BẢN CHÉP ÂM THANH 🔗
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Hello everyone.
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Welcome to another edition of the Timeless Wisdom episode of the ContraMinds Podcast.
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In this episode, I'm revisiting my conversation with Shan Shekar, founder and CIO of iThought PMS.
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Shan has over 15 years of experience in investment management and is also an angel investor.
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His keen eye for identifying potential startup ideas, promising founders, and backing them with patient capital is something I found different from many investors that I've met and interacted.
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His views about capital, evaluation, and entrepreneurship are all grounded in reality, which is something that I find as a rarity in many investors I meet.
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In the second part of this episode, he breaks the myth and talks about why investing is less about intelligence and more about discipline, self-awareness, and resisting hurt behavior.
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This part of the episode explores FOMO, virality, imitation, and the importance of staying within your own circle of competence.
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Let's dive in and listen to Sham and his thoughts in the Timeless Wisdom episode.
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I just want to have a conversation with you about two of those tweets.
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Okay.
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Amongst you know a lot of other brilliant ones.
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So the first is I think you put something out on the 1st of May about uh Warren Buffett, and uh you were basically saying to experience his style and learn from an investor, few ground rules apply.
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Don't clone blindly, don't quote him obsessively, avoid comparison, uh never virtue sell yourself using him.
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Understand him, but don't oversimplify him.
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Genuine learning and respect are behavioral.
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So I think it's a lot of interesting things going on in that week, but can you talk about the origins of where that uh idea even came from and why you actually.
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Anybody who is coming into the investment world, it's a natural fascination to see people who have done seven decades and are still able to maintain relevance.
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I don't think too many people have done it.
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Certainly not in India.
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Strangely, the longevity of our investors is not as good as the longevity of the great American investors.
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Maybe hopefully, some people are going to live long and do that seven decade thing.
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When you have such a long track record and history and a body of work, adulation is bound to follow.
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Everybody would want to be like you, but like in entrepreneurship in the investment world, also, no one person can be like the other.
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For example, Warren Buffett is not like his mentor Benjamin Graham, and despite him having numerous disciples and numerous people who claim to be Ekalevas, there is a problem in how we are going to learn from him and how we are going to learn with him.
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Ekalaeva never used Jonacharya to improve his image in society or to get some other objective.
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For him, learning was the primary pursuit.
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In investing, also, I think that we must learn a little bit from Ek Laiva.
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That's the simple thing that I would like to say.
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Because uh yeah, we would have learned a few learned a few things for sure, but how much are we going to be able to do it in our work?
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And what we do should be more from the learning than just doing what he has done.
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That is not learning.
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So you are saying have heroes.
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Yes, because individuality is what is going to keep you going because your heroes will be gone one day.
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After that, what are you going to do?
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It's like you know, there are Indian gurus who live.
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As long as they live, the place they live is buzzing, people go and visit them every year or whatever function.
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There are grand occasions, there are lakhs who visit.
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After that, how many people are able to carry forward what they have learned from the guru in the absence of the guru?
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So, if at all you are deeply reverential of the guru, I think that your engagement with that person itself should transcend tokenism, it should have more meaningful impact in what you are taking away, what you are carrying into yourself, and whatever little you are practicing.
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I don't see people who are continuously posturing, practicing enough.
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So I think that that difference is very, very critical for everybody.
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It's very critical.
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That's that says more about how you are treating a guru first, somebody whom you claim as your teacher.
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Yeah, yeah, no, it's that's totally true, and very it resonates with me because you see a lot of these people who wake up in the morning and put out like a Warren Buffett quote in the morning, and I'm like, why are you all doing this on Twitter?
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So I think recognition comes to people who position their own self in society.
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When you have less to position about yourself, it's a very easy option to
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position yourself as somebody's associate.
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It's very easy.
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Yeah, yeah, yeah.
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That's true.
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And this is a great segue to the second week, which I wanted to talk to you about, which is the more you sensationalize your investing, the more ordinary your investing would look.
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Uh, something simply won't happen by trying too hard.
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It's crystal clear, very, very concise and very precise and accurate, but some context will provide greater clarity to our listeners.
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So, what investors like us bring to the table first?
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We bring capital, we bring conviction, but we don't bring delivery.
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Delivery is outside our domain of competence.
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Investors deliver nothing, the delivery is in the hands of people who are entrepreneurial, they don't hide how much they can deliver.
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The best guys never overpromise.
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They always believe in promising modestly and delivering more than what they promised.
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Now, as an investor, if I am going to give just my capital to a company and then go to town trying to virtue sell the company, then I have no control over what the company is going to deliver.
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So, what am I trying to sensationalize?
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I am trying to sensationalize my involvement in the company, and I am trying to make more people say become affected by that sensationalism and participate in it.
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Effectively, without contributing to the success of the business, I am overpromising on behalf of the company.
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This is what I mean in that quote.
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I have zero competence to do it actually, and it's clearly sitting in the middle of being irresponsible.
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No, it's it's totally irresponsible.
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So, what happens is if something goes right, because the entrepreneur is a super guy who has delivered even beyond what I thought he would deliver, then I take credit.
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But if he doesn't deliver, right, then the blame becomes mine.
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Now, in this kind of a situation, why would a sensible sane guy wager such sensationalism on behalf of something which he has limited control over?
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And in which he is not a contributing person at all.
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So, which uh you know which brings me to one of the famous quotes that uh you know uh I read about what you said, uh, why popular trends scare you, right?
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So uh so why do so this popular trends why does it scare you?
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And what does it do to investing?
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What does it do to entrepreneurs?
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What does it do to business ideas?
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So, what impact does it have on success and what impact does it have on failure?
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See, when you viralize something, what are we trying to do?
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Virality is basically making everybody act in a particular way, acknowledging a particular thing and amplify that thing to bring in more people.
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In the investment world, this virality means you are bringing in more money into a place where that money should not be.
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What would eventually happen is when people realize that too much has happened, smart money will move out first, and all the late money, which for lack of better phrase, I would call dumb money, will get sucked and lost.
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It's like a shredder.
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You are putting notes into a machine, thinking that it's an ATM and it will give you back money anytime.
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You put all the notes inside, and you look up and then you realize that it's a paper shredder.
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This is what popular trends mostly turn out to be.
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So, virality, which has now got nicely conceptualized.
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See, actually, social media has helped you conceptualize something very clearly, but virality is basic is basically where you create a mania, whether it was tulip mania or whether it is Bitcoin today or it is some other thing related to recency, then it tends to be more powerful today than it was 20 years ago, and it will become even more powerful going forward, which means that if you are seeing a popular trend and if you are seeing it mature, you must be very scared.
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It's like seeing a cyclone in the eye.
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Even if you see it on your monitor, you should still be scared.
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So there could be a small section of people who catch the popular trend very early.
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They will be successful because they will leave before the party ends, they will leave before things get ugly.
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But remember that most people come late and stay on when things become too hot to handle.
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That is why popular trends tend to scare me because I have seen the popular trend kill lakhs investors financially, and today it's probably going to kill millions of investors, and tomorrow it may kill crores of investors because as more and more Indians become financially active and participative, then the popular trends are going to become even bigger and they'll probably cause more damage than in the past.
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And that is why they scare me.
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The
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And if you are interested in revisiting past episodes or taking a look at our show notes from this episode, please visit us at www.contraminds.com.
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And now back to the show.
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And just to follow up on that, uh, can you tie this with say something like understanding your own circle of competence and also understanding what are some biases you need to avoid from making these bad decisions?
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So if you want, like you said, there are there's an entire new generation of people who are gonna come in and start investing and thinking about their money differently, right?
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But there are some time-tested ideas, some time-tested mental models that they will have to learn the hard way.
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Uh, they either know it before and they believe in it so deeply that they avoid making mistakes, or they make those mistakes and learn the hard way that I should only understand what is within my circle of competence, or I should not have any hindsight bias, I should not have any availability bias, or anything like that, right?
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So, so can you talk a little bit about what are some uh mental models that they need to consider uh when they are going and making these sort of uh investment decisions early on in their careers?
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See, the first thing that an investor must be clear about is what is his own uh circle of competence, what is he really good at?
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Um what is his pain-bearing capacity?
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That's the second point.
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The third point is how much time does he have?
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A person who is uh let's say in his early 40s, who has to send his kids to study in two years, cannot take all his money and put it in the equity market today.
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He needs to keep that money away.
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So you have to see your circumstances, what you are saving and investing for, what kind of risk appetite you have, what's the nature of your regular income?
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Is it something you're going to have for the next 20 years, or are you a cricketer who's playing IPL and making crores or rupees?
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Or somebody in a similar vocation which has a shorter cycle but a very impactful cycle.
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So understand yourself and based on your understanding of who you are, what are you good at?
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What is giving you your capital?
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How long will you be able to get that capital?
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What are you using that capital for?
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What is that capital being purposed for?
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How much time do you have with the capital?
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When do you need that money for your purposes?
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Then you decide what is your investment path.
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You cannot see what somebody who doesn't need money at all is doing and try to emulate it.
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Most of India's super rich investors are in it like it's a sport.
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Now, somebody who is running towards life goals and who has so much to do should not be blindly copying somebody who has no purpose.
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So your model is something which is unique to you, your mental model should form based on all these aspects, it's completely personality-centric, and even the risk you take must align with who you are.
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Now, if I go and try to jump off a plane, even with another fellow, that doesn't sit with my personality.
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I should never try it.
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There are a lot of people who go in flights and then you know they have these, they jump and another guy will open a parachute and he'll bring you down and land you.
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Even to do that, you need personality.
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Now I know I don't have it.
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So just accept it and do something else.
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So in the investment world, also, understand your personality and do things.
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There are people who have this personality to do the jumping, but their life situation doesn't allow that.
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They have responsibilities which are very, very specific.
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I will give you two examples which completely shocked me.
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One was somebody I knew who was highly accomplished who went into a trek in Switzerland and then all of a sudden saw a nice water body and he felt like taking a nice dive.
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So he removed all his clothes and kept it on the side and took the dive.
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Because of some temperature shock, he never came out.
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And I see the same episode happen in India also.
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But it's not a temperature shock, it could be something else.
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You don't know what it was.
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When you make an investment, also there are a lot of people who make these blind dives, emotional decisions where they throw their money into a situation in which they should not be a participant.
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So uh so this brings me to a very interesting uh you know concept that is happening now in India, which is when you really do these startups, young companies, there is a friends and families round, there is a crowdfunding round, okay.
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And uh is that not something that uh you know what you
are telling uh you know is so relevant because uh you tend to get these kind of uh things saying that okay, I you know why don't you participate in a friends and families round?
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Why don't you participate in a crowdfunding model?
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Okay, and when you actually don't have the right uh you know uh purpose and objective, uh you then tend to actually, you know, what is your pain-bearing use, right?
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So then suddenly you're shocked, and this just uh kind of affects you, and it pretty much also uh affects you when even when you are a promoter and entrepreneur not knowing what risks you are taking, right?
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So there's a you must have seen these situations both as an angel investor, both as a uh you know portfolio manager.
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And is that not true?
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And uh is that not something which people should avoid?
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See, I think you have to understand the nature of the business very very clearly before you get into something.
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Capital can be very easily lost in businesses, businesses can run out of capital very fast, especially in the high-burn entrepreneurial era that we live in, cash can burn so fast, and the rate of replenishment is never going to match the rate of burn.
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So I think that middle class savers, people who are saving and investing for clear purposes, should avoid it.
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There is no doubt in that.
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And there should be investment vehicles that should be created for people to participate in them.
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Today you have the AF as a model, but it clearly knows that somebody who has one crore is the base level participant.
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So I believe that your risk taking should not be out of your zone of comfort.
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That's very clear.
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Because the entrepreneur is your friend, it doesn't mean that you have to give him money.
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I don't think this dinner party conversation should lead to private equity investments or venture capital or family and friends.
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You should be behind your friend, but you should ask yourself whether you have this appetite, you should have the spine to take a loss, should have the stomach for a loss.
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If you don't have it, then I think it's best that you remain a friend and don't become a co-investor.
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Your familiarity with a very high risk-taking person should not make you follow the same thing.
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I have always said this even to my friends that you know, sometimes I may be out of depth with an investment.
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Don't follow me because I may make a mistake and I may walk out of it.
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And every five ten years there will be something which will happen like that.
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However, hard you try, some things will go out of it.
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Hand.
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But when you copy, you will not be able to control the situation.
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But yet, I think that this temptation to be a part of what others are doing to clone is extremely high.
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And fear of missing out, which we call as FOMO, is very high when five people put the sixth fellow has to put his hand in.
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Whereas his situation would not allow that.
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He would have kept money for his daughter's college, and he will take that and put it in private equity from which you can never get.
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It's like Samudra Mantan.
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You don't know when it will come out.
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So, but people put money there thinking that no, no, no, whenever I can I can dip and take the money.
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It doesn't work that way.
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So I think that that is something that people should be very, very clear about, and you should say no to what doesn't suit you.
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