We Study Billionaires - The Investor’s Podcast Network - RWH066: Essential Truths w/ Howard Marks, Nima Shayegh & William Green

Starting point is 00:00:00 You're listening to TIP. You're listening to the richer, wiser, happier podcast, where your host, William Green, interviews the world's greatest investors and explores how to win in markets and life. This show is not investment advice. It's intended for informational and entertainment purposes only. All opinions expressed by hosts and guests are solely their own, and they may have investments in the securities discussed. Now for your host, William Green.

Starting point is 00:00:33 Hi there. I'm very happy to be back with you on the richer, wise, happier podcast. Today, I have something a little different plan for you. Usually, as you know, I tend to do long, in-depth interviews with great investors, but occasionally I like to pause and look back at some of the most valuable lessons from interviews that I've done over the last few months or year. And I think there's an important reason for this. There's so much noise coming at us from every, side, that it's often really actually very difficult to distinguish the signal from the noise. And I think probably like you, I'm constantly listening to things and reading more and learning more, which is all great. But at a certain point, I think you have to stop and ask yourself,

Starting point is 00:01:25 what's the point of it all? What really matters? What essential lessons do you actually want to remember and internalize so you can actually live by them? It's one reason really why I read the same books over and over again. And it's also why when I was writing my book, Richard, why is a happier? When I was so overwhelmed with material from many years of reporting and interviews, I would ask myself over and over again in my head, what's the eye of the eye of the bull's eye? I was always trying to think, what's the absolute center of the target here? The thing that I really want to convey about this investor or the thing that I really want to learn about what this thinker has to teach me. So that's what we're going to do today. We're going to

Starting point is 00:02:05 focus on the eye of the eye of the bullseye. We're going to focus on the essential truths from two of the most extraordinary subjects I've had on the podcast over the last few months. One of whom is someone who all of you know, which is Howard Marks, who's obviously a legend in the world of investing. And the other is someone named Nima Chayay, who has flown pretty much entirely under the radar as an investor. I think this was the first big interview he ever did. But it's wonderfully thoughtful and it's one of my favorite episodes of the podcast. And afterwards, actually, I received lovely messages from superb investors like Nick Sleep and Peter Keith saying how impressed they were with Nima's remarkable depth of insight. So anyway, what I'm

Starting point is 00:02:53 going to do is I'm going to play probably about four clips, two from Howard and two from Nima. And I'm going to comment on them, share what I think is important about them that I want to remember and internalize myself. And then probably towards the end of the podcast, I'm going to veer off in a totally different direction and talk about something a little bit more personal, perhaps, that hopefully will be helpful to you too. So anyway, the game plan is to start with Howard. And specifically, we're going to listen to a clip in which he talks about artificial intelligence and talks about the euphoria over artificial intelligence. And I think it's very helpful because is it gives you a sense of how one of the world's great investors thinks about markets,

Starting point is 00:03:40 thinks about investing, thinks about how to avoid getting swept up in euphoria, thinks about technology, thinks about the importance of humility and trying to learn from the patents of history as well. So there's a lot here that's quintessential Howard. And obviously, in terms of Howard's kind of status in the investing world, there's almost no one I listen to more seriously. As you know, with the passing of Charlie Munger and the retirement of Warren Buffett, I've kind of come to a guard Howard really is like the reigning wise man of the investment world in many ways. He co-founded Oak Tree Capital Management back in 1995, I think, and is now overseeing something like $223 billion in assets in alternative

Starting point is 00:04:25 investments and the firm has something like 1,400 employees around the world. But also, he's been writing these extraordinarily lucid, wise memos for the last 35, 40 years, something like that. I think they now have more than 300,000 subscribers. So in this interview, we talked a lot about the essential truths that we could learn from Howard's career. But in any case, let's listen to this clip about AI. Thanks so much for joining me. I'm wondering when you look at this period compared, say, to 1973, 74 or 99, 2000 or 2007 to 2008, what is it that rhymes in terms of where we stand in the pendulum between greed and fear and optimism and pessimism and risk tolerance and risk aversion? And what makes you not think that we're at that kind of extreme yet, if that's still the case that you don't yet think we're at that kind of extreme yet?

Starting point is 00:05:22 extreme, most likely. Well, I don't have my finger on the poll, so I don't know where we are today or this week, but I think that when you look for comparisons, the strongest comparison, not a perfect comparison, and I'm not saying this is true in degree, William, but in kind, the strongest comparison is to the TMT internet.com bubble of 98, 99, 2000. The nifty 50 was different because it was not around one novel technology, and it was around established great companies for the most part. I mean, there were no technological marvels that cracked out in the nifty 50. And then the years 0567 with the subprime and the mortgage-backed securities, subprime mortgage-backed securities,

Starting point is 00:06:16 is not comparable because that was not a technological. innovation, that was a financial invention. Nobody thought that, oh, you know, subprimortgage is going to change the business of housing. The houses were unaffected. It's just that they said, well, we can make money by giving financing to a new class of buyers, which turned out to be a bad idea, people who wouldn't document their earnings or their assets. So this is comparable to the internet bubble. People said the internet will change the world. I guess what? what it did. Can you imagine today's world without the internet? It's completely changed in a million ways, in fact, including the fact that we're talking over it. And so this is comparable. It's a technological

Starting point is 00:07:03 innovation that I think is going to change the world. But my recollection is we had a clearer view of how the internet would change the world. And the view of many in 1999, 2000 became, has become true. and I think a lot of the excitement surrounded e-commerce and e-commerce has become a major force. So it just feels to me like we had a vision of how that was going to work out and it mostly came true. Today, I think we have less of that. I personally, I'm not an expert. I'm the furthest thing from an expert in the world. But I've never heard anybody tell me how AI is going to change the world.

Starting point is 00:07:44 We know it's a powerful force. It can think, it can process data. It can, it has access to all the data that's ever been compiled. Exactly what it's going to do, how that's going to be a business, how people are going to make money at it, how it's going to impact life, I think is less clear. But I do think that the two are comparable. And in both cases, there was a new, new thing that fired the imagination. And most bubbles are around something new. In 69, it was growth stock investing.

Starting point is 00:08:13 in 06, it was subprime mortgages. In 99, it was the internet. In 1720, it was the South Sea company. And in 1620, it was tulibals in hollow. So I always make this point that the bubbles are very around something new because the imagination is untrammed and it can take, go off on a flight of fancy. And you can imagine trees growing to the sky. You're never going to have a bubble in paper stocks or timber stocks.

Starting point is 00:08:43 You know, it's too prosaic. And people can say, well, you know, we can tell how many houses you're going to build. We know how much wood is needed in each house. We can tell where we're going to get it from. And so, you know, you can't have these tree grow to the sky moments in the prosaic areas. It's always something new. You had a very interesting conversation recently, Howard, that I was listening to yesterday with Edward Chancellor, author of Devil Take the Heinmost, which had an important impact on you when you first saw the 2000 bubble.

Starting point is 00:09:12 And one of the things you said in that conversation, you made two bold statements. You said, number one, AI will change the world. Number two, most of the companies people are investing in today, in other words, to profit from AI will end up worthless. And then you said, when the naive or hopeful investor takes the leap that the irresistible trend will produce sure profits, that's when you get into trouble. Well, I should go back and reread that memo, I think. But that's right. And change the world and investors making money are not the same thing. And in fact, Warren Buffett pointed out, and I think he said this about the internet, that I think it was in his 2000 annual meeting, there's no doubt that the internet will produce a great increase in productivity. It's not clear that it'll have a positive impact on profitable. And I think the same is true with AI. AI is going to, you know, I mean, my concern is, I saw CNN is running an ad. On my travel, I watched CNN International, and they had, you know, they're drumming up interest in a show. And the anchor says to a guest, you say that AI has the ability to eliminate half of entry-level jobs.

Starting point is 00:10:31 That was the whole conversation because then they cut something else. But the point is, that may be true. And obviously, if you can produce the US GDP and eliminate half the entry level jobs, it could be more profitable, but are certainly more productive. But the questions will be more profitable. To whom will the savings accrue? If different companies are competing to provide the AI service, maybe they'll compete on price to the point where it's not profitable for that. or if the people who employ AI service compete for market share, maybe all the savings will go to the consumer in the form of lower prices. So exactly how the labor saving tool with AI is going to turn into profits, I don't think anybody can say.

Starting point is 00:11:21 You often like to ask Howard, what's the mistake here? And so obviously we don't have any idea how this is going to pan out. But when you ask yourself, what would be the likely mistakes worth avoiding at a time like this, particularly for either naive and credulous investors or just for smart investors who get sucked into euphoria, what are the likely mistakes we ought to be trying to avoid here? Well, what I've seen in euphoria after euphoria is, number one, you shouldn't make the assumption that today's leaders are certain to be the leader. of tomorrow. They may well be, but you shouldn't bet your life on. Number two, you shouldn't

Starting point is 00:12:06 assume that because the leaders are selling at high prices, that it's a good idea to invest in the lager, it's because they're cheaper. People say, well, they have a low probability of success, but maybe a big payoff, so I should buy it. And that's what I call lottery ticket mentality. And, you know, if they have a low probability success, you should accept that that means chances are good at a bond success. And then on the AI, I've led to believe that you can make binary vets in companies that have nothing else going on, which will be sink or swim vets. Or you can invest in through great tech, you know, preexisting great tech companies, which will get moderate benefits from AI if they're successful, but still be in business and profitable if it's not that big a deal. And now we're back to the very beginning of our conversation. Do you want to have a novel

Starting point is 00:13:03 entrepreneurial startup pure play, which has no revenues and no profits today, but could be a moonshot if it works? Or do you want to invest in a great tech company which is already existing and making a lot of money where AI could be incremental but not life changing? It's a choice. What's your style. That's your game plan. But I mean, if you're going to make binary bets on novel companies, you have to understand how risky that is. All right. So that's Howard Marks talking to me in an interview that we add in the middle of December 2025. And there are lessons here that I think are both very timely and also timeless, not least the fact that I think to be a successful investor, but also to function in the world, you have to have tremendous respect for uncertainty. You need to recognize the

Starting point is 00:13:59 fact that we really don't know that much about the future. As Howard often says, you know, with something like COVID, for example, when we talked about it for my book in the midst of COVID, he said, we didn't even know what could happen, let alone what would happen. And here we are in this situation where it's totally changing our lives. And now, I don't think we would have guessed the degree to which that would disappear and would no longer be the issue that's so defining and frightening in our lives. And here we are with this new issue of AI, which we didn't really talk about that much a few years ago, trying to figure out how it's going to change the world, which companies are actually going to make money off it, what it's going to do to our

Starting point is 00:14:40 careers, how it's going to affect productivity, what it's going to do to consumer prices. And so I think this basic attitude of just recognizing the fact that the future is inherently unpredictable and that you have to position yourself so that you'll be okay, more or less whatever happens, is a profoundly important attitude in life. And Howard often says he belongs to the I don't know school of thought. And you'll probably have noticed in this clip, there's a moment right at the start where he says, in talking about AI and tech, he says, I'm not an expert. I'm the furthest thing from an expert.

Starting point is 00:15:17 And so he always comes from this position, I think, of being pretty humble about his own knowledge of anything. I remember once when I was talking to him about Bitcoin, and we were discussing what he had learned from his son, who's also a successful investor, but much more tech savvy, much more a futurist. Howard just really wanted to emphasize the fact that he wasn't qualified to judge things like cryptocurrencies, that it just wasn't his domain. expertise. And so I think this idea of knowing our limitations is really critical. I think the last

Starting point is 00:15:52 time I interviewed Howard on the podcast two or three years ago, he quoted one of his favorite movie lines, so he's quoting lines from movies. And this was from Dirty Harry, the Clint Eastwood character saying, a man's got to know his limitations. So Howard doesn't know the direction of the market. He doesn't know what AI is going to do to us. But, you know, this doesn't leave you powerless, right? And so this is one of the keys is, in a really uncertain world, you need to recognize the fact that you have to set yourself up to survive uncertainty. But there are things you can do. You can, for example, as he does, study the patterns of history, right? So going back and studying the nifty 50, which almost undid his career as an investor

Starting point is 00:16:38 back in the late 60s and early 70s, is really instructive for him, going back to study. the tulip bulb bubble in 17th century Holland is really instructive. And one of the lessons of those periods is you want to beware of the expectation that trees are going to grow to the sky, right? As he puts it, just beware of this idea that there's some sort of irresistible trend that's going to lead to shorefire profits. And you look at something like Bitcoin over the last year where Bitcoin after this astronomical rise suddenly halved. And I don't pretend to have any knowledge at all about where Bitcoin is going. This is so far beyond my area of expertise. But I think it's really important for people just to know that they don't want to make

Starting point is 00:17:30 one-way bets, excessive one-way bets on things where if they're wrong, it's going to blow them up. And so it's fine to have some ultra-aggressive bets, but you don't want to bet the house on an uncertain future. So it's a matter of proportion. And so Howard's point, I think also, that you can't assume that today's leaders are going to remain tomorrow's leaders is a really important one. And I remember as a financial journalist back in the late 90s, you know, at the time you had these stories in Fortune. I remember the great Jonas Serra, one of the great magazine writers, writing a story. about Yahoo for Fortune, where the headline was, I think, do you believe?

Starting point is 00:18:11 And writing about, you know, all these articles back then about MySpace and all of the hot leaders like CMGI, you know, these companies that made people just massively rich. And most of them just disappeared. And yet, it's not about being some kind of pessimist or nihilist, right? Because I remember also back in 2017, I think it was when I was doing one of my interviews with Howard for the Rich or Wiser Happier Book, he was deeply wary of the fangs, right? So Facebook, Amazon, Netflix, Google and the like, for exactly this reason, right? Saying that trees don't grow to the sky. And he was wrong, right? I mean, in this case,

Starting point is 00:18:56 if you were overly conservative, you missed out on a lot of extraordinary companies. So this stuff is nuanced. It's not easy. I think part of it, one of the, one of the The key lessons from Howard is you always want to be tethering yourself to intrinsic value. You always want to be asking, is this cheap? As he would often say, how much optimism is priced into this asset? That's one of the primary questions he's always asking. And there are assets like gold and Bitcoin and the like, where he's just not interested, as he mentioned in this interview with me, amid the euphoria over gold.

Starting point is 00:19:31 He feels, well, I can't calculate its intrinsic value. So, you know, this just isn't an investment for me. And as Howard has said to me in the past, there are a lot of ways to make money, right? He said to me once, anytime I say that something's not possible, there is an investor, you know, whether it's Soros or a Druckenmiller, Howard would say, you know, you can't predict the future. And yet here are these guys who have a history of making extraordinary macro bets on the direction of the market. So it's not that you can't make tons of money investing in things where you can't calculate the intrinsic value or, making directional bets about the future or making big binary bets on novel companies, as he puts

Starting point is 00:20:11 it with some of these AI companies. You can make a fortune doing these things, but know what you're doing, know what your risk tolerance is. As Howard said, you have to ask yourself, what's your style, what's your game plan, what's your risk posture? And I think this is one of the most helpful things that I've learned from Howard over the years is this idea of understanding our own risk posture of saying, well, okay, so if usually on a scale of zero to 100 miles an hour, I want to drive no more than 65, in the conditions that exist right now, should I be driving faster or slower than that? And for some people, you know, they're younger and they have better prospects and lots of savings and they live cheaply and maybe they feel they can drive 80 miles an hour and they'll survive.

Starting point is 00:21:02 For me, I don't feel like I can drive 85 anymore. And so I think that's part of the key. It's knowing yourself, knowing your risk tolerance. But then also there's something very profound that I've learned from how it over the years, which is this idea of accommodating yourself to reality as it is. So you're looking at the conditions that are available to you in this market. And you're saying, well, so how much euphoria is there? How much are other people getting carried away?

Starting point is 00:21:29 and then you adjust your own speed based on those conditions. And so if the conditions are dangerous because there's too much euphoria and people are doing really risky deals that suggest that standards have dropped and that people are not being careful, then make sure you're wearing your seatbelt and you're diversifying properly and you're not doing anything that's going to knock you out of the game. So none of this stuff is really rocket science. and yet I think it's enormously important.

Starting point is 00:22:01 And for me, how it just helps me to remain grounded and centered, reading how it just reminds you to say, okay, I don't want to get carried away, I don't want to get over-emotional, I don't want to bet everything on something overly aggressive that I don't really understand. I don't want to push the envelope. So anyway, those are some of the timeless lessons,

Starting point is 00:22:26 I think that he's discussing in talking about how to think about AI and what it'll do to us. But I think they're also very timely. They're quite practical. Like really, really think about whether you want to have, as he puts it, this lottery ticket mentality, or whether you just want to have some exposure to this because it's incredibly exciting. It is going to transform things. So it's not about being a scaredy cat, as he once put it to me. there are times about Howard is extremely aggressive in his investing as he was in early 2009.

Starting point is 00:23:00 So you can be very bold when other people are very risk of us and there are extraordinary evaluations available. But don't take crazy risk when the conditions are dangerous and other people are being reckless. So the next clip is actually somewhat related. The next clip is really about how to keep an even keel emotionally in a world where everything is so uncertain. So let's have a listen. And then I'll share some thoughts of mine as well.

Starting point is 00:23:28 Going back to this general question that we've been discussing about dealing with risk and dealing with uncertainty, you often quote one of your favorite adages, which is from Elroy Dimson, who said risk means more things can happen than will happen. And it feels like the range of possible things that can happen today is wider than it's been in the past. And I'm wondering how you deal with it not only as an investor, but actually personally, this sense that, you know, as you talk to your kids or as you talk to your grandkids, like how one actually keeps an even keel in a period where you often quote a lovely line from Peter Bernstein, who said, we walk every day into the great unknown. How do we deal with it? Well, first of all, I've concluded in the last few months, William, that the toughest questions I get are the ones to start with how. Because I can tell you what you have to do.

Starting point is 00:24:30 You have to keep an even keel. I can tell you that it may be desirable if you want to be, quote, safe to have a more defensive portfolio. But how to make that decision and how to keep an even keel is a little harder. But obviously, if you let your emotions run away with you, if you buy when things get exciting, which usually means when prices are high, and you sell when things get depressing, which usually means prices are low, it's obviously going to be very counterproductive. So I think the even keel is essential. And I think most of the people that you've met with and written about have a pretty even keel.

Starting point is 00:25:14 So that's my strongest recommendation. And this goes back to not being hyperactivity, not trading, not trading all the time. Don't just do something. Sit there. You know, investing is not a, it's not a fluke that it works. It's not a Pachinko game or, you know, a roulette wheel. It works over time because economies grow and companies improve their profitability over time. And the most important thing for investors is to get on that gravy and stay on it. Invest, invest early, invest a lot, and don't tamper with it. And having your emotions under control is essential if you're going to be able to do that last thing of don't tamper with it. And getting on the gravy train and staying on it and not tampering with it is

Starting point is 00:26:06 much more important than getting on, getting off, picking the right times to get in, picking the right times to get out, picking exactly the stocks that will go out the most and avoiding the stocks of the global league. That's all kind of just embroidering around the edges. The most important thing is to be a long-term investor. Let's take a quick break and hear from today's sponsors. All right. I want you guys to imagine spending three days in Oslo at the height of the summer. You've got long days of daylight, incredible food, floating saunas on the Oslo Fjord, and every conversation you have is with people who are actually shaping the future. That's what the Oslo Freedom Forum is. From June 1st, the third, 2026, the Oslo Freedom Forum is entering its 18th year, bringing together activists,

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Starting point is 00:30:32 Back to the show. You also said to me something that really helped me in the chapter that I wrote about you in my book, about just not. not overreaching, like the big question being how much you push the envelope. And I think that's another really key thing, is just ensuring survival. But I was also very struck you, you quoted something in your risk revisited again memo from 2015, where you said, in my personal life, I tend to incorporate another of Einstein's comments, which is, I never think of the future. It comes soon enough. And I was wondering whether you were being kind of facile, a little bit facetious,

Starting point is 00:31:09 or whether actually that is something that helps you get through uncertainty that, that, that idea. Well, I don't think, I'm not a futurist. I don't think that my vision of the future is bound to be more right than anybody else. So, no, I don't think about it that much. And I just try to do, you know, all these things are kind of a little bit counterintuitive and a lot, little, a lot of things. I just try to think of laboring in the here and now to buy things that are going to do okay. Well, then you say, yeah, but Howard, in order to know whether someone's going to do okay, don't you have that review of the future?

Starting point is 00:31:44 Yeah, well, you kind of do. But so, again, don't think you know everything. Don't think you have it right. You've quoted Elroy Denson. The future is not a set single thing that if you're smart enough, you can figure it out what it's going to be and it's going to materialize and make you right. It's a probability distribution. It's a range of possibilities in each thing, whether it's GDP growth,

Starting point is 00:32:08 next year or inflation next year or who's going to win the next election, who's going to win the next World Series, or, you know, whether we're going to have geopolitical peace or any of these things, only one thing will happen, but many things can. And you should accept that. You should accept that it introduces uncertainty into the equation, and you shouldn't form a certainty around one outcome and bet heavily on it unless you have special expertise, which very few people do. So I think that humility is a great way to stay out of trouble. And I once wrote in some memo or rather about my favorite fortune cookie. You probably read that one too.

Starting point is 00:32:53 But it said that the cautious seldom err or write great poetry. Every person has to decide for themselves. Do I want to try to write great poetry and get rich if my bets are right? Or do I want to avoid erring and be sure that I'll do okay if my bets are wrong? It's a choice. You can't have both. Or you can try to do both, but you have to put your emphasis on one or the other. You can't emphasize both at the same time.

Starting point is 00:33:21 And so I think that this is, you know, this is a matter of mindset that I think most people should adopt. And life is uncertain, the future is uncertain, investing is uncertain. Are you going to go for winners or are you going to try to avoid losers? All right. That's Howard Marks again, talking in our interview back in December. It's kind of an extraordinary clip this. And I think it's quite easy to miss the relevance of it, the importance of it. But what strikes me is that it's an absolutely remarkable distillation of practical wisdom

Starting point is 00:33:56 from one of the great investment teachers, as well as one of the great investors of our time. And so if you actually break it down, there's so much incredibly wise, balanced advice here in such a short space. So if I think back at some of the things he said there, right, he said, be a long-term investor. Don't buy things when things are exciting. Don't sell things when they're getting pummeled. So keep an even keel emotionally. Don't be hyperactive. don't trade all of the time. Understand that the reason you'll do well over time is that economies grow and companies improve their profitability. So you're aligning yourself with this very powerful force as economies grow and companies become more productive and more profitable. So you want to

Starting point is 00:34:46 get on that gravy train early and then stay on it and don't tamper with it. So that requires you to have your emotions under control because you're just trying not to mess with it. And you're also at the same time trying not to overreach and making sure you survive because you don't want to knock yourself out of the game because this basic force that you're riding is in itself so powerful. So you don't actually need to be an outperforming investor who picks exactly the right stocks and times the market or anything like that. You need to align yourself with this very powerful upward trajectory over time and not get knocked out of the game. And then I think there's that extraordinary admission he makes that he doesn't really think about the future, that he says,

Starting point is 00:35:30 really what he's doing, and I love this phrase. I think the exact phrase was he said, he's laboring in the here and now to buy things that will do okay. And there's something very modest about that. I mean, the truth is he's done extraordinarily well. I mean, you know, if I remember rightly during the financial crisis, the bets that he and Bruce Cash made basically made something like $9 billion. So sometimes it is a little bit more dramatic. than that. But there's something almost prosaic about the ability to keep showing up in the here and now, trying to be sensible, trying to do the right thing, trying to buy stuff that's undervalued, not letting yourself get carried away by whatever people are over-excited about, and not getting

Starting point is 00:36:12 despondent or fearful when other people are fearful, and not deluding yourself into thinking that you know everything. So his basic idea that the future is a range of possibilities, of probabilities, It's a probability distribution. It's also really important that you have no idea what's going to happen with GDP growth or inflation rates or elections or whether there's going to be war or peace or pandemics or whatever there's going to be. And many things can happen. So just because one thing happens doesn't mean that there couldn't have been all of these other alternative histories. And so, as he put it, you have to accept that uncertainty. You have to recognize that this is the type of world we're living in and not delude yourself.

Starting point is 00:36:53 and take excessive risk. And I think also that idea that unless you really have a special expertise, unless there's a reason, as Ed Thorpe once said to me, for you really to believe that you have an edge, you probably don't, so don't bet heavily. And so this idea that humility is a really vital ingredient of staying out of trouble is critical, to understand your limitations and stay within them. And to understand that, as Jack Bogle, the founder of Vanguard once said to me, you don't have to be great, right? You can still do really well just by getting in early, early in your life, living within your means, continuing to add to the pot and staying in the game for a very long time. That's kind of good enough. You don't have to be extraordinary.

Starting point is 00:37:38 And so also Howard's reminder, I think, is really important that you need to understand your own personality and understand whether what you're trying to emphasize is getting rich quickly or whether you want to be more defensive. So either you're going for lots of winners. or you're trying to avoid losers. And so self-knowledge, self-awareness. And so what you're seeing here is this really remarkable distillation of practical wisdom accrued over many decades of watching the market, watching people blow themselves up. And so the trick, none of this stuff is really clear cut, right?

Starting point is 00:38:14 It's not, you know, as he said, the how of these things is difficult, how you actually apply them. But understanding these basic principles is so important. And so I think just really trying to pause and internalize this to understand what a powerful distillation of wisdom he's providing us with is just hugely helpful. And so this is in a way, like this is why I say that how it serves to ground me. It's like he's keeping you straight on the highways so that you don't blow yourself up. so you don't do anything too rash, so you don't do anything too stupid. And yes, maybe you're not going to drive 125 miles an hour and have the most exciting ride on earth, but you'll make it to your destination if you follow the kind of time-tested,

Starting point is 00:39:02 battle-tested principles that he's talking about. So, yeah, so for me, really the challenge is not to have my eyes glaze over when I hear these great truths that often feel almost platitudinous. It's really to take them to heart and live by them. The next clip we're going to listen to is from an interview that I did with a wonderfully thoughtful young hedge fund manager named Nima Shai. Nima runs a small investment firm in California, which is named Rumi Partners after the 13th century poet and Sufi mystic Rumi.

Starting point is 00:39:39 And like Howard, Nima's trying to penetrate to the essence of investing, but he does it in a very different way, Nima invest by finding a handful of extraordinary businesses and trying to understand their deep essence and then holding them for a long time. So in this clip, which is relatively long, it's about 10 minutes, but it's a beautiful clip and it's just full of insight and wisdom. He's talking about the importance of looking beyond the numbers, looking beyond what we can quantify to see some deeper truth about what makes things truly exceptional. So anyway, let's have a listen.

Starting point is 00:40:22 And you went to UCLA and then studied mathematics and economics. So in some way, there was a part of you that was kind of very left hemisphere oriented, as you've explained it to me in the past, and sort of convinced that if you could master things like maths and statistics and economics, you'd have a lot. these skill sets to understand reality. And my sense is that you gradually came to realize that actually comfort in numbers and logical reasoning and the like was not going to cut it. Can you talk a little bit about that evolution? Yeah, absolutely. The way that it's actually come together for me is this idea of branches and roots. Rumi has this quote that I love where he says,

Starting point is 00:41:11 maybe you're searching among the branches for what only appears in the roots. And I think that that quote has a lot of significance for investors. And when I just reflect on the investment industry broadly, I noticed it both in myself, but I noticed it in the industry in general. And it's this idea that if you can just get more precise, if you can quantify reality, if you can sort of measure things, the industry today has got has swung so far in the direction of quantification. You see it in, you know, expert calls and credit card data and web scraping technology. We have these extremely powerful tools today that can measure and try to predict what's going on. But it's still the case, as it's been for much of the last century,

Starting point is 00:42:02 that almost no one compounds capital at very high returns for all that long. Despite the fancy tools despite, you know, having tons of incentives, despite working really hard, it's just still very difficult. And so I reflect on this and I wonder, what is it that we're missing? What is it that we're missing? What is it that I'm missing? Because I started out as being really technical and really focused on mathematics and quantification and everything is about reason and science. And sure, but it felt like I was just lost in the branches and I missed the roots. And so what is it about what are the branches and roots as it relates to investing? So the branches are what everyone can see and measure. It's last quarter margins. It's this week's unit growth,

Starting point is 00:42:50 its next month's inflation print. You know, it's all of these quantifiable pieces of information that are devoid of reality, devoid of context. And so what would be the roots? The roots of a business are all of these qualitative forces that are causal to the future economics of a business. You know, Lou Simpson used to always say that all investing is figuring out the future economics of a business. And that statement might sound easy enough to just blow right past it, but it actually creates an extraordinarily high bar. You know, most investors tend to fixate on the current economics, the current branches. They fixate on the present reality. But every once in a while, you can get a really deep sense for what the future economics of a business might be.

Starting point is 00:43:43 And in those cases, it's usually the case that you have a sense for the roots. And so what are the roots? The roots could be something like the motivation of management, the culture of the company, the quality of the product, the alignment with customers. None of that shows up on any spreadsheet. You can't model it. You can't quantify it. but they're actually the most real parts of a business. So the question to me became, if the roots are what truly matter,

Starting point is 00:44:12 why isn't everyone focused on them? And the challenge from my perspective and actually the opportunity is that the roots require some intuition. So it wasn't all about getting better at Excel. And suggesting that the stock market, investing in the stock market requires intuition, I think makes many people uncomfortable. because it feels subjective and it feels squishy and it feels, you know, very hard to communicate.

Starting point is 00:44:39 But it's precisely those qualitative, invisible factors that live upstream from the financials that everyone else is sort of focused on. As you mentioned, you wrote this piece, Roots and Brunches, and I think it was originally a speech that you gave at Columbia, maybe in our friend Chris Begg's class in 2023, but then it became a shareholder letter of yours. So I've read it in both places. And you quoted in there, I think Robert Persig talking about pre-intellectual awareness and this, you talked about this ability to apprehend essence being super-rational. Can you talk a little bit about that sense that it's kind of super-rational? There's something there's something pre-intellectual in it.

Starting point is 00:45:22 It's something I sometimes have talked about with Chris Begg as well, that he has this sense that we have an embodied ability to tell whether something is. is true or not? Like when you meet a CEO and you're trying to decide, do I trust this person? Is this person actually honorable or not? So I think that in most cases, the roots of a business are too hard to tell. It's sort of, it's not obvious. And I think the first thing to note is that you only really want to swing when it's pretty obvious. In Buffett's parlance, you know, there's no call strikes. but there are some cases where you can know with some confidence what the roots of a business are. And in Persian, we have this very old expression that is probably more than a thousand years old.

Starting point is 00:46:10 And it is Cheshmede, which literally translates to eye of the heart. And it's this idea that the heart is more than merely this organ that pumps our blood. it's actually a faculty of perception, and it's capable of grasping non-material truths. And whether we like it or not, we live in a reality that's qualitative. And seeing with a qualitative perspective is so important I found in investing. And in terms of the pre-intellectual awareness, sometimes intuition is framed as this sort of superpower that you have to develop. And I think that it's less about developing or sort of achieving a superpower and more about clearing away everything that's muddying or perception.

Starting point is 00:47:01 I truly believe that all human beings have this capability to discern and perceive non-material qualitative truths. These are things like trustworthiness and sincerity and ambition and beauty. You know, these are qualities that you can't. model them and you can't quantify them, you can't measure them. But there's something pre-intellectual that can actually grasp and recognize those qualities when you're in the face of them. You had a lovely example of this when we spoke a couple of weeks ago where you were talking about the experience of, I think, going into the mall of a parking lot in a Tesla in like

Starting point is 00:47:42 the full autonomous driving mode. Can you talk about that a little bit? Yeah. I mean, this is actually quite timely because or Tesla. got an update just this morning and I was out, you know, testing it. It's version 14.2, which is the latest update that the company has rolled out. And, you know, it's hard to explain what makes this product special. But overwhelmingly, when I take my in-laws for a ride, or my parents or friends who are not familiar, there's this kind of moment of awe. In the example that I was talking about before was that we were driving to Costco one evening, and, you know, I clicked the button in the car, and it's navigating through all of these construction zones,

Starting point is 00:48:30 and it pulls over for emergency vehicles, and it gets on the highway, and it gets off the highway. I haven't touched the steering wheel or pedals the whole ride, and then it pulls into the parking lot of Costco, and there's plenty of open spaces that it decides I'm going to skip these open spaces, and I'm going to go a little further and see if I can find an even better spot. And then it just pulls in perfectly and it stops. It finds its own parking spot. And I'm thinking this is almost a miracle that this exists. And very few people, I think, understand the power of that technology without having felt had a direct perception of it themselves.

Starting point is 00:49:08 And I think that that is one example of coming face to face with quality. You know, there's plenty of other examples. I'm sure the first time that we all touched an iPhone, we thought this is some incredible, you know, black magic. And the first time you got same day delivery from Amazon, where you order a book and it shows up to your doorstep in two hours, you know, some of these customer experiences, it's worth just listening to them because they tell you something about the quality of what's leading to that experience. You had a lovely word for it that you mentioned a while back that you and a friend and investor friend had talked about the quality of blown awayness. Yes. Yes, blown awayness is that experience that I'm referring to. And unfortunately, it's not an industry term that you can quantify one out of ten. But I think it tells you a lot about the quality of something that you're encountering. And it's anything as simple as your favorite restaurant. You have a perception that you have a perception that you're, tells you when the quality of that restaurant has either improved or deteriorated. There's something within you that knows. And oftentimes it's emotional, it's physiological. You know, we all have this commonly held dogma that you're supposed to turn off your emotions

Starting point is 00:50:28 when you're an investor. And I'm not sure that that's always right. I love this clip from my conversation with Nima Shai, because I think for one thing, it gives you a sense of the great richness of investing, that it's not just about the numbers. Yes, the numbers are important, as Terry Smith, one of the great British investors said to me a while back. He's always amazed that people don't actually get really proficient at understanding a company's accounts. And he was shocked when he discovered some enormous mistake in the accounts of IBM many years ago. So yes, you need to understand the numbers. But there's a kind of a depth and beauty to

Starting point is 00:51:08 figuring out how to invest, that goes way beyond the numbers. And I think Nima is looking at a at a deep truth here when he's looking for companies that embody quality, that embody something that you can't really express in spreadsheets. And it reminds me of a comment that my friend the Nielo made when we first had lunch together a few years ago, when he said quality has its own frequency. And I came up in goosebumps when he said that, which I always think is a way that my body has of telling me that something's deeply true. And so I think, I think this issue of looking for quality and being able to appreciate quality, maybe even physiologically, that it actually has a physical impact on us, we feel it in our body is really profound.

Starting point is 00:52:06 The role of intuition in investing in life is a complex one, an interesting one. But I guess I'm sort of deeply influenced by David Hawkins, who has this sense that certain things make you go strong and other things make you go weak when you're in the presence of them. And also Robert Persig, who wrote Sand and the Art of Motorcycle Maintenance, who would talk about how there's an ugly way of doing things and a beautiful way of doing things and that you sense the difference. And when you're in the presence of something that's beautifully made, it makes you feel different than when you're in the presence of something that's slapdash.

Starting point is 00:52:44 And so I think Niem is onto something really important here about tuning into how products make us feel, to how we feel in the presence of a CEO or an investor, whether, whether we trust them, whether as you invest in a company and you get to know it better, you want to invest more with it, how it makes you feel, how the product makes you feel. It's very consistent, I think, the approach that Nima is taking. It's very consistent with the approach that Nick Sleep in case, Sakaria took, which I wrote about in Richelowise Happier here in Chapter 6, where they really focused on just a handful of companies that embodied quality, really inspired by Zen and the auto motorcycle maintenance, this idea that the businesses

Starting point is 00:53:38 themselves should, for example, be super long term in their perspective. They shouldn't just be trying to please Wall Street with its ridiculous obsession with short-term profits, right? They should be building a moat over the long-term. term. And so, you know, they focused very much on this one business model in the end, right? Scale economies shared where these companies that were very long term, like Amazon, Costco, and Berkshire, they would gain in strength as they became bigger because they would take the economies of scale and they would share them with their customers to give them an even better deal, as you see with something like Amazon Prime or Costco constantly in the way they keep their

Starting point is 00:54:21 cost down and just give you better and better products. And so it didn't surprise me after this podcast came out that people who appreciate this way of thinking responded so warmly to it. But I was really surprised and joyful when I got an email from Nick Sleep saying that he'd just listened to the interview with Nima. And he said, what a super fellow spot on. And he said, of all the folks you've interviewed, he may be the closest DNA-wise to doing what Zach and I did, except that he's so much younger than we are, which is rather humbling. So I think this is getting at something really important, right? This idea of looking for a few great businesses that have these kind of intangible qualities that you sense, you sense whether they really care

Starting point is 00:55:11 about their customers. You sense whether the management is honorable and is thinking in the long term in the way they allocate capital. And part of what was interesting in my email exchange with Nick's sleep is that he said this kind of long-term way of thinking, which is very much how Warren Buffett and Charlie Munger thought should have been arbitraged out by the markets. But as Nick pointed out, it hasn't. He pointed out that his and Zach's returns after they, they're. they've closed Nomad have continued to be the same basically as they were when Nomad was open, just by continuing to own Amazon, Costco and Berkshire as their main investments. And so he said a lot of this advantage basically can be attributed to time preferences.

Starting point is 00:55:58 And so the fact that these guys are investing in this very long-term way, looking for a few great businesses that in some sense make you go strong because they're looking at the right things. they're thinking long term. I think it's quite profound. But as Nima says, you're having to grasp non-material qualitative truths like, is management trustworthy? Are they sincere? These things that you can't really measure or quantify. And it reminds me also something that Arnold Vanneberg said to me a while back, where he was talking about his remarkable wife, Eileen, and he said that Eileen listens with her heart. And it reminds me of the comment.

Starting point is 00:56:39 that Nima talked about. I think he quoted Rumi saying that, what was it? Yeah, the soul has been given its own ears to hear things that the mind does not understand. So it's a thought-provoking idea, I think, that we want to go beyond just the numbers to focus on this slightly nebulous sense of quality, of blown awayness, of things that you can't quantify, things that just give you a particular emotional reaction. And I don't know, maybe it's because I'm not particularly good with numbers. I'm extremely drawn to this approach. And so I find myself with the people I end up investing with, they're people I trust,

Starting point is 00:57:26 there are people I feel I want to have in my life. And so I've learned to take this feeling of quality and integrity and decency more and more seriously. The next clip that we're going to listen to is about one of the great long-term investors. And this is Lou Simpson, who had an extraordinary record and was hailed by Buffett as one of the greats. And he's the person who really mentored and taught Nima. And so listening to Nima talking about what made Lou Simpson so extraordinary, I think is very, very instructive about how to invest for the long term wisely. So let's listen.

Starting point is 00:58:15 I want to go back and talk in much more detail about Lou Simpson, who's clearly been, in many ways, the formative influence in your life as an investor. So you moved to Naples, Florida in, I think, 2016 and worked until 2019 with Lou at his firm SQ advisors. And for people who don't know, who've just heard us mentioning him, Lou was head of investments for GEICO, this auto insurance company that's now owned by Buckshed Hathaway completely. And he was there for 31 years, I think, from 1979 to 2010,

Starting point is 00:58:51 and crushed the market over that period by a huge margin. And you recommended to me a book that I read a chapter on Lou yesterday, a book by your friend Alan Bonello on concentrated investing. where he talks about the circumstances when Buffett first hired him. When Buffett said, after meeting him, asked him about his personal portfolio. And then after meeting him said something like, stop the music, we found our guy. And he later said, simply put, Lou is one of the investment greats. This is from a letter, I think, that Buffett wrote in 2010.

Starting point is 00:59:25 Tell us about what it was like when you first met Lou, because in some ways, the culture that he created was diametrically the opposite of the culture that you had seen at Pimco. And this isn't a criticism of Pimco. It's just he embodied something very, very different. Absolutely. You know, every time I think of Lou, the memory that always comes is the first time that we met. And I was in my mid-20s at the time. And as I said, you know, as you mentioned, I was working at a more or less traditional investment firm, which was PIMCO. And, you know, I remember the energy that I carried with me at my first job was this sort of over-analytical habit. I had this formality, this intensity. And when I arrived in Chicago to meet with Lou for the first time, I carried a lot

Starting point is 01:00:25 of that energy with me. The context of our meeting was actually to discuss. a company that I thought he might be interested in. And in my mind, I imagined this very intimidating investment legend was going to rigorously cross-examine, you know, every little detail of my investment thesis. And so mostly out of insecurity, I lugged along with me to Chicago, this very thick stack of research material with charts and valuations and it everything. I was ready, I was sort of ready to go to battle, intellectually speaking. And I remember stepping into the elevator with my suit and tie on and your heart's beating a little faster than usual. And I lugged along my data points with me and my thick stack of research. And it's one of those long elevator rides up

Starting point is 01:01:18 where your ears are sort of popping along the way. And I remember thinking I'm going to be met by an assistant or ushered into some kind of waiting area. And, instead, you know, the doors open and it's just Lou himself standing in the hallway, very unassuming, no formality, no pretension. And he led me into an office that was really the polar opposite of the office that I had just been in, you know, the day before. There were no blumerg terminals. There was no, you know, financial TV on. It was like the library of a scholar, you know, a comfortable chair, a couple piles of reading material, and this just very calm presence that immediately struck me. And he looked at me as he led me inside and he said,

Starting point is 01:02:07 you know, make yourself at home. Let me make you a coffee. And I remember that that line just sort of stopped me in my tracks because here was someone who had compounded capital at world-class rates for decades. Someone who Warren Buffett had praised many times. over the years. And someone that I had been studying from afar since college, you know, my idea of passing time between classes in Calfich was to pull up an old Berkshire Hathaway 13F. And in some of those early years, you could actually scan down and see which holdings belong to Lou and which holdings belong to Warren. And so I would sit there at the UCLA coffee shop trying to reverse engineer, why Lou bought Freddie Mac or Moody's, you know, why he bought Nike in the early

Starting point is 01:02:55 90s and held it for 20 years or more. And now, you know, here he was this person behind these decisions stepping away to make coffee for a probably visibly nervous 20-something year old kid who hadn't done anything yet and who was so early in his compounding journey. And I remember thinking to myself, you know, I should be making you the coffee. And when he returned, he didn't to launch into some kind of monologue, he didn't try to assert how smart he was, she would ask these questions with this very sincere curiosity. And it was this remarkable receptiveness for someone with his experience and with his reputation. And, you know, that first meeting left such a deep imprint on me because it kind of opened a window that there was just a different way of being

Starting point is 01:03:44 in this work. It didn't have to be this hard-charging, zero-sum way of operating, this kind of hyperactive way of operating. Lou carried himself with remarkably little ego, and that was so different from the archetype of person that you typically run into in the investment world. You know, the normal experience is that you come across folks who are very bright, very hardworking, but for whatever reason, they insist on puffing up their accomplishments and telling you all about their, you know, most recent investment win and their assets under management and, you know, all this sort of thing. And Lou was just so different from this. Some of his most extraordinary achievements would just

Starting point is 01:04:28 sort of slip out accidentally after having known him for years. He seemed deliberately uninterested in indulging that kind of self-congratulatory aspect of himself. He was quick to say, I don't know, when someone would disagree with him or challenge one of his beliefs on a company, he wouldn't get defensive. He would simply say, yeah, you know, maybe you're right. I should think about that more. And I truly believe that his humility was, you know, his lack of egoism was the reason why he was a good investor, was a big reason why he was a good investor, because it gave him

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Starting point is 01:08:39 I had a Zoom breakfast with Charlie Munger and a few people like Lou were on the call. And Lou already, you know, who passed in in 2022 was already obviously pretty unwell, I think. And he was so lovely on the call. And it was a very, it was a very strange call because I got offquist, oh, our homework is going to be to study your book, Richard, Why's Happy? And then we'll discuss it. So I'm in this sort of embarrassing position where it's like, oh, here I am. I'm going to teach Lou and Charlie about how to invest. And there was There's a moment where Charlie was very dominant through the conversation and then someone turned to Lou and said, what do you think of the book, Lou? And Lou was really lovely about it, like very, very polite and charming and said how helpful it is to have stories of greater vests like, because we learned through stories.

Starting point is 01:09:24 And then we were talking about Alibaba, which he and Charlie had just been buying and they, you know, Charlie had been saying, oh, I'm all in. And Lou said something like, well, I just bought it yesterday. So it's bound to go down 50% immediately. And there was something sort of sort of. self-deprecating about it. Like he wasn't there to tell you, I just bought the, you know, and I asked him, why did you buy it? And he was saying, well, you know, it's a, it's a dominant business in a fast-growing country and it's extraordinarily cheap. But it was funny because it did go down 50%. And so that in a way, it was like very typical of him that he was so humble and self-deprecating. And in a way, maybe it was also a recognition of the fact, this is a really hard game. And you are going to, you know, you are going to go through.

Starting point is 01:10:09 these periods where just stuff happens. Yeah, absolutely. You know, it brings to mind, a friend of mine offered me a definition of humility that I think is remarkably precise. I think it's the best definition of humility that exists. He said that humility is the awareness, it's your awareness of your utter dependence on all that exists and your interdependence on everyone around you. And the opposite of humility, of course, is like a self-centered perspective to think that we did it all alone, that we're the ones in control.

Starting point is 01:10:49 That clouds your perception. It distorts your judgment. And this dynamic was so clear when Lou talked about his portfolio. You know, when everyone else would pitch their great ideas, Lou would say things like, you know, I think the portfolio is just okay. Maybe it's a little tired. And this is, you know, this is one of the best investors of all time. And he's just sort of whole hum about his portfolio. Whereas if you went into the Monday morning meeting of many large investment firms, you would hear people pounding the table on probably mediocre ideas

Starting point is 01:11:22 in many cases. And I think there's something that's objective about his humility. It allows you to see things clearly. And his humility wasn't performative. It wasn't like this inauthentic, humble bragging. It came from a real awareness in how little we actually control. And I think, you know, Buffett's line about the Ovarian lottery, I think captures that spirit so well. We all like to believe that we are the sole cause of our own success, that things are so deterministic. But in truth, you know, so much of anything that goes right in life in investing is really just the beneficence of life. There's a really lovely line also in our Bernal's book, I remember seeing before many years ago from Lou where he said, we are sort of

Starting point is 01:12:11 the polar opposites of a lot of investors. We do a lot of thinking and not a lot of acting. A lot of investors do a lot of acting and not a lot of thinking. And I'm wondering what you learned from him about the importance of detaching ourselves from the noise and distractions and the kind of casino element of Wall Street. Yes, I think Lou live. a pretty balanced life in the years that I knew him. He would read broadly. He had this amazing sense of humor. He would make it a priority to exercise. He would, in the mornings, he would go for a long walk or he would go for a swim. I remember on one occasion, it was definitely in the middle of the week, and I think the market was open. And I think our portfolio was probably down quite a bit that day.

Starting point is 01:13:02 And he just called me up and he said, you know, there's this new exhibition at MoMA in Chicago. Or do you want to go with me? I said, great. And we just spent the afternoon wandering around, you know, looking at art. You know, this is very different from the kind of experience that you might have at many, many investment firms. So I, you know, I won't claim to have all the answers about this. But what I do know is that if you intend to have a long-term investment journey and you, have surrendered to a lot of this volatility, I know that if you're constantly sprinting and you're

Starting point is 01:13:38 always wired and you're reactive to every little data point and you're just staring at ticks on a screen, maybe that will help your results for the next month or two months or six months. But over the long term, it will completely destroy your health. It will destroy your physical and mental health. It will strain your relationships. And ironically, it will make the investment the decision's worse at some point. And it's sort of perverse that the harder you push, the harder you try at investing, the shorter your runway. And in the end, you know, compounding is all about the number of years. And so I think creating space in your life is something that I learned from him and something that's invaluable. So much of modern investing is preparing a memo or

Starting point is 01:14:24 updating a model. You know, there's so much reactivity. And to his point, you know, so much little, so little time is intentionally devoted to reflection. And it's not intuitive for most people to think that going for a walk may be better for your portfolio than adding another scenario to your Excel model. That's Nima Shai, talking about the great Lou Simpson. Man, there's so many lessons here that's hard to know where to start. But I'll just focus quickly on a couple of them. The first, obviously, is the importance of humility, again, which is something that we discussed

Starting point is 01:15:03 about Howard Marx, this willingness to admit how little we really know, to admit that maybe we're wrong, to be open to other people's views to dissenting opinions and disconfirming evidence. And that this is not only a virtue in life, but is actually a virtue in investing, this ability to have kind of lack of ego. But I do think it's really important in life as well. And I remember many years ago I was thinking of this as I was listening to this clip again, just now, someone I used to work with who's a really superb writer, had done a stint at one of the biggest investment firms where he had helped a famous investor

Starting point is 01:15:46 write his shareholder letters. And I remember him saying to me that the first time he met this famous investor, who was managing one of the biggest funds in the world, the guy swung a baseball bat in his office so that it kind of nearly hit him, so it was scary. And it was just kind of a really unpleasant thing to do. And this writer told me,

Starting point is 01:16:07 I'm specifically not naming names, but the writer told me this because the successor to that famous investor behaved in such a different way. It was such a decent guy. And so, I don't know. I love hearing about Luz, humility. And I certainly saw it in that Zoom call that I had with Lou and Charlie. Like he,

Starting point is 01:16:28 he just had this very kindly manner. The other point that I wanted to emphasize, which is something that I think comes through really clearly from Nima's description of Lou's lifestyle, is I see in so many of the best investors that they live in this countercultural way, that they're detaching themselves from the crowd physically, intellectually, emotionally. They're setting themselves up at a kind of remove from society. So they're thinking for themselves, they're reading a lot, they're exercising, they're studying up. They're not reacting to every zig and zag of the market on their Bloomberg terminal. And they're not trying constantly to predict what's going to happen next to the market and the economy or stock prices. And I remember Nick Sleep talking

Starting point is 01:17:22 derisively to me once about that tendency to engage in wiggle guessing, as he called it. And so I think in Nima's description of Lou's lifestyle, you get this sense that there's an advantage as an investor, but also in terms of the quality of your life, to having a slower, slightly more thoughtful lifestyle where you're really focusing on what matters. And I realize that for the last few years, I've often talked about this question of what it is that you're optimizing for. I realized that I've actually stolen the idea from probably my first conversation with Nima a few years ago, because he repeats the idea, the wording in this conversation, that he's always thinking about what he's optimizing for. And so when Nima was setting up this company, Rumi partners, and he asked Lou for advice,

Starting point is 01:18:12 Lou was very clear in saying to him, look, focus on performing well. Don't worry about things like raising as much capital as possible. And NEMA is very clear that he's not optimizing for managing a huge fund or managing lots of people, a big team, or fundraising, or doing lots of administrative stuff. He's created this very simple lifestyle where he owns fewer than 10 stocks, and he's basically just spending his time analyzing businesses, looking for one or two, new ideas a year. And there's lots of time for reflection, lots of time for thinking about the best business models, thinking without distraction about great businesses. And so I think when I look at

Starting point is 01:18:57 these great investors, the ones who inspire me most in many ways, and not the ones who are like these adrenaline junkers, who are running as fast as they can, trying to beat the market by, you know, getting an edge where they're trading a few seconds before anyone else. It's these people who are really thoughtful in looking for great businesses, and understanding, as Lou Simpson often talked about, just understanding the future economics of a business, which you can't do with that many companies, but sometimes you can, sometimes there is some clarity. So again, it's, in a way, it's all about focusing on what matters most, focusing on what's essential, which is something that Howard Marks has a gift for as well, right? This distillation,

Starting point is 01:19:38 of wisdom. So you focus on what really matters on what's really essential. So I think for me, that's part of the inspiration here when I listened to Nima talking about Lou Simpson is it creates a kind of yearning in me to have a less superficial life, less speedy life. And it's difficult because I'm always piling more stuff on myself. And I'm sure you feel the same that we're all overburdened and overstretched in so many ways. But I feel like listening to Nima talk about Lou Simpson, it makes me want to have a little bit more of a spacious life and to have the time to think. And the more people are, you know, getting very superficial, quick answers from chat GPT and the like. It's interesting to me to focus on these people who are thinking about the long term,

Starting point is 01:20:29 who are reading books, who are thinking about the essence of great. businesses. The fact that Nima can quote the poet Rumi, left right and center, and is really drawing on centuries-old Sufi wisdom from this great thinker, that's a really wonderful advantage. I see the same thing with Bill Miller, who he emailed me the other day about various books that he's been reading and he's creating, has been creating an end-of-life book list because in typically pragmatic fashion, he's like, well, this is probably the amount of time I have left in life because, you know, you never know how long you have, but this is probably the number of books that I can read. And so he plans to read 40 books a year for

Starting point is 01:21:13 the next decade. And I love that, the fact that one of the greatest investors of our generation is finding the time to read 40 books a year. And he's sort of slightly august when he looks back at a year. And he's like, well, I only read 24 that year, but one of them was Anna Karenina, which is really long. So that kind of counts as too. And so I think in a way, when I think about these people like Bill Miller, Lou Simpson, or Nima, or Howard Marks. It makes me want to be more patient, more thoughtful, less rushed, less superficial, to lead a little bit of a quieter life. I remember once when I was working on the book, I went to interview Paul Isaacs, a great investor who really smart guys, very close to Jim Grant. And his office was just like a library. It was just

Starting point is 01:21:56 so quiet, so peaceful. And I think that's a great advantage in many ways. And so this isn't about ego and speed and noise and hyperactivity and self-congratulation and bluster, often the thing that actually leads to success in investing is something much quieter, you know, these qualities like humility and decency and the like. And that very much strikes me when I think about the one encounter that I had with Lou Simpson on that Zoom call, my enduring memory of him, my impressionistic memory of him is of this humility and decency and kindness. He came across as a good human being. He was very flattering about my book, but I couldn't really tell if he truly mentored or if he was just being kind.

Starting point is 01:22:48 Because if he didn't like it, I'm sure he would have said sign nice about it too. And looking back, I can see because it wasn't that long before he passed away that Zoom call. I don't think he felt well. I think he left a little bit early, but he was a, he seemed like a gentle soul, a decent, a decent person. And so it kind of makes you want to be more like someone like that. So I'm really grateful to Nima for talking about what it was like working for one of these giants of the investing world, because I think it gives us a really rich sense of what works and what,

Starting point is 01:23:28 created enduring success and also of why Warren Buffett would have been so enamored of Lou. You can see the qualities, the decency and the talent and the lack of ego of this guy, why that would appeal to Warren. And I'm grateful to have met him. So yeah, so that's the great Lou Simpson. Finally, before we wrap this up, I wanted to share a few personal thoughts of my own. And I've noticed lately that this has been a particularly challenging time for a lot of people I'm close to. I know that it's difficult for many parts of the world in terms of wars and geopolitics and economics and politics and the like.

Starting point is 01:24:07 But I'm also just seeing lots of personal suffering, you know, people with health challenges, mental health challenges, financial setbacks and the like. And I don't know, I'm feeling it, I'm feeling it myself that it's just a, it's been a very challenging year, not a bad year, but a really challenging year for me already. And so for various reasons, I started to go back to some of the stoic philosophy that I'd started many years ago because Bill Miller, who had talked to me about this back when I was first writing about him about 25 years ago, and then we talked about it again after the financial crisis when he had been drawing on Stoic philosophers like Epictetus and Seneca and Marcus Aurelius. And he had also read this

Starting point is 01:24:50 book by Vice Admiral Stockdale called Thoughts for a Philosophical Fighter Pilot. And so I went back recently and I did a kind of deep dive and I reread that book by Stockdale and I started digging back into Epictetus. And these are people that I'd written about in the epilogue of my book when I've been writing about Bill Miller. And I found it incredibly helpful. I have this small group called Friends Along the Path, which is a group of people from the last year's ritualized a happier master class.

Starting point is 01:25:18 And so I talked to them a lot about this. And so this has been very much on my mind, this whole issue of what we can learn from people like Epic Titus. And I just want to share a couple of thoughts and quotes and observations in case this is helpful for you as it's been for me. Because I think people like Epic Titus were remarkable of figuring out how to deal with suffering. If I remember rightly, this is, you know, it's the best part of a couple of thousand years ago. but he was born into slavery and he had a cruel master who basically crippled him. And then he ends up in the court of Nero, the emperor. And so, you know, he witnessed all sorts of depravity and difficulty and had lots of personal

Starting point is 01:25:59 suffering. And so he came by this philosophy of stoicism really partly through personal experience figuring out how to deal with all of this suffering himself. And so when I talked many years ago to Bill Miller about stoicism, and what he had learned from it that had helped him. He summed up the essence of it kind of beautifully. The chief lesson, this is a quote from Bill. He said to me, there's the lessons of stoicism where in essence you can't control what other people are going to say about you, think about you, whatever. You just control your reactions. So if you let other people determine whether you are going

Starting point is 01:26:35 to be unhappy or happy or your physical condition, you can't even do anything about that sometimes. So you only want to focus on what you can control as opposed to what happens to you. That's important. And Bill has this ability to get at the essence of things. And so for him as a fund manager after the difficulties of the financial crisis, one of the things he said to me is, is look, the big thing is understanding that if you keep yourself focused on trying to add value to clients every month, and that's what I'm focused on, I'm not focused on some other, on what some people are saying, but you should do it this way or that way.

Starting point is 01:27:10 He's like, that's really the key. It's just focusing on trying to add value to clients every month. And so this idea of simply focusing on what you can and can't control is really important. So Epictetus, there's a lovely line from him that I think I quote in the book where he said, for it is within you that both your destruction and your deliverance lie. So it's up to us, to some degree. You know, we can't control all of the external circumstances. is we live in an uncertain world where stuff sometimes goes wrong. And this had a huge impact

Starting point is 01:27:41 on James Stockdale, author of that book, Thoughts of Philosophical Fighter Pilot, because Stockdale was shot down above Vietnam and had to eject from his plane as a fighter pilot during the Vietnam War. And he said something along the lines of, if I remember rightly, as he ejected from the plane, he said to himself, I'm leaving the world of technology and entering the world of Epicetus, because he knew he was going to spend the next few years basically in prison and being tortured. And he was, he spent something like seven and a half years in prison in desperate conditions, several years in leg chains, several years in isolation, and he was tortured something like 15 times. And so when he talked about what he'd learned from Epictetus, he said, and this is an exact quote,

Starting point is 01:28:24 he said, each individual brings about his own good and his own evil, his good fortune, his ill fortune, his happiness and his wretchedness. You can only be a victim of yourself. It's all how you discipline your mind. So he said, the point then is to do nothing shameful, nothing unworthy of yourself, because if you do and you are in any way honorable, it will haunt you and corrode your will. And he said, these are simple, but very true, very powerful, very important facts. So he ends, he continues this quote. He says, resolve to stand for what is worthy of us, to live so that our own best conscience is not offended. So I love that, this idea that, you know, you have to really distinguish between

Starting point is 01:29:07 what you can and can't control. And so for Epictetus and for Stockdale, a lot of it was about protecting what they would call the inner man, you know, making sure that the inner man was preserved, that there was still a sense of inner, inner honor in the way that you behaved. Right moral purpose, as Epicetus would say. And I think my single favorite quote from Epicetus, I'll read you, which I had never noticed before I did this recent deep or medium deep or shallow dive, is he said this. He said, remember, you are an actor in a drama of such sort as the author chooses. If short, then in a short one. If long, then in a long one. If it be his pleasure that you should enact a poor man or a cripple or a ruler, see that you act it well, for this is your business.

Starting point is 01:29:58 to act well, the given part. And I've been thinking about this line a great deal in recent weeks, right? This idea that you should picture yourself as an actor and a drama, and the author of this drama, whether you regard it as the creator or fate or randomness or whatever, is deciding to cost you in a particular way. So maybe a part is short, maybe life is short, maybe it's long. Maybe he wants you to play a poor man or a cripple or a ruler. But as Epic Teter says, see that you act it well, for this is your business to act well, a given part. And so I keep thinking about that. Like, like, you know, I help my back a couple of weeks ago, not terribly, but it's been pretty painful. And I was thinking this morning, okay, my, my part is to play, it's to play the part

Starting point is 01:30:45 of a 57-year-old man with a really painful back who has a podcast to record. And a wife who at the moment has been in a sling because she had shoulder surgery. And so, you know, having to take care of her to the degree that I can, but also do ridiculous amounts of work and the like. And, you know, these are first world problems. It's not that difficult, but it's challenging. And so for me, these lessons from Epictetus and from Stockdale and from Bill Miller have just been hugely helpful.

Starting point is 01:31:16 And so, yeah, I don't know. Did I, I kind of remember it for a moment ago I said this. But yeah, that idea from Stockdale, that the point is to do nothing shameful, nothing unworthy of yourself, that's important, right? It's like you can control the way you behave. You can control the way you view yourself. But at the same time, I'm deeply conscious of the fact that we're screwing up the whole time and that we're not living up to these very high expectations of ourselves. And I think it's really important also to show ourselves a little bit of self-compassion in this situation. I was amused this morning when I was carrying a couple glasses of water trying to clean up the kitchen, which was a wreck.

Starting point is 01:32:03 And my wife asked me to go get something for her. And as I got something else for her and was carrying two glasses of water, I dropped one of the glasses of water and spilled the water absolutely everywhere. And I found myself blurting out something like, I can't do everything. which was sort of forlorn if a psychiatrist had seen me at that moment, they would have chuckled at how revealing that comment was. And so I think just this sense that we're trying to control what we can, but it's difficult. And sometimes we're going to screw up.

Starting point is 01:32:33 Sometimes we're going to fail. And we need a little self-compassion and a little compassion for others. And I think I quoted in the epilogue of the book, this lovely line that's often attributed, I think, to Philo of Alexandria, Fylo of Alexandria who said, be kind for everyone you meet is fighting a hard battle. And so these are some of the things that I, you know, for me have been helpful during a challenging time. And I'm not in any way saying my time has been challenging in the grand scheme of things. But I'm tossing out these ideas in case they're helpful to anyone else out there.

Starting point is 01:33:10 Anyway, thank you so much for listening. I hope you've enjoyed this episode. I'll be back soon. I'm going to miss one episode, partly because my schedule is crazy, partly because I'm actually going to be traveling to Nepal soon. But then I'll be back with some great guests like Matthew McLennon and David Epstein, whose last book range was a number one New York Times bestseller. So a nice mix of really great investors and really great writers and thinkers.

Starting point is 01:33:38 And in the meantime, as always, feel free to follow me on X at William Green 72 or connect with me on LinkedIn. I also have a new YouTube channel, which I think is called something like at William Green Markets and Life, which is all one word. So I think if you search William Green Markets and Life and YouTube, you'll be able to dig it up. And I regularly post videos there. So if you want to get highlights from the first 65 episodes or so of the podcast, do

Starting point is 01:34:07 subscribe. And I'm always happy to hear from you. So please reach out. Let me know how you're enjoying the podcast. And I hope it's helpful to you. So anyway, thanks for listening. Take good care of yourself and stay well. And I'll see you again soon. Thanks for listening to TIP. Follow richer, wiser, happier on your favorite podcast app and visit the investorspodcast.com for show notes and educational resources. This podcast is for informational and entertainment purposes only and does not provide financial, investment, tax or legal advice. The content is impersonal and does not consider your objectives, financial situation or needs. Investing involves risk, including possible loss of principle and past performance is not a guarantee of future results. Listeners should do their

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We Study Billionaires - The Investor’s Podcast Network - RWH066: Essential Truths w/ Howard Marks, Nima Shayegh & William Green

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