While the low-risk / high-reward businesses described in the first four chapters were varied in type, they did share some commonalities. These commonalities form the basis for the rest of the book, where Pabrai discusses these features in detail:
- Buy an existing business: each of the businesses described in the first four chapters had defined business models; nothing new was being invented.
- Buy businesses in simple industries with a low rate of change: all of the businesses described were necessary and were not about to be replaced.
- Buy distressed businesses in distressed industries: the very best time to buy a business is when it is hated and unloved.
- Buy businesses with a durable competitive advantage: this advantage can come from being low-cost to having a brand to having captive customers.
- Bet heavily when the odds are in your favour: in the businesses described, sometimes the investor did not make moves for several years, but when the opportunity was clear (odds in favour, with excellent returns), he invested much.
- Focus on arbitrage: in all cases, the investors saw a discrepancy between price and value that they exploited.
- Buy businesses at big discounts to their intrinsic values: the odds of a permanent loss are low when this approach is followed.
- Look for low-risk, high-uncertainty businesses: the uncertainty leads to severely depressed prices.
- It's better to be a copycat than an innovator: "innovation is a crapshoot, but scaling carries far lower risk."