Safal Niveshak

Wit. Wisdom. Value Investing.

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Archives for August 2018

Being Vulnerable

Value Investing Workshop in Bangalore (9th Sept – Sold Out), Chennai (23rd Sept), Mumbai (30th Sept), Hyderabad (7th Oct). Click here to register now. Few seats remain!

I was 23, straight out of college, when I came to Mumbai in 2001. I had come from a small town in Rajasthan with a population of under 2 lac, or 0.02 crore. Mumbai was 80 times more crowded, and I was scared.

I had just accepted a seat at an MBA college in this city, and my father had paid the fee. So, there was no looking back. Now when I think back about those times, it was quite possibly the most intimidating situation I had ever gotten myself into thus far.

But I did not want to be a quitter, so I stayed, struggled to get along with the city and its people, and still stayed.

In the first few weeks at college, I flunked more than half of my classes as I was too shy and scared to be out of my accommodation and onto the crowded roads and public transport and then into my class of ‘city’ students.

I never felt as vulnerable in my life as then.

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Being A Father

Welcome to the first edition of Outside the Box, Safal Niveshak’s new, free newsletter.

Now, what’s new here? Well, this newsletter will not be authored by me (you must be thanking goodness!), but a few of my friends in the value investing circle.

I have been connected to these people over the past few years, and highly respect their thoughts and ideas about investing, decision making, learning, and life in general.

Now, who are these people? In an alphabetical order, they are – Arpit Ranka, Gaurav Sud, Jatin Khemani, Neeraj Marathe, Ninad Kunder, Samit Vartak, Shyam Sekhar, and Vitaliy Katsenelson.

While these gentlemen are well-known in the value investing circles, I would introduce them better as we move forward and also have a few others join in.

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The Books That Made Me – Part 3

This is the third part of the series on books that have inspired me the most. Read Part 1 and Part 2. Here are the books I have profiled so far –

1. Life and Living

2. Learning, Thinking, Decision Making

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A Hidden Cost Called Rented Suit Liability

Lloyd’s of London, a 300-year-old insurance body, collects more than 33 billion pounds in gross premium every year. Its history goes back to the 17th century.

In 1906, when a major earthquake destroyed more than 80 percent of the Californian city of San Francisco, Lloyd paid out all the policyholder claims, irrespective of the terms of their policies. That cemented Lloyd’s reputation in the American market.

However, in the 1990s, this insurance behemoth was brought to its knees by a risk that had gone unnoticed for decades. After California earthquake episode, Lloyd started underwriting wide-ranging general liability cover to US businesses, including asbestos manufacturers.

Thousands of employees who had worked in asbestos plants were diagnosed with asbestosis, a deadly lung disease, twenty years later. These workers claimed the compensation from their former employer in 1990s. The employer, in turn, claimed it to the insurance companies like Lloyd who wrote the policy in the 1960s. Lloyd had failed to understand the nature of future risk and thus faced near bankruptcy.

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Latticework of Mental Models: Lollapalooza Effect

Value Investing Workshop in Bangalore (9th Sept), Chennai (23rd Sept), Mumbai (30th Sept). Click here to register now. Few seats remain!

Why were Warren Buffett and his creation, Berkshire Hathaway, so unusually successful?

In 2007 Wesco Annual Meeting, someone asked the above question from Charlie Munger. He replied –

If that success in investment isn’t the best in the history of the investment world, it’s certainly in the top five. It’s a lollapalooza.

Lollapalooza in the conventional sense means something outstanding of its kind. A person, a thing or an event that is particularly impressive, or extraordinarily attractive. But being multidisciplinary learners, we shouldn’t be satisfied with the conventional definitions, should we? Moreover, Charlie Munger doesn’t use lollapalooza just for its dictionary meaning.

Here’s the definition of Lollapalooza taken from the book Poor Charlie’s Almanack –

Lollapalooza is, as personified by Charles Munger, the critical mass obtained via a combination of concentration, curiosity, perseverance, and self-criticism, applied through a prism of multidisciplinary mental models.

When Charlie Munger uses the word lollapalooza, he often attaches the word “effects” (as in “lollapalooza effects”) which means that multiple factors are acting together in ways that are feeding back on each other. [Read more…] about Latticework of Mental Models: Lollapalooza Effect

An Early Bird Or The Second Mouse?

It took the world by surprise when Warren Buffett announced that he’d be donating all his personal wealth to Bill Gates foundation. Till then people imagined Buffett and Gates as two fierce businessmen trying to outdo each other for the top spot on the Forbes list of billionaires. Bill Gates has dominated that list for a good part of last 25 years. Buffett has also remained in top five for the same period.

So Buffett’s decision came out as a shocking announcement. However, very few people knew that Warren Buffett and Bill Gates had been very close friends since 1991. They watch movies, go on family vacations and play bridge together.

In 1996, Bill Gates wrote about an incidence when Buffett invited him to play a game of rolling dice. He showed a set of four dice to Gates and proposed that both of them choose once die each from the set and discard the remaining two. Then whoever rolls a higher number most often would be the winner. [Read more…] about An Early Bird Or The Second Mouse?

The Dangers of Persistence

Value Investing Workshop in Bangalore (9th Sept), Chennai (23rd Sept), Mumbai (30th Sept). Click here to register now. Few seats remain!

A few months back, during my lecture to a class of MBA students, I asked them to finish a sentence. The sentence was – “If you play a slot machine in a casino long enough, eventually you will ………” *

The class yelled out in unison “WIN!”

As most people reading this know, that is exactly the wrong answer. Slot machines are engineered to make everyone but the casino a loser in the long run. But MBA kids don’t know that, and they are never taught that. I assumed they confused the benefits of persistence with the actual odds of succeeding.

Anyways, I met a couple of my neighbours in the gym today, who smiled – as if mocking me – when I told them about my work that is to teach people to make lesser mistakes with their money and also learn to make sensible investment decisions for the long term.

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