An Investing Lesson from Prime Minister's Latest Podcast with Nikhil Kamath

Nikhil Kamath finally released the much anticipated podcast with India’s Prime Minister Narendra Modi this weekend. As an ardent follower and believer in PM Narendra Modi’s policy making initiatives, I watched carefully as the two chatted on topics ranging from his early childhood to what it takes to be a politician in India.

In the entire conversation there was one question that stood out for me as an investor – on being asked as to how the PM manages anxiety during critical junctures of his political career, the PM said “I hold such a position that I have to control my emotions – the natural tendencies that human beings have, I will have to stay detached from all of that. I will have to rise above all that. For example, in 2002, there were elections in Gujrat. It was the biggest challenge of my life; I never watched TV and didn’t check the results”

I feel this particular mindset in life is highly relevant and important in the world of investing. In this world where we are bombarded with constant updates from social media, news channels etc. etc., staying detached from all the noise that surrounds us is increasingly becoming difficult, and staying in control of our emotions is the single biggest skill required in investing.

WHY? Because great businesses and management teams tend to compound capital at higher than average rates of return in the long term, but the short term for most of these businesses is full of noise such as volatility in earnings, stock prices, attrition in KMP etc. etc.

Great investing outcomes are a true result of buying right and holding tight for a very long period of time, and therefore not reacting emotionally to the constant barrage of short term noise becomes extremely important in differentiating the good from the great.

“Success in investing doesn’t correlate with IQ, what you need is temperament to control the urges that get other people into trouble in investing” – Warren Buffett