Thread by @SmartSyncServ

When my friend and colleague, @KK63360362 read my old post, smartsyncservices.com/survive-to-thr…, he made some interesting observations.

Kartik: Ankit, while you have written about the art of survival in detail, you have not touched upon the thriving part at all in your post.

Do you really want to say that only survival is necessary for achieving success as an investor or as a human being? Don’t you think there is more to it?

Me: That’s an interesting observation, Kartik.

Survival is indeed the biggest requisite for any investor or for any human being, for that matter. But is survival really enough? Never gave it a serious thought. Maybe, to boost me in times of adversity I focus on the one thing and that is survival.

And I still feel that maybe that’s right for that moment. But I think you have brought out an important point. Let me think a little more about this.

Kartik: Yes, Ankit! That’s precisely what I meant. I would have loved to read something more on the thriving part in your post even though I enjoyed the part of surviving.

That conversation with Kartik got me thinking. I just could not get that out of my head.

~While going to bed.

~While taking a shower.

~While going for a walk.

~While doing the dishes.

It was during a lockdown you know! We were taking precautions! (May, 2020)

I needed to get this out of my head. So I started reading & writing about it. This thread has my thoughts and reflection on the conversation I had with Kartik.

I stumbled upon a post (bit.ly/2IWVanB) of Prof @Sanjay__Bakshi & found this simple idea very intriguing:

So, I re-read my post on “Survive to Thrive’ a few times.

And I was convinced that:

Survival is a necessary but not a sufficient condition to Thrive.

Survival has more to do with “not screwing up”.

And to thrive, survival is indeed the first step. But you also need to have something more if you really need to thrive.

"Thriving is a condition beyond mere survival, implying growth and positive development." - Wikipedia

This means:

Thriving = Survival + Growth

If you look at the above equation in investing parlance, the value of a business is also derived in a similar way:

Value of a Business =

Balance Sheet strength (Survival rate) + Future earning potential (Growth)

There are some businesses that derive value from their Balance Sheet strength alone (past performance).

And then there are some businesses that derive value from the growth potential in earnings (expected future performance).

But the best businesses are those that derive value from both.

-The ones which have shown some really great performance in the past, and

-Also have all the potential to grow further in the future as well.

That was regarding companies, how can we learn from the same concept as investors and benefit from this?

Let's start with the basic Compounding Formula

I know you have seen this equation umpteen times.

And I am also aware that you have been told by many investors that “n” is more important than “r” in the above equation signifying that if you survive for a long time as an investor, compounding will take care of you.

I want to touch upon an aspect that generally gets ignored.

There are three variables (PV, r & n) which derive the Future Value (FV).

PV is the amount you invest.

r is the returns you generate over investments.

n is the amount of time you will be invested.

If you look closely, you have much more control over PV & n than over r as returns on investments are never certain.

Now by increasing “n” you are basically implying a better survival rate.

But what we often ignore is the PV. The amount which you can invest over your lifetime.

PV is the variable that can help you thrive and where you have the most control. The quantum of PV is influenced by what you do in the present. “n” and “r” always rely on the future which is always uncertain

We never know how many years of compounding we have in store for us.

We never know what returns we will be able to generate.

But the more we invest today, the more we free ourselves from our dependence on the rate of return and the time period.

Of course, the longer we remain invested the higher the prospects of returns. However, you cannot ignore the fact that if you do not put enough money into your investment portfolio, even long periods may not fetch you a satisfactory sum.

Let's take an example:

If one invests systematically in a fairly diversified Mutual Fund portfolio then the net of taxes and fund management fees, 9% return is a decent target to look at.

A closer look would reveal that the best option among all is the last one, Case 3.

And that can happen only if you have the combination of Survive and Thrive.

Thriving means being good at what you do.

As a professional investment manager, thriving means generating more returns. That would attract more people willing to put their money with you to manage.

However, thriving as a non-professional investor means being good at what you are and hence being able to sell your product or services at a premium rate.

For example, look at the attached pic to know what @FI_InvestIndia said in an interview with @RichifyMeClub

This is something beyond survival. Something more. That something more can make all the difference in your life.

And I recall what @JeffBezos says:

"We can’t be in survival mode. We have to be in growth mode."

Which brings me back to my original premise,
"Survival is a necessary but not a sufficient condition to Thrive."

If you want to deep dive on this, check out the full blog here:

bit.ly/3kNMYD7

End