William Green is an author, journalist, and active member of the value investing community. William’s writing has appeared in prestigious publications such as, The New Yorker, Time, Fortune, Forbes, to name a few. His latest book, The Great Minds of Investing, features beautiful portraits and profiles of world famous value investors, including several we’ve interviewed for The Manual of Ideas: Howard Marks, Mohnish Pabrai, and Arnold Van Den Berg. William recently gave a talk at Google headquarters in Mountain View, California to share some of his key takeaways from interviewing so many of the world’s most successful investors. William’s talk is also one of twenty, hour-long investor talks at Google, available for free on YouTube. I highly encourage you to make your way through them all if the opportunity ever presents itself. But this post is specifically about William’s lecture, and the four lessons he learned in compiling his masterpiece book.

William’s first lesson is: A willingness to be lonely. While that initially may sound a bit drab or depressing, he’s not necessarily recommending that you literally have to be lonely to succeed as an investor; rather, what William is implying in this first lesson is that you need to be a free thinker. It’s your thoughts that need independence, not your body; although, sometimes the two do go hand-in-hand. Now, if you come to a conclusion on your own, that also happens to agree with consensus, that’s totally fine. I can think of plenty of examples where there’s no need to “reinvent the wheel” simply for the sake of being a contrarian thinker. Specifically, in the event of a personal illness, I would welcome the best possible cure recommended by doctors and years of patient data. But what William’s really getting at here, is that for the times when your own thinking does not agree with consensus, the great investors have enough confidence in their own reasoning not to immediately assume that they’re mistaken or wrong. Which brings us to William’s second point. 

The power of humilityIn a previous Latticework article, I wrote how Warren Buffett invests like a journalist. What I meant by this, is that Buffett takes a stance of natural intellectual humility and curiosity in developing his investing thesis, much like the same way a good journalist lets the facts tell the story, rather than trying to spin some pre-existing agenda. Humility is particularly important in investing, because it’s only when you’re hands-down, one-hundred-percent, money-back-guarantee certain you’re right, that you’ll get totally steamrolled. That’s when you suffer the big losses. So even if they know they’re probably spot-on in their rationale, the greatest investors still assume there’s a chance they could be very wrong, thus they protect themselves to hedge that possibility.

The third point that William makes, is that even for the brightest minds, mistakes are inevitable. And, it’s in how you deal with these setbacks, or as William puts it your ability to take the pain, that separates the good from the great. In the Google talk, William references Bill Miller, who suffered significant capital loss during the last financial crisis of 2008. Yet, Bill was able to remain calm and persevere through the panic. There’s almost a component of stoicism involved in taking these kinds of hits. And on that note, I highly recommend checking out William B. Irvine’s A Guide to the Good Life to dive deeper into the particular topic of applied stoicism. Chris Karlin, of Aquitania Capital Management, has also endured his share of hits. In our last conversation with Chris, he discusses the importance of learning from those mistakes and persisting anyways:

Some of it is how you view risk, how risk makes you feel, what makes you nauseous, what makes you jubilant. Part of it is just your chemistry. Beyond that, it’s experience. It’s going through and making mistakes, and losing capital permanently, and really assessing that. I have a harder time recalling the successes but I can recount to you all my losses in painful detail. And so it’s how you experience loss, experience risk, how you keep that going forward. Every day I’m making mistakes but I hope that I can keep it interesting by making new mistakes. It bothers me greatly when I make the same ones over again.

[link-to-moima-standard url=”http://www.manualofideas.com/interviews/chris-karlin-on-principled-yet-flexible-investing”]

Finally, and this is something of particular interests to those of you who also enjoy studying philosophy, William’s fourth lesson from interviewing the world’s greatest investing minds, goes beyond finance. It’s probably not a coincidence that the title of William’s book is, The Great Minds of Investing, rather than just The Great Investors, because it’s evident William wants to share not just investing tips with his readers, but also answers to life and philosophical questions. Some of the subjects William interviewed have IQ’s near 180, so getting their thoughts on just about any subject is fascinating. But, back to the point William wanted to highlight: The key to happiness. Or as he phrases it, investors are always thinking and talking about return on capital (ROC), but what about your return on life? What kind of performance do the greatest minds of investing get in that market?

Like all really deep and thought-provoking questions, the answer to that last question of “a key to happiness” is largely open to interpretation. In the talk, William gives the example of the investor Mohnish Pabrai who has set up a scholarship program in India called, the Dakshana Foundation. The word, “Dakshana” in Sanskrit means “to give”. And, as William notes, it’s quite possible that Mohnish will be remembered more for his charitable contributions than his hedge fund. I suppose time will ultimately be the judge of that, but the thing that’s clear is that “returning happiness” requires more than just satisfying one’s own needs. Some of the happiest people in the world, like The Dalai Lama for instance, radiate a sort of inner joy, yet all of his material assets are quite minimal. Which, pretty much brings us full circle. Because, it’s worth concluding here with the following final thought. Warren Buffett, who exemplifies all four of William’s lessons, often tells his audience of eager listeners that he’s always strived to live his life by an inner scorecard, as opposed to the more common, scorecard of society. Whether it’s capital allocation, making charitable contributions, or just doing daily errands, ultimately, contentment is found within ourselves. It’s found in the ability to look yourself in the mirror, and feel satisfied that you’re living your life as the kind of person you’d hoped you’d someday become. And if you can do that, happiness probably isn’t too far off.