Organising email. My system.

68,392 unread emails. That’s my inbox. How do your organise your email? Is a great interview question that gives insight into how someone organises their time. If I spent 30 seconds on all those emails, it would cost me >566 hours or 56 working days assuming I did nothing else.  Not feasible.

I take 30 to 60 minutes in my day, semi-scheduled to go through emails.  I read all headlines. If I think I can deal with in a minute or so, I answer immediately. If it’s of no value I move on. If I need to consider it, I click it open / mark it. If I think I might forget, I note it down physically.

Some peeps file and delete. But, I think there’s agreement that a set time to do it, is better than allowing it to pop up during your whole day as it saps attention and disturbs psychological flow.

My 2nd tip here, is to NOT make email the first thing you do when you sit at your desk in the morning. Make it anything else, preferably real world eg read a piece of research, a physical journal or assess your list of things to do; consider spending 10 to 20  minutes journaling thoughts, ideas, things to do. Then you can switch on your computer if you need to.
 

My 3rd tip:  for most meetings, lunches, dinners and dates leave your phone at your desk, or at least switched off and in your bag. Not visible or tempting on the table.  

The benefits of my system:

-super time efficient

-set time to deal with emails means workflow not interrupted

-not starting day with emails activates my Work thinking differently (might be different for you)

-avoids huge drain of time when time is one of my top assets

-never deleting means whole archive always there for retrieval

-can be semi-flex abou checking emails eg using downtime while waiting for a train

Disadvantages:

-quick reading of headlines can mean occasionally missing an email of value especially if headline is worded poorly (people used to be better at headlines)

-leaving emails for later runs risk of tardy execution (risk minimised by physical noting of important but not urgent emails, actually the most high value)

-not filing or deleting means finding old emails can take a few minutes longer (but I’m good at remembering key words for searches)

As a side observation, there is no “correct” way of organising time.  But to enable a team of diverse strengths you don’t want all the team to organise like me - that’s why it’s a useful interview question.

Other viable systems can rely on:

-having a personal assistant to organise your emails

-having 2 or 3 email addresses so that personal, Work and bulk emails are already presorted and separated.

-finding a set time to zero in and delete/file emails

-a filter/file macro set up

I’m co-responsible for $7 billion in people’s retirement savings as well as a Chair of a nationally funded innovative theatre company and a parent of an autistic spectrum child.  

I’m unlikely to go backwards and receive fewer than 100 to 200 emails a day.  I have no ambition to be a CEO who would likely receive more.

200 emails at 3 seconds a headline is a manegable 10 minutes, leaving me 50 minutes to respond to emails. A time efficient balance for me.

If you'd like to feel inspired by commencement addresses and life lessons try: Ursula K Le Guin on literature as an operating manual for life;  Neil Gaiman on making wonderful, fabulous, brilliant mistakes; or Nassim Taleb's commencement address;  Charlie Munger on always inverting;   JK Rowling on the benefits of failure.   There is also Anne Lamott on writing and truth as paradox.    And Oprah on gratitude and service.

Cross fertilise. Read about the autistic mind here.

Active Ownership. Academic Study.

“Active Ownership” by Elroy Dimson , Oğuzhan Karakaş  and Xi Li - this paper, in my view, suggests that successful active engagement in a collaborative and constructive manner on material ESG concerns improves the fundamentals of a company and also increases stock returns.

I differentiate this type of engagement with what one typical sees from “hedge-fund activists” or where board proxy fights occur; and where media engagements and open letters are used (although that type of activism has also seen positive returns see Klein and Zur, 2009).

Starting with the conclusions: “How does the market react to ESG activism? We find that ESG engagements generate a cumulative size-adjusted abnormal return of +2.3% over the year following the initial engagement. Cumulative abnormal returns are much higher for successful engagements (+7.1%) and gradually flatten out after a year, when the objective is accomplished for the median firm in our sample. We do not find any market reaction to unsuccessful engagements. The abnormal return patterns and magnitudes are similar for the subsamples of CG and ES engagements.4 This suggests the existence of a threshold for success to be pursued and achieved for both types of engagements. We then examine the cross-section of abnormal returns (controlling for industry and year fixed effects) and find that the positive market reaction to successful engagements is most pronounced for the themes of corporate governance and climate change. For these themes, the cumulative abnormal return of an additional successful engagement over a year after the initial engagement averages +8.6% and +10.3%, respectively.”

Then:

“To investigate the sources of the positive market reaction to successful engagements, we take a difference-in-differences approach and examine the subsequent changes in target firms’ operating performance, profitability, efficiency, institutional ownership, stock volatility, and governance after successful engagements relative to after unsuccessful engagements. We observe significant improvements in all these measures (i.e., an increase in firm performance, investor base, and governance, and a decrease in stock return volatility) following successful engagements, as compared to the unsuccessful ones.

Particularly focusing on the ES and CG subsamples, we first find that the return on assets and the ratio of sales to the number of employees improve significantly one year after successful ES engagements, as compared to the unsuccessful ones; but such improvements are less pronounced for successful CG engagements. These findings support the view that successful ES initiatives enhance customer and employee loyalty. Second, we observe an increase in shareholdings by the asset manager, pension activists, and SRI funds one year after successful ES engagements; but such an increase is not apparent for successful CG engagements. These results support the view that ES initiatives generate a clientele effect among shareholders. Third, we find improvements in the corporate governance structure of targeted firms, as measured by the Bebchuk, Cohen, and Ferrell (2009) entrenchment index, two years after successful engagements on all ESG issues. This suggests that good ESG practices signal improving governance quality.

And to conclude:

“We conclude that environmental, social, and governance activism of the type that we study

improves social welfare to the extent that it increases stakeholder value when engagements are successful and does not destroy firm value even when engagements are unsuccessful. We note that, after successful engagements (particularly on ES issues), firms with inferior governance subsequently improve their governance and performance. Our interpretation is that active ownership attenuates managerial myopia and hence helps to minimize intertemporal losses of profits and negative externalities (see Benabou and Tirole 2010). This approach is differentiated from other styles of shareholder action, particularly hedge fund activism. Responsible investment initiatives are less confrontational, more collaborative, and more sensitive to public perceptions; yet they achieve success.”

The full methodology and discussion is in the link SSRN here (further bibliography in that paper to studies on the full range of stewardship to activism) .

An overview of several Active Ownership studies is given by Share Action here.

Summary slides given by Dimson on this paper are here.

If one puts this work together with the work on the outperformance of Global Equity managers described here, one can start to build a defense of Active Management; where John Kay would argue Active Managers should compete on style and philosophy in any case.

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If you'd like to feel inspired by commencement addresses and life lessons try: Ursula K Le Guin on literature as an operating manual for life;  Neil Gaiman on making wonderful, fabulous, brilliant mistakes; or Nassim Taleb's commencement address; or JK Rowling on the benefits of failure.  Or Charlie Munger on always inverting.

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The chart above figure plots the cumulative monthly abnormal returns (CARs) around the initial engagements from one month prior to the engagement month to 18 months afterward. The chart examines the entire sample Each CAR is decomposed into the CAR for successful engagements (i.e., those that achieved milestones) and the CAR for unsuccessful engagements. For each event month, authors calculate the average abnormal return from holding an equally weighted portfolio of all target firms that initiated engagements in month 0. The stock returns are adjusted for Fama-French decile size-matched returns. The stock returns are winsorized at the 1st and 99th percentile levels before calculating the average CARs.

Richard Thaler. Nobel Prize.

Richard Thaler has won a Nobel prize. Perhaps most famous for his book Nudge and the behavioural policy units spawned in the UK and US. This has led to the default on option on UK pensions as being enrolled, with an opt-out option given. This has “nudged” participation in UK private-sector pension schemes from 42 per cent to 73 per cent between 2012 and 2016.  That’s quite an impact from “libertarian paternalism”. Video of Thaler at Google Talk below.

His observations on the “irrational” behaviour of man can be neatly seen in this New York Times column.

“This illustrates an important problem with traditional economic theory. Economists discount any factors that would not influence the thinking of a rational person. These things are supposedly irrelevant. But unfortunately for the theory, many supposedly irrelevant factors do matter.

Economists create this problem with their insistence on studying mythical creatures often known as Homo economicus. I prefer to call them “Econs”— highly intelligent beings that are capable of making the most complex of calculations but are totally lacking in emotions. Think of Mr. Spock in “Star Trek.” In a world of Econs, many things would in fact be irrelevant.”

Later in the article he mentioned how cash is the perfect econ gift.

I once gave one of my best friends cash for his birthday. He was in debt, and I was much better paid. I had thought about it long and hard, and decided cash was the most optimal solution.

It wasn’t particularly well received. In fact, I recall he tried to return it almost immediately,  something the most ugly jumper from a grand-aunt would not trigger.

I now tend to make a card and sometimes a drawing or poem. Perhaps, much more valuable a higher return on investment for sure.

Still, my friend is now out of debt. Perhaps not wanting to be embarrassed by his friend giving him money ever again.

(In my defence, it’s fairly traditional in Chinese culture to give money on various occasions perhaps that rooted me in this one rational strategy)

(Today, I’d suggest as a gift   i.  Some  shared experience  (there’s evidence that experiences → postivity/happiness over objects)  ii.  Hand made some thing  and then iii. Cash  only leaving a physical retail object as a distant iv.    Sadly, this would likely lead to a global recession if people stopped buying things, so perhaps good that not everyone thinks like this.)

If you'd like to feel inspired by commencement addresses and life lessons try: Ursula K Le Guin on literature as an operating manual for life;  Neil Gaiman on making wonderful, fabulous, brilliant mistakes; or Nassim Taleb's commencement address; or JK Rowling on the benefits of failure.  Or Charlie Munger on always inverting.  Or Ray Dalio on Principles.

Cross fertilise. Read about the autistic mind here. On investing try a thought on stock valuations. 

Principles. Ray Dalio.

Ray Dalio - Principles:“...you, like me, probably don’t know everything you need to know and would be wise to embrace that fact. If you can think for yourself while being open-minded in a clearheaded way to find out what is best for you to do, and if you can summon up the courage to do it, you will make the most of your life. If you can’t do that, you should reflect on why that is, because that’s most likely your greatest impediment to getting more of what you want out of life. That brings me to my first principle:

• Think for yourself to decide

1) what you want,

2) what is true, and

3) what you should do to achieve #1 in light of #2 . . . . . .

and do that with humility and open-mindedness so that you consider the best thinking available to you.

The principles you choose can be anything you want them to be as long as they are authentic—i.e., as long as they reflect your true character and values.

Think for yourself!

1) What do you want?

2) What is true?

3) What are you going to do about it?

Ray Dalio (wiki) should be listened to, in my view, whether you agree with him or not. He is in the top 100 richest people in world. Dalio has pledged half that wealth to the Bill Gates foundation. He has a coherent and thought provoking personal philosophy  that Dalio also applies to his hedge fund, Bridgewater, one of the largest and most successful in the world (which works under this culture: “an idea meritocracy that strives to achieve meaningful work and meaningful relationships through radical transparency.”) He uses these principles in life and in his business. Originally available in short form on the Bwater website, it is now out in longer book form.  (part 2 on investing and economics out some time in the future).

Dalio himself advocates developing your own principles rather than absorbing another’s completely whole. Thus this provides a fascinating take in the mould of “investor-philosopher” (thus joining Warren Buffet, Charlie Munger, Howard Marks, Peter Lynch, perhaps Seth Klarman, perhaps Nassim Taleb in this mould).

I noticed Dalio on mistakes sounds like Neil Gaiman's view on mistakes, one written by a story teller (I take a look at Gaiman's commencement address extolling mistakes in an earlier post) and the other written by an "investor-philosopher"; and also chimes with JK Rowling on the benefits of failure.

It also offers interesting reflections on his “mistakes” and experiences.

I highlight a few that struck me:

On consensus thinking “...everybody thinks the same thing—such as what a sure bet the Nifty 50 is—it is almost certainly reflected in the price, and betting on it is probably going to be a mistake.”

On losing money on a pork belly trade “It was a very tactile experience . . . [and] it taught me the importance of risk controls, because I never wanted to experience that pain again. It enhanced my fear of being wrong and taught me to make sure that no single bet, or even multiple bets, could cause me to lose more than an acceptable amount. In trading you have to be defensive and aggressive at the same time. If you are not aggressive, you are not going to make money, and if you are not defensive, you are not going to keep money. I believe that anyone who has made money in trading has had to experience horrendous pain at some point. Trading is like working with electricity; you can get an electric shock. With that pork belly trade and other trades, I felt the electric shock and the fear that comes with it.”

On expectations “I lost money until I figured out what was going wrong and how to deal with it. I gradually learned that prices reflect people’s expectations, so they go up when actual results are better than expected and they go down when they are worse than expected. And most people tend to be biased by their recent experiences.”

On learning from history “I learned that everything that was going on—the currency breaking its link to gold and devaluing, the stock market soaring in response—had happened before, and that logical cause-effect relationships made those developments inevitable. My failure to anticipate this, I realized, was due to my being surprised by something that hadn’t happened in my lifetime, though it had happened many times before. The message that reality was conveying to me was “You better make sense of what happened to other people in other times and other places because if you don’t you won’t know if these things can happen to you and, if they do, you won’t know how to deal with them.” “

On learning that there is always risk and uncertainty: “I vividly remember one “can’t lose” bet that personally cost me about $ 100,000. That was most of my net worth at the time. More painful still, it hurt my clients too. The most painful lesson that was repeatedly hammered home is that you can never be sure of anything”

If you’d like a provocative read of an investment philosophy of our times check out his book - UK link to amazon kindle version here  http://amzn.to/2wN4Oy4

A previous post on Dalio and risk and populism here. Video interview post book launch (Sep 2017) below.

Cross fertilise. Read about the autistic mind here and ideas on the arts here. On investing try a thought on stock valuations.

 

Kevin Warsh. Future Fed Chair?

Kevin Warsh could be next Fed Chair. He’s currently favourite in betting markets. A recent meeting with Trump has been confirmed. So, who is he?

Albert Edwards is not known for his optimism (I've worked with him, I should know!) The macro strategist, currently at SocGen, has mostly been an Equity bear for the last decade or so, and has the Ice Age thesis (West would slowly replicate Japan’s experience of the 1990s by descending into outright deflation) on deflation.

But Edwards has written very positively about Warsh. Not something I’ve come to expect from Albert regarding policy makers. This from Edwards after hearing Warsh speak in a Oct 2016 meeting:

“[Warsh] explained  that the Fed has been “captured” by a  groupthink  of  academics led  by  the ‘Secular  Stagnation’ ideas  of  his  friend, Larry  Summers. Rather  than admitting they are  wrong,  this  group, who failed to predict the current economic malaise,have constructed this theory to explain why ever more  stimulus  is  required. In particular Warsh warned that the Fed  had  become  the slave  of the S&P.”  

For Fed watchers it’s worth looking at these articles. Warsh in WSJ in August 2016. He writes:

“The conduct of monetary policy in recent years has been deeply flawed. U.S. economic growth lags prior recoveries, falling short of forecasts and deteriorating in the most recent quarters.”

“Two major obstacles must be overcome: groupthink within the academic economics guild, and the reluctance of central bankers to cede their new power...

First, the economics guild pushed ill-considered new dogmas into the mainstream of monetary policy….

The second obstacle to real reform is no less challenging. Real reform should reverse the trend that makes the Fed a general purpose agency of government…

Warsh as Chair would be shaping a different kinds of Fed it would seem.

And interview with Warsh on CNBC below:

Read a thought on valuations here.  Cross fertilise. Read about the autistic mind here and ideas on the arts here. Ray Dalio on populism and also a thought on risk and valuations. Or Black Swan author, risk expert, on life lessons from his commencement address.

Fed policy running against capital investment: Kevin Warsh from CNBC.

Nassim Taleb. Climate Change Risk.

On climate change… we should ask “what would the correct policy be if we had no reliable models”? writes Nassim Taleb and co-authors (see below).

We have only one planet.  This fact radically constrains the kinds of risks that are appropriate to take at a large scale. Even a risk with very low probability becomes unacceptable when it affects all of us - there is no reversing mistakes of that magnitude.

Without any precise models, we can still reason that polluting or altering our environment significantly could put us in uncharted territory, with no statistical track-record and potentially large consequences...

While some amount of pollution is inevitable, high quantities of any pollutant put us at a rapidly increasing risk of destabilising the climate, a system integral to the biosphere. Ergo, we should build down CO2 emissions, even regardless of what climate-models tell us.

Push a complex system too far and it will not come back. The popular belief that uncertainty undermines the case for taking seriously the “climate crisis” that scientists tell us we face is the opposite of the truth.

Properly understood, as driving the case for precaution, uncertainty radically underscores that case and may even constitute it. [My emphasis]

I think this case could be pushed more strongly given 3/10 Americans disbelieve manmade climate change. Even with this disbelief, most believe the climate is likely changing and an understanding of the risk framed in Taleb’s view should underscore the need for climate policy.

Source: Taleb's twitter feed

Nassim Taleb is not known for liberal left leaning views (although his politics are more complex to easily fit in the left-right axis; his local-global or libertarian axises are - in my view - more important) still this puts Nassim Taleb as a core anti-mainstream-left-thinker and Gregory Mankiw as an economist associated with the Republicans, strongly suggesting (1) Climate change should be taken seriously (in Taleb’s case) and (2) Carbon taxes or some form of Pigovian tax on carbon (in Mankiw’s case) should be enacted.

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More from Nassim Taleb thinking on the ethics of stuffing.   or Nassim Taleb's commencement address.  

A post thinking about the pros/cons of a carbon tax (and dividend).

A long thought about various sustainability ideas.

Bitcoin. Energy unsustainable.

Bitcoin is unsustainable in light of its energy consumption. Several authors have examined Bitcoin’s energy consumption and concluded Bitcoin is using up as much energy as a medium sized country. Currently about 72 in the world if considered a country.

I can not find a peer review, but I see several independent sources (see end) making their own assumptions, which seem plausible (I am no expert).

I highlight the digiconomist work.  They calculate bitcoin’s energy consumption to power approx 1.5m US households,  They estimate the VISA network to be equivalent to 50,000 households.

See above

As I have argued earlier, I do not believe Bitcoin is a good investment, but it might be thought of as a currency or a money.  Many are excited by the possibilities of blockchain.

This work suggests more needs to be done to make blockchain energy efficient, if this will be a sustainable mechanism.

The author Deetman writes after his calculations: “I haven't given up on the idea of distributed network transactions, but a radical rethinking of how these may be secured would be beneficial, be it at least for the environment.”  And if the calculations made by analysts below are true, I would concur. H/T to  https://digiconomist.net/bitcoin-energy-consumption as source.

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References:  Bitcoin Consumes A Lot     Bitcoin Is Still Unsustainable

Electricity consumption of Bitcoin: a market-based and technical analysis

Proof of Work Flaws: Ethereum Lays Out Proof of Stake Philosophy

An Unsustainable Protocol That Must Evolve

Bitcoin Could Consume as Much Electricity as Denmark by 2020

Bitcoins are a waste of electricity    Bitcoin is Unsustainable

How Much Power Does the Bitcoin Network Use?

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If you'd like to feel inspired by commencement addresses and life lessons try: Ursula K Le Guin on literature as an operating manual for life;  Neil Gaiman on making wonderful, fabulous, brilliant mistakes; or Nassim Taleb's commencement address; or JK Rowling on the benefits of failure.  Or Charlie Munger on always inverting.

Cross fertilise. Read about the autistic mind here. On investing try a thought on stock valuations.  Or Ray Dalio on populism and risk.  You can also click on the Carbon tag below.

Climate Survey

3/10 Americans disbelieve manmade climate change. This percentage has been stable for 20 years (with a slight rise to almost 4/10 in some years).

The fine work of the Yale Climate Communication Center focuses on the positive. It heralds the 6/10 who believe in manmade climate change. This proportion has also been stable for 20 years.

This discomforts me as it shows virtually no change in opinion over 20 years.

1/10 to 1 in 8 Americans do not think climate change is happening. I find this still rather high. But perhaps I am out of touch.  1/4  Americans believe in clairvoyance (source Gallup).

Source: Gallup Poll

Perhaps, most alarming only about one in eight Americans understand that almost all climate scientists (more than 90%) have concluded human-caused global warming is happening.

If that survey is correct then experts are having limited impact, and, or, peer reviewed robust information is not flowing down to the average American.

This lack of information or even disinformation (which seems to have plagued brexit) is a feature of today’s media that worries me.

The entrenched nature of people’s views also concerns me as it suggests to me there is a diminished ability to compromise and forge agreements from different viewpoints.

`'Public misunderstanding of the scientific consensus – which has been found in each of the Yale surveys since 2008 – has significant consequences. Other research has identified public understanding of the scientific consensus as an important “gateway belief” that influences other important beliefs (i.e., global warming is happening, human caused, a serious problem, and solvable) and support for action.

Updated in 2019: see here “… About seven in ten Americans (69%) think global warming is happening. Only about one in six Americans (16%) think global warming is not happening. Americans who think global warming is happening outnumber those who think it isn’t by more than a 4 to 1 ratio.
• Many Americans are certain that global warming is happening; 46% are “extremely” or “very” sure it is happening. By contrast, far fewer (8%) are “extremely” or “very sure” global warming is not happening.
• A majority of Americans (55%) understand that global warming is mostly human-caused. By contrast, only about one in three (32%) think it is due mostly to natural changes in the environment.
• More than half of Americans (53%) understand that most scientists think global warming is happening. However, only about one in six (17%) understand how strong the level of consensus among scientists is (i.e., that more than 90% of climate scientists think human-caused global warming is happening).
• About six in ten Americans (62%) say they are at least “somewhat worried” about global warming. More than one in five (23%) are “very worried” about it….”

For more information, see: van der Linden, S. L., Leiserowitz, A. A., Feinberg, G. D., & Maibach, E. W. (2015). The scientific consensus on climate change as a gateway belief: Experimental evidence. PLoS ONE, 10(2). doi: 10.1371/journal.pone.0118489

If you'd like to feel inspired by commencement addresses and life lessons try: Ursula K Le Guin on literature as an operating manual for life;  Neil Gaiman on making wonderful, fabulous, brilliant mistakes; or Nassim Taleb's commencement address; or JK Rowling on the benefits of failure.  Or Charlie Munger on always inverting.

Cross fertilise. Read about the autistic mind here. On investing try a thought on stock valuations.  Or Ray Dalio on populism and risk.