Saturday, November 16, 2019

Flywheels and Feedback Loops

I wonder if so many people would still be smoking if one cigarette killed you? It seems ok to smoke till one day (far away in the future, hopefully) all the years of bad behaviour catches up and manifests into a scary medical report. This is a classic long negative feedback loop. You push things far away into the future till one day, future arrives (Thanos is smiling).
Ideally one would want shortest feedback loops as the effects are known immediately and one can course correct. Trading vs Investment. The daily P&L in trading is a short feedback loop – you know every day if it’s working or not. In investments you have a long feedback loop so you can console yourself that even if the results are not encouraging, your process is correct and the markets will eventually see what they are missing today.
Short feedback loops can be painful but can encourage good behaviour by eliminating bad ones. Long feedback loops can mask bad behaviour and make it harder to inculcate good behaviours. Thinking of climbing Everest? Or learning a musical instrument? Or becoming the best version of you? All the best with the years of dedication. Same with good health. Easier to follow fad diets that show immediate results than following an approach that will work but requires lot of dedication and discipline.
Feedback loops also reinforce themselves. That’s why good keeps getting better. And maybe that’s why bad gets worse. Until things reverse. Nothing lasts forever. Feedback loops and flywheels.
Jim Collins originally used the Flywheel as a metaphor in Good To Great:
Picture a huge, heavy flywheel — a massive metal disk mounted horizontally on an axle, about 30 feet in diameter, 2 feet thick, and weighing about 5,000 pounds. Now imagine your task is to get the flywheel rotating on the axle as fast and long as possible.
Pushing with great effort, you get the flywheel to inch forward, moving almost imperceptibly at first. You keep pushing and, after two or three hours of persistent effort, you get the flywheel to complete one entire turn.
What all can we derive from this -
Momentum — An object at rest tends to stay at rest, and object in motion tends to continue in motion. Newton’s first law, applied to business and life. Flywheels (being massive heavy objects) are hard to get moving. If they get moving, they are likely to continue.
Feedback Loops — The faster the wheel is spinning, the easier it is to add incremental speed. The faster it moves, the more energy it generates. And the more excited everyone (and you) is about how great this Flywheel is!
Compounding Return on Effort —No “one push” makes it happen. Continuous small inputs add up into an impressive output, eventually.
Direction — Sustained effort must be focused in one direction in order to maintain momentum and compounding returns. Misplaced effort is either wasted or counterproductive. That is why it is immensely difficult to change behaviours.
Continuous Process – Need to keep working so that the flywheel is in perpetual motion. The momentum that it has will keep it going for some time, but not forever. And remember, it is difficult to get a flywheel in moving in the first place. 
There is a limit — these things don’t go to infinity and beyond!! Too fast and the entire thing can come apart. The laws of physics apply to all things.
You can see each of these concepts in this one paragraph from Good To Great explaining the effect:
The momentum of the thing kicks in your favor, hurling the flywheel forward, turn after turn … whoosh! … its own heavy weight working for you. You’re pushing no harder than during the first rotation, but the flywheel goes faster and faster. Each turn of the flywheel builds upon work done earlier, compounding your investment of effort. A thousand times faster, then ten thousand, then a hundred thousand. The huge heavy disk flies forward, with almost unstoppable momentum.

Flywheel Effect: Feedback loops that build momentum, increasing the payoff of incremental effort. Unfortunately it works both ways – positive and negative.

I hope we are working on our own feedback loops to achieve the impossible!! Enjoy your weekend :-)

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Friday, November 1, 2019

The Pursuit Of Happiness

What is happiness?
Do we want to be happy?
Do we know what makes us happy?
The dictionary defines Happiness as that feeling that comes over us when we know life is good and we can't help but smile. It's the opposite of sadness. Happiness is a sense of well-being, joy, or contentment. When people are successful, or safe, or lucky, they feel happiness.
It is a well-researched topic and many benefits of good health and longevity are believed to be linked to happiness. Interestingly, studies seem to indicate that happiness plateaus after certain level of financial achievement. Many studies also indicate the below characteristics exhibited by happy people –
Satisfying Social Connections
Looking at the bright side
Having a meaning and Purpose in life
Spirituality
Gratitude
Adequate rest and physical activity
But again, what is happiness?
Is it objective or subjective?
Is happiness the absence of sadness? Or do both co-exist?
Is it in small joys or the big moments?
Is remembered happiness more cherished as compared to current happiness?
Are there levels of happiness – is it the same in small and easy to achieve tasks vs big but difficult to get tasks?
Is it a goal or it comes from achieving ones goals?
Is it defined by our genes or is it an attitude that one can cultivate?
Can we influence it or is it defined by the environment we are in?
Is it in being selfish (doing things for oneself) or in selflessness (doing things for others)
Is it fleeting or everlasting? Or somewhere in the middle?
Is it in keeping control or giving it up?
Can one be worried and happy at the same time?
Is Happiness in the journey or the destination?
As you see I don’t have the answers. Like most emotions, it’s complicated. If we are able to look inward and better understand ourselves, I am sure we will know what makes us happy. In my case I have come to realise that I cherish the time spent in misery to achieve something that gives me happiness rather than doing things that give happy moments now but create dissonance later (eating sweets and not working out, binge watching, procrastinating on an important task etc).
So what makes you happy? Go figure.
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