Safal Niveshak

Wit. Wisdom. Value Investing.

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Archives for August 2018

Being Vulnerable

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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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Investor Insights: Jigar Shah

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Jigar Shah, born and raised in Mumbai, India, is a CFA charter holder and a C.A. He has more than 14 years’ experience as an analyst and fund manager. He has researched global equity markets for an investment firm for five years and has spent nine years in Indian equity markets.

Jigar joined Banyan Tree Advisors in 2011 as a fund manager. He is an avid reader and passionate about researching businesses, moats and investing for the long term.

In this interview, Jigar shares his thoughts on investing, his process, and the key lessons he has learned over more than a decade of being an investor.

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Special Report: 5 Powerful Hacks for Better Decisions

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Who wakes up every morning thinking, “I am going to make bad decisions today”?

No one.

Yet we all make poor decisions, more often than we want to. Surprisingly that’s not the biggest irony.

The biggest irony is that intelligent people – those gifted with above average IQ – not only make biggest mistakes but their bad decisions affect other innocent people who put their trust on these so-called smart decision makers.
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Being A Father

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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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Behaviouronomics: The Peak End Rule

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What does the future look like for an eighteen-year-old student who finds himself on a hospital bed wrapped up in bandages? My guess is that life careening off course would have been the least of concerns when he was fighting for his life.

In his senior year of high school, Dan was an active member of an Israeli youth movement. On a Friday afternoon, while preparing fireworks for a traditional nighttime ceremony, a large magnesium flare accidentally exploded near him causing third-degree burns over 70 percent of his body.

The next three years found me wrapped in bandages in a hospital, recalls Dan, “and then emerging into public only occasionally, dressed in a tight synthetic suit and mask that made me look like a crooked version of Spiderman.”
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The Books That Made Me – Part 3

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

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

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A Hidden Cost Called Rented Suit Liability

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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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Bookworm: Thinking in Bets

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Have you ever wondered where did the idea of “40-hour work with 2-day weekend” begin? Many believe that it was Henry Ford who started this practice of 5-day work week. Ford is considered one of the greatest capitalists of the last century.

In an apocryphal account, a journalist asked Ford the secret behind his massive success.

“Two words,” replied Ford, “Good decisions.”
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Latticework of Mental Models: Lollapalooza Effect

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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