Preface

I'm a big fan of the whole Preface and Acknowledgments routine in books.

I know people usually skip these parts, and with good reason. Why would anyone want to read the list of people the author is thankful to, when one has never met or is likely to meet any of them in future? Also, why would one waste time on the author's personal beliefs, when the 'real deal', the facts, the theorems, the 'course' starts from Chapter 1?

 Acknowledgment and Preface?

For me the charm of Prefaces and Acknowledgments is that the 100 odd words at the beginning help me picture the person who has penned/typed the rest 100000 words as a distinct individual and not a droning voice in my head. Also, it defines the overall framework, and even the limitations of the book. Sample the Preface from H.C. Verma's Physics book in Class 12.

Imagine you're watching a game of Chess with your friends played by 2 expert players, but none of the spectators (including you) knows the rules. You can only watch the movement of the chess pieces on the board. Over some time, you observe that the pawns always move forward by 1 square. So, you frame a Law - 'A Pawn shall either remain stationary, or move forward by 1 square, given that the square is unoccupied.' The next 20 moves on the chessboard might validate your Law, but the 21st move suddenly sees the pawn moving forward diagonally and taking an opposition piece. Your Law stands violated even though it has held for 20 observations, so you form a new Law - 'The Pawn shall either remain stationary, or move forward by 1 square, given that the square is unoccupied, or move forward diagonally by a square, given that the square is occupied by an opposition piece.'

Physics, in H.C. Verma's definition, is similar to watching such a game of chess played out in the universe, where we observe what is going on and attempt to predict or control what will happen next, based on our observations and assumptions of how things work.

What fascinated me about this definition of Physics was the humility - 'There are no hard-and-fast, immutable Laws. If observations change, Laws change', and the acknowledgment of a divine entity - 'We can only guess the rules of the game, not the motivations of the Players'. Both the book and the subject of Physics, once seen in this light, appeared much more interesting from then on.

Another memorable Preface was the one in Linda Goodman’s book on Sun Signs. Before you judge my taste in books, let me tell you that I did not actually purchase it, but came across it at a friend’s house. You are free to judge my friend’s taste in books. Anyways, the Preface, which I expected to be mostly hocus-pocus (“Don’t ignore the ascent of Saturn over Crab Nebula at the time your mother popped you out.”), was refreshingly witty and candid. It did not make any claims at being able to predict a person’s exact nature based on their birth date. Instead, it said that the Sun Sign can be seen as one of many indicators of a person’s nature, not the only one.

I still don’t think that my birth date has anything to do with anything in my life, but the book is worth reading for its categorization of 12 kinds of people.

Well, I think I should get on with the Preface of this blog before I ramble any further. So, as the name on the top suggests, the blog will primarily be about Value Investing. My 2 decades of recently concluded formal education has included subjects as varied as Civics, French, Tae-kwon-do (Pink belt – Can mortally wound an ant with multiple stomps.. Hai Ya!), Biology, Economics, Data Structures, Geography, Engineering Drawing, Algorithms, Human Behaviour in Organizations, Statistics, and a lot of blah blah. Since my retention of this heady concoction of subjects is embarrassingly low, it was necessary to separate out the knowledge I intend to carry forward from the one which I’ll consign to trash.

So, as I bid Sayonara to hydrocarbons, gram panchayats, mica deposits, binary fission, Slave Dynasty, Fourier Transform, Verb conjugation, and tons of other similar mind-clogging ‘knowledge’, this blog is an attempt to assimilate and structure the knowledge worth continuing with. The umbrella under which I wish to assimilate this knowledge will be Value Investing, for 3 main reasons –

1)      Value Investing is a Practical thing – It’s not empty theory, or castles in the air. I hope to actually use Value Investing fundamentals in purchasing and selling stocks over time, and providing justifications of my purchases and sales on the blog, open for debate by visitors.

2)      Value Investing encourages multidisciplinary thinking – Value Investing is not conducive to tunnel vision. Instead, it actively encourages the use of mental models from different disciplines such as Economics, Game Theory, Psychology, etc. This means a lot for me ramble on about.

3)      Value Investing can be taken up as a Passive interest – Since my career lies in IT Consulting, I will obviously not be able to devote huge amounts of time to tracking stocks on a daily basis. Value Investing, with its typically long-term horizon, is hence ideal for someone like me who can only spend so much time going over the Financial News in a day.

Warren Buffett : The One Value Investor to rule them all

So, with the objective of the blog out of the way, it’s important to write about some of the limitations as well. The most important ones are Subjectivity and Stupidity. Subjectivity means that almost every sentence you read in the posts to follow, must be read after mentally appending ‘In my opinion’ at the beginning. For example, if I write that ‘Gold Prices are likely to fall by next year’, please read it as ‘In my opinion, Gold Prices are likely to fall by next year’. I’m not pretending to be a fortune-teller, and while I will try to give justification for any such statements, I can be horribly wrong. Which brings me to the second limitation – Stupidity.

Even though I’m a Finance specialization student, my understanding of Finance is only marginally better than my understanding of girls (To misquote Edison – “I haven’t failed in my attempts to impress girls a hundred times. I’ve successfully discovered a hundred things girls don’t care about”). What this means is that there are going to be a million mistakes, some silly, some laughable, and some unpardonable as I parade my limited knowledge of Finance on this blog. It is my sincere request to all Finance-literate people to tolerate such mistakes, and let me know through your comments where I have screwed up.

Finally, before I end this Preface, a little explanation on the ‘Random Stuff’ part of the heading. Those familiar with my earlier blog – Accidentally in MBA, know that I don’t exactly colour between the lines. Not all the posts will be related to Value Investing, and a lot of general stuff which I feel like sharing will be put up on the blog to desperately seek attention and admiration.

I guess that concludes the Preface. Hope to come up with Chapter-1 by next week.