Published on: 17 April, 2019

The clients who ask us the most probing questions tend to have well organised work lives and a fierce focus on doing what is most useful and most enjoyable for them. Everything else is edited out of their lives. Such clients are not just successful capital allocators, they are also great time allocators. Each of those skills feeds into the other to create a virtuous cycle.

“Most of what exists in the universe – our actions, and all other forces, resources, ideas – has little value and yields little result; on the other hand, a few things work fantastically well and have tremendous impact.” ― Richard Koch in ‘The 80/20 Individual: How to Build on the 20% of What You do Best’ (2003)

Clarity of thought….
Over the past six months as we have crisscrossed India bolstering Marcellus’ assets under management, we have met over 500 businesspeople. The businesses they run range from being huge listed companies to small trading/wholesaling operations. However, regardless of how wealthy our clients are and regardless of how well educated they are, the tone & tenor of our meetings across India are determined by one variable and one variable only – the clarity of thought that the client is able to bring to bear in the meeting.

Since in every meeting we pitch the same product – Marcellus’ Portfolio Management Services – we are able to watch the client’s mind click through the gears as she absorbs our pitch, processes the information, asks questions and reaches a conclusion regarding the utility of our services. The majority of the people we pitch to will ask questions about elections, climate change, water scarcity, China/trade war, interest rates, QE/global liquidity, P/E multiples, digitisation/Artificial Intelligence/automation, etc. These clients are well informed and we can see that their head is packed with information.

However, only around one in three clients are able to ask the three questions which get to the heart of the matter, namely:

(a) How can you show me that your interests are aligned with mine? Specifically, tell me how much of your own networth in invested in Marcellus’ funds? And are you willing to paid entirely on a profit share basis rather than charging fixed fees?

(b) Explain to me in layman’s jargon how you will invest my money? To be more specific, how do you ensure that my money does not get invested in crony capitalist’s companies or in companies run by unethical management teams?

(c) What will you do to minimize the risk associated with investing my corpus in the Indian stockmarket? In specific, if I need my money back at very short notice, will you be able to accommodate me? If I want to avoid the high brokerage, custody & fund accounting costs and the capital gains taxes typically associated with PMS investments in India, how can you help me?

It is not so much that this minority of our clients understands what we do more or less than the rest of our clients. It is more that they are able to zero in on what really matters in the hour that is allocated to these meetings. The enviable ability of a minority of people to understand a relatively complex matter quickly and ask penetrating questions is something we too would like to possess. So why is it that some people have greater clarity of thought than others?

….is fundamentally linked to focusing on what matters in life
I used to think that clarity of thought is a genetic attribute – either god gave it to you or she didn’t. However, as we get to know our clients better, we have realised that like any other powerful skill, clarity of thought can be cultivated. Furthermore, businesspeople who are able to acquire this skill are also able to run their businesses far more effectively than those who don’t have this skill.

So how does one acquire clarity of thought? [I too am learning inspite of all pretensions to the contrary. Hence please read this as ‘work in progress’.] The first step seems to be the realisation that most of the information that we get via email, social media and mainstream media and most of what surrounds us is actually irrelevant. In an outstanding book on this subject, “Essentialism: the Disciplined Pursuit of Less”, Greg McKeown says that ‘The overwhelming reality is: we live in a world where almost everything is worthless and a few very few things are exceptionally valuable.’

The second is step seems to be around finding time & space to think and to reflect. To carve out time to think, you need to have a clear appreciation of what matters to you i.e. what is absolutely essential to your working day (and, by implication, what are the peripheral activities which you should minimise). We have seen that clients who are able to carve out a solid hour to spend with us (when they are not fiddling with their phones) are far more able to focus on the three core questions listed above.

The third step entails using the space & time freed up to play i.e. do work which you enjoy, which gets your creative juices going, work where the process of working/thinking is as important as the final outcome. Psychologists have found that play expands our mind in three different ways:

1) Play broadens our mind and helps us see possibilities that otherwise wouldn’t exist. For example, the promoter of a listed company who gave us money to manage read our bestselling book ‘The Unusual Billionaires’ (https://www.amazon.in/Unusual-Billionaires-Saurabh-Mukherjea/dp/0670089257) on holiday and realized that the same principles could also help his business. Upon his request we conducted a strategy workshop for his twenty most senior executives. We in turn learnt from this management team how tricky it is to build durable entry barriers in the consumer durables sector.

2) Play is an antidote to stress. As is well known, stress can shut down the creative, inquisitive part of our brain. Writing these blogs, for instance, is for us as much about de-stressing and learning interesting things as it is about promoting our dogma.

3) Third, and perhaps most importantly, “as Edward M.Hallowell, as psychiatrist who specializes in brain science, explains, play has a positive effect on the executive function of the brain…Play stimulates the parts of the brain involved in both careful logical reasoning and carefree, unbound exploration. Given that, it should hardly be surprising that key breakthroughs in thinking have taken place in times of play.” (Source: ‘Essentialism: the Disciplined Pursuit of Less’, Greg McKeown (2014)

The final step in this sequential journey towards building clarity of thought is derisking or buffering oneself from the vicissitudes of life. You can only do this if you have sufficient time & space to assess risks and understand steps that can be taken to reduce risk. People who are super busy and/or stressed seldom have the mindspace available to think through derisking. The clients whose questions are the most probing are the clients who have prepared in advance of our meeting. Why? Because they know that if they assess us properly during our hour with them, they are de-risking the management of their wealth in a far more effective way than worrying either about the outcome of India’s elections or how Donald Trump will stymie Indian exports to America.

If you want to read our other published material, please visit https://marcellus.in/blog/

Saurabh Mukherjea is the author of “The Unusual Billionaires” and “Coffee Can Investing: the Low Risk Route to Stupendous Wealth”.

Note: the above material is neither investment research, nor investment advice. Marcellus Investment Managers is regulated by the Securities and Exchange Board of India as a provider of Portfolio Management Services and as an Investment Advisor.

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