Readings Digest 17.11.17: Communicate Clearly

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Men vs Women: Women tend to take less risk when investing


The inspiration for this week’s reflection is Tom brakke’s book Letters to a young analyst. It contains many nuggets of wisdom for the aspiring investment professional. Tom writes a series of letters to a young professional (Tim), one of which is on learning to communicate clearly.

“Too often, those who analyze investments are unable to communicate their ideas very well.” The ability to communicate clearly and succinctly is essential in any profession. Most professionals swim in complexity as they prefer to speak in complex language and enjoy including complex terms to their presentations and writings. But do these add value to the listeners? The intention could be that audiences will be mesmerized. A lot can be hidden behind compex words and these can make customers and clients wary when things are not clear. Invest not in what you do not understand would be a good caution to heed.

My goal has been to try to explain things simply while respecting the intelligence of the audience. That’s  one of the reasons why I enjoy teaching as it forces me to think of ways to explain economics, finance and accounting concepts to my students in ways that not only help them understand and apply the concepts but also arouse their curiosity in the subject matter. The feedback has been very encouraging.  Isaac Newton challenges me that If I can’t explain a concept to a six-year-old, then perhaps I don’t understand it myself.

Richard Feynman is a role model here. During the hearing at the commission investigating the cause of the 1986 Challenger disaster where the Space Shuttle Challenger was destroyed killing all seven crew members, he practically explained how the failure of the O-rings led to the disaster. The simplicity of the explanation is captivating. Watch it here.  Perhaps he was motivated by what Mortimer J. Adler writes in How to read a book that “The person who says he knows what he thinks but cannot express it usually does not know what he thinks.” 

Tom Brakke continues: “It’s a well-kept secret:  One of the best ways to differentiate yourself in this business is to learn to tell your story and your stories so that people will listen.” Learn  to communicate clearly is a clear tool in the arsenal be it in making presentations, writing, or speaking. The Feyman technique is a good start: “Choose a concept. Teach it to a toddler. Identify gaps and go back to the source material. Review and simplify”

Have a communicative weekend, won´t you?

What I’ve been reading:

Richard H. Thaler: The Premortem
Learn to conduct a premortem instead of a post mortem:”Assume we are at some time in the future when the plan has been implemented, and the outcome was a disaster. Write a brief history of that disaster” It gives opportunity for critique and helps spark creative ways of thinking
Betterment: Data Suggests Women Are Better (Behaved) Investors

Research shows that women are better at investing than men. So perhaps next time you are looking for someone to help manage your money, look for a woman. Why? They less frequent asset allocation changes, take in less risk and stay in their when the market experiences tumoil. In short, women are more in line with being long term investors who aere more likely to benefit from the power of compounding.

The Economist: The network effect
On the power of networking:  Three key things when it comes to  networking: abandon all shame, prepare well to have something to say and work hard at it: “Being a good networker pays off—but it requires skill as well as shamelessness.”
Craig Shapiro: Knowing Your Audience
Craig Shapiro, founder of the collaborative fund, tells an interesting story on how he wanted to sell out his app to the public and got two companies to collaborate on something they had never thought before but which ended up benefitting all three of them. He started off by cold-calling one of the companies. His lessons:
  • “Every business is about solving other people’s problems. If you want to solve your own problem, focus on solving theirs first”
  • “…everyone has an itch. Figuring out how to align others’ interests with the success of yours is a glide path to success.”
New Podcast: Animal Spirits
  • Ben Carlson and Michael Batnick, two of my favorite finance bloggers because of their simplicity and honesty, have launched a new podcast called Animal Spirits. In episode 1, they give their background information on how they got into investing, tell a bit on how they invest in their personal portfolios and how they have moved from constant trading to more reduced trading with very little annual turnover.
  • Mike: Was doing triple leveraged ETFs (you can win or loss three times your original investment with these) with inherited money. In 2012, 11000 USD on commissions. He does not trade at all and no desire to read the tea leaves. He encourages people to trade to a small limited amount.
  • Ben: Observed that many money managers perform very poorly and chose to invest in a portfolio that is very stable and he does into change it often. He has a small holding in bitcoin and  is mildly enthusiastic on it.
Quote of the week
“There are no perfect jobs (or investment portfolios). Step one is finding a job (or investment stance) that works for you. Steps two through one-hundred are dealing with and accepting the drawbacks to your job (or investment strategy) and being content with your chosen path.”

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