The Hindu Business Line : Shake off the limits

Yet most of life is about making decisions whose outcome is hidden from us, writes Peter L. Bernstein in ‘Capital Ideas Evolving’ ( www.wiley.com ). “Many times, and especially in investing, uncertainty comes lumped together with complexity,” he cautions.

In response, we tend to use shortcuts, but these lead to “inadequate processing of information, or avoiding the use of information entirely and relying on our gut to guide us.”

This process of oversimplification and instinctive action arises from the artificial limits of our imagination, explains the author. “One of the most dangerous of these habits is to believe low-probability events will not happen.”

Other symptoms of the malaise are: extrapolation of recent developments ‘into the longer run future without questioning their significance for a constantly changing world’; or clinging to outdated preconceptions despite clear evidence to the contrary.

A book worth investing in!

Inside intuition

The real world laws are puzzlingly different from those of the logical world, and more thinking or more information is not always better, challenges Gerd Gigerenzer in ‘Gut Feelings’ ( www.penguin.com ). Intuition can solve many problems, he says. “Intelligence is frequently at work without conscious thought.”

Gut feeling is judgment that appears quickly in consciousness, whose underlying reasons we are not fully aware of, and is strong enough to act upon, explains the author. Gut feelings take advantage of the evolved capacities of the brain and are based on rules of thumb that enable us to act fast and with astounding accuracy, he says.

“Gut feelings can outwit the most sophisticated reasoning and computational strategies…”

Gutsy presentation.
First, the message

Charts are an important form of language, declares Gene Zelazny in ‘The Say It with Charts Complete Toolkit’ ( www.tatamcgrawhill.com). “No matter how many business graphics we see in various kinds of communications—including tables, organisation charts, flow diagrams, matrixes, maps—when it comes to quantitative charts, there are only five basic chart forms to choose from: pie, bar, column, line and dot.”

Choosing a chart form without a message is like “trying to colour co-ordinate your wardrobe while blindfolded.” Also, “when charts aren’t well conceived or designed, they serve more to confuse than to clarify.”

Helpful tools.
Four laws of wealth

To seekers of financial freedom, here is ‘Money is My Friend’ by Phil Laut, Jeffery Combs and Lisa Kitter ( www.jaicobooks.com). “Financial freedom is when you never do anything that you don’t want to for money and you never omit doing something that you want to do because of lack of money.” Gain this freedom by understanding the four laws of wealth discu ssed in the book. The first is the earning law that all human wealth is created by the human mind.

“The key to wealth is learning how to take charge of your mind, learning how to process your mind with affirmations, studying and freeing yourself from the major inhibitors of the mind…”

Investor-friendly.
Guide to disclosures

A common suspicion with most financial statements is whether they reveal all that is important. The Research Committee of the Institute of Chartered Accountants of India ( www.icai.org ) comes to the rescue of the hassled with a new publication titled ‘Checklist for Disclosures under Accounting Standards’. From this, you’d learn, for instance, that as per AS-27 on ‘financial reporting of interests in joint ventures’ the venturer has to disclose ‘the aggregate amounts of each of the assets, liabilities, income and expenses related to its interests in the jointly controlled entities’.

Educative.

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