A successful investor must be willing to take the risk and yet be extremely cautious, says the eminent value investor
Thomas 'Tom' Gayner, co-CEO of Virginia-based Markel Corporation, a Fortune 500 company, is one of the world’s leading value investors. He was recently in Mumbai, for a specially curated talk in association with ENAM and FLAME University. Along with the experienced investors in the audience, a group of FLAME students -Raj Agrawal, Purvi Shah, Ishita Varaiya, Utsav Adani and Vandit Dharamshi also had the opportunity to listen to Mr. Gayner, and to interact with him.
It was striking, recounted Raj, that among the various aspects of investment philosophy that were discussed on the day, the relationship between investing and other disciplines was so prominent. Even more than the number-crunching that is necessarily involved in good investment decisions, investors must pay heed to the ‘story’ of a company, Mr. Gayner had pointed out. This story encompasses such indices as the quality of management, in terms of both integrity and ability, and the relationship of the business to its customers- i.e., whether customers profit and grow along with the business, or not. "He said that it’s important to invest in ethical businesses. Such businesses earn loyalty and retain consistency- which is what investors want."
At one of his popular online Google Talks, Mr. Gayner had spoken about the bearing that history, economics, psychology and other disciplines have on investing. With this in mind, Raj posed the question to him: "What are the disciplines that a successful value investor must be familiar with?" The answer was, that in addition to a core knowledge of accounting, an understanding of human behavior is key. This is not only because markets fluctuate according to sentiment, but because an individual’s investment decisions are inevitably coloured by biases. As such, it is necessary to be self-aware, both at a social and personal level. "When I hear such talks it makes me read more in other disciplines", Raj admitted, "For example I’m now reading about the history of a particular bubble- a crash. I'm also paying a lot of attention to psychology as a discipline."
Similarly, one of the key takeaways for Vandit, was Mr. Gayner's observations on the need to wholeheartedly acknowledge and correct one's mistakes, in order to be successful. The next was about embracing uncertainty- One should have a willingness to take risk and embrace uncertainty, yet be extremely cautious. Taking no risk is also a huge risk.
Mr. Gayner also dispelled the fear of a general reversal of globalization and inter-connected-ness, in the modern era, and a return to partisan identities. Citing the example of Genghis Khan, whose pioneering introduction of paper currency was indeed reversed- but only for a time- Mr. Gayner made it clear that some ideas simply cannot be turned away from. Globalization and inter-connectivity are of this nature. Therefore, investors should think accordingly.
The event presented a great occasion for the students to meet and greet with leaders in the field of value investing. Through such interactions, FLAME continually looks to enhance students' learning experience. But most of all, Tom Gayner's talk was a reminder that inter-disciplinary education, with a global connect, are the foundation of excellence in the modern world, not least when it comes to investing.