Sanjay Bakshi Podcast

One of my favourite blogs to read on a Sunday morning is Shane Parrish's Farnam Street a blog covering all disciplines, with plenty of Mungerisms, great book recommendations and learning material. This week covered a Podcast with Sanjay Bakshi, an Indian Finance professor and successful value investor, founder of Value Quest Capital LLP (audited 24% gross return from 2002-12). Found a post on his career and his journey to become a value investor here. Fascinating.

10 points from the talk:

1. He reads on a Kindle, which when he makes annotations, sends the notes to the cloud which he can then access when the book is finished. This seems to be much easier and more efficient than underlying text in the book which can be a pain to find at a later date. 

2. Charlie Munger's multi disciplinary approach is essential to becoming a complete investor, i.e you cannot understand economics without understanding psychology and incentives. 

3. Financial independence is key to being able to think truly long-term like Berkshire. 

4. Talks about a 'physical space', somewhere with no distractions that enables one to make rational decisions. He refers to Guy Spier's room with no electronic devices and Buffett's move to Omaha from New York. 

5. He looks to minimise noise. He doesn't have a Bloomberg terminal or watch CNBC. Short term results, quarterly reports and next quarters EPS estimates are nothing but noise. He takes See's Candies as an example. A wonderful business that loses money 8 months a year but is hugely profitable for the remaining 4. Looking at short term info is noise. 

6. Low cost provider is the most sustainable moat. Speaks about Costco's business model. Sale of low cost brands, highly scalable, customers provide the business a float, pays customers better than competitors. Will look to do a post on Costco soon. 

7. Slow changes go unnoticed. Boiling frog syndrome - myth that placing a frog in boiling water it will jump out, but place it in luke warm water and then slowly boil it will not perceive death and die.

8. Give descriptive names to mental models to help retrieve them from your memory. 

9. Looking for a business/entrepreneur that is risk averse but not loss averse. Finding managers that are making asymmetric bets, not scared to take the right risk. This led me to think of a point made by Mohnish Pabrai about Bill Gates and Microsoft. Pabrai argues that Microsoft was not risky in the early stages. The actual amount of capital injected into Microsoft was very small but Gates dropped out of Harvard and concentrated solely on the project. He argues where the true risk of this project lies? If it succeeds it can change the world, literally, and if it fails, well Gates can go back to Harvard, complete his degree then find a job. Low downside risk, huge uncertainty. Good combination of a business or venture. 

10. Poor Charlie's Almanack is the book that has influenced him most.