BR 131: How will you measure your life? by Clayton Christensen

Category: 1 – Read ASAP! (All Categories are 1 – Read ASAP!, 2 – BUY it!, 3 – SHELF it, 4 – SOMEDAY it)

Comments: I wish I had gotten to this book sooner. Clayton Christensen has such a thorough and clear thought process that reading this book is like embarking on an interesting intellectual journey with him.

This book is all about “how” to think rather than “what” to do. It has inspired some immediate changes in my life and I’m sure will continue to do so.

I loved it. I’m sure I’ll be sharing stories from the book for a long long time.

Top 3 learnings:

1. Be careful about viewing indiscretions in terms of marginal cost i.e. maybe I’ll do it just this time. You might think you are making allowance for an extenuating circumstance but life is just a series of extenuating circumstances. No athlete starts out with doping in mind.. it happens one bad decision after another. We can’t commit to 99% of an idea. It’s 100% or nothing.

2. Don’t look products as something people buy. Look at them as things people rent to get a job done. Ikea doesn’t win because it has the most amazing furniture. It wins because people hire Ikea for a quick, painless, cost effective way of re-decorating a home.

Similarly, great relationships involve asking yourself – why would my partner hire a husband/wife in this situation? This way, we focus on empathizing with what the other person wants rather than giving them what we think they should want.

3. Be careful about outsourcing your capabilities – Capability = Resources (what) + processes (how) + priorities (why). Dell began outsourcing small parts of manufacturing to Asus.. and 16 years later, Asus was manufacturing the whole computer. Asus soon started it’s own line of computers and Dell could do nothing since it had outsources it’s capabilities.

It’s important to think of this in terms of our kids. If our kids are constantly raised by someone else and learn processes and priorities from someone else, whose kids are they?

Add on Mar 16, 2016: This book changed my life. Up there with Stephen Covey’s 7 Habits.

BR 130: The Investors Manifesto by William J Bernstein

Category: 2 – BUY it! (All Categories are 1 – Read ASAP!, 2 – BUY it!, 3 – SHELF it, 4 – SOMEDAY it)

Comments: William Bernstein deals with the very basics of investing and dispels some commonly held myths. An excellent book. May not interest everyone but if you are interested in understanding personal finance and investing, it’s a great book.

Top 3 learnings:

1. You don’t invest to get rich, you invest so as to not die poor. Great investments are not risky investments that produce prolific returns. They produce steady returns and avoid worst case scenarios. Of course, you cannot get great returns without great risk.

2. Understanding financial history is critical for a good investor. Long term capital management’s famous failure was because their equation did not take financial history into account.

3. You are your worst enemy. You cannot time the market. Don’t try. And don’t look for patterns in the financial markets. There are none.

A collection of other conclusions I put together – if it interests you

A pre condition to being a successful investor is a firm grasp of financial history

– High returns can only be achieved with high risk

– losing money in a bear market is a part of being investor

– study and understand the Gordon equation to calculate real returns

– whenever you buy or sell an individual stock or bond, you are competing against the best in the world

– Stocks: a growth company stock generally pays out less than a collection of bad company stocks

– primary decision as investor is overall mix of stocks and bonds. Diversify diversify.

– focus on the portfolio. Do not pay too much attention to best/worst. They change.

– You are your worst enemy. You cannot time the market. Don’t try.

– Don’t look for patterns in the financial markets. There are none.

– Stock brokers are out to fleece you. It’s the nature of the business

– Mutual funds aren’t different unless they are owned by stakeholders/ are private

– Live as modestly as you can and save as you can for as long as you can

– The best gift to your heirs is not cold hard cash. Rather its the ability to save, spend wisely and invest prudently

– Remember pascal wager – goal of investing is not to get rich but to not die poor

– index fund – consistent 8/10. It will never hit 10/10 but it won’t be a 1/10 either. Returns are proportional to risk…..

– Pro Tip – House: Whenever you go to a realtor, find out what the house rents at and multiply by 150. If you are charged above that, you are paying too much.