BAT’s Tattoo Decison

Interestingly, British American Tobacco’s (BAT’s) decision to exit ITC’s demerged Hotel business is going to an irreversible decision. Once it sells its stake in ITC, it can’t buy it back since India doesn’t allow FDI in tobacco. This poses an interesting dilemma! One on hand, BAT realises fully well that ITC is very well run and that it has been growing at a faster clip than themselves, however, due to strategic reasons, it doesn’t want to diversify into hotels via ITC.

Non-participation in the hotel business is akin to a Tattoo decision, as very succinctly put by James Clear,

I think about decisions in three ways: hats, haircuts, and tattoos.

Most decisions are like hats. Try one and if you don’t like it, put it back and try another. The cost of a mistake is low, so move quickly and try a bunch of hats.

Some decisions are like haircuts. You can fix a bad one, but it won’t be quick and you might feel foolish for awhile. That said, don't be scared of a bad haircut. Trying something new is usually a risk worth taking. If it doesn't work out, by this time next year you will have moved on and so will everyone else.

A few decisions are like tattoos. Once you make them, you have to live with them. Some mistakes are irreversible. Maybe you'll move on for a moment, but then you'll glance in the mirror and be reminded of that choice all over again. Even years later, the decision leaves a mark. When you're dealing with an irreversible choice, move slowly and think carefully.

Most investors are usually wearing hats or experimenting with hair-cuts. How many have kept their investments upwards of 10+ years on a bare minimum? After-all, keeping investments for decades not only requires insight, but more importantly mental fortitude, to keep up with the mood swings of Mr. Market.

The late Charlie Munger used to often advocate “Sitting on one’s ass and doing nothing”

Time to reflect on our decisions, especially if you are planning to get a tattoo!!!