Talking to Strangers

I found it oddly satisfying that Talking to Strangers was the fortieth and the last book that I read as part of the Goodreads 2019 Reading Challenge. For those of you who are expecting this to be a self-help book, let me make it clear that is not (However there is one very important take away from this book personally). Instead it is an exploration of the various theories and mental models that are used in our daily interactions with strangers.
I’m reading Malcolm Gladwell after a very long time and had skipped the last few of his books. So, Talking to Strangers was something like a re-introduction to Gladwell for me. So how good is this book? Well, rather than putting a number to it, let me put it this way. This book is as good as Gladwell’s other books. Like all his writing, in Talking to Strangers, Gladwell tries to leave the audience with an important thought – whether our current mental models are helpful or harmful in our interactions with strangers. Using examples from varied fields (only some of which are relevant in daily life), Gladwell explains how social psychology can work for or against an individual and consequently can shape societal trends.

A mixed bag of characters

While the case studies on the Cuban spies and the Chamberlain meetings with Hitler may not be too relevant in today’s world, there are others that hit home hard. The cases of Jerry Sandusky, Sandra Bland and the drunk frat party incidents are particularly harrowing to read as these can affect you and me any day.
Gladwell proposes three major theories in this book – Default to truth, Transparency, and Coupling. The default to truth theory refers to people’s general inclination to believe that the other person is being truthful in his or her communication. This theory plays a major role in shaping negotiations between strangers, especially when there is an asymmetry of information. Gladwell says that although relying on the default to truth theory can sometimes work against you in some of the cases, it is a very worthwhile heuristic to keep in mind in our human interactions. Without it, he claims, that there would be a complete breakdown in trust, commerce and other activities. An example that Gladwell beautifully brings out as far as Wall Street is concerned.
The theory of Transparency proposes that an individual’s outer behaviour matches what they feel inside. If a person smiles and moves energetically, he is feeling elated inside.
We tend to judge people’s honesty based on their demeanor. Well-spoken, confident people with a firm handshake who are friendly and engaging are seen as believable. Nervous, shifty, stammering, uncomfortable people who give windy, convoluted explanations aren’t.
This is another heuristic that society uses in measuring up the other party in any interaction. A majority of people in the world are transparent. Their behaviour matches their inner feelings. So for the most part this heuristic works. From cops trying to find out whether a suspect is lying, or juries (or judges) when attempting to sum up a defendant. But for cases where people are not matched, relying on this heuristic can be very dangerous. Gladwell explains this with the case of Amanda Knox, an American woman, who was wrongfully incarcerated for four years in an Italian prison after being found guilty in a murder case. According to Gladwell, it was he mismatched behaviour and lack of transparency that led the police and the judiciary to rule that she was guilty, even in the light of insufficient evidence to prove that she was in the room where her roommate was murdered.
The Coupling theory proposes that the behaviour of an individual must be seen in relation to his circumstances. If, in our, interactions with strangers, we are not aware of the context in which the other person is behaving it can lead to confusion at best and disaster at worst.

The end-point

Like other books by Gladwell, Talking to Strangers is an easy read and I breezed through it well within a week. Gladwell must be complimented for his lucid writing and his ability to keep the readers hooked. It also helps that his stories nicely wrap together the theories that he proposes (the downside of this later).
On the other hand, it can also be argued that, as is with most nonfiction books, Gladwell stretches out a point needlessly with case studies and anecdotes, some of which are totally irrelevant to the individual. At other times it feels like that the author is trying to shape the interpretation to fit the theory. An example of this is using the Friends episode to explain the concept of Transparency. Totally, anecdotal in my opinion. In his own words, “I’m interested in collecting interesting stories, and I’m interested in collecting interesting research. What I’m looking for is cases where they overlap.”
This does not mean that this book is not worth reading. For me, the biggest takeaway in the book for me was the issue of Transparency, or the lack thereof. Amanda Knox was caught and thrown in prison because of her lack of transparency. She could not show on the outside what she felt on the inside. And society misread her and wrongly punished her for it. Although such cases are far and few between, it still warrants a second thought on the importance of matching one’s outer behaviour with inner feelings.
Read Talking to Strangers if you’re interested in how individuals use these heuristics to process and simplify human interactions and what happens when these theories fail in practice. There is definitely a few useful pointers to take from this book and fans of Gladwell will definitely enjoy another thought-provoking book by him.

A little more on Gladwell’s writing

Now that brings me to a broader look at Malcolm Gladwell’s writing. Gladwell broke into the literary world through his first book – The Tipping Point which was an instant bestseller. He received a $1 million advance for writing it after his article on the same topic in the New Yorker. And through that book (and next bestselling book, Blink) the world of pop psychology was forever changed. Yes, that is what Gladwell’s writings can be classified into. His works do have popular impact and are often picked up by his readers as fact. As an example, the famous 10000 hour rule was first introduced by Gladwell in the Tipping Point. This limit is considered as a threshold for gaining expertise in any human endeavour. Post this there have been countless books and Youtube videos that profess the 10000 hour rule as gospel truth. That it has been equally debunked by other studies is a separate point.
There is no doubt that Gladwell’s writings makes society think. And his books bring otherwise bland and often dry theories to a wider audience. He can probably package the most yawn-worthy stories into a fun to read bestseller. Whether it is the Tipping Point, Blink, or Talking to Strangers, there’s enough serious material in each of these books to make you pause and think.
But personally I feel that beyond that initial ‘hmm’ and pause in one’s life, the reader tends to move on. Malcolm says that his aim is to get more people to take psychology seriously. But ironically, in order to do that, the serious reader would have to explore further and deeper than simply to spout the theories that he proposes in his books as gospel.
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Black Edge Book Review

Black Edge, as defined by the author Sheelah Kolhatkar in the book, refers to insider information. In financial parlance, this is classified material that is unavailable to the general investing public and is thus considered illegal to take advantage of. The author claims that certain employees of the successful hedge fund SAC Capital brazenly obtained and relied on black edge to help the firm get the unbeatable returns that it showed over a period of time on Wall Street.

The genesis of this book was from a New Yorker article published in 2017 by the author. The rise and fall of a hedge fund that impressed Wall Street with its unmatchable profits for its investors seems to have warranted a book of its own. And what a book it was. If this were fiction, it would be one of the tautest thrillers making an entry at the top of various book charts. But as incredulous as it seems, Black Edge is non-fiction, pieced together from real life events – with larger than life characters – both in terms of their personalities and the vast sums of money involved. Such is this story of success and failure of one of the biggest and most envied hedge fund called SAC Capital Advisros, run by an equally maverick personality – Steven A Cohen. Through this book, Sheelah Kolhatkar has done an excellent job of bringing to light the events that led to the litigation and aftermath of this hedge fund.

What I liked immensely about the book is that although it goes into sufficient detail and lays down the groundwork for each character before merging him or her with the main story, it doesn’t meander in the origin story. The back stories of each character feel suitably trimmed. Many a times I’ve found authors exploring the background of a character to an unnecessary extent – often delving into painful and superfluous details – simply to justify a minor quirk in the character’s personality. Kolhatkar refrains feom doing that and for that I’m grateful to her for that.

Midway through the book I felt a certain sense of familiarity with the characters, specifically their behaviour and personality. I vaguely recognized them. On impulse, I did a Google search of two terms together and the results resolved my doubts once and for all. “Steve Cohen Billions” was the query that I typed in the search engine. And there you had it. The excellent TV show, Billions, and its character of Bobby Axelrod was partly inspired by Steve Cohen. Through his hedge fund, Axe Capital, Axelrod indulged in the same type of “convicted” stock market calls that has him beating the market and then some. He is also surrounded by employees trying to get in his good books, often bending and breaking the rules in the quest of higher profits. It is certainly a work of art if well-written prose can evoke so clearly related imagery. And I still find it incredible that there are such real life characters out there as well.

This story of SAC Capital Advisors – this story of hope, greed and desperation is worth reading. No matter if you’re related to the hedge fund or the finance industry or even otherwise. The book shows that, as often is the case, not all crimes get punished especially to the extent you and I would like to. But it is also heartening to know that not all wrong deeds go unpunished as well. Yes, the Feds may not have caught the big fish. But they did get a good catch nevertheless.

It was an indeed a pleasure to read Black Edge and I would recommend this book to anyone interested in knowing about how Wall Street operates – specifically the opaque hedge funds that have dominated news feeds in the last decade. The book has only a handful of pages that I found boring. The rest of the book feels like a page turning thriller that you’ll enjoy reading and learning from.

As I mark this book read, I have only one question. Has this author written more books for me to devour?

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Dapper Dan: Made in Harlem

Nothing makes you question the purpose and meaning of life like hunger. Hunger is physical, it’s real.

Opening bets

This, my friends, is not a book. This is a lively narrated guided tour of Harlem, as it evolved through the second half of the 20th century. And it is an incredible life story of someone who has successfully fought the odds in life and has survived.

If you don’t know who Dapper Dan is, do not worry. You’re not alone. I myself did not know about him before I read this book. Based in Harlem, Dapper Dan is one of the most innovative and ground-breaking fashion designers who set up his own now-famous boutique in Harlem after having dabbled half his life as a hustler.

Hustle all the time

We were hustling before we even knew what the word meant.

Hustling as a verb has taken on a new meaning today. Urban Dictionary for example defines hustle as “Working hard, usually towards the common goal of creating an income.” But the hustle that Dapper Dan did all his life was based on the more traditional sense of the word, “to sell something to or obtain something from (someone) by energetic and especially underhanded activity.” For Dapper Dan, hustling was a way of life. Although he managed to stay away from other more debilitating addictions like alcohol and drugs, I guess hustling was his addiction.

As he would have said, a playa always be hustling whether on the streets or out of it. In one of the chapters he mentions about a time in his life when he had a respectable and responsible job of an assistant manager at a store. But the devious part of his hustling mind kept thinking of making extra money on the side. He explains how he tried to embezzle his employer’s money and got caught doing so. This resulted him in losing the job and almost got a friend fired as well.

Many of the hustles that Dapper Dan has dabbled in the past weren’t exactly legal. Gambling, selling drugs, credit card fraud, appropriating trademarks – his life was but an adventure on the wild side. At some point in time it did make me wonder for how long is a person responsible for all that he has done in the past, especially things that are not legal. But I realised that there are statute of limitations in law that define this boundary, beyond which an individual cannot be held to account (for minor crimes at least). I guess Dapper Dan was aware of these when he chose to disclose them.

Pretty fly

But it is evident that his experiences in his early life influenced and possibly even decided what he was going to do in his later life. As a playa, he was always fly. His unfailingly need to look dapper even got him his nick name and eventually led him to become a fashion designer.

It was about style and how you carried yourself in the street. It was about your shoes, the way you wore your hat. It was about the car your drove and how fly your girl dressed.

I understood how deep it was to be fly. It wasn’t the outside that was important. It was that thing that happened inside you that gave you strength. I felt powerful.

The book has a natural tone to it and is easy to. The story is so fascinating that I often ploughed through multiple chapters in a single sitting. It is most likely that the author narrated his story as he talked and walked in real life, and the book editor chose to keep the grammar and other lingo intact to capture the uniqueness of his style. It bring a richness and authenticity to the narration.

It is amazing how much Dapper Dan was fond of books and every time he started a new hustle he made it a point to read as much as he could find about that subject in order to give him an edge in the game. And boy was he ahead of the game. At one point in his life, he started “remaking credit cards” by scrounging for credit card receipts in the trash. He even swiped a credit card machine from a hospital and then proceeded on a multi-country jewellery buying binge. This was his paper game. This technique was so new that even when he got caught, the police and the judge had no clue about how the game actually worked and how serious their offence really was. As a result Dapper Dan and his partners got off lightly most of the time.

And just when you think that the game can’t be pushed any further, Dapper Dan went ahead and pushed it further anyway. By the late 1980s, Dapper Dan’s boutique was already quite popular with hustlers and rappers. When Harlem was facing a spike in the crime rate during this time, he started designing bullet-proof jackets for his hustler and rapper friends. Imagine a flashy Gucci-branded bulletproof jacket. Talk about having an untapped niche.

It is almost heart-breaking to read about how his store was pushed to the brink of closure and he himself had to face a dark period in his life when the big fashion brands descended on him for appropriating their trademarks. Of course what he did was questionable in the court of law, however he felt that his designs and creativity was still unique and original.

Intellectual property is still a gray area when it comes to fashion appropriation. Designers are constantly borrowing and sampling and getting inspiration from different cultures and from each other. It’s even more blurry in the art world.

What is not mentioned clearly or sufficiently in the book that lately Dapper Dan has in fact collaborated with these very same fashion brands that initially chose to choke off his creativity. For example he now has a partnership with Gucci and Louis Vuitton to co-create, using their brands and his own designs to create clothes in an inimitable style. But Dapper Dan hasn’t talked extensively about this partnership in the book. Neither has he talked a lot about his wife and children in the book. But that is completely natural if he wanted to keep his personal life and relationships out of the public eye.

Where to go from here?

There are a couple of potentially good book recommendations that I found in his memoir and I have already added them to my Goodreads shelf. Some of these books are probably out of print and it could be difficult to source them.

Even his description of the Nation of Islam, Muhammad Ali, and Malcolm X, among others, had me branching out to other material while reading this book. I (re)watched the 2001 Muhammad Ali biopic starring Will Smith one evening. And now I have this whole list of movies set in Harlem on my to-do list to find out more about the time and place that he so memorably reminisces about.

Final bets please

Made in Harlem is definitely one of the best memoirs that I’ve read this year. This is a must must read if you’re an entrepreneur or are running or are planning to run your own business. It describes the kind of hustling that you need to do in order to grow your business, and sometimes survive and bounce back from failures.

What makes the story of Dapper Dan so amazing is that it is so improbable. For ever Dapper Dan that comes out of under-privileged environments, there are hundreds others who fail to make it. Even in his own family and friends, he lost many acquaintance who succumbed to one vice or the other. This makes this book all the most important as an inspiring tale of surviving the odds in life. Odds – that is what Dapper Dan beat, both literally and metaphorically. And oh yeah, talking about odds, I now know how to play Cee-Lo.

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Borderless Economics

A brief read of the blurb, a look at the table of contents, and I was hooked. I often base my book selections after reading the table of contents. Sometimes this works, sometime it doesn’t. In this case, I’m glad it did.

This book is about people, and their stories. Stories of how they moved from the country they were born in to an unknown country – in search for freedom, wealth and a better standard of living. The author, Robert Guest, is the Foreign Editor for The Economist. As part of his work assignments, he has travelled and lived in many corners of the world. Placed in this unique position, Robert had an exposure to different cultures, and how people in these cultures have attempted to change their economic state – and to a certain extent, their country’s – through migration.

The book talks about the various diasporas across the world – the majority being dominated by the Chinese, Indians, and people from African nations. The interesting thing is that each group of these people are attempting to influence economic growth in different ways. The Chinese businessman, the Indian doctors and Silicon Valley founders, and the Nigerian agents have their own tried and tested method that differs from each other as chalk from cheese. Yet these methods work to benefit the migrants and both the nations that these migrants straddle.

In each chapter, the author leads with the stories of individuals or groups of people – migrants mostly – who have attempted to better their life situations. He then follows it up with numbers in some cases. And this format works because stories are known to be powerful. They can build a more compelling narrative and sometimes are more relatable than simple facts. Stories are more humanistic than statistics. If used correctly (and sparingly), they can engage readers fully with an incomparable effectiveness. Perhaps that is why ancient philosophers chose to impart moral lessons that were wrapped in fables or tales.

Guest makes a very important argument that although “brain drain” may be a concern in the countries where these migrants originate from – some specific examples being Indian doctors and engineers – and Philippine nurses, overall such migration actually boosts skills than deplete them.

What I also liked is that the author does not simply fill the book with the positive effects of migration. He also presents the dark side of tribalism – religious terrorism, drugs, mafia, and to a certain extent, even civil wars. These negative aspects can have severe effects that last for years. But this is an unfortunate consequence which should not simply be a reason to stop or to discourage migration.

The author ends the book by devoting a couple of chapters on the favoured destination for migrants – America. Although the entire book is filled with delightful stories and insight, I enjoyed the these chapters on America the most. Evidently, even today, America is one of the most popular countries where migrants choose to move. The author explains the reasons succinctly,

First, America offers an unbeatable material standard of living. Second, it offers the widest variety of niches,”… “virtually any immigrant can fit in, whether she is a socially conservative Arab or an ostentatiously gay Nicaraguan.

The author also rips apart the various global polls and surveys that often rank certain Nordic European countries as having the best quality of life.

These rankings often miss important nuances, however. They tend to measure the absence of problems rather than the presence of opportunity or excitement. Countries are (correctly) penalised for infants who die or homes that lack broadband. But what these indices fail to capture is the buzz that sets some countries apart. The Nordic countries are nice places: polite, prosperous and orderly. But how many people, given the choice between living in Finland or America, would pick Finland?

No wonder America continues to be the most favoured nation for migrants. However, here I have to point out that this book was written in 2011 and there is yet another point that the author makes about America and its treatment of migrants.

American talk-show hosts sometimes say odious things about illegal immigrants, but no openly xenophobic politician can attract the kind of support that France’s Jean-Marie Le Pen did in 2002…

Ahem. If you’re aware of the current political scenario in America at the time this article was written (mid 2019), you can pretty much judge whether this assertion still holds true.

The author ends the book by explaining his theory of why America will continue to be number one in spite of faster economic growth in countries like China. But to keep that position, the author explains that America will have to revamp its current immigration policy significantly.

About a million green cards (which allow permanent residency) are issued each year, but these are allocated mostly to family members of those who already live in America. In a typical year, only 15 percent are awarded on the basis of skills. No other rich nation puts such a low priority on work-based immigration.

Lately other countries such as Canada and Australia have started welcoming immigrants much more freely and actively based on skill based programs. Who knows, over time, these nations may better reap the benefits of skilled immigration.

I actually felt disappointed when I completed this book. It seemed to end too soon. I wanted more – more stories of brave migrants, more stories of countries that welcome them, and how both these pieces of the puzzle fit together to create synergy. At some level, I even want the author to revisit this book and update it, based on the changes that the world has seen since the book was published. That is, of course, wishful thinking. As of now, one can only follow the author in his subsequent works online.

In closing I just have one curious question. Although the book does point out the effects that migration has on the economies of nations, the author could have delved into the economics aspect in more detail. The deep focus on the stories about the individual and the relatively superficial focus on the economics part makes me wonder whether “Borderless Economics” is the perfect title of this book. But these are just nitpicks.

All In all, I absolutely loved this book. Although I am not a big fan of authors using anecdotes to fill up pages in a book, I feel that Robert Guest has used his stories effectively, to complement the points that he makes in the book. This makes the book a must read for anyone wanting to learn more about the reason and benefits of global migration. It doesn’t matter whether you’re a potential migrant dreaming about moving to a countries with better standard of living or whether you’re already a citizen of such countries. Both sides are likely to benefit from this.

Today information flows freely across the world without any controls or restrictions (well for the most part anyway). We are years away from creating a world that allows a similar flow of people – in and out of nations – free to live and conduct their business in their country of choosing. But one can dream.

Featured Photo Credit: mauro mora
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The Bed of Procrustes

If you want people to read a book, tell them it is overrated.
Nassim Taleb
Love me or hate me, I’m here to stay.

In the last ten years, Taleb has emerged as one of the most famous (even if controversial) writers on finance and human behaviour. Having written some best-selling books like Black Swan, and Fooled by Randomness, Taleb definitely commands a solid position in financial literature.

So it was surprising to me that this book was not about yet another exploration into the world of finance. Instead this is a book of aphorisms loosely linked to a tale in Greek mythology, that of Procrustes. Procrustes was a bandit who forced his victims to lie on a bed. Depending on whether they were shorter or longer than the bed, Procrustes tortured them to fit the bed by either stretching them or cutting off their legs.

If one looks beyond the symbolism, one finds that this is a common human fallacy. Rather than basing their theories on the observed evidence, people force-fit the evidence to suit their theories. And many a fortune has been lost as a result of this.

This book is a mixed bag as far as the coverage of topics and the quality of aphorisms go. Some of them are quite brilliant, some are plain ordinary,

The opposite of manliness isn’t cowardice; it’s technology.

and yet some make you wonder whether the author is simply venting out on some group or the other. For instance, Taleb seems to have a long standing feud against bankers, critics and academicians. He devotes entire chapters in ridiculing these groups through the aphorisms.

Just as no monkey is as good-looking as the ugliest of humans, no academic is worthier than the worst of the creators.

This book is part of his Incerto, a collection of four books that have been best-sellers individually. But in this book, you won’t necessarily find any linkage with the world of finance. So it doesn’t matter if you have not read the books in this collection.

Another highly recommended work of maxims is that by François de La Rochefoucauld, a noted 17th century French author. His book Maxims is quite a comprehensive body of work.

The problem with a book of maxims, quotes or aphorisms is that however brilliant it may be, it doesn’t feel original. This is not the fault of the author but of the subject itself. Good principles span across civilization and eras, whether they are in the form of a Zen koan, a Sufi couplet, or Greek fables.

Here Taleb has adapted some of these aphorims to fit into the current day scenario. He, at times, does goes on a rant as mentioned earlier. But the book is still worth reading because of the underlying lessons that the aphorisms impart.

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The Ocean at the End of the Lane

As we age, we become our parents

My first introduction to Neil Gaiman’s work was American Gods, not the book, but the TV series. The first few episodes were engrossing. But then halfway through the season, I lost interest. Maybe it was the mysticism, maybe it was the violence. And since then I had not bothered to read a Neil Gaiman work. Till now.

Lately, while browsing Goodreads and Reddit, I kept coming across recommendations for this book, The Ocean at the End of the Lane. It is a short story, they said. It has elements of magic, fantasy, and symbolism, they said. That drew me to this particular book. The beginning was quite captivating. This is the story of a lonely young boy living in a village in Sussex county in England. He loves books, the second thing that the protagonist has in common with me. A series of events leads him to meet his neighbour, a young girl named Lettie Hempstock. The Hempstocks are a mysterious family, consisting of three generations of women living on a big farm. Strange events start happening in the village after which the narrator heads out with Lettie to defeat the “monster” that is causing these events to happen.

The story is short and does include a lot of magical elements as promised. The symbolism of the duck pond as the ocean is quite fascinating. The book is filled with beautiful comparisons and observations. I especially loved the author’s explanation of the difference between children and adults.

Adults follow paths. Children explore. Adults are content to walk the same way, hundreds of times, or thousands; perhaps it never occurs to adults to step off the paths, to creep beneath rhododendrons, to find the spaces between fences.

This struck close to my heart. This was effectively the description of the rat race that people, once they grow old, enter into and never manage to come out.

For me though, once the mysterious events started happening in the book, the story took a deep dive (possibly into the pond, sorry the ocean) and never came up again. But this is not judging the quality of the book. Fans of Gaiman will probably enjoy it. Readers who are into the magic, fantasy, symbolism genres would also appreciate it. Unfortunately I’m not a fan of this and hence the feeling of being disappointed.

But still I give the book full marks for its poignant observations on certain topics, adulthood – I do not remember asking adults about anything, except as a last resort,” books – I went away in my head, into a book. That was where I went whenever real life was too hard or too inflexible,” and life in general – “You don’t pass or fail at being a person, dear.” Read it for the magical story and such fascinating introspections of the protagonist. I may  or may not pick up another Neil Gaiman book but these highlights in my book will stay close to my heart forever.

Featured Photo Credit: Cristian Palmer
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The Wealthy Renter

Buying a house vs renting a house is one of the most important life decisions that most people have to take at some point in in time. Whether you’re getting married, or having children, or simply moving out on your own, this decision will make a lot of difference in your life and finances.

On one side of this buy vs rent debate are proponents of the buy decision, who firmly believe that a house is a solid (no pun intended) investment as well as providing an abode – a place you can come back to at the end of the day. Besides owning a house means you don’t answer to anyone about how you want to decorate and spruce up the place you live in.

On the other side of the debate are the renters who want to stay flexible, who want to have an upper hand in being able to move easily, if the situation so arises. Renters believe that paying rent is not necessarily throwing away money. It’s simply being better aware of your fixed monthly expenses related to your housing.

Now from what I’ve read, the balance is heavily tilted towards the buyers. More people prefer to buy instead of rent, especially if they’re growing families. Buying a house is a major milestone in most families’ lives. It is often seen as a sign of getting settled. This is the trend across countries and there are common factors for this. The Wealthy Renter, by Alex Avery, however attempts to present the other side of this debate. Through the book, the author explains that renting has many benefits and if used correctly, it is not necessarily inferior to buying a house.

The book starts by pointing out that housing costs are one of the biggest expenses that people will make in their lifetimes. So much so that it can even play a major role in how quickly one can retire. Hence it is very important to consider both sides of the coin before making that decision. Where we live defines how we live our lives. Our housing choices determine how long it takes to get to work. How much time we spend with our friends and family. If you have kids, it determines where your kids will go to school, where they play, and who they play with. It can affect how well we do our jobs. It can determine how much money we have for other things, like travel and the nicer things in life, such as cars, clothes, jewellery, electronics, and collectibles. It’s probably the biggest factor that determines when we can retire and how we retire.

Avery explains that the reason why buying houses is the favoured trend in many developed countries is that the government plays a major role in pushing house ownership. From maintaining interest rates at a suitable level (according to the prevailing inflation) to providing tax rebates for house owners, the government makes it “lucrative” for people in the market for a house. There are reasons to this, as the author explains further. But some of these reasons were valid during a time when there was not much mobility. People grew up, went to school, lived and worked in the same town they were born. They were expected to retire there itself. During such a time and age, house ownership probably made complete sense.

But today economies are getting more interlinked, with technology obliterating the gap between the customer, who can be in one country, and the workforce in another. In this era of globalization, staying flexible becomes the order of the day.

The Wealthy Renter is full of reasons why renting can have multiple benefits in a young person’s life. Not only can it limit your housing expenses, it can also help you divert the balance of your savings into investments that can give a better rate of return than housing does. Although, the book is written keeping the housing trends in the Canadian economy in mind, the advice given in the book – like universal economic principles – can be adopted for people living anywhere in the world. One simply needs to be aware of the trends in their city – namely housing prices, average income levels, mortgage rates, etc. All of these factors will play a role in whether buying or renting makes more sense.

The book describes the ongoing trends and compares the six biggest cities in Canada. Unsurprisingly, the trends are similar to what one would have faced in their house hunting journey. Housing prices in cities such as Toronto and Vancouver, being popular with job seekers, are increasing rapidly, often out of the reach of first time home buyers. There was one interesting piece of statistic that stands out in this book. Canada is the second-largest country in the world by area. The population of Canada is roughly 36 million. The population density is only 3.4 people per sq km. But of course, this density is not uniform. Considering that most of Canada gets cold, really cold, in the winters, the majority of people live in the southern part of the country, “…with more than 80% of Canadians living within 160km of the US border.” The population density in cities is much higher as a result, and consequently this demand on housing has led to a multi-decade boom in housing prices.

The author does a fabulous job in bringing to light many aspects of home ownership that are not apparent to someone who have never bought a home. He explains the hidden costs that are associated in owning a house. Property taxes, maintenance costs, legal fees, etc. often add up whenever you plan to buy or sell a house. He also talks about investment creep, which is real and significant mistake that many people make in their excitement of owning a new house for the first time.

The book makes convincing points on how housing should be seen as what it is – a combination of investment (the land) and expense (the building). The former can increase in value, while the latter can only depreciate.

By the end of the book, the author has laid out a convincing argument on how renting can be better than buying. Of course this cannot be applied to everyone blankly. It definitely depends on one’s circumstances, priorities and financial health. But it does plant a seed in your mind that renting can be a viable strategy after all.

In the end, whether you buy or rent, good financial habits will make the biggest difference in the quality of your lives. It will ultimately decide how and when you can retire. In my opinion, for renters to actually come out on top, the following two points are paramount. I would consider these two points to be the crux of the book’s advice:-

1) Rent for less than what your mortgage payments would be for a comparable house.

2) Invest the difference amount that you save into (diversified) stocks, mutual funds, or ETFs, that are likely to give you a better rate of return than housing.

Housing works because it is a forced savings plan. Once you have a mortgage with a bank, you’re essentially forced to make regular payments to the bank. But if you can keep the same discipline by investing your savings from renting at a lower amount, you can have the best of both worlds – become wealthy and at the same time be flexible in your life decisions.

This book is a part of a category of books that are aimed at the Canadian resident and are considered to be very good. The first one that I read was Wealthing Like Rabbits. The Wealthy Renter is the second one. There are more down the line and you can definitely expect reviews on those books very soon.

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The Acquirer’s Multiple review

I came across this book in a podcast that I regularly follow. And if I remember correctly, I had also come across this book mentioned multiple times on twitter. And I picked it hoping that it would give some new insight on the art of stock-picking.

The book is meant for beginners to the world of stock investing. The author makes this quite clear at the beginning of the book itself that it is going to be a non-technical book, unlike his earlier work Deep Value that is much more detailed work for the seasoned investor. I believe all books should have this kind of clarification – the kind of audience that they are catering to. It would make selecting the right book a whole lot easier for the reader. Moving on.

Zig to the zag – Not a new dance move

Zig. This is the first piece of advice that the author gives. What does this mean? In simple terms what the author is saying that in order to become a successful investor who can beat market returns is to zig when the rest of the world is zagging. Effectively, this is what being a contrarian means. Having ideas that are contrary to the popular opinion. This is one of the ways how good stock pickers get better returns than the rest of the investors.

The author makes a good point that you need to be right while having a contrarian view. If you’re right along with the market, you will only make market returns, not beat it. And if you’re wrong, then obviously you will lose money. But I wonder whether beating the market returns is really a priority for the investor who is just starting out. Wouldn’t he be satisfied making market returns? Of course, a simpler way would be to invest in an ETF that tracks the market.

Thy shalt revert to the mean

The author also introduces the concept of mean reversion. Again to put it simply this means that stocks do not stay away from their true value for long. Things go back to normal. Think of it as a pendulum. Every time it moves in one direction, there is a greater force pulling it in the opposite direction. The momentum of the pendulum fights with this opposite force until both are equal. That is when the pendulum stops moving further and starts reversing. According to this concept, stocks that are undervalued are likely to rise in price whereas overvalued stocks are likely to fall down sooner or later.

The mean reversion principle is a popular and tested concept. But there is a big caveat that the author has chosen to ignore here. The famous economist John Maynard Keynes once said about the market, “The market can remain irrational longer than you can remain solvent.” This means that chances are that if you have bought into a battered stock in the hopes of having it rise according to the mean reversion principle, you could be waiting years (or decades) before it inches up. So while this principle may stand true theoretically, one needs to be aware of the time horizon of investing and the level of risk one is comfortable with.

 

 

 

 

 

 

In Buffett we trust

Carlisle’s theory, the Acquirer’s Multiple, is a new and improved way of looking at the attractiveness of a stock compared to market capitalizaion. He even claims that the Acquirer’s Multiple is better than the other famous and proven stock picking methodology – The Magic Formula by Joel Greenblatt. Apparently Carlisle claims that his way of picking stocks i.e. buying fair companies at wonderful prices is even better than Warren Buffett’s preferred method – buying wonderful companies at fair prices.

But for all the claims that the author makes on the superiority of his approach, he surely spends a lot of time explaining Buffett’s methods. There are a couple of chapters wasted on giving a history lesson on how Buffett started off with his famous cigarette butt approach of investing until his partner Charlie Munger knocked some sense into his head. Since then Buffett has practiced the wide-moat based investing philosophy.

Finally after a few chapters of talking about other contrarian investors, notably Warren Buffett and Carl Icahn, the author sets out to put forth his theory of the Acquirer’s Multiple. Even by definition this is not something new. The Acquirer’s Multiple simply uses part of the strategy that the Magic Formula uses. The author claims that in his testing, his approach beat the returns of the Magic Formula.

Again many of the points that he makes mirrors Buffets approach anyway. Carlisle liberally quotes Buffett from the annual Berkshire Hathaway shareholder letters. Take for example his focus on operating earnings. Buffett has always stressed the importance of operating earnings over other popular but artificially skewed measures such as EBITDA. Buffett and Munger have left no stone unturned in ridiculing the EBITDA.

What I disliked was that the author spends an inordinately long time detailing stories of other investors who have used different methods to get rich. In fact the theory of the Acquirer’s Multiple is not discussed until Chapter 5. After having explained his theory across a couple of chapters, again the author goes off in another tangent describing the exploits of Loeb and Icahn. Strangely, the chapter about Loeb has some inconsistent usage of tense, something that a sharp editor would have most likely spotted and corrected.

Is this really for the beginning investor?

The Acquirer’s Multiple, as a theory, may be an effective way to beat market returns. But the Acquirer’s Multiple, as a book, simply begs to be avoided. Firstly, the entire content of the book can be condensed into a small but crisply written whitepaper. I continued reading the book while waiting for a connecting flight. In any other situation, I would have simply closed the book and moved on.

Secondly, there are no new ideas presented here that are revolutionary. Although the author claims that the Acquirer’s Multiple gives better results than Greenblatt’s Magic Formula, I am still skeptical. Moreover the latter was groundbreaking when it was introduced. It simplified and distilled for the average investor the advice of Graham and Buffett. It proved to be an easy and reliable framework to pick good stocks that were likely to give a good return, maybe even beat the market. The Magic Formula combined quality companies with companies that were cheap. The Acquirer’s Multiple does away with checking the quality aspect. Doing so can be disastrous for stock market returns. High risk does not necessarily equate to high returns.

The Acquirer’s Multiple, on the other hand, does include a collection of amusing stories sandwiched between a few pages of theory. Thankfully, the book is really a short read, especially if you are aware of value investing even at a basic level. I finished it within a few hours, as the author claimed at the beginning. In closing, if you are a new investor simply starting out in the world of stock market investing, I would recommend a safer approach to buying stocks. If you are an advanced investor, then surely there are more substantial books than this? Why zag when you can zig, eh?

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The Intellectual Life

A toast to “bookception”

I came across a recommendation for The Intellectual Life while reading another excellent book on a related topic – Deep Work by Cal Newport. If you have been following my blog posts, you would know that one of my favourite ways to find new book recommendations is within existing books. Often such book recommendations go deeper and are more likely to be original content.

After having read both these books, I can confidently say that Cal Newport found a lot of inspiration from The Intellectual Life. He has extracted some of the best advice given in this book and packaged it in a way that people today can easily understand. And just as well.

The Intellectual Life by AG Sertillanges, a French philosopher, is not an easy book to get through. Written in the early 20th century, the style of writing is a little dated. You may not be able to understand certain passages the first time around. Thus you will need to definitely re-visit this book after a while.

However I would suggest you to stick with this book and giving it your full attention. P.S. if you’re struggling with attention, this book has certain tips for that as well. Talk about being meta. In fact, while reading this book, there were many meta moments that had me chuckling. For example, I had been making copious highlights and notes while reading this book. And then I came across the chapter where Sertillanges explains the right way to take notes. The author says,

Some people have so many [notes] and such full notebooks that they are prevented by a sort of anticipatory discouragement from ever opening them… Their imaginary treasures have cost much time and trouble, and they yield no return. Thank God there are many fine things in books; will you therefore copy down the whole National Library? Keep notes after thinking, and with moderation… Do not include the passage in your notes without letting some time elapse. Quietly, you will judge of the value of your harvest and store up only the good grain in your barns.

I’d be lying if I said that I didn’t put aside this book for a while as I felt embarrassed at my own incessant highlighting. But… but the juicy content… moving on anyhow.

The author kicks off by explaining what the virtues of an intellectual person should be. He goes on to describe how life should be organised so that one may keep a balance between isolating himself completely from the world and spending too much time in society doing frivolous activities. Once he has set the expectations of what an intellectual should do, the author moves on to explain how to best take up intellectual work. From my reading, I felt that the author talked about getting into a flow state, a concept that has been explored lately by multiple authors in how athletes and other high performing individuals manage to get much more work done than the rest of the ordinary folks.

Each part of the day has its own unique characteristics, says the author, and it is important to known and utilise these differences by doing the kind of work that is suitable to the time of day. For example, the author mentions that evenings should be used to prepare the work for the next day so that there is a sort of continuity of work between two consecutive days. This, he says, will definitely give a jump start as far as productivity is concerned. Of course, not everyone is built the same and each individual has his own body cycle – some of us being larks, others owls. But as long as one is able to understand his own body cycle, he should be able to make the most of the ebb and flow of energy and concentration levels throughout the day.

The author, AG Sertillanges
How can I make this book utterly brilliant but difficult to read at the same time?

Sertillanges then talks about the spirit of work, of the things that you need to keep in the background while undertaking your field of work. This will keep a sense of objectivity to the work as well as help you approach it in the right spirit. He debates the pros and cons of two different routes that one can take in their intellectual journey – the broad based approach, where one reads about multiple subjects/disciplines and tries to find interconnections and linkages between these fields (something that Charlie Munger has also advocated in his famous latticework of mental models), or the narrow-based approach, where one digs deeper into a subject that he has found interest in. Essentially whether to become a generalist or a specialist.

The latter part of the book deals with the preparation of work, how one should read, how to remember what was read, and how to take notes. Strangely but understandably, the author advises moderation in all these areas. One does not become an intellectual by reading more and more books. More important is how much one understands and is able provide original commentary upon. The same is with trying to memorise everything that one has read. Although the author meant this for an earlier time and age, today it becomes even more foolish to be a good memoriser, especially when there are multiple tools at our disposal to retrieve any information that is needed at any moment. The 24/7 connectedness of our lives has, I dare say, done away with our requirement of an extensive memory. Whether that is a good thing or bad, I leave it up to you. This chapter ends with a useful approach that the author prescribes to take and organise notes. People preferring to use the traditional paper-based note-taking may find this advice useful.

The author then deals with one of the most important parts of the book – the creative effort. For an intellectual, creation is paramount. Be it in the form of a book, a painting, a theorem, or simply original thought, creation is supposed to be the end result of your intellect. “One cannot be forever learning and forever getting ready.” This author lists down the qualities that are needed in order to create complete and useful works. Detachment, patience, persistence, and knowing your limits. These are the qualities that are discussed. If you’re running short of time or are frustrated with the ye olde language of the book, I would suggest that you read Chapter 7 and Chapter 8 completely. These two chapters contain enough useful and actionable advice to help create a marked difference in your productive output.

The book closes with some advice on how to keep oneself sane in the quest for intellect. It is very easy to go overboard in this often lonely journey, as have many geniuses in their time. The author advises that one should not forget the rest of life in pursuing your goals. As John Lennon said, “Life is what happens when you’re busy making other goals.” The secret according to the author is keeping a balanced view on life. Relaxation, exercise, social interactions, gratitude and a hopefulness towards success is what will keep you on the tracks when the going gets tough.

I felt so privileged to have come across this book and to have enjoyed it thoroughly. Unfortunately, this book is not available in a Kindle format so I will have to type out all the highlights and notes that I made in the margins to keep them better organised and referable. The Intellectual Life is probably going to be a book that I will keep going back to at times whenever I feel a creative block coming up. Beg, borrow or steal this book if you’re interest in knowing about the creative process or developing an intellectual mindset.

Featured Photo Credit: Aaron Andrew Ang
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What to do when you’re having two by Natalie Diaz

There are loads of books that help one guide through the uncertain, and often scary, nine months of pregnancy. However most of these books are focused on a single child pregnancy. For couples having a multiple pregnancy, i.e. twins, triplets or more(!), these nine months can be a harrowing period. Not only does one have to take additional care during these months of pregnancy, but life gets more chaotic after the angels are born. Mothers who have gone through the chaos that can accompany the first few months of a birth can attest to the fact that having twins can effectively stretch you even further for your time, money and effort in ensuring a smooth pregnancy and having healthy babies.

Thankfully there is a growing collection of books and other material targeted specifically for women with two or more buns in the oven. What to do when you’re having two is one such book written by a mother of twins who has gone through this experience first-hand. The author is also the founder of Twiniversity, an online forum filled with resources for people interested in learning more about a twin pregnancy and how to go about it while still being level-headed.

The book is short and easy to read. Consisting of twelve chapters, each part of the book deals with a different area that would-be parents are likely to scratch their head about. Right from the initial shock of knowing that there are two babies (or more) on the way, to questions about affording to raise them, this book tackles it all. Not only does it talk about the pregnancy, but it also describes the initial months after delivery that are bound to be most chaotic, especially in a twin delivery. As it should be, the author does not shy away from including the bad with the good and makes her point clear on how a twin pregnancy can potentially have higher risks than a singleton pregnancy.

What I liked about the book is that there is loads of actionable advice that will help calm the nerves of couple with a twin pregnancy. Especially if you live in the “western world”, the author reveals loads of ways that you can utilise to reduce the financial burden on raising more than one child simultaneously. I, for one, did not realise there are special support groups in bigger cities that are targeted at helping women with twin pregnancies cope with the emotional upheaval during such a time. There was even a section on how a C-section and a vaginal delivery takes place. This would be quite enlightening for first time parents.

The author also gives impeccable advice regarding the first few days after delivery, of observing the nurses and other hospital staff on how they handle your baby, in order to learn the right way to do it once you’re home and without any expert help around all the time. Yes, once you reach home, you will have only your spouse, family and friends to help you get through the initial amorphous mess that will be now your life for a few months. The author also discusses a few points on dealing with your children’s sleeping and eating patterns and keeping your sanity intact while doing so.

On the flip side, I felt that the book did not give sufficient focus on the pregnancy itself. Except for a couple of chapters, the book focused on similar tips and techniques that would be valid for a single pregnancy as well. This delicate phase of carrying two babies in your womb and how to ensure a healthy complication-free pregnancy could have been explained in more detail.

This book definitely should not be the only book that you read about bringing your child in this world. There are other books out there that are more detailed and useful in that aspect. But this book does give a good overview of what to expect when you’re expecting twice. Combine this book with other books that are well known and researched so that you’re fully prepared as you move towards this exciting phase in your life.

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