Wit. Wisdom. Value Investing.
Jaideep has been part of the Indian equity markets for more than two decades. He has worked in Fund Management, Equity Research, and Dealing. He is managing portfolios at Janak Merchant Securities Pvt. Ltd., a company promoted by his family, for the past 14 years. Jaideep is a member of the Institute of Chartered Accountants of India and is also a CFA Charter holder.
Disclaimer: Stocks/Examples quoted below should not be construed as recommendations.
Every Saturday, I plan to send out this special post with a few ideas I am reading and thinking about. Plus, a question I am meditating on.
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Book I’m Reading – A More Beautiful Question
Since early childhood, most of us learned that our parents did not like us asking many questions and that only authority figures – most grown-ups – had the right to ask them. The result was that we stopped questioning things and accepted what we saw, heard, and were told with meek acceptance.
Sadly, this approach worked well in the industrial era, but proves futile in the knowledge era, because it compromises our ability to think and understand deeply.
The company WeWork has been in the recent news for a lot of reasons — many of them not so comforting for the company’s private investors. Those who haven’t heard of WeWork or don’t know much about it, here’s a primer on Wework’s business model.
In one line, WeWork leases out large office spaces, upgrades them, makes them look cool and upscale, and rents them out on per seat basis to either individuals or other companies. In case you’ve heard of the term coworking spaces, WeWork is that.
[Read more…] about Of Good Stories and Bad Businesses
Businesses die, like we do.
However, in contrast to us (I mean, humans…because some bots and aliens may also be reading this post) gradually increasing our average life expectancy over decades, more businesses are dying faster than any time in history.
While there is no real research done on Indian businesses, as per Credit Suisse, the average life span of S&P 500 companies in the US, which stood at 60 years in the 1950s, has now fallen to under 20 years.
The biggest culprit for this is the disruptive force of technology, which is killing off older companies earlier and at a much faster rate than decades ago.
Anyways, today’s post is not about what businesses can do to stave off their deaths, which is mostly inevitable in these rapidly changing times.
I wrote yesterday about five ways to destroy wealth in the stock market.
As an antidote, and especially as you may be sailing through the vicissitudes of ecstasy (after seeing your stocks surge yesterday) and, at the same time, misery (for not buying more stocks before yesterday), today I share with you one way to win at the game of investing, or at anything in life.
That way, my dear friend, is of equanimity, which is calmness and composure, especially in a difficult situation.
Indian scriptures define it better as samabhaav, which means “sameness of things” or samatvam, which means “evenness of mind.”
[Read more…] about How to Win At Investing (And At Anything in Life)
It’s common if you are wealthy to worry about losing your fortune due to forces beyond your control. Like market meltdowns or economic stagnation.
But what many of us don’t realize is that our own behavior may be the root of significant losses.
Warren Buffett in his 2012 annual letter to investors, recommended William Thorndike’s book The Outsiders. Buffett called it an outstanding book about CEOs who excelled at capital allocation. The eight terrific CEOs that featured in the book have generated exceptional results across a wide variety of industries and market conditions. We had written about Outsiders in April 2016 as part of VIA bookworm series.
Saurabh Mukherjea’s book is the answer to The Outsiders. Mukherjea writes —
The book [The Outsiders] changed the way I perceived and analysed companies which have been successful over long periods of time (we are talking decades here). What Thorndike helped me grasp was that the truly great companies take the surplus cash flows created by their sustainable competitive advantages and then either return those to shareholders or reinvest those in their core franchise, or — and this is the litmus test of greatness — reinvest those successfully in new activities or markets. It is in those latter set of investments outside the core franchise that a great company assures its future regardless of how economic circumstances and customers’ tastes pan out. Without that insight from The Outsiders, there would be no The Unusual Billionaires.
How much weightage would you give to the advice dispensed by an entrepreneur who is known to have successfully built a multi-million dollar business?
If you understand the role of skill and luck in the field of human endeavours, you’d question me back, “First tell me, if that entrepreneur was successful because of his skills or was it just luck?”
Fair enough. So here’s another piece of information for you. That entrepreneur has built multiple successful businesses so the odds are high that his success is the result of his knowledge, skill, and experience than pure luck. So tell me, would you take his advice seriously?
At this point, you might be a little suspicious of the way I am framing my questions. I know you’re suspecting that I want to make you say yes and then reveal the reasons why you’re wrong.
[Read more…] about Behaviouronomics: The Shoe Button Complex
Yesterday did not start on a good note for me.
I broke three cups.
Sunday is when I usually prepare tea for the house. As I was pulling out three teacups from the cabinet, all with a single hand while holding the cabinet door with another, one of them slipped.
I watched, aghast, wanting time to stop. But it didn’t. In fact, it seemed to move faster. The cup was lost.
However, if that was not all, as I vainly attempted to catch it in that millisecond, the other two cups also dropped out of my hand.
All three were gone.
As I was cleaning up the mess, a realization struck. Maybe the second-best thing for me to do to save the two other cups was to let the first one go. The best thing, of course, would have been to not try pulling them out of the cabinet with one hand.
Life teaches us lessons almost all the time. We only need to observe well, and sometimes be prepared to hear the sound of breaking glass.
This post is the sixth episode of the multi-part series based on Peter Bevelin’s book — All I Want to Know is Where I’m Going to Die, So I’ll Never Go There.
So why are we talking about ideas on what doesn’t work rather than ideas on what works? Isn’t it a negative approach to talk about what doesn’t work? I’ll let Nassim Taleb explain why this works. In his book Antifragile, Taleb writes —
The greatest — and most robust — contribution to knowledge consists in removing what we think is wrong — subtractive epistemology…we know a lot more what is wrong than what is right…negative knowledge (what is wrong, what does not work) is more robust to error than positive knowledge (what is right, what works). So knowledge grows by subtraction much more than by addition — given that what we know today might turn out to be wrong but what we know to be wrong cannot turn out to be right, at least not easily…disconfirmation is more rigorous than confirmation.
Charlie Munger, while wearing his curmudgeon hat, declared, “All I want to know is where I am going to die, so I’ll never go there.” And that’s his way of driving home Taleb’s point about focusing on the negative knowledge.
Bevelin’s book is dedicated to Charlie Munger’s philosophy. Here are a few more insights from the book on what doesn’t work.
[Read more…] about Special Report: 27 Ideas on What Doesn’t Work — Part Six