Let’s Start with Safal Niveshak
Here are some useful posts from Safal Niveshak archive which you might want to read again…
- When I took Warren Buffett’s advice very seriously and it’s wasn’t about investing.
- When I met the legends of investing – Part 4.
- How to find great businesses, the Peter Lynch Way.
- Investing and the art of due diligence.
Guy Spier’s The Education Of A Value Investor is a book that reads like having a friendly conversation with a wise friend. It’s one of those very few books where the authenticity is reflected on each page and you can tell that every word has come out straight from the heart.
One of the most important things required for long term investing success, as I have learnt so far, is following a sound investment process. According to Guy, a sound process is a robust set of rules that makes our investment decisions smarter and less vulnerable to the distortions of our irrational brains.
Guy has developed eight such rules to bring an analytical rigour to his process. Here is one rule which made a lot of sense to me and cleared my dilemma about the need to talk to the management. He writes –
“…my own experience is that close contact with management is is more likely to be detrimental to my investment returns. The trouble is, senior managers—particularly CEOs—tend to be highly skilled salespeople. No matter how their business is performing, they have a gift for making the listener feel optimistic about the company’s prospects…But this gift of the gab doesn’t necessarily make them a dependable source of information…This isn’t to say that CEOs, CFOs, and other top executives are malicious or immoral…They may be skewing information subconsciously, without any bad intent. But it doesn’t matter. Knowing my own rational limitations, I’d prefer not to expose myself to this potentially distorting influence.
If I want to assess the quality of the management, I’d rather do it in a detached and impersonal way by studying the annual reports and other public data, along with news stories.”
So the rule is: Beware of CEOs and other top management, no matter how charismatic, persuasive, and amiable they seem.
And of course there are always some exceptions to every rule. Guy Spier says –
“Exceptions to the rule: Berkshire’s chairman and CEO, Warren E. Buffett, and a small but growing minority of CEOs (at companies like Fairfax Financial, Leucadia National Corporation, and Markel Insurance) who take seriously the idea of sharing what they would like to know if they were in their shareholders’ shoes.”
Meeting with management can seriously distort your view and mess up with your mind. Do that only if you’re confident about your ability to keep your mind insulated from a host of biases (Liking, Authority etc.) coming from the charismatic personality of the CEO.
Stimulate Your Mind
Forget the stock market for now, and consider some amazing content we read in recent times…
- What counts is not what’s said, but what’s heard. The art of giving the right feedback.
- Great entrepreneurs have a different response to the fear of failure. Yes, they’re afraid of failing, but they’re even more afraid of failing to try.
- It turns out there was an Uber way before Uber. Much before, about 100 years back.
- Surprisingly, the limited-willpower theory may not be entirely true.
Stay happy and stay blessed.
But don’t stay tuned to the news.
Be kind to others, and to yourself.
Vishal & Anshul