"Heads I win,Tails I don't loose much' with Mohnish Pabrai & Radhika Gupta | #KonnectWebinar

[Music] management and it's my pleasure to welcome you to an other addition of a device connect over the last few weeks in the lockdown you've joined us for connects with speakers across various domains right from Prahlad Kakkar tuition at an anon today I think we have a very very special personality with us and I'm so delighted that he's taken the time to join us I think Mohnish Pabrai needs no introduction but because I've got the pleasure of doing the introduction I can't resist doing an introduction Mohnish Pabrai well-known investor is managing partner of the pariah funds the Parra investment fund says many of us know what inspired by the original 1950s Buffett partnerships and in many senses are a close replica of the original Buffett partnership rules mohnish clearly and closely follows Buffett's principles on value investing in capital allocation I was looking at some data and from 1999 to 2008 in March $100,000 investment in poverty funds has grown to over 1.8 million after fees and expenses that's when the head of the Dow NASDAQ and most mutual fund managers when he started his career as an entrepreneur which we'll talk about he's also the author of multiple books on value investing of course the Thunder and Westar is something that all of us have known and loved a book all of us have known and loved he's a member of YPO I find that we have one thing in common which is that mohnish loves playing duplicate bridge and also very interestingly he received his first lifetime ban in 2019 from playing blackjack at a Las Vegas casino because of his ability to win again and again so found that super fascinating and he's been very kind to do this for us sitting out of California I think perhaps the most interesting thing is that in all the wealth that he is created he's also the the reduction of foundation which is doing a lot of good work on alleviating poverty in India through education providing intensive coaching for iit and I am students um so I found that very very fascinating so Manish thank you so much on behalf of a very wise asset management for doing this for us and we're so excited to have this conversation well Radhika thank you for that very flattering introduction pleasure to be here and hopefully we can add some value thank you so just for everyone the format of this conversation you are used to this if you've attended editions of Connect I have a bunch of questions to ask Manish and then I know we'll continue that session for about 3035 minutes and I know many of you are posting questions on the chat window I encourage you to post them I try to take some of those questions as well please do refrain from asking questions on single stocks that's the only rule but monisha in order to kick off this conversation with the port I have heard from you and this is something very close to me you said that the good news and investing is there are no HR problems because if they are new humans there are no problems I want to know why you chose investing as a career because I think you actually started out in sales and marketing he did entrepreneurship and then turned investor and I wanted to know about that thinking in the journey yeah I think that's a really good question it could be a long answer but I'll try to keep it keep it brief so most of us most of us when we grow up you know we basically tend to conform to what the world expects of us or how the world expects us to act or behave or things to do and so on so forth so each of us as humans has a some has a kind of let's say core map of who we are on the inside and and then there is how we act on the outside and the problem with the and the map that we have of the on the inside of who we are the theory is that it's hard-coded at the age of five between your genetics and first five years of life experience and after that it's not going to change for the rest of your life so it's pretty much set in stone the problem is that most of us do not know ourselves well enough to know what that inner map is so we go through life most of us go through life what I would call misaligned so for example if you have this as your inner map and this is your outer map this is typical almost most humans there's there's a misalignment and if you can get to inner and outer aligning really well which happens in a sliver of humans you can go really far in life because then you're maximizing all your all your you know capabilities and and and you know preferences and what you love to do and so on so so in my keen is I got that what I would call my owner's manual through a couple of industrial psychologists in 1999 so I was 34 years old and that's when I actually got a document which gave me my inner map and a lot of things that I had been doing until then were not in sync so you can you cannot change your inner map it is what it is and and the best that you can do is make the way you go through life be as closely aligned as possible to that inner map so one of the one of the first thing things that two psychologists had told me because I was just about to start for iPhones it was about three months before / - started and I was running a IT company with 160 people and they said to me that we actually don't even understand how your to function in this environment with all these people because so far away from where you are and they said that you know and then I describe to them what Popeye funds was going to look like and they said that looks perfectly aligned with what your what your inner map is and and in fact one of them became the one of the original investors in / - say I didn't even know him very well but he said look I looked inside your head I know the way it works and I'm very confident I'll do well with my money and so I'm fine and so and actually that was a priceless exercise it gave me a very crystal clear view of who I was and so so for example you know I would not be very happy if I had to spend my day meeting a lot of people and having a lot of social interaction and so on so forth I think that would would be quite significantly our alignment in a typical week I don't have any scheduled phone calls I don't have any scheduled meetings something like what we're doing today is unusual because I usually don't have I keep my calendar completely empty and that weird approach to life fits well for the weird inner map that I have that's it's absolutely fascinating and and I'm glad you gave us time on your calendar and there is another thing in bonus you were an entrepreneur incidentally many people listening on this all are also actually I want to preneur and you've had this belief that entrepreneurs take risk and people think they take risk and they get rewarded because they take risk but in reality and entrepreneur wants to do everything to minimize risk they want free lunches if they can get them and go after them but is this the whole hundo investing framework that you talked about in the book and actually what is the story behind the framework and the name well so first let's let's unpack number of questions in there but first let's just talk about entrepreneurship and risk and then we go to Tonto which will just dovetail into that but so you know that the common misconception is that entrepreneurs take two risk and so if we ignore venture-backed startups which are a completely different animal they represent less than 1/10 of 1% of all startups so we can we can ignore venture backs down if they don't represent the reality of how 99.9 percent or more of businesses get started so if if I take the example of let's say a dry cleaner for example so there are two towns they're like 20 30 miles apart and they are dry cleaners in both those towns and then there's a new Township coming up between those two towns let's call it town C and Town C is coming up and this one my cleaner notices that some people are driving quite a bit of distance to come to him because there's no dry cleaners and so he starts questioning the the people there and so on and he finds that basically there's an opportunity because there's not writing is there so he might he might open a small shop there it might not even have any facilities just might be a place to take in and deliver clothes to keep the back end that his main place he could minimize a risk of doing that by you know keeping the lease short and keeping the space small and so on so forth and then once it gets going he can scale that up and if it doesn't work he can pull that back and just go back to the way he was operating so basically the the idea is that entrepreneurs and doesn't matter you know you're running a restaurant or a gas station or whatever basically the the idea is that entrepreneurs look for arbitrage opportunities and as we understand arbitrage in markets pure arbitrage is risk free and entrepreneurship is not risk free but it's pretty low risk in the manner in which most entrepreneurs approach it so they try to do all kinds of things to make sure that the the downside is limited and you know coming to the word Thun though so my my roommate in college was a Gujarati guy and we're still very close friends and he he I'm in college in South Carolina he had a bunch of relatives uncles who had different businesses motels laundromats you know 7/11 so on and so several times on the weekend he would disappear to meet different family members and one'd come back Sunday night he'd be like have all these stories of all these deals his relatives Adams and uncle had you know bought a new motel or whatever and then the end when he finished telling me all those stories you would say bonus bundle okay and and done though the word Gujarati word that the direct translation is business but we know that what it really means is a approach to doing business which is gives you upside downside which is similar to what I just talked about entrepreneurs money when you practice an approach that's upside with no downside and you've said heads I win tails I lose I think it's very relevant for a market like India which is so chaotic I mean it's economically chaotic it's also politically chaotic now how do you actually practice that kind of investing do you have a checklist in mind and if you have to give people a bit because that's that's what everyone's trying to achieve in a market like India how do you practice that is there a checklist that you have what are the few things that you tell people who want to practice that kind of investing yeah the checklist the checklist comes in a little later in the process as in the sense that you're trying to make sure you've thought about all the things you should think about for making an investment but but when you first encounter a a business as a potential investment I mean the first question you should be asking yourself is how would I lose money on this investment not how I would make money but one of the ways in which things can go wrong and and after you can satisfy yourself that you can't easily come up with a scenario where things can go wrong you know kind of focus on the downside you really focus on the downside the upside karate scare of itself and and so so what we really want to do in investing is we want to we want to look for investments where the downside is very muted so I'll give you I'll give you an example and I think this is example that goes back I think maybe 20 or 21 years but it's very relevant today so in early 2000 when I had just started my funds I had a former executive at Microsoft who had joined my funds he had he had retired pretty senior guy used to work with Bill directly and so he had joined the fun that he told me Maurice you know if you're ever in Seattle I can introduce you to a bunch of you know current and former Microsoft employees and they might have an interest in you know putting some money with you and so I told him you know as a matter of fact day after tomorrow I'm gonna be in Seattle and so he said okay then you know so I you know cooked up my Seattle trip so I could go go meet and that type of refunds was just nagging few million dollars you know 3 4 million under management was very small and so I met a bunch of folks at Microsoft and a number of them became investors input - but I I I told them when I talked to them what I realized was that something like 90% of the net worth was sitting in Microsoft stock and their livelihood was coming from Microsoft and I told them at that time so Microsoft was the most valuable company in the world when I met them it had a six hundred billion dollar market cap the trailing p/e was something like 75 Australian for 75 times trailing earnings so I told them that look I know it's a great business I know you guys had a great run but you would be better off not holding or definitely you know trimming down actually the position you own and they looked at me like I was some arse like what are you talking about all the company has done is gone straight up and you know earnings and grow everything's gone it's just it's a monopolist in many ways and such so what happened after that from 99 to about 2013 or 2014 it was a 600 billion market cap in 99 and was a 600 billion market cap in 2014 it was completely flat for the next 14 or 15 years but he wasn't just flat it went down a lot more than 50 percent so it you know you had a pretty serious drawdown and and then subsequently you came up so over that 14 or 15 year period and in fact even if you go til today because Microsoft's had a great run in the last few years so today the market cap is 1.2 billion which is about 20 years later if I exclude dividends about three and a half percent a year even with dividends is about five percent a year or something so it the company has done really well the really well but the investor did not do well and the reason the investor did not do well is because in 1999 if you were looking at investing in Microsoft you would be paying six hundred billion dollars for something like six or seven billion in earnings so how long would it take you to earn the six hundred billion back it's a very long time no matter what growth rate you take and so so the first question I mean it was very obvious that if if you invest in a business like Microsoft it's it's it was obvious to me then there would not be a great investment and if if if we look today you know if you look at in the u.s. we look at the the fangs you know Facebook Apple Amazon Google lets you know you know Netflix and so on you know these are great businesses unbelievable businesses they have incredible you know moats and pricing power and franchises but all that is baked into the price if you look at their trailing earnings and the ratio or p/e ratios trailing p/e ratios they're ridiculous and and they are what's driving the SMP where it's going so it is possible then you could invest in Amazon and ten years from now you look great but the odds are against you it's not it's not a good bet to make one question I had is and this is the obvious question about crisis obviously you've seen 2008 you're seeing the current crisis around over you know whatever mistakes you've made in 2008 that you learned from and you feel that you held up better because of those during this period oh well we're still going through the periods for time will tell but yeah I think the number one area which I have had trouble in my portfolio has been making investments in leveraged businesses and buying leveraged financial institutions and in oh wait oh nine in that period I had you know I run a concentrated portfolio typically ten ten investments would make up more than 80% of ass but you know I had one investment which went to zero there was a mortgage mortgage lender and add another one that almost went to zero that was also and in in the finance business and and those really hurt because those were significant significant hitch to the fund we we came back and then some but it took us a while to recover from that so I think if the lesson I took from there is to stay as far away as I can from levered institutions and from in general you know leverage you know just level just a bi I don't have any leverage in my portfolios and personally we have no margin or anything like that we don't go there but I want to make sure that even the businesses we get into typically are not in that in that space and and you know when I we talked about the checklist earlier you brought up the the number one reason that value investors don't do well on their investments is leverage they were like four or five large reasons why investments don't work out leverage was the number one you know some aspect of management of ownership and their ethos was another one and then you know some aspect of the moat misunderstanding the competitive advantage was another one so these are three big ones what leverage is the biggest biggest one to be very off do you see the poet pandemic and this crisis is different from 2008 and how do you see it is differently I mean do you think is there a post covert investing world or is that too big of phrase ascribing too much to this current crisis yeah I mean I I think that most most people listening to this I probably not agree with me on this but 10 or 20 years from now history will judge our leaders very poorly on the way they have reacted to covet so what the what the world has done with the exception of a few places is they shut everything down India shut everything down you know the u.s. got shut down most of your code shut up shut down and so on and I mean you know I'm very familiar with the I mean I think I can even I think the Indian stats I read is not of a hundred million people have lost them lost their ability to earn money probably higher than that in the in the u.s. we've had more than 35 million people lose lose their jobs and you know the the thing is that yes we are we are trying to save lives and social distance is a very good thing and very masks is a really good thing but but when we do shutdowns of the kind that India did or the kind that the u.s. did no one I didn't see people do a proper analysis of what it means so when you when you take away jobs from 35 million people in the US the suicide rate is going to go on the depression rate is going to go up the divorce rate is going to go up the the violence at home is going to go up abuse of children is going to go up nobody I have not read a single article anywhere where anyone even talks about this that what's the what's the equation I mean the u.s. we've lost a hundred thousand lives and you have 35 million unemployed 100,000 lives they are counting a death as a coma death regardless of what other conditions the person was suffering from large number of the people who have died are nursing homes well you know your mortality rate is pretty low if you're in a nursing home in the US so so my my take is first of all I think that most governments I think did not in my opinion make the right call in terms of how to deal with it and again maybe 10 years from now we'll get a more you know balance for you looking back the second the second part of it is now what's done is done we can't really undo it and I think and I think on the Indian context if you're trying to create social distancing how do you create total distancing when you've got these mass migrations and how do you create social distancing when you go to mass move people hundreds of miles and the railway stations are jammed and the buses are jammed and all of that I just don't understand how you create social distancing when you you basically in do all those kinds of things well let's ignore all that you know that's war on the bridge we really can't do much about what's going on the impact the the comedy impact you know I think the business is capitalism and businesses are very very fragile creations I told you what the dry cleaner who starts a shop in a new town he needs everything to be steady state for that business to have a chance for that towns he thing to make it if anything goes out of the ordinary another cleaners comes you know anything else happens you probably won't make it it will just be too hard so so businesses are very fragile creations we are going through creative destruction and capitalism all the time in the United States every week 1600 businesses go out of business you know we lose what a hundred thousand businesses a year that just happens normally in a in a normal economy in the US and we create more than 100 thousand businesses then that whole creative destruction is what makes the economy go what we have done now is we have destroyed way more than 16-hundred businesses we've destroyed in my opinion probably hundreds of thousands of businesses and many of those will never come back because they are very fragile and to begin with you know you take some restaurant or some barber shop and such I mean these are these are difficult businesses they're surviving in a steady state in a very competitive environment it's hard to you know take the pull the rug out from under them and have them come back so so I think that the recovery even though government's have taken very good action in terms of you know supporting it and and supporting the financial system and all that in the u.s. we were at you know three odd percent unemployment we have the best job market in January in the history of the United States it was just the the most amazing economy more than 160 million people employed we will probably not see that again in my opinion at least for at least five years and it may be beyond that might even be ten years I don't know so I don't know how long it will take the United States to get back to three percent or for India to get those 100 120 family and people back to work but it's not going to be this year it's not gonna be next year it's not gonna be it will not be whenever you're vaccinated we have created serious permanent damage to the global economy beautiful points there and you know I wanted to ask you a related question from an Indian investors what you you know one of the things that the Indian investor has been looking at and many people listening on the corners they've been looking at the US market and you know you talked about the economic damage so how are you see the US market and the way it's moved and it's it's hard to talk about this given what has happened to the economy and the economic impact and for someone sitting in India who's looking to invest to the US also which is a lot of people today yeah so the US markets for the most part have brushed off COBIT as an ordered event I mean if you look at the decline in the in the stock indices in such I mean I think March 23rd was low but the economy's come I mean the stock markets come roaring back a lot of good news is is priced in and to some extent some of that may be justified because markets are forward-looking I think the United States is a you know superhuman economy it's a superstar economy it's the best most amazing economy on the planet with all the factors you know set up to to unleash all the entrepreneurial energies of the country and such so it's it's an amazing it's an amazing creation this amazing creation will bounce back and I think if the American spirit they will try to bounce back as quickly as possible but I think even two years from now we will still be maybe at 7 8 percent unemployment and then from there to get to three or four percent will take a while that's my best guess I mean I don't do math or anything I'm just saying that my best guesses will take a while and markets don't seem to be pricing in a lot of bad news I mean I think the markets assume we're going to have a vaccine in some finite time historically humans have not produced vaccine this vaccines this quickly so that that's an assumption being made the markets are assuming that the subsequent any subsequent waves that come off the wireless doesn't lead to more shutdowns and that's a question open question we don't know what the answer to that is so I think that definitely when I look at US markets so in many ways the market is very similar to 99 2000 in the sense at that time the market it very heavily polarized where everything had gone all the money attitudes or forms and the non comms are you know brick-and-mortar businesses were just languishing in valuations and we see something similar now at least in the US markets where the fangs there's a lot of money going into the fangs and the Tesla's and such and you know some normal brick-and-mortar businesses you know even now they're I think they are decent they're decent values so so I don't I don't think that markets have accurately discounted the macro covilhã density in the u.s. how they look at India I think India obviously is an economy that was probably in tough shape going into orbit we've been in the midst of a credit crisis since 2018 are they bright spots that you see in India and how do you see India kind of coming out of this yeah I I think I think I I feel I feel I feel India does a lot of self-inflicted wounds on itself so so for example we know that there is an excellent exodus from manufacturing in China that started happening after the US government started imposing tariffs and there were lots and lots of companies that were looking at alternative places to to China so they could continue to manufacture at competitive rates and Vietnam for example picked up massive amounts of manufacturing from China and India for example picked up very little and the reason India picked up a little is we make it really really hard to attract foreign investment we really have so many rules that are backwards and laws that are backwards and they defy Ricardo they defy Adam Smith I meaning the the mantra for how to make a country rich is extremely well known you can study Lee Kuan Yew and you'll get there you can study Augustine Pinochet you can study the Chicago economics school you can study Adam Smith you can study Ricardo none of these models is what India photos and it it blows my mind that it's not like we have a lack of brains or at the center we have a lack of understanding of what makes an economy tick and how to make an economy like India work really well and grow really go at very high rates and some of that gets gets to work bank politics where once you start focusing on those types of factors then you can forget about great economic results or great growth rates so I feel very sad when I see what is happening in India because we could be lifting tens of millions of people every year from poverty and we are not doing that and shame on the Indian government for going down that path if I wanted to switch gears a little wind and talk about behavior you know in a market like this there is so much of temptation to just take action I think I heard you say once that you don't make money when you buy stocks and when you sell you make money by waiting in fact one of the individuals asked a question that how do you appear so calm how do you practice patience during a crisis like this when you see so much happening well I mean I think yeah I mean I think the you know there's a there's a saying we all know as school kids in India if wealth is law and so you know when you are talking about wealth you really shouldn't you know be concerned too much unless you're one of those migrant workers without food or anything else or if you don't have you concerned about that but once you have the basics taken care of in your roof over your head and you know having three meals a day then it's really kind of dumb to focus on that so one one each to keep perspective and and the drivers of happiness and the driver of good health is not getting hyperactive about you know because the stock market or what's happening to your bank balance or brokerage balance and so on and finally I have to ask my set of last questions by because everyone wants to know this you know the buffett guitar is of course famous how did it happen in what are sort of the lasting memories that you have from that yeah so you know I think that for most of us if we live in the time and Gandhi was alive Newton was alive Einstein was alive Robin's article or either they were the way to bribe them have lunch with them I think a lot of humans would want to do that and so it it just so happens that Warren Buffett is willing to take a bribe once a year from the highest bidder to sit down for a meal and and my take was okay you know he's going to go down in history as a as an icon and he's alive and I'm alive he's in the United States he's not very far away he's willing to take a bribe the bribe you know I had made so many tens of millions of dollars of his intellectual property so I said you know we can bid for the lunch and if we win it then that's this a guru dakshana and I just wanted to meet him to thank him that was the only objective I had in the in the lunch auction was to you know look him in the eye and just you know thank him for grateful I have I was for all the knowledge and information he is so openly shared and and of course the the reality of the of the lunches that Warren wants to make sure that whoever wins the lunch thinks they were a bargain so he tries very hard to you know make himself fully accessible and like for example when he came to the ranch I met my family my friend vise near came with his wife and the first thing he told us is look there's no time limit on the lunch I have nothing going on all afternoon and when you guys are sick and tired of me let me know and I'll leave but but we don't have a limit of any kind and the lunch went on for like more than three hours and we covered a wide range of subjects and my my daughters were 10 and 12 years old at that time it wasn't for them to absorb many lessons that many things he said to them so it was just wonderful on all fronts of the one and it led to a friendship with Warren let me friendship with Charlie I many many bridge games with Charlie and many dinners at his place so the lunch has paid so many dividends and keeps paying dividends turned out to be a great bargain so Warren was right that we got the better end of the bargain this is a personal question I have to ask you because I play the game what is bridge taught you about investing if it has yeah so I think yeah I was very intrigued to learn maybe we can play some time you play you play on bridge base or do you play lies I play now if I started playing when I was 13 because we had nothing to do in Nigeria with my family so I play with my family yeah so unfortunately live bridge is now in trouble with covent because it's in fact there was an article about how in Colorado they had massive spread of Corona from one bridge Club which had a 299 as game it was very sad anyway so in the USA at least it has exploded in terms of online in fact by the platform I used bridge base to play online right after things went into lockdown the site was crashing because it got so oh well with drama bridge players but anyway I think that bridge is a incredible game it's an amazing game I am deeply saddened by the fact that it's a dying game that there are more people who died who used to play bridge then you young guys who take pick it up young girls pick it up but I think that it's a it's a game of probabilities and investing is a game of probabilities and and I think it's you know worldly is bridge charlie munger please bridge a lot of a lot of value investors play bridge they may be a correlation because I think in investing we have to think probabilistically there is no such thing as absolute you know sure probabilities or anything because Cove it showed you what can happen in terms of fat tails so yeah it's a great game and I'm grateful I get to play maybe like five or six hours a week I think Warren pays even more than that maybe around more than ten hours a week and and I even played I played with him once online which was quite a bit of fun and we were trying to get on the fly I was trying to figure out his conventions is but it went pretty well fabulous so I'm going to take a couple of audience questions now and to the audience if you do have questions please post and lots of them so I try and pick some of the more interesting ones um this one is really nice it comes from one of our advisors in Delhi Ravi : what does success mean to you now having achieved so much well I think that you know I you know there's different ways you can you can define success I think that one one way well you know I think there to be the most the most on a day-to-day basis for me what is important is am i bleeding aligned life which is am i acting out externally in in sync with my inner map that I think is a kind of a base level to try to get maximum output or whatever engine you have but beyond that I think the definitions you know I think Buffett uses the example of this girl in World War two this Jewish girl who's trying to hide and the question was will they hide me so will your friends hiding you when people come to get you and you know if you're the the kind of person that they look up to then yeah there'll be a lot of people willing to hide you or you know who who shows up at your funeral and so I think I think the definitions of success are more along those lines I think on my my own definitions I think is that I I like to play math games you know bridge blackjack investing they're all math games even many ways Dakshina as a math game and and I like to play them in a I would say elegant way and if the if the output shows that I've been successful then at the end a lot of people would have been helped through dakshana so that would be one way to look at success but I think the best way we just look at it is there you know on a daily basis are you happy I you aligned do people like admire and trust you those are the kind of things you should focus on there's a second question that you know if you had to knowing all the chaos in India sort of take a ten your outlook on India how would you invest in Indian businesses I mean what are the bright spots field yeah so I think I think the you know like they say that India grows at night while the while the government sleeps so I think at the end of the day it's not so much India versus different parts of the world this applies any way anywhere it's the same it's the same mantra is we want to find management teams with businesses where the businesses have you know great tail width and they've got a great runway ahead and a management team that's very aligned with great core principles to drive that competency so I think the combination of great mode with great management with the right incentives is I think what we're looking for and we're looking for that anywhere in the world and and if the if the macro environment is not giving you tailwind which has been the case in India for most of its history since independence there are still many many entrepreneurs which will transcend and do well regardless of that but it would make life a lot easier if we were not trying to you know or try tie all the time one hand behind the back of more so entrepreneurs by making their life difficult so so I think that's what we want to look for is you want to look for models in India where you're not relying on the largesse of the government oh you're not relying on government doing X or Y or Z just assume governor government does not much and can you make can the business still do well in that environment and there are many many businesses in many sectors that would that would fall in that in that space I mean if you if you look at a you know a company like like geo for example you know geo just executed incredibly I mean for an upstart to come and take all this market share become number one change the pricing models you know put a lot of other players in very defensive position in in many ways I mean they've got they've got a lot of teal which I'm not recommending that it's a good stock or or not but definitely from a business point of view the execution has been amazing finished one question that I wanted to ask you that came up or not because a lot of people here not from the asset management industry and the mutual fund industry how do you foresee the future for asset management especially from an India point of view well I think that when I when I look at I've been around the world and I look at it when I look at it in the US which is the place I'm most familiar with and then I look at it other places what I find is that in the United States with the extreme leverage of technology and scale the frictional costs of asset management has come down quite a bit and when I look at that same scenario in other countries I mean just when I look at you know our own trading costs in the u.s. versus trading outside the US or what asset management charge in the US versus outside the u.s. the u.s. is far more efficient and competitive and partially because the leverage of Technology I think I think India will get there I think in yes moving down that path but but but I still find today that frictional costs are high for asset management and and in many ways investors themselves do themselves or disservice both in the US and India and elsewhere in terms of the results that the end of carrying partially because of hyper activity but but I think that the the Indian asset management so India used to be a place where people were to only invest in three things they should be used by gold they should buy real estate and they used to have fixed deposits and that was pretty much gone maybe the fourth was under the mattress you know those are the four options that were there and I think that people at least I think enough you know people are realizing that gold is not going to get you to the promised land and real estate is not want to get you to a promised land you should buy real estate if you're going to live in that home but I don't think it makes so much sense we're buying a bunch of home expecting high increases in prices in the future so I think that the natural the natural place for the money to go is is in the in the asset management space in the equity space in the in the markets and such and so I think that that space has incredible tailwind for a very very long time it's it's adding your business you know I'm I'm a shareholder beetle wise and one of the one of the area's wheel wise that excites me the most is the wealth and asset management part of the business those are incredible franchises if we have a conversation 10 years from now or 20 years from now that industry in India will look so different so much larger and so much more efficient it's I mean it's got incredible incredible growth that so I'm going to ask you the last two questions the because you know you've had such an interesting approach to philanthropy and I think it's probably a great way to end this conversation you know you've talked about the problem of income and wealth inequality in the global economy what are you doing what do you want to see happen to bridge this gap well I think that it is it is very natural in a capitalist society to end up with haves and have-nots so capped capitalism is a great system for overall wealth creation it is not a great system for balanced wealth creation and and in and you know so the the the government and philanthropic organizations come in to temper some of the you know you can say the animal spirits capitalism so that it it doesn't lead to you know 2% of the of the country 1% of country controlling 98% of the of the wealth and assets you know so because that's the general outcome you can get so it is absolutely right for societies to be capitalist because it is the way to maximize the wealth of society but you have to counter that with ways in which the pie can be more equitably distributed without and this is the most important thing without affecting the engine that creates the wealth so in India we are really good at redistribution but the way we redistribute we mess up the engine that creates the wealth to begin with so basically we have taken our wealth creation engine and clobber it and then we become really good at redistribution so if you redistribute a pie that is not growing that's no no that's not going to help us get to the promised land and and so yeah the the role of I think the United States to me I think it has been incredible experience because Americans are the most generous people on earth they they give the most money as a percentage of their their their compensation and salaries and the richest Americans have been extremely generous in terms of give back and those give backs are way more efficient than having the government to them so the the philanthropic arms that we have like the bill endure and the Gates Foundation and so on those those entities do extremely good work far better than governments can well if my last question a lot of people in they know you're an avid reader so do you have any book recommendations that you're reading that you could leave with people yeah actually I'm I'm reading a book right now which I'm really enjoying a lot it was it was recommended to me the last time I met Charlie for dinner I think the last time I met up with John for dinner was March 7th which was just a week or so before things started to lock down in the u.s. so it's called capital capitalism in America and it's by alan greenspan who was the former chair of the Fed and it traces the history of the of the country in in a just a amazing way and and actually there are a lot of lessons for India in there I think in terms of what works and what doesn't work and and such so i I've I've really enjoyed reading that that book and and then there's another book which is which Leeloo recommended to me he manages money for for charlie it's it's called the other half of macroeconomics the author is a Richard Koo KO and so that's also a good book kind of explains why we didn't get any inflation after we pumped all this money into the economy and kind of people are left scratching their head as to how can you print all these trillions of dollars and drop them from helicopters and not get inflation thank you so much funny I definitely feel like I'm the smiling one and I got the better half of this which which is your generosity so thank you so much for doing this with us I have to tell you we had multiple thousands of people log in so this is one of the biggest events that we had and I can't thank you enough for doing this on behalf of the team a table boys and the team I didn't why is asset management think you've got more and more fans in India that you're building they over by day and I really look forward to playing that game approach yeah actually it'd be fun anytime maybe maybe when I'm in Mumbai if you have a game that we have be fun to to try it out and it was a fun hour I enjoyed the questions and and I I wish everyone the best I hope the lockdowns come to an end quickly and we can try to get back to a more normal world as soon as possible okay thank you

Channel: Edelweiss Mutual Fund

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Keywords: investment advice, investment tips, better investing, edelweiss mutual fund, mutual funds, edelweiss amc, sip, edelweiss sip, systematic investment plan, money saving tips, financial tips, invest your money, personal finance, money management, personal finance management, invest money, personal branding, personal branding tips, personal branding vs business branding, business branding, mohnish pabrai, edeweiss konnect, edelweiss mutual funds

Id: 2omU3Cmf4JA

Length: 58min 46sec (3526 seconds)

Published: Tue Jun 23 2020