Reviewing “The Dhandho Investor”

Reviewing “The Dhandho Investor: The Low-Risk Value Method to High Returns” by Mohnish Pabrai

This is the best book on investment principles I have read so far (but I only read 2 or 3, so…). It is closely aligned with value investing principles of Graham and Buffett, but takes a slightly different approach. It uses several formulas and ideas (for example, Buffett’s idea of the “moat,” Kelly’s formula, the Magic Formula, arbitrage,) and throws in some fascinating thoughts on an ancient military battle formation called
chakravyuh (one of the deadliest formations a general can encounter) and the ways to break through it, and ties this all together into a neat little story to describe the main tenants of his “philosophy.” The main among them is this one: “Heads, I win; tails, I don’t lose much.”

With this approach in mind, Mohnish goes on to examine stories of outstanding success, often by immigrants (Papa Patel, Manilal Chaudhari, himself) who came in the United States with nothing but a solid dhandho (work) philosophy, which transformed into an investment philosophy, which transformed into the above average successes.

There are a ton of examples and mathematical formulas that Mohnish uses to demonstrate the basics of the value investing (or Dhandho style investing). I made so many highlights in the book it is not even funny. Most importantly, his ideas are focused on ordinary, poor, underprivileged individuals who make it all the way through the chakravyuh and come out victorious, all presented in an angaging story-telling style, so they really stay in your head as vivid images long after the book is finished. The main differentiator between this and other books I have read is that this book describes a philosophy first and strategy and techniques second. I hated to put the book down, it was too short!

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