10 Best Success and Investment Rules of Mohnish Pabrai
Mohnish Pabrai is an Indian born successful Indian American businessman, Philanthropist, and investor. In 1991, Mr Mohnish Pabrai started a company called TransTech, Inc. In 2000, he sold his company for $20 million to Kurt Salmon Associates. He is the big follower of Warren Buffet and Charlie Munger. He also pays $6,50,000 for lunch with Warren Buffett.
Mohnish Pabrai has also published a book called Dhandho Investor. He is a very successful person. That’s why in this article, I am going to list out the 6 best successful rules of Mohnish Pabrai.
Top 10 Best Success Rules of Mohnish Pabrai
1. Always Try to Minimize Your Risk
Mohnish Pabrai says people think that entrepreneurs take the risk and they get rewarded because they take risks. In reality, entrepreneurs do everything they can to minimize the risk. They’re not interested in taking the risks. They want free lunches, and they go after free lunches, and so if you study any number of entrepreneurs, what you’ll find is that they have repeatedly made bets which are low-risk bets, which have high return possibilities.
So they are not going high risk, high return. They are going low risk, high return. So entrepreneurs are great at dealing with uncertainty and also very good at minimizing risk and that’s the classic, great entrepreneurs.
2. Define Your Market View
If you look at any market, any product or any services, they will typically be three or four players at the most that control 80% of that market. It could be making aeroplanes, or it could be making hair clips. You can pretty much go across the board.
If you are starting a business and you say that this is a $10 billion market and I only need 10% of it, and I will be a billion dollar company, well, right there, you’re off. Because the inversion will be that if you’re going after a market, your approach has to be, how do I get 60% of that market?
So if your starting point is that I am going to take 2% of this market or 5% of this market, what you have not done is you have not segmented that market properly. And that is a fatal flaw. So the first thing you want to do is define the market that you’re going after, and after you set it, if you don’t get to very clear-cut game plan to get 50%, 60% market share, then don’t even try.
3. Don’t Sell What You Wouldn’t Buy
Do not try to sell something that you wouldn’t buy yourself. So if you don’t honestly think it’s something that you would yourself be a customer of, don’t try to pitch it, don’t be a used car salesman.
So make sure that whatever you’re trying to come up with is compelling enough that you would yourself be genuinely interested in buying that product.
4. Focus on Marketing, Not Sale
The stronger the marketing, the weaker the sales engine can be. So Mohnish Pabrai doesn’t consider himself that he is a good salesman. He considers himself a poor salesman. He finds himself a pretty strong marketing person.
So if you have done your marketing homework, you can be a leper and make sales. The stronger the marketing, the less critical the sales engine becomes. So it is essential to spend the incredible amounts of time on the marketing aspect of the business.
Because if you don’t spend that time on that aspect of it, you will pay 50 extra that time on that sales and hit your head against a brick wall. So Monish Pabrai feels, the stronger the marketing, the weaker the deals.
5. Have Flexible
Mohnish Pabrai says peoples should be flexible. He thinks flexibility is essential in investing to be a learning machine and to have flexibility and to be willing to look at the opportunity set and decide whether you need to do anything at all or what is the best thing you can do based on the available opportunities.
6. Pay Attention To Your Customer Feedback
Let’s say if you have come up with a compelling value proposition, let’s say you’re truthful, you truly understand it, and your pitch is accurate and all of that. What Mohnish Pabrai found is that primarily whatever you come up with, and you’ve come up with it in your lab and thinking about it, talk with friends, looks excellent, the service and the product look great.
The real litmus test of that is when you put it in front of customers. So when you go out and make your pitch, your kit, and ad and whatever else, and the essential thing for an entrepreneur to do is when they put that out there be very, very, pay a lot of close attention to the feedback you get from the people who are listening to the pitch. It is essential at the front end. Because what is probably the case is that whatever you come up with, is off base. It’s not exactly what your market wants.