Otherforeign[Music]modi's also a well recognized author of businessman and affili and Professor some of the people who have benefited from his production of Foundations are here with us today here is an astrology piece of information about modern Foundation which I'm sure has made monish a very happy man since Inception in 2007. iits have accepted 631 darshana Scholars or for total of 1 to 8 A.M pass a heat rate of 49
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Otherand the successin 2014 was an establishing 64 percent
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Otherthis is the fourth prime minister is coming to ndi in the past he has enthralled your seniors with his words of wisdom today he has plans to do that to you with dots no lessin India recently so don't forget to ask him about that I'm sure you will enjoy a stock ladies and gentlemen I'll give you on this program
Otherthank you
Otherwhether it's a pleasure to be here with you today and you know MBI is a very
Otheryou today and you know MBI is a very unique and unusual Place very few places on the planet which are enlightened enough to have a value blasting program and it's been North America this is two or three places you can actually go to a Google MBA program that focuses on it and does a good job and I am not aware of any in India other than MPI the uh the accolades go to Sanjay for putting it together so give him a lot of love all right it's a field that generally speaking in MBA programs does not get you know there are certain areas of business they don't get studied much in Business Schools and one of the reasons they don't give a study part is because there are no sponsors so so for example the whole area of Entrepreneurship you know all these cases does not get much study in business because you know GM is not going to ask the study to be done on on
Questionergoing to ask the study to be done on on early stages and value investing is likeearly stages and value investing is likeearly stages and value investing is like that in the sense that it's a it's suchthat in the sense that it's a it's suchthat in the sense that it's a it's such a small Niche activity typically doesn'ta small Niche activity typically doesn'ta small Niche activity typically doesn't have a lot of responses and so on so sohave a lot of responses and so on so sohave a lot of responses and so on so so naturally professors and Businessnaturally professors and Businessnaturally professors and Business Schools tend not to focus on so fromSchools tend not to focus on so fromSchools tend not to focus on so from that vantage point I think India hasthat vantage point I think India hasthat vantage point I think India has done a great job and it's uh it's greatdone a great job and it's uh it's greatdone a great job and it's uh it's great to be here and happy to be invited backto be here and happy to be invited backto be here and happy to be invited back
Questionerso so what I wanted to do today is Iso so what I wanted to do today is Iso so what I wanted to do today is I just want to start by going over what Ijust want to start by going over what Ijust want to start by going over what I would call cloning 101 and just a fewwould call cloning 101 and just a fewwould call cloning 101 and just a few perspectives of you know what just myperspectives of you know what just myperspectives of you know what just my own evidence and empirical experienceown evidence and empirical experienceown evidence and empirical experience has been over the years so you know I Ihas been over the years so you know I Ihas been over the years so you know I I started to provide funds about 15 and astarted to provide funds about 15 and astarted to provide funds about 15 and a half years agohalf years agohalf years ago and for right under the Clone bomb youand for right under the Clone bomb youand for right under the Clone bomb you know basically I I lifted the theknow basically I I lifted the theknow basically I I lifted the the template of what it does from the buffertemplate of what it does from the buffertemplate of what it does from the buffer Partnerships you know there's aPartnerships you know there's aPartnerships you know there's a peculiarity in humans where they don'tpeculiarity in humans where they don't
Charliepeculiarity in humans where they don't like to copy what I think is obviously good and so the perfect Partnerships I were the most successful investment Partnerships in the history of of investing and such and when Warren Buffett punished a partnership in 1969 and we terminated it when I started to drive from the 1999 30-year period I could not find a single a single example of a case where the very large headphone industry had cloned them on and I found that it was it was tremendously valuable for me that that had actually happened built it was it was not the way most most money is gone you know things like no management fees basically focusing on long-term returning a set of investors that are with you for the Long Haul you know a few beds big beds in treatment beds all of those sort of investing and so obviously the other day that was a significant Advantage for me
Questionerthat was a significant Advantage for me and fork for dry fans and then you know a few years back in 2006 uh 2006 2007 uh my wife and I had started the dachshunda foundation dakshana also got most of its core Philosophy from Warren and Charlie and again in the in the non-profit world and in the the world of philanthropy and such I found that their ideas were very powerful but compare when I look at you know the number of non-profits in Indios who follow what I consider the laws of philanthropy it is even rarer very very rare compared to value of nursing I would say you you would have a huge Army of value investors compared to the number of people on the philanthropic side who actually had for my vantage point who thinks the way they ought to be done so dakshinar took these very poor I would say principles for acharya so the first the first of these
Otheracharya so the first the first of these principles was to quickly go through it none of these are like I said they're not these are new ideas none of them are my ideas I simply lifted sandwiches are trying to deal with issues societal problems you know poverty literacy Healthcare environment education and so on these are very tough problems to solve lots of very smart people lots of very dedicated government officials and over many decades have said have spent billions and trillions of dollars on these areas and they haven't been able to crack these properties because they are not easy they have problems if you're going to go at these problems what Warren and Charlie say is that you should very seriously narrow your focus so if you would run a portfolio for example you know eight or ten stocks on the philanthropic side you should put all your energies in one
Otheryou should put all your energies in one or two way in every time so extreme concentration the second principle is so again when we are trying to do investing we focus very heavily on risk and vibration you know in fact value investing works because we get a free lunch typically you're taking low risk and typically you're getting higher Returns versus the risk you think in in philanthropy when you're trying to go against these problems you need to be very bold and you need to be willing to completely fail so if you're not willing to take an approach for itself then I'm willing to complete detail that's what I'm doing then it's very hard to change the trajectory of mankind you know to actually get meaningful change is hard it's as it is these areas are hard but if you're trying to be conservative and you want to be careful and so on so you
Otheryou want to be careful and so on so you will you should be willing to lose itwill you should be willing to lose itwill you should be willing to lose it all in effect another principle thatall in effect another principle thatall in effect another principle that came from from Charlie Munger is thatcame from from Charlie Munger is thatcame from from Charlie Munger is that you know his perspective is that whenyou know his perspective is that whenyou know his perspective is that when you have endowments in foundations theyyou have endowments in foundations theyyou have endowments in foundations they ought to be extremely concentratedought to be extremely concentratedought to be extremely concentrated in fact he doesn't see a problem todayin fact he doesn't see a problem todayin fact he doesn't see a problem today foundational endowment having 90 offoundational endowment having 90 offoundational endowment having 90 of Assets in one stock for exampleAssets in one stock for exampleAssets in one stock for example and the reason the reason Charlie saysand the reason the reason Charlie saysand the reason the reason Charlie says to do that is that anyway on theto do that is that anyway on theto do that is that anyway on the on the when you embark on theseon the when you embark on theseon the when you embark on these initiatives you are taking very highinitiatives you are taking very highinitiatives you are taking very high risk so anywhere your kind of part ofrisk so anywhere your kind of part ofrisk so anywhere your kind of part of cashcashcash vaporize and be gone what you want to dovaporize and be gone what you want to dovaporize and be gone what you want to do which is the complete opposition ofwhich is the complete opposition ofwhich is the complete opposition of investinginvestinginvesting is you want to pursue moonshots if youis you want to pursue moonshots if youis you want to pursue moonshots if you go with 90 of assets single stock yougo with 90 of assets single stock yougo with 90 of assets single stock you would put all of that in your best ideawould put all of that in your best ideawould put all of that in your best idea the odds are higher that you will get uhthe odds are higher that you will get uhthe odds are higher that you will get uh good returns out of that idea versusgood returns out of that idea versusgood returns out of that idea versus your 14th idea and then to the extent
Otheryour 14th idea and then to the extent that those ideas work you can bring all that to their all the problems that went solved so dakshina embraced all these principles in fact our our assets are invested very constituted
Otherand again I was clueless about what to do and how to go about it I assumed that for at least 10 years whatever we would spend and add other different initiatives would lead to failure you know so I assume that 10 years or 15 years would just be wiped out in terms of money spent and not much return coming out with the Assumption of the 10 or 15 years that that would happen I wanted to start early so that I had Runway so what we did is my wife and I when our Network passed 50 million we said okay what we'll do is we'll give away two percent of our Network every year and the two percent would give us at least a million dollars a year and a million
Othermillion dollars a year and a million dollars we treated as kind of experimental money and we we didn't have any concern if whatever we were trying to spend it on basically vaporized and you know did work or we got cheated out of it whatever else happened so we were very willing to what our Our Hope was that that was kind of the tuition bills that we would pay and as part of the tuition deal we would learn and then we would over time get better and hopefully in 10 or 12 years we would figure out what we're doing and we'll take it from there so that was kind of the idea behind with this two percent model the good news was we felt that even if one year we completely failed at everything we did next year again we would have some money to leave it in the third year we again have some money so it gave us some kind of staying power to go and do this and I
Otherof staying power to go and do this and I even that two percent model was copied from Buffett and he set up his five percent a year going through a gate Foundation it's five percent of the balance basically so if he lived forever it would you know tens of millions would stay forever actually so so these were from the of the of the principle that none of these were like I said my idea or Regina's ideas they were all blown we lucked out in a significant way because we got tractions instead of getting Traction in 15 years or 10 years we got Traction in like 12 weeks so it was very fast in terms of the and it helps to have Tailwinds and it's worked out very well and of course there are challenges but it's it's worked out fine so so again I found that on the philanthropic side dakshina looked so good because I am not aware of are the any I'm not
QuestionerI am not aware of are the any I'm not aware about any philanthropy oraware about any philanthropy oraware about any philanthropy or charitable Endeavors unless unless theycharitable Endeavors unless unless theycharitable Endeavors unless unless they are there are some of them which areare there are some of them which areare there are some of them which are like you know if you look at people likelike you know if you look at people likelike you know if you look at people like that the world or you look at Peterthat the world or you look at Peterthat the world or you look at Peter Ramadan and these first generation guysRamadan and these first generation guysRamadan and these first generation guys who are going into philanthropy theywho are going into philanthropy theywho are going into philanthropy they have taken a similar approach they arehave taken a similar approach they arehave taken a similar approach they are willing to fail they're willing to makewilling to fail they're willing to makewilling to fail they're willing to make big bets and so on but if you look atbig bets and so on but if you look atbig bets and so on but if you look at the established foundations in the U.Sthe established foundations in the U.Sthe established foundations in the U.S like the Ford Foundation Rockefellerlike the Ford Foundation Rockefellerlike the Ford Foundation Rockefeller foundation and so on they take a veryfoundation and so on they take a veryfoundation and so on they take a very sedate approach you know they'resedate approach you know they'resedate approach you know they're basically they approach taken as onebasically they approach taken as onebasically they approach taken as one where it's about preservation on theirwhere it's about preservation on theirwhere it's about preservation on their own jobs and preservation of theirown jobs and preservation of theirown jobs and preservation of their capital and not playing about the boardcapital and not playing about the boardcapital and not playing about the board and having 15 different missionaries andand having 15 different missionaries andand having 15 different missionaries and all that stuff so so that gives us Iall that stuff so so that gives us Iall that stuff so so that gives us I think we don't compete with that but Ithink we don't compete with that but Ithink we don't compete with that but I think that if you were benchmarking I
Otherthink that if you were benchmarking I think dakshina would come out quite looking quite good because of all of those attributes and again all cloned attributes and then you know if you look at my most recent Venture which is the thunder holding I set up about a year ago or 14 months ago the idea was that Horizon could only invest in public equities an insurance company profitable insurance company so privately has across my radar and it looked like there was a possibility they may be up for sale and they we might be able to buy them but I couldn't buy it within my Bryson because the only by our mandate is only to buy stocks and I've always had an interest having ownership and control of one or more insurance companies and then basically not just insurance I wanted to look at otherwise people I think we've just kind of broaden out the kinds of things we
Greg Abelof broaden out the kinds of things we could do with it and and we'll take it and how we could uh how we could run it and such I set up under Holdings like I said about a year ago and then we raised about 150 million first quarter of this year and then we reached an agreement to buy that insurance company and I just actually just yes finally got all the regulatory approvals company called Stone Trust Insurance in Louisiana they do about 70 million a year and mostly work for stock uh premiums and it's a very nice company they're extremely good at the underwriting but they don't have much strong prowess on investing and insurance is highly regulated so we cannot in fact we can not invest I would say that's the experiment of how investing that's done I think when the broadside will be very Diversified and lots of things can come and so on but
Ajit Jainlots of things can come and so on but but we still can have actually exposurebut we still can have actually exposurebut we still can have actually exposure and all that so I think that the onlyand all that so I think that the onlyand all that so I think that the only change although is making the businesschange although is making the businesschange although is making the business is that I will manage the float andis that I will manage the float andis that I will manage the float and capital they'll continue running thecapital they'll continue running thecapital they'll continue running the business the way they run it in factbusiness the way they run it in factbusiness the way they run it in fact we've added 30 billion of capital to dowe've added 30 billion of capital to dowe've added 30 billion of capital to do business so it gives them some Firepowerbusiness so it gives them some Firepowerbusiness so it gives them some Firepower to grow and such again when you look atto grow and such again when you look atto grow and such again when you look at look at them what struck melook at them what struck melook at them what struck me I would like to be surprised at thisI would like to be surprised at thisI would like to be surprised at this because I knowbecause I knowbecause I know I didn't realize that I took a fewI didn't realize that I took a fewI didn't realize that I took a few months back so I certainly didn'tmonths back so I certainly didn'tmonths back so I certainly didn't realize it would be set up and always inrealize it would be set up and always inrealize it would be set up and always in the United States there are about 3 000the United States there are about 3 000the United States there are about 3 000 traffic annual insurance companiestraffic annual insurance companiestraffic annual insurance companies and about 550 billion a year in premiumsand about 550 billion a year in premiumsand about 550 billion a year in premiums that come in through 3000 companies youthat come in through 3000 companies youthat come in through 3000 companies you know when you look at Berkshire halfwayknow when you look at Berkshire halfwayknow when you look at Berkshire halfway it's a 50 year old modelit's a 50 year old modelit's a 50 year old model extremely well known model and I thoughtextremely well known model and I thoughtextremely well known model and I thought most insurance companies would have a
Ajit Jainmost insurance companies would have a very strong understanding of the model but I found many many insurance companies I would say hundreds of them that I've found so far where there is a very very strong disciplines on the underwriting and the operations of the insurance company very well run and and clueless cluelessness on the investing side you know absolutely no idea what to do first I was very surprised I found this remarkable that when you have these proven models out there and these are large businesses why they wouldn't emulate that model and then I remembered oh yeah the world is very bad at cloning they can't emulate the model they will you know you hit them over the head but then it dawned on me that the insurance business is very peculiar in the sense that if you were to actually try to replicate the virtual model in an insurance
Questionerthe virtual model in an insurance company what you would need is the company what you would need is the company what you would need is the leadership of that company you would need two very different skills need two very different skills need two very different skills you would need strong Insurance operation skills and you would need operation skills and you would need operation skills and you would need strong Investments and typically the type of person who and typically the type of person who and typically the type of person who would be good at one or the other is would be good at one or the other is would be good at one or the other is typically not going to be the same typically not going to be the same typically not going to be the same person and so typically these companies person and so typically these companies person and so typically these companies have come from the insurance side have come from the insurance side have come from the insurance side they've got strengthened the insurance they've got strengthened the insurance they've got strengthened the insurance side they haven't really thought about side they haven't really thought about side they haven't really thought about it how the Investments angle and if you it how the Investments angle and if you it how the Investments angle and if you if they were to I would say that's a if they were to I would say that's a if they were to I would say that's a beef up or improve the investment side beef up or improve the investment side beef up or improve the investment side what they would need to do is they would what they would need to do is they would what they would need to do is they would need to follow the approach need to follow the approach need to follow the approach which is they would need to identify a which is they would need to identify a which is they would need to identify a talented investment manager like two talented investment manager like two talented investment manager like two sensor sensor sensor then they would have to bring someone then they would have to bring someone then they would have to bring someone license on board license on board license on board and then they'd have to leave him alone and then they'd have to leave him alone
Warrenand then they'd have to leave him alone he he or she alone for a long time because then the investment business you know you can have 5 10 15 years we really figure out whether a person is truly doing better than most of the crowd and so on and so insurance is very institutional business and so what we would need to do is you need to have a very non-institutional approach which is you couldn't have a team you would need to have a gun because normally go to a team then you get to you know standard kind of institutional approaches to investing which will get you an average you've got that best so if you want to do better than average then you have to bring in talented manager and leave that manager alone and so you need two skills to be able to do that the first skill is you need the ability to identify and hire such a person and that is an extremely rare skill I
Questionerand that is an extremely rare skill I never realized that you know obviously someone like more Cooperative very talented in doing that he's now I'm going to make a mistake on that front you know if he had loosens and thoughtful depend back to everything all of them are superstars so most insurance companies CEOs and Boards would not be able to recognize the Muslim Clinic he was standing right in front of them for their nobility and then the second piece we need is you have to leave the person alone so full cartilage no second guessing of their decision so Warren Buffett said that every month used to get reports of all the trades that do something like that and what is portfolio look like and he said every month when he bought the report he disagreed with like 90 of what he saw on her book so he did not agree with what Lou was doing
Otherdoingdoing but he never once picked up the phonebut he never once picked up the phonebut he never once picked up the phone and Paul Louand Paul Louand Paul Lou what we thought about his useless thingswhat we thought about his useless thingswhat we thought about his useless things so he's just bit his tongue and saidso he's just bit his tongue and saidso he's just bit his tongue and said okay you know I have a guy who's doingokay you know I have a guy who's doingokay you know I have a guy who's doing his job and I'll uh let him keep doinghis job and I'll uh let him keep doinghis job and I'll uh let him keep doing his job and that skill probably is evenhis job and that skill probably is evenhis job and that skill probably is even rarer than the skill to hire someonerarer than the skill to hire someonerarer than the skill to hire someone might do something in the first placemight do something in the first placemight do something in the first place and so these things started to becomeand so these things started to becomeand so these things started to become mommy they obviously seem obvious nowmommy they obviously seem obvious nowmommy they obviously seem obvious now but I think I should realize it aboutbut I think I should realize it aboutbut I think I should realize it about years ago I realized a few months ago Iyears ago I realized a few months ago Iyears ago I realized a few months ago I think I think for thando it is athink I think for thando it is athink I think for thando it is a significant Advantage so when I set upsignificant Advantage so when I set upsignificant Advantage so when I set up tando I thought we would be interestedtando I thought we would be interestedtando I thought we would be interested in a wide range of private assets andin a wide range of private assets andin a wide range of private assets and different types of assets kind of godifferent types of assets kind of godifferent types of assets kind of go anywhere my perspective now is I'd likeanywhere my perspective now is I'd likeanywhere my perspective now is I'd like to hone in on insuranceto hone in on insuranceto hone in on insurance and I want to order an insurance becauseand I want to order an insurance becauseand I want to order an insurance because there is clearly a avoid significantthere is clearly a avoid significantthere is clearly a avoid significant voice and I I wouldn't have expected it
Othervoice and I I wouldn't have expected it in 2014 or 2015 that we will have such a large number of these wonderful Road career machines that have that void some of the folks I've talked to and would be delighted to partner with and I hope we can also make some more deals in the next few years and so I'm excited about that but again uh what I wanted to just kind of highlight is that when you look at kind of all three of these of these models you know from icons and the you know they are all basically looking at will accept ideas that that exist and just basically cloning them that works that works out pretty well shift gears a little bit so this is a shot of a farm in Iowa I think they're just getting ready to to lay down corn or soybean and this is the graph of the average value of Iowa Farmland per acre and so these are real prices so prices are a little bit different
Questionerso prices are a little bit different from gurgaon Farmland so for example if in 2013 you want to later or four times Iowa farmland it'll set you back less than nine thousand dollars how much is an acre here in gurgaon Sunday will you know million dollars do we have more than a minute so we're looking at what 100 to one so there's a significant price difference when you look at this this chart you can see that you know we've had long periods where there hasn't been much movement and we've also seen that you know you could have bought farmland for example in 1980 at about 2100 or 2150 an acre and you could have gone like 25 years and still been at 2150 and it's not an impression adjustment this is this normal price breaker so when you when you look at this Iowa Farmland I just want to show you a couple more numbers so this is the previous chart was going
Otherso this is the previous chart was going over a long period so this is like you know 1981 to 2013 and you can again see the the value breaker it's a pretty setting and I'm not showing over here daily values or monthly values but basically so these are real friends if a person is looking to buy Farmland in Iowa typically the only reason they're buying it is because they want to do corn or soybean Farm they really have nothing else that you could do with that land and so and it's very important and they've got different prices on the average now some of the things that go through the buyer's head would be okay the amount of money I'm going to make out of this transaction when I buy you know a few hundred acres a few thousand acres of Iowa Farmland is what is the expected price of Pawn over the next let's say 10 or 20 years what is the expected price of Labor
Questionerthe expected price of Labor what is the expected price of you knowwhat is the expected price of you knowwhat is the expected price of you know capex and things that you have to do forcapex and things that you have to do forcapex and things that you have to do for Life whatever and other things that youLife whatever and other things that youLife whatever and other things that you have to buy and so they they have tohave to buy and so they they have tohave to buy and so they they have to basically try to have some Viewbasically try to have some Viewbasically try to have some View on these various aspects and also they'don these various aspects and also they'don these various aspects and also they'd have to have somebody one whether thehave to have somebody one whether thehave to have somebody one whether the Dynamics of whether they're off and howDynamics of whether they're off and howDynamics of whether they're off and how many times in the next 10 or 20 yearsmany times in the next 10 or 20 yearsmany times in the next 10 or 20 years you would have you know significantyou would have you know significantyou would have you know significant destruction of rock or significantdestruction of rock or significantdestruction of rock or significant bumper crops because of them based onbumper crops because of them based onbumper crops because of them based on all of that then they would come up withall of that then they would come up withall of that then they would come up with an assessment of what they could affordan assessment of what they could affordan assessment of what they could afford to pay for the land he doesn't buy on anto pay for the land he doesn't buy on anto pay for the land he doesn't buy on an intelligent seller reach agreement thenintelligent seller reach agreement thenintelligent seller reach agreement then we get this table that we've seen thiswe get this table that we've seen thiswe get this table that we've seen this is basically showing you you can ignoreis basically showing you you can ignoreis basically showing you you can ignore the three or four columns on the rightthe three or four columns on the rightthe three or four columns on the right if you look at the problems on the leftif you look at the problems on the leftif you look at the problems on the left so this is rental rates operator so youso this is rental rates operator so youso this is rental rates operator so you know you could buy Farmland but you can
Otherknow you could buy Farmland but you can also rent fast right and so look at the rental rates in the last few years it's like from 200 to 250 per acre per year the the rental campus is a little bit easier because we don't have to go out in other 15 years we can just have a view of you know what are the different path to the production uh looking like the next one months most asset classes that we deal with in terms of you know real asset being sold between people and especially when you're talking about productive assets tend to be a lot of kind of detailed smart analysis that goes on with the buyer and with the seller and when both sides come to some some kind of standards of agreement you have a deal right you can look at that that same kind of calculus Will Go On when there's a used maruti for sale for example so if you have a you know five-year-old volunteer trying to sell
Otherfive-year-old volunteer trying to sell
Warrenyou have a sense of what the values are you'll be willing to sell it to a certain price range and the buyer will also have a certain perspective and then when there's an agreement there's a team so these are all negotiated transactions
Warrenthe stock market is completely different from that and it's a unique creation that's a few hundred years old what are most of it is like in the last couple of hundred years it has Dynamics which are very different from Iowa Farmland those Dynamics can work in your favor
Warrenso when we look at stock prices it is not a negotiated transaction between an intelligent buyer and then tell themselves these are for the most part faceless transactions you're not even face to face with the with the seller for example they're based on some part of it is based on based on fundamentality based on emotions and
Questionerfundamentality based on emotions andfundamentality based on emotions and either Euphoria or having a lot ofeither Euphoria or having a lot ofeither Euphoria or having a lot of concerns and so a lot of things getconcerns and so a lot of things getconcerns and so a lot of things get manifested into stock markets andmanifested into stock markets andmanifested into stock markets and because of all those additional auctionbecause of all those additional auctionbecause of all those additional auction driven markets whichever is optiondriven markets whichever is optiondriven markets whichever is option driven markets have a whole differentdriven markets have a whole differentdriven markets have a whole different Dynamic than negotiated transactions andDynamic than negotiated transactions andDynamic than negotiated transactions and so these auction driven markets willso these auction driven markets willso these auction driven markets will tend to produce lots of bizarre behaviortend to produce lots of bizarre behaviortend to produce lots of bizarre behavior in terms of market price movement asin terms of market price movement asin terms of market price movement as value investors we can take advantage ofvalue investors we can take advantage ofvalue investors we can take advantage of some of that desirements that dark modesome of that desirements that dark modesome of that desirements that dark mode that we're looking at has a bunch ofthat we're looking at has a bunch ofthat we're looking at has a bunch of numbers in it right and it has everynumbers in it right and it has everynumbers in it right and it has every every ticker every Ticker on the Bombayevery ticker every Ticker on the Bombayevery ticker every Ticker on the Bombay stock is saying that isanyone own itanyone own itanyone own it is it a value baris it a value baris it a value bar and how long have you owned itand how long have you owned itand how long have you owned it yeahwhy did it go down in 2011 was there awhy did it go down in 2011 was there awhy did it go down in 2011 was there a split or something what happened theresplit or something what happened theresplit or something what happened there okay so stop split okayokay so stop split okayokay so stop split okay foreignon his score for example is quiteon his score for example is quiteon his score for example is quite different from what we saw in the Iowa
Questionerdifferent from what we saw in the Iowa Farmland right I mean you're seeing a lot more movement and and again if if this fertilizer company but a private company right if the Tata group built up the same for example every month they got a page on what people are willing to buy it for me the chart will look like this I mean that those bid wouldn't change that much month to month okay so
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Questionerokay so this is a real business right what does uh ifci do working on it okay it's a good company anyone own it you want how long have you owned it like two two and a half years has it done well it doesn't look like it's done it's have a lot of swings so are you up yeah one of your Buy price 28 28 and there's no splits or anything so and so over 20 percent yes
Other[Applause]
Questionerokay so again if you look at this pretty wide swing on this right so if you look at it even 52 weeks it's like more than 100 almost right more than 100 movement
Questioner100 almost right more than 100 movement and so why do you think we see the movement of the stuff the way it's moved there's been a lot of I mean other than the standard business there's been a lot of problem with the upper management internal sites and things like that okay
Otherwe again have like lots and range in the last anyone own this
Questionerno no okay so you know we could keep doing this all all day long but thank you
Otherthank you Ashley so you know what I what I just wanted to illustrate to you is that you know you can see that there is a pretty wide range no matter what spot we look at in Nashville astronaut appears 12 months one of the things that in general is likely to happen when you are a value investor is you're likely to make these Investments on the lower end of that range I mean you don't know what what the 52 it will be in the next two weeks but because you're looking at so many stocks and
Questioneryou're looking at so many stocks and you're trying to pick the ones that are in one way or another from some Metric in one way or another from some Metric and the value you're likely to catch it on the lower end of that of That Swing on the lower end of that of That Swing range one of the one of the advantages you can you you do gain is just the the typical kind of exaggerated volatility that you see in in stock because of the nature of the oxygener markets gives you an advantage you know you might see a 30 40 50 30 and 100 range on on the stock over a year or two weeks just based on the the gyrations and emotions of people or Market players and that gives you that gives you an added advantage right so we didn't even look at stocks that are undervalued we just looked at a random set of stocks and so when you actually overlay and look at undervalued situations so one of the things which all of you I think do
Questionerthe things which all of you I think do as a natural exercise is when you actually look at a stock and you actually study to themselves one of the pieces you look at is that where is it in terms of its recent price history and you generally will feel better about buying it especially if you're a value investor if it's on the lower end of of that at least recent price history that gives you some Advantage it is it is one more I would say you know small advantage in Your Arsenal in terms of superior returns and I have seen that in my own portfolio when cancer act actually in hindsight it's been wrong on the stocks but made decent gains on it and simply because I happen to buy it at one of those low points and just the natural kind of American flow of the stock sometimes probably 50 60 by time we exited I'm perfectly happy with it if you give me 50 60 every couple of years
Questioneryou give me 50 60 every couple of years and these things that's no problem we'll take that all day long so with that what I'd like to do is if we could maybe open it up for questions and uh that is always the more interesting thing for me is to learn about what what's in your mind and what you'd like to talk about so we can take it from there and if you could just introduce yourself and if you're a student or where you're from that'd be great so go ahead my first question a lot of people teach us how to buy I would like to know your philosophy on how to sell or when do you sell right
Other[Music]
Questionerit's very difficult and the second question is that very few people are lucky to have the float of an insurance company like you and Mr Buffett have and in India a lot of capital misallocations keep happening at the promoter's end which does not permit you to own a stop forever kind you know like Buy and Hold
Questionerforever kind you know like Buy and Hold strategy that Mr Buffett always tells us to do so there's always this challenge in our minds whether we have to always look into that sense would you still say in the Indian context that Buy and Hold is the right strategy or you have to keep churning for the cash flows and for other compulsions
Questionerare those are the great questions well I would say that selling is more difficult than buying you know it's usually easy to get into things it's a little harder to get out just a few things that I I do is that and these are just I think most of the three naturally uh obvious to all of you know most of you is that you know if you are if you are operating within yourself to a confidence then you understand the business and if you understand the business you understand what is good you would have a good idea
Questionerwhat is good you would have a good idea so if a stock is trading at 50 rupeesso if a stock is trading at 50 rupeesso if a stock is trading at 50 rupees and other market cap of you know 200and other market cap of you know 200and other market cap of you know 200 floors and you understand the businessfloors and you understand the businessfloors and you understand the business and you think it's worth 500 kilos it'sand you think it's worth 500 kilos it'sand you think it's worth 500 kilos it's a set of metrics you have very clearlya set of metrics you have very clearlya set of metrics you have very clearly in your your head and I usually write upin your your head and I usually write upin your your head and I usually write up about a paragraph of what my perspectiveabout a paragraph of what my perspectiveabout a paragraph of what my perspective is on the stock and what I thinkis on the stock and what I thinkis on the stock and what I think intrinsic value is and why I think it'sintrinsic value is and why I think it'sintrinsic value is and why I think it's worth that and it usually in Graceworth that and it usually in Graceworth that and it usually in Grace simple English terms and that I knewsimple English terms and that I knewsimple English terms and that I knew that before I I buy usually I'm lookingthat before I I buy usually I'm lookingthat before I I buy usually I'm looking to sell at aboutto sell at aboutto sell at about 90 of what I think is perceived in real90 of what I think is perceived in real90 of what I think is perceived in real quick value and usually I'll go backquick value and usually I'll go backquick value and usually I'll go back every three months or six months andevery three months or six months andevery three months or six months and update my thoughts and perspectivesupdate my thoughts and perspectivesupdate my thoughts and perspectives because the company may haveit has increased and and then you knowit has increased and and then you knowit has increased and and then you know you can accordingly update intensiveyou can accordingly update intensiveyou can accordingly update intensive value and accordingly update what do youvalue and accordingly update what do youvalue and accordingly update what do you think the sale price should be it's youthink the sale price should be it's youthink the sale price should be it's you know it's to get started the basics of
Questionerknow it's to get started the basics of ram which is you're not buying a stock ram which is you're not buying a stock ram which is you're not buying a stock you're buying a business some basic you're buying a business some basic you're buying a business some basic things is to keep in mind that always things is to keep in mind that always things is to keep in mind that always approach it from the perspective as if approach it from the perspective as if approach it from the perspective as if you're buying the entire business if you're buying the entire business if you're buying the entire business if apple has a market cap of 700 billion apple has a market cap of 700 billion apple has a market cap of 700 billion you know the question to ask yourself is you know the question to ask yourself is you know the question to ask yourself is that if if your family had 1.5 trillion that if if your family had 1.5 trillion that if if your family had 1.5 trillion in wealth for example in wealth for example in wealth for example would you be willing to buy the entire would you be willing to buy the entire would you be willing to buy the entire company application company application company application and if the answer is yes then invest in and if the answer is yes then invest in and if the answer is yes then invest in response and the answer is no then you response and the answer is no then you response and the answer is no then you should even buy 100 worth of Apple stock should even buy 100 worth of Apple stock should even buy 100 worth of Apple stock so the the mindset of looking at it as a so the the mindset of looking at it as a so the the mindset of looking at it as a as an asset was in the stock is as an asset was in the stock is as an asset was in the stock is important if you understand what the important if you understand what the important if you understand what the intrinsic value is then you also the intrinsic value is then you also the intrinsic value is then you also there and of course there are mistakes in and of course there are mistakes in and of course there are mistakes in investing Stakes actually are quite investing Stakes actually are quite investing Stakes actually are quite numerous even amongst great Investments numerous even amongst great Investments numerous even amongst great Investments whenever it is obvious to you that you
Questionerwhenever it is obvious to you that you have made a mistake then you can re-evaluate one of the things I use as a circuit breaker for myself just to make sure that I'm not kind of trigger happy usually we'll tell to get self-doubt about a stock especially when it declines in price after we buy and my own history is most things I buy they know I bought the stock and they received the decline immediately after I bought has that ever happened to you
Questionerokay just you and me nobody else so what I do is that to conquer you know any urges to take instruction to Mr Market on on value is I just use a rule where unwilling to sell a stock at a loss until at least two years have passed from the time I bought it present intrinsic value has to be below presence of class so it has to be very clear depending which is where we grew up with clockwise and a significant amount of time has
Questionerand a significant amount of time has passed so that you you kind of shaken out every kind of Market different psychology that maybe driving you but the second the second part is that which is Buy and Hold versus you know trading and out I think a market like India is is a market where there is the possibility of having very long runways if there's a possibility of finding relatively small businesses that have long runways I return the Capital Club management and I feel the very best investments would be amount Investments that are achieved from a monetary perspective but ones that have those types of Dynamics where there's a Runway issue Which business could be worth 10 or 20 or 30 times in Revenue in five or ten years and so so I think that that if I were if I were in India that would be my primary focus is to try to find and I
Questionermy primary focus is to try to find and I think the the markets here are very different from U.S markets in the sense that is yeah to some extent it becomes very heavy like the primary Equity investment you know you have to do a lot more work in terms of understanding the nature of management and ownership and so on but to the extent that you can identify those long Runway opportunity that you can identify them at prices that are quite reasonable then I think that's the way to go the buy and selling is also perfectly fine but I would say do it within the context of you know that you own the business and you think of it as owning a business person owning a stock and look at your buying and selling the entire business whether the price in which you're buying the price you're selling is rational rational decision in both ways so that's that's my true sense
Questionerboth ways so that's that's my true sense other questions here
Otherother questions here
Questionerhello
Questionerpartnership was single person team as far as Investments are concerned don't do things having a level educate a lot of helps in certain situations
Questioneryeah that's a that's a great question
Warrenand I had a conversation a few years back with Charlie Munger and he he mentioned that he just casually mentioned that he always have someone to talk to about their presence so I said Oh you mean like Mr Barber he said well it wasn't always born but I've always had someone to talk until recently he said that again the Daily Journal meeting he said that even Einstein needed some of the property each each human brain processes the same information differently and to the extent that you can find someone who is thoughtful is not processing data similar to you it is it would be useful to have those conversations but I think
Otherhave those conversations but I think that that is different from having a team if you have if you have let's say analysts under you and they report people then the incentives and the Dynamics of that exchange are very different from having a peer where there is no vested interest of any kind and two people having conversations about thoughts so I never appreciated you know I think for for most of the history of horizon that I operated making decisions on my own I have a good friend guys here and usually he and I will talk about things that either he's looking at or are looking at many times we don't agreed and many times I'll buy things that he won't buy or he'll buy things that I don't buy and so on so if we look at our portfolios they look very different from each other but but I and I have found it very useful to have responsibility because actually
Otherresponsibility because actually the guy around the farm on his own neither of us have any economic interest in the other part because we don't gain or lose anything but what happens and and I is confident that we are candidates sharing our beliefs and perspectives and that's useful so I think that it is valuable to have that type of a relationship and it doesn't need no need to be even be an off the chart person I think just having someone else one of the things that happened just this year actually in in Omaha is I was at this branch and Charlie Munger was there he was sitting there there was nobody next to him so I decided to help the guy out and give him some company and just so he doesn't get bored and I took guy with me and I said Charlie this is the person I talked to about my investments
Charlietalk to me because I really have nothing to add to anything
CharlieI really have nothing to add to anything you do become popular so Charlie said
Otheryou do become popular so Charlie said that we are going through a process of talking to someone else about your ideas requires you to put them together in a certain kind of format and manner that can be articulated to the other person and that process is useful in scenes of flaws on argument so then I said to Charlie that yeah you know monish could actually just do that with a monkeyit's a monkeyand so it wouldn't work you know so so Charlie actually I saw in that interaction that and I've seen even when I've talked to him is that he puts a huge amount of weight on that notion of having another person to bounce this off and so I actually don't move on anything now and I haven't moved on anything until I have been at least one conversational member we have many conversations you know like I said we may not agree but you know exactly
Otherwe may not agree but you know exactly what Charlie said is supposed to mean to kind of put my thoughts in a organized Manner and and here are some perspectives may be different than that so it's it's a huge Advantage but I think you have to stand up you know more manner where there is no vested interest there's no actual grind it's a trusted open relationship and then that works yeah
Questionerlike what would be the uhokay so like 45 X 50 x okay 100x
Otherso obviously the thing is that one of the things that happens in terms of human psychology is that if I have owned something and I just told you you should look for wrong long runways right and if you look at the company like hero you know where so many advantages you know motorcycles are better in rural areas and that's Google are and they have all the distribution Network they've got this huge it's called base they've got
Otherthis huge it's called base they've got all the brand equity and all that so toall the brand equity and all that so toall the brand equity and all that so to for someone else to approve them is notfor someone else to approve them is notfor someone else to approve them is not easy right and so they always followeasy right and so they always followeasy right and so they always follow this but you know capitalism is ruthlessand I think that if if a person isand I think that if if a person isand I think that if if a person is holding on to Hero Honda because of theholding on to Hero Honda because of theholding on to Hero Honda because of the past that may not be as robust as votingpast that may not be as robust as votingpast that may not be as robust as voting on good people or having some view ofon good people or having some view ofon good people or having some view of the future future has a way over 40the future future has a way over 40the future future has a way over 40 differently from the past so if you aredifferently from the past so if you aredifferently from the past so if you are able to if you understand the businessable to if you understand the businessable to if you understand the business within yourself in public then you canwithin yourself in public then you canwithin yourself in public then you can look out five 10 15 years to now and seelook out five 10 15 years to now and seelook out five 10 15 years to now and see that those aspects of the mode are goingthat those aspects of the mode are goingthat those aspects of the mode are going to be intact and you know what the whatto be intact and you know what the whatto be intact and you know what the what the valuation of the business would bethe valuation of the business would bethe valuation of the business would be so again what is the hero Motocrossso again what is the hero Motocrossso again what is the hero Motocross market capmarket capmarket cap do you know60 000 crores okay60 000 crores okay60 000 crores okay the question I would ask you know ifthe question I would ask you know ifthe question I would ask you know if someone is buying the stock today issomeone is buying the stock today issomeone is buying the stock today is that how does it get to a 120 pounds andthat how does it get to a 120 pounds andthat how does it get to a 120 pounds and how long does that take or how long doeshow long does that take or how long does
Questionerhow long does that take or how long does it take to get to 200 uh two hundredit take to get to 200 uh two hundredit take to get to 200 uh two hundred thousand groups and how long does thatthousand groups and how long does thatthousand groups and how long does that be and what are the circumstances wherebe and what are the circumstances wherebe and what are the circumstances where does it come to heroics to get theredoes it come to heroics to get theredoes it come to heroics to get there
Otherit's just it's it's going to get thereit's just it's it's going to get thereit's just it's it's going to get there because of all these natural things sobecause of all these natural things sobecause of all these natural things so but I would say no holding on to itbut I would say no holding on to itbut I would say no holding on to it because you know the dividend is morebecause you know the dividend is morebecause you know the dividend is more than the cost basis that is irrelevantthan the cost basis that is irrelevantthan the cost basis that is irrelevant the cost base has been relevant I thinkthe cost base has been relevant I thinkthe cost base has been relevant I think the thing is that you look at it as ifthe thing is that you look at it as ifthe thing is that you look at it as if there are advantages of course in Indiathere are advantages of course in Indiathere are advantages of course in India you don't have the same Dynamic but inyou don't have the same Dynamic but inyou don't have the same Dynamic but in the U.S we have significant tax issues athe U.S we have significant tax issues athe U.S we have significant tax issues a long-term gains yeah so that you have nolong-term gains yeah so that you have nolong-term gains yeah so that you have no tax implications that's a beautifultax implications that's a beautifultax implications that's a beautiful place to be andplace to be andplace to be and and so so I think that if you if youand so so I think that if you if youand so so I think that if you if you have a view that this is a business thathave a view that this is a business thathave a view that this is a business that is going to double People for People inis going to double People for People inis going to double People for People in value within the next five or ten yearsvalue within the next five or ten yearsvalue within the next five or ten years you know it's a great place to be to be
Questioneryou know it's a great place to be to be there and if you have a view that for whatever reason that may not be the case or the or the low then you want to look at something else but I would say just identifying those long runways and I would say non-emotional about on that because I have one question for you uh it's regarding your recent investments in all the banking stocks in India in JMK bank and uh I mean what's the election Behind These two universities just because there is uh largely an unbanked country where there is a lot of scope for the next day everybody in 30 years uh that's one question and the other one issues with the JFK Bank you know Black Swan even yeah
Otherokay good questions but we cannot talk what a portfolio to the exit these positions next few years I think the thing is that there's a you know buffer in the mangrove over the commitment to bias obviously if I own the tops
Questionerand when I share those favorable views of them in public I mean evidence comes out that there's both the views I now say in my mind that oh I've mentioned these things so how can I now sell these things it makes me look stupid so I'd rather look stupid and try it but but at some point you want all these stops when we don't own them we can talk about them
Questionerexercise would you advise for somebody to wait for five years seven years no matter how long you will be because I really say a highly defensive businesses
Otheruh yeah that's a good question and you know if you let's say have let's say you have one lakh rupees and I'll put the comma to the US so let's say you're One Life to this and this is the you know 2014. right and you can't find anything of Interest you sit on it then let's say now it's two thousand uh 20. and now something shows up of Interest which is deeply
Questionershows up of Interest which is deeply undervalued and long Runway and all that and you make the investment invest the 100 000 over here and then this thing let's say is growing at 20 degrees from from this point now so if you if you even go let's say 20 25 20 would be like three and a half years for a double right so let's let's make the math simple let's go to like uh 20 20 27 for example so 2027 you've gotten two doubles so you are at 400 000. right what is the return from here to here so you 13 years so in 13 years if you get a 4X okay I'm not calculating but does that sound right here so let's say 11 percent so it is very hard to make up last years in an investment if you have an investment which does not people find you I think for 10 years then it starts moving and even a quite an aggressive rate it would take a long time for to analyze return to the investment over
Otheranalyze return to the investment overanalyze return to the investment over the entire period to have that so to getthe entire period to have that so to getthe entire period to have that so to get to close to 20 of this you have to goto close to 20 of this you have to goto close to 20 of this you have to go many many more yearswhat is your best option today where thewhat is your best option today where thewhat is your best option today where the risk of permanent loss of love it's therisk of permanent loss of love it's therisk of permanent loss of love it's the best of all the various options you havebest of all the various options you havebest of all the various options you have the returns you're better off doing thatthe returns you're better off doing thatthe returns you're better off doing that versus sitting there and just I thinkversus sitting there and just I thinkversus sitting there and just I think sitting there endlessly so first of allsitting there endlessly so first of allsitting there endlessly so first of all if you're an individual investor andif you're an individual investor andif you're an individual investor and you're sitting in India with the youyou're sitting in India with the youyou're sitting in India with the you know how long this box on the exchange Iknow how long this box on the exchange Iknow how long this box on the exchange I find it hard to believe that youfind it hard to believe that youfind it hard to believe that you couldn't come up with something that iscouldn't come up with something that iscouldn't come up with something that is low risk and decent return problem thelow risk and decent return problem thelow risk and decent return problem the best way to approach it is I think lookbest way to approach it is I think lookbest way to approach it is I think look at what is your best options today nowat what is your best options today nowat what is your best options today now sometimes the options are really bad insometimes the options are really bad insometimes the options are really bad in that case your cash is not a problem butthat case your cash is not a problem butthat case your cash is not a problem but planning to hold cashplanning to hold cashplanning to hold cash for some long period of time and thenfor some long period of time and thenfor some long period of time and then planning to have a runway for 20 yearsplanning to have a runway for 20 years
Questionerplanning to have a runway for 20 years or something or something or something you know the thing is the modes most of you know the thing is the modes most of you know the thing is the modes most of the way of evaporating and they have a the way of evaporating and they have a the way of evaporating and they have a way of changing so the thing is you're way of changing so the thing is you're way of changing so the thing is you're making an assumption that even a making an assumption that even a making an assumption that even a Unilever or PNG would have unaffected Unilever or PNG would have unaffected Unilever or PNG would have unaffected modes for 20 years whereas in the US for modes for 20 years whereas in the US for modes for 20 years whereas in the US for example we have seen significant erosion example we have seen significant erosion example we have seen significant erosion of the PNG mode because of the Walmart of the PNG mode because of the Walmart of the PNG mode because of the Walmart from Costco you know they've taken away from Costco you know they've taken away from Costco you know they've taken away a lot of their pricing power and so on a lot of their pricing power and so on a lot of their pricing power and so on so I think more solution boards can so I think more solution boards can so I think more solution boards can shrink it compounds the problem shrink it compounds the problem shrink it compounds the problem wait 10 years together 20 or more and wait 10 years together 20 or more and wait 10 years together 20 or more and that's that's a very difficult that's that's a very difficult that's that's a very difficult proposition proposition proposition to be right for 30 years you need to be to be right for 30 years you need to be to be right for 30 years you need to be right for the teachers so it's kind of right for the teachers so it's kind of right for the teachers so it's kind of hard to look at businesses today and hard to look at businesses today and hard to look at businesses today and know where they'll be 20 years from now know where they'll be 20 years from now know where they'll be 20 years from now that's there are very few businesses that's there are very few businesses that's there are very few businesses that you can actually make I'm not even that you can actually make I'm not even that you can actually make I'm not even confident that can't be like please go
Questionerconfident that can't be like please go under you'll be able to make a 20 yearunder you'll be able to make a 20 yearunder you'll be able to make a 20 year plate I mean it may it may well work outplate I mean it may it may well work outplate I mean it may it may well work out would that be a difficult thing to saywould that be a difficult thing to saywould that be a difficult thing to say that you have a very great situation forthat you have a very great situation forthat you have a very great situation for for that long so I would say that it'sfor that long so I would say that it'sfor that long so I would say that it's probably better to look at your bestprobably better to look at your bestprobably better to look at your best options todayoptions todayoptions today yeah
Questionerso just related to your question aboutso just related to your question aboutso just related to your question about industry in India I'm not going toindustry in India I'm not going toindustry in India I'm not going to specifically ask forspecifically ask forspecifically ask for portfolio but what you do mind because Iportfolio but what you do mind because Iportfolio but what you do mind because I read somewhere a while back that you hadread somewhere a while back that you hadread somewhere a while back that you had you were you sort of a worse it's notyou were you sort of a worse it's notyou were you sort of a worse it's not recently but uh yeah sometime back sorecently but uh yeah sometime back sorecently but uh yeah sometime back so what is your mind about investment wellwhat is your mind about investment wellwhat is your mind about investment well
OtherI think I think the Indian markets forI think I think the Indian markets forI think I think the Indian markets for the most part are outside myself tothe most part are outside myself tothe most part are outside myself to accomplishaccomplishaccomplish because I am not here the format I wouldbecause I am not here the format I wouldbecause I am not here the format I would I mean the type of work I would need toI mean the type of work I would need toI mean the type of work I would need to do to really understand many businessesdo to really understand many businessesdo to really understand many businesses would be similar to private I paywould be similar to private I paywould be similar to private I pay investment investing in the US youinvestment investing in the US you
Otherinvestment investing in the US you really have to get no management and youreally have to get no management and youreally have to get no management and you get to know a lot a lot of everythingget to know a lot a lot of everythingget to know a lot a lot of everything you need to be on the ground and get toyou need to be on the ground and get toyou need to be on the ground and get to know a lot more I would say a deeperknow a lot more I would say a deeperknow a lot more I would say a deeper understanding of thingsunderstanding of thingsunderstanding of things a few things aimed within sociala few things aimed within sociala few things aimed within social confidence a few things and uh you knowconfidence a few things and uh you knowconfidence a few things and uh you know it's hard to it's hard to know exactlyit's hard to it's hard to know exactlyit's hard to it's hard to know exactly how the future unfolds but India has hadhow the future unfolds but India has hadhow the future unfolds but India has had a I would say around 60a I would say around 60a I would say around 60 67 year history more than the 69 history67 year history more than the 69 history67 year history more than the 69 history of I would say either leaders who had aof I would say either leaders who had aof I would say either leaders who had a socialist friend leaders who had poorsocialist friend leaders who had poorsocialist friend leaders who had poor governance on both or even if even thatgovernance on both or even if even thatgovernance on both or even if even that they were capitalists they were not allthey were capitalists they were not allthey were capitalists they were not all capitalists and so on so you know wecapitalists and so on so you know wecapitalists and so on so you know we have we have a leader in Modi wherehave we have a leader in Modi wherehave we have a leader in Modi where there is there is a chancethere is there is a chancethere is there is a chance or very significant change I've alwaysor very significant change I've alwaysor very significant change I've always felt that in India for example the thefelt that in India for example the thefelt that in India for example the the government if they did just two thingsgovernment if they did just two thingsgovernment if they did just two things two or three things one is get out oftwo or three things one is get out oftwo or three things one is get out of the way
Otherthe way they're getting out of the way of being relative to the government to do in many many places build out great infrastructure built our great schools that would be a tremendous model s get out the way and focus on the things that governments are meant to do there's some chance that may happen right and so if he actually end up with those Dynamics then you could you could see significant growth in corporate profits and and even revenues and so on so you get a lot of favorites in that case I think we've made a few Bets with everything downside is very muted we think there is uh I mean most of the bets we have are in banking in general banks will grow at a multiple of GDP so if the GDP growth is coming in then then that will help and I'm sure your idea has a lot of One bank and such I think there's there's lots of code on that
Questionerthere's there's lots of code on thatthere's there's lots of code on that front so don't have a reason and we'llfront so don't have a reason and we'llfront so don't have a reason and we'll see how it works outthe approach I took with dakshana wasthe approach I took with dakshana wasthe approach I took with dakshana was that you know I'm a guy sitting inthat you know I'm a guy sitting inthat you know I'm a guy sitting in shorts in California and I don't haveshorts in California and I don't haveshorts in California and I don't have much to understand a whole lot aboutmuch to understand a whole lot aboutmuch to understand a whole lot about what is involved in India and so on whatwhat is involved in India and so on whatwhat is involved in India and so on what I had understood at that point forI had understood at that point forI had understood at that point for dakshana was that I was familiar withdakshana was that I was familiar withdakshana was that I was familiar with the super 30 modelI'm going to see him later today so II'm going to see him later today so II'm going to see him later today so I was familiar with super 30. I'vewas familiar with super 30. I'vewas familiar with super 30. I've obviously familiar with the IIT I wasobviously familiar with the IIT I wasobviously familiar with the IIT I was also familiar with the fact that the IITalso familiar with the fact that the IITalso familiar with the fact that the IIT the strict meritocracy where basicallythe strict meritocracy where basicallythe strict meritocracy where basically if you do well on the test you get inif you do well on the test you get inif you do well on the test you get in and it doesn't matter if you're theand it doesn't matter if you're theand it doesn't matter if you're the prime minister's son or ambali son ifprime minister's son or ambali son ifprime minister's son or ambali son if you don't do well you're not in it youyou don't do well you're not in it youyou don't do well you're not in it you know it's a very clean systemknow it's a very clean systemknow it's a very clean system and I was also aware that if you getand I was also aware that if you getand I was also aware that if you get into the iits there is a very highinto the iits there is a very highinto the iits there is a very high subsidy by the government and I thinksubsidy by the government and I thinksubsidy by the government and I think it's just I don't have much I have no
Otherit's just I don't have much I have no control over that but I think the stupid policy where the government subsidizes at you if I am God with your son and I can pay full prayer I have no ability to pay full plan the government gives me the same deal as some poor farmer son and so in effect that is a misguided public policy but that's that's a topic for another day but I saw the super 30 model I saw the power of that model I saw that the hiccup or the I would say the the the IIT government to be taking the best talent of the country of producing Engineers but what had happened is it became taking the best talent amongst middle class or higher urban areas and then producing engineers in that pool so it ignored large portions of the population ignore the poor ignored Rural and and so on and I felt that if if we are able to get kids into IIT for a very small
get kids into IIT for a very smallget kids into IIT for a very small amount of money span you can actuallyamount of money span you can actuallyamount of money span you can actually lift a family for poverty I'll get you alift a family for poverty I'll get you alift a family for poverty I'll get you a question about reading the first 12question about reading the first 12question about reading the first 12 weeks I just want to give a context ofweeks I just want to give a context ofweeks I just want to give a context of where we're coming from dakshina spendswhere we're coming from dakshina spendswhere we're coming from dakshina spends about let's say one lakh to one pointabout let's say one lakh to one pointabout let's say one lakh to one point one at a quarter lack per scholar weone at a quarter lack per scholar weone at a quarter lack per scholar we take ontake ontake on to get them notified and typically weto get them notified and typically weto get them notified and typically we are now getting about 60 30 of the menare now getting about 60 30 of the menare now getting about 60 30 of the men and even the rest of them the 30 whoand even the rest of them the 30 whoand even the rest of them the 30 who don't care they're not going to nit indon't care they're not going to nit indon't care they're not going to nit in another school it's almost 100 are goinganother school it's almost 100 are goinganother school it's almost 100 are going to uh engineering schools take the oneto uh engineering schools take the oneto uh engineering schools take the one and a quarter lack that we spend inand a quarter lack that we spend inand a quarter lack that we spend in effect forces the government to spendeffect forces the government to spendeffect forces the government to spend like 25 to 30 lakhs on that day becauselike 25 to 30 lakhs on that day becauselike 25 to 30 lakhs on that day because once he gets into IIT that is aonce he gets into IIT that is aonce he gets into IIT that is a substance so 608 laps a Year everyone issubstance so 608 laps a Year everyone issubstance so 608 laps a Year everyone is costing the government I'm happy tocosting the government I'm happy tocosting the government I'm happy to spend one life with the government spendspend one life with the government spendspend one life with the government spend 30 pounds 39 is a good number for me but30 pounds 39 is a good number for me but
Other30 pounds 39 is a good number for me but if you think about and we are able to if you think about and we are able to if you think about and we are able to basically lift a family for poverty from basically lift a family for poverty from basically lift a family for poverty from plan and we we just had a we had a kid plan and we we just had a we had a kid plan and we we just had a we had a kid who joined dakshina in 2010 his father who joined dakshina in 2010 his father who joined dakshina in 2010 his father is a very poor Taylor in a slum and is a very poor Taylor in a slum and is a very poor Taylor in a slum and Outsource of Hyderabad making less than Outsource of Hyderabad making less than Outsource of Hyderabad making less than four thousand rupees a month we prepped four thousand rupees a month we prepped four thousand rupees a month we prepped the kid for two years from 2008 to 2010 the kid for two years from 2008 to 2010 the kid for two years from 2008 to 2010 then he took the IIT interest exam he then he took the IIT interest exam he then he took the IIT interest exam he got a back of 63 out of 500 000 our best got a back of 63 out of 500 000 our best got a back of 63 out of 500 000 our best performing guys then he went to IIT performing guys then he went to IIT performing guys then he went to IIT Bombay computer science he finished this Bombay computer science he finished this Bombay computer science he finished this year 2014. Google interviewed him by year 2014. Google interviewed him by year 2014. Google interviewed him by Mountain View and they hired him and Mountain View and they hired him and Mountain View and they hired him and then they had Visa issues so they moved then they had Visa issues so they moved then they had Visa issues so they moved him to London I think he's starting him to London I think he's starting him to London I think he's starting salary is hundred thousand first month salary is hundred thousand first month salary is hundred thousand first month he moved his parents out of that place he moved his parents out of that place he moved his parents out of that place that they were living second month now that they were living second month now that they were living second month now they put a down payment on a house they put a down payment on a house they put a down payment on a house they're gonna own say who to a rental they're gonna own say who to a rental they're gonna own say who to a rental they moved to a house now third month
Otherthey moved to a house now third month they moved to a house now third month getting his father moved from working as getting his father moved from working as getting his father moved from working as a tailor for someone to being on his own a tailor for someone to being on his own a tailor for someone to being on his own you know they won't pay attention right you know they won't pay attention right you know they won't pay attention right we are seeing I mean you know you're we are seeing I mean you know you're we are seeing I mean you know you're going from like 80 a month to eight going from like 80 a month to eight going from like 80 a month to eight thousand dollars a month and it cost the thousand dollars a month and it cost the thousand dollars a month and it cost the whole thing cost two thousand dollars whole thing cost two thousand dollars whole thing cost two thousand dollars right so there's a big model so I knew right so there's a big model so I knew right so there's a big model so I knew that the model is good but I had no that the model is good but I had no that the model is good but I had no understanding of how to execute them on understanding of how to execute them on understanding of how to execute them on so what I did is this is what happened so what I did is this is what happened so what I did is this is what happened in the first weld me I contacted some in the first weld me I contacted some in the first weld me I contacted some friends I knew in the US who are IIT friends I knew in the US who are IIT friends I knew in the US who are IIT grads because and I told them hey you know I basically and I told them hey you know I basically and I told them hey you know I basically want to find poor kids and there was an want to find poor kids and there was an want to find poor kids and there was an industry there's an industry in India industry there's an industry in India industry there's an industry in India where I can pay her pay uh coaching where I can pay her pay uh coaching where I can pay her pay uh coaching Institute in Quota one or two lacks and Institute in Quota one or two lacks and Institute in Quota one or two lacks and they'll bring them right so the industry they'll bring them right so the industry they'll bring them right so the industry is there all I needed to do was find is there all I needed to do was find is there all I needed to do was find Bright poor kids send them to quota this
OtherBright poor kids send them to quota this was the original model I had my mind was the original model I had my mind was the original model I had my mind send them to quota paid room and board send them to quota paid room and board send them to quota paid room and board and everything and then two years and everything and then two years and everything and then two years they'll take the exam and we'll see what they'll take the exam and we'll see what they'll take the exam and we'll see what the returns are and what the results are the returns are and what the results are the returns are and what the results are and all of that and over time we already and all of that and over time we already and all of that and over time we already improve money for 15 years over time improve money for 15 years over time improve money for 15 years over time you'll improve the model and fact I only you'll improve the model and fact I only you'll improve the model and fact I only had this model in mind when I had no one had this model in mind when I had no one had this model in mind when I had no one in India I wasn't going to move to India in India I wasn't going to move to India in India I wasn't going to move to India none of that so drop this on my IIT none of that so drop this on my IIT none of that so drop this on my IIT friends and they said I said no I would friends and they said I said no I would friends and they said I said no I would like to find someone in India who can be like to find someone in India who can be like to find someone in India who can be a consultant or be a helper for me who a consultant or be a helper for me who a consultant or be a helper for me who can help me starting to put some of can help me starting to put some of can help me starting to put some of these pieces together and I've had a lot these pieces together and I've had a lot these pieces together and I've had a lot of experience with products one of my of experience with products one of my of experience with products one of my friends was fighting Madras he said okay friends was fighting Madras he said okay friends was fighting Madras he said okay you know write up something I'll put it you know write up something I'll put it you know write up something I'll put it on some glass along my cell phone on some glass along my cell phone on some glass along my cell phone there's this NGO who wants to say that
Otherthere's this NGO who wants to say that and so I wrote up some a lot of what I wanted to do and he put it on that classic board one person responded so this guy was about 67 years old he was a retired guy and he had graduated from class and he said that hey you know I like your calls I'm in Bangalore I am Idol and tell me what to do I'll do it so I told him okay here's what we'll do I want you to be a consultant okay you're a consultant to Dakshin I already formed the foundation in the U.S as if you're a consultant and every day you work for dakshana I'll pay you 5000 rupees okay and every hour remote collection now I'll pay you 800 so if you work three hours you just keep track of your time and another month we'll send you the money so he didn't really care about the money but he said fine no problem it sounds fair to me so I said here's the
Othersounds fair to me so I said here's the problem I want you to solve I I want you to problem I want you to solve I I want you to problem I want you to solve I I want you to figure out how we can find poor kids to figure out how we can find poor kids to figure out how we can find poor kids who are smart right I had one or two who are smart right I had one or two who are smart right I had one or two ideas so this is one idea I have is that ideas so this is one idea I have is that ideas so this is one idea I have is that there must be kids showing up at these there must be kids showing up at these there must be kids showing up at these coaching Institutes who want to get coaching Institutes who want to get coaching Institutes who want to get admitted but cannot pay the fees admitted but cannot pay the fees admitted but cannot pay the fees right so I said and I said all expenses right so I said and I said all expenses right so I said and I said all expenses are paid so if you're traveling or are paid so if you're traveling or are paid so if you're traveling or flying anywhere whatever flying anywhere whatever flying anywhere whatever all pink I got him a credit card which all pink I got him a credit card which all pink I got him a credit card which was a customer credit card as a product was a customer credit card as a product was a customer credit card as a product Builder you know you're taking a flight Builder you know you're taking a flight Builder you know you're taking a flight whatever you have no risk of an invoice whatever you have no risk of an invoice whatever you have no risk of an invoice okay okay okay so he started he became a traveling so he started he became a traveling so he started he became a traveling salesman he was going around and I said salesman he was going around and I said salesman he was going around and I said go to quota meet all the coaching go to quota meet all the coaching go to quota meet all the coaching history history history of kids that they run into whatever and of kids that they run into whatever and of kids that they run into whatever and so he started having a number of so he started having a number of so he started having a number of meetings with protein is still saying meetings with protein is still saying meetings with protein is still saying look if you find people who cannot pay look if you find people who cannot pay look if you find people who cannot pay we can pay and it's it's helpful to you
Otherwe can pay and it's it's helpful to youwe can pay and it's it's helpful to you because you'll get the students and allbecause you'll get the students and allbecause you'll get the students and all thatthatthat and these guys listen to us we actuallyand these guys listen to us we actuallyand these guys listen to us we actually got our first caller from one cellgot our first caller from one cellgot our first caller from one cell classes we we met finished up oneselfclasses we we met finished up oneselfclasses we we met finished up oneself the coaching instead of our short memorythe coaching instead of our short memorythe coaching instead of our short memory so just that afternoon some familyso just that afternoon some familyso just that afternoon some family showed up and they had no money and allshowed up and they had no money and allshowed up and they had no money and all that and they were crying in front ofthat and they were crying in front ofthat and they were crying in front of them and all that they said please don'tthem and all that they said please don'tthem and all that they said please don't gothese people and said they seem verythese people and said they seem verythese people and said they seem very poor the kid has qualified Consultantspoor the kid has qualified Consultantspoor the kid has qualified Consultants like I said we are not concerned aboutlike I said we are not concerned aboutlike I said we are not concerned about this I said support you know tell themthis I said support you know tell themthis I said support you know tell them we'll pay for everything and admit himwe'll pay for everything and admit himwe'll pay for everything and admit him and all that so he became our firstand all that so he became our firstand all that so he became our first scholar we admitted into a bunch ofscholar we admitted into a bunch ofscholar we admitted into a bunch of classes we got him set up in the Domclasses we got him set up in the Domclasses we got him set up in the Dom over there and he got going and as thisover there and he got going and as thisover there and he got going and as this guy was greeting more and more peopleguy was greeting more and more peopleguy was greeting more and more people the name of this school systemthe name of this school systemthe name of this school system started coming up in multiplestarted coming up in multiplestarted coming up in multiple conversations multiple people told him
Otherconversations multiple people told him you should look at jmb and you've never heard of him so when the third guy told him that he took a note and did some research and he found that there is a school system in India and other guys problems here which gave me the reform can you say at which state and descriptive okay you would find it hard to believe that the government of India actually executed such a phenomenal system the schools are fantastic they are it's a magnet system so two million kids 20 Lakers a year a fifth standard taker language independent IQ test and like the IIT is the the testing is absolutely corruption free and all the results get uh tableted in Delhi and they admit the top two percent of the kids so out of 2 million forty thousand kids get admitted into 550 kmbs across the country and so you have to be from that District to go
Questioneryou have to be from that District to go to the gym so typically let's say there's a district in Jaipur uh how many kids take the test every year in fifth standard
Othermore than a thousand and that's a low number
Questionerand what about you okay and uh which district to send you from which
Otheris right okay so so if you look at the restaurant district there are like let's say 10 000 kids from that dispute who are taking the steps in fifth standard and they can take it in one of 14 languages they are only admitting 80 of those films
Questionerokay so you have to be super super smart to be admitted not smart enough which college did you go to
Otheryeah now I mean
QuestionerI mean okay and what about you
Otherokay where you are now
Questionerall right congratulations
Other[Applause]
Questioneronce we found the jnvs and once this guy found out the system so he said no this system is in rural area it's an awesome taking place it's nowhere near any civilization it is only attractive
Othercivilization it is only attractive for people who are rural India who don't have that much money or because they are not understand it's an integrated system they should do cars that you drive so if you have any cost Place issues I mean your kids will be sleeping next to usually all of that is fully so it's not it is not an attractive school system for affluent people to send their kids can we work with your school system can we test your kids and then find them and so on so they listen to him and the genetic had a problem the problem they had is they have all these very broad they knew that kids were very bright but after 12th standard there was nothing right the kids finished off it and they are in the middle of nowhere I mean if you're the best company we are IIT coaching have Western program to be hard man how far is the closest sporting center okay so there you go so you have these
Otherokay so there you go so you have these you know ten thousand people fifty eight tickets there is no chance even if you had the money to get any idea right so they knew that problem and so what they said to us is okay window Revenue with the unknown darshana being set up like one school in each uh region there were eight regions in India we will test we'll have you test the best skills in each region and then we'll take 40 kids in each region and move them to that one school and dakshana will provide the faculty and all of that to run the program that's how we started in 2007. we had no expertise so by this time about nine or ten weeks have passed and in nine or ten weeks I think uh maybe 60 000 rupees or eighty thousand rupees have been spent uh in terminal and Ramesh came to me after about 10 weeks and said we have to bring this monthly
Questionerand said we have to bring this monthly or the daily billing to an end because Ior the daily billing to an end because Ior the daily billing to an end because I can't give back of the hours and all andcan't give back of the hours and all andcan't give back of the hours and all and it's taking too much my time I need toit's taking too much my time I need toit's taking too much my time I need to go full time so I switched him to onego full time so I switched him to onego full time so I switched him to one like a monthwe have started operations by June wewe have started operations by June wewe have started operations by June we had the first scholar and by Septemberhad the first scholar and by Septemberhad the first scholar and by September we had 320 kidswe had 320 kidswe had 320 kids we had selected from the DMVs and we hadwe had selected from the DMVs and we hadwe had selected from the DMVs and we had moved them to the eight students andmoved them to the eight students andmoved them to the eight students and what we had done in phota is we had somewhat we had done in phota is we had somewhat we had done in phota is we had some contracts with all these workingcontracts with all these workingcontracts with all these working institutes to provide faculty at theseinstitutes to provide faculty at theseinstitutes to provide faculty at these vocationsvocationsvocations so basically my take was all of theseso basically my take was all of theseso basically my take was all of these pieces just needed check writing abilitypieces just needed check writing abilitypieces just needed check writing ability and I knew I had checked writing abilityand I knew I had checked writing abilityand I knew I had checked writing ability right I didn't have any Ability Beyondright I didn't have any Ability Beyondright I didn't have any Ability Beyond that but we could write checks and wethat but we could write checks and wethat but we could write checks and we were up and running and then then whatwere up and running and then then whatwere up and running and then then what happened is that a lot of these coachinghappened is that a lot of these coachinghappened is that a lot of these coaching institutes did a very poor job they sentinstitutes did a very poor job they sentinstitutes did a very poor job they sent that faculty they could not what wethat faculty they could not what wethat faculty they could not what we found is that when we are doing uh
Otherfound is that when we are doing uhfound is that when we are doing uh coaching in Assam for example peoplecoaching in Assam for example peoplecoaching in Assam for example people would say yes yes I'll do all this stuffwould say yes yes I'll do all this stuffwould say yes yes I'll do all this stuff and this is the link they would take theand this is the link they would take theand this is the link they would take the moneybut in other regions it was a little bitbut in other regions it was a little bitbut in other regions it was a little bit better I think first first batchbetter I think first first batchbetter I think first first batch 22 percent of the batch went away and I22 percent of the batch went away and I22 percent of the batch went away and I knew that we had seen a lot of problemsknew that we had seen a lot of problemsknew that we had seen a lot of problems to get even to credit you so I knew thatto get even to credit you so I knew thatto get even to credit you so I knew that if we have better faculty and betterif we have better faculty and betterif we have better faculty and better things going on it would improve my takethings going on it would improve my takethings going on it would improve my take is that in any business or anything I'mis that in any business or anything I'mis that in any business or anything I'm running is all I care about is that therunning is all I care about is that therunning is all I care about is that the next year better than this year so wenext year better than this year so wenext year better than this year so we just started to talk some word and go onjust started to talk some word and go onjust started to talk some word and go on so we became lucky so you know the firstso we became lucky so you know the firstso we became lucky so you know the first 12 weeks I found this guy honest guy a12 weeks I found this guy honest guy a12 weeks I found this guy honest guy a simple guy and he he was doing his thingsimple guy and he he was doing his thingsimple guy and he he was doing his thing and we got the mou none of theand we got the mou none of theand we got the mou none of the government we got the scholars and andgovernment we got the scholars and andgovernment we got the scholars and and one of the things that works and and I'mone of the things that works and and I'mone of the things that works and and I'm sure what what year did you guys finish
Questionersure what what year did you guys finish your poetry with darshana
Other2012.
Otherforeign
Questionerokay there you go
Otherokay there you go and smart kids good batch what we did is we basically just then worked on the model to improve the model because we knew the talent was there we knew that all of the pieces were there and then we just worked on okay now let's just keep improving the yields and all that and work so that's it's always better to be lucky than to be good you know so I think Sanjay we should not wish to what you think and at least
Questionerhow is value investing impact in a personal life
Otheryou know that's a good question I might have to think about it for a second let me put it this way I would say that value investing lent me to warm comfort and Cali muscles I picked up a whole bunch of values which had nothing to do with investing right and then I saw specifically in actually both their cases they really didn't care about the money they were
Questionerdidn't care about the money they were making I mean they I think it's a big score for them especially War but it has vaguely impact on their lifetime you know they don't they're not really spending the money you're going to give it away and all those sorts of things some of that has rubbed off on me or will not to the extent that it's it's with them so I think it grounds you if you pursue value investing you cannot pursue it without understanding Warren Buffett if you understand them as people and as humans they're as high a quality as you can possibly get and if you emulate their qualities which are unrelated to investing the only thing that can happen is it can improve your your life so I think for me personally they would not have been for example they would not have been a dakshana if I were not include the world right and so I wouldn't have had the
Questionerright and so I wouldn't have had the values of you know the fallacy of having large inheritances my kids are not interested in large inheritances as neither of us and again that has come through because of the influence of warranty so I think there's many many things that I've picked up from them that either I've never paid attention to or never thought about because that's been useful and with that thank you very much
Other[Applause]
Questioneralways I think the discussion was the most impactful much more than the value investing qualities thank you okay
Otherohohoh [Music]