My Worst Investment Ever Podcast Vikram Mansharamani – Liquidity Will Not Always Be There
BIO: Dr. Vikram Mansharamani is a global trend-watcher who shows people how to anticipate the future, manage risk, and spot opportunities.
STORY: Vikram invested in a small commercial condo that he hoped to rent to Ph.D. students, but they weren’t interested. He had to sell it after a few years of no income. He took a 50% loss.
LEARNING: Liquidity is not a constant. If the timing of your thesis is off, then you’re wrong. The market can stay irrational longer than you can remain liquid.
“As long as you have liquidity available, or the option to redeploy or invest more, then you’re going to be fine because, over time, investments work out. It’s just getting caught at the wrong time and the wrong illiquid investment that could really hurt you.”
Vikram Mansharamani
Guest profile
Dr Vikram Mansharamani is a global trend-watcher who shows people how to anticipate the future, manage risk, and spot opportunities. He is the author of THINK FOR YOURSELF: Restoring Common Sense in an Age of Experts and Artificial Intelligence and BOOMBUSTOLOGY: Spotting Financial Bubbles Before They Burst.
He is a frequent commentator on issues driving disruption in the global business environment.
Vikram’s ideas and writings have also appeared in Bloomberg, Fortune, Forbes, The New York Times, and many other publications.
LinkedIn twice listed him as their #1 Top Voice for Money, Finance and Global Economics and Worth and profiled him as one of the 100 most powerful people in global finance.
Millions of readers have enjoyed his unique multi-lens approach to connecting seemingly irrelevant dots.
Worst investment ever
In 2008, Vikram invested in a small commercial condo in Southern Maine. He had done a lot of analysis on the investment, and his thesis was that this was an increasingly valuable asset.
At the time, Vikram was working on his Ph.D. and figured he would rent the space to other students. He was sure demand would be excessive. Unfortunately, things didn’t go as Vikram had planned. Vikram was stuck with an illiquid asset that brought no income. Yet, he was paying condo fees and other recurring expenses. Vikram lost faith in the condo and sold it in 2015 at a 50% loss. What was worse than the loss is that the property is now worth about 5x what he paid. So, Vikram’s thesis was correct. If only he’d believed and stuck with it.
Lessons learned
- Liquidity is not a constant. Something that you think is liquid may become highly illiquid at certain points in time.
- You won’t always have the duration for holding you think you do, so have enough flexibility.
- If the timing of your thesis is off, then you’re wrong.
Andrew’s takeaways
- The market can stay irrational longer than you can remain liquid.
- An asset’s liquidity and your need for liquidity change over time.
- First, you must have a thesis, then invest in that thesis, and stay in that thesis, and most importantly, the thesis needs to be right for you to be successful.
- Be careful when investing in illiquid assets, such as property, because you can’t get out of it that easily.
Actionable advice
Maintain optionality when you’re younger. You may think you have the greatest investment, and it’s illiquid, but you get stuck in it. And if things go down, you lose the option value of buying something else at a lower price.
Vikram’s recommendations
If you want to get up to speed on Vikram’s current views and the complete archive of all his writings, check out his substack.
No.1 goal for the next 12 months
Vikram’s number one goal for the next 12 months is to write another book, particularly about the lessons of being a generalist in a land of specialists.
Parting words
“At the end of the day, the world is filled with specialists, and there could be a lot of value in being a generalist. So look broad, as much as you take the time to look deep.”
Vikram Mansharamani
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