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Invest only when the odds are overwhelmingly in your favour, that is, valuations are very attractive. Investing, according to the author, should be treated as a game of probability. He is an acolyte of Warren Buffett and Charlie Munger and admits to having borrowed liberally from their value-oriented approach. He sold his start-up - which he had launched with a meagre capital of $100,000 - for $20 million in just 10 years. You must, of course, be astute enough to be able to distinguish between assets that have suffered only a temporary setback versus those that have got permanently impaired. As conditions improve, beaten down assets begin to perform and turn into money spinners. The upside - what you can make - is potentially very large. He then turns them around with competent management.īy buying an asset at a very low price, you curtail your downside risk - the maximum you can lose.
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Since no other entrepreneur will touch closed steel mills in places like Kazakhstan with a barge pole, Mittal is able to buy them for 10 cents to the dollar. Steel is anyway an industry whose economics are considered unattractive. He buys steel plants in distressed geographies amid depressed economic conditions. Lakshmi Mittal, the steel magnate, also personifies the 'dhandho' approach. From those humble beginnings, the community has amassed motel properties in the US worth over $40 billion. They pared operating costs to the bone by removing hired help and deploying family labour. The Patels bought motels at very low prices.
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The USA's motel industry was then in a recession. The Patels, who were driven out of Uganda by Idi Amin, landed in the US in 1972 as impoverished immigrants. Pabrai begins his book by citing examples that illustrate the 'dhandho' way of investing.