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The Buffett disciple

Mohnish Pabrai invests and gives away like Warren Buffett.

By R. Sridharan | Print Edition: July 29, 2007

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Over the last eight years, us-based value investor Mohnish Pabrai has hit the bull's eye several times. But his best 'bingo' moment came on June 29 when the 43-year-old Managing Partner of Pabrai Investment Funds won the bid to dine with legendary investor, Warren Buffett. It was the fifth time that Pabrai, a resident of Irvine, California, had bid to break bread with Buffett. What did the trick this time around was his whopping bid: $650,100, or Rs 2.66 crore, all of which will go to charity. So, sometime later this year or early next, Pabrai (besides his wife, Hiran, two daughters, and fund manager friend Guy Spier, who chipped in for the winning bid, and his wife) will meet up with the Oracle of Omaha at a New York steakhouse called Smith & Wollensky for what could be a three-hour lunch.

What's the first question that Pabrai, who studied computer science at Clemson University, South Carolina, and not an IIT because "I am not that smart", will ask his guru? "I will express my gratitude for all the learning I have received thanks to him, and how he has been my inspiration for not just how I invest, but live," he says. With $600 million under management, Pabrai, who launched the fund as a hobby but turned pro in 1999 with less than $1 million, isn't as rich or austere as Buffett (our man drives a BMW 6 series, and Buffett, a Cadillac DTS), but he does intend to give back like his idol. Pabrai and his wife Hiran have set up the Dakshana Foundation with the aim of making "social investment" along the lines of Muhammad Yunus' Grameen Bank, except that it won't have a "tight contract".

Here's the plan: Through Dakshana, Pabrai and his wife intend to give away 2 per cent of their net worth (he is the single-largest investor in Pabrai Funds, which has returned 29 per cent a year since inception) every year. But instead of just giving the money away, they are looking for the most bang for their buck. Ergo, they offer scholarships to poor but bright students who want to get into IIT. Here's where the value investor in Pabrai comes in. He will not fund just any student, but the most needy and deserving. Like Patna-based Anand Kumar's Super 30 Group that provides free coaching and accommodation to IIT aspirants from poor families, Pabrai's Dakshana will get students from Bihar villages, screen them through an 'entrance test' and move them to Kota for one- or two-year IIT joint entrance exam (JEE) training at private coaching institutes. Pabrai is open to spending up to $2 million a year on this, with each student training costing Rs 30,000 per child per year.

Currently, Dakshana, which has just moved into a 1,600 sq. ft office in Kota and is managed by Ramesh Bathija, a 61-year-old former prep tutor and an IIT Madras alumnus, has six scholars, including a girl, Sarita Kumar, who is the first girl from her village in Bihar to try for IIT. To qualify for scholarship, a student must come from a family with less than Rs 7,000 in monthly income, have scored above 75 per cent in maths and science, and pass the foundation's written test. Dakshana is trying to tie up with the state-run Navodaya Vidyalaya, which has a school in almost every district, to find potential scholars. "Next year, we hope to screen 25,000 students," says Bathija.

Pabrai, who has authored a book, Dhandho Investor, on the business philosophy of America's motel czars, the Patel clan, is making a simple calculation. His iit scholars will earn millions of dollars over their lifetime, and perhaps some of them will want to give back to Dakshana-"although they are free not to donate to Dakshana at all," says Pabrai. Tragically, Pabrai's philanthropy faces only one problem: Finding enough kids who are both brilliant and poor.

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