warikoo Wanderings

You can share this newsletter on WhatsApp, Twitter, LinkedIn, or view it on the web.
You can view all previous newsletters here.

​

THE ALPHA AND BETA OF LIFE

In stock market, there are 2 metrics that are often spoken of - Alpha and Beta.
However, I find the concept of Alpha and Beta fascinating, when applied to life.
It explains why most people, in the chase for growth, falter!

Alpha is the growth of a stock, relative to a baseline (which is mostly the total stock exchange).
So if the overall stock exchange grew by, say 15%, in the last decade, and a particular stock grew at 20%, then the alpha of the stock if 5 (20%-15%). If another stock grew by 10% over the same period, its alpha is -5 (10%-15%).

Almost everyone new to the market, focuses on the alpha.
What is the growth I can get?
Exactly the same way most of us focus on growth, when we make decisions in life.

Should I change my job or not?
We focus on the alpha (the salary, title, company brand, and the jump - from where we are).

Should I move countries or not?
We focus on the alpha (more money, better lifestyle, less pollution - from where we are).

Should I marry him/her or not?
We focus on the alpha (stability, love, support - from where we are).

Most decisions are driven by alpha.
But if they are driven by alpha, and most people are well aware about the alpha, then why is it that quite a lot of us still falter in life?

Because we ignore the second metric of the stock.
It's beta.
The volatility, or risk, of the stock.
A stock with beta of 1 moves more or less like the overall stock market moves.
When the market goes up, the stock goes up in equal measure.
When the market goes down, the stock goes down in equal measure.

A stock with beta of 2 moves twice as much as the overall stock market.
So an increase of 5% in the overall market means an increase of 10% in that stock.
However, a decrease of 5% in the overall market means a decline of 10% in that stock.
So it's more volatile, more risky!

So picture every stock in the universe on a 2x2 matrix:

On the x-axis is Alpha - high or low;
On the y-axis is Beta - high or low.

The best stocks will be which ones?
The ones with high Alpha (high growth) and low beta (low risk).
Those are the best ones, no?
They give you growth, while minimizing (not eliminating) risk.

And that might come at the expense of Alpha (or growth).
For example, if you compare crypto with stocks, crypto is high alpha AND high beta. Stocks are also high Alpha (but not as much as Crypto) and low Beta (as compared to Crypto).
Which one you prefer, becomes a reflection of your persona, your temperament, your personality.

THE SAME WAY
Life too has multiple choices.

There are low alpha, low beta decisions (such as putting your money in an FD - you KNOW it is not smart and yet you do it, because it is less risky).
Or a government job (low alpha, low beta - mostly). It's a safe job, with not a lot of monetary growth, but it's safe - you won't get fired.

There are low alpha, high beta decisions.
Eating junk food.
Low alpha (you just feel good in that moment) and massive beta (you could screw up your entire life because of the damage. Is it really worth that momentary pleasure?)

There are high alpha, high beta decisions.
Marrying someone because they are pretty/handsome/rich.
May make your life better, but what if the person turns out to be incompatible on all other fronts?
Or having an affair? Massive risk, no?

And then the sweet spot - high alpha, low beta decisions.
THIS SHOULD BE LIFE'S GOAL!
Instead of quitting your job to startup, continue working in the job and work your nights/weekends/holidays on your startup.
Massive alpha, if it works. Low beta, because you are still cushioned by the job you have.
Investing 5% of your investment in crypto.
Massive alpha (much higher than anything else), but low beta, because the remaining 95% will cushion the volatility.

Life is always going to have a beta attached to it.
The question is:
What is the beta you should be willing to digest, to get to your desired alpha?
Do not be blinded by the growth.
Adjust your growth, for the risk you are comfortable taking.

Unlike something a famous man once said, there is actual growth possible without taking a lot of risk.
You just have to manage the risk.
Not seek to love it, or eliminate it.

Happy Beta :))

​

BOOK I AM READING THIS WEEK

Finished Uncanny Valley - absolutely brilliant memoir of from Anne Wiener, on her journey of breaking into the tech industry in the US.
If you are woman in a male-dominated industry, you will relate to this a lot.

Currently reading Empire of Pain: The Secret History of the Sackler Dynasty - OMG - what a stunning read!
This book is a real-life story of the Sackler family and how they came to dominate the US Pharma industry through advertising, in the 1950s and 60s, with what many people claim was false advertising. They built a fortune and used philanthropy as a disguise for their acts.
Such a crazy book - must read if you like business thrillers!
​

Do Epic Shit is FINALLY in audio (yay!).
​adbl.co/doepicshit​

If you prefer printed books then pick up the book in English (Hardcover, Paperback, Kindle) Hindi, Marathi and Tamil.
240,000+ copies sold.
5 more languages coming up! (Including Portuguese)

​

QUOTES TO SHARE

Nothing will define success better than going to bed everyday knowing you lived your day the way you wanted to, without caring what the world thinks of you.
​​(Share on Twitter)​​

A powerful quote at the right time can change your life.
​​(Share on Twitter)​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​

The internet of today is designed to fill your spare time with someone else’s thoughts.
​​(Share on Twitter)​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​

​

RESPONSES TO LAST WEEK'S QUESTION

Last week I asked you:

Which school medium did you study in?

1. English medium
2. Hindi medium
3. State language medium

Here are the responses:

Observations:

• Isn't this fascinating? As the country has gotten older, there is a clear shift in every decade or so, of student being moved from state language medium to English medium.
• Hindi's influence has more or less remained the same (except 40+ category).
• This is understandable, since English is the business language for most of India's formal employment sector.

My response?
My sister and I both went to an English medium school. My mom had a colonial hangover and her ambition in life was to send her kids to convent English medium schools :))

​

PICTURE OF THE WEEK

The way I learnt TT (Table Tennis) was to play on the dining table at my cousin's place.
The tradition continues, where our dining table and my book, is now training the next generation haha :)

This Sunday we went to Tughlaqabad Fort for our heritage walk. This fort is less than 5 kms from our place and we drive past it every so often. But never knew the history behind it. Beautiful serene place!

QUESTION OF THE WEEK

Which language films do you often watch?

1. Hindi films
2. English films
3. Indian regional language films (apart from Hindi)
4. International language films (apart from English)
5. Don't watch films

​​Click here to let me know your answer (anonymously)​​​​​

​

CONTENT I SHARED THIS WEEK

Podcast:​
My favorite question
​Spotify, Amazon Music, Google Podcast, Apple Podcast, JioSaavn, Gaana or YouTube.

YouTube:​
14 ways to beat distraction
​You can watch it here.​

Instagram:​
A father and a daughter
​You can watch it here.​

Twitter:​
Getting to 500K followers on Twitter
​You can read it here.​

​

You can, of course, always write to me by simply replying to this newsletter.

I love reading all your emails, even though I may not be able to reply to them all.
Yes! I READ ALL MY EMAILS. ALL OF THEM.
​​​(Book padhte padhte jo neend aati hai, uski kasam!)

​

You can share this newsletter on WhatsApp, Twitter, LinkedIn, or view it on the web.