Admission Open for My Worth Investing Workshops (Offline): I’m excited to announce admissions to my upcoming in-person worth investing workshops within the following cities:

• Bengaluru – Sunday, thirteenth July 2025
• Hyderabad – Sunday, twenty seventh July 2025
• Mumbai – Sunday, tenth August 2025

Click here to know more and book your seat.

Seats are restricted in every metropolis. The primary 20 contributors can declare an early hen low cost.

Whereas flipping by a couple of of my previous notes, I stumbled upon a thought from Nassim Taleb that struck me once more with its knowledge. He was explaining the idea of path dependence, which is a phenomenon the place outcomes should not only a operate of current situations, however closely formed by the sequence of occasions that preceded them.

Taleb used a metaphor to clarify this concept:

Ironing your shirts then placing them within the washer produces a unique final result from washing your shirts first, then ironing them. The reader can both belief me on this, or strive the experiment with each sequences on the following Sunday afternoon.

He then utilized that very same thought to cash:

Assume that your capital is round a million {dollars} and you might be concerned in hypothesis. Making one million {dollars} first, then dropping it, is markedly totally different from dropping one million {dollars} first, then making it.

Within the first path (make, then lose), you’re at the least alive to struggle one other day. You could find yourself with much less, however you’ve tasted survival. Within the second path (lose, then make), chances are you’ll by no means even get to the “make” half. As a result of dropping early can depart you bankrupt, damaged, demoralized, and most significantly, unable to remain within the sport.

And should you’re out of the sport, the remainder of the trail now not issues.

That is the place Taleb’s perception dovetails with Warren Buffett’s much-repeated Rule No. 1: “By no means lose cash.” As a result of should you lose an excessive amount of too early, it doesn’t matter what good funding lies forward, you merely gained’t have the chips left to play.

Now take into consideration immediately’s inventory market. Extra persons are treating it like a on line casino than ever earlier than. Fuelled by zero-commission buying and selling choices, social media hype, FOMO, and simple cash narratives, investing has develop into much less about compounding wealth over time and extra about hitting jackpots. Many new buyers aren’t even studying the rulebook. They’re rolling cube with leverage, momentum-chasing, options-trading, and buying and selling out and in of shares like they’re altering tables at a on line casino.

Now, to borrow a degree from my good good friend Anshul’s tweet, I gained’t place the blame completely on them:

That is what makes the scenario much more fragile. For a lot of, as I agree with Anshul, derivatives or senseless buying and selling isn’t actually about getting cash, at the least not sustainably. It’s seemingly a type of self-medication for uncertainty. A short lived thrill. A shot of dopamine to flee deeper fears.

Nonetheless, the irony of all this (mis)behaviour is that almost all don’t realise the sport they’re in has no exit indicators. They’re strolling right into a psychological entice laid by the phantasm of management. And that’s exactly what Taleb warns us about: simply because the roulette wheel turned up crimson ten instances doesn’t imply you’re due for black. The sequence issues. So does timing.

Two Books. One Goal. A Higher Life.

“Uncover the extraordinary inside.”

—Manish Chokhani, Director, Enam Holdings

“It is a masterpiece.”

—Morgan Housel, Creator, Psychology of Cash

Now, right here’s what it means to your portfolio:

Think about two companies.

• Firm A has a clear stability sheet, generates constant free money flows, requires little exterior capital, and might afford to soak up shocks. It’s constructed to outlive unhealthy instances. Even when the market turns towards it, it’d lose quickly however it could keep within the sport.

• Firm B, however, is financially fragile because it has excessive debt, skinny margins, and continually on the sting of survival. A single extended downturn can crush it. It doesn’t have the luxurious of a second likelihood.

So, what’s the distinction? Firm A could also be on the make, then lose path. It has one thing to lose, but in addition the capability to endure and recuperate. Firm B begins from the lose, and that’s usually the tip of the story.

Now, path dependence is not only idea. It’s all over the place in markets.

• A startup that burns by capital and not using a product-market match is path-dependent. If it fails early, no later pivot will matter.
• A leveraged dealer who blows up their account in a crash might by no means return to the market, even when their later concepts are sound.
• An investor who panics in a down market and sells their long-term compounding shares on the backside locks in a path that completely destroys wealth.

If you make investments, consider path dependence not simply when it comes to enterprise well being, however in your personal capability to remain within the sport. Are you betting in a manner that enables for errors and nonetheless leaves you standing? Or are you enjoying a sport the place one mistaken transfer can knock you out?

Taleb’s deeper perception right here is brutal however trustworthy: Survival comes first. With out it, nothing else issues. Most speculators immediately are blinded by recency bias and short-term dopamine. They don’t realise that actual investing success is path dependent.

So, ask your self actually: what are you holding in your portfolio immediately? Are these “make, then perhaps lose a bit however survive” companies? Or are they “lose first, after which lose every little thing” bets dressed up as “sizzling” alternatives?

Discard the latter. Persist with the previous.

That is just because markets have a manner of reminding us, usually harshly and with out warning, that sequence issues greater than we predict. Particularly once you’re risking your future on video games that solely appear like investing however function extra like Russian roulette.