The Watermelon Festival

While addressing the audience at 14th Federation of Gujarat Industries (FGI) Awards for Excellence at Vadodara in September 2016, IIT alumnus and former defence minister of India, the late Manohar Parrikar gave one of the most memorable speeches recalling his childhood and growing up in the village of Parra where he used to?take part in the ‘Watermelon Festival’.

As narrated by Manohar Parrikar: “I am from the village of Parra in Goa, hence we are called Parrikars. My village is famous for its watermelons. When I was a child, the farmers would organise a watermelon-eating contest at the end of the harvest season in May.

All the kids would be invited to eat as many watermelons as they wanted. Years later, I went to IIT Mumbai to study engineering. I went back to my village after 6.5 years. I went to the market looking for watermelons. They were all gone. The ones that were there were so small.

I went to see the farmer who hosted the watermelon-eating contest. His son had taken over. He would host the contest but there was a difference. When the older farmer gave us watermelons to eat he would ask us to spit out the seeds into a bowl.

We were told not to bite into the seeds. He was collecting the seeds for his next crop. We were unpaid child labourers, actually. He kept his best watermelons for the contest and he got the best seeds which would yield even bigger watermelons the next year.

His son, when he took over, realized that the larger watermelons would fetch more money in the market, so he sold the larger ones and kept the smaller ones for the contest. The next year, the watermelons were smaller, the year later even smaller.

In watermelons the generation is one year. In 7 years, Parra’s best watermelons were finished. In humans, generations change after 25 years. It will take us 200 years to figure what we were doing wrong while educating our children.

Unless we employ our best to train the next generation, this is what can happen to us. We must attract the best into teaching profession."?

Sucess in the farming business is mostly held captive to the vagaries of the monsoon in India. Watermelons however are not a water intensive crop. A plant can give fruit 2 to 3 times a year. Bigger size watermelons are prized. However like any cash crop, good quality seeds that produce big watermelons are not a given. Harvest time is when the farmer realises the true quality of the seeds he/she planted. But once the farmer hits the jackpot in terms of quality seeds, he/she looks at ways to sustain the yield of big watermelons. This is where long term thinking helps.

The old farmer in Parrikar's story, understood the value of investing for the long term. He was willing to give up big profits in the short term to ensure sustainable profits for the long term. His son on the other hand had a trader mindset in investing, seeking out and maximising profits in the short term, with no thought about how it would affect his business in the long term.

Able administrators adopt a long-term mindset while formulating policy decisions, since the result of those decisions may be seen years and sometimes decades into the future, while the investments may be required upfront in the present. Investing for the long term is a mindset suitable for wealth creation - whether it is growing big sized watermelons, attracting quality teaching talent, or building your personal finances.

Wealth can be inherited; unfortunately, wisdom cannot be inherited with it. Wisdom of long-term investing cannot be taught; it is a "mindset". Changing mindsets from short-term investing to long-term investing is difficult, especially when the markets may hold many distractions to offer on a daily basis. Cultivating the mindset of a business owner rather than an investor can help with creating a mindset for long term investing.

Successful long-term investing requires knowledge and self-discipline. Whether you are just starting out on your investing journey or have been investing for decades, it is critical to have the right “mindset.”

Act like a business owner

The stock market “democratizes” capitalism by?making business ownership available to anyone with even modest means.?You can purchase shares in great companies at exactly the same market price as the largest institutional investors?pay. As a shareholder of public companies, think of yourself as a “business owner.” Business owners don’t worry about daily changes in the ‘market value’ of their businesses.?They focus on building the value of their businesses through long term earnings growth, by improving their products and services, innovating and creating new markets for growth. When you invest in the stock of a company, you reap the benefit of the work put in daily by the employees of the business. You may enjoy dividends and price appreciation too. Some companies even offer discount coupons on their products to stock owners. And the amazing part is during the ownership period you don’t have to lift a finger, besides staying invested.

Whether you own stocks directly or through funds, taking the business owner point of view will help put the short-term stock market ups and downs in perspective.??

Mentally preparing yourself, as a business owner, for regular stock market declines of 10% to 20%, occasional declines of 30% or more, and even extreme scenarios like the global financial crisis of 2008–’09 crash and?staying liquid in difficult times by determining your stock/bond allocation, is key to the kind of long-term thinking necessary to create wealth.?

So, the next time you bite into a big juicy watermelon, know that you are benefiting from the fruits of long-term investing.

Source: Stories at Work by Indranil Chakraborty,?moneysense.ca?

Author: Ashish Joseph George, MMS, CFP. The views shared in this article are my personal views and don’t reflect the views of any organization. This is not an investment advice