Yi-Chen Lu's Newsletter No. 4
A Great Investing Lesson, The Law of Mind and Perception, The Munger Operating System
Greetings from Vancouver, and wishing all of my American friends a wonderful thanksgiving!
Hope you enjoyed the last issue and that it inspired you to start thinking about what your core values are.
I would love to start this issue by sharing a quote:
The best way to predict the future is to invent it. — Alan Kay
Stop waiting for the future to come to your doorstep, get out there, and start inventing your future.
Question for you: What are you planning to start in 2021 that you can start right now?
For me, it's putting myself out there, sharing more ideas, and starting more conversations with people. If you like to learn more, watch this speech I did recently during the Performative Speaking course on my perfect intro and how it is leading me into 2021.
Here's a snapshot of everything in store for this issue:
A Great Investing Lesson
The Law of Mind and Perception
The Munger Operating System
A Great Investing Lesson
One lesson that stood out to me is, "It pays to study human behavior."
Investing is more about the study of human psychology than finance. The more I learn about investing, the more I see that to master investing, you need to understand all the basics of human behaviors.
Here are some of the great quotes I compiled from the best, illustrating how human psychology plays an important role in investing:
Financial success is not hard science. It’s a soft skill, where how you behave is more important than what you know. --- Morgan Housel
The psychological factors that weigh on other investor's minds and influence their actions will weigh on yours as well. These forces tend to cause people to do the opposite of what a superior investor must do. For self-protection, then, you must invest the time and energy to understand market psychology. --- Howard Marks
Understanding how our brains work - our limitations, endless mental shortcuts, and deeply ingrained biases - is one of the keys to successful investing. --- Seth Klarman
Each person has to play the game given his own marginal utility considerations and in a way that takes into account his own psychology. If losses are going to make you miserable – and some losses are inevitable – you might be wise to utilize a very conservative pattern of investment and saving all your life. So you have to adapt your strategy to your own nature and your own talents. I don’t think there’s a one-size-fits-all investment strategy that I can give you. --- Charlie Munger
It is crucially important not to let psychological factors interfere with economic rationality in investment decision making. --- Bill Ackman
The most important quality for an investor is temperament, not intellect. You need a temperament that neither derives great pleasure from being with the crowd or against the crowd. --- Warren Buffet
As I look back now, it’s obvious that studying history and philosophy was much better preparation for the stock market than studying statistics. Investing in stocks is an art, not a science, and people who’ve been trained to rigidly quantify everything are at a big disadvantage. --- Peter Lynch
The Law of Mind and Perception
You can have the best product in your marketplace that you believe will revolutionize the entire industry. But if you can't get this idea or product into the prospect's mind, it's nothing.
Marketing is a battle of perceptions, not products.
Marketers who think that getting the best products out there wins are getting it all wrong. The reality is, there is no such thing as the best product.
Marketers are preoccupied with doing the research and sharing facts about the product. But people don’t care about the facts as much as how they feel about it because facts are perceived differently relative to your experience versus the others’ experience.
Each customer will have their own perception of the same product.
Here’s a great example from the book, The 22 Immutable Laws of Marketing:
The three largest-selling Japanese imported cars in America are Honda, Toyota and Nissan. Most marketers would think that the battle between the three brands is based on quality, styling, horsepower, and price. Not true. It’s what people think about a Honda, a Toyota, or a Nissan that determines which brand will win.
It turns out, in Japan, the sales order looks like this instead: Toyota, Nissan, and Honda. The products didn’t change. However, in Japanese people’s minds, Honda is known as a motorcycle manufacturer. Think about this: would you want to buy a car from a motorcycle company?
So marketing is a perception manipulation game.
And it's a tough game to play because of the following reasons.
When someone makes up their mind about a product, it's tough to change it.
Customers frequently make buying decisions based on second-hand perception, known as the "everybody knows" principle.
The key takeaway: To level up your marketing, study how perceptions are formed in the prospect’s (or customer’s) mind, and focus your marketing programs on those perceptions.
The Munger Operating System
A man with extraordinary wit and wisdom, they say. Charlie Munger, the Vice Chairman of the world's greatest compounding machine, Berkshire Hathaway, is one of the great minds of the 20th century.
He is known for his unique way of thinking through complex problems and understanding how the world works.
This article got me interested in reading more about the concept of a multidisciplinary mindset and mental models. He is a big proponent of drawing ideas from different disciplines such as psychology, economics, physics, biology, history, and many more, to develop his mental models that cut through noises and get right to the bottom of complex problems.
In response to a big question: How do we live a life that really works?
I have summarized some of his key ideas, which I have broken down into two categories: The ones which aligned with my core values and the ones that I aspire to achieve as I move forward.
Ideas aligned with my core values:
Perseverance: Don't let setbacks bring you down. Learn from the mistakes and move on to become better.
Curiosity: Acquiring wisdom equals lifelong learning. Keep learning, keep applying, and keep adapting. Don't get stuck in one place.
Kindness: Avoid becoming attached to ideologies. Be objective. Consider the other side of the argument.
Ideas that I am working on right now:
Learn the big multidisciplinary ideas of the world and use them regularly.
Think through problems backward as well as forward. There is more than one way to solve the problem.
Don't self-pity, envy others, or hold resentment towards others. Help others succeed. Acknowledge self-serving bias, but don't let it get to you. But on the other hand, know that it is there for people who have not removed it.
Be reliable. Unreliability can cancel out the other virtues. Do what you say you will do.
Find your interest and passion. These are the areas where you will find the most success.
Trust, success, and admiration are earned. Earn them by doing the work.
The "get things done fast" mentality. Do it until it's done. No more, "I'll finish it tomorrow."
Did you solve the last digital health trivia?
Tis' the season to be SPACing: which of the following digital health companies was not taken public through SPAC (Special Purpose Acquisition Company)?
A. Clover Health
C. One Medical
The right answer is C. One Medical.
Unlike the other three companies, One Medical went through the traditional IPO process instead of SPAC. They raised $245 million through JP Morgan and Morgan Stanley.
So what exactly does this company do?
Source: One Medical
One Medical offers a membership-based primary care platform to patients who would like to get 24/7 access to their electronic health records and healthcare professionals or virtual care providers.
The company also works with employers to offer their employees the benefits of this platform. On some occasions, some companies also contract One Medical to provide on-site employee checkups. A happy and healthy employee is the company's biggest asset. The value proposition for employers is straightforward. Healthy employees mean higher productivity and less absenteeism or presenteeism, which can seriously impact their bottom line.
Last but not least, One Medical also works with health networks to refer patients for more serious conditions that need more specialized care. On the one hand, One Medical is getting its revenue from providing primary care services and platforms to well-insured patients. On the other hand, health networks are getting access to more employer-sponsored patients. Even better: the proprietary platform allows health networks to see actionable data from patients' health records and make better and more accurate diagnoses and treatment decisions.
To modernize health care, One Medical has a clear mission:
To transform healthcare for all through a human-centered, technology-powered model.
Digital Health Trivia
Which tech giant recently announced the move into the foray of pharmacy and prescription benefits and could become a disruptor to other well-established companies in the space like GoodRx?
I will reveal the answer in the next issue. Stay tuned!
Thanks again for reading.
P.S. I love to hear from you. Feel free to hit reply and let me know what you think about this issue.