Truffle Investments

and what I learnt from them.

Investment is the ultimate liberal art. This necessitates us to be learning machines; reading across the board, and applying ideas from various subject areas to our processes. As we look forward to a new year, it is befitting to reflect upon the best books we read this year and a key lesson from each of them that we can apply to our investment process. 

Creativity Inc. by Ed Catmull

is a story of Pixar (the animation company later acquired by Disney). Apart from being a tale in extraordinary patience (took them a decade into existence as Pixar, to produce their first film- Toy Story), there is another lesson that Ed Catmull (one of the founders of Pixar) drives home- “Originality is fragile.” 

When we look at new ideas through the lens of experience, our collective biases over time end up sand-papering away the differences, the innovations. While learning from experiences helps, it at times makes us complacent. It limits us from thinking differently; it makes originality fragile. While experience helps in establishing and  maintaining a process, one must “invert, always invert” to ensure we continue bettering our processes with progress. 

The Knowledge Illusion by Steven Sloman and Philip Fernbach

also exposes the complacency we develop with age but in the case of acquiring knowledge. Our illusion of explanatory depth showcased by the author by a simple example of a zipper is insightful.  We all know we can zip up a jacket to close it, however we are at a loss when asked to explain the exact working of a zipper. While drawing upon a community of knowledge and accepted norms (zip up to close the jacket or the bag for example) help drive efficiencies, it might also generate complacency (we actually don’t know why it works that way). An awareness of this lack of explanatory depth in our knowledge is critical to maintain ourselves as learning machines, always in the pursuit of knowledge. 

Bad Blood by John Carreyrou

is the story of Theranos, a healthcare diagnostic company touted as the most revolutionary of our times. Theranos had in fact managed to lie of their capabilities for over a decade while raising over $700mn from its investors. The founder Elizabeth Holmes in a desire to be a successful entrepreneur, modelling even her physical appearance on that of Steve Jobs’, made false claims and forged test results while soliciting money from investors and tie-ups with other businesses. While we rely on a community of knowledge we cannot piggyback relying on someone else’s endorsement. 

Theranos in its decade plus of existence, forged tie ups with the likes of Safeway, Walgreens, Pfizer, GSK, yet claims of their technical capabilities turned out to be false. Their list of investors included the likes of Walton Family (of Walmart), Rupert Murdoch and Carlos Slim and its board of directors included the likes of Henry Kissinger and George Schlutz. The presence of these stalwarts would have surely lured other investors to believe in the company’s pitch without doing their own due diligence. These biases occur in public markets even more often when we see buying or selling by famous investors being reported extensively and stock prices reacting simply based on that. 

Bottle of Lies by Katherine Eban

chronicles the practices at Ranbaxy (prior to being sold to Daiichi Sankyo) to hoodwink the USFDA and play the regulatory systems in the US for pharmaceuticals. This narrative highlights the importance of culture set by senior management. It is not the case that every employee in Ranbaxy intended to partake in falsehoods that put several lives at stake at times. The regulator was able to establish a case against the company by the insights and documents provided by an ex-employee. This employee, like many others, could not alter the course of the company though. 

The Indian public market is awash with multiple examples of this, especially in the financials sector. While questioning the management on numbers is crucial to our process, questioning them and their employees on the culture of the company is as imperative. 

Man’s Search for Meaning by Viktor Frankl

tells the story of the author, a Jewish psychiatrist in the concentration camps of World War II and his analysis of the mental condition of the prisoners in these camps. While the above four books reveal additional tenets we added to our process, the big lesson from this book prescribes an overarching lens to view our investing journey through: “He who has a why to live for can survive any how.” 

If and only if we have a clearly defined vision of what we (or our portfolio companies) want to achieve- the why, can we stomach the short to medium term volatility markets bring our way- the how. 

When Breath Becomes Air by Paul Kalanithi

Apart from these 5 books, each of which had a learning for my investment process, the one book I would recommend to everyone is Paul Kalanithi’s When Breath Becomes Air. This was undoubtedly my favourite of the year.

“Discussions on the concepts of death, identity, meaning of living itself are generally dealt with in the abstract. Dehumanising the most human questions. In narrating his story, Paul Kalanithi, elevates these discussions to reality. His prose enables us to pause and actually realize the weight of these questions, ponder over them.

As Kalanithi points out, the runner feels the fatigue of the marathon only after crossing the finish line, we too seem to glide through discussions and daily life without truly appreciating the weight of our being as well as its fickleness, without truly understanding those questions beyond a platonic discussion. Kalanithi in his tryst with death holds a conversation with us on living, in the narration of his story prods us to think about ours.

While Paul’s writing was beautiful, it was Lucy’s epilogue that is heartbreaking. Her prose epitomises a cliche, “Not the sailor, but it is the sailor’s wife that is the braver soul”. I have never come across an epilogue that I have not rushed through, in a bid to shut the book and head to the shelf to pick out the next.”