There are a few tough things in life, one of which is losing weight. It is said that 95% of diets ultimately fail and losing weight successfully is one of the hardest things to do, along with quitting tobacco, kicking off addictions and investing successfully. As such, having some mild success with both (diet and investing), I would like to share lessons which we could draw from one to the other.
I think there are two big concepts:
1. Think Big: Don't sweat the small stuff, pull the big levers!
2. Think Sustainable: If it cannot be sustained, then it won't work. Make sustainable changes!
We all know the different diets. There are now 1,001 diets out there and over the years, like many of us, I have tried my fair share. Counting calories, Atkins diet which emphasizes low carbs, intermittent fasting, less oil, less sugar and dunno what else. It didn't work! All the talk about such and such amazing diets in the end never lived up to expectations. Then I came to the realization that I have been sweating all the small stuff. I did not pull the big levers, or rather, there was not enough pain at all.
Just to go into counting calories, this is the funny one. You see, diet is about losing weight, or rather losing mass right? Calories is a unit of energy, not mass. In secondary school, we already learnt the law of conservation of mass which means that mass cannot be created or lost. So by counting and cutting calories, which is energy, how can we expect to lose mass or lose weight? Energy has nothing to do with mass except in Einstein's theory. E=mc2. Diet is not nuclear physics. It's about reducing mass (ie the food we eat), not energy. Well, counting calories did work for some people but ultimately it's bcos they have also reduced mass intake by a lot!
Now, low carbs, the most popular diet in the last 15 to 20 years, popularized by a certain Dr Atkins. Why was it so popular? That's because it didn't involve hard work. Oh, just cut carbs, eat more meat, that's very doable. We didn't like potatoes, plain rice etc anyways. But unfortunately, it won't work. Dr Atkins himself died of heart attack as he loaded up too much on meat, causing other problems.
And so it dawned upon me that all these diets were not focusing on the big picture. It was like trying to just solve part of the problem. They were futile attempts to reduce complex problems into one dimension to solve, like counting calories. Or focusing just on one food type, carbs. It was trying to fix one side of the Rubik's cube only without thinking far enough about how to solve for all sides!
Our bodies are machines that have evolved over millions of years and hence it would not yield to half-fuck diet solutions. In fact our bodies are so complex, we probably only know really little how nutrition and our digestive systems work. The Chinese in the past believed that eating tiger's penises could boost male vitality. Obviously, things didn't work that way. But hey, modern nutrition now also realized that eating high cholesterol stuff might not be the reason for accumulation of bad cholesterol which cause heart diseases, or eating good fats didn't cause obesity (it was the bad fats or trans fats, or so the experts currently think).
Tigers being farmed for their penises
The body is so complex that what we know is really just a fraction of how it really works. Think about it, a piece of fatty meat that we eat doesn't just stick to part of the belly as we might be tempted to think. It is digested, broken down into molecules then reconstructed all over again. Similarly, it is ultimately lots and lots and lots of exercise to burn off that belly that has been there after years of eating badly. Eating less alone would not cut our waistline by 1cm.
So when it comes to a good diet, I decided to stick to broad principles which are basically just common sense: eat natural food (ie less processed food including bread, sugar, rice, noodles etc) as much as possible, eat a huge variety of food in equal proportions and drink a lot of water (less coffee, tea, soft drinks etc). As to losing weight, it has to be big levers that could effect change. I would surmise a few key levers as follows:
1. Cut meat and cut dinner - ie eat a lot less
2. Exercise a hell lot more
3. Change enough of the bad habits!
Just a quick run through of these points. Meat besides having more mass vs plants, is the most complex of all food types (proteins and fats are long molecule chains). Hence, in my experience, eating less meat, rather than carbs, would be much more effective in losing weight. I am sure in some cases, less carbs might work, but for me, it was cutting down meat. An ideal diet, in my opinion should be like say 20% vegetables (green leaves) 20% tubers (carrots, radish), 20% fruits, 20% grains or carbs 10% nuts and other plants products and finally 10% meat and animal based products (milk and eggs).
On top of that, we have to exercise, although it is true that diet will do 80% of the work. We need the 20% exercise to complete the circle. You cannot solve just 5 sides of the Rubik's cube and leave one side out. Follow through with the tough stuff, we definitely see the waistline getting smaller. Ultimately, it is also making enough changes, like stop all snacking, drink everything sugarless, exercise three times a week. Change enough bad habits to good ones, the results will follow.
On top of that, we have to exercise, although it is true that diet will do 80% of the work. We need the 20% exercise to complete the circle. You cannot solve just 5 sides of the Rubik's cube and leave one side out. Follow through with the tough stuff, we definitely see the waistline getting smaller. Ultimately, it is also making enough changes, like stop all snacking, drink everything sugarless, exercise three times a week. Change enough bad habits to good ones, the results will follow.
In investing, it's more or less the same philosophy at work, we need to think holistically and always look at the big picture. Some time back, I notice a criticism on one of the the stock analysis I had done. The critic was saying how my models were not accurate enough (or rather bear case scenario not drastic enough), how that's poor Excel work, that I don't understand the business etc. I didn't bother to reply. I have noticed that young and/or inexperienced investors always like to tinkle with Excel a lot. They believe that by making the Excel model perfect, they can predict the company's future, make the right bet and make a million bucks. If the stock prices or calculation of intrinsic values correlate with changes in what we do with the Excel spreadsheet, why isn't every investor rich?
It is always more important in investing to focus on the big picture. There are usually a few key factors for the company and it's important to get those right. The modelling is a small part of trying to paint part of the picture. It is about understanding the business model, the industry dynamics and getting the valuation right. The stock in question was SIA Engineering. It does aircraft maintenance and this is a recurring business. Every airplane that's flown in the air has to be maintained. Sometimes, they beat up passengers to get things done.
Just kidding, but you get the idea, airplanes need maintenance. Needless to say, the big trend of more air travel will not reverse. Even with the risk of getting beaten up by security guards on airplanes, we have no choice but to fly more. There will more planes in the air, more LCCs or low cost carriers and Singapore as a hub will grow with T4 and T5. The down cycle with new planes needing less maintenance will pass and meanwhile, we're paid to wait with an annual 4% dividend. This is the big picture for SIA Engineering.
United passenger being "escorted" off the plane
For investing, the analogy to exercising a hell lot more and changing enough bad habits would be all the hardwork we discussed in previous posts. Investing is about doing enough major mental workouts. It's a lot of reading followed by analysing and discussion. An average investment professional (or any high level executive) needs to read 120-180 mins a day. That translates to 60 to 120 pages of reading (news, annual reports, articles, books and business magazines) per day depending on one's reading speed. Its then about changing habits to read better, analyze better. It means giving up chasing serials, sacrificing family and friend time. It is always the pain we take to be better. There is no two way about it.
To sum it up, I would say the three key levers for good stock investing would be
1. Seeing the big picture: understanding the business model, the positives and the risks
2. Doing the homework: reading, analysis, discussion, lots of it!
3. Paying less for more: only buy when there's good margin of safety
To sum it up, I would say the three key levers for good stock investing would be
1. Seeing the big picture: understanding the business model, the positives and the risks
2. Doing the homework: reading, analysis, discussion, lots of it!
3. Paying less for more: only buy when there's good margin of safety
Next post, we talk about sustainability!