In investing, I’ve always had some clarity about *what to avoid*. Can’t say that about *what to buy*. If a bunch of companies look good, selectively zeroing down is always difficult and has too many variables not in your control.
Future is always unknown and surprises come out of nowhere. Even in my own business, visibility beyond a period is non-existent. Experience has taught me to respect that.
When buying, there’s always confusion and self-doubt. It is exaggerated when other skilled people “seem” to have that ability which evades you. Experience, again, has taught me that they too are going through the same thoughts themselves.
After a while, it’s a leap of faith. You have a thesis and you buy based on that. It can turn out great, or fail. Being open about it and training yourself to average on *way up* and exiting early in case of mistakes has helped me quite a bit.
All said and done, I’ve realised I’m an average investor with a *good ability to avoid bad things* – and that is good enough to have an above average investing career. I avoid bad things and for the rest, I take help from good minds I know. Almost never do the “buy” research myself these days. Pay for those reports by talented people.
Several times in life, I’ve sat at the wrong table and waited for things to get better. A wrong job, a bad investment, a bad industry… to list a few. Talk about table selection and I’ve made all mistakes one could!
2 years in a job I hated. 3 years with a significant investment I wasn’t sure about. 2 years in an industry that I knew would take me nowhere.
Ever since 2005, I have really enjoyed studying businesses and have kept my money mostly in publicly listed stocks and since 2011, been interested in building one myself. At the same time, I love and seek inspiration from nature.
I’ve had trouble keeping them together because capitalism and its main cogs – business and finance, seem to be largely working against nature. I find it disturbing and hard to balance.
Several years ago, I owned ITC shares – a friend questioned how I could make money from smoking and tree-chopping (paper). I got out (though my reasons are ambiguous at best).
Charlie Munger often says, “tell me where I’m going to die, so I will never go there”. Avoidance of terminal risk is of great importance to him (and to Warren Buffett).
That is a very important thing to follow in life.
A Russian roulette is one game that is simply not worth playing at any price, even though the odds are in your favor. (There is a 5/6th chance that you will survive and there is a 1/6th chance that you’ll get the bullet, if the chamber is reset every time.)
Any game that can get you killed is just not worth it! Even if there is a good chance that you might survive and win a hefty prize.
A friend and I were discussing money and financial freedom, amongst other things in life.
“How much is enough money to be financially free? How do you decide?” I asked my friend.
Is it a fixed number? The ability to not work for money and have enough of it to pay all your bills through your lifetime? Is it 30 times your annual expense? 50 times? Having a good part of it in inflation beating investments? Or having a business that has good free cashflow and longevity?
Today, I found an excellent video that attempts to explain the concepts in a very crisp manner. How the economic machine works by Ray Dalio.
Watch it. You wont regret spending 30 minutes on it. I watched it twice.
PS: Usually, one thing leads to another. I noticed a lot of people talk highly of “Principles” – the manual Ray wrote to share his life and business management principles with his employees. I found it here and here (Kindle). Will be reading it soon.
This is the 2nd part of my notes from the book “Letters from a self-made merchant to his son”. You could read the first part here.
Graham on the art of selling:
A salesman has to talk, but before that he ought to know when to talk.
“A real salesman is one-part talk and nine-parts judgment; and he uses the nine-parts of judgment to tell when to use the one-part of talk.”
Never badmouth competition, never give up your dignity. Yet, be humble enough to sell.
“Never run down your competitor’s brand to them, and never let them run down yours. Don’t get on your knees for business, but don’t hold your nose so high in the air that an order can travel under it without your seeing it. You’ll meet a good many people on the road that you won’t like, but the house needs their business.”
3 steps to making it big in sales.
“First—Send us Orders. Second—More Orders. Third—Big Orders.“
It’s a brilliant book – witty, simple, wordly advice from a wealthy father (Howard Graham of Graham & co, a meat packing company) to his son Pierrepont. It covers nearly everything that a man goes through in his life – management, business, money, education, college, women, love, work, speculation, etc. Most of it is solid advice applicable even today.
I realized late that this was actually written by George Horace Lorimer and there never was any Howard Graham. Still, every page is realistic and on the money.
Of late, I have been reading quite a bit on economics, inflation, banking, etc. Am listing out a few that I found useful.
1. The mystery of banking
A good resource I recently found also happens to be free (which makes us value it lesser – I have read only 1 book and few other, I just scraped through). Those are the ones from the Ludwig Von Mises institute – which is a strong proponent of the Austrian school of economics.
Amongst a pile of free books there, I enjoyed reading Murray N Rothbald’s book – The mystery of banking. And I recommend it highly.
Every now and then, a friend asks me for a book recommendation, especially on personal finance, entrepreneurship and investing. Not because am an investing guru (which I am not), but because I read a ton of them!
I thought I will note it down here as well.
All these are books that I have read and liked a lot.
Few like One up on Wall street gave me the confidence that I too can be an investor in the stock market, which until then was crocodile infested space to me. Few like Intelligent Investor have been a huge huge help on almost everything finance. Few like Where are the customers yachts? changed my opinion on the stock market quite abruptly and changed my style of investing drastically.
And yet, few like Richest man in Babylon made me realize that simplicity and a principled method matters. A few like Extraordinary popular delusions helped me stay away from making costly mistakes.
Perhaps, there have been a few that have led me astray as well. Rich dad poor dad? Could be!