As a fund manager, I often get asked by multiple investors/stakeholders as to what the next big idea is? End of the day, our role as an asset management firm is to compound wealth, and it’s only within reason that we get asked this question. What surprises investors, in many cases is when I answer the question with – HDFC Bank as one of the candidates. The immediate response I get to hear is, no, ‘not HDFC Bank, but the next HDFC Bank – that’s what I am interested in’.
When you hear the response way too often, it got me thinking as to why investors as a community are on the search for the new next big idea many of the times. To answer this question, I have to draw parallels from the world of advertising which I believe is one of the most creative fields that we have been introduced to.
When David Ogilvy, the founder of O&M, fondly addressed as the “father of advertising” was asked this question, he answered – “ It takes a big idea to attract the attention of consumers and get them to buy your product. Unless your advertising contains a big idea, it will pass like a ship in the night. I doubt if more than one campaign in a hundred contains a big idea. I am supposed to be a fertile inventor of big ideas, but in my long career as a copywriter, I have not had more than 20, if that. Big ideas come from the unconscious. This is true in art, science, and advertising”.
When asked what was the best asset a man could have, Albert Lasker – the most astute of all advertising men – replied, ‘Humility in the presence of a good idea’. It is horribly difficult to recognize a good idea. I shudder to think how many I have rejected. Research can’t help you much because it cannot predict the cumulative value of an idea and no idea is big unless it works for over 10 years.
The above statement resonates a lot to the world of investing. One has to acknowledge that the same parallels exist here too. When Raamdeo Agrawal – the founder of Motilal Oswal, was asked about how they identified Eicher Motors as an investment in 2010 ( early), he had a very similar idea to share – ‘ We had a thesis on the growth of the commercial vehicles but all our growth and shareholder returns came from the tremendous growth of Royal Enfield which we neither factored nor had an idea of. While today it looks like a big idea, the truth was, when we made the investment, we could never have factored that’.
The next time anyone gives you their next big idea, remember the odds they are fighting against when they quote the same with smug confidence. An idea evolves over time, it has externalities that affect it and gets reshaped alongside luck. All of this goes into forming the next big idea.