We Study Billionaires - The Investor’s Podcast Network - TIP 004 : Mohnish Pabrai and Dhandho Holdings (Investing Podcast)

Starting point is 00:00:00 This is episode four of The Investors Podcast. Broadcasting from Bel Air, Maryland. This is the Investors Podcast. They'll take complex things and make them seem insanely simple. They make your boring drive-to-work feel exhilarating. They give you actionable investing strategies. Your host, Preston Pish, and Stig Broderson. Hey, how's everybody doing?

Starting point is 00:00:31 And this is Preston Pish, and I'm your host for The Investors Podcast. And today, I'm accompanied by my co-host, Stig Broderson, and we have a special guest, Hari Ramachandra. So, Hari, let's go ahead and just kick this thing off. Give us a quick introduction of who you are. And before we do that, Harry, I just want to open up and tell everybody how we know each other here. So last May, whenever I was at the Berkshire Hathaway shareholders meeting, I was in the airport getting ready to fly out at Omaha, and I bumped into this general.

Starting point is 00:01:01 Roman Hari Ramachandra. And him and I were starting to chat. He was wearing a LinkedIn jacket, and I was asking him about his background. And he's an executive over at LinkedIn and was with the company at the start whenever they first launched. And so Hari and I just kind of kicked it off and just started talking there in the airport. And it turns out that we had a lot of interest in common. And we've just kind of stayed in contact over email since that time. And so recently, Hari went to a shareholders meeting.

Starting point is 00:01:31 for a individual by the name of Monish Pabri. And Monish is a follower of value investing, particularly the same type of investing that Warren Buffett does. And so, Hari went out to his shareholders meeting. And what we're going to discuss in this episode is what Harry's experience was like whenever he was at that shareholders meeting. So, Hari, go ahead and tell us about yourself. And we'll just start right there.

Starting point is 00:01:56 Thank you, Pristian. Thank you for having me on the show. it's fun to be talking to you guys both today. As you said, we met in Purchair Hathaway, Shareholders meeting. In fact, while we were just heading back home, to answer your question, as you mentioned, I've been in the software industry for past 15 years and I work at LinkedIn. But the way I got introduced to stock market was early in my career. I got some stock options.

Starting point is 00:02:28 and I had no idea what to do. And I saw everybody around me trading. Software engineers are not great investors, by the way. They're brilliant folks, but they're not usually great investors. And most of the time, we try to or we at least kid ourselves that some skills are portable. So we think that we are good at coding, so we are good at investing as well. So I just followed the herd around me. I started trading, I did charting, I did options.

Starting point is 00:03:01 I did all things. And most of the time, I lost money. And fortunately, I didn't have much money to lose then. But even when I made money, I didn't know how I did. Because it felt like random luck most of the time. Around that time when I was so frustrated about all the money I had lost, I got introduced to Warren Buffett. by one of my friends.

Starting point is 00:03:30 I picked a couple of his books and I got hooked. I read more. I read books that he recommended, like The Intelligent Investor by Ben Graham, and that's how I got introduced to the world of value investing. Yeah. And you made a point there initially about, you know, software, engineers, mathematical type people having trouble initially.

Starting point is 00:03:57 and I can empathize with that because I know whenever I first started out, and I think Stig can probably agree with this, is that whenever you first started out, you're very analytical and you're just going by the numbers. Once you kind of figure out how the math and all that kind of works with investing, you're by the numbers, and you're not doing anything with like this quality type feel to it. And as, you know, I know personally for myself, as I continue to learn more, you really have an appreciation for, you just can't plug numbers into some calculator and get the answer of, I need to buy this stock. There's a lot more to it and there's a lot more quality with brands and goodwill

Starting point is 00:04:32 and all that kind of stuff that I think a lot of people don't really, I don't know, give credit due to that kind of stuff. You made a very good point. In fact, the problem with most of us engineers is that we love precision, but many times we confuse precision with accuracy. So I think Buffett has famously said, or maybe it was John Menard Keynes, that it's important to be in the right direction,

Starting point is 00:05:01 even if you are like in a few meters off. But if you are going north instead of south, then all bets are off. Yeah, I totally agree with you. Okay, so that's a little bit of introduction. I think you guys can all see that Hari's a pretty hardcore value investor, has adopted a lot of the same things that Warren Buffett has adopted. So let's go and talk about this Monish Pabri.

Starting point is 00:05:25 And Stig, you know, I kind of stole your question there, but... Don't think about it. All right. Let's go to the second question here, which is, Hari. Who's Monish Pabri? So Monish Pabri is a value investor and a businessman. In fact, he started out his career in information technology. He worked for TEL Labs in the early 80s before starting his own software consulting company

Starting point is 00:05:54 called TransTech, which he later sold to a equity fund. So according to him, he started another venture after that, but where he lost most of his fortune, and that's when he discovered Warren Buffett. And he says he got hooked to value investing, and he read all the books he could get hold of, which was either about Warren Buffett or value investing in the following years. And one less known fact about money,

Starting point is 00:06:24 Pabra is that he in fact wrote a letter to Mr. Buffett offering to work for free without pay. That sounds pretty familiar. Yeah. And Buffett promptly responded, but politely declined. Fantastic. Yeah, as Buffett says, you know, when he wants an opinion on his investing decisions, he looks at the mirror. He doesn't want any investing help. It's funny.

Starting point is 00:06:52 That's what Ben Graham did, the Buffett. He turned him down on the initial offer, as my understanding, is that Buffett offered the work for free, and Graham kind of turned him down, and then later on he ended up working for him. But it's kind of ironic that the similar story. Yeah, definitely. And maybe Pabroi was not as persistent as Buffett because he then went ahead and started his own fund. Yeah, he was already a multimillionaire at that point. Yeah, exactly.

Starting point is 00:07:16 That's interesting. Oh, yeah. But tell us, Harry, how did you get interested in Pupraai's funds? Sure. As I mentioned, Pabri comes from the software industry. He's a first generation immigrant from India. So there were a lot of things in common enough to make me curious about him. So I started reading about him and then look through his investments, his investment style and listen to a lot of his talks. And also, I was very interested in one of his philanthropic projects. He calls it the Daksina Foundation, where he where he and his organization educate underprivileged kids in India and help them get into the top schools in India and abroad. So a lot of these factors contributed to my curiosity about Monash and his philosophy of life and investing.

Starting point is 00:08:11 And that's how I started following him. I love that. So in the show notes for this episode, we'll make sure that there's a link to that fund that you're referring to there, Hari. So that's awesome. Yeah, that's really cool. Okay, so I have a question.

Starting point is 00:08:24 So I'm really big on books and I'm really big on finding somebody that I really admire and then reading whatever book they have or finding a book that somebody else has written about them just so I can kind of really understand that person's thought patterns and kind of how they got to where they are. So I know that Pabri has a couple books out there. I have personally not read them and I was curious if you had read any of his books. Sure. There are two books out there which are, I guess, on Amazon. One is the mosaic.

Starting point is 00:08:53 The other one is Dhando investing. Mosaic is out of print. I have not read it. However, I have read Dhando investing, which is a fascinating book. The book talks about the philosophy of investing, mainly Pabraised philosophy of investing. He also talks about how a little known Indian community, they are called the Patales. They're probably less than 0.2% of the entities. entire population of United States who have immigrated here, but they control three-fourth of all

Starting point is 00:09:28 the motel business in U.S. So he talks about how they operate. And through that story, he introduces investing. So he connects business and investing very well together in that book. And one of the key takeaways for me in that book was my perception has always been, especially being in the Silicon Valley, that if you're an entrepreneur, your risks. savvy or a risk taker, you're like this Richard Branson who is ready to jump off a cliff. And like, risk is in your blood. But Bob Reyes says, a true entrepreneur shies away from risk. In fact, he will do anything to reduce his risk, but he will embrace uncertainty.

Starting point is 00:10:13 And in his own words, his tagline is, heads I win, fails, I don't lose much. So that was fascinating. take a quick break and hear from today's sponsors. All right, I want you guys to imagine spending three days in Oslo at the height of the summer. You've got long days of daylight, incredible food, floating saunas on the Oslo Fjord, and every conversation you have is with people who are actually shaping the future. That's what the Oslo Freedom Forum is. From June 1st through the 3rd, 2026, the Oslo Freedom Forum is entering its 18th year,

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Starting point is 00:14:34 That's a good quote. Stegg, you look like you had something you want to say. Oh yeah. So, Harry, I think that you probably thought about this as well. because I've been reading up on this when he's pap rai. And to be honest, I really wasn't that familiar with him before this interview. But it seems to me when I read some of the things that he has written and some of the answers that he is giving to people at the annual meeting that he's holding, that he's very much into Warren Buffett, very much into Benjamin Graham.

Starting point is 00:15:04 So I'm a bit confused why someone would invest with the pap rye instead of investing with Warren Buffett. That's a great question. In fact, one of the things that comes across when you listen to Pabri, he is a self-proclaimed cloner. He is an R.N. fan of Warren Buffett, and he says that everywhere. In fact, he says that he has no original ideas and he's proud of it. One of the reasons you might want to consider investing with Pabri is that his capital...

Starting point is 00:15:43 Because he's not 86? Yes. That's a good one. He's not 86, but Buffett is still going strong. It's hard to beat Buffett even when he's 86. I don't know if that's his right age. Is he really 86? I don't remember.

Starting point is 00:15:59 I thought he's six years younger than Munger. So Munger is 90 plus. So he must be 83 or 84. Okay. He's old, though. So as I said, said, you know, like I had read a book by Thomas Phillips. The book is 100 to 1 in stock market, where he describes the dangers of ego in business and investing. And he says most miseries of

Starting point is 00:16:25 investors are due to their unwillingness to accept ideas other than their own. Wow. There's something to write down. I mean, I totally agree with that. I, you know, for a leader or for an investor, it doesn't really matter who you are, what you're doing. I mean, your ego will get in your way and it'll just crush everything. So, I mean, I can't agree with that anymore. It's awesome. Perfect. Yeah, I highly recommend that the book 100 to 1 in stock market.

Starting point is 00:16:53 I believe this was written in the 1960s, but it's a great read. And it talks about a lot of stocks that you could have bought in the 60s that would have made if you had invested $10,000 in those companies, it would be a million in 15 years or 20 years. Wow. So coming back to Stix question, one of the advantages Pabri has over Buffett is the law of large numbers working against Berkshire Hathaway.

Starting point is 00:17:26 I would think of Pabri as Buffett in his early years when he was working on his Buffett partnership. So his style is very similar to how Buffett used to invest when he used to invest for his partnership rather than investing for Berkshire Hathaway. And so a lot of people might not realize this, but Berkshire Hathaway has actually gotten so big. And Buffett, you know, he says this, that he's actually starting to become handicapped because he's moving so much capital that the smaller to midcap type companies, whenever he puts money into those smaller organizations, he really doesn't get that much of a, uh,

Starting point is 00:18:05 growth spurt over the whole size of his company because it's just such a small portion of his portfolio. So he's like forced to invest in these big, large cap businesses in order to get any type of, you know, 5% movement in his overall company. And so what, you know, Hari's kind of referring to here is with Pobri, you're able to invest in the same philosophy in the same exact way, but you're doing it on a much smaller portfolio, which allows him to have larger movement on the on the fund itself. So that's one of the claims that Harri Scott here with his response. Okay, so here, I've got another question for you. I read that to get into the fund, it required a significant amount of capital in order to initiate and to step into the fund.

Starting point is 00:18:52 I even read as high as $2.5 million in order to step into it. I'm just kind of curious, is that true, you know, is it really require that much funds to just kind of step into it? And is there any other nuances that you'd want to highlight? Yes, it is true. In fact, most of his funds are close to new investors today. One of the reasons why Pabri tries to keep the hurdle high is that he wants to attract a specific type of investors to his funds. And his favorite target is a successful entrepreneur or a businessman who has made fortune

Starting point is 00:19:32 in his own line of business. But he is not investing all his nestsick with Pabrii, which means he has staying power. And also he would not panic in and out of his fund. So Pabroi wants to limit the churn rate and also attract the right kind of investor to his funds. And in fact, interestingly, when I was in the annual meeting, I met a couple of investors who were his early, investors in his funds. And it was as low as $200 to $250,000 when

Starting point is 00:20:10 Pabai started back in 1999. So over the period of time, I believe he has increased the hurdle rate. Wow. Limit. I mean, I totally understand why he would do that. You know, I get asked a lot of the times by people, you know, why don't you start your own fund and this? And for me, I immediately reply back, well, I don't want to be handicapped by people taking the money out of the fund at the wrong time or giving me the money at the exact wrong time with the way that the market swings. And so when you have a person like Pabri who's doing this, he's forcing people that are an educated shareholder or educated investor into his fund so that they don't give him money at the wrong time or pull money out whenever he needs it most so he can buy undervalued

Starting point is 00:20:54 equities. That's kind of a really interesting approach that he was able to do this with a fund because he kept that threshold at such a high dollar amount. Would you agree with that, Hari? Yes, I do. And he also has a restriction of one year so that if you invest with him, you cannot pull your funds out for the entire year. But at the end of the year,

Starting point is 00:21:17 if you have any family emergency or if you need the money, you can always pull it out. That's really interesting. A lot of people might not realize this, but with Berkshire Hathaway, Buffett basically has the exact same model with his A shares, which encompass a majority of his entire portfolio as far as the value. So his, you know, when you look at his A shares, there are over $200,000 a share just to buy one share.

Starting point is 00:21:42 If you're buying the Bs, you can get them for right now. I think they're almost $140 a share. But that makes up such a small portion of his overall portfolio, those B shares, that it doesn't really have any impact over the total valuation of the business. So it's really interesting to see that both of them had the same exact model. Yeah, in fact, when somebody asked, how did you start your fund? Barbara answered that, like, you know, he looked around and he had already read about how Buffett had structured his partnership, and he saw that nobody was copying it for years.

Starting point is 00:22:17 So he decided to just clone it exactly how Buffett had done it. So his fee structure is exactly what Buffett had for his partnership, that is no man. management fee and one-fourth of the returns after 6% of annual returns. So that's very interesting. And he says, like, you know, he's surprised that nobody cloned Buffett's partnership for a very long period. Oh, yeah. And that's also really something that surprises me because Warren Buffett is very keen on

Starting point is 00:22:49 teaching everybody about investing. And he's not holding anything back. So since Warren Buffett has been so keen on. you know, telling what he's been doing, why do you think that so few people as Pop Rai are actually doing the same thing as Warren Buffett, Ari? That's a great question, stick. In fact, I believe Charlie Munger answered it the best

Starting point is 00:23:13 in one of the annual meetings. When somebody asked, why aren't people following this method? He said people would die before they follow this method. That's because it works against a lot of, of human nature. There is more psychology involved here than intelligence. As Buffett says that if you've got a lot of IQ, give it away to somebody else because you need more temperament than intelligence in investing. To follow Buffett's methodology, you need to have patience. Also, you need to defy instant gratification. You should understand the business. Investing should be

Starting point is 00:23:58 the process should be appealing to you rather than the end result. And also, it's just the nature of investing business, I feel, that a lot of fund manager, even though they know what's the right way to invest, like following the Buffett's way, they're not able to because their investors are not patient with them. many funds, like, you know, if they are not able to show results quarter over quarter or year over year, investors would pull their funds out of such funds. And hence, to survive, they have to follow the crowd, show the results. If they go down along with the market, nobody complains.

Starting point is 00:24:41 But if they lack the market, then people will pull out their funds. So in investing world, I believe it works both ways. Yeah, I have a point real fast. So a lot of people don't realize this, but Berkshire Hathaway, a lot of people think that Berkshire Hathaway is a fund. They don't think that it's an actual company, but it is a company. And one of the things that I think is really unique that Buffett's done is he's actually taken this, you know, people, the shareholders are giving you the money, or if you're

Starting point is 00:25:11 in a fund, I should say, they're giving you the money at the wrong time. They're giving you all the money whenever the market's climbing, and then whenever the market crashes, they're wanting to take that money away from you, which, totally handicaps that fund manager from being able to buy stocks and equities at a very cheap price whenever the market had crashed. And so what Buffett did is he literally took that model and flipped it on its head. Okay. And because it's his own company, he actually has the opportunity that whenever people want to

Starting point is 00:25:37 sell his company at a very cheap price, he then as a shareholder or as the manager of the company can just buy back those shares in an extremely cheap price. and then if the, let's say the market was overvalue in Berkshire extremely high, he could actually issue more shares in order to collect, you know, cash for those shares. He hasn't done that, but he could. And he's basically taken advantage of that market psychology so much so that that's how he modeled his company. And I, you know, I wouldn't be surprised if Pobri would somehow do that in the future if he felt like, and I think he's really kind of protected himself with the threshold that it costs to get into his fund.

Starting point is 00:26:15 But, you know, this is really interesting how these gentlemen have basically protected themselves from those types of investors and those types of people that would be investing in their fund or their company. Yeah, Pristin, in fact, you made an interesting point. Barbara is actually cloning the Berkshire model as well. In fact, he announced Dundo Holdings in his annual meeting this year. There you go. And his, this Dundah Holding will be a holding company. the first acquisition is a insurance company called. Oh my gosh, he is cloning them.

Starting point is 00:26:52 A lot of people don't know this, but Berkshire's biggest engine is Geico, which is a huge insurance company. So that's amazing. Yeah, so the first acquisition is actually an insurance company. It's called a Stone Trust Insurance, and they're into worker comp.

Starting point is 00:27:08 So I can see that, you know, Monish is now going after the float. and also I think his plan is to acquire more subsidiaries wholly owned, but he said he will also not shy away from investing in public companies or creating a portfolio inside the underholdings. So he is essentially creating a new Berkshire. Let's take a quick break and hear from today's sponsors. No, it's not your imagination.

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Starting point is 00:31:00 That's a good question. The meeting was in Soko University near Irvine. One of the interesting thing that I found was it was a casual atmosphere. There were fewer than 200 people there. Most of them were either his investors in his funds or bloggers or people like me who follow him. And since it was a small crowd, Monish walked around before the meeting started, shook hands, introduced himself, spoke to most of us. And even after the meeting, he had hosted a dinner for all the people attending the meeting.

Starting point is 00:31:40 And during the dinner, we could all get one-on-one time with Monash for a couple of minutes. We talked about investing his philosophy about life, current matters. So it was a very friendly atmosphere. In fact, I have heard about Berkshire Hathwa's annual meeting during the early 80s where there were very few, probably a couple dozen people attending those meetings. I kind of felt maybe it is similar. And I feel like those people should be very privileged because they could have interacted with perfect, asked him questions and picked on his brain on a lot of topics.

Starting point is 00:32:18 So yeah, it was fun. And yes, we could talk to Monish. Okay, Harry sounds like a great meaning and sounds something that I want to attend myself. What was the main takeaway that you got from this? meeting with Mr. Pabrai? So one of the main discussion points in the meeting was Dundah Holdings. And my main takeaway was that if, according to what Pabrae says, if it goes according to the way he is planning, Dundah holding can be a great entry point for many investors.

Starting point is 00:32:50 But I would also like to caution that we don't know how he will operate Dundah Holdings. and we don't know whether he'll be able to replicate Buffett's performance with Berkshire. But nonetheless, I would be interested to look into his company. By the way, the Underholdings is planning to go public in 2015. I was just going to ask you that question. Okay, so he's going to take the thing public in 2015. He'll probably bring the initial offering price per share, probably at like a $100,000 price point, I'd imagine.

Starting point is 00:33:27 Did he mention any of that, like what price you point you'd bring it in at? No, he didn't go into the details. He did mention about the plans to go public. I love this. This is awesome. Yeah. So it will be an interesting, interesting kind of, you know, structure for sure. Right now, it's structured as a special purpose investing vehicle,

Starting point is 00:33:51 which means that he has certain time limit before. the money is pulled back out of this out of this holding if it is not invested. So he has few investors who who have pulled in money for him. And he is looking into acquisitions. And one of his main acquisitions is the insurance company. I just mentioned if it goes through and then the holding will come into existence this year. And hopefully by next year they'll take it public. Well, so everyone out there, if you, if you're,

Starting point is 00:34:23 worried about Buffett's age and you're worried about Berkshire Hathaway and where it's going over the next 30 years. You might have something interesting here with Pau Brii funds and his new holding company that he's standing up. Stig, you have one more question? Oh yeah. So, Harry, this is one question that we like to ask our guests. Because something that I have benefited tremendously from is just one single investment advice. But let's first hear from you. What is the best investment advice you ever received?

Starting point is 00:34:52 That's a very good question, stick. And it's a hard one to answer because there are so many investment advice that you would have got, especially for me from Mr. Buffett and Mr. Charlie Munger. I have read so many of their books and also learned a lot. However, the one that made a big impact on my way of thinking was from Howard Marks and it was from one of his memos on Risk and Ritons to his investors. In that, he says, in life and investing, you can't expect above average returns by doing what everyone else is doing.

Starting point is 00:35:33 To me, this is simple and profound, and many times at least I had it hard time to really get this message. Buffett has been talking about it when he says, be fearful when others are greedy and be greedy when others are fearful. Essentially, they're talking. about being a contrarian investor. However, most of us try to follow the herd. At least I have

Starting point is 00:35:59 been following the herd. Whether it's value investing or trading, you find comfort in following the crowd. And the reason is that through evolutionary psychology, it has been understood that our ancestors were equipped with certain way of thinking which kind of, you know, help them make quick decisions. And one of those is if all the animals are running in one direction, there must be some dangers or run along with them. So it's very hard to sometimes overcome that and it requires a lot of discipline. I think the best way to overcome what you're talking about is knowledge. So I think a lot of people when they're investing, they follow this group think and they follow this, you know, herd mentality because at the heart of it in the essence of what's actually happening, they

Starting point is 00:36:51 really truly don't understand what they have their money in and what it represents. And I think that the more that a person understands and immerses themselves in it, and what is a stock, what does it represent, what's behind on the balance sheet, what's on the income statement, what does what do those numbers mean? I think when a person starts educating themselves with that information and that knowledge, it is so much easier to think different than the crowd and to go in the opposite direction because you truly inherently understand what the essence of what it is at you own. Oh yeah.

Starting point is 00:37:24 So I definitely agree with you. Knowledge is really the key here. And I think that pretty much also wraps up the whole thing that Warren Buffett and Mr. Popperer is talking about here. That's really that you really need to have knowledge to not do the same thing as the hurt. So, Hari, if anyone from our audience would want to be able to, get a hold of you or learn more about you or what you write. I know that you have a blog. Where could they find you at? Yes, Preston. So I share my experiences and my learning in my blog,

Starting point is 00:37:55 it's bidsbusiness. WordPress.com. It's BITS business. And anybody can interact with me there. I have a user request form as well, which they can kind of ask questions and I'll be glad to answer. I know one of the things that I went to Hari's blog for is he sometimes does a recap of discussions from some of these shareholders meetings. So if you wanted to see some of the notes from the Berkshire meeting, Hari posts that on there. He posts a bunch of really quite interesting articles. So I highly recommend that it's Bits Business in order to find Hari. And we'll have a link to that on the show notes. So if there's anything that you're interested in, whether it was a book we were talking about or any of these websites,

Starting point is 00:38:41 We're going to all have that on the show notes for The Investorspodcast.com. Just go to episode four, and you can find all those show notes. So if you have any question for us, we want to hear your voice. Go to Asktheinvestors.com right there. You can record your question. We'll play it on the show. And if, for whatever reason, your question does get played on the show, we'll send you a free sign copy of our book, the Warren Buffett accounting book. Be sure to tune in next week.

Starting point is 00:39:07 We have an episode and an interview with a former trader from the floor of the New York Stock Exchange. His name is Mr. Greg Pissani, and we're really looking forward to having him. So I'd like to thank everyone for joining us today, and we'll see you next week. Thanks for listening to The Investors Podcast. To listen to more shows or access to the tools discussed on the show, be sure to visit www.w.com. Submit your questions or request a guest appearance to the Investors Podcast by going to www. www.com.

Starting point is 00:39:39 If your question is answered during the show, you will receive you. a free autographed copy of the Warren Buffett Accounting Book. This podcast is for entertainment purposes only. This material is copyrighted by the TIP Network and must have written approval before a commercial application.

We Study Billionaires - The Investor’s Podcast Network - TIP 004 : Mohnish Pabrai and Dhandho Holdings (Investing Podcast)

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