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Ten interesting things we read this week

Some of the most fascinating topics covered this week are: Economy (Abhijit Banerjee's solution to revive Indian economy), Decision-making (Reason why we make bad decisions), Podcast (Morgan Housel on writing, reading and much more) and Covid (How CEOs view today's world; Bill Gates's efforts to fight coronavirus).

Published: May 9, 2020 09:06:03 AM IST
Updated: May 8, 2020 12:24:44 PM IST

Ten interesting things we read this weekImage: Shutterstock

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: Economy (Abhijit Banerjee’s solution to revive Indian economy), Decision-making (Reason why we make bad decisions), Podcast (Morgan Housel on writing, reading and much more) and Covid (How CEOs view today’s world; Bill Gates’s efforts to fight coronavirus).

Here are the ten most interesting pieces that we read this week, ended May 8, 2020:

1) How CEOs see today’s coronavirus world [Source: Livemint]
Covid has changed how businesses now operate. And in this piece, various CEOs talk about the changes they are seeing amid this crisis. 1) Tesla Inc. CEO Elon Musk: “So this is the time to think about the future, and also to ask, is it right to infringe upon people’s rights, as what is happening right now? I think people are going to be very angry about this and are very angry. It’s like if somebody wants to stay in the house, that’s great. They should be allowed to stay in the house, and they should not be compelled to leave. But to say that they cannot leave their house, and they will be arrested if they do, this is fascist. This is not democratic. This is not freedom. Give people back their goddamn freedom."

2) Microsoft Corp. CEO Satya Nadella: “As Covid-19 impacts every aspect of our work and life, we have seen two years’ worth of digital transformation in two months. From remote teamwork and learning to sales and customer service to critical cloud infrastructure and security, we are working alongside customers every day to help them stay open for business in a world of remote everything. There is both immediate surge demand and systemic structural changes across all of our solution areas that will define the way we live and work going forward."

3) Google parent Alphabet Inc. Sundar Pichai: “Q1 was in many ways the tale of two quarters. For our advertising business, the first two months of the quarter were strong. In March, we experienced a significant and sudden slowdown in ad revenues," Mr. Pichai said. “Overall, recovery in ad spend will depend on a return to economic activity." 4) Netflix Inc. CEO Reed Hastings: “We had an increase in subscriber growth in March. It’s essentially a pull-forward at the rest of the year. So, our guess is that subs will be light in Q3 and Q4 relative to prior years because of that.”

2) What Abhijit Banerjee thinks India should do to revive its economy [Source: Huffington Post]
Covid-19 has created havoc all over the world. Everyone is scared of what will happen next. Even India is battling with the surging cases. “It’s frightening. It’s not like anybody actually knows what’s going to happen next,” Nobel Prize winning economist Abhijit Banerjee said about Covid-19 during a conversation with Rahul Gandhi on the economic impact of the pandemic. For the Indian economy to recover, he said that the government needs to ensure money reaches the bottom 60% of the country’s population to keep millions from going into poverty.

Mr. Banerjee touted Keynesian economics, saying that reviving demand would be more useful than targeting the MSME sector. “Giving money in the hands of everybody so that they go buy in the stores or they buy consumer goods. MSME sector produces stuff that people buy but they are not buying. But if you promise them (people) money, it doesn’t have to be. In the red zone, we could say whenever it’s lifted you will have money in your account. You will have Rs10,000 and you can spend it. Spending is the easiest way to revive the economy. Because then the MSME people, they get money, they spend it and it has the usual Keynesian chain reaction.”

Also, Mr. Banerjee reiterated what he, economist Amartya Sen and former RBI governor Raghuram Rajan had said in an op-ed for the Indian Express, that the government should hand out temporary ration cards to people to deal with the problem of food distribution. He said the government should hand out temporary ration cards to anyone who wanted one, which lasted for three months and could be extended if necessary, while putting all other rations cards on temporary suspension. In discussing how to ensure people excluded from schemes of the government got cash, Mr. Banerjee’s suggestions included Aadhaar-based PDS and community cash transfers.

3) When you have no idea what happens next [Source: Collaborative Fund]
“The correct lesson to learn from surprises is that the world is surprising,” that’s what Daniel Kahneman said. The main takeaway from 2020 should be that anything can happen anytime and anyhow. We’ve learned this year that assumptions you have about the future can be destroyed overnight. That’s true for the poorest to the most successful, the old dry cleaner to the tech start-up. It was true in January, and it’ll be true again in the future. Things change.

In such a situation, what should we do? 1) Read more history and fewer forecasts: Once you accept how fragile our assumptions of the future are, you realize that forecasts are the real fluff and history is where the meat is. Surely, all the forecasts published in December 2019 are nullified now. Authors of these reports, most of which have been quietly removed, might say, “I couldn’t have foreseen Covid-19 in December, and it upended my entire forecast.” When a company reports poor earnings it’s often said they missed analysts’ estimates. But earnings don’t miss estimates; estimates miss earnings. Accepting that forecasts have little use doesn’t mean you become a blind fatalist. When you pay more attention to history than forecasts you pick up on the patterns that guide how people respond to unforeseen events.

2) Have more expectations and fewer forecasts: Forecasts rely on knowing when something will occur. Expectations are an acknowledgment of what’s likely to occur without professing insight into when it will happen. Here’s a useful expectation: assume the world will break once or twice per decade. No one knows where, or when, or how, who it will affect. But when you expect the world to break every once in a while you prepare for events you can’t foresee and you don’t have to rewrite your playbook when they happen. You’ll prefer big cushions and room for error. When people ask, “What are you preparing for?” you’ll say, “A world that history shows is both a growth machine and a continuous chain of unforeseen agony.” A world where we have no idea what will happen next. Nothing more specific.

4) Why we make bad decisions [Source: Safal Niveshak]
The author of this piece was reading a book, based on the true story of a trader called Jim Paul, “What I learned losing a million dollars” when a question cropped up in his mind. And that was… why do we make bad decisions? The short answer is that we have design flaws. We are fairly sure we are way above average, and we are also sure we see everything perfectly.

The long answer? Ray Dalio wrote in his book Principles, “The two biggest barriers to good decision making are your ego and your blind spots. Together, they make it difficult for you to objectively see what is true about you and your circumstances and to make the best possible decisions by getting the most out of others. If you can understand how the machine that is the human brain works, you can understand why these barriers exist and how to adjust your behavior to make yourself happier, more effective, and better at interacting with others.” The first bad habit is believing you are always correct. That’s ego. We don’t like to look at our mistakes and weaknesses.

“The blind-spot barrier is when a person believes he or she can see everything,” he explains. And that mentality is a mistake: “It is a simple fact no one alone can see a complete picture of reality,” he adds. So what’s the solution to this? Being open-minded is the answer. “…open-mindedness is motivated by the genuine worry that you might not be seeing your choices optimally. It is the ability to effectively explore different points of view and different possibilities without letting your ego or your blind spots get in your way. It requires you to replace your attachment to always being right with the joy of learning what’s true.”

5) Bill Gates’s efforts to fight coronavirus, explained [Source: vox.com]
He knew that this was coming and was already prepared. “I rate the chance of a widespread epidemic, in my lifetime, as well over 50 percent. Something like the Spanish flu in the modern day — health systems are far better, so you think, okay, that wouldn’t be very bad. What we showed [when infectious disease researchers working with the Gates Foundation modeled the scenario] was that the force of the infection, because of modern transport...within days, it’s basically in all urban centers of the entire globe.” The foundation funds vaccinations through programs like GAVI, which Gates set up with a $750 million grant in 1999 and which is estimated to have saved millions of lives. The Gates Foundation funds fights against diseases like malaria and polio, and in its first 20 years of existence, it has spent some $40 billion on global development and public health programs.

“Realistically, if we’re going to return to normal, we need to develop a safe, effective vaccine. We need to make billions of doses, we need to get them out to every part of the world, and we need all of this to happen as quickly as possible,” Gates argued on April 30th, explaining his relentless focus on getting a vaccine on an unprecedented timescale. Also, billionaire philanthropists like Gates have attracted justified criticism, but it’s crucial to look at the good side, too: The crisis has been an example of how, at its best, billionaire philanthropy can do critical work that democratic systems are failing to get done. It’s fair to say that things would be much better off if President Donald Trump had mounted a competent response — and much worse off if Bill Gates weren’t around to help fill the void the incompetence at the top has created.

In the developing world, global health teams Gates has funded, like the Global Polio Eradication Initiative (GPEI), have pivoted to working on a coronavirus response as the virus has made their original work unsafe (they could spread the coronavirus) and created pressing new needs in the communities they serve. “The GPEI will use our tools, our workforce, and our laboratory and surveillance network to support countries as they respond to COVID-19,” Dr. Erin Stuckey, epidemiologist and program officer at the Bill & Melinda Gates Foundation, said. As you might expect, Gates has also started directing resources at finding a vaccine for the coronavirus. “I do think manufacturing, construction, a lot of things we’ll do, but large public gatherings may have to wait until we have that vaccine,” he told NPR in April. “Until we get a vaccine that almost everybody’s had, the risk of a rebound will be there.”

6) Reading, Writing, and Lifelong Learning: A Conversation With Morgan Housel [Source: Farnam Street]   
In this longish episode of the Knowledge Project, Morgan Housel talks about writing, reading, his first job and much more. He is a partner at the Collaborative Fund. He’s a former columnist at the Motley Fool and a former columnist of the Wall Street Journal. His work has also been published in Time, USA Today, World Affairs, and Business Insider. He talks about how he got interested in finance. Though he wanted to be an investment banker, he went on to write about finance as investment banking wasn’t good for him.

He believes that writing is something that everyone should do as writing solidifies our thoughts. No matter in which field you are, writing is something that will help anyone and everyone. He also talks about his investments and his investment style. Every month, he invests in index funds, besides investing in any stock that he finds interesting. But, core of his portfolio comprises index funds. Talking about the best teacher he has ever had, he says that it is Charlie Munger. Why? Because, Mr. Munger can take any complex topic in the world and explain in a simple way. 

Besides these, he also talks about: 1) The three types of financial writing and the one Morgan finds most useful for readers. 2) The brilliant method Morgan uses to keep his confirmation biases in check. 3) The process Morgan uses to generate fresh ideas even when he feels like he’s exhausted them all. 4) How he structures his daily routines around when he does his best thinking and writing.

7) Anand Sridharan: I know it when I see it [Source: LinkedIn]
Anand Sridharan is an investor at Nalanda Capital and he knows a wonderful thing when he sees it, without a clue as to how it got that way in the first place. And that’s not all, he feels the surest way to have it stay wonderful is to maintain the same input variables, both within and around it. In technical terms, this philosophy goes by the name holism and is a better way to make sense of our messy world than the more commonly practiced reductionist approach.

He uses this in investing as well. How can he tell if a business is great? He knows it when he sees it. Why is it great? Because it’s great. How did it get that way? Don’t know. How to keep it great? Don’t change any variables. In an oversimplified sense, all great businesses are the same. They stand out, if not dominate, in their chosen niche. Dominance offers scale economics, on both making and selling fronts. They make a ton of money. He also feels that competence by itself isn’t a differentiator. Would competitive positions reverse if #2 poached #1’s haloed management? In fact, #1 position and a self-reinforcing blob of all things good is a better safeguard as #2 would have no place to start. Construct over competence!

He also describes how corporate world isn’t immune to a ‘hero’s journey’ narrative, involving quest, adventure, trials, battle and triumph. But what does it takes to stay #1? He feels the answer is nothing. To be more specific, nothing new. This doesn’t imply complete stasis. Each company is furiously innovating, adding products, expanding reach and improving efficiencies. However, these generally cancel out, in terms of materially changing competitive position or dynamics. Going down storied-hero path isn’t merely self-delusional but positively dangerous. It can give us false confidence to send off our (already overachieving) hero on new quests with adverse unintended consequences.

8) Listen to the Numbers, Not the Spin [Source: Bloomberg]
In this event of crisis, the stock markets world over have corrected, and executives/analysts don’t know what’s in store. Executives are deciding to withdraw their guidance in record numbers, making the responsible decision that if the pandemic is making them uncertain about the future they are best keeping their own counsel. As the quantitative team at BofA Securities Inc. shows, the preponderance of the 114 S&P 500 companies withdrawing all guidance come from the highly cyclical consumer discretionary and industrials sectors. The market’s ability to look through this has been nothing short of extraordinary. Prospective earnings multiples haven’t been this high since 2001.

Why are markets this positive? The author’s guess is that investors are drawing the best possible conclusions from what clues companies are giving them during earnings calls. There are numerous attempts to quantify guidance these days, and BofA’s suggests that executives become far more negative in their Q&A sessions with investors than they have been in the officially drawn up management guidance, which tends to be far more positive.

An exhaustive subjective analysis by the quantitative team of Bankim Chadha at Deutsche Bank AG found that executives were spinning a positive story about the issues that most worried investors. In particular, they found that companies were trying to avoid their mistake of 2009 in not being ready for recovery, while those exposed to China made positive noises about the speed of the return to normality there.  
9) There was no one like Irrfan Khan [Source: The Atlantic]
He was a versatile actor who could pull off any role. It was in 1968 when Mira Nair came across Irrfan Khan while scouting for her film Salaam Bombay! Though she cast him, she soon decided that he was too towering at more than 6 feet, that he seemed too well fed to convincingly play a malnourished child. To Khan’s dismay, Nair pared his role down to scraps. “I remember sobbing all night when Mira told me that my part was reduced to merely nothing,” the actor told the Indian magazine Open in 2015. “But it changed something within me. I was prepared for anything after that.”

Mr. Khan walked the tightrope between commercial and art-house Hindi cinema with ease, helping viewers imagine a future in which such a binary didn’t exist. Even more impressively, he accomplished this while making major inroads in English-language films, appearing in such big-ticket titles as Slumdog Millionaire (2008), Life of Pi (2012), and Jurassic World (2015). He toiled tirelessly throughout his career, thereby cementing himself in popular memory. The actor died recently in Mumbai, two years after being diagnosed with neuroendocrine cancer.

Mr. Khan’s final movie, Angrezi Medium, was the last Bollywood film released in theaters before the Covid-19 pandemic resulted in a nationwide lockdown. He could play the romantic lead with flushed ardor, as he did in Shoojit Sircar’s Piku (2015), but he knew how to cede the spotlight as a supporting player too. His style was free of the vanity or self-consciousness that could’ve made him seem larger than life. On-screen, Khan’s most vital instrument may have been that pair of soulful eyes that captured Nair’s imagination three decades ago. They could exude menace or innocence, depending on the role. It’s tempting to wonder what characters Khan would’ve introduced us to as he eased into old age, as his hair began to gray. That viewers are deprived of knowing feels like theft.

10) Book review: Author Steven Levy goes beyond bits, bytes and balance sheets to tell the inside story of Facebook [Source: moneycontrol.com]
In Facebook: The Inside Story, Steven Levy turns his massively insightful gaze to the trajectory of Facebook from its birth, its dizzying growth, and its embattled present, when its reputation is extensively scarred. Using multiple sources, notably Facebook founder Mark Zuckerberg, the key people involved with Facebook at various periods, and public information, Levy highlights the prominent cultural and technological facets of the Facebook phenomenon. Mr. Levy is presently an editor-at-large for Wired magazine. He has previously been a senior editor for Newsweek. His writing has appeared in A-list publications: The New York Times, Rolling Stone, The New Yorker, among others.

Speaking of cool, FB’s informal corporate culture makes for some fun reading: “Before noon, the office would be sparsely populated, and in the early afternoon, people would drift in and settle at their workstations for fourteen hours or so of coding. Zuckerberg would be wandering around, often in his pyjamas.” The writer maps out Zuckerberg’s personality expertly in this book. He never succumbs to Zuckerberg’s public relations, neither does he demonise the man. He also talks about Facebook’s tussle pertaining to privacy and events like Cambridge Analytica. The like button which is now a hit, is actually to gather users’ data.

For years, Zuckerberg has been implying that Facebook’s mission to connect the world was essentially noble. Certainly, that is how he pitched Internet.org or Free Basics to the emerging countries of the world. But Mr. Levy writes that it was actually an initiative to “[gather] data from deceptively “free” apps to inform its money-making business intelligence operations”. One of the things this book does is to raise the question: Is Facebook good for its users or not? To know the answer, you will have to grab a copy.

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