[Book Review] The Simple Path to Wealth


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



‘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.


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.

28 Principles to Live by on 28th Birthday

Principles are internal Operating System based on which we function in the real world. Inspired by Ray Dalio’s Principles, I wanted to explicitly write down and share the principles which I believe in. Although this is primarily a self- conversation, I hope that you will find something useful.

1.Read More, No TV:
“The man who does not read has no advantage over the man who cannot read.” — Mark Twain.

Having spent my childhood frivolously in front of television, I guarantee that TV adds no value to your life. Dump the TV , cut your cable subscription and subscribe to your local library. Reading will enrich you and open many avenues in life. Read at least one hour a day no matter what.

2. Embrace the inner Contrarian:
“Vox Populi, Vox Dei” — Latin Proverb or “Crowd is untruth” — Søren Kierkegaard.

The so called conventional wisdom has made us believe that there is wisdom to the crowds. I’m sure every culture has some variation of the quote”Vox Populi, Vox Dei”. However if you closely examine history, you will notice that there is no wisdom to the crowds. Only Manias and bubbles exists in crowds. Embrace the your inner Contrarian (with a capital c) and go against it.

3.Addition by Subtraction:
“Good habits are the key to all success. Bad habits are the unlocked door to failure.”

Adding a new feature to an App is great but bug fixing is crucial. Likewise, fix a bad habit or characteristic to become better and stronger. Improve via negativa.

4.Remove the Toxic and Negative people:
“Stay away from negative people they have a problem for every solution” — Albert Einstein

Life is short. Remove the toxic and negative people from your circle.

5.Seek Community:
“No man is an Island” — John Donne

This one took me a while to realise. Even contrarians need a community. Find your community, seek deep meaning, nurture &add value to them.

6.Compete with yourself:
“To be a champion, compete; to be a great champion, compete with the best; but to be the greatest champion, compete with yourself.” — Matshona Dhilwayo

I know its a cliché. But you will never find someone with identical experiences, memories, circumstances and memories as yours. You are the best person to compete with. Be the best version of yourself!

7. Self-regulate your online hours:
“Today, spend a little time cultivating relationships offline. Never forget that everybody isn’t on social media.” — Germany Kent

Internet is a double-edged sword. Unless you are careful, you will never know whether you are consuming the internet or the internet is consuming you. Don’t take break to go offline. When you find break, go online.

8. Fitness:
“Your body has rights over you, so take care of it” — Prophet Muhammad.

Especially in today’s time, Fitness is of paramount importance. Because your physical well being correlates with your mental well being.

9. Journal:
“Don’t trust your memory, jot it all down” — Earl Schoaaff

This one is a work in progress for me. Keep a journal and document your life in words and not just via social media.

10. Learn to think in Numbers:
“Mathematics is the language in which God has written the universe” — Galileo

If you cannot think in Numbers, you are putting yourself in disadvantage. World of computers have chipped away our mathematical acumen. Slowly and steadily regain your Math skills and apply in daily life.

11. Make ONE big move every year:
Our comfort zone is a place where you keep yourself in a self-illusion and nothing can grow there but your potentiality can grow only when you can think and grow out of that zone.” — Rashedur Ryan Rahman

Making one big move every year is surprisingly a easy move comparatively. The Hardest part is convincing yourself to the task. Once you walk past it, it open many new doors.

12. Think big, Start small:
“Think big thoughts but relish small pleasures.” — H. Jackson Brown. Jr

Another cliché here. But think about it. If you have a Big daunting goal, having many small milestones will help you reinforce positive feedback and help you achieve it.

13. Its okay to change your POV. 
The Man Who Views the World at 50 the Same as He Did at 20 Has Wasted 30 Years of His Life.” — Muhammed Ali

Don’t be intransigent. Its okay to change your point of view in the light of new evidence. Willingness to change is a sign of a sound person.

14. Be Open-Minded:
“A mind is like a parachute. It doesn’t work if it is not open.” — Frank Zappa

Having an Open-Mind, opens you to many possibilities. With Possibilities comes opportunities.

15. Trends are over-rated mostly:
Everything popular is wrong” — Oscar Wilde

Popularity isn’t proof. If something is trendy its either over-valued or over-sold, so be wary of trends generally.

16. Don’t heed to other’s opinions:
Yeah, well, you know, that’s just, like, your opinion, man. — Jeffery “The Dude” Lebowski

You have a Super-power, if you don’t care what other people think.

17. Be curious:
Be curious not Judgemental .” — Walt Whitman

Go wherever your mind takes you. Follow your curiousity.

18. Protect your attention: 
It takes discipline not to let social media steal your time.” — Alex Ohanian

First of all Attention on any given day is of finite supply. And studies have proved it again and again. Secondly and most importantly the Attention economy is slowly eating our attention like parasites eating our brain. So learn to guard you attention.

19. Know your Weakness:
“Every weakness contains within itself a strength.” — Shusaku Endo

Knowing what you don’t know and knowing your weakness will help you stay out of troubles almost all the time.

20. Take intelligent risks:
“Never was anything great achieved without danger.” ―Niccolo Machiavelli

Most of the seemingly risk free choices are often the riskiest. First understand what is risk. The word “risk” derives from the early Italian risicare, which means “to dare”. So Analysis, Understand and daringly, place your bets.

21. Avoid Thinking Traps:
“I don’t want the cheese, I Just want to get out of the trap” -anon

There are certain thinking traps you need to avoid like “Group traps”, “Burning Issue traps”, “Status-quo traps”.

22. Have Low Time Preference:
Don’t put off for tomorrow what you should do today. — Aesop fable “The Ant and the Grasshopper

From Aesop fables “The Ant and the Grasshopper” to Stanford Marshmellow experiment , it shows the importance of having low time preference or delayed gratification. Learn self-control.

23. Always invest in yourself:
“You will never go broke from investing in yourself” — anon

If you are not ready to invest in yourself, no one else will. You are the best investment you will ever make in your life.

24. It is okay to Start over:
“Isn’t it nice to think that tomorrow is a new day with no mistakes in it yet?”
― L.M. Montgomery

Its okay to Start over as long as you don’t stop.

25. Don’t be afraid to make a decision:
“Don’t be afraid to make decisions in life.” — Arnold Schwarzenegger

Most decisions in life are reversibile. So don’t hold back, make a decision. If it works you will be happy. If it doesn’t work you will be wise.

26. Have Skin in the game: 
Never ask the doctor what you should do. Ask him what he would do if he were in your place. You would be surprised at the difference” — Nicholas Taleb

Don’t give or take advice unless he or she who giving advice has skin in the game. From Economist to Teachers are selling opinions with no skin in the game. If you give advice, ask yourself “If I were in his/her position, would I do the same thing?”

27. Be obsessive:
“You become what you think about all day long.” — Ralph Waldo Emerson

Be obsessive. Run it in loop until you make it.

28. You’re the most important person in your life:
“Be yourself; everyone else is already taken.” — Oscar Wilde

Be yourself. You’re the most important person in your life. The only person you should try to make happy and impress is your own self.