It’s my great pleasure to announce Mohnish Pabrai as a keynote instructor at Latticework 2016, to be held at the Harvard Club of New York City on September 14. Mohnish joins other great instructors, including Charles de Vaulx and Howard Marks, for a tour-de-force day on the use of mental models in investing.
If you’re a member of the value investing community or simply an interested observer, it is impossible you could have overlooked Mohnish’s impact on the community and his long-term success as an investor. To many of us, Mohnish’s book The Dhandho Investor served as a powerful introduction to the concept, “Heads I win, tails I don’t lose much”. While knowing this concept may not make us immune to mistakes, it does provide an instructive way of thinking about potential investments.
Mohnish has shared his wisdom with our community at several occasions in the past. Here’s an excerpt of an exclusive office tour Mohnish granted to our members, with Guy Spier sitting down for a conversation with Mohnish in Irvine:
Last year, Mohnish, who is an avid bridge player, also joined us for a conversation on the link between bridge and investing. The discussion shed light on the propensity of famous value investors like Warren Buffett to embrace the game of bridge. Highly rated bridge player and value investment manager Tom Weik led the discussion. You may enjoy this article about Tom and the link between bridge and investing.
Here’s a snippet of Mohnish’s insights into bridge and investing:
…when you’re playing a [bridge] hand, you’re constantly calculating shifting probabilities. Each time cards are played, probability shifts. Each time someone bids, probability shifts, [the] distribution shifts, and assumptions about who has what cards shift. The rules are also very similar to investing; I always say, investing is one of the widest disciplines one can engage in because the factors that affect future returns or future prospects of a business cover almost any discipline you can think of in even the simplest company. When you play bridge, you become much more comfortable with probabilistic decision-making and playing the odds. The key to investing is to play the odds. If you make bets — and many times these aren’t certain bets — but they’re bets that are heavily in your favor. As long as you make bets that are heavily in your favor repeatedly, once in a while it’ll go against you, which is fine, but most of the time they’ll come in based on what the underlying odds are.
Mohnish also joined us for a keynote Q&A session at Japan Investing Summit 2012. Here’s a timeless snippet I found particularly insightful:
…my interest in Japan was piqued from the observation that the Nikkei had flat-lined for more than thirty years. There’s a book Buffett recommended a few years back by Maggie Mahar called Bull. She chronicled these seventeen-year cycles in U.S. markets. […] If you looked at the Dow in 1965, it was very overvalued. P/E ratios more than thirty or 35. When you looked at it in 1982, it was very undervalued. You could buy GE at seven times earnings. If you looked at it in 1999, you would again find GE at 35 times earnings. So, when markets do these long periods of no movement or long periods of very aggressive moves, you end up with these very overvalued or very undervalued situations.
A couple years ago, Mohnish also joined us for a session on checklists, along with Guy Spier and Michael Shearn, author of The Investment Checklist.
…when we saw the failure of Dexter Shoes, the question that came up was, is this a business that can be negatively affected by cheap foreign competition or cheap labor? Sometimes we had issues with businesses with unions. With something like U.S. Air — the airlines have multiple issues because you’ve got a duopoly of suppliers, you’ve got a duopoly of engine manufacturers, you’ve got unions, and then you’ve got pricing set by your dumbest competitor trying to cover marginal costs, so a number of different checklist questions come out of that sort of a business. We just went around one-by-one and just started building the list. The checklist now has about 97 questions on it…
We look forward to Mohnish’s insights at Latticework 2016, as the participants will have ample opportunity to pose questions directly to Mohnish. This is also why we are limiting attendance at Latticework 2016 to one hundred — we want to foster as interactive a dialogue as possible. Stay tuned for an announcement about the opening of registrations for Latticework 2016.
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