Essays of Warren Buffet... Chapter 2

This chapter begins with the most useful concept in value investing - Mr. Market, originally introduced by Ben Graham. In Buffet's words:


"You should imagine market quoatations as coming from a remarkably accommodating fellow named Mr. Market... Even though the business that the two of you own may have economic characteristics that are stable, Mr. Market's quotations are anything but. For, sad to say, the poor fellow has incurable emotional problems. At times he feels euphoric and can see only the favorable factors affecting the business. When in that mood, he names a very high buy-sell price because he fears that you will snap up his interest and rob him of imminent gains. At other times he is manic depressive and can see nothing but trouble ahead for both the business and the world. One these occasions, he will name a very low price, since he is terrified that you will unload your interest on him."


And now the killer:


"Mr. Market has another endearing characteristic: He doesn't mind being ignored. If his quotation is uninteresting to you today, he will be back with a new one tomorrow. Transactions are strictly at your option. Under these conditions, the more manic-depressive his behavior, the better for you... Mr. Market is there to serve you, not to guide you. It is his pocketbook, not his wisdom that you will find useful."


Buffet quotes Ben Graham again on the issue of holding: "In the short run, the market is a voting machine but in the long run it is a weighing machine." According to Buffet, the speed at which a business's success is recognized, is not that important as long as the company's intrinsic value is increasing at a satisfactory rate. In fact, delayed recognition can be an advantage: It may give us the chance to buy more of a good thing at a bargain price.


Buffet elaborates a bit on how he generally resists selling when the price is high which he contrasts with Wall Street attitude of: "You can't go break taking a profit". He explains that he is quite content to hold so long as the prospective return on equity capital of the underlying business is satisfactory. He doesn't explain this much further except for quoting David Ogilvy: "Develop your eccentricities while you are young. That way when you get old, people won't think you are going ga-ga".


The next section is an interesting one. Here Buffet talks about how a successful investor gets happier to see stocks falling. He poses a simple question: "If you expect to be net saver during the next five years, should you hope for a higher or lower stock market" ? "Even though people are going to be net buyers of stocks for many years to come, they are elated when stock prices rise and depressed when they fall. In effect, they rejoice becauses prices have risen for the "hamburgers" they will be buying soon. This reaction makes no sense... So smile when you read a headline that says "Investors lose as stocks fall"".


Arbitrage.


The next essay is on Arbitrage. This section carries a few of Buffet's experiences making and losing money in arbitrage positions, especially "risk arbitrage".


Efficient Market Theory.


In the next essay, Buffet lambasts Efficient Market Theory (EMT)... "Observing correctly that the market was frequently efficient, they [academics] went on to conclude that it was always efficient. The difference between these propositions is night and day". Buffet akins this ideology as "not even trying" when it comes to evaluating business principles of prospective investments.


Portfolio concentration - Too much of a good thing can be wonderful.


Another interesting point in this essay is related to portfolio concentration. Buffet says "we believe that a policy of portfolio concentration may well decrease risk if it raises, as it should, both the intensity with which an investor thinks about a business and the comfort-level he must feel with its economic characterstics before buying into it". He explains that the difference between portfolion-diversification and portfoloio-concentration is really the difference in how risk is defined. Proponents of portfolio diversification define risk as the relative volatility of stock - that is, the volatility of the stock as compared to a larger universe of stocks. Under this definition, stocks whose prices have dropped severely are considered riskier. In contrast, the definition of risk accepted by proponents of portfolio concentration is from the point of view of the owner of business - "the possibility of loss or injury". I noticed that this is a recurring theme in the book - Buffet indeed thinks about his investments a lot like an owner rather than a speculator.


Buffet provides some guidance about how to evaluate risk. He cautions that these characteristics are often difficult to quantify, but that does not negate their importance:


1. The certainty with which long term economic characteristics of the business can be evaluated.
2. The certainty with which management can be evaluated...
3. The certainty with which management can be counted upon to channel the reward from the business to the shareholders rather than to themselves.
4. Purchase price,
5. Taxation, inflation, and competition.


Portfolio insurance.


Portfolio insurance is a money management strategy which dictates that ever-increasing portions of a stock portfolio, or their index future equivalents, be sold as prices decline. So, a downtick of a given magnitude produces a huge sell order. In fact, one popular corollary is to repurchase these companies, once the stock has rebounded significantly. Apparently, in the crash of October 1987, $60 to $90 billion of equities were offloaded on this hair trigger. Buffet concludes by saying that a smart investor only stands to benefit from such speculative acts of others. In fact, he can be hurt by such volatility only if he is forced, by either financial or psychological pressures, to sell at untoward times.


Value-investing: A redundancy.


This is well stated by these four rules. The business should be one (1) that you can understand, (2) with favorable long term prospects (durable competitive advantage), (3) operated by honest and competent people, (4) available at an attractive price.


When deciding what is an "attractive price", the Margin of Safety rules may come handy... "If we calculate the value of a common stock to be only slightly higher than its price, we're not interested in buying. We believe this margin-of-safety principle, so strongly emphasized by Ben Graham, to be the cornerstone of investment success".


Buffer believes that an intelligent investor buying common stocks will do better in secondary markets than he will do buying new issues. The favorable factor for secondary markets being Mr. Market. For new issues, Buffet mentions that issuing corporation has little incentive to undersell their stocks than its intrinsic value, since they can set the price and time the IPO.

Book: The Essays of Warren Buffet: Lessons for Corporate America

I recently finished reading "The Essays of Warren Buffet: Lessons for Coporate America". Given my thin knowledge of corporate finance, corporate governance, and investing, this book was quite useful. Over the next few posts I'll be presenting a few interesting ideas from the book. This first post is based on the first chapter.

Chapter 1 Corporate Governance

The chapter is mainly about Buffet's frustration with the top management of firms not owned by Berkshire and how things are different at Berkshire owned firms.

He starts with talking about the significance of full and fair disclosure of company performance. He doesn't approve of any company that highlights EBITDA (Earnings Before Interest, Taxes, Depreciations, and Amortization). He says that proponents of EBITDA argue that depreciation is not truly an expense, given that it is a "non-cash" charge. He offers a convincing counter-example: imagine that at the beginning of this year a company paid all of its employees for the next 10 years of service. In the following nine years, compensation would be a "non-cash" expense - a reduction of a prepaid compensation asset established this year. Would anyone care to argue that the recording of the expense in years 2 through 10 would simply be a bookkeeping fomality ? Buffet offers some more views on the significance of clear accounting. He finally sums up his views as follows: "We want our managers to think about what counts, and not how it is counted."

Buffer is quite critical about CEO performance and compensation. He believes that CEOs of many public companies get away with underperformance for two reasons. Fistly, there are no clear standards of CEO performance. And secondly, the system charged with monitoring the CEO - the board of directors - often doesn't do a good job. Buffet provides some interesting insights into who should and should not be in the board. According to him, a director must have 3 qualities: (1) business savvy, (2) interest in the company, and (3) care about the owners. The most important service a director can do is to watch the CEO, ensure that he/she is doing a good job, and fire the CEO asap if not. Regarding the CEO, Buffet says that his message to every CEO is to run the business as if (1) you own 100% of it, (2) it is the only asset in the world that you and your family have or will ever have, and (3) you can't sell or merge it for at least a century.

Even if you have the best management and best board, you can still come out a loser if there are issues with the line of business. Buffet cites the example of a very well managed company, Burlington textiles, that has yielded substantially below average returns over the past few decades. He : "If you want to get a reputation as a good businessman, be sure to get into a good business". He offers another handy quote about working too hard on terrible businesses: "A horseman that can count to ten is a remarkable horse - not a remarkable mathematician". Buffet has a large repository of handy quotes on this topic. For example, in Chapter 2 he cites "When a management with a reputation for brilliance tackles a business with a reputation for bad economics, it is the reputation of the business that remains intact".

In the last section of this chapter, flaws in options based compensation and how that corrupts CEO performance. Buffet argues that if a midly profitable company reinvests its earnings (instead of giving dividends), it can still maintain a pretty decent stock price growth over time assuming a constant PE ratio. Consequently, managers will reap good profits from the fixed-price stock options they received when starting, even though they have merely sustained the company's slow growth. Buffet suggests that cash bonuses have all the same merits as stock options since the managers can use it to buy as much stock as they want from the open market.

Sources of Power

Interesting points from Sources of Power - How People Make Decisions, by Gary Klein.

The author tries to avoid advocating any single approach towards decision making, but instead studies how people make decisions in various circumstances. Knowledge of decision making in field is at least one take away from the book. Besides that the author analyzes the decision making process based entirely on rigorous research of real people and circumstances and presents his results. It's up to the user to draw any strong inferences or lessons from these results. The author simply ensures that the research is rigorous and relevant.

I've only read first half of the book so far. The book begins by dispelling the common belief that most decision making is comparative analysis based. In reality, most decisions, and important ones (examples cited are from military, fire fighters, ICU nurses, etc.), are of type RPD (Recognition Primed Decision). These are decisions which are essentially sequential in nature where the decision maker considers a list of options sequentially and picks the first one he likes. In fact, most such decision makers believe that they are not actually making a decision. In contrast, most outside observers get the impression that the decision maker actually made a "decision" (meaning decided based on comparative analysis).

According to author's survey of few hundred important decisions taken by individuals in serious and/or time-pressure circumstances about 80% fall into the RPD category. There are several scenarios where RPD is not the primary decision process, e.g., RPD is based on recognition for which an essential requirement is subject expertise. So when novices are making decisions they tend to be more comparative analysis based than RPD. Similarly, when the decision needs to be justified, e.g., to a higher authority, comparative analysis based decisions are more common. There are several other interesting statistics in the book regarding how the contribution of different decision making approaches varies by scenario.

Once the plenitude of RPD is established, the book delves into the details of how RPD works and what are the various components of the RPD process. Probably the most significant model the book introduces is that of simulation. Simulation is useful in two scenarios:

1. In the scenario recongnition phase where the available data is matched with past experience to decide which scenario we are in. Simulation helps by arranging and explaning a set of sequence of events such that the end result is the current scenario. This knowledge of the past, or what brought us here, is often critical in deciding where we are headed in the future. The author also introduces the notion of "expectancies" - once a simulation has been made to arrive at our current position, the decision maker can generate a set of expectancies and watch out for them in the future. If certain expectancies do not happen, or certain unexpected things keep happening, then that might be a good reason to worry that the simulation (and hence our perception of the current scenario and future) may be incorrect. The author amply illustrates this point using the example of the Libyan passenger airliner whose pilots failed to verify the expectancies, the fire fighter who figured that something was not right and pulled his team out of the house just before the entire first floor went crashing into the basement (he was not told that the house had a basement), etc.
   
2. Simulation is also fundamental in predicting and analyzing the effect of the decision. The power to do useful and realistic simulations can be very useful in making important decisions. Future simulation, like other aspects of RPD (like scenario recognition) require a good deal of experience. However, in most cases creative ideas can play an important role in the simulation - coming up with a creative insight into a problem and being able to simulate its effect can be very valuable in solving difficult problems. The author gives the example of the newborn baby with a blocked throat, the fire fighter who chose to make a rescue by removing the car's roof, etc.
   

The second half of the chapter on simulation is very interesting. Here the author makes some summary observations based on experiences drawn from different experiments. One of the topics covered here is about expertise. Who is an expert ? How do experts use and leverage simulation, etc. Here are some points:

• Experts are constantly improving themselves by doing simulations, mental or aided by paper, computer, etc.
• Pre-mortem (crystal ball). The author defines pre-mortem as the process of assuming that something failed even before actually doing it and then trying to figure out how the failure might have happened. In their experience, they found that pre-mortem often generates new/interesting insight into the problem. It's called the crystall ball approach also since a powerful analogy is that of looking at the future in a crystal ball and finding that something failed.
• Post-mortem. The author uses this concept in a more general sense. They do a postmortem of a task after the task but before results are out and then after results are out.
  
• An important trait of experts is the gut to doubt the data. This is highlighted using numerous examples throughout the book. The data available for making decisions may not always be accurate or timely. In such scenarios, the decision maker has to leverage his past experience not only for decision making, but also for weeding out inconsistencies in the data or outright doubting the data. In some ways, this is a higher form of expertise. There are several examples of this, e.g., the firefighter doubting their knowledge of the fire and pulling out the entire team before the floor collapsed into the basement, or the Naval ship crew not doubting the fact that a passenger airliner was emitting millitary frequencies making them believe that it's a millitary aircraft, etc.

The Vincennes shootdown is one of the classic examples of decision making going wrong under complex scenarios. The incident is but a combination of multiple smaller incidents and provides valuable insight into decision making. For one, half of the ship crew had already made up their mind that the object they are handling is really a missile and they were looking for reasons to justify it. This shows how individuals often make gut decisions subconsiously and then attempt to justify them by contorting evidence. Secondly, the ship crew did not doubt inconsistent, unlikely data, most importantly the millitary frequency coming from the passenger airliner was due to an error in placing the instrument, it was not double checked. Thirdly, it shows that under severe time pressure, better decision support systems are needed in order to avoid making wrong decisions, e.g., in this case better visualization and analysis tools.

Moments of genius

Dixie [sitting at front passenger's seat in SS's car talking to Rai sitting on back seat, the seat next to Rai is empty]: You know, many other people exist in higher dimensions, like the 11th dimension. For example, someone could be sitting right next to you at this very moment. [Looking at the empty seat next to Rai] Hello hi.

Dixie: Maybe you will run so fast, that you will walk on water.

Dixie: Let's discuss some new topics, like keeping quiet.

Dixie: You want to get high... eventually.

Dixie: You are wasting my _valuable_ time.

Pande: If you fly perpendicular to time, you'll find Floyd somewhere.

Dixie: We have three options, and the fourth option is ...

SS: Beauty lies in the eye of the upholder.

"Dixie: Kya khaun, heart attack khaun ki blood pressure khaun.
SS: Liver disease khao."

Dixie: Use your muscles... dead.

Rai: Dixie equals Airport Blvd equals Dixie.

Rai: Where is whose car ?

NLP based search

I am getting increasingly interested in Natural Language Processing (NLP) these days. NLP can enable better human computer interfaces, powerful search engines, etc. One of the search startups in this area that I have been following is www.powerset.com which was recently acquired by Microsoft. A good source to learn about powerset and a rought technical overview is at http://www.slate.com/id/2193837/.

Powerset's NLP technology breaks a sentence into smaller entities (nouns, verbs, adjectives, etc.) and establishes relationships between them, e.g., "eiffel tower was built in 1889" gets recorded as "eiffel tower" (noun) "built" (verb) 1889 (noun). Each such relationship (called "fact") is recorded and comprises a single quantum of information derived from the web page. A search query is translated into a similar, but incomplete fact, e.g., "when was eiffel tower constructed?" would become "eiffel tower" (noun), "constructed" (verb), and "when/year/time/date" (noun/adjective). The search algorithm then matches the "factualized" query to the closest resembling fact and fills in the missing details (the year 1889 in this case).

The cool thing about converting content and queries to facts is that the search engine can identify and return relationships not explicitly stated in the contents, unlike keyword based search. However, most popular content on the web is actually explicitly stated in a single sentence, so NLP seems less useful for searching popular content since Google search would already do a pretty good job here.

However, the real promise of NLP based search seems to be in the context of the "long tail" of search - which are frequently searches not explicity answered on any single web page. As the web continues to grow and many different kinds of contents come online (blogs, books, emails, etc.), the long tail of web search will continue to increase its share of the total search volume. Most of us have experienced that the unpopular searches often are not explicitly found in any single web page, instead they require the user to scan multiple web pages before they find what they want. Keyword based searching cannot make things any better here since the keywords may either be spread out across webpages or they may simply be absent (e.g., "dog" and "tommy" can be related if tommy is the name of a dog - a fact that keyword based search cannot discover). This is where NLP can really make a difference. It can identify facts from across web pages and save users valuable time spent scanning different web pages trying to forge an answer to their search queries.

So, very roughly speaking, if you can find the answer to your query in one Google search and after scanning 1-2 returned web pages, then NLP will not make things any better for you. If it takes more than one search and visiting 5+ search results to answer a given query, and if your query and its potential response can be formed into a fact, then NLP might be useful.

Another analogy for the applicability of NLP may be the information density of a web page. NLP will be more useful finding content in web pages with low information density. By converting the text to facts, NLP is in a way converting "semantic compression" of the contents. "NLP compressed facts", owing to their increased information density, are better suited to answer user queries. These "low information density" web pages may be web pages with lower page ranks on Google. Other examples of low density content might be casual chat sessions, email threads, etc.

Unfortunately, in my experience Powerset doesn't seem to be doing a good job in identifying complex facts. They do a decent job at identifying obvious or simple facts but based on some examples I saw, not so well for complex facts. For examle, if you search for "who was the author of the godfather", you get the answer "Mario Puzo". But Google also fairly easily gives you the same answer when you search for "Godfather author" or "Godfather writer". But if you query, "how many years did Mario Puzo take to write the godfather", Powerset doesn't seem to offer any useful results.

Also, I wonder if their algorithm can really connect information from across different websites, different paragraphs in the same web page (should be there I think), etc.

I'd conclude that for NLP search to be really useful, it should target the long tail of searches - searches which individually are an insignificant part of the total search volume but put together comprise a major chunk. Powerset NLP search doesn't seem to be there yet and quite likely neither do other existing NLP based searche engines.

Digital Planet May 20th

Not a very interesting episode except for the part on "Predicate Encryption". I think the seminal work in this area is http://eprint.iacr.org/2007/404

I don't understand how this is any different from general access control lists. True, since the data is encrypted, even if someone gets access to the entire data, they can only access the part they are authorized to access, but a software layer enforcing access control lists also essentially enforces the same semantics.

Digital Planet May 27

Listening to Digital Planet podcast for May 27th, I learned a few things:

1. Virtual worlds are more pervasive than I thought. Previously, I used to consider only Second Life as a virtual world and not social networking websites. But coming to think of it, there is significant overlap between the two, and for many reasons, people are creating new virtual worlds, often targeted to specific class of users, like young children, students, teens, etc. E.g., Lego Corp. has a virtual world where you can play with legos. BBC has one for kids, and so on. In fact there was a whole "Children in Virtual Worlds" conference that this edition focussed on. The podcast mainly discussed safety, "active moderation" (moderator is a character in the VW himself), "CCTV moderation" (moderators is outside but silently watching - considered a bad thing).

2. Another interesting item was the psychological analysis of friendships and relationships in the virtual world. The conclusion was that in a VW, like in a real world, friendships happen based on shared experiences. So, to create a "tighter" social network, you need more shared experiences - yes, it's all about the experience, shared ones.

The Far Away Tree Andaman Islands

Akshay Rawat, who is like a brother to me, has started a new venture in the place we both grew up and spent some of the most memorable years of our lives, Andamans. Check out his website at http://www.thefarawaytree.in

One week in Japan

I was in Tokyo for a week from March 23rd, 2008 afternoon to March 30th, 2008 afternoon. I stayed in Shibuya-ku (or simply Shibuya), which is located in the south western part of the city on the JR Yamanote line. Shibuya demographic is mostly young people and so it's not surprising that you'll find people on the streets very late in the night (2-3 am). My hotel, Hotel Cerulean Tower was hardly 200m from Shibuya station's west exit and offered a great view of the western part of the city from the window.

Train stations in Tokyo are quite big and there are many shops within the station complex. Sometimes it appears more like a mall where you can catch trains as well. Each station is shared by multiple train companies and often they share tracks too. Fortunately, it's easy to find your way around the train stations without knowing Japanese as all directions are written in English as well.

The Yamanote line is considered the single busiest train line in the world. This is partly because it's a giant loop connecting most of the key parts of Tokyo city (I think it has more than 30 stations), and partly because Tokyo itself is (probably) the most populous city in the whole world where statistically speaking, almost everyone commutes by train. As a tourist, most of the common attractions can be reached using the Yamanote line. It's advisable to purchase a "Suica" card, so that you don't have to buy a ticket for every trip. Perhaps the only annoying thing about Tokyo train system is that all trains stop at 12 midnight. Coupled with the extremely high taxi cab fares in Tokyo, it makes staying out late effectively infeasible, unless you only visit places in your neighborhood.

I spent the first few days of my stay totally engrossed in work. My breakfast was mostly pineapples served in our office every morning at 10 AM. I was told that fruits in Japan are quite expensive, just like beef and some other meat. Pork is cheap and fish is more so. Anyhow, I really enjoyed the pineapples which were quite tasty like the pineapples I have had in India (pineapples that you get in the U.S. are not as good).

Talking about food, Japanese don't really have much dessert of their own, you mostly get western style cakes and cookies. The funny part however is that the cake and other dessert are served in very tiny quantities. In our office, I ate probably the world's smallest cake. One might argue that it's healthy to eat less dessert, but not so much for most people as we simply ended up having five of those tiny pieces.

Japanese food is quite close to the nature, with very little processing. Fish is usually boiled and served along with rice and soup, and probably constitutes bulk of what Japanese eat. Probably this is why they didn't originally come up with lot of good dessert like Indians and French did because the latter two spend a lot of time processing food, so are more likely to produce great dessert.

Japanese restaurants are the symbol of efficiency. In a typical restaurant, several tables are joined together to complete a circle or rectangle. Customers sit on the outside of the tables. The kitchen may be located in the inside part where the chef cooks food right in front of everyone's eyes (which is good). If the circle is small, the chef can directly drop off the food into the customer's plate. Some places have a conveyor belt constantly running over all tables and the chef may simply drop the food in the conveyor belt for the appropriate customer to pick it up. Of course, if the restaurant doesn't receive enough customers to justify this elaborate affair, the kitchen may be kept separate and only the waiter walks in the space enclosed by the tables, serving each customer. The waiter ends up walking less which is probably good for him and for overall efficiency.

Enough about food. My first visit outside was to the Ebisu Garden Place which is a mall located close the Ebisu station on Yamanote line and is well known for its architecture. It was a brief lunch-time visit with colleagues. I spent a few evenings wandering around Shibuya and Shinjuku which is three stops from Shibuya on the Yamanote line, both places are known for having plenty of dining places. Once at Shinjuku, I asked for authentic Japanese food and was served live shrimps in my plate! Since then I stopped asking for authentic Japanese food.

At a Shinjuku restaurant, I also made friends with three cool Japanese people. Keiju Suzuki is an IT professional and a passionate motorcyclist (like myself) who enjoys long rides on weekends. Anna is the chef cum waitress who is a huge fan of Julia Roberts, and Hida who owns the place is an accomplished football player and is a pretty cool fellow.

On Thursday evening we all went to a nearby park [fill in name] for celebrating Hanami. Hanami is a traditional Japanese festival celebrating the arrival of spring marked by cherry blossoms. Typically, you get together with family and friends and spend time out eating and drinking at a park or other such location where you can spot some cherry blossoms. It was a great evening and I got some great shots of the cherry blossoms in the moonlight.

On Friday, I took off early from office and visited Yoyogi Park and the Meiji Jingu shrine. Yoyogi park is located near Harajuku station on Yamanote line (and not near the Yoyogi station as I first thought). Meiji Jingu was a highly regarded Japanese emperor (reign 1868 to 1912) who is credited to have ushered in the modern era in Japan. The Yoyogi park is quite big and one has to walk quite a bit to get to the shrine. The walk is quite enjoyable though, as it's lined with trees and Buddhist structures. There are also many narrow trails that you can take.

The shrine itself is very calm and serene. I spent about an hour relaxing there. It's a great feeling to sit on one of the benches close to the entrance and admire the shrine and its rich cultural history. There is a huge tree in the shrine premises and on a nice breezy day, it can all feel a little bit like heaven.

From Meiji Jingu I set off for Akihabara, which is the diagonally opposite end of the Yamanote line (Yamanote circle would be more appropriate). Akihabara is the electronic town in Tokyo. As such places usually go, it's somewhat crowded and haphazard. Nevertheless, I was quite intrigued by the many cellular phone and computer shops. For example, a simple looking cell phone with a touch senstive keypad, another one on which you can watch live television, pay for travel using an embedded chip which can be programmed to pay for many different services, and so on. Later during the week, going over my colleague and friend Frederic Beal's cell phone, I realized how far ahead Japan is in its mobile phone technology. Other examples include an amazingly useful transit app for cell phones, [try to remember more] etc. I noticed that most laptops and computers for sale came with a TV like remote control which make your laptop look indistinguishable from a TV. Also, I didn't see any computers using CRT monitors, everything was LCD.

The next morning (Saturday) I woke up early (6 am) and left for Nikko National Park. Frederic joined me at the south exit of Ikebukero station which became our meeting point thereafter given that I didn't have a cell phone. Nikko is less than two hours from Tokyo. It is a very old town located in the mountains. Nikko is historically significant for Japan since it is one of the first few places where Buddhism arrived and thrived in the country. It has many old Buddhist temples dating as far back as 766 A.D. There is a giant statue of Amida Buddha. At this point Frederic also explained to me the two main Buddhist sects prevailing in Japan (Shoda Bukya and Joda Bukya) and how they differ from each other and other sects of Buddhism outside of Japan. The temples are built on a small hill, so it's a nice walk up and down. The architecture is quite interesting, quite typical of a Buddhist monastery but unique in its fine metal work all over the entrance gates.

We had lunch at a traditional Japanese place in the Nikko town and took an early train back to Tokyo in order to beat the rush as we had seen a lot of tourists pouring in as the day progressed. We were quite enamored by the snow capped mountains engulfing Nikko and it reminded Frederic of his visits to the Swiss Alps. Frederic told me that Nikko receives snow as well and on one of his visits to Nikko during winter, the whole ground was covered with snow. We had Japanese beer on the way back (Asahi and Kirin) and I was slightly drowsy by the time we got back to Tokyo. The train trips although long were quite entertaining as we discussed our different ideas of the kind of companies we'd like to create and other stuff about Japan, France, and India.

I bid goodbye to Frederic at Ueno and on his suggestion went to the Ueno Park which is close to the station. It turned out to be the climax of my trip and an absolutely memorable experience. Earlier in the day, Frederic was telling me how there was no Japan at the end of WWII and how the Japanese people have come so far since then through their hard work and perseverance. I found the perfect testimony of their progress in the park. The park was full of people who were having a nice day out with family and friends. But the most memorable experience was a 200m walk through a trail that was fully lined on both sides with cherry blossoms. I sat by a side and dozed off for sometime as it was a perfect sunny day for doing so. It occurred to me that all the hard work, discipline, and sacrifices have been totally worth it for Japanese people as they rebuilt their country from ruins and have lived to enjoy this amazing day.

I left the park with the conclusion that "No tragedy is big enough". I came to the hotel and overslept, waking up very early next morning, doing sundry chores and checked out at 11AM. I met Frederic again at south exit of Ikebukero station. After roaming around for a while, we ate at a Japenese-European restaurant and followed it up with ice cream at Coldstone. I've never seen such a long line at Coldstone, which makes the JFK immigration line look minuscule. We went to a Yamaha music store where Frederic bought sheet music and also convinced me to start taking Piano lessons. Frederic, who is French, is an expert Clarinet player himself. So with that in mind, I said goodbye to him and Tokyo and left for Narita Airport.