Book Worm

I am sure most of you already know about Mohnish Pabrai. We had reviewed one of his books “Mosaic” in the previous VIA issue. For the benefit of those who haven’t heard about him, Mohnish runs US$ 850+ million US based hedge fund and is a true Munger-Buffett disciple. He is one of those rare money managers who have structured their funds mimicking the Buffett Partnership.

Mohnish has an eclectic background. He has built three successful businesses in last 25 years including a technology company, a hugely profitable hedge fund and a remarkable philanthropic organization called Dakshana Foundation, which educates talented underprivileged children to qualify for IITs. His success across varied fields is clearly the result of his multi-dimensional thought process which is pretty evident from the insights that he shares in his book.

He is a natural storyteller and has an exceptional skill of making the art of value investing look simple and doable.

The Dhandho Investor was one of the very first few books that I read during my initiation into the world of value investing.

Before diving into the book let’s first demystify the strange word called “Dhandho”. Dhandho is a Gujarati word which is best described as – endeavours that create wealth while taking virtually no risk. Like many other value investors, Mohnish too prescribes a low risk betting strategy.

The Patel Motel Dhandho

The book starts with a fascinating description of “Patel Motel” business. The Gujarati community in the US make up less than 0.2% population but they control more than 50% of the motel business employing nearing a million people and owning over US$ 40 billion in motel assets. The distressed motel industry, low initial investment, easy mortgage and free accommodation were reasons compelling enough to attract the Patel community to motel business. With frugality and extremely low operating costs, Patels turned motels into cash generating machines.

The cash generated by one motel was used to buy another motel and very soon Patels began applying their low cost model to higher-end hotels, gas stations, convenience stores (7-Elevens) etc. The snowball effect over time ended up creating amazing results for the Patel community.

The book includes an explanation of this idea with a simplistic DCF analysis (taking into account various possible outcomes) for a motel business and proves that it was a typical “Heads, I win; tails, I don’t lose much!” bet – a dominating theme in this book.

Other Dhandho Investors

Mohnish goes on to chronicle the adventures of few more well known businessmen like Richard Branson and Lakshmi Mittal. Both of them personify the Dhandho approach.
[Read more…] about BookWorm: The Dhandho Investor

In the last fifty years, Warren Buffett has recommended quite a few books in his lectures and writings. But there is one book that can boldly claim to have found its way to Warren Buffett’s reading desk. And that book is The Success Equation, authored by Michael Mauboussin.

Michael belongs to the breed of those rare investment strategists who have spent their life puzzling over the really crucial questions in the world of decision making. He is an expert in one of the most debatable topic in the field of business strategy i.e., role of luck in defining the success for an individual as well as an organization.

Apart from being a successful investor, Michael also teaches at Columbia Graduate School of Business. He has authored three other books out of which I have read two and found both of them equally insightful.

Let’s dive straight into the book first.

Many of us have heard the biblical story of David and Goliath. It tells how David, a young shepherd was pitted against a ferocious warrior named Goliath. David accepted the challenge when Goliath invited him for one to one fight. David was clearly an underdog. However, everybody was stunned when David killed the giant Goliath with a slingshot.

The truth is that it’s not easy to recognize the remarkable war strategy hidden inside the story. What strategy?

I’ll let you live with the curiosity for few more minutes and reveal the secret little later in this article.

The world we live in today has become terribly interconnected. This introduces a high degree of complexity which in turn leads to lot of randomness and unpredictability in the outcomes of events. When this randomness operates at an individual level, it translates to either good or bad luck.
[Read more…] about BookWorm: The Success Equation

Great perspectives on a book that teaches why it all starts with one belief, one thought, one word, one action, one habit, one value, and one step at a time.

Think of the last time you set out to bring about a major change in your life – like losing weight, starting a new project or business, learning how to invest on your own, starting an exercise regime, learning to break an addiction, or building a new relationship.

What did you feel? Exhaustion? Excitement? Fear?

Most people, when faced with change, get so overwhelmed with the perceived enormity of the work required to bring the change that they either don’t get started or give up very early. But there is an alternate way to circumvent our brain’s resistance. The book I am talking about here presents an idea that creates a backdoor entry, a kind of hack for your brain.

This is a small but amazing book written by Dr. Robert Maurer. It was recommended by Prof Sanjay Bakshi in his interview with Safal Niveshak in 2012. The big idea discussed in this book is of Kaizen, which is Japanese for “taking small steps to continual improvement”.

I can almost hear your mumbling, “Another big fancy jargon”. But let me assure you that Kaizen works and I am not telling you this just because I read the book. It’s a powerful idea.
[Read more…] about BookWorm: One Small Step Can Change Your Life: The Kaizen Way

If you are familiar with the terms ‘value investing’ and ‘behavioural biases’ then chances are that you have heard about ‘checklists’ too. The idea of checklist has been made popular in recent times by Dr. Atul Gawande.

A surgeon by profession, Dr. Gawande is also a prolific writer and deep thinker. He is a staff writer at ‘The New Yorker’. Charlie Munger was so impressed with one of his article that he mailed him a $20,000 cheque as a thank you.

[Update: Dr. Gawande was recently appointed as the CEO of a healthcare venture formed by Amazon, J.P. Morgan and Berkshire Hathaway.]

[Read more…] about The Checklist Manifesto by Atul Gawande

Great perspectives on investing from the wonderful investor and multidisciplinary thinker, Mohnish Pabrai.

I am sure the author of this book needs no introduction, but for the benefit of people who don’t know much about him, I am going to start with an interesting trivia. How much would you pay to have lunch with Warren Buffett? How about Rs 4 crore?

Don’t be surprised because that’s the amount Mohnish Pabrai (along with his friend Guy Spier) paid to have a private lunch with Warren Buffett in 2006.

Mohnish manages US$ 850+ million US based fund called Pabrai Funds and is a hardcore Buffett disciple. He has written another popular book called The Dhandho Investor.. However, the book I am talking about here is a rare one.

Mohnish has built 3 successful businesses in the last 25 years, including a technology company, a Buffett style hedge fund and a very successful philanthropic organization called Dakshana Foundation, which educates talented underprivileged children to qualify for IITs. With this kind of experience, I am sure he has some interesting insights for us.

In the previous issue of VIA, we had shared the link to Dakshana’s annual report. If you haven’t read it yet, I would suggest please don’t miss it.
[Read more…] about BookWorm: Mosaic: Perspectives on Investing