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: Economics (Could index funds be ‘worse than Marxism’?), Stock Market (Premchand Roychand: Mumbai’s original share king), Technology (Life after the pandemic), Careers (Programmer to CEO in 3 years), Strategy (Why drug makers are spending big on data), and Investing (The greatest show on earth).

Here are the ten most interesting pieces that we read this week, ended April 10, 2021.

1. What information do you need in order to change? [Source: Farnam Street
Improvement is the only way forward. And this applies to businesses as well as individuals. We all want to improve at something. Skills we’d like to develop, habits we like to change, relationships we’d like to improve—there are lots of areas where we’d love to see positive, meaningful change. How feedback works in behavior change: When you’re stuck, you need feedback. Feedback is a valuable source of information that you can use to effect the changes you want. You need information that tells you what you’re doing well and where you’re going wrong. But, how do you get feedback? If we want feedback we have to actively seek it out. Having direct feedback on the results of your specific actions can reinforce positive changes, help you develop habits, and inspire you to take further action. Feedback also helps you set goals for what you can reasonably accomplish.

Don’t be afraid to ask for feedback: The best way to improve is by asking for feedback. Asking how you could be a better partner, team member, friend, or leader from the people best placed to give you accurate feedback is a requirement for improving. If your actions are eventually going to get you fired, divorced, or ghosted by your close friends, you probably want feedback communicating the steps you’re taking toward disaster. No one is so good at something that they have no room for improvement. We can all get better. And if you want to get better, you have to be open to the feedback you receive. You don’t have to agree with it, but you do need to hear it.

The power of feedback: Giving great feedback isn’t about convincing others to do things your way. It’s about giving them insight into how to improve on their own methods. Giving good feedback requires an awareness of both what you’re saying, and how you say it. To the first point, make it personal, provide specific examples, and notice how things have changed over time. Reassure the person that you are trying to help them be a better version of themselves, that you are in their corner. Consequently, be aware of your tone. You’re a team member, not an accuser. And choose your timing wisely.

2. Premchand Roychand: Mumbai’s original share king [Source: Livemint
People know less of him, but there’s a gallery named after him (funded by the Roychand family) at the Chhatrapati Shivaji Maharaj Vastu Sangrahalaya, formerly known as the Prince of Wales Museum. Then there’s an award. The Premchand Roychand Award, given out by the University of Calcutta every year to an outstanding student, who clears the Master of Arts degree with flying colours. Premchand Roychand was one of the most influential businessmen in 19th-century Bombay. A man who made a fortune in the stockbroking business and came to be known as the Cotton King, the Bullion King or just the Big Bull. He was also the founder of the Native Share and Stock Brokers Association, an institution that is now known as the BSE.

Historian Sharada Dwivedi, in her book Premchand Roychand: His Life and Times, writes: “He is believed to be the first Indian broker who was fluent in speaking, reading and writing the English language. Success in his profession came quickly to young Premchand when he began to work as an assistant with Ratanchand Lala, a wealthy and successful broker, in 1852.” His life has been documented in two narratives. One, the story of how he amassed a massive fortune, squandered it all, regained a bit of it and then contributed generously to philanthropy, where he was an extraordinary man who sought neither fame nor riches. And then two, where he was a scam artist and led to the collapse of the Bank of Bombay and the Asiatic Institution in 1865 and then later in life redeemed himself in philanthropy.

In the years that followed the 1865 bust, Premchand spent a lot of his time and money on philanthropy. His largest endowment was made to the University of Bombay, for a library and a clock tower. It is but another legend that Premchand wanted the clock tower to be named after his mother Rajabai. Premchand also contributed generously towards education. For instance, he gave five shares of Mazgaon Reclamation Co. to the Cathedral School for girls. To the Alexandra Girls School, he donated Rs50,000 for setting up a boarding and lodging house. A large sum for those days, Rs3 lakh was donated to the University of Calcutta for the Premchand Roychand Award.

3. Technology after the pandemic [Source: NY Times
Bob van Dijk, the chief executive of Prosus, feels that many things are here to stay even after the pandemic. Prosus is an Amsterdam-based conglomerate that in 2019 was spun out of Naspers, the South African tech and media giant. The pandemic lockdowns changed consumer behavior, forcing Prosus to adapt in ways that Mr. van Dijk believes will be permanent. “We don’t have any reason to believe they will go away,” he said, adding that the pandemic essentially “brought the future forward by a few years.”
 Spurred by necessity, Prosus’ portfolio companies found other ways to wring efficiencies. “We found that more of our business can be automated than we thought,” he said. “That was pushing us further down the curve of making a very smooth customer experience that has as few touch points as possible.” For example, its classifieds business, OLX, began asking customers to inspect the cars for sale themselves, reducing social contact. “When forced, you can think creatively,” Mr. van Dijk said.

Though Prosus is emerging from the pandemic in a position of strength, Mr. van Dijk said the company wouldn’t be able to escape a global push by governments to constrain the power of tech giants in antitrust, labor and other areas. One major concern among tech giants is the rollout of so-called digital services taxes throughout Europe, meant to collect more revenue from multinational companies that do extensive business in countries without much of a physical presence within their borders. Those wouldn’t apply to Prosus, Mr. van Dijk said — “we invest locally and pay taxes” — but he added that the charges could erode the industry’s profit margins.

4. Balaji Srinivasan on the future of bitcoin and ethereum, and more [Source: tim.blog]
Balaji S. Srinivasan, an angel investor and entrepreneur. Formerly the CTO of Coinbase and general partner at Andreessen Horowitz, he was also the co-founder of Earn.com (acquired by Coinbase), Counsyl (acquired by Myriad), Teleport (acquired by Topia), and Coin Center. He was named to the MIT Technology Review’s “Innovators Under 35,” won a Wall Street Journal Innovation Award, and holds a BS/MS/PhD in Electrical Engineering and an MS in Chemical Engineering, all from Stanford University. Balaji also teaches the occasional class at Stanford, including an online MOOC in 2013, which reached 250,000+ students worldwide. In this podcast he speaks about Bitcoin and Ethereum, Media Self-Defense, Drone Warfare, Crypto Oracles, India as Dark Horse, The Pseudonymous Economy, Beautiful Trouble, Ramanujan, Life Extension, and more. An excerpt:

“…the dotcoms that we know and love were actually not feasible until I think about 1991, plus or minus one or two years, but I think it was 1991, they repealed the AUP. And the reason people fought it, they said there was going to be spam, and porn, and malware on this commercial internet, and it was all going to be broken, because before that, it was an academic and military internet. Everybody was sort of a quasi-trusted user on it. You had to have a .mil or .edu domain. And then they were like, “Oh, my God, all these crazy people are going to get on. It’s going to be…” And you know what? They were right. All that stuff did happen. But the benefit was worth it. The downside was mitigated by I think the upside, and that was the birth of the commercial internet.

And that’s something which most people don’t even know how that came about. It really was something where one rule was holding back all this innovation. That’s something that’s made a deep impression on me. So stuff like that was the kind of stuff that I tried to convey in the course, alongside the nitty-gritty. And I think most of the time, that kind of stuff is not taught in the same place from the same person with one coloring the other. I think that’s part of why the course was popular.”

5. Investing: The greatest show on Earth [Source: Collaborative Fund]
In this blog, Morgan Housel writes how investing is a broader field than it looks, and how there is so much to learn about it outside of the narrow lens of finance. He uses two analogies to demonstrate this. The first one pertains to the growth of a tree. “A tree that grows quickly rots quickly and therefore never has a chance to grow old,” forester Peter Wohlleben writes. Likewise, there’s a graveyard of companies and investors who tried to grow too fast, attempting to reap a decade’s worth of rewards in a year or less, learning the hard way that capitalism doesn’t like it when you try to use a cheat code. Chamath Palihapitiya, Canadian venture capitalist, once put it: “The faster you build it, that is the half life. It will get destroyed in the same amount of time.”

The second analogy pertains to medicine (cancer). In 2013, Harold Varmus, then director of the National Cancer Institute, gave a speech describing how difficult the war on cancer had become. He said that we focus too much on cancer treatment and not enough on cancer prevention. If you wanted to make the next big leg up in the war on cancer, you had to make prevention the top priority. But prevention is boring, especially compared to the science and prestige of cancer treatments. So even if we know how important it is, it’s hard for smart people to take it seriously. And the same irony hurts investors. The solution to 90% of financial problems is “save more money and be more patient.” Nothing is more powerful or more capable of moving the needle. But it’s so boring.

When Mr. Housel writes about these two different stories, his point is to highlight that you can learn lots about investing by reading things that have nothing to do with investing. Greed, fear, risk, opportunity, and scarcity – the most critical topics in investing – reveal themselves in all kinds of fields. If you find something that is true in more than one field, you’ve probably uncovered something particularly important. The more fields it shows up in, the more likely it is to be a fundamental and recurring driver of how the world works. Lastly, he points out five fields that have taught him more than most finance books. These are health, sociology, military history, evolution, and nature. Next time you plan to invest, look around, read from fields that are not related to investing. It’s more fun and gets you closer to the truth.

6. Archegos Capital Management fiasco and lessons for bankers [Source: NY Times; Financial Review]
The Archegos Capital Management fiasco has made bankers think about their lending strategy. Bill Hwang, founder of the investment firm, borrowed billions of dollars from Wall Street banks to build enormous positions in a few American and Chinese stocks. But things changed when the lenders demanded their money. When Archegos couldn’t pay, they seized its assets and sold them off, leading to one of the biggest implosions of an investment firm since the 2008 financial crisis. So what are the lessons that bankers have learnt? Failed to focus on the potential risks: It’s relatively common for clients of prime brokerages to refuse to provide their lenders with details of their other trading activities. One way that prime brokers try to mitigate their risks is by using regulatory filings to see what their hedge fund clients are buying. But because Archegos was a family office, it faced fewer disclosure requirements. Bankers are now muttering that if they’d been aware of Archegos’ dealings with other banks, they would have been much more circumspect in their lending.

Sheer speed with which liquidity can disappear from markets: Archegos’ prime brokers would have been relatively sanguine that their risk was limited because they held cash collateral for their loans, and because the fund focused its bets on large, blue-chip stocks. They would have been confident that if Archegos were to get into trouble, they would have little difficulty in selling these listed stocks quickly without roiling the market, because these were reasonably liquid stocks. But Archegos’ meltdown proved that this was a dangerously complacent view.

In the event of a fire sale, those who don’t get out quickly end up getting badly singed: When Archegos started buckling under the pressure of margin calls, some of its lenders suggested gradually unwinding the investment positions, rather than conducting a fire sale. But Morgan Stanley and Goldman Sachs were sceptical that this would work, because the market would soon figure out what was happening, and would punish the stocks involved. Instead, the two US investment banks moved quickly to offload large blocks of their Archegos exposures, and this helped limit their losses. But for less agile lenders, including Credit Suisse and Nomura, the result has been brutal.

7. Indian drug makers are spending big on data – Here’s why the government is loving it [Source: ET Prime
From Sun to Alkem, drug makers are spending big on data and the government seems to be loving it. The article says experts believe the moves point to a larger strategy to digitise the supply chain, plug loopholes, promote transparency, and take healthcare to remote corners, as envisaged by the government’s National Digital Health Mission. Besides, setting up of a pan-India online pharmacy chain is also a distinct possibility.

The article says that while the Indian government and pharma seem to be forever at loggerheads, a consensus seems to be emerging on laying the foundations for an efficient and inclusive system that promises to deliver healthcare to the remotest parts of the country. A key aspect of that plan is the use of digital technology to gather data and scientific information to offer better services to millions. Armed with sharp insights on issues like disease prevalence; reach of basic healthcare; availability of doctors, nurses, and diagnostic labs; nutrition levels; and patterns of medicine prescription and consumption, under-served groups can be identified and handled efficiently.

Two developments show the healthcare industry’s foray into data analytics. A quartet of leading Indian drug makers – Sun Pharma, Zydus Cadila, Lupin, and Torrent Pharma–have agreed to fork out INR40 crore each to set up a partnership venture named ABCD Technologies LLP (to be later renamed IndoHealth Services LLP). In the other development, Mumbai-based Alkem Labs said that its investee company, ABCD Technologies — a different entity without any link with the identically named LLP company mentioned above — had acquired a 66% controlling stake in market-research company AIOCD Pharma Softech AWACS. Alkem also agreed to acquire the remaining stake, subject to fulfillment of certain terms and conditions. No valuations for these deals were shared by the companies. Here is how the government figures in the scheme of things. The article says, “Although neither groups provided insights about how the investment in data analytics will help as a pharma manufacturer or seller, experts say the moves point to a larger strategy to digitise the supply chain, plug loopholes, promote transparency, and take healthcare to remote corners, as envisaged by the government’s National Digital Health Mission (NDHM).”

8. How I went from programmer to CEO in 3 years [Source: Medium
Being open to learning is the key to improving in anything and everything. In this article, Sharat Chinnapa, CEO of HumAIn, a subsidiary of Goalist, writes about his journey to being a CEO and also his learnings. He says that there are three main behaviours (besides luck) that helped him grow, and gain enough trust to earn this wonderful opportunity. 1) Create situations that force you to learn: fresh out of college, he hatched a cunning plan in an attempt to learn as much as he could. “I was joining a startup, and startups are well known to be an environment where people have to “wear many hats”. With this in mind, before even starting work, I decided I would agree to work on literally anything for the first one year, no questions asked.”

2) Use empathy to help people grow: There are many schools of thought on how to encourage people to grow. But his own opinion here is heavily shaped by Peter Senge’s “The Fifth Discipline”. The core of this book is about creating a learning organisation, and there’s a chapter on “Personal Mastery” which helped shape his thinking about encouraging people to grow. Based on the principles in the book, he proposed to create a framework for employees to create personal visions and self-manage their progress towards those visions. Participation was voluntary. The results were quite a patchwork. However, sitting down with everyone while being as unbiased as he could, and just acting like a sounding board and a question-asker for their dreams and goals helped him become better able to connect with them as people, understand their motivations, become better able to empathetically interact with them.

3) Keep asking “Why?”: Curiosity is the key to learning. Asking “Why?” a few times can get another person to reveal frameworks and mental models that they have gained through years of experience. Asking “Why?” creates a chance to “debug” a colleague’s thinking without friction, uncover untested assumptions, and offer ideas or frameworks that may help them avoid similar bad decisions in the future. Lastly, he says how curiosity has been a very powerful and invaluable tool to improve himself. These points have played a critical role in increasing his actual capability to deal with a variety of challenging and ambiguous situations.

9. Meet the women of Dalal Street [Source: Forbes India
Women have aced each and every field on this planet. This article profiles a few women who have earned a name for themselves in the finance (specifically, stock market) world. And these include Mahek Shah (23-year-old trader), Priyal Anil Bagri (25-year-old trader), and Lakshmi Iyer (CIO, debt, and head-products at Kotak Asset Management Company). The number of women on brokerage firm Zerodha’s online trading platform, for instance, has increased to 7.2 lakh, up from 3.5 lakh last year, and they form 16% of the total traders on the platform. The average age is 30, says co-founder Nikhil Kamath, and the average ticket size women invest is about Rs80,000. “A lot of them have bought into the corrections that the pandemic got with it. Hopefully, this is a precursor of increased participation and more women coming on board,” he says.

Even though losses are an inevitable part of the trading and investing game, women tend to face harsher repercussions than men due to long-standing prejudices, say experts, which adds to their cautious and fearful attitude toward the markets. “Even today, if a man loses money, it’s fine. But if a woman loses money, everyone says, ‘Oh, I told you so. You can’t handle it’. These unconscious biases are reinforced time and again, and women are reprimanded more than men for making the same mistakes,” says Mrin Agarwal, founder director of finance education platform Finsafe. “Lack of knowledge and confidence are also not helpful.”

According to Kamath, only 1 to 1.5% of the country’s population has access to financial markets, which is “abysmally low”. A crucial part of improving this statistic is to improve the number of women who trade and invest, he adds. Kamath explains that even though the number of women traders on Zerodha has doubled in absolute numbers over the past year, their proportion to total investors on the platform has remained stagnant at 16 percent. “So for every 100 people who are investing and trading, only 16 of them are women and 84 are men. This gender ratio itself is not changing,” he says.

10. Could Index Funds Be ‘Worse Than Marxism’? [Source: The Atlantic
Economists and policy makers are worried that the Vanguard model of passive investment is hurting markets. Economists, policy makers, and investors are worried that American markets have become inert due to a decades-long trend, not a months-long one. Millions of Americans, getting into the market no longer means picking stocks or hiring a portfolio manager to pick them for you. It means pushing money into an index fund, as offered by financial giants. With index funds, nobody’s behind the scenes, dumping bad investments and selecting good ones, the writer says. Nobody seems to be doing much with funds are “passively managed.”

What is good for retail investors may not be for the financial markets, public companies, or the American economy at large, says the author. The passive revolution’s scope has raised all sorts of hand-wringing and red-flagging. Analysts at Bernstein have called passive investing “worse than Marxism.” The investor Michael Burry, of The Big Short fame, has called it a “bubble,” and a co-head of Goldman Sachs’s investment-management division has warned about froth too.
In conclusion, says the author, “The American economy in recent decades has gone on autopilot. Index-fund investment is hyperconcentrated. So is online retail. So are pharmaceuticals. So is broadband. Name an industry, and it is likely dominated by a handful of giant players. That has led to all sorts of deleterious downstream effects: suppressing workers’ wages, raising consumer prices, stifling innovation, stoking inequality, and suffocating business creation. The problem is not just the indexers. It is the public markets they reflect, where more chaos, more speculation, more risk, more innovation, and more competition are desperately needed. The antidote lies not just in fixing passive investment, but in making markets be markets again. Perhaps we could all use a little more of that manic stock-picking energy, not less.” 


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