Tamohara Quarterly Newsletter - Best Books I Read in 2022

  • December 2022

Dear Investor,

‘Investing is a liberal art’ is not just a corny poster we put up in our office but something we truly believe in. In line with this belief it has become a tradition for us to reflect upon the best books that we read in the year and what those varied subjects covered have taught us about investing.

2021 lessons were centered around doing a few simple things, but doing them thoroughly and consistently. After a heady 2021, 2022 has been a sobering year and perhaps for those reasons the lessons we have inferred from our best reads of year are centered around how little we know and can control, the power of economic incentives and a realization that when something doesn’t work it is time to go to the drawing board and reimagine the problem.

Dead in the Water by Matthew Campbell and Kit Chellel

Dead in the Water is a long-form investigative piece that opens up the wildly dark underbelly of the shipping industry. The book follows the story of the Brilliante Virtuso, a oil tanker that was apparently attacked off the Yemen coast by Somali Pirates that started a whole chain of events in the shipping and insurance industry including the murder of a British National in Aden. The Billiante Virtuoso was registered in the Marshall Islands, flew a Liberian flag, had a Greek owner, a British insurer and was attacked off the coast of Yemen and subject to international law. The complex holding structures of each individual vessel, the incredibly bleak working conditions on the vessels and the extent to which a few oligarchs dominate the game along with an insurance company that cannot do anything about the rigged game- all expose the fragile nature of the supply chain on which globalization rests.

The book highlights the extent to which we do not know the true reasons for events occurring, nor the players involved in ensuring we get the perfect Peruvian Avocado delivered to our homes. It also shines light on the power of economic incentives and how that governs our world.

As investors, when we conjure up reasons on why and when a new business model/ disruption would get adopted it is essential to figure out the economic incentive in doing so. Electric two wheelers have been a prime example of the same. Adoption started galloping only when the total cost of ownership of EV started reflecting far better economics than an internal combustion engine bike. Scrapping an oil tanker (that was way beyond its age and maintenance) would not yield as much as staging a pirate invasion and getting insurance companies to pay for the damages. Never underestimate economic incentives and at all given points of time try to visualize those for all of the businesses we own.

The World for Sale by Javier Blas and Jack Farchy

The World For Sale is yet another book that showcases the power of economic incentives and how little we actually know of what drives the world. The creative extent of capitalism practiced by commodity traders and the extent of their economic and (shockingly) political influence made this a read unlike any other finance/ economic history book out there. Vitol, a commodity trading firm, engaged in the sugar for oil trade that essentially kept Castro’s Cuba afloat. They used shell companies to ensure their activities fell outside the purview

of the economic embargo imposed by the USA. This is just one of the many stories highlighted by the authors in the book. Having read these stories, one cannot help but view recent news in the global energy markets with a cynical lens.

The power of economic incentives is the reason that pushed a trading firm to come up with their own currency in the hyper inflationary environment in Zimbabwe. As investors, we have made it a part of our process to answer questions crudely around Porter’s five forces that help us cover the business incentives from the perspective of various stakeholders. This list is by no means exclusive to Porter’s five forces, nor is it exhaustive. As we come across many examples of incentives leading people awry or in an unexpected direction, we keep building our checklist out.

The Battle for Rezang La by Kulpreet Yadav

If the power of economic incentives has failed somewhere it is with the Indian Armed Forces. The courage and valor demonstrated by them has no roots in economic reasoning whatsoever.

Kuldeep Yadav’s vivid narrative elaborating on the painstaking details of the preparation for the battle in the 1962 Indo China War, as well as the actual combat against the waves of Chinese attack, was one that I was unable to get out of my head for a while after keeping the book down. Ahirs of the 13 Kumaon take a 'fight till last man standing and last bullet available' stance, which in light of the infrastructure they are equipped with and the economic conditions of the jawans is surprising. There is however a lesson in the story of the battle for for us all. The troops upon arrival at Rezang La had warned the seniors of a

likely wave of Chinese attack coming in from the direction that it eventually did come from. The seniors however did not heed this feedback despite not being on the ground themselves. This is a lesson for us in life as much as in investing- keep yourself grounded by allowing for a feedback loop. While not everything warrants a reaction, ignoring all feedback from the ground as noise is also not prudent.

The First Cell by Azra Raza

Being deaf and blind to feedback loop is a problem that has plagued cancer therapy for the past four decades now. Majority of cancer treatments over the past four decades plus have been dominated by the medieval methodologies of slash (surgery for tumor removal), poison (chemotherapy) and burn (radiation). It is evident that the RoI on the research dollars flowing into cancer therapy is not yielding significant advances in therapy. There are simply small niches being unlocked here and there but nothing significant.

The First Cell by Azra Raza is a book that is in equal parts harrowing, stimulating and informative. Dr. Raza in establishing her hypothesis that the more effective way to spend R&D dollars in cancer therapy is on having a disproportionate amount of resources allocated to early detection (detection of the first cell) vs.

spending billions on drugs that work on specific indications/ manifestations of the disease, draws on the pragmatic problems faced by the cancer patients and families as well as emotional.

Despite being a trained oncologist, in the face of data suggesting otherwise, Dr. Azra calls for a rehaul of our thinking on cancer therapy (though she actually spent almost a decade in medical school learning it and a couple more decades practicing it). What stops us from going back to the drawing board when we realize there is a flaw in our process?

View it as a task and rethinking a problem may seem cumbersome. View it as a chance to start afresh, it is liberating. It is on this humbling yet uplifting note that we wish to start our new year.

As always, thank you for your continued support and faith in choosing us to be your partners in your wealth creation journey. Wish you and your loved ones a very happy new year!

Happy Investing!

Harini Dedhia
Head of Research and Portfolio Manager