Blog – Value Investing Almanack – Safal Niveshak

InvestorInsights: Jeff Gramm

August 20, 2017

Jeff Gramm manages Bandera Partners, a value-oriented hedge fund based in New York City. He has served on several public company boards and is the author of Dear Chairman, a history of shareholder activism that has been described as “a grand story” and an “illuminating read” by the Wall Street Journal, “a revelation” by the Financial Times, and “an excellent read” by Andrew Ross Sorkin at the New York Times. Jeff has taught Applied Value Investing with Terry Kontos since 2011. He received his MBA from Columbia Business School in 2003 and graduated from the University of Chicago in 1996.

A hedge fund manager and an adjunct professor at Columbia Business School, Gramm has spent as much time evaluating CEOs and directors as he has trying to understand and value businesses. He has seen public companies that are poorly run, and some that willfully disenfranchise their shareholders. While he pays tribute to the ingenuity of public company investors, Gramm also exposes examples of shareholder activism at its very worst, when hedge funds engineer stealthy land-grabs at the expense of a company’s long term prospects. Ultimately, he provides a thorough, much-needed understanding of the public company/shareholder relationship for investors, managers, and everyone concerned with the future of capitalism.

BookWorm: Steal Like An Artist

August 10, 2017

When you give yourself permission to steal from the great artists, it takes away the huge burden of the need to be original. And that relief itself, ironically, makes space for original ideas.

Investing, they say, is more of an art than science. And, art by definition, stands on the shoulders of creativity. Where there’s art, there’s creativity. So, any insights that can inject some creativity into one’s life and work, including investing, are worth paying attention.

Austin Kleon’s book – Steal Like An Artist– is an illustrated guide that gently touches the various aspects of how creativity takes shape. It’s a manifesto for writers, artists, entrepreneurs, designers, photographers, musicians, and anyone attempting to make things, especially in the digital age.

Spotlight: Of Investing, Horses and Creativity

August 5, 2017

For a human mind, the best way to learn a complex idea is to find it living inside something else it already understands. Metaphors create that bridge. It’s when we find metaphors, to explain something which doesn’t exist in our current vocabulary, we break the mental barrier and create the possibility of discovering something new.

In 1891, a German high school mathematics teacher, Wilhelm Von Osten claimed that his horse named ‘Hans’ had unusual intelligence. According to Osten, with the help of some basic training, Hans had developed a remarkable ability to solve fairly difficult mathematical problems. Osten firmly believed that humans had been underestimating the reasoning skills of animals, especially horses. Soon Von Osten began touring all over Germany to show off “Clever Hans” mathematical proficiency.

Alan Bellows in his article,Clever Hans the Math Horse,describes this incident –

Life 2.0: Your Ears, Another Door to Wisdom

July 30, 2017

In our journey of sharing the investing wisdom with Safal Niveshak tribe, we’ve always highlighted the importance of reading books. We are an ardent subscriber to Charlie Munger’s idea of minimizing the stupidity and mistakes in life. And a big part of the quest to avoid mistakes is to learn from others’ mistakes. That’s where books come into the picture. They’re the best source of vicarious knowledge.

Reading books involves the use of eyes which engages a certain part of the brain which in turn exercises a specific section of neural machinery. However, when it comes to learning, one should be open to the idea of absorbing knowledge through multiple senses. Involving multiple senses fires up neurons in different locations of our brain. This creates the possibility of brand new connections between previously unrelated brain cells. These unprecedented linkages give you brain an enhanced ability to perceive the world and generate brand new insights.

Guy Spier, in his book The Education of Value Investor, mentions that someone gifted him an audio CD of Charlie Munger’s talk at Harvard on the 24 standard causes of human misjudgment. And there was an 18-month period, writes Guy, “during which this was the only CD in my car’s entertainment system.” He probably listened to Charlie’s talk hundreds of times.

So, to experiment with this idea, I have been trying to learn through my ears. One way to do that is to listen to the audio versions of the books. For that, I subscribed to Audible and listened to quite a few audio books. My experience with audiobooks led me to the conclusion that listening to biographies and fiction is quite enjoyable. And there are evolutionary reasons behind it. The technology of writing and reading came into existence quite late in the history of human evolution. The human brain hasn’t yet adapted naturally to the idea of learning things by reading. However, for millions of years, the knowledge was transferred from one person to another by narrating stories. So, sound was the primary mode of sharing and propagating information for majority of human evolution timeline.

Which confirms my personal observation about my inability to absorb any information in audio form if the content is not in a story format. The human brain was able to think about complex matters precisely because of the invention of written word. We learn to do complex algebra and calculus in school because the process involves delegating all the steps to paper. If you had to do it all in your head, 99.99 percent of the people would find it almost impossible. Our brains aren’t wired to do that.

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The Big Edge of a Small Investor

July 30, 2017

Paul Graham is a very successful venture capitalist. He is an accomplished entrepreneur and the founder of YCombinator, a startup incubator. But it’s not Graham’s accolades that sparkle, it’s his deeply thoughtful mind. The collection of essays on his blog that he’s been writing since 2004 is a treasure trove of wisdom for anyone who is in serious pursuit of learning how to think.

One of my favourite essays is How to Make Wealth. In this masterpiece, Graham argues –

Suppose you are a little, nimble guy being chased by a big, fat, bully. You open a door and find yourself in a staircase. Do you go up or down? I say up. The bully can probably run downstairs as fast as you can. Going upstairs his bulk will be more of a disadvantage. Running upstairs is hard for you but even harder for him.

Replace the little nimble guy with a small investor and the bully with a big institutional investor. In fact, the bully doesn’t necessarily have to be the institutional investor. Big-fat-bully represents majority of players in the stock market. And to outperform this bully a small investor needs to run upstairs. Running upstairs in this context means exploiting the structural strength that financial markets bestow on the small investor. What’s this strength?