[The Weekend Bulletin] #44: The Pursuit of Betterment
A digest of some interesting reading material from around the world-wide-web. Your weekly dose of multi-disciplinary reading.
Everything that we do in our adult lives is towards one of the two purposes: to seek entertainment, or to improve. When the two purposes converge, work becomes play, and life cannot be any easier. However, work or play, we cannot escape improvement. Becoming better is a constant endeavour that we need to undertake, not just to shine, but also to survive.
Betterment is a demand of every walk of life - from work, to hobbies, to even relationships. And while we all strive to becoming better at whatever walk of life is our priority, there is one aspect of becoming better which we should not forget - becoming better human beings.
To be human is not just to be logical, communicative, and progressive, but also to be loving, caring, and giving - not only to the ones that we know, but also to our tribe at large. Giving is the ultimate getting better - it encompasses Dharma (moral), Tyaga (generosity), Moksha (liberation), and in many ways, Purusartha (object of human pursuit).
And thus, while we all journey towards our individual pursuits of getting better at something, we should, at times, pause to celebrate and reflect upon those humble souls that attain the highest pedestal of betterment. I came across two such stories that I thought were absolutely worth sharing and getting inspired from:
The first is the story of general human kindness that was captured in a short travelogue. Usually when we read about tourists, we often read about their hardships, mishaps, robberies etc in the media. But what does not get reported, or recorded, is the warmth of a kind stranger in a strange land. This warmth, this kindness, is what transcends borders, cultures, religions, status, languages, and what binds us together into a single moral fibre.
The next story is one of a billionaire who planned to die broke - not because he wanted to gamble his fortune, but because he wanted to give it all away for a cause, while he was still alive. This is an incredible story of one of the founders of the Duty-Free Shops who "pioneered the idea of Giving While Living—spending most of your fortune on big, hands-on charity bets instead of funding a foundation upon death. Since you can't take it with you—why not give it all away, have control of where it goes and see the results with your own eyes?”. As per this article, he has given away 375,000% more money than his current net worth.
I hope the above stories inspire you to give something back to society, in what ever small way that you can. And trust me, it is not that difficult to begin: just take the first small step and then the forces will guide you.
I want to share a story here, and I apologise for sharing a personal account, but I think it will help you take that first step:
This story is about the first role-model of my life - my father! When the COVID induced lockdowns started in March this year, he got news of people sleeping hungry in slums due to loss of income. Over the next few days, he made innumerable calls to people to figure a way to provide food to these people. Eventually, he found a way - one of his friend’s son was part of this group that provided free meals for policemen, and government employees. They agreed to provide packed meals at a subsidised rate. He started with a small number using family funds. When he figured the logistics over the next few days, he reached out to family, friends, and associates. A number of people came forward, and at the peak of lockdown he was managing the distribution of 600 lunches, and a few hundred dinner packets. Towards the end, we had more fund commitments from people than the number of packets that we could distribute - and thus money was not a constraint really. Someone just had to think through the problem and figure the logistics, the rest fell in place. I share this story to emphasise the importance of the first step. [My father was interviewed by a TV channel, which I shared here along with the logistics in more details.]
The food distribution stopped long back (people went back to villages, the rains complicated the matter, government and other local bodies also started distributing food), but my father didn’t. He now helps anyone in need with supply of food materials. From the lady who manages the kitchen at the temple, to a lady that sells fodder for cows, to a flute-seller, to our iron-man (dhobi!) - he has provided them all with a kit with nearly a month’s food supplies (5kg wheat, 5kg rice, 1kg oil, 2kg daal etc). Each of these kits costs a few hundred bucks, not a lot for any middle class family. Once again, I share this to drive the point that it does not have to be Big Bang; a small gesture can also go a long way in making a difference to someone’s life. Don’t wait to get to the end of the line to do something dramatic, start today. Start small, for size doesn’t matter, but beginning does.
Thank you for bearing with me.
Let’s get on with sharpening our investment skills now.
Section 1: Investing Wisdom
Betterment through Deliberate Practice: If you heard the Yen Liow interview that was shared last week (I highly recommend that you do in case you haven’t already) you would remember how Yen used case studies to develop his investment philosophy. Here is what he said:
"The external process, we use a thing called case study methodology. So we had the great fortune of meeting Eddie Lampert the summer of 2005 in 2006 at two Ziff Brothers’ retreats. And I just asked Eddie how did you become so insightful so early in your career? Eddie compounded capital at almost 30% for two decades and started in his mid-20s.
I said, That’s just not human.
And how did you do it? But he said to me, he spent 50% of his time training. The best investments in history, and he did it through a thing called case study methodology, and I say, “Wow, if it’s good enough for you, it’s good enough for me. What does that mean?” Someone gave me a tool!
And I literally dedicated my life to it right after that, and so we’ve been teaching that at Columbia and Harvard business schools for the past decade, and doing this internally. We’ve literally spent thousands and thousands of hours on this, generated hundreds of cases internally.
What that is, is literally taking clusters of the best investments in history and trying to learn patterns from them. And it’s very, very detailed work, it takes a lot of work per case, in fact, it’s best done as clusters because you’re trying to look for patterns. You’re not trying to look for just idiosyncratic outcomes, and what we end up doing is it… All of excellence, in my view, comes back to decoding and then decoupling, breaking down each element of it. So we found it as eight elements that define all of these types of right tail, 5 and 10 year, 20 plus compounders.”
In a report titled ‘The Makings of a Multibagger’, Alta Fox Capital conducted a similar study (An Analysis of the Best Performing Stocks over the Past 5 Years) and was kind enough to share the findings (645 slides - but you can get a gist in the first 20-odd slides) with us. This is treasure-trove that needs not one, but repeated reading.
Betterment through Regret: Regret is inevitable in investing. You either regret having bought something or having not bought something. It shows up in bull markets, as well as bear markets. While regret is a negative emotion, it can have positive implications if used correctly. This article tells us how to deal with regret correctly.
Betterment through New Insights: There is big change underway in the world of business which impacts how we approach investing. This change is the increase in intangible investments over more tangible ones as well as the shift in investments from the balance sheet to the PnL, requiring investors to refresh their understanding of book value and earnings. While a lot of has been written on this subject over time now, most of it has been about the increase in intangibles over tangibles. What makes this note interesting is that it goes further to offer a number of ways in which investors can adjust for these changes and how they can incorporate them in their valuation model. An important framework for all investors to understand and adopt.
Section 2: Mental Models & Behavioral Biases
Betterment through Learning from Mistakes: Here is something that all of us investors should be doing. Arisaig Partners looks at some of the its past investment decisions to identify the various biases that were are at play at the time of making those decisions. While the biases were not as apparent then, they surely are more recognisable with the benefit of hindsight. This is an exercise that if conducted regularly will help identify many of these biases pre-mortem rather than post-mortem. More importantly, then can also help identify a pattern of flaw in decision making over time. This note is praiseworthy in that not only did Arisaig Partners undertake this exercise, but they also made it public which is really commendable.
Betterment through Mentorship: They say one of the best ways to learn something is to find someone who is successfully doing what you want to do and then learn from them. Such learning can either be in-person or vicarious - by learning from their experiences. Attempting at such vicarious learning, Eric Jorgenson created a book on wisdom of Naval Ravikant. He has been kind enough to share this book in various formats, including a free pdf version (although I recommend buying either a print or kindle book as a gesture of appreciation for his hard work) that you can find here.
Section 3: Personal Development
Betterment through Unlearning: Continuing with our thread on learning better over the last few weeks, the lesson to take this week is that of unlearning. Alvin Toffler once wrote, “The illiterate of the 21st century will not be those who cannot read and write, but those who cannot learn, unlearn and relearn.” Thus, to be better learners, it is important that unlearn that we have already learnt, to make way to new lessons. But what exactly do we unlearn? This article provides a list of five things to start with.
Betterment through Letting Go: Taking last week’s thread on the importance of taking breaks to focus better, this article talks about the importance of not trying too hard. In the vein of Alan Watt’s famous words “Muddy water is best cleared by leaving it alone”, an overworked mind is best left alone.
Section 4: Trivia
I have been asking some (tough?) questions over the last couple of issues. We’ll take a break from that. Allow me to provide some information about a very interesting domestic (Indian) business:
This company started with the objective of selling a seasonal fruit in all seasons so as to benefit from the gap between low seasonal and high non-seasonal prices. Today is clocks a revenue of over INR 500cr ($68M) every year.
While the company is over 60 years old, it faces very little competition till date (unlike soaps and toothpastes). Sales have grown at an annual rate of around 25% for the last 15 years!!
Nearly 40lakh (4M) people visit its facilities every year. For comparison, the Eiffel Tower in Paris receives 70 lakh (7M) visitors a year.
By the late 90s, the company had only managed to get distribution in to the western region of India. Today it’s distribution network spans across 17 Indian states and also countries like USA, UAE, Fiji and Russia.
Started at Vora Jams, the company is now well-known as Mapro Foods (short for Mahabaleshwar Products).
To borrow from Peter Lynch, there are great businesses around us everywhere. We just need the eye to see them. Unfortunately for investors, Mapro Foods is not listed.
The above data and further details can be found here.
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That's it for this weekend folks. I hope you enjoyed this issue; let me know your thoughts/feedbacks by commenting below.
Have a wonderful week ahead!!
- Tejas Gutka
[Sep 19, 2020]
P.S.
If you come across an interesting article that you feel is insightful and worth sharing with the community of readers of The Weekend Bulletin, please email a link of the article along with a short summary/note on why you like the article to: share2TWB[at]gmail[dot]com.