10 ways to make better decisions - Caution- DANGER AHEAD

Note- This part is in continuation with- 10 ways to make better decisions.

In the childhood days there was a jungle nearby our place. (We used to live 5-6km away from the Pune city. But now, after around 22 yrs after that incidence, our house is surrounded by concrete jungle.) Me and my friends used to go for hiking there.

In one late evening we were returning from a hiking expedition. It was dark, we were going downhill and we were in hurry to reach home. We all were afraid of parents scolding us for being late. So we were running fast through the bushes without much visibility, and then I jumped over a rock and landed in a thorny bush. My foot was protected by the shoes but my calf was all exposed. I was in so much speed and on the slope that I took 4-5 steps before coming to a halt.

When I stopped, I noticed my right calf was all bruised because of the thorns and there were three thorns still in my flesh. Later I dug out 2 thorns with needle but the third one was buried deep in to my calf. I didn't had heart and expertise to dig that much. So I decided to take doctors help. My mother took me to a nearby doctor. The doctor first gave me Anti-tetanus vaccine and some painkillers. Tried to squeeze the thorn out, while I was crying because of pain and trying to convince her that I have tried it and you have to operate it out.

But instead of listening to me she said, "This kid has too much imagination. I will give him some painkillers and if there is anything inside then there will be development of puss in the wound and the thorn will automatically come out." She also told us to cover the wound with corn cap.

After two weeks, despite the corn cap, the wound healed. The doctor declared her victory to my mother, "See,I told you, this kid has all in his imagination, this kid is obsessed for getting operated, the healed wound is the proof that nothing is inside, our body doesn't accept foreign objects." (It was despite one can feel something deep inside if pressed a finger at the spot of the healed wound.)

But I knew from the pain and sensation that there is a thorn of at least 2cm length in my calf.

Then after a year of enduring the pain there come a competitor doctor and the first doctor closed her clinic. So again I convinced my parents to visit her and see if she can take the thorn out.

As we visited her clinic the new doctor immediately said, "We need to operate it out, and what you people were doing this long?"  And after 3 days she operated the thorn out. And to our amazement the thorn was a little more than 3cm in length(1cm longer than my assessment).

My parents were speechless. And I was finally relieved from the pain.

There were mistakes done by everyone except the second doctor.

1) I was running faster than the safe speed in those conditions.

2) The first doctor diagnosed the situation totally wrong.

3) She again did a mistake of associating the healed wound as the proof of absence of the thorn.

4) My parents who believed the doctor more than me.

5) I didn't fought fiercely to get the thorn out.

I think this is a serious matter and we should analyse it so as to avoid such mistakes again.

Let's start with the first mistake-

Mistake No.1

I was running faster than the safe speed in those conditions.

That is why I landed in the trouble in the first place. But why I was doing the risky thing? I was doing it because everyone else was doing it, someone of our group started running, second followed, third saw 2 boys of our group running so he too joined them, 4th saw 3 boys running so he too followed, and this went on till we all were running. None asked if it was that necessary to run. No one did any compulsion on any one but still everyone complied.

This happens because of the default programming of our brain which is the result of thousands of years of evolution. Many animals also had the same default programming.

Our brain always try to save it's processing capacity by following shortcuts. These shortcuts used to make our life a lot simpler. For example if someone from a group saw a predator he would start running, otherwise there was no other reason for running. Then the most logical thing to do for everyone else is to run in the same direction first and think about it later. Because if one sees a running group mate and he starts thinking about why is he running? Starts looking for the cause then it would have been too late for him and he would become an easy meal for the predator. So obviously the animals without the default shortcut of running when one sees other running group mate fell pray to the predators first, thereby becoming obsolete. The one following the other running group mate thinks that the other knows some important thing which can make difference of life and death.

Then there is another thing that we feel safe in a group instead of living alone. Because it is the logical thing in the wilderness. In a group, different tasks can be divided to different members, so the group operates more efficiently than a lone organism. The group of organisms can even defend some deadly predators, sometimes even injuring the predator. So the predators are also a little afraid of groups of pray. Therefore the lone organisms first become pray to the predators.

So I didn't wanted to be left behind the group. That is one more reason I was running with everyone else.

And none consciously knew who started running first and what was his motive behind running. Even I don't remember if it was me or someone else who started running first.

In psychological terms this default behaviour of copying the behaviour of other group members to which we belong is called "SOCIAL PROOF BIAS".

Mistake No. 2

The first doctor diagnosing the situation totally wrong.

I don't really know why she misdiagnosed the situation. She was a surgeon, so she could have did some tests like X-ray or something to determine if there is really a foreign body inside my calf and then operated it out. But may be because of some preoccupation she wanted to dismiss my case as early as possible. Or may be she has a bias that kids have imaginary medical problems. Or may be she was taking me as a threat to her profession that a kid is telling her to operate, which she might have thought is her right to take that decision. Or it was unbearable for her that a kid is guiding her.

The answer can never be known.

Mistake No. 3

She associated the healed wound as the proof of absence of the thorn.

When she diagnosed that the healed wound is the proof that there is no foreign body inside, one can easily feel the thorn inside by pressing a finger at the place of the healed wound. She also felt it.

But still she wanted to be consistent with her earlier diagnosis so she persisted that there is nothing and everything is imaginary.

In psychological terms this default behaviour of being consistent with part behaviour is called "CONSISTENCY BIAS".

The simple explanation behind this CONSISTENCY BIAS is people don't trust others who are not consistent with the past decisions or opinions. But it is always better to change or modify our decisions when they are proven wrong.

Mistake No. 4

My parents who believed the doctor more than me.

When this happened I was 13-14 yrs. old and the doctor obviously had various degrees from medical colleges hanging on the clinics wall, plus a well equipped clinic representing professionalism plus she had a confident voice. She displayed every trait of a professional doctor. That is why my parents did the mistake of taking her word as a final word.

In psychology this default behaviour we generally follow is called "AUTHORITY BIAS". People tend to believe what an authoritative person says. People assume that the other person have more knowledge than themselves. And people look for the traits for the authority, not exactly the real authoritative person. This bias is hugely exploited by advertising professionals. Do you remember watching the TV commercial in which an actor in doctors suit and stethoscope sometimes accompanied by an actress in the nurse's get up recommending some product? Though we consciously know that they are actors and not the actual doctors but unknown to us our subconscious assumes they are doctors because of the visible traits we associate with doctors and it later prompts us to buy that product at the time of shopping. This association tendency is called "ASSOCIATION BIAS" in psychology.

So do not always trust what you see. Look beyond the visual clues. Use your common sense.

Mistake No. 5

I didn't fought fiercely to get the thorn out.

I was feeling very overpowered by the doctor and my parents. And while proving them that there is a thorn inside, I would have to bear the pain of they trying to feel it by pressing, the pain then used to ease after 4-5 days of such proving rounds with no positive outcome. So I decided to wait for some opportunity to come by. (And finally after one year of enduring pain the opportunity came as another doctor in our neighbourhood.) What a relief it was...!!!

I told you my story so that you can avoid such mistakes due to various BIASES and take the right decisions. And do remember that professionals also have BIASES so be vigilant to spot the wrong decisions taken by professionals. Use some common sense (samanya buddhi). When you see any proof that the decision is wrong or the decision is based on the wrong assumptions do change the decision, do not fall victim to the CONSISTENCY BIAS.

That's it for now.

See you again.. Have a nice day...

Sumit
The POWER is when,
You use ODDS,
To get EVEN.

10 ways to make better decisions

Hello friends,

A few days ago, I read an article on the internet. I am reproducing some part of the article which stimulated my brain-

Scientists Shai Danziger, Jonathan Levav, and Liora Avnaim-Pesso analyzed 1,112 bench rulings in a parole court and plotted the proportion of favorable rulings over the course of the day. They found that judges were more likely to deny a prisoner's request and accept the status quo outcome as they advanced through the sequence of cases on a given day. More specifically, their proportion of favorable rulings started out high, at about 65% at the start of the day, but dropped off rapidly.

By the time a meal break came around, the proportion of favorable rulings was close to zero. When court was back in session, the pattern repeated itself, starting high and ending with almost zero favorable rulings. Interestingly, neither the judges nor the panelists who advised them were aware that mental energy is essential to careful deliberation and the later in the day, the lower such energy is, unless a lunch break allows judges to recharge.

Evidence for the same type of cognitive fatigue has been found in other contexts, including consumers choosing among various products and physicians prescribing antibiotics. Primary care doctors often prescribe unnecessary antibiotics for acute respiratory infections (ARI), researchers have found. As the physicians appeared to "wear down" during their morning and afternoon clinic sessions, the rates at which they prescribed antibiotics increased. About 5% more patients receive antibiotics at the end of a clinic session as compared to the beginning, this research shows. Thus, while clinicians make many patient care decisions each day, the cumulative demand of these decisions leads to more inappropriate choices later in the day.

End.

Unbelievable, isn't it?

But believe it, just take a little time and think about your how your yesterday went? How you started the day? What decisions did you take? Whether they were right? How did you felt while assessing the choices?

You will find it that some decisions you took were bad decisions, you could have made better decision if you were in better mood. Others were simply right, and you were in good mood while taking the decisions.

So what is this MOOD??

A good mood can be characterised by an energetic condition of brain and vice versa.

But why does the quality of decisions get's affected by condition of the brain??

Generally after enough sound sleep we wake up with an energetic brain. Everyone knows that we can grasp things easily in the morning. But then 2 things happen as we proceed through the day-

1) Decision fatigue-

As we wake up in the morning we start making a series of decisions, like on weekdays we might be thinking, how to reach the workplace on time? Am I running late? If running late then which things I can skip to save time? Or how can I move fast? How much I have to move fast? After reaching office, how to tackle the boss? How to tackle different problems at the workplace?

Then there are decisions related to relations with other people or about our health or different needs, different compromises, decisions about the family, financial planning, planning for shopping (grocery, clothes, vehicles, study material for kids, consumer durables, fuel for vehicles.....) the list of decisions we take goes on and on. There seems to be no end.

All this decision making process consume the processing power of our brain. As our brain thinks, it produces some chemicals which goes on accumulating in the brain. These chemicals inhibit the processing power of the brain. We can counter these chemicals temporarily by drinking tea or coffee, as the chemicals in the tea or coffee temporarily desensitize our brain cells to the build-up of the slowing chemicals.(but the builds up remains there.)

Along with this there is also a build-up of short term memories which we gather to take decisions. Our brain has to get rid of these two inhibiting factor to regain it's processing power. And the only way to achieve this is to get enough of sound sleep. During sleep, our brain classifies the things in the short term memory in to useful memory, which is then handed over to long term memory and the unwanted memory is discarded.

While we are asleep chemical changes also occurs in the brain. The inhibiting chemicals formed during decision making progress gets removed.

That is the reason why we feel fresh and in good mood after a good night's sleep.(along with the revitalised grasping power)

This explains somewhat why our decision making ability deteriorates through out the day.

Then there is a second reason responsible for bad decisions-

2) Preoccupation-

Our brain is not designed for multitasking. But we still try to multitask. For example you need to pick up the kids or spouse or some grocery item while going back home, and you try to do office work while keeping this information in your short term memory, which is like a RAM in the computer. As you know when the RAM gets crowded, the processing capacity of the computer slows. Similarly as our short term memory gets crowded our decision making ability dwindles.

So what happens when we have decision fatigue and preoccupation???

When our brain develops decision fatigue and is preoccupied it starts taking short cuts while making decisions. Sometimes it doesn't consider all the relevant things, other times it may fit the current problem with some other not so relevant solution, or it simply borrow solution from someone without knowing if it actually suits your problem.

For example even while taking big decisions like buying a car, one may simply chose a car owned by a colleague or neighbour, or best selling car in the country etc. This decision is taken without considering what features we actually need in a car or what type of car do I need to carry out my specific work etc.

How to get past this thing to make better decisions??

10 WAYS TO MAKE BETTER DECISIONS (and live a better life)-

1) A simple answer would be make as few decisions as possible. Weed out the unnecessary ones.

2) Take important decisions when your mind is fresh i.e. in the morning time.

3) Avoid making decisions in bad mood.(remember those bad breakups with loved ones??)

4) Reduce the preoccupation with the help of smart phone reminders.

5) Get away from disturbances.

6) Stop multitasking.

7) Get enough sleep.(enough sleep also ensures good health along with fresh mind)

8) Maintain a good health. Exercise also helps in rejuvenating our mind.

9) Only make friendship with good people.

10) Take your time while making your mind.

A great billionaire and philanthropist- Warren Buffett have given a great advice to the investors -

"To make your investing decisions much better, I will give you a punch card with 20 slots in it, every time you make an investment you punch this card, you only have 20 investments to make in the life. This will dramatically increased the quality of your decisions. And 20 good decisions are enough to make you a lot richer in life."

Many renowned investors including Warren Buffett and Charlie Munger also agree that you only need to find one investment idea in a year or two to get awesome results.

That's it for now. See you again, till then have a nice day...

Sumit
The POWER is when,
You use ODDS,
To get EVEN.

Do you enjoy your own company?

Hello Ladies and Gentlemen...

Today in the lunch time I was sitting at my table, reading an article about behavioural finance, there was no one in the office and one guy named Kiran came and sat at his table. Just after 10 seconds Kiran started flipping through some papers, making some comments (so as to attract my attention), yawning louder but I didn't budge, so after about one or two minutes of efforts to attract my attention Kiran finally got up and sat on the chair in front of me and started to make conversation with me. Kiran was trying to gossip then talking about weather then finally trying to talk about tax saving, (he started talking about tax and money because he knew that would interest me) but I was constantly showing him lack of interest, putting my head in my smart phone on every opportunity, ignoring him and testing his patience. (I am not always this much rude, but you would never know when I am doing my experiments 😉) This went on for around 15 minutes, till then Kiran was on the verge of leaving the room but couldn't just sit and keep quiet. To his rescue, another colleague appeared in the scene, a guy named Rohan came in, immediately with a relief, Kiran started talking with Rohan. They kept chit chatting on various useless topics.(I don't have any idea what they are going to do by getting an up to date information of a love affair going on in the neighbourhood office, or about some loose comments of a film actor and many more such topics, including bitching about others.)

Everyone knows there is no point in doing all these things. But still most are involved or rather addicted in such things whenever situations permit. But the question is why Kiran wanted so desperately to talk with someone who is not even paying attention to him, who seems preoccupied? Wasn't he feeling insulted? But why he still persisted in talking?

I see people everywhere who are not at all interested in listening or taking up any knowledge. They just want someone to listen and talk themselves out. They are just like a proverbial crocodile with a HUGE, LONG, BIG MOUTH AND NO EARS.(well I have lots of respect for crocodile as it is one of the many masterpieces of natures adaptive engineering, (a crocodile is a cold blooded creature, can control it's heartbeats, can reduce it's heartbeats to just 2 per minutes, can hold it's breath up to 45 minutes, can live for days without food or water(yes you read it right, ' without water') and there are many more characteristics but that is not the topic of discussion here)).

The point is that there are many people around us which can not just sit quietly. But why? Why they want someone's company? Why they want keep talking?

As most of the time such people are only talking useless things and not listening, my guess is that they are LAZY and AFRAID. They don't want to confront the reality, they don't want to confront the real problems, they just want to be preoccupied and make it as an excuse to neglect the real problems or the reality.

OR IN OTHER WORDS, THEY ARE NOT COMFORTABLE IN THEIR OWN COMPANY.

(Real problems like why they are stuck in the same place in the office which they don't like at all, or why their health is diminishing fast, or why there is lack of understanding or lack of love in their family, or why they have to keep doing their most hated job for money etc. There are enough of such small but real problems for everyone.)

The other guy is going ahead in life is not a problem for you, but YOU are not going ahead in life is a problem for you.

So what's the cure?

Most of the wise Rishi's and Maha-Rishi's from old scriptures have unanimously vouched for-

DHYAN, CHINTAN and MANAN

Which roughly means- Meditate, Contemplate and Reflect.

Now what is meant by MEDITATION?

Meditation is observing your own thoughts from a distance; neutrally; so that you don't get disturbed by the thoughts.

IN SHORT YOU BECOME A NEUTRAL OBSERVER OF YOUR OWN THOUGHTS. YOU BECOME AWARE OF YOURSELF. YOU BECOME COMFORTABLE WITH YOURSELF.

You now know the useful thoughts from the useless ones. So now you automatically start CONTEMPLATING more and more about the useful thoughts, so the useless ones just vanish.

As you think on the useful thoughts more and more, you start acting on it and then comes the phase of REFLECTION. Where you reflect on the whole process; fine-tune it and repeat.

That's the way to grow spiritually.

So next time when you find yourself alone, just sit, lean back, relax and observe your own thoughts. You will feel much better.

That's it for now. More about mind and meditation coming soon..

Till then have a great time..

Sumit
The POWER is when,
You use ODDS,
To get EVEN.

Where to start???

We all are very familiar with the question, WHERE TO START? Every day we encounter this question numerous times. Each time we have to start doing something new, we encounter the question, WHERE TO START?

Many people apply different techniques for starting to solve an unknown problem. There are as many solutions to WHERE TO START as much as the population of human beings on earth. But I like a simplified and effective solution. I use a solution borrowed from three sources-

1) Police department.
2) The knowledge of how our brain works.
3) Pierce Brosnon's dialogue in a James Bond movie, "First comes first".

Let's go in to the deep-

1) POLICE DEPARTMENT-

Police department or the law and enforcement officers encounter unknown problems regularly. Generally their work involves hunting down criminals. Criminals usually try to hide their crime and the evidences which relates them to the crime. Therefore crime investigating officers have to evolve a technique which helps them in finding the unknown in the uncertain environment.

What the investigating officers do is, they assume a theory or assume a possible culprit, and then try to find the evidences which prove or disprove the theory.

If the theory is proven right by the evidence then case solved but if disproved then the information gathered during this exercise gives further clues about the possible suspect our if not, the investigators simply think about another possible suspect as per the first theory or may change the theory because of the new clues and information gathered.

In short what the investigators do is decide a goal, start going towards goal by collecting unknown information, with the new information they correct their path and the goal itself if needed. And then moving this way, they finally achieve their goal, i.e. finding the culprit and the evidences proving him or her the culprit. Job done.

2) HOW OUR BRAIN WORKS-

As per the book PSYCHOCYBERNETICS by Maxwell Maltz, our brain works like a servo mechanism. For those who don't have any engineering background- servo mechanism is a conditional switch which operates when a pre-specified condition is met. For example thermostat in an electric iron or an electric geyser or electric oven is a servo mechanism. The temperature which is higher than the room temperature is first set in to the thermostat and then the heating starts. The temperature of the iron, water or air in the oven starts rising because of the heating. When the temperature exceeds the set level the thermostat cuts the electricity to the heating element, thereby preventing further increase in the temperature. But when the temperature drops below the set temperature, the thermostat switches the electricity on. Again the temperature starts rising, again as is exceeds the set temperature the thermostat cuts the electricity to the thermostat. This way the thermostat maintains the set temperature.

For a servo mechanism to work, there has to be a set point, i.e. GOAL. When a we set a goal, feed the necessary data and let the servo mechanism work then we can easily achieve our goal.

Now, the question is how to feed the data?

In the above example of thermostat, the data is the temperature, the temperature sensor senses the temperature and feeds the temperature reading to the servo mechanism. If we don't start heating then the servo mechanism does not work.

If you want to go to north and you are not moving then a servo mechanism can't tell you the direction. If you start moving then only the servo mechanism can tell you whether your direction is right and if not, then what correction is needed.

How to use this mechanism?

Set a goal and start moving for the goal. For example of you want to earn a particular amount of money in a particular time then first you have to start earning money in whatever way possible to you (I only advise legal ways). Then only you will understand if it is enough or you need to change the source or if there is anything else.

3) Pierce Brosnon's dialogue in a James Bond movie, "FIRST COMES FIRST".

Many times starting to solve a problem is as easy as FIRST COMES FIRST. For example, are facing a common problem of less savings. So you decide to save more and spend less. Now you encounter the question WHERE TO START? Just go for the FIRST COMES FIRST. From now on what is the first thing you are going to spend money on? Just think about how to lower it, our if it is necessary to spend at all? Then one by one go on to face the bigger expenses where you can save more with less efforts. Apply the 80-20 rule, that is 80% results are obtained by 20% of your efforts.

So starting out to solve a problem is as easy as 1 2 3.. You just have to start, and you will find a way. If you make a start then half the battle is already won. Because there is no problem which is unsolvable.

Further the solutions to the problems can be found at any place or situation in the universe, irrespective of the relevance. One just need to have an open mind to see it.

So what's the first problem you are going to face now? You know where to start..😉

See you soon...

Till then have a nice day...

Sumit
The POWER is when,
You use ODDS,
To get EVEN.

The myth about city mileage and highway mileage

Most car and motorbike companies provide tested and verified mileage of their car models or motorbike models. Two things you must have observed that they provide two mileage figures- city mileage and highway mileage and second- highway mileage is greater than the city mileage or in other words highway fuel consumption is less than city roads.

As per my observation most people only look at those mileage figures at the time of purchasing the vehicle but afterwards very few pay attention to the actual mileage per unit of fuel consumed by the vehicle. Further most of the people think mileage is an inherent characteristics of a vehicle and only a vehicle mechanic can tinker with it.

The astonishing thing is that I have even seen engineers doing the same thing. Most of my friends are engineers and almost none pays attention to the mileage figure of their vehicle.

But on the other hand, I have seen some handful of guys understanding and finding and tinkering with the mileage of their vehicles. I guess curiosity is the common thing among these guys.

Well until now if you have not measured the mileage of your vehicle, don't worry. As you are reading this article, you are curious enough.

This article is to be read along with,

The power of compounding- 10 ways to improve your bikes mileage

Ok, so let's  now come back to our myth- the city mileage and the highway mileage-

Most of the time, my observation is in contradiction with the automakers. My motorbike and car gives less highway mileage than city mileage. And I can safely bet that for most of the people it is the same way.

Now why it is so?

There are two reasons-

1) AIR RESISTANCE-

Now what is this AIR RESISTANCE?

Whenever any object is moving in the stationary air, the air in front of it gets pushed by the object, also there is a vacant space produced behind the object as it moves forward. It is like moving through a densely packed crowd. You have to push the person in front of you away from your path and as you go forward the person occupies the space formed behind you. So you encounter a resistance to go forward. The more speed with which you want to go forward the more resistance you have to encounter. And if you move more than a certain limit you may get beaten up by the persons you are pushing. :-)

The same thing happens with your vehicle. As your speed increases the air resistance increases.

The air resistance quadruples as your speed doubles.

So you burn more and more fuel to overcome this air resistance as you increase your speed.

To reduce this air resistance which is also called air drag most cars are made aerodynamic (i.e. stream lined). So that they have to make less movement in the air. Or in other words they make it easy for the air to move around it.

But still as your speed doubles the air drag quadruples.

To understand the might of the air drag let's see another example-

The air drag is so negligible for us humans that we never give a thought about it while walking or running. It is because normal humans seldom run and even if we run, we can run at the top speed of 15km per hour and we generally walk at 4km per hour. So we just feel a little wind blowing around us when we run and no movement of air while we walk. That is we have to apply very little force to overcome the drag while walking or running. But suppose you are able to run at say 200km per hour then you have to apply the force equal to your weight to overcome the air drag. For example of you with 70kg then you would have to apply 70kg of forward force to overcome the air drag to run at 200km per hour(if you were able to run at that speed with our normal aerodynamics).

Usually we drive slowly in the city traffic as the roads are crowded and the speed limit is also lesser than the highways. Therefore if you are driving in a relaxed manner then you will encounter much lesser air drag, hence lower fuel consumption.

But on the highways you have open roads with higher speed limits, so obviously we drive at higher speeds on the highways. Which increases the fuel wasted on overcoming the air drag.

Now the second reason-

2) ENGINE EFFICIENCY-

The internal combustion engines (i.e. gasoline or diesel engines) fitted in our vehicles are operated in the wide range of RPM. The throttle governs the fuel going in the engine and thereby governing the RPM. While driving the vehicle we are constantly changing the RPM of the vehicle to suit the driving conditions.

But the engines efficiency is highest in a narrow band of RPM. Above this narrow band or below this narrow band the efficiency of the engine decreases drastically. Generally the vehicle operates the most economically when it is in the top gear and the RPM a little above stalling RPM (stalling is when the engine RPM is so low that it can't function smoothly). In such a condition your vehicles engine will be working comfortably and most efficiently.

If you look at the specifications of the engine, they generally provide a maximum torque figure and the RPM at which you get this maximum torque. This is the RPM at which the vehicle operates most efficiently. So in any gear depending on the driving condition of we stick to this RPM then we will get the best fuel economy possible.

But we almost always exceeded this RPM by a huge margin whenever driving on highways. Therefore the engine is working far away from the economic working zone of the engine.

So the result is LOW FUEL ECONOMY.

(The working of an engine is similar to us. For example, though an average person can run at the top speed of 15km per hour, we seldom cross 4km per hour. If we start running, soon our body starts struggling to get enough oxygen, struggling with removing the excess heat generated, struggling with the lactic acid generation in the muscles etc. Same is the case with the automobile engine. As we work great when we are doing things in our comfort zone most of the time, the same is applicable for automobile engine.)

I have tried to make this subject as easy to understand as possible. Hope you are ready to apply and save fuel.

See you soon.. Till then have s nice time..


Sumit
The POWER is when,
You use ODDS,
To get EVEN.

Happy new year

So ladies and gentlemen, you must be thinking why am I so late in wishing Happy New Year??

Well, it is because I don't just want to wish you but, contribute in making your new year happy. You must be thinking how am I going to do it? Do I know the situation you are in and have a perfect cure for your problem?

Yes, I do know the situation you are in, I was in the same situation, trust me. Whenever new year came, I would make new year resolutions, decide what I wanted to do and achieve in this year and then making a plan to achieve the goals I set but then out of nowhere problems start arising, like I am too tired to get up early in the morning and practice yoga, so I would decide to start from tomorrow, I would decide to study regularly, but every time it was time to study there was a great movie playing on the TV which I couldn't resist watching, or friends are calling me for an outing and obviously the only choice I made is postpone my plan. This process got repeated so many times that I got used to postponing my plan and then one fine day, without my knowledge my new year resolution was lying in the remote corner of my brain. And this day was hardly a month away from the 1st of January.

Does it sounds familiar with your experience? Have you made such resolutions and couldn't stick to the plan?

If yes then keep reading otherwise you don't need my advice.

For those who are reading, it is very easy to come out of this situation and make your plan work. The remedy to your situation is in three words. Now sit tightly as I am going to tell you those magical 3 words which are going to change your life forever-

The 3 words are-

MAKE IT SIMPLE.

Yes, you read it right, to make your plan work, you just have to MAKE IT SIMPLE.

What do I mean by SIMPLE?

SIMPLE means 3 E..

1) Easy to make
2) Easy to work with
3) Easy to get results

Now we will get in to details of the 3Es.

1) Easy to make-

To make the plan easy to make just cut the crap. Don't think about the things which are not related. If you have doubt about the relation, then simply assume it have no relation if there is no fatal danger. You will get to know about the relation later on, automatically. For example, why to include 1st of January in your plan? Does it really have any relation to your resolution? Mostly it does not have any relation with the plan (what do 1st of January have any effect on starting a fitness workout or practicing yoga?). You can start from just now. Don't wait till your enthusiasm dies.

2) Easy to work with-

Your plan should not change your lifestyle drastically all of a sudden, the change should be gradual. Because there is always resistance to change so make the changes slowly but persistently. For example- I will sleep 15 minutes earlier today and get up 15 minute earlier tomorrow so as to get those 15 minutes of time in the morning to yoga. No drastic change like getting up 1 hour earlier than normal and doing 1 hour yoga. That's not going to work. 15 minutes is enough and do-able.

3) Easy to get results-

Results are very important. Positive results keeps our moral high. Positive results keeps us going. So your plan must be designed in such a way do as to get results easily. If it is really difficult to get results then the plan doesn't work. For example of you practice yoga for 15 minutes in the morning with proper understanding and attention to your body, you will feel much relaxed the whole day. That's a good result.

That's a simple hack you can use to make new resolutions from now, you don't need to wait for a new year to make new year resolution, just start from now, one small step at a time.

Remember ONLY ONE SMALL STEP AT A TIME, MAKE IT SIMPLE is the way towards better health, wealth and happiness.

See you soon.. Till then have a simple life and extraordinary results...

Sumit
The POWER is when,
You use ODDS,
To get EVEN.

Wealth creation- Ratio of spending to income

So until now, you have learnt the simplest definition of what is an asset and what is a liability.

To revise again, ASSET is your belonging which puts money in your pocket, while the LIABILITY is your belonging which takes money out of your pocket.

If you want to be rich you must buy assets, lots and lots of assets. You have to allocate most of your income in purchasing assets, but what's the point of making money if we can't buy liabilities? Because we have longing for all the costliest liabilities, e.g. fancy car, huge flat screen television sets, home theatre systems, automatic home appliances, latest smart phones, fancy gadgets, the list even goes to luxury yatchs, private jets, vacation houses, maids and servants, personal assistant etc.

To understand how to do it, you must imagine you are doing a business, even if you are not a businessman. (what is a businessman? is another important topic to write a post on, you will soon get to read it on samanyabuddhi.blogspot.com , stay tuned.)

So now you are imagining that you are doing a business, you are the CEO and managing director of the business. Your business is managing your family. You and may be other family member of your family have incomes, may be from job or self employment or business or rental etc. That is your income or you can say income from operations, and then you have to pay the utility bills, grocery bills, servants salary if there are any, tuition fees of your kids, hotel expenses, entertainment expenses, purchase of clothes, traveling expenses, loan EMI's, fuel expenses etc.

So these things make income statement or cash flow statement of your business(it tells you from where your money is coming from and where it is going)-

Income statement / cash flow statement-
Income-
1) My salary -
2) Spouse's salary-
3) Interest on deposits-
4) Dividend on investments-
5) Gifts-

Expenses-
1) Grocery bills-
2) Utility bills-
3) Traveling expenses-
4) Maintenance of vehicles-
5) Children's education-
6) Healthcare expenses-
7) Gym memberships-
8) Entertainment-
9) Miscellaneous expenses-
10) Various taxes-

There can be other incomes and expenses too which I have not covered, but you can include them.

If you do it, you will get a clear picture of, from where and how much money is coming and where it is going. The money remaining after the expenses is your free cash or savings. You can use this free cash to buy assets, which will add to your income.

Similarly, you can make list of your assets and liabilities on a sheet, known as balance sheet.

Assets- (which put money in your pocket)
1) your job
2) property(only if it is putting money in your pocket or it's price is increasing more than it's expenses- in short putting money in your pocket)
3) shares of any company you are holding (again if putting money in your pocket)
4) fixed deposits
etc.

Liabilities- (which takes out money from your pocket)
1) your car
2) your smart phone
3) your tech gadgets
4) loans
5) different memberships
6) shares or equity in a loss making company
etc.

So now you get a clear picture of from where your money is coming and where it is going, also which of your belongings are putting money in your pocket and which are taking it out. Once you get the clear picture it is easy to start the reconstruction.

The reconstruction process involves getting rid off the unwanted liabilities and purchasing more of the profitable assets.

But the question is up to what extent we have to do it for the best results?

The answer to this question lies in the financial statements of the successful companies. How these companies spend their earnings. The dividend they give out is expense to them while retaining of earnings to purchase or expand the business is like buying assets for them.

So the first on my list is The company managed by legendary capital allocator Warren Buffett and his business partner Charlie Munger, The Berkshire Hathaway.

Berkshire Hathaway has paid dividend, hold your breath - ' only once' under Warren Buffett's part ownership, but that too because Warren Buffett does not had sufficient percentage holdings to stop the dividend payment. After that Warren Buffett have increased his equity in the company so much as he had virtually total control on the company's decisions. Since then Berkshire Hathaway have not given any dividend. That is the company had used all it's income to fund new investments and expansion of existing profitable operations. Berkshire Hathaway is the extreme case of retained earnings. None can blame Berkshire Hathaway for not paying any dividend because it had used the money for increasing it's income very efficiently.

But if we look at other growing, profitable and debit free companies, we will find that, they are sticking to the 80-20 rule.

It's not a rule it's just an arbitrary value. These growing, profitable and debit free companies reinvest their 80% of the earnings and distribute the rest of the 20% as dividend to the shareholders. In this way the shareholders of the company has money to spend and also have a growing business(growing income).

I always try to stick to this 80-20 rule. It's a no brainer and it works. Now a days most of the average families save less than 10% of their income and buy assets (if they are not paying home EMI's). So it is hard for them to reach that 80% mark, but you can start increasing 1% at a time. You can not convince your family and yourself from directly moving from 10% to 80% but you can certainly convince and achieve the move from 10% to 11% and then from 11% to 12% and so on until you reach your target. Use the proverbial ' Boiling Frog Syndrome ' to your advantage.

That's it for now.

Hope you have got the basic idea about how to look at your financial situation and how to improve it for your betterment.

See you soon.. Till then happy investing...

Sumit
The POWER is when,
You use ODDS,
To get EVEN.

Understanding financial freedom- Cats

I love cats. Cats are one of the many masterpieces of nature's adaptive engineering skills. Cats are very loving, soft, beautiful animals and also deadly, cruel, capable killers at the same time. The most important thing is they know which role to play at which time. A pet cat sitting on your side, expressing it's love for you with the deep and tender 'grrrrrr grrrrrr' sound can sense it's pray or enemy nearby and starts playing it's deadly killer role within a fraction of a second.

Actually I like all the animals in the CAT family, including Tigers, Lion, Leopard; the bigger siblings of our domestic cats. They are almost similar except size and strength.

But they all have one thing in common- "The Attitude".

They have a very distinct confident but carefree attitude. Big cats are really the king of the jungle. If you look at them, you will know, 'they are the undisputed king of the jungles'.

Our domestic cats have the same attitude, same everything, except the size.

As I like to observe and learn, I quickly learnt to understand when the cats are hungry and immediately give then the required food. So my pet cats don't have to worry about the food when I am there. So their Royal attitude remains intact in my company. But what happens when I am not there to feed them is a very interesting thing.

When I am not at home and my pet cats feel hungry, it has two options, either go out and search for a prey or to ask for food to my parents. The first option had very high uncertainty of getting food, they also have to compete with other animals which are after the same prey. But the second option offers some certainty. They will get food if they can convey the message over and over again. So most of the times the cats choose the second option. That is to ask for food.

(Domestic cats convey this message that they want food by, making that deep grrrrr, grrrrr sound and "myaaw, myaaw", simultaneously rubbing their cheeks, body and tail against our feet. (what a demeaning behaviour !!!) Demeaning because they don't do this the other times, that means they don't like doing it. At other times they are exhibiting their Royal attitude. To show their love they just sit beside us or on our laps or body and make that grrrr, grrrrr sound, or they just sit on your belongings like your quilts, bag, table etc. And look at you lovingly.)

Their whole Royal attitude is ruined when they ask for food. And the Royal attitude goes down and down as this process is repeated. But the process can be reversed if they are provided the food before they need to ask. Again their Royal attitude returns.

Amazing story isn't it!!!!

This story will become more amazing and fascinating once you substitute humans for cats and money for food and what a man does to earn the money. The story is equally true.

As domestic cats have two ways to get food we also have two ways to earn money-

1) Go out and earn money of your own.(similar to hunting, a way full of uncertainty, but full of dignity.)

2) Take a refuge to an employer and be a salaried person.(similar to asking for food to the owner by pleasing him, a way with a lot of certainty, but less dignity.)

(see my post on 'ONE IDIOT')

Similar to the domestic cats most of us also choose the option with a lot of certainty and keep doing the job for the sake of money. Even if we don't like doing that job we still keep doing it for the sake of money. We do it year after year and so on up to an extent where this demeaning kind of behaviour is so much ingrained in our brain that we no longer feel it as a demeaning task. We perform our own brainwashing without ever realising it. We even teach our children the same thing- ' to get good grades in the school and college so that you can land in a good paying job.'

It's like the proverbial 'BOILING FROG SYNDROME' (it is said that if we put a frog in a boiling water, it will immediately jump out of the boiling water, but if we put a frog in water at room temperature and slowly heat the water to boil, the frog will not jump out and die. It is because the frog is unable to notice the small changes in temperature of the water, even though the changes are deadly.) We seldom notice small changes in our life until its too late.

Or then there is a social proof bias preprogramed in our brain which prompts us to do what most others are doing.

All this results in to a kind of entrapment.

But don't worry, you can easily get out, just like my cats have found out their way. They just stay with me as they know, they will get food without having to ask or beg. So how can one get the money without asking or doing any job?

To know how read my posts on 3 MOST IMPORTANT ASPECTS OF LIFE - WEALTH.

Enough for today.

Hope you got the lesson from my cats as I did.

See you soon. Till then enjoy the life..

Sumit
The POWER is when,
You use ODDS,
To get EVEN.

She loves me...
She loves me not...