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 ey, Gays Welcome Back to Want library's site where every Sunday you get high-quality book summaries which is based on Finance, Stock Market, and Investment, so today's book summary is The Dhandho Investor authored by Mohnish Pabrai.

Introduction(author and book):-

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© Want Library|The Dhandho Investor
Mohnish pabrai is an Indian born American entrepreneur, investor and philanthropist and is the managing partner of Pabrai investment fund and his fund has given an annualized return of 28% since its inception. Mohnish pabrai and his friend paid $650000 in 2002 to have lunch with Warren Buffett actually
He once asked one of his Marwari friends that how do you become so successful in business? Because wherever I see in the whole of India, your community is the highest in the list of rich people, then that Marwari gave him a very open and one-shot answer that even if a Marwari fails in the fifth class, if he ever If he invests in the business, he expects from him that he will get the return of his invested money in three years and there should be no chance of sinking money in it, and then on top of that the investment and growth should continue and listening to this Mohnish was quite impressed. But friends, the question arises in which place can you invest from where you can get such a good return? To understand this with so little risk, Mohnish Pabrai wrote this book, The Dhandhau Investor, in which he has given interesting information to many Marwari and Gujarati people. Write down principles that are popular only among people in that community. If not in other people, then I thought why not follow the golden principles of all Indians? So that we all can grow and create wealth, that's why today we will discuss these three golden rules of business and investing. These rules are very simple and interesting too and I will explain them with examples so that you can get them in detail. If you understand.

High risks High returns (a lie):-


So friends, if you take a Chartered Accountant, MBA, Finance, or any other degree in finance, then you will be taught that to earn more returns, you will have to take more risk.

For example, if you invest in FD, then you take the least risk and that is why you get the least return, like five to six percent. But if you want to earn more returns then you can invest in mutual funds can get good return but, there will be little risk in this or you can invest in direct stocks, where you can get 20 to 25% return, but it will have more risk than FD and mutual fund, just like you are looking to earn more returns. If you move ahead, the level of risk keeps on increasing. But some communities in India believe that you don't need to take much risk to earn high returns. You can earn good returns even by taking very less risk. enough
You should know some of the principles of Investing in them. Friends, This is Gujarati and Marwari communities one thing you must have also noticed is that in our country most of the businessmen were from these two communities, so in today's article we will focus on Marwari because their population in India is 1%. Even less than India, but still they are the owners of India's more than 10% wealth, so their first and foremost quality is that no matter how good a job they get. The majority of them will always think of a business and if that business becomes successful, they will always think of growing it. So if they have any extra cash, then they immediately think of putting it to work, either they invest it in their own business or the business of others because they know that wealth will be created from business only and not from a job.

First rule (enter in your business line):-


Friends, the first and most important rule of a savings account is that it is always Repeating the existing business model which has been successful before, or doing an existing business in which they already have expertise because if you start a completely new business then you will not see profit in the first two to three years. And if you go for any innovation, then you may see a profit for the first four to five years. If not found, that's why their best formula to earn more profit with less risk and less effort is that repeat what is already working. Now for this, I tell you the real-life story of a Marwari, in 2007 when he wrote this book, at that time Bill Gates was number one on the list of the world's richest people. The second was Warren Buffet and the third was the name of an Indian, about whom very few people would know. His name is Lakshmi Mittal, and he belongs to a Marwari family. Abhinav started his wealth creation journey at the same time as Bill Gates started working at Microsoft. The only difference was that Bill Gates chose the tech industry, In which the profits are very good and the whole industry was growing very fast. But Mittal Ji chose the steel industry because his father was also doing the same business. So he had very good knowledge of it. But the problem is that this industry was very different from the New Age industry. There is a difference between land and sky in the operations of the tech and steel industry. Now, if we try to understand this in a little detail, Microsoft's profits are recurring. This means every year they keep getting repeated profit from the same customer and their expenses are also very less. Because from the raw material to the salary of the laborers, they have to spend very little everywhere. Because whenever a computer manufacturing company like Dell, HP, or Lenovo makes a computer, then they have to buy all the raw materials like plastic glass, or aluminum. Then they need software that Microsoft provides, then Microsoft does not have to purchase any raw material to provide this software. This is made by coding in the computer. They have to give only one copy to all these computer manufacturers through CD or pen drive and through that one copy Dell and HP install Windows in all their millions of computers. Now in the era of cloud computing Microsoft doesn't even need to give a copy. Now all the updates are wireless and that's why Microsoft's profit margin is 60-70% whereas in other industries like the steel industry profit margin is 6-7% because here the pay competition is very high and ultimately These companies do not have any control over the price of the steel they sell. This is a commodity. Which can be sold by anyone, then they have to sell on a very low margin and a lot of capital has to be invested in it. Buying raw materials and setting up, big plants which ultimately leads to very low returns on capital and thus creates profits for such a company is very difficult. Many smart investors always stay away from such companies, but still, Lakshmi Mittal has built all her wealth from this industry. So the main reason for this was that he followed the first golden rule of his community with discipline. They focused on the same business on which they had the expertise and then they were repeating the same business model which had been successful before. So he started with a small steel factory. And then whenever he found a steel factory cheaply, he would buy it with his saved money and then run it efficiently and in the same way, he would increase his business and his wealth. Growing up, his biggest deal was in Kazakhstan where he bought the Karma Steel Mill. Now this plant was running at a loss for years at that time. For many months, their owners were unable even to pay salaries to their workers, and in a few months that plant was going to be closed forever Lakshmi Mittal bought that plan for free by making a deal with the government. And this deal was done by the Kazakh government happily signed with them because then that plant would remain closed for years like this, that is why the only condition of the government was that they would not remove any workers from their jobs. And then Lakshmi Mittal not only returned those workers but within a few months made that plan profitable and made it grow further. Then he repeated the same strategy in many other countries like in 1992 he bought a steel mill from the Mexican government. In two hundred million dollars, 2B $were spent by the government to set up. This means he bought it at 90%, then his success formula is similar to Warren Buffet's old value investing strategy, where he buys a Rs 100 company at a discounted price like 15 or 10 rupees, But then instead of selling it, they run it very efficiently, so that ultimately they get more profit than their investment in a few years, so this is the golden rule of Marwari, where they get double their capital within three years. Is found. But if we now see the network of these people in the list of 2022, then Bill Gates and Warren Buffet are still in the top ten in the list of the world's richest people. But Lakshmi Mittal fell below the third rank of two thousand-five and has now reached the rank of One. And the main reason for this is that in the last few years, they have not acquired companies and have sold them instead. Because there has been negative growth in this sector in the last ten years and that is why they are not able to grow their wealth with the power of compounding. As investors from other industries have been doing, But still, what Lakshmi Mittal has achieved in her life is commendable because creating wealth from such a sector and coming from zero to the list of the world's richest people is a huge achievement in itself. So in the same way, if you are just starting to learn about investing and creating wealth and you don't have that many millions, To buy a company completely, you can also buy an existing company. Through the stock market where you will not need to run companies and from time to time we also get many good companies at a discounted price. When there is a market crash or when there is fear in the hearts of people and if you do not know about operating such a steel industry, then you can invest in a company like Google, Apple, or Microsoft, in which you will have a good first knowledge because You must be using their service every day.

Second rule (ultra-slow rate of change):-


Marwari's second golden rule is a simple business with an ultra-slow rate of change. Now it means that they enter into such a business in which they can clearly estimate that how much profit they can earn from it in the future because many people try to find out which new technology will be successful in the future and which of these We will be able to invest in the business. But it is a game of complete speculation and there is a lot of risk in it. The smart way is that no matter how we are living in a time where technology is changing people's lives rapidly. But still, there are many such industries where technology will make such a difference in the future as well, otherwise, it will be more economical to invest there and you will be able to earn good returns as well. Now for this also let me tell you a small story. Jeff Bezos, one of the richest people in the world, who is the founder and CEO of Amazon company, was repeatedly asked by the investors of his company what is going to chain, Which are the next five to ten years what are you doing to prepare for it? Because being the CEO of the company, he has to answer this to the shareholders of his company, Jeff Bezos gives a very interesting answer that I focus on what's not going to change. The next Ten Years mean they focus on those things which will not change in the future like customers will always want everything in their business at a cheap price or customers will always want delivery very quickly. If delivery can be done in two days, then the customers will want it in one day. And if it can be done in a day, then the customers will need it on the same day, then all these things will not change even after ten years. Because no customer will say tomorrow that I like Amazon very much. That's why I wish I would have got things a little expensive or if the delivery was a little late, there is no one to say that Jeff Bezos always focuses on such things which are simple and there are very few chances of change in its future so that today Whatever hard work you do, you will definitely get benefit in the future. You will be pretty sure of this thing, similarly, if you notice, then maximum Gujarati and Marwari operate only in these few selected sectors, in which slow changes come due to technology. Like those who do business on a small level. So they run a general store or do a gold and jewelry business but all these were old and traditional businesses with less profit margin like the steel industry. That's why if you do a little research, now the majority in India, e-commerce, startups, Marwari, and Gujarati are running. For example, India's largest e-commerce company Flipkart is run by two Marwari businessmen Sachin and Binny Bansal. Myntra was also started by Mukesh Bansal, a Marwari. Then Rohit Bansal to Snapdeal, Lase Card, Piyush Bansal to Ola, Bhavish Agarwal to Indiamart, Dinesh Agarwal to ShopClues, Sandeep Agarwal to OYO, Ritesh Agarwal to Naaptol, Mannu Agarwal, Manmohan Agarwal or Radhakishan Damani started D Mart, so all of them are Marwaris. Although their population is only zero point five percent, but almost all the e-commerce companies in India are running here and if you check the business model of all these companies, they are all inspired by Amazon, Walmart, and other successful US companies.
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Third rule (grab opportunity):-


Then the third golden rule is but a heavy way of being in your favor. When you get a chance, you should take full advantage of it. Then whether it is to start a business like the new entrepreneurs of India are doing now or whether it is to start a business which Lakshmi Mittal told us by riding a bike to steel mills because good opportunities do not come, but he has a problem. That is, to invest a large amount, you should have that much confidence and that is why most of the Marwaris give this to their children at a very young age. I used to take him to my shop or office when he was in school so that he could learn the fundamentals of business. This is also a very big secret of theirs, due to which it happens that when those children grow up, they already know about the operations of the business and that is why they run it successfully in the future. So that's why even if you don't have much money right now, you can pick a good sector or business and learn about it and build your expertise in it, because to follow the third rule, you need to exchange your knowledge with money. If you also have to submit, then you can improve your knowledge by watching such educational videos and reading books, So that when money comes to you Conclusion:   in the future or a good opportunity comes, then you will be ready to invest or start a business yourself because friends, no child gets rich from his mother's stomach to become rich. They study further in the world only.

Conclusion:-


Just some people start their journey early with the support of their parents and some people a little late and some people never start at all. Thinking that becoming rich is not in his destiny. But if you have a designer inside you to do something in life and live a happy and comfortable life then nothing can stop you. Then no matter where you live in any most have got to learn something from this article.
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