INSUBCONTINENT EXCLUSIVE:
four years after the discovery of the Arthashastra)
Four hundred years before the birth of Christ, Chanakya (or Kautilya), the most senior
minister in the court of Chandragupta Maurya, created the first set of recorded rules for managing an economy and a polity
law (civil criminal), governance (civil service regulations, selection of officers), political strategy, battlefield tactics and economics
(how much to tax, what to tax, the role of the state vs the private sector).
No text before or since has captured the roles and
responsibilities of a ruler as comprehensively
Historians believe that the Arthashastra laid the foundations of the Mauryan empire, which reached its zenith 200 years later under
Ashoka.
Fast forward 21 centuries to eighteenth century Scotland to encounter another original system-level thinker
Adam Smith actually studied philosophy, not economics, at the University of Glasgow and at Balliol College, Oxford, but his insights into
transformed our understanding of how the economy worked:
Every individual, therefore, endeavours as much as he can both to employ his
capital in the support of domestic industry, and so to direct that industry that its produce maybe of greatest value; every individual
necessarily labours to render the annual revenue of the society as great as he can
By preferring the support of domestic to that of foreign industry, he intends only his own security; and by directing that industry in such
a manner as its produce maybe of greatest value, he intends only his own gain, and he is in in this, and in many other cases, led by an
invisible hand to promote an end which was no part his intention
Nor is it always the worse for the society that it was no part of it
words, Smith captured the essence of what allows the free market economy to deliver, not just at the level of the individual, but for
Just as the Industrial Revolution was kicking-off, Smith legitimised commerce and laid the economic premise on which our world rests.
Two
From the late 1950s onwards, Warren Buffett started buying big chunks of undervalued listed companies with the aim of selling them for a big
His success in doing so over the next twenty years and his use of Berkshire Hathaway from 1972 onwards as his publicly listed investment
vehicle legitimised stock market investing which until then was seen as the domain of speculators.
Buffett seared into the American psyche
American Private Equity industry.
A decade later, as Buffett was becoming a multi-billionaire and as equity mutual fund managers like Peter
Lynch and John Neff were becoming household names, an award winning maths professor and Head of the Maths department at Stony Brook
University laid the foundations for a new mode of investing.
Jim Simons founded Renaissance Technologies in 1982 and with the help of other
mathematicians, statisticians, physicists and programmers created the paradigm for a novel form of investing
statements, in weather, in politics, in almost everything that could be number crunched.
Without using anybody with a conventional Wall
It has generated a CAGR of 72 per cent per annum, before fees, from 1994 through to 2015
Now, thanks to firms like Bridgewater, Two Sigma, AQR and Research Affiliates, the majority of the money being traded in America is now
able to understand how the economic system works in its entirety whilst most of the rest of us only understand the world at an episodic and
none have made as much money as these two men
massive even if others can copy what you are doing.
(Saurabh Mukherjea is the author of The Unusual Billionaires and Coffee Can Investing:
the Low Risk Route to Stupendous Wealth, and Founder of Marcellus Investment Managers
