INSUBCONTINENT EXCLUSIVE:
By Saurabh Mukherjea"The successful iconoclast learns to see things for what they are and is not influenced by other people’s opinions
He keeps his amygdala [the fear centre of the brain] in check and doesn’t let fear rule his decisions
And he expertly navigates the complicated waters of social networking so that people eventually come to see things the way he does.”–
Gregory Berns in Iconoclast: a Neuroscientist Reveals How to Think Differently (2010)Outsiders, especially Jewish ones, have always excelled
George Soros was born in Budapest, survived Nazi Germany-occupied Hungary and immigrated to England in 1947 after Hungary was occupied by
After finishing his education in England, Soros migrated again, this time to the USA.
Michael Steinhardt was born to a Jewish family in New
The son of Sol Frank Steinhardt, a compulsive high-stakes gambler, New York's leading buyer of stolen jewellery, and a convicted felon who
was sentenced to jail for ten years for buying and selling stolen jewellery.
Carl Icahn was raised in a Jewish family in Far Rockaway, a
suburb of New York City, which thanks to the 2-hour commute to Manhattan has some of the lowest rents in the City
Icahn attended the local high school
His father was substitute teacher
His mother also worked as a schoolteacher.
All three men rose from humble origins, got themselves an elite education (Soros at the London
School of Economics, Steinhardt at Wharton and Icahn at Princeton) and then broke into the White Anglo Saxon Protestant (WASP) dominated
investment elite in America to become amongst the most successful investors of their generation
All three men pioneered new forms of investing, very distinct from the non-confrontational mutual fund format practised by the WASPs.
Soros
pioneered the concept of a macro hedge fund which, amongst other epic adventures, famously broke the British pound in 1992
Steinhardt was amongst the earliest exponents of the multi-asset long-short hedge fund which charged fixed fees of 2% performance fees of
20%.
In 2014, Bloomberg named him as ‘Wall Street’s Greatest Trader’
As the Chairman of Wisdomtree, Steinhardt pioneered the introduction of ETFs in emerging markets
Carl Icahn pioneered activist investing i.e
ask underperforming CEOs to perform and if they can’t do so, turf them out
In an epic 60 year career, Icahn has unseated the CEOs at some of America’s best known companies (including Time Warner, TransWorld
Airlines, Revlon and Marvel) and earned tens of billions of dollars in the process.
‘Outsider’ tag has been central to their successAt a
practical level, it is relatively easy to see why someone who does not belong to the establishment will be able to pioneer a form of
investing which takes on the establishment
If you belong to the same social club or community as the CEO of a prominent company, you are unlikely to turn the screws on him in public
and then oust him if he does not deliver
If you went to college with the British establishment, you are unlikely to consider running down the Pound
Put simply, an outsider has simply less vested in supporting people or institutions who validate the status quo.
In addition, as the quote
at the beginning of the piece says outsiders or iconoclasts also have a different mental make-up
In Ray Dalio’s words
“The number one principle says that you must think for yourself.”The outsiders are independent thinkers – both
curious and non-conformist at the same time and happy to
“act in the face of risk because their fear of not succeeding exceeds their fear
of failing…the greatest shapers don’t stop at introducing originality in the world
They create cultures that unleash originality in others.” (Source: Adam Grant in
Originals: How Non-conformists Change the
World)Investment implicationsAs the asset management industry in India moves beyond the traditional mutual fund format (where delivering
alpha has become a challenge), Indians with more unconventional backgrounds will enter the investment arena and pioneer new styles of
Already, we can see that the pioneering efforts in the VC and PIPE (private investment in public equity) segments have occurred in Indian
investment houses not based in Mumbai.
More unconventional styles of investing will not only shake up things for the traditionally dominant
mutual fund houses but they will also require the intermediaries – who take investment products to HNWs – to see the world through a new
Out of the window will go portfolios with 50+ holdings and annual churn in excess of 30 per cent.
Into the arena will come tighter
portfolios with low churn, which gives the fund manager no place to hide
Out of the window will go juicy fixed fees, which fund expensive overheads in central Mumbai
Into the mainstream will come fee structures where the investor and the fund manager share the upside.
It took a full generation (the thirty
years to 2010) in America for the mutual fund to be gradually replaced by low cost tracker funds (as the mass market product) and by hedge
funds and private equity (as the products for the elites)
The transition will happen sooner in India as both the Indian regulator and intermediaries have seen how the story panned out in the
west.
But what is clear is that in this transition it is the outsiders – rather than the established elite – who will bring the fresh
As Adam Grant says in his bestselling book
Originals: how Non-conformists Change the World(2016):
“Ultimately, the people who choose to
champion originality are the ones who propel us forward…their inner experiences are not any different from our own
They feel the same fear, the same doubt as the rest of us
What sets them apart is that they take action anyway
They know in their hearts that failing would yield less regret than failing to try.”(Saurabh Mukherjea is the author of The Unusual
Billionaires
and Coffee Can Investing: the Low Risk Route to Stupendous Wealth
and Founder of Marcellus Investment Managers, a provider of
Portfolio Management Services.)
