What I Learned About Investing from Darwin Quotes

“However, on rare occasions, investors who don’t subscribe to GKPI succumb to the pressure of temporary macro, industry, or company issues, and we can then swoop in to buy a piece of an exceptional company. It doesn’t—and shouldn’t—happen often, but when it does, we go all in.”
― Pulak Prasad, What I Learned About Investing from Darwin

“Nalanda’s approach to investing comprises three straightforward, sequential steps: 1. Avoid big risks. 2. Buy high quality at a fair price. 3. Don’t be lazy—be very lazy.”
― Pulak Prasad, What I Learned About Investing from Darwin

“We define our unit of analysis clearly as the company. Not the economy, not the market, not a theme. We care about the fundamentals of the company—nothing else. We have never invested in a theme and never will.”
― Pulak Prasad, What I Learned About Investing from Darwin

“Why should not Nature have taken a leap from structure to structure? On the theory of natural selection, we can clearly understand why she should not; for natural selection can act only by taking advantage of slight successive variations; she can never take a leap, but must advance by the shortest slowest steps. Charles Darwin, On the Origin of Species, chapter 6, “Difficulties of the Theory”
― Pulak Prasad, What I Learned About Investing from Darwin

“While I call myself an investor, an evolutionary biologist would not be remiss in branding me a “signal decoder.” The only things investors can rely on to assess a company are the signals emitted by it—some direct and others indirect, some comprehensible and others bizarre, some ongoing and others delayed, and some quantitative and others qualitative.”
― Pulak Prasad, What I Learned About Investing from Darwin

“The Selfish Gene”
― Pulak Prasad, What I Learned About Investing from Darwin

“global events may affect the stock prices of high-quality companies but not their business strength; the fact that investors were dumping stocks was not a problem but an opportunity; businesses’ market valuations may take a hit but not their intrinsic value; the opportunity cost of not investing in troubled times far exceeds any near-term pain owing to notional losses.”
― Pulak Prasad, What I Learned About Investing from Darwin

“The failure of most investors does not lie in pursuing a wrong model but in failing to repeatedly pursue a good model. It does not take a genius to theorize that investing in quality management teams running excellent businesses should lead to success over the long term, but how many can translate this theory into practice day after day and year after year?”
― Pulak Prasad, What I Learned About Investing from Darwin

“Are you as gobsmacked as I was when I first read about this process? Do you see what has happened here? The honeybees have an extraordinarily complex and challenging decision to make. Yet, they make it through a very straightforward process: Dance harder for a better site, and attach yourself randomly to a dancing sister. That’s it.”
― Pulak Prasad, What I Learned About Investing from Darwin

“Researchers have conclusively proven that honeybees have an absolute standard for assessing the quality of a nesting site. The vigorousness of their waggle dance, translated into the number of dance circuits, indicates the quality of a particular site. A honeybee takes between fifteen minutes and an hour to evaluate a potential site. She inspects the cavity’s outside and spends a lot of time inside walking around and taking short flights. If the bee finds the nesting site desirable on first inspection, she returns to the swarm and advertises the site with a waggle dance. If another bee follows her to this site, she will perform almost the same waggle dance (in terms of duration and intensity) when she returns to the swarm. Honeybees have a universal standard for assessing nest quality.”
― Pulak Prasad, What I Learned About Investing from Darwin

“As investors, we are supposed to have deep insights into our companies and industries. We are required to understand the business of the companies we invest in, with the implicit assumption that the individual who can comprehend a business better will become a better investor. Of course, we are also required to answer all the questions anyone might pose on the businesses we have invested in. But the problem is that if brilliant biologists are still struggling to unravel the mysteries of a lowly, discrete, organic molecule after seventy years of research, how can we think that an entity as amorphous as a company can be analyzed by investors in seventy days, or even seven hundred?”
― Pulak Prasad, What I Learned About Investing from Darwin

“The field of biology, particularly evolutionary biology, took a giant leap forward in 1953 with one of the most significant discoveries of the twentieth century: the molecular structure of DNA. This Nobel Prize–winning effort of Watson and Crick unraveled the mystery of how genetic information is encoded and transmitted through the double helix. Or did it? Even decades after this seminal event, scientists do not agree on the definition of what constitutes a gene.1 We are endowed with 22,500 genes; some scientists think that less than 2 percent are helpful, whereas others assert that more than 50 percent are. As a result, we do not know what most of our DNA—comprising more than six billion letters—does. More surprisingly, even when there is agreement on the function of a particular bit of DNA, it is still a mystery how this DNA translates into a phenotype, or observable trait. The plain truth is that despite hundreds of millions of dollars being spent every year by dedicated researchers globally, we don’t understand how evolution works at the molecular level.2 And this is a good—no, great—thing.”
― Pulak Prasad, What I Learned About Investing from Darwin

“The field of biology, particularly evolutionary biology, took a giant leap forward in 1953 with one of the most significant discoveries of the twentieth century: the molecular structure of DNA. This Nobel Prize–winning effort of Watson and Crick unraveled the mystery of how genetic information is encoded and transmitted through the double helix. Or did it? Even decades after this seminal event, scientists do not agree on the definition of what constitutes a gene.1 We are endowed with 22,500 genes; some scientists think that less than 2 percent are helpful, whereas others assert that more than 50 percent are. As a result, we do not know what most of our DNA—comprising more than six billion letters—does.”
― Pulak Prasad, What I Learned About Investing from Darwin

“He must be a dull man who can examine the exquisite structure of a comb, so beautifully adapted to its end, without enthusiastic admiration. We hear from mathematicians that bees have practically solved a recondite problem, and have made their cells of the proper shape to hold the greatest amount of honey, with the least possible consumption of precious wax in their construction. Charles Darwin, On the Origin of Species, chapter 8, “Instinct”
― Pulak Prasad, What I Learned About Investing from Darwin

“Darwin laid the foundation of evolutionary theory by asserting that if an organism has a small advantage over its peers (say, the ability to run faster), then given enough time, this favorable trait will spread across the entire population. Darwin understood, like no one else before him, that compounding can create macroevolution through microevolution.”
― Pulak Prasad, What I Learned About Investing from Darwin

“Look at it differently. I assume many of you own a home or know someone who does. Do you know of any homeowner who trades in and out of their home at frequent intervals? Does a homeowner check the price of their house every day, every month, or even every year to sell it at a high price and buy another one at a lower price? If not, I see no reason to treat holding shares in a business differently.”
― Pulak Prasad, What I Learned About Investing from Darwin

“It seems too easy, isn’t it? Buy a great business. Sit tight. Watch the moolah roll in. It is, and it is not. Over my decades of investing, I have heard many objections from my fund manager friends and investors who have refused to give us money because they were uncomfortable with our permanent owner approach. “It does not make sense” is a common refrain after I reveal that we plan to be permanent owners.”
― Pulak Prasad, What I Learned About Investing from Darwin

“That seems like a weird assertion. How can not selling cause better buying? Here is how. How much time do you think fund managers devote to thinking about the “right” sale price for their businesses? If you manage money, you already know the answer, but if you aren’t a fund manager, please ask someone who is. The answer will probably range from 30 to 70 percent. Some fund managers argue, “If we are not a buyer, we are a seller.” These people are probably contemplating a sale all the time.”
― Pulak Prasad, What I Learned About Investing from Darwin

“I love our entrepreneurs. Behavioral economists have a quaint name for this disease: the endowment effect. It is the irrational mindset that assigns a disproportionately high value to what one owns. Investing is supposed to be a cut-and-dried profession where, à la Mr. Spock, fund managers dispassionately enter and exit businesses based on intellect, instinct, or insight. Unfortunately, we fulfill this requirement only for entry and some exits.”
― Pulak Prasad, What I Learned About Investing from Darwin

“We don’t sell when stock prices rise suddenly. These nonactions during market euphoria have been as important as—actually, more important than—our acts of buying during market panics. As I wrote earlier, as of June 2022, out of our portfolio of twenty-four businesses (excluding the ones bought during the previous two years), we had multiplied our money by more than ten times in INR in nine (of these, the largest multiple, 82×, was for Page, and the smallest, 13×, was for Info Edge). In five of these nine, our holding period had been more than eleven years, and we had held the remaining ten-baggers for more than eight years. Why do we not sell when stock prices rise dramatically”
― Pulak Prasad, What I Learned About Investing from Darwin

“For most investors, a holding period of four years seems long enough. It would not have been very intelligent to think that we could earn 65 percent IRR incrementally over the next five to ten years. If we were IRR fans, we would have exited Page in December 2012, crowed about the astronomical return delivered over four years, and described the return in bold in our marketing materials (actually, we don’t have any marketing materials, but that is beside the point).”
― Pulak Prasad, What I Learned About Investing from Darwin

“It’s almost ridiculous, isn’t it? Simply owning Page for fourteen years compensated for seven unsuccessful investments more than five times over. If the upside of holding companies for long periods is so significant, why don’t investors do it? One critical reason is an underappreciation of compounding, which makes fund managers value IRR more than the multiple, instead of the other way around.”
― Pulak Prasad, What I Learned About Investing from Darwin

“Buffett is the Darwin of investing—he changed the field forever and for the better. But if eminent scientists in the late nineteenth and early twentieth centuries could barely comprehend the power of cumulative growth, how can investors, who by and large are much more intellectually challenged, be expected to appreciate it? But the problem is worse than you think. Not only do investors blithely ignore Buffett, their behavior over the last fifty years indicates that they firmly believe the exact opposite! The holding period of stocks by mutual funds has fallen to less than a year from seven years in 1960.”
― Pulak Prasad, What I Learned About Investing from Darwin

“Here is a puzzle for you to chew on. I assume you will agree that all fund managers want to earn decent returns while beating the market over the long run. Imagine a situation in which a multibillionaire investor shares his secret of getting rich with us every year in a detailed letter. His best practice is widely known and available to everyone, and it hasn’t changed for more than fifty years. We know his advice is invaluable because he continues to amass great wealth by following his teachings over almost six decades. We also know that doing what he does is not difficult to understand or even implement, at least for the professionals. But most choose to both laud him and ignore him.”
― Pulak Prasad, What I Learned About Investing from Darwin

“have seen too many people make a profit of 50 to 100 percent on an investment in a great company and then press the exit button. We investors take pride in being math savvy. Mention the word “compounding” to us, and you will get knowing smiles. Unfortunately, most of those knowing smiles do not seem to know that what they know about compounding—that it can lead to big numbers over time—hides two great unknowns. The first is that compounding does not lead to significant numbers for a very long time. The second is that investing would be easy if companies could compound predictably. But, alas, they don’t. The real world is quite messy, and the path to long-term success is treacherous, unpredictable, and full of disappointments. What is needed to become a successful investor is not intellect, a commodity, but patience, which is not.”
― Pulak Prasad, What I Learned About Investing from Darwin

“The holding period of most funds is barely a few months, let alone years. If you explain this behavior to an intelligent noninvestor type (I have done so), they will find it rather odd. They say something like this: “You are telling me that it is tough to find great companies to invest in; you are also telling me that these companies can grow their profits reasonably predictably over long periods. So why would you sell such a company in a hurry after you have become fortunate enough to own it?” I haven’t had a good answer to this question except, “My community is not willing to wait for the rabbits.”
― Pulak Prasad, What I Learned About Investing from Darwin

“The bigger surprise—which is also counterintuitive—is the opposite observation: Nothing happened for a very long time! After twenty years, not many rabbits would have been visible in Australia, and even after forty-five years, there were fewer than two rabbits per square kilometer. So Australians ignored the rabbit problem for many decades because rabbits did not become a problem.”
― Pulak Prasad, What I Learned About Investing from Darwin

“This is a true story. Unfortunately, the twenty-four rabbits released by Mr. Austin in Australia in 1859 did produce ten billion rabbits by 1925 and wreaked havoc on the flora and fauna of the continent.10 Despite more than one hundred fifty years of government efforts ranging from building fences, trapping, shooting, and conducting biological warfare (by releasing flies with the deadly myxoma virus), Australia has been unable to eliminate this pest.”
― Pulak Prasad, What I Learned About Investing from Darwin

“He was saying that if a particular variation—say color vision—could give an individual a slight advantage over its peers, almost the entire population would be able to see in color over many fewer generations than we would imagine. Let us assume that color vision has a “selective advantage” of 1 percent, meaning that individuals with this trait produce 101 viable offspring instead of 100 (maybe color vision allows the individuals to locate higher-quality fruits in the forest). Thus, the selective advantage here is equivalent to compound interest or annualized return. The advantage accumulates and grows exponentially over generations. Thus, in the second generation, the 101 offspring with color vision produce 10,201 offspring who can see color (101 x 101), whereas the 100 “normal” offspring produce 10,000 “normal” offspring (100 x 100). This slight advantage compounded at 1 percent per generation yields dramatic change over time.”
― Pulak Prasad, What I Learned About Investing from Darwin

“Now that everyone could understand. Intellectually, this was a much simpler assertion to understand than Darwinism because it could be “visualized”—Darwin’s gradualism couldn’t be. The world of investing is eerily similar. Everyone seems to know that the stock price of AMC, a movie theater chain, tripled in May 2021, but how many know that Home Depot’s multiplied 140 times over thirty years from 1990 to 2020?”
― Pulak Prasad, What I Learned About Investing from Darwin