Pare, Parrot, Pareto
Pare, Parrot, Pareto
Parrot is the word that is currently ubiquitous around us, be it investments, following or forwarding. There is very little that one needs to do either as a successful investor or feel good follower. All one needs, is follow the dumb, get comfortably numb in the mind. Decades of education has more less became questionable ones, the more ine tries to erase the more one recalls. Rock Star fund managers are no longer sought far, every rock you touch is the star now.
Pareto Principle – also known as the "80/20 Rule" – which was coined by Italian economist, Vilfredo Pareto. The Pareto Principle states that 80 percent of a project`s benefit comes from 20 percent of the work. Pareto Analysis identifies the problem areas or tasks that will have the biggest payoff. 80:20 rule is more line in sand not carved in stone. The whole exercise is one of problem identification and solving. What are the equivalents of these 80:20 today. Vaccinated Vs not Vaccinated, Growing Rich Vs Growing Poor, those who lost jobs Vs held jobs, Believers Vs non-believers, Silence Vs Spoken, Din Vs Dumb just to name a few (there is no particular order maintained). Of all this, that is grave concern is growing rich Vs growing poor. This has tremendous socio-economic-cultural changes.
Nassim Taleb, in his book “Fooled by Randomness”, narrates his view about market going up, when in fact he held short position. He explains his rational by expected value of the outcome rather than just the absolute move. While we have ‘breathless pundits’ pouring their views on endless optimism fooled by the new age central bankers the end game is not one of stalemate. Those who did not toe this are already timed out. Fear of FOMO is at its peak. We have reached a stage of “know nothing investors”. We have long forgotten that Pride comes before the fall. We are reaching the ‘the tragedy of the commons’ where by individuals acting in their own self-interest, spoil through collective action.
Sage Shuka, son of Sage Vyasa has parrot like face. Parrot face is a symbol of all Vedas, while his body is representation of materialistic world. Parrot also is a symbol of memorisation of Vedas. Equivalent is “I am a brain, rest of me is mere appendage” – Sir Arthur Doyle.
We as investors always care for big returns, little we understand what those big return brings in fulfilling our needs and wants. The joy of holding multi-baggers is more than the joy when they actually materialise. The emotion that we attach to a painting after we hang up in our home is completely different before we identify. Our brains cannot process complex subjects. We are no different than the birds which can count only up to particular number. Imagine the choice to choose between two or three vehicles than the choice to choose host of vehicles, the option always is default that is what every one else is buying or simply what the majority is buying. We are in a world of “less is more information.”
PARE, (Pain, Agony, Rational and Ego), the only way to avoid this is pare it, once we meet objectives, else one will have to stare at it. Markets are irrational longer than one can remain insolvent, for now appears only to sellers. Today a bunch of stocks is what is the Index. We suffer from primary and recency irrationality. Primary because investing irrespective of bubbles bring wealth, recency there is no choice left. While passive is the new active, active is new dumb. For the behaviour investor “exploit the error, avoid the terror.”