2021 — Year of learning
2021 turned out to be one of the most momentous years of my life. I quit my corporate career, redid my entire personal finance portfolio (significant allocation to a small number of small/mid cap stocks) –incorporated modified bar-bell strategy and some anti-fragility into it and immersed myself completely in learning. I have taken the biggest risks in my life, by far — at least that is what my former self would have thought. But what seemed like risky steps at one time, now feel like natural and logical progressions — asymmetric bets, as Mohnish Pabrai often said in his book — The Dhandho Investor, “Heads, I win; Tails, I do not lose much”.
The biggest transformation is the transitioning from thinking in terms of “absolutes” to delving with “probabilities”. For as long as I remember, once I made a decision, I stuck to it — while sometimes, this may be a good thing, many times, this steadfast binding to decisions made in the face of uncertainty, turned out to be suboptimal in more ways than is obvious — the end result was sub-par, dogmatic perspectives got reinforced and learning was limited, if any.
Penny dropped for me when I was reading the book, “Seven brief lessons on Physics” by Carlo Rovelli. I learnt that heat does not “flow” from hot substances to cold substances because it follows a physical law but it happens because of “sheer chance”. It is entirely possible that heat could transfer from colder to hotter substances but is highly improbable (this is because fast vibrating molecules of hot substances have a higher chance of hitting upon slow vibrating molecules of cold substances resulting in transfer and evening out of kinetic energy among them). After incorporating this mental model into my mind, I started to see it everywhere. For example, I now understand that evolution is not inevitable, but only highly likely. I have come to realize there are whole categories out there in the world — “Newtonians” and the Darwinians”. Without getting too formal about this categorization, it is essentially a contest between “deterministic” and “probabilistic” views.
So if a person is born into a privileged background, it is more likely that that person may end up having a good life compared with one born into a poor family — it is not certain though.
If you worked hard this year and created lot of value to the firm that employs you, it is likely that you will be appraised well at the year-end, your compensation may increase in tandem and you may even get a promotion — but this is not guaranteed.
A while back, I read somewhere that Jeff Bezos was clear that it is not possible to predict which business proposition will be relevant ten, twenty, thirty years into the future — so for his business (Amazon), he decided that he will instead focus on things that will continue to be relevant in the future — customer service and satisfaction (customers will continue to care for service from their providers in the future as well). I am not sure of the veracity of this story but the point of this story is sharp and enlightening. More than two decades ago, Amazon started out by selling books online, today it sells practically everything online. It is also one of the top cloud technology infrastructure providers in the world. What however, did not change in all these years is its focus on customer service.
A few years back, Robotic Process Automation (RPA) was all the rage — at least in the Information Technology and Operations world. It was felt that RPA was going to change the world. Large teams were hired to develop and deliver RPA solutions. Many RPA products stumbled into the market. Today you do not hear a beep about it. RPA was a trend whereas automation and productivity improvement are constant societal needs. Somewhat like customer service, automation and productivity have been relevant right through the age of industrialization (200+ years and counting).
The point here is that future can never be predicted with certainty.
So, if future is uncertain and cannot be predicted, it makes sense to focus on increasing the odds/chances of achieving what we want, instead of fixating on specific results (which are not certain anyway). So, pursuit should be of increasing odds.
“’I don’t know’ is not the blind spot; ‘I know’ is the blind spot” — Sadguru
Everyone knows that future cannot be predicted accurately. There is however a big difference between knowing and accepting. Where will markets be next year? What about currencies and price of oil? GDP? What about inflation, interest rates and the tapering schedule by the central banks? Will I get promoted next year? We, as human beings, crave for certainty about the future and give undue importance to precise predictions by experts. All this, while we intellectually appreciate that future is not knowable.
Coming back to my learning, now I’m lot less sure of precise predictions, I tend to use these words often: “likely, most likely, unlikely etc”. In my planning, I always account for me being (completely) wrong. I focus a lot more on processes, frameworks and systems and a lot less on results. I am focusing more on small, incremental improvements and forcing myself to be long term oriented. This also released me from the onerous pressure of achieving specific results — instead I’m focusing on practices that increase odds of achieving the same specific targets.
As it turns out I had been documenting my learning’s over the last year in the form of blogs and here they are:
- Long term orientation trumps short term hedonism every single day
- Process and method over results and outputs
- Avoid stupid risks over engaging in heroic efforts
- Embrace the hum of constant progress over seeking constant excitement
- Own my failures — how else can I learn from them
- Consistency is a super power
- Balance in life is not a thing to achieve but an attitude to adopt
- Progress is not linear: slowing down can actually give a significant fillip to life
- Robustness is good but anti-fragility is better
- Lifelong learning could perhaps be the purpose of life
Distilling these further, most of these lessons can be summed up as:
Compounding is the surest method for unfathomable growth; Not just money, everything worthwhile (health, relationships, career etc) can compound. Compounding is non-intuitive. Compounding = small, frequent progress + long period of being at it.
This may sound simple which it is but it is not easy to implement. It requires relentless focus and alertness. Straying from the path is not uncommon and getting back-on is not easy — it requires explicit and sometimes external intervention. Attaching a purpose behind intentions helped me.
“The mystery of human existence lies not in just staying alive, but in finding something to live for.” ― Fyodor Dostoyevsky, The Brothers Karamazov
Now that I shared my lessons here, I would greatly appreciate if you can share your lessons that had profound impact on your life.
