AI's Winners and Where Value May Re-emerge

In this wide-ranging conversation, Gautam Baid joins Excess Returns to discuss the principles that shaped his investing philosophy, the lessons learned through bear markets, and why compounding, patience, and quality matter far more than forecasts or short-term performance. Drawing from his books The Joys of Compounding and The Making of a Value Investor, Baid shares a deeply reflective framework for long-term investing, portfolio construction, behavioral discipline, and global diversification, with insights spanning Indian and US markets, liquidity cycles, AI, and investor psychology.

Main topics covered
• The asymmetric power of compounding and why being wrong half the time can still lead to exceptional long-term returns
• Why patience, temperament, and behavior matter more than analytical precision in investing
• The role of journaling in improving decision-making and avoiding repeated behavioral mistakes
• How investor sentiment reveals itself through IPO markets and portfolio quality late in bull cycles
• Why long-term investing requires continuous monitoring rather than buy-and-forget complacency
• Letting winners run, cutting losers, and understanding power-law outcomes in stock markets
• Liquidity cycles and how they drive market returns in both India and the United States
• How bear markets reshape investing philosophy toward resilience, quality, and diversification
• When averaging down makes sense and when it is dangerous
• The differences between Indian and US equity markets, valuations, and governance
• Why home country bias can be a major risk for US-based investors
• AI, productivity, profitability, and where future market winners may emerge beyond mega-cap tech
• Why passion for investing matters more than money in sustaining long-term success

Timestamps
00:00 Introduction and the asymmetric nature of compounding
01:00 Gautam Baid’s investing background and books
03:00 The importance of journaling and learning through bear markets
06:00 Investor sentiment, IPOs, and late-cycle market behavior
10:20 Long-term investing versus complacency and monitoring risk
14:15 Convex upside, concave downside, and letting winners run
18:30 Liquidity cycles and lessons from Stan Druckenmiller
22:45 Identifying market bottoms and the anatomy of bull and bear markets
28:00 Averaging down, quality, and risk management
30:30 How bear markets change investor psychology and strategy
33:00 Patience, management quality, and long-term optionality
36:15 Mr. Market, price signals, and market intelligence
39:00 The Federal Reserve, inflation, and asset price dynamics
44:00 Understanding the Indian equity market and valuation structure
46:45 Why global diversification matters for US investors
50:30 AI, margins, and the future of value investing
53:00 Passion, purpose, and the psychology of long-term investing
54:30 The single most note investors should learn