Good Investing Talks - How did Mohnish Pabrai inspire Guy Spier? An interview in the Aquamarine Fund's office in Zurich

Episode Date: January 24, 2021

At the beginning we learn what mistakes made Guy Spier the investor he is today. At 04:00 we learn how Guy Spier changed his view on mistakes. At 06:27 Guy Spier explains which concepts he copied for his life. Ab 11:13 wechseln wir ins Deutsche und lernen Guys Deutschkenntnisse kennen. Ab 13:06 erfahren wir was den deutschen Anteil von Guy Spier ausmacht. At 16:36 we are back in English and Guy answers the question which people had the biggest influence on him. At 19:10 Guy Spier explains three lessons he learned from Mohnish Pabrai. At 28:39 we learn more about a typical day and week of Guy Spier. At 32:49 we talk about the right incentives in life.

Hello YouTube. I just learned what guys here learned from Monashvary and Charlie Munger. So you can learn it too. And if you like it, subscribe. Thank you. Hi, nice to meet you in Zurich. Thank you for inviting us to your library. Tillman it's a pleasure and it's also a pleasure to see German quality and precision being used. I should have expected it, but I was still mildly surprised. I try my best. You're doing very well. Thank you. I wanted, I named the topic of our first part of our interview, becoming guys beer. Yeah. And I want to ask some questions that are more broadly. Yeah. And let's just start with it. What mistakes made you

the investor you are today. How much time do you have for me to talk about hours and hours and hours? You know, I think that so, and by the way, for the listener they should know that I didn't know what these questions were beforehand. Actually it's a key approach to life is to take your mistakes and learn as much as you possibly can from them. And it's actually only through our mistakes that we've become who we are. I would say that I wrote about it in my book. The mistake that I made to go and work for somebody that I did not respect and admire. Not only did I not respect and admire him, I think that

some of his behaviours exhibited the worst of what the financial markets are. That that taught me an awful lot, but it only taught me an awful lot because I was able to find a way to get into a state of mind where I was willing to learn from that. And I think that the worst thing that I see from time to time in people is that they feel like when they've made a mistake, that's it. And mistakes are the most beautiful blessings, or if you see mistakes as the most beautiful blessings, then you will get the opportunity to improve and learn. Certainly, I don't think I would have discovered Warren Buffett. I don't think I would have become an investor. I think I may have done many other things.

But it was the fact that I was sitting in that office in Wall Street in downtown Manhattan and was just thrown back on myself that gave me the space to start exploring other things. So that certainly was the biggest mistake. But I think that the mistake that most recently, so we go from one of the first mistakes that I made to the most recent mistake, I've talked many times about investing in horsehead holding. And I think I got some new insight into that recently, which is actually really important. So I've had a couple of investments in my portfolio that have performed horribly over the last year or two. but it doesn't bother me in the slightest because I sized them right

and I could not have foreseen many of the things that happened at horsehead holding but I could have sized the investment right and the investment was clearly wrongly sized and I think I've become much more aware of how important it is to size your investments

to the right degree and we all know the Kelly formula but so we We kind of know it in theory, but to put it into practice is an art that I'm learning more about. How long did it take for you to find this blessing or this dealing with mistakes as a blessing? So I think that where it started for me, and it's why I kind of, when I meet people who haven't lived in the United States, I kind of want to encourage them to go live in the U.S. because I think that the U.S., it's sort of in the air, this idea of succeeding

against the odds and using failure to succeed. And at the time that I was at D.H. Blair, I'd been living in the U.S. two or three years. So I was starting to really absorb that what exists, a tight geist which just exists in the atmosphere. But then I discovered Anthony Robbins. And Anthony Robbins has been a controversial figure.

Many people don't enjoy either his seminars or other things about him. But I found that he gave me just what I needed, which was the ability to reorient my brain to see failure and to see mistakes and see setbacks in a different light. And in a certain way, so many times when something bad happens, we have this natural and very fast reaction in our body to start feeling bad about ourselves. And it's almost a timing issue that we have to get there before that sets in and stop it. And I actually, just to give an example, not to do with investing, you go out running. Now, today I went running this morning before I saw you, but it's a beautiful day. But what if you go out running and it starts raining?

There's a body reaction that says, oh, it's raining, I shouldn't go running, let's go home. You need to step in before at that and say, yes, rain. Get a different reaction going in your body, and if you can start that. So I think I started learning that from Tony Robbins now 20 years ago. And there are all sorts of places to learn it. I mean, neurolinguistic programming, I think, is really, really powerful just studying the use of words. It's the people you get around. I got very angry at somebody a couple of days ago who started feeling sorry for me because my children are no longer in my home.

They're in boarding school. And I got angry at her for even starting to start feeling sorry for me to encourage those feelings inside me. Not because I wanted to be angry with her, because I want to get myself as far away from those kinds of influences. I don't know if that's helpful. It's very helpful. You mentioned that you copied some concepts for your work and your thinking. What are the concepts and people did you copy?

I mean, so I think that the... So I think we have to... copy everyone, all success that we see all the time. And I think that the biggest thing for me is not so much who, but getting to the idea that we should copy. So there's this idea that we get at universities and at schools that your work has to be original. And in an academic setting, that's absolutely true that we should not plagiarize other people's work. But the minute you get into the world of business, actually copying, or as Monash Pabri says, cloning is the ultimate thing to do. It's the thing that we don't do enough of. And one of the many things I didn't understand

is that there's a strange thing that happens is that when you copy other people, when you copy success, you actually make it your own. So it's actually in a certain way not copying. It's learning from other people. But if I just stop and think, I mean, most recently for me, something that I think that, I don't know if I've been focused on it, but I think that there's a calm,

I've been, so in my book, I wrote about how I wasn't into meditation and it wasn't really something for me. And then people wrote, I apologize. And then, so in my book, you'll have to cut it. it. In my book, I wrote about how meditation wasn't really something for me. And then a lot of people wrote to me and said, guy, you've got that completely wrong. Meditation is certainly something

for you. And this is like now the book's five years old. So this slowly, this thought slowly percolated down on me. And I started trying, not consciously, but I started thinking more about some of the more thoughtful, quote, meditative investors that I know. And so I reached out and spent some time with a guy called Josh Tarasov recently. Josh is a very thoughtful guy and is meditative in a certain way. Spends far more time, I think, thinking than I do. Another guy that I reached out to is somebody who's no longer a professional investor. His name is Nick Sleep. And I just recently had lunch with him in London. I really enjoyed seeing how he creates a quiet environment around him. And then there's somebody else that you have to go interview, if you'll give you an interview,

this Sarab Madan, who finally, he's gone to work at Markell Insurance. He works closely with Tom Gaynor now. He finally connected me up with some people who are going to teach me Vapasna meditation. So I'm going to be Tillman at the beginning of November, I'm spending 10 days with zero contact with anything other than my own mind. So I think that just spending time, well, if you admire somebody, you want to be like them. And if I try and pull people, all of those three people, I admire for all sorts of reasons. And if you pull them into your life, then you start the ideas that will, enable you to copy them pop up naturally. And I know that in the case of Sarab Madan, for example,

he'll be one of the first people that I get in touch with after my 10 days of Vipasna meditation because he'll be curious to find out. Now it have become a little bit more like him in that regard. Actually, funnily enough, the first guy who got me going on that is a German guy, Raimar Schultz. He told me, and it's funny, he sort of at my very, value X conference, he sat down with me and he said, guy, I know you don't think it, but you should go and do some Vipasana meditation. And now he just said that about four or five years ago, maybe three years ago, four years ago. So now finally I'm going. I'm quite excited, as you can see. So cloning or copying people happens just from being around them and finding ways to be around

them. Yeah. Sorry, these are long and meandering questions. It's great. It's very interesting. I try a language switch. How English or Schweitzerish best you then, like? How do I read I? No, like, do, what is the German? What is the German? Ah, by me, so. I must say that, that by me, I'm, I read ever weaker Dutch

and so more that I in the Switzerland and I live here since

10 years and what happened by me everywhere around around

there there people who either our our work um

is English and then the people who I work with the good English if I

good English if I'm good English and then to I'm at home, I'm with my wife, English, and then when I read

English? That's going to more than, because the English I like very, but I have no English at home. My kids want to me no English read, also when they can't. So then, between the German, Swiss-Dutch. I'm very righty to speak English to read, because Dutch is not my mother's language.

I can it sure, although the Dutche, they can this not, because that is your muttersprach, and you see, I can this I can this not so good, but I can churhechli say, and why can I Chhochli say?

Because I can Hebraish and then can the Chah. But when I'm German, actually, we have a, so the firm here, we have a begetting on English are for Regulatory for FINMA. So I read a bit of a bit of German, but I have the

question forgotten. What was the question? What is then a German or Schweitzer in you? Ah, in me. So, yeah, I have a German pass. I'm a, I, I, I, I, I, I, I,

I, I, I'm, I'm, I'm, I'm, an Eighty in me is My mother is also South Africa. My father, actually, is also not in Germany, who is in Israel, born. His parents were Dutch, who were in the 30 years

were out of the 30 years, has been great history there. I'm very strong on my German history. I am very stol on the German state, today, what a very good

of Israel has, and very good a real relationship had. When I in Israel say that I am a stronger, German, there are people who don't want to, but

I say it, so I'm I'm still as in Germany with his history. Germany has a very good a very good relation to the history, that she has. But for me, Dutch is not a mother's language. I'm in

England, more or more or less overwaxed. Now I have a big problem. With the Brexit, it could well come, that although I have family, a few family and friendship's in England, I would not in England

when I there wanted, could I not, because with the German pass, were I not bereftied, after the Brexit, to wander. But, so that is my Deutsche one part, and actually, that has had me

to help in the Switzerland to doggle because by the German Hathaway meetings, I have

started with the German-Sprachian trade, there to go and that has me a

connection and to the Switzerland and to give and the better possibility

me from New York to in the Switzerland to come. Schweitzer Renteel before

ten years, I came had I had I a few Swedish lectures

a bit better to learn how the people here read. I have that overgiven I wanted not muttersprachic or so good

Switzerland-deutch I don't I don't. But when I with the Schweizer-Dutch or I think I'm

with me so they are with me so. But and now are here 10 years and we

will we we will, we will maybe Schweitzer can get then will be a

part of me of Schwezer be a but the last side on this

answer is that there is I'm trying to explain, when people

if people ask, when I were in Brooklyn born in Manhattan

off and now I'm have I have I a house with kids

in New Jersey and the people ask, but what is you? Broclin Brooklyn

Manhattan or New Jersey, the answer is all three. And when people me ask, so are you German, you're from South Korea, are you Englander, I'm all these things. And my identity, how many people, identity of many people, is complex. Which people had the biggest influence on you? Yeah, so, you know, I've talked about,

I feel like I want to go, in answering this question, I want to go further than just renaming people who've had an influence me on me that I've talked about. But just to summarize briefly, there's no question that my father's had a huge influence on me, and we can go into why. You know, we all, all of us who are in this community are enormously grateful to Warren Buffett and to Charlie Munger. And, you know, for me, the learning curve that I went up when I met Monish Pabri was enormous. In fact, I write in my book, and I would hold on to that today, that in a certain way, I learned more from Monish Pabri than I learned from Warren Buffett. And the proximity to Monish Pabri helped me enormously. I would say that even though I don't know Charlie Munger and he's not a friend or anything

there are some things in Charlie Munger that I react to I hate to say it slightly negatively so I don't agree with Charlie Munger that it's wrong to read fiction funnily enough I saw Charlie Munger say that and I specifically decided that even though I had not read a lot of fiction I would start reading more fiction, that there was more for me to learn from fiction and that I wouldn't want to die without having read certain books. I would tell you that now I've been married 15 years. My wife has had an enormous influence on me, just an enormous influence. She has some qualities. So she, far more than me, for reasons that I'm not ashamed of, but I wish it didn't

exist inside me. I am much more aware when I meet people than my wife of who they are, what position they hold, how wealthy they are. And while I wish it didn't happen, my reaction changes based on that knowledge. My wife is not like that. She treats everybody the same. And I think that over 15 years, I've become much better at that. And so my wife has had an enormous influence on me. What did you learn from Monash Paprai? Can you maybe name three things? Yeah. So one is, and not much has been written about this, is there's an art to cloning.

So if you copy the wrong things, you're not actually cloning what you should be cloning. So if I want to copy Warren Buffett or if I want to become. more like Warren Buffett, because I want the success that he has in the world, I could choose to wear the same clothes as him, or I could choose to drink Diet Coke. But that's not really what makes Warren Buffett, Warren Buffett. I mean, it's fun, and it's funny to do, and there's nothing wrong with it, and it's harmless. But you want to be a kind of a close student and observe what it is in this case, what is it that I admire in Warren Buffett, and how can I copy what he does?

does. And drinking Diet Coke might not be the most important thing. So for example, uh, uh, uh, in the case of setting up an investment partnership, one of the things that I failed to clone Warren Buffett in was this zero management fee, uh, nought and 25. And I did not realize, you know, there's no point drinking with Diet Cokes or the Coca-Cola's or eating the peanut brittles. If you're not going to clone those far, far more important things. So figuring out what to clone in somebody, what is relevant and what is not, I think, is one extraordinarily important thing that I learned from Monish Pabrai. The second thing that I would go to is it's not a, well, did I learn it from Monish Pabri? The, you sort of, so in order to achieve success,

practical success in life, you need to figure out, I learn from Monish, I need to figure out what behaviors can I engage in consistently that are going to work over time. So the one thing is to learn those behaviors. And then the next thing is to do it consistently over a period of years. And I saw Monash Pabri doing that in various ways, not just doing certain behaviors consistently, but building an organization that will do it. How do you build an organization that makes the world happy that you exist? You know, a book that influenced me a lot that I think that all value investors should read is by a guy called Tony Sear called Delivering Happiness. And basically, he built Zappos around the idea that what he wanted to do is have a company

that, quote, delivers happiness. But unlike many people, he scaled that up. And how did he scale that up? What did he do? He actually had a system in hiring the customer service reps early on that if they didn't meet certain criteria that he wanted in the employees, he'd pay them to leave. He'd give them a $2,000 check to walk out the door.

So he had some unusual ways of building an organization that does what most of us think. So I learned in a second lesson, I learned from Monish Pabri how to scale up. So it's not enough to read in a book, this is a good behavior. Writing thank you notes is a good behavior. Sending holiday cards is a good behavior. You need to discipline yourself to do it. And even better, you need to scale up an organization to do it. When I say an organization, that doesn't need to mean hundreds of people.

It could be a small team of four or five people. And if I look at the behavior of Debbie Bessanick, obviously Warren Buffett selected her. But she helps amplify Warren Buffett. So she's doing for Warren Buffett what he could not do for himself. And so we all need to find people who can help us to scale up what we want in the world. So that's a second huge lesson that I learned from Monish Pabrai. And I'm sort of like searching around my mind to pick a third lesson. And my mind is blanking, but let's see if I come up with...

Then we could two lessons. Well, no, I'll give a third one. And so I will give you a theory which I see Monish doing in practice. And I think that we all know the theory, but the lesson of doing it in practice is something that I'm still not very good at, but at least I know what I'm aiming for. And the theory is this. So a false positive is much more expensive than a false negative. What does that mean? If I hire the wrong person, that's a false positive.

it is going to be far more expensive for me than to not hire a great person. So to say no to somebody who actually turns out to be a fantastic person doesn't cost us anything because we said no and they're out of our lives. But to say yes to somebody who turns out to be a negative in our lives is extraordinarily expensive because it just takes time to get rid of them and sometimes you can't get rid of them for y'all. So that means that we need to be extraordinarily biased towards saying no.

It's okay to say no to something that turns out to be okay. And I have an element inside me that wants to be fair and wants to be inclusive and want to bring all sorts of people into my life who end up being false positive. So that's the theory. I think that what I've seen in Monash is that he's very quick, very, very quick to do it. And he doesn't feel any sense of sort of, he doesn't feel bad about having done it. And I think that I've learned to be better at that. So you kind of don't worry about the fact that I have to learn not to worry about whether the person is a good person or not.

It's okay to just say the person doesn't meet criteria, my criteria. So, although this investor doesn't meet my criteria or this investment doesn't meet my criteria, doesn't meet my criteria. Just one other, perhaps even better lesson, Tillman. So here's a lesson that I learned through Monish Pabri, but also from his observations of Charlie Munger. This is kind of a gem. This might be the best part of this conversation. So we all know Adam Grant's idea of being a giver, being a matcher, or being a taker. So just very briefly, matches will say, oh, you scratch.

my back, I'll scratch your back. They match. A taker, when you do something for a taker, they will say, oh, wow, he did this for me. I wonder what else I can get out of him. A giver is somebody who says, oh, he did this for me. What can I do for him? What can I do for that person? What can I do for that person? The bottom line is that we want to be around givers. So that's Adam Grant's book, Give and Take, very worthwhile book to read. So now, Monash gave me an observation of Charlie Munger. So I don't know Charlie Munger well, but Charlie Munger has a very gruff exterior. He is, he's not a friendly person to approach. And what Monash Pabri shared with me is that when you become a friend with him, and

Monish Pabri is a friend with him, that demeanor completely changes. He becomes extraordinarily warm and generous and giving in a way that he's not in the general public. And so here's the insight that is really a profound insight. If you are a giver in life, which Charlie Munger is, you'll have a lot of people coming at you. And so you have to develop often a very gruff exterior in order to keep them away. And so many of the world's greatest givers are actually not particularly pleasant on first meeting because they have to keep people away from them. By contrast, takers are often the most extraordinarily friendly, warm, and they have to do that in order to draw people in. So the world has these kind of strange inversions where what you

think you're getting is not actually what you're getting. The nicest talking person at at the cocktail party may be the least worthwhile friend. And the most worthwhile friend isn't talking to anybody at the cocktail party because he's got so many people coming at him. I think that was a profound lesson. Just because somebody has a gruff exterior, don't assume they're not givers to the people who are close to them. So yeah.

Interesting. How does a typical day or week of you look like? Yeah. I will describe, I can describe two things, my ideal day and my typical day. So, and the reason why I say that is that I am traveling more than I would prefer. The reason why I'm traveling is for good reasons. My children, much as they enjoy being in Switzerland, have decided that they like going to boarding schools in the UK. And so I'm in the UK a lot to visit them and to see them.

And I don't like, well, we're going to figure out I will have a place in the UK. We will have a place in the UK, which will make it better. But my ideal day, I've worked out that if I'm going to do exercise, I'm much happier and more relaxed. And the only real time for me to get the motivation to do exercise in the morning. So I try to start each day with exercise. I also, I leave the shutters relatively open and I try to wake with the morning light. So, you know, rarely I wake at 6 or 7 a.m. I might wake at 8 or 9 a.m. I allow the morning light to wake me up and I don't set meetings for the morning.

So I will not have any meetings before 11 o'clock if I have to have a meeting. I can confirm that. Yeah, exactly. Although I did actually have a doctor's appointment before I saw you. But so I get up and I do sport. If I'm doing intermittent fasting, I'll try not to eat before I do sport and eat after I've done the sport. And then I come home after sport, I shower and I really like to read in the morning. So I have various places where I read.

And it might either be investment reading or it might just be the book that I'm reading or the books that I'm reading. And I have a couple of places that I do that. But so depending on the morning, I'll try to get to the office sometime mid-morning, but it may be as late as 1 or 2 o'clock if I'm really enjoying the reading and what I have going on at home. And then here in the office, I have things usually turn very differently in that. I still have at least two key people who work for me in the United States. So there's quite a bit of me that's tuned into the U.S. time zone. So things tend to get busy around 2 p.m. People are waking up on the east coast of the United States, 2.3 p.m.

There's often conversations and things going on with the United States. And so that's kind of a busy time for me, much as I would like to nap in the afternoon. and we're here in the library where I spend far too little time. And that usually lasts till six or so, six, seven o'clock. If my children are home or if my wife's at home, I want to get home for dinner with her. And then, you know, after dinner, I will do either work or reading at home. That is my ideal day. What disrupts it is travel.

But when I'm traveling, I try to keep to the same kind of routine in that It's get up in the morning and do sport, then do reading, and then after lunch, busy work. I think if I lived on the west coast of the United States, and most of the world was getting up before me, I might be able to spend, I might change it around, and the morning, an early morning, would be sort of busy type work, and then the afternoon would be more reading type work. But actually ever since high school, I learned that the absorbing new information happens best in the morning, absorbing new ideas and concepts. So it's good to read in the morning.

What are right incentives for you, which incentives are important in life? Yeah, I mean, so something that I see a lot, and it's completely, understandable is that the incentive of many people is to make money, get rich, get richer. And why do we want that? We want that for security. We want that for self-actuation and achievement. And I don't think there's anything wrong with that, but I think that I think that I, I, I I feel, I believe, when I've looked at billionaires, the motivation just to make more money

when you're already rich seems to me a little bit ridiculous. I mean, imagine saying, oh, you know, I'm going to pile up oxygen, more oxygen than I could ever breathe in my lifetime. Why, because oxygen's good, you know, it'd be like a little ridiculous, wouldn't it? And in a certain way, money is a bit like oxygen. It's fuel that makes things happen in the world, but you can't use more of it than you need. So why would you try and pile up more than you would ever need in your lifetime? And so that's something that I've struggled with a little bit over the last few years,

where I suddenly realized that if you take that oxygen and energy, I have around me more oxygen than I would need in my lifetime. And I think that what, and I'm not saying that I'm doing a good job at it, is the motivation to make the world a safer place for myself and my children. It's a reason why I like living in Switzerland. It's a place that so much of my taxes that I pay here goes to really making the society a safe and a happy place for everyone to live, including the plumber, the electrician, the guy who cleans the roads, which are really, really important. And I have not spent much time in Germany recently, but when I go to the UK, and I'm spending a lot of time in the UK,

even though it's an advanced and rich society, by comparison to Switzerland, I think that there's an enormous amount of pain there. pain because of the inequalities between rich and poor, pain because people can't get onto a good career path. And I think that the real motivation for many people who do the job that I do is to make societies healthier where there are less unhappy people and more contented and happy people. And I think that Switzerland's done a great job. By reputation, I believe that Sweden's done a great job. I think that other large democratic economies like the United States, United Kingdom, France, for sure, and quite probably Germany have a long way to go. That's really what automotivate people like me, if that's helpful.

That's very helpful. Thank you very much for the first part of our interview. Yeah. Yeah, good.