Calling yourself an ‘investor’ is fashionable today. And if you’re a Value Investor, you’re in vogue. There are hundreds of books on investing which give you quite a few strategies to emulate. If you’re really serious, you’ll pick up books on Warren Buffet and Charlie Munger. The tools in this book are easy to replicate. And over time, you realise that the biggest hurdle in implementing these strategies is your own biases, your own mental makeup, and your inability to control your emotions.
Recently I came across ‘Richer, Wiser, Happier: How the World’s Greatest Investors Win in Market and Life’ written by veteran American journalist William Green. For a quarter century, he interacted with some of the wizards of the investing world — including Late Sir John Templeton, Howards Marks, Charlie Munger, Joel Greenblatt, Nick Sleep and Qais Zakaria.
Green doesn’t elaborate on their success stories, or on which stocks they picked and why they picked them. He gives us a peek behind the curtain: who these investors really are and what shaped their thinking process. The book oscillates between the mind of a maverick investor, the soul of an evolved person, and the balance they have achieved in life. It also covers the universal investment laws, like:
- Whenever you buy a stock, you’re purchasing a portion of an ongoing business
- Pay attention to how much you pay, keep a safety margin
- Have a contrarian view
- Hold for the long term
- Don’t predict the market
- Buy what you understand
I have attempted to highlight some of the key insights I have got from them:
Bill Miller (Investor whose portfolio beat the S&P 500 Index from 1991 to 2015)
- “It’s all probabilities. There is no certainty” : Investing is all about having the odds in your favor
Bill Ruana (WW2 veteran who launched Sequoia Fund)
- “Do not borrow money to buy stocks”: Leverage is a double-edged sword
Peter Lynch (Manager of Magellan Funds, who made it the best performing mutual fund in the world)
- Only way to beat them is to outwork them
Ed Thorp (Mathematics professor and Hedge Fund Manager famed for applying probability theory for financial gains)
- When irritated steps back and question your anger
Mohnish Pabrai (Indian-American investor; author of The Dhandho Investor)
- Clone from the very best, avoid anything that’s hard
Sir John Templeton (American-British investor who became a billionaire via globally diversified mutual funds)
- Willingness and conviction to be lonely is essential.
- Beware of emotions and your own ignorance: you don’t know what you own.
- Diversify to protect yourself from your own fallibility.
- Be obsessed with punctuality and self-control. You control your levers.
Howard Marks (Co-founder of Oaktree Capital Management, the largest investor in distressed securities worldwide.)
- “Everything that’s important in investing is counterintuitive and everything that’s obvious is wrong.”
- Risk is highest when the risk tolerance is extreme.
- Build unfragile portfolios and unfragile lives; don’t push the limits to maximise.
Jean-Marie Eveillard (French investor; also professor at Columbia Business School)
- Perseverance: look for reasonable returns and suffer minimum losses
Joel Greenblatt (Hedge Fund Manager, Value Investing Professor, now runs Gotham Fund)
- Look for honest founders
- Cheap+Good= Holy Grail
Nick Sleep and Qais Zakaria (Co-founders of Nomad Investment Partnership which made 921% return in 13 years)
- Zen and the Art of Motorcycle Maintenance is a must-read.
- It’s not necessary to behave unethically or unscrupulously to achieve spectacular success.
- Performance comes from what is held, not bought and sold.
Tom Gayner (Co-CEO of Markel Corporation)
- Compensate lack of intellect with discipline and persistence.
- You can’t control the outcome but control the effort and dedication.
Charlie Munger (Billionaire investor and Vice chairman of Berkshire Hathaway; Warren Buffett’s right hand man)
- Three things ruin people: Drugs, Liquor and Leverage
- Keep learning, reexamine your thoughts: Mindset of Falsification
Arnold Van Den Berg (CEO of Century Management, credited as ‘Superinvestor’)
- Flood your mind with uplifting affirmation, eradicate the incapabilities
- People need love and if they have less love they substitute it with materialistic wealth
Each maestro gave me a different insight. Although their brilliant investing careers often give us an impression that they are in a cocoon of wealth and privilege which will isolate them from most difficulties, they have had their shares of bitter divorce, sick children, periods of overwhelming stress, physical disability and loss of trust of their client. But they had the ability to keep walking to greener pastures. They have mastered the art of subtracting everything and anything which will block them from what they plan to achieve.
The above guiding principles are helpful for investors as well as startup founders. If you use this as a building block for your venture, in all probability, you will attract the right investors, and wealth creation will happen over time. After all, a brilliant life comes from an inner self that reflects the light outside.