威廉-格林。"投資大咖的經驗"｜谷歌講座 (William Green: "Lessons From the Great Minds of Investing"

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MALE SPEAKER: So today we're here
to talk about a special book.
This is a book that has lots of pictures, lots of profiles,
lots of wisdom in it.
And you just wish that when you're
reading this book that you didn't
have to pay as much as the sticker tag,
because it's prohibitively expensive.
But part of the reason is it's also a fantastic book.
It's a great book.
And we have the author of that book here with us today.
William Green has been writing about investing
and other topics for over two decades now.
And as you read the words in the book.
"The Great Minds of Investing," you
realize that he has tried to talk
about the wisdom of great investors,
but not restricted it to investing alone.
He's taken it beyond that.
And he's put it together in a very, very authentic voice.
I'm very honored and very happy that he
has decided to come here in person
and talk to us about his thoughts.
So without any further ado, ladies and gentlemen,
please join me in welcoming William Green.
[APPLAUSE]
WILLIAM GREEN: Thank you so much.
I'm delighted to be here.
And I'm so grateful to you all for taking time off
during your lunch break to come here.
And I'm actually particularly happy to be here
because I'm actually a shareholder in Google, or now
Alphabet.
And it's pretty much the only investment
that I've had over the last year or so that's done really well.
So keep it up.
My retirement is in your hands.
But I feel happy because I've rarely been in a room
where there are so many IQ points.
So thank you for all of your ingenuity and hard work.
When I was 15 years old, I became
obsessed with gambling, and specifically
actually with horse racing.
And at the time I was at this very posh English school,
a school called Eton College that had been founded, I think,
in 1440 by Henry the VI I think.
And this is a school where people
like Prince William and Prince Harry went
and the current British prime minister, David Cameron.
And so I was supposed to be becoming
this posh English gentleman, and instead I
would go off to gamble in this turf account
in this betting shop in Windsor, the neighboring
town next to Eton College.
And I actually had this illicit account because I was only,
I guess, 15.
So I had an account under a fake name,
which was Mike Smith-- not a very creative name.
And at first I did pretty well.
And I made some money, totally randomly.
It wasn't because I knew what I was doing,
although I think at the time I thought I did.
And then after a while, I sort of started to lose.
And I realized-- basically the reason
I had started in the first place,
it wasn't because I loved horses.
It wasn't because I thought this is an incredibly
beautiful sport or anything.
I just liked the idea that here was
something where you could make money just by using your mind.
And I was kind of lazy.
And I thought well, I don't want to mow lawns or anything.
And here if I can just sort of invest a little bit of money
on a horse race and make some money, that's fantastic.
And when I started to lose, I just thought,
I'm going to stop cold turkey.
And literally I stopped at the age of 16.
And I haven't had a bet on a horse race,
I haven't been to a casino and gambled in more than 30 years,
because basically it's a mugs game.
You're just losing.
You're just doomed to lose.
The odds, unless you're particularly brilliant at sort
of figuring out odds, you're just kind of doomed to lose.
And so I stopped completely.
And then when I got to my 20s, I discovered the stock market.
And then I thought wow, now this is what I was really after.
This is the real game.
Because again, this is somewhere where, if you're smart,
you can use your brain just to make money
without really getting your hands dirty in any way.
And I just thought this was magnificent.
Now I was very fortunate, you know, that-- thanks.
That was a very good move.
That was impressive.
I want to see that again if you could do it.
And then I was very fortunate in that I
was writing for these magazines back then
like "Forbes" and "Money" and later for "Fortune" and "Time."
And so I got to interview all sorts of famous investors.
So I would, for example, I would get
to interview Peter Lynch or Jeff Vinik who
was managing the biggest mutual fund in the world
when he was in his early 30s, or Seth Klarman or Marty Whitman,
Bill Ruane who ran the Sequoia Fund for many years,
some of these extraordinary investors.
And I would go off to Houston, for example,
and I'd meet Fayez Serofim, who is
this Egyptian multibilllionaire known as the Sphinx.
And he has an El Greco painting, a 430 year old El Greco
painting on one wall, a de Kooning on another wall,
and he's got this 5th century mosaic floor from Syria
that he's imported from a Syrian church.
And I became really fascinated by the fact
that there was this tiny minority of people
that managed to defy gravity by performing extraordinarily well
for many years as investors.
And I sort of figured, what if you could reverse
engineer these people and figure out why
it is that they win this game?
How do they stack the odds so that they win as investors?
What characteristics do they have
in terms of temperament, in terms of principles,
in terms of insights?
And is there any way that I could learn to do this?
Then over the last couple of years
I was working on this book, "The Great Minds of Investing,"
where I had this opportunity-- in the end I interviewed
I think 22 of these guys and I wrote
profiles of 22 famous investors and edited profiles of several
more.
And by this time, part of what happens
I think when you hit your 40s is that you
start to suffer from all sorts of existential angst.
So instead of just thinking, how do
I get rich by reverse engineering these people,
you start to think, well how do I live?
How do I make better decisions?
How do I eradicate what Charlie Munger would
call standard stupidities?
How do we make good decisions in the face
of a very uncertain future?
How do I handle adversity?
How do I handle pain?
How do I handle stress?
How do I balance my family, who are here-- so obviously not
very well-- my family, my work, all of these things?
And so the question really became how to live.
And so what I'd like to do today is to share four lessons that I
think are really-- they're very useful in terms of investing,
or at least three of them are.
And I think they will help to make
you richer over the long term.
But I actually think they're also very
important in terms of life.
And really it seems to me that the goal
is to reverse engineer these people to figure out,
how do I become richer?
How do I become smarter and wiser?
And how do I become happier?
And so I think these are lessons that
help you in each of these areas
And we're going to talk-- I've got these four things up here.
Hopefully you can see if the technology is working.
The first idea we're going to discuss
is the willingness to be lonely.
And what we're really talking about here
is this idea that you have to take
what Peter Bernstein, the market historian
once described as uncomfortably idiosyncratic positions.
That if you want to outperform, you
have to diverge from the crowd.
You have to be willing to be lonely.
And this has powerful implications
both in terms of investing and other areas of life.
The second idea we're going to discuss
is the power of humility, which as we'll see
is a somewhat contradictory idea.
You have to have the self-confidence
to go your own way, but you also have the humility to say yeah,
but what if I'm wrong.
And then you have to build in safeguards in case
you're wrong.
The third idea-- sorry for these gloomy titles.
My son Henry said to me, man, that's a real downer.
The third title is the ability to take pain.
But what we're really talking about here
is emotional resilience, which I have come to believe over
many years of covering investing is really
one of the absolute keys to long term success as an investor.
And what we're talking about with all of these people,
we're not talking about being great
as an investor over one cycle.
We're trying to achieve success over many decades.
And so you need this ability to take pain,
because there are going to be times when you're hit.
And this obviously also relates to other aspects of life.
The fourth topic, which is slightly more elevated
in areas, is the key to happiness, which it strikes me
that one of the things you really
want to learn from these great investors is how do I
not just become rich, but how do I make the money work for me so
that it's not just sort of a short circuit in my life,
but is actually something that enriches my life?
So the fourth section is really about what
you could call true prosperity.
And what we're really talking about with all of these things
is the ability to stack the odds in your favor
so that you're kind of tilting the playing field so
that the odds of having a successful life in all
of these different areas is increased.
So the willingness to be lonely-- back in, I'd say,
the winter of 1998, I got this fantastic assignment
to go interview Sir John Templeton.
And as many of you know, Templeton
was one of the greatest investors of the last century.
At the time he was 85 years old.
If you had invested in the Templeton growth fund,
over 38 years he compounded a rate of about 15% a year.
And as a result, your $10,000 would turn into $2 million.
And in fact his returns-- that doesn't really
reflect his returns because he was an extraordinary investor
really for about 60 or so years.
So he defines this ability to have great success
over a long period.
Now Templeton lived in this gated community
called Lyford Cay in the Bahamas, which
was a fascinating place.
He had decided early in his life he
was going to save-- he saved half of the money
that he made early in his career,
and then decided with his wife, we're
going to be able to live anywhere we want in the world.
And so they took a bunch of pieces of paper
and figured out that Lyford Cay was
the place-- Lyford Cay was a place where people like Prince
Rainier of Monaco lived.
The Aga Khan had a house there.
Sean Connery had a house there.
I think part of "Thunderbolt", the Bond movie
was filmed there.
So this was a pretty sweet gig to go in the middle of winter,
to go interview Templeton, this great guru at Lyford Cay.
And I remember as I came up to his house, there's actually,
as you walked along the porch of his house,
an electronic dog starts barking.
And I had this quandary whether I
should out him in this article as having
this fake security, which of course I did mention
in the article.
And so Templeton is kind of this giant
of this period, this 85-year-old who
is really the pioneer of international investing.
He was the first great fund manager in America
to venture abroad and say, why should I just be
looking for bargains in the US?
So the most memorable experience,
strangely with Templeton, was not in fact anything
that he said.
It was watching him one morning when he was exercising.
And he didn't actually know that I was there.
So I'm on the beach in Lyford Cay.
It's a very tough assignment.
And I hide behind a palm tree because I'm
worried that he's going to see that I'm there.
And he's in the water.
He would do this for 45 minutes every day for many years.
He's in the water up to here, and he's
pumping his arms and his legs like this.
And he just looks ridiculous.
He's wearing this hat with this crazy visor
sticking up there and these ear flaps down here.
And his face is slathered with sun cream, which
he hasn't bothered to rub in.
And as I'm watching this, I'm just thinking,
this is kind of this extraordinary sight.
I thought I was going to see this kind
of heroic sort of wise sage.
And in fact he just kind of looks like an idiot.
And when I got home to New York, I'm thinking about this.
And I'm thinking actually, this is the key to Templeton.
What I realized Templeton really embodies is this willingness
to be lonely, this willingness to say,
this is how I do things.
This is a way to act that actually makes sense to me,
is a really efficient exercise.
I don't care what anybody thinks of me.
And it's an extraordinarily powerful way to think.
And this became kind of a metaphor
for me when I started thinking about the great investors,
that what all of these guys have in common is
they're kind of mavericks and free thinkers.
They don't go with the crowd.
If you want to outperform, you have to be different.
And this is something that all of these guys have.
And you see this very vividly with
this extraordinary investment that Templeton made in 1939.
So the world is kind of coming to an end, right?
It's really this calamitous event where Germany
is about to overrun Paris.
The market is still-- many companies
have been just smashed by the Great Depression.
And Templeton looks at the Wall Street Journal,
and he tells me he figures out that there
are 104 stocks trading on the New York Stock
Exchange that are all trading at less than $1 apiece.
And he figures that actually the world is not coming apart.
It's not going to end in the way-- this
is one of the great lines from Howard Marks.
Howard Marks said to me, most of the time,
the world doesn't end.
And this is something that Templeton figured out.
So he figures actually the war is
going to jump start all of these tiny companies that are still
recovering from the Great Depression.
And so he put in this order for 104 of these stocks.
And the broker that he calls, calls him back and says,
yeah, it's an eccentric order, but fine.
We'll do it.
But there are 37 of these companies that are bankrupt.
And Templeton says yeah, I want those too.
And so he buys these 104 stocks.
And he said to me that five years later when
he liquidated his position, 100 out of 104
had been profitable bets, and he quintupled his money.
So think about this in context, right?
This guy was about 27 years old at the time that he did this.
He'd started on Wall Street maybe two years before.
He had no money.
He came from nothing.
I mean, his father told him, I think his second year at Yale,
I cannot pay a dollar towards your education anymore.
And here he actually borrowed $10,000.
It was the only time he ever borrowed money to invest,
he told me at least.
And so he borrows what in today's money is about $170,000
I think.
This is incredible guts to do this.
So this is the first idea is that you
need to be willing to diverge from the crowd
if you're going to succeed at this.
And you have this extraordinary default option, right?
If you don't want to diverge from the crowd,
you can just buy an index fund.
And we know you'll do just great over many years.
And it may be that you do even better doing that.
But if you want to outperform, you actually
have to be willing to go against the crowd.
So I think this is one of the areas where
you can apply this great line from Charlie Munger where
Munger as we know says, he takes a line from algebra where
he says, invert.
Always invert.
So think about what the crowd does
and all of the stupidity of the crowd, all
of the folly of the way that most people invest,
and then invert it.
So we know that when it comes to investing,
the crowd is emotionally very reactive.
They make these very short term decisions.
They trade too much.
They get carried away by fads, by whatever
seems to be hot at that moment.
They're listening to market predictions,
for example, a great deal.
And there was a wonderful line from Marty Whitman, who
said that market prediction is the last refuge
of the incompetent.
We know that market prediction really doesn't work.
We know that you're not going to be able to figure out
when the market's going up, when interest rates are going up.
And yet so many people spend their time
being yanked around emotionally and intellectually
by watching the latest news on CNBC and the like.
So one of the things that my friend Mohnish Pabrai who's
one of the most brilliant minds in this book, "The Great
Minds of Investing" said to me is
that when he started to invest in 1994,
and he started basically to reverse engineer Buffett,
he said you could see that Buffett basically
lays out the laws of investing.
You can see what you need to do.
And he said he would look around,
and no mutual fund managers and no hedge fund managers
were doing this.
And he was like, what a country.
He said it's like it's like an entire generation of physicists
saying that gravity doesn't exist.
So this became his great opportunity.
It was to say, all right, if no one else can to do it--
he's like, if no one else will do it,
the Indian guy will do it.
So he figured out that he was just
going to use Buffett's laws of investing.
So things like buying stocks at a great discount
to their intrinsic value.
As he put it at one point to me, he said, rule number
one, extreme patience.
So if everyone else is being very short term,
exercise extreme patience.
Regard the market as your servant or something
that you can use rather than as your master.
So Francis Chou, another of the great investors in this book
said to me, most of the time you just
shouldn't be buying anything.
He said I could wait 10 years now
without buying a single stock.
He's like, I don't need to do anything.
I can just sit around and read until there's
a great opportunity.
So I think one of the things that you
see with these great investors is this ability
to detach themselves from the stupidity of the crowd
and to think for themselves.
And I think the first point to remember really
is to ask yourself, do I actually have
what it takes temperamental and intellectually
to go my own direction, to defy conventional wisdom?
And if I don't, it's a perfectly smart thing
to buy an index fund.
But if I do, then these are the kind
of rules that are going to really help me.
I want to diverge from the crowd.
And I think there's no shame in saying,
this is a game I shouldn't play.
It may be that the single smartest
thing I did in my youth was to decide
I'm going to lose if I bet on horses and if I gamble.
And I'm just not going to play that game anymore.
So I think self-awareness is probably
an important starting point.
The second idea is the power of humility.
Now this photograph, which was taken by my friend Michael
O'Brien, who took the extraordinary photographs
for this book, "The Great Minds of Investing,"
is of Howard Marks.
And as I mentioned in my profile of Howard,
when you're in the presence of Howard,
you feel like you're in the presence
of a very superior machine.
He's one of those people you just
fell, man, this guy's so much smarter than I am.
And he really is, at some level, one
of the greatest of the great minds of investing.
This is a guy he's overseeing, I think, $97 billion
in assets at this point.
He has this extraordinary reputation
where Buffett would say, when something arrives
in the mail written by Howard Marks,
it's the first thing I read.
I drop everything and I read that.
He's worth a couple of billion dollars already.
He bought an apartment in Manhattan for, I think,
$52.5 million dollars.
So he's a very remarkable success story
and sort of a triumph of the intellect and rationality.
One of the things Howard said to me when I met him
in his office-- he has this beautiful corner office on sort
of the 43rd floor of a Manhattan skyscraper--
he said the screwiest thing you can do
is to think that you're a master of the universe.
And this is a very important idea.
He explained to me that A, the future is extremely uncertain.
So you don't want to get carried away
by this hubris of thinking that you know what the future holds.
So he said the only constant is impermanence.
We just don't know what's going to happen.
And so you have to be constantly looking
at where we are in the cycle and thinking,
am I getting carried away?
Am I taking too much risk given where we are in the cycle?
Rather than just thinking, I know
what the future is going to bring, just keep
a careful gauge on the weather and think,
am I getting carried away.
And people do.
The other thing that I would say about Howard Marks
is he has this belief that comes from Japanese philosophy,
from it's this idea of the turning of the wheel
of the law, which is the Japanese word, [JAPANESE],
where he basically says, we're all just little cogs.
And the world is going to keep on.
The universe is going to keep on going without us.
And so you can't get carried away
by the sense of your own brilliance.
And he is fascinated by this idea of randomness and luck
in his own life.
So he said to me actually, even something
as simple as the fact that he became
a very successful investor was a series of total flukes.
He told me this wonderful story where
he said that he got this job out of--
or he applied for this job out of college at Lehman Brothers.
And the partner at Lehman Brothers
who's supposed to call him and say Howard,
we're super excited to hire you, got drunk and had a hangover,
and totally failed to call him.
So one of the reasons why he took this path where he ends up
as an expert on junk bonds and the like
is just because he didn't go to Lehman Brothers
because a guy got drunk.
And so he said, before you start thinking
you're a master of the universe, think
about how many lucky breaks came that you thought
made you incredibly successful but actually were
just this beautiful randomness or these deep patents,
however you want to see it, that put you where you are.
The other person I would talk about
in discussing this idea of the power of humility
is Bill Miller, who is a very remarkable mind
in the same sort of way as Howard Marks.
He has this wonderful kind of Renaissance mind.
I had this wonderful assignment back in, I guess, 2001
to write a profile of Miller.
And so I spent something like 45 hours interviewing Miller.
And since then I've spent a lot more time interviewing him.
It was this experience because I flew with him
on his private plane from Baltimore
to his alma mater where he was giving a speech.
And Miller said to me the only reason
he had this plane really was because he had a 90 pound dog,
and he really, really wanted to be able to travel with his dog
wherever he went.
Well it didn't come on this particular trip.
And also he quoted Buffett, saying that at a certain point,
the scarce resource is time, not money.
So we go on his private plane to-- I think it was William
and Mary was his college.
And at the time the market was just imploding.
I mean, this is right after 9/11.
And I think the market had its single worst week since 1929.
And stocks were just crashing.
And Miller is just buying like crazy.
He's just totally happy, totally calm,
totally at peace as this brilliant contrarian investor,
very unemotional.
And at the time he has like a 15% stake in Amazon,
which has just crashed from $90 a share to $5.50 a share.
And I went to some conference where
Bruce Greenwald, who's a brilliant, brilliant mind who's
one of the great gurus on value investing,
basically pillories Bill Miller for thinking
that Amazon's going to survive.
And Bill stands up and he gives this sort
of impassioned speech, speaking at triple speed
because he's nervous and says if I'm wrong,
I'm going to lose 100% of my money.
But if I'm right, I'm going to make 50 times my money.
And when I looked last week, actually the stock
is up 100-fold from then.
And so he was this consummate contrarian value investor,
very, very brilliant, able to see what other people kind
of couldn't see and able to apply this temperament, really
this willingness to be lonely that we were talking about.
And I'm standing next to him one morning when
he calls his office in Baltimore and he says yeah,
is there any news?
And one of his colleagues says yeah,
this stock that we bought the other day,
AES, they've missed their earnings massively,
and the stock is halved.
And so it's not even lunchtime and Miller's just
lost $50 million on this one stock.
And he was totally calm.
He's like, let me see where my cash position is.
Let's double our bet on this.
And he's just assuming that basically most people overreact
to bad news.
The crowd is going to overreact to bad news.
It's going to be discounted more than it should be.
And his default position is that he should
he should be adding to his bet.
And so I'm watching this guy and I kind of start to hero worship
this guy because he just embodies everything
that I admire in an investor.
So then you wind forward a few years to the financial crisis,
to 2008, 2009, and all of these stocks
are imploding once again.
Financial stocks are getting killed.
Housing stocks are getting killed.
Miller, as always, is tremendously contrarian
and he's buying things like Countrywide Financial,
Merrill Lynch, AIG.
And everything he touches turns to dust.
It's unbelievable to see someone this smart look so foolish.
And he's just absolutely crushed.
And one of his funds, his flagship fund
goes down 55% in 2008.
The other fund goes down 65%, his smaller fund.
And this to me was an extraordinarily powerful
reminder of why you need to be humble, that you need always
to remember, what if I'm wrong?
What if this hedge fund manager that I admire,
that I have my life savings with,
turns out to be a charlatan or a fraudster?
What if this brokerage account that I have turns out actually
to be a house of cards and the bank goes under?
What if this private company that I've invested in
turns out to be terrible?
And in fact this is a particularly resonant issue
for me because the single stupidest investment I ever
made was in a private company that I made about 12,
13 years ago, where everything looked fantastic here.
The technology was fantastic.
It was run by a friend of mine who I love dearly,
is a very talented person.
And then it just goes to hell.
And Goldman Sachs came in and invested
at 40 times the valuation that I invested in.
And so I'm thinking wow, I'm so smart.
And in fact you discovered no, you're not smart at all.
You're an absolute idiot.
And so I think this is a very useful reminder.
And for me part of the reminder is that you also
need to be humble about your own flaws and foibles
as an investor.
And so for me I think part of the attraction of investing
in a company like that was feeling like wow,
I'm part of the smart intellectual set who
gets these inside opportunities that
aren't available to the mere mugs
out there who are just getting fleeced by Wall Street.
And any time you let your ego get
involved in investing I think it's kind of a disaster.
So I think the power of humility is a very important
characteristic.
And I'll finish this topic just by mentioning this wonderful
from Damon Runyon, a superb writer who would often
write about gambling.
And he wrote this great story "Guys and Dolls"
that became the musical "Guys and Dolls."
And there's this character in it, Sky Masterson,
who's a gambler.
And Sky Masterson's dad bankrolls him to be a gambler
and gives him this advice very early in his career.
And he says son, he said in the course of your travels,
someone will come to you and they'll offer you a bet.
And they will say-- they'll hold up a sealed pack of cards,
a sealed deck of cards.
And they'll say, the jack of spades
is going to jump out of this deck of cards
and is going to squirt cider in your ear.
And he says son, do not take that bet.
Because sure as you're standing there, the jack of spades
is going to jump out of that sealed deck of cards,
and you're going to wind up with an ear full of cider.
And I think this is, in some ways,
humility is a part of avoiding that you earful of cider,
these situations that you think it's impossible that they'll
happen, and they do.
The ability to take pain-- so as I was saying before,
this is about emotional resilience.
So let's go back to Bill Miller.
So think about what Bill Miller went through
during the financial crisis.
He had recently gone through a divorce, which
he said to me it was an amicable divorce,
but it halved his assets.
He then invests half of the assets on margin
because he is always kind of a bit of a risk taker.
He loses 80% on paper of his assets in the financial crisis.
Whereas he said to me, he said his wife put all her money
in bonds and did fantastically and outperformed him massively
and now has the biggest house in Greenwich, Connecticut.
And so he's done well since then, so he's recovered.
But his two funds get really hammered.
And assets just fly out of the window.
I mean, at his peak at Legg Mason,
he was overseeing $77 billion dollars.
Assets go down to $800 million.
And when this happens, he has to lay off tons of people.
And so he ends up laying off over a hundred people.
And he said to me, this was the worst thing.
He said, people lost their money.
Investors lost their money.
And people lost their jobs because of me, because
of Mistakes that I made.
And I said to him, did you blame yourself?
And he said sure as hell I blamed myself.
He said I looked around, I wanted to blame someone else.
There was no one else to blame.
They were my mistakes.
And during this period he told me that he put on 40 pounds.
And I said to him, how come you put on 40 pounds?
Dietary issues are important to me
because I'm always wondering how I can ever lose weight.
And so I was interested in his answer.
And he said, well, I ate a lot of comfort food.
I ate a lot of cheeseburgers.
I ate a lot of Chinese food.
I would drink red wine at night.
And he said, you know, I could have come home
and just had grilled salmon and broccoli and Perrier.
But he said a man can only take so much pain.
[LAUGHTER]
So Miller said to me at one point
that if you did a brain scan of the greatest value investors,
he said he's pretty convinced that you would find
that the greatest value investors are actually
wired differently than the rest of us,
that the part of the brain that processes, say,
the fear of loss or the pain of loss
is actually kind of stunted in them.
And I think you can see this in people
like Buffett, that they're just extremely unemotional.
You see it in Marks as well.
And yet, Miller during this period
of very tremendous intensity, gets
hit badly enough that he puts on 40 pounds
and it becomes this incredibly intense experience.
And I think this is a powerful reminder that you really
need to pay attention.
If you want to be long time successful as an investor,
you need to pay attention to the need
to build emotional resilience.
And this is a really important point
that I think particularly people forget when we're
going through a good period.
You tend to assume things will always be good.
And you tend to overreach during these good periods.
We get full of overconfidence and hubris.
And I think it's really key to remember one of the things
that Howard Marks says, which is that life is basically
a pendulum, that our own lives are a pendulum.
They swing one way from one extreme to the other.
The market is a pendulum.
The market euphoria is a pendulum.
And so just not to get carried away during these periods where
everything is good.
You don't want to overreach.
You want to work on the basis that there
is going to be a time where I'm going to get hit.
And this isn't to be gloomy about it.
You want to take various safeguards,
various precautions.
You don't want to overreach.
Bill Ruane once said to me, you just
never want to invest in margin.
Because when the market gets hit,
it's just impossible to be rational
because it's such an emotionally grueling thing.
So I think this sense of taking great caution
during the periods where things are good
is a key to setting yourself up to be
able to dealing with pain.
But I think also it's really important
to look at where different investors get
their emotional strength and to ask yourself,
so where will I get my strength when things go wrong?
And so it was very striking to me,
for example, that Miller, when I asked him
what he was reading during the financial crisis,
he said basically I was reading the stoic philosophers.
So he was reading Epictetus and Seneca.
Because what they're talking about
is, as he described it to me, he said
it's their general attitude to misfortune.
It's that they're saying, you can't necessarily
control what happens to you, but you can control your attitude
towards it.
This is a very, very important idea.
And when I look at all of these great investors,
it's very tempting to assume that there
was this straight upward trajectory
and their lives were always going to be a success,
and it's really not true at all.
These guys, all of them went through the wringer.
And you look at people like Eveillard-- Jean-Marie
Eveillard or Don Yacktman, they went
through periods in the late '90s where
they looked like idiots because they refused
to buy expensive stocks.
They underperformed for years.
You know, Eveillard said to me, when you underperform massively
for three years, he said the first year,
your shareholders are upset.
The second year they're furious.
And the third year they're gone.
And he said at a certain point, you start to say,
am I an idiot?
How come I don't get it?
How come everyone else gets it?
So while we're talking about the willingness to be lonely,
the willingness to go your own direction,
it's important to understand that this
requires a degree of strength.
It requires emotional fortitude.
But I would say for all of you, you're
going to find that in the course of a lifetime,
there are periods that are very intense.
And you need to figure out, where
am I going to get my emotional strength?
And it doesn't necessarily matter
whether it's from stoic philosophy,
whether it's from spirituality-- which
it was for someone like Don Yacktman who
was a-- actually he was an archbishop in the Mormon church
at one point.
And he said to me that a period like the late '90s,
he said if it hadn't been for his faith, his family-- he's
been married for I think 50 years
and has seven kids and 25 grandkids--
if it hadn't been for his faith, his family, and the fact
that he volunteered in things like the Scouts,
he said a period like that could have destroyed me.
And this was his language.
He was like, it could have destroyed me.
And so I think here's a very important idea.
Where am I going to get my emotional strength,
and not to underestimate the importance of that.
And also just not to idealize these great, successful people
and assume that everything was just fine always.
It's like no, you're going to go through periods
that are very difficult.
The fourth and final idea before we get to questions
is, I think, probably the most important,
which is the key to happiness.
And I've spent a lot of time over the years studying
these great investors.
And some of them are multibillionaires.
And you're trying to figure out, are they happy?
What does the money buy them?
What makes their lives worthwhile?
And I was in a very privileged position
because I got to see this up close.
And so I got to see when actually they
were really pretty unhappy.
And you could look in the eyes of certain investors,
whether it's a Tom Gayner or a John Spears or a Mohnish
Pabrai, and you'd be like, this guy has a kind of glow to him.
And why?
Where does that come from?
Why is this person more fulfilled
than some of the other investors?
And so the reason we have this photograph of Irving Kahn
is that in some ways he kind of embodies this deeper wisdom
about what life is about.
This photo of Kahn was taken when he was 108 years old.
He was one of four siblings, all of whom live to over a hundred.
It's an astonishing thing.
And what's even more astonishing is
he smoked until he was about 50--
I'm not necessarily advocating this-- and ate red meat always.
And so his son Tom, who worked with him for many years,
was in his 70s, said to me, really he
stayed young because he just always studied.
He just was learning constantly.
So he had a youthful mind until the very end.
So a few months-- actually maybe six,
eight weeks before Irving Kahn died,
I had this very strange interview with him
where I was hoping to meet with him in person,
and he was too sick to meet me.
And I was initially very disappointed.
And then his grandson Andrew, who's a analyst in his third--
he's at Kahn Brothers, his investment firm--
is a really lovely bloke, takes my questions
that I've written out, and asks these questions
to his grandfather, whom he adored, over several days,
and writes our answers.
And when I get these answers back,
there's something deeply moving about them.
This is sort of the lifelong wisdom of a 108 year old man.
And so one of the key questions I
said to him, when you look back on your life
and you think about not just the key to a long life,
an extraordinarily long life, but actually
a happy life and a meaningful life, a fulfilling life,
what is it?
What can we learn from you?
And he said, this is a very hard question to answer,
and it's different for everyone.
But he said for me, family is very important.
And when I asked him what made him happy,
what made him look back on his 108 years with happiness
and a sense of pride and fulfillment,
he said the things that were important
were happy, healthy family members, the fact that he
built a company that he was proud of,
that he'd created something.
And the third thing he said was that he'd
met people who were smarter than him who could give him
the answers, because he said there
are certain mysteries in life that you just
can't solve on your own.
And sometimes you have to stop and you
have to ask for directions.
And so when you look at the things--
and I'm pretty sure that the person he was referring
to above all was Ben Graham, who was a lifelong friend of his.
And he was actually his teaching partner in the 1920s.
So here you're looking at a guy who lives to 109.
And the things that he's emphasizing, it's not,
I had a Maserati.
It's learning.
It's family.
It's health.
It's wisdom.
And his son and grandson said the only thing
he ever truly craved, really, in terms of physical objects
was books.
They were taken to a French restaurant,
fancy French restaurant, and he would order
chop steak or a hamburger.
He just was totally not interested in anything flashy.
So I thought that was very revealing.
I had a very interesting interview with John Spears
from Tweedy Browne.
He's an extraordinary guy, again,
with a real glow in his eye, someone
you feel has figured stuff out.
And he was telling me about this apartment that he
had bought in Florida, which cost him, I think, $5 million.
And he doesn't like to have a lot of risk.
He doesn't like to have a lot of stress in his life.
So he paid for it in cash.
And he said to me, yeah, I felt like kind of a big shot.
It was the biggest apartment in the building.
And I was the only one who had two apartments
that I put together.
And he said-- he was very funny about it.
He said yeah, so I had this sort of sense of my own importance.
And then he said when he thought about it more,
what he realized was actually the importance was
that his kids and his grandkids could come stay there with him,
that it was big enough.
And he said to me, investors are always
talking about return on investment, return on assets,
return on invested capital.
And he said, this is a return on life.
And I thought it was a very beautiful, kind
of poetic phrase.
And it's an important way, I think, to look at your money.
There's got to be a return on life.
I'm not trying to be self-righteous about this.
This isn't a moral thing.
It's like, it's what works.
Munger always says, he looks at other people and figures
out what works and what doesn't work.
And so you're look at these people like Kahn and Spears
and Gayner who are very charitable, very philanthropic,
who are very family oriented, and they're actually happier.
And I think that's a very revealing thing.
So finally I would mention Mohnish Pabrai,
who has spoken here before.
And Mohnish kind of embodies this attitude.
He's thought very deeply about this stuff.
And Mohnish is a very brilliant guy
and a very brilliant investor.
And I went with him to India recently,
and he was talking about how he was a lousy student as a kid.
And then they did bunch of testing on him
and they said oh yeah, by the way,
you have an IQ in the 180s.
So this is an incredibly smart guy.
He has a really good engine.
And he's figured out how to stack the odds in his favor
so he wins this particular game of investing.
But the thing that Mohnish is going to be remembered for--
and he's very conscious of this--
is not his hedge fund, however good the returns are.
It's actually this charitable foundation
that he's set up, which is very extraordinary,
which is called The Dakshana Foundation.
And Dakshana a Sanskrit word for gift.
And I had the opportunity to go recently
with Mohnish over Christmas to spend several days in India
with him.
And so I went around to look at the charity up close
and to see what it did.
And what Dakshana does that's very extraordinary
is it takes some of the cleverest teenagers in India,
but these are people from very, very poor backgrounds.
Some of them are from families that are untouchables,
from very poor rural areas.
And he gives them two years of free coaching
to take the exam to the Indian Institutes of Technology,
which as many of you will know, is
the Indian equivalent of MIT.
And this totally and utterly transforms their lives.
If you get into IIT, your prospects in life
and the prospects of your whole family are just transformed.
And IIT has an acceptance rate of less than 2%.
Dakshana graduates, 54% of them have gotten so far.
It's an astonishing thing.
And again, it's Mohnish figuring out, how do I win this game.
What are the things that we can do that can make our students
do really well in this exam.
And so the latest count, I think 888 of these graduates got in.
And I had this wonderful experience in India
where I was in Pune where I met a lot of the graduates.
One of them particularly stuck out.
He was kind of the star of the Dakshana Foundation graduates.
He had come top of all of them in the national exams.
He's come 63rd out of more than half a million people
in this exam and had gone to IIT Bombay, which
is the hardest to get into.
And then he gets this job at a great tech company,
goes to work in London.
And recently came, a month or so, recently
came to work in California.
And I said to this guy, were your parents smart?
Because I knew that he lived in a very, very modest home,
a very modest area.
And he said yeah, my father is incredibly smart.
He said he was a superb mathematician.
But he never had an opportunity to use it.
And he spent his life-- he makes a very modest salary
as a tailor.
And one of the first things that this guy had
done with his money after he gets this tech job is he
buys a house for his parents.
And so he moves them out of the very, very modest house
into a new house.
And as I'm thinking about this story,
I'm thinking what an amazing thing, that Mohnish
has taken his skill at playing a game,
and he's totally transformed hundreds of lives in this way.
And that this young guy has figured out
actually the first thing I want to do
is to transform my parent's life, not my life when
I get the money.
And the thing that's more amazing about this
is that that guy is in this room now,
and it's Ashok, who's here.
And so the company that Ashok went to work for
is actually Google.
And so Ashok went to work, after graduating from Dakshana,
went to work for Google in London,
recently came here as a software engineer
in the search area for Google here in Mountain View.
So you're seeing here the fact that Mohnish
has been able to take this extraordinary skill,
this extraordinary brain, this ability
to stack the odds in his favor in life,
and actually use it to have this tremendous impact
on other people.
And I don't think this is because Mohnish is
some sort of righteous figure.
I think he's a lovely guy.
He's a great guy.
I love spending time with him.
But I think what he's figured out is, this is what works.
He's like, if I'm to have a really happy and fulfilled
life, it's not going to come because I have a yacht.
It's actually going to come because I figured out
how to help other people and how to make other people's
lives more complete.
And so the thought that I would leave you with
is just that you should think about your Dakshana.
What's your gift?
And how do you take your particular gift
that you have-- you're all incredibly smart people-- how
do you take your abilities and figure out
what do I do with this to make a difference in other people's
lives?
And I think you do this not because you're necessarily
Mother Teresa or Gandhi, it's because you're
tilting the playing field in your direction.
You're stacking the odds in your favor
so that you can have a happy and successful and meaningful life.
Thank you.
[APPLAUSE]
MALE SPEAKER: Thank you William.
We'll open for taking for questions.
AUDIENCE: So you're talking about-- you suggested
to diverge from the crowds.
I think the people follow the crowds for reasons
because it's safer.
It's less risky.
So what's your take on this point?
If you want to be [INAUDIBLE], takes more steps
to be diverse, but probably be more risky.
WILLIAM GREEN: So how to think through this idea of how
diversified you should be to control risk.
AUDIENCE: Yeah, versus taking risk.
This is a trade-off there.
WILLIAM GREEN: Yeah, I think you've
focused on really one of the most important questions.
And one of the things that was fascinating to me
in terms of interviewing an array
of these different great investors
was actually to see the difference in the way
that they had solved this question.
So Mohnish for example had most of his money
in about five stocks and had tremendous confidence,
tremendous knowledge of these stocks.
But then one of them blew up.
So it's risky.
I think it's one reason why Mohnish will outperform
massively over the years, but I think it can be like that.
And so you for Mohnish, because he
has this extraordinary temperament, it's feasible.
So I said to Mohnish about the financial crisis, I said,
how did you deal with the stress of the financial crisis?
Because at one point his fund, his hedge fund
was massively down.
And he said oh, I don't feel stress.
And I actually don't think that's true.
I think it may have been true then,
but I think there are circumstances
where even for Mohnish or even for Bill Miller, these guys who
are very unemotional, you can get to a situation
where a sufficient number of things
can go wrong that actually it becomes very painful.
And so I think even for people like Mohnish who
have an extraordinary temperament,
you have to be aware of the dangers of overconfidence.
And I talked to people like Joel Greenblatt about this.
And Joel had 80%-- Joel is one of the greatest hedge fund
managers of all time.
And Joel had 80% of his money in six
to eight stocks for much of his career.
And he said, every few weeks the portfolio might go down
30% in a couple of weeks.
And he said it was fine for him.
He could cope with it.
But he said he actually returned a lot of the shareholders'
money.
After five years he returned half the money.
And after 10 years he returned all of the money.
So the only shareholders were him and his family
and his partners.
And he said if the family lost money or friends lost money,
he would just help them out.
And so it was OK.
So I think the point is, you kind of have
to look at your own temperament and say how unemotional am I.
And one of the things my friend Guy Spier was saying to me
recently is you can actually get to a point
where you are emotionally flooded, where you can actually
reach a point where, if a sufficient number of things
can go wrong at the same time, that it's
very hard to be rational, to make rational decisions.
And his view is that you want to try always
to be the last man standing.
And he said you look at Buffett, who
has 10 times more capital in his insurance business
than anyone else.
He's basically set it up so he's antifragile.
So he'll survive whatever goes wrong.
And so Guy's view is, you want to kind of look
at what everyone else is doing, what the people you really
admire, where they are on the risk curve.
And then he said, just do less than them.
And I think it's a really interesting idea that
yeah, if you're super constrained,
if you're incredibly smart, you can get unbelievable returns.
But I think for most of us if you
want to survive over not one cycle but 20, 30, 40,
50 years as an investor, I think diversification and just
saying, what do I know.
What if it goes wrong?
What if I'm wrong?
There's a French investor I interviewed,
a guy called Francois [INAUDIBLE], who said to me,
I have three principles-- doubt, doubt, and doubt.
And I think it's kind of helpful to doubt yourself.
And I think diversification-- it's just
kind of rational to say yeah, but if this company
I own, if I'm wrong, what are the consequences?
And one of the things Irving Kahn said to me that I thought
was really interesting, he said, the single most important piece
of financial advice I can share is to focus on the downside.
And he said, you know, the trouble these days
is that people can gallop really fast.
But he said they don't really know what direction they're
galloping in.
And he said if you really focus on the downside,
and he said you have reasonable returns
and you avoid terrible losses, he
said you'll outperform all of your gambler friends.
And he said it's also a good cure for your sleeping
problems.
AUDIENCE: I think you interviewed
Bill Ackman for your book.
Would you please tell us something about him,
and do you think he will survive?
WILLIAM GREEN: Yeah, I do think he'll survive.
I think Ackman is remarkably smart.
I think he's a very brilliant analyst.
He's got a very brilliant mind.
I think as with all of these great investors,
they're flawed.
They're not perfect.
They make mistakes.
And his mistake with Valeant-- so far
it's turned out to be a really dire mistake.
You could say that's a kind of bull market
phenomenon of over confidence.
But he's always been taking these very contrary positions
that are very aggressive.
And it's part of his character.
And I think Bill has a very interesting personality.
He's very combative in certain ways.
And he's prepared to go into these very difficult situations
where, with something like Herbalife where he thinks
this company's a fraud and a Ponzi scheme
and I'm going to take it down.
And he has spent over $50 million
on this campaign to bring down Herbalife.
And so I think he has a very distinctive approach.
And one of the things he said to me about money,
he said the reason I wanted to get rich from very early on
was so that I would have independence.
He said it was so that I could say what I believe,
so that I could act in a way that I believe is right.
And so he really embodies this idea of the willingness
to be lonely, the willingness to take idiosyncratic positions.
And that's going to mean there are times where he's
going to look really stupid.
But there were times where Buffett
looked stupid in the late '90s where
he refused to buy any tech stocks,
where Eveillard looked stupid, where Don Yacktman looked
stupid.
Eveillard's assets went down from I think $6 billion to $2
billion during the tech bubble in the late '90s.
Everyone abandoned him.
He said to me that one of the senior executives
at his company said, well, Jean-Marie,
he's half senile anyway.
And Jean-Marie said to me, I was 59.
And so I think one of the things that's really striking to me
is that there are always periods where these great investors
look like idiots.
And my money is on Ackman, just in terms
of his intellect, his analytical brilliance,
and he's got a kind of in inner toughness to him.
And I think the real lesson for-- you know,
there are multiple lessons of the Valeant situation.
But I think the hubris and the overconfidence one
is important, the unknowability of the future.
Peter Lynch was looking through some old notes
from an interview I had Peter Lynch the other day.
And well, the interview was about 18 years ago,
but I was looking at the notes the other day.
And Lynch said to me, he bet on some company in 1969
where he said, Ned Johnson was not yet running Fidelity
but was then running a fund there.
And Lynch pitched this stock to him
that was an apparel company that was great.
He said it had the cover of Vogue three times.
And their earnings, it was like a record year.
And he said then the movie, what was it,
"Bonnie and Clyde" comes out.
And he says Faye Dunaway is wearing
these incredible long pleated 1930s skirts.
And it totally and utterly changes fashion.
And he said in the same year this company
had record earnings, the company went bankrupt.
And he said he talked to Ned Johnson about it,
and he said Ned Johnson just laughed.
And he said yeah, sometimes this stuff just
comes out of left field.
And so I think this sort of healthy awareness of the fact
that the jack of spades can actually jump out
of the pack of cards and squirt cider in your ear,
it's useful to retain that sense of our own fallibility.
AUDIENCE: During the times when you
said these investors would look stupid,
there seems to be two kind of categories.
One is category where they decided
they don't want to participate in irrationality they see,
like Don Yacktman or Eveillard.
And then the second one is where they
seem to be confident about something,
but then it eventually builds up on them.
So say Bill Miller, Valeant example that you gave.
In those cases where they're taking
a bet where they're kind of alone, how important is it
where, on one side you want to be kind of confident,
but the humanity is confidence doesn't go into arrogance.
And in several of these cases there was enough evidence
that they could be wrong.
For example, there's a famous Steve Eisman and Bill Miller
kind of face off type of thing where Steve Eisman was
this young hedge fund analyst, running company
that had done all this work.
That this is really a bubble.
In the Valeant case there was enough evidence
before that all these--
WILLIAM GREEN: I think it's a really profound and important
question you raise, this thin line between the willingness
to be lonely and the arrogance where you say everybody else is
wrong, I am right.
And you end up blowing yourself up.
And it's a very, very interesting question.
You know, I was always a huge admirer of Marty Whitman.
And he was an absolutely brilliant contrarian value
investor.
And Whitman-- once I said to him,
if you would to own just one stock for the next 10 years,
what would it be?
And he said MBIA.
And this is the company that Bill Ackman shorted.
And Ackman said to me that he actually-- I think he said,
I can't remember if actually met him,
but I think he told me that he contacted Marty and said
to him, I want to go through this
and explain to you why this is crap,
why it's going to fall apart.
And Marty kind of dismissed him and kind of bad
mouthed him in the press.
And Marty's a kind of combustible guy in the way
that he's feisty.
And I talked to Marty about this afterwards.
And I said, why did you mess up?
And he said-- I mean, he's now in his 90s.
And he said at a certain point as I became richer and older,
I became lazy.
And he said there were certain stocks where
I should have sold.
He said I knew that I should have sold my housing stock
before the financial crisis.
And I kind of didn't get around to it.
And Bill Nygren said to me that this is a full on game.
He said there are lots of people who
have decided I'm going to go into semiretirement.
And it's like no.
He's like, either the switch is fully on or it's fully off.
He said it is so hard at that level.
And so I think it's interesting that all of these guys
screw up.
Templeton said to me, however smart you are,
you're going to screw up a third of the time.
And you know, there was a wonderful moment
with Bill Miller where years ago in 2001
after the financial crisis where he's making
these incredibly gutsy bets.
I said to him man, you really have
to have balls to do what you do.
And he said yeah, you have to have balls.
But you've also got to be right.
And it stuck with me forever.
And he said, let me show you this chart.
And he shows me this chart of a fund's performance.
He says, look at this.
You see the steady monthly upward trajectory of this fund.
And then he said, and then it just collapses and goes down
90 something percent.
He said that's Long-Term Capital Management.
And he said the thing that's really hard to tell
is am I here in my career or am I here?
And so I think this idea of hubris, of just saying yeah,
I believe this is true, but what if I'm wrong?
And this is why the idea of the margin of safety
is so powerful.
And so I think when you look at people like Irving Kahn, who
did tremendously well for decades,
it's partly they survived.
They didn't blow themselves.
And so Irving would have a tremendous amount of cash,
often.
I think at the end he had about half his money in cash.
And so yeah, maybe you underperform.
But you survive.
And so I think that idea of just being resilient,
of trying to be the last man standing
rather than necessarily the smartest guy in the room, that
is very powerful.
MALE SPEAKER: Thank you for the great talk.
And can we all have a big round of applause only
for [INAUDIBLE].
[APPLAUSE]
WILLIAM GREEN: Thank you so much.

威廉-格林。"投資大咖的經驗"｜谷歌講座 (William Green: "Lessons From the Great Minds of Investing" | Talks at Google)