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Hypothetical question (or Not)

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Whats better, a near sure shot 100 bagger in 25-30 years in a monopoly business or a diversified portfolio and shooting for 20% or more ?

 

Written by amitdipsite

February 13, 2017 at 9:56 pm

Posted in Uncategorized

When Not to look ahead & Rungs of skills

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​When not to look far ahead, but create options
Many writers on strategy seem to suggest that the more dynamic the situation, the farther ahead a leader must look. This is illogical. The more dynamic the situation, the poorer your foresight will be. Therefore, the more uncertain and dynamic the situation, the more proximate a strategic objective must be. The proximate objective is guided by forecasts of the future, but the more uncertain the future, the more its essential logic is that of “taking a strong position and creating options,” not of looking far ahead. Herbert Goldhamer’s description of play between two chess masters vividly describes this dynamic of taking positions, creating options, and building advantage:

Two masters trying to defeat each other in a chess game are, during a large part of the game, likely to be making moves that have no immediate end other than to “improve my position.” One does not win a chess game by always selecting moves that are directly aimed at trying to mate the opponent or even at trying to win a particular piece. For the most part, the aim of a move is to find positions for one’s pieces that (a) increase their mobility, that is, increase the options open to them and decrease the freedom of operation of the opponent’s pieces; and b) impose certain relatively stable patterns on the board that induce enduring strength for oneself and enduring weakness for the opponent. If and when sufficient positional advantages have been accumulated, they generally can be cashed in with greater or less ease by tactical maneuvers (combinations) against specific targets that are no longer defensible or only at terrible cost.
Rungs of skills
A man I know only as PJ lives on the East Cape of Baja California, about thirty miles north of San Jose del Cabo, on the Sea of Cortez. He is now a surfer and fisherman, but PJ was once a helicopter pilot, first in Vietnam, and then in rescue work. The land in Baja California is unspoiled by shopping malls, industry, paved highways, or fences. Sitting on a hilltop in the warm winter we could see the gray whales jump and hear their tails slap on the water. Making conversation, I offered that “helicopters should be safer than airplanes. If the engine fails, you can autorotate to the ground. It’s like having a parachute.

PJ snorted. “If your engine fails you have to pull the collective all the way down, get off the left pedal and hit the right pedal hard to get some torque. You have about one second to do this before you are dropping too fast.” He paused and then added, “You can do it, but you better not have to think about it.”

“So, everything has to be automatic?” I asked.

“Not all,” he replied. “When an engine fails you have a lot to work out. You have to concentrate on where you are going to land and on maintaining a smooth sliding path down to the flare. That stuff takes a lot of concentration. But the basic act of controlling the helicopter, yes, that has to be automatic.

You can’t concentrate on the crisis if flying isn’t automatic. PJ opened another Corona and then expanded on his point. “To fly a helicopter you’ve got to constantly coordinate the controls: the collective, the cyclic, and the pedals, not to mention the throttle. It is not easy to learn, but you’ve got to get on top of it. You’ve got to make it automatic if you’re going to do more than just take off and land. After you can fly,

then

you can learn to fly at night—but not before! After you can fly at night with ease, maybe

then

you’re ready to learn to fly in formation, and then in combat.”

As he spoke, PJ spread his fingers, overlapped his thumbs, then swooped this miniature formation around to illustrate his point.

“Master all that—make it automatic—and you can begin to think about landing on a mountain in high wind in the late evening, or landing on a rolling, pitching deck of a ship at sea.”

As PJ spoke, I could visualize him landing on a ship at sea, timing the swells and pitches of the deck. Having long ago mastered the coordination of cyclic, pedals, and collective, he could concentrate on the coordination between his aircraft and the ship.

To concentrate on an objective—to make it a priority—necessarily assumes that many other important things will be taken care of.

PJ was able to concentrate on the coordination between his helicopter and the rescue vessel because he already possessed layer upon layer of competences at flying that had become routine.

After this discussion, I came to see skills at coordination as if they were rungs on a ladder, with higher rungs in reach only when the lower rungs had been attained. Indeed, PJ’s concept of a layering of skills explains why some organizations can concentrate on issues that others cannot. This understanding has helped shape the advice I offer clients. For example, when I work with a small start-up company, their problems often revolve around coordinating engineering, marketing, and distribution. Asking the CEO of such a firm to concentrate on opening offices in Europe may be pointless, because the company has not yet mastered the basics of “flying” the business. Once the firm stands firmly on that rung, it can move abroad and develop international operations. But, in turn, asking that newly international firm to move knowledge and skills around the world, as does a global veteran such as Procter & Gamble, may also be pointless. It must first master the complexity of operating in various languages and cultures before it can begin to skillfully arbitrage global information.

Written by amitdipsite

February 10, 2017 at 6:58 pm

Posted in Uncategorized

‘Pivot Point’ example

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​To achieve leverage, the strategist must have insight into a pivot point that will magnify the effects of focused energy and resources. As an example of a pivotal objective, in 2008 I was in Tokyo, discussing competitive strategy with Noritoshi Murata, the president and chief operating officer of Seven & i Holdings. This company owns all of the 7-Eleven convenience stores in the United States and Asia, as well as grocery superstores and department stores in Japan and other ventures Focusing on Japan, Murata explained that the company had come to the conclusion that Japanese customers were extremely sensitive to variations in local tastes and fond of both newness and variety. “In Japan,” he told me, “consumers are easily bored. In soft drinks, for example, there are more than two hundred soft-drink brands and lots of new ones each week! A 7-Eleven displays fifty varieties with a turnover of seventy percent each year. The same holds true in many food categories.”

To create leverage around this pattern, 7-Eleven Japan has developed a method of collecting information from store managers and employees about local tastes and forming quick-response merchandising teams to develop new product offerings. To further leverage this information and team skills, the company. has developed relationships with a number of second- and third-tier food manufacturers and found ways to quickly bring new offerings to market under its own private-label brand, at low prices, using the food manufacturers’ excess capacity.

At the same time, 7-Eleven was expanding its operations in China. There, Murata explained, their outstanding advantage was cleanliness and service. The Chinese consumers were used to being supplicants at a retail outlet, and 7-Eleven Japan’s tradition of spotless interiors and white-gloved service personnel who greeted customers with bows and smiles, as well as its good-tasting lunches, were producing twice as many sales per square foot than any competitor obtained.

Murata’s strategy focused organizational energy on decisive aspects of the situation. It was not a profit plan or a set of financial goals. It was an entrepreneurial insight into the situation that had the potential to actually create and extend advantage.

A pivot point magnifies the effect and releases more force than spent, ‘give me a lever large enough…move world..’

Ref: Good strategy, bad strategy

Written by amitdipsite

February 9, 2017 at 12:03 am

Posted in Uncategorized

The ‘real’ you is priceless

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Scientists who consider themselves material physicists are not going to find out the ultimate mysteries of nature. Max Planck, the father of Quantum Physics understood this, for he said “Science cannot solve the ultimate mystery of nature. And that is because, in the last analysis, we ourselves are part of nature and therefore part of the mystery that we are trying to solve.”

He further nudges and presses to cultivate spirituality, adding, “There can never be any real opposition between religion and science; for the one is the complement of the other. Every serious and reflective person realizes, I think, that the religious element in his nature must be recognized and cultivated if all the powers of the human soul are to act together in perfect balance and harmony. And indeed it was not by accident that the greatest thinkers of all ages were deeply religious souls”

I understand that one needs to work for a living, 9-5 to keep the body and soul together, and then shelter, mortgage, children, their education, and soon life is over.

What you must not lose track of is that the entire physical manifest known Universe to us at large, with 100s of billions of galaxies each having 100s of billions of star systems is smaller and less precious than the ‘real’ us.

Does science ‘really’ understands anything in depth ? Not really, nobody even understands electricity http://gizmodo.com/we-still-dont-know-how-static-electricity-works-1579257797 After hundreds of years of using this force daily in our lives, we still do not understand it complete, nor do the leading minds of our times that think about it 24/7.

How much more challenging will it be to theorise and prove mind, consciousness, self-awareness, non-dimensional existence..etc. We have lost the sense of wonder and amazement, actually everything is a miracle, including our existence. What is the age of this physical solar system ? few billion earth years ? Well we all have been around for countless years, more than thousands of billions of earth years.

So, how can any other project be bigger than finding and knowing the ‘real’ you, ‘Nothing is impossible save man’s spiritual un-adventurous-ness ‘, said a wise man.

 

Written by amitdipsite

February 6, 2017 at 10:47 am

Posted in Uncategorized

‘Guiding Policy’ example

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​To look more closely at how a guiding policy works, follow the thinking of Stephanie, a friend who owns a corner grocery store. She does the accounts, manages personnel, sometimes runs the cash register, and makes all the decisions. Several years ago, Stephanie told me about some of the issues she was facing. She was considering whether she should keep prices down or offer more expensive, fresh organic produce. Should she begin to stock more Asian staples for the many Asian students who lived in the area? Should the store be open longer hours? How important was it to have a helpful, friendly staff that gets to know the regulars? Would adding a second checkout stand pay off?

What about parking in the alley? Should she advertise in the local college newspaper? Should she paint the ceiling green or white? Should she put some items on sale each week? Which ones?

An economist would tell her that she should take actions that maximize profit, a technically correct but useless piece of advice. In the economics textbook it is simple: choose the rate of output Q  that provides the biggest gap between revenue and cost. In the real world, however, “maximize profit” is not a helpful prescription, because the challenge of making, or maximizing, profit is an ill-structured problem. Even in a corner grocery store, there are hundreds or thousands of possible adjustments one can make, and millions in a business of any size—the complexity of the situation can be overwhelming.

Thinking about her store, Stephanie diagnosed her challenge to be competition with the local supermarket. She needed to draw customers away from a store that was open 24/7 and had lower prices. Seeking a way forward, she believed that most of her customers were people who walked by the store almost every day. They worked or lived nearby. Scanning her list of questions and alternatives, she determined that there was a choice between serving the more price-conscious students or the more time-sensitive professionals. Transcending thousands of individual choices and instead framing the problem in terms of choosing among a few customer groups provided a dramatic reduction in complexity.

Of course, if both of these customer segments could be served with the same policies and actions, then the dichotomy would have been useless and should be cast aside. In Stephanie’s case, the difference seemed significant. More of her customers were students, but the professionals who stopped in made much larger purchases. Pushing further along, Stephanie began to explore the guiding policy of “serve the busy professional.” After some more tinkering, Stephanie sharpened the guiding policy a bit more, deciding to target “the busy professional who has little time to cook.”

There was no way to establish that this particular guiding policy was the only good one, or the best one. But, absent a good guiding policy, there is no principle of action to follow. Without a guiding policy, Stephanie’s actions and resource allocations would probably be inconsistent and incoherent, fighting with one another and canceling one another out. Importantly, adopting this guiding policy helped reveal and organize the interactions among the many possible actions. Considering the needs of the busy professional with little time to cook, she could see that the second checkout stand would help handle the burst of traffic at 5 p.m. So would more parking in the alley. In addition, she felt she could take space currently used for selling munchies to students and offer prepared high-quality take-home foods instead. Professionals, unlike students, would not come shopping at midnight, so there was no need for very late hours. The busy professionals would appreciate adequate staffing after work and, perhaps, at lunchtime. Having a guiding policy helped create actions that were coordinated and concentrated, focusing her efforts.

Reference: Good strategy, bad strategy, Richard Rumelt

Written by amitdipsite

February 5, 2017 at 8:40 am

Posted in Uncategorized

Macro picture

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Ratio of insiders’ sales to buys (US). Insiders may have a lot of reasons to sell their stock, but chart doesn’t provide  warm feeling in the heart region.

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Inflation the next problem in UK

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Ghost cities aside,China now an important producer of commodities

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Australia looking good

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India’s Bank NPAs are a coming to hit

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Germany’s do not consider America a reliable partner

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Meaningless metric but here it is: Drawdown by US President

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Disclosure: Views are personal notions and do not represent any organisation or company. Investment in stock market can (and many a times do) result in loss of principal capital.

http://www.elevendimension-funds.com

Written by amitdipsite

February 5, 2017 at 1:35 am

Posted in Uncategorized

Go micro

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ant

That is Ant Man.

Be off the radar.

Find micro caps.

Turn more stones than others.

You need an edge to make supernormal returns in the markets. You generally cannot exploit a) information asymmetry but b) processing/analytical or c) behavioural with mid or large caps. The last i.e. c) being the most sustainable edge with longest durability. Eventually the game runs out with information asymmetry.

So, my goal has always been to exploit a) as much as possible. In fact I went to far off places to seek alpha with a) including Middle east, Fiji, Kenya, Nigeria, Nepal, ended up investing in a couple of these markets. It continues to work.

With lots of connecting dots over time and experience one can exploit b) intuitively like pattern matching. But c) can take you to play the game in billions not just millions. Which is when others are losing their head you keep yours.

We saw this in India when everyone dumped financial stocks in November-December 2016 post demonitisation. Most of these companies are up 50-60% within previous 30 days.

Like: Manappuram, Muthoot, Bharat Financial, Repco, DHFL, GIC etc. Almost a panic buying is seen in these companies.

What went wrong ?

Madness in herds and waking up alone. Human mind when acting in herd is so predictable, so repeatable, so sure shot to be exploited for its biases.

I was trying to search for some tweets of NBFC bashers, but they have since been deleted since. I know the tweet I was looking for that was made on 28th of December 2016. Moving on, nobody can predict short term movements.  Feels good to be absolved of staying invested in NBFCs, for now, not sure about future! (Mind you I don’t delete past posts).

At this juncture I feel IT sector is a good contrarian bet as its disliked with Trump in office, and also select SMEs.

Disclosure: Invested in all stocks mentioned.

 

Written by amitdipsite

February 2, 2017 at 10:55 am

Posted in Uncategorized