I recently read the book- The Education of a Value Investor by Guy Spier. This book is about Guy Spier’s journey from that dark place toward the Nirvana where he now lives.
This blog post includes my top learnings from the book.
8 Rules developed by Guy Spier to be followed while investing:
2. 1. Stop Checking the Stock Price
o
As
Buffett has said, when we invest in a business, we should be willing to own it
even if the stock market were to close the next day and not reopen for five
years.
o
We
also know from behavioral finance research by Daniel Kahneman and Amos Tversky
that investors feel the pain of loss twice as acutely as the pleasure of gain.
o
The
Rule: Check stock prices as infrequently as possible.
3. 2. If Someone Tries to Sell You
Something, Don’t Buy It
o
As
Charlie Munger has joked, “All I want to know is where I’m going to die so I’ll
never go there.” For me, if an investment is being sold, that’s a place where I
certainly want to avoid going.
o The Rule: If the seller has a self-interest in me buying, I am not buying.
4. 3. Don’t Talk to Management
o
The
Rule: Beware of CEOs and other top management, no matter how charismatic, persuasive,
and amiable they seem. Exceptions to the rule: Berkshire’s chairman and CEO,
Warren E. Buffett, etc.
5. 4. Gather Investment Research in the
Right Order
o
The
Rule: Pay attention to the order in which you consume information. And don’t
eat your dessert until you’ve finished your meat and vegetables.
6. 5. Discuss Your Investment Ideas
Only with People Who Have No Axe to Grind
o
The
Rule: Pool your knowledge with other investors, but stick with people who can keep
their ego in check. If the other person happens to be Buffett, Munger, or
Pabrai, so much the better.
7. 6. Never Buy or Sell Stocks When the
Market Is Open
o
Wall-Street is rewarded for activity. My shareholders and I are rewarded for
inactivity.
o
As
Ben Graham explained, we have to try to make the market our servant, not our
master.
o
The
Rule: The Rule: Keep the market at a safe distance. Don’t let it invade your
office or your brain.
8. 7. If a Stock Tumbles after You Buy
It, Don’t Sell It for Two Years
o
The
Rule: Before buying any stock, make sure you like it enough to hold on for at least two years, even if the price halves right after you buy it.
9. 8. Don’t Talk about Your Current
Investments
o The Rule: Don’t say anything publicly about your investments that you may live to regret.
- Buffett once said, “Try to learn from your mistakes—better yet, learn from the mistakes of others!”
- Investing is about much more than money. So as your wealth grows, I hope you will also come to realize that the money is largely irrelevant. And what you will want to do with the bulk of your wealth is give it back to society.
- Reputation in business- especially the investing world- is everything.
- We like to think that we change our environment, but the truth is that it changes us. So we have to be extraordinarily careful to choose the right environment—to work with, and even socialize with, the right people. Ideally, we should stick close to people who are better than us so that we can become more like them.
- It’s not just a quaint, self-help idea that the people who succeed are those who get up when life knocks them down. An essential component of our education is to learn from our mistakes—and if we don’t make mistakes, sometimes we may not learn at all.
- Never do anything that could taint reputation.
- On Efficient Market Hypothesis: After all, if the market were efficient, the whole endeavor of searching for undervalued stocks would be futile.
- Life can change in a heartbeat.
- “It is not the critic who counts; not the man who points out how the strong man stumbles, or where the doer of deeds could have done them better. The credit belongs to the man who is actually in the arena, whose face is marred by dust and sweat and blood.”
- Buffett has said that the only diploma he keeps in his office is a certificate confirming that he had “successfully completed the Dale Carnegie Course in Effective Speaking, Leadership Training, and the Art of Winning Friends and Influencing People.”
- Valuable life lesson: it’s so important to show kindness and be helpful to people early in their careers, even when they have done nothing to deserve it.
- An ancient rabbinical saying puts it: “Who is strong? He who masters his own passions.”
- The process of self-correction begins with self-knowledge.
- Investing has a way of exposing our psychological fault lines—whether it’s greed, a lust for power and social status, or any other flaw. Envy was one of my biggest weaknesses at the time.
- As Munger puts it: “I like people admitting they were complete stupid horses’ asses. I know I’ll perform better if I rub my nose in my mistakes. This is a wonderful trick to learn.”
- The author has talked in short in this book about- value investing approach to life.
- Charlie Munger points out that it’s always easier to be truthful because you don’t have to remember your lies. This relieves your brain of much unnecessary mental work so that it can focus on something more useful.
- The author, David Hawkins, explores the theory that we have a greater capacity to influence others when we’re an authentic version of ourselves since this truthfulness evokes a deep psychological response in others.
- Guy Spier on joining the Buffet Fan Club-
- Instead of mingling with the New York crowd, I began to stay at the DoubleTree Hotel, joining the members of a Buffett fan club called the Yellow BRKers. Their website warns: “The Yellow BRKer Gathering is a 100% informal and unofficial gathering of Berkshire shareholders. The gathering is not intended as a forum to promote any particular product [or] service.”
- The people in this group weren’t dressed for success, and they didn’t have the slightest interest in doing business at the Berkshire meeting. They were there to learn, to celebrate friendship, and to drink from the well of wisdom.
- If you’re going to do something, it’s best to commit to it with wholehearted gusto.
- Warren Buffet donates a significant amount to the GLIDE Foundation. Guy Spier describes the founder of the GLIDE Foundation Reverend Cecil Williams, a man who, like Buffett, did his job with every ounce of his being.
- Infamously dumb investor, Isaac Newton who lost his life savings in the South Sea Bubble observed, “I can calculate the movement of stars, but not the madness of men”.
- Great investors don’t often talk publicly about their emotional challenges. But George Soros gave some sense of the stresses of investing when he wrote that there were moments when he wasn’t sure if he was running his fund or if his fund was running him. By contrast, Buffett has said that he tap dances to work every morning. His playfulness and zest for life are reflected in his sense of humor and his love of bridge. He has found his passions, and he delights in them.
- Buffett treats the investment business as a game and does little that compromises his day-to-day happiness.
- When you drop a stone in a calm pond, you see the ripples. Likewise, in investing, if I want to see the big ideas, I need a peaceful and contented mind.
- Mohnish Pabrai often quotes from Blaise Pascal: “All of humanity’s problems stem from man’s inability to sit quietly in a room alone.”
- Construct an environment in which we can operate more rationally—or at least less irrationally.
- Investors who are serious about achieving good returns without undue risk should follow the example of pilots which involves following the checklist. Why? Because in investing, as in flying, human error can be a bitch.
- Mohnish Pabrai has decided that he’d never put in an order to buy or sell stock during the hours when the market is open.
- Investment tool that is so invaluable that it merits a chapter of its own: a checklist.
- Guy Spier does not want to invest in companies as diverse as Philip Morris (a phenomenally profitable business that is damaging to its customers’ health) and Greece’s national lottery firm OPAP (a phenomenally profitable business that is damaging to its customers’ wealth). Both of these companies have a license to print money. But they do so by preying on people’s weaknesses. For the consumer and for society at large, this is not a win-win proposition. Personally, I don’t want to invest in companies that make society worse even if their products are legal. Call me irrational, but I think it’s bad karma. In any case, I much prefer to invest in businesses that benefit society. Once again, in learning this lesson, I realized that Buffett already knew it; as far as I’m aware, every one of his holdings meets this high standard.
- Checklist Item: Is this company providing a win-win for its entire ecosystem?
- The point is that I want to invest in companies that control their own destiny, not in companies that have their destiny determined by forces beyond their control.
- “Hang out with people better than you, and you cannot help but improve.” Those words have had an enormous impact on me. As Buffett helped me to understand, nothing is more important than getting better people into your life.
- Nicholas Christakis: if you have obese friends, you’re more likely to be obese. Similarly, if you have fit and healthy friends, you’re more likely to be fit and healthy. In other words, our close social connections count not only in the obvious ways but also in subtle ways that we barely understand.
- As Mohnish often says, quoting an old adage that Ronald Reagan loved, “There’s no limit to what you can do if you don’t mind who gets the credit.”
- Nothing, nothing at all, matters as much as bringing the right people into your life. They will teach you everything you need to know.
- The paradox is that you end up receiving infinitely more in life by giving than by taking. There’s a real irony here: in focusing on helping others, you end up helping yourself too. For some people, this is not easy to understand. They act instead as if life were a zero-sum game, in which the person who gives something away is the poorer for it.
- Susan, Warren Buffet’s wife told in a class, “When you get to my age, you’ll really measure your success in life by how many of the people you want to have love you actually love you. I know people who have a lot of money, and they get testimonial dinners and they get hospital wings named after them. But the truth is that nobody in the world loves them. If you get to my age in life and nobody thinks well of you, I don’t care how big your bank account is, your life is a disaster. That’s the ultimate test of how you have lived your life.”
- Anybody who sees Buffett merely as a great stock picker is clearly missing the point. At our charity lunch, his kindness and generosity of spirit were unmistakable. He was evidently determined to deliver much more value to us than we could possibly have hoped for or expected. He was there to give, both to the GLIDE Foundation and to us, not to receive. He wasn’t just polite and cordial.
- Books are a priceless source of wisdom.
- Mohnish often quotes a beautiful line from the Bible, “I am but dust and ashes.”
- The goal for the rest of us is not to be Warren Buffett or Mohnish Pabrai, but to learn from them. In big ways and small, I’ve come to see them both as grandmasters in the game of life. To repeat that all-important line from Warren, “Hang out with people better than you, and you cannot help but improve.”
- The real reward of this inner transformation is not just enduring investment success. It’s the gift of becoming the best person we can be. That, surely, is the ultimate prize.
Aaditya Chhajed
M: +91-9404055222.
Disclaimer:
Investors should seek the advice of their financial advisor prior to making any investment decision based on this report or for any necessary explanation of its contents. Future estimates mentioned herein are personal opinions and views of the author. This post is not a recommendation to buy or hold or sell securities. Investments are subject to market risks. Please read all investment-related documents carefully.
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