The Unrepentant Recalcitrant

Lessons for an accidental entrepreneur

Archive for the tag “Value Investing”

Charlie Munger on Wrestling with Pigs

Charlie Munger is the long time associate and friend of Warren Buffet and an investing legend in his own right.

I hope to be talking about him a lot on this blog, not just because I believe he is a great investor but also because I believe he is one of the foremost proponents of what I like to call “Right Thinking”.

Right Thinking is not about how to pick stocks or how to startup companies or take your profits. Right Thinking is about how to go about thinking about all of these things and so much more.

It’s the framework of your thoughts and actions that will determine your satisfaction with the end result and your success.

I am going to adapt his quote on Pigs but I keep the meaning in all seriousness.

Charlie says, “Don’t wrestle with Pigs. You will both get very dirty. Trouble is, the Pig will enjoy it”

Be careful whom you associate with. It may be expeditious, it may even seem like you have no choice at the time.

You may believe you can get out of the relationship any time you choose.

But you are going to get very dirty.

It never ends well.

Each of you reading this know who these pigs are, and which of you are considering wrestling with some.

That shit will not come off easy.

The Story of Abhimanyu: Why You Must Have an Exit Strategy

Let me tell you the story of Abhimanyu.

Long long ago in a kingdom far far away, an epic battle was fought.

The battle and its larger story were immortalized in an epic Sanskrit poem called “The Mahabharata”.

The war was between two families of cousins battling for control of their kingdom.

Abhimanyu, a warrior prince learnt the strategies of war while in his mothers womb. His overheard his father Arjuna telling his mother Subhadra how to enter, exit and destroy various battle formations.

The most complex of these  battle formations was the “Chakravyuh”, a formation resembling a rotating spiral that moved forward and expanded at the same time.

Here is where the story gets interesting (and relevant, so pay attention!).

Subhadra, listening to her husband teach, fell asleep before he finished. Abhimanyu, learnt the method of entry into the Chakravyuh, the way to fight once inside, but did not hear how he should exit.

Fast forward to the battle, many years later. The bad guys (sic) are winning. Things look grim. The Chakravyuh is advancing on Abhimnayu and his forces. It seems unstoppable.

Abhimanyu, hero that he is, rushes forward and uses his knowledge to penetrate the spiral. He breaks his way in and fights the enemy from the inside.

Alas, he does not know how to get out of the spiral, once he is in. He lacks an exit strategy.

He is surrounded and killed by the enemy forces, and dies a bloody death on the battlefield.

 

I think I’ve made my point to all of you here (and It isn’t that you shouldn’t fall asleep in class!).

Whatever you do, entrepreneurship or investing or anything else with meaning to you, consider your exit strategy.

Not an exit strategy, not even a couple. You should be devising a decision tree of exits based on your view of multiple different outcomes for your task.

While your life may not depend on it as it did for our hero, you should behave as if it does.

Your outcome(s) will thank you.

 

As a coda for readers interested in the Mahabharata, it is the longest Indian poem (the title means Great Indian Story), is available in English translation and is one of the most gripping tales ever told. The Bhagavad Gita, a discourse by Lord Krishna is a story within this story and probably better known. In the Gita, Krishna speaks to Arjuna (Abhimanyu’s father) and explains right living and the concept of “Karma”. Try it. You will love it.

 

 

All Entrepreneurship is Value Investing

It shouldn’t be a surprise really when you think about it.

Value investing has been described as buying a dollar for fifty cents. Warren Buffet, speaks of investing as delaying the economic gratification of spending money today to have more money in the future. This “more money” is wealth generation resulting from investing in a business that profits.

So, what exactly is a startup?

You have a (great) idea. You start a business. No one believes in your idea. Its crazy they tell you. It would never work. Why, they say, if its such a great idea are the big players in your space not already doing it? As soon as you start valuing your company, you start to see the discrepancy between what you believe the business is worth and what others (“experts”/”investors”) think its worth.

You see where I am going with this?

You “invest” time, effort, energy in this company denying yourself gratification in order to build wealth and if you are successful, the worlds view of the businesses worth now matches your own (or more likely there is froth and the pendulum has swung wildly to overvaluation…You sell into this as fast as you can hombre!)

Value Investing has the concept of a “catalyst”, the event/result that brings together the price of an investment to its real value and converges the two. You, my entrepreneur friend are the catalyst in your business. Believe in yourself and stop listening to the noise.

 

 

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