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- [00:01]
A
Hello, everyone, and welcome to Investing by the Books, a podcast by Red Eye. I'm your host, Eddie Palmyan, and today we're thrilled to have Rupal Bansali on the show to discuss her great book, Non Consensus Investing. Rupal is a seasoned investor in New York with over 30 years of investing experience. She has climbed from analyst to portfolio manager to cio, overseeing billions of dollars in global as well as international equity strategies. For a number of years, Rupal has featured on Barron's list of the 100 most influential women in US finance. And today she runs her own firm, Double Duty Money Management. CNBC has described her as a legendary contrarian, known for her unconventional thinking, which is exactly what RuPaul's book is all about. Non Consensus Investing was published in 2019, and we're thrilled to have its author on the show today. Here comes our conversation with Rupal Von Salih. Hi, Rupal, and welcome to Investing by the Books podcast.
- [01:06]
B
Happy to be here.
- [01:07]
A
It's great to have you on. Where are we reaching you today?
- [01:10]
B
I'm in the U.S. in New York.
- [01:13]
A
And to begin, you've dedicated the book that we're going to speak about to your father. So I'm curious, when did you first learn about the stock market?
- [01:21]
B
Oh, well, as a child, because my dad was a stockbroker in the Bombay Stock Exchange. And so I grew up hearing stock stories, unlike other kids who hear fairy tales. So I guess I was born with it.
- [01:35]
A
And is there a favorite stock story from your childhood that you'd like to tell us?
- [01:40]
B
Well, frankly, it was more hearing my dad tell stock stories to his clients. I would listen in. It was just, you know, my bedroom double as his home office. So again, I could sort of hear him talking to his clients. I obviously didn't understand a lot of what he was saying, but I think one thing I felt away is that managing money is a lot about managing expectations. And it's a lesson I've kept with the rest of my life.
- [02:05]
A
In the book, you also write about your mom's impact on you. What did you learn from her?
- [02:11]
B
Well, I'm very fortunate because, you know, back home, when I grew up in India, women tend to have a subordinate role. And my mother was a housewife. She had never worked, but she was very keen for me to have a career because she believed very strongly. And I think it's a very important life lesson that without financial independence, you cannot be emotionally independent. And both are very necessary. The latter gives you self esteem, self respect, self worth, all very important attributes to succeed anywhere. And so she really encouraged me to work outside the house. You know, typically back then, girls were made to do household chores inside the house. So that was unusual and unconventional on our part and actually a big sacrifice. But I'm so grateful that she pushed me out there. And I started working at a very young age, again thanks to her support. And I think learning on the job was one of the most transformative things for me because you can learn things from a textbook, you can learn things from classroom, but actually experiential hands on learning was something that I think is absolutely essential. So I would encourage anybody to get out there and start working at an early age. So that was my mom's influence me from a professional standpoint, encouraging me to have a career. But from a personal standpoint, I think one of the other things she always told me when life got tough or there are always people that you come across that you don't quite get along with. She told me, always look for something good to find, whether it was in a circumstance or in a person. And there's always something good, whether there's silver lining, whether it's some attribute of the person you can respect or admire. And so I think those sorts of, I'm going to call it hacks. If I may have been very instrumental in allowing me to move forward in what I want to accomplish.
- [04:01]
A
And what were those first jobs you had and how did you get into finance?
- [04:08]
B
Well, you know, back home I worked on Dalal street at a small boutique investment bank. And I learned a lot of things, you know, with respect to different facets of finance. I actually didn't know much about investment management per se as a career. And frankly, finance has so many different avenues you can pursue. You know, you can be in investment banking, which is also called corporate finance or merchant banking. Back in the day. You can be in loan syndications, you know, you can be in equities, IPOs. There are so many different ways in which you can approach, you know, capital markets. And I was very lucky that, you know, at a young age I got exposure to a lot of different things, you know, lease financing, asset backed financing, a lot of different instruments, a lot of different ways to raise money, and a lot of different ways to do research, you know, on the particular investment. And so I think that breadth of exposure, being sort of a generalist was also very helpful. You, of course, need to specialize over time, but once you know all these different aspects of finance, I think it gives you a very deep understanding of the interplay or different sub segments of the market. And clearly that's, you know, never been toured today where what happens in the fixed income markets or in the treasuries, you know, affects what you think about equities and so on and so forth. What happens in the currency markets obviously impacts your worldview of many things as well. So I think that sort of exposure at a young age, working in the markets, it doesn't matter what kind of job you have. Of course, it was a very low job. It was a clerical job. I literally had to proofread prospectuses back in the day. But even that taught me how to read a prospectus, which can be very daunting. But once you've done it, it takes a fear out of you and frankly you learn the 80, 20 of what needs to be filed away. And frankly, that was very beneficial to me. When the GFC came along, you know, I had read a lot of prospectuses of many instruments, you know, newfangled instruments that had launched securitized paper, you know, structured product. So you never know what's going to help you later in life. I'm a big believer that, you know, whatever you do in the present moment, you know, give it your best because someday down the road, whatever you did is going to come back and pay it forward for you. And then of course, it's my obligation to pay it forward for someone else. But that sort of was my first experience is working at this small boutique investment bank in India where I got exposed to a lot of different aspects of finance.
- [06:39]
A
And behind you now there's a map. We can see some parts of the world there. And you moved across a large part of it. When you went to the U.S. how was that and when was it?
- [06:50]
B
So, Eddie, I have always, you know, as a child when I learned that America has the most efficient stock markets, if you're an athlete, you want to compete in the Olympics. And my Olympics is beating the US Stock market. So of course I had to come here and I plotted my way, you know, to get to the country by studying, by getting a scholarship and then getting admission to an MBA program here. And after that I stayed back and sort of the rest is history. I've been an American citizen now for a long time.
- [07:24]
A
And the first time you came was in the, was it in the late 80s, 1991.
- [07:30]
B
And I vividly remember that year because, and that season because I was literally boarding my flight to come to the US to study and the Indian rupee devalued by 40%. Talk about currency risk affecting you know my personal fortune in the sense the tuition fees that I had to pay were in US dollars and obviously my income and and savings were in Indian rupees. So I've learned firsthand how to think about risk, currency risk and all sorts of risks. But that's kind of when I came to this country and I finished my MBA in 1993 and then I started working here.
- [08:12]
A
And over more than three decades you have climbed from analyst, you have been a portfolio manager, you are a CEO, cio. You have invested billions of dollars on account for institutional investors in global and international stocks. How has this journey been for you?
- [08:32]
B
Full of ups and downs like any journey is, and twists and turns. But I think if you keep walking in the direction of your destination, you get there. That's my story.
- [08:43]
A
And today we'll speak about the great book that you wrote and published in 2019, non consensus investing. Can you briefly describe the main message of the book?
- [08:53]
B
I. I think in most things in life, if you get things correct, that's enough. In investing, it's not enough to be correct. Your correct view must also be known consensus. Because the consensus view is already in the price. You can't beat the market if you simply regurgitate what's already known. You have to discover new information, you have to interpret information differently and figure out what is a fair price of a security. Otherwise there is no reward for you in the market. And so I think that's the crux of my book is how to become a non consensus thinker so that you can beat the markets. More importantly, it's not only not enough to be correct and be known Consensus, you know, your view not only has to be right, you have to prove everybody else's view wrong. It's a lot of fun by the way, to be able to pull that off. And so I think that's sort of what the book is about, how to do that and why to do that.
- [09:53]
A
And maybe more common term that people are familiar with is contrarian or contrarian investing. Is this the same or do you see any differences from non consensus?
- [10:04]
B
Well, on one level it is the same. You know, we are contrarians. But I think sometimes people misunderstand the term contrarian. They think it's just the opposite of what everybody else is doing. And that's not true. The meaning of non consensus or contrarian is to have an independent point of view that is not influenced or swayed by any other person or thing. So that's your independent view. If it happens to disagree with the market, then it becomes a non consensus view. And so I think that's the biggest mistake people make when they think about contrarian or non consensus. It's not just the opposite. Sometimes doing the opposite can be very dangerous. And again, that sort of implies that you're letting other people drive your behavior or actions. And that's not what contrarian means at all. Contrarian actually means standing alone, to stand apart.
- [10:56]
A
And from reading your book, it's clear that you put in a lot of time and effort into writing it. How did it come about?
- [11:03]
B
Well, a couple of reasons, Eddie. You know, my whole life I have been blessed by. By reading other people's books. And I think books are an amazing way to pass on knowledge. And I think it's sort of like a gift. You know, imagine for a few bucks you can get a lifetime of learnings from the author. And I felt that, you know, by reading and not writing, I had taken but not given. So it was time to pay it forward. And that's sort of why I wrote the book. There was another reason I wrote the book, which is about 2016. I remember I was in the train in my commute, going to my office, and I opened the Wall Street Journal and I saw the headline, the Death of Equities, and I thought, I'm not wanting my obituary to be written yet. It was the Death of Active equities. I'm sorry. And I didn't want the world to think that activists do not have a role to play. Active had become very vilified. It remains vilified, frankly, because the record seems to suggest that Active cannot outperform. Now, while it is true that a lot of Active managers underperform, that's true of any profession. First of all, if you're a doctor, you're a lawyer, you're a surgeon, half the people are going to be below average. I mean, by definition, that's just arithmetic. Second, I think that Active did a disservice to itself because a lot of people were closet indexers. I call them pseudoactive. They pretended to be active when they were not, and they were charging high fees. And that diluted the record of the genuine active. I did the homework and I looked at a lot of other professors who've done studies on this topic. The genuinely active managers have actually generated alpha. And active managers have very important role to play in markets. And that's really important for society at large because we want free and fair markets. And the role of Active is to discover the fair price. The fair price is one at which neither buyer nor seller get an advantage over each other. And that's really important so that we can conduct transactions in a free and fair manner. And so I think it is important to pass on this knowledge of active stock picking fundamental research. And I hope my book does that for other people. That's why I wrote the book.
- [13:25]
A
We really appreciate that you did that. How has the reception been from people reading the book?
- [13:30]
B
Well, I can't meet my readers individually, but generally when I see on Amazon or these platforms, the reviews are good. So I imagine it's been a helpful and useful book. I think the most important part of the book, I hope that it comes across as a practitioner, not as a professor. Too many books out there are written, you know, full of platitudes, you know, buy low, sell high. I mean, that's nice and dandy, but how do you actually execute on that principle? I think my book takes that a step further and says, here's how to do it. So not just what to do, but how to do it and also more importantly, why to do it. So hopefully it's much more holistic and much more practical. That's important to me. I don't believe in knowledge for the sake of knowledge. I want knowledge to be applied. And hopefully this book becomes sort of a reference book, a handbook, but also a source of inspiration because I hope that many other people follow this kind of in depth fundamental research to uncover lucrative ideas.
- [14:28]
A
I really think so too. And it's very generous of you to share all your knowledge with us investors if we go into the book. Risk management is a very central theme of it, I think, and it's clear that you have thought more about this topic than most investors. So how do you approach risk as a non consensus investor?
- [14:47]
B
I think the way to think about risk is if you don't manage risks, you actually cannot manage returns. It's a prerequisite to generating returns. A lot of people focus their efforts on picking the winners, thinking that if they pick the hot dot, the hot stock, that's all it takes. But actually what happens is even if you have a winner on your hands, if you also have a loser, the losses on the losing idea can more than negate the wins on the winning idea. And people don't spend a lot of effort thinking about how to avoid the losers and losses. I do, I just call that risk management. It's plain and simple. You know, risk is losing money, returns is making money, and I mean of course losing money permanently. You know, volatility, you know, causes a certain degree of Loss, but that's not the focus. So I think that's actually part of what I write in the book, because people forget that there is a very big part of investing which is how not to lose money. In fact, you know, a lot of people follow Warren Buffett and Charlie Munger and they remember, you know, a lot of the other aphorisms, like, you know, fear and greed and sort of being disciplined and margin of safety. But one of the most important things that Buffett also has talked about is the first principle. You know, the two lessons in investing, right? The first is don't lose money, and the second is don't forget the first. So I think I would echo that.
- [16:06]
A
And as you mentioned previously, your journey has been filled of ups and downs. How has your perception of risk developed over time?
- [16:15]
B
I think it really developed at Soros, the hedge fund where I first worked at on the buy side back in the mid-90s. When you short stocks and when you have margin borrowing, which is sort of intrinsic to a long short and investing framework, you discover very quickly that losses or a position going against you can kill you. I mean, literally, it's fatal. So learning how not to lose money or to make too many mistakes or make a costly mistake, more importantly, you learn that very quickly and you learn that very effectively. So I think my formative experience working on the long short side taught me how to stress test my ideas. You know, people definitely debate and research their ideas. I hope certainly that they do that. But I think often it's very uncomfortable to stress test your work, you know, to figure out what can go wrong proactively. You don't want to believe it, you don't want to think about it, but you almost have to force yourself into that role playing exercise. And I think that's something that I've just done now intuitively and innately, and it's very instrumental again in figuring out not just what can go right and how much money I can make, but what could go wrong and how much money would I lose. And unless you know not just the reward potential of the idea, but the risk of the idea, how much you can lose, you actually should not enter the idea.
- [17:44]
A
And how often do you follow up that when you own a stock?
- [17:49]
B
Well, that's a constant monitoring exercise. You know, as a portfolio manager, you're always trying to look for dissonance. And what I mean by dissonance is there are things happening in the fundamentals of the business and there are things that are being reflected in the stock price. Sometimes it's fundamentals. Sometimes it's sentiment, sometimes it's both, sometimes it's neither. Sometimes it's some external externality. So I think as a portfolio manager, you're constantly trying to assess, you know, what's sort of right and wrong about what's being priced in. And you're trying to test, you know, what you expected to happen in the business, whether it's actually playing out. Very often stocks can behave differently than how the business is performing or could perform. And so that's the job, you know, to figure out that asymmetry. And the larger the asymmetry, the, the larger the potential again, either for gains or losses. It cuts both ways. If the business is doing really poorly, sometimes the stock can be doing fine, but you better exit because now the mismatch between the fundamentals and the expectations are too far apart. So I think on some level, when you're an investor, you always have to monitor your portfolio. It's a full time job as an active investor because you owe it to your clients. You owe it to again, the markets to be vigilant about change. Change is a constant. That does not mean you're constantly looking over your shoulder. It does not mean you're constantly, you know, it's like a human being. If you keep checking your blood pressure, you make your blood pressure go up. It's counterproductive. So I'm not suggesting, when I say it's ongoing monitoring, but it's definitely. You can't be in denial either. You have to keep testing whether your thesis, your expectations are playing out and related to risk.
- [19:43]
A
You have many suggestions in the book what investors should look out for. One that I like is crowded trades. And I'm curious how you define this and what criteria do you have to measure if something is a crowded trade?
- [19:57]
B
It's a bit of a judgment call. I think it's generally understood if a stock is very much talked about and very widely owned, I think that's a fair definition. And there's a lot of hype surrounding it. Usually you know that it's a crowded trade, so you know it when you see it kind of phenomenon. That said, you know, not all crowded trades are not worth owning. And what I mean by that is sometimes, you know, a crowded trade can also be a reflection of some very big inflection point that you end up missing but others have caught onto and it can be an opportunity cost. So I don't think one should sort of vilify crowded trades either. But generally speaking, on average, for the most part, crowded trades tend to be more hype and one should try to stay clear of them. But that does not mean that every crowded trade is necessarily a bad trade. Again, once again, you don't want to let other people's behavior define your behavior. You know, just because it's crowded does not give me an easy pass to say, oh well, it's not contrarian, so I should not look at it. The point is to have an independent point of view that either proves correct or false. And I have found a lot of situations over my career where what I thought was a crowded trade was simply my failure to understand change, either in that sector or that company or a product, whatever it might have been, that actually proved to be rather game changing. And over time I missed out on an investment because I had not researched or understood it correctly.
- [21:34]
A
Could you give one on an example of that?
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B
Well, so many Nvidia comes to mind, right? And I don't mean FOMO as in of late, but I'm talking in yesteryears. You know, I used to own Nvidia almost a decade ago and I sold it because I never saw the GPU demand. Of course, you know, post the 2022 AI inflection point, I sold my stock many, many years prior to that. But that's just one example where when a company has a capability that's a very unique capability, there is something to be said for it. And that's certainly true of Nvidia. Again, I'm not talking about today that I would own Nvidia. It's certainly a crowded trade and then some. In my opinion, I could be again wrong. But a couple of years ago, in hindsight never thought that this is the future in store for that company, which was such a multi bagger kind of prospect.
- [22:35]
A
Then there are always alternative histories where this wouldn't have happened and this company wouldn't have had the success that it had. Now, is that something that you take into consideration, alternative histories?
- [22:48]
B
Totally. So, you know, Hindsight is somewhat 2020. In fact, even with hindsight, you can't identify the things that you should have done and should not do. And I think you hit upon a really good principle, Eddie, which is as an investor, you must always examine the counterfactual. And you're very right. You know, just because one future played out does not mean that that future was the only one that could play out. And a lot of times, you know, where one makes money or loses money is sometimes out of good luck or bad luck. You know, some prospects can be very binary. I mean, certainly Nvidia was like that. The difference in the Nvidia story is that capability was unquestioned. It's just that the application of that capability was in one end market, which was video gaming. I did not think of it in the context of compute power for a whole different application of AI. So I want to separate when one thinks about could this future have played out? It was certainly eventually going to play out. And I think in the early innings of when AI came into being and you needed those sorts of GPUs, I should have connected the dots sooner and faster. Again, I don't, because I knew the capability of the company. I just had to open up my horizons to understanding that the end market was going to be so much larger than what it used to be in the video gaming market. That's all. So that's a research error. It's not a question of it need not have played out. Once I knew that, and I'm not talking before 2022, but once you knew that, it was a matter of connecting the dots. And I applaud people who did. I would say that examining the counterfactual is very important because sometimes you feel that you've done the wrong research, but actually you did the right research. There was no way to bankably figure out that that was going to be the road ahead. And so luck plays a very important part even in investing. And distinguishing that from research is super important.
- [24:45]
A
Good point. When it comes to the crowded traits. I also thought about something else there because you're so easily drawn to people who have the same mentality like you have. And here at Red Eye, we work a lot with what we call serial acquirers, and we meet a lot of investors having that mindset and also the companies. And it can feel sometimes like this is such a crowded trade. Everyone is in this. But then when you zoom out a little bit, it's just this tiny part of the market where I am very involved in, and it's not a big, big part of the whole thing. And I feel like that sometimes when you're in Omaha for the Berkshire meeting, there's like thousands of contrarians there. How do you feel about this and how do you deal with it?
- [25:25]
B
It just goes back to that independent research. I don't start out thinking, oh, gee, this is a crowded trade. As I told you, you don't want anybody else to define your thinking on the subject matter, so you independently do the work. You know, either you find that more hype is built into the stock than it's worth or you find the opposite. I mean, it's as simple as that. And if you don't find it, you know, you don't know if something is occurring. I guess as I mentioned to you earlier, you don't want to. A crowded trade, even though it feels like it's very talked about, it's very popular, it's very mainstream, necessarily means it's a bad investment idea. It's a question of the risk reward that's embedded in it relative to your other opportunities. So it could be that you own something that everybody else also likes and maybe the prospects, full prospects, have yet to materialize in it because you're early in the innings of that story. That's entirely possible. You know, sometimes other people can like a stock or a business, but they may not be fully pricing in the prospects that you see in it. It certainly happened to me with Microsoft, you know, when I bought it about 15 years ago. It's not that Microsoft was a hated stock or you know, that people didn't like it or that people didn't think it was a fine company, but I think they underestimated the potential of their cloud offering. You know, over time they underestimated the potential of their ability to raise prices in Office 365. And so LinkedIn, you know, was going to be another very valuable property. I think a lot of people over rotated on the fact that they had missed the boat on mobile, but that did not mean that they missed the boat on enterprise. And you know, a lot of people were focused on owning consumer staples, which is very easy to understand because that's how Buffett, you know, has made it quite popular. And I think people didn't apply that lens and realize that enterprise staples are equally very solid franchises. And that's kind of how I saw Microsoft. It was not very widely understood. Today it is better understood again, but at the time it was not so again. Here's an example of something that can be widely liked and widely admired and yet the full prospects and upside potential in is not in the price.
- [27:47]
A
Another big takeaway for me from your book is your focus on business quality. And in the book you provide a list of 10 familiar but flawed indicators of business quality. We encourage everyone of course to buy the book, to read all of them. But one example from your list is a bit surprisingly maybe for some competitive advantage. So why is having a competitive advantage not enough to be a high quality company in your view?
- [28:11]
B
Well, if you think about it, we live in a capitalist world when it comes to business and stocks and in a capitalist world, competition is always around the corner. That's my view. And I think that if you have excess returns, which is what a competitive advantage gives you for the time being, you're going to attract attention. And that attention, if you don't continuously evolve your competitor advantage, your competitive range can become outdated. For example, I'm sure you know, the company that made the best horse whip at a time when we rode in horse carriages was perhaps the best company with the best competitive advantage. But if horses and carriages go away, well, what's the point of having a competitive advantage in making horsewhips? So I think people over rotate on competitive advantage and clearly it's a prerequisite, but it's a, I would call it a necessary but not sufficient condition of investment success. And that's all I wanted to remind people.
- [29:17]
A
You call it a Darwinian advantage. I like this term.
- [29:21]
B
Exactly. You know, if you have a competitive advantage, the best way to sustain is just to keep layering on advantage over advantage over advantage. So having multiple competitive advantages makes it very difficult for a competitor to take you on because they could take you on on one dimension, but they can't take you on six or more. And so, you know, they'll stop trying or they look for easier fish to fry. I mean, that's the hope. So I would say a singular competitive advantage, while it can yield outsized gains, you know, for a period of time, over time. What I found, you know, researching companies, you know, who tend to survive decades, not just years, and frankly sometimes over a century. Nintendo is one of them. They kept evolving, but they kept their core, which is how to have people make fun. I mean have fun and making entertainment is sort of their core business. But over time, the way they made the video game, the platform, the console, the medium, the storyline, the graphics, all of that had to evolve over time. And you'll see that when it comes to making video games, very few people come close to making the kind of game that they do. And it's 120-year-old company, I believe. So that's, I think what companies need to keep in mind is not just to succeed today, but to really prepare and plan for success tomorrow and day after. Those are the companies that I think have the most longevity and success.
- [30:56]
A
And related to this, another piece of the business quality indicators that you bring up is pricing power. And you call it the myth of pricing power. Why do you do that?
- [31:08]
B
You know, once again, I think it's easy to think of pricing power as a panacea, you know, Costs go up. Let me just raise my prices. Well, again, if you charge your customers too much or you overcharge them, God forbid, guess what? No customer likes to pay more. Tell me one customer who loves to pay more. I don't know of any. So you risk overplaying your hand if you rely too much on raising prices. I have found a lot of companies, and this is again how a contrarian perhaps thinks is I want to find companies who know how to lower costs so that they don't have to raise prices. They can continuously improve their value proposition. And because other companies don't think like that and they don't plan around that kind of framework, you know, they're constantly having to raise prices. Now your value proposition keeps improving. Think Costco. You know, in a world of all sorts of retailing changes, online E commerce, you know, Costco, which gives you high quality at a low price, they don't raise prices on you, they lower prices for you. That's the recipe. So I think again, it's just about thinking outside the box and not thinking. There is one way and that's the only way, if anything. Often when a way becomes a very popular way to do something, I think it's sort of overmined. And frankly, I would say that you need to think outside the box and figure out another way to skin that cat. Anyway, that's how I'm wired. So nothing against people having pricing power, but I would be, it's just I would always ask myself the question, who wants to pay more?
- [32:53]
A
By now I think many of our listeners are curious to know how you practically conduct your research to find out these kind of things.
- [33:02]
B
Oh, for that you've got to read the book that cannot be captured in a podcast, I'm afraid. It's a process, you know, it's a multi stage process. But I think at the core of is to figure out the capability of a business. And the capability encompasses a whole slew of things, not just the fact that the company does generate excess returns on capital employed and for a sustained period of time. That's quantitative analysis. But you really want to understand not those the what, but the why. Why do they generate that, why will they keep generating that? That's where fundamental research comes in. And if you can't answer the questions about why and why not, don't engage, don't engage, don't go any further. And I think, you know, that sort of research, that sort of breadth and depth of knowledge is a full time job. I'm sort of surprised that people take it up as a diy, it's okay to have fun with it. But if you want to compete in the major leagues, which is what investing is all about, you better be prepared. Otherwise you'll be the one that the wealth transfer occurs from rather than to.
- [34:24]
A
And when it comes to financial models, is that something you are using extensively or how important is that in your investor experience?
- [34:34]
B
Oh, sure, I, I didn't mean that qualitative research or, or understanding the business model, which is kind of what I was referring to is the be all and end all. You absolutely must have a financial model. You know, we do. We quantify our expectations of, you know, revenues, profit and loss account, cash flow statements, balance sheets. I'm sorry, that's so table stakes. I didn't even call it out. I mean, that's par for the course. And then, you know, you have to determine and, and stress test, you know, those assumptions. So it's not about a model. A model is just a template. Every P and L cash flow statement, balance sheet is the same. No matter what are the assumptions and drivers and inputs that result in those outputs. That's sort of more important. And that's where the research comes in. Knowing what to plug in. Otherwise it's garbage in, garbage out.
- [35:19]
A
Yes. And beyond the research and financials, we also need to handle the emotional aspects of buying, selling and holding stocks. And you also have a chapter on this in the book. So what is your most common behavioral bias as an investor?
- [35:34]
B
All of us come with our biases. I think you train through practice to not succumb to them. So I think that's what that chapter is all about. To alert Knowledge starts with awareness. You need to be aware that you have these biases. All of us do. Some have more of certain kinds of biases than others. Some are perennially optimistic, some are perennially pessimistic. Both are bad. Any extreme is bad. I think investing is about an optimization exercise. You can't get carried away in either direction. So I think all those biases that are right about in the book are ones to be especially vigilant around. And when you're an investor for as many decades and you've seen so many playbooks, you've been actually tested, so you don't overcome these biases by reading about them. You have to live them. You know, human mind is sort of, it needs to get rewired. So it does take time, it does take practice, it does take effort. But that's true of anything where you're trying to form a muscle memory around, you know, you have to exercise your brain and your temperament in that direction.
- [36:47]
A
And you need to have a lot of patience. That's my experience at least. And in the book you also write that the patient contrarian investor prefers to lose the battle and win the war. What do you mean by this?
- [36:58]
B
Well, often things don't play out in the short term as you'd hope they would. And very often the long term prospects are at odds with the short term fundamentals or behavior and what's priced in. So you need to be prepared that for the time being, your thesis may not pay off. It may be more back end loaded. And so how you behave in the interim can be quite critical to capturing that upside that exists. And I think a lot of people don't realize you can be the best trader of a seed, but if you let the seed blossom into a flower, you'll make way more money. You don't need to be a good trader. So that's what I mean about patience is not always the slow move, it can be the smart move.
- [37:51]
A
And your book was published seven years ago. Now, is there anything today that you would have liked to add or remove from it?
- [37:59]
B
Not really. I put a lot of thought into saying and incorporating a lot of my beliefs and philosophies and principles and examples. So I hope that they remain sort of universal and classic and so I don't have to update or add or subtract anything that I've said there.
- [38:19]
A
I think it has stood the test of time very well as well. And if we go over to your more current engagement, you are the founder, CEO and CIO and portfolio manager at Double Duty Money Management. Please tell us about the firm.
- [38:34]
B
Well, it was my dream to launch my own business, you know, throughout my career, even though I was an employee, of course, at various firms that I worked at before, I really was an entrepreneur. You know, I love building things. I love troubleshooting problems I'm very good with. I like to have a challenge. If I don't have one, I'm sort of. I don't feel like I'm alive. And so throughout my career, I've always helped to build a team, build a process, build the infrastructure around it, you know, help my former employers build sort of franchises. And I always wanted to do it my own, but I wanted to be financially secure, you know, to be able to make that pivot. And I came to that stage, you know, where I was. And so here we are with my new business. The best part about this one is I'm Working with former colleagues and you know, it's like working with friends. They are so talented, they're so nice. It's just a wonderful feeling that, that you know, you get from working with people that you've known for a long time. I would say that even though we know each other very well, we are very good at playing devil's advocate with each other. You know, being friendly does not mean that you give each other a free pass. It means actually you make each other better. You care enough that you speak up. And so that kind of safety, I would say is, is very important in investing and especially for our kind of investing where we want to have known consensus thesis. But you know, sometimes you can be known consensus and incorrect and you can pay the price for that big time. So I'm very grateful that you know, in this current structure, you know, we've got an amazing team and I'm having the time of my life. I love being an entrepreneur, even though it is exhausting as much as it is exciting. So it's a package deal, but then what in life isn't?
- [40:27]
A
Yeah, you have a lot of responsibilities and you are both a manager and you're running the portfolios and how do you cope with this and how do you manage your days?
- [40:36]
B
Well, I've got a great team of people who take care of a lot of the non investment functions. So I really don't have to. Despite of course I am the CEO, which means I am responsible for strategy. But that does not mean I'm the day to day running of the business. On the non investment side, I've got a full time dedicated person and a whole team of persons behind her, you know, doing all that. I would say that my focus really predominantly is on managing money, you know, doing the research with my teammates and managing the money. Being a CIO means that, you know, I'm the spokesperson, but beyond that it does not take a lot of time or effort. At core I'm an analyst and a portfolio manager and that's where I spend the bulk of my time.
- [41:17]
A
And it's clear that you are a very competitive person. How do you measure your success?
- [41:23]
B
I think there was a time when I thought of measuring success in terms of achieving individual success and you think of it in terms of perhaps roles and responsibilities and career progression. But as I have now grown older and hopefully wiser, I think one measures success in terms of not the world's impact on you and how you have flourished in that world, but what you have done to make the world flourish. And so it's about what impact have I had on the world? And I think I've had some good impact, hopefully through my book and many other things. But I have a long way to go, so the best is yet to come.
- [42:12]
A
And besides everything you do at Double Duty, you are also a board member of 100 Women in Finance, which is another way, I guess you mentioned with the book that you wanted to give back, and I suppose this is another way to give back your experiences. What is the purpose of the organization, 100 Women in Finance?
- [42:30]
B
Well, it's a nonprofit headquartered in New York, but it's a global organization and we focus on empowering women at every stage of their career in finance. And I would very much encourage any woman all over the world. We have many, many different locations, you know, in, in Asia, in Europe, in the US to join. It's a very small membership fee of only $100 or so annually. And you get a lot of peer group engagement, networking, educational programs, you know, and podcasts like these are also featured on the website. There are events, there are conferences. So a lot of opportunity to meet other people. I think women in particular often cannot be what they don't see. So we try to have role models. We try to showcase and inspire women and also, of course, help them with many, many skills that you need. Whether it's negotiation skills, whether it is networking skills, I think women can be better supported. And so we are very fortunate that this organization exists to do exactly that. That is not to say that we don't encourage men to be part of the organization. In fact, we have men on the board as well. You know, men are enormous allies. And I'm very blessed on my team, in my career, you know, that I've worked shoulder to shoulder. Sometimes men don't know how to help women. And so the last chapter of my book, which is non consensus Career advice for women, and I hope you share that because it's posted for free on my website with the Same name, non consensusinvesting.com you know, allows it gives some tips not just to women, but also to mention what they can do to support women.
- [44:11]
A
I think you are really a role model in this and doing great work with that. And it's been a couple of years, as mentioned, since the book came out. Have you seen any change in the number of female money managers?
- [44:23]
B
Sadly, no. But I think it takes a whole ecosystem to effect change. So every move that your audience can make in that direction, whether it is considering a female money manager, whether it's considering ways in which they can partner with women on enterprises. I think every little way in which you can support. But I'm not a believer to get special treatment. That's not what supporting diversity, whether it's gender or any other form, it's not about that. It is about giving opportunity. So I am a big believer and this is sort of my message to your audience, if I may, as we are closing out. You know that life, in my view is all about taking chances and giving chances. So take a chance in yourself and give a chance to other people and it creates a flywheel and that's how we move life forward.
- [45:24]
A
And as this is a book podcast, we like to wrap up with a few questions on reading and writing. So besides your book, do you have any recommendations for our listeners?
- [45:34]
B
Well, there are many, many books on investing that are worth reading, so it's hard to call them out. But I think in particular the kind of investing I like to do. And so the role model or inspiration I have is Charlie Munger by far. So anything that is said by him, written about him, how he thinks, how he invests is worth reading.
- [45:59]
A
Fully agree on that. Would you like to write another book yourself?
- [46:03]
B
Oh gosh, no. Not only not unless I have something very differentiated and valuable to share. And I hope I did that in my previous book.
- [46:12]
A
Definitely. Rupal Bhansali, thank you so much for coming on Investing by the Books Podcast to talk about you and your great book. Do you have something more you want to add here before we finish up?
- [46:22]
B
No, I think you've covered it already. Thank you for the opportunity and I hope that your audience enjoys learning both from this podcast and the book and many other books out there. This is not the only one, but I think it's one of the more practical and counterintuitive one and I hope that makes it worth the while.
- [46:38]
A
Great. And lastly, where can our audience follow you and your work and if they want to engage with you in your firm?
- [46:45]
B
Well, my website, DoubleDutmm.com is a good place to see what I'm up to. And then my book's website is nonconcensusinvesting.com and I post a few things there too.
- [46:57]
A
Perfect. We'll put that in the show Notes. Thank you so much for taking the time.
- [47:01]
B
Thank you.
- [47:04]
A
Thank you for listening to Investing by the Books, a podcast by Red Eye. Follow us on twitterbredai and email us at ib Podcastede se to improve. We'd love to hear your feedback, so please rate and review. Reviewers notice that the content in this podcast is not and shall not be construed as investment advice. This information is meant to be informative and for general purposes only. For full disclaimer visit Redeye Se. I'm your host, Eddie Palmian, and until next time, I sincerely wish you the best of luck on your journey through life and investing.