We Study Billionaires - The Investor’s Podcast Network

TIP597: Darwin's Investing Lessons w/ Kyle Grieve

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Jan 2, 2024

Discover intriguing lessons from Darwin's principles as they apply to investing. Learn why focusing on risk is more valuable than chasing returns. Explore how nature illustrates the persistence of great companies and the attributes that allow businesses to thrive in changing environments. Dive into unique insights on identifying robust firms and understanding honest versus dishonest business signals. Find out what a cheetah and guppies can teach investors about strategy and decision-making.

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ADVICE

Bet Your Life Test

Ask yourself: Would you bet your life on your next investment?
Look for durable businesses with strong moats and honest management.

INSIGHT

Errors of Commission vs. Omission

Investors make two types of errors: commission (doing something wrong) and omission (failing to act).
Natural selection minimizes errors of commission to survive.

ANECDOTE

Cheetah's Dilemma

A cheetah faces a dilemma: chase prey and risk death (commission) or ignore it and go hungry (omission).
Nature prioritizes avoiding commission to survive, much like Buffett's rule of not losing money.

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On today’s episode, Kyle shares the lessons he learned from reading What I Learned About Investing From Darwin by Pulak Prasad.

The book is authored by Pulak Prasad, an investor out of India who helps run Nalanda Capital. From 2007 to 2022, they compounded their capital at 19% per annum turning 1 rupee into 13.8 rupees during that time sample!! But more important than their track record is the unique ways they run their fund.

The book illuminates 3 key principles that Nalanda uses for its investing framework:

1. Avoid big risks.

2. Buy high-quality at a fair price.

3. Don’t be lazy – be very lazy.

To help readers understand why he invests this way he dives deep into many of Darwin’s principles to help you understand their potential power in investing.

IN THIS EPISODE, YOU’LL LEARN:

00:00 - Intro

20:26 - What a cheetah can teach you about risk

24:33 - Why you should be more focused on risk than returns

25:40 - How things in nature and investing mostly stay the same

27:42 - Some interesting data on why great companies remain great, and poor companies remain mediocre

28:29 - What a Russian scientist can teach us about the power of focusing on one investing metric to help identify wonderful businesses

34:58 - The importance of robustness in nature, and why you should search for the same attribute in business

37:00 - How to identify businesses that can evolve in a fast-changing world and remain on top

43:01 - What guppies can teach us about honest and dishonest signaling

46:06 - Why we should prioritize the past over making bold predictions

48:11 - How to invest without ever doing a discounted cash flow ever again

51:05 - What bear teeth and finches can teach us about the importance of avoiding noise

55:20 - How to use the presence of noise as an opportunity to outperform

Disclaimer: Slight discrepancies in the timestamps may occur due to podcast platform differences.

BOOKS AND RESOURCES

Join the exclusive TIP Mastermind Community to engage in meaningful stock investing discussions with Stig, Clay, Kyle, and the other community members.
Check out What I Learned About Investing From Darwin.
Learn more about the Berkshire Summit by clicking here or emailing Clay at clay@theinvestorspodcast.com.
Follow Kyle on Twitter and LinkedIn.
Check out the books mentioned in the podcast here.

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