How to decide better in uncertain periods of life?

There are so many ways of managing uncertainty. I have been thinking through which one is the most effective. The problem is that the effectiveness of the technique is so subjective. So it would not be correct to say use this or that technique – but still I wanted a simple way to capture the decider’s mind. I felt that the best way would be to have just a 3-step process that is common to all scenarios while also managing uncertainty – something short and crisp is easy to follow and implement.

Step 1: Prepare the mind with the right setup

Step 2: Analyse the issue with a scenario-based model

Step 3: Take action which takes you forward in the right way

Step 1: Prepare the mind with the right setup.

  1. a) Observe your breathing for 30 seconds – breathing brings you into the present and takes you away from illusions, imaginations, uncertainties. If you can, practise meditation.
  2. b) Bring your mind’s “whats” over to a positive state by taking yourself back with sweet memories and by looking at sweet things around you
  3. c) Make your mind steady and build a mind of patience (everything happens in its own phase). Immerse yourself in nice songs or motivational things like TED talks.
  4. d) Move your mind from feelings and emotions – especially the emotion of fear – to numbers and analysis. This sets the right chord in your brain.

Step 2: Analyse the issue with a scenario-based model

  1. a) There are only few possibilities of what can happen in your situation. Assign probabilities – the total probability should be 1 (100%).
  2. b) Now look at how you can reduce the probability of the worst cases and take those actions next. Think of the worst-case scenario – what is the maximum that can go wrong? Now just focus on solving that scenario – take the most important step you feel for that.

Step 3: Take actions

  1. a) Focus and just take the actions to reduce the uncertainty based on the Step 2 results. Prioritise the worst-case scenario mitigation as the first thing.
  2. b) Here please focus on only what you can control and not what is not in your control. Don’t waste time predicting.
  3. c) Above all, enjoy the joy of uncertainties and appreciate the co-incidences around you. Enjoy every day of what is currently in your hand – rather than worrying about what is not in your hand. Nice things happen to you, once you let things happen for you. Don’t block the passage with worries and fears.

Are we in deflation?

I feel we are entering deflation first, and later it could trigger massive inflation.

Why currently deflation?

Normally in a closed world, product prices go up when the costs of raw materials to produce them and of labour which converts them into a marketable product (productivity costs) go up. So if these two decrease, then there should be real deflation.

  1. What we have seen for so many years is thatraw materials, clothes, shoes, food are coming from all over the world – especially from China – and thus in real terms prices have gone down for those items. The reason – globalisation.
  2. Secondly, oil etc. prices have gone south, which is one large cost chunk in industry production.
  3. Technology is bringing in more and more automation, so we are able to produce things the world needs at a lower cost.
  4. All over the world, labour takes place at those production points where it is cheaper than in the rest of the developed world – so prices are going down for world products.
  5. The prices of many products, especially electronic products which are coming into every part of our day-to-day life, are decreasing rapidly.
  6. The internet is leading to price comparison, and thus the lower price wins, as you are able to find it with ease. This is driving prices down in almost all industries.

So in summary, considering some of the above, the prices should actually go down.

Now the question is, why are we not seeing those decreasing prices?

Some reasons why we are seeing price increases instead of the logical decreases may be the following:

  1. Governments are taking measures to artificially avoid deflation and keep the inflation, for example with quantitative easing.
  2. Cartels and others are using their model to increase prices. For example, OPEC countries fix the price of oil, which happens to be a raw material underlying much industrial production.
  3. We are seeing massive bubbles in prices because of speculation – like we saw with the subprime housing bubble – that could take our eyes off real deflation.
  4. You see that many people have a larger income than before (as actual costs are down) and they have more money and invest in high-risk assets (with larger loans), buy things that are not necessities, etc – this is a clear indication of deflation.
  5. Companies are able to produce in lower-cost countries but with their brand images sell at much higher margins. These companies are able to thrive as more people are able to buy their products.
  6. Terrorism is driving fear and thus global activities are slowing down to artificially drive prices up.
  7. The value of the dollar is increasing in spite of so much pumping. If there is more and more of something in the market, the price should decline, but here the price is increasing!! – How is that possible? It means that people are betting that undeveloped and emerging economies – rather than the American market – are going to have more problems.

The above artificial forces will see to it that prices are not going down.

Now, assume that none of the violent mechanisms are used but pacific models – then we will have deflation like in a pacific world – Japan, which has had deflation for the last 20-plus years.

Reality checks

  1. After all this monetary easing, if the price of assets like gold – which is supposed to increase in anticipation of inflation – still goes down, then gold – the trademark of inflation measures – is actually showing deflation.
  2. Simple essential things in life like vegetable prices are decreasing. (How is that possible?)
  3. When crashes happen, or any system reset happens, if the price immediately goes down, then you know that the real prices are actually the lower ones (not only attributable to demand but also to the marginal cost of supply).
  4. Real estate prices are decreasing as soon as you put in some state levers, like tax.
  5. Worldwide, as mentioned, the underlying cost of production and cost of raw materials are decreasing.

So, if the world is moving towards deflation, then economies cannot sustain themselves (as economy, banking, insurance are all based on one important principle – that prices increase!!! – they will all be out of business if deflation happens).

Nationalism pops up everywhere, state-sponsored terrorism happens, and the world again becomes more and more local rather than global. This would drive massive supply-side countries like China – which can no longer sell into the world – to crash.

We see a nationalised (regionalised) world. Companies and products based in their local economies rise in value, as they will be able to sell more with the emotions of their respective countries. Global economic powers struggle, at least until they adapt their models. A lot of M&As will happen, where global firms sell to local firms and roll back their global aspirations. Prices start to increase again … and again we are in an inflation cycle.

So the underlying world says deflation is in place, but on the surface, many actions are happening that are not letting the world fall into deflation. So there is a huge tussle.  So the question is, which direction will the world move in?

I believe, unfortunately, there will be war, cyber-terrorism, nationalism, and new models of extreme terrorism.  But to the question of if we are in a normal market-driven world, will this happen – I doubt not.

A lot of my friends ask how to invest now.  As an investor – buy bitcoins, have some gold in case some large unwanted events start to unravel – as that will happen – go and get some real, real assets that you know are not going to drop in prices because they are definitely needed, like water. If you have some money, go and buy real estate in big cities, as unemployment will shoot up, and buy agricultural lands at a reasonable price – not at inflated prices. Let me also say, if you are on the enjoying side of the price increase, take the profit, and go and enjoy the world and get experience of the world. That is something you are going to always have in your heart and memory as the biggest asset.  But do see that the wind might be blowing for quite long in opposite directions, as artificial forces always believe they can win. To be human is to err (if not in the short term, definitely in the long term), so artificial forces cannot have their way all the time, as the natural way takes over in the long term.

Let us see our world in-depth and not be carried away from what we see on the surface – and decide with a decider’s mind how we will go about our world.

Overwhelming Life – what did i do?

I was facing a situation where I had to do something about too many things in my life. I had been on 16-18 hours a day for almost 2 years, including considerable weekend time. I had been managing it with the DDDD model – but still, at some point I could see that a tactical DDDD model is not enough.

I had to either continue to apply the DDDD model that I mentioned earlier or look at the whole thing and make some strategic choices. So the following is the way I went about strategising the whole choice.

I considered the following important aspects and said to myself, unless all 4 important items are showing green, I probably have to drop or delay those activities.  I am happy to share the four aspects that I used, which might also be applicable to many of you.

  1. Passion level
  2. Effort and time level
  3. Value level (in the case of a business/financial choice, this means returns or revenue)
  4. Uncertainty level (Risk for a business/financial choice)

PEVU (pronounced like “pivot” – which signifies direction)

Option A (PART-TIME CONSULTING): Interestingly, this choice did not suit me on the passion and time and effort level, but it did fit on the value (returns) and uncertainty (risk) levels. Previously I would have accepted that, but now as it failed the tests of the passion and effort level – which I am able to judge better – I have taken it off my list.

Option B (STARTUP): The revenue level is very high (as verified by others) for both the short and long term, and there is outside support too. Risk is reduced, as in the last 8 months, assumptions have been clarified and found to be on a clear track. Effort is shared with the team and partners in place. This is a good start, but it is not yet in the perfect state, where the level is in a good range for all 4 elements.

Option C (LIFELONG PASSION): This has a very high passion level, and I was thinking it had a very high return level, but I was misjudging the effort level. (Any time we are passionate about something, we always misjudge the risk and effort levels.) So now it is clear that high passion is there, so I will continue with this (as it will continue passively) and check that effort and risk are reduced and a clear revenue pattern emerges. The beauty of a high passion level is that you will continue with the activity and automatically become better and better, and if you actively consciously do that, then something great is waiting for you. This option will become centre stage after I complete the other ongoing activity which has fit all the bills.

Previously I was handling A and B and C all in one go: A was taking quite a lot of time, B was in preparation for a full launch and so mentally tiring, and C was also intensifying.  It was too many things to juggle and I was doing only moderately well in all of them and making myself very tired and dragging. Now I am dropping A, and doing B and then C. For now I am just focussing on just B. As I said, focus gives amazing results and speed, and I hope to be speeding now and soon doing the best job on Option C, my LIFELONG PASSION. Going from option A to B to C is a good sequence. B right now has the strong elements of A and strong elements of C and perfectly fits the PEVU (Pivot) bill.

can astrology be a decision tool in life?

I would say absolutely, if you believe in astrology. But do consult somebody who is really a good astrologer – otherwise you are going to be immensely confused.  If you are over 30, don’t consult only the D1(Rasi) chart but also the D9 (Navamsa) chart. It did help me, it could help you too.

What should i do during this demonetisation phase in India

Demonetisation has happened multiple times in the past, over the last 2000 years in China, Italy, France and Spain, for example. Every time, there was massive destruction of value.  What people call a complete system reset – a new world order. This is a very dangerous thing to happen. So be sure, there are some good things that will come, but at the same time some very bad things are set in motion. The adage that “old is gold” holds. So the best thing to do is not get fazed by media and popular opinions, but look for carpet being pulled out from under your feet – be cautious. I will try to quantify and qualify my thoughts as we go further.

Why do so many people loose in investments & trading

The answer is very simple – they lose something else before they lose their money. That is the cause of their losing money. The root is that they lose to themselves first. They lose their mind and focus. Investment is all about psychological control and what to expect. When did the premise go wrong and at what point are they not in control of themselves? A man who can control himself will never lose money in stock markets or in trading.

How did I quit smoking

One thing I am very proud of myself for is that I quit smoking after 12 years of the habit. The last years of that period was heavy smoking: getting to more than one pack a day. My smoking would increase dramatically when I was meeting friends or travelling or focussed on working… After the first few years, when I kind of felt I was addicted, I started reading about quitting, and I became aware of the health hazards. I tried a few times to quit, but actually always resorted back to smoking. I could give up anything in life but not smoking. I was very heavily addicted. At the time, the world was becoming more environment friendly, it was no longer cool to smoke. But I could not quit. I read Allen Carr books many times, but even though that helped me a bit, I would be back to my friend called Marlboro… It was really also spoiling my professional life. I tried to take all kinds of medicine, nicotine patches… even they did not help. So in short, knowledge, social pressure, health awareness, professional dullness, medicine, the cost of smoking… nothing could stop me… I had almost thought I could never give up smoking and I would end up smoking all my life.

My parents were arranging a marriage for me and I was not very keen… but then I met my wife and after we got engaged we started talking… and it was important for her and me that we have a child…. That was the moment… the thought of me smoking and the possibility of getting a deformed baby because of that, that image felt completely off to me. Imagining that kind of baby in the arms of my wife who was marrying me with all trust that I would be taking care of her…. That was the moment… I could not do harm to a baby or to a person who loves me so much… how could I do something like that to them… I quit the same day, and never looked back again.

So many times, large decisions are not possible when we look at them from our own angle, but by having an angle towards others… so many large decisions in life can be taken from that insight. Later I started getting into human psychology a lot and learnt that habits are breakable when the neuron chains of those habits in our body are loosened – and that happens when you truly start loving something else and the body starts loosening the neuron chains to form a new neuron chain around that new passion/interest of yours… That is what happened to me. Aren’t feelings of love and care so strong, don’t they help us take very important and large decisions? Life is wonderful.

Should i decide with mind or heart?

I think the right answer lies in deciding based on your subconscious mind and intuition. I might be wrong, but for me whenever I have taken a decision based on my subconscious mind, I was right. That is why people say, sleep over the problem, as the subconscious mind then answers the question. There are other methods of activating the subconscious mind – like answering 5-whys or following the Da Vinci method. Then if it has to be a choice between mind vs heart, heart is better – trust me, the universe is wired to act right that way :-)! I will write about activating the subconscious mind at will in more detail in the coming days.

I am adding this paragraph two months after writing the post as I felt this is a very important addendum. The mind decides practically, based on your strength, society and what we call local minima. The heart decides based on global maxima without knowing how to take it practically. Let the heart decide and let the mind work on the heart’s decision – you will have bliss and be successful. Don’t let the mind decide and the heart work on it – you will suffer and be a life failure. I wish the best to you – feel the bliss and be successful.

How to decide in any situation?

You can decide in any situation based on one thing: if love/care/compassion increases by doing something, then that is the best decision. You can go back in your life and see that whenever you did that, you were happy later about that decision. Myself, I can say that I always not only felt but can prove that when I took a decision not based on this principle, I took the wrong decision. Also, whenever you take a decision towards your passion, that is always right, since in that you are showing care/love/compassion to yourself. (In turn it increases care around you, too – that is the exponent of your rightness in your decision.) There are many different theories and I will write about them, but in short this is what I have experienced leading me to a good decision.

should i invest in Bitcoin?

We invest either to grow and preserve or to hedge our capital. So any investment should help in at least one of these goals. Bitcoin is beautiful in both senses. Indeed, it is as beautiful as investing in art!

Hedging: One good rule for adding a new asset to your portfolio is that it should not be closely correlated to your other asset classes. When assets are not correlated, they behave differently to each other, so even if there is a strong south wind in other asset classes, this asset could behave differently and therefore help in preserving capital. In that sense bitcoin is a great hedging instrument compared to other asset classes. It has shown that it does well in currency crises too. When Brexit happened and we saw the pound literally pounded, Bitcoin was standing and growing tall. It exhibited the same strength when the Chinese currency outflow was happening.  So in short, when world fiat currencies are being printed left and right, we have something we can use as a hedging instrument. It is very much a digital nirvana of gold from the hedging angle.

Growth: People like Horowitz say bitcoin may rise to hundreds of thousands of dollars; others talk more in the range of five hundred. So there are different expectations, but the reality would be somewhere between that. There are many reasons for price increases, but the most conservative way of looking at it is that the total number of bitcoins is limited to 21 million, and bitcoin rewards get halved every 4 years. So purely by a supply/demand calculation, we should see a doubling of its value at least every 4 years, which is much more than any normal investor ever can produce as returns. Things are changing: the whole world is moving online, and that includes investment and money. Bitcoin happens to be the online currency, and it is reshaping so many different industries. So it stands to grow with massive fundamental support.

I will write more about bitcoins in the coming days, but if you feel bitcoin satisfies the two main simple reasons for investment, go for it. But to start, do not allocate more than 1% of your total portfolio to bitcoin. As you get more comfortable, you can invest further – but again, never forget the principle of diversification and asset non-correlation while investing.

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