Monday, April 10, 2023

To Be Invested or Not To Be Invested?

 As a minimal business investor and entrepreneur coach, Pulak Prasad’s upcoming book, What I Learned About Investing From Darwin, is a godsend. His first chapter alone is worth the price: combining Buffet’s advice, with statistical inference on the types of risk and how natural selection works, you get a great idea of how Prasad evaluates opportunities. As the author says, you might miss out on an Apple or Tesla, but you will avoid hundreds, thousands of JC Penney’s (in the 21st century) and the like.

The key is minimizing calling a bad investment a good one (type I error). Mistankenly putting money into a bad company is a losing risk and the biggest hindrance to having an overall good record. Whereas most investment funds chase lots of opportunities, they underperform against the stock exchange indexes (S&P 500, DJIA e.g.) This might be in contrast to Taleb’s Black Swan strategy—because you can’t predict winners, invest some in a lot of companies and the winners will overwhelm the losing multitudes. But then Prasad gives simple advice on how to simply identify a few solid investments. For those familiar with Stern Stewart’s Economic Value Added, you’ll resonate with Prasad’s analysis.

While you think evolution is only concerned with physiological traits, the author identifies some behavioral evolution and relates this to company leadership and strategies. 

I spotted one consideration worth changing on this upcoming book: Buffet’s guidelines are referred to as “diktat” but better is “dicta” since the former is considered pejorative as it refers to edicts from an external or distrusted authority.

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