6 January 2022

Clay Finck chats with William Green about how the greatest investors taught him how to live a better life, the lessons William learned in simplifying an investment approach, what it takes to know if you’re ready to buy individual stocks and try to outperform the market, why investing in mudanity is often a very good investing approach, Bill Miller’s incredible story during the financial crisis, and much, much more!

William Green is the author of Richer, Wiser, Happier: How the World’s Greatest Investors Win in Markets and Life. Over the last quarter of a century, he has interviewed many of the world’s best investors, exploring in depth the question of what qualities and insights enable them to achieve enduring success. He’s written extensively about investing for many leading publications such as Time, Fortune, Forbes, Barron’s, The Economist, and many others.

William also wrote and edited The Great Minds of Investing, which features short profiles of 33 renowned investors, along with stunning portraits created by Michael O’Brien, one of America’s preeminent photographers.

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  • What led William to study the best investors not just to discover the investing lessons, but also to learn how to live a better life.
  • The lessons William learned in simplifying an investment approach.
  • What it takes to know if you’re ready to buy individual stocks and try to outperform the market.
  • The role humility has played in the lives of the best investors in the world.
  • Why investing in mudanity is often a very good investing approach.
  • What William’s biggest takeaways are in interviewing and studying Charlie Munger.
  • The benefits of having conservative finances and how Bill Miller has influenced how he views this subject.
  • One simple idea that William would like listeners of the show to implement into their own lives.
  • And much, much more!


Disclaimer: The transcript that follows has been generated using artificial intelligence. We strive to be as accurate as possible, but minor errors and slightly off timestamps may be present due to platform differences.

William Green (00:00:03):

Most people thought that amazon.com was going to go bankrupt, and so Amazon had fallen from $90 a share to about $6 a share at the time, which is hard to think of, $6 a share. And Bill had bought 15% of the company. I saw him at an event get pillared for this by a bunch of his peers in value investing communities, who were like, “This thing is going to go bankrupt,” and he says, “Look, I may be wrong, and if I’m wrong, I’m going to lose 100% of my money, and if I’m right, which I think I am, I’m going to make 50 times my money.”

Clay Finck (00:00:37):

Man, oh, man, am I excited to bring you today’s guest, William Green. William is the author of Richer, Wiser, Happier: How the World’s Greatest Investors Win in Markets and Life. Over the last quarter of a century he has interviewed many of the world’s best investors exploring in depth the question of what qualities and insights enable them to achieve enduring success. He’s written extensively about investing for many leading publications, such as Time, Fortune, Forbes, Barron’s, The Economists, and many others. During the episode, I chat with William about how the greatest investors taught him how to live a better life, the lessons William learned and simplifying one’s investment approach, what it takes to know if you’re ready to buy individual stocks and try to outperform the market, why investing in mundanity is often a very profitable strategy, William’s biggest takeaways in interviewing and studying Charlie Munger and much, much more.

Clay Finck (00:01:34):

My favorite parts of the episode were the fantastic stories about Sir John Templeton, investing in bankrupt companies after the Great Depression and Bill Miller’s experience going through the 2008 financial crisis, losing the majority of his investors and bouncing back stronger than ever in the years following. So make sure you stick around to listen to those bits. Now, without further delay, I hope you enjoy this brilliant episode with William Green.

Intro (00:01:59):

You’re listening to Millennial Investing by The Investors Podcast Network where your hosts, Robert Leonard and Clay Finck interview successful entrepreneurs, business leaders, and investors to help educate and inspire the millennial generation.

Clay Finck (00:02:20):

Hey everyone, welcome to the Millennial Investing Podcast. I’m your host, Clay Finck and on today’s episode, I’m joined by William Green. Welcome to the show William.

William Green (00:02:29):

Hi, Clay. It’s great to be here with you.

Clay Finck (00:02:31):

Now I’ve read a number of investment books, but I must say that yours is easily towards the top of my list of books to reread and recommend the others. That book is Richer, Wiser, Happier. Not only does it include an incredible number of timeless investment principles, but it’s also very well written. So first off, congratulations on the successful book.

William Green (00:02:54):

Thank you so much.

Clay Finck (00:02:56):

Now there’s a saying that if you want to become wealthy, study wealthy people, I’m very curious what led you to study the best investors, not just to discover those investing lessons, but also to learn how to live a better life as well?

William Green (00:03:11):

I started off originally, I just wanted to make money. I didn’t like the idea of working for a really annoying boss who I had to take orders from. I was always a little bit subversive and independent minded even as a kid. So I think when I discovered investing in my 20s, I thought, “This is this miraculous thing where if you think well, you can achieve a degree of financial independence and security, is difficult to of any other way.”

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William Green (00:03:40):

So I had this tremendous advantage because I was working as a journalist. So when I started to want to invest and make money off the stock market, I could actually go and interview all of these great investors for magazines like Forbes and Fortune and Money and Time, all these magazines that I ended up writing for. So I would do things like I would go off to The Bahamas and spend a day with Sir John Templeton, who was probably the greatest global stock picker of the 20th century.

William Green (00:04:07):

So initially I was looking at these guys thinking, “This is so cool. They can teach me to become rich,” and then gradually what happened, much to my surprise, is I figured out, “God, these guys are really interesting.” These really strange characters who are incredibly thoughtful and I think what I gradually figured out is that they’re almost like practical philosophers, that they weren’t just thinking about these really abstruse esoteric questions like, “Does this chair exist?,” and, “Do I exist?” They were thinking about these really practical philosophical problems like, “Wait a second, so the future is unknowable. So how the hell do I make a good decision about the future, about anything?”

William Green (00:04:47):

So what occurred to me when I look back now on 25 years of writing about these famous investors, is that the reason they have to think that way, they have to be very pragmatic, very philosophical in terms of thinking about the future and how to make good decisions, is because they have skin in the game. If they screw up, they actually get really punished for it. You can lose tens of millions, hundreds of millions, billions of dollars in the case of some of these investors. So I think that makes them very good thinkers.

William Green (00:05:17):

So my interest deepened over the years. It starts off really just being about money, and then I start to think about all of these issues that they’re grappling with. To give you an example, someone like Howard Marks, who I write about in one of the chapters of this book, here’s a guy, multi billionaire, managing something like $160 billion at a firm called Oaktree, and he’s literally grappling with this problem of fact that the future is unknowable, and as he puts it, “Everything changes.” When he was a youngster he went to Wharton and he was a very good artist and he wanted to study art, but they were like, “No, you’re a finance student. There’s no way you’re allowed to study fine arts.” So they kick him out of the class, so he has to find another class to study.

William Green (00:05:59):

So he goes to this Japanese studies class and discovers this Zen Buddhist concept of impermanence, the word for it in Japanese is mujo, and this has become this kind of defining idea of his life is, “Okay, so if everything is impermanent, if everything is changing, what the hell do I do? How do I deal with the future?” So one of the things that he does is he says, “Well, you have to accommodate yourself to reality as it is. You have to say, ‘Well, I’m not this master of the universe. I don’t know what the future holds. I don’t know what can happen. All I know is that everything is changing. Everything is inconstant. So I have to adapt myself to circle instances.'” This sounds like an esoteric, airy, fairy idea, but it’s actually really practical because you think about how it applies both to financial markets and to life.

William Green (00:06:48):

So financial markets, we don’t really have any idea whether the stock market’s going up, whether it’s going to go down, whether inflation is going to go up. We had no idea whether COVID would come along. All you know is basically that things are going to change. So his fundamental idea of just adjusting to circumstances as they are, turns out to be an incredibly practical idea. So he would say in markets, for example, if everyone is going crazy, everyone’s super bullish, everyone’s getting carried away by Bitcoin or, or Tesla stock or whatever, they’re all thinking, “God, it can only ever go up.” He said, “You just want to adjust as if you were driving your car in icy conditions.”

William Green (00:07:31):

So it’s not that you know what’s going to happen. You don’t know that Tesla is going to crash, you don’t know whether Bitcoin is going to go up or down, but because other people are being a little bit crazy and are taking risks with money that they can’t afford to lose, you just want to go a little slower, drive a little more safely, make sure you’re wearing your seatbelt. And it’s the same in other areas of life. You think about COVID. I was talking to my wife right before this interview. I really wanted to go into the city this Saturday because I go in every Saturday morning typically, and I’m Jewish. I go to a Shabbat service and it’s lovely, it gives me a chance to stop working for one thing.

William Green (00:08:08):

And she’s like, “Well, wait. So there’ll be like 100 people in the room, and nobody really wants to wear a mask and people are going to be singing, and there’s a new variant of COVID, where we really know what’s going on yet, and we have a family meal with my elderly parents later in the week. You really want to go?” So it’s like, “Yeah, I really do want to go,” but I have to adapt myself to circumstances as they are.

William Green (00:08:35):

So this idea that sounds really esoteric, this idea that we don’t know the future, everything is unknowable, it seems like something where you would just kind of throw up your hands and despair and be like, “So what do I do?” But actually what someone like Howard Marks is teaching us is, “Well, look at reality as it is, not as you want it to be, both in markets and in life and adjust to those circumstances.”

Clay Finck (00:08:58):

Yeah. I can definitely relate to the experience you had with how you got into investing. When I was around 18 years old, I read a biography on Warren Buffett and started learning about this thing called stock investing, and I was like, “Why is nobody talking about this? Why has no one mentioned it to me?” It’s kind of like money is this taboo subject, and when you look at the Berkshire Hathaway shareholder meeting, it becomes pretty obvious that some of these investors, you can learn a whole lot from them, not just on the investment side, but also how to be a better person and live a better life.

William Green (00:09:35):

Yeah, Charlie Munger has this great phrase. This is Buffett’s legendary partner, who I interviewed for the book, who’s now 97 years old and who’s this great kind of Polymathic genius who knows everything about everything and has done nothing but read for the last 97 years. He talks about worldly wisdom, which is a phrase I think he got from the economist, John Maynard Keynes, and that’s really what the greatest investors embody, is this kind of worldly wisdom where they’re not just thinking about how to get rich, but they’re thinking about things like, “Yeah, but what does the money even mean? If you get incredibly rich, are you going to be happy? What are you going to do with the money? How are you going to have it not destroy your family? If you have vast amounts of money, what are you going to do with it? How are you going to give money away? Should you buy the Ferrari or is that actually not going to make you happy?”

William Green (00:10:22):

So they’re dealing with all of these really interesting philosophical questions, even things like Munger will talk about morality a great deal. So he’ll say, for example, “There are all of these people in the business world who are perfectly happy to screw their suppliers and squeeze people and be in lawsuits with their partners and try to take advantage of their shareholders to get as much money as they can, as many fees as they can,” and Munger is like, “No, my view of life is win-win. I don’t want to squeeze my partners.” So that’s what I was trying to say about Howard Marks, it’s this way of looking at life that’s much more holistic. Yeah, you want to get wealthy, you want to be financially independent, you want to be financially secure, but for someone like Munger, these issues of how you win the game, in what manner you operate become really important. Are you going be moral or are you just going to screw everyone in your path, have sharp elbows all the way up to the top?

William Green (00:11:25):

So I think that’s one thing that I really loved about studying people like Munger, Buffett, Howard Marks, a lot of the people in this book, is that they were thinking more deeply about these questions, not only of how to get rich, but actually about how to live. So, in a sense, I think that’s the deeper aspect of what you can learn from these great investors. It’s like, yeah, you want to be rich, but if you just get rich and the money ruins you or you become totally fixated on it or you just become full of pride or you become obsessed with your possessions, you can end up having a totally miserable life.

William Green (00:12:01):

So these philosophical questions of actually how you live, how to think better, how to treat other people, all these aspects of worldly wisdom become really important, and when I was 20, I can’t tell you how little I thought about this stuff. I was just thinking, “So how do I get people to be impressed with me? How do I get my way? How do I make people respect me? How do I date someone beautiful.” I didn’t really care about these deeper questions, but I think maybe as I got older, I got slightly less superficial, and I started to think, “Well, actually getting rich isn’t really going to do it, and if I become famous, that’s not going to do it, and if I get respect from everyone but I disrespect myself because I know that I’m a schmuck, that’s not going to help.”

William Green (00:12:50):

So maybe part of what happens is when you are middle aged, like I am because I’m 53, you have this kind of second adolescence where you start to look at your life and be like, “Well, that didn’t work, that thing that I did, but this thing kind of did.” So then these great investors become a really helpful guide in how to live a more aligned and meaningful life.

Clay Finck (00:13:10):

You mentioned how Charlie wants to focus on treating people right and doing right by them, kit reminds me how pricey some valuations have got today, it’s been difficult for Warren and Charlie and Berkshire to acquire wholly owned businesses at prices that they would like to do so. I’ve heard stories how some companies will just willingly sell to Berkshire because they know that Warren and Charlie will treat the people right, and these are people’s businesses and their livelihoods and it’s kind of their legacy in the long run and they could accept more money elsewhere, but they know that Warren and Charlie are going to treat them right. And since you bring up Charlie, I’m curious, were there any other big takeaways you had in interviewing him?

William Green (00:13:58):

Yeah, the most valuable thing that I got from interviewing Charlie, which I did in Los Angeles originally. I traveled 3000 miles to interview him, originally with the promise of a 10 minute interview, so it was a little bit crazy, but I ended up subsequently talking to him more recently. The biggest thing that I learned from Charlie was this incredibly simple and practical and also quite profound idea, which is that instead of trying to be smarter, what you want to do actually is try to be consistently less stupid, and it sounds kind of like joke, but here’s Munger, this genius, who’s probably the brightest guy in investing pretty much with the possible exception of someone like Ed Thorp, who I also write, he’s another genius, brilliant guy, Charlie Munger and he spends his whole time trying to figure out, “How can I be less stupid?”

William Green (00:14:51):

So when I went to interview him, I’m sort of sitting knee to knee with this Sage, and he is peering at me through these very thick glasses, because he is blind in one eye and he can barely see and I knew that I didn’t have much time, so I had to cut right to the chase. So I said, “Charlie, I regard you as the grand master of stupidity reduction,” I said, “Why is that such a critical focus for you?” And he said, “Because it works, it works,” and he starts to explain that what he does is instead of trying to be brilliant the whole time, which comes more naturally to him than it does to most of us, what he does is he says, “Okay, let me figure out what a dumb person would do in this situation,” whether it’s investing or anything else in life.

William Green (00:15:36):

So he says, “If, for example, you want to be a good investor, a very successful investor, start by thinking what a terrible investor would do. So list all of the dumb mistakes that terrible investors routinely make, and then having figured that out, don’t do that.” So it’s something that he’s taken from this 19th century mathematician, a guy called Carl Gustav Jacobi, who said, “Invert. Always invert.” This is what Charlie is doing, he’s inverting, he’s solving the problem backwards. So he’s not saying, “Let me figure out how to be a great investor.” He’s saying, “Let me figure out first how to be a terrible investor.”

William Green (00:16:13):

That’s really helpful because actually it’s really easy to identify dumb mistakes, what he calls standard stupidities or idiotic behavior. So he’ll look at things like the fact that investors routinely buy whatever’s going up and Wall Street will convince them that whatever’s going up is worth buying because Wall Street gets paid to do that. They don’t really care whether it’s going up or down, they get paid for commissions frequently.

William Green (00:16:41):

So people will buy stocks that are at the top of the cycle, for example, assuming that it’s going to continue to be good and then the stock goes off a cliff and the investor gets hosed. Or another thing people routinely do is they listen to predictions, the market seers, market strategists of these big Wall Street firms or idiot journalists like me are making where they say, “The market’s going to go up 20% over the next year,” or “This sector is going to be the best sector,” and the truth is nobody knows. This is a really chilling realization, but once you actually start to be like, “Well wait, so all of these predictions are kind of bogus,” it’s pretty liberating because you know that you can stop listening to all of these prognosticators who pretend that they know the future.

William Green (00:17:31):

So for me I’m happy to say, “Well look, if Buffett can’t predict the future, if Munger can’t predict the future, if Howard Marks can’t predict the future, then I sure as hell can’t.” So if they’re saying that that’s a standard stupidity, to believe that you can tell whether the market’s going up or down, that’s a really good default position for me to say, “Okay, let me not fall into that trap of trying to guess where the market’s going to go. I’ve got to position myself so I’m going to be okay whether the market falls or rises. If it plunges, I’m going to survive, I’m going to stay in the game, and if it goes up, I’m going to benefit from it,” and over the long term, the market has always gone up. The trajectory has been amazing because productivity increases, populations increase. It has this incredible upward trajectory over centuries.

William Green (00:18:24):

So, the long term prognosis is likely to be good, but you have to avoid these standard stupidities of jumping in and out, believing people who make predictions, trading hyperactively, having excessively high expenses, for example, if you jump in and out where you have short term tax liabilities because you’ve been trading in and out. So Munger’s approach of reducing standard stupidities is incredibly practical in investing, but it actually turns out to be incredibly practical in other areas of life as well. He gave this great speech at a school that he had some like eight children and step grandchildren and he gave great speech one year at commencement where he said, “Look, instead of me giving you a prescription for happiness, I’m going to give you a prescription for an absolutely miserable life.”

William Green (00:19:15):

So this is a perfect example of inversion. It’s telling you, “If you want to have a miserable life, here are all the things you want to do.” So he lists all of these standards stupidities, so there are things like be unreliable, never be someone people can rely on. Be vengeful. So when someone hurts you, seek revenge, that’s sure to lead to misery. Be envious. So he describes envious, the dumbest of the seven deadly sins because he said, “It’s not even fun.” So there are all of these ways in which you can actually guarantee yourself a pretty miserable life if you behave that way. So this turns out just to be an incredibly helpful strategy and I’ve really applied this in my own life. I think about, when I’m doing certain things. If, for example, you’re getting into your car and you’ve had a bottle of wine, you just look and you think, “Well, no, this is a really dumb idea.” It’s basically these things that have minimal upside, a tremendous potential downside you want to avoid.

William Green (00:20:14):

So you think about things like drinking. Charlie talked about how a number of his childhood friends who had enormous promise ended up destroying their lives because they became alcoholic. You think about it with drugs. He says, “If you want to guarantee misery become addicted to alcohol or ingest chemicals.” But you think about it also with things like cheating. So things like cheating on your expenses at work, cheating on your taxes, cheating on your spouse, your girlfriend, boyfriend. If you’re dating someone you love, you don’t really want to jeopardize your relationship or your family for the short term pleasure of cheating.

William Green (00:20:50):

So it’s this simple idea of actually avoiding standard stupidities becomes a kind of guiding principle, not only in investing, but actually in life and it’s just constantly saying, “How could this go wrong? How could this ruin me? What would a really dumb person do in this situation? And let me at least not do that.”

Clay Finck (00:21:14):

Yeah. That reminds me so much of just the market psychology, which you alluded to, the 2000 tech bubble or even today, it’s like, what would the worst investor do today and is that type of person considering the potential downside and the potential upside? It’s just so important to keep in mind that worst case scenario that since the future is unknowable, that could definitely play out.

William Green (00:21:39):

And it’s really hard to do when you haven’t been through these circumstances yourself. I think part of what happened to me is that I started as a financial journalist in the late ’90s, so I actually went through that period of the crazy bull market in dotcom stocks. So I went through this period where magazines, like I was at Money, which was owned by Time, Inc and I was at Forbes during that period and I could see either way that journalists were covering this, in this sort of breathless way. They would write stories about people who had just made millions and millions of dollars in months on some hot dotcom stock. Then in 2000, 2001, it basically all goes to hell and you see these people get crushed. So I think for people my age, who went through that viscerally, you know what it’s like to go through a bubble like that.

William Green (00:22:39):

Buffett has this wonderful line where he says, “It’s good to learn from your own mistakes, but it’s better to learn from other people’s mistakes.” It’s much cheaper to learn from other people’s mistakes, but there’s something, you can study these things. You can study a period like the dotcom bubble and have a sense of like, “Oh, I don’t want to get carried away,” but there’s nothing like actually getting hurt yourself or seeing people close to you get hurt and thinking, “God, let me not do that.” I think of this. My mother has a close for friend who’s… I won’t give you too many details, but somebody’s who very brilliant and was really successful in a different area of life and made a lot of tech investments during the bubble and lost their home and lives in a really modest way in a rural setting where they didn’t want to end up, and I remember that.

William Green (00:23:36):

I saw it in 1974 as well. I was born in 1968 and my father, who always loved stock investing, adored the stock market, but wasn’t a particularly good investor, he was more enthusiastic than he was knowledgeable. He always had a bit of an overdraft and invested on margin because it was more exciting. So during the ’70s, in ’72, ’73, I guess, the stock market was going crazy, a bit like in 1999 and 2000, and my father ended up getting crushed when the market got killed in ’73, ’74, I guess it was, to such an extent that… He was an incredibly cultured guy and he had a beautiful Flemish painting, old painting 300 or 400 years old by a Flemish artist called Harry [Metdubless 00:24:25] and he literally had to sell this painting that later, I think, would’ve been worth hundreds of thousands of dollars.

William Green (00:24:32):

And my uncle, who was a better investor, a much more sophisticated investor than my dad, had to sell his house, which was a beautiful house. I used to go there as a kid, it was this wonderful house with a gorgeous swimming pool and I remember they had every action man and toy you could imagine. It was like heaven for a child to go there. He had to sell his house, but he didn’t sell any of his stocks and he bought more and he ended up making millions and millions of dollars off the crash. So I think when you’ve viscerally seen these things and experienced them, it’s much easier not to get carried away and to learn the lessons the past.

William Green (00:25:08):

So I would just say given this audience is on the whole younger and has gone through this period of great abelian over the last 12 years, where the market basically has just gone up pretty much, with a few painful dips, you want to just be aware that one of the great lessons of history is that we tend to forget what can happen. There’s a beautiful line from Buffett that I quote somewhere in the book, where he talks about the mistake that he had made before 9/11. He was very exposed to 9/11 because Berkshire has a lot of insurance business, so the lost billions of dollars, and he said the mistake was, “That we didn’t focus on our exposure. We focused on our experience.”

William Green (00:25:54):

So the experience was, “Well, we’re unlikely to have a massive terrorist attack in the middle of Manhattan that’s going to cost us billions of dollars, so I don’t need to take that risk too seriously,” but the exposure was actually enormous. So you want to always be asking yourself, “What risks am I exposed to that if things went wrong, I’d be really, really unhappy?” So just to distinguish between your experience and your exposure is actually a really valuable thing.

Clay Finck (00:26:23):

Now you touched on this. I believe that one of the common themes among many of the most successful investors is the level of humility that they have. Could you tell our audience about the role humility played in the lives of some of these investors you interviewed?

William Green (00:26:39):

Yeah. I think it’s natural to have humility when you look at how little we actually know about the future and what could happen. So you think of someone like Howard Marks, who I mentioned before from Oaktree, who I interviewed him originally a few years ago and then I came back and I interviewed him during COVID and he said, “Look, it’s not just that we didn’t know COVID would happen. Most of us didn’t have any idea that COVID could happen. The idea that this disease could come along, shut down everything, simultaneously, around the world, change the way we work, that two years later we still wouldn’t really know where we are going. The vaccines would be developed so incredibly fast that that companies like Pfizer… People were always attacking big pharma as being this sort of emblem of these sort of villains that you would have Hollywood movies about, big pharma came and saved us in certain ways. We couldn’t have predicted much of what’s happened.”

William Green (00:27:41):

So it’s natural to have a little bit of humility, I think in the face of this unknowability and to say, “Well, I don’t know what what’s going to happen. I don’t really know what could happen, so let me tread a little lightly. Let me protect against my own stupidity, against my own fallibility, against my own ignorance. So that means you don’t want to put thing in one asset class. You don’t want to put everything in one country. I don’t think you really want to put everything with one brokerage firm or one bank. You want to say, “I don’t know what could happen, so let me just spread it around a little bit, not have all my eggs in one basket.”

William Green (00:28:22):

I remember interviewing Sir John Templeton and who I write about in the second chapter of the book, he said to me, “Look,” he was, I think, 86, at the time I interviewed him, brilliant guy, guy who had come top his class at Yale while working pretty much full time and then became road scholar at Oxford, probably the greatest international stock picker of the 20th century.

William Green (00:28:44):

And he said to me he used to track investment decisions and see whether they turned out well and he said, “Over the course of my career,” he said, “I’ve probably made half a million decisions,” and he said what he figured out is a third of them were, as he put it, “the opposite of wisdom,” which was a polite way of saying, “I was dead wrong.” So if you think of someone like Templeton, who is about four times smaller than I am, being wrong a third of the time, that’s pretty worrisome. It means you’ve got to hedge against your own tendency to be wrong.

William Green (00:29:17):

There was a guy interviewed for the book, a guy called Jeffrey Gundlach, who’s noticed the king of bonds, who again, manages something like $150 billion, and he said to me… this is not a guy with a small ego. This is a guy who knows how smart he is and who’s been incredibly successful, another billionaire. And he says to me, “Look, I’m wrong a third of the time as well. So,” he says, “what I’m always saying is what’s the consequence if I’m wrong?” And that struck me as really an incredibly profound question, both in investing and life, to say, “Okay, I believe I’m right.”

William Green (00:29:50):

Let’s say I’m totally convinced that Bitcoin is going to go up or that Solana, or any of these other cryptocurrency is going to go up. Let’s say I’m totally right and I can just hang in there for 10 years and it’s going to dip, it’ll fall 50%, multiple times, 80% once in a while, but I know that it’s going to be great in the long run. Yeah, but what’s the consequence if I’m wrong? Same thing with Tesla, what’s the consequence if you’re wrong?

William Green (00:30:18):

I think that’s a wonderful attitude to have in every area life. It’s a bit like… I have a son Henry who’s 23 and I remember when I was teaching him to drive, which is a joke because I got taught to drive by my wife when I was about 25, so I’m not exactly a master of driving, but I remember talking to him about Buffett’s idea of the margin of safety, which he got from is teacher Ben Graham, and just saying, “Henry, there are blind spots. There’s a spot where you think it’s safe to change lane, but you don’t really know. Instead of just checking in your mirror, just glance around, just look to see if you’re okay,”

William Green (00:30:57):

And likewise, there’s a guy I write about in the book, Fred Martin, who had an extraordinary experience of our own fallibility, of how little we know, when he was working on a ship during the Vietnam War and right before he started… I think he was the youngest guy cleared for command of a ship in the Vietnam War, he was something like 24 years old and when the captain was asleep at night, about 240 people’s lives were in his hands. And another ship in the U.S. Navy had just… maybe it wasn’t the U.S. Navy, another allied ship had just been destroyed because these young lieutenants had turned the wrong way without looking, and they were tired, really prone mistakes and something like 70 or so people lost their lives, if I remember rightly and he said, “This wasn’t part of our training, to go out on the bridge and just look and see, ‘Am I right to be turning at this point?'” and he said, “It should have been part of our training,” and when he ended up becoming an investor, he saw exactly the same lack of vigilance among investors.

William Green (00:32:05):

Very early on, he was investing in the early ’70s and, and it was during he Nifty Fifty bubble where everyone said, “These stocks are just going to go to the moon. You can pay any price for them, they’ll just be amazing.” And there was one company he was studying and he goes to his boss and he says, “I don’t see how they’re ever going to make any money, and I don’t see why everyone’s buying it,” and his boss said to him, “Oh, don’t worry, Fred, it’s a faith stock,” and he’s like, “What do you mean a faith stock?” They’re just betting on it blindly on the faith that it’s going to continue going up and he said, of course, it got absolutely destroyed, and most of those people who were working on Wall Street betting blindly in that way, ended up getting washed out or washed out of Wall Street. And here’s Fred Martin, who 40, 50 years later, is still an incredibly successful investor because he was vigilant all along. So just this idea of always maintaining a margin of safety, of always having the humility to say, “Yeah, I may be wrong, and what’s the consequence if I’m wrong?”

William Green (00:33:10):

I remember having a bet once many years ago, I was at Eaton High School in England, which there are all these people like Boris Johnson and David Cameron went, and I was obsessed with the movie Withnail and I and I’d watched it maybe eight times. I remember having a bet with a friend of mine about the name of one of the actors. It was the guy who played I in it rather than Withnail and there were all of these brothers, I think they’re the McGann brothers, if I remember rightly. I can’t tell you how certain I was that I was right. I thought the person I was betting with was a total moron and I was wrong, and I had watched that movie about eight times, and I knew so much about that movie and I was still wrong. It was one of those things where you’re just like, “God.” The brain is a glitchy thing. We don’t really know what we don’t know. So you just have to go through life, I think, with a little bit more humility about your own limitations.

Clay Finck (00:34:02):

That’s brilliant and I definitely agree that many millennials should just be aware of history and have the humility to recognize that being in a 12 year bull market is not normal and if history is any indication, then a downturn is really inevitable at some point where so many speculators just get totally wiped out.

Clay Finck (00:34:23):

I also agree that the majority of people should have a diversified approach and William, the more I learn about financial markets and investing, the more I’ve realized just how complex these subjects actually are. I’m curious, what are the biggest lessons you’ve learned from these investors in simplifying your investment approach?

William Green (00:34:43):

Yeah. I ended up writing a whole chapter about the power of simplicity because it occurred to me gradually that the world is such a complex and confusing place that if you can come up with a few simple principles that are approximately right, that are approximately true over time, both in investing and life, it’s incredibly clarifying and it can help you get through the fog. This came through to me very powerfully in a bunch of different interviews. One of them was with a guy called Will Danoff, who managed something like $200, $250 billion, immensely successful investor, probably the most successful fund manager at Fidelity, which is one of the biggest fund companies in the world, the most successful investor of his generation. This guy had beaten the market over decades.

William Green (00:35:36):

So I went to Boston to interview him and I was saying, “So what’s the secret?” And he said, “Stocks, follow earnings,” and I’m like, “What do you mean? That’s it?” and he’s like, “Yeah, like over time if a company’s earnings are going to double over the next five years and probably approximately the stock is going to double too,” so he’s like, “So I’m just constantly looking for companies that are going to continue to grow for a long time.”

William Green (00:36:06):

So he opens up his notes, he’s got these shabby old notes of interviews with thousands of different companies, the interviews, hundreds of different CEOs a year and he takes out his notes from a conversation that he’d had with Howard Schultz, the founder of Starbucks, literally, I think a week before the company went public, and he’s like, “Look, they had a few dozen, I think, cafes back then,” or maybe it was a hundred or 200 or something.

William Green (00:36:32):

And he’s like, “But look, the opportunity is enormous,” and you could see that it didn’t cost very much to set up a new Starbucks café, and the returns on them were incredible, the return on investment. So you could see that this engine was pretty big, that it was a huge market potentially because you knew how many cafes there were in Italy and you could see the high investment returns.

William Green (00:36:58):

He then shows me the chart for Starbucks over the next 20 years or something and if I remember rightly, the stock went up something like 28% a year or something and the earnings were very similar. And then he shows me the earnings for the S&P 500, and again, the stock return and the earnings were so similar. So it was such a simple insight and you want to get this secret sauce. You want to think, “Oh, there’s something really profound and complex here,” but actually no, stocks follow earnings.

William Green (00:37:32):

Likewise, I go interview this guy, Joel Greenblatt, who is one of the greatest value investors of all time, a guy who made 40% a year for 20 years, which means you basically turn a million dollars into, I think, $836 million, incredible investor. And I say to him, “What’s the secret?” and he says, “Value of business and buy it for much less than it’s worth,” and he said, “That’s it, that’s all you’re doing.” He said, “If, for example, I own a super a market in the Midwest and suddenly there’s a credit default crisis in Greece or something and the news is full of the fact that there’s this credit crisis. Why do I care? I own a supermarket in the Midwest.” He’s like, “It’s not relevant. So,” he said, “it’s just really simplifying for me to know that I just have to value businesses and buy them for less than they worth.”

William Green (00:38:21):

So I start thinking about this principle of simplicity and I start to realize actually it runs through every area of life and you think about it in something like the spiritual world or religion, you think of all of these faiths saying, the golden rule, “Love thy neighbors as thyself,” all the rest is commentary, just love they neighbor as thyself, just become a kinder, more loving, more compassionate person. It’s kind of it. Or you think of science where they talk about Occam’s razor, which is saying that usually the simplest solution is the best of all. So you’re always looking for simple solutions. You see it in business again and again. So think of something like Apple, where Steve Jobs was obsessed with Zen Buddhism. So he takes this very simple, elegant aesthetic from Zen Buddhism and you see it in the design of Apple computers or iPhones and the like, there’s a kind of simplicity and elegance.

William Green (00:39:19):

You see it with something like the Google homepage, where you would just have this kind of [inaudible 00:39:25] you plug a search term in, and this becomes one of the most successful businesses in history. So this idea of keeping things simple becomes really powerful, both in investing and life. So I think what you want to do is you want to say, “Okay, the world is very complex and I know what’s going to happen in the future, but I believe that these principles that I’ve identified are more or less true, at least on average over time,” and so for Joe Greenblatt that means, “I’m going to buy companies that are on valued. That’s the most important thing.” For

William Green (00:39:58):

Howard Marks, likewise. Howard Marks says, “The single most important thing is how much optimism is priced into this asset. Is there too much optimism or too little?” So he said, “The thing that’s going to really determine whether your returns are good is, is this thing cheap? And if it’s cheap, you’ll end up doing well, and even if it’s a fabulous company, you don’t want to overpay because you’ll pay the price for having bet on something that’s overvalued.”

William Green (00:40:25):

So that’s a very simple principle. Something like the margin of safety that we were talking about, which is basically buying things at a discount, their intrinsic value. It’s a very simple principle that’s incredibly robust over time. What makes it difficult is that these simple principles aren’t true all of the time. So sometimes you can do something like overpay massively for a company that you don’t understand or for an asset that you don’t understand and you’ll actually do brilliantly, or you look at your neighbor or your idiot cousin, who’s just made a 1000% of some dumb investment that they didn’t understand and you start to be like, “God, should I do that too? Maybe I should get carried away too.”

William Green (00:41:08):

So it’s really easy to get knocked off your core principles, but I think if you have a set of principles that basically make sense, over time you’ll end up doing great, but you have to identify what they are. So that’s what that chapter on simplicity is about, is saying, “These are the things that I believe are approximately true over time.”

Clay Finck (00:41:30):

Let’s dig a little bit deeper on that idea. Now, many people that live busy lives, they have a job, they might have a family and other things going on, the best approach for them might be to just buy index funds, given the pure simplicity and the difficulty of picking individual stocks that are going to perform well over time. So I’m curious what your take is on how might a younger investor know if they have what it takes to pick an individual stock or if they should just take the more simple approach of index fund investing.

William Green (00:42:05):

Yeah. One of the great lessons for me of working on this book and interviewing all these great investors, was to see that I’m not them, that I don’t have the characteristics that someone like a Joe Greenblatt or a Charlie Munger or Howard Marks has. One of the things that Charlie Munger says, he said, “If you are five, three, you don’t want to pick basketball as a career,” and so you have to play games that you can win. And this is one of the most consistent lessons that I’ve found from all of the great investors, is they stick with games that they can win.

William Green (00:42:40):

So for me to look at these great investors and say, “They’re playing a game that they’re optimized for. I’m not really optimized for that game. So what should I do?” That’s actually very valuable, that admission of my own incompetence is really helpful, and it’s not just incompetence. Part of it, of course, is a matter of competence. It’s saying, “Well, do I have the knowledge that it takes? Do I understand the rules of the game? Do I have the financial tools? Do I understand accounting?” things like that.

William Green (00:43:16):

There’s a guy called Joel Tillinghast, who’s a great investor, very successful over decades, who said to me, “You need to stay away from your own ignorance.” So you need to be aware of your ignorance. Do you have the knowledge to win this game? So that’s critical. You wouldn’t expect to be an incredibly successful basketball player without the training, but the knowledge is kind of attainable, right? If you worked hard enough to study accounting, to read massive annual reports, you could attain that knowledge.

William Green (00:43:45):

But then there’s this temperamental side of it, which is really critical. Do you have the ability to diverge from the crowd? That’s a really important question, because if you think about it, to beat the market, you have to be different from the market, you have to diverge from the market. You have to think for yourself, very independently, question what orthodox opinion is and say, “Well, is that right?” and this is something I’ve seen again and again, with the great investors.

William Green (00:44:14):

You look at someone like Sir, John Templeton, who we mentioned before, he did this extraordinary thing during World War II, when he was a relatively young investor and totally unproven where Nazi Germany had literally just invaded France and the stock market was just crashing, and it seemed like Europe was entirely going to fall to Nazism and it seemed kind of like the end of the world, and the last thing that you wanted to do was load up on stocks as the market is crashing and the world is coming to an end, and here’s this young investor, says, “Well, no, that’s totally wrong, that actually the war is going to drive up certain stocks because suddenly there’s going to be immense demand for everything. All of these companies that have been struggling are suddenly going to have enormous demand to produce things during the war.”

William Green (00:45:02):

So he looks at something like 104, I think it was, of the most busted stocks that were all trading at under a dollar and he buys all of them and he calls his broker and he says… I think it was something like $100 at the time, “Can you put $100 in each of these companies?” And the broker says, “Well, that’s a strange request. We’ve done it for you, but 37 of the companies are in bankruptcy, so we didn’t do that.” And Templeton says, “No, I want to buy those too.” So he ends up making five times his money over the next five years as these companies that nobody wanted to touch, that were totally toxic, recovered and came back from the dead.

William Green (00:45:40):

So that’s a kind of extreme example of the temperament that you need to be willing to question orthodoxy and say, “Everybody else is doing this and I’m totally comfortable stray from the crowd.” For me, I’m a writer by trade and writers tend to be outsiders, we tend to question conventional opinion, we’re difficult and ornery by nature. We always disagree with everyone and we’re kind of opinionated. So I’m contrarian in that way, but I’m kind of fearful. I’m a little bit anxious. I worry about what could go wrong, which is also something I think that probably is pretty typical of journalists, we’re always looking at the dark side of things, we always think the world is about to end. Whereas if you think of a venture capitalist or a young entrepreneur, they always are like, “No, no, everything’s going to be fantastic.” Journalists tend not to be very good as entrepreneurs, I suspect, for that reasonable or venture capitalist with some exceptions.

William Green (00:46:34):

So for me, maybe I’m contrarian enough to be a really good investor, maybe I could figure out how to understand the numbers and how to read the balance sheets and stuff, but I’m a little too fearful, a little too anxious. So that means I’m probably well positioned to survive as an investor, get through really difficult periods because I’m going to be conservative enough to get through them. It’s going to be hard for me really to beat the market as someone who’s that fearful, I think. So just having this kind of self-awareness, how you are wired, whether you are able to be independent, whether you are interested enough and passionate enough to do the work.

William Green (00:47:12):

One of the things Munger says is, he’s never succeeded at anything that he wasn’t really deeply interested in. I think that’s true. You want to play games, not only that you are naturally talented at, but actually things that you are deeply interested in. So when you are, when you’re picking a career or when you’re deciding whether to manage your own money, you want to focus on stuff that you would almost do whether you were paid or not. Like I’m perfectly happy to read constantly and think constantly and talk constantly. Those are things I’m kind of built for, but I don’t really want to sit in a room quietly with the blinds closed, like Warren Buffett, reading annual reports, it’s actually just not what I’m built for. So just that self knowledge I think is really valuable.

Clay Finck (00:48:00):

It reminds me of Buffett, always mentioning how he tap dances to work every day and he just loves what he does and is so passionate about it. Then when people hear about what Buffett actually does all day, they realize there’s no way they could talk themselves into reading financial statements and reports all day. When I’ve read that bit in your book about Sir John Templeton and how his broker was trying to talk him out of the decision he was making in buying those distressed companies, it’s just incredible the level of temperament and conviction that truly requires.

Clay Finck (00:48:34):

Now you’ve experienced firsthand the value of having conservative finances and having high levels of financial security. I also loved reading this piece in your book about Bill Miller. Could you talk to our audience about Bill Miller’s story and why maximizing investment returns might not be the best strategy?

William Green (00:48:55):

Sure. Bill Miller’s one of the most brilliant investor I’ve encountered and for listeners who don’t know him, well, Bill famously beat the market for 15 years running while he was managing a fund called Legg Mason Value Trust, and this is absolutely unprecedented. The idea that you could outperform the market every year for 15 years, is kind of like defying gravity. It was a lucky trick to some extent in that you had to have all of the stars aligned so it would be January to January, but it’s still an astonishing feat. So here was a brilliant guy, who I wrote about many times over many years interviewed. I think I’ve interviewed him somewhere between 80 and 100 hours over the last 20 or so years, one of the most thrilling minds I’ve ever encountered.

William Green (00:49:43):

So when I saw that he could kind of walk on water I wrote about him after 9/11, I traveled with him for a couple of days and the market’s imploding and Bill is betting hundreds of millions of dollars, beaten down stocks that everybody else is too scared to touch. I just see this guy who’s an extraordinary gambler in a way, brilliant probability machine. He’s looking at things that terrify everyone else and he’s like, “No, no, the odds of the odds of this working out are great. I’m going to be fine.” So back then, for example, when I was writing about him for Fortune, back in about, I guess, 2001, most people thought that amazon.com was going to go bankrupt. Amazon had fallen from $90 a share to about $6 a share at the time, which was hard to think of, $6 a share and Bill had bought 15% of the company.

William Green (00:50:38):

And I saw him at an event get pillared for this by a bunch of his peers in the value investing community, were like, “This thing’s going to go bankrupt,” and he says, “Look, I may be wrong and if I’m wrong I’m going to lose 100% of my money, and if I’m right, which I think I am, I’m going to make 50 times my money.” So Bill was so massively right about Amazon that he’s ended up being individually, he told me not long ago, that he’s the largest individual shareholder of Amazon whose surname isn’t Bezos other than now McKenzie, who was married to Jeff Bezos and now isn’t called Bezos.

William Green (00:51:15):

So Bill to me is the epitome of an incredibly smart, brilliant contrarian investor, and yet when it came to the 2008, 2009 financial crisis, Bill does exactly the same thing where he goes against the crowd. He assumes that everyone is wrong, he bets on all of these financial stocks that were imploding like Countrywide Financial, Merrill Lynch, AIG, Lehman Brothers, Bear Stearns, all of these things that in a sense were not dissimilar to what Sir John Templeton had done during World War II, betting on the things everyone hated most on the assumption that actually, if the world didn’t come to an end, they were going to bounce back the most.

William Green (00:51:59):

And you know what happens? He’s totally and utterly wrong. Bill Miller gets crushed and for once being a contrarian turns out to be an absolute disaster and those companies get killed and his flagship fund, the one that had beaten the market for 15 years running, loses 55% just in 2008 and his smaller fund Legg Mason Special Situations or… I can’t remember the exact name, ends up Legg Mason Special Opportunities, I think, lost 65% in 2008.

William Green (00:52:33):

So you think of that, two funds run by this genius guy, one of the great contrarian value investors of all time, lose 55% and 65% in 2008 alone. So all of these investors who’d believed in the genius of Bill Miller bail out at the worst possible time, abandon this brilliant investor because they can’t handle that kind of volatility that comes with being a contrarian. So his assets under management went from something like $77 billion to, I think, $800 million at the lowest. So he’s then had this astonishing recovery over the last 12 years. He’s been one of the greatest performers over the last 12 years since then. If you think about the moral of that story, if someone as brilliant as Bill Miller can be as wrong as he was, that again makes you realize just how flawed we are, just how capable of being wrong we are and just how careful we need to be.

William Green (00:53:34):

So Miller said to me afterwards, he’s extraordinarily candid about what went wrong and one of the things that he did is he ended up diversifying more after that meltdown during 2008, 2009 because he said to me, “It’s an admission that I didn’t realize how catastrophically wrong I could be.” And he said, “One of the things that happens when,” as he put it, “you’re right, right, right for so many years, is that even if theoretically you believe in the importance of humility and you know that you can get it wrong,” He said, “you start to actually believe your own publicity. You’ve just seen again and again that you’ve outwitted the crowd, and so,” he said, “some of that seeps through and you end up taking too much risk.”

William Green (00:54:18):

So for me, this is again, a really important reminder that you want to focus on staying in the game, you want to focus on avoiding ruin. You want to focus on saying, “If I’m wrong, what’s the consequence?” And for Bill Miller, the consequence was having an enormous number of shareholders bail out at the worst possible time so that they didn’t actually benefit from the rebound when he came back from the dead. The consequence also was that about 100 people at Legg Mason lost their job because, as he put it, “I screwed up,” and that that was deeply painful for him, it was a brutal period. So I think you’re always having to think, “If I’m wrong, will I survive? Will I stay in the game?”

William Green (00:55:08):

And so [inaudible 00:55:09] brilliant and who came from a very poor background anyway, he was the son of a taxi driver and he said, when he was a kid for him to go to Burger King for his birthday was an incredible treat. So he was like, “I don’t really care that much if I lose my money.” He said, “I’ve been without money before. I’m okay, but,” he said, “it was torture to lose money for these shareholders and torture to have people lose their jobs,” because of him.

William Green (00:55:34):

So I think just always thinking about the primary importance of avoiding ruin and staying in the game becomes really key and when I think of my own biggest mistakes over, gosh, 30 years now, I guess, 30-something years of being an investor, the biggest mistakes were when I overreached. It was when I got jealous of other people because they were making great returns and I thought, “God, they’re all gunning it and are being rewarded. Let me take a bit more risk.” I remember for example, investing in, I think about three different private companies run by friends of mine, that were all… there was one that had incredible prospects, had amazing technology and Goldman Sachs, the most illustrious bank on Wall Street, invested in this private company at something like 40 times the valuation that I’d invested to get into it, and I felt so smart and so exclusive. I was on the inside track and it really appealed to my vanity.

William Green (00:56:36):

And then, I don’t know, I lost almost all of that investment. With all three of those private companies I lost. I think the best return was something like a loss of 85% and when I look back at the really boring stuff that I did, where I just quietly tucked it away in a sensible well run fund, and then just kept adding to the pot, those things have worked out brilliantly. So in a way it’s really hard because you don’t realize this until you look back after many years and you realize that the conservative things you did, where you didn’t get blown out of the game, were the ones that actually worked out best.

William Green (00:57:16):

It’s difficult to keep your head and invest in this conservative way that’s more sustainable because you read all of these articles about the outliers who had incredible lightning strikes. So you’ll read about Tesla or you’ll read about Amazon and you’ll think, “God, well if I get Amazon or I get Tesla, I’m done. The whole thing is done, I won the game,” and that’s true, but what if it turns out to be pets.com, which was one of the hot stocks of 1999 of that dotcom bubble that went under? There were so many tech stocks along the way that were hot, that died. So I think just that awareness that you want to stay in you game over many years, that’s one of the most valuable lessons I think I’ve learned.

William Green (00:58:09):

To go back to that guy, Fred Martin, the guy who talked about just look where you are turning when you are on the ship. He said, for example… one of the things he’s done is he never puts more than 3% of his portfolio in any stock when he purchases the stock and he lets them grow, he tends to own stocks for 10 years minimum on average, so he has a relatively concentrated portfolio, but he’s like, “Oh, I own about 45 stocks typically.” So that’s diversified enough that he’s survived for more than 40 years as a fund manager, but it’s concentrated enough that he’s beaten the market by a mile. So there’s always this tension between out-performance and survival, it’s a difficult balance to get, and I would say it’s more important to survive than to outperform. So instead of trying to optimize, just ask yourself, “Am I overreaching and do I need to overreach?” Maybe you don’t need to overreach.

William Green (00:59:08):

For me, I don’t need to have tens or hundreds of millions of dollars to have the kind of lifestyle that I want to have, so I don’t need to take wild, crazy risks. I want to be financially independent, financially secure, able to do the kind of work that I like to do, not have to work for a boss I dislike, I don’t need to have a private plane. So if optimizing would mean that I could lose my home or not be able to pay for my 20 year old daughter to finish last two years of college, that would be really dumb.

William Green (00:59:44):

So just play your game, don’t think about how to compete with other people with some incredible lightning strike, especially because people also lie about their returns. They tend not to talk about the things that went wrong. It doesn’t give me a lot of play pleasure to tell you about my three private companies, all of which went more or less bankrupt. It makes me look like a fool, but I think it’s worth looking really honestly, at those things and saying, “Well, that’s not a game I’m really equipped to play. So I’m better off playing a more conservative game that plays to my strengths.”

Clay Finck (01:00:22):

Yeah. If you listen to some investors, you probably think they had 100% hit rate on some of these stocks and you just had so many good timeless investment principles in that bit there, and one, I would like to reiterate or restate my own words is the more sexy an investment is, the more skeptical you should probably be about that investment because you know that you have something like, say an index fund strategy that’s tried and true and proven and you know is going to work out. So if there is something that appears to be a bit sexy and has like a ton of upside, then you better be pretty convinced that it’s going to work out or limit your exposure and limit your risk by having a smaller position size.

William Green (01:01:11):

Yeah, exactly and sometimes really the most mundane things turn out to be really beautiful. There was one investor who talked me about the things that he had done during COVID when the market was melting down and one of the things he did, all of these restaurants were closed, so the restaurant industry was getting crushed. So he used the opportunity to buy a stake in a company that made ice machines for restaurants. How boring and mundane could that be, but it’s kind of brilliant because it’s a good business, there are always going to be restaurants. You know, that most restaurants are going to go under, but there are always going to be restaurants and they’re going to need ice machines and you could get it cheap at the time.

William Green (01:01:57):

Or think about someone like Joel Tillinghast, who I talked about before, who was the guy who said, stay away from your own ignorance. He’s always refused to buy biotech stocks, which are incredibly hot and have done unbelievably well for people who hit the jackpot with them. But he said, “They make me crazy because they’re so volatile and you can’t really predict what their earnings are going to be. There’s not really any visibility there about the future.” So you know what his single most successful stock has been over all these decades? Monster beverage and when I last spoke to him, it had gone up a thousand fold, literally a thousand fold and I bet if we looked again, it’s gone up even more.

William Green (01:02:35):

I don’t know, you think you should be buying Amazon and Tesla and all of these beautiful, sexy stocks, and it’s like, “Yeah, maybe,” but maybe you should be buying an ice maker or maybe you should be buying a uniform rental company. It’s not really about the glamor of the thing, it’s about the value of it. Are you able to buy lot of value for less than it’s worth? So it all comes down to price really, it all comes down to the value. Can you buy it at a discount to what it’s worth and that requires a degree of discipline, not getting carried away.

Clay Finck (01:03:16):

Absolutely. I would like to close out episode with a quote from the great Charlie Munger, “Take a simple idea and take it seriously.” For listeners of the millennial investing podcast what is one simple idea that you’d like to share with them that they should consider implementing into their own lives?

William Green (01:03:36):

I think if you take really seriously the idea of compounding in multiple areas of your life, it’s a very profoundly important and powerful concept. So think of compounding first in the most obvious way, which is investing. If you look at compound interest tables and you think about what happens when you make 10% a year without catastrophe over many, many decades, the results are so astonishing that you start to realize, “Well, actually I don’t need to be gunning the engine and trying to make 30% and risking going bankrupt.” You just want to stay in the game, have steady returns for a long period of time. So compounding money over a long period of time is very powerful. And also your expenses are compounding against you. So if you keep the expenses low, your trading expenses, your transaction costs, your tax bills, if you keep those low and you live within your means and you compound money steadily over many years, you become extraordinarily rich.

William Green (01:04:41):

So compounding money over time without disaster is an incredibly powerful idea, but then think about the different ways in which you can also apply the concept of compounding. So think about the importance of compounding knowledge over many years, compounding skills over many years, actually over decades. One of the things that Charlie Munger says about Buffett, who’s a relatively young man compared to Charlie Munger. I think Buffett is only 90 or 91, so he’s a mere stripling, a youth. One of the things that that Munger says about Buffett is he’s a continuous learning machine.

William Green (01:05:21):

So think about why Buffett has been so immensely successful. One of the reasons is that he’s been learning like crazy for the last 90 years. So he’s changed the way he invests over decades. He started off buying busted companies, what he would call cigar butts, things that were discarded that were incredibly cheap. Then under Munger’s influence ends up buying better companies, then becomes more international, stops just buying companies in the U.S., it becomes international, then goes into industries that he never believed in investing in like railroads that have becomes hugely profitable. And then always said, “You shouldn’t invest in technology,” and ends up in his 80s making investment in Apple that turns out to have been, in dollar terms, the most lucrative investment of his entire career. So there’s a guy who’s a continuous learning machine, who just keeps compounding his knowledge. That’s a really a important idea. You want to be constantly compounding your knowledge over many, many years, over decades. T

William Green (01:06:24):

hen you think of compounding with your habits. So think about, I wrote about this in a chapter on high performance habits. If you do simple things in life, whether it’s reading consistently or exercising consistently or eating well, they seem like nothing on the day. If you meditate for, say, 12 minutes on the day, it doesn’t really have a huge impact. Maybe it calms you down, maybe it settles you a bit, but if you meditate for 10, 12 minutes a day for 10, 20, 30 years, the impact is astonishing. So, again, it’s this compounding over many years.

William Green (01:07:02):

I interviewed Ray Dalio the other day. Here’s a guy who’s literally, he’s probably the most successful hedge fund manager of all time, he’s been meditating since 1968. Think of the compounded benefit of 20 minutes a day, 40 minutes a day of meditation for 53 years. That’s astonishingly powerful. So, if you pick a few good habits that you stick with over time, the benefits of them compound,

William Green (01:07:35):

And then think finally of another form of compounding, but maybe the most important of all, which comes from a friend of mine, Guy Spier, who’s been a guest of The Investors Podcast multiple times, Guy talks about the compounding of goodwill. So what Guy does is he’s constantly trying to be generous to people, to be helpful to people, to be kind to people and what I realized in writing this book is that there’s a tremendous compounding effect in your own life when you try over many years to be decent and kind, ethical, do the right thing, help people, that there’s this kind of compounding effect there as well.

William Green (01:08:14):

So I think we probably discussed about four different types of compounding there and I’m sure there are more, but compounding money, compounding knowledge and learning, compounding good habits, compounding goodwill, and kindness. If you just harness that one simple idea of compounding, you really take it seriously, you make it an operating principle, it’s immensely passed. It changes your whole life, and actually when I think about it, when I think about the reason we’re here together, Clay, talking today, it’s literally, I think, because about seven years ago, I published a book called The Great Minds of Investing and Guy Spier who has been a friend of mine for 20-something years and has always been kind to me, always been doing these favors, introduced me to Stig and Preston, who then had just founded We Study Billionaires, at which then was called The Investors Podcast.

William Green (01:09:05):

So they were just starting out and they had interviewed him and they interviewed me over two episodes and then Stig wrote an incredibly kind of my book on LinkedIn, I think, that I didn’t ask him to do just because he’s a kind bloke. Then over the years we’ve just remained really friendly and I ended up, when this book Richer, Wiser, Happier, came out I wrote to Stig about it. I think the very first interview that I did about the book, probably one of the… Yeah, I think probably the first podcast I did was with We Study Billionaires, was with Stig.

William Green (01:09:36):

We’ve continued to talk, become better and better friends and now as a result I met you because now I’m going to be doing a podcast where I’ll be co-hosting a podcast for The Investor’s Podcast Network, and you came to my office because Stig sent you to help set me up with the equipment and you got a wonderful trip out of New York and we all got to become friends too.

William Green (01:09:58):

So you think of the series of events that have happened because of Guy’s kindness seven or eight years ago in introducing me to Stig and Preston and all of these good things in our lives have happened because of that, and that’s all unknowable. You couldn’t have predicted any of that, but this is happening in Guy’s life and my life in so many different ways and wherever I go I see people who Guy has helped over the years, and it’s something that’s very easy to underestimate. If you are behaving in that way, in countless little ways, in all areas of your life, you’re just constantly helping people, the impact of the compounding of good will over decades is actually pretty much overwhelming because your relationships ultimately is what matters most.

William Green (01:10:43):

So if people feel good about you because you’ve tried to be decent and kind, it has an immense impact and you see it with Buffett and Munger. Why do 40,000 people want to go to Omaha each year to see Buffett and Munger talk? It’s because of the way they behave and their relationship is built on kindness and honesty and integrity and fairness. So these values, the way that you behave, creates this kind of knock on effect, it reverberates in all these different ways. So just knowing that good behavior has a long shelf life, that it has this compounding effect,, that’s really profoundly important, I think

Clay Finck (01:11:28):

I love all of that, and I did get to meet you in person and it was an honor to be able to do so. When I was researching your background for this interview, I did see that you interviewed with Stig all the way back in 2015. And I’m like, “Holy cow.” That is like… since that is the very beginning of the podcast, it’s incredible to think you wrote this book, you did interviews with The Investor’s Podcast and you’ve known Stig all of these years and now you’re going to be a host on We Study Billionaires podcast. And it’s just crazy to think about where life can take you when you have that optimistic approach, and you’re taking that long term approach and just being a good person and trying to do good things for the world. It’s just crazy to think about.

William Green (01:12:09):

Thanks. That’s certainly been a huge advantage for Stig I would say, that when I think about why I’ve remained friends with Stig and want to partner with him, he’s a really good bloke. I think we tend to underestimate the benefits of that and I have this term for it in my book where I call it the mensch effect, and a mensch is just someone who’s a good person. I write about Tom Gainer as someone who embodies the mensch effect. He said to me, “Look, I’m kind of a good guy,” and he said, “It’s a real advantage, because,” he said, “there are just all these people out there who wish me well and who are just rooting for me instead of rooting against me.” I thought it was wonderfully honest that he said that because it’s quite hard to say because it’s like saying, “Look how well I behave up and look how kind I am,” but actually it’s true.

William Green (01:12:56):

I remember once. I have this 23 year old son and a 20 year old daughter and they’re both very musical and they love playing guitar and mandolin and singing together and I remember once I posted something on Facebook of them singing a song together. It was kind of touching, it was a musician who had recently died, they covered his song, it was really beautiful. And a few days later I get a phone call from Tom Gainer saying, “I just wanted to let you know how moved I was by that video of your children singing.” Tom Gainer is co-CEO of a Fortune 400 company, he’s got some of the 17,000 employees and he is managing over $20 billion and he bothers to call to tell you that he was really moved by this song that your kids sung. That’s a really lovely person. So I think we tend to underestimate the power of that behavior.

Clay Finck (01:13:54):

That’s just fantastic. William, I really can’t thank you enough for coming onto the show. I really, really appreciate it. Where can the audience go to connect with you and learn more about your book?

William Green (01:14:05):

Well, I’m on LinkedIn. They’re welcome to befriend me on LinkedIn, if that’s the term, connect with me. I’m on Twitter where I’m WilliamGreen72 and please connect with me there. I’m relatively active on Twitter. I have a website, WilliamGreenwrites.com, which has quite a lot of staff on it, resources that are there for free of old interviews and the like or old articles. And soon I’ll be on We Study Billionaires, so you’ll be able to listen in on interviews there. The first one is with Ray Dalio and after that I have a series of interviews with some extraordinary investors. People like Joe Greenblatt, Howard Marks, Bill Miller. So I’m afraid your audience is going to be hearing more of me.

Clay Finck (01:14:47):

That’s a good thing. I’m very excited for all of those episodes is to be coming out over the next year in 2022. There’s an old adage that good artists copy and great artists steel, and the first chapter of your book discusses how to succeed shamelessly by borrowing other people’s ideas, and your book is just such a good example of learning from those investors and trying to implement those into your own life, whether it be through investing or just living a better life. So, William, thank you so much for coming on.

William Green (01:15:20):

Thank you, Clay. It’s been a great pleasure.

Clay Finck (01:15:23):

All right, everybody. I hope you enjoyed today’s episode. Please go ahead and follow us on your favorite podcast app, so you can get these episodes delivered automatically and if you haven’t already done so, be sure to check out our website, theinvestorspodcast.com. There you’ll find all of our episodes, some educational resources we have, as well as some tools you can use as an investor, and with that, we’ll see you again next time.

Outro (01:15:45):

Thank you for listening TIP. Make sure to subscribe to We Study Billionaires by The Investor’s Podcast Network. Every Wednesday we teach you about Bitcoin and every Saturday we study billionaires and the financial markets. To access our show notes, transcripts or courses go to theinvestorspodcast.com. This show is for entertainment purposes only. Before making any decision consul a professional. This show is copyrighted by The Investor’s Podcast Network. Written permission must be granted before syndication or rebroadcasting.


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