A series of chapter-long profiles in which the author seeks to reverse-engineer the principles, processes, habits and idiosyncrasies of the world's best investors. A worthwhile book, at times uneven and disorganized, but with plenty of insights.
Notes:
Introduction
* Interesting that this author used to presume Wall Street was "a casino full of crass speculators who cared only about money," but once he comes into some money of his own from selling an apartment, he finds it worth looking into the domain after all. And then, after getting to know many of the great investors, he realizes that most, if not all, are genuinely sincere people who are happy to share their insights and secrets.
* "As far as gambling is concerned, if I don't have an edge, I don't play." --Ed Thorpe, author of Beat the Dealer
* Gambling as a metaphor for problems (and opportunities) in investing: e.g., the "rake" = investor fees or commissions; knowing game odds; your advantage (or disadvantage) vs. your counterparties; is the game negative-sum or positive-sum, etc.
Ch 1: The Man Who Cloned Warren Buffett
* Unfortunate the author does not know it's Chartered Financial Analyst, not Certified Financial Analyst (see page 9), a common mistake among non-Wall Streeters that probably says more about the CFA Institute's incompetence at managing its brand than anything else.
* Mohnish Pabrai on doubling your capital: "Life is all about doubles."
* On Pabrai's impecunious father, who kept starting undercapitalized and over-leveraged businesses, experiencing repeated bankruptcies, but who used to say to Mohnish: "you could put me naked on a rock and I will start a new business." A guy who keeps going right there!
* Pabrai's concept of "cloning", not reinventing the wheel but instead literally copying whatever models are out there that work well. Pabrai frequently says, "I have no original ideas." (Of course this is actually not true: the idea of cloning itself, and doing it so overtly, relentlessly and publicly, is actually rather original).
* What's attractive to me about cloning is the fundamental humility of it. You can't do this if you suffer from "not invented here" syndrome, you can't do it if you think you need to come up with your own brilliantly original tweak on somebody else's strategy. Smart-boy/gamma-type personalities will struggle with the fundamental unoriginality of cloning.
* I never realized that Pabrai dropped so many f-bombs!
* Pabrai, Buffett, Munger sometimes go years without buying a new name. Good reminder to make sure you wait for your pitch.
* Note the Seritage [SRG] investment! An instance where cloning can go wrong... Looking over SRG myself it doesn't look all that interesting to me here.
* "We don't get paid for activity, just for being right." [Buffett] Saying no to almost everything, rejecting almost every investment idea except the really, really good ones.
* No mention here (yet) of Pabrai's failed investments like Horseheads Mining [ZINC] (later, much later, in the book the author refers obliquely to Horseheads, which went through an ugly bankruptcy). See also Pabrai's investment in Graftech [EAF] too. You must look at "great" investors longitudinally, and always make sure you do honest port-mortems on their (surprisingly frequent) airball investments too! Often there is more to learn studying the airballs than studying just the winners.
* Interesting that the author is both an investor in Guy Spier's hedge fund, he helped him write his book (the excellent Education of a Value Investor) and also edited his annual investor letters. I did not know this.
* Pabrai and Spier's luncheon with Buffett as a version of "guru dakshana" a gift presented to your spiritual teacher when your education is complete.
* Monish Pabrai's charity Dakshana might be a good charity to donate money to. Efficient, scales well, helps a lot of people on a very little funding, etc.
* The author gets very meta here with cloning as an idea in his own domain: writing. Examples: reverse-engineering the pacing and energy of a novel from good writers like Michael Lewis, exploring how Oliver Sacks cloned the writing of the famous Russian psychiatrist A.R. Luria... who also cloned the writing of Walter Pater.
Ch 2: The Willingness to Be Lonely
* On Sir John Templeton being a kook, on many investors having some degree of Asperger's, or having lack of human warmth, or being on some kind of spectrum of behavior that enables looking at the world in a non-consensus way. "At the end of the day, we're paid to see the world through a different prism."
* Templeton as a devout Christian who left the United States and renounced his citizenship to become a British citizen. Settled in the Bahamas.
* Templeton adamant about the perils of retirement, seeing them as idle useless people who are a drag on civilization.
* Buying at the point of maximum pessimism, finding asymmetric bets.
* Templeton's religious faith enabled him to trust that the world would eventually emerge from the chaos of World War II.
* Living in the Bahamas helps strengthen his psychological detachment from the Wall Street herd. The Wall Street Journal would arrive days late.
* Templeton's six guiding principles:
1) Beware of emotion
2) Beware of your own ignorance
3) Diversify broadly to protect yourself from your own fallibility
4) Successful investing requires patience
5) The best way to find bargains is to study whichever assets have performed most dismally in the past five years, then assess whether those "woes" are temporary or permanent.
6) Don't chase fads
* The author interviewed Templeton some 20 years ago (Templeton died in 2008 at age 95) and one gets the impression that it did not go well. This is also one of the book's weaker chapters.
* Templeton shorted IPO share "unlocks" in 84 tech names at the 2000 peak. Notable that he came up with that theme in his late 80s.
* Templeton as a sort of Calvinist, per the joke: "it's okay to make money so long as you don't enjoy it."
* The author frames himself as a skeptical journalist who isn't fooled by positive thinking, and he comes across as a little bit too much of a skeptical midwit here.
* At the same time, the reader gets to see an interesting arc of transformation in the author's own life and mindset here: the author discusses how he changed out his own tendencies toward idleness, impatience and indirection, he sort of sees the light with Templeton, grasping (albeit years later) that he failed to learn from Templeton when he first interviewed him, failed to fully and sincerely understand him. He realizes that he was too smug and dismissive to see the real value of how this man mastered himself, mastered his own internal world, his own inner game. Interesting to see the author's maturation and "arc of understanding" of Templeton.
Ch 3: Everything Changes
* Howard marks on impermanence, on humility and honesty about our vulnerabilities and limitations.
* "How can you think yourself a great man when the first accident that comes along can wipe you out completely?" --Euripides
* "Everything that's important in investing is counterintuitive, and everything that's obvious is wrong." --Howard Marks
* "We have two classes of forecasters: those who don't know--and those who don't know they don't know." --John Kenneth Galbraith
* Read widely, know your history. On viewing the world as behaving cyclically and oscillating. The future is unpredictable but the mechanism and recurring process of cycles of boom and bust is remarkably predictable. As you get older you will have seen "similar movies" (cycles) many times before "so you should try to get old." (heh)
* The market environment that we're in at any given time simply is, it is what it is. "We can't demand a more favorable set of market conditions. But we can control our response, turning more defensive or aggressive depending on the climate." Looking at examples of tons of IPO or M&A deals or other signals to discern the level of overconfidence, or greed, or low standards among investors in a given market environment.
* "Most of the time the end of the world doesn't happen."
* An authorial whiff here similar to the discussion of Pabrai: the reader learns all about how Howard Marks was such a genius contrarian during the great financial crisis, but what about discussing the many calls that he got wrong? One key theme in this chapter is how we do not know the future: Howard Marks has made plenty of mistakes over the course of his career, let's hear about and learn from those too.
* Howard Marks' five critical ideas:
1) The importance of admitting that we can't predict or control the future
2) Studying the patterns of the past and using them as a rough guide
3) Cycles reverse and reckless excess is punished
4) Using cyclicality by behaving countercyclically
5) The need for humility, skepticism, and prudence in an uncertain world.
* "If we cannot accept this teaching that everything changes, we cannot be in composure." Shunryu Suzuki
Ch 4: The Resilient Investor
* On value investor Jean-Marie Eveillard: "It's much warmer inside the herd" as a metaphor for why people find comfort in consensus "fashionable" investments, and why non-consensus, maverick investment thinking is extremely difficult for people, even (or perhaps especially) at the institutional level.
* Eveillard has an epiphany stumbling onto Ben Graham's books Security Analysis and The Intelligent Investor, with "margin of safety" as a mantra.
* "To lag is to suffer" he dramatically lags the stock market in the late 90s and lost assets as investors in his mutual fund sold/redeemed shares. And then SocGen sells his fund to Bleichroeder literally right before a glorious period when value investing massively outperformed. In other words: Eveillard goes from a rock star to a total bum and then right back to a rockstar in a matter of a few years.
* Note an insight here where it may not matter how much of a non-herd thinker you are if your fund sits on a business platform run by herd thinkers! Worse, if you're a non-herd thinking investor running a fund with daily redemptions, you're fragile to your shareholders being herd thinkers.
* Aspects of financial resilience:
1) Being vastly overcapitalized
2) Holding a ton of cash
3) Running a permanent investment vehicle (like Berkshire Hathaway or a closed-end fund), unlike a mutual fund which has daily redemptions.
* On the change in returns and volatility between market periods. See for example 1900-1911, 1932-1945, and 1945-1966. Every investment generation has a very different life experience from the prior one. 1900-1911 for example was a period of investment stability followed by *three atrocious decades* of high volatility and mediocre returns.
* Note how often in the investment pundit class (actually in all pundit classes) you see affectations of rigor and above-average intelligence, for example when a value investor pundit claims "there are no undervalued stocks out there/I can't find any undervalued stocks" thereby implying what a rigorous "smart boy" he is while implying the unwashed plebe investors out there are being unrigorous and naive compared to him.
* Note the following content-free paragraph about Matthew McClennan envisioning the global markets as "one giant block of marble"...
...this paragraph is an example of a minor annoyance this writer imposes on readers: a tendency to convey an idea from one of his subjects using broken phraselet quotes (a parodied example to convey the idea would be something like McClennan "believes that" the "best way" to "do something" is...). Sentences like this lack rhythm and finesse, but worse, they make it unclear where the investor's idea ends and where the author editorialization begins. Better that the author rephrase it fully in his own words to clearly convey the investor's idea that way.
* This is not to take anything away from this specific idea however! The "flakes" of "marble" that you "chip" off: would be things like:
1) Faddish sectors of the stock market (tech in the late 90s, MBS or housing stocks in 2007)
2) Countries that don't respect property rights
3) Countries or sectors that have attracted large, indiscriminate flows of capital
4) Companies with opaque balance sheets, too much leverage, imprudent management that is "too expeditionary" (a good phrase!)
Thus you can safely filter out investments like these and improve your returns.
* Respecting entropy: things fail, things tend toward disorder, things are not permanent. Things fade, thus the idea of avoiding companies that "fade" (seeking out an anti-entropy strategy) and seeking to invest in companies that are resistant to "fade" (for example: owning a company that makes ice makers rather than owning a specific restaurant, because restaurants come and go but they all need the same equipment) More general examples might be things like industries with high barriers to entry, a company with a sustainably great brand and business model, etc.
* Interestingly, McClellan cites Colgate Palmolive [CP] as resistant to fade (he considers it an example of "mundane scarcity"), when I'd argue the traditional consumer products is ripe for disintermediation and tremendous fade in the coming generation.
* There's a running thread pro- and con- about diversification in each of the different chapters: some of these investors see diversifying as return-constraining (why buy anything but the names you have highest confidence in), others see it as a central and critically important act of humility (you don't know what's going to happen so diversification protects you from the unknown).
* Interesting also to see another running thread across chapters (largely unaddressed by the author but apparent to readers) about the trade-offs these investors often end up making with their personal lives: Eveillard "neglected" his daughters, his protege Matthew McClellan gets divorced, Mohnish Pabrai gets divorced, etc. See also where the author says "the giants of investing are not always endowed with an abundance of social skills." So what then is the real game here, and what would it mean to "win" that game? The author could have addressed this in significant depth but doesn't.
Ch 5: Simplicity is the Ultimate Sophistication
* Once again the author visits a famous investor in his mansion: in this case Joel Greenblatt in his Hamptons mansion, two chapters ago it was Sir John Templeton at Lynford Cay in the Bahamas. The book has a kind of "lifestyles of the rich and famous" component which trivializes the book's actual topic, but this is often what financial reporters love to dwell on when they write about the great investors.
* Joel Greenblatt, exceptional because he actually has social skills, "a beguiling manner and a warm smile." And he didn't get divorced! Also worth noting: this dude put up monster returns during his public investment career. Monster.
* "He's motivated primarily by a game player's delight and devising ingenious ways to win." This is really what investing is all about to me too.
* Brief disappointment here to see yet another naive citation of Barry Schwartz's book "The Paradox of Choice" and the totally, laughably debunked "jam study" all over again. Does everybody read the same books?
* On simplifying/avoiding complexity: The investments you want to run from are: complicated, opaque, hide high fees, etc. Run also from all structured investment products. [Better yet, use the heuristic "never buy any investment sold to you."]
* The author mentions Josh Waitzskin here for a second time without continuity: He'd already introduced Waitzkin (with an identical introduction) in a footnote to Chapter 1 (the Mohnish Pabrai chapter).
* Complexity as a "seductive trap for clever people." Buffett, in contrast, with his four simple criteria for investing in any business:
1) one that we can understand
2) with favorable long-term prospects
3) operated by honest and competent people, and
4) available at a very attractive price
* Will Danoff at Fidelity: "stocks follow earnings." On not being too worried about valuation (except when it gets ridiculous). Sometimes to own a great company you've got to pay a fair price. Look for companies that will grow such that they'll double their earnings per share in the next five years, thus that stock is likely to double as well, more or less.
* Danoff on Starbucks [SBUX], a company that could easily fund its own growth because the return on each store was high with a rapid payback.
* Danoff, speaking to Bill Miller: "Look, I'm not that smart and there's a lot of information out there. So when I look at a company, I just ask myself: are things getting better or are they getting worse? If they're getting better, then I want to understand what's going on."
* Bill Miller: "I don't build models anymore." Concentrating on the three or four critical issues that drive the business rather than modeling out earnings to ten decimal places (being "generally right" rather than "precisely wrong").
* Back to Greenblatt now (this book occasionally jumps around disruptively): Greenblatt had a similar experience at Wharton that I had in my MBA program: I went to investment management classes to ostensibly learn how to invest, but then I went to a part-time job at a mutual fund which actually caused me to "unlearn" all my classroom knowledge! Good example of the ludic fallacy here: real life is not a classroom. Greenblatt likewise had his investing classes at Wharton, but then unlearned everything by stumbling onto Ben Graham's books Security Analysis and The Intelligent Investor.
* On remembering to ask: "does it matter or doesn't it matter?" to keep things in perspective. The stock of a chain retailer in the Midwest isn't suddenly worth half of what it was before just because something bad happened in Greece, for example. Asking this question helps illustrate that a lot of macroeconomic strategist talk, a lot of economic "parlor talk" (and most financial media punditry) is vacuous nonsense.
* "Do you know how to value a business?" The author asks this as a metaquestion, and it's a good one. You have to know how to do this part or you're never going to be able to play the game competently.
* This is a minor criticism of a footnote lost on page 126, but the author has some more work to do to fully understand the whole Mike Milken's/junk bond phenomenon, as he spouts a consensus and (quite frankly) lazy take on Milken. Enterprising and curious readers might consider reading The Creature from Jekyll Island for a vastly different take on Milken's experience with US securities regulators and the US justice system.
* Greenblatt and special situations: illiquid stocks, "orphan" stocks (see for example the spin-off of Host Marriott from Marriott international in the early 1990s, an orphan name that Greenblatt ultimately put 40% of his fund into. Makes you think about diversification! "I didn't see how I was going to lose much money."
* Cheap + good = the holy grail. Buying cheap is great, but if I can buy a good business cheap, even better. Buffett's evolution from investing in really cheap mediocre companies to investing at better quality companies at reasonable prices, thanks to Charlie Munger's influence. "Wonderful businesses at fair prices."
* Greenblatt's "magic formula": EBIT / assets (essentially). Discussed in "The Little Book That Beats the Market" (very much worth reading in my opinion) and then on his free website magicformulainvesting.com.
* Another very useful insight from Greenblatt: "For most individuals, the best strategy is not the one that's going to get you the highest return. Rather the best strategy is a good strategy you can stick with even in bad times." The best strategy is often incredibly volatile and it shakes out investors. "When I own six or eight names, it was not uncommon to lose twenty or thirty percent in a few days every two or three years. It's a difficult strategy to stick with, so it's not good for most individual investors. But that's perfectly good for me. When something falls twenty or thirty percent, I don't panic because I know what I own." Good quote to remember here, both to know what you "can stick with," and likewise what you'll be required to endure if you concentrate your investments. Most people (including myself!) will not have the temperament and constitution to invest like Greenblatt.
Ch 6: Nick & Zak's Excellent Adventure
* Nick Sleep and Zak Zakaria, unlikely investors given their initial careers and upbringings. They try working at traditional Wall Street jobs, then travel together to Berkshire Hathaway's annual meeting, discovered that real investing was about real businesses. And starting The Nomad Investment Partnership together at Marathon Asset Management in London.
* A long-term goal of 10xing their assets.
* "Shelf life" as a metaphor for avoiding short-lived, short-term economic noise and thinking more long-term, ignoring quarterly information, avoiding being "a quarterly EPS junkie" for information that will likely be worthless in 12 weeks, not being part of the short-term crowd. Likewise ignoring day to day stock price action.
* Intentional disconnection, avoiding dopamine rushes from checking stock prices, avoiding "wiggle guessing" (guessing the next wiggle in a stock price) and instead focusing on "destination analysis" of a company (where things are ultimately going to end up).
* Also: using destination analysis as a tool for other life domains: being healthy, being remembered lovingly by family and friends, etc.
* Being inspired by the book Zen and the Art of Motorcycle Maintenance, and thus structuring their partnership with a very low annual management fee, a 6% hurdle, and holding back some portion of performance fees if they underperformed in the future (so they can then refund fees to the shareholders). Running money with a mindset towards quality in the Robert Pirsig sense.
* Avoiding sales and marketing, avoiding being in the "asset gathering business," never speaking to the media, also turning away "investors who seemed unsuitable or irritating, regardless of how rich they were." This sounds awesome, this is the kind of investment partnership I would run if I ever ran one. These guys seem like good dudes.
* They move on from cigar-butt type investments to compounders, basically finding farsighted company management who would grow the companies over time so "you can subcontract the capital allocation decisions to them. You don't have to be buying and selling shares." Finding companies with "unusually long shelf lives." A good example would be shared scale economy businesses like Costco or Walmart (also AMZN), highly efficient firms that share their savings with customers.
* Zak gives Sleep 51% of the business (a controlling stake) because if there were ever a disagreement he trusted him to do the best thing for both of them.
Ch 7: High-Performance Habits
* On adopting habits with benefits that compound over time, on being "radically moderate" about everything you do, extreme changes aren't sustainable but moderate incremental changes are.
* On Jeff Gundlach making sure he avoids disaster: "If I assume that I'm wrong on this, what's the consequence going to be?" "Make your mistakes nonfatal."
* Also focusing on putting one foot in front of the other, not getting caught up in news events, riots, stuff like that.
* Continuous learning, voracious and eclectic reading, interconnecting with other smart people, also focusing on helping the people around you. The Mensch effect, "the compounding of goodwill" in Guy Spier's terminology.
* This chapter drifts a bit: it lacks focus, now we're talking about how hard guys like Jeff Vinik and Peter Lynch work (both were PMs at Fidelity), how Marty Whitman got too old and "lazy" to do proper due diligence during the great financial crisis etc. Cool stories and points worth taking, but they have little to do with the chapter's theme.
* On being physically located far away from financial centers and locus of noise, distraction, news and day-to-day of Wall Street. See Chuck Akre running his firm out of rural Virginia, see Buffett running his firm out of Omaha, see Laura Geritz working out of Kyoto or Salt Lake City, etc.
Ch 8: Don't Be a Fool
* On systematically reducing "standard stupidities" per Charlie Munger: "It is remarkable how much long-term advantage people like us have gotten by trying to be consistently not stupid, instead of trying to be very intelligent." Also, another Munger truth bomb: "Other people are trying to be smart. All I'm trying to be is non-idiotic. I find that all you have to do to get ahead in life is to be non-idiotic and live a long time. It's harder to be non-idiotic than most people think."
* Munger influenced by Carl Gustav Jacobi, a 19th century algebraist who famously said "invert, always invert." Example: asking "What can I do to really ruin India?" (and not doing that) versus asking "What can I do to help India?" It's easier to think through the things you could do to ruin India and reverse it and not do those things and work backward from there. "It's a more complete way of thinking a problem through."
* Buffet discussing the art of inversion in the 2009 BRK shareholder letter "What We Don't Do "
* "Sing a country song in reverse, and you will quickly recover your car, house and wife. " :)))
* The idea of being candid, open and owning your own mistakes, even "rubbing your nose in your mistakes," this also is a technique to limit your stupidity.
* Fred Martin of Disciplined Growth Investors realizing his father was a terrible investor: hyperactive, impulsive, too excited.
* Munger on avoiding behavior with marginal upside and devastating downside.
* Munger's three speeches about the psychology of human misjudgment, basically a list of 25 psychological tendencies that cause our minds to malfunction.
* Note in particular the "doubt avoidance tendency" where we try to rush to a decision or resolve an issue quickly to remove doubt, but it leads investors to make impetuous decisions that often end in disaster.
* "Forget what you know about buying fair businesses at wonderful prices; instead, buy wonderful businesses at fair prices." Buffett on the blueprint given to him by Munger.
* Studying counterarguments (steelmanning, basically), avoiding heavy ideology because it distorts human cognition in an extreme way, etc. Find people who are not afraid to disagree with us.
* Pre-mortems, devil's advocate reviews, having a mindset of falsification, simultaneous evaluation of multiple competing hypotheses.
* Note also how stress, depression, hatred and envy cause dysfunctional thinking and accentuate cognitive biases. For example "acute stress and confusion can intensify an investor's urge to follow the crowd and abandon independent thought, especially when markets are plunging."
* Ken Shubin Stein: meditation, exercise, sleep and nutrition as baseline practices for good decision making. Also recognizing when your emotional state might impair your judgment, and postponing important decisions until you're in a state more conducive to good decision making. Staying aware of your internal state.
* [Some of these themes are randomly in one chapter or another: see for example how a lot of the discussion by Ken Shubin Stein could be added to the "Habits" chapter (chapter 7), not necessarily in the "Don't Be a Fool" chapter (chapter 8). The reader gets a feeling of arbitrariness, as if the author must tell his entire collection of investor anecdotes come hell or high water but didn't finish the job of grouping them properly. Thus the book is starting to read like the old joke about history being "one damn thing after another."]
* Once again, the author could have taught his readers much more if he gave more longitudinal context for some of these investors' decisions (recall my comment above on studying Pabrai's periodic airballs and not just his winners). In this chapter, where Charlie Munger buys Wells Fargo at the bottom in March 2009, he says it was a perfect example of rationality: so why does the author leave undiscussed the fact that Buffett and Munger disagreed about what to do with WFC in 2020 in the wake of various scandals at the bank? (Munger's Daily Journal Company didn't sell WFC while Berkshire Hathaway dumped its entire WFC stake unceremoniously) So what did Munger see that Buffett didn't, or vice versa? A post-mortem on that "split decision" would be extraordinarily helpful to readers, but the author leaves this intriguing question unaddressed. [Note that the answer wouldn't require all that much incremental work to figure out: see for example this video where someone asks Munger this very question, and Munger answers "I expect less out of bankers" than Warren.]
* Munger on how envy is "the dumbest of the seven deadly sins because it's not even fun."
* On facing a 50% drawdown "with aplomb and grace" and structuring your life in such a way that you can do just that (by having extra cash, cultivating non-attachment to results, etc.).
* Munger talking about Sumner Redstone (the Viacom/CBS CEO): "almost nobody ever liked him, including his wives and his children." Using Redstone as a contra-example for how to be.
* "The idea that life is a series of adversities and each one is an opportunity to behave well instead of badly."
Epilogue: Beyond Rich
* What are we willing (and unwilling) to sacrifice for the sake of money?
* On building your capital to the point where you're independent, not under the control or whim of a boss or a company.
* The author himself gets exposed to the true extent of his fragility when he loses his job, his investments take a huge hit in the great financial crisis--and he has two kids in private school while living in high-cost London. He has a bit of a come-to-Jesus moment and realizes nobody is coming to save him.
* The ability to take pain, per Mohnish Pabrai, see also Jason Carp discovering that his investment performance showed no clear linkage between process and outcome, and that he's thus being judged on something he has no control over. The fact that there's so much randomness in investing (and particularly professional money management) that it can drive you insane.
* Cloning stoicism: Marcus Aurelius, Epictetus.
* Ah, here we're finally talking about Bill Miller's tremendous failure at the Legg Mason Value Trust mutual fund in the 2008 crisis. I didn't realize it was so bad! Assets under management went from $77 billion to just $800 million (down 89% from peak), which means his geometric or dollar-weighted returns were negative for sure for almost all of his investors. Then, he lost half his personal wealth in a divorce... then he lost 80% of the remaining half because he got margin-called when the market imploded. Jesus Christ.
* Bill Miller: "I'm much more sensitive to risk and being wrong that I was before. It's an admission that I didn't think I could be as catastrophically wrong as I was." [This book (unwittingly) gives a tremendous takeaway for all individual investors: realize that anyone you're investing with may, while they're running your money, achieve this precise insight--not before, not after, but while they are running YOUR money. As a result they will lose a lot of your money through their own arrogance and sense of infallibility. Please remember this and invest accordingly. Miller found the financial crisis "very cleansing." What you want to do as an individual investor is have him run your money only after he's been "cleansed."]
* Finally, here we also learn about Mohnish Pabrai's investment in Horseheads Holding Corp., which went bankrupt with Pabrai holding a large position of client money in it. I guess all the secrets come out in the epilogue...?
* The story of Arnold Van Den Berg, Holocaust survivor from the Netherlands, later learning from a psychiatrist "if your life is more important than your principles, you sacrifice your principles. If your principles are more important than your life, you sacrifice your life." A clarifying dictum here.
Finally, this book offers a tremendous, tremendous reading list:
Jack Bogle: Enough: True Measures of Money, Business, and Life
Jack Bogle: Common Sense on Mutual Funds
Charles Ellis: Winning the Loser's Game
Burton Malkiel: A Random Walk Down Wall Street
Edward O. Thorp: Beat the Dealer
Edward O. Thorp: A Man for all Markets
William Poundstone: Fortune's Formula (see for the Kelly Criteria for bet-sizing)
Roger Lowenstein: When Genius Failed
Philip Tetlock: Superforecasting
Mohnish Pabrai: The Dhandho Investor
Tim Rerriss: Tools of Titans (on cloning/modeling others)
Josh Waitskin: The Art of Learning
Charlie Munger: Poor Charlie's Almanack
Carol Loomis: Tap Dancing to Work
Robert Hagstrom: The Warren Buffett Way
David Hawkins: Power vs. Force, The Eye of the I, I: Reality and Subjectivity, Truth vs. Falsehood, Letting Go
Barton Biggs: Wealth, War and Wisdom
Lauren Templeton and Scott Phillips: Investing the Templeton Way
John Templeton: Wisdom from World Religions
Glenn Mosley: New Thought, Ancient Wisdom
Shunryu Suzuki: Zen Mind, Beginner's Mind
Satipathanna Sutta (Buddhist text)
Shinzen Young: The Science of Enlightenment: Teachings and Meditations for Awakening Through Self-Investigation
**Brad Warner: Hardcore Zen
**Jean-Louis Servan-Schreiber: The Art of Time
Daniel Ingram: Mastering the Core Teachings of the Buddha
Peter Bernstein: Against the Gods: The Remarkable Story of Risk
Thucydides: History of the Peloponnesian War
Dr. Dean Ornish: Undo It! How Simple Lifestyle Changes Can Reverse Most Chronic Diseases
John Tracy: How to Read a Financial Report
James Bandler: How to Use Financial Statements
Joel Greenblatt: The Little Book That Beats the Market
Rav Berg: Kabbalah for the Layman
The Zohar (important Kabbalah text)
Lou Marinoff: The Middle Way: Finding Happiness in a World of Extremes
Rav Yehuda Ashlag: The Wisdom of Truth
Lauren Templeton and Scott Phillips: Investing the Templeton Way: The Market-Beating Strategies of Value Investing's Legendary Bargain Hunter
Martin Ford: Rise of the Robots: Technology and the Threat of a Jobless Future
**Robert Trivers: The Folly of Fools: The Logic of Deceit and Self-Deception in Human Life
Dietrich Dorner: The Logic of Failure
Tren Griffin: Charlie Munger
Peter Bevelin: Seeking Wisdom, and All I Want to Know Is Where I'm Going to Die So I'll Never Go There
**Richards J. Heuer: Psychology of Intelligence Analysis
Jim Stockdale: Thoughts of a Philosophical Fighter Pilot
James Allen: From Poverty to Power
James Allen: Mind Is the Master
John Rothchild: The Davis Dynasty
Robert Pirrsig: Zen and the Art of Motorcycle Maintenance
Cal Newport: Deep Work
Bryan Magee: Confessions of a Philosopher
Louis Menand: The Metaphysical Club
John Williams: The Wisdom of Your Subconscious Mind
Bruce Lipton: The Biology of Belief
Joyce Fern Glasser: Core Healing
Richard W. Wetherill: Right Is Might