Hello and Welcome. This page is a collection of 27 quotes that I liked and saved while reading What I Learned About Investing from Darwin book by Pulak Prasad. I hope you will like them too.
By the way, I am Deepak Kundu, an avid book reader, quotes collector and blogger.
What I Learned About Investing from Darwin Quotes
- We want to be permanent owners. We don’t invest unless we think we can own a business forever. A bad business that is dirt cheap? Pass. A mediocre business at a low price? Thanks, but no thanks. A high-quality business at a fair price? Give me more so I can never let go.
- We buy rarely, and we sell even more rarely. In this world of nonstop action where Nike’s slogan “Just do it” seems to be the core mantra of a successful life, our core tenet of “Just don’t do it” may seem out of place.
- The problem with our investment community is that we don’t take investing seriously. Seriously. Those of you who are in the investing profession are probably bristling with indignation right now. You travel two hundred days a year, work sixty to eighty hours a week, deal with irate and demanding clients, attend excruciatingly boring conferences, your spouse and kids rarely see you, and the stress of beating the markets is making you look ten years older than your actual age. And I have the temerity to tell you that you are not taking your job seriously? Well, if you are so angry, answer this question for me: Would you bet your life on your next investment?
- Whereas most investment books and college curricula focus on teaching how to make good investments, everyone would be better off by learning how not to make bad investments. An investment career is probably among the very few that rewards the skeptic more than the optimist. Buffett is the best investor in the world because he is the best rejector in the world.
- We at Nalanda love stable, predictable, boring industries. Give us electric fans over electric vehicles, boilers over biotech, sanitaryware over semiconductors, and enzymes over e-commerce. We like industries in which the winners and losers have been largely sorted out and the rules of the game are apparent to everyone. For everything else, thanks, but no thanks.
- Natural selection among animals is incessant and merciless and has produced millions of species, all of whom adhere to this simple principle: Minimize the risk of committing type I errors to curtail the risk of injury or death, and learn to live with type II errors or foregone benefits.
- Look closely, and you will notice that the life of a plant, in many ways, is more exciting and action-packed than that of almost any animal. Paradoxically, this is because plants can’t move. If they are malnourished, they can’t move to a different location to feed; when attacked by herbivores, they don’t have feet to run or claws to fight back; when infected by pathogens, they can’t be offered treatment and cuddles like we humans can.
- People don’t change. Especially criminals, crooks, and cheats.
- As permanent owners, we at Nalanda have no interest in a business owned or run by someone who defrauds customers, suppliers, employees, or shareholders. When we come across such a person, we don’t ask if the business is cheap enough for the risk to be mitigated; we don’t ask if we could persuade this individual to change; we don’t ask if their crimes are trivial enough to ignore. We simply walk away.
- As a long-term investor in a business, I don’t want the company ever to go bankrupt – whether the times are good or bad. I can live with a slightly lower return on equity and lower earnings-per-share (EPS) growth, but at least I will live.
- Debt diminishes strategic flexibility and hence long-term value creation. For a day trader or even an investor whose holding period ranges from three to five years, a reasonable amount of leverage may not matter. But for a permanent owner like Nalanda, any constraint that prevents a business from taking calculated strategic bets is undesirable.
- We eschew a very long list of risks. This is the core element of our investment strategy. We don’t invest in businesses run by crooks, we detest turnarounds, we stay as far away from leverage as possible, we refuse to engage with M&A addicts, we can’t figure out fast-changing industries, and we don’t align ourselves with unaligned owners.
- Capitalism thrives on risk-taking. And risk-taking is not limited just to teenagers starting companies in their garages in Silicon Valley. All companies, if they want to grow and succeed, need to keep taking calculated risks. Those that don’t take risks either atrophy or remain small and irrelevant; those that venture to take bigger risks than warranted implode. It is in the Goldilocks zone of calculated risk-taking that most companies thrive.
- We know that given the nature of the businesses we are after – those with very low risk and exceptional business quality – they will almost never be available cheap. The market is not an idiot; it is almost always efficient. Almost always. Not always. We wait for those few occasions to pay what we call a “fair” price. Not too low but not too high either.
- The capitalist world is a Boston Marathon that never ends – there is no respite at the end of a punishing two-hour race. The race goes on and on and on and on and on: 24 hours × 7 days a week × 365 days a year. It’s unending, unrelenting, unforgiving.
- We ignore all market forecasts. Well, maybe not entirely. I do look at them on days when I want to have a good laugh.
- We want the businesses we own to increase in value over the long run. And the only way for this to happen is for the company to perform well over many years, preferably decades. Investment success may not correlate with business success for a day trader or short-term investor. But for us, the ultimate success of an investment is almost entirely dependent on the ultimate success of the business.
- I am not saying I don’t read (or listen to or watch) interviews of business leaders. I do. But I read them for the same reason I read articles on Brexit, running, films, and the latest Trump tantrum: to gossip with friends, to pass the time on a Sunday afternoon, and for general interest in our fascinating world. Not for investing.
- Great businesses remain great much longer than we think. The probability that a not-so-great business becomes excellent over time is infinitesimal. Our investment strategy is thus quite simple: 1. Since the vast majority of businesses do not become great, our default strategy is not to buy. We are lazy buyers. 2. We buy only if we can find a high-quality business that can stay in stasis over decades. If we believe we have such a business, we don’t sell. We are very lazy sellers.
- We have saved a lot of heartburn by studying business quality while ignoring stock prices. We have stayed focused on getting married and have eschewed casual hookups, to draw an analogy from the dating world. A world intent on swiping left and right at breakneck speed probably finds it very hard to notice a marriageable candidate even when that candidate has been staring at them for decades. That gives us a competitive advantage we never asked for and probably didn’t deserve. But we will take it. Thank you very much.
- The bigger mystery of compounding is not that it leads to large numbers but that it doesn’t do so for a long time.
- What is needed to become a successful investor is not intellect, a commodity, but patience, which is not.
- The rule for selling a great business is simple: Don’t. You. Dare.
- We never indulge in “sell-high-to-buy-low” activity. We only sell if we have lost confidence in a business, and when we do, we return the money to our investors. The opportunity to own an outstanding business comes along very rarely, and if we have won this lottery, why should we kill the goose laying golden eggs?
- Investing is a unique profession in which inactivity can be hugely rewarding. It has been so for us. We will continue to be lazy. Very lazy.
- It appears that these researchers never get to a definitive answer to any question; the best they do – and boy, do they do it well! – is to raise even more questions.
- In this complex, unknowable, and uncertain world, we are not trying to make the best investments since we are in the dark about most things. We don’t know what the best investment would be. Instead, we are simply trying to invest well. These are very different ways of investing and lead to radically different investment models. Our model – that of investing well – tries to achieve just one objective amid uncertainty: increase the predictive accuracy of our investments.