Global Inequality – Book Summary

globalinequality

It was interesting to read a book on Globalization or should I say Global inequality in post-brexit, trump world. Globalization is the invisible force which affects our income, employment prospect, knowledge and our cost of living. The gain of globalization will be unevenly distributed.

Global inequality = Sum of all national inequalities + Sum of all gap in mean incomes among countries 

According Branko Milanovic, we will continue to the below trends due to globalization.

1. Rise of the “global middle class” whom are mostly located in china and other countries in “resurgent Asia”
2. The stagnation of the groups in the rich countries that are gloablly well-off but nationally middle or lower middle class.
3. Emergence of global plutocracy.

Effects on Rich countries: 

1. Top earners will make more money from cheap labors.
2. Middle class will squeeze by automation and globalization.
3. Continued polarization of the western world. Populism and Nativism will grow in Europe and US will become plutocratic society.
4. National accounts will becomes less relevant and monetary policies will not be conducted by states. (private monies such as Bitcoin may play a bigger role.)

Effects on Resurgent countries: 

1. Although the globally inequality is decrease, there will be increase in income inequality with countries. In some years, there will not be rich Americans and poor Chinese. Instead there will be rich Americans and poor Americans, rich Chinese and poor Chinese, rich Russians and poor Russians.
2. Horizontal inequality will not be solved by providing existential equality(policy followed in countries like India). Instead resurgent countries should focus on income inequality.

Effects on Individuals: 

1. People with scalable jobs will be the real winner of globalization. In these jobs where a person’s same unit of labor can be sold many times.
2. Chance and family background will play a much bigger role than ever before.

Recommend that you give Global inequality a read to understand the present and the future better.

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How to Fail at Almost Everything and Still Win Big – [Book Summary]

scottadams

A book can leave great positive impact on some and leave no mark on others. As I was reading this book, I knew this book will leave a positive impact on me. This is a part-memoir and part self-help book. And I learn’t a lot of hacks and life lessons from Scott Adams. I wanted to share some of the interesting thing which I learnt.

  • Systems Vs Goal. 
  • Personal energy.
  • Success causes passion.
  • Habit of success.
  • Talent stack.
  • Affirmation and How to become an optimist
  • Happiness recipe.

System Vs Goals:

Scott Adams says “Goals are for loser”.  I know it sounds blasphemous but he makes some good counter-intuitive points. Goal-oriented people exist in a state of nearly continuous failure that they hope will be temporary.   If your goal is to loose 10 lbs, you’re in a state of nearly continuous failure until you achieve your goal.

Whereas System-oriented people look to do something everyday which will increase their odds of happiness in the long-run. They will continuously  for better deals and succeed every-time they apply their system. Instead of loosing 10 lbs, if your system is to eat right every-day then every health meal you eat makes you a success. It will create a positive feedback and eventually this will increase your physical and mental well-being.

I know this system vs goals distinction looks vague on the surface. Here is a good way to distinguish between the two. A system is you do everyday regularly that increases your odd of happiness. A goal is something you’re waiting to achieve someday in the future.

Personal energy:

The most important metric to track in your life is personal energy. Personal energy is what brings you happiness and success. So if you focus on increasing your personal energy happiness success will follow.

Maximizing your personal energy means eating right, exercising, avoiding unnecessary stress, getting enough sleep and having something that excites you in life.

Managing your personal energy is like managing your budget. It gives an asymmetric payoff.

Success causes passion:

Success caused passion more than passion caused success. Passion is often simply a by-product of knowing you will be good at something. People are rarely passionate about something they’re not good at or something they know that they will never be good at.

Habit of success:

Pick a hobby or sport and become consistently good at it. The habit of success will stay with you on more important quests in life. After you tasted success, you will want more and this wanting will give you the sort of energy that is critical to success.

Talent stack:

Good+ Good > Excellent

Every skill you acquire doubles your odd of success. Instead of pursuing a singular skill, trying to be good at combinations of ordinary skills will bring you better odds of success. Entrepreneurs are a good example here.

Affirmation and How to become an optimist:

Affirmation is a system of that helps you focus, boosts your optimism and energy and perhaps validates the talent and drive that your subconscious always knew you had.

You can train yourself to act like an optimist by writing affirmation is probably a good training. So that you will get the same benefits as natural optimists when it comes to noticing opportunities.

Happiness recipe:

Happiness should be the only pursuit in our life. Scott Adams gives a bold recipe for happiness to life.

  • Eat right.
  • Exercise.
  • Get enough sleep.
  • Imagine an incredible future.
  • Have flexible schedule.
  • DO things at you steadily improve.
  • Reduce daily decisions to routine.
  • Help others after you help yourself.

Highly recommend that you give “How to Fail at Almost Everything and Still Win Big: Kind of the Story of My Life” by Scott Adams a read.

 

 

 

[Book Review] The Simple Path to Wealth

simplepathtowealth

This is the book which introduced me to FI/RE and arguably the best book on the subject. Here are some of the things I learnt from this excellent book by JL Collins.

Things to avoid
1. Avoid debt.
2. Avoid fiscally irresponsible people. Never marry one or otherwise give him or her access to your money.
3. Eliminate all non-essential spending
4. Avoid investment advisers.
5. Never buy stocks on margin.
6. Safety is a bit of an illusion. Don’t fall for it.
7. Spending too much time worrying about how things might work out. It’s a huge waste. Don’t do it.

On Saving and thrifty lifestyle
1. Save and invest unwavering 50% of your income.
2. The beauty of a high savings rate is twofold: You learn to live on less even as you have more to invest.
3. When you can live on 4% of your investments per year, you are financially independent.
4. If your lifestyle matches or exceeds your income, you are a slave.
5. Better to adapt yourself and your attitudes to the numbers than to adapt the strategies to your psychological comfort levels.
6. If financial independence is your goal, your savings rate in these years should be high. As you invest that money each month it serves to smooth out the market’s wild ride.
7. Be persistent. Life is uncertain.

On Stock market and Investing
1. Investment rules: Rule #1: Never lose money. Rule #2: Never forget rule #1
2.The stock market is a powerful wealth-building tool and you should be investing in it.
3. Embrace indexing.
4. Crashes, pullbacks and corrections are all absolutely normal.
5. Any investing done short term is by definition speculation.
6. Market timing is an un-winnable game over time.The point is that to play this market timing game well even once, you need to be right twice: First you need to call the high. Then you need to call the low.
7. The market always recovers. Always.
8. Everybody makes money when the market is rising. But what determines whether it will make you wealthy or leave you bleeding on the side of the road is what you do during the times it is collapsing.
9. Most people lose money in the stock market. Here’s why: 1. We think we can time the market. 2. We believe we can pick individual stocks. 3. We believe we can pick winning mutual fund managers.
10. By dollar cost averaging you are betting that the market will drop, saving yourself some pain. For any given year the odds of this happening are only ~23%. But the market is about 77% more likely to rise, in which case you will have spared yourself some gain. With each new invested portion you’ll be paying more for your shares.
11. Put all your eggs in one basket and forget about it.

On F-You Money
1. Money is a small part of life. But F-You Money buys you the freedom, resources and time to explore it on your own terms. Retired or not. Enjoy your journey.
2. Once you have your F-You Money, all you need do is make sure you continue to reinvest to outpace inflation and keep your spending below the level your stash can replenish.
3. You’re young, aggressive and here to build wealth. You’re out to build your pot of F-You Money ASAP. You’re going to focus on the best performing asset class in history: Stocks. You’re going to “get your mind right,” toughen up and learn to ride out the storms.

Highly recommended read!!

Book Review: Thinking in Bets

thinkinginbets

 

‘Thinking in Bets’ by Annie Duke is probably the best book on decision making that I have read. The Basic idea of the book is that thinking in bets will substantially improve the decision-making skills in our day-to-day life. Annie Duke is a professional poker player and according to her life imitates poker, not chess. Poker is a decision making game under uncertainty over time. It has valuable information hidden, there is element of luck in any outcome. The decision we make in our lives- raising kids, health, business- have uncertainty, hidden information & luck.

What a bet really is?
A bet is a decision about an uncertain future. Thinking in bets starts with recognizing that there are exactly two things that determine how our lives turn out:

  • the quality of our decisions
  • luck.

Learning to recognize the difference between the two is what thinking in bets is all about.

What’s your best and worst decision?

Take a moment to imagine your best decision in the last year. Now take a moment to imagine your worst decision. Chances are you will equate the outcome of the decision to the quality of the decision. This is because we’re susceptible to “resulting” and hindsight bias.

We must disassociate outcome with decision. A great decision is the result of a good process and that process must represent an accurate picture of our state of knowledge.

Resulting: tendency to equate the quality of a decision with the quality of its outcome

Hindsight bias: tendency, after an outcome is known, to see the outcome as having been inevitable.

When we work backward from results to figure out why those things happened, we are susceptible to a variety of cognitive traps, like assuming causation when there is only a correlation, or cherry- picking data to confirm the narrative we prefer. We will pound a lot of square pegs into round holes to maintain the illusion of a tight relationship between our outcomes and our decisions.

Two Brains:

We’re susceptible to these mental traps because our brains are not built for rationality. Our brains work basically in two modes. Daniel Kahneman popularized the labels of “System 1” and “System 2”.

System 1: encompasses reflex, instinct, intuition, impulse and automatic processing.

System 2: is how we choose, concentrate and expend mental energy.

Both systems are necessary for survival. Mistakes happen when System 1 overtakes System 2 in decision-making.

Since most of what we do daily exists in automatic processing. We are used to thinking in System 1 mode. The challenge is to figure out how to make decisions within the limitations we already have.

Embrace uncertainty and Redefine wrong:

Embracing “I’m not sure” is difficult. We are trained in school that saying “I don’t know” is a bad thing. Not knowing in school is considered a failure of learning.

Of course, we want to encourage acquiring knowledge, but the first step is understanding what we don’t know. “I don’t know” is not a failure but a necessary step toward enlightenment.

There are many reasons why wrapping our arms around uncertainty and giving it a big hug will help us become better decision- makers. Here are two of them. First, “I’m not sure” is simply a more accurate representation of the world. Second, and related, when we accept that we can’t be sure, we are less likely to fall into the trap of black- and- white thinking.

Decisions are bets on the future, and they aren’t “right” or “wrong” based on whether they turn out well on any particular iteration. An unwanted result doesn’t make our decision wrong if we thought about the alternatives and probabilities in advance and allocated our resources.

Redefining wrong allows us to let go of all the anguish that comes from getting a bad result. First, the world is a pretty random place. The influence of luck makes it impossible to predict exactly how things will turn out, and all the hidden information makes it even worse. Second, being wrong hurts us more than being right feels good.

All decisions are bets:

All our decisions are always bets. We routinely decide among alternatives, put resources at risk, assess the likelihood of different outcomes, and consider what it is that we value.

The betting elements of decisions— choice, probability, risk, etc.— are more obvious in some situations than others. Investments are clearly bets. A decision about a stock (buy, don’t buy, sell, hold, not to mention esoteric investment options) involves a choice about the best use of financial resources. Incomplete information and factors outside of our control make all our investment choices uncertain

Most bets are bets against ourselves:

In most of our decisions, we are not betting against another person. Rather, we are betting against all the future versions of ourselves that we are not choosing.

Whenever we make a choice, we are betting on a potential future.

Our bets are only as good as our beliefs:

Our bets are only as good as our beliefs. our default setting is to believe what we hear is true.

We might think of ourselves as open- minded and capable of updating our beliefs based on new information, but the research conclusively shows otherwise. Instead of altering our beliefs to fit new information, we do the opposite, altering our interpretation of that information to fit our beliefs. Our pre- existing beliefs influence the way we experience the world. This irrational, circular information- processing pattern is called motivated reasoning. The way we process new information is driven by the beliefs we hold, strengthening them. Those strengthened beliefs then drive how we process further information, and so on.

Being smart makes it worse:

Being smart makes it worse the smarter you are, the better you are at constructing a narrative that supports your beliefs, rationalizing and framing the data to fit your argument or point of view. we all have a blind spot about recognizing our biases. The surprise is that blind- spot bias is greater the smarter you are.

Wanna bet?

Offering a wager is the best way to fight these mental traps and brings the risk out in the open, making explicit what is already implicit. We can train ourselves to view the world through the lens of “Wanna bet?”

Once we start doing that, we are more likely to recognize that there is always a degree of uncertainty, that we are generally less sure than we thought we were, that practically nothing is black and white, 0% or 100%. We don’t need someone challenging us to an actual bet to do this. We can think like a bettor, purposefully and on our own, like it’s a game even if we’re just doing it ourselves.

Instead of thinking of confidence as all- or- nothing (“ I’m confident” or “I’m not confident”), our expression of our confidence would then capture all the shades of grey in between. Incorporating uncertainty into the way we think about our beliefs comes with many benefits.

Use CUDOS:

CUDOS stands for

  • Communism (data belong to the group)
  • Universalism (apply uniform standards to claims and evidence, regardless of where they came from)
  • Disinterestedness (vigilance against potential conflicts that can influence the group’s evaluation)
  • Organized Skepticism (discussion among the group to encourage engagement and dissent)

Techniques to become a better bets:

Techniques like Suzy Welch’s 10-10-10, temporal discounting problem, pre-commitment, pre-mortem can help us make better bets on our futures.

Our irrational, impulsive & instant gratification tendency are because we favor our present-self at the expense of our future-self. This is called “temporal discounting”. Thinking about the future and recognizing when we commit temporal discounting and helps us maintain the right frame of mind.

Suzy Welch’s  10-10-10 has the effect of bringing the future-us into more of our in the moment decisions. Before taking a bet/decisions visualize how it will affect us in the next 10 minutes, 10 months and 10 years.

Tilt is a poker term when a player is not in a mental or emotional state to choose optimal strategy.
Whenever you feel you are experiencing “tilt”, pre-commit to walk away from the situation.

Backcasting is a useful time-travel exercise where we imagine a successful future and identify necessary steps for reaching our goals. Working backward helps even more when we give ourselves the freedom to imagine an unfavorable future. It also makes it possible to identify when there are low-probability events that must occur to reach the goal

Premortems: working backward from a negative future. It’s an investigation into something awful, but before it happens. Asking “Okay, we failed. Why did we fail?” frees everyone to identify potential points of failure without the for fear of being viewed as a naysayer. Despite the popular wisdom that we achieve success through positive visualization, it turns out that incorporating negative visualization makes us more likely to achieve our goals.
We are going to do better, and be happier, if we start by recognizing that we’ll never be sure of the future.

Final thoughts:

Although the book becomes repetitive places, this is easily one of the best books have read on decision making and cognitive psycology. If you are planning to read only one book for the year, I recommend you pick this up.

In case if you are looking for super-short and concise book summary of the same, you can check out my twitter thread.

Essential reads for Bitcoin beginners to become a Bitcoin Baron

The Chinese calendar says 2018 is the year of the Dog. In the realm of technology and fin-tech, its certainly looks like the year of “Bitcoin, crypto and Blockchain“. Facebook appears to working on launching their own crypto-currency and even Wall Street will soon trade Bitcoins. It would be wise to learn what this phenomenon is.

An investment in knowledge pays the best interest. – Benjamin Franklin

Before investing in any asset class, the best investment you can possibly make is in “YOU”. What better way to sharper your mind than reading. In this blog post, I want to share some of the books which helped me develop a holistic understanding on “Bitcoin, crypto and Blockchain”.

Digital Gold:

Digital Gold

Digital Gold is written by New York Times journalist Nathaniel Popper in 2015. Although a lot has happened since 2015, still Digital Gold will help you understand the evolution of Bitcoin and the people behind it. Nathaniel has interviewed all the major players from Bitcoin-Core Developers, Libertarians to Silicon Valley Venture Capitalist who helped Bitcoin to gain popularity since its inception in 2009.

The Story takes off soon after Satoshi Nakamoto (Mysterious Figure) published his Bitcoin white paper online. You will learn there a lot interesting characters who adapted Bitcoin early-on. Although they come from different backgrounds, interests and ideologies, you will find they all shared the same distrust of Central Banks and 2008 financial crises & the subsequent bail-out only reinforced their fears and commitment to Bitcoin.

The book is filled with crazy interesting anecdotes. One of my favorite is that Laszlo Hanyecz paid 10,000 BTC for two pizzas in May 2010 which would cost $84854650 today.

Cryptocurrency: How Bitcoin and Digital Money are Challenging the Global Economic Order

The Age of Crypto

Cryptocurrency: How Bitcoin and Digital Money are Challenging the Global Economic Order is written by Wall Street journalist Paul Vigna and Michael J. Casey. Its easily one of the best primers on Bitcoin that covers most ground especially for people with non-technical background. You can gain a basic understanding on BTC concepts like Blockchain, proof of work, 51 percent attack, BTC Mining.

They interview liberatrians, cyper-punks, VCs and many bitcoin enthusiasts. What really like about this book is that it gives a global perspective why Bitcoin matters. They present a case how it helps girls in Afghanistan to hyperinflation infected countries like Argentina. I really can’t recommend it enough. Go grab a copy now.

Cryptoassets: The Innovative Investor’s Guide to Bitcoin and Beyond

Cryptoassests.jpg

If you are purely interested in Bitcoin and cryptos only from an investor prespective, then Cryptoassets: The Innovative Investor’s Guide to Bitcoin and Beyond is the book for you. The writers, Chris Burniske and Jack Tatar, present a case from Modern portfolio theory perspective on why you should include cryptoassest class in your portfolio.

The book makes a good case on why Crypto-assests is a new Asset class like equity and precious metals. It takes us through various crypto-projects from its inception, their use cases, developers & its target market. Shares the similarities and dissimilarities with other assets classes from historical perspective.

Evaluating cryptoassets can be problematic because cryptos cuts across multiple disciplines and traditional valuation methods & metrics are unhelpful to validate these assets. What really works in this book is that it provides the right framework and tools to validate & analyse these Crypto-assets. Also provides some good metrics to detect scams in the Wild World of ICOs.

The Sovereign Individual

TSI

I seriously cannot recommend this book enough. Its one of those books which had a profound effect on my thinking. The main thesis of the book is that, in the twenty-first century, citizens will be more of a customer to governments and governments will act more as a service provider than a political institution.

The Sovereign Individual is incredibly prescient for a book written in 1997. Had I read this book in its year of publication, I probably would have dismissed it as an alarmist-elitist rant. But reading it after two decades since its publication, I am quite surprised how accurate many of its prediction are. The authors rightly predicted the role of cyber economy, crypto-currencies, income disparity, automation of low skilled jobs, rise of nationalism & extreme right-wing groups across the globe, rise of neo-luddites and the role of silicon valley entrepreneurs. Although many other events predicted in the book haven’t happened yet, I am inclined to agree with most of their views. A thought provoking read. Highly recommended.