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For the last few years, our economy has been going down, down, down, but our stock market has been going up, up, up. Stock markets are a strange beast. You can consider them to be the engine of a growing economy or a casino with no relation to the real world. For some, they are an object of loathing. For others, they invoke hope and romance. I just find them fascinating because they're both a picture of reality and a tussle between the many fantasies in our heads.


In stock markets, a world of today collides with the world of tomorrow, and perception matters as much as reality, at least in the short term. I'm bullish on stock markets, though I'm not sure. In a perfect world, the stock markets would be so bullish right now.


Welcome to the Scene and The Unseen, our weekly podcast on economics, politics and behavioral science. Please welcome your host of Vardaman. Welcome to the scene in The Unseen. My guest today is a brilliant depiction by an old friend known to the world as an investing guru, but known to me simply as one of the smartest and nicest and most interesting people I know. So I invited him onto the show ostensibly to talk about investing, but cunningly, my intention was to pick his brains on much, much more the mental models through which he looks at the world, including markets, his insights on investing, his insights on life, and he even for his bad jokes, which are second only to mine.


Depok runs Capital Mind, a Bangalore based investment research and wealth management startup, and he also runs the Capital Mind podcast. All those links will be in the show notes. Before we get to a conversation or let's take a quick commercial break. I often advise people not to invest in stock markets unless they have studied it first, that old poker saying applies. If you don't know who's the sucker at the table, it's you. Well, if you do find it fascinating, they learn about it.


First, listening to this episode and picking up the books the recommends is one way of doing so. Another Way is heading on over to the sponsors of this episode, the great Kosice plus dot com and enrolling in the art of Investing. The Art of Investing is a 24 lecture start by John Mhlongo and will take you through all the basics of investing in stock markets. But that's not all the great courses. Plus has a fantastic library of online courses on subjects ranging from music, math, cooking, history, political theory and much else.


They also have an app that you can listen to the audio of these courses the same way you are listening to this podcast, and it will cost you nothing. You get one month of unlimited free access if you use the following, you all the great courses plus dot com slash unseen. That's right. Unsign the great courses plus dot com slash unseen for one month of unlimited free access. What an investment. Depok, welcome to the scene in The Unseen Eye here with always glad to have a conversation with you and lovely to be on CNN, Nancy.


Yeah, I mean, this is oddly strangely, you know, after 200 episodes, the first time you were on the scene in The Unseen. And the thing is, over the years, I have, you know, got so much delight and insight in the many long conversations that we've had. And the bizarre thing is and I wonder what you think about this, that, you know, I was sitting down figuring out all the ideas that I'm going to talk to you about.


And then at one point it struck me that, wait a minute, this guy has been a personal friend for a long time. But many of the personal questions that, you know, are almost standard for me to ask my guests. I don't actually know about him. You know, and this is weird because a couple of days after this, I'm recording with another person who's been a personal friend for a couple of decades. And I realized that I don't know that much about her either.


So it's like you build a friendship by just hanging around and talking about whatever, but you don't actually know so much about each other, which was a bit weird, which is actually quite fascinating because you don't generally have relationships like that after like Second Nature, something that's almost almost entirely based on the intellectual framework of what we talk rather than our families or where are you going?


And, you know, what have you done in the past and all that stuff, which is definitely like I mean, it's that's what I was telling someone when I was always telling me who is, as I was telling the drama is I'm like to so many things, man. He's been a professional poker player. He's been a writer. He has been a cricket, not just enthusiast, but, you know, so deeply into cricket.


He has held guns in Peshawar and pretended to be non Indian for, you know. So, you know, there are so many things about you that I know, but there's obviously a lot of other things. Somebody asked me, where is he from?


And I'm like, should I have no idea? I don't even know whether he's whether the wormhole that the army is you name or Bengali surname or, you know, and and whether he's related to Raja Varma.


So, yeah, no, no. Sadly, I don't have any royal lineage that way though. My father's Punjabi and he was born just outside Lahore pre partition. So some could even say that I am international. And by the way, for those of my listeners who for the first time are wondering, what was Ahmed doing holding a gun in Peshawar? No, I was not carrying out a secret mission for the Indian government. I was covering the Indian cricket to Pakistan in 2006.


And I happened to kind of, you know, go to Peshawar at one of the venues and a friend and I managed to get some people to take us to the gun market where guns are sold openly. And the friend was a journalist called Faisal Sharif. At that time, he used to write for Rediff. And together we posed with guns, which is the largest I have ever looked. I won't say failed because, you know, and the other thing is, you know, as listeners would have guessed the book and I know each other from our blogging days, basically, which is where we met and I realised that so many of my friends, in fact, all my closest friends, without exception, are not people from I know from school or from college or whatever, but really from that time, people who we managed to connect with through the Internet in those days, sort of like minded people doing similar things.


And that kind of becomes the basis for forming this community. And this is something we now take for granted, right. That we can just form a community of choice at any point in time. And it started with our generation. You know, the generation before us would not have been able to reach out. You're basically constrained by geography, constrained by accident of birth, all of those things. And now we can actually, you know, reach out and form a community based on shared interests or whatever the case may be.


And it's mind blowing when you think about it.


Yeah, I mean, it's the are put on the MySpace and now what's happened perhaps tomorrow signal of real life and that's connected us. And, you know, it's strange. I have I think the process of us, you know, knowing each other, have met you in Bangalore, in Bombay, perhaps in Delhi as well. And I've travelled and lived in each of these places. And yet, you know, when we talk to each other again, it's almost like, you know, it's starting from the same point where we left off the last time.


So, yeah, yeah. It was like you just click into place. You don't have to kind of, you know, reconnect again or figure each other out. Well, if I met someone from my college days or whatever, they would be this process of reconnection because you're meeting fundamentally a changed person and trying to kind of figure that out. But that reminds me that is a lot I don't know about you. So, you know, is what casket.


Barnie, let's kind of get a little deeper into the history of the book Shenoy. So, you know, I do want to spend a lot of this time talking about investing in your philosophy towards money and life and all of those things. But before I tell me a little bit about who the young the book should, I was like growing up, what kind of kid were you? What did you want to be? When you grow up? You don't know what were the influences on you?


What kind of books? Ruggieri, tell me a little bit about that part of your journey. So, you know, my youngest, perhaps, as as far as I can remember, my father was in a bank, so transferable job moving around quite a bit. You know, I come from this little town in a village in the western parts in Karnataka. But then since my father was in the bank, we traveled everywhere. So I think my early days were, no, they're poor and they know our grind a couple of other places.


But then since the time I actually remember things, I was in Bangalore till I think nineteen eighty three or nineteen eighty two and I actually studied in a girls school.


What is a girl school after. What standard and boys were allowed to the fortunate. Because I don't know, there's some rule that you know, maybe boys are okay to live with the fourth standard and then they get really bad after that.


So it was interesting because I still know people are reconnecting with people from that school and the fascinating personalities, you know, so it's almost like I wish I knew more at that age that I could have remembered in terms of conversations. But that's part of life. What's interesting is also the first time I tried to learn about books.


This is early in my life. I always liked reading. I still do to the point where my mom used to literally give me a comic and I would walk with her through marketplaces when she had to go shopping. And I would not complain even a little bit because I read the book every chance I got.


And the books, of course, you know, the early days were Amarjit to Qatar and a bunch of those things and all that, but it evolved.


Eventually I moved to Delhi and then I was about after my third standard. So again, Delhi was very interesting. It was we landed it up in Delhi, I think the year or the year before the Indira Gandhi was assassinated.


And that was a learning thing for me because I was I was like probably 10 years old at the time, and it was a few days before my birthday.


So I really did not, you know, find it very interesting to have spent the birthday at home. But then when I came out, it was a whole new world.


Bunch of things that you don't want to learn when you're 10 years old, you learn and you know, and kind of made a very different kind of impact on my life.


Those are the years where you would go everywhere in Delhi and you would see soldiers sitting in, you know, cages and sat behind sacks all over the place. So and you you know, we found out later that you're are not allowed to approach them either. So it was it was dangerous to do so. But we are in interesting times growing up.


Those are the early days. I don't think I I mean, till well, after that, we moved back to Bangalore. I wrote an exam, probably the first exam I ever scored any reasonable marks. And luckily that was the standard exams. So I managed to go to this college course and I what's now called an 80s radical. Earlier it was to be arrested and I still like to be Morrises with Karnataka, Oddisee, Sukiyaki, which was I mean, it has a zing to it.


And I Beaky does not sound as quite as zingy, but that's what the me with the college is. No, it's a quaint little college in Peltzer Little.


It's worth 350 because of campus. In the other it actually has its own beach of a text which we did not appreciate it then and now I feel sorry.


I did not appreciate it then but that was a formative years because still, you know, till you're 18 years old, sheltered you at home, do your thing and suddenly thrown into college where you you're alone.


I mean, that's OK. But you get right. You do the things you have to, you know, fend for yourself. But you also learn a few things about freedom or.


Doing stuff the way you want to do them and a couple of years and you can realize that you'll never be able to live in a shelter, cloistered environment again or simply because you've.


For all the good and bad that comes of it, that you have to wash up not and stuff like that, it's just far more acceptable to do that rather than try to with other freedoms that you have. So eye opening for that from another perspective, because I finally discovered what I thought I would do for the rest of my life, which is our computer programming.


I got somewhere in the bay to call me Lanuza because, you know, in the first year you had these local area networks that were set up in the country and everybody got the same usery. You have to log with the Israeli lanuza. And the password was lanuza.


They're very creative, you know.


So I was because I went in first year, I discovered I really like the stuff and maybe I wasn't very good at it, but I was just at it at the time.


And I learned from a few other people that I went and I was initially in this branch in mechanical engineering. And then I asked for a shift to computer engineering.


And that's when I discovered I really like the subject, the concept of a relatively new age that I was 1982, 1983.


The interesting thing about this part of my life was that I was I didn't know what I wanted to do. I had no idea.


I had worked with some computers in the earlier parts, but I had never actually seen, you know, computers really work. And they told us at one point that they are not allowed to play games. So we said, OK, what? We're going to write our own game.


So I wrote a very weird version of Pacman. And then, you know, nobody could say anything because it was a game I programmed.


So I was like, I'm testing it and it's perfectly legal to do. And so little word, Lanuza. There was a new order. For all practical purposes, I probably still am. But finance makes you less nerdy, I guess.


But interestingly, you know, that college actually opened it up because what happened was there was because of its relative distance from anything human, they allowed you a lot of things. So, for instance, I was given the permission to keep the line open until whatever time I wanted. I was given a key and I said, you know, just shut it down when you're done. So we do these things and we learn a lot of these things. And then once I got into my second year, the first year in my college was common across all branches, everybody the same subjects.


The second year onwards, you got your specific subjects and then it carried on further.


We did very interesting things with the stuff that you can do on your phone in five minutes sometimes would take us two or three days to do so. You had to prep for it, so you had to think about the code that you write and then you write it and then you keep the compiler rendered or whatever it was that you read. And suddenly it would take two days for it to render something which was like a little box coming out of something else.


And because I wouldn't even ask, because we go in the first, this is all again stuff that when our parents used to tell us things like, you know, people you don't know the value of poverty.


And, you know, I used to before I took my went to school, I had to take water out of the well and have the seven brothers and sisters I had, all of them had to have a bath. And then I would walk five miles to college, to school. And then they would have like this is just like this is just stuff that I wouldn't I never do.


I'll never be able to even see. You know, I just turn the tap and water comes. It's pretty much that effort.


So when I tell my kids, you know, it's all in a time when you had one point four four inch floppies and I don't know, there was another one three somewhat, three and a quarter, five and a quarter inch floppies.


And you didn't have hard disks or one of the drives contain your basic compiler and the other one contained the place where you go to a store. And if you had only one drive, you had to put one in law of the basic memory and then pull the second one into storage program. So it was like crazy stuff that, you know, my kids look at me like, what's a floppy disk? I'm like, it's the before what's what came before CDs and what is what's the CD?


I'm like, okay dude, I am done.


I mean, this is at this point it's like, you know, but I mean I lived that life, which I guess is exotic from today's perspective.


But, you know, they would be exotic from then. So, you know, that makes us human. But, you know, all through this early days.


Well, I think the the point is that while I liked reading a lot, I still do most of it for at least the first twenty twenty odd years of my life. Was fiction. So nice, you know, from the Frederick Faucet's to our Trelease. And, you know, the stuff that, you know, was probably exciting at the time. And the last Nix's and Tintin's and later the Calvin and Hobbes that became kind of. A story of choice, but then soon after college, I was just the early part of my life, I'm rambling a little bit all that.


So but I kind of finished college and joined this company, which is now emphasis that I was going to be a software. It was a bunch of mergers and all that.


And I was sent to the U.S. in about three months. And at that time things were very weird because I was hailed as a qualified engineer to the U.S. on a project where I literally did not know more than maybe 20 lines of code.


So I had to go there. I had to pretend that I would not pretend, but I told them not to do so. We figured out the code mostly after we'd gone there, met a bunch of customers, you know, did a lot of crazy things because your first time in the US, you have no idea what to expect. I remember I had gone to this place called Omaha. I mean, now it's more famous because of Warren Buffett, because at that time it was famous for that, I think.


But, you know, at the time, I hadn't even heard of Omaha. And I nobody told me that when they say minus two degrees with the wind chill of minus 20 degrees. It actually means you're going to feel like it's minus 20 degrees. So I went to the little jacket, which had absolutely no chance against, you know, even minus two degrees. But then I was willing to risk it. But minus 20, I mean, it's like, oh, dude, I am dying.


So we went in this kind of embarrassing because when we landed up there with that jacket that just looked at us.


Are you like, I'm serious because you're dying that. So we said, okay, and then we had to go pick up a jacket from one of the supermarkets now.


And, you know, I think I use a jacket for literally all my gold while, you know, Adventure's for at least 20 years afterwards was pretty good. But you could not even think of wearing that in India. It was just impossible.


It's just one of those things that, you know, but they're talking a lot about living in America, different ways. You have a very fancy view of the state.


So you sit in. India read books about this and that, you go there and say, well, these are the same people, just different accents. It's not in a way, superheros kind of.


Talk process that you started off with and also the place it's I mean, it's developed. Yes. But, you know, there is some kind of rigid property is that as well?


And there is a kind of standard of living that you suddenly realize that life is very limiting if you don't have a lot of money. Very obvious in the US. Later my adventures in Europe, I found that was not so much the case.


But I mean, after I finished that, I think my only thing in college was that I want to start my own business. I didn't know why, but I really wanted to start my own business.


And when I went to the U.S., I was applying to colleges to do my master's degree in science there.


And then I decided I want because I want to start my own business. But for some reason, I had a job offer from the company that I was visiting and they were kind of cutting off the contract with the emphasis of that. I would be a friend at the time and they said, we'd like to hire you guys.


And we said, OK, we're OK with that. And, you know, unfortunately, my father passed away in India at the time 24.


It was very complicated because he was a banker. He had held the key to a lot of finances in the family. And I had no idea what any of that stuff was that he did. So also, I mean, of course, grief was one that was very complicated because, you know, I always thought that I never spent enough time.


And now I still regret that in the sense of I went to college, I was doing my own thing. And I remember my mom after I had gotten out of college, I was desperate to get started on my job. And my mom said, you know, stay on for a couple of months more. You have another job offer that starts in November. Why are you leaving now? So I said, no, I am going because I want to start working early, as early as possible.


And this was August and I he passed away in February the next year so that two months would have been nice. But, you know, such is life. Unfortunately, I wasn't able to spend that much time with him when I was, you know, have the time and, you know, sometimes that that whole thing of, you know, the cat's in the cradle, the song kind of come to mind. You know, it's strange because that song, something I heard in college and I said, listen, people don't understand it and knew it was deep, but I didn't understand.


And it's like Calvin and Hobbes the first time when you visit, when you're a kid, you don't you know, there's something in there that's deeper. And as you go further in life is say that is like philosophy. It's not a cartoon, but there's something in that song that that kind of talk to me that time. And then when my father passed away, I had that. I heard the song again. And then I was like, this is real.


And now and I have kids. It's just a different meaning altogether. You're dealing with it from three different angles. And, you know, it's the same song and it's beautiful. So but since that time and I came back one day, I said, listen, I'm not taking the job in the U.S. I have to figure out. More stuff, and I think if my goal is to start a business, then I should do it here in India and the U.S. was and this is what my dad told me before he passed away.


If you want to start a business, why are you locking yourself to a six year period in the U.S. when you can't start a business? So what do you mean? Then I looked it up and said, yeah, I mean, if you're in an H-1B visa until you get yourself a green card, you can't start a business.


You can join a business that started making process visa, but you can't really start a business. I mean, it was complicated at the time. So I said, I'm not doing this. I'm going back to India or to start my business. So a couple of years down the line started a business.


We built a lot of things for people using a language called Delfi, but a computer thing, but came into this finance thing at that time because we started writing software for companies that wanted accounting as part of their application. So I was like, what is this accounting business? Let me read it.


And, you know, my father, my uncle, everybody in the family were bankers. My surname kind of gives it away. But that's how, you know, the whole family was. And I was this dude, I'm a computer engineer and I was different from everybody else, so. It's this accounting thing that kind of came by and through this process, I learned about accounting. I started my own business when I was 24, I think, and then around that until I was about 30 before I got married.


And in this process, I built accounting packages. We built something that was an Indian accounting package. And we got so what we found interesting in this whole thing was that you could look at public companies because they would give their accounts to the public every year and every quarter, and you could actually download it from their websites somewhere in the middle are looking at this and say, OK, we could download this account. We can get these so called industry public markets for writing about in 2005, worked a couple more companies.


I think I got if I say I'm good at something, it's only because I was really bad at it and I decided not to be through the process. So I think I was with my foot. When I look at my early posts, even I cringed and said, what kind of process was that?


But it's good now. I mean, the blog came along and, you know, here I am. I won't bore you with the further details of what else happened. But I hope this has been it's a very different part. I think I met you in like 2007 or something. So since then, we've been in touch. I guess I came to Bombay. I did a bunch of things that on algorithmic trading before, and I found out to my chagrin, it was even legal.


So it was it was apparently not legal to auto trade. So we had to physically and hit the turkey whenever you actually interrupted. So we did that so that you could hit me. I mean, to. A human being had to sail on a train before it was it went to the exchange. Now, of course, things have changed and you can play it automatically. Computers can do it with each other. But we want to build this stuff in 2008.


Fascinating, because I helped in another hedge fund, which actually did this when Sebi finally legalized it. And now, you know, they have 30 percent of the volume of the exchange. So I'm thinking algo trading is not just one, but algo trading as a whole is is now a feature of the exchange capital mind, of course, when it was 2013.


And that's kind of blossomed into a fairly decent business. And I suppose you'll probably ask me a bunch around investing. So I'll probably go into detail when we go through that. Yeah.


You know, before we get to sort of investing in capital mind and algo trading, about which I also want to ask you, you know, the back story is really fascinating. And there are a bunch of threats from here that I want to pull, which actually come kind of to the same question. I mean, one, of course, is, you know, what you said about being really bad at it before you got good at it. And that struck a chord with me because I just came about this thread on Twitter by a random person I wouldn't name, not an Indian, but basically which went viral.


And one of the things he said in that thread was that, you know, I don't follow people who post regularly because, you know, you can't get a great flash of insight every day. So if you're posting too regularly, I don't follow you. And, you know, I prefer people who post just once in a while. And I thought, wait a minute, that is completely the wrong way around, because when you begin doing something, you're bad at it.


What makes what excellence repeated iteration makes for excellence? You know, you do something repeatedly every freaking day and you always begin something is bad and then you get good at it because you've done it again and again and again. And examples from the blogging world would be something like Marginal Revolution, for example, or and, you know, literally anything. You know, Virat Kohli was not going to the next once a week he was going there and spending seven hours a day every freaking day through his childhood bill, iteration, iteration, iteration.


And you get to excellence. And it's kind of that process of learning something that I want to delve deeper into. One is a you know, for our listeners, just before we started this, the book and I were being nostalgic about the bad old days. I would say when, you know, you couldn't do anything on the computer because you plug anything in, you've got to install 40 drivers and nothing works together and all of that. And we were just setting up our mikes and stuff before this, and it was all relatively smooth.


And it struck me that we are sort of that, again, I'll say a unique generation, perhaps not in a good way, just in an interesting way. That one, we do a lot of learning. Our formative years are spent before the Internet. So we are restricted in terms of what we can learn by whatever we are privileged to have around us, which could be the books that we have or whatever. And both of us are relatively privileged in Indian terms in the sense we got to read a lot when we were growing up and all of that.


But otherwise we don't really have access to most of the knowledge in the world. And then at least in my case, another big part of my learning comes even growing up when the Internet happens and when I'm exposed to ideas and all of this from everywhere. And the question that I'm leading up to is, one, did this sort of process happen with you as well? And to how does one build up mental frameworks through which we look at the world?


Like, one thing that I've noticed about you is that while you're brilliant at investing, one of the reasons that makes you much more interesting than other investors I have made is that you're bringing to bear mental models which have to do not just with investing alone, which have to do with life, which have to do with human beings, with the way we behave. And then you applying a lot of it to investing. And then obviously you're getting a lot of specific domain specific insights as well.


But how did building these mental models kind of happen? What was this process like of the formation of the book Shenoy as a person? Because with most people this would happen by the time you're 22 or 23, it has happened. But for people who are in their mid 40s like us, and I think our readers are not a secret to anyone, it's been this complicated, almost staggered process where the Internet sort of causes this explosion and then, you know, you learn all over again.


So. So what are sort of your thoughts on this?


That's you know, I mean, if you think about the Internet, it's actually changed one big opportunity for us. It's you could not do this without a lot of the stuff that we are doing, including what we're doing right now without the Internet.


And one of the things that I realized is that the hunger for knowledge exists and maybe it was privileged, maybe it was whatever it was that you could solve that hunger for knowledge in different ways when you're younger.


I always felt, for instance, I mean, I am a social person, but I'm actually quite introverted when it comes to a lot of. Gatherings and all that stuff, so I prefer to sit and curl up and read and think and walk and all that stuff, but somewhere.


So this is this is where I think I credit my college for this, is that you got long periods to yourself long, very long.


And then in this process was the discovery of myself. Well, maybe it was in bits and pieces over time.


But what I discovered is that there are a lot of things that I like, but I like marginally and a little bit here and there and stuff there.


And there is very clearly stuff I don't like.


Fourier transforms. I think that is one thing I can tell you categorically that I don't like I don't like to eat good or cheese or something. I discovered very young. I was I cannot do it. And I even in college, most people would fight for a seat next to me because I would give them my little portion of corn that would probably like to I don't want it on my plate. And people would swap that with, like even chicken.


And I was like, dude, this is like a I mean, you are do this bargain every day. I'm all for it.


But but that was like those few things I didn't like. And few things are like and mental models when you're younger is like you shouldn't not like something. And we should tell some people, because when you as you grow up, you ought to be polite, you are law and stuff, and you can't categorically say, I don't like this subject because you have to do it. It's part of.


But somewhere along the lines, I found out that what I liked I would pursue and maybe it was the kind of college I was in or maybe the kind of person I was. And I have no shame in losing or, you know, it's like when you crack a bad joke and people, like, kill you and then you don't like bad jokes because they want to kill you. I was never the kind of guy who would stop it. Not that I would not crack the bad joke.


I like to kill me, kill me, but I want to keep trying. So once once in a while, you get a good job or mostly bad even now.


So but interestingly, that philosophy maintains itself even in so it's like, you know, when you're doing something, you are right.


And the best thing about computers in the early stages was that you could do this, you would hit compile and see error and say, okay, it's an error, let me go back and fix it.


And somewhere along the line, you learn that this is the right way to do things. And then even that right. We do things keeps changing over a long period of time. And it's a learning process to work there. From the time when I started, there was visual basic to start that and there was Pascal and C++ and now there are, you know, named I mean, they have languages which don't have vowels in their languages with only vowels and syllables.


And, you know, there's a there's a guy who's made a YouTube video and all the different kinds of languages out there, which is like it's an hour long. And he's he's like, I'm not even scratched the surface and I believe him.


But at that time, I deal with all of that, all these programming languages.


I want to learn Fortran. I did. I learned COBOL. I taught COBOL in my final year to other people and earn some money out of it because they had a job which had a COBOL as an entrance testing paper or something. And that's how I learned COBOL I in order to be able to earn the money to do other things. So this process, this thought process has kind of continued since then. You're curious about something you've learned quite interesting.


Delve into it some more during the process of accounting or learning, accounting. And by the way, accounting is this weird thing. I still don't think I get it. But it has these, you know, in English language, they'll say, oh, you don't work in there are some letters that are silent and you're like, why?


And then you ask about this and then they'll come to you with a letter like through and then through. SDH Ah. Which is fine. And then all you get, which is like, excuse me, why, why do you have all those extra letters and why is there an itch and a G and you know, but obviously there are some rules and you kind of learn that these are rules and you can't violate these rules. And the same way in accounting, there are some rules, some stuff that you don't understand, which is not logical, but it's there.


That's the way they've decided things are.


And then you look at this of thing and say, well, you know what, this doesn't seem to add up because you said these two add up to that and it doesn't add up.


And in Italy, well, that's because the company is.


No. Bullshitting its way out here, they've added it somewhere else and something else on it will excuse me, company can do this, and then you find out that companies are this stuff that people use to cook their books and there's stuff that's real. So over time, it's always fascinating to try and find those little things like these little puzzles that come around.


You see looking at stuff. We're looking at numbers. And my wife and my kids also now look at me and said, Dad, that's just like numbers.


And I'm like, yeah, that's my job. But then I'll be looking at those numbers. This fascination that is. Well, now I can figure out something isn't right.


If I looked at those numbers somewhere, something's got to throw themselves at you. It's got to look a little bit closer. It's the strangest thing because today, for instance, there was the results of our I.T. company. So the one number I looked for is how much they have in transportation charges. I mean, because nobody's flying. You can't be spending a whole lot of money on transport at this point, so it was, of course, in line with what I thought, but then I realized that was probably why would I look at that?


It started because the picture I know is that this is a problem, which is that somewhere the mental models coming together in tents and covid, you've got these issues. Companies reveal this information on a quarterly basis. This is one quarter where you might have seen the emergence of some travel record. And yet you've so you go in with that thought process. But if you ask a different person, you might not look at that number. You might look at a complete different number.


But it's that just the way that these conditions conditionings have happened, I think have happened mostly because, you know, this is Finding Nemo Lane I love to write about.


I liked it, I think multiple times. And Finding Nemo, apologies to everybody. I, I could carpool lanes because I have two kids and I have watched every cartoon that has ever not lived. But one of the lanes in Finding Nemo is madness.


This is this story and this Nemos Dad Modlin. So they're together and Modlin is really distraught because he can't seem to find a son and daughter like what happened. Like, you know, I told his mother, Dimos mother, that I wouldn't let anything happen to him.


Speciously stories like that. Strange if you if you don't let anything happen to him, then nothing will ever happen to him. So I think all of us live in those protective cocoons of ourselves, not just our kids, but ourselves, saying if I make mistakes and screw up and look bad, whatever it is, but if you don't make mistakes, how do you eventually not make mistakes? You you have to go out there and experiment and try these things, but you don't know what will happen.


And yeah, you might be wrong. And sometimes in in stock markets, you actually pay a price. In most other places you don't. If you're not good at cooking, at best you'll ruin a meal in your country, which is, by the way, a new thing earlier, how to cook again. But, you know, you you know, if you don't do that, nobody will trust that, you know, cooking. I could read 500 cookbooks, but I'm still not going to be able to cook well if I haven't cooked and made a mess of myself before.




Know, this goes back to earlier point of sort of endless iterations. Like I remember in in my poker playing days, somebody once asked a question that, you know, what does it tell you about a player if it's Bluff's never get called? And the answer obviously, is that he isn't bluffing enough because there are an optimal number of blocks you have to make. And similarly, I would say that if you're someone who never makes mistakes, then you're not living life as it should.


You are just way too safe to become good at anything. You have to make lots of mistakes. I did. And I was struck by sort of you know, you spoke about making bad jokes. And I guess that is one of those things where repeated iterations don't really make one deal because I have the same problem. And I was just thinking, you know, the moment you said Fortran, I thought if I go to go and tell somebody that I have learned Fortran, he will say what?


Actually, I have learned my friend. So, you know, let us not iterate too much on this. We are not kind of going to get better. And the most delightful thing about doing so, though, was the connection between Good and Fourier transforms, which again is possibly unique to you. No one else would use those two in the same sort of sentence. So, you know, is it fair to say from all of this that and I don't know which way the causation goes, is it fair to say that computer programming, learning, computer programming gives you sort of a systematic way of, you know, looking at, you know, how things function and therefore how the world functions and you can, you know, transplant that systematic way of thinking onto other things?


Or, of course, the causation could be the other way around. It might be the case that people who become good at computer programming are possibly those who are drawn to that kind of systematic thinking to begin with. Either ways I mean, they can one can reinforce the other. But is it kind of a sort of a link between that? Like when you talk about mental model, the one key point that you made was that if you're interested in something, you kind of go down the rabbit hole, which is pretty much what I do.


You know, I can watch a random YouTube video and then watch all 400 videos in that channel by before the night is over, partly aided by the fact that I watch a double speed. But there is that kind of part of the process. And also I would imagine that, you know, learning, accounting, for example, which I imagine was sort of the bridge between computer software to actually getting into investing and all of that, because first you build this accounting software and you have to figure it out and it must be really boring.


At what point does it begin to get interesting for you where you say that this is fascinating, I need to learn more about this and then how does that process of learning happen? Like, I know very little about investing. I know that there is, you know, Benjamin Grahame's value investing school with the, you know, which Warren Buffet follows. And they're the ones who will do the things. And then the United. He, of course, is a machine learning any, you know, algorithmic trading and all of that.


So at what point does it begin to fascinate you? Why does it begin to fascinate you? And then how do you sort of eat yourself or learn that subject?


I think, you know, this is actually I think it's many iterations of what has happened. And I'll come to the latest ones. You know, again, it's sometimes what helps me is to think of again, another cartoon is Ratatouille, the movie. And this guy who says anyone can cook. It doesn't mean that everyone can cook means that, you know, some the best cook can come out of, you know, so the sometimes the biggest problems in life is the so-called authority people telling me this or, you know, what this guy has said.


So therefore it is. But it's not so many times. So because I'm by nature irreverent when I say I'm rebellious, I don't like to just make statements at face value because they give given to me.


But also the curiosity of something drives a lot of the thinking. And while I think it's the computer programming or process, perhaps it's the way that's evolved for me, it's for somebody else. With that curiosity model, it might have evolved differently. The difference is that if you're, for instance, that somebody told you this in the book, if you're in a computer lab and you make an error, you just press control if you can. And again, if I'm in a chemical lab, I'm not going to make too many errors hate, so I have to plan and think.


And do you know that? I don't know. I'll blow up the whole lab if I screw up.


So you and people in the mechanical world, in the civil world, you can't experiment with creating a building because, you know, it's got to be structurally solid.


So you ought to think about it, planet somewhere else and all that stuff.


So we get afford it a little more on the mystic platform than people in other industries or engineering courses are. And then in the humanities, there's no concept of everything is an opinion at some level. So it's nice. I wish I'd done that because you appreciated it. Life as an engineer sucks because you want rationality and everything. And then it takes your whole life to figure out that irrationality is the only thing that survives because you have to I mean, you know, the old adage was that there were two squirrels and one of them scored it's nuts for the winter and the other one just was having fun.


And now you know how when winter came, the one that, you know, I'm starved of strength and the other one was OK, and that was supposed to be a moral lesson. And now they give you the same thing with a different two captions. You have the second one starving. And then there's the whole list of, you know, people who are protesting, saying, how can one guy have all the nuts when the other fellow is starving and then therefore they take the Nazeri from the first guy and then give it to the second guy and like, look, and why do you have to spend all that energy doing all those, not saving them?


Because could had fun.


But interestingly, those models are so I think I must have lost myself in this whole thing. But for me, the mental model started working, saying things have to be rational, things have to come one after the other, and then you slowly build up on that. And even now I think that's what happens. For instance, that might lead us somewhere in the middle.


And, you know, I my wife remembers this because I was obsessed with it for like I think four weeks I had to find out about nuclear power. Don't ask me why. And I didn't know anything about. So I had to find out how nuclear reactors were made, and specifically because I was like, I'm curious about this whole subject and I want to find out. I spent like days and days looking into nuclear power and reactors and what specifically Toryism played as a part in that process.


So in the end, I was left with a lot of information, almost completely useless. I hope it'll be useful at some point in the future. But I mean, it's just like I wanted to get a feel of the subject.


I understood what the tourism cycle was. The fact that India was at that time the forefront of thorium based nuclear technology perhaps is one of the few of, you know, further down that line. Even today, India has the second largest reserves of put him in the world we could produce. We have had a functioning reactor for the last 25 years, 25 years. This year we would really five in Bombay, which is an experimental reactor that can actually produce its own fuel as a byproduct of this process, one of the first and earliest.


You know, uses of this technology, and it uses thorium as one of the fuels. The other thing that it actually produces uranium, which is so rare in the world. So why this actually happened, I don't know. But somewhere down this process, I said, OK, there's got to be a reason why people think this is bad nuclear stuff. And eventually I found out that nuclear is not bad. I mean, I know people may disagree and say, OK, no, no, it's not environmentally friendly, but it in the scale of environment friendliness as a whole.


The nuclear power generation process is the most environmentally friendly in less people have died in all of the nuclear accidents all over the world, even considering the effects downstream and so on, then in probably any other form of power generation in the world. And and I don't see this because, you know, I'm just quoting a magazine or anything like that. But because I've gone through the read, I've gone through it and seen how this stuff functions. And even though we have movies like Chernobyl, which comes along and talks about a lot of things and how nuclear holocaust and all that stuff happened, I don't I mean, I think now I mean, I'm comfortable understanding that the reason why I'm saying this is because the mental model that caused me to go down this hole was because perhaps somewhere someone had commented that the stuff is unsafe in order to find out for myself.


And got fascinating and why it got fascinating was something in the middle that didn't think shit, which we talked about that. And one of the factors that did that for me was that India had the second largest oil reserves in the world. And like but we don't have that many nuclear reactors, do we? And then it turns out we do have a fair number, but nowhere close to what export is eventually acquired. And thorium has to with on the beaches of Karola.


Fascinating fact, but it's screwing around. It's one of the largest things out there now than it used to be then.


But so when you think about how your philosophy evolves over time, I've learned that you can somewhat latch onto philosophies or mental models even when you're doing the strangest things playing solitaire.


You could play solitaire, you could lose, you come back and win again, and you've seen this in poker, you can either keep playing poker endlessly without learning. And a lot of people do that, you know, and you could do this with bridges. Well, you could do it and you could play Contact Bridge forever and Narconon.


Or you could go down a little bit further and said, this is a game of probabilities. You're going to play the probability game. But you have to understand how the priorities work. You got to figure out how they're arranged. And if you know how they're arranged, you instantly start to make mental models of poker, a bridge in bridge, for instance. If the bidding happens in a certain way, you get a certain clue on the lay of the table and then you start making immediate eliminations in your mind.


I'm not a very good chess player. I'm probably a terrible choice. But in chess, you do this like probably 100 times more than you do in bridge, but you eliminate possibilities more than you include them. And over time you're. So what do you what you're doing when you're playing is that you're finding a better way to do the same thing that you were doing, brute force methods and then you build.


So somebody tells you that in blackjack you count and there's a reason you can't go back.


But if you play blackjack enough, even if you don't read the books and read the literature on it, you know that if there have been enough face cards that have already come off, sometime you learn this that you don't want to bet anymore.


You know that if the more number of these cards have come in, your chances of of getting off this card of the dealer getting hit and going out later reduces somewhat.


So this kind of mental modeling comes to you after some time. And it's just sometimes that it clicks and sometimes it doesn't. For me, it has never been. So look, I have been playing it for a long time and I somehow have never found it.


Useful enough to go down and try and figure out how to play this a lot better than I than I do right now, but I've done this with Seabridge or some of the other games that I play. And, you know, it's but what I think is fascinating is that it's about interest.


If I was not interested in accounting and I don't know how I got an accounting, there was a pleasure in finding out the interesting things about it.


So even today, I look at accounts and I marvel at some things, like, for instance, they say that, you know, the three things that you can never figure out is that, you know, taxes and how reliance makes profits. But how do makes profits is, you know, is is a book by itself, because for every error, there's a new little nice little accounting technique that they use. And, you know, it's very nasty accounting stuff.


Would you like to I like this man. This is like cool. So it's fascinating to get that that.


Aha. When you kind of find out that they've removed all the kinks in what would otherwise be like vilely, why is anybody doing this. And now it's like, oh yeah, this is why they're doing it. So fascinating. Because of that perhaps. Yeah.


No, there's a lot to unpack here. But firstly I'll say that I'm delighted that you brought up that nuclear declaration because something that I have been planning to write about or maybe find an expert and do an episode about is that, you know, nuclear power could literally be the solution to climate change in the sense that it is so incredibly safe. Obviously, I don't have your level of knowledge about thorium deposits in India, which is a kind of geeky thing I'd expect you to know.


But, you know, I did do a lot of reading on this at one point in time. And it is you know, all the data comprehensively shows that it is by far the safest form of energy. Tens of thousands of people die every year from fossil fuels, and a lot of them are unseen debts, which we don't necessarily directly attribute. But people will bring up this bogey of Chernobyl or whatever. And I think the Chernobyl is that, look, that was not something that, you know, necessarily was a failure of nuclear power.


It was a failure of a certain system of governance, which was really the Soviet system. And that's how you should see it. And while the website is fabulous, I'd recommend a book by Adam Higginbottom on Chernobyl, which I linked from the Señores, which is a wonderful, wonderful book on that subject. I also sort of loved ones on mental models because, you know, you brought up all these different sports and I'll kind of mention them briefly because it seems that the one way in which my years as a poker player changed my thinking and sharpened my thinking was that it made me think about the world in a probabilistic and, you know, not look and not connect results to outcomes.


And it may not be results oriented. Focus more on process and doing the right thing and realize that the role of luck in our lives is, you know, much greater. And that is, of course, the kind of probabilistic thinking is a framework that applies to everything, including investing. I did an episode with more hits at the end and a mutual friend who is also an amazing investor, where we spoke about the similarities between investing and Booker in terms of the kind of different mental models that go in.


Similarly, you sort of mentioned chess. Now, that's also relevant because what you do as a chess player is that there was a study which showed which compared top chess players with beginning chess players and try to figure out how many moves ahead to the sea and the beginning just blowsy, as many moves ahead as the best grandmaster in the world. But the top player will see the right moves. And that is because of pattern recognition, because they are not going by magic or unguardable.


Walk, go. And then this will happen and then this will happen. That's not how they are thinking. They're looking at certain patterns of how the pieces are placed on the board. And from that they know certain patterns of how things move. And in fact, you become better at chess by just by recognizing more and more patterns and using them. So you're thinking at a higher level, which might be a reason, by the way, that, you know, Sudoku is frustrating to you because in Sudoku there are no whio patterns.


Everything is moved by move. Everything is concrete. If you're figuring out Esalen million, no new istrouma unibody and therefore they don't know how your patterns to see. I'm just kind of speculating and thinking aloud. And by the way, I'm not hooked onto this new form of chess on to assert control fog of war, which is beautiful. And what fog of war is that? You know, if anyone has pictures, they should really try it out, is that you can only see your own pieces at the beginning of the game.


You can't see your opponent's pieces. And as you play, you can only see those parts of the board, which will be suskin attack. So if you put a bishop on a long diagonal, you can see everything on the diagonal. The point, you know, it's blocked by something. So it is you know, the difference between poker is registered as a game of perfect information. Well, poker obviously is imperfect information. And this brings that element of imperfect information into chess where you're not just trying to kind of, you know, all the information isn't out there.


So part of your task is to figure out how do I get more information and how do I protect? You know, information from getting out is really a fascinating mix, and I've kind of gone down that rabbit hole in recent days and probably one of the highest ranked players in chess dot com right now in that form of the game. That is obviously not the case in any other form because I play all other forms for time, but I do not try to improve.


I do not want to improve like what poker players would call a fish. But that's what I try to do here, and I guess that's part of it. But if you you form these mental models doing various things and then you can apply them to everything and pattern seeking is not something that you do only in chess. We are pattern seeking creatures. We are sort of evolved to do that, which is why we kind of look for patterns in everything that I do know.


My next question about sort of investing in markets is this and this is possibly a prescriptive question. How should we think about markets? Because from an outsider, someone who doesn't invest, someone who hasn't thought about it at a higher philosophical level, markets can be either, you know, at the very basic level that you're buying into a company and they're using your money and doing something with it. And that's a system. Or it can be like this grand casino, which is completely disconnected from the real world.


Connection in a new economy is going down. Markets are going up, which, of course, you wrote about in this wonderful column in June, which I again, linked from the show notes and possibly courtroom. But people have these very simplistic conceptions of markets. And I presume at some point, obviously, you begin with these simplistic notions as well, and then you begin to find out more about it. So how should we think of markets and, you know, why should we invest in markets?


You know, how has your thinking or kind of how did your thinking rather evolve on the subject?


You know, the problem with markets is that there's always more than one right answer to almost everything. And this is something that a lot of people find extremely uncomfortable. They may be accounting fraud or snuffles that are happening, and yet it may still be a great company to invest. And this is the one of the things that people always find fascinating. But there's a lot of stuff of that sort. Let me start off with the basics.


And, you know, and perhaps I should I should paraphrase this with saying this is not always this is you know, this is just storytelling or anything else.


So if you think about the most simple advice, piece of advice that people can give you, it's just, you know, keep investing and you'll make money.


Oh. That's as simple as it sounds, right, and if you just took that one piece of advice and and nothing else, I think, you know, it would do really well life.


Because with the hows and whys and all that stuff can come later, but this is a really simple piece.


Right now things start to get complicated because you're going to ask me very at least so I can tell you you invest in the stocks with these mutual funds. And, you know, out of every 10 people, you'll find one or two people who say to the investor in March, and then it was really good for a while. And then all those stocks went to ship and I lost all my money and then I'm done. OK, that sounds like it, but that one person is going to influence 10 or 15 other people to say don't invest in markets because this is what it is and now the confusion starts to creep in.


Now, how do I start off the same way I didn't have any money. I love you. My first experience with Stockton, I had seen my father make money out of stocks. He bought Hero MotoCorp Honda at the time when it was in its IPO. He never sold it. He never worked for one reason because he pledged to take a loan to build his house so he couldn't sell it.


So he took that. Those shares are worth, I don't know, 4000 times they were at IPO, but. The interesting thing about thing was I had seen this money being made in stocks and I was like, OK, so I in 2000, February, after looking at stock market going up every single day. I decided to venture into markets myself and I stood in line that I will perform school in line to sit in line and went and invested in ICICI Prudential Mutual Fund Technology Fund, and it was at Entropies and promptly in three months it was a two rupees.


And I said, this is the only money I had ever seen. I'm running my own business. All my money is there at 10000 rupees and I put it into the city, became good and I swore off market saying I don't know how anybody's ever made money off this thing. But when you all this counting thing, I suddenly realized there's a pattern, there's a way to make money.


And if you think about it in a very basic way and maybe this realisation took me years to get, but I'm just going to go back in here. You're making money off the fact that someone else is making money.


You're not going to make money by yourself. And since I'm not selling the pipes, I'm buying the company's shares, then that company's sells pipes. The guy who's selling the pipes knows how to sell pipes. I don't know how to figure that out. All I need to know is that he's selling pipes and he can continue to sell pipes in the future. And I think Pipes is a great market. So that's all I need to care about. You don't get these kind of what you think of the markets as in poker or in in a game where you're playing in a casino.


The odds are always a little bit against a little bit that that little bit in poker.


It start off with poker. You're playing in a team. You probably someone with the odds if you're smart. And when I say odds, I mean, you can try over and over again.


And if you've got the right kind of process, if all you have is a slight edge, a slight edge, over time, you will win.


There are two reasons why, two things that are important for this concept to work. One is that you need to be able to play many times. That means they should stop you, like you can give your 12th standard exams only so many times. And that's you can give it for more than those many times. You have to win the short time frame. So you need a different approach to it, which is also why it's knowledgebase rules-based to think that life is not rules-based.


Life is very random to a certain extent, and therefore you struggle to win in investing.


You have to be able to play many times.


What happens to a lot of people is they get taken in by this Iraqi general one, I'll bet some money on title and that made him 800 call ehteshami be resurrection. To unlearn this took me 10 years to unlearn the philosophy that said, boss, bet everything on one thing. I've done this, I'm an entrepreneur, I've made all my money on my company, and I've had four of them, you know, some different kinds of success, but.


I don't think this is great investing advice that you bet a lot of money on a single thing. I don't think it works for me. And I realized that all time investing is about who you are.


If you're this crazy and you see this in poker, a lot people who come in and say boss is handwritten, which was great because that could be a trophy and you have to go. You have to for the guys want to play on it because of his ego. So people do this Whicher thing, Suzlon and Suzlon, Mebazaa, even though he's lost 80 percent in Suzlon, is putting more money into it thing. Average down, average down stock that falls 90 percent is the stock that first fell 80 percent and then fell by half.


So if you thinking it's 80 percent down, it has nowhere else to go but up.


It's going to fall another only another 10 percent in the overall scheme of things, but 50 percent for you. So this is something that I think it takes time for everyone to learn. But what is fascinating is the building of why you invest or how you invest.


For me, that learning came in over time saying, OK, I look at accounts and look at stock prices and they don't make sense. Is a company that's growing at 10 percent and overvalued at some obscene number. OK, it doesn't make sense. Over time, you realize that this is a lot of luck and luck plays a huge role because sometimes it's a crappy company. It gets its share price point where it can raise capital at a very high value.


It raises that capital at a very high valuation.


And now because that capital, it's strengthened because of this capital raise, it suddenly becomes a good outcome.


I mean, not and it's still overvalued, but it's a good company that can actually withstand a fall. So when there is a fall, because it has this capital cushion, it's able to withstand it. Its competitors are not, which were relatively less priced, but, you know, did not have the kind of capital buffers that this guy does. So it certainly has those capital buffers and stock price increases. The increase in stock price made a company that could ride out a really big downturn.


So this concept never struck me.


I mean, it still astounds me that that happens. And what you really realize is that when a company starts to raise capital, when it's extremely overvalued, it's actually a good company.


And it you need a company to do that, too, and to make to make for a very short break from my original spin of things. Because you want to look at a company and say, OK, no debt is good, no debt companies are good in India. They tell you that a company should not have debt. Yes, there are a lot of companies, a lot of debt based companies which are still good.


And you realize that over time that it's the judicious use of our terms and terminologies and things that you learn and how somebody told you this probably.


And it's underappreciated.


Follow the rules and second, figure out when to break the rules. Is the worst advice you can ever give someone new, because they would have no idea what that means, because first they are to figure out why those rules work and then they to figure out why those rules don't work or when those rules don't work.


But. The art of investing, if there is an art in it, it is the process of figuring out what works and what doesn't and why. Sometimes some things are different and sometimes some things are exactly the same. And many times in this process you'll find out that. OK, so let me start with the basics. You say, OK, the basic advises invest on a regular basis and you'll make money. And then you're doing this for a while and then you realize, oh, shit, and what the market's going up in smoke me doing this every month, I just double down every time.


Just add more money. I have more money and the market keeps going up and I feel like I'm a genius. This is happening right now with a lot of people who started six months ago, but it's happened on every bull cycle in the past. So when you become a genius, the first thing you do is start telling your friends that you're a genius. And then nowadays it's the WhatsApp and the signals and whatever it is. And then you form a following of that sort.


And over time there's a crash at some point and then you realize you're not a genius and that this market is going to beat you up. And because you'll make the same mistake that other people are writing that you're making now, the people are telling you, listen, don't double down on a stock that's that's got corporate governance issues. And you're like, no, no, no, it's temporary. The promoter is not really looking to save. Not everybody needs money right now.


So, like, OK, that statement is just the worst, most horrible statement ever, because, you know, if you siphoning out cash, it's probably real. So then you kind of break it down and said, good, I won't invest in these stocks at all, ever.


And then somebody comes and tells, you know, there's something called technical analysis. We look only at prices and forget what the fund what the company does. It doesn't matter. The price is going up. You bite of the price is coming down, you know. So there's this famous investor called Semirural, was a pretty active on Twitter. Really, really sings.


One of the things is that, you know, the value that rises, that buy stocks that go up, if you ask them what about if it goes on and don't buy it? So he's he's basically it's hindsight bias and all of that stuff.


But all the logical biases we see in debates and reasoning, the same kind of biases exist. Investing, which is you have hindsight bias. You look at survivor survivorship. You say that this strategy worked because you look back and say, well, if I had done this to finance we do you know what? At the same time, the budget finance, was there the same rules that you used, qualified as Suzlon as well. So if you put in any half and half both, well, you might still have made out like a bandit, but it'll be like a smaller bandit bandit without a bandanna.


And also because but I mean, these are the things that you learn over time that these rules of the court, you are selective, sometimes designed to impress rather than actually be true. And nobody is going as nobody's entitled perhaps to correct advice, but nobody gives you that because everybody is colored by their own biases.


The richest of investors today, people who we admire or C have to some extent been shaped by luck. And the few people that don't recognize that you should be so wary of them because giving guidance is easy, man. But, you know, not recognizing the rule of luck in your investing life is a sin. You it all children of an extremely lucky regime.


And you know, and in the markets, there's more luck than anything else. And to attribute most of it to skill is, you know, like you said, they haven't bluffed enough.


Yeah. Or no. Or they've made the right person gotten lucky. Let's take a quick commercial break. When we come back, that is again, as always and everything you say. Lots to unpack here. I want to talk about Bokat. I want to ask you deeper questions about investing, but I will begin by talking about cricket to illustrate a central point about investing in life. But after a quick commercial break. As many of you know, I'll soon be coming out with the fourth volume anthology of the scene on the unseen books organized around the themes of politics, history, economics and society and culture.


These days, I'm wading through over three million words of conversation from all my episodes so far to curate the best bits. And for this to happen, I needed transcripts. And that was made possible by a remarkable young startup called Chief. That Chief Adaptive Dotcom is a digital platform that allows companies to outsource work to their network of freelancers and achieve network includes more than hundred and five thousand people. As of now, you want people to make you a Web page or design a logo or compose a jingle or do some digital marketing for you.


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Welcome back to the scene in The Unseen, we are chatting with the multifaceted depiction, you know, you know, people are, as Isaiah Berlin once said, foxes or hedgehogs, you know, foxes who, you know, know a little bit of a vast variety of subjects and hedgehogs who delve deep into one thing. But if you have the right model, you can be both a fox and a hedgehog. You can know a lot about different things.


So I sort of designed this episode not just to talk about investing, which, of course, the book is the ideal person to speak about that, but also a bunch of other things. But before I do that, I'll go off on sort of a little bit of a tangent and come up with the thought experiment of cricket, which is and I'll explain why it is relevant to my listeners right after this, which is that let's say that, you know, in a universe where betting on matches is illegal, let's say there is a series between India and Australia and they are going to play Seifi one day matches.


Right. So what you do is you have the database of a thousand punters and you write to the thousand punters and you say, listen, visiting all these matches are fixed. I know what is going to happen. I will tell you the result. And you don't need to pay me anything you can either choose to bet on or to bet. But I will give you the result in advance. You track what happens, right? And then you write to 500 of those thousand guys and say India will win and you tell the other half that Australia will win.


So now what will happen is that one of those two sides will win. And therefore, 500 people have just seen that. You got the first prediction, right? Then you write to 250 of them and say India will win the second round to 50 and so on and so forth. And in the end, you will have a bunch of people who will see that you got all five predictions. Right. And what simply happened here, that that particular line of predictions which took you there is what you can call survivorship bias.


And that also illustrates the rule of luck in life, that the market is full of many, many people in many, many funds. And you're not trying all kinds of different strategies. And the guy who got those five hits, you know, right in at all, obviously, the odds against anybody getting those five hits in a row, it's incredibly unlikely. But if everybody's trying all kinds of things, a bunch of people will get those five hits right in a row just by accident or just by luck, which is not to see it at all.


Successful firms or all successful investors are beneficiaries of the survivorship bias. But it is a possibility to consider that luck also played a big role in whatever they did. And this is, of course, one of the biases that you mentioned. So this sort of thought experiment kind of came to mind because whichever smart punter tried this, you know, the guys who've seen him get all five. Right. Are going to pay him big money to, you know, for his next prediction.


And even if he gets it wrong, they'll rationalize that because now they're kind of invested and sunk cost fallacy and all of that rubbish comes into play as far as sort of since Herbert Walker Bush is different from other kinds of gambling in the sense that you're not playing against a house, you're playing against other players.


So in that sense, it is a game of skill, but it's a zero sum game. When there is no house involved, the house takes a little bit of break out of every pot. It's a negative sum game. But the key point that you mentioned, there was bankroll management, like in one of your other interviews I saw about how, you know, after your early investing foray, which you mentioned, you actually put all your savings into the arsenal.


I think it was right.


And there was. Yes, I mean, that was the first stock that I thought was Vincent, I think, which is actually, by the way, as I find out very recently, probably a good thing to have done for. Oh, yes, yeah, so the point being that is that bankroll management is incredibly important, even proper bankroll management can see you go closer and closer towards getting broke. So you also have to in a sense, it would help if you don't have human emotions, if you can just focus on doing the right thing, because we are also wired with something called loss aversion.


We react more negatively to losses than we do to profits. So, you know, which is, again, a sort of a problematic thing to control. But the big question that I want to kind of ask you is, oh, by the way, another of these sort of biases that you mentioned is, you know, and you've mentioned this in previous interviews also, that what beginning investors will tend to do is if a stock goes down, they will want to hold on to it because they want to recoup their losses.


But if it goes up a little bit, they'll sell it immediately because all my little profit Winnaleah, which is entirely the wrong thing to do in poker, the phrase we use for it is called eating like a bird, shooting like an elephant. So that's kind of what it amounts to is a lot of similarities. But the question that I have for you is this, that on the one hand, you could see that in an ideal world, the sort of a you look at the fundamentals of a company, the sort of the Benjamin Graham Warren Buffett kind of way, you look at the fundamentals, you look at the balance sheet, you make projections into the future and the stock prices based on that.


But then, as we know, in the real world, prices are based on supply and demand. And when it comes to the stock market, it seems to me that they are based a lot on perception. And it's not just a perception of how the company is doing. Even if you know the company is shit, you see the stock price going up and you're playing the greater fool theory that, you know, I might buy it at a high price, but somebody will buy it at a higher price because after all, it's moving up.


As Chuck Prince of Citigroup once said, when the music's playing, you've got to keep on dancing. Even if you know you're in a bubble, it could be profitable for you to remain in the bubble. And indeed, it could be rational for you to pay irrational prices if you believe that those prices are going to keep going up. And therefore, that becomes a game which is not related to the real world. Although, you know, George Soros, who had once coined the term reflexivity, we're talking about how perception can affect reality and your example of how a company with a high share price can raise capital, which can actually make it a good company and can justify the share price, which is, you know, seems to me to be a classic example of how perception can actually sort of change reality.


So it seems to me at one level that one that's a game. That's a game where it's not so much anymore about what companies may or may not do. That's just one factor in it our company is doing. How solid are the. But the other bigger factor is a perception's of all the other players in the game. And therefore you're, you know, understanding human behavior is as big a skill, if not a greater skill and understanding balance sheets, for example.


And so how do you approach this? Do you take this as something that is a given and then say that, yes, within this given there can be different sort of systems to approach investing, how has your thinking on this kind of evolved?


So I think this is a very interesting topic because this is comes back to the thing that said, there is no one right answer. There's many right answers. And when you start off, you become increasingly militant about your own thought process.


I like value investing. Everything else is shit. You guys don't know what a company is supposed to be, what you're paying, go overpaying for this and underpaying for that.


And then you realize the most horrible way that perhaps somebody else, you know, grows richer and richer despite following the exact opposite strategy that you have.


And you suddenly realize that that's after some time, many ways to play the game is just kidding. No, I don't know. We're just assuming that some people do. There are many ways to do it. But here's the thing that you start.


You think of companies as a result of metrics or they make profits, they should be worth X amount of profits. Maybe if I had my money in a fixed deposit, it gives me four now, five percent a year.


Therefore, if a hundred rupees to fix deposit gives me were bezier, can I find a company that funds five rupees if I gave it a hundred. So you look at something called a return on equity, which is a similar metric, and you say, OK, well this company owns 20 rupees for every hundred that it has. It's a fantastic company. Better than my fixed deposit. The some risk. So I'll ask it all, 20 percent or 10 percent, more than 10 to 20.


So it's good.


Then you find out that this company is worth something else. Now, in the in the 70s, there were these companies called the Nifty 50 snarkily to our Nifty in India, but they were called the Nifty 50. Among them were very interesting companies, including McDonalds. And at the time, Kodak, Kodak eventually went bankrupt, but you paid a huge amount of money for these extremely good businesses.


McDonald's is not a bad business at all, except even years later, the McDonald's price was 70 percent lower than it was in the 70s. When I talk about this. So sometimes you overpay for a business believing that it's a good business and you will not make any money on that.


It's like you paid the price of a Mercedes for a model. You're not going to get a Mercedes performance and not do I own Maruti. So I shouldn't say too much. Many bad things about Andolan Mercedes.


But here is where the point is that you have to now be a judge of whether what you're paying is worth it or not. So valuation and business analysis are two slightly different things. You come to the conclusion that, OK, I'll pay a certain value for this kind of business and you find out that certain businesses where you can't value them, you simply cannot because you couldn't have imagined the power of an iPhone.


When the iPhone came up, a very few people really thought they thought it was a bigger iPod or you put the Internet in the iPod together in one thing, how whenever we realize there is a revolution to change things and it killed Nokia in a way that even Nokia couldn't have imagined. But, you know, something fundamental changed about the world.


And what's happening now is doing that. What we don't realize is that in the last, say, 20, 24 months, we've certainly seen a change happening and we have not even acknowledged restaurants used to deliver. Now restaurants in India to deliver you always use or Zomato or all of these things for delivery.


And the restaurants themselves don't employ delivery people at all. The whole delivery work force of hotels, restaurants, which is perhaps sometimes only a part time post, graduate people, students and all that stuff is gone. That's that's complete. That entire model is gone bust. In the late 90s, there was these things called Esteva and Estie boots. If you lose your phone today, there is no way you can make a phone call by paying someone for it.


You literally have to beg someone for a phone and ask them to give it to you free. And most of them will because they don't pay anything for the phone call anyways.


But it stuns me that the whole HDD model went to zero and we didn't even notice when. And when you see these changes coming in an industry that you could invest in, you might actually see these nonlinear gains simply because they're not available on those balance sheets anyway. They're not available. They're a function of the future, not of the past. Their function of new technology that's coming in and it's going to break everything. Electric vehicles, for instance, people say, oh, Tesla is expensive and this.


But when you go down to the wire, you actually find out these are is this it's the electric cars. Drones will not sell because they're environmentally friendly.


I don't think many people care. They will sell because they're cheaper and faster period, and that change, if you tell a person you are, you know what, I'm going to keep these motorcycle and stock these companies, even though they continue to sell gaspers bikes and they don't have a strategy for electric because you know what? Nobody's going to buy these environmentally. This is just a fad. It's not. It's actually economically better. And if you see this as a model, you could have said this four years ago.


It would have been great. But the last four years, electric hasn't taken off in India at any meaningful.


We can't see that for the next four. It's about now trying to judge whether that model comes. And then if you're involved in a company that does not have an electric footprint of any sort, then you may be, you know, on the losing side of things. So you have a great balance sheet. Maruti has no debt.


It has a lot of cash on the balance sheet as so many cars are selling. It sells half the number of cars that India sells every month.


And yet if it doesn't have a strategy for electric cars, it might just not survive the next decade.


So things could happen that far. So when you're investing, your problem is now no longer like, oh, I can look at the accounts and figure out what's doing. Well, it's also I have to guess the future and see what's true. And I I can't guess what one of the alternatives to what you talked about in the cricketing terms happens every day in stocks. People send you five stocks saying these five stocks will do well. Invariably, one of them does.


The next day, as I told you about the stock. Now, I don't need to wait for that 1000 to trickle down to 20, I can do this to you every single day and give you five stocks and you'll be thinking, dude, this guy is a genius every day and he's a good stock. But you are looking at the fact that I have lost all four of them and it's very rare that were lost on all five in those days, you know, I'll stop talking to you.


I'll go to the next guy. But this is how the tips market has been working in India for the longest time.


In times like these, when the markets are really hot, you find that, you know, relative newcomers will come and tell you this is this. And you know what? The stock's up at 45 percent in a month. And this is where, you know, they haven't bluffed enough. They haven't played enough because they haven't seen the downturn, because they're highlighting the winds. You meet a guy who highlights his losers. That's the guy you want to talk to about investing because he'll tell you the real lessons that winning is for for everyone.


But so the the mental model that you start moving to when you start investing is is this other part of this philosophy where you say, listen, it's not just the it's not just the future, but it's also our role of luck, because out of those five things that I pick, which had great accounts and a fantastic future, we wondered, well, why you go back and there's no reason for it. And then you say, OK, do you know what, I, I have to play the luksik, which means I have to have enough of those.


So that opportunity will knock on at least one of them, because if you keep just one door, then, you know, they could skip it doesn't look good. I didn't like the color, whatever. And, you know, so the problem with investing as a whole is that you have to imbibe this philosophy saying, listen, you're not going to know everything, and most of them you know nothing. So it's good to know a lot of little things about a lot of industry sometimes and a lot about one industry.


But whatever it is, you got to place multiple bets. The rule by this guy called Larry HYC famous. He says the two rules, if you don't bet, you won't win. That simply means you got to put your money down on something, but if you lose all your chips, you can bet the idea you you got to play to the extent that you don't lose all the chips in poker if you can, because the people go all in and then you either have to battle them or walk away.


And at some point, if they keep betting, all in all, to lose all the chips. But in market, you don't have to bet on the chips. There is no fear in walking away in the middle. And, you know, you can take part profits away from the market at all points in. Given this, the framework slightly started chanting, Look, now you wanna diversify your take a bunch of industries that you think will do well and a bunch of industries that perhaps have done.


So I want to look at, say, a cement company and say, you know what, cement is the most boring thing in the world because you take a bunch of limestone and something else and, you know, make something out of it that you can't even import, because by the time we ship it from China, it turns into stone because of the sea. And, you know, so it's got this little local market in India. So I'm going to bet on the cement player because you can't it doesn't have competition from abroad.


And in India, everybody's a cartel. We all know that. But we love it because we are invested in their shares and so many companies will do well.


There's no reason why this same argument doesn't apply to the U.S. It's just that in the US there are a lot more cement companies, perhaps, but they also don't have these supernormal profit regimes that the current Indian ones do. So you want to bet on this cement and a couple of plasma cement. But I can't stick to cement because that may not be the only thing that works. So I'll buy some steel and I'll buy some technology and I'll buy some.


So you go and I'll start diversifying into all of these. Somewhere along the way, it would have got like 40 companies. What am I doing? I don't have time to analyze all of these companies. And every day somebody or the other buys a small stake. And then I would go and figure out who this guy is and why is he buying and why is someone selling to him? And, you know, some news or press release something.


We have been awarded a price. Now it's time to even figure out if this is valuable news. Sometimes it is completely useless and sometimes it's the news that makes or breaks a company. When you spend more and more time on a company basis, you have diversified too much. You have 40 or 50 companies. You say, well, you know what, this doesn't work for me. Somebody has created something called an index. It's called Sensex or Nifty.


They've found the 50 most valuable companies, put it into a bunch and they've said, listen, this is the index. This is what the market is.


Well, and I say, listen, I know that whatever today's Nifty is not tomorrow's, because tomorrow some other company will come coming up. Why don't I just buy whatever you call the Nifty?


And if you change one company and yes, bank goes out and some new bank comes in, I'm going to just sell that bank and buy the new bank. And I'm not.


If I did that, I would reduce my effort of tracking which company to buy, I don't care if you have cement, steel technology, cigarettes, you know anything, but as long as you have those companies in this index, I own them if they don't.


So, you know, that became one philosophy. And then you take this out and you say, is this the way you buy most of the companies? Let us buy it for you. Just buy one share of me. And that became the mutual fund. That said, oh, I'll play the mutual fund manager to figure out which companies are going. Some of them will just buy an index. Some of them will say I go beyond the index and find companies that are great and geniuses.


And I'm this guy who breeds lives and eats stocks. And I'm this genius. And, you know, I have five stocks and one of them will do well every day and some of. So some people give the money to these people some money, give money to the mutual funds. Some people give money to an index fund, they call it. This is how your training evolves. Then pretty much after this is a phase where you start getting frustrated, seeing mutual funds, a cop, and then somebody tells you that they're charging to your fee.


That's why they're bad. They're like, why am I paying them so much?


They would do this myself. I'd go back and do it myself. I win a few days and like in poker. There is a point at which, you know, a sucker is written on your forehead. And everybody goes through that phase once in their life, hopefully only once. Many people, many times and those people get beaten up by things like, oh, this guy, I have heard a rumor that this company is going to partner with Eslam.


Tesla has just come to India. You have to buy this company. It goes up nine percent on one day. This happened today, today and only in the stock. But this company went up nine percent in in in in like ten minutes. It ended the day down for the. So if you went in and said, like Tesla, come on, and then you find out that the news was bullshit, rumors and all that stuff, and so this process then evolved and you go and give it back to mutual funds, or sometimes you go find what you're really good at and invest it on your own.


This philosophy, I think, emerges over time. It's fascinating for me to watch even myself go through this over time. And I see many people break you drop off somewhere in the line.


You know, you can see them. You've gone in like, for instance, right now. You've got a lot of people saying, I have to participate in the markets.


And after this is the third time and I'm seeing a crazy raging bull market in front of my eyes, and I can tell you that a lot of these people are not coming back when this market tanks. Eventually it will at some point. I don't know where it is. But again, this is again, a friendly piece of advice is to not listen to new bad news like this is a bubble and think of it as a bad thing. Bubbles are good.


Bubbles make things happen. Bubbles is what gives an order and eventually a three year Zomato and all of that stuff. So I think bubbles for all their work and really give us what Indian stock markets are eventually fascinating a lot in Baghdad.


And, you know, the one reason I have never I've stayed away from investing is that, you know, I try not to get too deep into something about which I don't have too much knowledge. So my point is, you know, before I got into poker, started a lot. And obviously you learn along the way for investing. I just saw that I'm not going to invest my money in stock markets because I simply don't know enough. And also for most of my life, I haven't even had the money to invest.


But that's a different matter. But it's like Nakhon and I know obviously a lot of what you said kind of underscores that because there are so many factors that goes into how a stock is priced. I mean, first of all, there's no correct or wrong price at all. There's a you know, it's an interplay between the real world, how things actually are and how companies are doing. It's an interplay between the future, which is full of, you know, unknown unknowns and also with how people perceive the real world and how people perceive the future.


And it's all dreadfully complex, which is by a point that you have also made earlier, is that, you know, never make another system. You might have one system for investing. There might be another system which is doing well. Have the epistemic humility that, you know, there are all kinds of things going around. And if what works for you works for you, that's great. But don't go too much into, you know, don't this adobes.


I mean, I think you could. It also goes back to the parable of different blind people feeling different parts of an elephant in describing it now from this complexity and the humility within our state actually to there are three broad directions I want to kind of go in. And the first of those directions is the role of machine learning or, you know, algorithmic trading, which you did at a point in time where, you know, like the one thing that strikes me is that the market is too complex and all the movements and everything are too complex for humans to figure it out with our primitive brains, which are very advanced in other ways, but in certain ways are very primitive.


And machines can do that better like I had. Professor wasn't heard on this episode recently. He teaches in a stern school of business in New York. So I had an episode with him called Brave New World. I'm also producing a podcast for him called Brave New World. I think Episode four should be out this week. And he started an algorithmic trading firm in New York in the 1990s. And he was talking about how, you know, it would come up with all kinds of counterintuitive things, insights which they would not understand.


But when they try to sort of run simulations where they will use their own judgment and the machine will do something they always lost to the machine. No, I wanted to kind of explore this with you because initially, whenever we deal with machines in any way, we think that, okay, we are the masters, we will program the machine. The machine will do what it does, but we know better. But at some point we realized that, you know, good machine learning is just way ahead.


Like I did an episode with our mutual friend, the one should the tough two or three years ago, and Alpha Zero, the chess program that came out, and the reason it was so mind blowing, what Alpha Zero basically did was that you didn't need to program it like other chess computers with heuristics and with judgments and openings and all of that. It just played against itself a few a million times and learned the game and created its own heuristics and then destroyed the best computer in the world, which was way stronger than the best player in the world, simply destroyed it and destroyed it, not by brute force like Stockfish, which which was a machine that it beat, was doing millions of simulations, you know, per minute.


And this was maybe doing a hundred thousand. But it by playing itself endlessly, it figured out heuristics which were often contrary to what human chess players had figured out over 300 years of the game. You know, in the ways that we value initiatives are immaterial and. So on and so forth, and it strikes me that, you know, so in your what was your process like of getting into algorithmic trading and, you know, were there times where, you know, you would reflexively react against a counterintuitive kind of inputs coming at you from the machine or from the software, but then realizing that there was something it was doing.


Right, which you couldn't fathom. And also is a tell me a little bit about momentum trading, because that's something that, you know, you worked in for a while. And I would assume that that would be something that, you know, emerges out of using a like this because the air is much better placed to process all the data that you need to for that.


That's interesting that you bring both these things up, because I think there's a little bit of a difference between there.


So algorithmic trading is let's say there's two areas. So one is I want to find opportunities to invest in the market. And one of the reasons why I want to find opportunities, because, I mean, I want to rule-based and give me a set of data. I'll find the rules that better match that data. And then I will say, OK, when this happens, I want to do this. So a simple thought process is if I take an average of 10 B average of prices and let me do a simple heuristic rule that says when the price crosses from below that, then the average, because my price would have gone down and below and goes back up.


I want to buy the stock because I expect it to go further up and then maybe at some point when it crosses down below its average, again, I'm going to sell it. This is called a moving average crossover strategy. So it is algorithmic strategy that you couldn't say the rule.


And now, because it doesn't matter which company it could be, this company could be 100 other companies.


All of them have a price, like always a price. I mean, as a price.


I knew we were different from online, but board prices are prices over time. You have prices going up, oil prices going down from up. The prices. I can tell you when this oil price is likely to go up and again, probabilistically. So the algorithmic trading, sometimes they listen, lose the prize itself or some objective fact they're not subjective factor, could determine what will come next. So in a way, it's a short term prediction. But the difference between the prediction is you don't have to be right.


All the time, you don't even have to be right like 80 percent of the time, if you're right 51 percent of the time when you do enough, you will win.


Sometimes you have to be right only 10 percent of the time and you can win. If I tell you that the venture capital murder, Weatherzone will put our money into 10 different companies and nine of them can go bust.


But that one will give me a hundred extra. And if that one gives me a hundred extra done, I earn 10x on my fun and all I need to find is enough bet. So I have a 10 percent windley. But the odds when I, for me, are hundreds to one when I win and zero when I look so technically even a point one percent, but now edge is enough not to be at all point one, point one and 100 times has been.


So if I if I had to be there for 10 rupees on each of the hundred, only on 10 companies, and every time I won it was 100 times what I invested. So why then would become a thousand. So I'd get more than one hundred enlisted. What if I invested in 100 different companies? If I listed 100 different companies, I would then break even if even one of them gave me hundreds. So then you find out that situation where your hedge works for you.


This is the ETrade. So you can program this. You could call this an algorithmic strategy where now you're using heuristics, moving average and working with so rich moving average values. That can be a 10 hour, 40 hour. Let the computer go figure it out. I will tell you that I will use a moving average strategist to find out which moving average actually works in the data that I've given you now. You could have something called a curve vetting process where you say, I've given you three years of data.


Please tell me that the 37, the average is the best.


I should have told me that the 37 day average is the best, but now it could be the next three years.


I see horrible results on the strategy and actually run it with money. There's a reason for that is because I've used the data that was based on a certain time frame, but not perhaps best overall to test this another time frame, saying for the last three years this has done well, but maybe three years before that, at age 37, what would have got? And that was something slightly different, and then I lose too much when that happens or hurts my feelings very different.


So the answer is no, then I can use that model. If the answer is yes, that means I've got something called Overfitting. So I have to use a different strategy. Sometimes the strategy completely fails because it becomes public. There was a public experiment called the totals are very interesting. This is from the movie Trading Places, which originally was Eddie Murphy and a bunch of guys. There were two guys, I forget the other guy's name. One guy was called Richard Dennis, a very famous guy who was a Republican support at the time.


Nowadays, it's a bad thing to be called Republican support, I guess.


But, uh, but interestingly, what happened that time was he had an argument with his friend and he said that guy said, listen, it takes Arktos to invest. Well, so this guy said, no, it's skill, Richard, that he said it's skill. It's not art.


It is a rule-based game. So I guess they disagree. They said, listen, let's do a bet, and he says, yes, I'll do this, but they will train traders like the breed turtles in Singapore, which is in a farm. You just put them into our thinking cage and then they breed them.


So he put out an advertisement saying, listen, you don't have a trading or finance background. That's even better. I want you to come and I'll trade you. And that is help you larocco trade. And you you want to trade my money. So he called these people, literally picked them off the street, gave them a set of rules and said, this is all you want to do.


Those rules made a lot of money. Until I think for my dignity, something to 1992, these people made truckloads of money for him, they went around, some of them became very famous criminals by themselves. One of them is writing books and, you know, a bunch of things now and also has been a successful for.


Interestingly, after 92, they actually published this. In a book, and since then, the rules stopped working because enough people had figured out that you could put this into an algorithm, and then once you have enough people playing the game, then you don't have enough money left in the game. So sometimes the rules will change because people have to figure them out. The markets have figured out that things are changing. So when you write a program in algorithmic trading, you're going to have to incorporate all of these comforting back testing.


How you gonna test how you're going to get real data? Because a company's price can be for free trade can certainly fall to 10 rupees tomorrow. Do you know that it's actually fallen 80 percent or is it a stock split of one is to five and it's caused the price to fall. So you need somebody to go and adjust that data and make sure that the has clean this part of this process is another part. So we figured or through the school of hard knocks perhaps that things aren't exactly the way they seem to be, how to fix the data.


You operate the algorithm to ensure that you're not doing survivorship bias comforting you. Can you also audie's these loss aversion problems in algorithmic systems so you can design a system that's great, like this concept of Rhys's where you lose on main companies would win only one. It takes a different mentality. Imagine losing nine consecutive times before that one big winner you would have given lost Hartsell. And if you have this concept that the loss aversion might end up saying because the stock market, you can get out anytime you want it, we just put a lot of it around.


That's the equivalent of holding your hand and taking the chips and walking away so you could quit just before the stock just breaks out and gives you 100, 100 extra tonne and have missed all of. So you have to build that algorithm in a way that does not give you nine consecutive losses unless that's the kind of person you are and you can handle it. So you find out what somebody calls their uncle point. It's the point at which you call your uncle for help.


So you fight over uncle pointers, like if I lost 30 percent of my money, is that my uncle? And then I don't want to lose 30 percent. So find anything that corresponds to a less than 30 percent loss on my overall portfolio. And so I'm going to find systems that work but that work for the less than 30 percent loss in the interim before I start to make money. So I want to make these bets based on these programs. But this is still a heuristic based logic.


You may use computers to back to me user, but still heuristically, you're giving it the rules and it's kind of testing the rules and implementing them and then saying, listen, you're running this rule. I want to run according to the rules, said, what if you went one step ahead and said, I don't know the rules? Dear computer, please go and figure out what rules work and then. You might find that the computer throws out some very strange things, you and this has happened to me a lot.


So, for instance, the natural tendency that when people see a stock hitting a new high has been always and this is, regardless of it, raffone because it's run up too much. How can you buy at this price?


And I've come to the point where my mind now sees if it's going up OK. Think of it in a way you buy a stock because its stock price will go up. This is precisely what it has done. And so why are you penalizing it by not buying any more of it? Or by selling it or by not buying a stock that's making anyway, because it's doing exactly what it's supposed to do, it's supposed to go where no man has gone before and or woman for that matter.


And, you know, if it's there, why aren't you?


Why? And the answer is, is counterintuitive, because we don't this is where momentum comes in. But the momentum at a later point toward a machine learning to machine can go in and figure out what actually made sense was to buy stocks which are making new highs and buy a lot of these stocks.


And you might look at this and say, this is so counterintuitive. Why would I buy these stocks? The answer seems to be that, yes, you know, you can go back and justify it. I can tell you that if a stock has means making new highs, you know, what's happening is that, you know, it probably made a hike at some point. In fact, there are people who bought it that high who have that same loss aversion problem there.


They don't want to sell on the way down, but their mind is when it comes back to this place, I'll get out of that already. So the price goes back and they sell the place. Maybe it's a little more then comes back further up. So it has gone beyond the point that the last guys who buy water to the last high have, you know, kind of decide to sell and get get out it. Even when it crosses that level.


You have uncharted territory.


You have people who are buying who literally are saying the prices are going even further from this because it's never even and it's never even been here before. So the logic here is that only stocks that are making new great things tend to be here at a point where nobody has bought it earlier. And if you build a portfolio of such stocks, the odds are that you will make much more than you lose. And when you lose, you lose when perhaps when a stock kind of corrects more than 10 percent.


So if you went into the MLR algorithm, you might find that this is one of the counterintuitive things that it does. Or you could discover a completely new thing where you don't even know what it is using to decide. Because the intermediate structure that it has figured out of what makes or breaks stock is in a format that is incomprehensible. You know, it's like saying if I wanted to, OK, this is probably more true than anything else. But apparently recently there has been an attempt to make up translate to a universal translator.


A universal translator would be where you could given a lot of languages and it would be able to translate all of those languages to any other language, give it Mushi, let it learn the machine, learn on its own. So apparently one such as and I don't know how true this is, a friend told me this and he's pretty knowledgeable in this subject, but he says he probably went in and they built this thing. They traded it traded. They put so much machinery behind it that it was a multi machine system.


So you could you could have 100 machines doing the same kind of processing eventually this machine. Figured out that they can take any language and break it into this intermediate language that it had, and if you use that intermediate language to translate into any other language. So the machine figured this out, right? And then there were multiple machines. And when they start transmitting, this, intermediate language bites to each other. These guys realize that, holy shit, they're talking to each other, the computers, they're talking to each other in a language we don't understand.


We have no idea what they're saying to each other.


They shut it down. And this is like, you know, the symbol of Silicon Valley where, you know, thing and all that, but.


It's true that, you know, eventually stuff will happen that is downright scary and it's already scary for many of us. I mean, I could say sometimes they just say, OK. And no, my fault is what did he just say? Because it's looking for quick Google or something like. So the problem really is that, you know, you don't know right now how much things are happening without even the heuristics of a human are leading. It could be the machines that and I'm not afraid of it.


And I know that it's eventually going to happen, but.


It's amazing how far this can get and it's going to get there in computers as well, where they've kind of figured it out in the end. Do whatever you do. All you'll do is either make money or lose money. And I can control that. I can shut you down my losing too much money. So in the algorithmic world, he said, go ahead, go do whatever the hell you want. You want to build an intermediate language. You are you want to analyze Twitter feeds and figure out which stock is going to move tomorrow.


Go ahead and do it. So Emelle or there is basically saying are Olav's of judgment. You know what's interesting is that, you know, George Soros, thing of reflexivity. The more people that use algorithms to determine a certain pattern. The more likely it is that if I know that this is the pattern, you are going to recognize that I can write a program to beat up. It effectively means that I could build my machine, which is entirely built to beat your machine.


It's not meant to beat you. But all I have to know that is and I'll give you an example of this. There's a there's an algorithm written in the US for people who want to sell a large number of stocks so that if I have like 10 million shares of some company to sell, I am not going to be able to sell them. Because the minute I start selling my brokered by editors Aleesha, the brokers will tell all his clients, dump this because this book Shenoy is selling, what, million shares of it.


And before I sell all of his, I want you to get out because he's going to destroy the price.


So I wrote him the frontrunner. So I get it on all of my own and start putting orders. And if I start, I suddenly realized I can't do this because it's too much time. I buy a computer algorithm and one of the algorithms that did this was to sell shares at all in the world. It would send 100 shares of eBay and even into one that would send 500 to 100, 500. There was a computer program written to just detect this pattern of hundred and five so that they could gimmicked.


So finance is evil and we have no idea how evil, because I can tell you that there are no morals and no scruples in this industry. So people will do this if they were widows and orphans involved because they don't care.


And we've seen this in Enron, a bunch of these things. But these are legit programs. And they were written with that particular philosophy of saying, my only job is to jump the other day. And so you get the machine learning on the machine learning kind of algorithms as well. So it can get quite deep in that. What we figured out is that we don't want all of that stuff, not because it's it's a very complex argument of why, but.


I think what makes sense in a lot of sense to people is because when you do something that is algorithmic, really high frequency and all of that stuff, you introduce layers of taxation, layers of, you know, economic value, transaction costs and all of that stuff that kind of hurt a person's return.


Her managing money for somebody else, you want a strategy that doesn't read too much, but also at the same time has some kind of some kind of system behind it that he said if I followed the system consistently over time, I will make enough money.


Sometimes it's the algorithm, the way the algorithm was accepted and that the momentum is one of these things which have this viewer problem that people don't seem to understand it actually counterintuitive.


Like I said, a stock making a new high is is is in momentum and you should buy it. Why should you buy it?


Because it if you look at the system and it backwards, the odds of winning or how much you make when you win is higher if you have the right strategy than how much you lose when you lose. And the strategy is simple. Just keep buying the highest momentum stocks. When the stock loses momentum, replace it with one that has a higher momentum. So over time, if your edger is that you even know it's 50/50, let's say, but you still make more when you win than you lose.


When you lose at the extreme, you can only lose 100 percent of what you put in a stock, but you can make 300 percent. So if you only had a binary win or lose, all you need is a few winners and you would still make more money than you lose because you can win more than two or more than 1x, when you win, you win.


So momentum is simply that embodied into a strategy where it says, I will discover which stocks are moving and they are more likely to give me outsized returns, not more likely to win, but to give me outsized returns.


And the losses are controlled because I get out when they lose momentum. So when they lose momentum, they were lost only 10 or 15 percent.


When they win the give me 40, 50 percent on average over a long period of time, I will make money.


This is a very simple philosophy. And we know what we call indexes are embodiments of momentum in a different way. What are the biggest stocks in India today? The biggest stocks are Lion Sticks, HDFC, HDFC Bank.


Twenty years ago, the similar lines, but there was no resistance. There was probably Hindustan, Unilever, which was one of the top most stocks.


And so why, why, why did they change over time? The answer is that the market capitalization of these stocks changed now. And in fear of this year's world, the top market cap stocks at the at about twenty years ago, they may be slightly so over time. The momentum in market cap made them as part of this index.


Reliance is the highest market cap stock, but five or six years ago it was desists.


If you look at the US, Amazon or Apple have shared the mantle of the highest market cap stock. 20 years ago, it was Exxon and 20 years before that or something else. So the leaders have changed. But what has happened is that each of them has added momentum in market cap. The total number of shares they own multiplied with their stock prices, the market cap, the company, the most valuable companies have floated to the top. So you've taken a moment and this is is that everywhere?


If Virat Kohli is informed, it's a form of momentum. It means that in almost every next year, it makes sense to bet on him on every next subsequent match simply because he's informed. And sometimes being informed itself is a factor. It's the reflexive factor. If you are informed, you have confidence. If you have confidence, the chances that you will get unnerved when something bad happens to a slightly lesser one good ball and that confidence starts to show in your batting.


In subsequent things, your shoulders droop a little bit lesser.


You stand up a little bit straighter, you get your stance a little bit better. You are less nervous. That contributes to your playing better and that increases your form again. So the form kind of positive feedback itself and you do the same thing happens to a company company does well. Its cost customers look into our cost structure. But Chikara and you are looking at different things to our core business that they would give you more money so he gets more money.


Obviously people say the stock is good because the stock price is going up because the company is making more money. But nobody says the company's making more money because the stock price is going up.


And that factor, it's not sexy. So people don't like to see it, but sometimes that adds to it. It's the form that adds to form.


It's the momentum that adds to business sometimes, which is also another layer. Why businesses that are in great momentum in the stock market sometimes have an irrationally. Good effect on their underlying business, potentially.


So this strategy, of course, I justified in hindsight perhaps, and I'm not the first person that the momentum has been. I think that's happened forever. I it like, you know, my kids love Formula One. I love Formula One. I still like what I like. But, you know, I don't have the patience to three hours of car race as much as I did when I was younger. But when I was younger, it was Michael Schumacher and Ferrari.


So I have this fond love of Ferrari and I keep saying this to other people saying I love Ferrari. So I asked my kids, why don't you like Ferrari? Why do you like this? Lewis Hamilton, Mercedes. They say because he wins. And that's the answer. The momentum, actually, everything you said is very fascinating.


And I unpack different parts of it. But I'll throw in a couple of minor disagreements with the things that you said right at the end. For example, with sports, I think, you know, I've seen studies that people form sporting loyalties towards those teams or individuals who are doing well when they are at a certain age, when they are beginning to follow a sport, maybe 13, 14 or maybe later when they begin to follow something. So it's natural that, you know, you would remember Schumacher and Ferrari fondly.


And, you know, and you just from seeing who's an Arsenal fan, I can make out how old they are because it means that, you know, those were Arsenal years and that Arsene Wenger. And that is why, you know, today, you know, you might have people liking different teams away. Indians would, you know, have such a hard core loyalty for these British football teams completely baffles me as far as momentum is concerned. I actually see cricket and sports as the wrong example to use, because I think when we talk of form and when we talk of momentum in sport, you are absolutely right about your domain.


But in sport, when we talk about it, I think we are often imposing narratives in hindsight that in hindsight we can look back and say Akihiro year for Mitha and we define that period by when it ended. But that is a narrative in hindsight. In the moment there's really no such thing, which is why, you know, The Sports Illustrated jinx comes up. The Sports Illustrated jinx, of course, is that, you know, the moment you put someone on the cover of Sports Illustrated, that career goes downwards.


And the reason it happens is that, you know, they were on a lucky streak at that time, which you could ascribe to form or whatever, and you basically put them on the cover when they were at their peak. And then there was a regression to the mean and therefore it appeared that that is a curse and it isn't.


Yeah, let me tell you that. In fact, that is exactly what it is. And the reason why I'm saying it's not different is because we call we have something called loyalties. Which is stupid in the momentum theory.


You have no loyalties, you have only loyalties to them, which means I will go, so I will go with the Roger Federer as long as he's winning. And sometimes he's winning because he's winning. I don't get I found no loyalty through tomorrow. We beaten by the ball. I will go to Nadal if he gets beaten by the next guy. I don't know who the new leaders are in the first place, but let's say somebody else comes in.


And there was a time I was a big Boris Becker fan. I was Ivan Lendl fan. And to be fair, I was more than you are an little fan, General Motors mcavan. But that didn't work out quite as well.


And I was a big Steffi Graf fan and big Serena Williams fan.


But in tennis, I found it easy to kind of not have loyalties in cricket and to bring up tennis players of that era.


I remember I once saw this interview with Jim Courier was doing really well. He won a couple of grand slam tournaments. And at that time, Pete Sampras had just become No.1 in the world, but hadn't yet won his first Grand Slam tournament, which I think was a US Open, which he went on to win. So it was Australia award winning all these Grand Slams. But, you know, Sampras was world number one. He said world number one doesn't matter.


Tell him to win some Grand Slams first. And then I think Sampras won the very next one and then history just unfolded. It sort of clarification to the whole momentum thing. Isn't is it the case that humans are basically, you know, the anchoring effect explains that you see your stock at a particular point, say rupees, it goes to 110, you wouldn't go to the hundred. So in relative to that, hundred and ten seems high and you might as well sell.


Now, while actually it doesn't matter that every single time you look at a stock, you should do a clean reset in your head and not refer to previous prices would in fact refer to previous trends like the momentum. And what you're seeing is that that is more indicative of what is going to happen to the stock tomorrow. And if that momentum is an upward momentum, then just speaking of probabilities, it is likely to go up then to go down and vice versa.


Is that yeah, I saw thing.


You know, we'll bring that up because this is actually one of the biggest problems that you have as a trader yourself. You will buy a stock at 100 and you sell it at 120. This is, of course, because you made this 20 rupees in your time with yourself at Whitecross, because let's say the stock falls back to 90. You are thinking yourself as this hero was managing all the money. So we were beaten by your boss and all that.


And then it goes back to one hundred and thirty. You are going to literally kill yourself before you buy that stock again. Because you're thinking hundred and thirty one hundred with each other, I mean, to me, your mind is telling you, were you wrong to sell it? One hundred and twenty, but your mind is literally what you were. To. And, you know, it'll go back to that time you buy it again. This is your mind playing tricks on you and your mind, thinking that it's a reversal to mean kind of happening, but it's not.


And what happens here is that one hundred and thirty one 200 rupees and you kill yourself. Because not because you didn't buy it, because you didn't buy it, and then 40, you didn't buy 150 environment 60 and any of those times, if you had bought it, you would have still made enough returns to be proud of.


But you didn't because you was fascinated, like you said, the anchoring effect of that hundred grand. It's not the price that was existing. It was the point that you had sold at one hundred and twenty after buying at one hundred. So you were the hero. How can you not be the hero to give up and say buy it back at one hundred and thirty? This is usually where it kills a lot of people, especially value investors, where you're looking at as Benjamin Graham kind of valuating and you can't be wrong.


I mean, you find it difficult to be wrong.


So this is where momentum comes in. And it. Just discipline. It doesn't matter what and that it doesn't matter what the underlying I'll give you an example of the last maybe eight months and maybe people are right. So the stock markets are a it's not a zero sum game. To give you an example, I create a company and I Solutions shares down, and I have probably invested, you know, 50 rupees in the business, but I sell it at 100.


I am happy you've got 100 rupees. I've got 50 with the profit. You take that business that share and whoever was running that business earns a little more profit. Somebody else says, I have value. I see value in over 200 rupees. You sell it to that person at 200, you've made a hundred will be profit. That person looks at the stock price goes to 300 who is lost. It's a zero sum game and somebody should have lost and somebody should have won.


Nobody lost. It's the underlying value of the company that became bigger and bigger, but nobody actually lost the money on this front. It would have lost money if you had sold it to a hundred and then the price came back two hundred and you bought it back at one hundred and that person lost the money. And so that's usually not the stock market as a whole is not a zero sum game.


So your ability to pick up momentum is not at the cost of someone else or pick up stocks that are doing well. It's not that the cost is that somebody else is only to lose in order for you to win. This is something that I and I also feel that this philosophy has to it doesn't come naturally to us. We always think of life as a battle. If you won, then who's lost? If India has won, then Australia should have lost the Test match.


Well, how can you how India and Australia both win and yet, you know, have a match. So the answer to this is not you know, it's not intuitive to us. You learn it all the time that one person's win could be in one timeframe. Another person's win could be in a different time frame. They will be overlapping or not even related. And this is where momentum scores because you don't have to always win. You just how.


So if a stock goes from ten two hundred, if you make between 25 and 50, that's enough for you don't have to make a made entirely from ten to one. You shouldn't have picked the bottoms or picked the of the tops.


If you made anything in the middle you made the meat of the whole thing. This is the tough thing in momentum because you're fighting your own gut. And I do this for me. It's there all the time. I have the same emotional challenges as anybody else. It's just that, you know, sometimes because I've seen it, I still make those mistakes. I sometimes sell because the stock is not too much risk. I go it goes 10000 times.


And then you're like, oh my God, I sold seven. I had no idea. And then now I realised that, you know, I will not have an idea.


I but I should I should sell according to a system rather than according to lopsided view of all this company is on up too much. That's the only thing that protects me sometimes.


So a couple of quick asides before I go on to my next question. And one is about the whole zero, something it's practically you know, it's a common trope, if not a cliche on the show for me to whine about how we are wired to think of the world in zero some ways, and it doesn't really work in those ways. So it's refreshing to see you sort of talk about that. The other thing which I take some time to process is the difference between poker and investing in this case, a book.


It, of course, is a zero sum game and that may be part of the difference. But what we were earlier seeing about how our machine learning figured out a strategy. But if another machine can know that strategy, it can figure out a better strategy. Now, in poker, typically there are two ways to play poker. One is exploitative, which is if I know your strategy, I can exploit your strategy because you could be bluffing too much, in which case I will call you more or you could not be bluffing enough.


In which case I know that you have more value bets and I look forward to your more and so on and so forth. Whatever you do, I can exploit you. However, the other way of playing poker is what is called game theory optimal, where if your sort of ranges are perfect, it doesn't matter what the other person has or what the other person does, you're guaranteed not to lose. So, for example, Pelleted is 200 bucks in a pot and I bet 100 rupees.


So you're you have to call hundred to win 300. Right. You're getting three to one odds. You have to be right. Twenty or twenty five percent of the time. Now therefore if I build my range so that exactly 25 percent of the time I have a bluff and the other 75 percent I have a value and I cannot lose to you. You can lose if your frequencies are not correct and they go on either side. But I cannot lose.


And what would then happen is if you and I are both playing GTA or Game three optimal, which is only possible only in theory because after all, we are all human. If you're both playing GTA and if the casino isn't taking a cut, it's basically bang zero sum. Nobody can win or lose, but because others can play GTA or the closer you get to it, you can win. But your description of what know different machine learning algos fighting each other indicates that in stock markets there's no GPO.


It's all sort of exploitative or perhaps, you know, good deal would be too complex to kind of even. I understand a word that could be like, but my question before I go on to you and I said there were three questions arising out of complexity and humility before we end this, this particular first question about here, would you agree that at some point, like, it seems inevitable to me that all trading at some point must be done by machines must because, one, they can process information much better in process, complexity much better.


And two, humans are hard wired with so many biases that get in the way, some of which you describe. So is it then only a question of time that, you know, that that eventually happens?


Yeah, I think, you know, there is actually this this theory that eventually the forex markets are 99 percent trading by machines, most of it eventually a lot of the stock markets will also be mostly created by machines. It's just the way that they can trade a lot more and they're probably more efficient. So instead of me saying I want to sell so many shares and I believe this is I have proposed this as a solution, even in India, to the government selling stakes in their disinvestment program.


So I'm looking at why it is an correct brogrammer that I don't intend to interfere. And whenever I find someone who would sell some more shares, you will eventually get some 15000 crores or 20, whatever you want. I'll make you make a hundred thousand crores. Who can get it out of that system like that? They just hunt for volume and they will later figure out when it's time to get give when somebody is trying to game it. So it might actually not sell at those times.


And then it can figure out when people actually want to buy those shares, which can sell a little more at those times. It is completely better that that is still and there's a political reason for this, because if a politician decides to sell a business, he's going to demand bids and then he's going to disqualify some people and that'll be politically charged a machine to Hogan to question. So you can't it's a very interesting way to solve a problem that might be both economic and political, but that kind of trading will be done by machines for now.


Eventually, some part of decision making or whether to sell or to buy will also be done by machines by saying, listen, this seems to be too much demand, let me put supply in place and we're too much demand, too much supply and demand. So I sell. So the the this part of this equation is definitely going there. But if you see the last few years and how things have changed for us people in the stock market, where's the money being made?


It's the guys that invested in these new startups where there is no price on release. So there is a there is a startup that's interesting. It comes up and it becomes so big and it raises money from a bunch of investors. Then what do other investors then? A bunch of poor and then goes to the stock market and sells its shares and then it becomes publicly traded. Barbara, but. It's possible that, you know, I'm sitting on the side of this business, which is when it comes to the stock market, then I'll buy it, then it'll become big.


What if it's already become which is what has happened in the last 20 years, is that all the human intelligence has gone into places where there's no data. Or the leaders who didn't do you or that it was not available to you, they're creating new businesses by changing the rules of the game, whereas the stock market guys are working with places where the rules of the game are more well-defined.


So you don't get a PTM in the stock markets. And in other times, opinion would have been listed in the stock markets, would have been able to buy it. But because of our listing rules and people doing lots of frauds with listing shitty companies in the past, you've said rules that are old or inordinately profitable, more than three years of profitability year over year. And those guys are like, dude, I don't care. Will we grow big?


And now it's gone to a point where if we went in there, perhaps was this will be probably part of the nifty 50 valued at that much, even as our market is probably better at a that point where we call a large cap company, a top hundred companies. And this is a factor, I think, more of. Now, if you think about machines, really, where there's a lot of data, there's enough data to analyze it and they make those trades.


The human trading has shifted into the non-exchange traded investment business.


If you automate that, they'll find another way. So if humans. Like with the famous Jurassic Park dialoging, this is finally a non cartoon movie, his life finds a way. So if you take all the jobs away from the trading humans, they will find something else to trade. Bitcoin trading is done by machines. It wasn't to the earlier machine. Humans entered the trade and now the bitcoin machines trade against each other. Perhaps tomorrow there will be another system that will allow humans to trade off of different levels.


People make money off of different things. So scarcity is one. Scarcity is possibly. It's one of the ways Indian stock markets work is that that all the shares are most of the shares are held by very concentrated sort of people. Then the remaining shares are too few. So even a small amount of demand can get the price up. The U.S. operates in a slightly different phenomenon, but bitcoin is the same. So Bitcoin is very low floor. Everybody else wants to hoard.


So the prices are basically if there are enough there's enough volume or liquidity at any point, then it until the price could drop quite as much, which is also happens. And that's why it's very volatile. This phenomenon, I think, has condor's that cause.


So machines will trade and I think humans will also always find something new from tulips in the past to private companies today, there is always something because humans are geared towards creating. We love to make deals. We are like by nature, making individuals. So if you tell that the machines are making all the deals, that's just not going to fly. We'll find something else to deal with.


You talk about humans being deal making creatures and we're always craving action. We want to put the push the chips forward. So to say it's just a bug rather than a feature. For example, in poker, it's really just a small to three percent of the people who really make money. Everybody else loses. But that's a zero sum game. The point that you were making is that stock markets are a positive sum game, though. When they're going down, they might seem like a negative sum game as well.


My second question that arises from complexity and humility, which it should bring us to, is should the common person invest? Like earlier at the start of the show, you give the advice that everyone should invest because that is how you make money. But that is under the assumption that they are investing in a sensible way and that they have an edge now that an argument could be made that most people don't have enough knowledge to invest like I certainly I don't because of exactly that reason that most people don't have the knowledge to invest and therefore they are the suckers at the table.


You know, there's that old saying, if you don't know who is a sucker at the table, it's you. And therefore the other suckers at the table. They might feel good about themselves as they write a bull market, but then it crashes in. Then they realize they know nothing at all and that, you know, and that sort of epistemic humility is something that people like you and I in the different domains, which we actually do know a few things about, the more we learn about it, the more we realize that there is so much to learn.


Right. And that constant humility is what makes us better. The common investor doesn't really have that humility and that you also pointed out that the time to exit a share is possible. Even the bond. What I tell you, it's a good time to buy the share. And it seems to me that, you know, there is a case to be made that maybe common people should not get excited and go in for some of the action because they could just be in above their heads.


And all the trading is being done by machines. People like you are using incredibly complicated software. Of course, one way of investing is you go to a capital minded, you know, trust with the dictionary, with your money, which is great. So then you have an expert and he'll do what he has to for you, which is possibly a sensible way to start, but otherwise be kind of wary because and always, you know, they're dunning Kruger effect.


The less you know, the more you think you know. And that's a great danger with markets where inevitably somebody who is just out there to exploit the whole greater fool theory is the greater fool. So what's your kind of take on this? Because I know that, you know, you care about investing, you would evangelize it. But there is also this downside that, you know, people can just lose a lot because they don't know what they're doing.


Yeah, I mean, let me take this into three parts. So firstly. The this so it comes close to a point about, if at all, but why should you see if you could keep working when our politicians are eight years old, they're still looking. And why can't we continue this work to build your capital and whatever? Come spend it and you don't have to do anything. The minute you will counter this will probably the Depok. What happens if I get angry?


I don't want to work anymore. I have to take a holiday. Where will I get the money for that? I have to save hell. Yes, you do that very close to the answer to that as well. You know what? I'll put it in the bank and the bank's not going to cover inflation. Costs are going up. You got to have the money grow to a point where it's at least the saving is enough to meet that emergency that you really needed to meet and so on.


So you're going to have, you know, kind of beat inflation over the longest time when there are these 10 percent, 11 percent, 12 percent rates where I could say, forget it, just put your money in a bank. Even if it's a fixed deposit, it's five percent and you'll pay some tax on that. And he goes not personally together to get this error has unfortunately gone.


So we're facing a point where a lot of countries have zero percent deposit rates, interest rates, a lot of countries have negative interest rates. So when you put one hundred into a bank, they give you back 99. The answer to why is very complicated, but it's there. That's the situation that's happening in India as well. As recently as yesterday, I was looking at a fixed deposit rates and they reach 4.5 percent or 4.5 percent may still be OK compared to the U.S., but for India, it sounds like a horrible, horrible number.


But given this, if you want your investments to beat that 4.5 percent or you need your money to grow a little bit more than that, you're going to have to invest.


So sometimes when I say invest, it's only because there is almost no alternative doing so. And I don't invest only in stocks. Investment is a way to deploy your money so that it becomes more than what it was, not necessarily that it should be only in equities and stock markets. And for that, I would say that a bunch of more things that you can invest in, you can buy real estate values are believed to go up over time. And over the last 10 years, they have not perhaps gone anywhere.


There is investment in gold, which is one of those old assets where you almost never hear a 10 year period see a loss. So it tends to grow at the rate that inflation goes up again, something that may not necessarily have occurred in the last ten years. The last two years perhaps are an anomaly more than anything else. But before that, the gold price was more or less stable. So there are different things you can invest and you need to be able to invest primarily just to make those extra returns that will beat inflation.


If you don't invest, then you got to work for the rest of your life and assume that you have a stable income. The best thing that you could do is build yourself an income that is passive. When I say that, I mean it could mean writing a book that gets you royalties forever.


But we all know that not all books give you royalties forever, and it's very difficult to write a book. Sometimes people just don't know how to write. And sometimes people I know are trying to change that. But and I hope you do. There's a lot more people that come out of the books. But the way people consume content today is no longer in the format of books alone. It could be a and has opened up new avenues. You could build YouTube videos that eventually get you advertising revenue without even you having to work for it.


So this passive income thing is a great thing to do around investing. So it's like saying, listen, I'm getting something else that gives me continuous income, but not the same thing. So stocks or bonds or fixed deposits or whatever it is that you invest in, that is also another way for you to have an income that is beyond the primary job that you're doing. And that income could be by eating off of the corpus or by the oil stocks being your dividends.


However it is it doesn't matter because if, say, you had five Grasstree and that five crores was giving you half a percent a month, that's two and a half like rupees a month that you could take out of that five crores every month and spend. And if you're spending less, maybe only like a month, then one and a half gets keeps getting added to that five core corpus and which keeps growing until you draw out enough. So your ability to now quit whatever you're doing and do something else has no impact to your life because you could say, listen, even if I don't get a salary, I could pick out the one like a month from these this money I'm making from the investments that I have.


And so it gives you that one additional degree of freedom.


And we don't appreciate this enough, but having as many degrees of freedom as you can in your life is what eventually drives happiness, not joyous joys you can buy.


You can go to Bali to snorkeling. You'll get joy. But happiness is a state of mind. So it requires you to have that to remove those little latent fears in the back of your head. And that's one of the reasons why you invest, not because you should or you have to, because inherent uncertainty, the squirrel that stores nuts and this is why taxes are bad, because they end up taking away from the guys who save the nuts for the winter.


You know, this is what the squirrels saving their winter food is what I call akin to investing. You don't have to do it. You could, you know, hope to find enough nuts at any point in time to be able to survive. But it's the recognition of the fact that the market may not be there. They may be a winter and the winter is coming is the reason why. But I also think that the complexity of investing is too much.


There is way too. And that's because people in this industry are evil. That is why they will tell you stupid things like give me money for six years and I'll give you back so much money for five years. And oh my God, this is a fantastic return. And they call it a unit linked insurance package. And I got a ULIP. Everybody's talking about who lives now, but this is like putting lipstick on a pig. It's a pig.


It's actually better to put your money in a fixed deposit in your bank. You will get higher returns. But nobody's telling you that they've invented this because it's too much education and B, to lose all that education elsewhere. So basically, I mean, I say this is already like uncle of dialogue, but the idea is that if you make things complex, they sound attractive to people who are smart and they sound attractive to people who are not smart.


Also thinking that this person is smart is using words like you in a sentence which is possibly means that he knows what he's talking about. So you automatically get money coming to your fame, recognition, power. Eventually you have enough money to tell other people that you shouldn't chase after money in your life so that if he cheated on other people, you shouldn't look where you go after passion. Want do come on, make your money and then you do whatever passion stuff you want.


But the point about missing that investing is important and is that you should know that the need to invest is driven by those saving marks for interpolating.


I don't mean that in any other way, but I absolutely say that that is what will save you from Ovington.


But that doesn't mean that you have to go in or complicate your life by going and buying a stock that somebody sent you on, what? Suckley Just because that guy sent you five picks and stock WhatsApp yesterday? Because you don't understand this stuff. Once you do, you might appreciate that that guy's bullshitting himself. And then you have to have a strategy and a discipline to do things and all these complexities of how. So discovering who I talked about value investing at one stage, momentum investing, algorithmic investing, the three different styles.


Not every style appeals to every person. It takes a four or five year discovery process in order to get enough of an education. And you've got to be serious fees to the market for giving you that education before you figure out who you are. If you're not that kind of a person, you shouldn't get into complexity. So simplicity would be easier if they sold it better. But it is available for fixed deposits are simple. You put so much money, you get so much money.


It the simplest thing in the world, it's like, you know, there's no other thing.


But there is complexity and stock market people to buy this stock, which is that complex buying index makes sense. I don't care who the top stocks are either by the index and out of maybe an index fund manager. He charges very little fees, but he always buy the top stocks. And I'm happy to go with that. I'm not going to put a hundred rupees into equities. I'm going to put only 70, 30 rupees will be fixed. Deposits are in bonds and that's it.


That's the end of my life. No, Harry Markowitz created this phenomenal. And this goes back to your other thing about how your your childhood or your prime years shape your fears and your your you know, your loyalties.


Harry Markowitz created this massive capital allocation thing. You want some Nobel type of prize and maybe it's a no in itself. I'm sorry. I don't want to I don't mean to insult him, but he's a very famous guy.


So when he was asked, how do you invest your money now, people who are expecting an answer like God, I took calculated risk free capital versus risk cost of capital. I had one. I just went into an inverse derivative of this. He said, I thought about all of the alternatives and I put fifty percent of my money in stocks and fifty percent of money in bonds.


Although you went of the way to figure out how to allocate more money to stocks at a certain time, he said, it's too complex. I just like 50/50. And I'm not the guy who invented the algorithm that tells you how to differentiate between the two doesn't do it himself. And there's another example of somebody else or somebody else or thought what he said about how the past shaped his life. He said, I grew up in Nazi Germany and I saw the worst of all the excesses that people in the nastier side of life and and what you know, the stock market bust, which is what Nazi Germany actually came out of there in 1939.


In 1932, depression was caused by a stock market crash. And he says, when I see that and I see the evil that things happen, I am too scared of the future to put my money into anything but parts. So most people who were born in those times have different risk appetites than people who were born in the 40s in the U.S., which was the baby boomer era. And therefore, those people are much more likely to put money into stocks.


People are born in the 60s, saw the 1970s oil shocks and depressions again. They were likely to put more money. So that's a models also discovering who you are and how your past shapes your life. It's important to do that because you don't want to be unhappy choosing a strategy that is lousy. So just find, according to me, invest according to the kind of risk you can you are willing to take. If you're not willing to take risks.


Don't believe anyone who tells you that you should be. The only caveat to this is if you're completely screwed. And this is my advice to everybody. I've written this, and I think the biggest advice I can give to you is make more money. And that's the end of that story, because if the advice does not involve make more money, you're too rich to get fascinating.


And so it sounds much like be happy. You know, you can just generally kind of throw it out there. A couple of quick asides. One is, I'm glad that you railed against the taxes or you brought up saving Knoxville, Winterthur. And my point about taxes simply is that we should think of taxes as part time slavery. If I am giving 25 percent of my income to the government, I am basically working for the government between January and March.


I start only in April, between January and March aimlessly of the government. And which is not to say that there should be no taxes. There should you know, we need taxes, we need the state. But we should question what is done with that access far more than we actually do, which is the unfortunate thing to keep demanding government should spend on this. Government should rescue it, and the government should do this. But it's our slavery, which is the consequence of that.


Did the other thing is you said, you know you know, you spoke about going to Mali and all of that. And I've just come out of a year of lockdown, you know, I went to freakin Santa Cruz from a lady the other day and I felt so happy. So don't kind of get me started on that. I did. The third thing I would say is that, you know, to sort of paraphrase what you said about why invest.


The point is that, listen, you even if you don't want to invest in the stock market, you are making a decision of what to do with the money that you're saving. You know, either it is in a savings account or a fixed deposit or the stock market or whatever. Now, all of these are very different kinds of risk reward ratios and so on and so forth. And because it is your hard earned money, it is at least your responsibility to figure out how much risk you're willing to take and get the information about which of these is therefore right for you.


As you so wisely said, you know, I just follow Inácio and I just keep it laying in my savings account because, you know, just don't have the bandwidth to figure out all of the other stuff. And that kind of brings me to the other like I don't think by, you know, relationship managers from the bank will call me and say, hey, why don't you buy this instrument or that instrument? And I simply don't, because as you pointed out, that so much of investment advice that the common person gets is so incredibly scummy, like selling insurance to 65 year olds.


And, you know, a common example that you've given in the past and this is so much of it is so scary. And it makes me wonder that, you know, when I can sit at home and start a YouTube channel or a podcast or whatever with such simple tools at my disposal, you know, why don't we have a stage where I could, you know, I could invest my money, but, you know, using such simple tools and of course, one way of doing that is by going to CHENOY for advice or just finding an intermediary who does that for you.


But then which intermediary do trust? Why do you trust them? And so on and so forth. Like I remember my third question really coming out of complexity and that whole complexity, humility paradigm was really about how if so much of stock prices are determined by narratives, they one thing that you want about, which is a sort of a red flag against a companies, when a company says, we are going to do this, you know, we are going to raise capital or we are going to sell this or sell that and whatever.


And your point simply was that why are you telling me you are going to do that? Why don't you just freaking do it? And the fact that it is telling you about what it is going to do instead of doing it is a red flag because it means it is trying to build that narrative and it's focused on the share price. Now, a mutual friend, Little Bay, who is also your Bengaluru City seatmate, you know, once remarked when those old allegations came up against a particular party for hacking EVMs.


And he said, why do they need to have EVMs? It is easier to hack the human mind. And it seems to me that that is true. And what you do have it all these peddlers of narratives is that you have incredibly skilled marketers who know how to manipulate the human mind, perhaps using the kind of jargon you mentioned, become, you know, ULIP or Debenture Kalinga and whatever. And you think this guy knows what he's talking about.


But techniques of hacking the human mind have become so complicated that as a common person who doesn't know anything about this subject, my instinct is to just stay the hell away because otherwise I am going to get fooled. You know, I know a lot about one or two subjects, but everything else, I am extremely wary of being conned. And here, of course, there is a lot at stake so you can get conned. So, you know, is this something that you see changing the fact that the common man has to be permanently bewildered, whereas with other things like I no longer you know, if I buy a printer, it's plug and play.


I don't have to install 40 freaking drivers like we had to do 20 years ago. That got simplified. You were telling me before the session started about how you assemble a desktop computer for your son and it was so easy. Motherboard, a chip, certainly a hard drive up going to and it's just working out of the box. To me, that's unimaginable because that's not how I know computers. So can this kind of thing what do you do with your money and what happens to it?


Can this ever get simplified? Isn't that the next big problem waiting to be solved?


This is very interesting. I, I think I mean, OK, I'm betting my future on the fact that it is a problem what solving. So I am very biased on that. So I believe it is my job to make my job obsolete because I come from a background where automation is the only God you care about, which means you are from technology. You're going to automate things, you're going to remove the intermediaries. And yet here I am as an intermediary, somebody I ask to trust me in order to figure out what's best for them money.


Sometimes this philosophy can be the more people.


I've tried this in the past saying, listen, we'll give you an algorithm.


And you can invest according to that algorithm, you don't need me, you just have to. But every algorithm has its faults and every human therefor has a complication because they're not thinking, not just because is this a problem with the algorithm is it's natural that once in a while see a loss or do I have to change this algorithm?


And now I need a human being to help me figure out whether this is the case or that is the case? And then if I need a human being anyway, I'm going to go with this advice, then why do I need the algorithm? Let him go and select whatever it is that he wants.


So we fall back on Human Trust. Kutty, I believe in the like in the US they've tried things like, oh, we do automatic accounting. When you save your money into a bank account, it automatically get swept into some kind of a money market account. And then from there it goes into some kind of stock market account and gets invested. For instance, you and I don't have Employee Provident Fund, but if we did that money, 10 percent of it would be forcibly invested into the stock market.


Even if you didn't like stocks, there's nothing we can do about it. Somebody is automatically doing that for us. India has come, interestingly, from a phase of forced investing by telling us that you don't know what is best for you and therefore give a fixed deposit is that you don't know what is best for you.


So you give me money at four and a half, five, six percent as a fixed deposit. I will go lend it to Reliance Industries at nine and a half percent. I will make the intermediate thing. And don't ask me why you can't lend to nine and a half percent because you don't know what is good for you. When we evolved from there, we said, OK, maybe you know that it's giving money to Reliance's. Better for you.


Go ahead and do it. So when we've evolved, we've just added one degree of freedom removed the institution called the bank, which was the intermediary between us and clients and allows us to directly talk plans.


Now, you might argue that's a good thing because it removes the power of the banker to manipulate our fortunes because they have and also allows us to get a slightly higher return by doing things ourselves in this process.


Now, this complexity, the guy who doesn't know about the bank or lives doesn't know whether he should go to the lines. We should go to a bank. So now you have this dichotomy which has been created by more information. It's like saying, why do we need 48 brands of soap? We know that all the soap does is killing you and you can put some scent and in some sense to the other, but if you go to the market today, there are big, small, tiny.


This melts fast is not so for women, only for armadillo. For women only. I mean, come on. But no, but that's the reality. And then you have shampoo's for this kind of hair. And so the more developed country is, the more degrees of freedom a country has, the more traces of soap that are in the supermarkets and therefore the more choices of investments there will be for the citizens of that country.


And therefore, at some level, that complexity is a byproduct of our freedoms. So if we took it away in some way and we continue to retain freedom as an important part of our society, then we would continue to have other investment products on top of whatever is simple. So what is simple is always not going to be easy to access. But I do think that given the amount of misselling and the lack of retribution.


Because if somebody mis sold your policy insurance policy, there is no a. The guy gets to continue to sleep at night while you don't. So this happens because people say that bad has to be bad. I don't think that's a that's a correct philosophy, that we need laws. And here I will be a little anti libertarian in the sense I will say that you do need laws to protect against misselling of this kind. But at the same time, I don't want choice to be taken.


To me, that means you will not need that type of I a good simple thing that's just easy for everybody to see what I'm doing.


And this is a low risk thing and a high risk thing. And it's very simple. Lauristin will be just bank deposit kind of thing. High risk thing will be something more risky, like stocks or real estate or whatever it is. And you can choose some money here and some money that and you're done. That would be a brilliant thing to have. I don't know whether and I'm going to bet my future on the fact that people desire simplicity, although everything in the past shows that they love complexity.


But the example you said came to mind, which is why do we just buy devices now and they just work? You don't hear people complaining a lot about, oh, my God, I'm in a service station with many of my cell phone the other five days, it hasn't come back. Of course, you find one of unsterile those kind of complaints, but nobody gives their cell phones for service anymore, either twittering by anyone or, you know, you know that once it goes wrong, it's gone and you just replace it, but you don't get your TV repaired.


When I was a kid, you'll always be going bad and we'd call it the better, you know, to come. And he would do something complicated. Intraperitoneal govey know these people are very smart, so they know exactly what is wrong with your cathode ray tube TV and whether something is bad or something like that. But their entire jobs have been taken away. Because you don't need to repair this thing anymore when electric cars come, the nature of the system is that a dealership exists a little bit because of sales, but this much because of service, much more.


The service and spares give the dealership it's much required revenue in order for it to continue our dealership. Tomorrow, the electric car comes, they don't need any service that's like a lifetime warranty, they can afford to it much lower parts. You don't have to do anything. There's no countrypolitan oil change of any sort. I mean, maybe there's some inside of the motos, but I don't know.


But however, what I'm trying to get at is that when you've simplified something through technology or to some kind of new this thing, it changes that industry forever.


Tomorrow's dealers, they will not demean rubinow dealers who may be directly buying from Tesla, which you currently have to go to new dealers. But every other manufacturer, Maruti, you don't buy from you go to a dealer. You don't buy. You can't go to Hindustan Unilever's website and buy even one. So although they sell so you can go to PMG and buy diapers, they sell diapers.


But the reason is because they've built a supply chain. You go to the distributors in the middle and those distributors are a little bit of margin. So that soap and if you start selling diapers directly and everybody go buying from them, all those people who go out of business, and that will change the nature of life.


So when you do that in finance, you also impact a very large number of people by removing the intermediaries in the place. But that's the only way to go. In the US, there's a company called Vanguard. It started in the 70s. It said, listen, don't invest with active active managers are perhaps maybe people like me who see the book. I mean, so I'll tell you, listen, I know how to invest. I can find stocks.


I have this fantastic strategy and I will find these stocks and I will make you lots of money and you give me money. I'm actively managing your funds for that. I charge you a one percent, two percent a year, or typically in India, it's like two percent. But they charge you two percent a year to manage your money. What Vanguard did was this guy called John Bogle. He said, listen, this is crazy because if I just bought the indexes, I would beat most of these active fund managers.


Sure, one or two will beat me, but they're not going to be the same one or two for a long time. A few will beat me this year and tomorrow Weetbix and tomorrow will be acces in fourth year, it'll be somebody else.


So if you stuck with one fund, chances are you'll be on top one year, but then you'll be on the bottom for the rest of the year. So if you were to look at something simple enough that could and that beats just because of charging lower fees Vanguardia in the ecosystem, it's the second largest fund manager in the world.


It manages some seven trillion, six trillion dollars worth of assets.


The biggest one is a company called BlackRock Lumber, Larry Fink, which has both active and is passive with the passive so much overshadows the active that you are running on a world that is almost entirely run on index funds. When I see index funds, it means people are actively making decisions. They're just the largest market cap companies. And what happens when you have a system where the largest companies are the ones that everybody invests in is that the largest companies get more money.


So at some point, perhaps it will not matter if these companies make profits or not, because when you save money and it goes automatically into these passive funds, nobody's making the stock selections. People are just buying the highest owned companies. So the money keeps going to the highest quality, the companies. Eventually, they'll be a small sort of people, perhaps influential, that will then say, I know that this company is a frog, you're giving it more money, but it's dead in the top simply because you're giving it more money.


But I think it'll go down. They go and talk to stocks. Some of those stocks fall you because they fall. You stop taking giving them any more money and then they fall all the way to zero. Something else comes up. This is the way the systems in the U.S. not work right now. And because they have simplified this process, it's very easy for you to make that investment, hopefully in India. And I believe this will come because it's there that you will be having one of those choices.


And one of those choices will be don't put too much of your mind to it, go with a strategy, passive concept that has worked in the past and that will continue to work. You may not be the best that's out there, but you will be definitely not be the worst because you're not making those active calls. This philosophy, I think eventually it's probably less than five percent of what I think it'll go up to 35, 40 percent eventually while not going back there again.


And I'd say that, you know, the sort of the car dealerships being driven out of car dealership by electric cars because, you know, they mostly do service and that would be required. Reminds me of the boots you spoke about earlier. And I think we both agree that that kind of creative destruction is a damn good thing. It brings value for people. It goes back into the economy, creates new jobs in new sectors. You know, it's not like all the people who were running at boards could do nothing else with their lives.


The economy boomed and they found other things to do. And I would sort of contest a couple of things. One is I would say that, you know, having laws that protect pensioners from evil insurance salesman are not anti libertarian, though every libertarian would agree that you need that kind of protection, whether it's through tort laws or someone. But if someone, you know, misrepresents a particular product or service and they make money off you, that's basically cheating.


So, of course, you want the rule of law to protect you from that. And the other thing I'd say is that, you know, I used to bring about the supermarket analogy. I used to talk about any kinds of shampoos at the supermarket and say how that's such a great thing. And I've written a column about this in the context of education, about how our students today don't have a choice. They have one kind of system, one kind of school.


But shampooer people have a lot of choice. And I would say that, you know, what you said was that complexity is a byproduct of a free society. It's a choice is a byproduct of a free society and not necessarily complexity. Because when I go to buy a soup, I think I can be assured that every soap I pick up in the supermarket will do the job of cleaning me. Right. Whereas I don't have the same assurance with any kind of financial product.


I see, because I just need to know how to even begin to understand how the hell they work. But as you're pointing out, maybe, you know, we can, I think, simultaneously move towards greater choice and greater simplicity and all these frauds who fall by the wayside as will inevitably happen, like the study books of your to the history books. Guys weren't frauds. They were important businessmen providing a useful service that is no longer required. But you know that things will kind of change.


Let me ask you point one thing, or they're very interesting, because this is interesting analogy of I mean, the story that goes making the rounds. I read about how an insurance policy that you could have taken would have made more money in a fixed deposit. OK, and sometimes even I'm stupid because the problem isn't that they're buying a substandard product. That can help them make less money in the future. Sometimes all that is required that people need is to save money, regardless of whether it owns five percent or three percent because of the story that goes around wrong around saying this is a guy who's a smoker and somebody comes to him and asked him, how many cigarettes do smoking is is, ah, 20.


And then that's 20 cigarettes a day. Yeah. How many years have you been smoking? Over 30 years. So 30 years into 365 and 220. My God. That's 25 like rupee's. You could have bought a Ferrari by now. So this guy looks at the person and says, well, do you smoke. No, come on. Where's your Ferrari as the point. Right. In the end, you can I can read about these products all all I want.


But if even if it's doing that little iota of service of seeing that you could in the end have a bunch of money that came out of nowhere. I tell you this.


I felt as myself I had an insurance policy I had bought in 2000 or something of that which was a horrible insurance for. But given the way I am, I always look at this sunk cost fallacy and every point in time I'm going to shift or I want to look at this as a tregg, interest in what's better. Forget what's happened in the past. It was always better to see I got this money this year I. Brendan bought my son a piano, this gives me immense amount of joy.


I, I tell you, it's just getting that money. It was a decent sum of money, but this getting that money made me feel that. Do you know what I know was a shitty product, but just in the middle of a lock down, getting this nice little check or this money coming to your back or that is awesome. And I don't I want to see this.


All my bullshit about you learning to be a better investor or not is just throw it out.


If you're not doing anything to save if you're saving money and sitting in your bank account and you're not spending too much of it, even sometimes that is enough. You don't have to invest. Maybe this simplification of investing is glorifying investing more than perhaps what is really required is just save and you'll make or break. Yeah, I mean, it can be as simple as that. No, no, of course, in previous interviews, you've you done this really nice episode, I think Episode four of the Capital Mind podcast I from the Señores, where you spoke about these kinds of intermediaries and people who will, you know, selling insurance product to a 65 year old pensioner and not let him know that there's no liquidity.


So he has no escape. His money is just blocked for five years. And stuff like that just sounds like horrendous to me, which is why my advice would be that if you do not understand something completely, do not do it. You know, beware of the Dunning Kruger effect. Have some humility about the limits of your own knowledge, which is why my money is in a savings account. I am saving whatever little there is of it. But, you know, it's going to move to you know, people would have wondered the entire episode, Somalia and it hasn't Asadi but the one thing we want him to ask.


Right, which is the economy is going down, down, down. Stock market is going up, up. Now, why is this you have of course written that you wrote a column about this in June, which I love, where you spoke about how in 1958 the U.S. industrial production fell 10 percent in less than a year. Stock market went up 30 percent. You have quoted John Templeton's explanation of that and all of that. But in simple terms, for all the junta who sat through patiently for three years to wait for me to ask you this question, you pay Haukaas.


Is this all a big scam? Kindly explain the oil.


Everything's a big scam if you ask me, but then it doesn't. You know, at that level, it doesn't matter on a long enough timeline the chances of survival of anything close to zero. Right. So the problem at some point is that we are trying to justify this market. It's not justifiable.


This is a very, very interesting situation where you've had I will not try to justify not don't get me wrong here. I will not say that this is a great market, but something has changed. And what that something is, is this glut of liquidity. To give you an example of how crazy it has been, the amount of money that's been printed in the last one year, perhaps, you know, is greater than money printing the last time and the money printing the last 10 was rather than the last 30 be.


The idea that the central bankers have decided is that I will not let stock prices fall. Specificly, stock price. I don't know why. And one of the reasons in the US is very clear is that people's power, when they've made interest rate zero, they have literally told us that there will be no interest that you will receive on the money that you place inside a bank, and therefore you have to take risk in your investments. And they have taken that risk by putting their money into stocks.


Since people's retirement money is now almost entirely into stocks you can't do in the stock market, it has political ramifications because you are killing people's retirements. And when you do that, you say that I will protect the stock market at any cost. The answer to doing that is to print money. When you print money, a lot of it. What has happened really is that companies like Google, Facebook, which otherwise in an interest bearing economy, would have taken years and years and years to get profitable, suddenly become not well, not profitable to get attractive.


And they were right, because if you had invested in a Facebook in the early years, you might have said the I mean, why am I investing in a Facebook? It's not making any money. And, you know, it's interesting technology, but what's the point of it? The other side of that equation is that if you put your money, nowhere else is that OK? Let's keep it here. So Facebook gets that amount of time like Uber has, like Squiggy has.


They may be making losses, but people are forgiving those losses, specifically foreign investors who are saying, listen, go ahead, build a big industry, kill all the delivery boys.


You become the delivery boy network of India. And the you know, nobody else can compete with you because everybody else has an industry to fight against. So, I mean, you do that, you create a different set of incentives. The same way in stock markets, people have been incentivized to invest when they've invested in the stock market's gone up and around the world. It's not just in India. So around the world also, they have discovered all India is an interesting phenomenon.


Let's invest there the investment fund that invests in India, that the money comes to India in the last two months. That's for November and December of twenty twenty one like twenty thousand crores is coming to the Indian stock markets from abroad. Forget from India one like really thousand was a scam.


And that massive thirty percent fall you saw in April, in March of twenty twenty during the global crisis saw only 60000 crores. So literally twice that has come, and that is not even OK to give you an example of, what, 120000 Krause's? It's about 16 billion dollars, 16 billion dollars is in a whole two month cycle is nothing.


And I say nothing because what the U.S. is printed in March or April together is five billion or something like that.


Their first stimulus was two trillion. That is nearly a hundred times more than what my India received as foreign investment in the stock market in them in the last two months. So the scale of things is that India is so tiny that even if you throw it, what are crumbs from outside? India gets about one percent of worldwide capital. So if new capital that has been printed, money that has been printed is five trillion, India should get a 50 billion dollar cheque at some point.


I mean, together drop out of Italy, 16 Ascham. So you can imagine that if they printed five trillion already and they're promising to print more because it's a stimulus coming in the US and the EU, in Europe, in Britain, in Japan, there's always a stimulus that's like permanently stimulated. And then you've got all that money. One percent of that makes its way to India is at one percent. Forget India being a big economy or whatever, just one percent.


That would be two or 3x what India would receive in any great year. And that's going to keep these stock markets irrationally buoyant for a long time. So looking at it from a primarily oh, my Guadaloupe trading at 40 times earnings and 50 times earnings is one way to think about it. But the other way to think about it is to see these guys keep printing this money. And whenever there's a crisis, they print more money. So at what point are you going to fight them?


Maybe they'll keep printing it until they die, at which point my fight will be useless. So at some point, if your savings bank can't give you 0%, it's.


You would also like to put to put a little weight in stocks and you will watch it go up and you'll be happy about it. And when it goes down, of course, you know, really causes the world, but nowadays goes down. Cycles last two months before central banks come together and say, let's bring our ass off.


And so I think that is a true explanation of where we are today. But I would hesitate to say that this is in any form. Public life changes very fast, very often and more when you least expect to carry if you want to invest. I would say just be careful of the music's playing, but you got to be standing near the door at some point in time.


You know, I mean, it's easier. OK, let's put it this way. You would walk more carefully if you knew you were walking on X. So if you don't know that you're walking on eggshells, you're in for surprise at some point because they're hard boiled today and tomorrow is when the not so the questions that sometimes and you know, Warren Buffett as this fantastic I mean, I'm a I'm a big fan of his persona, not so much of his investing philosophy, but from his persona itself.


And the persona is great because he makes these pithy one liners which kind of embody so many things in that one sentence, if you say to contradict myself.


So he says it's only when the tide runs out that you find out who's swimming naked. So your it's true. In the stock market, everybody's making money to buy a Jet Airways, which hasn't flown off three years. Two years is still making new highs in the stock market.


Pretty. And people are buying smoke, not necessarily mirrors and not really even a pulse is optional. Chet Edwards does not have a pulse and is making new highs. And in that kind of a market, you got to be careful so things can break down at any point and when it's going to be. But what I know is this is forever going to be interesting and perplexing at the same time. So, you know, somebody told me this knock bulgogi girl.


This is one of those times when the only person who can do it successfully closes nose and be aware that you take this money out with the loss when he has to, but that the more irrational this market gets, it can get even more. Alan Greenspan had this a saying that he said this Stock prices are increasingly irrational. And I put with thread about this, which is that when he said it, the price was X, it went down to some 30 percent more and then dropped 20 percent.


The lowest point of the after that drop was still 10 percent higher than when he said it. Then it went on to make another 50 percent higher. You imagine the frustration of this guy who's I mean, who's looked at Greenspan said he's seeing it irrational. So it must be irrational. And for six years, you've not see prices come down to anywhere close to his level. So that's what I say, that this is irrational as a market. It's happening because of the glut of liquidity.


You're fighting the central bankers by saying, I won't invest when the market valuations are so high and therefore you your strategy should be a completely different one. Be careful. That's what I would say.


You know, there's also that other pithy one liner about how the market can stay irrational longer than you can stay solvent. So if you're planning to kind of fight the irrationality, let me kind of process this consequence of printing money. You know, typically what we are taught in macroeconomics and it's broadly true is that if you increase the money supply, inflation happens because if you're just going to print money, money supply goes up relative to the goods and services that are available.


So inflation happened and inflation is, of course, a tax on the poor because the poor are having to pay more. Now, as you've pointed out in the real world over the last 10 years, printing money hasn't really led to that kind of real world inflation, possibly because of factors like growing productivity and technology, making things cheaper at the same time and so on. So you could say that given that in the counterfactual things would possibly have been even cheaper, that this is an unseen kind of inflation that, you know, doesn't result in prices necessarily moving up, but in being higher than they otherwise would be.


So a lot of this is entering sort of keeping the stock market going. That is possibly sort of the scene inflation, as it were. You know, what are you know, and it just, again, strikes me, you know, I don't know the subject of much debt, so I'm asking you. But it seems to me that at some point something's got to give or is it the case that governments can just keep printing money? Every time there's a crisis, they'll get together, lower the interest rate, print more money and keep the dance going on, as it were?


Or do you think something's got to give? What is your sense of what's happening?


Interestingly, I have a very, very slightly different take on this sort of explanatory. Printing money tends to end rent seeking.


Oh, it's interesting, because when you have a situation where let's say I'll give an example, Uber would never have come up any other way through if I had to buy all of these cars and provide a decent return to my investors, I would not be writing a new book. It's just not possible. What what what is true is or promises drivers an extremely high return promises taxi takers are people like us are extremely low price and bridges the gap by making losses funded by people who say, listen, guys, go ahead and do this until people realize that they all can't live without the service.


They sell their own cars and survive on you. So you're now your marginal cost of revenue so you can reduce the amount you give your drivers little bit, increase the fares a little bit, and you reach this extreme profitability because you have the market size that you wanted. This would never have been possible for the industry to come. And you have money printing of this magnitude simply by seeing that people have to invest in risky avenues. You make such businesses possible.


You increase productivity effectively because what you've done is introduced a far more productive layer called the uber taxi than the old taxi, which did not have any thought in Bombay. You had to go out and managed to go out into the taxi in Bangalore. Your finger would be stuck there forever. It would. There's just no way to, you know. So now even those things for places that didn't have the Bombay taxis and even the Bombay taxis, you had those old Fiat cars because they give the taxi license, according to the Karnac, according to the driver.


So you can't get rid of those cars. And those people are like because they have the license, they can't give it up, they can't get a new car. So what they do is they keep the car on. Do you get a car when you have that stick shift, which nobody has seen since 1977, and those are cars you continue to have in Bombay.


That's because of a screwed up rule that allows a municipality to give power to one agency, which is that whatever the taxi even agency is licensed giving it to determine a rule.


That said. And so I was saying that the taxi network that. He saw automated in this fashion was all in some way the result of cheap money, cheap money has resulted in the largest companies in the world being debt free. Can you imagine what that means? We made that cheap and free. Apple, Amazon, Microsoft, Google have no worries. Apple has some because of some tax bullshit. But net, net, they have hundred and forty billion dollars in cash or something like that.


So it's unimaginable because this is the counterintuitive thing. How can you make debt almost zero cost and yet the largest companies in the world are companies are debt free. The lines in India use this opportunity to make itself net debt free to sell it. It owes banks money because the banks need to order money, because if you take away reliances debt, the banking system is in bad shape and they want the companies like Reliance not to give back their loans.


So Reliance has, you know, a hundred and fifty thousand dollars in cash and 50000 frozen loans and net zero. The printing of money has actually made companies less dependent on debt.


And that also makes sense. To give you an example, if you have an economy with 10 people owing each other money. So I use a hairdresser, I owe money, the hairdresser owes a cyclist all the money and the cyclist or the shop was the money in the shop owes me money. Technically, all of us are in debt. If one person were to get paid, they pay back their loans to everybody else. Suddenly the economy is net debt.


So therefore that is what happened. The governments have absorbed the bulk of the debt. Countries still have or people still have a large amount of debt. Which is why this phenomenon of cutting out the messenger, cutting out the middleman, getting older and sicker is what the cheap money is doing. And this is also why inflation's not coming up, because every time you cut the middleman, you improve productivity, not productivity.


Increase corresponds to a slightly higher. So to give you the analogy, let's say there was a place with only one bank. There were a hundred people making widgets of some sort, the 100 widgets and each widget costs one rupee. So the 100 rupees in the system, somebody finds a way to make everybody produce two widgets instead. Now there's 200 widgets. There is not 200 rupees to pay for it, so the price of the widget falls to 50 percent.


So the price comes down because of the increase in productivity.


So that's what they call real GDP growth when they say real GDP growth is the fact that your productivity has increased from 100, 200 to 100 percent real GDP growth. The nominal growth is zero in this case because the prices went down to half. What if I printed another hundred reports now, I would have 200 rupees for 200 widgets and the price would remain the same. OK, what if I printed 300 rupees instead? No, I would have 400 rupees and 200 widgets and therefore the prices increase from one to two rupees.


PERUGGIA So this is the various macroeconomic factors playing a role here. Productivity and increase in money supply in right now. What's happened is they increase money supply in a way that hasn't made its way into the economy. So a lot of money sits in the banks and with the central banks, what has made its way to the economy is getting offset by the productivity benefits of cheap money.


So the inflation that we expect to see is simply not there, but it has resulted in it's up to the one place that it is not coming is an asset prices, which means that real estate prices went up when you first reduced money supply.


And that was a big problem that went bust. You had then stock prices. Stock prices went up. They went down because of covid, not because of an extreme amount of these things.


Only went to good. They printed more money.


Stock prices are back up. So asset prices have not seen any productivity benefits because there's only positive feedback loops. Unfortunately, there's no negative feedback. It's like when everybody is listing their own companies and making them go public is when you might actually see some kind of correction to this phenomenon. But as I said, people watch the stock market so curlier the stock market with a barometer. Now you want to influence the barometer. So I want the temperature to reach 90 degrees because you're measuring 90 degrees and telling me I was healthy.


So salame 90 degrees according to the data. So, you know, it's like in India, this current government tells us the data that we want to see. And it's true of past governments as well in different ways, but suddenly, you know, there was a lot of the data is not really trustworthy. That's because it's a flexible day at work. And the same thing that asset prices already have come down because it can make them look bad and they have the power to do so.


At one point they will not. Bitcoin is perhaps the geek answer to this thing, to good price. But all that I will buy something that, you know, protects me but protects you from what it protects you from nothing. It's just basically another invention of human beings that is currently not controlled by anybody. And I say currently I mean, there are plans for people to control it and the technology that allows people to control it. But when you have asset price inflation like this.


So to give you an idea of what happened in hyperinflation in Russia once there was a short period of time in 2014 before that inservice, that in Zimbabwe when you had hyperinflation, people went and bought real assets. And as I realized, I mean, cars, iPhones, bend's expensive pens because they retained value, even though the inflation inflationary scenario, that aspect is just translate that into what they're printing money like crazy.


Let's just go buy stocks. That's what is happening. There is hyper inflation in asset prices, but we don't care because we don't have a consumer prices.


You know what kind of strikes me here is that politics gets into this and therefore narratives get into this because like you said, once it becomes a barometer, like anything that becomes a metric can be gamed. For example, at one point the GDP became a metric. He is the economy doing well and therefore it is in the government's interest to get the GDP. And it's easy for the government to gain the GDP because government spending is a part of GDP so it can dig up a million ditches and fill them up and your GDP goes up and there are various other ways to game the GDP.


Similarly, it seems to me that if people are looking at stock market prices as a metric by which you sort of judge how well the economy is doing, that's also easy to game. Just print more money, boom. And, you know, because of all of these other factors and these positive feedback loops and all of that, it isn't actually reflecting on the ground. And there's no hyper inflation as of yet. But who knows what unintended consequences and unseen effects are waiting for us down the road.


Maybe 10 years later, if you do an episode, we can discuss the future.


Only we know at the time. A few final questions. And here's the thing.


So, you know, I did an episode a few weeks back with the advertising guru Missenden, who's written a bunch of books on advertising. And one of the things I realized, talking with him and talking earlier with Santoshi, they say another advertising giant I had done an episode with is that following the advertising of the country, you can actually get a lot of insights into our society and our culture and our economy. Similarly, when talking to you, it strikes me that for someone who follows the stock market as closely as you do, which is not just the world of perceptions and all of the feedback loops that happen within, but a lot of it, you know, feeds down into the real world.


I mean, the most obvious example of that was, you know, it's almost a quiz question where three months ago there was this chart which showed one company shares plunging down and the other one plunging up on the same day. And that was the day the vaccine was announced. So one was Zoome and the other was some airline. And, you know, so the real world is involved here. And you're looking at investing in stock markets so closely.


Must have also given you interesting bits of insight about our nation and our society. Is that the case in you know, would you like to share some of that? Oh, yes.


I mean, if you think about the software we're using right now, we're looking at the operating systems on our cell phones. Almost none of them have any listings in India. I mean, we if you think about the early 2000s or early 1990s, the time that every product you used, you could buy it off the stock market, you could buy anything you really want to. Soaps you use, you could buy, you know, so almost everything that you use was listed today.


A lot of the stuff that you use is not listed in India. What do you get in Indian markets is a stark contrast to anything that you get in foreign markets. That means the best. The companies that we use today are almost all exclusively listed in the U.S. The companies that are listed in India are companies who you know about. But you, for instance, if I told you Tata Steel is a great company. Yes, yes. But if I gave you 10 steel bars, I'm telling you, there is no way you would have out which one is from Tata Steel and which one is from JSW Steel.


And of course, they try to print their names on it just to show the difference. But they behave exactly the same.


The commodity products that drive a lot of the Indian companies, this coal, cement, oil and gas and a bunch of things. One, few companies are trying to break out of that loop has been something like Reliance was gone and done, a Jew and a bunch of start up level investments. So there are few and. Far between and to a very large extent, I see this quite often, perhaps you should go and go to a company's website and the number of companies website on which you can actually do a transaction to buy that company's products indicates the level of technology that has permeated into the economy in the last 10 years.


Perhaps that issue in India has improved 10 percent. In the U.S., it's probably 90 percent. And that's quite amazing because you could go to zooming by Zoom as a product in Reliance. Of course, I think one of their website, many websites you could actually buy stuff, but hardly any so many of the others, you simply can't.


They just give you information about who they are as a company who could even go and visit it because it's a tech company. And, you know, at best they'll tell you to contact them. But you couldn't download or use any of their products, even though they are tech companies, even the technology savvy of them are not for you. So in a way, they are not reflective of the economy. The stock market is not for sure. That's why there is a dichotomy between the stock market and the real economy, because a lot of the products that people use on a regular basis, even the Indian ones, are not listed.


We use tomatoes. We have, I don't know, a bunch of things that we do. None of them are listed in India.


Some of them don't want to be listed in India. Some of them can't because of our rules. So our stock market really determines the kind of influence technology has had, unless I have a whole lot of hope, because I feel that the next era is going to be where technology companies take over the Indian economy. But you can see the level of sophistication in that economy by just looking at how evolved the companies are from high tech business, even if they're not to company.


I mean, tomatoes are tech companies that are a company that has an app, but that primarily does delivery.


Mitsuo or USLAW, on the other hand, is a technology company that also sells cars, which is such a difference because you can't see that of almost any company in India or regional R&D and stuff like that. It's not like we don't have the brains. It's just that for some reason we haven't gotten there yet. And maybe that happens when India becomes a bigger economy. Five trillion dollars. I mean, it is is India being, you know, low down the value chain and the kind of things that we do so much of commodity and not enough innovation, is that partly because of cultural factors like risk aversion and all that?


Or is it because of regulatory environment or governance? What do you think are the reasons behind it? And is that something that you see changing?


Yes, I think the reason is simple. It's high interest rates. The informal interest rates are actually 24 percent. Of course, credit card worldwide people. So that's a that's a horrible metric to look at. But you go to a bank, they don't want to give you a loan, less than 12 percent. Now they're saying, okay, home loans at six and a half percent. Somebody recently talked about some other loans at eight percent.


But the first time we hear of them and these banks are borrowing it, you know, three percent or four percent, there's no competition in that banking sector. And until now, it has not been prudent for people to actually try to take risks. I wrote a blog post in 2006. I had no idea this would happen, that my expenses would inflate at roughly six percent per year. I looked at that was yesterday, so shit. Let me see how much this is actually.


And you know what? It's it's inflated 5.1 percent here. Not not bad, which is.


And at that time when I wrote six percent a year, people told me doesn't six percent of India's inflation is then I said no, but my inflation is different from India's inflation because the product basket I use is different. So I think my core inflation, I mean, not gold. I didn't have kids at the time, so I said I'm not counting kids school expenses. Have you factored in the piano piano game?


Me, I bought it in 2002 and so, so, so.


But interestingly, the inflation that I have mean I'm talking minus school fees is so, you know, with inflation being at five percent, I was able to get eight, nine percent interest rates at that time until two years ago. I think it was eight, nine percent to three, seven or eight to inflation on a personal level is five percent and I'm getting seven percent. Why do I need to take risks if that were to change and you're fighting against somebody else who has to compete not against a twelve percent interest rate, but against a five percent interest rate, which is perhaps China or America?


I think it's not it's no wonder they'll win because they have to earn less profits and they can beat you on price. So we then stop imports because come on, how can we have cheaper products that aren't?


But the answer is, you know, they have to lower interest rates. We've screwed up and we've managed to control inflation to a very large extent the last year. But we steadfastly kept our heads too high.


And that has resulted according to mean as being extremely non-competitive. It's one of the factors. There are hundreds of other factors, regulatory overload. You can't start an investment company in India. I can't invest in a drama without you perhaps even getting an income tax noticing. How the hell did I invest in you at a high valuation? Because for Carl, this is how the regulatory and tax situations in India are. So that also contributes to these this lack of anything.


But we are an extremely entrepreneurial country and and formal credit is available to very few people in order to start their business. And it's available at a very high cost at these factors together, according to me, is why India loves the coal companies and the just the large business.


We still want big employers. Why I mean, why can't we just exercise more of this? I mean, the reason Swaggy works is because each person thinks he's his own boss, because he's actually a he's a writer. He's a consultant. He's not actually employed by. And like this, he could create a billion a zillion different kinds of models. But we still love the fact that in one factory there will be a thousand people, a thousand people will get jobs.


But that philosophy is why I think we continue to like our complex and in a way, we've become a little bit more like Korea and Japan.


People rescue the top corporate and not let them go to. Japan did that with the top six Japanese companies, the Korean chaebol, his famous Samsung and LG continue to be their top kind of players in Korea. That's because those countries have said these guys are too big to fail and we will bail them out at all costs.


India has done it to all its banks and to a lot of large corporates as well, which causes resentment, but more like they hate people who come and disrupt those people's businesses as well. So get a lot of important Tata Steel or DWC lot, but also Steel Coal Company. And so that is the philosophy of the thought process and.


I used to be there for a reason, is that because it's almost become Indian in the sense that the philosophy is more Indian? Because in America you would let companies until the last year would let companies fail.


Now that also they don't let companies fail.


So but, you know, failure, unfortunately, is considered. So, you know, these companies will go down because some companies will have to come and become better than them. Not that these companies will fail. You know, it's tragic.


And when you talk about rescuing these big companies, what is happening happening is that the profits are being privatized, but the losses are being socialized, which basically means it comes down on us and on our taxes, which remembers part time slavery. Instead of working from January to March, you'll have to work for a few days of April for the government for free. Also, that is what Gourami is, my good friend. Do you think you're a free person or you want to have sort of three final questions for you before I let you go?


You've been very generous with your time, and as both of us know, enough economics to know that this has an opportunity cost. So I'm very grateful that you're, you know, hanging out and chatting with me, though I could also point out that it's a positive sum game and we are both having fun. So my third last question for you is basically this, that if the depiction of 2021 could meet the dictionary of 2001 and give him advice about this, I might be a over the last 20 years, which will help you in your journey, but your investing journey and your journey in general.


What would you tell the book?


Perhaps one thing that I mean, of course, my first feeling is to write all the stocks to buy so that you don't buy to be specific.


What I mean. But this is my problem and this is the stock stock market problem of people going from the future back to the past.


But one of the things that I think people will I mean, I will tell that person is I changed careers completely. I was a tech guy. I moved to finance. And it was a long period of fighting with myself before I changed it. And that period of that fight was very useless because I could use my skills on the tech level in the finance work and tech skills by themselves have a use in that. They're only useful in some world that they build.


It's only recently that they can be useful by itself, but usually it helps some other industry. So to that extent, I think the person that I would say that I should become is to stop fighting those battles about what is the right way to proceed in the future. In 2001, I was running a business and that business is actually doing well, even though there was a downturn in the economy. And I believed at that point a lot of those things that that I thought would come true.


You just gave it time. It worked. I think the new me will just say, listen, I always set up a time frame. If things don't work out on those time frames, you're all you need to be out. You need to. And maybe trading and markets have taught me that that set up a stop loss. And if things don't work out by that time, you're OK. That's the learning I would take to that time because it was not intuitive, because at that time I thought, dude, I am engineer, I'm smart guy.


I can it on anything.


The role of luck is perhaps, you know, this is Uncle Me talking to younger me and the younger me would never listen to me. But really, it's like appreciate the role of luck and create more opportunities for luck.


So at some point in the middle, like stop that opportunity, and that landed up in a situation where in 2005 I was, you know.


For a small period of time, bankrupt when I say bankrupt, not united or anybody money, but I didn't have any money. After seven years of working with a temporary office, I borrowed money from my wife to kind of pay for a few things. But I don't think I kept that in mind when I was running the business, that there is something beyond for a guy who talks about personal finance and investing. I was a horrible investor. I'm the opposite of a lot of things I tell people to save all the time.


My entire future is dependent on the company I've built or I have helped build, and which is that all of my medicine that I tell people to diversify. But my bets are that for the most part.


So similarly, I think the learnings of what I'm doing right now is that you're going to build yourself a little bit more of a saving and equity, that you could have done more of your stuff that you want to do for passion or that you to like that can build you a great asset in the future, can happen earlier than you talk and you on slavery to the government for four months. Sometimes it's slavery to something else for 12 months and do a lot of people it's like, dude, I'm slaving over anyway, you might as well say for the government at the same time.


So that that was the philosophy that drove me to entrepreneurship multiple times and perhaps in 93, never go, to be honest. Like I said, the young me will just not listen to the old sumac, which we will do. No, we got our. I I think more or less, you know, it's just sad. That's good. Perhaps I see my children now and I kind of admire them for it, although I'm very frustrated sometimes.


Yes. I think, you know, back YouTube channel manager is a job, OK? No, but yes, OK. It is perhaps because he shows me these numbers that these people make and I'm like, that's not a job, but that's a lot of money where, you know, I mean, I'm that's just me being the thing.


But I tell you, sometimes they're not listening to people like me is a good thing.


Well, so your uncle's advice to the younger you is don't listen to me, which is fantastically in ways I can't even begin to describe. Second last piece of advice. Listeners of the show always want to know what books to read to learn more about the subject. So if you are to someone like me, intelligent layperson, I hope I can describe myself as that intelligent layperson want to learn more about a subject. You know, what are my first go to is not necessarily just books.


Maybe there's a YouTube series out there. Maybe there's a movie somewhere. I don't know. But if someone wants to learn about investing, what are the first steps that they should take in your view, or what are the books that shaped you?


This is actually incredibly difficult to answer because I think I have both been led and misled by books.


The unfortunate problem that you have the authority in this industry is that they do not accept that there are many right ways to solve the same problem and that money printing creates inflation and money printing does not create inflation are both correct at the same time, perhaps at the same place. So a lot of the theory is wrong in the sense that you don't have I mean, not not much of this is is known. Sometimes it takes some time to understand. But what I would say is my reading of my entire series of reading.


That's the stuff that started it. Some of it no longer exists. So there was this lady, her name was Doris Dunley called Tanta or Tanta know how to pronounce.


But there's a blog called Calculated Risk Blog Dot com. And to be honest, a lot of the stuff I learned on the about things like mortgages and economic fundamentals were from that blog at that time. She unfortunately passed away from cancer in her writing, although survives in the blog is probably no longer relevant in a way that it used to be at the time. And she talked about the housing crisis before there was a housing crisis, but she talked about mortgages.


And, you know, a lot of the understanding of my understanding of that feeling that time was from that.


Another thing that I learned was that you read interviews and podcasts, lectures perhaps to get these little nuggets of information that you would otherwise find difficult for someone.


To paraphrase a good book. And there is a podcast called Simply Invest Like the Best by Patrick O'Shaughnessy. So it's a very interesting podcast from people nowadays.


A lot of topics not because by James O'Shaughnessy, maybe this is his dad. I don't know. Of course, his dad is also legendary investor. So he's also an investor. He runs a fund, but he also takes this podcast. Very interesting people. And that that I think has very interesting and not the more you look at that podcast, more you realize how different investing has become because a lot of the topics that are private company investing, bitcoin, real estate stocks, different kinds of stocks and so on.


There's another set of books by a guy called Jack Schwager.


These are books that actually initially attracted me to investing algorithmically, a book that I read about these totals. The phenomenon that I talked about was written in 1990. This book, the first series, it's called Market Results, and there are about four or five hedge fund market wizards stock market. Was that the first two in that book market? Wizards and the new market wizards talk about investing as a career and people who believe that investing it is just purely interviews of them.


You want to learn about the history of the stock market in the US. And it's very interesting because India has parallels and does not have a similar book is a book called What Goes Up. It's a beautiful book. It just contains a lot of things and quotes by a lot of people through the various cities or right from 1929 nine post 1929 to the start of Merrill Lynch in 1934, stops before Merrill Lynch was eliminated from history. But it's a very interesting history of the time of the U.S. stock market in India.


There's a book called A Scam by the Wall, and they were Shigematsu, which is a phenomenon.


I mean, you might have seen the CVS on Sony life, but if you like economics or think it may be a little daunting, but the amount of detail in that is spectacular.


Talks about so many things that I didn't know about in 1992. I now understand that subject a little bit more, but I think big lots of credit to certain devices for actually simplifying, going through and looking through all of that in that angle. Of course, none of these are educational books from the perspective of in the end of it, I could ask you five questions and you can answer them, but they put things across into perspective that will shape the way you want to if you want.


Purely like the Benjamin Graham book you mentioned, which I have I have tried several times. I have not been able to go past at least 30 pages. I think this is this is my problem with Atlas Shrugged as well. So I'm sorry to interrupt. I have not been able to go past thirty pages and it is my problem. And Nassim Taleb, second book, Black Swan, that's the book. I haven't been able to get just past the book because at some point there are some things which.


I just can't read, but the interesting thing about those books is that the thought process is, I mean, tell you what to invest in Hawaii and all that stuff, but it'll give you an interesting purpose. So, for instance, I don't agree with one book at all. Like this is a book by Robert Kusakabe Karnad I know. Pitched at BORTAC. I don't agree with a lot of concepts of that, but one point which he makes is passive income and how it can change your life.


That's what getting home sometimes you read people who do different things from what you see or what you think. So, for instance, I would not like Warren Buffett's philosophy quite as much as, you know, isn't his investing style. I'm not a value investor by the face of it, but. I think a lot of us seeing a lot of very interesting answers, some of the statements that he says and you should read this book by way of Warren Buffett, which is not a glorifying book.


It's my book I called Roger Lowenstein, called Buffett as unimaginative as that word. It's a brilliant book because it goes through his life in a different way. Another book which he's written called When Genius Failed, which talks worldwide, is algorithmic trading thing. When people think that they are too intelligent, what happens? It was a book. It's a story of think of long term capital management and by Nobel laureates who so they brought on the whole economic system.


And you know what? To this day, their formula continues to be followed religiously by everybody, including regulators, saying this is the only formula that exists because in spite of its dramatic failure, we don't have an alternative.


Karaf something to believe in, man. So, you know, that's unfortunately the I won't recommend too many books because, you know, you don't have to have something to believe in.


You don't have to have another hero.


You know, when genius failed is great. And I have written a note and a little bit of graem. All of that, though I find them very entertaining on Twitter. He keeps fighting with all my favorite public intellectuals. So that's really his.


He's blocked me. He's blocked it. Oh, he's. You interacted with him. Yeah. So there you go. Yeah, he's extremely acerbic in an entertaining way, but he's fought with a lot of people I admire on Twitter, like Steven Pinker, Philip Tetlock, op ed by law, Nate Silver, he just shits on all of them all the time. So that's good for notices. This is like a fabulous list. And I'm kind of reminded of how, you know, when PORKED began evolving, like around circa 2002, you could have bought books on Poca.


But what has happened over the last ten years is that there is no book which is really up to date. It's changing really fast. All you have is nuggets of wisdom here. And the people who really know shit are not going to share it randomly because obviously they're still making money off it. So, you know, there was a period of time of about five years coinciding with the years when I was abroad, that you basically had to pick up nuggets from here and there and all the books were outdated and basically they would lead you down the wrong track.


So my final question, because it's pretty late in the night and I want to let you get back to your home and your dinner and that ocus piano playing of your progeny is now that we're ending this episode and our listeners hopefully are much more interested in who is the opportunity, who has given us so much again. Tell me a little bit about capital and what this capital might do and why should people go to capital mined for their investment needs?


Yeah, OK, this is going to be a bit so yeah, it's better that way. It is. It is nakedly apage.


So I'm inviting meagerly, which is brilliant. Okay, so the capital mined at Capital Weingarten is a portfolio manager. So we actually manage money and we also have something called Capital Mind Premium. Both of these are different. One is do it yourself. The premium is a Do-It-Yourself model where we explain various pleading. We have portfolios. We are different expert reports on how things work from macroeconomics to bond markets to different ways. You can buy different kinds of bonds to make money and save taxes and how to invest your money and so on.


This is a premium community on Slack, which is why we don't it helps. This is a do it yourself model. But we as I said, we just a portfolio manager.


We also have to do it. We do it for you model. So where we can take your money and invest it in your name into stocks and our fixed income, we have a bunch of algorithms and tech behind it. So it's fintech in a way that isn't completely algorithmic. But we have designed algorithms that help you reach longer term goals and we have portfolios that are complex, like we have a multi-cap and momentum strategy, both of which use different philosophies to invest in different stocks in the market.


We also have something that you might or you say talked about, which is just blindly something that super to do, something that's about 65 percent India's top hundred stocks, 35 percent U.S. top hundred stocks and nothing else, relatively cheap, continuous investment strategy that strangely, as we do most mutual funds and even most of our other investing strategies other than momentum, which has done really well in the last one or two years.


Of course, this is a minimum of the slack. So we can't accept less, unfortunately, but we keep our fees relatively low.


So very high value for money service and a lot of technology so that we can automate most of the tasks that people otherwise regularly. I mean, other companies in this industry might find it more difficult to do.


We are a system based on a lot of simplicity, basmati. What do you reading? People in Bangalore? Twenty people now in Bangalore, but with a lot of hard. A lot of connections, you can find me on Twitter, you'll find me on YouTube, where I find a lot of party members on both Twitter and YouTube talking about these things.


We are also, you know, hopefully as as things grow, we'll probably get more and more into the fintech area. One thing we don't do at this point, and probably sometimes you useful to tell people what we don't do. We don't do we don't sell insurance. We don't do things like fixed deposit without a bank. We don't lend people money and we try to keep it as simple as possible.


That's my call, Aramic. I think what would be useful, as you know, if you're looking at reading even some of the books that we've talked to that I haven't actually talked about on the books that we recommended, there's a post that came out recently which has a bunch of books that the team loves to read, some of which are holding back from the show notes.


I learned that from the show. Yes, I have.


We have a library here consisting about 75 percent of the books that I have read and 25 percent that I will pretend to have read. And so you don't please if you're in town, we would like to visit there. And it is hardly out and the out as well. So just a tiny introduction to what capital mind is. Also, one of the things that we will not do is guarantee that also if you ask me, like, I have no idea.


So that's the that's the only thing that I can tell you that I can't tell anyone who guarantees your return is a fraud.


Another of the lessons that I remember you've kind of shared in the past and, you know, among the many, many, many lessons you've shared in this episode and in all of your writing and podcasts will, of course, link the Capital Mind podcast from the Señores. And you're writing as well. Deepak, thanks so much for taking so much time out for the show.


Hey, thanks, man. I think if anybody is here, I'm going to personally clap for you guys. I mean, all of you made it all the way to the end. The thanks I get this has been wonderful. I have no qualms about time at all.


But I guess the Internet is telling us that it's time to cool with it, disconnecting us during this recording. So we've basically been sitting together for almost four and a half hours, though obviously the episode will be much shorter than that. So thanks. Cheers.


Thanks. Thanks again. Thanks everyone for listening. Thanks I much. If you enjoyed listening to this episode, hop on over to the Señores for relevant links, you can follow the book on Twitter at Depok Shenoy. You can follow me at on my Amitay readme. You can browse past episodes of the scene in the Unseen at seen unseen dot and it will be an excellent investment of your time.


Did you enjoy this episode of the scene in The Unseen? If so, would you like to support the production of the show? You can go over to see unseen and slash support and contribute any amount you like to keep this podcast alive and kicking. Thank you.