Some of us at Marcellus had the good fortune of serving the team at Nalanda Capital from our previous stint on the sell-side and have been great admirers. Anand Sridharan, one of the team members at Nalanda, through his brilliant essays, has helped us get a deeper understanding of their investment approach. This week saw the launch of the book ‘What I learned about investing from Darwin’ by Nalanda’s founder Pulak Prasad, which not only elaborates on Anand’s essays but shows what investors can learn from evolutionary biology. (the book is currently available in India only on Kindle with the hard copy due to be launched shortly). In this blog, which Anand acknowledges is neither a review nor a summary, he shares his thoughts on the book.
A key takeaway from the book is that, unlike what most investors believe investing is all about predicting the future, the folks at Nalanda believe in understanding the business as is through a business’ historical journey. This historical aspect combined with long term thinking is where evolution inspires investing. Anand writes:
“Investors are supposed to learn from history. Each of us has studied a reasonable amount of business history, if not human history. Evolutionary biology is simply the broadest history available, the history of all life on Earth for all time. It covers the most universal of all struggles, to survive and thrive amidst an adverse environment. That life is still around and abundant after a few billion years vouches for the efficacy of evolution. Why wouldn’t we learn from the most successful approach over the longest period of time for tackling the most universal of our problems? As a bonus, when short-termism is a major problem for investors, anchoring to a process that functions on glacial timescales helps nudge us towards longer term thinking.”
The book pays high regard to Charles Darwin and Warren Buffett alike, with every chapter beginning with a quote each from the two greatest practitioners in their respective fields.
“Behavioural science is popular. It is essentially about being aware of our own limitations, the tricks our minds play on us and our futile attempts to compensate for the same. On this front, Darwin is the OG. He had a freakish level of self-awareness and intellectual honesty. He was his worst critic, constantly probing his own work for flaws and seeking falsifying evidence for his theories. He wrote entire chapters on what could prove him wrong. As evolution is responsible for human nature, it is fitting that evolution’s pioneer is the role model for helping us overcome the frailties that come with human nature.
Pulak’s book helps us better appreciate Darwin. Not merely is Darwin in the title and quotes at the start each chapter, his spirit is pervades the entire book. However, the real hat-tip to Darwin is that the bedrock of Pulak’s investing approach is an explicit acceptance of how clueless we are in figuring out the world around us.”
Robert Hagstrom’s book Investing: The Last Liberal Art, talked about how investors can find lessons from a wide array of disciplines – from physics to sociology to literature. It did have a chapter on evolutionary biology. Pulak’s book goes deeper into this connection between evolution and investing. Even without the connection to investing, some of the evolutionary concepts brought out in the book are fascinating by themselves.
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