The book ‘What I learnt about investing from Darwin’ by Pulak Prasad, the founder of Nalanda Capital starts with a comparison between evolutionary biologists and investors, and wonders why the former get better at their craft and the latter get worse.
Why has he written this book? “Most investment methods don’t work over the long run. Ours has, and hence I’m sharing my thoughts with you,” he says candidly. He explains that Re.1, invested in Nalanda’s first fund, during its inception in 2007, would be worth Re.13.8 in Sept 2022 beating the Sensex, which would’ve yielded Re. 3.9, and the mid cap index which would’ve yielded Re. 4.
My curiosity is piqued, as Prasad shares anecdotes about deers, dodos, sea urchins, marmots, bumblebees etc; to make his point. My favourite chapter is ‘The Siberian Solution,’ where he actually tells you how to filter good investments from bad. And yes, there are wolves and dogs in that chapter too!
Our Bookstrapping insights are as follows –
Minimise losses: The book is organised into three sections; avoid big risks, buy high quality at a fair price and don’t be lazy, be very lazy. The last one in particular, means ‘just don’t do it’, because cutting your own losses is the most important key to long term success.
Reading can change your life: Prasad’s life changed after reading ‘The Selfish Gene’ by Richard Dawkins, referenced by Charlie Munger at one of Berkshire Hathaway’s annual meetings.
Every book is made better by a sense of humour: Almost everyone makes mistakes, the author says – but this does not include his wife. Funny! These mistakes happen because we don’t do the things we are supposed to and do the things we aren’t. Point taken!
Have a core philosophy: Citing the example of the Indian equity market, the author says that as of 2020, about 70-80 percent of funds had constantly underperformed the market, over a period of three, five and 10 years. He contrasts this with his own philosophy; ‘we want to be permanent owners of high quality businesses. We don’t invest unless we think we can own a business forever.’
See through the facade: The book asks you to make a distinction between managements that speak well, and managements that lead well. Ok!
Prasad’s principle of ‘be lazy’ is really something young investors must understand thoroughly. ‘Not buying’ is the key skill for Pulak and he sums it up with ‘ a great investor is a great rejector!’
The multi-disciplinary approach between evolution and investing in the book, is an aid and not a deterrent to reading and the only thing I would request is, ‘can the font size be larger?’ Go make some money!
Reeta Ramamurthy Gupta is a columnist and bestselling biographer. She is credited with the internationally acclaimed Red Dot Experiment, a decadal six-nation study on how ‘culture impacts communication.’ On instagram @officialReetaGupta