Leave it to the Experts (Don't)

Experts are experienced individuals with a good track record (have a good reputation and are widely trusted) and reliable authority of knowledge relative to the audience. They usually have formal training (are generally highly educated from accredited institutions), regularly share their opinions, and are valued by society (generally earn a high income and have developed a cult following).

As an investor, one must use expert's opinions. This is because talking to an industry expert or ex-CEO of a company, for example, allows you to gain access to specific knowledge and develop specific insight about the industry and the specific company.

However, expert-opinion must be treated with a healthy dose of skepticism. Firstly, one must acknowledge that experts are often overconfident. Furthermore, they are often in an ivory tower (this is particularly true for academic experts), and out of touch with reality. Moreover, one must remember that expertise is perceived to exist. This is the most important point, because charismatic pseudo experts can lead one to make ill-informed decisions.

So, we must use expert opinion - with a grain of salt.

Change is not always for the best

I am creature of change and variety. A change of furniture, a change in layout, a change in almost anything is exciting. I even get uncomfortable with the status quo. Being excited is great. Needing change is less so; often times, the status quo works best! This need for change is an important world issue which receives insufficient attention. 

In the political sphere more than any other, people are always looking for change. A large part of this is driven by media which makes the current system look broken. I am not saying that the existing systems are flawless (because nothing ever is). I am simply saying that a lot of the systems are in employment because they work.

In the corporate sphere, management change is often followed by grand strategy overhauls. It is true that management changes are often the result of extended periods of sagging performance, but continuously taking two steps forward and three steps back does not lead to progress. Instead of an overhaul, a better strategy is often to fine tune existing processes, and selectively plant a few seeds that can grow into trees.

I understand that we must focus on issues and solutions if things are to improve. But before we seek to improve everything, we must improve our “factfulness”, for things often work better than we think. So, I would be weary of grand presentations in which management proposes strategy overhauls: running an existing company is (almost always) about understanding the mechanics of the vessel, and precision-setting the course of a ship; it is rarely about turning the ship in an entirely different direction, and (almost) never about rebuilding the entire vessel. 
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N.B: If an executive finds themselves trying to rebuild the vessel, they probably failed to see potential sources of disruption, and didn't set the course carefully enough. And, the chances are they will fail to rebuild the vessel in time (before it fills with water and sinks!!).

Go with the flow

Twenty-four people, six families of four arrive at a hotel over a two hour period; before the arrival of the next group, the party that has already arrived congregates in the foyer. You might think this is a tour group, but it is not. You might think they are travelling separately, but they are not. They are not even the same family, yet they are closer than most families truly are. 

This is the my family’s “gang” of friends — it has been the same since I can remember. My parents have an unusually special group of friends; the “gang” spends time together every year, regardless of geographic boundaries, logistical complexities, or a paucity of time. Moving to the UK allowed me to realise the unique, precious dynamic of this group, which had been - and always will be - a large part of my life. 

I was curious. If this group had so much fun together that we couldn’t imagine going on a holiday without each other, why didn’t more people have friend groups like this? What was stopping them? On a recent trip, I posed the question to some of my parents’ friends: “Why do you think groups like this are so rare?”

They responded in similar fashion — there may well be some truth in that age old adage “birds of the same feather flock together”. They each felt that the group was willing to “go with the flow”, and nobody attempted to unilaterally drive the agenda; simply put, people were flexible.

This is rare, because people (me included) love doing exactly what they want to do: siblings bicker over which show to play on Netflix, and friends debate which restaurant they should go to. In the process, people miss out on what they actually wanted. The goal was to spend quality time with one another, whilst engaging in a fun, entertaining activity.

I first tried going with the flow in Summer 2018. I spent three weeks at Columbia University, and in my free time, I tagged along with my roommate and a friend of his. I was walking blind, following and not leading, and I had some of the most fun I have ever had in my life!

That is not to say you should never drive the agenda. I believe it is important to stand up where it counts. Stand up for ideas, values, beliefs, colleagues, friends, family, and yourself. It is also important to lead and to carry your share (if not more). But, when someone else is taking charge, and one doesn’t really have a problem with the direction they are heading in, one must learn to go with the flow and be a passenger.

I think the same principles apply when investing in companies; although it may be tempting to get management to do what you want, it is far better to identify managements with expertise in the relevant field who have a value system you can back, and let them execute their strategy. Don't try to influence every management decision. Don't react to every management decision. Asses the big picture and if you like the overall direction they are heading in, "go with the flow".

Key Things I Learned at First State (FSSA)

This summer, I spent more time with First State Investments: one week at FSSA's Singapore office, and two weeks at their Hong Kong office. Attending internal meetings and company meetings during these three weeks allowed me to gain exposure to several sectors and markets, including Chinese FMCG and manufacturing, Japanese IT services, and Sri Lankan telecommunications. 

In addition to attending meetings, I conducted research and wrote a company report on Nissin Foods, the HK listed subsidiary of Nissan Japan (a instant noodle company). My report was then discussed by the entire FSSA team. This experience has allowed me to learn a great deal about the investment research process.


I am very grateful to the entire FSSA team, and look forward to more experiences like this in the future. Here are a few Key Things I Learned at FSSA:

• It is important to look for good quality, risk aware management who are frank about mistakes and determined to improve and grow the business strategically in the long term. Their interests must be aligned with minority shareholders’ and you have to be able to trust them.

• There is a big opportunity with formalization and premiumisation of consumer goods in developing countries.

• If the overall industry is not a good industry, even the best operators will struggle to be successful.

• You have to put down your thoughts and look back over what you were thinking. Otherwise, it is very easy to fool yourself and think you “knew it all along”. 

• It is a mistake to buy optically cheap businesses. Businesses that look cheap often deserve to be cheap because they are bad businesses, and good businesses are often expensive because they deserve to be. If you want to invest in good businesses either find those that are fundamentally undervalued due to short term challenges, or be willing to pay up for good businesses.

• You have to be somewhat contrarian to make high returns. i.e, it is important to have a view that is different to the consensus. However, you should not be contrarian for the sake of being different.

• It is very important to have a good investment process. A focus on process will drive returns over the longer term.

• Try to invest in companies that don’t need your money, and have the ability to grow organically.

Write a note

Whilst we can debate whether thought precedes language or language precedes thought, we cannot deny that language and thought are intertwined; the way you think influences what you say and how you say it, which again influences the way you think. Clearly, language is powerful, and we must be mindful of the way we use it.

Often, we unknowingly misuse language. We use words such as "like", "problematic", and "good", which add ambiguity to our statements. We also establish non-links between sentences to make arguments seem more bullet-proof. I have unconsciously included an example of the latter in the first paragraph, when I suggest that my preceding statements make it "clear" that language is powerful. This is unclear communication. This unclarity in language may lead to unclarity of thought. This could in turn be a self-reinforcing loop. This is dangerous.

For an investor, clarity of thought is of utmost importance: it is necessary to have a specific thesis, which you can constantly test and evaluate. This is because if one is unclear about the investment case, one is more likely to make decisions influenced by emotion. For example, one might hold on to an investment even as the company's thesis story fails to play out. Alternatively, one might sell when a risk we were previously aware of - and comfortable with - actually materialises. In both scenarios, the action may actually be right; the long term story may be intact in the former case, or the risk may be bigger than one perceived it to be in the latter. However, if an investor's decision is driven by emotion, it is a bad decision - regardless of the outcome.

In order to have clarity in thought, an investor must have clarity of language. This clarity of language can be achieved by writing. When we are forced to put concrete thoughts down on paper, we are forced to clarify what it is we mean, and be more precise in our thesis. This results in greater clarity of thought.

So, I urge you to "write a note".

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This post was inspired by my attendance of a seminar titled "Am I Helping Tyrants When I Say 'Like'? George Orwell and Alexis de Tocqueville on How Political Language Manipulates and Liberates" at Yale Young Global Scholars, PLE II, 2019. The following was the provided description of the Seminar: