Mental model: rule of 72

I have been a fan of Charlie Munger's principle of keeping mental models, which will help one think properly and make prompt and correct decisions in most circumstances. I thought I should remind myself of the mental models I have been following, consciously or subconsciously, which suit my life very well.

Rule of 72 is one of them. The rule helps one to calculate how many years it will take for an amount of money to double at a given rate of interest. If the rate of interest is x% per year, then the money will double in (72 / x) years. For example, if rate is 9%, money will double in (72 / 9) = 8 years.

This rule also has a hidden rule in it, because it works only for compound interest - which means, one cannot take the interest out of the account at the end of each year. Thus discipline is required for the rule to work.

The math behind this rule is not complicated for the mathematically savvy. But the rule works whether you know how to derive this rule yourself or not! There are people who can do much more sophisticated math, yet fail to take advantage of the rule!

Facing Reality in India

Crimes against women have unfortunately become very common in India! Today my wife was so annoyed at the groping and molestation incident that happened in Bengaluru on new years day that she started discussing it with me with a lot of agitation. I didn't even look at the CCTV video that is available online when I read the news, because my watching the video isn't going to help the victim and is very well going to agitate me a lot. At my wife's behest, I eventually watched it and was quite shocked. I have to admit that I was disturbed for quite some time after watching it. Then my wife went to her own past and recalled how couple of men misbehaved with her in public transport several years ago in India. Then the discussion went to the Delhi gang rape case and how the victim subsequently died. Apparently the main accused is roaming free now after three years in jail, since he was a juvenile. At this point my patience on discussing world affairs came to an end. I hate thinking about problems which can be solved only by a miracle. And in a country like India, I have not seen any miracle happen in my life time (38 years). So the discussion with my wife ended abruptly with me not wanting to continue!

If you really start thinking about this problem at a personal level, all you can do is control things at your end. You cannot change other people or an entire country! No question that the perpetrators of such heinous crimes should be punished severely. But leaving that problem aside for a moment, my advice to women in India is to try and stay away from trouble as much as possible! It is unfortunate that your right as a human being is challenged, but you are living in a country with a lot of problems. You cannot change the country, but you can avoid putting yourself in precarious situations as much as possible. The way that girl was walking at 2:30 AM all alone by herself looked like she was going to get into trouble! Couldn't she have walked with a few friends? Couldn't she have not gone to a party that late at night? I am not saying such things cannot happen inside homes or be committed by close relatives, but at least you can try and protect yourself as much as you can!

Changing the country on this aspect will require a change at another level - law enforcement. When the police is weak and corrupt, crimes are inevitable. Even in a developed country, any rule that is not enforced is flouted. And any crime that goes unpunished encourages others to commit those crimes! I don't think most car drivers in developed countries would follow traffic rules if they are not strictly enforced or if the police start taking bribe! At least in the US, I believe people are afraid of the police for the right reasons and most people follow the rules most of the time. Yes, I don't want a cop to pull me over in the US, because that most likely means I have done something wrong - that is the only reason that should come to my mind. In India, when a cop pulls me over, I think how much this guy is going to take from me! In India we used to joke telling the only difference between a good thief and a bad cop is the police uniform; both of them take money from you! (The bad thieves hurt you physically too!) And a lot of cops in India are bad. The justification is that cops are paid so little that they need to "supplement" their incomes through bribes! When people start justifying mistakes, then there is no solution.

I remember my dad telling me during my last India trip about how bright the days after India got independence from the British. He was only 9 at that time, but he remembered how everyone respected Indian political leaders and how good the police force was, and how much everyone dreamt of having a great life! And he has seen India go from that golden age to its present stage in these 70 years!

I used to think a lot about how to fix the problems in India. After a few years I realized it was futile. I can only do things under my control, like following the rules, waiting my turn in a queue, pay taxes properly, try to stay away from trouble as much as possible and be honest; and if everyone just takes care of just himself, I think the country has some hope for fixing itself!

Car not responding to FOB key

tldr; Your fob key battery may be fine, but your car battery may be dead.

My cousin from SF was visiting us over last weekend. They wanted us to keep their Honda Odyssey 2016 for a week when they went for their week-long Mexico cruise. Everything was good with the car for the first two days. On the third day, the car alarm went off apparently for no reason. I wasn't home at that time, and my wife unlocked and locked the car with the fob key and everything was good. Then two days later, I wanted to open the car to keep some bags inside. I was shocked to find the car not responding!

The small red LED light on the fob key was still turning on when I pressed the buttons, but the car simply didn't respond. My natural response was to think that something was wrong with the fob key. I noticed that my cousin's son had put some small toy magnets with the key and those were sticking on it. I suspected those magnets messed up something inside the fob key. I have never used a fob key and a keyless ignition so far, so had to google around. The first reason everyone mentioned was that the battery inside the fob key might be dead. Figured out how to open the fob key and change the battery, a CR2032 3 volts battery (costs $2 a piece at Walmart). I tried again, but still no response from the car! I was suspecting that would be the case since the car is brand new and the LED lamp was turning on when I pressed the buttons.

I did not realize that when I opened the fob key, the physical key that the fob key had inside it could actually open the car. (See this video if you don't know how to get the physical key out of the fob key.)

I thought the car doesn't have a slot for the physical key, but had I seen below the driver door handle, I would have seen the slot to insert the physical key and open the door! Alas, the way I had parked the car in a corner with little room to stand next to the driver side door hid that slot when I was standing.

I called couple of my friends who have Honda Odysseys and they were clueless too. Everyone was thinking of complicated reasons like the car having some anti-theft protection that locks the car automatically, etc., No one even suggested trying to open the car with the physical key and check if the car would start!

I finally ended up calling AAA. First they sent a lockout technician. Even he didn't know that the physical key could open the car. He did his usual stuff on the passenger window and opened the car. But he correctly guessed that the car battery might be dead. I got in, pressed the ignition button and there was no response. Then I called AAA again to get battery jump. This guy was the one who finally told me I could use the physical key to open the door! He gave a jump start and then we started looking why the battery died. One of the lamps inside was on! And it was the lamp next to where my cousin's five year old son sat! He had left the lamp on and since I drove the van only during the day, I never noticed it! I turned off all the lamps and then drove the car for half an hour for the battery to recharge. All good after that.

If you ever face this problem, then first open the car with the physical key and check if the car battery is alright.

Practical Implementation of Sharpening the Saw

One of the books that really influences my thinking is Stephen Covey's "The seven habits of highly effective people". In this post I thought I could share how I am implementing the seventh habit of "sharpening the saw".

The story behind the principle is that of two woodcutters (sorry, trees and tree huggers!). The first woodcutter just kept cutting trees for eight hours a day with his saw. The second woodcutter spent the first hour each day sharpening his saw and cut trees only for seven hours each day. At the end of a month, the second woodcutter had vastly outperformed the first and also looked much less tired compared to the first one.

In today's world, especially when it comes to the IT industry, I can see these two woodcutters at all workplaces. The people who look like the first woodcutter work very hard and get quite tired by the end of the day. They don't seem to have a lot of fun at work. They are usually working on putting out fires at work, meaning they work on urgent and pressing matters all the time. They look quite burnt out at the end of the day. Usually they need some alcohol or TV after work to wind themselves down. The people who look like the second woodcutter work hard too, but they seem to be energized by their work and more productive every day. They also seem to have a lot of fun at their jobs and seem to help others a whole lot more. Somehow you feel quite relaxed and are at ease when you are around the people from the second group. They also seem to have enough energy at the end of each work day that they can spend time on more demanding tasks like helping kids with their homework or doing little chores at house in the evenings.

To implement this principle into my life, I decided that I was going to evaluate how much I was learning each day at work. On some days, the projects I do at work provide opportunities for learning something new. On those days, I don't need to separately dedicate an hour first to learn something new. But I found that at least half of my days are spent on just doing mundane work - work based on what I already knew. On these days, I decided I would spend the first hour learning something closely related to work and projects, but not exactly work on the project my boss gave me. What I found out was, though this time was spent on something else, it paid me back multiple times in the long run. Also it kept my brain fresh with ideas and gave me alternate ways of thinking about a problem at work.

Some really smart companies like Google realize the value of this and give their employees 20% of the time to work on their own projects. These companies invest in their employees. But other short-term thinking employers think of this as a waste of time. If our employer is in the latter category, then we need to take charge of ourselves and improve ourselves. After all, no one cares more about our success than ourselves!

In my previous job, I did not have the luxury of doing my own stuff for the first hour each day, so I actually spent an hour outside of my work hours to do the learning. After about a year of doing that, I was ready to move up and take on a more responsible job. This new job gives me plenty of flexibility to learn at work itself, so I give myself the first hour of my office hours to learn something new. Currently I am working in the fields of data science, machine learning and big data. There is never a lack of things to learn in these fields. I have about a dozen things in my radar to learn next.

Another way to implement this strategy is to participate in a mailing list and try to help out others with their problems. I was active on StackOverflow for about a year when I was learning Solr. It was a very rewarding experience. I could see what challenges people faced in their jobs and solved many practical problems. I would have never even thought of many things had I not looked at StackOverflow. Participating in such platforms helps us learn things that we would have never thought of ourselves to learn. For about a year, this was just a hobby for me, but a year later, a project came up at my company that no one knew how to solve efficiently. It took me a very short time to figure out how to do that project in a scalable manner with Solr. I took on that project and worked on it for a few months. It worked amazingly well and scaled to well over ten times the data my employer initially had (with the same hardware we were using)!

A huge benefit I found by spending the first hour at work learning is that I remain positive for the rest of the day, irrespective of how the work for my employer turns out that day. This is similar to the positive energy you feel if you work out in the mornings. Doing such high RoI (Return on Investment) tasks first thing in the morning helps us tremendously in the long run.

In summary, practicing the habit of "sharpening the saw" has multiple rewards and something we should practice every day in our lives.

Does value investing work?

If you are reading this article, I believe you are a person who already knows about the advantages of diversification, index fund​​s, rebalancing and low expense ratios. I also hope that your own investments are in low cost index funds already, with proper allocations to stocks and bonds, based on your risk tolerance and investment horizon.

(If you did not understand anything I mentioned in the first paragraph, please stop now and do yourself a favor. Read the book "The Bogleheads Guide to Investing" by Taylor Larimore et al. Don't worry, I am not affiliated with the Bogleheads, nor do I get compensated for referring that book, nor there is an Amazon affiliate link in that URL. That book that gets you to almost an under-graduate level in investing. Without understanding that book, I can confidently say that value investing is not for you.)

You probably have been doing some reading or research on alternative investment strategies, obviously to do better than what you think your current passive indexing strategy will probably deliver. Maybe you read some books by Benjamin Graham, or listened to Warren Buffett, or read some books about Buffett or some other value investor, and are thinking of adopting value investing strategies.

I was exactly in your situation. I and my wife have some money in our retirement accounts. Most of that is invested in Vanguard Target 2045 retirement fund, with the rest mostly in Vanguard index funds. I say "most of that" because my employer has an index fund with another company, so I have no option but to pay the 0.31% expense ratio for a total stock market index fund, for which I would pay a paltry 0.05% with Vanguard!

I read Benjamin Graham's "The Intelligent Investor" couple of years back and realized that active investing is a very time consuming process (think 40+ hours a week). I decided to be a passive investor and follow Vanguard 2045 retirement fund (the year chosen based on when I will roughly turn 65). But every now and then, I would wonder if I could do better than this passive investing strategy. I started reading a lot on value investing recently! After about two months of reading over a dozen books and several hours of online research, what I realize is that even people who are full time value investors do not succeed all the time. The ones whom you hear about are the ones who succeeded after several years of value investing. For each successful value investor, there are probably anywhere from tens to hundreds of failures. It is not because value investing principles do not work. They certainly do. But as human beings, we do not always stick to those principles! If you read Graham's book, he says repeatedly that it is easy for him to give guidelines, but difficult for us to follow it in practice. Just ask yourself - did you floss your teeth today? did you exercise for at least 30 minutes today? Two or three years of inferior returns from value investing will drive almost all of us out of value investing into indexing with our tails between our legs!

I have high regard for Warren Buffett and his sage advices on value investing, but trying to use his value investing advice in our own portfolios is impractical. He has unusual intelligence with numbers, excellent memory and has a solid command over estimating odds. He says he got wise by reading a lot - by lot, I mean he reads about 500 pages of financial documents a day! He has the ability to really understand what he reads and remember that too. And finally after several years of value investing, he says in his 80s, that for most individual and institutional investors, index funds are the best! Thank God he finally said that!

The field of value investing is very enticing to someone like me, who loves to learn a lot and think of myself as a contrarian! Let's just look at the game I am going to play. Here I am with all this knowledge I acquired by reading so much. I also have a solid engineering and math background. Most people don't understand much about stocks, most people don't take the time to read, most are not as mathematically oriented as me. Most of them buy when market goes up and sell when it goes down. So isn't it obvious that with all this intelligence I got I should do better than the vast majority of others? This kind of thinking is detrimental to our investment returns. What happens in reality is that even with all those qualifications, many have played this game and failed miserably. We don't hear much about them because no newspaper or magazine wants to hear from them! Their interviews won't sell. Even if there is such an interview, most of these investors never admit their mistakes; instead they blame someone or something else. It is very hard to tell in an interview "I thought I could beat the market by doing what I did. Now I realize that the market has beaten me to a pulp. I failed.".

Another important fact is that, historically, value companies have done better than growth companies, but that doesn't mean that same will happen in the future. Growth may very well outperform value over the next thirty years and that may very well be all the time you and I got as our investment time horizon.

Every now and then, someone will come up with some "magic formula" even within the field of value investing. It may even work for a while or even a long time, but I don't want to put my own money into figuring out if they are right or wrong. Beware of all such "magicians", since they usually run magical mutual funds which charge high fees. The magic ensures that they become rich whether we even get the market returns or not!

In conclusion, I believe that for me and a vast majority of regular people who have full time jobs (in fields other than stock market), indexing is the way to go. Spend that little extra time you got every day to doing other things - to learning more about your field of work or spending more time with family and friends or pursuing other hobbies. Manage your money passively with low cost index funds and sleep well :-)

Equality in Indian Religious Practices

People in India are quite devoted when it comes to their religious practices and ceremonies and I have nothing against someone doing something they want, as long as it does not affect others in a negative way. But then Indians want to let others know when they are doing something good, like praying or going on pilgrimages to temples like Sabari malai, etc., This is where I believe they encroach upon the space of others quite liberally.

Where we used to live, there was a church nearby. The Sunday services are always done with loud speakers and the whole surrounding area is forced to hear it. And we moved to another place and now there is another church nearby and the same deal again. Right next to my sister's house, there is a church and every Sunday no one can talk to them on phone since all you can hear is the loud preaching of the church. I do not understand why people have to disturb others when they are praying or doing religious ceremonies. This happens every Sunday and is very annoying. Didn't even Jesus Christ preach that when you pray, you pray in privacy without sounding a trumpet? Trumpets would be less louder and for much shorter duration, than the loud speakers we are forced to hear every Sunday!

Then there are other seasonal celebrations like going to Sabari mala, where people rent out loud speakers and blare the devotional music and their religious chantings out so loud, that one wonders whether these people are looking for peace and harmony, or just plain recognition.

The idea of equal rights in India seems to have a net negative effect on everyone. Everyone has a right to disturb everyone else... Non-Christians are annoyed by the loud Sunday services, Christians are annoyed by loud non-Christian ceremonies, and non-Muslims are annoyed by Muslim service calls. The point is to have everyone follow whatever they want, without disturbing others. Tolerance should not be in tolerating the annoyances caused by others, but should be a "live, and let live" attitude towards others that they can follow whatever they want and do whatever they want, and I am OK with that.

Chennai Furniture Shopping

Bought some furniture for my home recently and want to share a decent experience I had with the furniture stores. The store came highly recommended by my paternal uncle and cousin, who bought all the furniture for their home from that store. The furniture in their home looked quite good and I decided I would order almost exactly the same pieces of furniture and some mattresses from the store.

My first order was a big one. I got two single beds (cots) for my parents. The legs and the beams were all solid wood and the base (on which the mattress rests) was plywood. I got it for Rs. 13K each. Then I purchased a sofa set (one three seater and two one seaters) for 28K and a four-seater dining table for 14K. I also ordered two Kurl-on mattresses (one for 17K and another for 10K) for my parents. The total came to 97K (after discounts). The shop took some cash advance and delivered the items on time and took the remaining amount when they delivered.

My next order was for a double bed and it costed 21K. This order was delivered a day late, but compared to how a lot of things get delayed in India, a day's delay was alright (though I expected better from the store). There were also nominal delivery charges (750 for the first one and 500 for the second).

Ok, now you want to know which store this is. It is:
Sri Venkateswara Furniture,
No 573, Anna Salai, Teynampet, Chennai, Tamil Nadu 600006
Tel: 044 4269 2150

(The store is close to Teynampet police station.)

I found the owner Mr. Parthiban both amiable and efficient.

We believe the furniture will last us a long time (few decades at least).

Disclaimer: I am not in any way affiliated with the store, the owner or will get any compensation for promoting the store. I am just a happy customer who likes to share both my positive and negative experiences with my shopping in India via this blog (since there is no Yelp in India yet).