The Ultimatum Game

In 1982, 3 economists created an experiment on economic theory.

The rules are simple:

* Player 1 has the money and proposes how to utilise.

* Player 2 can accept or reject the proposal.

Traditional Economic theory says that Player 2 should accept any amount as far as it adds to money in to his pocket. But when real people played, many of them consistently rejected the proposal when they seemed unfair to them!

This theory reveals profound about human behavior. Player 2 literally deny opportunity at his own expense to enforce fairness norms.

One particular conversation worth to mention on how deeply — the Ultimatum Game – shapes investor behavior.

It was a Tuesday morning when one investor, Mr. Shah walked into our office. A successful businessman just sold a property and wanted to invest the proceeds—Rs. 2 crore—in mutual funds. We talked about his investment suitability, risk appetite, investment horizon, diversification and not following past performance for scheme selection.

But Mr. Shah leaned back and said, “That’s all okay. I need at least 18%. I’ve heard of funds giving 20%+. I’m the one taking the risk.” He became Player 1.

His “offer” demanding 18% returns felt like a split that ignored the realities of the market, the effort behind strategy, and the principles of sustainable returns. As player 2 of the Ultimatum game, I had to deny his terms of high expectations. I replied, “we must follow fundamental investing. I can’t offer you which compromise your capital’s long-term wealth. I’d rather walk away from this proposal than put us both in a misaligned position.”

In investing, fairness trumps greed. At Shalibhadra, our role isn’t to agree to every demand—but to protect the integrity of the every transaction, even if it means risking rejection. Because in the long run, trust is built not on maximum gains, but on mutual respect.

Nishit Siddharth Shah

Just matter of Five Minutes

Raj is hero of our story. Raj had to catch a train and was running just little late to the train station. He arrived just 2-3 minutes late to see the train leaving the platform. He was late—not by much, just 2-3 minutes. But that small delay now meant waiting 24 hours for the next train. The station wasn’t his goal; his destination was. Those lost five minutes wasn’t small anymore.

As it is hard to let the old habits go, he sat on a bench and started recalling old incidents which cost him dear. Once he arrived ten minutes late for a job interview. “It’s just 10 minutes,” He thought. But the job went to someone else, and Raj spent six months struggling before another opportunity came along. Those ten minutes had cost him half a year.

A year back, he had been 15 minutes late to a see a relative during his last breaths. Everyone else was too polite to say much, but Raj confessed later that he would regret missing that moment of closure for the rest of his life. 15 minutes had left a permanent gap in his heart.

Reflecting on these stories, Raj realized how he underestimated the impact of small delays. Five minutes here, ten minutes there—what seemed minor could ripple into months or even a lifetime of consequences. It wasn’t about the minutes themselves; it was about the opportunities and memories lost in those moments.

Similarly in our own life, we are absolutely late in certain life decisions. Early on spending and Late in saving. Early in EMI and Late in SIP. Early in withdrawing and Late in investing. Our saving and investing cycle is erratic. In many cases, a lot of time is taken away in planning but execution remains missing. Every day is missed opportunity. While procrastinating by few months seems harmless, but the lost time mean a significantly smaller corpus.

At Shalibhadra, we encourage start their investment journey with ‘One step at a time’. Investor may have large goals but the first step without delay will get them to their goals.

Nishit Siddharth Shah

Conversation of Ro-Ko

In a fictitious yet relevant world, two Indian legendary cricket players were practicing in nets. Rohit Sharma and Virat Kohli were batting with their usual focus. As the kids play, both were taking on the bowlers one by one with sound of the ball striking the bat and goes in the air with much power. As they took turns, Virat, ever the playful, suddenly called out to Rohit.

“Hey, Rohit, let’s make a bet,” Virat said with a mischievous tone. “If you hit the longest six in the next match, I’ll give you Rs.1,00,000. But if you can’t, you’ll pay me just Rs.1000.”

Rohit paused, his bat resting on the ground and tightening the gloves. He thought about it for a moment before looking up at Virat and saying, “I don’t like the bet. I won’t participate.”

Virat was surprised. “Why not? You can easily hit a six. And Rs.1,00,000 is not bad deal, is it?”

Rohit smiled but shook his head. “Hitting a six is fun, yes, but it’s not the real game. The real game is in the little things—like running between the wickets, rotating the strike, and building partnerships. Those are the things that win matches.”

Virat trying to understand. Rohit added, “If you aren’t disciplined in the small things, you won’t be disciplined when it matters most. It’s the basics that make the big moments count.”

What we saw in just concluded ICC Champions Trophy was not about hitting 6s and 4s. It was more about small things planned in details. In Investment scenario, portfolio built with hot tips and borrowed information often gives excitement, but not necessary that it is long term sustainable.

Building a corpus is all about chasing a score. Investor may hit 6s and 4s when market gives them chance but when not, they must participate through SIPs systematically and average their investment game.

Seeing Causes and Intentions

Let me start an experiment with 3 sentences.

“Fred’s parents arrived late. The caterers were expected soon. Fred was angry.”

Take a guess on why Fred was angry? Was he angry because caterers did not show on time? Or was he angry because his parents took more time to arrive?

In our network of associations, anger and lack of punctuality are linked as an effect, we immediately start making assumptions for possible causes. However, sometimes there is no such link between anger and the idea of expecting someone. A coherent story is Fred was angry because the flower agency was not picking up the calls.

Finding such causal connections with available limited data point is our automatic operation of System. Such CAUSES AND INTENTIONS immediately start playing role in case of any major international events. Media starts playing their role in randomly connecting dots with limited data points. Remember Covid time in 2020 when everyone was coming to immediate conclusions with limited data points.

In fact, all the headlines do is satisfy our need for coherence: a large event is supposed to have consequences, and consequences need causes to explain them. We have limited information about what happened on a day.

In Investment situation, Investors apparently take decisions by looking at the headlines. If the headlines read, “Some country went for election and someone from leading party will become top most leader in that country”. Investor start taking actions based on the available and limited sources of information.

Investors should have single agenda to follow process of investment at various market levels. Single or random occurrence of events do not alter our and our investor’s confidence.

Lost in a Limbo

Let me share story of King Trishanku, An ancestor of Rama himself. Trishanku’s real name was Satyavrata. He had one seemingly impossible wish – he wanted to enter heaven in his human form, in his mortal body.

He approached a powerful Rishi Vashishth, But the Rishi Vashishth refused Satyavrata’s plea citing would be against the rules of nature. But Satyavrata would not take no for an answer. He turned to the son of Vashishth, Shakti, to convince him to take up the task. When Vashishth heard of this, he cursed Satyavrata of deformed body and his new name became the disparaging Trishanku.

But still determined, Trishanku came upon Rishi Vishwamitra. Rishi Vishwamitra took it upon himself to fulfil Trishanku’s wish. With the powerful powers, Trishanku started to rise to the heavens. But King Indra of heaven did not want Trishanku to enter heaven in his mortal body and break the rules of life and death. So, when Trishanku reached the gates of heaven, Indra refused to let him in.

Thus Trishanku started to fall back to earth. But when Rishi Vishwamitra saw this he refused to allow Trishanku to fall to the earth, and using his powers, he started to push back against Indra to get Trishanku to heaven.

Hence – Vishwamitra would not let him fall to the earth, and Indra was refusing to let him into heaven. So, he hung helplessly upside-down between heaven and earth. What we often call ‘Lost in Limbo’.

In Investment context, Investor lives are continuously trapped in an ever-repeating no-man’s land loop between secured products to high risk products, from current holding of an investment product to temptation of high performing investment product and from obligatory relationships to media noise. They are unable to surpass someone direct or indirect influence on either sides.

Investor should ‘Know the False from’. Something which is not in control must be avoided.

Deer in the headlights

This is an idiom that describes someone who is frozen in fear or surprise and unable to react to a sudden situation. Many wildlife explorers may validate that Deer often paralyzed by the bright headlights at night.

Deer are primarily nocturnal or crepuscular. Hence, they are more susceptible to being blinded by bright lights because their eyes are adapted to low-light conditions. Deer are most active at dawn and dusk, and have many more rod cells than humans, which are 1,000 times more sensitive to light than cone cells. Intense light overwhelms their visual system and temporarily blinds them.

Deer in the headlights effect is often used metaphorically as a reminder of the limitations of our own senses and the power of fear to immobilize us. By understanding the science, we can understand the complexity of this behavior which seems simple.

Investing in the stock market is a complex task. It can often induce fear and uncertainty, particularly during times of volatility. Just like a deer caught in the headlights, investors can find themselves paralyzed by fear, unable to make rational decisions.

When the market goes down, investors panic and sell their holdings. When market go up, investors’ try to find “next big thing” which lead to decisions without proper due diligence. Coupled with Ups and Downs of market, Investors are often paralyzed by constant stream of news, opinions, and data which overwhelms investors.

A wise investor always tries to optimize returns by looking after scheme performances. Rebalancing task with movement of market is key process as per market situation. Their try is to make sure not to get blinded by two headlights name ‘Greed and Fear’.

You Reap What You Sow

One day, Goddess Parvati told Lord Shiva, “I have noticed that you seem to add the troubles to the people who are already sad, while those who are happy stay free from sadness.”

To explain this, Lord Shiva and Parvati taken human avatar and went to a village in the form of a husband and wife. Lord Shiva told Parvati, “Since we are here as humans, we must live like them. I will arrange for food, and you prepare the stove.” Parvati ji went to gather bricks for the stove and took them from some old, broken-down houses in the village. When the stove was ready, Lord Shiva returned empty-handed. Parvati ji asked, “You didn’t bring anything. How will we cook?”

Lord Shiva asked her where she got the bricks for the stove. Parvati replied, “In this village, many houses are not cared for and are breaking down, so I took bricks from those.” Lord Shiva said, “The houses that were already weak have become even weaker because you took bricks from them. You could have taken bricks from well-kept houses instead.” Parvati ji replied, “The people in those houses have taken good care of them. They look nice and strong, and it wouldn’t be right to spoil them.”

Lord Shiva then said, “Parvati, this is the answer to your question. People who take good care of their homes. Those who live with good actions, keep their lives strong and beautiful. Sorrow cannot touch them. Those who are happy are so because of their own actions, while those who are sad are suffering because of their own actions.” People should live in a way that makes their lives strong and beautiful, like a well-built house that no one can damage.

This message from Lord Shiva also applies to today’s investors. Those who stay calm and focus on building a strong portfolio without giving in to greed or fear are the true winners in the long run. But those who constantly compare themselves with others’ returns are often left disappointed, with weak and unstable investments.

Investor’s aim is to build strong portfolios and strong investors. Returns are results of process which determine returns in the end.

Recipe to Silence

A friend of went for a Vipassana course. Vipassana is a ten-day experience for detoxification of body and mind. Most important part is one is not allowed to speak for ten days. Many devotees try Vipassana with a thought to sustain through these 10 days of silence and it is actually a long stretch.

Five days later, I got a call from him that he had left the program midway because he wasn’t able to take the silence. It made him uncomfortable to a level where he started feeling anxious.

This is true for large number of people. We don’t often pause to evaluate how comfortable we are with silence. In olden times, grandparents were working for hours with no communication. They were absorbed in the activity and therefore needed no other distraction. But even outside working hours, their life was really quiet for long durations without feeling awkward or anxious.

Today, we take refuge in the outpouring of information available to us at a click. Our brain is continuously seeking new information though scroll of our thumbs and electromagnetic device called ‘Mobile’. The information available is totally massive and in many cases, non-required for us.

It is actually beautiful to be speechless. During beautiful sunsets, long walks on a beach, road trips in the mountains, and in prayer rooms—it’s easier to find calm and be mindful.

Investors go through continuous churning of information from family, friends, media etc which makes them anxious about investment. As we all know, silence is always more powerful than the noise of any kind. Market volatility is not new. It has been prevalent since birth of stock trading. If investor cannot handle that noise with their own silence than such investor definitely stays away from equity investment.

The Nobel Prize-winning bacteriologist Robert Koch in 1905 mentioned, ‘The day will come when man has to fight noise as inexorably as cholera and the plague’.

Exactly, the noise of becoming infectious diseases like cholera and plague. Investor must stay away by taking vaccination names ‘silence’.

Dear Patrons,

Start with End in Mind

Famous actor and politician Arnold Schwarzenegger shared his approach to success of work.

Whenever I finished filming a movie, I felt my job was only half done. Every film had to be nurtured in the market place. You can have the greatest movie in the world, but if you don’t get it out there, if people don’t know about it, you have nothing. It’s the same with poetry, with painting, with writing, with inventions.

Greatest artists, from Michelangelo to Van Gogh, never ‘sold’ their arts until they found a gallery owner or an agent or someone who valued their art. If they have not met with right person at right time, great artists would go into a restaurant and do a stand up artistry to earn a meal.

All great work starts with a small efforts and their end decides their greatness. But in between the incremental efforts and consistency make something which is great in the end.

Investment success is similarly more about its end part rather than the starting of it. It is the time which decides success in the end. Further to that, right decisions taken adds for the compounding. Generally individual decisions are hinged to making best decision at the beginning.

Starting is just a step ahead and actual gain comes from the process, compounding and consistency.

The ‘Yaksha Prashna’

In the heart of the forest, the Pandavas wandered during their exile. While pursuing the stag, the brothers sensed urgency of water, Yudhisthira requested Nakula to locate a water source. To their relief, Nakula spotted a lake. However, a peculiar crane, claiming ownership of the lake. The crane informed Nakula that it could only get water after successfully answering his questions. Disregarding the crane’s warning, Nakula died soon after tasting the water.

In a tragic turn of events, one after another, the brothers met with the same fate at the hands of the crane on the lake’s shore, simply by disregarding its warning. Eventually, Yudhisthira arrived at the scene and got devastated by the loss of his siblings.

The crane unveiled itself as ‘Yaksha’, and warned, “This Lake is under my ownership and your brothers paid the price for not answering my questions before drinking from it. If you also ignore this, you too will suffer the same fate.” Yudhisthira responded respectfully, “I have no intention of claiming what is rightfully yours. Kindly ask me your questions, and I will make every effort to provide satisfactory answers.”

As the story goes, Yudhisthira answered with the wisdom drop by drop and all his brothers came back to life.

With respect to investment, the five answers of the ‘Yaksha Prashna’ can be following

1. What is the most surprising thing in the world? – The most surprising thing is that countless people believe that their wealth is immune to risk. They forget that fortunes rise and fall like tides.
2. What path should one follow? – The path of disciplined investing. Analyse history, study fundamentals, and plan strategically. Emotions sway like monsoon winds; principles endure.”
3. What is the greatest wealth? – Contentment. True wealth lies not in hoarded gold but in finding peace with what one possesses. Market highs and lows are mere ripples.”
4. What brings the greatest happiness? – Detachment from greed and unrealistic expectations. Happiness blooms when we accept what is achievable, ignoring market noise.”
5. What must you protect? – Investment strategy should be of ethical standards, honor and integrity guard wealth. Shortcuts lead astray.

As an investor, Investment is nothing but following simple these 5 ‘Yaksha Prashna’ and not deviating from them.

Nishit Siddharth Shah