I came across this word recently and resonated with me. On reading about it, I realized that I have always admired this behavior and strived for it. So what is agency?

As per google,

In a person, “agency” refers to the capacity to act independently, make free choices, and exert power to shape one’s own life and experiences. It’s about having control and influence over one’s actions and the outcomes they produce

In India, we call this jugaad

As I look back on my own life and those around me who have done well, I find almost all have had high agency – a drive to improve their life

In my generation, India had started opening up and we experienced the first technology revolution – Internet. A lot of young people in the late 90s joined IT services companies (making switches from other careers), some started online businesses, some moved to the US and some like me started a blog on investing on a whim

I enjoyed reading and investing. Pre-internet it meant getting annual reports from brokers and reading the newspaper. There were no Indian blogs (only US based such as the Motley fool bulletin boards). When I found this new medium, I started writing my own thoughts for no particular reason

Today its called content marketing, but then it felt like writing to myself with no one reading it

One thing led to another – I eventually started an advisory with my friend – Kedar which we have been running for 12 years. I still get surprised to hear from people that they have followed me for years and were reading what I was writing. I never realized that this would happen

The new revolution

We now have another shift in the making – Artificial intelligence. I am equally excited about it. As in the late 90s I get the same tingly Spidey sense of something exciting.

How will it evolve and where will it lead us?

I don’t know, but as I did earlier, I am learning about it and playing with it

I am sure it will be an exciting and fun journey as it happened with the internet. I keep saying to anyone willing to listen to do the same but be less timid

We wrote the following to our subscribers

When and at what level will the market bottom?

what should be the cash level in the portfolio to ride out the bear market?

These are wrong questions to ask. Let me explain –

I wrote about preparing for a downturn in my prior note. We have developed a process based on the study of the past bear markets and our failures. The key point is that we ignored some risks in the past which hurt us when the market cycle turned.

We have identified the following risks and managed them as they intensified towards the second half of 2024

1. Valuation risk: We exited/trimmed several positions in tranches as stocks went from under-valued to fairly and then overvalued. We did not exit these positions in one shot as we wanted to take advantage of the momentum
2. Position size risk: There are positions we want to hold through the cycle. However, this poses the risk of opportunity loss if the size is too large. We trimmed some of these positions so that we can hold the balance with less stress
3. Sector concentration: we reduced positions if they were based on the same theme and sector. When a sector goes out of favor, it can impact the stock for a long time
4. Poor performance: In some cases, the performance of the company was weakening and we exited as the risk reward was no longer attractive

One additional element this time was to review the indices and breadth to gauge the market cycle. As the cycle weakened in Q4, we actively reduced our risk.

In summary, we were focused on managing risk and not predicting what will happen to the market.

Half the battle

We are now at 45%+ cash level which is the highest ever and it is NOT burning a hole in our pocket. This cash level is an outcome of the process

It is easy to feel smug at this point. However, this is only half the battle. Equally important is to re-enter the market and not get locked into a bearish outlook.

We will not depend on market forecast or expert views for it. We have looked at this phase of the market too in the past cycles and have a process of initiating or raising our positions. Some of you have asked how long will it take?

We don’t know. That can only be known if you can predict the market (We can’t)

Graded entry and exit

We had a gradual exit out of several positions to reduce the aggregate risk as the market weakened.  We will re-enter in a gradual manner too driven by our buy process

The buy process for a stock will be based on its fundamentals and risk reward equation. It does not require for us to forecast when and at what level the market will bottom. Fixating on the market level is a waste of time. We are focused on refining and executing our process of finding and entering new positions

This time around, the cash level will also be a result of executing this process

I started my career in Marketing and switched to IT (consulting). The pay was 2X and the stress was half of that. I had also come to the realization that I did not enjoy sales/marketing. Reading and learning was the thing I loved, and IT provided a great opportunity for that. Investing was the other area where I could the same and earn at the same time

I joined one of the Large IT services companies and was deployed on an ERP project. I had no clue about the technology. I tackled the problem the same way I had handled it as an investor

I went online, downloaded the implementation guides, manuals, notes – whatever I could find and started reading them. At first, they made no sense. However, by the third reading (cover to cover), I started getting a hang of it

The next step was to get into the software and practice. I became good at it within a year.

On the next project, I had some juniors working with me who were in the same place, I was a year back. To my surprise, when I asked them to read all the material, cover to cover, they balked at it. Till the end of the project, they kept reaching out to me for help and just coasted along

Most people avoid lifelong learning

At the end of this episode and a few years later, I realized a couple of things

• These colleagues did reasonably well in other companies and moved into managerial roles. It just showed that learning was not key in moving up the ladder and most companies did not care for it.
• There is a perverse system where a lot of IT service companies do not reward for deep expertise. As a result, they end up with a layer of management who have outdated technology skills. It is not their loss though as they tend to fire such resources when they get bloated
• Curiosity and drive to learn is not as common as I thought. Most of the people I know would rather coast along without pushing themselves

Why people avoid learning

Initially I was puzzled why people avoided learning when it was fun, and you were better off in the end

I realized that the process of learning makes you feel stupid. I recently went through this phase when I was learning technical analysis and poker a few years back. Even now, I get the same feeling on a regular basis. This is not a question of intelligence. No one likes to feel dumb and as a result people avoid learning new things

This will be a major hurdle in the future for a lot of people as new AI based technologies go mainstream. I have gone down that rabbit hole in the last 2 years and can see massive changes on the horizon.

Unfortunately, a lot of people will complain and find reasons to avoid the discomfort of learning. I am lucky that I am comfortable with feeling lost and stupid most of the time. I have 25 years of practice in it