Here's a statistic that will fill your heart with pride. Did
you know that a study done few years back had put the Indian origin Patels as
owners of around 21,000 hotels and motels in the US? That's a staggering 42% of
the US hospitality market and a combined worth of US$ 40 bn!
However, it wasn't always like this. The so
called 'Patelisation' of the US hospitality industry traces its roots to the
1970s when Patels in large numbers landed on US shores from Uganda, where a
certain dictator stripped them of their enterprises and drove them out.
When they finally landed in the US, their woes
were far from over though. The US economy was undergoing its own bleak period
on account of the oil crisis. The motels industry was one of its most damaged.
But this is what the Patels set their sights on. Their game plan was simple.
Get the banks to finance a chunk of the purchase price of motels and then move
into them with their extended families. Doing this served two very important
purposes. It not only eliminated the accommodation costs but the entire family
could also double up as the motel staff.
The end result was a potent mix of low cost operations
and an asset base that was in place with almost negligible capital cost.
Needless to say the competition found it hard to put up a sustained fight. And
one by one, a lot of the motels came to be owned by the Patels, making them a
dominant force in the industry.
Perhaps oblivious to them, the Patels were using
a time
tested investment strategy. One where the focus is not on making huge gains
but on trying to minimise the losses as much as possible. It was a classic case
of what ace investor Mohnish Pabrai calls, 'Heads I win, Tails I don't lose
much' approach to investing.
By starting the enterprise with very little of
their own capital, the Patels ensured that downside was as good as
non-existent. Please note that they did not worry about the upside too much as
in how much revenues they can make. Their only aim was to not lose much should
things don't work out in their favour.
If you thought the Patels were the only ones
adept at this, let us tell you that as per Pabrai, even business leaders
ranging from Richard Branson to L N Mittal have minted their billions using
this very same approach. The approach of trying to minimise the downside so
that the upside can take care of itself.
Does this ring a bell? It does, isn't it? After
all, this is the mantra that Warren
Buffett also
seems to live by. Remember his famous two rule quote for investing? Rule number
1, don't lose money and rule number 2, always remember rule number 1.
In fact, a recent quote from a famous investor
called Joel Greenblatt is pretty much along similar lines. In an interview, he
offered the view that his largest positions are not the ones that he thinks he
is going to make the most money from. Instead, his largest positions are the
ones where he thinks he is not going to lose money in.
Now this is something that certainly doesn't
strike as natural to majority of investors out there. They are of the view that successful
investing is all
about finding stocks that literally hit it out of the park. In other words,
successful investing is all about finding the next big multi bagger.
However, as Greenblatt and the Patels and the
Bransons we just highlighted show, the idea is to bet in such a way that even
if one is wrong, one does not lose too much. Of course there's nothing wrong in
trying to plunge headlong into trying to find that next multi bagger.
However, if
you are looking for market beating results from your investing with a lot less
stress and risk taking, then your portfolio needs to consist mostly of stocks
where even if you are wrong, you don't lose a great deal.
Trust us, if history is any indication, there's
very little chance you will walk away disappointed with this approach over the
long term.
Jealousy is a basic human instinct. It's not uncommon for jealousy to get stirred up by seeing roaring success in others. This is true for 90% of people of ordinary financial status. Jealousy starts rearing its head and expressing itself from early childhood when another child comes into the family. It has been seen that initially the older child shows traits of envy towards the younger, suffering from insecurity of parental love getting divided. This envy takes on another form in school and college, directing itself towards other students who are more successful. In the professional field, envy and jealousy takes on a more diplomatic form. People who are not so successful financially express their jealousy towards others who are. Their attitude towards the rich becomes extremely negative. “Rich people become richer while the poor get poorer”, “the rich make their money from the blood of the poor”, “rich people are dishonest”. These thoughts fill their minds constantly. These are popular myths, and are not necessarily close to the truth. In fact, if it was true that all rich men are dishonest, no one would have gone ahead and done business with them. To expand a business in a really big way, one needs to work with various associated companies, and thousands, and sometimes millions of customers. If one is dishonest, one would lose everyone's trust, putting abrupt brakes on the growing business. Thus, contrary to popular belief, the rich and the successful have to be more honest than anyone else, because that is the very basis of their career. Billionaires have golden hearts.