Book Review: The Dhandho Investor

Author: Mohnish Pabrai

Genre: Equity Investment


Written in a straightforward and accessible manner, The Dhandho Investor lays out the powerful framework of value investing. Among the list of my top books, this is always on the list. I remember relishing this book on a train journey. It is the same old school value investing book but very new when it comes to the concept of Dhandho framework and the investment philosophy of the author. This review might be a little longer as we try to decode two things, the investment philosophy of the author and the history of the business community of India.

Talking about the author himself, Mohnish Pabrai is an Indian-American businessman, investor and philanthropist, and author of this bestseller book. Guy Spier and Mohnish Pabrai are also known for paying $650,000 for a charity lunch with Warren Buffet. There was so much to learn from Buffet which influenced the ideas and his investing mindset. Pabrai often recalls saying if there wasn’t a warren buffet, there wouldn’t be a Pabrai funds and there certainly wouldn’t be this book. Mohnish brings a concoction of thoughts in this book which are ideas of his own along with those of Warren Buffet and Charlie Munger.

So, what exactly is Dhandho?

The word is derived from the Sanskrit language where Dhana means wealth and Dhandho means Endeavors that create wealth. This term is most popular in India especially in Gujarat, the same place where Mohnish comes from.

Gujaratis or residents of Gujarat are a business-savvy community of India who know how to run a business using a low-risk high return approach. I know many of my friends who are Gujaratis and master’s in business without an MBA. Many Indians stereotype different communities in India. When it comes to business it’s an India myth that only Gujaratis, Sindhis, and marwadis can run a business as it is in their blood.  But this is a huge myth. I also happen to know people at my native place in Punjab, where a lot of people practice self-employment and run their venture successfully. There are many examples in my network who are from the south as well.

So where did the stereotype emerge? There was a time when Gujaratis specially Patels migrated in a significant number to Uganda and settled there as traders or indentured labors. Since they had an entrepreneurial community for centuries they came to control a large proportion of business in Uganda. It is during this time that General Idi Amin came to power in Uganda as a dictator in 1972. He declared that Africa was for Africans and that Non-Africans had to leave. Amin wasn’t a big fan of the Patels who controlled most of the economy. Since most the patels had been there for generations they had all their business and property in Uganda. The Uganda state seized all their businesses and nationalized them- with no compensation to the owners. A total of 70,000 Gujaratis were thus stripped of their assets and thrown out of the country. Since Bangladesh was recently formed and Indians had a warlike climate, already reeling with a serious refugee crisis, the Indian government refused to recognize the Indian origin population being expelled from Uganda. It made sense for the Indian government. When people had been living in Uganda for generations with their citizenship, any government would be reluctant to take its ancestral descendants back to the country, especially in a warlike climate. During this time president Nixon felt sympathetic of the Patels and they accepted refugees in but they were limited in the number of refugees they could accept. Few went to England and Canada and the others turned towards the US. That was a time when countries like the US and Canada wanted migrants to boost the economy as well. It is during this time the patels went on capitalizing the motels business in the US. The Patel descendants quickly capitalized the market and continued to be in the same business.

Even after patels were stripped of their assets in Uganda, they built an empire again. They are a community of hard-working, determined bunch of people who feel no shame in doing any small business. They can sell you anything and you would convincingly buy it. It is this mindset that prevailed in the Gujarat region for a long period of time and ultimately got ingrained in their descendants and hence they came to be known or associated with running businesses enterprises.

Today Asian Indians make up 1 percent of the US population. Less than 1 in 500 Americans is a Patel and still, you would be amazed that half the entire motels in the country are owned by Patels. What is more stunning is that there were no patels in the US 35 years ago. They started arriving as refugees in 1970s without much capital or education. They were bad at English yet today the patels own over 40 billion in motel assets in the US and pay 725million in taxes and employ nearly a million people. They firmly believed in the notion of low-risk high return business strategies with which they had been running the motel business for decades. It is this low-risk high return approach that the author is trying to propagate in stock market investing via this book

Being a fan of this approach, he talks about ventures taken by Richard Branson and Lakshmi Mittal on a similar method. Throughout the book, he tries to convince you in good faith, how a method like this can work everywhere. He has a famous quote on the same ideology. Whenever you google Mohnish Pabrai quotes, the first quote that would come up is “Heads I win; Tails I don’t lose much” Does it mean if an investment is a low risk, there is a sure short return? No. There is always a risk, but one should try to minimize the odds of losing by not betting in a risky business or investment and hence the quote I don’t lose much if it is a tails (business risk is realized)

Other important concepts that the author discusses in the book are but not limited to:

  • Investing in simple businesses.
  • Investing in distressed businesses
  • Investing in businesses that have durable moats.
  • How to make few bets but big and infrequent bets
  • The art of selling and when to sell.

Mohnish is a very revered value investor in both US and Indian stock market. He is active on his blog called Chai with Pabrai where you can reach out to him

Pre-requisites before reading the book: None

Is the content relevant even today? Yes

Vocabulary and Understandability: Easy

Level of investment expertise required: Any

How can it benefit you?

Read this book if you really want to learn how to make big and infrequent bets with odds in your favor not only in investing but in business and life as well. Heads I win; tails I don’t lose much. Once you hold this book in your hands, you would regret not reading the book earlier.

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