← The Long Game with Vishal Khandelwal
Loading summary
Transcript71 lines
- [00:00]
A
When I was a boy, my grandmother kept a small plant on her windowsill. Now, I don't remember what kind of plant it was, but I still remember that she watered it every morning the same way and at roughly the same time. I also remember asking her once why she didn't just water it a lot, once a week and get over with it. She looked at me like I had said something strange and said, that's not how it works. I think about that a lot. Not about the plant, about the look on the face and about that idea that some things have their own pace and you don't get to negotiate with them. I now believe most of what matters in life is like that plant. Whether it's building wealth, raising a child, learning a craft, staying married, or even thinking clearly, none of it happens quickly. And yet we live in a world that keeps asking us to measure ourselves every few weeks, every few months, and against people who are also measuring themselves every few weeks, every few months. Almost nobody seems to be playing the long game, and the ones who are quietly, they tend to end up with lives worth paying attention to. That's exactly what this show is all about. It's called the Long Game. For those of you who been here a while, it's the same show you've been watching as the 1% show. Just going into a name that's that better reflects what it has always been trying to be, which is conversations with people who've stayed with something difficult for a really long time. Most of my guests would be investors, but over time I would love to bring on anyone whose life is a case, studying patience in doing one thing slowly for decades and letting it compound. The name of the show comes from a book, the Long Game, that I just finished writing, but the idea goes back much further than that. It's what I've spent most of my adult life trying to understand. I don't have a full answer, but I have guests and I have questions and that's usually enough. My guest in this first episode is Vinod Sethi. We recorded this conversation in August of 2025 when I was preparing for the book. Now, Vinod has spent more than 30 years in Indian markets. He was the CIO of Morgan Stanley Investment Management in India in the 1990s, and since then he has been investing his own capital, teaching and thinking about markets in a way that very few people do. He's also one of those rare people in finance who talks about markets and life in the same breath, which is exactly the kind of guest this show is. Built for. Here's our conversation. I hope you enjoyed.
- [02:37]
B
Great.
- [02:38]
A
So, so first question. You know the. Looking back at the very beginning of your career when you were just starting as an analyst and investor, what were some of the misconceptions you carried about this profession and what did you think the job was about and how did you, how did reality teach you otherwise?
- [02:55]
B
Well firstly I was very young, I didn't. And India was also a different country in the 80s. We were still per capita income was whatever $300 or whatever. So the context is different. So you in the late 80s you sort of felt that you were coming from a, from you know, in India which is under potential at that point today is a very different world and you've gone to the superpower on earth. So there was that as a 26 year old, 25 year old you'll have that natural sort of bias that you know as to you're going this is Wall street and all of that. So more than any bias it was, it was just, it was a different universe in a way. So you went from what was a 300 per capita country and perhaps US was at that time, I don't know, forget the exact number but 25, 30,000 per capita country. So there was that. So one had to adjust to that reality that you're actually in, not only in that economy but you are one of the premier banks working in that economy and you know, and you've been chosen to manage money. So I say the preconceived notions were not many. I mean you just went wide eyed. It's the way you would go if you, you know, went to Disneyland when you were 10 years old. So it was just a, just you know, it was a lifetime's opportunity to walk in and work there that time. And so yes, so those were sort of the, I'd say the blanks canvas or you know, that was the sort of context of that moment. So that's how, that's how you went. So you know, you're learning everything and you just pre assume that everyone is and everything is smarter than you are but then you slowly realize that that isn't the case. We quickly realize that actually. And then at the end of the day, you know, the human, you know, it's as human a place. New York is a Bombay. I mean it didn't take long to figure out that working in Adamant Point or working in New York is you know, okay, similar cities, sister cities in some ways. So you got into the groove very fast post that. So but over Time you realize that human, human emotions are what they are. Markets are emotional, people in higher positions are also human. And so, so over time, and that's called learning, I guess that you keep moving. And so that was sort of the context of that era and that's how it was.
- [06:23]
A
So I think over a period of time. So you had a start with Morgan Stanley and very young at your age. And I think rightly said that there were some misconceptions, I think some preconceived notions, not many, but they were quickly dispelled with, I think as you learned more into the, into your career, I think the amount of noise and information and confusion that time, probably, I don't know, maybe you can correct that may have been much lesser compared to what a young analyst getting into the market or into the industry today is. Is that a correct assumption I'm making?
- [06:55]
B
Well, the ignorance of that era was lack of data. The ignorance of today's era is too much of data. But ignorance remains. So opportunities remain as reserved. As long as there's misconceptions and ignorance floating around, we investors have a job. So that continues, I would say the, the earlier era of lack of information, we assumed that the Internet era would make us all much more intelligent and better investors and so on. But I think it's led to the era of, of, of, of stupidity also. So you see that in politics, extreme people get voted into power people, all sorts of things going on in this world right now. So I'd rather not take names and so on and so forth. But you know, we've transcended from an age of ignorance to an age of stupidity today. So that's okay, that's great because if it was an age of enlightenment, then you know, we'd be making 1% returns. So, so essentially it is important to recognize an age for what it is. So it's important to realize that information itself doesn't make you either a better investor or a better decision maker. But it is relative to what is the psychological bias of that car. So making money in an age of stupidity is easier than in an age of ignorance. So everything swings one way or the other. And so I think we formed self reinforcing loops, which is if your social media will reinforce, self reinforce. If you think the earth is flat, you'll get more and more videos on why the earth is flat. And so does AI have that bias? AI also has been accused of self reinforcing and making you feel good. So, so there is, so there is all of that. So the Bottom line is that as long as there is, if, as long as people don't see reality for what it is, and if you can, then you can make a good investor. If you had to even broadly summarize, that is what it is, which is you capture mispricing because this sort of delta shows up as mispricing in stock prices, and that is your ish, which if you can hone that down, if you can get that delta and get it right, then it's perfect. So how do you do that? Not easy. But then you don't have to capture every delta, so you don't have to catch every fish in the river. So let's assume the market is like a river. You're a fisherman, okay? So you're interested that you catch a reasonable, reasonable number of fish on a predictable, consistent basis. You don't need to know the whole river. You don't have to beat anyone. There's enough fish for everyone if they want to. It's not like a boxing match or a tennis match where there's one winner and one loser. The investment banking business is more like a fisherman's business. So, you know, if you just do some and you catch sufficient amount of fish at home, so one shouldn't get overwhelmed with also too much of data, too much. You know, there are thousands of listed stocks. There's so much there that you can get intimidated as a young analyst as to where do you begin. And so, like most young analysts, you believe that working 12 hours a day and, you know, reading as much as possible, giving equal weight to all information that lands on your desk, it's like an equal weighted portfolio. So like I give you 100 research reports, you devote as much time to page one as page two and page three, because so on and so forth, then you're in trouble because those pages are never ending. You'll feel exhausted. You would have worked 18 hours a day. You would feel good that you're hard working. But hard work has nothing to do with returns. I mean, the correlation is very, perhaps is a slightly negative correlation. So, you know, it's not that you get better by staring at more and more data. So the challenge in the investment business, unlike many other professions, is that there is some sort of a linear relationship between hard work and output. You're a factory worker, you're a dentist, you're a cardiologist, you're a lawyer. You've been taught since childhood to be on that road. But the, but the. But I don't think that relationship holds up. I remember Some odd conversation that used to float around in Morgan Stanley. I might have the facts wrong, but I think there was a very prominent global strategist of ours called Byron V, who was the head of global strategy mob for decades. Very well known guy. He happened to be a good friend of Soros or childhood friend, some link. They've known each other for decades. So one became, become, you know, a very wealthy guy. The other was also wealthy guy, but you know, Soros was. So Soros would apparently laugh and tell Byron, you know, Byron, the reason I'm more wealthy than you is because I didn't have to come to office every Monday. I didn't have to come to office every day. So, you know, it's, it's funny, but it's also profound. I mean, he's, he is saying something meaningful. So to live with that non linearity is not an easy thing to do because it can. If you, let's say you work very hard but you, you know, you didn't make good returns or whatever it can, it can stress people out, especially youngsters. And the ability to wake up when the woolly mammoth is in front of you and to be sleeping otherwise is an art that money managers need to cultivate. And so how you do that is a personal choice. I mean, there's no, I can't say do this and that. So how would I sort of do it? Like I'd swim every day. Okay. Because swimming is, you know, one, you can enjoy swimming, the other is you can ponder over ideas, you can see patterns, you can do other things. And the great thing was you can stop swimming and start investing, for instance. So I'm just giving you one example. I'm just saying you can figure out your own pattern. But in, to be in a, in a relaxed state where you're not forcing, you know, it reminds me of people at a railway station where they, they're waiting for a train and many of them come to the edge and look whether the train is coming. You see, that is an analyst. He's hoping that him looking will make the train come faster. It's not going to, okay, so you might not relax. So when the train comes, it comes, but when it comes, you better be awake. So very often the challenge in working in an investment bank as a money manager is that an investment bank, everyone's working 24 hours a day, okay? Everyone's not a money manager. You're just hanging out, you're staring out of the window, wondering whether you know, you should take 5% of HDFC or 10% of HDFC. And what are the pros and cons of both? And for that you have to stare out of the window for a month. You see? But to anyone else in the office, you look jobless because, I mean, look at this guy, you know, where everyone shows up at work at 7 and you're staring out of the window or you're just like pacing around because what else can you do? So to come to that conclusion, there's nothing else you can do. You can't work hard and come to that conclusion. So it is just, you know, modeling in your brain, managing risk. You're managing, you know, events you're managing, you're thinking of, you're forming your probability sort of function in your brain as to how do you. There's a fine line between being heroic and crashing everything in markets. It can happen overnight. And so how do you pace these things out? So now in what way will hard work get you there? I don't know. I don't think so. So I think analysts need to know that in markets they need to cultivate. And at the end of the day, you will get paid for pain and patience. It's a fair price. So they asked the. There was a interesting interview of the Nvidia founder recently. He's one of the, you know, the largest market cap company in the world. And someone I think in one of the interviews asked him a question that given same question that you're asking. If you had gone back to your younger self, would you do what you're doing? He said no, because only I know what nightmares have gone through to reach here. So if I had to relive it, I'd never do this. It's shocking, but it's true. So at the end of the day in investments also, whether you like it or not, you'll have to play pay. You'll have to. The price you pay for significant returns is pain, patience. That doesn't go away, however bright you are. And you know, you have to wait for long periods of time and you know, and sometimes stocks give you a return in a. What you waited for a decade gives you that return in three months. It happens. So, so now those are skills that you need to, it's. You need to cultivate. I remember there was a, there was some trader, I forget the exact detail, but this is part of folklore at Morgan. There was a guy who in 87 shorted the, the Dow just before, you know, about sort of early in the year, not October 87, when there was a big crash. He was expecting a big crash. So he was seriously short somewhere May, June or something, three, six months before that. I could be wrong a bit on the facts, but the fact is less important. And so apparently the market kept going up and this guy went on a vacation. He said, I'll return when the market falls, okay? And October 87, when the day the market fell, I think he made for that era, he made 55 million or something for the firm. And I think that quarter also, Morgan Stanley was profitable the October 87 quarter, thanks to one guy with insight, with patience, ability to take pain and hang in there and, and get it. Yeah, it happens. So I mean, the reason I'm giving some of these examples is just to give context to young people that youngsters sometimes feel like till that time you've gone from first standard to second standard. You know, there's a linear, you would like to make 20% return the first year, you like to make and so on and so forth. But the Sensex went below 3,000 every year between the, between 94 and 2003. Every year it went below 3,000. So now that is what, nine years. So patience, so stocks did well and so on and so forth, but it isn't, it wasn't easy. So for people who lived through the that era, it was a tough market. So I think, for analysts, I think you need pain, patience, as I said, you need clarity of mind, insight and, you know, declutter your braid in whatever way you can. I think these are vital and not everyone has it. So, you know, I, I think you're probably born with it. And if you're born with it, you get better. So there are many, many bright guys I know, much brighter than me, who are poor investors, but that doesn't mean they have, but they make careers in entrepreneurship, they make careers in other things. So they've been investment bankers, they've been deal makers. So, you know, you have to figure out early that whether you're cut out for this. So otherwise it can be an extremely painful profession. You know, career path, yes, you, your fantasies of big money is being made and all that, but, but the mortality rate of all the players since the 80s and 90s is very high. So there's a very small, there's a very small universe that gets glorified. But it's probably almost like a statistical. Auditing. So a senior charter director met me and he said, he, he, you know, he told me like that I invest only in startups and, and, and unlisted situations. So, so I said what he Said I can't handle daily price movement. It's just light. It's just, I can't, I'm paralyzed. So. No. So the great thing about him is that he knows what makes him tick and what doesn't make him tick. And because he's figured that out, he's done very well. Not that he's done badly. I'm not saying there's. But if you, if you lack that ability to have this skills, then you should reassess. That's what I would tell young analysts that, you know, Wall street movies, Hollywood movies, everything makes it look racy. You see billionaires and you know that, you know, I mean, a lot of Wall street channels are like, you know, sports channels now. You know, everything looks racy and so on. So, but it's not. So it's at the end of the day a challenging, maybe boring business where you just have to spend a lot of time waiting very often between action points. So, so I, I always caution young because I see a lot of that, that lots of youngsters get into it. Then there's also, I find that youngsters feel the peer pressure today that, you know, some other 20 year old has done this and my friend is doing this and that. So there is that. So that is a big danger. The big danger is that this isn't a tennis game. And if you, I mean, market in a funny way is like a mirror. If you suffer from greed, you'll get screwed. If you suffer from fear, you'll get screwed. So your biases will finally show up in your outcomes. And so there's a, you know, so that I think is also I find among young, I, I meet a lot of youngsters. I hardly meet people of my age group. I mean, prefer to meet 20, 30, 40 year olds just because, you know, they're energetic. And I learn a few things from them also as to how they're thinking. So sometimes I feel that they unduly put this pressure on themselves that, you know, they should free themselves a little from this competitive pleasure because the guy who does well over a decade or two, three decades and four decades isn't the guy who's winning the game every day. I think Warren Buffett probably made 99% of his money after the age of 60, you know, so at 55, you would have just been a wealthy guy, but not a legend. So he's, he's been playing that game for 50 plus years and he's gotten there. So, so that is, that is, you know, that is. But the statistical averages are I think the, the statistical odds of young analysts and people wanting to go in Bollywood or Hollywood, maybe about the same. The hatred will not be materially different. So every 100 people who want to do it. I don't think it can wear you out if you're not self aware about whether the skills you have are or your strengths align with what the market requires. So, and very often health suffers as a result. So, you know, lots of people also have health issues as a result. And that comes from that little distortion. You can't sleep well at night. You know, all the, everything adds up. So, and there are always events. Covid came along. There was 2008 crisis, there was a World Trade Center. Rajiv Gandhi gets assassination. When is there not enough reason for you not to sleep well at night? There's endless reason. But if you can sleep well every day that you're a money manager and you don't miss out on your sleep, that's very important. 2 and that's also a litmus test, whether you cut out for it or not. If prices make you sleepless, then you're in trouble or if prices make you irrationally happy and you want to hit the bar daily. And that's also a problem so. Because in both cases you'll get hammered if you don't sleep well or if you drink too much. So yeah, so the ability to make a lot of money and go to a bar and drink a glass of milk like Phantom used to in his comic books, you know, a long time ago, then you're something. Then you probably. Or if you make a lot of money and you still take the same taxi home, glory to you. So these are some of the avenues you need to also cultivate as a young person. One of my friends met, he was studying at Columbia. He was a prominent industrialist in North India. He was in Columbia University. And he was taking the subway to go downtown. And then this was at night. And then he saw some guy in a suit who looked like it is Warren Buffett. But he couldn't believe it. What the hell? I mean like, you know, 9:30 at, in Harlem, there's this guy who looks like Warren Buffett standing at the subway station. So he, like a nice Indian, went left, right. It peered into him. So then Warren Buffett called him and said like, what's it, you know, what's up, son? So this guy asked, I'm sorry, but are you Warren Buffett? He said, yeah, I'm Warren Buffett. So he said, what are you doing in the station? He said, I'm going downtown just like you. So now a guy who can do that is. Is probably fit to be a billionaire. So that is so all these things. There are some certain qualities that many of these people do share. The ability to be grounded at all times because unless you're grounded, you'd make a poor money manager. If you don't see the human situation, the human condition, then. Then you'll pay a price. And some other businesses, possibly you can get away in a manufacturing and setup, maybe you. I don't think you can. But anyway, I don't know enough about other professions, but this is a common theme I've seen. So for instance, I had. And so this is what I tell young analysts also that whenever I used to go to London, I used to meet. My final meeting was always with a friend of mine who was, I think the heir to a 500 year financial empire of Europe. I won't take his name, but his family's been having good wine and food and wealth for five centuries. And so I always end my. My last meeting of the day would be in his office. So I come in a cab and you know, get off in his office. And so, you know, we chat about the money. It was an interesting chat. And then he would say, so how are you going to the airport? So I keep quiet because I know he'll recommend me to take the subway with him, the underground, because he lives somewhere on the way. So I said, you know, my car's waiting. But I'm saying like, you know, I don't know what I'm doing. So he's saying, okay, let's, let's, let's take the underground. We'll get another 45 minutes. And so this heir to the fortune of It's a crowded underground train. I'm just laughing at the fact that no one in the train knows who I'm talking to. But this guy's unaffected. He's sitting there and he drops off and then I go to the airport. So I think analysts should make an effort to step out and meet interesting
- [33:36]
A
people
- [33:38]
B
because you can't learn by reading. You can learn. These things change you fundamentally. When you live that. So I did the same thing dozens of times. And I'd say that taught me a lot about how you should be when you're wealthy. And unless you touch and feel situations like this, it might just sound like fantasy and that you think every guy, the first thing you die do is to buy a Maybach and load around. But yeah, so, I mean one. So many well known the top money managers of our business would take the train home in New York and live in rented homes and walk to the office from the station. I mean, it's so in midtown Manhattan. You, you could you meet the who's who walking to the office. I mean, I see, I see like all the legends, I've seen them walking on the streets. So being grounded, being real is. And know know well that money is a, is a flow. It can disappear also. So don't identify yourself too closely with wealth or don't live under the delusion that it'll be forever. So I remember Parvinder Singh was in our office, ran back seat old, ran backseat chairman, I think four or five years before he passed away. And yeah, great plans is that. And the other. And then look what happened. I mean, his children lined it up and prison, lots of things happen. I mean, it's very sad, but that's the nature of money. Nature of. And why talk that far? I mean, let's talk about Ratan Dutta. I mean, I've seen him. I don't know whether I've spoken about this before, but like is raining very heavily in Bombay, you know, right now. I think this was in the late 90s, perhaps it was raining very heavily. And this was after the Asian crisis and I was sort of managing the Singapore office also. And so all traffic came to a grinding halt about 3km before the airport total stop. And so my option was to wait in the car or go walking in the rain and catch the flight. So I said, okay, clear decision, no debate. So I got off the, the the car and I went walking to the airport fully drenched. I see no one in the airport. There's one guy in a suit about 50 meters ahead of me, looking, carrying this and walking. And as I come closer, I think I thought it was Rajan Taraji. I caught up with him and I said, like, why are you working? So he told me, why are you working? I said, listen, I have a job, you know, I'm an employee of Morgan Stanley. I just laughed. So he said, no, no, I, I also have some important work. So there were two of us walking all the way to the airport, which is 3km. And then we got into the. And Singapore Airlines was waiting there. And so they had towels ready for us because they heard that Ratan Tata is coming. And thanks to Rabnit Tata, I benefited also. I got a shirt, I got a towel, I got upgraded to first class, so on and so forth. But look at Mr. Tata. I don't think even Employees would do that, walk three hours, I mean three miles in the, three kilometers in the rain. And. But he was doing it and carrying his own luggage. So, so you know, these, these, these are marks of greatness in my view. And so I can tell you many such incidents out there of Mr. Tata. See, I'm sure you should know that, that it isn't about glitz and glamour and being seen at the right places, but it is having, being so well grounded and self satisfied that you can do all this, that you can walk to the airport. I think people should put themselves in situations where they, they can witness such things. So I think going, getting out of the office, factory visits, going here and there is helpful meeting other money managers, getting out of your comfort zone and then you'll see greatness all around. You will not see. I'm not saying greatness exists only among the wealthy money managers. There is greatness all around. I remember once I again talking about dream. Once I got into Bombay airport and there was like the old Santa Cruz airport those days There was like three feet of water outside and this is like 1am so there is nothing, my car, no car, nothing. And there's this one girl at this one of these cab companies, you know, Akbar Travels or whatever, she was there, some young kid, 22 year old girl. So I went to her and I said, can I, you know, is, is there any chance of getting a taxi? Even I'm laughing, she's also laughing and then she says okay, let me drive. So she got on the phone, she went out in the water, she hustled and screamed and shouted and got me a taxi within an hour. Somehow she doesn't know me, I don't know her. She's just another ordinary Bombay citizen doing a fairly low end job. But I was amazed at her commitment, you know. And only good things can happen to such people. So a greatness exists at every level. And your ability to see that is important. It need not come in a Mercedes. It can be just that one person out there and, and there are many such people. So I think a good job of a money manager's good job is to see how the inner DNA of a person is. So I remember looking at a company, I'd gone for a company visit where I found the promoter spoke very rudely to the security guard, lose weight or hour and so on. That is enough for me not to invest in him, you know. And, and the company, the stock also went to zero. And I also went with Bridgemo and Munjal for the hero Honda plant visit with him. And at least 500 workers touched his feet while we were walking around. Okay, now that tells you something. And we took a large stake there. I in fact went to the Haldiram in Calcutta. When it first opened, they had opened one big, what do you call it, a food court. I think it was some 1 lakh square feet or some. It was very big, first of its kind in India in a large city. So he had set this up and so I went to his office. I had heard about it, you know, so I said I want to go there. So those days I used to wear a tie and so on and so forth. So when I walked in, the liram owner thought there's a raid on him. There must be some income tax, some ed the hell some guys come to raid him. So he panicked. None of that, you know, I mean, I just felt like I want to see you. I heard you're great, so I'll just come to see what you're doing. So he realized because we had some common friends. So he quickly understood that, you know, then he took me around his facility. And the amazing thing about this guy was he didn't speak a word of in English, by the way. He didn't even know hello. But he was a super bright guy. I absolutely admired him. But as we were walking around, every repeat customer he saw in that store, he was touching their feet. The owner Al, was touching the feet of his customers. He touched the feet of at least 25 or 50 odd regular customers he saw in the food court while he was taking me around. I didn't, I didn't have to. I was pretty sure that day this guy is going to become very big. No number can tell you that. But I just knew in my gut that this guy is going to be big time. He just sold a stake at some fancy valuation. He's earned every penny of it. He was that way when he started. I mean, amazing. So, so you have to have a certain pattern recognition. You got to, have got to be able to see under the skin of the matrix. You know, you just can't see, you just can't see numbers and say this will happen. So, so your ability to, to see things a little more as to what the intentions and the motivations of the investment that you're making the, of the person driving that investment, I think you'll have a better idea. Your odds of making money will be higher. So in this clutter, as you said, you know, there's so much of data, there's so much of all this. But who's going to tell you this unless you step out of your office and you. Actually I didn't even have a appointment with them. I just walked in because I just saw that building. And I think youngsters should know that the world is much more receptive than you think. You know, whenever a youngster, no one stopped taking my calls. I mean, Rahul Bajaj will also speak to us. Mr. Chidam Bram would kindly speak to us. Mr. Manmohan Singh would kindly speak. The world is helpful. There are enough people. Whatever you say, whatever you know, you say. At the end of the day this will be a common experience of people who've, who've, you know, broken out in early age. They'll always say that they found everyone helpful, you know, so youngsters should make that, not feel too reticent about making their phone call. An accomplished guy gives a discount to a young kid. He's happy that he's caught. He's okay to, he's okay if the young kid is stupid. He's not, you know, he will give you that. He will try to help you if you can, if he can. I mean, there'll be some arrogant guys, of course. But my own experience is that people are more helpful than you think. So I remember writing a. I mean I had very little pocket money as a kid, so I, I developed this crazy habit about writing letters those days, postal letters, you know, there was no email, of course, in the seventies and so on. I remember writing a letter to Indira Gandhi. I don't know what I wrote. Also something, some. I was high school student. But the funny thing is she replied. So I wrote on Monday and my mother opened the letter on Friday. She was shocked that Indira Gandhi is written to a kid who's like just gone to school. My point is if you make the attempt, the world is more helpful than you think. So that optimism should be there among youngsters and don't hesitate to reach out. And this is a common theme. Even if you hear Steve Jobs and Gates and everyone, they'll all tell you that Steve Jobs got an apprenticeship at Unit Packard when he was a school kid because he got his number from the yellow Pages, from the White Pages. You know, there used to be telephone directories those days and he found that Mr. Packard's number is the thing. So he just called up Mr. Packard and said, like, I'm Steve Jobs and I want some chips or whatever. So the guy gave him a job. So break out of the mold, you know. So in this clutter, I mean I'm saying all this because these are your, these are sort of your breakout points, if you will, you know, if you make that a dent. So, yeah, I went on a motorlog.
- [49:13]
A
No, I think that covered. That covered a lot of questions, in fact. So I had a lot of questions on that.
- [49:18]
B
I saw some of your questions.
- [49:19]
A
Yes, yes, yes.
- [49:19]
B
So I just sort of, since this is for the young analyst. Yes. I'm just sort of trying to say things that, and giving them real examples rather than preaching, you know, about this and that as to how, know. I mean, these are some of the strengths you need to have and this is how you need to break out and create opportunities for yourself.
- [49:49]
A
And great. I think you mentioned about Steve Jobs. I was just reading, I think, one of his biographies where they talked about the. And I think for Steve Jobs, who talked about the power of being naive right. When you were starting out, because when you are naive, you. You are not sure that something cannot happen. And because you know that something cannot or something, you're not sure whether you are going to do it or not. Because. And because you think that you're well equipped to do that, because not. You're not really scared about that this thing cannot happen and I cannot do it and nobody can do it. And that makes you well equipped to do that. So a lot of stuff happens.
- [50:23]
B
Absolutely. Absolutely. I still ask the dumbest questions and start from, you know, building blocks. You know, even today I'll ask if I don't know something, I will ask what it is and go by building blocks. Because to me, it's a mark of confidence if someone can ask a dumb question because he knows he can figure it out block by block. So never get intimidated by what you don't understand. And there's a big mistake investors make, which is especially if you are, say, for, from. For instance, I was recently meeting a defense company which was organized by a lot of the big names on Dalal Street. So the guy had come to meet me, and so we were talking and I realized that sometimes investors, when you don't understand, for instance, say, tech or you don't understand basic laws of science and so on and so forth, you hesitate to ask the simple questions. And you run the risk of, since you don't understand, you take it as a given that they might be right. And so I found that to be the case in this. And, you know, it's better to ask dumb questions and know that if something, something can't be explained to you, then there's either a catch or you shouldn't invest. So always be naive enough to ask the simplest of questions. And you know, simplest of questions can, you know, you ask a series of half a dozen questions, you will, you will either get the answer or you'll know that the other person doesn't have an answer. So yeah, simple. Never hesitate to be naive, as you said.
- [52:41]
A
I think you mentioned in the previous response that a lot of these things are unlearnable or unteachable because you're born with them. Like the idea of curiosity, the idea of being grounded.
- [52:50]
B
Right.
- [52:50]
A
So most of the time we are not. We cannot really learn them as we grow up. We either born with that or we are not born with that. Specifically about. See, being an analyst in an institutional setup. And most analysts work. If you're not your own investor, right. You're working in an institutional setup, whether it's a sell side or a buy side. Right. And you take, and you mentioned that it takes a lot of pain, a lot of patience or her to come to this kind of an idea. That it takes a lot of patience, a lot of pain to really become great at your art or whatever you're doing as an analyst. Right. How does in your experience. So you, you start, you, you started work with Morgan Stanley institutional setup in today's world, I think the incentives are all, I think almost a lot of misaligned incentives that institutions work with. The short termism, given that setup and also the failure rate that you mentioned about that being successful after long, many years is a statistical oddity. Given all that set up, how does an analyst working in an institutional setup really create that patience or have that luxury of time to go through that pain to become a good observer or good thinker or do you need to seek out mentors? Do you learn from experiences? Is it pure luck? How do you deal with that?
- [54:06]
B
Good question. It's tough. It's very tough. The incentives are all misaligned. And the bigger danger is that. You might learn the wrong lessons or you might just burn out as a result. So I think a few things are important. One is try to find a. Your bosses need to be little more longer duration. If you work in a setup which is looking daily enemies and so on and so forth, then you're sort of doomed. So you, you need to get lucky also to have a, a wise boss. So. And very often, you know, people learn from, you know. So I would actually give credit to my bosses at Morgan Stanley, not me, to be honest. And I really mean that for being patient with me. And I mean Hats off to them, really. So that, that is the missing side of the equation that you don't see that there is. Your environment is important, but there's a contra example to that, which is like someone like Julian Robertson worked on the cell side and started Tiger only at the age of 49. And so he took the, he took the, he concentrated that short termism experience of being a sell side broker. Learned enough, so it's up to you. You can sit in a gutter and also learn. And you can sit in a male and also notler. Okay? So he started Tiger at the age of 49 or 50. Mean I could be wrong a little bit here and there. And I think he went around trying to raise money, barely managed to raise 8 million out of it. I think 4 or so was his own money and so on. I mean, my facts may be a little fuzzy, but the broad story is along these lines. So if you want to learn, as they say, that, you know, Satyuga is so much better than Kalyug, right? But they say your chances of spiritual development are higher in Kaliyug than in Satyayug because shit happens every day, okay? In Kalyug it happens once in a thousand years. So now you can take shit two ways. You can get enlightened by it, you know, okay, if you develop an inner silence, you see the comedy of it all, okay? It's stressful. If you partake in the game, if you just. It's a movie, you'll learn and you'll become very good investor. If you're born with it, you'll learn one way or the other. So yes, it is what it is. And it's a mad house. And let's face it, the market is a crazy place. Everyone's the collective. The question is basically, how do you profit from a situation where millions of people want to get rich overnight? That's 90% of the market, okay? So it is a mad house. So how do you create that stillness in you, wherever you are? So it isn't the borrowed piece of Mount Everest or Taj Hotel or somewhere that you're sitting, but if you can sit in this chaotic fund house of yours, everyone's crazy and you could get fired anytime, okay? And you can still create a stillness and either see the. It can make you a very good investor, you'll understand psychology better than others. So. There is no excuse. And nothing can stop, you know, you can't. You, you can't stop a guy. Basically, it's up to you. So it can be an excuse it can be stressful or like Julian, you can become a, you can put all that to use one day. So that. But also in sort of a, what do you call it? So as Buddha famously said, no. So he, so apparently Buddha got enlightened and he chose to be silent. That's the story. Then all the gods descended on him and said, like, listen, you know, you've, you've, you know, you should, you should preach and talk and help humanity. So then Buddha said that, listen, I don't see the point of it because a person who has to get there will get there anyway. Yeah. And how much ever I've reached, a person who doesn't know how to get there will never get there. So then the gods came up with a nice answer and they said that, yes, what you're saying is absolutely correct. But there are some people who are in that intersection set who might benefit from you. You know, these are not mutually exclusive sets. There is a small segment of people who will benefit from your teaching. So that's when Buddha apparently started preaching. Well, I think same thing applies to markets, you see. So yeah, you can live by excuses or you can live by outcomes. I think very poorly of a guy who starts a meeting. You say, I was poor, you know, I struggled and I'm like, you know, puts me off right away. He thinks excuses will generate sympathy and therefore I will invest never. I'm looking for a guy who looks for no excuse, only outcomes matter. So once you get into that mindset, then, then, so that's the other thing that people invest in excuses, especially young and young people. So some guy came to raise, looking for some money. Some invest some potential. One investor want to set up his own PMS or whatever. He spent 45 minutes telling me how, how, you know, his family lost everything. He came up the hard way, this, that and the other. And after 40 minutes he asked me, do you have any questions? I said, none, I have no questions. Since you're so much into your own greatness, this is really patting yourself on the back that you are, that you have. Everyone is a hero, everyone has adversarial situations. So drop off. So this is what I. All my young analysts who work for me, I would say that I want no excuses. I don't want to know whether something worked or not worked. Not interested, only interested in outcomes. Whether you come to office at 9 o' clock in the morning is also of no interest to me. Whether you come at all is also of no interest to me. I'm just interested in outcome. I Don't want to know you. I don't want to know your wife, I don't know want to know your kids. I don't want to get into that. So I think if you start creating that, that their attitude, I think that is, that sets you, this shortens your learning curve. You'll get there faster. Excuses tend to. Give you the wrong incentives. As you said, these are the wrong incentives basically because it doesn't really. So. So lots of people who I've worked with are still come meet me and all that. You know, they might have thought I was very tough at some point than the other. But at the end of the day, many of them still, all of them, many of them talk to me and are in touch with me still. And so I think. You must cultivate that attitude because only then will the world take you seriously, you know, so stop living on excuses that I have a handicap because you know, I was poor and I was rich and I was this and that and the other. Drop all of it and you will. You also end up destroying your ego. That's good. Yeah. Your self created greatness. So yeah. And I think young animals should also know that their job is to make sure that they make their boss's life more comfortable rather than, you know, I mean the boss is not a school principal. You say you're working on a fund manager. Now your boss is what makes a boss comfortable. You come up with brilliant ideas, you know, and everything else is a story. So you know, let's be clear. So your incentives are sometimes misaligned because you're fuzzy also in your head and you're using all these strategies to, to survive and that's not really helpful. You're better off. I mean, if you're a straight shooter and you come out with powerful ideas over time, I mean you'll be sought after. So. So there are two ways to survive. One is to be so good that no one can live without you. Then the other way is to live by excuses. So is the blue pill and the red pill. Automorph's great line. But is. I think that is what it is. I mean I love to tell this to young youngsters because I think it, you know, it, it clears the clutter in the brain. Very often it can that everything else doesn't matter, you know, so much. So, So this. I think, I think youngsters would benefit from, from decluttering themselves and walking on a courageous path like that, you know. And they will, I think, I think they will reach their full potential F. If they take that risk.
- [67:13]
A
I think it's good. I think you mentioned about decluttering and that's I think where my next question was coming from, especially in today's world. I think you mentioned that when you were starting out it was the scarcity of information or. Right. In today's world it's abundance of stupidity because there's too much information out there and not many questions and not many people willing to really sit with their questions. Because every one of us is is wanting to seek instant answers and we're getting confident answers from people, we're getting confident answers from AI and that adds to our own confidence that whatever AI is saying, whatever we think as the first idea must be the right idea. So there's too much confusion out there, the amount of volume of data opinions out there. Right. So when you talk about decluttering, given all the situation all around the confusion and data and opinions, are there any specific mental habits or disciplines that probably you've learned to cultivate and you see around in those good analysts that can really make a difference between someone who either drowns in information and opience versus someone who learns to filter and focus on what really matters. So any mental habit or any ideas on that front?
- [68:20]
B
Yes, I think a couple of thoughts on that. One is what you said is absolutely correct. I think education gives us the wrong incentives. We have to answer questions. Whereas the real skill in life is to ask the right question. To ask the right question. The other is so in all this data, asking the right question will give you the multibag as to what is it? So what do I mean by the right question? So right question can be how do you prioritize on a totem pole? How do you prioritize what is most critical? Separated from important, separate to necessary, separate to would be good to have. Okay, so you equally waiting everything is a big disaster. So I don't need to know the last final number in a balance sheet. I'm not interested in that. I'm interested in just that one critical. Firstly the critical important firstly I'm segregating what is the critical, what is the important what is this I do all the time, not only in balance sheets, in everything in life, as to what I should do in the day. Also the critical. Because There are only 24 hours in a day, there's cluttering everywhere. So you have to abandon ship. You can't do everything, you can't attend your grandfather, sisters, brothers marriage and also there are only. So there are many things you cannot do. So you start with a hierarchy as to what are the most critical things which has the highest delta that I need to do today or even when you're studying a balance sheet or company. What is that one thing? What is that one critical thing which can be the breakout here of which the noise is hiding, you see. And so leave the answers to the world. Everyone has that information. So I'm not impressed by someone who says I know the dead equity ratio and the average inventory days of a company, okay? TK oga so but that you equal weighted everything you had that asana. If you can figure out what is the key driver which if you get an answer to can make this a profound investment or you know that this is going to not do well. So the ability to declutter comes from a state of mind where you're looking for hierarchy of choices to make. Okay. And you're not getting confused by the 20 page reports and 30 page reports. You're not. Now if you read a 50 page presentation with this mindset, you'll be able to read it in five minutes and you'll also find the fault in the presentation. You'll find where the flaw is. So very often people would like get shocked that they would have worked a week for a presentation to me and I'll. That one flaw in that whole 50 page, I will point only at that and I would have read it only five minutes. Everything else they've done. Well, it's not because I'm a genius. I'm not. I'm just saying because I, I'm looking to, I'm looking at that key question and whether I'm getting a clear insight out of the presentation. If I'm not, it is very impressive chat. GBD produces a great presentation today. So now how to make a better decision maker. So these are habits you need to cultivate. So you, you also can't get into the habit of enjoying reading for its own sake. So I'll read a. Let's see. I mean, I'll force myself. I, I'll give myself only 10 minutes, say for instance, to say read the Wall Street Journal. Okay. And I'll read it cover to cover. But I can also spend two hours reading it and enjoying it and having a cup of coffee and, and get nothing out of it. Okay. It might be fun. But then, you know, you have to decide. Those are the choices you have to make. So, so, you know, I'm, I'm giving these suggestions because we live in a world of clutter. There are a hundred podcasts to watch. There are 100, you know, self improvement things. There are books and this and that, nothing going to help you. But, but if you realize that the real shortage in life is time, okay? And that, so, so you don't have the luxury of getting the last piece of information digested and so on, so forth and see, you achieved something, you've achieved nothing, okay? So give up this completion habit like you only have passed an exam. There is no exam here, okay? So your, so you have the only, your only shortage is time. Your only weapon is time. And so how do you put it to best use? And you need to sleep eight hours a day, you need to rest for, relax for eight hours a day. So you basically have, how much time do you have? So the return of time, that is more important than anything else, I'd say more important than money. Return on equity, return on time. So, so if you cultivate certain, if you're conscious of it, you'll do something about it. Otherwise you become a 40 year old. Before you know it, life will take over. So if you're aware of the passage of time and then you have that sense of criticality and that that will never come back, then you'll do something, you, you'll read a balance sheet differently, you'll read all data differently and the odds are you won't spend half a full day watching cricket then because what you did, you just chased a ball, okay? So you ask me, have I watched cricket? No. Do I watch a movie? No, because that adds 20% to my, so to me time is important. So whether India won a Pakistan won a cricket match, I mean a day is lost. So I'm not criticizing people who, it depends on what you want to do in life. I'm saying if you're a young analyst, there's so much leakage of time that you can, in a world of so much clutter, you contribute to the clutter by having habits where like I remember I was, I was told the chairman of the firm had told me that you should learn golf, okay, at Morgan Stanley. So I was actually taken to a coaching lesson. This is really funny that. It was in, I think she was even standing there, you know, the coach is teaching me. So he asked me to hit a ball, okay? So I hit the ball. Then I stared into the sky and I flung my golf club and I told the chairman, I don't want to do this because suddenly I thought about this, that I'll be hitting a ball six hours gone just so that I can get to know someone, okay? I mean It's. I'm not saying it's a good. I'm not criticizing the sport. Don't get me wrong. I'm just talking about what you. My prior. So you know, it was. Yeah. So unless you actively work at decluttering, first you have to declutter your time. You have to add. Expand your. Your time to the best possible because that's your only nuclear weapon in your hand. Okay. And what compounds is the. The way you spend your time? So it doesn't. I think that has to be a conscious habit that young analysts should create only the better, because I think employability now is between the age of 20 and 40. I think we're entering an age where most people will be unemployable at 40 unless they really practice some of the things we're discussing now. Because there's AI, there's commoditization, there's everything. So you can't just cruise along and retire at 65 anymore. Very relevant if you don't. So I would frankly argue that some of the things that we're discussing are probably the way to survive the. The new era. You know, this is. I think so. So, so how do you make yourself relevant? Where. So an analyst had the time to. Had the luxury of three days to come up with a report on an idea that I gave. And I mean, I. I'll give you an example. So I just. I was very curious to know for many, for a long period of time that what is the history of the East India Company and what did its stock price do and link it to events in India, what actions in India to the stock price of East India company right from 1600 to 1860 when it shut down. This is always in the back of my mind that this is like a thesis, you know, that. And so my idea basically was. My suspicion was rather is that all actions of East India Company in India were really motivated by this, its stock price in London. That was my basic thesis. So I was decluttering the entire history of British India. And you know, you say there was a battle of Plassi, Panipat, this, that and the other. Okay, fine. But I wanted to look at it from a capital market point of view. So I struggled for years. So I, I was always struggling, like, how do I get this done? So, but now came ar. So I was thinking, you know, maybe it'll take me three months a year to figure this out and this and that. And I'd always tell people that do this as a PhD thesis, you know, wherever you are. You know, suggest this to your, some university and do it. No one did it for years. I told people. Then I got into AI Then in a. So I, it's, you know, I went to multiple AI engines. And basically what I did then is this question I'm saying is from the sharp questioning point of view, I'm saying this to explain how sharp questioning is more important than information. That's why I'm telling you the story, which is I just started by sharp questions, okay, that first breakdown in decade by decade, 16 to 16, 10, 1610, 1620 and so on so forth. So like 26 slices of time and tell me what major events happened every decade and what did the stock price do in that decade? Okay, so use, use clutter. 260 years of time. So AI being a, being a useful slave will do exactly what you ask to do if you ask it sharply. So I did all that and then I got a great insight into East India Company which I probably wouldn't have got by reading three books on East India Company. There are many books on East India Company. I've seen them. But you know, they're descriptive. No one's linking. I was looking for a different causality. You know, I was looking for what I'm basically saying that the stock price was, was the motivator for actions of East India Company in India. Partly, I would like to research that. I'm not saying I concluded now after all of that research, I got a fair. I got an insight into East India Company that, you know, I think it's pretty interesting. Again, why, because of sharp questioning, proper questioning. And so then the AI So then I asked AI So you know, what do you think makes the stock price tick? So let's look at that. Why do you think when did the prices go up? When did it go down? So then it, you know, it went into a bit of a tizzy. But then the conclusions were pretty obvious that when they were expanding their, their coverage of India, the stock price was going up. And when they stopped expanding in India, the price would go down. So what's my point of saying this? My point of saying this is not to describe about the East India Company, but I'm saying we are in a different world where if you are, if you can translate some idea or hypothesis of yours into sharp questioning, don't bother about reading too much and looking at other people's answers and in a scattered way trying to find your questions answered. Today those tools are available for you. I mean the same thing to come to this conclusion I probably have to sit in a library and be reading all sorts of stuff to come to all of this conclusion. But today all of that is possible if you ask the right question. So basically what would have taken 10 analysts to give me this data over three months, 260 years of financial history, its linkages and so on and so forth. All that job has been eliminated by the new tools in our hand. So for a young analyst the option of just comfortably working on collecting data on East India Company is no longer a guarantee of $100,000 job is what I'm trying to say. So they better up the curve and learn how to. So you're better off learning to use the weaponry that is now in your hand and make that a useful slave and put it to use. And the young analyst job is also reinvented in a way, you know, or will get reinvented in a way. So, so I, I gave the example of the East India Company just to say that, you know, because this is a classic example of what a financial problem an analyst would face. He'll be asked some questions about, you know, whatever ITC Hindustan lever. So I was frankly looking at another question which is why has Unilever Indonesia and why the ITC equivalent of Secure company in Indian Gudang Garam It's a famous. So these are sort of the equivalent of the Unilever In India and ITC in India both those stocks have collapsed 90%. So I kept asking analysts like why is that happen? Can it happen in India? I mean if in, if Unilever indonesia can fall 90% that like I really want to know why? Because are they. That's an emerging market. India is an emerging market. You know, there are commonalities. How can something fall 90% then the same with the cigarette company. I asked many analysts. They couldn't, they couldn't figure it out. Young analysts. And then finally I, I figured out let me use AI and you know, again ask sharp questions and like, you know, just see if I can. I think I got, I got some answers. I wouldn't say it's complete. I'm not saying the research is complete but I'm saying that this art of as a young analyst, either your boss or you will come up with some. You want to see a pattern recognition. Pattern recognition is at the heart of taking a good stock. It's very important. So there's clues everywhere. So any good analyst should this. The shocking thing is no good analyst has looked at Unilever Indonesia and why it is down 90%. It's the same Unilever in India which is trading at 50, 100 times earnings or whatever it is. So, so the, so for an analyst to be valuable today, he has to have this sort of, he has. In this age of clutter, you still can parallel process and see patterns. And now you have the tools to exploit it. So you, you know, you can become a super analyst if you give such ideas to your fund manager wherever you're working, buy side, sell side, or you're an investor yourself or whatever. I mean I'm just giving some of these examples to stretch their minds to thinking that way. You know that the old typical job of being given a question I will go linearly at it has materially changed. And so today you can, you need to keep constantly be curious and develop this habit of, let's put it the other way around. So we spent say an hour on a question and then we spend 20 hours finding the answer. Now in a way that's reversed if you ask the right question, AI gives you the answer in an hour. So you freed up 19 hours of your time, theoretically speaking, to ask even sharper questions. Some guys are going to put this to devastating effect. Think of a world where you have a eight hour working day where you spent five hours asking really insightful questions and the answers are just flinging away. I mean that's like me having 100 MBAs working for me. And then the question is, are you capable enough to, to ask smart questions of. I was. Then you'll be invaluable. So I mean I'm just like thinking about it like when I'm talking to you. But you know, I didn't come. But that's really what it is. I think the dilemma is that you're caught in this world where it was one hour of question and 20 hours of work. And I think it's, it's, it's the, and education hasn't prepared us for this sort of. So an analyst, if he starts thinking along these lines, a young guy, that would be the future, I think. So a future where you spend an eight hour day asking sharp questions is a powerful word, a very powerful world. So that requires conscious training and all of that. So that's what I think that's what the new analyst should do.
- [91:37]
A
Are there any questions? So just thinking a bit aloud. So one of the inspirations for this book, Letters to a Young Analyst comes from a very old book called Letters to a Young Poet, Rainier Maria Rilke. And I think one of the very important insights Which I. And it was written in a different era for sure. So one of the very important insights and the advice that the author gives to the young poet is to not seek instant answer to the questions that lie within you and sometimes let time answer those questions. So you have to learn to live with your questions. Now we are again living in a world again with AI and instant answers. Even if you ask the right kind of questions and the answer appear immediately, a lot of time is freed up. But are there any questions according to you, which probably AI cannot answer currently? And you only need to let time handle that. You sit with that question deep down, and as I say, when the student is ready, the master appears. Right? In the same way, when the question is ready, when the question is really ready, the answer will appear for someone. Rather than you going and asking AI to have instant answers, is there any question that you can think of that probably only time can help the analyst answer that?
- [92:54]
B
Absolutely. No, no. Let me rephrase what I was saying. What I was saying that I still say AI is a useful slave. It isn't your. It isn't a colleague or your peer group or your boss. He is a useful slave. And that's how I see it. I'm not enamored by it, but I can put it to use. But the. But the questions always remain and life is the. So time is the canvas on which your questions get framed and answered or your questions drop. So that job of time AI can never take over. So your. So the. The fundamental questions that have dogged humanity will always be. And that only. I mean, time is the. Time is the Lord in that sense. So time is a great revealer, it is a great equalizer. The whole canvas plays out on time. Karma plays out on time. Time is the grand canvas. Nothing replaces that. So that AI cannot help you in that. So your. Your core questions, as Socrates always said that all that I know is I don't know. So that this is something that transcends question answer dialectic. And that remains that I don't think that's the glory of life. And they say that one day your question cease, they just drop, they don't get answered. So questions just drop and you are that emptiness that is beyond question and answer. So the ultimate questions I've always had, I mean, that always ends that way, has to end that way.
- [95:17]
A
Just imagining going to AI and asking, what is the meaning of my life? And I remember four years back, when I asked you that question, you said, there's no meaning of life. And I Think that's probably one of the questions that ceases to exist. Because once you find the meaning of your life that the question does not exist anymore. And you don't?
- [95:31]
B
No. Then life is utilitarian. If life has a meaning, you mean that you're just a cog in the machine, right? Okay. You're much more glorious than that. Well, I'm not saying life is meaningless. I'm saying life is beyond meaning. You see, you're complete, so why should you have a meaning? Meaning means, you know, it's like, you know, it's like doggies washing your clothes. And so life at the end of the day is, is beyond meaning, which is much more profound than. So the pessimists take it as meaning meaninglessness. No, I would say it transcends meaning and meaninglessness both.
- [96:16]
A
So it's like you said, there's some questions which cease to exist after a certain point of time. So probably that's one of the questions
- [96:23]
B
out there that is the only answer. The only final answer is that questions have to draw because every question leads to an answer. Every answer leads to 10 more questions. And so there is no answer but to drop into where the question drops. And you just, you're just, you're just that emptiness or that silence or whatever you may want to say. So what question can you answer? I mean, now, they're now not here enough now. So even the Big Bang theory is now being questioned by modern, you know, a lot of new. So there, there are all sorts of extreme views floating around. I mean, one view floating around is that this universe is, is living inside a black hole. So there are all sorts of. So questions never really get answered.
- [97:23]
A
I think the, the more I hear you, I think also the last time and also this time what I really probably get to. And probably also my experience is that it all starts and ends with knowing yourself. Whether you want to become a good analyst or a good poet or a good writer or good investor. And I think that is one task that we generally, when we are young, we relegate it to. Okay, I'm going to know myself once I am 50 years of age. Once I'm retired out of this life and active life. Currently I don't have time to answer that question about who am I, who am I really? Right. So I think I am not sure whether you agree with that or you also have that point that it's whether you want to become a good analyst or a good investor. It starts from that self awareness of do you really know yourself? And if you know that if you know really that. And I think then there. There's no other question which really exists in that line.
- [98:16]
B
Right.
- [98:16]
A
So. So, so probably becoming a good analyst is more of a study education in knowing yourself and philosophy.
- [98:24]
B
And it is, it is sadhana, I would say it is a meditation. It is a meditation and many professions are. I'm not saying this is the only profession that is, but every profession can be. But I won't postpone the day because life is fleeting and there's no guarantee. 50, you have 50 years or you have 50 minutes. And if you don't get it now, you'll not get it 50 years from now either. So it can't be. The rules have been set by the universe, which is you don't know how long anyone lives. It can go today or it can go in 100 years, but it will go. And so the luxury of postponement is not available. You might delude yourself to believing that it. It exists, but it really doesn't. And if you do that at 50, you'll postpone it to 60. And yes, it. I mean to lead a fulfilled life and to experience the magic of life. And I think being in capital markets actually can make you very. I think it can make you materialist and destroy you totally or it can make you objective and detached and help you evolve. So. So both are both. Both. I think markets, following markets is a great accelerator can be because you are seeing history every day. You see companies rise and fall, you're seeing many things. So what you would experience in 50 years, the market, if you follow for 50 years, I mean like you would get a much more denser, compressed more data points in that period of time because in a way every company is also a history to itself. So. And some patterns repeat in every company and so on. So for instance, East India Company also died. So will every other company that you're following. So, so basically end is also certain for the largest of companies. So, so there are the. So markets can help you. So nothing stops you from learning about a 260-year-old company and learning the gist of it. And that lesson is valid to a large cap company today. Also some of his lessons, rather. So you can learn a lot. I think markets make you wiser if you survive. So. Yeah, so. So, you know, analysts have a. I think it is. It's an exciting. I think analysts should also have some interest in history to see patterns and to see. And none of these patterns have not been repeated in the past. So. So the other thing I would encourage analysts to do is to look at 30 year charts, 50 year charts, 10 year charts, 20 year charts. You know, one good way to spend an hour every day is to just, just look at charts, long periods of time for various companies, various commodities, whatever, and you'll be, you'll see and then let your pattern recognition mind learn from it. You know that because history may not repeat, but it always rhymes. So with a different twist, it comes back with a different twist. So I think analysts who don't have a sense of history can get caught up in a bull phase or a bear phase. I totally miss the, miss the tsunami. Some things repeat. So I think that's the other thing that analysts should keep in the background. They should have a sense for history, financial history, events and you know, so for instance Trump putting tariffs on India, the same thing was tried by the first George Bush in 89 I think. So patterns repeat. So it isn't like what Trump is doing happened for the first time. So that gives you some perspective then gives you some perspectives that, that how things turned out or that India was sanctioned in 1998. This is not the first time we be analyzed and the market did well despite that. So all these things help you come to a instinctive young analyst will sell the market because tariffs went up. You see, negative news should drop, it hasn't dropped. So, so understanding your history and linking it all to is helpful in sm. So there are many counterintuitive things you can see in the market. So for instance, even in this recent skirmish with Pakistan the both the Indian market didn't fall nor did the Pakistan market fall. So it's interesting the market seeing some, I'm not seeing what the conclusion is but I'm saying analysts should look at these things and because there'll be some, there are some, you know, you'll get got to be curious because you will come to some, some insight or understanding that will be helpful. That sort of like when Article 370 was removed, the Pakistan market went up 45% in a month or two. It's just curious. I mean everyone, the Indian media was going about how Kashmir is going to burn. Wrong decision. This, that and the other. I was tracking the Pakistan market and the Pakistan market said that look, Kashmir was basically over because it went up 45%. So one headache is gone. I mean that's how the market sort of reacted and market has been broadly right market sometimes. So young analysts should have a sense for history and then they won't panic in crisis situations. So like, so Like Covid came, lots of people sold, you know, or for instance, there's so many such cases like when the World Trade center fell, every Islamic market doubled. Yeah, you would have thought otherwise. But the market basically said that this is sort of the peak of Islamic extremism and is probably going to dip from here. And over time that has turned out to be broadly sort of. Right. No big September 11th like World Trade center event happened after that. So it's just interesting for financial analysts to wear that little and look for various patterns, you know, just make them better investors. Because, because the risk young analysts run is that so I remember when the rupee devalued, I mean I'll give my own example in you know, when Ma Singh in early 90s devalued the rupee, it went from whatever 16 to 30, 26, 30 or I forget the exact number. I was a young analyst, so I sort of froze, you know, then I spoke to some of the wiser people, I spoke to the chairman, I spoke to one of, you know, some of our top investors and all and they seemed surprisingly non unaffected. I was like pleasantly surprised. And they told me the market will go up okay as a result, which is what happened. So then you had the 92 rise, you had the 94 rise and all of that. So yeah, so when you're seeing it the first time a young analyst freezes, so did I for a short while. But I was lucky to have wiser people who were just laughing at it. I thought I'd lost my job maybe because, you know, basically the rupees depreciated. Right. So. So your value is hard, basically. But it was interesting how so I think that gives you a backup. So when some crisis unfolds, you can place it in a historical context as to what markets did in similar situations in the past. So you don't react in, you don't react in a negative ways.
- [109:12]
A
I think that perspective is so important and I think also like you mentioned being lucky to have the right kind of mentors around you, that kind of bosses around. You've seen that thing. I think that is such an important.
- [109:21]
B
Oh, that is heaven. That that is grace. I mean that is. You have to be blessed. I agree. I mean I think that is a. To be basically being surrounded with good people is a. Is the ultimate blessing. Your bosses, your colleagues and everything. And I'd urge young people to select that rather than a bigger pay package and go for the biggest salary. And you know, beyond that, because surrounding yourself with good people and so going so if you have an option you rather work with, with such people than work with people where, where you just get a higher salary. So, so yeah, so I remember, I remember there's some, some offers much higher than Morgan Stanley came up when I got hired. Okay. But you know the, the best thing I did again advice from seniors at Morgan Stanley they said like it's all laughable. So you know. And which it turned out to be true. So I think some of, actually some of the. One of the biggest misleaders can be high salaries for youngsters. As the other point that I don't think they should go by, they have to treat the first 10 years as university, they're just learning. So what you learn in that decade is what will make you a good investor. So you're really getting paid to be a student in the first 10 years. So walk with that hat in your, walk with that thinking cap. Don't get so obsessed with your bonuses and salaries because whether you like it or not it is university you're learning and as long as you're earning stay in the job. And if you learned a few things you'll anyway make money. But very often burnout. Lots of things go wrong because of you chasing the. I mean for a sophisticated investor you will never hire a guy who's just looking for higher salary. He'd be fired. That's clear. So I would never hire someone his salary is his motivation. Never, never. Because you're just giving the wrong incentives. You're linking, it's not going to work. And very often this is my other experience that a young analyst should know because papers carry this, this IIT guy got a 1 crore salary and this guy got IIM Ahmed Ahmedabad some guy got a 3 crore salary and so on and so forth. I know lots of people who've gotten that. And if you take a longer view of their careers, very often it, it disrupts badly because in a bad time that's the first guy to get fired. Expectation from him is sky high and then the person doesn't get a comparable job because no one else pays in that, that salary. So you lose time, you become unemployable over time. So it's better not to. Sometimes the best thing that can happen to you is, is, is a gradual rise rather than a spectacular. You become a one trick pony. You know, you become a one hit wonder often because what happens, it plays with your, you know, psyche. You, you get a very high salary. Then your psychic expectation in your psychic, your self belief goes out of whack and you know, you're taking needless stress also too early. Your ability to make mistakes comes down. I mean many things can go wrong basically. Yeah. So the longer career is one which is built on learning. Well and you know, reading the first decade really as, and I say this because I've lived that. I'm not, I'm not saying it because that's exactly what I did. So and this is what I recommend everyone that because it will take you at least a decade to see various aspects of markets, you'll be in situations, you'll be in crunch times, you'll be in a crisis, lots of things that happen. So. And you'll be better off every time a crisis happens actually. So you'll get better. So there is no shortcut. Yeah. And AI, none of that is going to change that time horizon. I mean nothing. It's not going to help beyond a point. Of course it'll, it'll aid your, it might accelerate things. But you know, you sometime time, it just takes that much time to ripen and become mature in your thinking, you know, so, so let's say these are some of the things that I think are important for young analysts to be aware of while they make their career decisions and the paths they choose. So I've seen that because sometimes I look at. So we have this Morgan Stanley alumni, you know, it's a very, it's become a very big and a very impactful alumni because many of the alumni then, you know, went into Oracle, they went into SoftBank, you know, they are in Black Rock, Blackstone. I mean, you know, cfo lot of these are all. So all these guys basically because they took this sort of, they went through that university grind for a decade or two and they've, they've had, I would say, extraordinarily long and impactful careers. So I'm literally surprised how you can find one Morgan Stanley alumni and virtually any Fortune 100 company or any large private equity fund and so on and so forth. So I think there is some value to getting, you know, spending a decade getting better. I think same thing in India. I mean so many people I find who are ex SBI and in Indian corporate circles, you know, ex sbi State bank of India, less so now, but like a decade or two ago, many, many guys came from few institutions like that. So I mean I remember a lot of people who were at SBI CAT when we first came to India we had a relationship with sbicap, so we were working with them. I used to sit in the SBI Cap Office. And how many of those people have, who were youngsters? PRASHANT JAIN Many of them. I mean, many of the people in the mutual fund industry, even in India, they were all working at SBI CAPS as young analysts. And, you know, over time they've really matured well and gone far. So they've had long, fruitful careers. And. So I'd say, you know, significant percentage of that bash is done very well. So. So, you know, these things. I think while analysts are seeking out, they need to have perspective as to how, you know, the background of lots of today's success stories were because of the choices they made many decades ago.
- [118:38]
A
So moving on to the actual analysis part, and again, not about how to analyze, but the real part where a lot of analysts struggle in the sense there's like an existential crisis that a lot of people face. And we understand that there are very few things which are harder investing than watching your thesis fail, especially when you've defended it in public. And a lot of analysts are public analysts. So they take a call, they announce publicly that this is the call, and then the thesis fails. How, how do you deal with that inner pull to be right at all cost? Because we are taught to be right. And as analysts, you expect it to be right all the time. Right. Which I, going by your answers, is not true.
- [119:16]
B
Right.
- [119:16]
A
You have to make some mistakes. You make some mistakes along the way. But being a public analyst right in the eye and your incentives are structured that way. And you need to take that 10 years of university education to develop yourself in the interim. How, how do you deal with that inner pool of being right at all cost? And has letting go of that need to be right all the time improve your ability to make better, faster decisions?
- [119:43]
B
Absolutely. I mean, you have to decide whether you want to be right intellectually or you want to have money in your wallet. You want to make money or you want to be, you have to be very clear. So if you think you want to defend your ego against the market, you will be destroyed. The market will take you for a ride. So you have to be clear. If you want to be an investor, you have to put your ego behind. If you're wrong, you're wrong and take it and turn around. I mean, I remember there was a Stan Brockenmiller was at, you know, this is years ago, he was in some conference, Mobile, Stanley conference, where he was giving an investment thesis on one of his large holdings. Okay. And so we were quite, I mean, I was a youngster. We were quite so There was, you know, coming from Stan Druckenmiller, everyone took it pretty seriously. And then the stock, later, I remember the stock collapsed or something. So there were lots of people who were also very gleeful that, you know, Stan Druckenmiller's got his comeuppance now. And so some of us did homework as to like, you know, aru, what happened to Stan? And then we realized that. So I think one of our bosses is his relative or something. So they spoke to Stan and he said, he spoke about this thesis at the investment conference. And from the, from the. Looking at the audience, he realized he's totally wrong in his thesis. So he sold everything and he went double short where we thought he would have lost money. He made tons of money because he did not put his ego in the middle. He didn't care that he told everyone this idea. He sold the next day. He went short the day after. So. So you decide you want to protect your ego, your wallet. It's a very clear decision. So in the market, you, you cannot have a rigid point of view. So let's face it, so you, you don't have. You should not. I really have a very rigid viewpoint in the market because market's changing every day. There is new data. There's everything. So I don't. You can never win defending your ego against the market and that inner turmoil and all is. Is set up because you want the market to obey your intellect. Okay, so this is like the tail wagging the dog. You're guaranteed to have blood pressure and sleepless nights. It's because of the choices you make. And so you think your small intellect is going to figure out the market? No way. No chance. So if you go as a humble devotee to the market, you might be able to figure it out. If you think you can sit on a ich and figure out the market. No. So, I mean, most money managers, therefore, I mean, we, we laugh at our strategists and all this because, you know, opinions and opinions and opinions and investors have a blank mind. I mean, you're just. We're waiting for the market to whisper something in our ear. So we are not waiting to have an opinion. And so the market better follow my opinion and otherwise I'll. I'll be upset. I mean, my God, that is. That's blasphemy. I mean, that's my view. So one shouldn't be. One should keep one's ego aside and focus on the wallet.
- [124:20]
A
Oh, I think a lot of time it also happens that we, we connect or we probably equate the idea with our identity. So we come out of an idea and we, we, we defend it so much that it, it becomes our identity. And it's so difficult to let go of that.
- [124:37]
B
Yeah, but then life is a life. Finally you have to let go of your body also.
- [124:45]
A
That's so true.
- [124:47]
B
So, so the problem then is your inability to letting go. So nothing else. Life is flowing, market is flowing. So when you create this unnatural barrier and you think it's important for you, then you limited yourself. So, so that's why markets will either destroy you or make you very detached. So therefore markets are very good because you get slapped every day.
- [125:23]
A
The great humiliator, as they say.
- [125:25]
B
Yeah, he's the great equalizer.
- [125:27]
A
Great equalizer.
- [125:28]
B
So he's like an enforcer. The day you have, you think you're making things happen is the day you'll get hammered.
- [125:41]
A
That's such an important lesson. I think again, if I were to just bring in that stoic philosophy or Epictetus. Right. We talks about the dichotomy of control. We think we control a lot of things even when reality is something else. Right. We are controlled by something else. A lot of things are not in our control. But we still make predictions, we still want our models to be perfect and we still want to get that last decimal place in the DCF that we do for a company that we have no idea about.
- [126:08]
B
There's some Zen story, you know, there's a lizard on the wall. So all the lizards are going out. It's the weekend, so they want to go for a party or go to a bar or something. So they ask the lizard also to count. And he said, I'm holding this roof up. Oh God. We think so. It's better to, better to be. Better to be light on yourself and let it flow out. Let it not. Don't take yourself too seriously.
- [126:48]
A
Basically Charlie Munger, where he spoken about having that five minute mind where decades of accumulated knowledge allow him to size up a situation almost instantly. How has your own intuition? So I think it's more about intuition after you've done the hard work. So how has your own intuition evolved over the years, these years? And do you remember when you first started trusting your gut? And can you share an example where that intuition saved you from a poor decision?
- [127:12]
B
I would say that I have actually always gone by my intuition since, I mean that was a decision I made early in my life. Uh, so I think in, I made that decision in high, in school. So I have, I have and the, in a way it was. There was I thought no good advisor around me. So, so my default option became that and on hindsight I would say that is the only. That is one of the key things I sort of pat myself the younger self that he did the, that I think has saved me most of my life. So. Yes, but your intuition gets better. Your intuition gets better in markets especially because you become, you see patterns. You become very good at interrogation too. I mean I think when you meet lots of people and so on, so forth. So I think we'd be very good inter. We'd be better interrogators than many, many agencies I'd say because you know, you've seen so many. In fact you recognize physical facial characteristics of entrepreneurs also. So, so yes, it gets better. But, but I think having an open mind and not being, not setting yourself up for targets and so on and so forth or setting yourself in a time bound grab that I need to double my money in six months or I need to do this, that and the other. I think that's when your intuition sort of leads you wrong because your feverishness sort of is like a cloud. It's like rain falling on the windscreen of your car. So your feverishness, everyone has intuition in my view. It's not like intuition is a unique preserve of someone or the other. So the universe sort of I think communicates with all of existence. The intuition is a channel that I think almost everyone has. Is the noise in your brain, is the feverishness in your brain. You challenging time that I have to, you know, that is my way or the highway. And all of that is the reason why people don't listen to it. And so when you see scams with some regular person parted with 3 crores and lost 3 crores because of some phone call he got for whatever reason, at the end of the day these reasons work because this campster taps into some feverishness in you that desire to either get rich fast or you get seduced by some voice or you get blackmailed by some voice, whatever. But at the end of the day that feverishness exists in you which causes you to or the fear of jail. So you part with money. So there, you know, sometimes you wonder why all this happens. I mean, because nowadays it's there in the papers every day and in the market, you see that all the time. So you're, I would say your very often your underperformance and your misjudgment is when you are, there's some sort of Feverishness or turmoil in your head, either emotional it is. You feel you're missing the boat. You want to hit it big. You want something that causes you to flutter. And that fluttering in markets is lethal. That fluttering is, is lethal because it can really. So there are some, you know, really smart guys I know who. I know a recent guy who's taken a big stake in a company which is. Got all the right elements. It's got good promoter. It's, it's, you know, it's a good business. But they are getting into sort of, they're sort of reinventing their own market. But this person probably wants a huge home run. So he made this, I don't know, I mean, I'm guessing some 20% of his portfolio. And that's caused great agony because that's only gone down. So the company fits all the sort of traditional elements. Good promoter. He's hired people from Asian paints and you know, all the multinationals. But, you know, you, some of the pro. Some of the elements doesn't make a. You can't put carbon, hydrogen, oxygen together and produce a human being. You know, it still requires a lot more. So which is which for whatever reason, his desire to, to hit the ball out of the stadium caused him to take. So he, he's taken away signal. And I think that's, that's. He works hard. I mean, fits all boxes. But, you know, some feverishness in you will cause you to see reality a little. You're imposing your view on reality or you wish it to be that way, or you want, or you're challenging time. You want to get there fast. You don't have that. So you got to be a little timeless. You got to have a little empty mind. I think everyone will be able to see there see what the, what the intuition is saying. And I think the market whispers in your ear. Market is being generous daily deceptive, daily generous, daily forgetful, daily efficient. Market has 5, 6 personalities that keep floating in the market. But one of them is generosity for sure. So, so sometimes you get stocks that were, you know, you get a price what it was 10 years ago. And so if you've done your homework, then it can be an extraordinary generous moment. You've saved 10 years. It's like you've seen the end of the movie and you've been taken back to the front of the movie. So but for that you need to be, you need to have uncluttered mind to be able to see things the way they are. And I'm not saying that's an easy thing to do. But I think if you don't have that then you run a risk in markets because in markets you run risk with that in life. I mean a lot of entrepreneurs I've seen have skidded away because of one or two wrong decisions made out of. I mean, I mean, you know, for instance, Malia also ran a very good business. I mean, you know, I know him and I feel sad for him. I mean he was a great entrepreneur, made mistakes, whatever. But at the end of the day getting into the airline business was, I mean only he has to explain why he did it. But you know, just that one decision made out of, you know, hit him badly. So keeping your clarity going and if you don't, it can hit badly. Entrepreneurs, market players, you know, people in life, you know, so. And markets is much more pronounced because you're playing with real money and things, things can go down. So like for instance today I was reading, I don't know how true it is but I was reading some people said that the chat GPT5 that came up is underwhelming. It isn't the, the leap that people thought. So now this is a data point. Now this is a data point because I mean a lot of the health of the American GDP is resting on the backs of the CapEx which is driving AI. So these are facts. I'm not saying it's good or bad but if you box yourself in a corner and think that AI is going to change the world or it is not going to change the world, both are not helpful. You just have to see things as they evolve and sometimes decision points come as a result. I mean we had to give you live examples. We had a large stake in Z Television those days. So we had come in during the ipo so we had a significant stake. We had taken it at par. It had gone up a lot. It was like 1600 and so on. It was the only private television channel and dominant Subhash Chandra and a great show and talking about the 90s, 80s, 90s. Then one day we had a four hour meeting with Sony Entertainment. It was unlisted so I spent. You know, four, four hours there with I think Kunal Dasgupta. Kunal Dasgupta was the ND and I came out and we started selling next morning Z. So now till yesterday we were large holders but intuition changed because you saw also Sony Entertainment and you clearly saw a future where private competition is breathing down the neck. It's all going to emerge. So this dude Russian Z sort of option is going to. And you know, you could clearly see Start TV would be there and you know, many other things would come came in a flash. So we did so now and there were lots of analysts at 1600 who thought, I mean most analysts thought this is going to go to much higher. It was cheap. And so your ability to. Change is a function of your open mindedness and you not getting attached or in love with or in a self reinforcing loop with yourself. You can argue everything is cheap. You know, there are people who think land at 100 crores an apartment is also cheap. And even if it was 150, they think is cheap because they think God doesn't make extra land and so on and so forth. So there are all sorts of characters in this world but all that reflects in prices. So your ability for instance, okay, we had a take in Asian Paints. Lovely company. You know, great roes, great track record. It went up multi, multi fold for us until Grasim and GSW announced that they're getting into. So I was waiting for one day like that because no high roe stays forever. Competition is bound to enter. So Asian Page was just very lucky that no one read his balance sheet 10 years before we did. That's all. They're the cement business, they're in the construction business. They distribute CET, they could distribute paint. Their business is 10% ROE. This guy at 40, 50% RV. So it was a wonder why it took so long. But in the meantime.
- [140:40]
A
So then I did a test.
- [140:41]
B
I called up all my wealthy smart investors and I said so what do you think of Asian? I'm thinking of selling as a, I do this often. I mean like. Is this still a great company? I'm not saying it isn't but prices are independent of companies often because perceptions are in the measure now. So I sold. This even made me much more happy that everyone still loves it. So we sold. And on hindsight it was the right thing to do. Because even today the prices, ever since the Grassium JSW announced the prices have done nothing. And then even the promoter announced that he's selling some 500 crores of sale. You know, shares, something like that. You know, I think a few years ago that announcement also came. So my point is that if you keep your, your windscreen clear, you'll be able to see the road ahead a little better while you're driving your car. And the windscreen here is your own chaos in your, your own meenkas jumping in your brain. Even Vishwamitra fell for it. Okay. So we are nobody. So if Vishwamitra can get seduced by main cars, then like everyone is susceptible to mainkas. I mean, I'm using it metaphorically, you know, just to mainka doesn't necessarily mean a main car. But money is a mainka. Power is a main. Everything is a main car. Dancing? No. So, so if that, if that disease is in your brain, then, then the odds are stacked against you in the sense one day you will. It's naked ladders, just like snake and ladder. It takes nothing to go all the way back to square one. And in markets more so because you're dealing with real money and the ball is coming at 100 miles an hour every day. And, and the bowler is new every day. It's not the same bowler. So the pitch is different every day. So you increase your odds. If your wind screen is little more cleaner that you can buy also you can sell also you can, you can be detached and attached at the same time. You're like detached attachment. But you know, frankly, The Gita, after 18 chapters is trying to tell you the same thing, which is the market. You face it every day. So. And I think life also. Why only market if you're running a business? Also the same thing. So this is. So I think intuition is a very powerful weapon to have and one should own it. And basically you have to trust yourself. Basically, life is digital. You either trust the universe yourself or you don't. And if you don't, then bad health is inevitable because you feel you have to do everything, that the universe is untrustworthy, everything. So then you pay a price in terms of fatigue, health, diabetes, hypertension. At the root causes of fundamental distrust in your. Your own intuition and that the universe is a kind, compassionate energy. Life actually. So you either trust your intuition and the universe or you don't. And if you don't, then the universe also steps back. Your intuition also steps back because you want to be in command. They're very kind and compassionate forces. They let you be, they give you the freedom. So when you're off on your own and then you can't sleep at night. But these are classics. These are classic. A person need not say more if someone says, I can't sleep, I have diabetes, I have blood pressure, I have this and that, you know, the road he's taken. So. So that shows up in great promoters too. So for instance, where I used to be, one of the reasons I had a big stake in Hero Hondas, whenever I met Bridgeman, his phone would barely ring. His. He Would never end the meeting. He was a polite man. So when he had great, what you call old world grace and politeness, he would end the meeting. You won't look at his watch and get away. He let you finish and you finish the meeting. You'd leave. So at those, say if a promoter's four is ringing all the time in your meeting, so that itself tells you quite a bit, you know, so I've seen, I've seen great promoters where uncluttered, you can meet them last minute, they're available in a sense, you know, so. So I think much of these habits can be cultivated in your life. So it sounds forward. Constantly rings. It tells me that. I don't know what it tells me, but it tells me that there's some, there's some, some chaos, inner or outer, I don't know which it can be. It can happen one day, two days. But if it's a pattern, then yeah, someone can be in a crisis on a day basis. But I see people whose phones ring, they rang every day and there are people whose phones barely ring. And that is how it is every day. So it's just a small analogy, but yeah. So if you think the whole universe is against you, then your intuition has very little space to flourish. So you'll panic at the bottom, you'll get exuberant at the top. And if you do well, you think you made it happen, that you're a genius and so all the wrong lessons are being learned. So. So even bright minds like Isaac Newton went bust in the market. That's a fact. I don't know whether you know what happened to Isaac Newton. Yeah, so he first put, I mean, just to give proportion, ratios and proportions, he first put a small amount in lousy bubble. And this is the guy we met with gravity Calculus, considered one of the greatest physicists of all time. He put a small amount in South Sea Bubble. It went up, I don't know, three, four times. And so. So he sold and felt he's, I mean, like I'm on the inventor of gravity. I figured this out also. So then the price goes up further. It goes up five, seven times. Then what does Mr. Newton do? He puts his. All his savings at the top of the price. Not 1% or 2% of his wealth. He puts all of it into the market and loses it all. So, so what can you say? It's so clearly markets are not for everyone and it's not for the brightest or the domest. So that's no criteria. It's. It's A sort of having a, A combination of intuition, ability to take pain, as we discussed yesterday. Patience, insight and, and getting psychology. Right, Getting psychology, right. You know, are you on the exuberant? Is the stock at an exuberant point or at a depressive point? So, Yeah, but there are people who are momentum investors who, you know, play the momentum game and so on and so forth. Maybe, maybe they're cut out for that, maybe they cut out for that. But God bless them, I think, you know, I mean, I couldn't be able to. I wouldn't be able to do it. So. So intuitions, I think is an important faculty too create for, for living a full life, I think. So not only markets, a long Runway
- [151:33]
A
also provides you that ability to believe you and trust your intuition. If you have a long Runway, like the patients, either like you mentioned, you're talking about someone who has that patience of not doing something every day but waiting for that market to whisper. So having. Having the flexibility of a long Runway or a patient mindset or patient capital at hand, that also is one of the ingredients in terms of trusting your intuition. So intuition everyone may have. But when do you trust that once you have some, some setting or the environment really helps you in that way that you were allowed to trust?
- [152:09]
B
No, I would go even further. If you don't have patience, you are going to be a disaster, however bright you are. So I know lots of very bright people who are impatient ends in disaster. Because the act of challenging time, that this has to happen my way or the I way. I mean in, in my scheme of things, time is the Lord. It does that, it wants to do so. So you can't challenge it. So and if you do, and impatience is basically a game of so even taking on debt or being impatient, all these are challenging times. So you can go seriously bust when you, you make a challenge with time. That I will be able to pay this debt in two years or three years. It's your challenge time. And so we've seen so many companies go under. Yes, some succeed, but. But that keeps the game going. No, that's why others also fall into the same trap. Because statistics is wonderful. Because it'll always give you that hope. That's why people gamble, right? That's all the online gambling and all of that people money. So statistics is the is, is, is, is a fantastic. What do you got? Depends on your favorite. Then you'll see the positive side of statistics or the negative side. So that's what it is. But I, I go further that I think one should learn patience is almost like a prerequisite. So you may go to Harvard, you may go to Wharton. Batisha Impatient. So there was these endless stories I was reading about some guy who was a garage attendant or something in. He was, I forget his name. And when he died he had $8 million in his stock account that he, that he donated to the library of the town and so on, so forth. So being patient and being out there on a daily basis is more important than earning a high salary or being very bright. So this guy used his time as a park attendant or parking attendant or something to read the Wall Street Journal, Barons and so on. He did it for 30, 40, 50 years and did very well. So. But patience is also something that. I don't know. I mean maybe you're born with it. I don't know. Some people, I find that lots of people are just, are just impatient by the very nature. You know. So many qualities have to align for, for an entrepreneur or a market man to be wealthy for long periods of time. I, I also liked G.D. birzla's letter to Aditya. His advice. I don't know whether you ever read it is worth reading. So he says it. I mean I, I mean I can't summarize everything but he says things in one day. But he says profound things. He says like read food as medicine, you know, then no greed. Don't let ostentatiousness get in. I mean it's quite amazing that in one he summarizes health secrets to wealth and how you should, how his grandson should conduct his life. I'll try to pull it out. It's somewhere it's. But it's worth a read. So. Basically if money seduces you then you have a problem. If you somewhere you get it wrong. You know, I'm saying over long periods of time you might do well for 10 years, 20 years and so on. But there are certain patterns where you know multi generational wealth is, is there. There are certain patterns that you see in how they conduct themselves and, and that exists in some of the old families of Bombay also. You know, Tatas, Mahindras and all of that. It's, it's obvious it exists.
- [157:29]
A
So what about the idea of writing? I'm sure. Do you believe in writing down your investment rationale? Because I think it's one thing to carry an idea in your head and there's another thing to commit it to paper. So has writing down your investment rational ever changed the decision you were about to make in the past? Do you Believe in.
- [157:47]
B
Yes, yes. I used to write my shareholder letters at one time and it would rarely be more than a page or two. And so I would always encourage people to write everything in one page and, or two and never in a 20 page report because the. So I believe that if you cannot summarize your investment thesis in a paragraph or maybe two is not worth investing. So if you have to give me a, a long history about what this is the reason you're not going to make money. So I would, in my investment letters I would summarize my holdings like HDFC in three lines. And it would take me sometimes a week to write the one letter, one page because every word had to be. But you know what, when you do it that way, the reader gets it somewhere the energy transference happens that you could summarize all your ideas in light, not one idea, but all your ideas in a page or two. And that discipline is fantastic. If you have a mediocre investment, you try to summarize it in three lines or four lines. Be very difficult. It'll be obvious to you that you're fooling yourselves. So it is a good idea to write. But if you can write it in a few lines or if you can explain the investment thesis with great clarity in a minute or two, both are sort of the same thing, then you're good. You know. So yes, I, I think the act of writing can distill your thinking and crystallize your, your. What you call. And by writing I mean it need not be physical writing too. I mean just clarity in your brain that you know, can you, can you expound on it in the middle of the night in two minutes, even if you're sleepy then. But if you have to pull up charts and you need to show me a whole report and then I may or not get convinced after half an hour, it's. Yeah, I think writing is a good way to distill your, your idea. And I would take it further that you don't write a thesis but you write a para. And if you can do that, I think it'll help sharpen your. And it'll also help you to figure out what is the most critical and what is the less important. And you know, and you suddenly realize that your equal weighting average, the big hitter and the small hitter, you know, giving it equal amount of time, that's not good. So that way you will come to the heart of the matter. It'll help you. Any research report is just 510 page law. You never made me money so any thesis that thing never but sharp. So I would encourage all my analysts also to write max one page although I'm not reading it. Maybe you can spill over into one and a half pages but no if, if you just have to write that much. So it suits the ego of the writer, suits the ego of the analyst but frankly it's you know, it doesn't impress the. Or it doesn't make you money maybe. So yeah. Volume of data doesn't help and hard work and spending a lot of time
- [162:22]
A
studying too much doesn't help I think relate that to. There's this note written by Buffett long time back about Geico where he titled the security I liked best. It was a single page note on Geico which is I think the only one which is published on a stock analysis done by Buffet himself. It was a single page where he laid out very clearly like you said right. In a single page entire thesis of Geico that.
- [162:47]
B
No, absolutely.
- [162:48]
A
That also helps you in terms of the writer as well. Right. It also helps you clarify a lot of things in your.
- [162:54]
B
Yes, it's, it's. It's because the. It's very difficult to write a. A short sharp idea in few lines. So in the emphasis first annual report they asked me to write a letter so I just happened to read it recently. So I also wrote like three paragraphs on why we invested in Infosys but that was also only three paragraphs and I think the main argument was one paragraph. The other was just wishing the company well and so on. So, so I happened to read it on hindsight. You know this was written whenever I don't know. 93, 94 but the habit of writing to or to the point is, is. Is helpful and all the main drivers of why Infosys came out in that one paragraph. So I was also pleasantly surprised that I'm not saying it for my own self glorification. I'm just saying that the putting on the core points down on paper and summarizing your investment argument is probably a very good discipline to have. It's better. It's good to have a notebook that an investor might carry where what he invests if he just you know, one page. That's it. This is why I used to do that at one time and then I would revisit it three years later, five years later and so on. So I went through that phase. Now I do it mentally but it's good to have a diary which. And you know or you can make notes on. I mean there's so many more options now. Technology avoids you. You can just do a small recording or whatever. It, It. It is a good discipline because if you see it a bit later, three, four years later, you will, you will learn what mistakes you made or what you did right. And you know, you get some. You'll see your own report card in a sense that you have evolved. You wrote some because not only have you written that, but then the stock has performed in a certain way. And then we look at it five years later, it. It gives you sort of a report card as to how your thinking is evolved. That is a good way to actually also that analysts can do to keep an investment diary rather than like people used to have diaries, an investment diary of ideas. And it can be very helpful to him and to. If his grandchildren and also want to be investors, they'll also get something to. It'll be a noteworthy diary to have.
- [166:24]
A
I remember in our last interaction four years back, you talked about the idea of being in flow when you are not obsessing over outcomes, but you're simply playing the game for its own sake. Now the question is, how can a young analyst who's working in a professional setup can cultivate that state of mind where life, where the work itself becomes rewarding and not just the results, where you're playing the game just for the joy of it and not to carry the scorecard in your head.
- [166:49]
B
How.
- [166:50]
A
I'm sure it's difficult when you're working in an institution set up and you're working as an employee. But how can a young analyst even cultivate that state of mind which he or she may practice, if not now, maybe 10 years down the line after that university education gets over or.
- [167:04]
B
Yeah, difficult to start, I agree. But then, I mean, this is what I would do. I would, as I would take the elevator up to the 20th floor and to my office in Morgan Stanley. I would remind myself that I'm at a. I'm entering a cremation ground. Okay, try this out. And that nothing touches me. I'm like, you know, nothing offends me. The chaos is not my chaos. So I've already separated myself from the chaos. I'm okay, I get fired, I get fired, I get promoted, I get promoted. Idea works, works. Doesn't work, doesn't work. Then it gets into your skin is when the chaos affects you. Just a small thing where you just remind yourself that this is all. This is not me. This is not real. This is not going to be me 10 years from now. So then you've Created some space for being at peace. And chaos also it gets to you because you think you can't live without it. Your titles, your job, your credit rating, your loan, your car loan, your house loan, your wife, your children's education, everything will run away because then it gets into your skin. So otherwise you can. So in Zen, in samurai training, so. So there is this famous Samurai who's written 26 points. I think it's worth reading. Musayashi. I think Musayashi, I may be pronouncing it wrong. Musayashi. He never lost a battle in his life. So then he gives you 26 tips on how to do it. So it's worth reading. Because whatever I'm saying is sort of actually rhymes with that to some extent. So he, he. He clearly says that the. I mean in samurai trading, it is that the person who. Who gets angry or gets emotional will lose. The guy who gets a thought in his brain will lose. A guy who's in flow and is in no mind, has no desire to win or to lose, is just fighting the battle for what it is, can never be defeated, you see? So these are some of those things that he says how the internal state of a guy who never lost, he says profound things. He says absolutely profound things. So he says even so he even says that, okay, you may believe in God, but don't count on him to show up, okay? So he gives you very, very practical. All of them are absolutely bang on and also applicable to markets. Yes, chaos is there. So the only place you won't have chaos is in death, okay? Life means chaos. Even Ra. Even Krishna had a murder case on him. Okay? Krishna did not have one day of so called peace in his life. Although he was in equilibrium at all times. That's why we call him an avatar. That through it all, there was no equanimity of a Ram and a Krishna was unshaken through everything. You think in your office you have chaos. Look at the chaos in Ram's life or in Krishna's life. Everything is moving every day. So that's the beauty. So don't think that the chaos is the problem. Chaos is just giving you an opportunity to detach and find yourself there. You'll be sleepwalking. So don't give yourself the excuse of chaos. Don't give yourself excuses at all. Just look at outcomes. Because you can make many Bollywood films, You know, because you have to deal with a deck of cards that you've been handed out. It's like a game of bridge. Life is that you can't cry about the fact that you didn't have this and that either don't play the game or play the game with what you have. And the odds are you've been given a set of cards that if you. I don't think you've ever been given a set of cards where if you played well, you can't win. Because in that way, nature is extremely fair and is a great communist and a great socialist. It doesn't, beyond the point, favor anybody. So. So you look at your. Look at that deck of cards that you've been handed out and then try to play your game well. So instead of whining about the fact you didn't get an ace or you didn't get a king, but you do it. So it's your attitude that also plays a huge role in whether your job is stressful or not. So very often you have to ask whether this job is stressful or the superstructure and permanency that you've created in your brain that is causing you stress. More likely, it is your own. Stress is clearly your own. And actually, when you ask for no stress, you're asking for death. So be careful what you're asking for. So if you want life, you can't have life at peace also. What do you have? What are you gonna. You figure out how to live in peace in the chaos that is the. That is the solution. So in a way, you're. So that's what the Upanishads also say, that you have a jeevesha, the desire to live, and you also have a Mrityeshina, which is you have a desire to die. And this is when you ask for peace, do you want to. Life is too much, you know, so you got to be careful what you're asking, actually. Yeah. So escaping stress is also like escaping life. I mean, these are billions of cells talking to billions of cells being hurt by billions of cells. Okay. How it all works is a. Is a miracle to start with. It all happens, so just enjoy the miracle. Yeah. And gobar is a very short miracle, doesn't last too long. So. So don't set too many preconditions on something which is a wonderful magic show here. Just enjoy it. So outcomes will be better if you're happy. If you are in that sort of positive, peaceful state, you'll be happy with your outcomes also.
- [176:16]
A
Now, it's tempting to believe that our wins in life, or investing, being an analyst or anywhere, that our wins are brilliance and our losses are bad bricks. But over time, the luck as a Constant, which is an invisible force in life. So how has your understanding of luck versus skill evolved both as an analyst and in life over the years?
- [176:38]
B
I think the luck is a probabilistic view of life and skill is, you know, your insight. I think you need both. Clearly, no, no, no questions about it, but I think the probability function. Works better if you, if you maintain that non feverish state that I mentioned. Very often bad luck is also solace that we give ourselves. And I'm not saying luck is, but I think the probability function is not set in stone. You can influence it and it influences with, I mean things like greed and fear. The probability function works against you for instance, very clearly. So if you're independent of greed and fear, your probability function in markets will be different. So what you call luck will also be different. So, so, so if you are very greedy, you will blame it on bad luck because the probability function will, will change. Just like quantum mechanics says that probability function changes with the observer. You know, the observed is influenced by the observer. I think that's sort of true with things also. Yes, you can have periods of bad luck and good luck and so on. I'm not saying that is not important, but over a span of life the only thing you can do with luck is try to improve the odds that hopefully good luck follows you. And so which is one of the beliefs of dharmic living and good karma and all of that is essentially at the end of the day improving the odds for you to have a more fulfilled life. And that if you lead a dharmic life, if you do, if your intention is bad, the outcomes will be bad. So at the end of the day, yes, luck can decide when things come. But at the end of the day I feel that your ultimate intentions drive the ultimate outcomes. So you might have flashes of brilliance and so on, so forth, but your intentions finally catches up. So to that extent, although the luck may vary on a day to day basis, I grant that, but over a long period of time, the, the outcome is a function of your intentions. So, so Ran was a great guy. I, in many ways he was a Sid, Sid Purush. And you know, he was a, he was a brilliant guy and everything and, but intentions ultimately drove outcomes and he was a master astrologer. So he could play with the stars, you could play with luck, you could, you could do all of that, but it still didn't, ultimately didn't work. It worked for a while. So yes, I think function, you know, luck and scale, all of that is good. But I think some of these, The Indian philosophy of karma, keeping intentions good, not trying to. I think all these have been set to because ultimately impacts the outcomes in your life. That's all it's saying. And so if the luck isn't luck, might, you know, change. Whether it happens at the age of 40 or 50 or 30 or 60, that could well be. But outcomes happen. I mean, like Swami Prabhupada went, who started the ISKCON movement, went to the US at the age of 69 to start the Krishna Consciousness movement. So nothing much happened in his first 69 years. But then he wanted to save the PLA. Power generation, you know, the drugs and all of that of the 60s and 70s. So he went to the US at the age of 69. And so. So while he was going on a boat to America, he got two or three heart attacks on the way. So you could say it's all bad luck. But he reached America. There he was living literally on the streets of Brooklyn and New York and so on, so forth. And then one day he decided it's too much. So he decides that he wants to go back to India. So the day he decides to go back is that night he gets robbed. So he loses passport, money, and so he can't come back to India. So from that day, the Krishna movement starts, ISKCON starts. And I think he died at 78 or 79. So he died within nine years. So within those nine years, 108 temples were set up by him. The movement came alive. It's still running. It still feeds millions of people. So the reason I'm telling you this story is intentions ultimately drive outcomes. So there were patches of bad luck. He had 200 acts, he got robbed, many things. But his work continues even now. So that tells you that at the end of the day, one shouldn't give what you call too much weightage to luck, bad luck, talent, no talent. And so on your intention and what you wish to do, what you want out of this world and what you want to give to this world has a big influence on outcomes. So those things are in your control. So what is not in your control? Don't bother much. Okay? Luck. Yeah. I mean, you know, who knows? But your intentions are sort of in your control. Your discipline is sort of in your control. You may not be the brightest guy, but who the hell says that the brightest guy gets ahead? I don't think so. I know lots of bright people. So, no, it doesn't work that way. So I think we overrate luck. We overrate talent. And we sort of underestimate what is in our control, which is basic discipline. You know, getting up every day and you know, practicing your trade, your skill, whatever, keeping your intentions clean in a rough and tumble world where everyone looks like a thug and only thugs look like they're getting ahead. But you know, those are things under your control. So as I'm saying, it's a deck of cards given to you. So what is not in your control, don't bother much. Your talent is also a gift given to you. So treat it like a dowry given by God to you when you were born here. So these are the things handed over to you. Make the most of it. Why blame lady luck? Why blame that you're not talented, someone else is more talented, all of that. Why are you looking outside? Also why are you looking at your peer group? So, and don't create peer groups and so on. That actually is, that actually clouds your, your, your destiny, you know, because at every point you want to be ahead of someone and that's not helpful. That's not so if success means that you have to beat up another human being or you have to win by crushing someone, I don't think that's such a helpful day. My view. But you know, so I would never like to be a boxer or something and be the world champion because I beat up 100 yards and I'm the best. I mean, I would, I would treat that wealth and success as we disturb me. But anyway, that's me need not apply to everyone.
- [186:19]
A
The second last question. So if you were mentoring say a 22 or 23 year old analyst right now, and you could only pass on, say three timeless lessons, what would those be?
- [186:30]
B
Pain, patience, intention. All these three things in your control. Your talent is not in your control. Nothing else is in your control. You cultivate these three things. Nothing, nothing will happen without pain. Nothing will happen without patience. Nothing will happen without. If you're patient, your ability to take pain and you keep your intentions right, the heavens will descend on you one day. You, you're eligible to be on the dining table of the universe. That's the entry pass. I'm talking about things that you can do that you. Which you can. It's in your volition to do so. These three things I think you know, I mean, that's what I would say because I've seen that people who do have a low tolerance for pain or who are impatient or whose intentions are sort of murky. Finally, I mean, at the end of the day, okay, life is about Playing chess with the universe. At the end of the day, you can't win, okay? You'll be checkmated for sure. Just a matter of time. I mean, it's preordained that you'll be checkmated because at the end of the day, you're playing chess with nobody but the universe. So. So you have these three things. The odds are you'll win. So that's what I think. Hard to implement. But, you know, frankly, these are timeless lessons, I think.
- [188:28]
A
So. I think in your long career, you've. You yourself lived through lots of booms and busts and crises and bubbles and recoveries, right? When you zoom out across these decades, what has the market ultimately taught you about life itself?
- [188:42]
B
I think market is a great compressor of history and time in the sense in one decade you see a lot of history, you learn lots of. Because in a way, each company is a story. It's a beginning and a middle. So I think it can accelerate your evolution. I think over the years, what I've learned is that market is very profound, that you're better off worshipping or respecting the market for what it's telling you. Then you talk down on the market and think that what you think is right and the market is foolish. People say that, you know, market is bunch of insider traders, manipulators, Beta. This is like every. You go, everywhere you hear all this, I take a different view, that the market is a great master, he's a great guru, a great deity, that if you. If you treat it with that sort of. In a way, we worship Lakshmi with that same intention, you see. So market is Lakshmi. So if you treat it that way, you learn that you become a wiser person, you become a balanced person, you become a wealthier person. So. So I think it's a. It's a profound force. It's like a divine force. That's what I feel. So I don't ever try. I would never encourage anyone to manipulate the market. I always want people who. People who raise IPO money at higher prices to rip off the market. So they'll. There's a whole bunch of investors who want to either manipulate or rip off the market in some way or the other. But I always caution that you shouldn't do that because it'll come to harm. You will come to harm. And there's so much evidence there also. So I think those are some of the things that. That markets. And they do that every time, like market prices. Even when they confuse you, they. They are telling you something, you know, so going as a going as going as a humble student is far better with the market than going as an arrogant smart ass who has done some spreadsheets, has gone to business. I am Ahmedabad and so you know, so that's what I'd say.
- [191:49]
A
Thank you so much for your time. You know, I think it's been very inspiring as always, always enjoyable.
- [191:55]
B
Vishal with you.
- [191:56]
A
Thank you so much. Thank you for listening. If something in this conversation stayed with you, please reflect on it for a few days before you decide what to do about it. I think that's usually when good ideas turn into something useful. And if the idea of playing the long game is something you want to think about more deeply, I've spent the last few months writing a book about exactly this. It's called the Long Game and it features 30 investing practitioners sharing what they've learned from playing their long games of their own. The link of this book is in the description below. I'll see you in the next episode. Thank you so much.