Special Report

For many world-famous value investors, their interest in the field can be traced back to Warren Buffett.

In 1982, Thomas Russo was a business student at Stanford University when he attended Warren Buffett’s talk. He was simply dazzled by the speed of Buffett’s mind and his knack for weaving profound investing lessons with stories and rib-tickling quotes. Russo was hooked for life and chose to pursue a career in value investing.

Today, Tom Russo is a pre-eminent value investor of our times who manages US$ 12 billion as a partner at Gardner Russo & Gardner. The most important idea that Russo talks about wherever he goes is Capacity to Suffer.

Capacity to suffer is closely connected with the idea of delayed gratification. Delayed gratification happens when someone resists the temptation of an immediate reward in preference for a later reward. Delayed gratification is associated with resisting a smaller but more immediate gain in order to receive a larger or more enduring reward later.

In the famous Marshmallow Experiment, social scientists reached the conclusion that the kids who had the temperament to patiently wait on an easily accessible marshmallow so that they could enjoy two marshmallows later, tend to fare better in life as compared to those kids who couldn’t control their urge and grabbed the one marshmallow.

You can easily replace “marshmallow” with “money” in the experiment and the context won’t change. Often, putting off pleasure ‘in the now’ is the difference between failure and success over the long term. The ability to delay gratification is one quality that consistently separates the most successful ones from the not so successful ones.

[Read more…] about Super Investor: Tom Russo on the Capacity to Suffer

Great habits are built through constant practice. The idea is to take a simple idea, and then take it seriously.

In the previous issue of Life 2.0, we talked about habits as a way of simplifying and taking control of your life. Let’s now take it one step further and explore how we can build skills at an expert level.

Everybody aspires to be really good at something. It could be a sport, an art, playing a musical instrument or any other activity like reading, painting or drawing. Sometimes when we see somebody who displays an extraordinary talent in any of these fields, it not only leaves us awestruck but inspires us.

A common myth about talent is that it’s a genetic gift and talented people are born with it. However, nothing can be further from truth. Some people do have a natural inclination towards few activities but it’s not what makes them talented.

So how do you become good at something? How do you improve your performance in a chosen activity? Well the cliché “practice, practice and practice” isn’t the entirely correct answer.

Talent is an outcome of “deliberate practice”. If you haven’t heard of this term before let me give you the definition first.

Deliberate practice is a highly structured activity engaged in with the specific goal of improving performance.

The idea was made popular by author Malcolm Gladwell in his book, Outliers. According to Gladwell, it takes 10,000 hours of practice to become a world class expert at any skill.
[Read more…] about Life 2.0: Deliberate Practice

Success in life and investing needs a design apart from randomness and luck. I focus on the ‘design’ part in this post,taking a few leaves from the success story of Warren Buffett, how he achieved it, and a path we can follow for ourselves.

One of the best short stories that I’ve read outside children books concerns employees of a company, who saw a big board on their office’s door as they were about to enter it. The board read – “The person who was hindering your success and growth in this company passed away yesterday. We invite you to join the funeral in the room that has been prepared in the gym.”

[Read more…] about How to Succeed in Life and Investing

A few days back, a friend called me to discuss a new stock idea that he was excited about.

“Do you know that Rakesh Jhunjunwala’s investment in Delta Corp was close to 400 crores a few months back. And now even when the stock has gone down by more than 60 percent, he is still holding on to it. With so much at stake, I am sure Delta corp is his high conviction stock.”

“We can’t say for sure if Delta corp is his high conviction stock,” I said. “He has many other stocks in his portfolio.”

“Yes, but look at the size of his investment. Four hundred crores is not a small amount.” My friend reasoned.

I could not find a convincing answer to counter my friend’s argument at that time but I kept thinking about it. This post is my attempt to answer my friend and offer some insights on how to think more rigorously before deciding to copy other successful investors.
[Read more…] about Do As I Say, Not As I Do

In 1996, Sally Clark, an English Solicitor, gave birth to her first child. Unfortunately, her infant son died at the age of 11 weeks. Doctors reported the cause as sudden infant death syndrome (SIDS) — a diagnosis when an infant dies unexpectedly and postmortem doesn’t reveal anything.

SIDS usually occurs during sleep and affects infants under the age of one year, with the peak incidence occurring when the infant is at 2 to 4 months of age. As an aside, Elon Musk’s first child had also succumbed to SIDS in 2002.

Clark’s life took a nasty turn when in January 1998, Clark gave birth to her second son, and the baby died at 8 weeks, again reportedly of SIDS. It’s hard to imagine her situation but her plight worsened when a month later, she was arrested and accused of smothering both her children.
[Read more…] about The Grave Consequences of Misunderstanding Probability