New Era – Revisiting “Investment Decisions Framework”

In 2016, I wrote an article about why to invest in bitcoin. I explained why that would be the best alternative compared to other asset classes. Keep in mind that at the time bitcoin was not even thought to be an asset, let alone something that most of the investing world or investment gurus would invest in. In fact, I also wrote that it was the least risky of all (inspired by the new kid in the block)! Looking back it has produced returns of more than 2000% in this period.

Now it is spring 2018, probably the last snowing day, and I am inspired to share my thoughts on decisioning and my investment decisions framework for the new era we live in.

Your investment decision should strengthen your portfolio in at least three ways:

  • Layer 1 – Expanded Selection of Assets
  • Layer 2 – Decision Analysis to Build Conviction
  • Layer 3 – Allocation Decisions Driven by Logic

Layer 1 – Expanded Selection of Assets: Today swathes of money are blindly chasing ETFs and passive allocations – the money is moving dangerously in one direction, and volatility in the market has become alarmingly low. So it is pretty nasty out there right now as investment has become very very unidirectional and can’t be sustained. Please become multi-dimensional. There are multiple assets and n number of options in each of those asset classes. Many new asset classes are emerging, and many old ones are moving off the radar. So we can’t keep checking the same periscope. I am not saying let’s move as the world is moving. No, not at all. In fact, I am a big fan of old asset classes, as they will soon become very very important. What I mean is, we should not think about selecting assets in the old-fashioned way. We need to expand our horizon and constantly seek new assets – things are changing rapidly with technology, and technology itself is the biggest investment you can make.  So don’t get stuck (in management, we would say don’t get into an anchoring problem) with existing assets that you hold. Seek new ones, learn, experiment and add to your arsenal. Don’t throw away old asset classes as they become unfashionable, either. Be very critical in your decisioning. If you are an investment house, have people, partners, tools and processes that help you grow your assets, in both number and quality. Don’t miss out on great investments!

Layer 2 – Decision Analysis to Build Conviction: Every asset has its own value drivers, things that make that particular asset grow or shrink. They can be radically different from one another even in the same asset class. For example, the pre-dominant (but by no means the sole) value driver for Ethereum is the developer community, whereas for Bitcoin it is the network transactions and wallet counts. For Apple, it is product & service purchases. You need to look at assets together with their value drivers. Industry people will know the value drivers, so you need to learn something about them. Focus on understanding the predominant value driver and base the asset’s growth on that – irrespective of the price movements. It’s best to collaborate with experts who can do that for you.

Layer 3 – Allocation Decisions Driven by Logic: Even once you have selected multiple assets and analyzed which ones are good investments, never jump to investing immediately. Never have FOMO – fear of missing out. You need to look at how the decision to include the new asset changes the total risk of existing portfolio. Is it rightly correlated and does it reduce the overall risk? What % you should allocate? Is it a good time to invest in this asset class? If not, wait for the right time. One of the best ways to invest in any asset class is with dollar-cost-averaging – in layman’s terms, if you plan to invest x$, start by investing a small proportion of that x$ and keep adding to your initial investment as your conviction grows. Another most important criterion is liquidity.  Never ever put all your allocation into illiquid assets. For example, many families ruin their entire productive life by buying a house (an illiquid asset) and then working just to pay the loan for that house. Keep your emotions out of your allocations: have a proper model and system for that, too. If you are an investment house, definitely have proper tools for allocation methods, maintain a healthy watchlist and have governance implemented on top of all your investments.

Above all investment decisions, the best investment is always investing in yourself and the people around you. Over time, there is nothing that beats that. If you ever have a choice between asset classes and people, go for people without a question. If after that you have another important decision to make – then it is to invest in technology.

Have a great day!

Regular Update : 7th Feb 2017

I said early about before it mooned. Here the next.. . Solid team.. super speed wallet.. high economic rent with nodes… stellar coin types but no threat of dilution like in stellar.. massively below radar… Enjoy moonride ..falcon.. Note: this is not investment advice, Do your own research. this is only sharing my thoughts.

Regular Update: 2/2/2018

Cryptomarkets were oversold today. There was a strong pullback and BTC came back to USD 9000 after going below USD 8000 (a crucial mark).  What decisions can we take at this stage?

  1. Don’t leverage in such times, and don’t take emotional decisions.
  2. Keep your cash aside for the next few months – don’t put everything in the  At the same time, don’t take all your money out of the market.
  3. See if companies/tokens that you like are at good price levels, and start accumulating them.
  4. There is a lot of FUD and irrelevant news in market – don’t get swayed by them. Weigh them. For example, the Indian market does not bring so much volume, so if India’s government plans to ban or pseudo-ban cryptos, the corrections should not lead to crisis.
  5. Don’t over-follow or over-idolize anybody in the Make your own judgements.
  6. Fearful times and greedy times provide the best opportunities. Keep learning the market and seek the best opportunities.


The value of hard work is over-rated & the value of judgement is under-rated – Naval is so right on this – awesome observation.

I always felt at decidersmind, we need to think and imbibe and rewire our brains, as from childhood all we learn is that hard work is most important and decisions are taken by our parents. But a few good judgements in life take you to greatness, and a few bad decisions take you to totally wrong roads.  Does hard work matter so much if you are on the wrong road? Give conscious thought to your judgements (truly feel and think them through) – they matter a lot. Life changes completely and the decider’s mind emerges more powerful if we start valuing the right things – judgements & great decisions.

NPV: spinning the equation in hypothetical deflationary world

In an MBA corporate finance class, the first thing we learn is NPV – Net Present Value.  When I first understood that, it was almost like understanding the whole business world in this simple formula.  For example, a company could do so many things, there would be thousands of moving parts from customers, suppliers, competitors, employees, financiers to goods, loans, machineries… and so on. If you put all that together in one single formula, that is NPV:  the net sum of all present and future cash flows.

One element in this equation is WACC: Weighted Average Cost of Capital. This is the discount factor that you apply to find the value of cashflows each year after discounting the inflation and thus the interest rate.

We all are taught that future cash flows have less value than present cash flow. The underlying assumption is that there is inflation and interest rates are going to increase. Now imagine, just for a second, how the world will be in a deflationary state with interest rates becoming negative and assuming for the heck of it, WACC becomes negative… the future cash flows will become more valuable than present value.  So suddenly, what that means for the investor is that assets are very cheap and produce good returns year on year. So in that sense, Apple shares are not expensive but cheap!!! The stock market is not expensive but cheap. So it is contra argument and we start seeing a different perspective on how assets are valued. In a negative interest world, the farther away the revenue is, the less risky it is.

I have been taking some time and discussing this insight with some of my close MBA classmates. They all kind of see what I am getting at, but it is difficult to fathom and internalize, because it changes the way we see the valuation of assets and the world around us!  🙂 Welcome to a new world of contrarian thinking.

Deflation Export: new Trend

For the last 40-plus years, one major trend that has been sweeping the world is globalization.  People, cities and countries got more and more connected. And the internet kind of put the whole globalization on the fast track.

In terms of economics – if I may simplify – things got cheaper in the developed world, as with globalization, goods started coming from China, finished products started coming from Bangladesh and Pakistan, and information technology professionals started coming from India. Oil was partly regulated by OPEC in terms of exports and matching supply and demand, but nothing was regulating the other industries.  So we saw prices dropping  for most goods the world over. Our shirts, our pants, our shoes, our computers, our phones – everything got cheaper and the world looked to be functioning the right way for most of us!

When globalization went at a totally new speed with China dominating the world and the internet spreading to the remotest areas, it became clear that the world was facing a new challenge: deflation – when the price of goods falls over time instead of rising. The problem has started getting serious, especially as developed countries were not really growing much and on top of that, the interest rates have dropped almost to zero. I wrote about deflation last year; you might want to refer to that for more details.

Just imagine: would you lend money to others, if they were going to give less money back to you next year? That is what deflation is. The issue is that economies don’t function with deflation. Banks, insurance companies, pension funds, everything is based on one major assumption: that is there is inflation, and that interest rates are positive. In many of their business cases interest rates must be at least 2%. Imagine the government needs to pay pensioners a fixed amount every month, but the interest rate is getting lower and lower. It’s not possible to make meaningful returns – suddenly your promised payments are not sustainable. No doubt you can think of many other similar serious and important scenarios around us. That is why central banks try hard to manage inflation and deflation.

If we are not able to manage this deflation very well, the world can become a bit more difficult, and as we are seeing, nationalism takes over.  Nationalism is the opposite of globalization.  If globalization – along with the internet – drives deflation, nationalization and a censored internet leads to inflation.  Many countries’ prime agenda is to export the deflation, but I am afraid China can’t take that back. We are entering a very different world where many of our existing mechanisms suddenly don’t work.

Crypto-Currency Market : Re-establishing trust…

Any market is technically a nexus of trust contracts.  Currency in particular is very much nothing but a trust contract. The cryptocurrency market is therefore all about TRUST.

Right now, we are seeing a lot of bleeding in the market, irrespective of which cryptocurrency we consider.  Will there be an end to this bleeding and, if so, when? – this is the question all of us have in our mind. Let us look at the answer from the trust angle.

Let us go back to the beginning.

Trust event 1 -> When we lost trust in our banking system after the crash of 2008, we were void of trust. That is when Bitcoin came into existence. It brought that very thing – trust!! People jumped into it, because trust itself was getting re-established. The market steadily rose, and people who could see the whole thing got handsomely rewarded.

Trust event 2 ->  Everything was going more than fine! And then we experienced the Mt. Gox event. The Mt. Gox exchange, which had been handling more than 70% of bitcoins, suddenly announced that 850,000 bitcoins – equivalent to 450 million USD – had been stolen.  At the time, that was a major portion of the bitcoins that were in circulation. Guess what, we lost trust – anybody could lose trust with such an event. The whole market tanked.

Trust event 3 ->   People all over the world lost trust after Mt. Gox. The market went back to less than 80% of its peak and was lingering and limping sideways. What was needed was a trust event big enough for the world to perceive that cryptocurrency has a big future and we should trust it.  It was announced that Tim Draper was the winner of a 30,000 bitcoin Silk road auction.  Bitcoin being brought by a very successful VC, one who had invested in and supported many many good technology companies, re-established trust and conviction in people. So people started looking at bitcoin again, and we were heading towards the good old days once more.

Trust event 4 ->  ICOs raising huge money without any significant value to show.  We saw some good ICOs and some bad ICOs, every one of them raising money like crazy – with insane valuations or sometimes even absurd valuations.  It didn’t matter what the concept was, what stage it was at, what maturity level – all ICOs (more or less) were raising lots of money. This could not go on.  When some ICOs raised large sums of money and were unable to even issue tokens properly, market participants started losing trust.  They started thinking seriously and re-visiting their own trust in this market.  Already they were a bit wary of scaling for ICOs, with the Bitcoin segwit debate and the Ethereum disappointment. The trust was broken when the ICOs raising money were not even able to distribute the tokens properly.

Now we are in a place where the trust is broken.

Bitcoin and the cryptocurrency space have immense potential. The value to humanity of decentralization is unquestionable.  Each one of us needs to help re-establish the trust – it is our duty to help build trust if we believe this is a place where we want to be in the long term. Let’s hope we have a bigger trust-establishing event, sooner rather than later. Only such an event could help us establish the trust in the market soon, otherwise the market is going to remain sideways or even downwards, without direction for quite some time.  I would love to see another trust-building event and see the heights of the potential that this market can bring to us and generations to come.

Deciding where to live

We have been thinking a lot about where to live, as we are expecting our second kid in the coming months and our first child will start going to school next year. We have to decide on a place to live for at least the next 12 to 15 years. For many people making decisions is much easier, either because they have one or two parameters that they are very clear about or because they decide based on what the typical social behaviour or decision would be.

For us, we just happen to have 4 members, and we want each of us to flourish in their own way to the fullest, and we believe our parameters themselves will keep changing over time, as we all are still evolving every single day.

Finally, the main deciding point came down to this: Where do we have more options & future possibilities for each of the family members, as each of us are still developing ourselves and still wondering how big this world is and how abundant everything is? The other way to decide between two places is by proof by contradiction – which of the two is more restrictive, will not be able to provide a safety net in bad times, is purely thought of because of one short term benefit but is likely to hamper larger possibilities for the kids.  We believe we have a solution and are kind of converging on one place – after many many years of being in multiple places – it looks like it is going to be Frankfurt. Interestingly, this was the place that appeared to be restrictive, but now compared to the other places that we have considered, seems to be the one offering the most options! The world is round.

Abundance mind vs scarcity mind

One thing I have been thinking about and letting others know as well, is how you as a person lead a life depends quite a lot on how you think about the world and its resources.

If you think everything is available in abundance – love, money, knowledge… then you actually feel at ease and you work on yourself to acquire those things. The pioneering mind thinks in terms of abundance. Here you don’t think about competitors and others like them… it is a great state of mind to be in. You tend to be creative… In leadership, such a mind is very powerful for defining opportunities and working on the person’s own strengths and weaknesses. Abundance thinking leads to inside-out thinking. The world is nice and rosy. A meditative mind normally sees this way.

On the other hand, if you think things are scarce, you develop a kind of competing mind, your mind thinks about others in order to win… But then you have a different kind of mind – it worries about threats and mainly focusses on winning and thinks too much about society and what society thinks about you. It is outside-in thinking. In our world, a lot of things are artificially created to be scarce, so that we all compete. So the question is, do we want to compete all the time? Sometimes competition drives negativity and diseases.

One possible better approach would be to be in the state of bliss. That means thinking that everything is in abundance but having a scarcity mind in terms of real natural resources like our planet, water, trees, etc. – it is a state of nirvana and vasudeiva kutumbum – the world is one family.

Bitcoin – why am i increasing position?

Many people are jittery about Bitcoin as it is experiencing quite lot of swings up and down and is highly volatile – which is not digestible for typical investors.  So a better way to decide is by thinking about whether it adds value to the existing assets that you are holding.

Right now, I feel bitcoin has the highest safe-return ratio of all investments!! – Yes, that is a very bold statement. So I am increasing my position compared to other asset classes. For my reasons for investing in bitcoin at all, please see my article from last year. Here is why I am increasing my position – because every other asset class raises some concerns in the current market context.

Equity: We can clearly see that equity has done an overrun – it is overpriced and the crash is likely to come soon. Many investors are already aware of this.  People are chasing equity because there are no real returns in bonds. Maybe Indian equity could do well (due to demographics, the political model and unleashing values – money moving from non-performing asset classes to performing asset classes as an effect of de-monetization), but in US and Europe, I think we should be aware that it is doing its last mile run! For Indian equities I like finance companies(as they will be the harbingers of bringing offline cash to the digital economy) in the current context.

Bonds: It makes absolutely no sense to invest in bonds, when you are getting sub 1% p.a. and people have still chased them speculatively as central banks are lavishly buying them. So beware, there is a bust in the waiting, which will massively impact equity and world currency markets as well.

Currency: There has been a lot of quantitative easing all over the world, and that is still not reflected properly in currency pricing.  Tight monetary policies and loose fiscal policies increase the underlying currency values and vice versa. So imagine how the euro could survive – or any economy that is not doing any fiscal spending but has loosened its monetary policy – for very different reasons! There are many countries whose currency is at risk – see how much money is moving out of some of the large nations.

Gold and silver: This is definitely a good asset class, used as the main transaction model during difficult times. But moving it into digital form is a bit of a challenge. So it might not be as interesting as bitcoin – as bitcoin carries all the real reasons for gold investment, and at the same time makes transactions at microlevels possible.

Context: Bitcoin is at a very nice tipping point and priced cheaply. Equity, bonds and fiat currencies are overpriced in today’s market context… would you buy tomatoes at 10 cents/kilo or 10 dollars/kilo? In fact, I am also increasing my positions in a few other altcoins.

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