The Contrarian Letter
Hello Everyone :)
Last week’s question had very few responses. Probably because I placed it at the end of the letter. From all the responses I received, I struck a chord with my friend Harshita who said that we should learn from and hire specialists instead of relying on google and Kunal said a lot of us should stop stressing over the smaller things in life
According to me, I think the three things that everyone should do but don’t are as follows –
1. Speak less, listen more. We have two ears and one mouth. The amount we listen and the amount we speak should be done proportionately.
2. Start investing early. The advantages are immense. I have done it and completely vouch for it. No, I am not Buffet who started at the age of 11.
3. Understand how compounding works. We need to get out of the text book formula of compounding and start experiencing it ourselves. It’s just not limited to money.
This week’s question is an interesting one. Please take some time to think deliberately and share your thoughts. Here it is –
What would you do if you became famous tomorrow and suddenly everybody wanted a piece of you?
Three Cool Things I Learnt This Week
John Cage was a famous and revolutionary composer who changed the face of contemporary music. He was a huge fan of Zen Buddhism and tried to bring elements of this into his work. His most famous composition is a piece called “4 minutes 33 seconds”. The entire piece is silence. The whole orchestra will sit still and not make a sound for 4 minutes and 33 seconds! It’s amazing.
If you have to do the zen meditation, you have to simply sit down in a quiet spot, watch your breath go in and out, and mentally repeat the sound Mu. That’s it. In Zen, the real work was generally done in a group setting called a sessin. In traditional settings, a trained person would walk around with a kyosaku stick. If you started to sleep or lost focus in another manner, you would get a smack on your shoulders with the stick. Zen was strict; there was no playing around. This form of Zen was serious work.
“Before elevators, the classic 5+2 Parisian apartment house looked much the same as good apartment buildings have done since the days of ancient Rome. Far more economically diverse than today: shops on ground floor, the rich on top of that, then middle class, at top, working class.
Rich people weren’t interested in walking up all those stairs, so the higher you got in the house, the smaller and cheaper the apartments got. Today we have elevators, so these houses are more economically homogenous than they used to be, often the top floor is the most expensive
Should You Buy A House Early?
Earlier this week, I wrote on twitter that the only rule to buy a house in your 20’s should be to not buy it before 40. The tweet blew up.
Here are my thoughts on why I wouldn’t buy a house in my 20’s. These are just my thoughts. Please do not get offended :)
Buying a house early in life limits your options. You lose the opportunity to move at anytime because you are stuck with the emotional burden of staying in your dream home. Rent is a plan with most options.
How is a house your equity capital when you are going to stay in it for life. If its not going to provide you with any cashflows, how is it going a part of your assets?
I can’t stress this enough about non-linear effects of compounding. You may be ok with buying a house early and investing later in life when your income is high. However, higher incomes invested later in life get lesser time to compound. Time is fuel for money. If you are still not convinced, this post from Nick Maguilli should help.
You make yourself fragile by committing early in life. No one has their life figured in 20’s. What if you do not like your current area of work? A mortgage is never going to provide you that opportunity to quit and start over again. Capital, most certainly will.
Even though Indian is in a low interest rate regime, it still does not make too much financial sense to buy an “asset” that may or may not appreciate with inflation. I know few folks who sold their house at cost after 10 years.
Buying an index fund does not require much skill but buying one property early in life which you think will definitely appreciate requires skills that are a result of decades of work done. Understand the concentration of capital in just one piece of real estate versus diversification in hundreds of businesses.
If your parents have built houses in their lifetimes, please live in those and build financial capital for yourself. Make yourself antifragile.
In other news, I released a video titled “How To Make Your First Crore?” Do watch it and share your thoughts.
Take care, stay safe. Looking forward to hearing from you.