Catastrophe Finance and Better Ways to Learn
Three pieces that stood out for me last week:
The ongoing Covid situation nudged me to read more about ‘catastrophe finance’. In brief, the bond holders of these financial instruments get attractive yields, albeit when disasters strike. In those situations, money is not paid back to the buyers but is rather siphoned to the governments of nation(s) where the disaster has caused the damage. Investors with high risk appetite find them appealing, for the risk of losing investment could be as high as 30%. I found this short article in The Economist as a good primer on the topic. A case in point, as the article highlights, is $150m of payment made to the Mexican government through these catastrophe bonds in the wake of the 2017 earthquake. Could these instruments not be used for pandemics, such as Covid? The key limitation is the stringent conditions that trigger the release of the money. For example, the incubation time of around 12 weeks, whereas the impacted governments may need the money in a much shorter period to cope with the situation. Yet another one is the fear that these instruments have a minimum threshold associated with them (such as number of deaths) and do not reward quick remedying actions. In any case, the Covid situation provides a fertile ground to test some of the fundamentals associated with such bonds.
As I continue investing time to learn Swedish, I unsurprisingly end up distracting myself with articles on how to learn faster. One such interesting story (a book review rather) came in the FT last week. It’s based on Dehaene’s book, How We Learn, which aims to educate us on some of the new science behind learning. Unsurprisingly, Dehaene argues in favour of sleep as a key factor to consolidate information and reiterates the age-old wisdom that rephrasing ideas and concepts in our own words are essentials to speed up learning. Interestingly though, Dehaene says a few good things about video games as well, and how interspersing of easy/difficult bits rewards and nudges the players to keep improving. I have added this book to my reading list and will share a detailed summary later. Are there other interesting books on learning faster and better that you have come across? Write to me about them.
How to retain most from a book that you've read is an age-old challenge. One that I struggle with – so much so that I started this blog to hold myself accountable for writing short summaries of all the good stuff that I have read. I am not sure if I have found the sure-shot approach on retention yet, but the search for the same got me to this Tim Ferriss video. In this video, Ferriss explains his approach of taking notes while reading books. While the key to remember big ideas is to rephrase them in our own words (what this blog is trying to do and related to the point above), a practical way of earmarking those big ideas is to create a 'retention index' on the empty pages in the book. I found his approach very similar to mine and it involves noting down the page numbers of the book that describe those ideas in detail. When you must go back to the book, instead of reading the entire book again, or flipping through all pages to browse all the underlined paragraphs, it's easier to read those specific pages that you have noted down. I have tried a version of this approach and just the act of writing down the key parts that I want to remember (even in shorthand) helps.
An interesting passage that I came across last week:
‘We can read the story Seneca tells in ‘On Tranquility of the Mind about Julius Canus’, a philosopher who was unfairly sentenced to death, casually playing a board game as he awaited his execution. When the time came, he stood up, counted the pieces left on the board, turned to the executioner and said, “You will testify that I was one piece ahead,” and then went off to his death. We, the reader, might write “badass last words” in the margins, and then remind ourselves in the future to try to find humor in even the darkest and worst of situations.’
