Principles - Ray Dalio

Ray Dalio explains in this book the principles he has used to get to where he is today. It discusses not just individual principles that we live by, but also principles that which organisations can follow, establishing structures to guide their path to success. While insightful, is it worth a read?

Content: Ray starts off by explaining his background and the early stages of Bridgewater Associates, the company he founded decades ago. He described the principles which he lived by (life principles) and how he incorporated them into his company (work principles). Finally, he ended with the governance and structures in place that can help individuals and companies stick to these principles to allow for continued growth and development.

Estimated reading time needed: 10-12h, including time for reflection. 

Key takeaways: 

1)  Be radically open-minded and learn your ego and blind spot barriers: Our defence mechanisms make it hard for us to accept that we are wrong at times, but we need to put our egos down and learn. The key takeaway for me is that we should learn from whoever is the expert, even if that person is a junior. The most important thing is to get the right answer rather than to be right.

2) Creating a culture in which it is ok to make mistakes and unacceptable not to learn from them: More applicable to organisations - a culture in which it is unacceptable to make mistakes will naturally find that mistakes are swept under the rug as nobody wants to get into trouble. This means that not only are mistakes not resolved, but the same mistake may be made again if there is no education provided. I think a "fail fast, learn fast" culture may be the quickest way to develop and grow as individuals and organisations.

Recommendation: While Ray provides some useful insights, I would recommend reading this book with an open and critical mind. Firstly, the book itself could have been much shorter if not for the repetitions and unnecessary explanations/examples, which made it less enjoyable to read - filter out only the necessary stuff. Secondly, Ray's principles worked for him and are good for us to consider. However, these are meant to be a guide rather than the whole truth, as there are other principles out there that we can follow/create. Thirdly, remember that Ray is the founder of his firm and thus several of his points come from that perspective. Not all may apply to non-founders.

That being said, I also do agree with many of his points. Ray spoke about creating an open culture where mistakes are called out, individuals are educated, and people challenge each other (for the purpose of getting the right answer). As someone who also has blind spots, I always appreciate feedback, especially from my superiors at work.

Overall, the points in this book are generic and not life-changing. They are real lessons that he has learned over the years of building his company. The book is more like a reminder for me, so 10-12h is a bit too long. Not a bad book, but also not great.

The Hour Between Dog and Wolf - John Coates

Reading biology has never been more thrilling. Coates expertly blended finance with biology, taking us on a journey through the trading floor and what goes on in our bodies over time. If you are interested in what happens on the trading floor and what happens to our bodies during times of stress and excitement, this is the book to read. It will give you a new perspective, helping you understand your body better through a molecular lens (literally).

Content: The book was informational and the storytelling was fantastic. Coates went from describing how our hormones rise and fall during certain times, how we can build resilience, and even the setup of an investment bank and what traders do on a day-to-day.

Estimated reading time needed: 15-20h; it is a non-fiction book with technical jargons, so more time will likely be required to fully understand and process the information.

Key takeaways: 

1) During a winning streak, we can become euphoric and our risk appetite expands (winner effect). Testosterone increases and so do confidence and risk-taking which segue into overconfidence and reckless behaviour. On a losing streak, we struggle with fear, reliving the bad moments and the stress hormones linger, which may ultimately result in high blood pressure and other infections.

2) If we want to understand how people make financial decisions, how traders and investors react to volatile markets, and how markets tend to overshoot sensible levels, we need to recognise that our bodies affect our risk-taking behaviour.

3) Ever wondered how a cricketer can catch a ball in a split second? The brain anticipates the actual location of the object and moves the visual image we end up seeing to this hypothetical new location.

4) Every millisecond matters. We hear events that happen near us before seeing them, and we see events that occur far away before hearing them. The intersection is called the "horizon of simultaneity". On the trading floor, traders see the price on the screen, but an audio feed could give traders a 40-millisecond edge in the market.

5) The four stages of competence - unconscious incompetence, conscious incompetence, conscious competence, and unconscious competence. "Thinking, one could say, is something we do only when we are no good at an activity". However, I believe this blanket statement should not be applied to every scenario. Make sure you check your work thoroughly before submitting it to your bosses!

6) Traders with a high IQ and insight into the value of stocks and bonds may be worth listening to, but if they do not have an appetite for risk, they will not act on their views. Good traders must also be able to scrutinise the screens for hours at a time, and they must move to trade before anyone else.

7) Computers may take over the job of quick trade executions, but our bodies will continue to be crucial for success in the markets because they provide us with perhaps the most important data informing our call on the market - our gut feelings. How can we train ourselves such that our gut feeling becomes more accurate?

8) Mentally toughened individuals welcome novelty as a challenge and see it as an opportunity for gain. Resilience to stress comes from experiencing stress. Toughening our minds can thus come from a process of challenge and recovery. The author also distinguished the difference between periodic stress and chronic stress. The former would give rise to toughened individuals, but the latter would cause infections and other health issues.

9) Exercise is the most important way to toughen ourselves, as it helps to inoculate us against anxiety, stress, depression and learned helplessness. Exposure to cold weather or water would also help us be more emotionally stable during prolonged stress.

Recommendation: Having studied biology and finance, it never occurred to me how one is affected by the other. I believe that understanding our physiological reactions can help us adjust and react to our environment easier, and at the same time remain calm and in control of ourselves over external events. If any of the above was interesting to you, I highly recommend reading the whole book.

Getting to Yes - Roger Fisher & William Ury

This was hands down one of the best books I've read. Extremely useful in learning how to get to an agreement with others. Although theoretical, the pointers were clear with sufficient explanation and evidence, and with practice, I believe this is a skill that can be trained.

Content: The book is fairly straightforward - how do we get others to saying "yes". There are 3 main bodies for the book - the problem, the method, and other considerations we may have when negotiating. First, they look at defining what's the roadblock to the agreement, then laid key generic frameworks for standard negotiations that we can use. 

Estimated reading time needed: 12-15h depending how quickly you can internalise the info. I suggest taking it slow and absorbing as much as you can.

Key takeaways: 

1) Communication is the basis of negotiation, where negotiation is a process of communicating back and forth our interests.

2) In a difficult negotiation or with an impasse, there are 4 steps to create options we can take - same as solving any other problems in our lives - identify the problem, analyse it, identify approaches and take action steps.

3) An agreement may be based on disagreement - where one man's trash is another man's treasure. 

4) When negotiating, focus on interests and not positions. There are a few ways we can get to safeguard our interests. In principled negotiation, we can get others to come together to discuss a solution to all our problems, rather than argue about who wants what or who is right.

5) Your best alternative to a negotiated agreement (BATNA) - your next best alternative - is extremely powerful. Identify and improve it, so that you have more confidence in your negotiation and are willing to ask for more. Even if the negotiation turns sour, your alternative is still a good choice.

6) If the other party is firm on their position, look at their underlying interests, ask questions and pause. If they attack you personally, recast that attack as an attack on the problem.

7) Stick to principle when negotiating - it is difficult for others to fault your interests if you know what's important.

8) Separate the people from the problem - tackle the problem together, not tackle the other person.

9) Understanding the forest landscape is better than understanding one specific path through the woods. Know your interests, strategies, BATNA, potential rebuttals, and those of the other party.

Recommendation: There are many other interesting information and pointers in the book which I didn't cover here, such as what we can do if the other party has more "power" over us and how principled negotiation can help when encountering phony tactics. Negotiation happens in our daily lives, personal and professional. While we don't have to negotiate our way through everything, such as where to have dinner, it sure would be helpful to have such skills when needed.

Think and Grow Rich - Napoleon Hill

If you want to grow rich and have someone nagging at you that you have to stop breathing, eating, and sleeping just to cater 24/7 to getting rich, this is the book for you. 

Content: The entire book is based on the notion that if you want it, you can have it. That you just need to dream it. In the early chapters of the book, Hill mentioned how if you're ready you'll know what to do as you read through the book. It's probably the case if you already have an idea of how to get rich and you just need some form of external motivation pushing you on.

Estimated reading time needed: ~20h

Key takeaways: 

1) You need to believe and envision the life before you can lead the life.

2) Getting rich requires determination and discipline. Lots of them. You need to be obsessed with getting wealthy, and make the required sacrifices.

Recommendation: There really aren't many takeaways as I only read the first hundred or so pages. The reviews were great, but I didn't see the need for an author to write about "believing in yourself", "have faith", "you can achieve anything you dream of as long as you work for it". These may be helpful if you're stuck or lost in life, but such fluffiness is something I didn't expect in such a highly acclaimed book. Furthermore, as many other reviewers have pointed out, Hill said he didn't allow his deaf son to learn the sign language because he "believed he could live like a normal human", which implies that deaf people cannot live "normally", or that sign language isn't "normal". Crass and crude. I definitely do not recommend wasting your time with this book unless you need to hammer in those thoughts into your head. 

The Psychology of Money - Morgan Housel

People overreact when they fail because they forget how normal it is to fail. 

Housel wrote this book with the audience in mind - people who want to know about money, and the minds of people when it comes to money. He understood that people didn't want to read hundreds of pages for a single point, so he condensed what he knew into many short points.

Content: Housel provided multiple digestible points about how people treated money, how they acted when it comes to money and how they thought about money. There are so many learning points in this book that it's hard to pick and choose which are most important.

Estimated reading time needed: 10h

Key takeaways: 
1) Our personal experiences with money make up a tiny tiny fraction of what's happened in the world, but make up the bulk of how we believe the world works. Most of what we know are thus extremely little, and our perception of what is "supposed to be" and what isn't will be very different with that of others. 

2)  What we focus on are usually the "tails" (think of a normal distribution curve). These tail events, although extremely unlikely, are more focused on in the world. Housel opined that "the more extreme the outcome, the less likely you can apply its lessons to your own life, because the more likely the outcome was influenced by extreme ends of luck or risk". Whether you agree with luck/risk or not, we have to recognise that most of the people we've heard of on the news are the tail ends (Bezos, Gates etc). In essence, pay attention to broader patterns rather than individuals.

3) Enough - how much money we want to have, how much money we need to have the life we want. All these differ depending on the individual. Housel pointed out that if our expectations rise with results, it doesn't make sense to strive for more because we will constantly feel disappointed by this gap in between. 

4) Happiness is just results minus expectations.

5) Progress happens too slowly to notice, but setbacks happen too quickly to ignore.

6) Having a margin of safety lets you live happily with a range of outcomes.

7) In a book "30 Lessons for Living" by Karl Pillemer, a thousand elderly Americans were interviewed on the most important lessons in life. None of them said to work hard to make more money, or to be as wealthy as others, or to choose a career based on how much money you want to make.

8) Controlling your time is the highest dividend money pays.

Recommendation: As a finance student, this book spoke to me deeply and made me reflect on what wealth means to me. Without a doubt some people might think that money is extremely important to them (it is to me as well), to each their own. There is no right or wrong when it comes to money, it's just a matter of preference, and everybody plays a different game. People born in 1920 think the stock market is a terrible game to play, but people born in 1990 will think the stock market is an easy game to play. A great book on money, good read!

Mastering Private Equity, by B. White, C. Zeisberger, and M. Prahl.

Being a finance student, I've been interested in the concept of private equity (PE) for some time. In school, we mostly learn to apply what we've learned to public equities, because of their availability of information. The concept of PE seemed elusive, even after doing some online courses on it. However, this book covered most if not all there is to know.

Content: The concept of PE is not as straightforward as its name suggests. PE encompasses private equities, but has been becoming more like private capital instead, since it also includes real estate, infrastructure, distressed PE secondaries, mezzanine funds etc. Traditionally, PE looks at 3 areas - venture, growth equity and buyouts. They generally follow the same process, from deal sourcing to the 2 stages of due diligence to negotiation and documentation. However, differ in each areas. For example, equity control is crucial in buyouts more so than in venture investments, because of the need to make financial, strategic and operational decisions.

Estimated reading time needed: 25-30h. I took about 2 weeks, reading close to 2h each day.

Key takeaways: 
1) PE is not just about valuing companies, finding alpha and generating returns. PE is also a people business, and there is a need to understand the people PE companies invest with, through developing real relationships based on trust and respect.

2) In valuing companies, it is more of an art, and efforts to mitigate risks is more of a science. To get the best returns, choosing the right firms to partner with is especially important for businesses, and choosing the right firms to invest in is important for PE firms. This is why in deal sourcing, the highest bidder may not always be chosen.

3) Perhaps the most crucial part of PE investing isn't the pre-investment phase where investors source for deals and identify investment opportunities. Instead, it could be the post-investment period where value is created and realised on exit. This is where the PE firm implements a solid corporate governance model, align the teams, basically being more "hands-on". 

Recommendation: Personally, PE is an industry that I'm interested in as a career, which is why I've enjoyed reading this book. Although it is still extremely complicated to me, it helped me gain a better understanding of this concept. I will probably have to read it again some time in the future as a refresher, but I recommend it to anyone interested in this field. However, do note that this is not a short book, especially since it's very technical with some jargons.