This essay’s title is the best nugget of worldly wisdom I have ever received. Ajit Jain is, by a wide margin, the most reclusive among my role models. Everything he’s ever said or written in public domain can be covered in a few hours. Over half of this content came from when he accompanied Buffett on an India trip and he, perforce, had to join Buffett’s interviews. In one such interview, Ajit was asked how he thinks about his legacy at Berkshire. He characteristically replied that he didn’t find it helpful to think of such lofty things. Then, he uncharacteristically volunteered an answer to a better question that hadn’t been asked: what do you actually think about? I paraphrase, but Ajit essentially said that he constantly thinks “I hope I haven’t done anything stupid today”.
It sounded odd, coming from the world’s foremost expert on real-world risks and odds. It is fascinating to study some of his big insurance contracts that find mention in Berkshire’s annual report (e.g. insuring NCAA bracket prize money) or Berkshire’s long-dated put options on equity indices (with ridiculously favourable odds and terms). I believe that his evening calls with Buffett are the modern day equivalent of the correspondence between Pascal and Fermat. On further reflection, what he said wasn’t odd at all. It’s probably at the core of what makes him the foremost practitioner in his field.
Ajit’s words are as practical as they are profound. It guides any investor on what to do every day, in every context. “What am I missing” is the overarching question for people like me. My world splits into two buckets: businesses I already own and businesses I’d like to own. In the first bucket, I keep chewing over what can make owning stupid. Balance sheet stretch? Market share loss? Distractions from core? Big acquisition? Self-goal? Disruptive managerial transition? Wrong investment thesis going in? Further, all businesses in my first bucket aren’t equivalent. A few already make me uncomfortable, in light of such developments. Most of my mindshare goes into what I am missing in thinking correctly about these businesses.
There’s a similar thought process around my second bucket. I know the few that are close to buyable, assuming I am roughly right about risk and business quality. Again, for this short list, I fret over “what am I missing”. This could be in either direction, inadequate or excessive margin of safety. Are there risks I should avoid, which I am trying to price? Have I correctly assessed materiality of different risks? Am I too aggressive or cautious about how I price them? Perhaps, a business is already buyable and I have been too stupid to realize it.
In both buckets, asking the question matters more than answering it precisely. With a sensible process, the most common answer might well be “nothing much”. Even with a company that seems in trouble, I may not actually be missing anything if ‘trouble’ is merely the inevitable vicissitudes in any business’s trajectory. With a company that’s done exceedingly well, it’s worth asking the question to check if there’s anything anomalous about its outlier performance. While this helps weed out those that are too good to be true or too good to sustain, there’s nothing ‘missing’ in some businesses which are simply good all around. A null answer may well be the most valuable answer in such cases. The idea of asking the question isn’t to panic, freeze or exit, but to take nothing for granted.
In many MBA-type jobs “what do you do all day” is a surprisingly hard question to answer. It’s especially so in investing, given an indulgent, slovenly, eccentric existence built around reading all day, punctuated by an occasional call from a Swiggy delivery boy. Ajit’s wisdom is the closest I have come to answering this question, at least to myself. I spend all day trying to not be stupid about a few businesses that matter.
I publish this essay, thinking “I hope I haven’t written anything stupid today”.
[PS. I have recently and involuntarily taken up a second job. I provide support services to a reluctant 1st grader’s online schooling. Duties include tech helpdesk, facilities management, just in time delivery of supplies, document scanning/printing and general maintenance of good humour. On most mornings, I check Kiddo’s email before I check mine. As a result, cognitive load and intraday interruptions have increased manifold. Concentrated writing of longform essays is no longer tenable. I’ll stick to shorter and/or sillier pieces until something changes.]