Book of 2023: What I learned about investing from Darwin by Pulak Prasad – Beragampengetahuan

Books on investments are usually the same type with similar lessons: Invest for a long term, do not buy/sell a lot, invest in larger number of assets and so on. It has been a while since I stopped reading books on investments. I thought there is not much new knowledge one could learn from these books. I could not be more wrong.

I came across this book with an odd title ‘What I learned about investing from Darwin‘ by Pulak Prasad. Pulak is co-founder of Nalanda Capital, a Singapore based investment firm. For a moment I thought this must be one of those investment books which will be around some vague ideas of Darwin.   I was really surprised how the book digs deep into evolutionary biology and distills lessons for investing.

Book Summary:

The investment profession is in a state of crisis. The vast majority of equity fund managers are unable to beat the market over the long term, which has led to massive outflows from active funds to passive funds. Where should investors turn in search of a new approach?

Pulak Prasad offers a philosophy of patient long-term investing based on an unexpected source: evolutionary biology. He draws key lessons from core Darwinian concepts, mixing vivid examples from the natural world with compelling stories of good and bad investing decisions—including his own. How can bumblebees’ survival strategies help us accept that we might miss out on Tesla? What does an experiment in breeding tame foxes reveal about the traits of successful businesses? Why might a small frog’s mimicry of the croak of a larger rival shed light on the signs of corporate dishonesty?

Informed by successful evolutionary strategies, Prasad outlines his counterintuitive principles for long-term gain. He provides three mantras of investing: Avoid big risks; buy high quality at a fair price; and don’t be lazy—be very lazy. Prasad makes a persuasive case for a strategy that rules out the vast majority of investment opportunities and advocates permanently owning high-quality businesses.

Combining punchy prose and practical insight, What I Learned About Investing from Darwin reveals why evolutionary biology can help fund managers become better at their craft.

The book offers same lessons on investing as other books but the way Prasad weaves evolutionary history into investing is just amazing. I have become really glued to history of evolution and watching videos/seeing books on the topic.

He starts the book saying key to successful investing is to avoid losing money.  A great investor is a great rejector. In investing, we have to think like the prey animals whose small mistake could lead them to be hunted by the predator. So the prey animals try and follow utmost caution. They would avoid going to water bodies as much as possible knowing the predator would be waiting for them. Likewise, investors have to let go of investments which may look atractive to begin with but may lead to losses eventually.

He also explains Type-I and Type-II errors in process which confuse so many of us. Type I is error of comission where one would go to a water hole knowing the prey will attack. Type II is error of commission where one would even avoid the water hole in which there is no predator. Most prey animals have evolved in a way to avoid Type I error as much as possible even if it would mean to commit Type II error. That is one way to live for as long as possible and explains much of the evolution.

There are so many more such insights and examples.

Highly recommended! Perhaps the best investment book I have ever read.

This entry was posted on December 30, 2023 at 5:25 pm and is filed under Book Review, Financial Markets/ Finance, Indian Economy/Financial Markets. You can follow any responses to this entry through the RSS 2.0 feed.
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