Pocket size scale Scale, Mountain Size Impact
The Tenerife airport disaster in 1977 is the deadliest aircraft accident in history. The error was stunning. One plane took off while another was still on the runway, and the two Boeing 747s collided, killing 583 people on a runway on the Spanish island.
In the aftermath authorities wondered how such an extraordinary catastrophe could occur. One post-mortem study explained exactly how: “Eleven separate coincidences and mistakes, most of them minor… had to fall precisely into place” for the crash to occur. Lots of tiny mistakes added up to a huge one.
It is intuitive that we factor high impact, low probability event and discount low impact, high probability events. It is very easy for us assume the world will break at once as we have been shown in movies and shows. The actual impact happens through low-probability events, so it’s common to discount their happening.
Similarly, the most astounding force in the universe is ‘Evolution’. The thing that developed single-cell organisms into humans who can read this article on an iPad with a terabyte of storage. Evolution is best example of basic math of compounding. It is about compounding of favorable traits over the period of 3.8 billion years.  Minuscule changes compounded them for 3.8 billion years and we are result of this compounding.
You do not need extraordinary change to deliver extraordinary results.
Investor Howard Marks once mentioned. Some investors whose annual results were never ranked in the top quartile, but over a 14 years period he was in the top 4 percent of all investors. If he keeps those for another 10 years, he may be in the top 1 percent of his peers.
The most important question is not “How can I earn the highest returns?” It’s “How can is consistently earn better returns for the longest period of time?”
At Shalibhadra, we believe in doing course correction at every juncture of investment journey which adds positively to compounding.
Nishit Siddharth Shah