Thread by @Sanjay__Bakshi

Really enjoyed learning from @nrmangal in his class to my students in my Forensic Accounting course at MDI. Thanks Neeraj.

https://twitter.com/sanjay__bakshi/status/1326767878033584131

Here is a link to a book recommended by Neeraj. amazon.in/dp/9350450798

At one point during the talk, Neeraj showed an example when he deliberately asked a dumb question from the management of a company he was working on. Immediately I could relate this to Detective Columbo. See this: quora.com/How-has-the-Co…

The technique, according to Neeraj works and I can totally understand why. You really have to see a few episodes of Columbo to see how it works! g.co/kgs/fkUDnF

Another point that Neeraj made was about the importance of keeping a mind unbiased when one is starting to study a business. Isn't that the hallmark of all good detectives? I think so. Should it not be good practice for all investors?

In his wonderful book on Sherlock Holmes (amazon.in/Few-Lessons-Sh…), Peter Bevelin reproduces extracts from various writings on the detective. Here are some excerpts:

We approached the case...with an absolutely blank mind, which is always an advantage. We had formed no theories. We were there simply to observe and to draw inferences from our observations. (Holmes; The Cardboard Box)

|I have not all my facts yet, but I do not think there are any insuperable difficulties. Still, it is an error to argue in front of your data. You find yourself insensibly twisting them round to fit your theories. (Holmes; Wisteria Lodge)

It is a capital mistake to theorize before one has data. Insensibly one begins to twist facts to suit theories, instead of theories to suit facts. (Holmes; A Scandal in Bohemia)

So, it's hugely important to not jump to premature conclusions whether you are a detective or an investor. But what happens when you find some evidence that tells you something?

You form a theory - a hypothesis. But make sure it's a provisional one. And maybe you have a competing theory. You hold both theories in your head and continue to work in a detached manner - collecting data, thinking about it, challenging your theories.

And after a while, maybe one of your theories will fall flat because it cannot be sustained in light of the evidence. And maybe another theory will take its place. You have to allow that to happen.

"You have a theory? "

"Yes, a provisional one." (Holmes; The Yellow Face)

One forms provisional theories and waits for time or fuller knowledge to explore them. (Holmes; The Sussex Vampire)

Well, we can adopt it as a working hypothesis and then see how far our difficulties disappear. (Holmes; The Valley of Fear)

So there is a time to have no theory. That's when you start. Then after you collect some evidence, there must be a theory. Or a few theories.

So exactly when to form a provisional theory and move from a "blank slate" of mind to some working hypothesis is something that good detectives (and investors) know. They just know.

Actually what they know is when not to form premature theories.

The temptation to form premature theories upon insufficient data is the bane of our profession. (Holmes; The Valley of Fear)

I wrote the above tweets because @nrmangal's class reminded me of the parallels between his thinking style and that of Holmes...

My apologies! In my tweets I should have written Nitin. Not Neeraj. - Absent-minded Prof 😩