Getting RICH is EASY | Gautam Baid

Money also not be working for us 24/7. That is how you can achieve financial independence. Belief is that every person's savings, hard-earned savings, should work equally hard as that person did for earning that money in the first place. Reading a book is the best way to get access to the life's entire life's learning of a of any intellectual or any learned person.

Welcome to the Book Thinkers Life-Changing Books Podcast. How are you feeling today?

Hi, Nick. Good to be here. Thanks for having me.

Yeah, I'm very excited for our conversation today. I just finished reading The Joys of Compounding, your first book, and it was fantastic. So the Book Thinkers family has some treats in store today. But before we jump into the book, I'd love to have you introduce yourself to everybody.

So I come from a family of 4. I'm the youngest of the 4 siblings in my family. I was born and brought up in the city of Kolkata in India. And, uh, you know, since my childhood years, I was very fascinated by the concept of entrepreneurship because my father used to run a small business. And I used to observe that once a solid foundation is built for a business, the owners do not work for money. Rather, money works for them. I did my graduation with a specialization in accountancy. So pursuing higher studies in the field of finance. Seemed like a natural extension. So I did my MBA in finance from Nirma University, Ahmedabad, India, and I also did my MS in finance from ICFI University, Hyderabad, in India. Later on, I also went on to become a CFA charterholder from CFA Institute, US. After completing my MBA program, I got hired as an analyst with Citibank in their investment banking department in Mumbai, India, where I worked for 3 years. And after that, I joined Deutsche Bank as a senior analyst in their investment banking team, where I worked at their Mumbai, London, and Hong Kong offices for almost 4 years. Now, all throughout the first 7 years of my investment banking job career, I was very fascinated by the stock market. And like most investors, I was attracted to the stock market during the, during the final euphoric phases of a bull market. In my case, it was the 2003 to 2007 bull market in India. I still remember I had invested in a mutual fund called Reliance Power Sector Mutual Fund in late 2007 and a stock named Ispat Steel in January 2008, because power and steel were the hot and fancied sectors of the bull market at that time. And both these investments had appreciated very sharply in a short span of time when I first noticed them. So I paid no attention to their valuations or business fundamentals. And I eventually paid the price. Both those investments crashed 70 to 80% within the first 12 to 18 months of my purchase, and I'd successfully gained admission into the stock markets by paying my admission fees. But despite this bad initial experience, my curiosity and interest in the stock market remained very high all throughout the first 7 years of my professional investment banking career. And one One day I came to the realization that, hey, I just have this one short life to live my dream, and I do not want to waste any further time doing something that I'm not truly passionate about. Thing is that many people in the world confuse having a high income with job satisfaction, but that is not the case. You actually derive true happiness from your work when you find meaning and fulfillment in it. So I was so keen for a career shift to the stock market side that in 2015 I relocated to the US without having any job in hand. So one of my relatives, he's a US citizen, he sponsored my green card, and I was under the impression that since I'm a CFA charterholder, I will land a job in the stock market pretty easily within a very short period of time. But as you know, life is not a bed of roses for those trying to carve their own destiny. I got rejected in my first 3 stock market job interviews within the first 6 months of coming to the US, but I did not give up. I was very firm and adamant that I'm not going to go back to my previous field of work of investment banking, where the presence of perverse incentives constantly led to conflict of interest and incentive cost bias, and it did not suit my personal nature. During the same time, I ran out of whatever little money I'd brought with me from India, and to care of my living expenses in the US, I took up a minimum wage job as a front desk clerk at a hotel in San Francisco where I worked for 15 months in the graveyard shift. Now, for all of you who don't know what a graveyard shift means, it is the shift that runs from 11 PM at night to 7 AM in the morning. And this was the phase in my life when my learning curve really took off from a very tiny base. The pace of work at the hotel was pretty slow. From late night to early morning, and I made full use of the free time to read up every single blog article published from inception till date on blogs like Safal Niveshak, Janav WordPress, Fundu Professor, Macrocap Club, Vaset Investing, and others. And the passionate pursuit of lifelong learning had finally begun because for the first time since the beginning of my busy investment banking career, I finally got some time for myself to read and learn. And after, you know, every night during those 15 months, I remember I used to apply to a minimum of 3 stock market jobs online. And as you know, every single time we take out the time to fill out the job application, attach a resume, and click on the submit button, every single time there is so much hope attached behind every single submission. In those 15 months, I had applied to more than 1,300 stock market jobs. To face rejections more than 1,300 times and still keep on going is only possible if you're truly passionate and dedicated about what you want to do in life. And one fundamental principle of life is that compounding will bestow its magic and benefits upon you only after testing your patience and conviction to the fullest. That is what happened in my case as well. One fine night during November 2016, while doing my daily job at the hotel, I came across a job application on LinkedIn and I just clicked on the quick apply button. And wonder of wonders, I was shortlisted for the interview, and that too for a senior role in an investment firm, even though I had zero formal stock market experience. And this was the phase in my life during which I was about to realize the power of compounding knowledge in action. All those hundreds of hours which I'd spent over the previous 15 months studying and reading up on all those value investing blogs and white papers at the hotel had now built a very strong intellectual foundation for me investing. And this time I was able to excel in all the 3 rounds of my job interview because body language derives from self-confidence and self-confidence derives from knowledge. This is— this knowledge about investing is what I was lacking when I got rejected in those first 3 stock market job interviews after coming to the US. So I was given the role of a portfolio manager of global equity strategy, and it was like a dream come true for me. Never in my wildest dreams that I imagined that I'll away become a portfolio manager. I thought I'll get hired as a junior analyst, then work my way up to an analyst, senior analyst, then assistant portfolio manager, and finally a portfolio manager after 13-14 years. But this is, you know, how, you know, compounding is so magical. Basically, there's no greater power than persistence. And after working for 4 and a half years in that role tracking global stock markets India as a stock market and as a country very clearly stood out to me in terms of the number of high-growth opportunities it offered. So in July 2021, I quit my job and I started work on setting up my own India-focused fund in the US because I wanted to bring the great India investment opportunity to the investment community in America. So today I'm the managing partner and the fund manager at Stellar Wealth Partners India Fund. It's a Delaware-based investment partnership which is modeled after the original Warren Buffett partnership fee structure. We charge zero management fees and we invest in listed Indian equities with a long-term focused and value-oriented approach. So that's a brief about my journey, Nick.

Wow, there is so much to unpack there. For an opportunity for everybody to get to know you a little bit better, um, what was it like working as a hotel clerk With this foundation of knowledge, studying, studying, you already had a bunch of work experience, you were working in something that you were under— I mean, you were way overqualified for. I mean, did that hit your ego? Did you feel like you should be doing more? Uh, how did that represent itself?

So even though it was very difficult for me intellectually, emotionally, physically, and culturally, in hindsight, those 15 months were one of the most productive and most helpful phase of my life because like I mentioned earlier, for the first time since the beginning of my professional job career as an investment banking analyst, I finally got time for myself to read and learn. And this is when I— when my learning curve really took off from a very tiny base. And, you know, many of us, we stop reading and learning after we graduate out of college, but learning is a lifelong journey. And, you know, if you want to You know, outperform the rest in your field of work or your business, you have to outlearn the rest. And learning, you know, is a field of, you know, it's very, very competitive. I think it's a invest— if I talk about investing, for example, investing is a field of competitive learning. The more you learn, the more you earn, like Warren Buffett says. And Benjamin Franklin has very aptly said that an investment in knowledge pays the best interest. That is what I've personally experienced in my life as well.

There was something you said early in your introduction which reminds me of the book Rich Dad Poor Dad by Robert Kiyosaki. You said that business owners don't work for money, they have money work for them. And so was that a concept that you originally discovered in Rich Dad Poor Dad or another book?

So this was a concept which basically I got introduced to during my teenage years when I used to watch many businessmen and entrepreneurs in India and also around me in my family and social circles that You know, once the solid foundation has been established for a business, then you don't exchange your time for money. The key to true financial independence is having control over your time, and you can only have control over your time when you break this link between your income and your input and effort. That is the only way you can actually become truly wealthy, because the rich have money, but the wealthy have got control over their time. So this is Something again which you get to learn only with the passage of time and experience, that at the end of the day, all of us are craving really for freedom and the ability to do what we want with whom we want for as long as we want and whenever we want. That's basically at the end of the day what gives us very lasting meaning and happiness.

That word freedom reminds me of something we talked about a little bit earlier today before we pressed record, which is the idea of the American dream. So your story, coming from India, taking a job that you're way overqualified for, putting hundreds and hundreds of hours into job research, job applications, only to land a role that starts to fulfill your dreams and ultimately puts you where you are today, being interviewed on this podcast with a best-selling book. That is the American dream, right? Do you believe in the American dream?

I definitely do. I think in this country, anyone who's willing to work hard and put in the required effort Can make it big because you know and you know beyond the basics of health and sustenance, the fact is all of us are very lucky if we are living in America because we are constantly having lucky things happen to us every day whether we recognize them or not. The kind of opportunities which this country gives you is simply unparalleled compared to the other parts of the world. So we should not let you know we should make the best of this opportunity. All that is required is a sincere dedication. And the willingness to work hard, and success will follow. But if you can live a life in which your passion and your profession are aligned, that is the ultimate recipe for success. Because when passion meets profession, wealth and success follows. So try to find your ikigai. Ikigai is simply an intersect. It's a Japanese concept, and it's basically an intersection of three basic things: what the world needs. what you're good at and what you can get paid for. Basically, once you find an intersection of these 3 elements, you've found your ikigai, and that is when work starts feeling like play, and that is when you start looking forward to your Monday mornings rather than your Friday evenings. That is the state in which I find myself today. I love investing in the Indian stock market, and every day just feels very exciting.

Do you spend most of your time reading and learning or investing?

So all of them are basically interconnected. So, you know, reading and learning is directly connected to investing. And in today's fast-changing environment and fast-changing world, you have to be a lifelong learner and constantly adapt yourself to changing realities. In my book, I write that the great investors are active seekers of truth. That is a hallmark of a great investor. When the facts change, you have to change your mind. You know, the days of investing in a business and then forgetting about it for the next 15-20 years are over. In today's very dynamic and fast-changing world, start with a 3-year view when you're investing in the stock of a business and then keep evaluating as you go along. Because, you know, I'll give you a good example here. So recently we had— we have this new artificial intelligence breakthrough called ChatGPT. Which is now becoming a threat to Google's search engine because, you know, this AI technology is getting integrated into Microsoft's Bing search engine. Who would have thought till a few months ago that Google search could be disrupted? But that is the kind of world we are living in today, that technology can disrupt you from, in, from places and, and in ways which you can never imagine. So you have to adapt yourself to changing realities. And that is how you'll become a good investor over time.

Yeah, absolutely. Well, let's jump into a little bit of the book here. At what point in your journey did you say, I think I've learned enough to write a book and provide value to other people?

There's a very interesting story about how this book came to fruition. So in November 2016, I joined Twitter for the first time and I started microblogging or just simply posting my thoughts on various subjects. Like philosophy, psychology, history, investing, etc. And within a few months of me joining Twitter, two people from India flew all the way from India to Salt Lake City, Utah, in U.S. to meet me and thank me personally for posting my thoughts.

Wow!

They were the ones who proposed to me the idea of writing a book. They said, "Why don't you write a book? You you know you write so well on Twitter. We love your thoughts. Why don't you write a book?" So now Steve Jobs has very aptly said that you cannot connect the dots looking forward, you can only connect the dots looking backward. For many years I had this habit of organizing all the content that I'm reading and my learnings from that content into a personal journal. And I also used to bookmark a lot of my favorite blog posts and articles. So I thought I have all this information with me ready and organized nicely by topic, why don't I simply write a book and sell it for zero royalty. I self-published the first version of The Joys of Compounding, was a self-published effort. I sold it for zero royalty because that time my only intention was to give back to others and to help the investing community from whom I have gotten to learn so much over the years. And I thought maybe a few like-minded individuals will also come in touch, you know, I'll form a nice small community with those people. That was a simple basic thought process. So I self-published the book and once it started taking off, then in May 2019 during the Berkshire Hathaway annual meeting in Omaha, Miles Thompson, the commissioning lead editor at Columbia Business School Publishing, he got to know that this book called The Jaws of Compounding is selling very well at the Omaha Airport Bookstore. And he got a call from the Omaha Airport Bookstore actually by Jim Ross. Informing him about the book. So he flew down from New York to Omaha to meet me in May 2019, and he offered me a publishing opportunity with them. And I just went numb for a few minutes, unable to digest what had happened here. You know, basically I just simply self-published a book, you know, as just my small little effort, and here, you know, was Columbia Business School Publishing, one of the biggest and mightiest publishing houses in the world, offering a publishing opportunity. With them. And for all value investors, we know that this discipline, our field of value investing originated from Columbia Business School because that is where Benjamin Graham used to teach value investing. So it's every author's quiet dream to work with Columbia Business School one day on an investing book. And here it was like a dream come true again for me. So first dream which came true was that of becoming a portfolio manager. The second dream which came true was that of getting published by Columbia Business School. So that's how basically the book got published and the rest is history. Today, The Joys of Compounding is an international bestseller in 6 countries.

And it sold over 50,000 copies, right?

Yes.

Can you imagine 50,000 different people opening up your book and starting to read your thoughts that were randomly organized before and now they're a book?

Right. And I think, you know, reading a book is the best way to get access to the life's— entire life's learning of any intellectual or any learned person. And I think we greatly undervalue, you know, what we get from books. For the price that we are paying, I think it's a bargain. And there is very less low downside and asymmetric and very high upside if we get it right, because you never know when— which one of these books can completely change your life. For example, Rich— you mentioned Rich Dad Poor Dad earlier. That book changed my perspective towards money and investing in general, because till that time, you know, the standard learning that we get from our parents is, you know, you know, study, get a job, that's it, you know, that's basically it. But Rich Dad Poor Dad teaches you how you need to become an entrepreneur, and that is how you get to shape your destiny in your life, and how to make use of, you know, how to have very good knowledge of tax regulations, because that's very, very— we are not taught financial literacy basics of tax planning in schools and colleges, but it's an essential life skill which all of us should know in detail.

When you were growing up, was the subject of money talked about in your household?

Not learning too much, to be honest. Not, not much. In fact, even I really developed a keen interest about money and investing only once I started working in a job, because I was living in one of the world's most expensive cities, Mumbai, in India. And there, basically, you know, the amount of savings that you can do with just a job income is very minimal. So I decided to understand, okay, you know, these savings are not going to get me anywhere just by letting them, you know, stay in the bank account. I need to make them grow. How do I make them grow? That is where learning all these investing books really came in handy, because my belief is that every person's savings, hard-earned savings, should work equally hard as that person did for earning that money in the first place. You know, we work, you know, we work and live our lives 24/7. Why should our money also not be working for us 24/7? That is how you can achieve financial independence, because it's very difficult to get rich only on a salary, because, you know, you get paid for doing, you know, this simple linear— solving simple linear problems in the job. But you get paid in a disproportionately high way for, you know, for seizing those asymmetric high-reward opportunities as an investor or an entrepreneur.

You just said something to me about, uh, yeah, can you repeat that line? Nothing teaches you as much as—

Nothing teaches you the biggest lessons of life more than an empty wallet and an empty stomach.

1,300 rejections as far as job applications go.

Correct.

Yeah, wow. Now, how many books do you think you read before writing this book?

Before writing The Joy of Compounding, I must have read more than 200 books.

It's interesting, you said you didn't grow up in a family where money was a subject talked about very much, but for the cost of Rich Dad Poor Dad, you can get access to somebody who can teach you about the subject of money. That's why financial literacy and reading are so interconnected. You can leapfrog yourself out of these situations and spend time with amazing mentors For $20, for $15, for $25.

Any problem that you're— that you have in your life right now, I can literally guarantee you that the solution is out there in a book somewhere. It's, it's a literal certainty because the, you know, in the entire world we have 8 billion people, and somewhere in the world someone has faced a problem similar to yours and has figured out how to get out of it. And most likely, you know, someone else or that person himself has turned it into a book. Find it, read it, learn from it, and change your life. Take control of your destiny because books are incredibly powerful. I mean, you know, books changed my life for the better. And if a person of average intellect like me can empower himself through reading so many books and learning from them and implementing those learnings most importantly and changing his life for the better, anyone can do it.

You're very humble to say that you are of average intellect because you are one of the most articulate people that I've met. You have an incredible story. Your willingness, your perseverance, and also your awareness to read these amazing books. So I would say you are above average intellect.

Well, thank you. But I think, you know, the key to, you know, just see, many people become successful, but to retain that success, I think we all need to have a sense of humility, a sense of gratitude, and a constant learning mindset, because that is the only way you can stay rich. Many people become rich, but But to stay rich you need to have these 3 attributes: humility, gratitude, and a constant learning mindset.

Yeah, absolutely. Getting rich and staying rich are 2 very different skill sets, right?

Very different skill sets. To become rich you have to take much more higher risks, swing for the fences at times. But when you want to stay rich you have to be paranoid about risk all the time. So a large part of my personal— most of my liquid net worth for example is invested in my India fund. To align myself with my limited partners. And now I'm absolutely paranoid about risk, downside risk at all times because my own money is on the line. Once you have skin in the game, that is when you start focusing on downside risk and preserving what you have. So I think incentives are very powerful and that's why in the book I've dedicated an entire chapter to incentives. Once you can understand how incentives work, I think you can do a lot of smart things in life. In fact, I highly recommend people to read Robert Cialdini's book Influence phenomenal book which talks about, you know, how you can leverage on the power of incentives. And Benjamin Franklin has also, you know, said this very aptly that, you know, if you want to persuade, appeal to interest, not to reason. So because most of human beings are basically looking out for the interest, you know, instead of selling a product or pitching a product, pitch a solution. You know, what solution are you providing? What problem are you solving? That is how you appeal to people's interest.

So I'm interested to learn a little bit more about your India fund. So if somebody's listening today and they're an accredited investor, what is the solution that you're providing with this fund, this investment opportunity that you have?

The single biggest solution I'm providing to investors in America through my India fund is diversification and reducing single-factor risk. I'll explain with an example. So in the last 2 years, Many investors in the American stock market have got destroyed because they were 100% overly exposed to one single factor risk— US technology stocks. That's it. And the moment the interest rate cycle turned, hundreds of those stocks blew up 70, 80, 90% in the last 2 years. Everyone was overly exposed to single factor risk. I always tell people, you should diversify across asset classes and across geographies because you never know when the tide will turn because many investors in American stock markets were simply the beneficiaries of all this cheap money printing over the last 13-14 years and long duration assets like technology stocks were the prime beneficiaries of a low interest rate cycle. Now we're in a different regime, we're in this— like Howard Marks has said recently in his memo, we're undergoing a sea change, very big sea change in the investment world. So you have to adapt and you have to diversify your assets and reduce factor risk. You cannot be exposed to any one single factor because the moment that single factor goes against you, you'll be wiped off. So accredited investors by definition are those people who have saved a decent sum of money and have a decent amount of net worth. You have spent so much of your life and you've done so much hard work to become rich. Now you want to stay rich as well, right? So you want to diversify your investment portfolio. That's basically how you grow your wealth in a sustained manner.

Now I remember reading in your book, The Joys of Compounding, that over-diversification can also be an issue as well, right? So how do you protect against that?

So as per a study published in the international bestseller, A Random Walk Down Wall Street by Burton Malkiel, it was shown that as the number of stocks in a portfolio reaches 25 to 30 names, the incremental volatility-reducing benefits of diversification reach near zero. And this is the sweet spot for an investor who's looking to outperform the market, have a diversified portfolio of 20-25 different businesses. This basically minimizes factor risk to a single industry. And also, 20-25 names is still manageable to track and study and monitor. So you get the benefits of good diversification, good healthy returns, and you minimize your exposure to factor risk.

Now correct me if I'm wrong, but the minimum investment in your India fund is $250,000?

Yes, that's $250,000.

Okay, so for most people in my audience, we're mostly ages 18 to 34, people in the US. I like to say they recognize the difference between where they are today and who they're capable of becoming. They're using these books and these interviews as an opportunity to close that gap. But they might not have $250,000. In fact, 98% of the audience probably doesn't have $250,000. And so if, if you were talking to me and I said, where do I start? How do I get into the world of investing? Blank slate, brand new. I have a little bit of liquid cash that I can invest and I want it to work for me, but I don't even know the first steps.

What do I do? The first step you have to do is start investing in a low-cost index fund. You can opt for an index fund offered by Vanguard. Again, this is not financial advice. Please consult your financial advisor before making any investment. But I always advise people, you know, go for an index, low-cost index fund first. Once you become comfortable with the volatility of the stock market, then you start graduating to actively managed mutual funds. And once you have developed a good level of learning and expertise, then you can start to pick stocks directly, or you can entrust your money to a fund manager in a hedge fund or a privately managed fund to manage your funds for you. So that's the natural progression. And how do you learn how to pick stocks effectively? You learn how to pick stocks effectively by learning from the best in the business. Pick up some of the all-time best investing classics: One Up on Wall Street by Peter Lynch, The Most Important Thing by Howard Marks, and Mastering the Market Cycle by Howard Marks is another great book. Common Stocks and Uncommon Profits by Phil Fisher is another great book. Read the classics on investing and implement the learnings from them. Once you become comfortable with investing, that is when you start to pick stocks directly, and that is how you build wealth over the long run.

Okay, so the low-cost index funds, something like the S&P 500, get involved once you understand a little bit more of the volatility. I've got some questions about the actively managed mutual funds. I've read across maybe half a dozen books here that The S&P 500 will outperform an actively managed mutual fund when you go out 20, 30, 40 years, 98% of the time. Do you think that's true?

That's very true. In fact, I'll add to what you're saying. There's a reason why that happens. It's because many of those active fund managers are just churning their portfolios over too much and incurring big transaction costs. They are also charging exorbitant fees. That's why after fees and trading expenses, the investor earns much more lower return compared to an S&P 500 index fund. In addition to that, I will mention one more important thing here. Just investing in an index fund will not save you if your personal behavior is not appropriate. What do I mean by that? So in the 20 years ending in 2018, the S&P 500 delivered 5.6% return पर अनुम, but the average investor in an S&P 500 index fund in America earned only 1.9% return for those 20 years, a gap of 3.7% per annum. Behavioral research firm Dalbar Research has termed this difference the behavior gap. What does behavior gap mean? It means investors chase the most recently outperforming fund, fund house, or fund manager. At the precisely wrong time when those fund managers or those fund houses are operating near the peak at high valuations, and they dump the underperforming fund manager and the underperforming fund house which has been underperforming recently at the worst possible time, just when valuations have become very reasonable and prices have corrected. This behavior of buying high and selling low is what leads to this behavior gap, and that is why Investors in even basic products like an index fund are much lower over time. Now Benjamin Graham has very aptly said that the investor's worst enemy often tends to be himself.

Yeah, I think that's true. Warren has that line where he says, be fearful while others are greedy and greedy while others are fearful, right?

Correct, that's it. Basically, you know, you buy when there's blood on the streets. But, you know, people ask me, okay, but what if it is my own blood? In that case, the best course of action is to do nothing. Just shut off from social media, shut off from all the business media channels, just focus on your work and your family. That is how you'll attain peace as an investor. Because if you keep— if you just open any news channel, see, the media's job is to grab eyeballs because their business model is based on advertising. The only way they'll get more advertising revenue is to get more eyeballs, right? And nothing sells more than fear. So open any business channel, open or open social media, people are just talking about all the bad things in the world. There is a war going on somewhere, there's a pandemic happening somewhere, there's a disease outbreak somewhere, there's a geopolitical tension happening somewhere, there's political crisis somewhere. Only bad news, bad news, bad news all day long. That's it. So, you know, the key to becoming a great investor is to remain in the game long enough without letting the problems of the world overwhelm you. That's basically what I've understood. And you don't— you need to develop reality-based optimism. Again, like I mentioned earlier, books are the solution. So you can read, uh, you know, Ryan Hansling's book called Factfulness. It will give you a great perspective on, you know, all the great things that have hap— that have happened in the world over the long run, over the last one century. That is how you'll develop a feeling of gratitude, and you'll start feeling grateful and optimistic about you know, how much we have progressed as a, you know, as a world in total.

And I know you're also a fan of Ryan Holiday's work with Stoicism. Stoicism has helped me improve my emotional intelligence and be a little bit less reactive to negativity and develop a more optimistic, more neutral mindset when approaching the world. And so just like you, when I see all of this craziness happening all over the world on news, I'm aware that That's how these news stations make money. That's how these social platforms make money, by mining our attention. And fear sells. It gets you to click into an article. It gets you to pay attention to the TV. And so you're right, reading these types of books can definitely improve your ability to view things from a state of neutrality.

Very true. Basically, you know, being a learned person helps you become more objective. It gives you objectivity and helps you become a more rational person because You know, things are never really as bad as they seem or never really as good as they seem. You know, basically it's somewhere in the middle.

Okay, so step 1, get into an index fund, understand volatility, watch how the market behaves. Step number 2, move your money into a managed fund. And step number 3 is to move it to somebody like you who's a little bit more active but also Well, you know, what is the difference between an actively managed mutual fund and a hedge fund manager?

So I've worked in a mutual fund before, you know, when I was working as a portfolio manager of global equity strategy. But most mutual funds in America are basically closet indexers. They're just trying to match the benchmark and they're holding 100 to 150 stocks in their portfolio. And nearly you basically become a quasi-index fund at that point of time. So you end up paying the active mutual fund manager his fees But you're getting the results, slightly worse of results than an index fund because you're paying more fees for essentially the same list of stocks which you get in an index fund. So I think, you know, index fund first, then actively managed mutual fund, and then if you can pick stocks directly, invest in stocks directly yourself or entrust it to a private fund manager.

So as a private fund manager, now this is pretty cool, I know Warren Buffett has complimented your fund structure. So what's unique about it? How are you leveraging his recommendations with the way that, that you interact with your clientele?

So, uh, Warren Buffett started his career as a hedge fund manager in the late 1950s. He used to run a hedge fund called the Buffett Partnership. So I've simply implemented the same, uh, fee structure as the original Buffett Partnership fee structure, in which I charge zero management fees, and I get compensated only after investors in the fund earn more than 6% returns per annum in US dollars, in US dollar terms. So this ensures that I'm not just getting paid for breathing. Most of the private fund industry basically gets a lot of management fees in which you end up paying the fees to the fund manager irrespective of their performance. But in my case, I've got a 5% compounding hurdle rate with a high watermark provision and zero management fees. So this enables me to align myself with my investors and When I wrote a letter to Buffett with my proposed fee structure, he wrote back to me praising the fund structure. And for me, that was the ultimate validation. I don't— I didn't need to get, you know, validation from anyone else. I thought, yes, now I'm following in my mentors' and teachers' footsteps, and I think I'm doing the right thing for my clients.

And I—

it's— I've learned this in life, that as long as you do the right things by your family and by your clients, the outcome ultimately takes care of— takes care of itself. The key is to avoid instant gratification because this desire for instant gratification is what leads us to opt for shortcuts and, you know, get rich quick schemes. That is when we spoil our reputation, we compromise with our integrity, and we go basically just sliding down. And that is what we want to avoid. Just have patience, have a long-term mindset, do the right thing by your, you know, by your family, by your clients, and In the end, if you do this for a long enough time period, you'll do pretty well in life.

Yeah, I think so too. Now let me ask you, how do you think about balancing instant gratification versus long— versus enjoying the moment? So let me ask that question again. How do you balance the importance of delayed gratification with enjoying the present moment?

So this is where in my book I've talked about a concept called minimalism. And minimalism does not mean being cheap. It means spending money only on those things that bring happiness to you and bring some amount of meaning to your life. Basically, this is how you get to manage and balance instant gratification with delayed gratification. At the same time, don't go overboard with delayed gratification. This is also very important. Enjoy your present reasonably well, but save some money and invest it well so that you can enjoy an equally good lifestyle or a slightly better lifestyle tomorrow. Inflation is a serious problem, as we've seen in the last 2 years. And every year, you know, you earn less than the inflation rate, you're losing purchasing power. So in order to maintain and preserve your purchasing power, you have to invest for the long run, invest in good quality assets, good quality businesses, patience. This is the key to preserving your purchasing power. So enjoy your present reasonably well, and, you know, also save a bit to enjoy your future just like you're enjoying it today.

What are some of the things that create enjoyment for you in the present moment outside of work, outside of investing?

So reading is one, obviously. Uh, travel— I love traveling and spending time with my family and friends. Uh, I'm also— I also like to watch, uh, Marvel and DC comic movies. I'm a big Marvel and DC comic movie fan. So I do have, you know, a few interests outside of my work, and they keep me busy during my recreational I'm curious.

Yeah, sometimes people ask me on podcasts, hey Nick, how many hours a week are you working? Or they'll ask me about time management, how many hours a week are you working? And it's interesting because reading was a hobby that I had before I did it professionally, and so I spend a lot of hours every week reading, and I'm not sure if I count that as work or not because just like you say, it's the intersection of what you enjoy personally and your professional life. So I'm curious, how many hours a week do you consider yourself working?

I don't consider myself working, to be honest. I'm just having such a good time, I don't even consider this as work anymore. It just feels like play to me now because even if I did not get Pennycrate, anything, I would still be tracking and investing in the Indian stock market anyway. So now that I'm actually— now that I've been able to make a business out of it, what could be better? This is when you Like I mentioned earlier also, right, when passion meets profession, true happiness and success follows. So I'm really blessed to have found my calling in life and to be doing something which gives me a lot of happiness every day.

Yeah, I feel the same way. There are so many people that wake up on Monday and they just dread their workday. They're doing something that's misaligned. Their passion and their profession are not aligned whatsoever. And what, what, how do people find this outside of Ikigai? They could read Ikigai, they could study it, but You know, I'm curious, like, at what age did you know that you wanted to be involved in the world of investing?

It took a long time, actually. In my early 30s, I was probably 31 at the time when I got to finally discover my passion. And there's, you know, again, there's a, again, a very, uh, intriguing story behind it, so I'll share that with you. So I mentioned earlier that I came to the US. I was working in a minimum wage job. It was very difficult to make ends meet. I was living as a— I was living in a small room as a paying guest. In the outer suburbs of San Francisco. And I remember one fine night during, uh, summer, you know, summer of 2000— it was summer of 2016. One fine night I was, you know, reading a book by Carol Loomis on Warren Buffett. It is called Tap Dancing to Work. After finishing the last chapter of the book, I got to realize that there is a newer version of that same book which has got one additional chapter in it. I did not want to spend money on purchasing the newer version of the book. So I basically stepped out, I exchanged 2 buses in the middle of a big rainstorm. I got completely drenched while waiting for those buses at the bus stand, even though I had an umbrella with me. And I finally reached the downtown Barnes& Noble bookstore in San Francisco, went inside the store, and read the final chapter of the book inside the store to save myself a few dollars. And when I came back that night from that experience back to my room, I could not sleep that entire night. I was just absolutely spellbound by what had just happened, that I've just discovered my calling in life. This is what I love to do. Because passion can make you really move boundaries in life like I did that night. So I think that was a true moment of awakening and calling for me that night.

Wow, it's an amazing story. So you, you had one chapter left to read and you endure the rain, the late night, you sit inside of Barnes& Noble and you read the book.

Yes, I had a monthly bus pass at the time, so I did not have to spend money on the bus ride. So I thought it's a good deal, let me just do this.

I think I could use a little bit of that minimalistic thinking. You know, I read in Ramit Sethi's book I Will Teach You to Be Rich, he says, cut ruthlessly on the things that aren't meaningful to you and double down and invest almost blindly in the things that really do mean to you, mean something to you. And I think I could cut a little bit more ruthlessly on some of the things that don't mean as much to me.

Yeah.

Interesting. So, if somebody's listening to today's show and they say, oh wow, Gautam's an amazing person, He's clearly very articulate. He's read a lot of amazing books, but I'm not sure if this book is a good fit for me. I'm curious, from your perspective, who is the target reader for this book?

So this book is for everyone. I think investing is an essential life skill, and lifelong learning is also an essential skill to have. So the first half of the book will teach you how to become a lifelong learner. The second half will teach you how to become a better investor. And both of these essential life skills I meant for everybody in the world, irrespective of wherever they live. So I would highly recommend this book to everyone who's listening to this podcast.

Yeah, I would as well. I've, uh, I've been joking around quite a bit because I have a book coming out later this year that your book, at least the first section, is a much better version of the book that I'm trying to write right now. You have a very mature voice. You reference a lot of fantastic studies. You have amazing quotes throughout the book, and it just feels like if I had 2,000 more hours to put into writing the beginning of my book, it would come out something more like this.

So small efforts add up to a lot over time. So I remember, you know, how I used to write this book. So from the morning, uh, in my previous job, I used to work from morning 8 AM to evening 5 PM, and every single day without fail, 7 PM to 10 PM, I would work devote 3 hours to writing this book. It took me 2 years, and if you just do this basic math, it took me around 1,500 hours over 2 years. Now, when you tell someone you have to put in 1,500 hours, that guy can become very overwhelmed with that quantity of effort. But when you break it down into manageable 3 hours every day— consistency is the key to compounding, and that is basically how you can, you know, achieve greatness in life, just by keeping at it one day at a time and putting your best foot forward. That's how you— that's really all that there is. There is nothing like an overnight success. It's simply this series of small steps over a long period of time which lack that one key to tie it all together. And, you know, eventually your time will come. You just have to have the conviction and the patience.

Yeah, I can agree. We've had a couple of billionaires on this podcast, and what I've realized is that The entire spectrum of guests we've had, nobody's been an overnight success so far. We've had over 100 well-known entrepreneurs and authors, people who have sold anywhere from thousands to millions of books. None of it happened overnight. None of it.

Yeah.

And there's always some sort of story just like you told, out in the rain waiting to go read an extra chapter of the book. There's always something like that that was a foundational building block in somebody else's success.