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For the last few years, our economy has been going down, down, down, but our stock market
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has been going up, up, up.
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Stock markets are a strange beast.
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You can consider them to be the engine of a growing economy or a casino with no relation
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For some, they are an object of loathing.
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For others, they invoke hope and romance.
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I just find them fascinating because they're both a picture of reality and a tussle between
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the many fantasies in our heads.
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In stock markets, the world of today collides with the world of tomorrow and perception
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matters as much as reality, at least in the short term.
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I'm bullish on stock markets, though I'm not sure in a perfect world the stock markets
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would be so bullish right now.
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Welcome to The Seen and the Unseen.
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Our weekly podcast on economics, politics and behavioral science.
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Please welcome your host, Amit Verma.
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Welcome to The Seen and the Unseen.
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My guest today is a brilliant Deepak Shanoi, an old friend known to the world as an investing
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guru, but known to me simply as one of the smartest and nicest and most interesting people
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So I invited him onto the show ostensibly to talk about investing, but cunningly, my
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intention was to pick his brains on much, much more.
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The mental models through which he looks at the world, including markets, his insights
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on investing, his insights on life and hey, even for his bad jokes, which are second only
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Deepak runs Capital Mind, a Bangalore based investment research and wealth management
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startup and he also runs the Capital Mind podcast.
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All those links will be in the show notes.
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Before we get to our conversation though, let's take a quick commercial break.
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I often advise people not to invest in stock markets unless they have studied it first.
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That old poker saying applies, if you don't know who's the sucker at the table, it's
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Well, if you do find it fascinating, then learn about it first.
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Listening to this episode and picking up the books Deepak recommends is one way of doing
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Deepak is heading on over to the sponsors of this episode, thegreatcoursesplus.com
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and enrolling in The Art of Investing.
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The Art of Investing is a 24 lecture course taught by John M Longo and will take you through
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all the basics of investing in stock markets.
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But that's not all, The Great Courses Plus has a fantastic library of online courses
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on subjects ranging from music, math, cooking, history, political theory and much else.
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They also have an app where you can listen to the audio of these courses the same way
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you are listening to this podcast and it will cost you nothing.
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You get one month of unlimited free access if you use the following URL, thegreatcoursesplus.com
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That's right unseen, thegreatcoursesplus.com slash unseen for one month of unlimited free
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What an investment, Deepak, welcome to The Scene and the Unseen.
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Hi Abed, always glad to have a conversation with you and lovely to be unseen and unseen.
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Yeah, I mean, this is oddly strangely, you know, after 200 episodes, the first time you're
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on The Scene and the Unseen and the thing is over the years, I've, you know, got so
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much delight and insight in the many long conversations that we've had.
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And the bizarre thing is, and I wonder what you think about this, that, you know, I was
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sitting down figuring out all the areas that I'm going to talk to you about.
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And then at one point it struck me that, wait a minute, this guy has been a personal friend
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for a long time, but many of the personal questions that, you know, are almost standard
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for me to ask my guests, I don't actually know about him.
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You know, and this is weird because a couple of days after this, I'm recording with another
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person who's been a personal friend for a couple of decades.
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And I realized that I don't know that much about her either.
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So it's like you build a friendship by just hanging around and talking about whatever,
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but you don't actually know so much about each other, which was a bit weird.
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Which is actually quite fascinating because you don't generally have relationships like
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that after like say college or something like that.
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So it's almost, almost entirely based on the intellectual framework of what we talk rather
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than the families or where are you going and you know, what have you done in the past and
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all that stuff, which is definitely like, I mean, it's, that's what I was telling someone
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when I was, somebody was telling me who is, I was telling them who Amit Verma is and I'm
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like, dude, he's so many things, man.
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He's been a professional poker player.
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He has been a cricket, not just enthusiast, but you know, so deeply into cricket.
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He has held guns in Peshawar and pretended to be non-Indian for, you know, so, you know,
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there are so many things about you that I know, but there's obviously a lot of other
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So where is he from and I'm like, shit, I have no idea.
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I don't even know whether he's, whether the Verma that, the VARME is a UPwala surname
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or a Bengali surname or, you know, and whether he's related to Raja Ravi Verma.
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So, yeah, no, no, sadly, I don't have any royal lineage that way, though my father's
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Punjabi and he was born just outside Lahore, a pre-partition.
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So some could even say that I am anti-national.
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And by the way, for those of my listeners who for the first time are wondering what
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was Amit doing holding a gun in Peshawar, no, I was not carrying out a secret mission
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for the Indian government.
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I was covering the Indian cricket tour to Pakistan in 2006 and I happened to kind of,
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you know, go to Peshawar at one of the venues and a friend and I managed to get some people
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to take us to the gun market there where guns are sold openly.
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The friend was a journalist called Fazal Sharif.
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At that time, he used to write for Rediff and together we posed with guns, which is
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the machoest I have ever looked, I won't say felt because, you know.
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And the other thing is, you know, as listeners would have guessed, Deepak and I know each
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other from our blogging days, basically, which is where we met.
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And I've realized that so many of my friends, in fact, all my closest friends without exception
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are not people from I know from school or from college or whatever, but really from
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that time, people who we managed to connect with through the internet in those days sort
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of like minded people doing similar things.
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And that kind of becomes the basis for forming this community.
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And this is something we now take for granted, right, that we can just form a community of
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choice at any point in time.
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And it started with our generation, you know, the generation before us would not have been
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You're basically constrained by geography, constrained by accidents of birth, all of
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And now we can actually, you know, reach out and form a community based on shared interests
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or whatever the case may be.
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And it's mind blowing when you think about it.
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Yeah, I mean, it's the Orkut and MySpace and now WhatsApp and perhaps tomorrow Signal of
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And that's connected us and you know, it's strange, I have, I think, in the process of
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us, you know, knowing each other, I've met you in Bangalore, in Bombay, perhaps in Delhi
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And I have traveled and lived in each of these places.
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And yet, you know, when we talk to each other again, it's almost like, you know, it's starting
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from the same point where we left off the last time.
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So yeah, yeah, it's like you just click into place.
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You don't have to kind of, you know, reconnect again or figure each other out.
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While if I met someone from my college days or whatever, there would be this process of
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reconnection because you're meeting fundamentally a changed person and trying to kind of figure
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But that reminds me, there is a lot I don't know about you.
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So you know, is podcast, let's kind of get a little deeper into the history of Deepak
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I do want to spend a lot of this time talking about investing in your philosophy towards
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money and life and all of those things.
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But before that, tell me a little bit about who the young Deepak Shanoi was, like growing
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up, what kind of kid were you?
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What did you want to be when you grew up?
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You know, what were the influences on you?
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What kind of books did you read?
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Tell me a little bit about that part of your journey.
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So you know, my youngest, perhaps as far as I can remember, my father was in a bank.
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So transferable job, moving around quite a bit.
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You know, I come from this little town in a village in the Western Ghats in Karnataka.
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But then since my father was in a bank, we travel everywhere.
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So I think my early days were in Udaipur and you know, Agra and a couple of other places.
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But then since the time I actually remember things, I was in Bangalore till I think 1983
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And I actually studied in a girl's school.
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What is a girl's school after fourth standard and boys are allowed till the fourth standard
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because I don't know, there's some rule that, you know, maybe boys are okay till they're
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in the fourth standard and then they get really bad after that.
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So it was interesting because I still know people are reconnected with people from that
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school and they're fascinating personalities, you know, so it's almost like I wish I knew
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more at that age that I could have remembered in terms of conversations.
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But that part of life was interesting is also the first time I tried to learn about books.
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This is probably early in my life.
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I always liked reading.
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I still do to the point where my mom used to literally give me a comic and I would walk
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with her through marketplaces when she had to go shopping and I would not complain even
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a little bit because I'd read the book every chance I got.
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And the books, of course, you know, the early days were all Amar Chitra Katha and a bunch
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of those things and all that.
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But it evolved eventually, I moved to Delhi when I was about after my third standard.
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So again, Delhi was very interesting.
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It was we landed up in Delhi, I think the year or the year before the Indira Gandhi
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And that was a learning thing for me because I was like probably 10 years old at the time
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and it was a few days before my birthday.
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So I really did not, you know, find it very interesting to have see spend the birthday
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But then when I came out, it was a whole new world.
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Bunch of things that you don't want to learn when you're 10 years old, you learn and you
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know, it kind of made a very different kind of impact in my life with those are the years
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where you would go everywhere in Delhi and you would see soldiers sitting in, you know,
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cages and behind sacks all over the place.
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So and you know, we found out later that you're not allowed to approach them either.
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So it was it was dangerous to do so.
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But having interesting times growing up, those are the early days.
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I don't think I I mean, till when after that we moved back to Bangalore, I wrote an exam,
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probably the first exam I ever scored any reasonable marks in.
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Luckily, that was the 12th standard exams.
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So I managed to go to this college called NIT, which is now called NIT Suratkal.
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Earlier it was to be REC Suratkal.
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And I still like the name REC Suratkal, it's Karnataka REC.
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So KREC, which was I mean, it has a zing to it, NITK does not sound as quite as zingy.
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But that's what the name of the college is now.
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It's a quaint little college in, well, it's not little, it's about 350 acres of campus
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It actually has its own beach, but it's next to a beach.
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We did not appreciate it then and now I feel sorry I did not appreciate it then.
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But that was a formative years because till you know, when you're till you're 18 years
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old sheltered, you're at home, do your thing, they suddenly thrown into college where you're
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That's okay, but you get dragged, you do your things, you have to, you know, fend for yourself.
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But you also learn a few things about freedom or doing stuff the way you want to do them.
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And a couple of years in, you kind of realize that you'll never be able to live in a sheltered
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cloistered environment again, simply because you've for all the good and bad that comes
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of it, that you have to wash up notes and stuff like that.
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It's just far more acceptable to do that, rather than trade away the other freedoms
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So college was eye opening for that and from another perspective, because I finally discovered
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what I thought I would do for the rest of my life, which is computer programming.
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I got somewhere in the, they used to call me LAN user because you know, in the first
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year you had these local area networks that was set up in the college and everybody got
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You had to log in with the user ID LAN user and the password was LAN user, a very creative,
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So I was, because I went, then first year I discovered that I really liked this stuff.
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And maybe I wasn't very good at it, but I was just at it at the time and I learned from
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a few other people, then I went and I was initially in this branch in mechanical engineering
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and then I asked for a shift to computer engineering.
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And that's when I discovered that I really liked the subject, the concept of it and relatively
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knew that I was 1992, 1993.
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The interesting thing about this part of my life was that I was, I didn't know what I
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I worked with some computers in the earlier past, but I'd never actually seen, you know,
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And they told us at one point that you're not allowed to play games.
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So we said, okay, you know what, we're going to write our own game.
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So I wrote a very weird version of Pac-Man because, and then, you know, nobody could
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say anything because it was a game I programmed.
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So I was like, I'm testing it, it's perfectly legal to do.
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And so the word LAN user, I was a nerd for all practical purposes.
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Probably still am, but finance makes you less nerdy, I guess.
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But interestingly, you know, that college actually opened it up because what happens
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was there was, because of its relative distance from anything human, they allowed you a lot
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And I was given the permission to keep the LAN open until whatever time I wanted, I was
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given a key and said, you know, just shut it down when you're done.
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So we do these things and we'd learn a lot of these things.
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And then once I got into my second year, the first year in my college was common across
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Everybody took the same subjects.
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The second year onwards, you got your specific subjects and then it carried on further.
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We did very interesting things with stuff that you can do on your phone in five minutes.
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Sometimes it would take us two or three days to do, so you had to prep for it.
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So you had to think about the code that you'd write and then you'd write it and then you'd
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hit the compile or render or whatever it was that you did.
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And suddenly it would take two days for it to render something, which was like a little
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box coming out of something else.
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And because I don't even ask because we, I mean, the first, this is all again, you know,
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stuff that when our parents used to tell us things like, you know, Deepak, you don't know
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And you know, I used to, before I took my, went to school, I had to take water out of
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the well and have the seven brothers and sisters I had, all of them had to have a bath.
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And then I would walk five miles to college, to school, and then they would carry, I'd
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be like, dude, this is just like, this is just stuff that I, I mean, I'll never do,
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I'll never be able to even see an oppo.
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I just turn the tap and water comes.
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It's pretty much that effort.
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So my, when I tell my kids, you know, it's operating a time when you had 1.44 inch floppies
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and I don't know, there was another one, three, some three and a quarter or five and a quarter
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inch floppies and you didn't have hard disks.
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So one of the drives contained your basic compiler and the other one contained the place
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where your code was stored.
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And if you had only one drive, you had to put one in, load the basic into memory and
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then put the second one into store your program.
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So it was like crazy stuff that, you know, my kids look at me like, what's a floppy disk?
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I'm like, it's the before, what's what came before CDs, like what is, what's a CD?
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I'm like, okay, dude, I am done.
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I mean, this is at this point, it's like, you know, but I mean, I lived that life, which
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I guess is exotic from today's perspective, but you know, today would be exotic from then.
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So you know, that makes us even, but you know, through this early days, well, I think the
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point was, while I liked reading a lot, I still do, most of it for at least the first
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20, 20 odd years of my life was fiction.
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So nice, you know, from the Frederick Fawcett's to Arthur Haley's and you know, the stuff
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that, you know, was probably exciting at the time and the Asterix's and the Tintin's and
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later the Calvin and Hobbes, that became kind of a story of choice.
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But then soon after college, I, I mean, that was just the early part of my life, I'm rambling
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a little bit over there.
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But I kind of finished college and joined this company, which is now Emphasis, that
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time it was called BFL Software, there was a bunch of mergers and all that.
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And I was sent to the US in about three months, and at that time, things were very weird,
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because I was sent as a qualified engineer to the US on a project where I literally did
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not know more than maybe 20 lines of code.
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So I had to go there, I had to pretend that I am not pretend, but I told them, I'm new
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And we figured out the code, mostly after we'd gone there, met a bunch of customers,
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you know, did a lot of crazy things, because your first time in the US, you have no idea
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I remember I'd gone to this place called Omaha, I mean, now it's more famous because of Warren
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Buffett, because by that time, it was famous for Jack All, I think.
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But you know, at, at the time, I hadn't even heard of Omaha, and I, nobody told me that
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when they say minus two degrees with a wind chill of minus 20 degrees, it actually means
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you're going to feel like it's minus 20 degrees.
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So I went to the little jacket, which had absolutely no chance against, you know, even
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minus two degrees, but then I was willing to risk it.
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But minus 20, I mean, it's like, Oh, dude, I am dying.
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So we went in, it was kind of embarrassing, because when we landed up there with that
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jacket, the customers looked at us, are you like, are you serious?
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Because you're gonna die in that.
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So we said, Okay, and then we had to go pick up a jacket from one of the supermarkets.
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And you know, I think I use that jacket for literally all my cold, well, you know, adventures
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for at least 20 years afterwards, it was pretty good, but you could not even think of wearing
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It was just impossible.
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It's just one of those things that's, you know, but that taught me a lot about living
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in America, different ways, you have a very fancy view of this, right?
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So you sit in India, and you read books about this and that, you go there and say, well,
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these are the same people, just different accent, right?
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It's not, in a way, superheroes kind of thought process that you started off with.
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And also the place, it's, I mean, it's developed, yes, but, you know, there is some kind of
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Richard poverty is there as well.
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And there is a kind of standard of living that you suddenly realize that life is very
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limiting if you don't have a lot of money, very obvious in the US later in my adventures
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in Europe, I found that was not so much the case.
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But I mean, after I finished that, I think my only thing in college was that I want to
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I didn't know why, but I really wanted to start my own business.
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And when I went to the US, I was applying to colleges to do my master's degree in science
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And then I decided I won't because I want to start my own business.
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But for some reason, I had a job offer from the company that I was visiting and they were
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kind of cutting off the contract with the emphasis at the time or BFL at the time.
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And they said, we'd like to hire you guys.
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And we said, okay, we're okay with that.
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And unfortunately, my father passed away in India at the time, I was 24, it was very complicated
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because he was a banker, he had held the key to a lot of finances in the family.
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And I had no idea what any of that stuff was that he did.
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So also, I mean, of course, grief was one that was very complicated because, you know,
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I always thought that I never spent enough time and now I still regret that in the sense
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of I went to college, I was doing my own thing.
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And I remember my mom after I had gotten out of college, I was desperate to get started
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And my mom said, you know, stay on for a couple of months more, you have another job offer
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that starts in November, why are you leaving now?
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So I said, No, I am going because I want to start working early as early as possible.
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Now, he passed away in February the next year.
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So that two months would have been nice, but, you know, such is life.
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Unfortunately, I wasn't able to, you know, spend that much time with him.
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When I was, you know, when I had the time, you know, sometimes that that old saying of,
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you know, cats in the cradle, the song kind of come to mind, you know, it's strange because
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that song was something I heard in college and I said, listen, this is deep, but I don't
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And I knew it was deep, but I didn't understand it.
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And it's like Calvin and Hobbes.
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The first time when you read it when you're a kid, you know, there's something in there
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And as you go further in life, you say, that is like philosophy, it's not a cartoon.
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But there's something in that song that that kind of talked to me that time.
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And then when my father passed away, I had that, I heard the song again, and then I was
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And now when I have kids, it's just a different meaning altogether, you're dealing with it
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from three different angles, and you know, it's the same song, and it's beautiful.
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So but since that time, and I came back to India, I said, listen, I'm not taking the
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job in the US, I have to figure out more stuff.
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And I think if my goal is to start a business, then I should do it here in India, and the
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US was, and this is what my dad told me before he passed away, like, if you want to start
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a business, why you locking yourself to a six year period in the US when you can't start
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So I was like, what do you mean is then I looked it up and said, Yeah, I mean, if you're
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in an H1 visa, until you get yourself a green card, you can't start a business, you can
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join a business that started, they can process your visa, but you can't really start a business.
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I mean, it's complicated at the time.
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So I said, dude, I'm not doing this, I'm going back to India, I want to start my business.
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So a couple of years down the line, started a business, we built a lot of things for people
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using a language called Delphi, very computer thing, but came into this finance thing at
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that time, because we started writing software for companies that wanted accounting as part
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So I was like, what is this accounting business?
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And you know, my father, my uncle, everybody in the family were bankers, my surname kind
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But that's how, you know, the whole family was.
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And I was this dude, I'm a computer engineer.
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And I was different from everybody else.
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So it's this accounting thing that kind of came by and through this process, I learned
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about accounting, I started my own business when I was 24, I think.
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And then I ran that when I was about 30, before I got married, and in this process, I built
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accounting packages, we built something that was an Indian accounting package.
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And we got, so what we found interesting in this whole thing was that you could look at
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public companies, because they would give their accounts to the public every year, and
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And you could actually download it from their websites, somewhere in the middle, we tried
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looking at this and saying, okay, we could download this account, we can get these.
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So got interested in public markets, started writing about it in 2005, worked a couple
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I think I got, if I say I'm good at something, it's only because I was really bad at it.
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And I decided not to be through the process.
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So I think I was, when I look at my early post, even now I cringe and I said, what kind
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of thought process was that?
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I mean, the blog came along.
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And you know, here I am, I won't bore you with the further details of what else happened.
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But I hope this has been a very different part.
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I think I met you in like 2007 or something.
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So since then, we've been in touch, I guess I came to Bombay, I did a bunch of things
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around algorithmic trading before and I found out to my chagrin, it was even legal.
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So it was it was apparently not legal to auto trade.
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So we had to physically and hit the enter key whenever you actually enter a trade.
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So we did that so that you could hit, I mean, so a human being had to say okay on a trade
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before it was, it went to the exchange.
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Now of course, things have changed and you can trade automatically, computers can load
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But we wanted to build this stuff in 2008.
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Fascinating because I helped in another hedge fund, which actually did this when Sebi finally
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And now, you know, they have 30% of the volume of the exchange.
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So I'm saying I'll go trading as not just this firm, but I'll go trading as a whole
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is is now a feature of the exchange.
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They start capital mind, of course, when it was in 2013, and that's kind of blossomed
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into a fairly decent business.
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And I suppose you'll probably ask me a bunch around investing, so I'll probably go into
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detail when we when we go through that.
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Yeah, you know, before we get to sort of investing and capital mind and algo trading about which
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I also want to ask you, you know, the backstory is really fascinating.
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And there are a bunch of threads from here that I want to pull, which actually come kind
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of to the same question.
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I mean, one, of course, is, you know, what you said about being really bad at it before
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And that struck a chord with me because I just came about this thread on Twitter by
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a random person I won't name not an Indian, but basically, which went viral.
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And one of the things he said in that thread was that, you know, I don't follow people
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who post to regularly because, you know, you can't get a great flash of insight every day.
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So if you're posting to regularly, I don't follow you.
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And you know, I prefer people who post just once in a while.
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And I thought, wait a minute, that is completely the wrong way around.
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Because when you begin doing something, you're bad at it.
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What makes for excellence repeated iteration makes for excellence.
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You know, you do something repeatedly every freaking day and you always begin something
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is bad and then you get good at it because you've done it again and again and again.
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And examples from the blogging world would be something like marginal revolution, for
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example, or, and you know, literally anything, you know, Virat Kohli was not going to the
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He was going there and spending seven hours a day every freaking day through his childhood
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till iteration, iteration, iteration, and you get to excellence.
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And it's kind of that process of learning something that I want to delve deeper into.
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One is, you know, for our listeners, just before we started this Deepak and I were being
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nostalgic about the bad old days, I would say when, you know, you couldn't do anything
#
on the computer because you plug anything in, you've got to install 40 drivers and
#
nothing works together and all of that.
#
And we were just setting up our mics and stuff before this and it was all relatively smooth.
#
And it struck me that we are sort of that, again, I'll say a unique generation, perhaps
#
not in a good way, just in an interesting way, that one, we do a lot of our learning,
#
our formative years are spent before the internet.
#
So we are restricted in terms of what we can learn by whatever we are privileged to have
#
around us, which could be the books that we have or whatever, and both of us are relatively
#
privileged in Indian terms in the sense we got to read a lot when we were growing up
#
But otherwise we don't really have access to most of the knowledge in the world.
#
And then at least in my case, another big part of my learning comes even growing up
#
when the internet happens and when I'm exposed to ideas and all of this from everywhere.
#
And the question that I'm leading up to is, one, did this sort of process happen with
#
And two, how does one build up mental frameworks to which we look at the world?
#
Like one thing that I've noticed about you is that while you're brilliant at investing,
#
one of the reasons that makes you much more interesting than other investors I have met
#
is that you are bringing to bear mental models which have to do not just with investing alone,
#
which have to do with life, which have to do with human beings, with the way we behave.
#
And then you're applying a lot of it to investing.
#
And then obviously you're getting a lot of specific, domain specific insights as well.
#
But how did building these mental models kind of happen?
#
What was this process like of the formation of Deepak Shanoi as a person?
#
Because with most people this would happen by the time you're 20 to 23 it has happened.
#
But for people who are in their mid 40s like us, and I think our ages are not a secret
#
to anyone, it's been this complicated, almost staggered process where the internet sort
#
of causes this explosion and then you learn all over again.
#
So what are sort of your thoughts on this?
#
Yes, if you think about the internet, it's actually changed one big thing, which is opportunity
#
You could not do this without a lot of the stuff that we're doing, including what we're
#
doing right now, without the internet.
#
And one of the things that I've realized is that the hunger for knowledge exists and maybe
#
it was privilege, maybe it was whatever it was, that you could solve that hunger for
#
knowledge in different ways when you're younger.
#
I always felt for instance, I mean, I am a social person.
#
But I'm actually quite introvert when it comes to a lot of gatherings and all that stuff.
#
So I prefer to sit and curl up and read and think and walk and all that stuff.
#
But somewhere, so this is where I think I credit my college for this, is that you go
#
out long periods to yourself, long, very really long periods to yourself and then in this
#
process was the discovery of myself.
#
Maybe it was in bits and pieces over time.
#
But what I discovered is that there are a lot of things that I like, I mean, I like
#
marginally and a little bit here and there, the stuff that, and there is very clearly
#
stuff I don't like, Fourier transforms, I think that is one thing I can tell you categorically
#
I don't like to eat curd or cheese is something I discovered when I was very young, so I was,
#
I cannot do it and I, even in college mess, people would fight for a seat next to me because
#
I would give them my little ration of curd that you grab it like, dude, I don't want
#
And people would swap that with like even chicken.
#
And I was like, dude, this is like, I mean, you want to do this bargain every day, I'm
#
But that was like, you know, few things that I didn't like and few things that I liked
#
in mental models, when you're younger is like, you shouldn't not like something.
#
And we shouldn't tell some, because when you as you grow up, you have to be polite and
#
you have to try and learn stuff and you can't categorically say I don't like this subject
#
and because you have to do it, it's part of, but somewhere along the lines, I found out
#
that what I liked, I would pursue and maybe it was the kind of college I was in, or maybe
#
the kind of person I was in.
#
I have no shame in losing or, you know, it's like, when you crack a bad joke, and people
#
like want to kill you and then you don't crack bad jokes, because they want to kill you.
#
I was never the kind of guy who would stop at not at would not crack the bad joke.
#
I'm like, dude, if you want to kill me, kill me, but I want to keep trying.
#
So once once in a while, you get a good job, but mostly bad even now.
#
So, but interestingly, that philosophy maintains itself even in so it's like, you know, when
#
you're doing something, you are trying and the best thing about computers in the early
#
stages was that you could do this, you would hit compile, and then it would say error,
#
then you say, okay, it's an error, let me go back and fix it and somewhere along the
#
line you learn that this is the right way to do things.
#
And then even that right way to do things keeps changing over a long period of time
#
and it's a learning process throughout there.
#
From the time when I started, there was visual basic to start that then there was Pascal
#
and C++ and now there are, you know, name the I mean, they have languages which don't
#
have vowels in their languages with only vowels and no syllables and you know, there's a guy
#
who's made a YouTube video on all the different kinds of languages out there, which is like,
#
it's an hour long and he's, he's like, I'm not even scratched the surface and I believe
#
But at that time, my deal was I want to learn all these programs, I want to learn Fortran,
#
I did, I learned COBOL, I taught COBOL in my final year to other people and earn some
#
money out of it, because they had a job which had a COBOL as an entrance, this thing, paper
#
or something like that.
#
So I learned COBOL, I in order to be able to earn the money to do other things.
#
So this process, this thought process has kind of continued since then, you're curious
#
about something, you learn it, find it interesting, delve into it some more, during the process
#
of accounting or learning accounting, and by the way, accounting is this weird thing,
#
I still don't think I get it.
#
But it has these, you know, in English language, they'll say, Oh, you know what, in there are
#
some letters that are silent.
#
And then you'll ask about this, and then they'll come to you with a letter like through, and
#
then through has THR, which is fine, and then OUGH, which is like, excuse me, why?
#
Why do you have all those extra letters and why is there an H and a G and you know, but
#
obviously, there are some rules, and you kind of learn that these are rules, and you can't
#
And the same way in accounting, there are some rules, some stuff which you don't understand
#
which is not logical, but it's there.
#
That's the way they've decided things are.
#
And then you look at this thing and say, well, you know what, this doesn't seem to add up
#
because you said these two add up to that, and it doesn't add up.
#
And then they tell you, well, that's because the company is bullshitting its way out here,
#
they've added it somewhere else and something else is on, excuse me, company can do this.
#
And then you find out that companies are this stuff that people used to cook their books
#
and this stuff that's real.
#
So over time, it's fascinating to try and find those little things, it's like these
#
little puzzles that come around to you.
#
So looking at stuff, looking at numbers, and my wife and you know, my kids also now look
#
at me and say, Dad, that's just like numbers.
#
And I'm like, yeah, that's my job.
#
But then I'll be looking at those numbers with this fascination that says, well, now
#
I can figure out that something isn't right.
#
If I looked at those numbers, somewhere, some things start to throw themselves at you saying
#
you've got to look here a little bit closer.
#
It's the strangest thing because today, for instance, there was the results of an IT company.
#
So the one number I looked for is how much they have in transportation charges, I mean,
#
because nobody's flying.
#
You can't be spending a whole lot of money on transport at this point.
#
So it was of course, in line with what I thought.
#
But then I realized that when I was talking to you, I was like, why would I look at that?
#
It's not because Deepak Sharma knows that this is a problem, it's just that somewhere
#
the mental models come in together and said, since COVID, you've got these issues, companies
#
reveal this information on a quarterly basis.
#
This is one quarter where you might have seen the emergence of some travel recur.
#
And yet you've so you go in with that thought process.
#
But if you ask a different person, he might not look at that number, you might look at
#
a completely different number.
#
But it's just the way that these conditionings have happened.
#
I think they've happened mostly because, you know, there's this Finding Nemo line I love
#
I think I've done it multiple times.
#
And Finding Nemo, apologies to everybody, I'm going to quote cartoon lines because I
#
have two kids and I have watched every cartoon that has ever not lived.
#
But one of the lines in Finding Nemo is when this is this Dory and this Nemo's dad, Marlin.
#
So they're together and Marlin is really distraught because he can't seem to find a son and Dory
#
is like, what happened?
#
It's like, you know, I told his mother, Nemo's mother that I wouldn't let anything happen
#
So she's like, Dory is like, that's strange.
#
If you don't let anything happen to him, then nothing will ever happen to him.
#
So I think all of us live in those protective cocoons of ourselves, not just our kids but
#
ourselves, saying if I make mistakes, I'll screw up and look bad, whatever it is.
#
But if you don't make mistakes, how do you eventually not make mistakes?
#
You have to go out there and experiment and try these things.
#
You don't know what will happen and yeah, you might be wrong.
#
And sometimes in stock markets, you actually pay a price.
#
In most other places, you don't.
#
If you're not good at cooking at best, you'll ruin a meal and you'll call Swiggy, which
#
is by the way, a new thing earlier, you had to cook again.
#
But if you don't do that, nobody will trust that you know cooking.
#
I could read 500 cookbooks, but I'm still not going to be able to cook well.
#
If I haven't cooked and made a mess of myself before.
#
Yeah, no, this goes back to our earlier point of sort of endless iterations.
#
Like I remember in my poker playing days, somebody once asked a question that, you know,
#
what does it tell you about a player if his bluffs never get called?
#
And the answer obviously is that he isn't bluffing enough because there are an optimal
#
number of bluffs you have to make.
#
And similarly, I would say that if you're someone who never makes mistakes, then you're
#
not living life as it should, you're just way too safe to become good at anything.
#
You have to make lots of mistakes and I was, you know, struck by sort of, you know, you
#
spoke about making bad jokes and I guess that is one of those things where repeated iterations
#
don't really make one better because I have the same problem and I was just thinking,
#
you know, the moment you said Fortran, I thought if I go to Gurgaon and tell somebody that
#
hey, I have learned Fortran, he will say, I have learned Fyftran.
#
So you know, let us not iterate too much on this.
#
We are not kind of going to get better.
#
And the most delightful thing about your answer though was the connection between curd and
#
Fourier transforms, which again is possibly unique to you.
#
No one else would use those two in the same sort of sentence.
#
So you know, is it then fair to say from all of this that, and I don't know which way the
#
Is it fair to say that computer programming, learning computer programming gives you sort
#
of a systematic way of, you know, looking at, you know, how things function and therefore
#
how the world functions and you can, you know, transplant that systematic way of thinking
#
Or of course, the causation could be the other way around and it might be the case that people
#
who become good at computer programming are possibly those who are drawn to that kind
#
of systematic thinking to begin with either ways.
#
I mean, they can, one can reinforce the other, but is there kind of a sort of a link between
#
Like when you talk about mental model, the one key point that you made was that if you're
#
interested in something, you kind of go down a rabbit hole, which is pretty much what I
#
You know, I can watch a random YouTube video and then watch all 400 videos in that channel
#
by before the night is over, partly aided by the fact that I watch at double speed.
#
But is that kind of part of the process?
#
And also I would imagine that, you know, learning accounting, for example, which I imagine was
#
sort of the bridge between computer software to actually getting into investing and all
#
of that, because first you build this accounting software and you have to figure it out and
#
it must be really boring.
#
At what point does it begin to get interesting for you where you say that, fuck, this is
#
I need to learn more about this.
#
And then how does that process of learning happen?
#
Like I know very little about investing.
#
I know that there is, you know, Benjamin Graham's value investing school with, you know, which
#
Warren Buffet follows and there are the quants who will do their things.
#
And then, you know, and today of course is machine learning and AI and algorithmic trading
#
So at what point does it begin to fascinate you?
#
Why does it begin to fascinate you?
#
And then how do you sort of teach yourself or learn that subject?
#
Yeah, I think, you know, this is actually, I think it's many iterations of what has happened.
#
And I'll come to the latest ones.
#
You know, again, it's sometimes what helps me is to think of, again, another cartoon
#
is Ratatouille is a movie and this guy who says anyone can cook.
#
It doesn't mean that everyone can cook means that, you know, some the best cook can come
#
So the sometimes my biggest problems in life is this call to authority.
#
People tell me this, oh, you know what this guy has said.
#
So therefore it is, but it's not so many times.
#
So because I'm by nature irreverent, when I say I'm a rebellious, I don't like to just
#
take statements at face value because they're given to me, but also the curiosity of something
#
drives a lot of the thinking.
#
And while I think it's the computer programming thought process, perhaps it's the way that's
#
It's up for somebody else with that curiosity model.
#
It might have evolved differently.
#
The difference is that if you are, for instance, as somebody told me this in college, if you
#
are in a computer lab and you make an error, you just press control F nine and it you can
#
If I'm in a chemical lab, I'm not going to make too many errors, right?
#
So I have to plan and think and do, you know, I don't know, I'll blow up the whole lab if
#
So you and people in the mechanical world and the civil world, you can't experiment
#
with creating a building because, you know, it's got to be structurally solid.
#
So you want to think about it, plan it somewhere else and all that stuff.
#
So we get afforded a little more on the mistake platform than people in other industries or
#
engineering courses are.
#
And then in the humanities, there's no concept called an error.
#
Everything is an opinion at some level.
#
I wish I'd done that because you'd have appreciated life is as an engineer sucks because you'd
#
want rationality in everything.
#
And then it takes your whole life to figure out that irrationality is the only thing that
#
survives because you have today.
#
I mean, you know, the old adage was that there were two squirrels and one of them stored
#
its nuts for the winter and the other one just was having fun and now, you know, how
#
when winter came, the one nut, you know, starved to death and the other one was okay.
#
And that was supposed to be a moral lesson.
#
And now they give you the same thing with a different two captions where the second
#
one's starving and then there's the whole list of, you know, people who are protesting
#
saying how can one guy have all the nuts when the other fellow is starving and then therefore
#
they take the nuts away from the first guy and then give it to the second guy and the
#
second guy is like, look, why do you have to spend all that energy doing all those nuts
#
saving when we could have had fun?
#
But interestingly, those models are so I think I must have lost myself in this whole thing.
#
But for me, the mental model started working saying things have to be rational, things
#
have to come one after the other.
#
And then you slowly build up on that.
#
And even now, I think that's what happens.
#
For instance, that my latest, somewhere in the middle, and, you know, my wife remembers
#
this because I was obsessed with it for like, I think, four weeks, I had to find out about
#
And I didn't know anything about nuclear power.
#
So I had to find out how nuclear reactors were made, specifically because I was like,
#
I'm curious about this whole subject and I want to find out so I spent like days and
#
days looking into nuclear power and reactors and what specifically thorium played as a
#
So in the end, I was left with a lot of information, almost completely useless.
#
I hope it'll be useful at some point in the future.
#
But I mean, it's just like I wanted to get a feel of the subject.
#
I understood what the thorium cycle was the fact that India was at that time, the forefront
#
of thorium based nuclear technology, perhaps is one of the, you know, furthest down that
#
line even today, India has the second largest reserves of thorium in the world.
#
We could produce, we have had a functioning reactor for the last 25 years, 25, yeah, this
#
year it will be 25, in Bombay, which is an experimental reactor that can actually produce
#
its own fuel as a byproduct of this process, one of the first and earliest, you know, users
#
of this technology and it uses thorium as one of the fuels and the other thing that
#
it actually produces is uranium, which is so rare in the world.
#
So why this actually happened, I don't know.
#
But somewhere down this process, I said, okay, there's got to be a reason why people think
#
this is bad nuclear stuff.
#
And eventually I found, okay, nuclear is not bad.
#
I mean, I know people may disagree and say, okay, no, no, it's not environmentally friendly,
#
but in the scale of environment friendliness as a whole, the nuclear power generation process
#
is the most environmentally friendly in, less people have died in all of the nuclear accidents
#
all over the world, even considering effects downstream and so on, than in probably any
#
other form of power generation in the world.
#
And I don't say this because, you know, I'm just quoting a magazine or anything like that,
#
but because I've gone through the data, I've combed through it and seen how this stuff
#
functions and even though we have movies like Chernobyl, which comes along and talks about
#
a lot of things and how nuclear holocausts and all that stuff happen, I don't, I mean,
#
I think now, I mean, I'm comfortable in understanding that, the reason why I'm saying this is because
#
the mental model that caused me to go down this hole was because perhaps somewhere someone
#
had commented that this stuff is unsafe in order to find out for myself and got fascinating.
#
And why it got fascinating was something in the middle that triggered and saying, oh shit,
#
wait, wait, what about that?
#
And one of the factors that did that for me was that India had the second largest thorium
#
I'm like, but we don't have that many nuclear reactors, do we?
#
And then it turns out we do have a fair number, but nowhere close to what is eventually required.
#
And thorium has, thorium is on the beaches of Kerala.
#
Fascinating fact, but it's strewn around.
#
It's one of the largest things out there.
#
It's probably lesser now than it used to be then, but.
#
So when you think about how your philosophy evolves over time, I've learned that you can
#
somehow latch onto philosophies or mental models, even when you're doing the strangest
#
things, playing solitaire, you could play solitaire, you could lose, you come back and
#
And you've seen this in poker.
#
You can either keep playing poker endlessly without learning.
#
And a lot of people do that, you know, and you could do this with bridge as well, and
#
you could play contract bridge forever and not learn, or you could go down a little bit
#
further and said, dude, this is a game of probabilities.
#
You're going to play the probability game, but you have to understand how the probabilities
#
You have to figure out how they're arranged.
#
And if you know how they're arranged, you instantly start to make mental models about
#
In bridge, for instance, if the bidding happens in a certain way, you get a certain clue on
#
And then you start making immediate eliminations in your mind.
#
I am not a very good chess player, I'm probably a terrible chess player, but in chess you
#
do this like probably, you know, 100 times more than you do in bridge, but you eliminate
#
possibilities more than you include them.
#
And over time, you're so what you what you're doing when you're playing is that you're finding
#
a better way to do the same thing that you were doing brute force methods.
#
And then you build so somebody tells you that in blackjack you count and there's a reason
#
you count and you go back.
#
But if you played blackjack enough, even if you didn't read the books and read the literature
#
around it, you know that if there have been enough face cards that have already come,
#
after some time you learn this that you don't want to bet anymore.
#
You know, if the more number of face cards have come in your chances of getting a face
#
card of the dealer getting hit and going out later reduces somewhat.
#
So this kind of mental modeling comes to you after some time and it's just sometimes that
#
And sometimes it doesn't.
#
So for me, it has never clicked in Sudoku.
#
I have been playing it for a long time.
#
And I somehow have never found it useful enough to go down and try and figure out how I could
#
play this a lot better than I than I do right now.
#
But I've done this with say a bridge or some of the other games that I play.
#
And, you know, it's but what I think is fascinating is that it's about interest.
#
If I was not interested in accounting, and I don't know how I got interested in accounting,
#
there was a pleasure in finding out the interesting things about it.
#
So even today I look at accounts and I marvel at some things like for instance, they say
#
that you know, the three things that you can never figure out is debt, you know, taxes
#
and how Reliance makes profits.
#
But how Reliance makes profits is, you know, is a book by itself, because for every era
#
there's a new little nice little accounting technique that they use.
#
And you know, it's very nerdy accounting stuff, but you're like, dude, I like this, man.
#
So it's fascinating to get that that aha, when you kind of find out that they've removed
#
all the chinks in what would otherwise be like, why is anybody doing this?
#
And now it's like, oh, yeah, this is why they're doing it.
#
So fascinating because of that, perhaps.
#
Yeah, no, there's a lot to unpack here.
#
But firstly, I'll say that I'm delighted that you brought up that nuclear digression because
#
something that I have been planning to write about or maybe find an expert and do an episode
#
about is that, you know, nuclear power could literally be the solution to climate change
#
in the sense that it is so incredibly safe.
#
Obviously, I don't have your level of knowledge about thorium deposits in India, which is
#
I'd expect you to know.
#
But, you know, I did do a lot of reading on this at one point in time.
#
And it is, you know, all the data comprehensively shows that it is by far the safest form of
#
Tens of thousands of people die every year from fossil fuels.
#
And a lot of them are unseen deaths, which we, you know, don't necessarily directly
#
But people will bring up this bogey of Chernobyl or whatever.
#
And the thing with Chernobyl is that, look, that was not something that, you know, necessarily
#
was a failure of nuclear power.
#
It was a failure of a certain system of governance, which was really the Soviet system.
#
And that's how you should see it.
#
And while the web series is fabulous, I'd recommend a book by Adam Higginbotham on Chernobyl,
#
which I'll link from the show notes, which is a wonderful, wonderful book on that subject.
#
I also sort of loved your answer on mental models because, you know, you brought up all
#
these different sports and I'll kind of mention them briefly because it seems that the one
#
way in which my years as a poker player changed my thinking or sharpened my thinking was that
#
it made me think about the world in a probabilistic way and, you know, not look and not connect
#
results to outcomes all the time, not be results oriented, focus more on process and doing
#
the right thing and realized that the role of luck in our lives is, you know, much greater.
#
And that is, of course, that kind of probabilistic thinking is a framework that applies to everything,
#
I did an episode with Mohit Satyananda, mutual friend, who's also an amazing investor, where
#
we spoke about the similarities between investing and poker in terms of the kind of different
#
mental models that go in.
#
Similarly, you sort of mentioned chess.
#
Now that's also relevant because what you do as a chess player is that there was a study
#
which showed, which compared top chess players with beginning chess players and try to figure
#
out how many moves ahead do they see and the beginning chess players see as many moves
#
ahead as the best grandmaster in the world.
#
But the top player will see the right moves and that is because of pattern recognition,
#
because they are not going by me ye karunga to wo wo karega and then this will happen
#
and then this will happen.
#
That's not how they are thinking.
#
They're looking at certain patterns of how the pieces are placed on the board.
#
And from that, they know certain patterns of how things move.
#
And in fact, you become better at chess by just by recognizing more and more patterns
#
So you're thinking at a higher level, which might be a reason, by the way, that, you know,
#
Sudoku is frustrating to you because in Sudoku, there are no higher patterns.
#
Everything is move by move.
#
Everything is concrete.
#
You're figuring out ki achha iss line mein ye number nahi hai, iss row mein ye number
#
Therefore, there are no higher patterns to see.
#
I'm just kind of speculating and thinking aloud.
#
And by the way, I'm now hooked onto this new form of chess on chess.com called fog of war,
#
And what fog of war is that, you know, if anyone has played chess, they should really
#
try it out, is that you can only see your own pieces at the beginning of the game.
#
You can't see your opponent's pieces.
#
And as you play, you can only see those parts of the board which your pieces can attack.
#
So if you put your bishop on a long diagonal, you can see everything on that diagonal till
#
the point, you know, it's blocked by something.
#
So it is, you know, the difference between chess and poker is that chess is a game of
#
perfect information, while poker obviously is imperfect information.
#
And this brings that element of imperfect information into chess, where you're not just
#
trying to kind of, you know, all the information isn't out there.
#
So part of your task is to figure out how do I get more information?
#
And how do I protect, you know, information from getting out?
#
So it's really, it's like a fascinating mix.
#
And I've kind of gone down that rabbit hole in recent days, I'm probably one of the highest
#
ranked players on chess.com right now in that form of the game, though that is obviously
#
not the case in any other form, because I play all other forms for time pass, I do not
#
try to improve, I do not want to improve, I'm like what poker players would call a fish.
#
But that's what I try to do here, and I guess that's part of it that if you you form these
#
mental models doing various things, and then you can apply them to everything.
#
And pattern seeking is not something that you do only in chess, we are pattern seeking
#
creatures, we are sort of evolved to do that, which is why we kind of look for patterns
#
and everything that I do.
#
Now my next question about sort of investing in markets is this, and this is possibly a
#
prescriptive question, how should we think about markets because from an outsider, someone
#
who doesn't invest, someone who hasn't thought about it at a higher philosophical level,
#
markets can be either, you know, at the very basic level that you're buying into a company
#
and they're using your money and doing something with it.
#
And that's a system, or it can be like this grand casino, which is completely disconnected
#
from the real world, economy is going down, markets are going up, which of course you
#
wrote about in this wonderful column in June, which I'll again link from the show notes
#
and possibly quote from, but people have these very simplistic conceptions of markets, so,
#
and I presume at some point, obviously, you begin with these simplistic notions as well,
#
and then you begin to find out more about it.
#
So how should we think of markets?
#
And you know, why should we invest in markets?
#
You know, how has your thinking kind of, how did your thinking rather evolve on the subject?
#
You know, the problem with markets is that there's always more than one right answer
#
And this is something that a lot of people find extremely uncomfortable.
#
They may be accounting fraud, or snafus that are happening and yet it may still be a great
#
company to invest in this.
#
This is the one of the things that people always find fascinating.
#
But there's a lot of stuff like that.
#
So let me start off with the basic simple assumption.
#
And perhaps I should paraphrase this with saying this is not advice.
#
This is, you know, this is just storytelling or more than anything else.
#
So if you think about the most simple advice, pieces of advice that people can give you,
#
it's just, you know, keep investing and you'll make money.
#
That's as simple as it sounds, right?
#
And if you just took that one piece of advice, and nothing else, I think, you know, you do
#
Because with the hows and the whys and all that stuff can come later.
#
But this is a really simple piece of advice.
#
Now things start to get complicated because you're going to ask me where are you going
#
So I can tell you, oh, well, you can invest in these stocks, these mutual funds, and you
#
know, out of every 10 people, you'll find one or two people who said, dude, I invested
#
And then it was really good for a while.
#
And then all those stocks went to shit, and I lost all my money, and then I'm done.
#
Okay, that sounds like it.
#
But that one person is going to influence 10 or 15 other people to say don't invest
#
in markets because this is what it is.
#
And now the confusion starts to creep in.
#
Now, how do you, I started off the same way.
#
I didn't have any money.
#
To be fair, I'll tell you my first experience with stocks, and I had seen my father make
#
He bought Hero Motocorp, Hero Honda at the time, when it was in its IPO, he never sold
#
He never sold it for one reason, because he pledged it to take a loan to build his house.
#
So he couldn't sell it.
#
So he took that those shares are worth, I don't know, 4,000 times what they were at
#
But the interesting thing about thing was, although I'd seen this money being made in
#
stocks, I was like, you can't.
#
So I, in 2000 February, after looking at stock markets going up every single day, I decided
#
to venture into markets myself and I stood in line that time you had to fill paper forms
#
go in line, so you stood in line and went and invested in ICICI Prudential Mutual Fund
#
Technology Fund, something like that.
#
And it was a 10 rupees and promptly in three months, it was a two rupees.
#
And I said, this is the only money I had ever seen.
#
I'm running my own business.
#
So all my money is there at 10,000 rupees, and I put it into this and became 2000 rupees
#
and I swore off market saying, I don't know how anybody has ever made money off this thing.
#
But once you go to this accounting thing, I suddenly realized this is a pattern is a
#
And if you think about it in a very basic way, and maybe this realization took me years
#
to get but I'm just going to go back in here.
#
You're making money off the fact that someone else is making money.
#
You're not going to make money by yourself.
#
And since I'm not selling the pipes, I'm buying the company shares, then that companies
#
The guy who's selling the pipes knows how to sell pipes.
#
I don't have to figure that out.
#
All I need to know is that he's selling pipes and he can continue to sell pipes in the future.
#
And I think pipes is a great market.
#
So that's all I need to care about.
#
You don't get these kinds of opportunities.
#
You think of the markets as in poker or in a game where you're playing in a casino.
#
The odds are always a little bit against a little bit that little bit in poker, it's
#
not of course poker when you're playing in a team, you're probably someone with the odds
#
And when I say odds, I mean, you can try over and over again.
#
And if you've got the right kind of process, if all you have is a slight edge, a slight
#
edge over time, you will win.
#
There are two reasons why two things that are very important for this concept to work.
#
One is that you need to be able to play many times.
#
That means they shouldn't stop you like you can give your 12th standard exams only so
#
You can't give it for more than those many times.
#
So you have to win that short time frame.
#
So you need a different approach to it, which is also why it's knowledge-based, rules-based.
#
Life is not rules-based.
#
Life is very random to a certain extent.
#
And therefore, to win in investing, you have to be able to try many times.
#
What happens to a lot of people is they get taken in by this Rakesh Jhunjhunwala bet some
#
money on Titan and that made him 800 crore.
#
To unlearn this took me 10 years to unlearn the philosophy that said boss bet everything
#
I've bet all my money on my company and I've had four of them, you know, some different
#
But I don't think this is great investing advice that you bet a lot of money on a single
#
I don't think it works for me.
#
And I've realized that over time investing is about who you are.
#
If you are this crazy and you see this in poker a lot, people will come in and say boss
#
is hand with a banana because that hand could be a throw away and you had to go, you had
#
to fold the guy's going to play on it because of his ego.
#
So people do this with shares saying sooslon and sooslon may pass on even though he's
#
lost 80% in sooslon is putting more money into it saying average down, average down
#
stock that falls 90% is a stock that first fell 80% and then fell by half.
#
So if you are thinking it's 80% down, it has nowhere else to go but up.
#
It's going to fall another only another 10% in the overall scheme of things, but 50% for
#
So this is something that I think it takes time for one to learn.
#
But what is fascinating is the building of why you invest or how you invest.
#
For me, that learning came in over time saying, okay, I look at accounts and I look at stock
#
prices and they don't make sense.
#
There's a company that's growing at 10% and you're valuing it at some obscene number.
#
Okay, it doesn't make sense.
#
Over time, you realize that this is a lot of luck and luck plays a huge role because
#
sometimes it's a crappy company.
#
It gets its share price up to a point where it can raise capital at a very high valuation.
#
It raises that capital at a very high valuation and now because that capital is strengthened
#
because of this capital raise, it suddenly becomes a good company.
#
I mean, it's still over value, but it's a good company that can actually withstand a
#
So when there is a fall because it has this capital cushion, it's able to withstand it.
#
Its competitors are not, which were relatively less priced, but did not have the kind of
#
capital buffers that this guy does.
#
So it suddenly has those capital buffers and the increase in stock price made a company
#
that could ride out a really big downturn.
#
So this concept never struck me.
#
I mean, it still astounds me that that happens.
#
And what you suddenly realize is that when a company starts to raise capital when it's
#
extremely overvalued, it's actually a good company.
#
And you need a company to do that, to make for a better thing.
#
That's very esoteric from my original experience things, because you want to look at a company
#
and say, oh, no debt is good.
#
No debt companies are good.
#
In India, they tell you that a company should not have debt.
#
Yes, there are a lot of no debt companies, lots of debt based companies, which are still
#
And you realize that over time that it's the judicious use of terms and terminologies and
#
And how so somebody told you this, probably, and it's underappreciated.
#
And second figure out when to break the rules is the worst advice you can ever give someone
#
new because they would have no idea what that means.
#
Because first they have to figure out why those rules work.
#
And then they have to figure out why those rules don't work.
#
Or when those rules don't work.
#
But the art of investing, if there is an art in it, it is the process of figuring out what
#
works and what doesn't.
#
And why sometimes some things are different.
#
And sometimes some things are exactly the same.
#
And many times in this process, you'll find out that, okay, so let me start with the basics.
#
You say, okay, the basic advice is invest on a regular basis and you'll make money.
#
And then you're doing this for a while.
#
And suddenly you realize, oh, shit, you know what, the market's going up.
#
Instead of me doing this every month, why don't I just double down every time?
#
I add more money and market keeps going up and I feel like I'm a genius.
#
This is happening right now with a lot of people who started six months ago.
#
But it's happened on every bull cycle in the past.
#
So when you become a genius, the first thing you do is start telling your friends that
#
And nowadays, it's the WhatsApps and the signals and whatever it is, and then you form a following
#
And over time, there's a crash at some point.
#
And then you realize you're not a genius and that this market's going to beat you up.
#
Because you'll make the same mistakes that other people are writing that you're making.
#
The other people are telling you, listen, don't double down on a stock that's got corporate
#
And you're like, no, no, no, it's temporary.
#
The promoter is not really looking to siphon out cash.
#
Nobody needs money right now.
#
So like, okay, that statement is just the worst, most horrible statement ever.
#
Because if you're siphoning out cash, it's probably real.
#
So then you kind of break it down and say, dude, I won't invest in these stocks at all
#
And then somebody comes and tells you, no, there's something called technical analysis.
#
When you look only at prices, forget what the fundamental, what the company does, it
#
The price is going up, you buy it, if the price is coming down, you sell it.
#
So there's this famous investor called Sameer Arora, who's pretty active on Twitter, very
#
So one of the things is that, you know, they tell you the advice is that buy stocks that
#
If you ask them, what about if it goes down, then don't buy it.
#
So he's basically, it's hindsight bias and all that stuff.
#
But all the logical biases we see in debates and reasoning, the same kind of biases exists
#
in investing, which is you have hindsight bias, you look at survivorship, you say that
#
this strategy worked, because you look back and say, well, if I had done this to Bajaj
#
Finance, it would have been great.
#
But you know what, at the same time that Bajaj Finance was there, the same rule set you used
#
qualified as Suzlon as well.
#
So if you put your money half and half in both, well, you might still have made out
#
like a bandit, but it'll be like a smaller bandit, a bandit without a bandana.
#
But I mean, these are the things that you learn over time that these rules that they
#
quote you are selective, sometimes designed to impress rather than actually be true.
#
And nobody is going as nobody's entitled, perhaps, to correct advice.
#
But nobody gives you that because everybody is colored by their own biases, the richest
#
of investors today, people whom we admire or see, have to some extent been shaped by
#
And the few people that don't recognize that you should be so wary of them.
#
Because giving Jan is easy, man, but not recognizing the role of luck in your investing life is
#
We're all children of an extremely lucky regime, and in the markets, there's more luck than
#
And to attribute most of it to skill is, like you said, they haven't bluffed enough.
#
Yeah, or no, or they've made the right bluffs and gotten lucky.
#
Let's take a quick commercial break.
#
When we come back, there is again, as always in everything you say, lots to unpack here.
#
I want to talk about poker, I want to ask you deeper questions about investing.
#
But I will begin by talking about cricket to illustrate a central point about investing
#
in life, but after a quick commercial break.
#
As many of you know, I'll soon be coming out with a four volume anthology of the Seen
#
and the Unseen books organized around the themes of politics, history, economics and
#
These days, I'm wading through over 3 million words of conversation from all my episodes
#
so far to curate the best bits.
#
And for this to happen, I needed transcripts.
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And that was made possible by a remarkable young startup called Tap Chief.
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Maybe they could solve your problem too.
#
Welcome back to the Scene on the Unseen, we are chatting with the multifaceted Deepak
#
You know, people are, as Isaiah Berlin once said, foxes or hedgehogs.
#
You know, foxes who, you know, know a little bit of a vast variety of subjects and hedgehogs
#
who delve deep into one thing.
#
But if you have the right models, you can be both a fox and a hedgehog.
#
You can know a lot about different things.
#
So I sort of designed this episode not just to talk about investing, which of course Deepak
#
is the ideal person to speak about that, but also a bunch of other things.
#
But before I do that, I'll go off on sort of a little bit of a tangent and come up with
#
a thought experiment of cricket, which is, and I'll explain why it is relevant to my
#
listeners right after this, which is that let's say that, you know, in a universe where
#
betting on matches is illegal, let's say there is a series between India and Australia and
#
they are going to play say five one day matches, right?
#
So what you do is you have the database of a thousand punters and you write to the thousand
#
punters and you say, listen, here's the thing.
#
All these matches are fixed.
#
I know what is going to happen.
#
I will tell you the result and you don't need to pay me anything.
#
You can either choose to bet or not to bet, but I will give you the result in advance.
#
You track what happens, right?
#
And then you write to 500 of those thousand guys and say India will win.
#
And you tell the other half that Australia will win.
#
So now what will happen is that one of those two sides will win.
#
And therefore 500 people have just seen that you got the first prediction right.
#
Then you write to 250 of them and say India will win the second one, 250 and so on and
#
And in the end you will have a bunch of people who will see that you got all five predictions
#
And what simply happened here that that particular line of predictions which took you there is
#
what you can call survivorship bias.
#
And that also illustrates the role of luck in lifestyle.
#
The market is full of many, many people and many, many funds and you know, trying all
#
kinds of different strategies.
#
And the guy who got those five hits, you know, right in a row, obviously the odds against
#
anybody getting those five hits in a row are it's incredibly unlikely.
#
But if everybody is trying all kinds of things, a bunch of people will get those five hits
#
right in a row just by accident or just by luck, which is not to say that all successful
#
firms or all successful investors are beneficiaries of the survivorship bias.
#
But it is a possibility to consider that luck also played a big role in whatever they did.
#
And this is, of course, one of the biases that you mentioned.
#
So this sort of thought experiment kind of came to mind because whichever smart punter
#
tried this, you know, the guys who've seen him get all five right are going to pay him
#
big money to, you know, for his next prediction.
#
And even if he gets it wrong, they'll rationalize that because now they are kind of invested
#
and sunk cost fallacy and all of that rubbish comes into play.
#
As far as sort of since you had bought a poker, poker is different from other kinds of gambling
#
in the sense that you're not playing against a house.
#
You're playing against other players.
#
So in that sense, it is a game of skill.
#
But it's a zero sum game when there is no house involved, when the house takes a little
#
bit of rake out of every pot.
#
It's a negative sum game.
#
But the key point that you mentioned there was bankroll management, like in one of your
#
other interviews, I saw about how, you know, after your early investing foray, which you
#
mentioned, you actually put all your savings into VSNL, I think it was right.
#
There was, yes, I mean, the first stock that I bought was VSNL, I think, which is actually,
#
by the way, as I find out very recently, probably a good thing to have done.
#
So the point being there is that bankroll management is incredibly important.
#
Even proper bankroll management can see you go closer and closer towards getting broke.
#
So you also have to, in a sense, it would help if you don't have human emotions, if
#
you can just focus on doing the right thing, because we are also wired with something called
#
We react more negatively to losses than we do to profits.
#
So you know, which is again, a sort of a problematic thing to control.
#
But the big question that I want to kind of ask you is, oh, by the way, another of these
#
sort of biases that you mentioned is, you know, and you've mentioned this in previous
#
interviews also, that what beginning investors will tend to do is if a stock goes down, they
#
will want to hold on to it because they'll want to recoup their losses.
#
But if it goes up a little bit, they'll sell it immediately because, oh man, at the profit
#
banalia, which is entirely the wrong thing to do in poker, the phrase we use for it is
#
called eating like a bird, shitting like an elephant.
#
So that's kind of what it amounts to.
#
So a lot of similarities.
#
But the question that I have for you is that on the one hand, you could say that in an
#
ideal world, the sort of a you look at the fundamentals of a company, the sort of the
#
Benjamin Graham Warren Buffet kind of way, you look at the fundamentals, you look at
#
the balance sheet, you make projections into the future and the stock prices based on that.
#
But then as we know in the real world, prices are based on supply and demand.
#
And when it comes to the stock market, it seems to me that they are based a lot on perception.
#
And it's not just a perception of how the company is doing.
#
Even if you know the company is shit, you see the stock price going up and you're playing
#
the greater fool theory that, you know, I might buy it at a high price, but somebody
#
will buy it at a higher price because, hey, after all, it's moving up as Chuck Prince
#
of Citigroup once said, when the music's playing, you've got to keep on dancing.
#
Even if you know you're in a bubble, it could be profitable for you to remain in the bubble.
#
And indeed, it could be rational for you to pay irrational prices if you believe that
#
those prices are going to keep going up.
#
And therefore, that becomes a game which is not related to the real world, although, you
#
know, George Soros had once coined the term reflexivity, talking about how perceptions
#
can affect reality and your example of how a company with a high share price can raise
#
capital which can actually make it a good company and can justify the share price, which
#
is, you know, seems to me to be a classic example of how perception can actually sort
#
So, it seems to me at one level that, one, that's a game.
#
That's a game where it's not so much anymore about what companies may or may not do.
#
That's just one factor in it.
#
How are companies doing?
#
But the other bigger factor is the perceptions of all the other players in the game.
#
And therefore, you are, you know, understanding human behaviour is as big a skill, if not
#
a greater skill than understanding balance sheets, for example.
#
And so, how do you approach this?
#
Do you take this as something that is a given and then say that, yes, within this given,
#
there can be different sort of systems to approach investing?
#
How has your thinking on this kind of evolved?
#
So, I think this is a very interesting topic because this comes back to the thing I said.
#
There is no one right answer, there's many right answers.
#
And when you start off, you become increasingly militant about your own thought process.
#
I like value investing, everything else is shit.
#
You guys don't know what a company is supposed to be worth.
#
You're paying, overpaying for this and underpaying for that.
#
And then you realise the most horrible way that perhaps somebody else, you know, grows
#
richer and richer, despite following the exact opposite strategy that you have.
#
And you suddenly realise that that's, after some time, you come to realise there are many
#
ways to play the, there are many ways to skin, I don't know who skins cats, but assuming
#
that some people do, there are many ways to do it.
#
But here's the thing that you start.
#
You think of companies as a result of metrics, or they make profits, they should be worth
#
X amount of profits, maybe if I had my money, I could put it in a fixed deposit, it gives
#
me four and a five percent a year.
#
Therefore, if I put 100 rupees into a fixed deposit, it gives me five rupees a year.
#
Can I find a company that earns five rupees if I give it 100 rupees?
#
So you look at something called a return on equity, which is a similar metric, and you
#
say, okay, well, this company owns 20 rupees for every 100 rupees that it has.
#
It's a fantastic company, better than my fixed deposit, there's some risk.
#
So I'll ask it to earn 20%, or 10%, more than 10.
#
Then you find out that this company is worth something else.
#
Now in the in the 70s, there were these companies called the nifty 50.
#
This is not related to our nifty in India, but they were called the nifty 50 of among
#
them were very interesting companies, including McDonald's, and at the time Kodak, Kodak eventually
#
went bankrupt, but you paid a huge amount of money for these extremely good businesses.
#
McDonald's is not a bad business at all.
#
Except 10 years later, the McDonald's price was 70% lower than it was in the 70s when
#
So sometimes you overpay for a business, believing that it's a good business, and you will not
#
make any money on that.
#
It's like if you paid the price of a Mercedes for a Maruti, you're not going to get a Mercedes
#
in performance, you're going to get a Maruti and not to, I own Maruti, so I shouldn't say
#
too many bad things about it and don't earn Mercedes.
#
But here is, you know, where the point is that you have to now be a judge of whether
#
what you're paying is worth it or not.
#
So valuation and business analysis are two slightly different things.
#
You come to the conclusion that, okay, I'll pay a certain value for this kind of business,
#
then you find out there are certain businesses where you can't value them.
#
You simply cannot because you couldn't have imagined the power of an iPhone when the iPhone
#
A very few people really thought, they thought it was a bigger iPod, or you put the internet
#
and the iPod together in one thing, okay, whatever, but you didn't realize there was
#
a revolution that changed things and it killed Nokia in a way that even Nokia couldn't imagine.
#
But you know, something fundamental changed about the world and what's happening now is
#
What we don't realize is that in the last, say, 12 to 24 months, we've slowly seen a
#
change happening and we have not even acknowledged it.
#
Restaurants used to deliver.
#
Now restaurants in India don't deliver.
#
You always use Swiggy or Zomato or one of these things for delivery.
#
And the restaurants themselves don't employ delivery people at all.
#
The whole delivery workforce of hotels or restaurants, which was perhaps sometimes earlier,
#
that time, postgraduate people, students and all that stuff is gone.
#
That entire model has gone bust.
#
In the late 90s, there was these things called STD and ISD boots.
#
If you lose your phone today, there is no way you can make a phone call by paying someone
#
You literally have to beg someone for a phone and ask them to give it to you free and most
#
of them will because they don't pay anything for the phone call anyways.
#
And it stuns me that the whole STD, ISD model went to zero and we didn't even notice when.
#
And when you see these changes coming in an industry that you could invest in, you might
#
actually see these non-linear gains simply because they're not available on those balance
#
They're a function of the future, not of the past.
#
They're a function of new technology that's coming in and that's going to break everything.
#
Electric vehicles, for instance, people say, oh, Tesla is expensive and this is, but when
#
you go down to the wire, you actually find out there's a reason, the electric cars will
#
not sell because they're environmentally friendly.
#
I don't think many people care.
#
They will sell because they're cheaper and faster, period.
#
And that change, if you tell a person, yeah, you know what, I'm going to keep these motorcycle
#
and stock, these companies, even though they continue to sell gas-based bikes and they
#
don't have a strategy for electric, because you know what, nobody's going to buy these
#
It's actually economically better.
#
And if you see this as a model, you could have said this four years ago, it would have
#
But the last four years, electric hasn't taken off in India in any meaningful way.
#
You can't see that for the next four.
#
It's about now trying to judge whether that model comes.
#
And then if you're involved in a company that does not have an electric footprint of any
#
sort, then you may be on the losing side of things.
#
So you have a great balance sheet.
#
It has a lot of cash on the balance sheet.
#
It has so many cars that are selling.
#
It sells half the number of cars that India sells every month.
#
And yet, if it doesn't have a strategy for electric cars, it might just not survive the
#
So things could happen that fast.
#
So when you're investing, your problem is now no longer like, oh, I can look at the
#
accounts and figure out what's doing well.
#
It's also I have to guess the future and see what's doing well.
#
And I can't guess what.
#
One of the alternatives to what you talked about in the cricketing term is it happens
#
People send you five stocks saying these five stocks will do well.
#
Invariably one of them does.
#
The next day I said, I told you about this stock.
#
Now I don't even have to wait for that 1,000 to trickle down to 20.
#
I can do this to you every single day and give you five stocks.
#
And you'll be thinking, dude, this guy is a genius.
#
Every day he identifies a good stock.
#
But you aren't looking at the fact that I've lost on four of them.
#
And it's very rare that you are lost on all five.
#
In those days, I'll stop talking to you.
#
I'll go to the next guy.
#
But this is how the tips market has been working in India for the longest time.
#
And times like these when the markets are really hot.
#
You find that relative newcomers will come and tell you, listen, I just did this.
#
The stock's up 45% in a month.
#
And this is where they haven't bluffed enough.
#
They haven't played enough because they haven't seen the downturn because they're highlighting
#
You meet a guy who highlights his losers.
#
That's the guy you want to talk to about investing.
#
Because he will tell you the real lessons that are learned.
#
Winning is for everyone.
#
So the mental model that you start moving to when you start investing is this other
#
part of this philosophy where you say, listen, it's not just the accounts.
#
It's not just the future bets.
#
It's also now a role of luck.
#
Because out of those five things that I pick, which had great accounts and a fantastic future,
#
You go back and there's no reason for it.
#
And then you say, OK, dude, you know what?
#
I have to play the luck cycle, which means I have to have enough of doors so that opportunity
#
will knock on at least one of them.
#
Because if you keep just one door, then they could skip it.
#
I didn't like the color or whatever.
#
And so the problem with investing as a whole is that you have to imbibe this philosophy
#
saying, listen, you're not going to know everything.
#
And most of the times, you'll know nothing.
#
So it's good to know a lot of little things about a lot of industry sometimes.
#
And a lot about one industry, but whatever it is, you've got to place multiple bets.
#
There's a rule by this guy called Larry Height, a famous trader.
#
He says the two rules, if you don't bet, you won't win.
#
Simply means you've got to put your money down on something.
#
But if you lose all your chips, you can't bet.
#
The idea is you've got to play to the extent that you don't lose all your chips.
#
In poker, you can, because people go all in, and then you either have to bet all in or
#
And at some point, if they keep betting all in, you're going to lose all your chips.
#
But in markets, you don't have to bet all your chips.
#
There is no fear in walking away in the middle.
#
And you can take part profits away from the market at all points in time.
#
Given this, the framework slightly start to change, saying, look, now you've got to diversify.
#
You've got to take a bunch of industries that you think will do well, and a bunch of industries
#
that perhaps have done well.
#
So I want to look at, say, a cement company and say, you know what, cement is the most
#
boring thing in the world, because you take a bunch of limestone and something else and
#
make something out of it that you can't even import, because by the time you ship it from
#
China, it turns into stone because of the sea.
#
So it's got this little local market in India.
#
So I'm going to bet on the cement player, because you can't, it doesn't have competition
#
And in India, everybody's a cartel.
#
We all know that, but we love it because we've invested in their shares.
#
And cement companies will do well.
#
There's no reason why this same argument doesn't apply to the US.
#
It's just that in the US, there are a lot more cement companies, perhaps, but they also
#
don't have these supernormal profit regimes that the current Indian ones do.
#
So you're going to bet on, say, cement and a couple of players in the cement industry.
#
But I can't stick to cement because that may not be the only thing that works.
#
So I'll buy some steel and I'll buy some technology and I'll buy some.
#
So you're going to now start diversifying into all of this.
#
Somewhere along the way, you say, dude, I've got like 40 companies.
#
I don't have time to analyze all of these companies.
#
And every day, somebody or the other buys a small stake and then I have to go and figure
#
out who this guy is and why is he buying and why is someone selling to him?
#
And some news or press release comes saying, we have been awarded a prize.
#
Now, it's time to even figure out if this is valuable news.
#
Sometimes it is completely useless.
#
And sometimes it's the news that makes or breaks a company.
#
When you spend more and more time on a per company basis, you have diversified too much,
#
you have 40 or 50 companies, you say, well, you know what, this doesn't work for me.
#
Somebody has created something called an index, it's called a Sensex or Nifty.
#
They've found the 50 most valuable companies, put it into a bunch and they've said, listen,
#
This is what the market is about.
#
And I'll say, listen, I know that whatever today's Nifty is not tomorrow's because tomorrow
#
some other company may come in.
#
Why don't I just buy whatever you call the Nifty?
#
And if you change one company and yes, bank goes out and some new bank comes in, I'm going
#
to just sell that yes bank and buy the new bank and I'm done.
#
If I did that, I would reduce my effort of tracking which company to buy.
#
I don't care if you have cement, steel, technology, cigarettes, you know, anything.
#
But as long as you have those companies in this index, I own them if they don't.
#
So, you know, that became one philosophy.
#
And then you take this out and then you say, why are you buying those 50 companies?
#
Just buy one share of me.
#
And that became the mutual fund that said, oh, I'll pay the mutual fund manager to figure
#
out which companies are good.
#
Some of them will just buy an index.
#
Some of them will say, I'll go beyond the index and find companies that are great and
#
geniuses and I am this guy who breathes, lives and eats stocks and I'm this genius and you
#
know, I have five stocks and one of them will do well every day.
#
And some of so some people give their money to these tips people.
#
Some people give money to the mutual funds, some people give money to an index fund, they
#
This is how your training evolves.
#
Then pretty much after this is the phase where you start getting frustrated seeing the mutual
#
And then somebody tells you that, listen, they're charging too high a fee.
#
That's why they're bad.
#
And you're like, why am I paying them so much fees?
#
I win a few days and like in poker, there is a point at which you know, a sucker is
#
written on your forehead, right?
#
And everybody goes through that phase once in their life, hopefully only once many people
#
And those people get beaten up by things like, oh, this guy, I've heard a rumor that this
#
company is going to partner with Tesla and Tesla has just come to India, you have to
#
It goes up 9% on one day.
#
So I'm not going to name the stock, but this company went up 9% in like 10 minutes.
#
It ended the day down for the day.
#
So if you went in and said, dude, this is like Tesla, come on.
#
And then you find out that the news was bullshit, it was rumors and all that stuff.
#
And so this process then evolves and you go and give it back to mutual funds or sometimes
#
you go find what you're really good at and invest it on your own.
#
This philosophy, I think, emerges over time.
#
It's fascinating for me to watch even myself go through this over time.
#
And I see many people break, you know, drop off somewhere in the line and I tell you know,
#
you can see them, you've gone in, like for instance, right now, you've got a lot of people
#
saying I have to participate in the markets.
#
And after this is the third time when I'm seeing a crazy raging bull market in front
#
And I can tell you that a lot of these people are not coming back when this market tanks
#
It will at some point, I don't know where it is.
#
But again, this is again, friendly piece of advice is to not listen to bad news.
#
Like this is a bubble and think of it as a bad thing.
#
Bubbles are good bubbles make things happen.
#
Bubbles is what gave us an Uber and eventually a Swiggy and a Zomato and all of that stuff.
#
So I thank bubbles for all their work and really it gave us what Indian stock markets
#
And you know, the one reason I have never, I've stayed away from investing is that, you
#
know, I try not to get too deep into something about which I don't have too much knowledge.
#
So my point is, you know, before I got into poker study it a lot and obviously you learn
#
along the way for investing, I just saw that I'm not going to invest my money in stock
#
markets because I simply don't know enough.
#
And also for most of my life, I haven't even had the money to invest, but that's a different
#
But it's like, nahi karna hai.
#
Now obviously a lot of what you said kind of underscores that because there are so many
#
factors that goes into how a stock is priced.
#
I mean, first of all, there's no correct or wrong price.
#
It's all, there's a, you know, it's an interplay between the real world, how things actually
#
are and how companies are doing.
#
It's an interplay between the future, which is full of, you know, unknown unknowns and
#
also with how people perceive the real world and how people perceive the future.
#
And it's all dreadfully complex, which is why a point that you have also made earlier
#
is that, you know, never mock another system.
#
You might have one system for investing, there might be another system which is doing well,
#
have the epistemic humility that, you know, there are all kinds of things going around
#
and if what works for you, works for you, that's great.
#
But don't go too much into, you know, don't diss other ways.
#
I mean, I think it also goes back to the parable of different blind people feeling different
#
parts of an elephant and describing it.
#
Now from this complexity and the humility within us that it should lead to, there are
#
three broad directions I want to kind of go in.
#
And the first of those directions is the role of machine learning or, you know, algorithmic
#
trading, which you did at a point in time where, you know, like the one thing that strikes
#
me is that the market is too complex and all the movements and everything are too complex
#
for humans to figure out with our primitive brains, which are very advanced in other ways,
#
but in certain ways are very primitive and machines can do that better.
#
Like I had Professor Vasanthar on this episode recently, he teaches in Stern School of Business
#
So I had an episode with him called Brave New World.
#
I'm also producing a podcast for him called Brave New World, I think episode four should
#
And he started an algorithmic trading firm in New York in the 1990s.
#
And he was talking about how, you know, it would come up with all kinds of counterintuitive
#
things, insights, which they would not understand.
#
But when they tried to sort of run simulations where they will use their own judgment and
#
the machine will do something, they always lost to the machine.
#
Now I wanted to kind of explore this with you because initially whenever we deal with
#
machines in any way, we think that, okay, we are the masters, we will program the machine,
#
the machine will do what it does, but we know better.
#
But at some point we realized that, you know, good machine learning is just way ahead.
#
Like I did an episode with our mutual friend, Devanshu Dutta two or three years ago on Alpha
#
Zero, the chess program that came out.
#
And the reason it was so mind blowing, what Alpha Zero basically did was that you didn't
#
need to program it like other chess computers with heuristics and with judgments and openings
#
It just played against itself a few million times and learned the game and created its
#
own heuristics and then destroyed the best computer in the world, which was way stronger
#
than the best player in the world, simply destroyed it.
#
And it destroyed it not by brute force, like Stockfish, which was a machine that it beat,
#
was doing millions of simulations per minute and this was maybe doing a hundred thousand.
#
But by playing itself endlessly, it figured out heuristics, which were often contrary
#
to what human chess players had figured out over 300 years of the game in the ways that
#
we value initiative, visa, we material and so on and so forth.
#
And it strikes me that, you know, so in your, what was your process like of getting into
#
algorithmic trading and you know, were there times where, you know, you would reflexively
#
react against a counterintuitive kind of inputs coming at you from the machine or from the
#
software, but then realizing that there was something it was doing right, which you couldn't
#
And also is, tell me a little bit about momentum trading, because that's something that, you
#
know, you worked in for a while and I would assume that that would be something that,
#
you know, emerges out of using AI like this, because the AI is much better place to process
#
all the data that you need to for that.
#
That's interesting that you bring both these things up, because I think there's a little
#
bit of a difference between them.
#
So algorithmic trading is, let's say there's two areas to it.
#
So one is, I want to find opportunities to invest in the market.
#
And one of the reasons why I want to find opportunities, because, okay, I mean, I want
#
a rule based system and give me a set of data, I'll find the rules that pattern match that
#
And then I will say, okay, when this happens, I'm going to do this.
#
So a simple thought process is if I take an average, a 10 day average of prices, and let
#
me do a simple heuristic rule that says when the price crosses from below that 10 day average,
#
because my price could have gone down and below and goes back up, I'm going to buy the
#
stock because I expected to go further up and then maybe at some point when it crosses
#
down below its average again, I'm going to sell it.
#
This is a called a moving average crossover strategy.
#
So it's an algorithmic strategy that you can say is a rule.
#
And now because it doesn't matter which company this is, it could be this company, it could
#
be 100 other companies, all of them have a price like alu has a price onion has a price
#
alu will be different from onion, but both prices are prices.
#
Over time, you have prices going up or prices going down to map the prices, I can tell you
#
when this alu price is likely to go up and again probabilistically.
#
So the algorithmic trading sometimes says, listen, use the price itself, or some objective
#
factor not subjective factor to determine what will come next.
#
So in a way, it's a short term prediction.
#
But the difference between the prediction is you don't have to be right all the time.
#
You don't even have to be right, like 80% of the time, if you're right 51% of the time
#
and you do enough, you will win.
#
Sometimes you have to be right only 10% of the time, and you can be enough.
#
And I'll tell you, that's the venture capital model, where they say we'll put our money
#
into 10 different companies, a nine of them can go bust, but that one will give me 100
#
And if that one gives me 100 X return, I earn 10 X on my fund.
#
And all I need to find is enough bets.
#
So I have a 10% win rate.
#
But the odds when I for me are 100 is to one when I win, and zero when I lose.
#
So technically, even a 0.1% bet edge is enough.
#
It's 0.1 into 100 times is 10.
#
So if I had 100 rupees, I put 10 rupees on each of the 100 on 10 companies.
#
And every time I won, it was 100 times what I invested.
#
So my 10 would become 1000.
#
So I'd get more than the 100 I invested.
#
What if I invested in 100 different companies?
#
If I invested in 100 different companies, I would then break even if even one of them
#
So then you find that the situation where your edge works for you.
#
So you can program this, you could call this an algorithmic strategy where now you're using
#
heuristics moving average, I want to try which.
#
So which moving average should I use, should I use a 10 day, a 10 hour, a 40 hour, let
#
the computer go figure it out.
#
I will tell you when I'm going to use a moving average strategy.
#
So do you find out which moving average actually works or in the data that I've given you?
#
Now you could have something called a curve fitting process where you say, I've given
#
you three years of data, please tell me that the 37th day average is the best.
#
Or if you're told me that the 37th day average is the best.
#
But now it could be that the next three years, I see horrible results on this strategy and
#
actually run it with money.
#
There's a reason for that is because I've used the data that was best on a certain timeframe,
#
but not perhaps best overall.
#
So we'll test this in other timeframes, saying for the last three years, this has done well.
#
But maybe three years before that had I used 37, what would I have got?
#
And that was something slightly different.
#
And then do I lose too much when that happens or is my winnings very different?
#
So the answer is no, then I can use that model.
#
If the answer is yes, that means I have got something called overfitting.
#
So I have to use a different strategy.
#
Sometimes this strategy completely fails because it becomes public.
#
There was a public experiment called the turtles.
#
They're very interesting.
#
This is from the movie Trading Places, which originally was Eddie Murphy and a bunch of
#
I forget the other guy's name.
#
One guy was called Richard Dennis, very famous guy, he was a Republican supporter at the
#
Nowadays, it's a bad thing to be called Republican supporter, I guess.
#
But interestingly, what happened that time was he had an argument with his friend.
#
He said, that guy said, listen, it takes artists to invest well.
#
So this guy said, no, it's skill.
#
Richard Dennis said, it's skill.
#
It is a rule-based game.
#
So the guy, they disagreed.
#
They said, listen, let's do a bet.
#
And he says, yes, I'll do you this bet.
#
Why will train traders like they breed turtles in Singapore, which is in a farm.
#
You just put them into a thing cage and then they breed them.
#
So he put out an advertisement saying, listen, if you don't have a trading or a finance background,
#
I want you to come and I'll train you and I'll help you learn how to trade.
#
And you're going to trade my money.
#
So he called these people, literally picked them off the street, gave them a set of rules
#
and said, this is all you're going to do.
#
Those rules made a lot of money.
#
Until I think from 1980 something to 1992, these people made truckloads of money for
#
Some of them became very famous traders by themselves.
#
One of them is writing books and a bunch of things now and also has been a successful
#
So interestingly, after 92, they actually published this in a book.
#
And since then, the rules stopped working because enough people had figured out that
#
you could put this into an algorithm.
#
And then once you have enough people playing the game, then you don't have enough money
#
So sometimes the rules will change because people have either figured them out, the markets
#
have figured them out, there are things that are changing.
#
So when you write a program in algorithmic trading, you're going to have to incorporate
#
all of these curve fitting back testing, how you're going to test, how you're going to
#
get real data because a company's price can be 50 today, it can suddenly fall to 10 rupees
#
So do you know that it's actually fallen 80% or is it a stock split of one is to five
#
plus cost the price to fall.
#
So you need somebody to go and adjust that data and make sure that the data is clean.
#
This part of this process is another part.
#
So we figured over through the school of hard knocks, perhaps, that things aren't exactly
#
So you have to fix the data, you have to write the algorithm, you have to ensure that you're
#
not doing survivorship bias, curve fitting.
#
You also have these loss aversion problems in algorithmic systems.
#
So you can design a system that's great, like this concept of VCs, where you lose on nine
#
companies but win on only one, it takes a different mentality.
#
Imagine losing nine consecutive times before that one big winner, you'd have given lost
#
And if you have this concept, the loss aversion might end up saying because in the stock market
#
you can get out anytime you want, right, you just put a sell order in your own.
#
That's equivalent to folding your hand and taking your chips and walking away.
#
So you could quit just before the stock just breaks out and gives you a 100x return and
#
you'd have missed all of it.
#
So you have to build that algorithm in a way that does not give you nine consecutive losses,
#
unless that's the kind of person you are and you can handle it.
#
So you find out what somebody calls their uncle point.
#
It's the point at which you call your uncle for help.
#
So you find out what your uncle point is, it's like if I lost 30% of my money, is that
#
And then I don't want to lose 30%.
#
So find anything that corresponds to a less than 30% loss on my overall portfolio.
#
And so I'm going to find systems that work, but that work with a less than 30% loss in
#
the interim before I started to make money.
#
So I'm going to make these bets based on these programs.
#
But this is still a heuristic based logic.
#
You may use computers to do back tests, you may use them, but still heuristic based, you're
#
giving it the rules and it's kind of testing the rules and implementing them and then saying,
#
listen, you're running this rule, I'm going to run according to this rule set.
#
What if you went one step ahead and said, I don't know the rules, dear computer, please
#
go and figure out what rules work.
#
And then you might find that the computer throws out some very strange things at you.
#
And this has happened to me a lot.
#
So for instance, the natural tendency that when people see a stock hitting a new high
#
has been always and this is regardless of, it's going to fall because it's run up too
#
How can you buy at this price?
#
And I've come to the point where my mind now says, if it's going up, okay, think of it
#
in a way you buy a stock because its stock price will go up.
#
This is precisely what it has done.
#
And so why are you penalizing it by not buying any more of it or by selling it or by not
#
buying a stock that's making a new high because it's doing exactly what it's supposed to
#
It's supposed to go where no man has gone before and or woman for that matter.
#
And if it's there, why aren't you buying it?
#
And the answer usually is counterintuitive because we don't, this is where momentum also
#
But I come to momentum at a later point, talk about ML, machine learning, the machine can
#
go in and figure out what actually made sense was to buy stocks which are making new highs
#
and buy a lot of these stocks.
#
And you might look at this and say, this is so counterintuitive, why would I buy these
#
The answer seems to be that yes, new high, now you can go back and justify it.
#
I can tell you that if a stock is making new highs, you know what's happening is that,
#
you know, it probably made a high at some point, then it fell.
#
There are people who bought at that high who have that same loss aversion problem there.
#
They don't want to sell on the way down.
#
But their mind is, when it comes back to this price, I'll get out and I'll get rid of it
#
So the price goes back there, they sell the price, maybe corrects a little more than comes
#
So it has gone beyond the point where the last guys who buy it bought it at the last
#
high have, you know, kind of decided to sell and get get out it even when it crosses that
#
level, you have uncharted it.
#
You have people who are buying who literally are saying the price is going even further
#
from this because it's never even and it's never even been here before.
#
So the logic here is that only stocks that are making new great things tend to be here
#
at a point where nobody is bought it earlier.
#
And if you build a portfolio of such stocks, the odds that you will make much more than
#
You lose when perhaps when a stock kind of corrects more than 10%.
#
So if you went and did an ML algorithm, you might find that this is one of the counter
#
intuitive things that it does.
#
Or you could discover a completely new thing where you don't even know what it is using
#
Because the intermediate structure that it has figured out of what makes or breaks stock
#
is in a format that is incomprehensible to you.
#
Now, it's like saying, if I wanted to, OK, this is probably more true than anything else.
#
But apparently, recently, there has been an attempt to make a translator, a universal
#
A universal translator would be where you could give in a lot of languages and it would
#
be able to translate all of those languages to any other language.
#
Give it machine, let it learn that the machine learn on its own.
#
So apparently, one such doesn't I don't know how to this is a friend who told me this and
#
he's pretty knowledgeable in this subject.
#
But he says, they went in and then they build this thing, they trained it, they put so much
#
machinery behind it that it was a multi machine system.
#
So you could have 100 machines doing the same kind of processing.
#
Eventually this machine figured out that they can take any language and break it into this
#
intermediate language that it had, then you use that intermediate language to translate
#
into any other language.
#
So the machine figured this out.
#
And then there were multiple machines.
#
And when they start transmitting this intermediate language bytes to each other, these guys realized
#
that, holy shit, they're talking to each other, they're computers, they're talking to each
#
other in a language we don't understand, we have no idea what they're saying to each other.
#
And this is like, you know, the Silicon Valley theme, you know, thing and all that.
#
But it's true that, you know, eventually, stuff will happen that is downright scary.
#
It's already scary for many of us.
#
I mean, I could say, sometimes I just say, okay, and no, my phone says, what did you
#
just say, because it's looking for okay, Google or something like that.
#
So the problem really is that, you know, you don't know right now how much things are happening
#
without even the heuristics of a human are leading it could be the machines that and
#
And I know that it's eventually going to happen.
#
But it's amazing how far this can get and this can get there in computers as well where
#
they've kind of figured it out in the end, dude, whatever you do, all you'll do is either
#
make me money or lose money and I can control that I can shut you down and losing me too
#
So in the algorithmic world, they said, go ahead, go do whatever the hell you want.
#
You want to build an intermediate language you are, you want to analyze Twitter feeds
#
and figure out which stock is going to move tomorrow, go ahead and do it.
#
So ML over there is basically saying, are older ways of judgment, you know, what's interesting
#
is that that, you know, George Soros thing of reflexivity, the more people that use algorithms
#
to determine a certain pattern, the more likely it is that if I know that this is the pattern
#
you're going to recognize that I can write a program to beat that it effectively means
#
that I could build my machine, which is entirely built to beat your machine.
#
It's not meant to beat you.
#
But all I have to know that there's an I'll give you an example of this.
#
There's a there's an algorithm written in the US for people who want to sell a large
#
number of stocks, because if I have like, you know, 10 million shares of some company
#
to sell, I am not going to be able to sell them because the minute I start telling my
#
broker, I need to sell these shares, the broker is going to tell all his clients, dump this
#
because this deepak shanoy is selling about 10 million shares of it.
#
And before I sell all of this, I want you to get out because he's going to destroy the
#
So I don't want him to front run it.
#
So I get a terminal of my own and start putting orders.
#
And if I start, I suddenly realize that I can't do this because it's too much time.
#
I buy a computer algorithm, and one of the algorithms that did this was to sell shares
#
at odd intervals, it would send 100 shares at a time.
#
At even intervals, it would send 500 to rotate between 100, 500, 100.
#
There was a computer program written to just detect this pattern of 105.
#
So that they could game it.
#
So finance is evil, and we have no idea how evil because I can tell you that there are
#
no morals and no scruples in this industry.
#
So people will do this if there were widows and orphans involved because they don't care.
#
And we've seen this in Enron and a bunch of these things.
#
But these are legit programs.
#
And they were written with that particular philosophy of saying, my only job is to chip
#
And so you get the machine learning on the machine learning kind of algorithms as well.
#
So it can get quite deep in that.
#
What we figured out is, listen, we don't want to do all that stuff.
#
Not because it's a very complex argument of why, but I think what makes sense and a lot
#
of sense to people is because when you do something that is algorithmic, very high frequency
#
and all of that stuff, you introduce layers of taxation, layers of economic value, transaction
#
costs, and all of that stuff that kind of hurt a person's return.
#
Managing money for somebody else, you want a strategy that doesn't read too much, but
#
also at the same time has some kind of system behind it.
#
That is, if I followed the system consistently over time, I will make enough money.
#
Sometimes it's the algorithm, the way the algorithm is accepted is that the momentum
#
is one of these things which have this weird problem that people don't seem to understand
#
It's very counterintuitive.
#
Like I said, a stock making a new high is in momentum and you should buy it.
#
Because if you look at the system and test it backwards, the odds of winning or how much
#
you make when you win is higher if you have the right strategy than how much you lose
#
And the strategy is simple.
#
Just keep buying the highest momentum stocks.
#
When a stock loses momentum, replace it with one that has a higher momentum.
#
So over time, if your edge here is that, if there's no edge, it's 50-50, let's say.
#
But you still make more when you win than you lose when you lose.
#
At the extreme, you can only lose 100% of what you put in a stock, but you can make
#
So if you only had binary win or lose, all you needed is a few winners and you would
#
still make more money than you lose because you can win more than 2x or more than 1x when
#
So momentum is simply that embodied into a strategy where it says, I will discover which
#
stocks are moving, and they are more likely to give me outsized returns.
#
Not more likely to win, but to give me outsized returns, and the losses are controlled because
#
I get out when they lose momentum.
#
So when they lose momentum, they would have lost only 10 or 15%, but when they win, they
#
On average, over a long period of time, I will make money.
#
This is a very simple philosophy, and now what we call indexes are embodiments of momentum
#
What are our biggest stocks?
#
In India today, the biggest stocks are Reliance, TCS, HDFC, HDFC Bank.
#
Twenty years ago, there was still Reliance, but there was no TCS.
#
There was probably Hindustan Unilever, which was one of the top stocks, and so on.
#
Why do they change over time?
#
The answer is that the market capitalization of these stocks changed.
#
Now Infi and TCS weren't the top market cap stocks at about 20 years ago.
#
So over time, the momentum in market cap made them as part of this index.
#
Reliance is the highest market cap stock today, but five or six years ago, it was TCS.
#
If you look at the US, Amazon or Apple have shared the mantle of the highest market cap
#
Twenty years ago, it was Exxon, and 20 years before that, it was something else.
#
So the leaders have changed, but what has happened really is that each of them has had
#
momentum in market cap.
#
The total number of shares they own multiplied by their stock price is the market cap.
#
The company, the most valuable companies have floated to the top.
#
So you've taken a moment, and this is there everywhere.
#
If Virat Kohli is in form, it's a form of momentum.
#
It means that in almost every next, it makes sense to bet on him on every next subsequent
#
match simply because he's in form.
#
And sometimes being in form itself is a factor, it's a reflexive factor.
#
If you are in form, you have confidence.
#
If you have confidence, the chances that you will get unnerved when something bad happens
#
to you is slightly lesser.
#
One good ball and that confidence starts to show in your batting in subsequent things.
#
Your shoulders droop a little bit lesser, you stand up a little bit straighter, you
#
get your stance a little bit better, you're less nervous.
#
That contributes to your playing better, and that increases your form again.
#
So the form kind of positive feedbacks itself and leads you on.
#
The same thing happens to a company.
#
Its customers look and say, your stock is doing very well.
#
And you're looking at them and saying, yes, our stock is doing very well.
#
Our business will give you more money.
#
Obviously, people say, dude, the stock is good because the stock price is going up because
#
the company is making more money.
#
But nobody says the company is making more money because the stock price is going up.
#
And that factor, it's not sexy.
#
So people don't like to say it.
#
But sometimes that adds to it.
#
It's the form that adds to form.
#
It's the momentum that adds to business sometimes, which is also another layer why businesses
#
that are in great momentum in the stock market sometimes have an irrationally good effect
#
on their underlying business potential as well.
#
So this strategy, of course, I justify it in hindsight, perhaps.
#
And though I'm not the first person there, the momentum has been a thing that's happening
#
I say it like, you know, my kids love Formula One.
#
I used to love Formula One.
#
I still like Formula One a lot, but I don't have the patience to three hours of car race
#
as much as I did when I was younger.
#
But when I was younger, it was Michael Schumacher and Ferrari.
#
So I have this fond love for Ferrari.
#
And I keep saying this to other people saying, I love Ferrari.
#
So I ask my kids, why don't you like Ferrari?
#
Why do you like this Lewis Hamilton Mercedes?
#
They say because he wins.
#
Actually, everything you said is very fascinating, and I'll unpack different parts of it.
#
But I'll throw in a couple of minor disagreements with the things that you said right at the
#
For example, with sports, I think, you know, I've seen studies that people form sporting
#
loyalties towards those teams or individuals who are doing well when they are at a certain
#
age when they are beginning to follow a sport, maybe 13, 14, or maybe later when they begin
#
So it's natural that, you know, you would remember Schumacher and Ferrari fondly and,
#
you know, and just from seeing who's an Arsenal fan, I can make out how old they are because
#
it means that, you know, those were Arsenal's peak years under Arsene Wenger.
#
And that is why, you know, today, you know, you might have people liking different teams
#
or why Indians would, you know, have such hardcore loyalty for these British football
#
teams completely baffles me.
#
As far as momentum is concerned, I'd actually say cricket and sports is the wrong example
#
to use because I think when we talk of form and when we talk of momentum in sport, you
#
are absolutely right about your domain.
#
But in sport, when we talk about it, I think we are often imposing narratives in hindsight
#
that in hindsight, we can look back and say, yes, this was in form and we define that period
#
But that is a narrative in hindsight.
#
In the moment, there's really no such thing, which is why, you know, the sports illustrated
#
The sports illustrated jinx, of course, is that, you know, the moment you put someone
#
on the cover of Sports Illustrated, their career goes downwards.
#
And the reason it happens is that, you know, they were on a lucky streak at that time,
#
which you could ascribe to form or whatever.
#
And you basically put them on the cover when they were at their peak and then there was
#
a regression to the mean.
#
And therefore, it appeared that that is a curse and it isn't.
#
Yeah, in fact, let me tell you that, in fact, that is exactly what it is.
#
And the reason why I'm saying it's not different is because we call, we have something called
#
loyalties, which is stupid in a momentum theory.
#
You have only loyalties to momentum, which means I will go.
#
So I will go with the Roger Federer as long as he's winning.
#
And sometimes he's winning because he's winning.
#
I form no loyalties to him.
#
Tomorrow he gets beaten by Nadal.
#
If he gets beaten by the next guy, sometimes I don't know who the new latest players are
#
in the first place, but let's say somebody else comes in and there was a time I was a
#
I was an Ivan Lendl fan.
#
And to be fair, I was more an Ivan Lendl fan than a Boris Becker fan, but that didn't work
#
And I was a big Steffi Graf fan and a big Serena Williams fan.
#
But in tennis, I found it easy to kind of not have loyalties.
#
In fact, since you bring up tennis players of that era, I remember I once saw this interview
#
when Jim Courier was doing really well.
#
He won a couple of Grand Slam tournaments and at that time, Pete Sampras had just become
#
number one in the world, but hadn't yet won his first Grand Slam tournament, which I think
#
was a US Open, which he went on to win.
#
So Courier was asked that you are winning all these Grand Slams, but you know, Sampras
#
He said, world number one doesn't matter.
#
Tell him to win some Grand Slams first.
#
And then I think Sampras won the very next one and then history just unfolded.
#
My sort of clarification to the whole momentum thing is, is it the case that humans are basically,
#
you know, the anchoring effect takes place, that you see a stock at a particular point
#
says 100 rupees, it goes to 110, you are anchored to the 100.
#
So relative to that 110 seems high and you're like, might as well sell now, while actually
#
it doesn't matter that every single time you look at a stock, you should do a clean reset
#
in your head and, you know, not refer to previous prices, but in fact refer to previous trends
#
And what you're saying is that that is more indicative of what is going to happen to the
#
And if that momentum is an upward momentum, then just speaking of probabilities, it is
#
likelier to go up than to go down and vice versa.
#
So interesting, you know, you bring that up because this is actually one of the biggest
#
problems that you have as a trader yourself.
#
You will buy a stock at a hundred and you sell it at a hundred and twenty.
#
This is a curse because you made this 20 rupees in your damn kuch with yourself.
#
I'll tell you why it's a curse because let's say the stock falls back to 90.
#
You are thinking yourself as this hero, boss, maine saw pe kharida, maine 120 pe bicha,
#
mai you boss and all that.
#
And then it goes back to a hundred and thirty.
#
You are going to literally kill yourself before you buy that stock again.
#
Because you're thinking hundred and thirty pe dada, hundred and twenty pe bicha tha.
#
Mentally your mind is telling you, were you wrong to sell at a hundred and twenty?
#
But your mind is also telling you, but you were right, it went to 90, you know, it'll
#
At that time you buy it again.
#
This is your mind playing tricks on you and your mind thinking that it's a reversal to
#
mean kind of happening, but it's not.
#
And what happens here is that a hundred and thirty vada stock goes to 200 rupees and you
#
kill yourself because not because you didn't buy it a hundred and thirty, because you didn't
#
buy it a hundred and forty, you didn't buy it a hundred and fifty, you didn't buy it
#
And any of those times if you had bought it, you would have still made enough returns to
#
But you didn't because you were fascinated, like you said, the anchoring effect of that
#
It's not the hundred and twenty price that was existing.
#
It was the point that you had sold at a hundred and twenty after buying at a hundred.
#
How can you not be the hero to give up and say buy it back at a hundred and thirty?
#
This is usually where it kills a lot of people, especially value investors, where you're looking
#
at this Benjamin Graham kind of value thing and you can't be wrong.
#
I mean, you find it difficult to be wrong.
#
So this is where momentum comes in and says to just discipline.
#
It doesn't matter what and that it doesn't matter what the underlying I'll give you an
#
example of the last maybe eight months and maybe people are right.
#
So in the stock markets are it's not a zero sum game.
#
To give you an example, I create a company and I sell you shares at a hundred rupees
#
and I have probably invested, you know, fifty rupees in the business, but I sell it to you
#
I am happy you've got a hundred rupees, have got fifty rupees of profit.
#
You take that business that share and whoever's running that business earns a little more
#
Somebody else says I have value, I see value in it at two hundred rupees.
#
You sell it to that person at two hundred.
#
You've made a hundred rupee profit.
#
That person looks at it.
#
The stock price goes to three hundred.
#
Somebody should have lost and somebody should have won.
#
It's the underlying value of the company that became bigger and bigger, but nobody actually
#
lost the money on this front.
#
It would have lost money if you had sold at two hundred and then the price came back to
#
a hundred and you bought it back at a hundred and that person lost the money and so on.
#
So that's usually not the stock market as a whole is not a zero sum game.
#
So your ability to pick up momentum is not at the cost of someone else or pick up stocks
#
The cost is that somebody else does not need to lose in order for you to win.
#
This is something that I and I also feel that this philosophy has to it doesn't come naturally
#
We always think of life as a battle.
#
If you've won, then who's lost?
#
If India has won, then Australia should have lost the test.
#
How can you have India and Australia both win and yet have a match?
#
So the answer to this is not, you know, it's not intuitive to us.
#
You learn it over time that one person's win could be in one time frame.
#
Another person's win could be in a different time frame.
#
They could be overlapping or not even related.
#
And this is where momentum scores because you don't have to always win.
#
So if a stock goes from 10 to 100, if you make between 25 and 50, that's enough.
#
You don't have had to make made entirely from 10 to 100.
#
You shouldn't have picked the bottoms or picked that sold at the tops.
#
If you made anything in the middle, you made the meat of the whole thing.
#
This is the tough thing in momentum because you're fighting your own gut.
#
It's there all the time.
#
I have the same emotional challenges as anybody else.
#
It's just that, you know, sometimes because I've seen it before, I still make those mistakes.
#
I sometimes sell because the stock is run up too much.
#
It goes to 10,000 rupees and then you're like, oh my God, I sold at seven, I had no idea.
#
And then now I realized that, you know, I will not have an idea.
#
But I should I should sell according to a system rather than according to a lopsided
#
view of this company has run up too much.
#
That's the only thing that protects me sometimes.
#
So a couple of quick asides before I go on to my next question, and one is about the
#
It's practically, you know, it's a common trope, if not a cliche on the show for me
#
to whine about how we are wired to think of the world in zero-sum ways and it doesn't
#
really work in those ways.
#
So it's refreshing to see you sort of talk about that.
#
The other thing which I'll take some time to process is the difference between poker
#
and investing in this case.
#
And poker, of course, is a zero-sum game and that may be part of the difference.
#
But what you were earlier saying about how a machine learning figures out a strategy.
#
But if another machine can know that strategy, it can figure out a better strategy.
#
Now in poker, typically there are two ways to play poker.
#
One is exploitative, which is if I know your strategy, I can exploit your strategy because
#
you could be bluffing too much, in which case I will call you more or you could not be bluffing
#
enough, in which case I'll know that you have more value bets and I'll fold to you more
#
and so on and so forth.
#
Whatever you do, I can exploit you.
#
So the other way of playing poker is what is called game theory optimal, where if your
#
sort of ranges are perfect, it doesn't matter what the other person has or what the other
#
person does, you're guaranteed not to lose.
#
So for example, let's say there's 200 bucks in a pot and I bet 100 rupees.
#
So you have to call 100 to win 300, right?
#
You're getting three to one odds, you have to be right 25% of the time.
#
Now therefore, if I build my range so that exactly 25% of the time I have a bluff and
#
the other 75% I have a value hand, I cannot lose to you.
#
You can lose if your frequencies are not correct and they go on either side, but I cannot lose.
#
And what would then happen is if you and I are both playing GTO or game theory optimal,
#
which is only possible only in theory because after all we are all human.
#
If you're both playing GTO and if the casino isn't taking a cut, it's basically bang zero
#
You can win or lose, but because others can't play GTO the closer you get to it, you can
#
But your description of what different machine learning algos fighting each other indicates
#
that in stock markets there's no GTO, it's all sort of exploitative or perhaps GTO would
#
be too complex to kind of even understand what that could be like.
#
But my question before I go on to, I said there were three questions arising out of
#
complexity and humility, before we end this particular first question about AI, would
#
you agree that at some point, like it seems inevitable to me that all trading at some
#
point must be done by machines, must, because one, they can process information much better
#
and process complexity much better and two, humans are hardwired with so many biases that
#
get in the way, some of which you described.
#
So is it then only a question of time that, you know, that that eventually happens?
#
Yeah, I think, you know, there is actually this, this theory that eventually, let's see,
#
the Forex markets are 99% trading by machines, most of it, I eventually, a lot of the stock
#
markets will also be mostly traded by machines.
#
It's just the way that they can trade a lot more and they're probably more efficient.
#
So instead of me saying I want to sell so many shares, and I believe this is, I have
#
proposed this as a solution, even in India, to the government selling stakes in their
#
So I'm like, yeah, why disinvest a program or two or three shares and whenever it finds
#
some volume, it sells some more shares, you will eventually get some 10, 15,000 crores
#
or 20, whatever you want to make you make 100,000 crores, you can get it out of that
#
system like that they just hunt for volume and they will, it will figure out when it's
#
trying to get game when somebody's trying to game it.
#
So it might actually not sell at those times, and then it can figure out when people actually
#
want to buy those shares so it can sell a little more at those times.
#
It is completely better that that is true.
#
And there's a political reason for this, because if a politician decides to sell a business,
#
he's going to demand bids and then he's going to disqualify some people and that will be
#
Oh, machine, how can you question?
#
So you can't, it's a very interesting way to solve a problem that might be both economic
#
and political, but that kind of trading will be done by machines forever.
#
Now eventually, some part of decision making or whether to sell or to buy will also be
#
done by machines by saying, listen, this seems to be too much demand, let me put supply in
#
the place and too much demand, I put too much supply, I put demand.
#
So the this part of this equation is definitely going there.
#
But if you see the last few years, and how things have changed for us, people in the
#
stock markets, where's the money being made?
#
It's the guys that invested in these new startups, where there is no price on a daily basis.
#
So there is a there is a startup, that's interesting, it comes up, and it becomes so big and it
#
raises money from a bunch of investors, then much of other investors, then a bunch of third
#
and then goes to the stock market and sells its shares.
#
And then it becomes publicly traded, blah, blah, blah.
#
But it's possible that, you know, I'm sitting on this side of this business, which says,
#
when it comes to the stock market, then I'll buy it, then it'll become big.
#
What if it's already become, which is what has happened in the last 20 years is that
#
all the human intelligence has gone into places where there's no data, or the data is hidden
#
to you, or the data is not available to you, they're creating new businesses, by changing
#
the rules of the game, whereas the stock market guys are working with places where the rules
#
to the game are more well defined.
#
So you don't get a paytm in the stock markets.
#
And in other times, a paytm would have been listed in the stock markets, you would have
#
But because of our listing rules, and people doing lots of frauds with listing shady companies
#
in the past, we've set rules that said, oh, no, you know what, only profitable more than
#
three years of profitability, those guys are like, dude, I don't care, we'll grow a peak.
#
And now it's gone to a point where if paytm in India, perhaps was listed, it will be probably
#
part of the nifty 50s valued at that much.
#
Even a Zomato is probably valued at a time point where it will be called a large cap
#
company at the top 100 companies in India.
#
This is a factor, I think more of if you think about machines trading, where there's a lot
#
of data, there's enough data to analyze it, and they make those trades, the human trading
#
has shifted into the non exchange traded investment business.
#
If you automate that, they'll find another way.
#
So humans, like with the famous Jurassic Park dialogue, and this is finally a non cartoon
#
movie, is life finds a way.
#
So if you take all the jobs away from the trading humans, they will find something else
#
Today, Bitcoin trading is done by machines.
#
It wasn't that way earlier machine, humans entered the trade.
#
And now the Bitcoin machines trade against each other, perhaps tomorrow, there will be
#
another system that will allow humans to trade off of different levels, people make money
#
off of different things.
#
So scarcity is one scarcity is simply, it's one of the ways Indian stock markets work
#
is that all the shares are most of the shares are held by very concentrated set of people,
#
then the remaining shares are too few.
#
So even a small amount of demand can rocket the price up.
#
The US operates on a slightly different phenomenon, but Bitcoin is the same.
#
So Bitcoin is very low float, everybody else wants to hold.
#
So the prices are basically, if there are enough, there's enough volume or liquidity
#
at any point, there are chances that the price could drop quite as much, which has also happened.
#
So that's why it's very volatile.
#
This phenomenon, I think, has contours that cause so machines will trade.
#
And I think humans will also always trade, they'll find something new.
#
From tulips in the past to private companies today, there is always something because humans
#
are geared towards trading, we love to make deals, we are like, by nature, deal making
#
So if you tell that the machines are making all the deals, that's just not going to fly,
#
we'll find something else to deal with.
#
So you talk about humans being deal making creatures, and we're always craving action,
#
we want to push the chips forward, so to say, is that a bug rather than a feature?
#
For example, in poker, it's really just a small 2-3% of the people who really make money
#
everybody else loses, but that's a zero sum game.
#
The point that you were making is that stock markets are a positive sum game, though when
#
they're going down, they might seem like a negative sum game as well.
#
My second question that arises from complexity and the humility which it should bring us
#
to is, should the common person invest?
#
Like earlier, at the start of the show, you gave the advice that everyone should invest
#
because that is how you make money.
#
But that is under the assumption that they are investing in a sensible way and that they
#
Now, an argument could be made that most people don't have enough knowledge to invest, like
#
I certainly, I don't because of exactly that reason, that most people don't have the knowledge
#
to invest and therefore they are the suckers at the table.
#
You know, there's an old saying, if you don't know who is a sucker at the table, it's you.
#
And therefore they are the suckers at the table, they might feel good about themselves
#
as they ride a bull market, but then it crashes and they realize they know nothing at all.
#
And that, you know, and that sort of epistemic humility is something that people like you
#
and I in the different domains, which we actually do know a few things about.
#
The more we learn about it, the more we realize that there is so much yet to learn, right?
#
And that constant humility is what makes us better.
#
The common investor doesn't really have that humility.
#
Like you also pointed out that the time to exit a share is possibly when the Panwala
#
tells you it's a good time to buy the share.
#
And it seems to me that, you know, there is a case to be made that maybe common people
#
should not get excited and go in for some of the action because they could just be in
#
A lot of the trading is being done by machines.
#
People like you are using incredibly complicated software.
#
Of course, one way of investing is you go to a capital mind and, you know, trust Deepak
#
Shanoi with your money, which is great.
#
So then you have an expert and he'll do what he has to for you, which is possibly a sensible
#
And otherwise be kind of wary because and always, you know, the Dunning-Kruger effect,
#
the less you know, the more you think, you know, and that's a great danger with markets
#
where inevitably somebody who is just out there to exploit the whole greater fool theory
#
So what's your kind of take on this?
#
Because I know that, you know, you care about investing, you would evangelize it, but there
#
is also this downside that, you know, people can just lose a lot because they don't know
#
I mean, let me take this into three parts.
#
So firstly, the why invest.
#
So it comes close to a point about why save at all.
#
And why should you save?
#
You could keep working.
#
I mean, our politicians are 80 years old, they're still working.
#
We could continuously work to build your capital and whatever comes, spend it and you don't
#
The minute you will counter this will probably with Deepak, what happens if I get an injury?
#
I don't want to work anymore.
#
I have to take a holiday.
#
Where will I get the money for that?
#
Then where are you going to save?
#
The answer to that as well, you know what, I'll put it in the bank.
#
The bank's not going to cover inflation, your costs are going up, you've got to have the
#
money grow to a point where it's at least the saving is enough to say meet that emergency
#
that you really needed to meet and so on.
#
So you're going to have to, you know, kind of beat inflation over the longest time India
#
had these 10%, 11%, 12% rates where I could say, forget it, just put your money in a bank,
#
and if it's a fixed deposit, it's fine, you're getting 12% and you'll pay some tax on that
#
and this error has unfortunately gone.
#
So we're facing a point where a lot of countries have 0% deposit rates, interest rates, a lot
#
of countries have negative interest rates.
#
So when you put 100 into a bank, they give you back 99.
#
The answer to why is very complicated, but it's there.
#
That's the situation, it's happening in India as well.
#
As recently as yesterday, I was looking at fixed deposit rates and they've reached 4.5%.
#
4.5% may still be okay compared to the US, but for India, it sounds like a horrible number.
#
But given this, if you want your investments to beat that 4.5%, or you need your money
#
to grow a little bit more than that, you're going to have to invest.
#
So sometimes when I say invest, it's only because there is almost no alternative doing
#
And I don't say invest only in stocks.
#
Investment is a way to deploy your money so that it becomes more than what it was, not
#
necessarily that it should be only in equities and stock markets and some stuff like that.
#
Today, I would say there's a bunch of more things that you can invest in.
#
You can buy real estate, real estate values are believed to go up over time, though the
#
last 10 years, they have not perhaps gone anywhere.
#
There is investment in gold, which is one of those old assets where you almost never
#
over a 10-year period see a loss, so it tends to grow at the rate that inflation goes up.
#
Again, something that may not necessarily have occurred in the last 10 years, the last
#
two years perhaps are an anomaly more than anything else.
#
But before that, the gold price was more or less stable.
#
So there are different things you can invest in, and you need to be able to invest primarily
#
just to make those extra returns that will beat inflation.
#
If you don't invest, then you've got to work for the rest of your life and assume that
#
you have a stable income.
#
The best thing that you could do is build yourself an income that is passive.
#
When I say that, I mean, it could mean writing a book that gets you royalties forever.
#
But we all know that not all books give you royalties forever.
#
And it's very difficult to write a book.
#
Sometimes people just don't know how to write.
#
And sometimes people I know are trying to change that, but I hope you do.
#
There's a lot more people that come out with great books.
#
But the way people consume content today is no longer in the format of books alone.
#
And today has opened up new avenues.
#
You could build YouTube videos that eventually get you advertising revenue without even you
#
So this passive income thing is a great thing to do around investing.
#
So it's like saying, listen, I'm getting something else that gives me continuous income, but
#
So stocks or bonds or fixed deposits or whatever it is that you invest in, that is also another
#
way for you to have an income that is beyond the primary job that you're doing.
#
That income could be by eating off of the corpus or by those stocks paying you dividends.
#
However it is, it doesn't matter.
#
Because let's say you had five crores today and that five crores was giving you half a
#
That's two and a half lakh rupees a month that you could take out of that five crores
#
And if you're spending less, maybe only a lakh a month, then one and a half lakhs keeps getting
#
added to that five crore corpus and which keeps growing until you draw out enough.
#
So your ability to now quit whatever you're doing and do something else has no impact
#
Because you could say, listen, even if I don't get a salary, I could take out the one lakh
#
a month from these, this money I'm making from the investments that I have.
#
And so it gives you that one additional degree of freedom.
#
And we don't appreciate this enough, but having as many degrees of freedom as you can in your
#
life is what eventually drives happiness, not joys, joys you can buy.
#
You can go to Bali to snorkeling, you'll get joy, but happiness is a state of mind.
#
So it requires you to remove those little latent fears in the back of your head.
#
And that's one of the reasons why you invest, not because you should or you have to, because
#
inherent uncertainty, the squirrel that stores nuts.
#
This is why taxes are bad, because they end up taking away from the guys who save the
#
nuts for the winter, but the squirrels saving their winter food is what I call akin to investing.
#
You don't have to do it.
#
You could hope to find enough nuts at any point in time to be able to survive.
#
But it's the recognition of the fact that the nuts may not be there, they may be a winter
#
and the winter is coming is the reason why.
#
But I also think that the complexity of investing is too much.
#
There is way too, and that's because people in this industry are evil.
#
That is why they will tell you stupid things like, give me money for six years, then I'll
#
give you back so much money for five years, and oh my God, this is a fantastic return.
#
And they call it a unit linked insurance package, and you're like, oh my God, a ULIP, everybody's
#
talking about ULIPs now.
#
But this is like putting lipstick on a pig.
#
It's actually better to have put your money in a fixed deposit in your bank.
#
You would have got higher returns, but nobody's telling you that.
#
They've invented this because A, too much education, and B, too little use of that education
#
So basically, I say this is a very uncle kind of dialogue, but the idea is that if you make
#
things complex, they sound attractive to people who are smart.
#
And they sound attractive to people who are not smart, also thinking that this person
#
He's using words like ULIP in a sentence, which possibly means that he knows what he's
#
So you automatically get money coming to you, fame, recognition, power.
#
Eventually, you have enough money to tell other people that you shouldn't chase after
#
This is a very famous shitty dialogue that people say, you shouldn't look, you go after
#
Make your money, and then you do whatever passion stuff you want.
#
But the point about my saying that investing is important is that you should know that
#
the need to invest is driven by those saving nuts for winter.
#
I don't mean nuts in any other way.
#
But I literally say that that is what will save you from a winter.
#
But that doesn't mean that you have to go and overcomplicate your life by going and
#
buying a stock that somebody sent you on WhatsApp today, just because that guy sent you five
#
picks in stock, WhatsApp yesterday, because you don't understand this stuff.
#
Once you do, you might appreciate that that guy is bullshitting himself, and then you
#
have to have a strategy and a discipline to do things, and all these complexities of how...
#
I talked about value investing at one stage, momentum investing, algorithmic investing.
#
There are three different styles.
#
Not every style appeals to every person.
#
It takes a four or five year discovery process in order to get enough education, and you're
#
going to pay serious fees to the market for giving you that education before you figure
#
If you're not that kind of a person, you shouldn't get into complexity.
#
So simplicity would be easier if they sold it better, but it is available.
#
So fixed deposits are simple.
#
You put so much money, you get so much money out of it.
#
This is the simplest thing in the world.
#
It's like, there's no other thing.
#
But there is complexity in stock markets.
#
People will say, buy this stock versus that complex.
#
Buy an index makes sense.
#
I don't care who the top stocks are, I just have to buy the index, or maybe I pay an index
#
He charges me very little fees, but he always buys the top stocks, and I'm happy to go with
#
I'm not going to put 100 rupees into equities.
#
I'm going to put only 70.
#
30 rupees will be in fixed deposits or in bonds, and that's it.
#
That's the end of my life.
#
Now Harry Markowitz created this phenomenal, and this goes back to your other thing about
#
how your childhood or your prime years shape your fears and your loyalties.
#
Harry Markowitz created this massive capital allocation pro thing.
#
He won some Nobel type of prize.
#
Maybe it's a Nobel itself.
#
I don't mean to insult him, but he's a very famous guy.
#
So when he was asked, how do you invest your money?
#
Now people are expecting an answer like, God, I do calculate risk-free capital versus risk
#
cost of capital, and I do an adjustment and do an inverse derivative of this.
#
He said, I thought about all of the alternatives, and I put 50% of my money in stocks and 50%
#
Although he invented the way to figure out how to allocate more money to stocks at a
#
certain time, he said, it's too complex.
#
I just like 50-50, and I'm done.
#
The guy who invented the algorithm that tells you how to differentiate between the two doesn't
#
And there's another example of somebody else who talked about, he said about how the past
#
He said, I grew up in Nazi Germany, and I saw the worst of all the excesses that people
#
learned in the nastiest side of life, and what the stock market bust, which is what
#
Nazi Germany actually came out of, the 1929, 1932 depression was caused by a stock market
#
And he says, when I see that, and I see the evil that things happen, I am too scared of
#
the future to put my money into anything but bonds.
#
So most people who were born in those times have different risk appetites than people
#
who were born in the 40s in the US, which was the baby boomer era.
#
And therefore, those people are much more likely to put money into stocks.
#
People who were born in the 60s saw the 1970s oil shocks and depressions.
#
Again, they were likely to put more money.
#
So that's about also discovering who you are and how your past shapes your life.
#
It's important to do that because you don't want to be unhappy choosing a strategy that
#
So just find, according to me, invest according to the kind of risk you are willing to take.
#
If you're not willing to take risk, don't believe anyone who tells you that you should
#
The only caveat to this is if you're completely screwed.
#
And this is my sheer advice to everybody.
#
I've written this in the thing.
#
The biggest advice somebody can give to you is make more money.
#
That's the end of that story.
#
Because if their advice does not involve make more money, you're too rich to care.
#
And so it sounds much like be happy, you know, you can just generally kind of throw it out
#
A couple of quick asides.
#
One is I'm glad that you reeled against taxes or you brought up saving nuts for winter there.
#
And my point about taxes simply is that we should think of taxes as part time slavery.
#
If I am giving 25% of my income to the government, I am basically working for the government
#
between January and March.
#
Between January and March, I am a slave of the government.
#
And which is not to say that there should be no taxes.
#
There should, you know, we need taxes, we need the state.
#
But we should question what is done with our taxes far more than we actually do, which
#
is the unfortunate thing.
#
We keep demanding government should spend on this.
#
Government should rescue Air India.
#
Government should do this.
#
But it's our slavery, which is the consequence of that.
#
The other thing is, you said, you know, you spoke about going to Bali and all of that.
#
Listen, I've just come out of a year of lockdown.
#
You know, I went to freaking Santa Cruz from Andheri the other day and I felt so happy.
#
So don't kind of get me started on that.
#
The third thing I would say is that, you know, to sort of paraphrase what you said about
#
The point is that, listen, you even if you don't want to invest in the stock market,
#
you are making a decision of what to do with the money that you're saving.
#
You know, either it is in a savings account or a fixed deposit or a stock market or whatever.
#
Now all of these carry different kinds of risk reward ratios and so on and so forth.
#
And because it is your hard earned money, it is at least your responsibility to figure
#
out how much risk you're willing to take and get the information about which of these is
#
therefore right for you.
#
As you so wisely said, you know, I just follow inertia and I just keep it lying in my savings
#
account because, you know, just don't have the bandwidth to figure out all of the other
#
And that kind of brings me to the other, like I don't buy and, you know, relationship managers
#
from the bank will call me and say, hey, why don't you buy this instrument or that instrument?
#
And I simply don't because as you pointed out that so much of investment advice that
#
the common person gets is so incredibly scammy, like selling insurance to 65 year olds and,
#
you know, a common example that you've given in the past.
#
And so much of it is so scammy and it makes me wonder that, you know, when I can sit at
#
home and start a YouTube channel or a podcast or whatever with such simple tools at my disposal,
#
you know, why don't we have a stage where I could, you know, I could invest my money,
#
you know, using such simple tools.
#
And of course, one way of doing that is by going to Mr. Shenoy for advice or just finding
#
an intermediary who does that for you.
#
But then which intermediary do you trust?
#
And so on and so forth.
#
Like I remember my third question really coming out of complexity and that whole complexity
#
humility paradigm was really about how if so much of stock prices are determined by
#
narratives, like one thing that you want about, which is a sort of a red flag against the
#
company is when a company says we are going to do this, you know, we are going to raise
#
capital or we are going to sell this or sell that and whatever.
#
And your point simply was that why are you telling me you are going to do that?
#
Why don't you just frickin do it?
#
And the fact that it is telling you about what it is going to do instead of doing it
#
is a red flag because it means it is trying to build that narrative and is focused on
#
Now, our mutual friend Nitin Pai, who is also your Bengaluru city mate, you know, once remarked
#
when those whole allegations came up against a particular party for hacking EVMs.
#
And he said, why do they need to hack EVMs?
#
It is easier to hack the human mind.
#
And it seems to me that that is true.
#
And what you do have with all these peddlers of narratives is that you have incredibly
#
skilled marketers who know how to manipulate the human mind, perhaps using the kind of
#
jargon you mentioned, you know, you know, you live for debenture and whatever.
#
And you think this guy knows what he's talking about.
#
But techniques of hacking the human mind have become so complicated that as a common person
#
who doesn't know anything about this subject, my instinct is that just stay the hell away
#
because otherwise I am going to get fooled.
#
You know, I know a lot about one or two subjects, but everything else I am extremely wary of
#
And here, of course, there is a lot at stake, so you can get conned.
#
So you know, is this something that you see changing?
#
The fact that the common man has to be permanently bewildered, whereas with other things like
#
I no longer, you know, if I buy a printer, it's plug and play.
#
I don't have to install 40 freaking drivers like we had to do 20 years ago.
#
You were telling me before the session started about how you assembled a desktop computer
#
for your son and it was so easy, motherboard Leah, chipset Leah, hard drive Leah, sub connect
#
here and it's just working out of the box.
#
To me, that's unimaginable because that's not how I know computers.
#
So can this kind of thing what you do with your money and what happens to it?
#
Can this ever get simplified?
#
Isn't that the next big problem waiting to be solved?
#
This is very interesting.
#
I think, I mean, okay, I'm betting my future on the fact that it is a problem worth solving.
#
So I am very biased on that.
#
So I believe it is my job to make my job obsolete because I come from a background where automation
#
is the only God you care about, which means you're from technology, you're going to automate
#
things, you're going to remove the intermediaries and yet here I am as an intermediary.
#
I ask to trust me in order to figure out what's best for their money.
#
Sometimes this philosophy can be the more people have tried this in the past saying,
#
listen, we'll give you an algorithm and you can invest according to that algorithm.
#
You don't even need me.
#
You just have to kind of, but every algorithm has its faults and every human therefore has
#
a complication because they're now thinking not just because is this a problem with the
#
algorithm, is this natural that once in a while I'll see a loss or do I have to change
#
And now I need a human being to help me figure out whether this is the case or that is the
#
And then if I need a human being anyway, and I'm going to go with this advice, then why
#
do I need the algorithm?
#
Let him go and select whatever it is that he wants.
#
So we fall back on human trust today.
#
I believe in the like in the US they have tried things like we do automatic accounts.
#
So when you save your money into a bank account, it automatically gets swept into some kind
#
of a money market account.
#
And then from there it goes into some kind of stock market account and gets invested.
#
Today, for instance, you and I don't have employee provident fund, but if we did that
#
money, 10% of it would be forcibly invested into the stock market.
#
Even if we didn't like stocks, there's nothing we can do about it.
#
Somebody's automatically doing that for us.
#
India has come, interestingly, from a phase of forced investing by telling us that you
#
don't know what is best for you and therefore a fixed deposit is that you don't know what
#
So you give me money at four and a half, five, six percent as a fixed deposit, I will go
#
lend it to reliance industries at nine and a half percent.
#
I will make the intermediate thing.
#
And don't ask me why you can't lend to reliance at nine and a half percent because you don't
#
know what is good for you.
#
When we evolved from there, we said, okay, maybe you know that it's giving money to reliance
#
So when we've evolved, we've just added one degree of freedom, removed the institution
#
called the bank, which was the intermediary between us and reliance and allows us to directly
#
Now you might argue this is a good thing because it removes the power of the banker to manipulate
#
our fortunes because they have and also allows us to get a slightly higher return by doing
#
Now there's complexity.
#
The guy who doesn't know both the bank or reliance doesn't know whether he should go
#
to reliance or he should go to bank.
#
So now you have this dichotomy, which has been created by more information.
#
It's like saying, why do we need 48 brands of soap?
#
We know that all the soap does is clean you and maybe you can put some scent and one and
#
some scent in the other, but if you go to the market today, there are big, small, tiny,
#
this melts fast does not.
#
So for women only, I'm like, hello, for women only, I mean, come on, but no, but that's
#
And then you have shampoos for this kind of hair.
#
So the more developed a country is, the more degrees of freedom a country has, the more
#
choices of soap there are in the supermarkets.
#
And therefore, the more choices of investments there will be for the citizens of that country.
#
And therefore, at some level, that complexity is byproduct of our freedoms.
#
So if we took it away in some way, and we continue to retain freedom as an important
#
part of our society, then we would continue to have other investment products on top of
#
So what is simple is always not going to be easy to accept.
#
But I do think that given the amount of miss selling and the lack of retribution, because
#
if somebody miss sold you a policy, insurance policy, there is no retribution.
#
The guy gets to continue to sleep at night while you don't.
#
So this happens because people say that buyer has to be there.
#
I don't think that's a it's a correct philosophy that we need laws.
#
And here, I will be a little anti libertarian in the sense, I will say that you do need
#
laws to protect against miss selling of this kind.
#
But at the same time, I don't want choice to be taken away.
#
That means you're going to need that choice of saying I go with simple thing.
#
That's just easy for everybody to see what I'm doing.
#
And there's a there's a low risk thing and a high risk thing.
#
A low risk thing will be just bank deposit kind of thing.
#
High risk thing will be something more risky, like stocks or real estate or whatever it
#
And you can choose some money here and some money there and you're done.
#
That would be a brilliant thing to have.
#
I don't know whether and I'm going to bet my future on the fact that people desire simplicity.
#
Although everything in the past shows that they love complexity.
#
But the example you said came to mind, which is, why do we just buy devices now and they
#
You don't hear people complaining a lot about, oh, my God, many service station, many up
#
now cell phone the other five days.
#
Of course, you'll find one of once in a while those kind of complaints.
#
But nobody gives their cell phones for service anymore.
#
You either throw it away and buy a new one or, you know, you know that once it goes wrong,
#
But you don't get your TV repaired.
#
When I was a kid, the TV would always be going bad.
#
And we'd call a repairer, you know, to come and he would do something complicated and
#
Now, these people are very smart.
#
So they know exactly what is wrong with your cathode ray tube TV and whether something
#
is bad or something like that.
#
But their entire jobs have been taken away because you don't need to repair your this
#
When electric cars come, the nature of the system is that today a dealership exists a
#
little bit because of sales, but this much because of service much more the service and
#
spares give the dealership its much required revenue in order for it to continue to have
#
Tomorrow, if electric car comes, they don't need any service as like a lifetime warranty.
#
They can afford to do it.
#
There are much lower parts.
#
You don't have to do anything.
#
There's no concept for an oil change of any sort.
#
I mean, maybe there's some inside the motors, but I don't know.
#
But however, what I'm trying to get at is that when you've simplified something through
#
technology or through some kind of new this thing, it changes that industry forever.
#
Tomorrow's dealers, they will not be no dealers.
#
You will be directly buying from Tesla, which you currently have to because Tesla has no
#
But every other manufacturer, Maruti, you don't buy from Maruti, you go to a dealer.
#
You don't buy, you can't go to Hindustan Unilever's website and buy even one soap,
#
although they sell soap.
#
You can't go to P&G and buy diapers.
#
They sell diapers, but the reason is because they've built a supply chain.
#
You go to the distributors in the middle and those distributors earn a little bit of margin
#
so that and if P&G starts selling diapers directly and everybody were buying from them,
#
all those people would go out of business and that would change the nature of life.
#
So when you do that in finance, you also impact a very large number of people by removing
#
the intermediaries in the place.
#
But that's the only way to go.
#
In the US, there's a company called Vanguard, which started in the 70s.
#
It said, listen, don't invest with active fund managers, active fund managers are perhaps
#
maybe people like me who say, Deepak, I mean, so I'll tell you, listen, Amit, I know how
#
I have this fantastic strategy and I will find these stocks and I will make you lots
#
And you give me money, I'm actively managing your funds.
#
For that, I charge you a 1%, 2% a year or typically in India, it's like 2%.
#
But they charge you 2% a year to manage your money.
#
What Vanguard did was this guy called John Bogle, he said, listen, this is crazy because
#
if I just bought the indexes, I would beat most of these active fund managers.
#
Sure, one or two will beat me, but they're not going to be the same one or two for a
#
A few will beat me this year and tomorrow it'll be ICICI and day after tomorrow it'll
#
be Axis and fourth year it'll be somebody else.
#
So if you stuck with one fund, chances are you'll be on top for one year, but then you'll
#
be on the bottom for the rest of the years.
#
So if you were to look at something simple enough and that beats just because of charging
#
lower fees, Vanguard changed the ecosystem.
#
It's the second largest fund manager in the world today.
#
It manages, I don't know, some $7 trillion, $6 trillion worth of assets.
#
The biggest one is a company called BlackRock, run by Larry Fink, which has both active and
#
But the passive so much overshadows the active that you are running on a world that is almost
#
entirely run on index funds.
#
When I say index funds, it means people are not actively making decisions.
#
They're just the largest market cap companies.
#
And what happens when you have a system where the largest companies are the ones that everybody
#
invests in is that the largest companies get more money.
#
So at some point, perhaps, it will not matter if these companies make profits or not.
#
Because when you save money and it goes automatically into these passive funds, nobody's making
#
People are just buying the highest owned companies.
#
So the money keeps going to the highest quality companies.
#
Eventually, there'll be a small set of people, perhaps influential, that will then say, listen,
#
I know that this company is a fraud.
#
You're giving it more money, but it's there in the top simply because you're giving it
#
But I think it will go down.
#
They go and short those stocks.
#
Some of those stocks fall.
#
Because they fall, you stop giving them any more money.
#
And then they fall all the way to zero.
#
Something else comes up.
#
This is the way the systems in the US work right now.
#
And because they have simplified this process, it's very easy for you to make that investment.
#
Hopefully in India, and I believe this will come because it's there, that you will be
#
having one of those choices.
#
And one of those choices will be, don't put too much of your mind to it.
#
Go with a strategy, passive concept that has worked in the past, and that will continue
#
You may not be the best that's out there, but you will definitely not be the worst.
#
Because you're not making these active calls.
#
This philosophy, I think, eventually, it's probably less than 5% in India, but I think
#
it will go up to 35%, 40% eventually.
#
Well, lots to unpack there again.
#
And I'd say that the car dealerships being driven out of car dealership by electric cars
#
because they mostly do service and that won't be required, reminds me of the STD boots you
#
And I think we both agree that that kind of creative destruction is a damn good thing.
#
It brings value for people, it goes back into the economy, creates new jobs and new sectors.
#
It's not like all the people who were running STD boots could do nothing else with their
#
The economy boomed and they found other things to do.
#
And I would sort of contest a couple of things.
#
One is I would say that having laws that protect pensioners from evil insurance salesmen are
#
Every libertarian would agree that you need that kind of protection, whether it's through
#
tort laws or someone, but if someone misrepresents a particular product or service and they make
#
money off you, that's basically cheating.
#
So of course, you want the rule of law to protect you from that.
#
And the other thing I'd say is that I used to bring about the supermarket analogy.
#
I used to talk about 80 kinds of shampoos at the supermarket and say how that's such
#
And I've written a column about this in the context of education, about how our students
#
today don't have choice.
#
They have one kind of system, one kind of school, but shampoo people have a lot of choice.
#
And I would say that, you know, what you said was that complexity is a byproduct of a free
#
I'd say choice is a byproduct of a free society and not necessarily complexity because when
#
I go to buy a soap, I think I can be assured that every soap I pick up in the supermarket
#
will do the job of cleaning me, right?
#
Whereas I don't have the same assurance with any kind of financial product I see because
#
I just need too much know how to even begin to understand how the hell they work.
#
But as you're pointing out, maybe, you know, we can, I think, simultaneously move towards
#
a greater choice and greater simplicity.
#
And all these frauds who fall by the wayside as well inevitably happen like the STD booths
#
of your, though the STD booths guys weren't frauds, they were important businessmen providing
#
a useful service that is no longer required.
#
But you know, that things will kind of change.
#
Let me ask you point one thing over there, very interesting, because there's this interesting
#
analogy of, I mean, the story that goes making the rounds, I rail about how an insurance
#
policy that you could have taken would have made more money in a fixed deposit.
#
And sometimes even I am stupid, because the problem isn't that they're buying a substandard
#
product that can help them make lesser money in the future.
#
Sometimes all that is required that people need is to save money, regardless of whether
#
Because there's a story that goes around doing the round saying this is guy who's a smoker
#
and somebody comes to him and asks him how many cigarettes do you smoke a day?
#
This is 20 and then there's 20 cigarettes a day.
#
How many years have you been smoking?
#
So with 30 years into 365 into 20, my God, that's some 85 lakh rupees, you could have
#
bought a Ferrari by now.
#
So this guy looks at the person and says, well, do you smoke?
#
That's the point, right?
#
In the end, you can, I can rail about these products all I want, but if even if it's doing
#
that little iota of service of saying that you could in the end have a bunch of money
#
that came out of nowhere, I tell you this, I felt this myself.
#
I had an insurance policy I had bought in 2000 or something like that, which was a horrible
#
But given the way I am, I always look at this sunk cost fallacy and every point in time,
#
I'm going to shift or I'm going to look at this as a, should I get out?
#
We forget what's happened in the past.
#
It was always better to stay in.
#
I got this money this year, I went and bought my son a piano.
#
This gives me immense amount of joy.
#
I tell you, it's just getting that money, it was a decent sum of money, but just getting
#
that money made me feel that, dude, you know what, I know it was a shitty product, but
#
just in the middle of a lockdown, getting this nice little check or this money coming
#
into your bank account, that is awesome.
#
And I want to say this, all my bullshit about you learning to be a better investor and all
#
is just throw it out if you're not doing anything to save.
#
If you're saving money and it's sitting in your bank account and you're not spending
#
too much of it, even sometimes that is enough, you don't have to invest.
#
Maybe this simplification of investing is glorifying investing more than perhaps what
#
is really required is just save and you'll make out all right.
#
I mean, it can be as simple as that.
#
In previous interviews you've done this really nice episode, I think episode four of the
#
Capital Mind podcast, which I'll link from the show notes, where you spoke about these
#
kinds of intermediaries and people who will sell an insurance product to a 65 year old
#
pensioner and not let him know that there's no liquidity.
#
So he has no escape, his money is just blocked for five years and stuff like that just sounds
#
like horrendous to me, which is why my advice would be that if you do not understand something
#
completely, do not do it.
#
You know, beware of the Dunning-Kruger effect, have some humility about the limits of your
#
own knowledge, which is why my money is in a savings account.
#
I am saving whatever little there is of it, but you know, let's, let's kind of move on
#
to, you know, people would have wondered ki yaar, three ganta episode sun liya, Amit hasn't
#
asked Deepak the one thing we want him to ask, right?
#
Which is ki economy is going down, down, down.
#
Stock market is going up, up, up.
#
You have of course written, you wrote a column about this in June, which I love where you
#
spoke about how in 1958 US industrial production fell 10% in less than a year, stock market
#
You've quoted John Templeton's explanation of that and all of that, but in simple terms
#
for all the janta who sat through patiently for three hours to wait for me to ask you
#
this question, ki bhai ho kya raha hai, is this all a big scam?
#
Well, everything's a big scam if you ask me, but then it doesn't, you know, at that level
#
it doesn't matter on a long enough timeline, the chances of survival of anything goes to
#
So the problem at some point is that we are trying to justify this market.
#
This is a very, very interesting situation where you've had, I will not try to justify
#
No, don't get me wrong here.
#
I will not say that this is a great market, but something has changed.
#
And what that something is, is this club of liquidity to give you an example of how crazy
#
it has been now, the amount of money that's been printed in the last one year, perhaps,
#
you know, is greater than money printed the last 10 and the money printed the last 10
#
was greater than the last 30.
#
The idea that the central bankers have decided is that I will not let stock prices fall specifically
#
And one of the reasons in the US is very clear is that people's, when they've made interstate
#
zero, they have literally told us that there will be no interest that you will receive
#
on the money that you place inside a bank.
#
And therefore, you have to take risk in your investments.
#
And they have taken that risk by putting their money into stocks.
#
Since people's retirement money is now almost entirely into stocks, you can't, true in the
#
stock market, it has political ramifications because you're killing people's retirements.
#
And when you do that, you say that I will protect the stock market at any cost.
#
The answer to doing that is to print money.
#
When you print money, a lot of it.
#
What has happened really is that companies like Google, Facebook, which otherwise in
#
an interest bearing economy would have taken years and years and years to get profitable,
#
suddenly become not well, not to get profitable to get attractive.
#
And they would have died because if you had invested, let's say in a Facebook in the early
#
years, you might have said, I mean, why am I investing in a Facebook?
#
It's not making me any money.
#
And it's interesting technology, but what's the point of it?
#
The other side of that equation is, dude, where else will you put your money?
#
Nowhere else is that interested.
#
OK, OK, let's keep it here.
#
So Facebook gets that amount of time like Uber has, like Swiggy has.
#
They may be making losses, but people are forgiving those losses, specifically foreign
#
investors who are saying, listen, go ahead, build a big industry, kill all the delivery
#
boys, you become the delivery boy network of India.
#
And though nobody else can compete with you because everybody else has an interest rate
#
So when you do that, you create a different set of incentives.
#
Same way in stock markets, people have been incentivized to invest.
#
When they've invested, the stock market's gone up and around the world.
#
It's not just in India.
#
So around the world also, they have discovered, oh, India is an interesting phenomenon.
#
They invest into a fund that invests in India, that money comes to India.
#
In the last two months, that's November and December of 2020, one lakh twenty thousand
#
crores has come into the Indian stock markets from abroad.
#
One lakh twenty thousand crores has come.
#
And that massive 30% fall you saw in March of 2020 during the COVID crisis saw only sixty
#
So literally twice that has come.
#
And that is not even OK, to give you an example of what one hundred and twenty thousand crores
#
Today, it's about maybe 16 billion dollars, 16 billion dollars is in a whole two month
#
And I say nothing because what the US has printed in March or April together is five
#
trillion or something like that.
#
Their first stimulus was two trillion.
#
That is nearly a hundred times more than what India received as foreign investment in the
#
stock markets in the last two months.
#
So the scale of things is that India is so tiny that even if you throw it, what are crumbs
#
from outside, no, India gets about one percent of worldwide capital.
#
So if new capital that has been printed, money that has been printed is five trillion, India
#
should get a 50 billion dollar check at some point, I mean, together added up, out of which
#
So you can imagine that if they've printed five trillion already and they're promising
#
to print more because there's a stimulus coming in the US, in Europe, in Britain, in Japan,
#
there's always a stimulus that's like permanently stimulated.
#
And then you've got all that money, one percent of that makes its way to India, just that
#
Forget India being a big economy or whatever, just one percent.
#
That would be two or three X what India would receive in any great year.
#
And that's going to keep these stock markets irrationally buoyant for a long time.
#
So looking at it from a primarily, oh, my God, we're trading at 40 times earnings and
#
50 times earnings is one way to think about it.
#
But the other way to think about it is to say these guys keep printing this money.
#
And whenever there's a crisis, they print more money.
#
So at what point are you going to fight them?
#
Maybe they'll keep printing it until I die, at which point my fight would be useless.
#
So at some point, if your savings bank account gave you zero percent returns, you would also
#
be like to put a little bit in stocks and you'll watch it go up and you'll be happy
#
And when it goes down, of course, you know, everybody curses the world.
#
But nowadays, those down cycles last two months before central banks come together and say,
#
dude, let's print our ass off and get so.
#
I think that is a true explanation of where we are today.
#
But I would hesitate to say that this is in any form permanent.
#
Life changes very fast, very often and more when you least expect it.
#
So today, if you want to invest, I would say, just be careful.
#
The music's playing, but you've got to be standing near the door.
#
At some point in time, you know, I mean, it's easier, okay, let's put it this way.
#
You would walk more carefully if you knew you were walking on eggs.
#
So if you don't know that you're walking on eggs, you're in for surprise at some point
#
because they're hard boiled today and the tomorrow's ones are not.
#
So the questions that sometimes and you know, Warren Buffett has this fantastic thing.
#
I mean, I'm a big fan of his persona, not so much of his investing philosophy, but his
#
And the persona is great because he makes these pithy one liners, which kind of embody
#
so many things in that one sentence that you say, dude, I couldn't have done it myself.
#
So he says, it's only when the tide runs out that you find out who's swimming naked, right?
#
So it's true in the stock market.
#
Everybody's making money.
#
Today, a jet airways, which hasn't flown off three years, two years, is still making new
#
highs in the stock market today.
#
And people are buying smoke, not necessarily mirrors.
#
And I say, you know, today, even a pulse is optional.
#
Jet airways does not have a pulse and it's making new highs.
#
And in that kind of a market, you've got to be careful.
#
So things can break down at any point and when it's going to be.
#
But what I know is this is forever going to be interesting and perplexing at the same
#
So you know, somebody told me this, knock bunker can invest.
#
This is one of those times when the only person who can do it is going to successfully close
#
his nose and be aware that he's going to take his money out with a loss when he has to.
#
But that the more irrational this market gets, it can get even more.
#
Alan Greenspan had this saying that he said this stock prices are increasingly irrational.
#
And I put out a tweet thread about this, which is that when he said it, the price was X.
#
It went on to some 30 percent more and then dropped 20 percent.
#
The lowest point of the after that drop was still 10 percent higher than when he said
#
Then it went on to make another 50 percent higher.
#
You imagine the frustration of this guy who's I mean, who's looked at Greenspan and said
#
he's saying it irrational.
#
So it must be irrational.
#
And for six years did not see prices come down to anywhere close to his level.
#
So that's what I say that this is irrational as a market.
#
It's happening because of the glut of liquidity.
#
You're fighting the central bankers by saying I won't invest when the market valuations
#
And therefore you your strategy should be a completely different one.
#
That's what I would say.
#
You know, there's also that other pithy one liner about how the market can stay irrational
#
longer than you can stay solvent.
#
So if you're planning to kind of fight the irrationality, let me kind of process this
#
consequence of printing money.
#
Now typically what we are taught in microeconomics and is broadly true is that if you increase
#
money supply, inflation happens because if you're just going to print money, money supply
#
goes up relative to the goods and services that are available.
#
So inflation happen and inflation is, of course, a tax on the poor because the poor are having
#
Now, as you've pointed out in the real world over the last 10 years, printing money hasn't
#
really led to that kind of real world inflation, possibly because of factors like growing productivity
#
and technology making things cheaper at the same time and so on.
#
So you could say that given that in the counterfactual things would possibly have been even cheaper,
#
that this is an unseen kind of inflation that, you know, doesn't result in prices necessarily
#
moving up, but in being higher than they otherwise would be.
#
So a lot of this is entering sort of keeping the stock market going.
#
That is possibly sort of the seen inflation as it were.
#
You know, what are, you know, and it just again strikes me and, you know, I don't know
#
the subject in much depth.
#
So I'm asking you, but it seems to me that at some point something's got to give or is
#
it the case that governments can just keep printing money every time there's a crisis,
#
they'll get together, lower the interest rate, print more money and chalo keep the dance
#
going on as it were, or do you think something's got to give?
#
What is your sense of what's happening?
#
So interestingly, I have a very, very slightly different take on this or explanatory ways.
#
Printing money tends to end rent seeking.
#
It's interesting because when you have a situation where, let's say Uber, I'll give you an example.
#
Uber would never have come up any other way.
#
If I had to buy all of these cars and provide a decent return to my investors, I would not
#
It's just not possible.
#
But what does Uber do is promises drivers an extremely high return, promises taxi takers
#
or people like us are extremely low price and bridges the gap by making losses funded
#
by people who say, listen, just go ahead and do this until people realize that they can't
#
live without the service.
#
They sell their own cars and survive on you.
#
So you're now your marginal cost of revenue, so you can reduce the amount you give your
#
drivers a little bit, increase the fares a little bit, and you reach this extreme profitability
#
because you have the market size that you wanted.
#
This would never have been possible with a high interest rate and you have money printing
#
of this attitude magnitude simply by saying that people have to invest in risky avenues.
#
You make such businesses possible.
#
You increase productivity, effective, because what you've done is introduced a far more
#
productive layer called the Uber taxi than the old taxi, which did not have any.
#
So in Bombay, you had to go out and stand and stick a finger out into data tax.
#
In Bangalore, your finger would be stuck there forever.
#
It would, there's just no way to, you know.
#
So now Uber's evened out things for places that didn't have the Bombay taxis.
#
And even the Bombay taxis, you had those old Fiat cars because they gave the taxi license
#
according to the car, not according to the driver.
#
So you can't get rid of those cars.
#
And those people are like, because they have the license, they can't give it up.
#
They can't get a new car.
#
So what they do is they keep the car on.
#
So you get a car where you have the stick shift, which nobody has seen since 1977.
#
And those are the cars you continue to have in Bombay.
#
That's because of a screwed up rule that allows a municipality to give power to one agency,
#
which is that whatever the taxi giving agency is, license giving agency, to determine a
#
rule that said, so I was saying that the taxi network that we saw automated in this fashion
#
was in some way the result of cheap money.
#
Cheap money has resulted in the largest companies in the world being debt free.
#
Can you imagine what that means?
#
And today, Apple, Amazon, Microsoft, Google have no borrowings.
#
Apple has some because of some tax bullshit.
#
But Netnet, they have $140 billion in cash or something like that.
#
So it's unimaginable because this is that counterintuitive thing.
#
How can you make debt almost zero cost?
#
And yet the largest companies in the world are companies that are debt free.
#
Reliance in India used this opportunity to make itself net debt free.
#
It owes banks money because the banks needed to owe them money.
#
Because if you take away Reliance's debt, the banking system is in bad shape and they
#
want the companies like Reliance not to give back their loans.
#
So Reliance has 150,000 pros in cash, 150,000 pros in loans, and net zero.
#
The printing of money has actually made companies less dependent on debt.
#
And that also makes sense.
#
To give you an example, if you have an economy with 10 people owing each other money.
#
So I use the hairdresser, I owe him money, the hairdresser owes a cyclist who owes him
#
money, and the cyclist owes the shop who owes him money, and the shop owes me money, technically
#
If one person were to get paid, they pay back their loans to everybody else.
#
Suddenly, the economy is net debt free.
#
So of course, that has not happened.
#
The governments have absorbed a bulk of the debt.
#
Companies still have or people still have a large amount of debt, which is why this phenomenon
#
of cutting out the messenger, cutting out the middleman, cutting out the rent seeker
#
is what the cheap money is doing.
#
This is also why inflation is not coming up.
#
Because every time you cut a middleman, you improve productivity.
#
That productivity increase corresponds to a slightly higher.
#
So to give you the analogy, let's say there was a place with only one bank.
#
There were 100 people making widgets of some sort.
#
There are 100 widgets, and each widget costs one rupee.
#
So there's 100 rupees in the system.
#
Somebody finds a way to make everybody produce two widgets instead.
#
Now there's 200 widgets, there is no 200 rupees to pay for it.
#
So the price of the widget falls to 50 paisa.
#
So the price comes down because of the increase in productivity.
#
So that's what they call real GDP growth.
#
When they say real GDP growth is the fact that your productivity has increased from
#
So you're 100% real GDP growth.
#
The nominal growth is zero in this case, because the prices went down to half.
#
What if I printed another 100 rupees?
#
Now I would have 200 rupees for 200 widgets and the price would remain the same.
#
What if I printed 300 rupees instead?
#
Now I would have 400 rupees and 200 widgets, and therefore the price has increased from
#
1 rupee to 2 rupees per widget.
#
So this is the various macroeconomic factors playing over here, productivity and increase
#
And right now, what's happened is they've increased money supply in a way that hasn't
#
made its way to the economy.
#
So a lot of money sits in the banks and with the central banks.
#
What has made its way to the economy is getting offset by the productivity benefits of cheap
#
So the inflation that we expected to see is simply not there.
#
But it has resulted in, so the one place that it is not coming is in asset prices, which
#
means that real estate prices went up when you first reduced money supply, and that was
#
a big bubble and that thing went bust.
#
You had then stock prices.
#
Stock prices went up, they went down because of COVID, not because of an extreme amount
#
It was a national event to do it, they printed more money, stock prices are back up.
#
So asset prices have not seen any productivity benefits because there's only positive feedback
#
There's no negative feedback loops.
#
It's like when everybody is listing their own companies and making them go public is
#
when you might actually see some kind of correction to this phenomenon.
#
But as I said, people watch the stock market.
#
So earlier, the stock markets were the barometer.
#
Now you want to influence the barometer.
#
So I want the temperature to read 90 degrees.
#
Because earlier you were measuring 90 degrees and telling me I was healthy.
#
So I won't let it go below 90 degrees.
#
So you know, it's like in India, this current government tells us the data that we want
#
And it's true of past governments as well in different ways.
#
But suddenly you know that a lot of the data is not really trustworthy.
#
That's because it's a flexibility at work.
#
And the same thing with asset prices, they're not letting it come down because it will make
#
And they have the power to do this.
#
At one point, they will not.
#
Bitcoin is perhaps the geek answer to this, saying to subquit price blogger, I will buy
#
something that, you know, protects me, but protects you from what?
#
It protects you from nothing.
#
It's just basically another invention of human beings that is currently not controlled by
#
And I say currently, I mean that there are plans for people to control it, and the technology
#
that allows people to control it.
#
But when you have asset price inflation like this, so to give you an idea of what happened
#
in hyperinflation in Russia, once there was for a short period of time in 2014.
#
Before that, we see that in Zimbabwe, when you had hyperinflation, people went and bought
#
And as a real asset, I mean cars, iPhones, pens, expensive pens, because they retained
#
value even through the inflation, inflationary scenario, that aspect is just translate that
#
They're printing money like crazy.
#
Let's just go buy stocks.
#
That's what is happening.
#
There is hyperinflation in asset prices, but we don't care because we don't have to consume
#
What kind of strikes me here is that politics gets into this and therefore narratives get
#
into this because like you said, once it becomes a barometer, like anything that becomes a
#
For example, at one point, the GDP became a metric, he is the economy doing well.
#
And therefore it is in the government's interest to game the GDP.
#
And it's easy for the government to game the GDP because government spending is a part of
#
So it can dig up a million ditches and fill them up and your GDP goes up.
#
And there are various other ways to game the GDP.
#
Similarly, it seems to me that if people are looking at stock market prices as a metric
#
by which you sort of judge how well the economy is doing, that's also easy to game.
#
Just print more money, boom.
#
And you know, because of all of these other factors and these positive feedback loops
#
and all of that, it isn't actually reflecting on the ground and there's no hyperinflation
#
But who knows what unintended consequences and unseen effects lie waiting for us down
#
Maybe 10 years later, if we do an episode, we can discuss, yeah, only known at the time.
#
So you know, I did an episode a few weeks back with the advertising guru Ambi Parmeswaran,
#
who's written a bunch of books on advertising and one of the things I realized talking with
#
him and talking earlier with Santosh Desai, another advertising giant I had done an episode
#
with is that following the advertising of the country, you can actually get a lot of
#
insights into our society and our culture and our economy.
#
Similarly, while talking to you, it strikes me that for someone who follows the stock
#
market as closely as you do, which is not just the world of perceptions and all of the
#
feedback loops that happen within, but a lot of it, you know, feeds down into the real
#
I mean, the most obvious example of that was, you know, it's almost a quiz question where
#
three months ago there was this chart which showed one company shares plunging down and
#
the other one plunging up on the same day.
#
And that was the day the vaccine was announced.
#
So one was Zoom and the other was some airline.
#
And you know, so the real world is involved here.
#
And you're looking at investing and stock market so closely, must have also given you
#
interesting bits of insight about our nation and our society.
#
And you know, would you like to share some of that?
#
I mean, if you think about the software we're using right now, we're looking at the operating
#
systems on our cell phones, almost none of them have any listings in India.
#
I mean, if you think about the early 2000s or late 1990s, the time that every product
#
you use, you could buy it off the stock market, you could buy Hindustan Unilever with soaps
#
you use, you could buy, you know, so almost everything that you use was listed.
#
Today a lot of the stuff that you use is not listed in India.
#
What do you get in Indian markets is a stark contrast to anything that you get in foreign
#
That means the best, the companies that we use today are almost all exclusively listed
#
The companies that are listed in India are companies who you know about, but you, for
#
instance, if I told you Tata Steel is a great company, yes, yes.
#
But if I gave you 10 steel bars, I'm telling you there is no way you would have figured
#
out which one is from Tata Steel and which one is from GSW Steel.
#
And of course, they try to print their names on it just to show the difference, but they
#
behave exactly the same.
#
They're commodity products that drive a lot of the Indian top companies, this coal, cement,
#
oil and gas and bunch of things.
#
One few companies are trying to break out of that loop has been something like Reliance
#
who's gone and done a geo and a bunch of startup level investments.
#
So there are few and far between and to a very large extent, I say this quite often,
#
perhaps you should go and go to a company's website and the number of companies website
#
on which you can actually do a transaction to buy that company's products indicates
#
the level of technology that has permeated into the economy.
#
In the last 10 years, perhaps that ratio in India has improved 10%.
#
In the US, it's probably 90%.
#
And that's quite amazing, because you could go to zoom and buy zoom as a product.
#
In Reliance, of course, I think one of their websites, many websites, you could actually
#
buy stuff, but hardly any so many of the others you simply can't they just give you information
#
about who they are as a company, you could even go and visit a TCS sort of HCL tech company
#
and you know, at best they'll tell you to contact them.
#
But you couldn't download or use any of their products, even though they're tech companies,
#
even the technology savvy of them are not for you.
#
So in a way, they're not reflective of the economy, the stock market is not for sure.
#
That's why there's a dichotomy between the stock market and the real economy.
#
Because a lot of the products that people use on a regular basis, even the Indian ones
#
We use Zomato, Swiggy, Btm, I don't know, there are a bunch of things that we do.
#
None of them are listed in India, some of them don't want to be listed in India, some
#
of them can't because of our rules.
#
So our stock market really determines the kind of influence technology has had in our
#
I have a whole lot of hope, because I feel that the next era is going to be where technology
#
companies take over the Indian economy, but you can see the level of sophistication in
#
that economy by just looking at how evolved the companies are from a tech basis, even
#
if they're not tech companies.
#
I mean, Zomato is not a tech company, they're a company that has an app, but that primarily
#
So Tesla, on the other hand, is a technology company that also sells cars, which is such
#
a difference because you can't say that of almost any company in India, Original, R&D
#
It's not like we don't have the brains, it's just that for some reason, we haven't gotten
#
And maybe that happens when India becomes a bigger economy, five trillion dollars.
#
I mean, is India being, you know, low down the value chain and the kind of things that
#
we do, so much of commodity and not enough innovation, is that partly because of cultural
#
factors like risk aversion and all that?
#
Or is it because of regulatory environment or governance?
#
What do you think are the reasons behind it and is that something that you see changing?
#
Yes, I think the reason is simple, it's high interest rates.
#
Today informal interest rates are still 24% a year.
#
Of course, credit cards worldwide jib people, so that's a horrible metric to look at.
#
But you go to a bank, they don't want to give you a loan less than 12%.
#
Now they're saying, okay, home loans at six and a half percent, somebody recently talked
#
about some other loans at 8%, but the first time I'm starting to hear of them and these
#
banks are borrowing at, you know, 3% or 4%, there's no competition in that banking sector.
#
And till now, it has not been prudent for people to actually try to take risks.
#
I wrote a blog post in 2006, I had no idea this would happen, that my expenses would
#
inflate at roughly 6% a year.
#
I looked at that blog post yesterday, I said, shit, let me see how much my expenses are
#
today and you know what, it's inflated 5.1% a year.
#
And at that time when I wrote 6% a year, people told me doesn't 6% took two less, India's
#
I said, no, but my inflation is different from India's inflation, because the product
#
basket I use is different.
#
So I think my core inflation, I mean, not counting, I didn't have kids at the time.
#
So I said, not counting kids, cool expenses, because I'm not counting that.
#
Have you factored in the piano?
#
Piano came free, I bought it in 2000, remember.
#
So but interestingly, the inflation that I have, I mean, I'm talking minus school fees.
#
So your, with inflation being at 5%, I was able to get 8 to 9% interest rates at that
#
Till two years ago, I think it was 8 to 9%, maybe two, three years, seven or 8%.
#
So my inflation on a personal level is 5%.
#
Why do I need to take risks?
#
If that were to change, and you're fighting against somebody else who has to compete,
#
not against a 12% interest rate, but against a 5% interest rate, which is perhaps China
#
or America or things like that, it's no wonder they'll win, because they have to earn lesser
#
profits and they can beat you on price.
#
So we then stop imports because come on, how can they have cheaper products than ours?
#
But the answer is, you know, they have cheaper products because of lower interest rates.
#
We've screwed up and we've managed to control inflation to a very large extent till last
#
year, but we steadfastly kept our rates too high.
#
And that has resulted, according to me, in us being extremely non-competitive.
#
It's one of the factors.
#
There are hundreds of other factors, regulatory overload.
#
You can't start an investment company in India.
#
I can't invest in Amit Verma without you perhaps even getting an income tax notice saying,
#
how the hell did Deepak Sinha invest in you at a high valuation because you're frauding.
#
This is how the regulatory and tax situations in India are.
#
So that also contributes to this lack of this thing.
#
But we are an extremely entrepreneurial country.
#
And formal credit is available to very few people in order to start their businesses.
#
And it's available at a very high cost.
#
And these factors together, according to me, is why India loves the coal companies and
#
the just the large business.
#
We still want big employers.
#
I mean, why can't we just exercise more of this?
#
I mean, the reason Swiggy works is because each person thinks he's his own boss because
#
he's actually a rider, he's a consultant.
#
He's not actually employed by Swiggy.
#
And like this, we could create a billion or a zillion different kinds of models.
#
But we still love the fact that in one factory, there will be a thousand people.
#
A thousand people will get jobs.
#
But that philosophy is why I think we continue to like our top players.
#
And in a way, we've become a little bit more like Korea and Japan.
#
We will rescue the top corporates and not let them go down.
#
Japan did that with the top six Japanese companies.
#
The Korean Chai Ball is famous.
#
Samsung and LG continue to be the top kind of players in Korea.
#
That's because those countries have said these big guys are too big to fail and we will bail
#
Korea has done it to all its banks and to a lot of large corporates as well, which causes
#
resentment, but more like they hate people who come and disrupt those people's businesses
#
So, how are you bringing out cheaper steel?
#
Put in import duty because I have to save Tata Steel, JSW Steel and 50000 Steel companies.
#
That is the philosophy or the thought process.
#
And I use Hindi there for a reason is that because it's almost become Indian in the sense
#
that that philosophy is more Indian because in America, you let companies, I mean, till
#
last year, you would have let companies fail now there also they don't let companies fail.
#
But you know, failure, unfortunately, is considered so, you know, these companies will go down
#
because some companies will have to come and become better than them, not that these companies
#
And when you talk about rescuing these big companies, what is happening?
#
Happening is that their profits are being privatized, but their losses are being socialized,
#
which basically means it comes down on us and on our taxes, which remember is part time
#
slavery instead of working from January to March, you'll have to work for a few days
#
of April for the government for free also.
#
That is what Gulami is my good friend.
#
You think you're a free person?
#
I have sort of three final questions for you before I let you go.
#
You've been very generous with your time and as both of us know enough economics to know
#
that this has an opportunity cost.
#
So I'm very grateful that you're, you know, hanging out and chatting with me, though I
#
we could also point out that it's a positive sum game and we are both having fun.
#
So my third last question for you is basically this, that if the Deepak Shanoi of 2021 could
#
meet the Deepak Shanoi of 2001 and give him advice about these are my TILs over the last
#
20 years, which will help you in your journey, both your investing journey and your journey
#
What would you tell young Deepak?
#
Perhaps one thing that I mean, of course, my first feeling is to tell him all the stocks
#
to buy so that, you know, by 2003, you can't be specific, just meta level stuff.
#
But I mean, this is my problem, right?
#
This is the stock stock market problem of people going from the future back to the past.
#
But one of the things that I think people will, I mean, I would tell that person is
#
I changed careers completely.
#
I moved to finance and it was a long period of fighting with myself before I changed it.
#
And that period of that fight was very useless because I could use my skills on the tech
#
level in the finance world.
#
And tech skills by themselves have a use in that they're only useful in some world that
#
It's only recently that tech can be useful by itself.
#
But usually it helps some other industry.
#
So to that extent, I think the person that I would say that I should become is to stop
#
fighting those battles about what is the right way to proceed in the future.
#
Now, in 2001, I was running a business and that business was actually doing well, even
#
though there was a downturn in the economy.
#
And I believed at that point, a lot of those things that I thought would come true, just
#
if I gave it time, it would.
#
I think the new me would just say, listen, always set up a time frame.
#
If things don't work out on those time frames, you're out.
#
You need to and maybe trading and markets have taught me that, that, you know, set up
#
And if things don't work out by that time, you're out.
#
That's the learning I would take to that time, because it was not intuitive.
#
Because at that time, I thought, dude, I'm an engineer, I'm a smart guy, I can figure
#
The role of luck is perhaps, you know, this is uncle me talking to younger me and younger
#
me would never listen to an uncle me.
#
But really it's like appreciate the role of luck and create more opportunities for luck.
#
So at some point in the middle, I had stopped that opportunity and that landed up in a situation
#
where in 2005, I was, you know, for a small period of time bankrupt.
#
When I say bankrupt, not really, I didn't owe anybody money, but I didn't have any
#
After seven years of working, I will temporary phase, I borrowed money from my wife to kind
#
of pay for a few things.
#
But I don't think I kept that in mind when I was running the business that there is something
#
beyond for a guy who talks about personal finance and investing, I was a horrible investor.
#
I'm the opposite of a lot of things I tell people to save all the time.
#
My entire future is dependent on the company I've built, or I've helped build and which
#
is that all of my bets are there, I tell people to diversify, but my bets are there, for the
#
So similarly, I think the learnings of what I'm doing right now is that you want to build
#
yourself a little bit more of a saving and equity that you could have done more of your
#
stuff that you want to do for passion or that you have to really like that can build you
#
a great asset in the future can happen earlier than you thought.
#
You don't slavery to the government for four months, sometimes it's slavery to something
#
And to a lot of people, it's like, dude, I'm slaving off anyway, might as well stay for
#
the government at the same time.
#
So that was the philosophy that drove me to entrepreneurship multiple times.
#
And perhaps in hindsight, I didn't have to go through to be honest, like I said, the
#
young me would just not listen to the old me.
#
So my kuch bhi bolta nahi ho hi karta ho.
#
I think more or less, you know, it's just sad, but that's perhaps I see that in my children
#
now and I kind of admire them for it.
#
Although I'm very frustrated sometimes, kyuni aisa nahi kyuni, no dad, YouTube channel manager
#
Yes, perhaps because he shows me these numbers that these people make and I'm like, that's
#
not a job, but that's a lot of money.
#
You know, I mean, I'm, I'm, that's just me being this thing, but I tell you sometimes
#
not listening to people like me is a good thing.
#
So your uncle use advice to the younger you is don't listen to me, which is fantastically
#
meta in ways I can't even begin to describe a second last piece of advice.
#
Listeners of the show always want to know what books to read to learn more about a subject.
#
So if you are, say someone like me, intelligent lay person, I hope I can describe myself as
#
that intelligent lay person want to learn more about a subject.
#
You know, what are my first go-to is not necessarily just books.
#
Maybe there's a YouTube series out there.
#
Maybe there's a MOOC somewhere.
#
But if some someone wants to learn about investing, what are the first steps that they should
#
take in your view or what are the books that shaped you?
#
This is actually incredibly difficult to answer because I think I have both been led and misled
#
The unfortunate problem that you have with authority in this industry is that they do
#
not accept that there are many right ways to solve the same problem.
#
And that money printing creates inflation and money printing does not create inflation
#
or both correct at the same time, perhaps at the same place.
#
So a lot of the theory is wrong in the sense that you don't have, I mean, not much of this
#
Sometimes you take some time to understand.
#
But what I would say is my reading or my entire series of reading that's the stuff that started
#
it, some of it no longer exists.
#
So there was this lady, her name was Doris Dungy, she was called Tanta, Tanta, I don't
#
know how it's pronounced, but there's a blog called calculatedriskblog.com.
#
And to be honest, a lot of the stuff I learned around about things like mortgages and economic
#
fundamentals were from that blog at that time.
#
She unfortunately passed away from cancer and her writing, although survives in the
#
blog, is probably no longer relevant in a way that it used to be at the time.
#
And she talked about the housing crisis before there was a housing crisis.
#
She talked about mortgages and a lot of the understanding of my understanding of that
#
field at that time was from there.
#
Another thing that I learned was that you read interviews and podcasts like ours, perhaps,
#
to get these little nuggets of information that you would otherwise find difficult for
#
someone to paraphrase into a book.
#
And there is a podcast called Simply Invest Like the Best by Patrick O'Shaughnessy.
#
So it's a very interesting podcast on people investing, and nowadays a lot of topics may
#
The book is by James O'Shaughnessy.
#
Maybe this is his dad, I don't know.
#
Of course, his dad is also a legendary investor.
#
So he's also an investor, he runs a fund, but he also takes these podcasts with very
#
And that I think has very interesting analysis.
#
Now, the more you look at that podcast, the more you realize how different investing has
#
So the topics there are private company investing, Bitcoin, real estate, stocks, different kinds
#
There's another set of books by a guy called Jack Schwager.
#
These are books that actually initially attracted me to investing, algorithmically.
#
The book that I read about these turtles, the phenomenon that I talked to you about,
#
it was written in 1990, this book.
#
The first series, it's called Market Wizards, and there are about four or five hedge fund
#
market wizards, stock market wizards.
#
The first two in that book, Market Wizards and New Market Wizards, talk about investing
#
as a career and people who built their investing out of careers, just purely interviews of
#
If you want to learn about the history of the stock market in the US, and it's very
#
interesting because India has parallels and India does not have a similar book, is a book
#
It just contains a lot of sayings and quotes by a lot of people through the various series.
#
So right from 1929, just post-1929, to the start of Merrill Lynch in 1930.
#
Of course, it stops before Merrill Lynch was eliminated from history, but it's a very interesting
#
history of the time of the US stock market.
#
In India, there's a book called The Scam by Sucheta Dhanal and Deva Shishbasu, which is
#
I mean, you might have seen the series on Sony Life, but if you like economics, it may
#
be a little daunting, but the amount of data in that is spectacular.
#
It talks about so many things that I didn't know about in 1992.
#
I now understand that subject a little bit more, but I think lots of credit to Sucheta
#
and Deva Shishbasu for actually simplifying, going through and looking through all of that
#
Of course, none of these are educational books from the perspective of, in the end of it,
#
I could ask you five questions and you can answer them.
#
But they put things across in a perspective that will shape the way you are.
#
So if you want purely, like the Benjamin Graham book you mentioned, which I have, I have tried
#
I have not been able to go past at least 30 pages.
#
I think this is my problem with Atlas Shrugged as well, so I'm sorry to Ayn Rand.
#
I have not been able to go past 30 pages and it is my problem.
#
And Nasim Taleb's second book, Black Swan, that's the book.
#
I haven't been able to get just past the book because at some point there are some things
#
which I just can't read, but the interesting thing about those books is that the thought
#
process is, I mean, it may not tell you what to invest in or why and all that stuff, but
#
it will give you an interesting thought process.
#
So for instance, I don't agree with one book at all.
#
Like this is a book by Robert Kiyosaki called, you know, Rich Dad Poor Dad.
#
I don't agree with a lot of concepts of that book.
#
The one point which he makes, which is passive income and how it can change your life, that's
#
Sometimes you want to read people who do different things from what you say or what you think.
#
So for instance, I may not like Warren Buffett's philosophies quite as much as, you know, as
#
in his investing style.
#
I'm not a value investor by the face of it, but I think a lot of his sayings have a lot
#
of very interesting answers.
#
So one of the statements that he says, and you should read this book by Warren Buffett,
#
which is not a glorifying book.
#
It's by a book guy called Roger Lovenstein called Buffett, as unimaginative as that,
#
but it's a brilliant book because it goes through his life in a different way.
#
Another book, which he has written called When Genius Failed, which talks about why
#
is algorithmic trading thing.
#
When people think that they're too intelligent, what happens?
#
It was a book, it's a story of thing called Long-Term Capital Management run by Nobel
#
laureates who, so they brought down the whole economic system.
#
And you know what, to this date, their formula continues to be followed religiously by everybody,
#
including regulators, saying this is the only formula that exists because in spite of its
#
dramatic failure, we don't have an alternative, got to have something to believe in man.
#
So you know, that's unfortunately the, I won't recommend too many books because you know,
#
you don't have to have something to believe in, you don't have to have another hero.
#
You know, When Genius Failed is great and I have read No Rand, a little bit of Graham,
#
all of Taleb, though I find him very entertaining on Twitter.
#
He keeps fighting with all my favorite public intellectuals, so that's really, he's blocked
#
Oh, you actually interacted with him.
#
He's extremely acerbic in an entertaining way, but he's fought with a lot of people
#
I admire on Twitter, like Steven Pinker, Philip Detlock, Pair Ballon, Nate Silver.
#
He just shits on all of them all the time.
#
This is like a fabulous list and I'm kind of reminded of how, you know, when poker began
#
evolving, like around circa 2002, you could have bought books on poker.
#
But what has happened over the last 10 years is that there is no book which is really up
#
It's changing really fast.
#
All you have is nuggets of wisdom here and there.
#
People who really know shit are not going to share it randomly because obviously they're
#
still making money off it.
#
So you know, there was a period of time of about five years coinciding with the years
#
when I was a pro that you basically had to pick up nuggets from here and there and all
#
the books were outdated and basically they would lead you down the wrong track.
#
So my final question, because it's pretty late in the night and I want to let you get
#
back to your home and your dinner and the raucous piano playing of your progeny, is
#
now that we're ending this episode and our listeners hopefully are much more interested
#
in who is this Deepak Shinoi who has given us so much Gyan.
#
Tell me a little bit about CapitalMind.
#
What does CapitalMind do and why should people go to CapitalMind for their investment needs?
#
This is going to be a pitch.
#
So it's pitched that way.
#
It is it is nakedly a pitch.
#
So I'm inviting nakedly pitches.
#
So CapitalMind at CapitalMind.in is a semi-registered portfolio manager.
#
So we actually manage money.
#
We also run something called CapitalMind premium.
#
Both of these are different.
#
The premium is a do-it-yourself model where we explain various trading, we have portfolios,
#
we have different explanatory posts on how things work from macroeconomics to bond markets
#
to different ways you can buy different kinds of bonds and make money and save taxes and
#
how to invest your money and so on.
#
This is a premium community on Slack, which is, you know, it's helps.
#
This is a do-it-yourself model.
#
But as a semi-registered portfolio manager, we also have a do-it-we-do-it-for-you model.
#
So where we can take your money and invest it in your name into stocks and fixed income.
#
We have a bunch of algorithms and tech behind it.
#
So it's fintech in a way that isn't completely algorithmic, but we have designed algorithms
#
that help you reach longer term goals.
#
And we have portfolios that are complex, like we have a multi-cap and momentum strategy,
#
both of which use different philosophies, but to invest in different stocks in the market.
#
We also have something that you might, you said talked about, which is just blindly something
#
So we do something that's about 65% India's top 100 stocks, 35% US top 100 stocks and
#
A relatively cheap continuous investment strategy that strangely has beaten most mutual funds
#
and even most of our other investing strategies other than momentum, which has done really
#
well in the last one or two years.
#
Of course, this is a minimum of 50 lakhs.
#
So we can't accept less, unfortunately, but we keep our fees relatively low.
#
So very high value for money service and a lot of technology so that we can automate
#
most of the tasks that people otherwise regularly, I mean, other companies in this industry might
#
find it more difficult to do.
#
We are a system based on a lot of simplicity, we're a small team, we're about 18 people
#
in Bangalore, 20 people now in Bangalore, but with a lot of heart and a lot of gumption.
#
So you can find me on Twitter, you'll find me on YouTube, I find a lot of our team members
#
on both Twitter and YouTube talking about these things.
#
We are also, you know, hopefully, as things grow, we'll probably get more involved into
#
One thing we don't do at this point, and probably sometimes you were useful to tell people what
#
we don't do, we don't do, we don't sell insurance, we don't do things like fixed deposits, we're
#
not a bank, we don't lend people money.
#
And we try to keep it as simple as possible.
#
That's my core dynamic.
#
I think what would be useful is, you know, if you're looking at reading, even some of
#
the books that we've talked over that I haven't actually talked about all the books that we
#
recommended, there's a post that came out recently, which has a bunch of books that
#
the team loves to read.
#
Some of which I haven't read.
#
I'll link that from the show notes.
#
I'll link that from the show notes.
#
Yes, I have, we have a library here consisting about 75% of books that I have read and 25%
#
that I will pretend to have read.
#
And so, you know, please, if you're in town, we would like to visit, we're in HSR layout
#
So just as tiny introduction to what capital mind is, also, one of the things that we will
#
not do is guarantee returns.
#
So if you ask, I have no idea.
#
So that's the only thing that I can tell you that I can't tell you.
#
Anyone who guarantees you a return is a fraud, another of the lessons that I remember you've
#
kind of shared in the past and you know, among the many, many, many lessons you've shared
#
in this episode and in all of your writing and podcasts, we'll of course, link the capital
#
mind podcast from the show notes and your writing as well.
#
Deepak, thanks so much for, you know, taking so much time out for the show.
#
I think if anybody's here, I'm going to personally clap for you guys.
#
I mean, all of you made it all the way to the end.
#
This has been wonderful.
#
I have no qualms about time at all, but I guess the internet is telling us that it's
#
It's kept disconnecting us during this recording.
#
So we've basically been sitting together for almost four and a half hours, though obviously
#
the episode will be much shorter than that.
#
Thanks everyone for listening.
#
If you enjoyed listening to this episode, hop on over to the show notes for relevant
#
You can follow Deepak on Twitter at Deepak Shanoi.
#
You can follow me at Amit Verma, A-M-I-T-B-A-R-M-A.
#
You can browse past episodes of The Scene and the Unseen at sceneunseen.in.
#
It will be an excellent investment of your time.
#
Did you enjoy this episode of The Scene and the Unseen?
#
If so, would you like to support the production of the show?
#
You can go over to sceneunseen.in slash support and contribute any amount you like to keep
#
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