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Tuesday 30 November 2021

Revision of Quantamental Subscription

More Options. Better Options

Hoping to bring you some good news at the end of the year :-)

Since launching Quantamental, a number of investors had suggested that I have a two-year option for it. Since, both the long term and Hitpicks, have both one and two-year subscription offerings, that idea made sense to me. 

My only issue was that since Quant was priced slightly higher, a two-year subscription might actually end up being very expensive for a lot of people. And it is difficult to afford it if one had a smaller capital to invest in the strategies.

Considering that I am making the following changes:

1. Quantamental package from www.intelsense.in (Direct subscription) - This is going to be Rs 20,000 for a year and Rs 35,000 for two years. This includes access to both the Q30 and Q10 strategies.

2. Q30 on smallcase - I am reducing the price to Rs 15,000 for 1 year. Smallcase does not have a 2-year option.

3. Q10 on smallcase - The price continues to remain at Rs 15,000 for 1 year.

For all existing direct subscribers, you will get a 3-month free extension on renewal
For all smallcase Q30 annual subscribers, we will be giving you access to Q10 on intelsense.in for a proportionate duration.

Thursday 25 November 2021

Weekend Reading

Reading across disciplines is one of the best ways to improve our investment acumen. Here is a summary of some of the best articles I read this week. If you like this collection, consider forwarding it to someone who you think will appreciate it.

1. Retrofitting Older Cars with Electric Motors Could Transform Transport

The higher purchase price of electric vehicles is one reason that they are still a small fraction of all cars sold, but retrofitting older cars and trucks with electric motors could be the fix needed to turbo-charge electric vehicle uptake.


Ford and General Motors are among the big names offering electric conversion kits for drivers looking to keep their current car on the road while drastically lowering its emissions. General Motors announced its motor, battery, and converter kit in 2020. Ford is readying a drop-in 281 horsepower electric crate motor for sale.


Transitioning from fossil fuel cars to electric will take time and retrofitting needs regulation oversight for it to be safe and effective. Electrification of car stock brings its own complications. Carmakers are in the midst of a chip shortage, better rapid charging infrastructure needs to be put in place, and the national electric grid will need an upgrade likely costing more than $100 billion.


On top of that, there are likely to be shortages of essential metallic elements like nickel and lithium used in EV batteries. Analysts say that forces EV makers to look at alternative battery technologies, including solid-state batteries with faster charging times and longer life, and the auto industry has invested heavily to find solutions.



2. Carbon Pricing: Social cost of CO2 emission

Carbon pricing is an instrument that captures the external costs of greenhouse gas (GHG) emissions—the costs of emissions that the public pays for, such as damage to crops, health care costs from heat waves and droughts, and loss of property from flooding and sea level rise—and ties them to their sources through a price, usually in the form of a price on the carbon dioxide (CO2) emitted.


A price on carbon helps shift the burden for the damage from GHG emissions back to those who are responsible for it and who can avoid it. Instead of dictating who should reduce emissions where and how, a carbon price provides an economic signal to emitters, and allows them to decide to either transform their activities and lower their emissions, or continue emitting and paying for their emissions. In this way, the overall environmental goal is achieved in the most flexible and least-cost way to society


When damages from sea level rise, extreme weather and other effects are taken into account, the global social cost of carbon is $180 to $800 per tonne, rather than the $12 to $62 range used by the US Environmental Protection Agency.


India’s country-level social cost of carbon emission was estimated to be the highest at $86 per tonne of CO2. It means the Indian economy will lose $86 by emitting each additional tonne of CO2. India is followed by the US, where the economic damages would be $48 per tonne of CO2 emission. Saudi Arabia is close behind at $47 per tonne of CO2 emission.




3. The End of Trust

Trust is to capitalism what alcohol is to wedding receptions: a social lubricant. In low-trust societies (Russia, southern Italy), economic growth is constrained. People who don’t trust other people think twice before investing in, collaborating with, or hiring someone who isn’t a family member (or a member of their criminal gang). The concept may sound squishy, but the effect isn’t.


The economists Paul Zak and Stephen Knack found, in a study published in 1998, that a 15 percent bump in a nation’s belief that “most people can be trusted” adds a full percentage point to economic growth each year. That means that if, for the past 20 years, Americans had trusted one another like Ukrainians did, our annual GDP per capita would be $11,000 lower; if we had trusted like New Zealanders did, it’d be $16,000 higher. “If trust is sufficiently low,” they wrote, “economic growth is unachievable.”



4. Why Investors’ Memories May Be Bad for Their Wealth

Overconfidence can be bad for markets and bad for investors. You just need to look at the recent crash in cryptocurrencies to see what can happen when investors believe they simply can’t lose. It’s certainly not a new phenomenon in the world of investing. From Tulip Mania in 17th-century Holland, to the dot-com bubble of the late 1990s, history is littered with examples of investor bravado leading them blindly into big losses when their sure-fire bet goes south.


Yet the reality is that overconfident investors don’t really make for good investors. They tend to trade more frequently despite losing money doing so, over-react to market signals and suffer from the “winner’s curse” in which they purchase overpriced investments. They are also more likely to commit investment errors such as under-diversification and overconcentration on familiar stocks. 


The good news is our research was also able to identify a relatively straightforward way of tackling the issue. In the final part of our study, we split our investors into two groups. Half were asked to look up the results of their past investments at the start of the experiment. This showed them exactly how they had previously fared. The other half had to rely on their memory as before.


Those who had seen their past results behaved much more cautiously. They made fewer trades and spent less of the US$500 stake they had received than those just relying on their memory. While not removing memory bias and overconfidence completely, this simple step did go a long way towards minimising their impact.




5. The Perils of Social Media

Social media has addictive qualities that I think surface primarily in two ways. First, as a passive consumer of information, social media platforms are skilled at “curating” your feed in a way that learns your interests and presents a never-ending stream of content tuned to what you have proven you will click on in the past. This can result in a consumer of information falling into an echo chamber resembling an intellectual monoculture — a recipe for confirmation bias. Second, once a user starts posting on social media, the feedback loop comes into play. Human beings like attention, and the likes and retweets become addictive.


From the standpoint of a consumer of information, I am convinced that the worst aspect of technology in general is that interrupts the state of flow by leading to endless context switching.4 All meaningful productivity occurs in a flow state. If you are picking up your phone a dozen times an hour to check how many likes you got on your latest tweet, there is zero chance of entering a state of flow.


Sunday 21 November 2021

Equity Returns Are Lumpy In Nature

Markets were weak last week and both Q30 and Q10 gave back most of the moderate gains accumulated in the previous 2 weeks. We remain about  8-10% down from the peak value in mid-October. While both Q30 and Q10 are outperforming the market handsomely over a longer duration, few members who have joined in the last few months have not seen any gains whatsoever. That may feel disappointing when the Q30 CAGR is 70% plus since inception on March 2020 and Q10 is still up more than 50% for the current FY. 

Here is an excerpt from one of the past quantletters that is relevant to repeat once more: 

Excerpts from May 21 Quantletter: (All figures and numbers mentioned are as written in May 21) 
"While it is very important to follow the process and take what the market gives us without letting our emotions override the Q30/Q10 investing decisions, it is also important to remember that market returns are lumpy in nature. In trending markets, we will make a lot. In a downward market, we will give back some portion of it. In a sideways market, we will bleed a little as the market takes its breath and before starting to move in one direction whether up or down. 

What happens if you start at the wrong time and the market declines thereafter and the momentum doesn’t return for a few months or several months? Framed differently, the question is how long do you need to remain invested to gain a 100% probability of profit? 

If the past is any indication, that period could be anything from a couple of quarters to a couple of years. You must be willing to remain invested and follow the process with discipline throughout these periods to come out of the drawdowns, recover your investment value and then make a decent return on your corpus over a longer time frame of 2 to 3 year rolling return basis. 

To put that into an example from the above table, if one only has a 1-month outlook, one could get anything between (-4%) to +18%. But if one has a minimum 3-month outlook, the probability and magnitude of loss reduce. Returns between 3 months of March 20 to May 20 period is (-0.35%) whereas returns between 3 months of Feb 21 to April 21 is 34.06%. Stretch that time window to 6 months, a year, 2 years and you get the drift. 

The future is not exactly going to mimic the past. The past does however provide an indication of likely scenarios. Based on data from 2007 calendar year onwards, below are a few inferences: 
•1 out of 4 quarters and 1 out of 4 calendar years have resulted in negative returns. 
•There were no 2 back-to-back years of negative returns but there were 5 to 6 back-to-back negative return quarters/months in different time periods over the last 14 years. 
•We may do better than in the past. We may do worse than in the past. The strategy has built in safeguards to gradually go into higher % of cash allocation as we will not get enough stocks to meet our criteria for investments in prolonged conditions of market bearishness. 
•What we also know is trying to second guess when is the right time to invest and when is the right time to sit out usually results in getting out at the wrong time, missing out on the gains and making far less than what we could have if we just followed the strategy. 

When the Corona crisis hit us in March 20, many of us thought markets would not do well for several months or quarters. In the second half of the year, many were still in disbelief that the market couldn't go higher. Over the last few weeks, many have been expecting the market to fall like last year. But Q30 has instead gone up 9% in a month like April 21. 

To wrap it up we should let the market tell us what to do rather than follow our own opinion so far as Q30 is concerned and remain invested for a minimum period for the strategy to play out and let the edge work for us. The longer you follow the process with discipline, the bad periods and good periods even out and the edge of the strategy plays out and whatever the market will do in longer time frames, we expect to do better by a margin and by repeating that over and over again, we let the magic of compounding work in our favour.

Trailing returns for different periods and drawdowns are below: 

Thursday 18 November 2021

Weekend Reading

Reading across disciplines is one of the best ways to improve our investment acumen. Here is a summary of some of the best articles I read this week. If you like this collection, consider forwarding it to someone who you think will appreciate it.

1. A fascinating story of the world's first org chart

In 1855, the New York and Erie Railroad Company had a problem.


Railroads were now the biggest operations the country had ever seen, both in terms of capital investment and the complexity of the organization. Just as new physical technologies, such as the telegram, were changing the game for businesses, the size and scale of the railroads meant it needed organizational technology too.


Keeping reporting lines organized not only helped keep track of the hundreds of different managers out on the front lines of the tracks, but was quite literally a matter of life and death.


The railroad’s superintendent Daniel McCallum, who was also a leading management thinker at the time, was tasked with coming up with a solution. McCallum drew out an answer — a complex, layered, tree-like org chart. The first the modern world has ever seen.




2. Hydrogen Ready to Ignite as Transport Network and Technology Takes Off

Transport is undergoing a massive transformation so it can meet society’s demands for a low-carbon economy. Introducing electric vehicles (EVs) and declining gasoline and diesel use are helping, but zero-carbon hydrogen can speed up both the transition and long-term de-carbonisation of transport.


Hydrogen is not considered a true replacement for gasoline or diesel as a combustion engine fuel for cars because it is harder to store safely. And while fuel cell electric vehicles (FCEVs) that turn hydrogen into electricity can compete with EV performance — and even out-compete them on range and refill time — extra energy is needed to produce the hydrogen needed for fuel.


Finding investment for storage, pipelines and fuel stations is still a challenge. Until there is excess capacity in renewable energy to make green hydrogen, without using methane from natural gas, hydrogen-powered cars could have a negative climate impact. Happily, prices for producing green hydrogen are expected to be a fraction of their current level by 2030, cheaper than so-called gray hydrogen from natural gas.


Even wastewater and solid waste can create green hydrogen. Researchers are using sunlight to isolate hydrogen from industrial wastewater. Chemical plants and refineries that currently face high costs for cleaning wastewater could transform it into clean hydrogen supplies.




3. Your behavioural biases are causing more financial harm than you realize

Some of your behavioural tendencies might be causing harm to your financial wellbeing, research suggests. Regardless of factors such as age, income and education, there’s a connection between certain biases and financial health.


The research focuses on four common biases:

  • Present bias: Tendency to overvalue immediate smaller rewards at the expense of long-term goals.
  • Base rate neglect: Tendency to ignore the probability of something happening and instead judge its likelihood by new, readily available information.
  • Overconfidence: Tendency to overweigh one’s own abilities or information when making an investment decision.
  • Loss aversion: Tendency to be excessively fearful of experiencing losses relative to gains.

While you may not be able to eliminate your own biases, there are things you can do to minimize their potential to negatively impact your financial life, Wendel said. For instance, you can set up what he calls “decision-making speed bumps.”


“It’s doing something to slow the decisions down,” he said.




4. Humans are driving one million species to extinction

Up to one million plant and animal species face extinction, many within decades, because of human activities, says the most comprehensive report yet on the state of global ecosystems.


Agricultural activities are also some of the largest contributors to human emissions of greenhouse gases. They account for roughly 25% of total emissions due to the use of fertilizers and the conversion of areas such as tropical forests to grow crops or raise livestock such as cattle. Agricultural threats to ecosystems will only increase as the world’s population continues to grow.


The next biggest threats to nature are the exploitation of plants and animals through harvesting, logging, hunting and fishing; climate change; pollution and the spread of invasive species.


An estimated 5% of all species would be threatened with extinction by 2 °C of warming above pre-industrial levels — a threshold that the world could breach in the next few decades, unless greenhouse-gas emissions are drastically reduced. Earth could lose 16% of its species if the average global temperature rise exceeds 4.3 °C.



5. Focus on reducing errors, not seeking brilliance

In expert tennis, about 80 per cent of the points are won; in amateur tennis, about 80 per cent of the points are lost. In other words, professional tennis is a Winner’s Game – the final outcome is determined by the activities of the winner – and amateur tennis is a Loser’s Game – the final outcome is determined by the activities of the loser. The two games are, in their fundamental characteristic, not at all the same. They are opposites.


… if you choose to win at tennis – as opposed to having a good time – the strategy for winning is to avoid mistakes. The way to avoid mistakes is to be conservative and keep the ball in play, letting the other fellow have plenty of room in which to blunder his way to defeat, because he, being an amateur will play a losing game and not know it.


If you’re an amateur your focus should be on avoiding stupidity, not seeking brilliance.


Thursday 11 November 2021

Weekend Reading

Reading across disciplines is one of the best ways to improve our investment acumen. Here is a summary of some of the best articles I read this week. If you like this collection, consider forwarding it to someone who you think will appreciate it.

Creativity Is a Process, Not an Event

Creative thinking requires our brains to make connections between seemingly unrelated ideas. Is this a skill that we are born with or one that we develop through practice?


One of the most critical components is how you view your talents internally. More specifically, your creative skills are largely determined by whether you approach the creative process with a fixed mindset or a growth mindset.


The basic idea is that when we use a fixed mindset we approach tasks as if our talents and abilities are fixed and unchanging. In a growth mindset, however, we believe that our abilities can be improved with effort and practice. Interestingly, we can easily nudge ourselves in one direction or another based on how we talk about and praise our efforts.


Creativity is a process, not an event. It's not just a eureka moment. You have to work through mental barriers and internal blocks. You have to commit to practicing your craft deliberately. And you have to stick with the process for years, perhaps even decades, in order to see your creative genius blossom.



AI for drug discovery

A new Alphabet company, Isomorphic, will use artificial intelligence methods for drug discovery, Google’s parent company announced. It’ll build off of the work done by DeepMind, another Alphabet subsidiary that has done groundbreaking work using AI to predict the structure of proteins.


For years, experts have pointed to AI as a way to make it faster and cheaper to find new medications to treat various conditions. AI could help scan through databases of potential molecules to find some that best fit a particular biological target, for example, or to fine-tune proposed compounds. Hundreds of millions of dollars have been invested in companies building AI tools over the past two years.


Isomorphic will try to build models that can predict how drugs will interact with the body, Hassabis told Stat News. It could leverage DeepMind’s work on protein structure to figure out how multiple proteins might interact with each other. The company may not develop its own drugs but instead sell its models. It will focus on developing partnerships with pharmaceutical companies.



Smell as a repository of old memories

When you see, hear, touch, or taste something, that sensory information first heads to the thalamus, which acts as your brain's relay station. The thalamus then sends that information to the relevant brain areas, including the hippocampus, which is responsible for memory, and the amygdala, which does the emotional processing.


But with smells, it's different. Scents bypass the thalamus and go straight to the brain's smell center, known as the olfactory bulb. The olfactory bulb is directly connected to the amygdala and hippocampus, which might explain why the smell of something can so immediately trigger a detailed memory or even intense emotion.


Some think it goes back to the way we evolved: Smell is one of the most rudimentary senses with roots in the way single-celled organisms interact with the chemicals around them, so it has the longest evolutionary history. This also might explain why we have at least 1,000 different types of smell receptors but only four types of light sensors and about four types of receptors for touch.



Diversify before concentrating your focus

In Wang’s most recent analysis, he found that artists and scientists tend to experiment with diverse styles or topics before their hot streak begins. This period of exploration is followed by a period of creatively productive focus. “Our data shows that people ought to explore a bunch of things at work, deliberate about the best fit for their skills, and then exploit what they’ve learned,” Wang said. This precise sequence—exploration, followed by exploitation—was the single best predictor of the onset of a hot streak.


The research suggests something fundamentally hopeful: that periods of failure can be periods of growth, but only if we understand when to shift our work from exploration to exploitation. If you look around you at this very moment, you will see people in your field who seem wayward and unfocused, and you might assume they’ll always be that way. You will also see people in your field who seem extremely focused and highly successful, and you might make the same assumption. But Wang’s paper asks us to consider the possibility that many of today’s wanderers are also tomorrow’s superstars, just a few months or years away from their own personal hot streak. Periods of exploration can be like winter farming; nothing is visibly growing, but a subterranean process is at work and will in time yield a bounty.


Wang’s research seems to back up that claim. The central paradox of the explore-exploit sequence is that hot streaks are examples of specialization, but specialization itself doesn’t lead to hot streaks. Today’s best exploiters were yesterday’s best explorers.



Turning industrial emissions to animal feed

Chinese researchers said they have developed the technology to turn industrial emissions into animal feed at scale, a move that could cut the country’s dependence on imported raw materials such as soybeans. 


The technology involves synthesizing industrial exhaust containing carbon monoxide, carbon dioxide and nitrogen into proteins using Clostridium autoethanogenum, a bacterium used to make ethanol.


If China can produce 10 million tons of synthetic protein using the new technology, that would be equivalent to about 28 million tons of soybean imports, the researchers noted. Producing synthetic proteins for animal feed at a large scale would also help China in its decarbonization program.


Tuesday 9 November 2021

The IPO Frenzy


The IPO market in India is sizzling. Some notable IPOs that are open now or was issued in the recent past. But what has caught the imagination of the investors are the new-age tech startups. The notable ones are as follows:

  • One 97 Communications (Paytm)
  • PB Fintech (Policybazar)
  • Fino Payments Bank
  • FSN Ecommerce (Nykaa)
  • CarTrade
  • Zomato

Let me state it upfront. I believe that the Indian new-age IPO market is in a bubble. A big one at that. And promoters are rushing head over heels to bring their loss-making enterprises to market to secure their own futures. No one is questioning how much of the IPO is an OFS (offer for sale) where the existing promoters and investors are dumping their own holdings onto public shareholders.

But are they to blame? Why are investors ready to pay 30-80 times sales for companies which are not profitable, neither have a path to profitability or where competition is so stiff that whatever meagre profits are being earned can disappear in an instant from external competition or regulation?

The answer to that probably lies in the fabulous run of big tech (FAANG etc) in the US. Indians have seen the phenomenal performance of Amazon, Facebook, Google etc and feel that this time they can make money from such new-age tech stocks. After all, wasn’t Amazon loss-making for a very very long time?

There are two fundamental problems with the Amazon example. And nearly always, Amazon is the example 😊

  1. Amazon wasn’t doing very well on their retail front but AWS, which was something no one knew would come along, came in and started spewing cash with a vengeance. That cash is what helped the stock reach the commanding heights it has done today.
  2. Amazon is and always was a dominant global player which could use its scale to reduce its cost. It built its business on being a low-cost, consumer-friendly operation that passed on a large part of its scale-gains back to the customer thereby creating a virtuous cycle. People got low prices because of Amazon’s scale and more people bought more goods on the platform which in turn increased its scale. But even this is not enough, because a lot of other players did the same in the offline world – like Costco, Walmart etc. Walmart tried replicating the same in the online world as well but wasn’t very successful.

Look at the Big Tech stocks – can you think of normal lives without Google (search, youtube, Gmail, maps, translate)? Is any of India’s tech companies as dominant in its space as Facebook or WhatsApp? Or have fierce loyalty as Apple? Do we have a Netflix equivalent or a Tesla? Nearly all the US Big Tech have global dominance.

When you dissect each business that is IPOing in India today, you realize that none of these businesses is new. They have been in business for a number of years and are still struggling. Their claim-to-fame is the media PR, which is probably paid for by the companies themselves, and mainly deals with how much money one has raised from its investors. Can you live if Paytm is down for a day? Of course, you can. Most probably you won’t even miss it. Can Zomato be profitable if labour regulations harden or if (and when) restaurants start their own ordering app?

And in the typical incentive-caused bias of media and sell-side analysts come in. Nobody wants to put their neck out and say that these IPOs are priced ludicrously. Investors are happy if they get an allotment and get an initial pop. No one is looking to buy and hold these businesses for the next 10 years. In fact, for a lot of promoters, bringing their company to market is the end-game and not really a step along the long and arduous journey of building an institution.

I am not someone who obsesses over valuations. I think good things are always expensive. But paying a scaringly high price for buying something where the promoters are willingly selling and which have a questionable business model with a very hard-to-fathom path to long term profitability scares the hell out of me.

Since I come from a middle-class background and believe that capital is sacred and irreplaceable, I am very sceptical about the entire IPO scenario in India today. The bubble is there, it is acknowledged in hushed tones but no one wants to leave the party. For the simple reason that no one knows if the party s nearing its end or just beginning. I am not applying for any of these overpriced and overhyped IPOs as of now. I am ready to forego of listing gains and looking foolish (in reality, can’t actually be sure if I am foolish or not!!). 

But let this be my caution to you. Participate in this frenzy only if you know what you are doing.

This article appeared in The Economic Times

Thursday 4 November 2021

Weekend Reading

Reading across disciplines is one of the best ways to improve our investment acumen. Here is a summary of some of the best articles I read this week. If you like this collection, consider forwarding it to someone who you think will appreciate it.

1. The art of not selling

“Of our most costly mistakes over the years, almost all have been sell decisions. The mistake, in virtually every instance, has been selling too soon. Reflecting on these mistakes gave rise to this letter, and its title, “The Art of (Not) Selling.”

Taking a step back, our investment philosophy involves concentrating our capital in a small number of what we believe to be growing and competitively advantaged businesses. These kinds of businesses are rare and are only periodically available for purchase at attractive valuations. With that in mind, we do our best to hold on for the long term, so that our capital may compound as the businesses grow.

Holding on means resisting the temptations to sell — and there are many. We tune out politics and macroeconomics. To the surprise of many, neither valuation nor price targets play a role in our sell decisions.

To be clear, there may be times when we believe it is appropriate to sell. In these instances, it is typically because of an adverse change in the business itself.



2. The Scientific Argument for Mastering One Thing at a Time

If you want to master multiple habits and stick to them for good, then you need to figure out how to be consistent. Research has shown that you are 2x to 3x more likely to stick with your habits if you make a specific plan for when, where, and how you will perform the behavior. Researchers found that people who filled out this sentence were 2x to 3x more likely to actually exercise compared to a control group who did not make plans for their future behavior. Psychologists call these specific plans “implementation intentions” because they state when, where, and how you intend to implement a particular behavior.


Developing a specific plan for when, where, and how you will stick to a new habit will dramatically increase the odds that you will actually follow through, but only if you focus on one thing.


Follow-up research has discovered implementation intentions only work when you focus on one thing at a time. In fact, researchers found that people who tried to accomplish multiple goals were less committed and less likely to succeed than those who focused on a single goal.


The best way to change your entire life is by not changing your entire life. Instead, it is best to focus on one specific habit, work on it until you master it, and make it an automatic part of your daily life. Then, repeat the process for the next habit.



3. The IPO mania has begun

It's one thing to invest in a loss-making company but quite another to invest in a business that has never made money. Not just that, one could reasonably argue that in some of these businesses, it is unproven on a global scale whether money can be made at all. Food delivery and cab-hailing are perfect examples of this. One particular company may be chronically unprofitable and that's pretty bad but if no one in the world has ever made profits in a particular line of business, then you have to start wondering if that business is a business at all.


The classic logic that is always given for investing in such businesses is that the losses are a price to be paid for fast growth and for capturing enormous market shares. There are many dominant Internet businesses today whose past is said to prove this point. Google, Facebook, Amazon are all perfect examples. However, the key here is that it takes growth - scorching growth - to justify the losses. Is that kind of growth visible in the big Indian names here? Paytm, which is apparently going to come out with the largest Indian IPO ever, has now had a stagnant topline for three years! Its net income for the March 2021 year-end is actually lower than that for the March 2018 year-end.


In fact, when one looks at Nykaa, one realises that never having made any profits actually works well for such companies at the time of the IPO. Nykaa has had the misfortune of having actually made some small amounts of profits here and there. This means that investors can calculate the P/E and see what value they are getting. Perpetual lossmakers like Zomato and Paytm are, in that sense, lucky that they have never made any profits, so no P/E can be calculated, and therefore, all that is there is a hot story about the future, unsullied by any whiff of reality.



4. Internal vs external benchmarks

If you measure your career solely relative to an external benchmark – you’re on the neverending path of feeling inadequate, incompetent, and poor. Nothing you do will ever feel that great because someone is always smarter than you, more popular than you, better looking than you, getting richer faster than you, and making sure you know about it.


It’s not until you focus on internal benchmarks and see how far you’ve come, relative to where you began – the gap between today and your own cost basis – that you have a good view of where you stand and what you’ve accomplished.


Almost everything looks better from the outside. When you’re keenly aware of your own struggles but blind to others’, it’s easy to assume you’re missing some skill or secret that others have. Few things are as awful as chasing something you eventually realize you never actually wanted.



5. Jeff Bezos' management principles

“Amazon has no secret management principles.” Jeff talks about them all the time at “all-hands” meetings. He explains them in press interviews that can be viewed on the internet, and they are listed at the bottom of every press release. But, I explained, you have to live by them all of the time, and most businesses are unwilling or unable to do so.


The most important is customer obsession. In his words, too many companies focus on their competitors and not on their customers.


The second principle is constant invention and innovation. As noted above, invention is closely linked to customer satisfaction. Constantly invent and apply technologies to solve problems and build new businesses.


The third principle is operational excellence.


Think long-term is the fourth touchstone, whether in launching new businesses or investing in new technologies.


Perhaps Jeff’s overriding principle, which is not on Amazon’s formal list, is his abiding optimism of the future and how we are only in Day 1.