What I Learned About Investing from Darwin
The investment profession is in a state of crisis. The vast majority of equity fund managers are unable to beat the market over the long term, which has led to massive outflows from active funds to passive funds. Where should investors turn in search of a new approach?
Pulak Prasad offers a philosophy of patient long-term investing based on an unexpected source: evolutionary biology. He draws key lessons from core Darwinian concepts, mixing vivid examples from the natural world with compelling stories of good and bad investing decisions―including his own. How can bumblebees’ survival strategies help us accept that we might miss out on Tesla? What does an experiment in breeding tame foxes reveal about the traits of successful businesses? Why might a small frog’s mimicry of the croak of a larger rival shed light on the signs of corporate dishonesty?
Informed by successful evolutionary strategies, Prasad outlines his counterintuitive principles for long-term gain. He provides three mantras of investing: Avoid big risks; buy high quality at a fair price; and don’t be lazy―be very lazy. Prasad makes a persuasive case for a strategy that rules out the vast majority of investment opportunities and advocates permanently owning high-quality businesses.
Combining punchy prose and practical insight, What I Learned About Investing from Darwin reveals why evolutionary biology can help fund managers become better at their craft.
In his wonderfully original and insightful book, Prasad makes a compelling case for the science of evolutionary biology informing the art of investing. From red deer and silver foxes to green frogs and dung beetles, he draws upon the work of Darwin and others to colorfully articulate many of the investment principles that have driven his remarkable success. — Peter Ammon, CIO, University of Pennsylvania
I had the privilege of working with Pulak for nearly a decade. There are great investors and great minds: Pulak was always an unusual combination of both. His book brings both of those elements together―an architecture of investing that he has practiced for decades with great success―but constructed in an unusual way by comparison to phenomena in the natural world of evolutionary biology. The result is a fascinating and highly enjoyable experience that reminds us of the often simple answers to complex questions. — Chip Kaye, CEO, Warburg Pincus
Pulak Prasad is proof of Charlie Munger’s adage that great investors thrive on multidisciplinary thinking. He has written a highly enjoyable and thought-provoking book that is a master class on both investing and evolution. — Seth Alexander, president, MIT Management Company
What I Learned About Investing from Darwin conveys important lessons and concepts for those interested in disciplined, long-term investment. Prasad’s writing is engaging, charming, and stimulating. — Robert Wallace, CEO, Stanford Management Company
About the Author:
Pulak Prasad grew up in India across many towns and cities. His father was in the armed forces where the Indian government transferred him to new locations every couple of years. Pulak changed seven schools in his first twelve years of studies.
He has been gifted with a sense of numbers and mistakenly thought he could be an engineer. He earned his undergrad engineering degree from the Indian Institute of Technology in Delhi (IIT Delhi) and got his first job in Unilever India as a production management trainee. While Unilever was a great experience, he did not enjoy his shop floor job. To escape his boredom, he decided to pursue an MBA.
To his surprise, he loved his two years at the MBA school Indian Institute of Management Ahmedabad (IIM Ahmedabad). He was very lucky to land a job at the management consulting firm McKinsey & Company in 1992. He spent six years at McKinsey in India, South Africa (he volunteered to go to Johannesburg after apartheid was abolished), and the US. However, all this while, he could not see himself as a life-long consultant. And so, as he had done earlier, he left consulting to try something new.
In 1998, he joined the private equity firm Warburg Pincus. Within a few months at Warburg, he knew he had found his lifelong passion: investing. Pulak was very fortunate to have bosses like Dalip Pathak and Chip Kaye who were ideal mentors: they were patient with his mistakes and gave him a lot of freedom to pursue his passion. At Warburg, Pulak did private equity as well as public equity deals.
After spending more than eight years at Warburg, four of which were as the co-head of India, Pulak decided to launch his own firm Nalanda Capital in early 2007. He decided to focus exclusively on investing in listed India securities. Nalanda aims to be a permanent owner of high-quality Indian businesses. It manages about $5 billion primarily for US endowments, and US and European family offices and foundations.
Apart from investing, Pulak’s two other passions are running and reading. He primarily reads two types of books: fiction and evolutionary biology. For reasons not clear to him, in 2001, he became interested in Darwinian theory of evolution, and started devouring many books on the topic. He continues to do so today (his latest: Evolution Gone Wrong by Alex Bezzerides). At Nalanda, in his quarterly letter to investors, he started drawing parallels between investing concepts and evolutionary theory. Encouraged by many of his readers who said they loved his letters, he decided to write the book What I Learned About Investing From Darwin.