrew themselves to some other place, activity where through reflection and adaptive capacity were able to transcend their ordeal armed with a greater resolve and purpose. (For Lincoln - it was law and study, Teddy Roosevelt - Badlands, FDR - Warm Spring Georgia where he recuperated and met others. LBJ is an exception).

Lincoln
Early Signs

• He likened his mind to -
  
  I am slow to learn and slow to forget that which I have learned. My mind is like a piece of steel, very hard to scratch any thing on it and almost impossible after you get it there to rub it out.
• Was extremely poor. Walked miles to borrow books to educate himself. 
• Affable by nature. Was easy for him to strike conversations and form relationships with people. Also indicates he had a high degree of EQ. He was the source of his friends’ entertainment and also the lone dissenting (contrarian) voice when such cases arose - wasn’t afraid to face their disapproval rather than abandon what was right.
• Crafted an intensive education for himself.

• Avid reader.

• Storytelling ability.

Adversity Struck

• Suffered a blow to his public reputation when his home state Illinois plunged into recession and all his pet projects were stalled.

• He valued his promises to the electorate very much.

How did he turn it around

• Turned around his bad phase by withdrawing from public life and focusing on law practice. And he started to read beyond the boundaries of law like - philosophy, astronomy, science, political economy, history, literature, poetry and drama.

• His pursuit of knowledge was directed towards understanding the role and purpose of leadership.

• Did deliberate practice of storytelling by soliloquizing

• Do we know what books he read?

Characteristics:

• Had an immense desire and ambition to inscribe his name on the book of communal memory. Wanted to emulate DeWitt Clinton. 

• Extremely good orator. Inspired conviction in others because of the conviction of the speaker in himself.

Teddy Roosevelt

Early Signs

• Roosevelt’s mind was "wax to receive and marble to retain. " Photogenic memory.

• Was born into a well-to-do family but was physically weak so father arranged for all sorts of tutors in any field he showed interest in like Taxidermy, German etc.

• Avid reader.

• As a biographer wrote - “The story of Theodore Roosevelt is the story of a small boy who read about great men and decided he wanted to be like them.”

• Widely read in all disciplines and well traveled at a young age.

• Lacked empathy, kindness. But very curious, zealous and focused.

• Storytelling ability.

• Took interest in politics from college when many of the peers stayed away.

Adversity Struck

• Lost his young wife and mother on the same day.

How did he turn it around

• Left for the Badlands and started to live among the cowboys adopting their lifestyle in order to become familiar with the hardships as he was born in a well-to-family

• Stayed there for two years - and made his body stronger (he was physically weak) and made himself mentally strong.

• Perseverance was the key!

Characteristics:

• Start with a bang - believed in starting a new venture with style

• Ask questions

• When attacked, counter-attack and stick to your point.

• Realized as a navy admiral - to keep space with the people he was supposed to command. It is the greatest possible mistake to seek popularity by showing weakness or mollycoddling with the men who then never respect a commander who does not enforce discipline.

• Used to endorse the African proverb “Speak softly and carry a big stick”

Franklin Roosevelt

Early Signs

• Lacked the physical strength of Lincoln and the torrential energy of Theodore. Was also born in a privileged class and an only child.

• Great temperament is what set him apart!

• Developed a desire to be the “nice child” so as to not trouble his sick father. This continued as he remained the “good student” in school earning him no friends.This tendency took shape in his adulthood as well where he learned to project optimism.

• Also was passionate towards his hobby of collecting stamps.

• Was interested in debating from the start.

• Had decided to follow the footsteps of Theodore Roosevelt while in his 20s
  

Adversity Struck

• Was struck by polio unaware.

How did he turn it around

• He had the tendency to project happiness and optimism even if he was sad, lonely inside right from his childhood so as to not worry his parents.
• Kept looking for alternative treatments for polio which at the time was not fully understood. (~1921)
• Had a very supportive wife and a friend (Louis Howe) who had tied his future to FDR’s political career. Wife continued to represent him in political circles cultivating his prospective political allies while he recuperated and the friend strategized his comeback. Warm Springs, Georgia  - was key to his revival. 
• He came to know about a spa in a ramshackle resort which had mineral water gushing from the nearby hillside at around 86 degrees. It was rumored to have therapeutic value and in his search for “alternative” treatment he wanted to try it out.
• He could feel improvement so he took over the place, invested his own personal fortune and built it into a resort where other specially abled people could come and recuperate too.
• He underwent a spiritual transformation developing a powerful new empathy enabling him to connect emotionally with all manners of people who fate had dealt an unkind blow.

Characteristics:

• Projected bright and happy mood even though deep down he was troubled. Good quality needed for a leader.
• Experimental i.e always open to trying out new things - common sense to take a method and try it: If it fails, admit it frankly and try another. But above all try something. With this same approach - he treated his illness and the Great Depression.

Lyndon Johnson:

• He was the only one out of the four who reacted negatively from the adversity - it magnified negative aspects of his nature. Later on a heart-attack helped him reshape his life's priorities.
• FDR was his mentor but he even repudiated his mentor’s landmark achievement (the New Deal) to achieve some political gain.
• He wasn’t a good public speaker so tried to balance it by “meaningful” one-to-one interactions.
• Indulged in some fishy maneuvering to win the Senatorial race which he himself had been at the receiving end of in 1948
• He had adopted the mantra of “getting ahead of the world by getting close to people who were head of things” aka kowtowing, pleasing people. Very calculating by nature.
• No hobbies. Didn’t know how to unwind.

Characteristics:

• Used to work himself to the ground. Was a hard taskmaster.
• Single-minded determination, enthusiasm, flattery