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never do. You never know. See what he's saying. I mean, again, it's a very good question. And and what we want to do is we want to find things where the intrinsic value is here and the price is here. And so his question is, how do we estimate the time that it's going to take for the gap to close? And the answer is there's no way to say.
Uh on occasion there are what we call catalysts and um one catalyst would be uh the maturity the pending maturity of a bond. If a bond is going to mature in 2012 and it's selling at 60 because most people think it's going to go bankrupt but it's but we think it's going to pay off and and uh at maturity then the date of that m the existence of a maturity date is going to force the convergence of price to value.
Uh another uh catalyst today is all these um um activist investors. They find a company it's selling. They think the intrinsic value is here. It's selling here because the management is subpar and they're not doing the right strategy. So they go in they fment trouble. They try to get a board seat. They try to force the management to do the right thing to course to to cause the price to converge with the value.
So there are a few catalysts in the world but generally speaking you buy a stock you hope you think it's worth here the price is here you hope it'll converge but there's no way to estimate the time and that's the reason why being too far ahead of your time is indistinguishable from being wrong because it can take a long time
only natural that the stocks are better companies should be more expensive which are the better companies that's the question you Well, in the nifty50, there were two beliefs, Jay. One was that these were companies that were so good that nothing bad could ever happen. And two, these are companies that were so good that for their stocks there was no price too high.
So people were not applying value discipline. They were uh worshiping at the altar of these companies. Now it happens first of all that at least half the companies ran into serious trouble. So this idea that nothing bad could ever happen was a big mistake and uh I I would say in many cases among other things there was a failure of uh second level thinking for example.
Mhm. One of the leading companies of the Nifty50 was Xerox. Mhm. And Xerox at that time had a monopoly position. Yeah. In in dry copying without without liquids. Yeah. But not enough people said, "Hey, wait a minute. They have a monopoly. They're keeping the prices very high. That produces exceptional profits.
But mightn't those profits attract competitors? Who would then require the prices to decline? They'll compete on price. How will Xerox do if it has to compete on price? And in fact, uh mostly Japanese copier companies Mhm. uh developed competing products. Mhm. I I I think Xerox Xerox either went bankrupt
or got very close. Uh everybody knew Xerox was a great company. The question is who asked yeah but is it sustainable? So that was number one. And then number two this idea that there was no price too high for these stocks. Mhm. I mean, one of I was lucky because I was a boy at the time, literally, literally a boy, and I learned an important lesson in the 70s, which is that for there are no assets
which are so good that there's no price too high. Mhm. For every asset, regardless of how good it is, there's such a thing as a bargain price, fair price, overpric. That's the realization that nobody had at the time. But the people, some people said, "Yes, it's it's a great company, but it's not that great." You see, and this is the greatest example of of second level thinking.
Mhm. The first level thinker says, "It's a great company, you should buy the stock." Mhm. It's simplistic. Everybody understands that. Probably wrong. Mhm. The second level thinker says it's a great company but it's not as great as everybody thinks. So as a result it's overpriced. You should sell the stock.
You see you have to that's very simplistic example but the point is you have to take your thinking to a higher level more in-depth more nuanced asking more questions not so superficial. And I'm I'm very lucky to have learned this lesson at a very young age. By the way, you only learn from from uh difficulty. Uh very few valuable lessons are learned through success.
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