Gurus of Chaos by Saurabh Mukherjea

We associate investment related books with authors from Western world and seek experience from best money managers from U.S. and U.K, however here the author has made an attempt to break this pattern. Gurus of Chaos by Saurabh Mukherjea is about ‘experiences’ of fund managers in India and his key learning’s on investments.  The author’s narrative is simple and the book is a quick read for the professionals in financial services industry.

I liked his opening research data point – In the past 20 years, over 80% of listed Indian companies have failed to give share price returns better than the rate of inflation (which is around 7%).  Certainly, there is an interesting story to narrate about our fund managers who have generated substantial returns. This book contains such stories of fund managers/investors.  It’s worth reading all of them; however my favorites are these two interviews.

a)      Sanjoy Bhattacharya , Founding CIO of HDFC Asset Management: his experience in the initial days at CRISIL are very insightful.  His principles on exiting a stock are intuitive.

b)      Akash Prakash, CEO of Amansa Capital: his perspective on mutual funds in India is a must read. He says funds sometimes act sub-optimally and don’t have freedom to invest.

Author’s case study approach on Asian Paints and TTK to decipher the quality of financial statements is a good read. I respect his viewpoint on giving importance to the promoter’s competence and integrity. His simple rules for successful investing are  

1. Only buy a stock if you understand the business model          

2. Only invest in companies which can generate cash flows and high return on capital employed for long periods of time.

3. Buy the franchises identified by rule 2 when they are available at prices which build in ‘margin of safety’.

 In the later part of book, author dwells on investor psychology.  He has referred to the most acclaimed book Thinking, Fast and Slow by Daniel Kahneman and many psychologists. He drives the point that we all can rewire our brain and can become disciplined investors.

I felt that this book could have had a separate section for beginners or novice investors. It’s high time that successful investment professionals in India connect to the prospective investors by writing such books. This may motivate investors to relate to Indian context. 

David and Goliath-Malcolm Gladwell

Let’s look at disadvantage situations with a fresh perspective - this thought crossed my mind after reading David and Goliath by Malcolm Gladwell.  Normally, we get deluded by advantages and avoid disadvantage positions, but if one reads this book it will encourage pursuing ‘desirable difficulties’.

Vivek Ranadive example sets the tone of the book. A businessman and techie, who digitized Wall Street, decide to coach his daughter in basket ball and her team goes on to win the national championships. Since he was an underdog and misfit he attempted something new. Certainly a must read chapter – the advantages of disadvantages (and the disadvantages of advantages)

I liked the author’s viewpoint on parenting, classroom size, children with dyslexia and upbringing in adverse conditions. As a parent, we all strive to provide resources – how much wealth is important to grow children? At what point wealth starts to negatively impact well-adjusted children. He gives many examples to explain- excess wealth goes against good parenting. These children may end up as Goliaths later in life.  Parents who have excess ought to ponder this point – how much less?

On a lighter side for an Indian middle class person – the answer to this question on how much wealth is important to grow children?  - It’s always more… J .  Five days of the week we expend all our time and energy to make ends meet. Wealth is very important to provide consistent love and attention for a healthy atmosphere at home. The key question the author is asking – at what point does money stops making a difference?

You wouldn't wish dyslexia on your child. Or would you? This chapter on theory of desirable difficulty is the best part of this book. An extraordinarily high number of successful entrepreneurs were dyslexic.  His interpretations as to why people with dyslexia thrive are remarkable. His example on Gary Cohn- President of Goldman Sachs is sharp. He goes on to explain geniuses are those who grow up in adverse conditions. After reading this section I felt – there are many talents in each one of us which we aren't aware, and some situations ignite these, but most of us don’t step-up.  

Author’s viewpoint on Big Fish-Little Pond, Little Fish-Big Pond is very energizing. His findings on relationship between number of children in a classroom and academic performance are insightful.  We all spend lot of time debating, pondering on student class size – too small doesn't help. I felt this theory can be extended to our corporate career. Which pond do we want to be in?

What’s missing in this book? – I would have loved to know author’s opinion on David vs. Goliath in the corporate world.