Truffle Investments

This year has led us to coin our own corollary to ‘never judge a book by its cover’; ‘never predict the end of a news cycle from its start’. In order to not get bogged down by the news cycle in the interim, I reflect on some of the best books I have read this year and what they have taught us. 

Kitchen Confidential by Anthony Bourdain

This book is an honest exposition of what it is like to work as a chef and run a restaurant. In an age where every investor is trying to find the next successful consumer brand or every other adult imagines starting their food venture/ cafe as their retirement plan this is a must-read. Beyond the facade of glamour, running a restaurant is a high mortality risk endeavour. Being a chef involves cooking the same food every single day with the worst hours possible for the human body. Every customer has been consuming food since they can remember and hence each and every one of them deem themselves experts enough to critique it.

It goes to show that what seems to be an exciting business has a risk-reward ratio that is simply not favourable for most investors. A critical parallel to draw would be to investors who rush to businesses that sound ‘cool’ at absurd valuations. However, the road to wealth creation would be surrounded by graves of the so-called cool businesses. Success ratios in consumer facing ‘cool’ businesses are minuscule and very difficult to pre-empt. 

That Will Never Work by Marc Randolph

The story of the early days of Netflix in the words of its creator and first CEO, Marc Randolph. The book demonstrates the transition of Netflix from a DVD rental service that is delivered via physical post to a subscription service that offers us content to watch wherever digitally without any offline activity.

What the transition shows, above all else, is it would have been impossible for any investor at the start or even 2-3 years into the journey of the company, to know that Netflix would morph into the form it has today and become the giant it has today. Multibaggers are always known in hindsight. 

Additionally, the nimbleness shown by the management in transforming from a physical DVD rental service to Netflix today, to allow Reed Hastings to take over the company when the circumstances demanded so shows that the importance of great management cannot be overstated. We tend to over-complicate our investment thesis with various projections and our understanding of a product’s greatness and yet a great, open-minded management with a mediocre product will beat others. 

The Swerve by Stephen Greenblatt

The Swerve is the probably the best history book I have read. It explains how the discovery of an ancient text, Lucretius’ ,’On Nature of Things’ written in 50 BCE, shaped the Renaissance movement that helped the west leap from the medieval to the modern ages. To think an ancient text helps lay the foundations of a modern world further stresses on the fact that the amount we don’t know and can’t know (unless in hindsight) is staggering. 

Leonardo Da Vinci by Walter Isaacson

While we have known him to be the most famous painter in the world, the book illustrates his genius as a creator of war machines, a biologist who discovered arteriosclerosis (buildup of cholesterol in arterial walls) and a city planner who designed a drainage system for a town. In light of how much we don’t know, it is this book that drives home the most important lesson for all investors: “Be Curious, Relentlessly Curious”.

With this quest for knowledge in mind, I wish you a very happy, prosperous and an inquisitive new year.