The One Percent Almanack

Wit and Wisdom on Investing, Business, and Life

Vishal Khandelwal

Life 2.0: Pursuing a Memorable Life

The key to living a memorable life is the pursuit of a memorable life. We share few ideas to stock up your personal happiness store, without spending too much money.

Let me ask you a question – “Can you recall what you did on each day for past 30 days?”

Don’t feel bad if you can’t because it doesn’t indicate a poor memory. In fact, if it gives you some comfort, here is an interesting fact – according to a study most people can’t remember more than 3 days from their past 30 days of life.

Surprising, isn’t it? So what happened to all those forgotten days? You might as well have not lived them since they, in hindsight though, appear to be a complete waste of time.
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InvestorInsights: Ian Cassel

Ian Cassel, a full time micro-cap investor, shares his investment journey. His insights about what makes micro-cap investing different and challenging are worth a million.

In this issue, I interview Ian Cassel of MicroCapClub.com, which is an exclusive forum for experienced microcap investors focused on microcap companies (sub $300m market cap) trading on the US and Canadian markets.

Ian has been investing in microcaps for 15 years and has been a full time microcap investor since 2008. Ian looks to invest in great management teams running great businesses with a moat. He tries to invest in the best 5-6-7 companies he can find at all times.

Ian founded MicroCapClub in 2011 to be a place for “real” and experienced investors in the microcap space to share ideas and learn from one another. When Ian isn’t researching stocks or administering MicroCapClub, you can find him reading, golfing, or shopping at Costco with his wife.

Safal Niveshak (SN): Could you tell us a little about your background, how you got interested in investing and also about your wonderful blog microcabclub.com?

Ian Cassel (IC): I’m 34 years old, married, and have a daughter. I live in the United States in Lancaster, Pennsylvania. Lancaster is a rural community mostly known for our Amish people. I am not Amish  I’m a full time private microcap investor, which is a fancy way of saying I only invest my own capital (no family, friends, or clients) and only in small public companies called microcaps.
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BookWorm: Zero To One

Peter Thiel is the guy who identified the multi-billion dollar businesses like Paypal, Facebook, LinkedIn and Palantir very early and invested in them. The best way to predict the future is to create it. Peter knows that for sure and in his book he reveals the secrets.

The most interesting thing about future is that it’s unpredictable. Anybody who claims that he or she can predict the future is either lying or crazy, possibly both.

However, there’s still a way in which a handful of people have ended up not only predicting the future but benefitting from it enormously and creating disproportionate amount of wealth in the process. These are the people who believe – “The best way to predict the future is to create it.”

The problem is that these people work secretly and rarely come out in public to claim their share of fame. But once in a while, you see a dark horse coming out and willing to share his or her thought process.

Peter Thiel is one such dark horse who was relatively unknown outside the group of selective people in Silicon Valley. In case you don’t know about Peter Thiel, he was the founder of PayPal (with Elon Musk) and an early stage investor in Facebook, LinkedIn and SpaceX. He is one guy who has been there, done that. Thiel’s ideas are must read for every entrepreneur.

In this post, I’ll share some big ideas I learned from Thiel’s book Zero to One. The book is based on his lectures at Stanford University. One of his students, Blake Masters, made lecture notes and published it. The notes became instant hit on the internet and soon Masters got an opportunity to co-author ‘Zero to One’ with Peter Thiel.

In just few years, Blake Masters went from being Peter Thiel’s student to co-author. I call this strategy, exposing yourself to positive black swan or in simple words, giving luck a chance to find you. But I’ll save that discussion for some other day.

Let’s talk about the book.

Nassim Taleb says in his endorsement of this book – “If a risk taker writes a book, read it. If it is Peter Thiel, read it twice. In fact, read it thrice to be safe.”
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Behaviouronomics: Chauffeur Knowledge

Having a chauffeur driven car is a convenience but when it comes to learning, don’t delegate the task of steering your car to a chauffeur. We discuss the pitfalls of borrowed wisdom and how to detect second hand knowledge.

In 2007 Charlie Munger gave a talk at the University of Southern California. In his talk Charlie tells the story of famous scientist Max Planck…

I frequently tell the apocryphal story about how Max Planck, after he won the Nobel Prize, went around Germany giving a same standard lecture on the new quantum mechanics. Over time, his chauffeur memorized the lecture and said, “Would you mind, Professor Planck, because it’s so boring to stay in our routine, if I gave the lecture in Munich and you just sat in front wearing my chauffeur’s hat?” Planck said, “Why not?” And the chauffeur got up and gave this long lecture on quantum mechanics. After which a physics professor stood up and asked a perfectly ghastly question. The speaker said, “Well, I’m surprised that in an advanced city like Munich I get such an elementary question. I’m going to ask my chauffeur to reply.

Well, the reason I tell that story is not to celebrate the quick wittedness of the protagonist. In this world I think we have two kinds of knowledge: One is Planck knowledge, that of the people who really know. They’ve paid the dues, they have the aptitude. Then we’ve got chauffeur knowledge. They have learned to prattle the talk. They may have a big head of hair. They often have fine timbre in their voices. They make a big impression. But in the end what they’ve got is chauffeur knowledge masquerading as real knowledge. I think I’ve just described practically every politician in the United States. You’re going to have the problem in your life of getting as much responsibility as you can into the people with the Planck knowledge and away from the people who have the chauffeur knowledge.

In the real world, it is critical to distinguish when you are “Max Planck,” and when you are the “Chauffeur.”
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Spotlight: What Could Go Wrong

Investing is a loser’s game and not anyone else but the investor, with his unforced errors, beats himself all the time. That’s why even an average performer can win this game by being consistent in avoiding mistakes. Focusing on what can go wrong has long been a hallmark of sound investing.

An investor needs to do very few things right as long as he avoids big mistakes. ~ Warren Buffett

If you don’t lose money, most of the remaining alternatives are good ones! ~ Joel Greenblatt

We are big fans of fear, and in investing it is clearly better to be scared than sorry.~ Seth Klarman

Superior returns are mostly earned through minimizing mistakes than through stretching for yield. ~ Howard Marks

Warren Buffett isn’t particularly prone to superlatives, so it’s high praise indeed that he calls two chapters in Benjamin Graham’s The Intelligent Investor – one on stock market fluctuations (chapter 8) and the other on margin of safety (chapter 20) – “the two most important essays ever written on investing.”

In the first, Graham introduces the concept of a manic-depressive “Mr. Market,” whose mood swings can lead to equity mispricing. In the second he describes how to manage risk by investing only when there is “a favorable difference between price on the one hand and appraised value on the other.” This margin of safety, Graham writes, “is available for absorbing the effect of miscalculations or worse-than-average luck.”

Focusing on what can go wrong has long been a hallmark of sound investing. Baupost Group’s Seth Klarman put it succinctly in an investor letter –

We are big fans of fear, and in investing it is clearly better to be scared than sorry.

But chances are that even the most avowed pessimists can have their attention to risk dulled by long periods of generally favorable market conditions and low volatility – becoming oblivious, as Klarman writes, to “off-the-radar events and worst-case scenarios.”

Many fund managers have unimpressive careers, not because they haven’t had any multi-baggers. They might have quite a few 10, 20, even-50 baggers, but along with those home runs they also have too many losers which end their careers too soon.

And yet they don’t learn from each other because you can still find many of them swinging for fences with every bet they make.
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