A Letter to Wealthy (Inheritor)–Modesty in Abundance

I came across this letter from GD Birla to his son and this wealthiest industrialist has been an advisor to Gandhi and had great influence on his industry policy matters. Gandhi borrowed the concept of trusteeship to promote capitalism over socialism. Gandhi gave his blessings to the abundant wealth of Birla, to his teaching on trusteeship, a concept which asserted the right of the rich to accumulate and maintain wealth as long as the wealth was used to benefit society. This is the letter Birla wrote in Marwari language to his son, reproduced in English and is appropriate for every wealthy but still applicable to every individual to do whatever he can afford for good. This is a brief yet precise life principles concisely expressed with a fatherly affection and to be referred every time and anytime in a lifetime and perhaps continues to your future times (births) having read many times.

Dear Basant,
Whatever I’m writing, you should read even when you are grown up and also at your old age. I’m writing this from experience, as to how life must be lived.
Birth as human, is a rarity and when born as human, whoever misuses the birth, it is like he lived like an animal. You have wealth, health, good social connections. If you use them for the service of mankind, as a good human being, these are successful, else they are devil’s tools.
Never use wealth on selfish ends or merry spending, as wealth may not be there always. Spend less on self, more on public welfare and for the welfare of the distressed. Wealth is a force. Possibility of injustice is likely with this force or power. Take care that no injustice is done.
Leave some good morals for your children. If they indulge in merry-making, they become sinful and spoil our business. Do not pass on wealth to such unworthy children, rather use it for public welfare or distribute among deserving poor. Do not have mental blindness or passion for such children. Boundless effort and labor has been put in by we brothers, to build the business, assuming that our children will make best use of wealth we have generated.
Never forget God. He gives good sense and intellect. Have control on sensuous impulses, else those will sink you.
Do exercise and Yoga daily. Health is our biggest wealth. Health gives deftness, accomplishment and prosperity. I have seem how unhealthy millionaires become poor and frail. Eat meals feeling as medicine. Eat for living not live for eating.

G.D, Birla

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After a long hiatus, back in action with Warren Buffet

It has been an ‘annus horibilis’ of sort, well yes and no. Yes as misfortunes and setbacks are part of life and no as you’ve the resilience, character and faith to overcome them. Hence, rather than seeing every year as either horribilis or fantastic, see it as part & parcel with equanimity. It is good to be back in writing action after a long procrastination. Live Writer has gone to ‘open source’  which is the right thing in this age of freedom expression – freedom of choice for best tool out there to pen your words and thoughts elegantly and post them efficiently. I’m starting off with legendary Warren Buffet’s wisdom from ‘My Warren Buffet Bible’ by Robert L. Blocch. Being a fan of buffet style investing where I disdain constant monitoring/trading to buy a worth and leave it grow. This book accentuates that idea clearly and provides investing plus life’s wisdom too. Some snippets from those wisdom:

  1. Wall street is the only place that people ride to in a Rolls Royce to get advice from those who take the subway
  2. A great investment opportunity occurs when a marvelous business encounters a one time huge but solvable problem
  3. Should you find yourself in a chronically leaking boast, energy devoted to changing vessels is likely to be more productive than energy devoted tp patching leaks
  4. You have to do a very few things right in your life so long as you don’t do too many things wrong
  5. I’ll tell you how to become rich. Close the doors. Be fearful when others are greedy. Be greedy when others are fearful
  6. Only buy something you’d be perfectly happy to hold if the market shit down for 10 years
  7. You should invest in a business that even a fool can run, because one day a fool will
  8. There seems to be some perverse human characteristic that likes to make east things difficult
  9. I tell everybody who works for our company to do only two things to be successful. They are 1) think like an owner, and 2) tell us bad news straight away. There is no reason to worry about good news
  10. Five years from now, 10 years from now, the world everywhere will be doing better
  11. When proper temperament joins with proper intellectual framework, then you get rational behavior – so true for investing and life too
  12. Most people get interested in stocks when everyone else is. The time to get interested is when no one else is. You can’t buy what is popular and do well.
  13. Remember stock market is manic-depressive
  14. The difference between successful people and very successful people is that very successful people say no to almost everything.
  15. I insist on a lot of time being spent. almost everyday, to just sit and think. That’s very uncommon in American business. I read and think. So I do more reading and thinking, and make less impulse decisions than most people in business. I do it becuase I like this kind of life
  16. A pin lies in wait for every bubble. And when the two eventually meet, a new wave of investors learn some very old lessons

How to make a Million–Slowly

Practical wisdom from John Lee, is one of the UK’s leading private investor and MP to British parliament.

My Guiding Principles from a Lifetime of Successful Investing: These are the rules or principles that I’ve followed over the past 50 years of investing. These in gist provide some key lessons for the investor

  1. Endeavour to buy shares on modest valuations – hopefully with an attractive yield and single-figure price earnings ratio and/or discount to net asset value/real worth.
  2. Ignore the overall level of stock market. Don’t make judgments on the macro outlook – leave that to commentators and economists. Focus on your particular selection.
  3. Be prepared to hold for a minimum of five years.
  4. Have a broad understanding of the PLC’s main business activity – one which makes sense to you.
  5. Ignore minor share price movements. Looking back years hence you will have got it either right wrong; whether you originally paid, say 55 pence rather than 50 pence will be totally irrelevant.
  6. Seek established companies with a record of profitability and dividend payments – avoid start-ups and biotech or exploration stocks
  7. Look for moderately optimistic or better chairman’s/CEO’s most recent comment
  8. Focus on preferably conservative, cash rich companies or those wit low levels of debt
  9. Ensure the directors have meaningful shareholdings themselves in the PLC an ‘clean’ reputations
  10. Look for a stable Board – infrequent directorate changes. Similarly with professional advisers.
  11. Face up to poor decisions. Apply a 20% ‘stop-loss’ – sell and move on. However, ignore stop-loss if there is a major overall market fall.
  12. Let profitable holdings run. Don’t try to be too clever. i.e. selling and hoping the market will fall to ‘buy back’ at a lower price

Author’s note to encourage AGM attendance wherever possible – Which I reckon is great thing to keep note + the point 11 (advice) above.

Through attending these meetings, I have gained financially, had many amusing interludes, tucked into some excellent buffets and picked up at least one non-executive directorship. The psychology of AGMs is important to understand. The chairman is usually apprehensive, having spent hours with advisers preparing for difficult questions that might arise. Will the recently fired sales manager turn up to wreak his revenge?

Usually, of course nothing untoward happens and the meeting progresses without incident. The chairman relaxes, defenses down. This is the ideal time for a shareholder to move into action.

Take careful note of expressions, reactions, nuances – all valuable information. If the chairman is the dominant shareholder, any lack of family succession points to a future takeover. Sometimes you see clashes within families. Major institutions rarely attend AGMs (having their own private briefings) so the meetings are the private investors’ theater. But be strong wiled. Do not waste the time in which you could be gathering crucial information by going back for a second helping at the buffet. Circulate – and make sure you stay sober. Gaining entry into AGMs usually presents no difficulty – many companies are delighted just to have a shareholder turn up. Some have a table at the door on which sits an enormously inhibiting copy of the share register. However a look of authority, or saying rather grandly that your holding is in “nominee” names, usually suffices. The success, growth and integrity of the company (and thus you investment) is tied inextricably to the personality, abilities and ambitions of the chairman and/or the chief executives. If he owns a flashy BMW with personalized number plates, drips with gold jewelry and has ambitions to own the local football club – bad news. But a conservative car, gentleman’s shoes, love of cricket, faded regimental tie and membership of the local school board spell good news. I exclude from all this the 30-year old, multi-millionaire, whiz-kid creators of IT companies on price/earnings ratio of 50+. These live on a different planet, so normal judgments and personality tests do not apply.