It is such a pleasure to spend time with her – very sweet and mellow child and an elephantine memory. She can recall things/incidents she has heard or happened a month ago.

Like, we were comparing our hands and I casually mentioned that mine were dark in comparison to hers. She immediately said “Daddy, I dont lick my hands. That’s why its fair !” It took me a while to realize that I had asked her to stop licking her hands a while ago or they would turn dark like mine.

Another funny incident – she remarked “Daddy, all the red colors are Sunday” and it took me a while to understand that she was referring to the Calendar and how all Sundays are marked as Red.

She had her annual sports day meet on Sat and it struck me that she is quite tall for her age when I saw her in the middle. She had to run on the racetrack, pause to solve a jigsaw puzzle and then towards the finish line on completing it. Proud to say that she did finish.

She is a Chota Bheem fan and likes watching TV. We try to keep that slot to a minimum. I read to her children books from JustBooks, I hope she picks up the interest when she grows up. How I would love her to read Ruskin Bond books. They are a revelation to me at this age !

• Risk for a long term investor is permanent loss of capital while volatility is a reasonable measure of risk for short term investors.

• Investors overbet due to problem of induction (assuming future will be like past), leveraging and the short term focused incentives in the financial industry.

• Stress forces people to focus on here and now while they SHOULD be focused on the long term known as myopic loss aversion.

Mauboussin also briefly touches upon mean/variance efficiency (risk vs reward is linearly related), Kelly’s Criterion and portfolio sizing. Stay focused on long term investing, don’t overbet, retain a sound temperament and success is yours.

He has elaborated more on Kelly’s Criterion in another thought provoking paper (Size matters). Maximizing geometric mean should be the sole focus if you want to compound your wealth. This in turn requires an investor to participate in the markets for the long term as the returns can be volatile in the short term. Having an analytical edge is the key and appropriately sizing the bet is essential for market beating returns.

Incidentally, Consuelo Mack interviewed Michael Mauboussin last week on Wealthtrack – the podcast is available here.

I came across Bill Ackman’s Pershing Square letter in 2008 where he had outlined his thesis on GGP (100+ slides) when it was reeling close to bankruptcy (30-90 cents a share). One of his biggest hits as GGP emerged out of bankruptcy in 2010 with ~15$ a share and a HHC spinoff.

Unfortunately, I failed to pull the trigger on GGP as I was just learning about commercial real estate and it was out of my circle of competence.

The long interview (53 min) is available here

“The concept of a coach is slippery. Coaches are not teachers, but they teach. They’re not your boss—in professional tennis, golf, and skating, the athlete hires and fires the coach—but they can be bossy. They don’t even have to be good at the sport. The famous Olympic gymnastics coach Bela Karolyi couldn’t do a split if his life depended on it. Mainly, they observe, they judge, and they guide.”

“Most surgery is done in your head,” Osteen likes to say. Your performance is not determined by where you stand or where your elbow goes. It’s determined by where you decide to stand, where you decide to put your elbow. I knew that he could drive me to make smarter decisions, but that afternoon I recognized the price: exposure.

For society, too, there are uncomfortable difficulties: we may not be ready to accept—or pay for—a cadre of people who identify the flaws in the professionals upon whom we rely, and yet hold in confidence what they see. Coaching done well may be the most effective intervention designed for human performance. Yet the allegiance of coaches is to the people they work with; their success depends on it. And the existence of a coach requires an acknowledgment that even expert practitioners have significant room for improvement. Are we ready to confront this fact when we’re in their care?”

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“Although doing great work takes less discipline than people think—because the way to do great work is to find something you like so much that you don’t have to force yourself to do it—finding work you love does usually require discipline. Some people are lucky enough to know what they want to do when they’re 12, and just glide along as if they were on railroad tracks. But this seems the exception. More often people who do great things have careers with the trajectory of a ping-pong ball. They go to school to study A, drop out and get a job doing B, and then become famous for C after taking it up on the side.

Sometimes jumping from one sort of work to another is a sign of energy, and sometimes it’s a sign of laziness. Are you dropping out, or boldly carving a new path? You often can’t tell yourself. Plenty of people who will later do great things seem to be disappointments early on, when they’re trying to find their niche.

Is there some test you can use to keep yourself honest? One is to try to do a good job at whatever you’re doing, even if you don’t like it. Then at least you’ll know you’re not using dissatisfaction as an excuse for being lazy. Perhaps more importantly, you’ll get into the habit of doing things well.

Another test you can use is: always produce. For example, if you have a day job you don’t take seriously because you plan to be a novelist, are you producing? Are you writing pages of fiction, however bad? As long as you’re producing, you’ll know you’re not merely using the hazy vision of the grand novel you plan to write one day as an opiate. The view of it will be obstructed by the all too palpably flawed one you’re actually writing.”

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