The Tortoise Speaks...

A blog which periodically revisits evergreen investment principles!

Games We Play

A few months ago I read a very nice post by @Alex_Danco on why VC’s should play bridge. It’s worth reading & it inspired me to write from my own experience of learning this interesting card game along with my friends, during the lockdown.

For any investor it is impossible to ignore these steps, the data, the analysis, the partnership, the expectation, the execution & finally luck

In my view, the game of bridge is so well designed, that we get to see all these things play out in every single gameplay.

What powers the world of Moneylanders?

The Oracle of Omaha once wrote, “It has been far safer to steal large sums with a pen than small sums with a gun” (1988 Chairman’s Letter to Shareholders).

This statement rings loud and clear in an era where entrepreneurs have amassed humongous amounts of illicit wealth by siphoning off shareholders’ money or diverting proceeds from lenders for personal purposes, leaving no distinction between corporate net worth and their own. 

The greed for a lavish life, the desire to meet analysts’ quarterly expectations, to drive up the stock price (they benefit from stock options) makes corporate frauds an endless battle to fight against.

Howard Schilit in his book, ‘Financial Shenanigans’ has very well illuminated the multiple ways by which it is highly possible to dress the financial results and manipulate numbers and stock price.

Investing with Conviction @ FLAME University

I got another chance to present on a very abstract topic which I have personally found very hard to articulate. It was thanks to (@NeerajMarathe) Neeraj Marathe’s four day course at FLAME University. FLAME Investment Lab provides a very unique learning platform for professionals.

Tweaks to our investing framework

The headline first.

There is no change to the basics of our investing approach.”

Our investing approach consists of

  • Investing only with Promoters / Managers who have the best interests of shareholders at heart and who are competent in the business that they run.
  • Investing in businesses where the underlying characteristics are good. These are, limited competition and pricing power which ultimately is shown by high return on capital employed.
  • Limited use of leverage in the non banking / financial businesses we own.
  • A good potential for growing the business is usually a positive provided it can be done in a capital efficient manner.
  • Buying at attractive valuations.

Investors who do not care for the nuances may ignore this post completely.

Do companies get the shareholders they deserve?

Traditional Textbook Economics has the point of view of maximising utility. It means that each individual’s action in the economy is based on the expectation that they will make the maximum possible gain from a transaction. Whereas, behavioural economics has taught us, painfully, that we may not always be doing this well. We may set out with the best intentions of maximum gain but many times our actions fall short of the goal.

It is not the final action, but the motivation underlying the action, that decides what is or is not viewed as cooperative or fair behaviour.
– Games Indians Play by V Raghunathan

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