The Rushmore Yardstick
We are living in a world of information overload and especially for an investor who seeks to build an informational edge, ends up devouring anything and everything that comes her way. Given there is only so many hours in the day and only that many useful sources of information, even fewer in terms of insight, it is imperative to eliminate the noise and focus on the signal. In some ways, the 3L&3S is meant to serve that purpose, though at times we have been guilty of mixing noise for signal. Anand Sridharan, an investor at Nalanda Capital, a firm many of us have had the opportunity to learn from, hammers home the point in his usual entertaining style and gives us a way of dealing with information overload. He recommends identifying a short list (in single digits) of people in any field we are trying to learn and build insight on, using a fairly stringent yardstick. He calls it The Rushmore Yardstick. Anand surely makes it to our Rushmore list of investors who can write with wit. Like these digs he takes at day trading:
“Whenever I hear how great it is that everyone has access to all information at their thumb tips, I cringe. It’s terrible, not amazing. Noise overload is like choice overload. It leads to disastrous decisions, mental health problems and day trading. Buggy humans can’t even handle Maggi variants (just give me the one from childhood and burn that atta ragi desiccated veggies added crap).”
“Even within investing, your Rushmoreans will differ from mine. If your method is different, you may create a Mount Rushmore out of factor, algorithmic or quantitative investors (I wonder who’s on day-traders’ Mount Rushmore. Am guessing it rests on an active volcano).”
But why Anand makes it to our Rushmore list is his ability to articulate in simple English what most of us end up unnecessarily complicating – like these two paragraphs which succinctly capture everything to learn from the gurus of investing:
“Investing’s Rushmore list is easy: Graham, Buffett, Munger, Bogle. Graham said three things. Market’s nuts, ignore it. Since real businesses underlie market nuttiness, gauge what they’re worth. Act only if you spot a good deal, but don’t cut it too fine. Buffett and Munger added a tweak. Apply Guruji’s method only to businesses whose worth increases over time. You can make higher returns on larger sums over longer periods for less work. Case closed. Rest is detail.
Bogle approached the problem from a better angle. He said “Not so fast”. Those three fellows are freaks of nature. Most of you aren’t. You’ll mess it up, as you always have. Plus, there’s a kutti problem called fees. Bogle’s advice to most: don’t even try. Regularly buy everything without giving us scamsters a cut. You’ll get a fairer deal and better businesses will automatically grow on you. All four clarified that it takes a long time for good things to happen and it can get very ugly on the way.
After nearly two decades at it, that’s all I know about investing. New-age folks claim to be lifelong learners and expand their circle of competence every forty-five minutes. Not me. I haven’t learnt one damn thing outside of what’s mentioned above. My circle has shrunk over time as hard knocks made me more aware of my limitations. Any success has been a function of remembering the obvious, not reaching out for the esoteric. I keep revisiting Big Four’s timeless writings to better appreciate nuances and not to get ahead of myself.”