Please find our key excerpts from a brilliant video by William Green (Emphasis Ours).
William Green is an author of the highly rated book "The Great Minds of Investing". In this speech he speaks about the most important lessons he has learned in two decades of studying, interviewing, and writing about many of the world's best investors.
William Green used to gamble a lot in his early teens and used to make some money based on that. He liked the idea of making money just by using the mind. He realised later that gambling is not good because the odds are stacked against you and unless you know the odds you are doomed to lose.
He later found his interest in the stock markets and was fascinated by how the investors made money. He took the interviews of more than 20 investors and collated insights based on that which will not be only helpful in investing but also life in general.
Here are the four lessons that he tries to present during his talk:
1. The willingness to be lonely: He talks about an icon of investing who is known as John Templeton. John Templeton was a legendary fund manager who generated a CAGR of around 15% for around 38 years; if you had invested 10000 dollars before 38 years it would turn out to be 2 million dollars after 38 years. He talks about how it is important to develop the habit of being lonely because it is not only important for investing but also for life. Templeton had the guts to buy 104 companies during 1939 when the odds of failure were comparatively larger. When he called the broker to buy the companies the broker told him that he was being eccentric and 37 out of the 104 companies are bankrupt. He found out that after 5 years when Templeton liquidated 100 out of the 104 companies he generated extraordinary amount of returns. The example talks a lot about the ability and willingness to take the decision when everyone is actually de-motivating you to do it.
2. The power of humility: The speaker gives the example of Howard Marks who is a brilliant mind in investing; Howard Marks says don’t mistake yourself as the master of the universe. He says a lot of times in his life luck had a crucial role to play. He says that the outcome is not only the cause of skill but also luck and randomness. He talks about a scenario where he applied for a job at Lehman brothers but the CEO didn’t call him because he was drunk and then he ended up as managing a totally different fund. He says the role of external circumstances are huge when it comes to decision making and therefore being humble is always the best way to go about it. The speaker talks about another great investor by the name Bill Miller whose fund lost huge chunks of money during 2008 when they invested in AIG and other stocks. Bill Miller himself says that sometimes our own intelligence can lead us to believe something which is not true. Bill Miller says that the role of luck is huge in determining success in investing.
3. The ability to take pain: One of the greatest virtues of life is to have developed the ability to tackle pain. The speaker talks about investors like Bill Miller who says that there were times when you just look stupid and there is nothing you can do. He talks about there are times when you suffer so much loss that you have to lay off so many people and it is because of the mistakes committed at his end. He took the blame upon himself and gained around 40 pounds. Both in investing and in life it is important to accept the pain and to learn the ways in order to deal with it. The speaker talks about Charlie Munger who is always on the lookout for the ways in which things work. This is not a moral thing but something that works.
4. The key to happiness: The speaker talks about people like Mohnish Pabrai who has been instrumental in founding an organization by the name Dakshana Foundation. His foundation gives the coaching to the smartest minds who came from not very privileged backgrounds and prepare them to get admission into institutes like IITs. He says that it is important to know what makes you fulfilled and happy; and it doesn’t involve owning the Maserati but to actually help other people succeed.