13 June 2022

In this episode, William Green speaks with Mohnish Pabrai, a famed hedge fund manager who is not only one of the best investors of his generation but a trailblazing philanthropist whose foundation, Dakshana, has lifted thousands of families out of poverty. Mohnish, the founder of Pabrai Investment Funds, speaks here about the principles that have driven his success and shares lessons he’s learned from his friendship with Warren Buffett and Charlie Munger.

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  • How an introduction from Warren Buffett led to Mohnish’s friendship with Charlie Munger.
  • What it’s been like to hang out with Charlie over the last 14 years.
  • How Warren and Charlie have succeeded by being voracious “learning machines.”
  • How Warren and Charlie differ from each other as investors.
  • How Charlie figured out that Li Lu would be one of the greatest investors of our time.
  • Why it’s helpful to know that even the best investors are wrong a third or half of the time.
  • How a checklist and other “circuit breakers” can help you to reduce your error rate.
  • Why Mohnish and Charlie believe it’s a huge competitive advantage to be ethical.
  • How Mohnish decides whether or not to build a relationship with someone.
  • How he’s changed, becoming more committed to serving others as selflessly as possible.
  • What Mohnish figured out about how to parent his daughters.
  • How the power principles he learned from David Hawkins have changed his life.
  • Why it’s so valuable to be candid and to “bare your soul.”
  • Where Mohnish wants his ashes to be scattered after he dies.


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):
Hi there, I’m delighted to introduce today’s guest, Mohnish Pabrai. Who’s not only one of the smartest investors of his generation, but also an incredible philanthropist. Mohnish’s charitable foundation has lifted thousands of families out of poverty across India, which is where he grew up before he moved to America. When I started working on my book, “Richer Wiser Happier”, the very first thing I did was travel to India with Mohnish, because I wanted to see up close, how he thinks and operates. We ended up spending five days together there, and we even shared a bunk bed on an all night train ride to Mumbai. Part of what fascinates me about Mohnish is that he treats everything in life as a game. His strategy is basically to study the people who are the very best at whatever game he’s trying to win. He reverse engineers, their winning approach, and then replicates it with really ferocious attention to detail.

William Green (00:00:54):
When it came to investing, Mohnish started by studying Warren Buffett and then Charlie Munger, which makes a lot of sense, given that they’re the most successful investment team that ever lived. But what I think Mohnish never imagined is that Buffett and Munger would actually become friends of his and would take him under their wing. Munger in particular has become a really close friend and mentor to Mohnish. I think actually it says a lot about Mohnish’s intellectual brilliance and also the quality of his character that Munger saw something special in him and welcomed him into his inner circle. As you can imagine, Munger is not an easy guy to impress. In this conversation, Mohnish talks in depth about what he’s learned from hanging out with Munger and Buffett and observing them so closely.

William Green (00:01:37):
What I love about our conversation is that we get this really personal account of the values and principles that Buffet, Munger and Mohnish himself live by. All three of them are deeply committed to behaving ethically, and business, and investing, and life, which is fairly one of the keys to their enormous success. The fact that Mohnish is determined to be honest, and to tell the truth also makes him a fabulous person to interview. I hope you enjoy our conversation. Thanks so much for joining us.

Intro (00:02:11):
You’re listening to the “Richer Wiser Happier” podcast where your host, William Green interviews, the world’s greatest investors and explores how to win in markets and life.

William Green (00:02:31):
Hi folks. I’m absolutely thrilled to be here with Mohnish Pabrai. Mohnish, it’s great to see you. Thanks so much for joining us.

Mohnish Pabrai (00:02:38):
Well, William, it’s always fun to hang out with you.

William Green (00:02:41):
So I wanted to start by asking you about Charlie Munger. You’re obviously in a very unusual and privileged position of having Charlie as a close friend and mentor. I think you’ve been friends with Charlie since Warren Buffett introduced you to him back in about 2008. And so I wondered if you could talk about just what it’s been like to hang out with him over the last 14 years, whether there are any particularly memorable experiences you’ve had with him. And then maybe we can get to what you’ve learned from being in Charlie’s orbit over all these years.

Mohnish Pabrai (00:03:09):
Yeah, well, I mean, I have to pinch myself at all of this because, I think on many fronts… I think we, all of us are very privileged to be living in the time of Warren and Charlie. I mean it’d be kind of like living in the time of Newton, Einstein or any of those luminaries we look up to. So, that’s wonderful. And I think in my case, I would’ve never expected to have any kind of a interaction directly with Warren or Charlie. I think that was just not part of the equation. And then of course Warren takes bribes and if you bribe him enough, then he’ll sit down and have a meal with you. And this year, actually I think was the last year that he auctioned off the charity lunch. I’m not sure what it went for, but that’s the last one.

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Mohnish Pabrai (00:03:53):
And so since he was willing to take the bribe and I had bid for a few years. But in 2007, Guy Spier and I prevailed and we won the lunch, and we met Warren in 2008 and I pretty much just expected that to be it. I wanted to just thank him in person and I did not expect to end up with any type of a ongoing relationship. And what Warren did during the lunch is he kind of got competitive when my wife told him, my ex-wife told him that she was her true love in life, really was Charlie. And Warren immediately told her that Charlie’s a very boring guy and I’m really the one or the two way more interesting. And then he told us that he would arrange lunch with Charlie, just so we could see how boring Charlie is and we could compare who was a better lunch companion.

Mohnish Pabrai (00:04:46):
And I thought he was joking, but then the following week, his assistant sent a note to Charlie’s assistant. And that led to actually in 2009 lunch with Charlie at the California club. Actually, the funny thing was I thought that Charlie Munger lunch was way better than the Buffett lunch. And it was kind of like buy one, get run free, which was great. And of course, you get tongue tied and all of this. And I remember Charlie came to that lunch and then he reaches into his court pocket and he pulls out this printout, which has like Google focus, written on it. And it has my US portfolio, the 13Fs [get filed 00:05:22], and he’s looking at the portfolio. And this is 2009, everything has crashed and burned. And he looks at Sears Holdings, if it was in my portfolio and he just shakes his head like that, quite extreme disapproval.

Mohnish Pabrai (00:05:37):
And then I remember I, we probably had some brief discussion on Sears. And the markets were always already closed that day when we met. But the next day I wiped Sears Holdings out of my portfolio, which was a great, I would say, instant take home value from the lunch. And then of course what I also did not expect is that lunch would lead to additional interactions and a friendship with Charlie. I never expected that. And then I think a few years after that, I became a substitute bridge partner of his. Every Friday afternoon, Charlie would play bridge at the LA country club with his friends. And they started inviting me when one of the old guys couldn’t make it or couldn’t get out of bed or something. So usually I’d get to know on Thursday night or Friday morning that we have a slot. And I’d say, yeah, you don’t need to give me notice I just drive over.

Mohnish Pabrai (00:06:29):
Those afternoons were really amazing because we would start with lunch at the LA country club. And I’d be sitting there at this table for four and just sitting across from me would be Charlie Munger and Rick Goran. And I’m looking at these two guys, historic figures and all of this. And I would ask them all these questions about the deals in the 60s and the early days when they were working at the Pacific Stock Exchange. And any type of lunch or bridge or dinner with Charlie is always very entertaining. I mean, it’s very educational, but it’s very entertaining.

Mohnish Pabrai (00:07:06):
One of the things that happened the first time I met him to lunch was, as he was talking, I heard the “F” word. And I’m thinking in my head, did God just uttered the F word? And as I’m processing that in the, my head, I hear another F word. Okay. And there were a number of F words during that meal. And then I realized after that every time I met God, the F word just flowed freely. And I’m actually surprised that at the Berkshire Meeting or the Daily Journal Meeting, there’s no F word because it’s so natural the way he speaks that I have never seen him on a interaction with me where there wasn’t colorful language, that has never happened.

William Green (00:07:48):
Is it just him being emphatic or exuberant?

Mohnish Pabrai (00:07:52):
I think he’s with friends and I think he’s using it the way we use it. He uses to make a point.

William Green (00:07:58):
Is there something that’s changed in the way you operate in the world from actually being up close with Charlie all these years? Like, has he changed,

Mohnish Pabrai (00:08:06):

William Green (00:08:06):
The way that you think and behave?

Mohnish Pabrai (00:08:08):
I would say that the greatest learnings I’ve had from Charlie have not come from … Well, he said put some pretty amazing things to me. So there’d be, it’d be up there. But I would say that besides some of those things he said to me, which have been transformational for me, most of my learning from him on the one-on-one interactions have come from observing him. Not what he’s saying, but observing how he functions and observing how he is, on a daily structure and how he arranges his life. And the interaction with his grandkids or interaction with his kids or his daughter-in-law or his man servant and all of that. So I think that when I just observed Charlie with his friends and family and just with himself, when he’s reading or something, those have taught me a lot more.

William Green (00:08:56):
Is there stuff that you’ve consciously cloned from the things you’ve observed in the way he behaved? Cause I remember years ago realizing that when you replied to emails, often you would write a couple of words in pen at the top on a printout and have it faxed. And I was like, that’s what Charlie does. Like, so.

Mohnish Pabrai (00:09:10):
Yeah. And actually I probably took that from him because I had received notes like that from Charlie much before 2009. I’d sent something to him or something to Warren, Warren would sometimes send it to him and then I’d get a note back and that sort of thing. And Warren’s notes back many times would be a letter and what not, but Charlie was always a scribble and whatever. But I think that the biggest thing I took away and it’s just so daunting and I’m still daunted by it is, he’s set up in his all, in this kind of lazy boy type easy chair. And on both sides of him are high tables, relatively large tables. And there’s a lot of high powered lights behind him cause his eyesight is not that great. But the best analogy I have is that there’s a big stack of books on one side and other reading materials, and a bar, and value line, what not.

Mohnish Pabrai (00:10:01):
And there’s a big stack of books on the other side. And Charlie’s like an assembly line, devouring. I mean, there’s a engine of these things running through from the unread pile to the red pile. And I would estimate that he’s reading more than 500 books [inaudible 00:10:18]. I think it’s more than one a day. Now, he doesn’t read the way we read, he’s skimming a lot. And he’s especially skimming a lot when he’s not, he finds the author rambling or whatever. And so he’s trying to get the nuggets he wants. And they’re in such a wide range. And usually I’d sometimes go in on a Saturday or something to have with him. And he’d be reading something about global warming, some book on global warming or climate change or something. And then they’d be a discussion on, and sometime he would be reading about the Chief of Staff for President Roosevelt.

Mohnish Pabrai (00:10:54):
And then we’d have a discussion on that. And this… I forget the name of the guy who, maybe Admiral. And this guy basically was… Roosevelt really trusted him and Roosevelt trusted very few. I mean, he was very, very… he had lot of his cards close to his chest. But with Leahy Admiral, Leahy, he had complete trust in Admiral Leahy. And Admiral Leahy was kind of, this guy who was a frat boy, he liked to have his drinks and whatever. But Roosevelt knew that he didn’t have another agenda, and that he was loyal, and that he could get candid opinions and such from him. So Leahy, which most people don’t realize willed enormous power, this massive amount of power in the Roosevelt administration. And so there was a book on Leahy, and then I read that book later. These subjects would be all over the place sometimes I’d go in and he’d be designing the dorms, right.

Mohnish Pabrai (00:11:49):
And then he’d be stuck on some subject and he’d say, “what’s the height of a pickup truck?”. And I’m like saying, well, let’s go ask God Google. Like I don’t know that, because he was trying to figure out how high the parking lot should be and all this kind of stuff. So I’d get all these kind of weird questions from him on all of that. But there’s also… They had so much fun, Warren, Charlie, and Rick Goran. And I remember that one time Rick and Charlie were sitting across from me at the LA country club. And they started talking about, like I said, “tell me about one of your deals in the 60s?”. Because they were buying whole companies as well then. There was this kind of Maverick entrepreneur in California, who had come up with an additive that you could add to your engine in your car.

Mohnish Pabrai (00:12:36):
And it would plug any leak. Like if the engine developed a leak, this thing would basically kind of mush over it and your leak would go away. Right. It was kind of magical. And this guy used to go to repair shops with his gun and shoot a hole in the engine block, in front of the mechanic. And then pour his liquid and then say, now put the oil in and nothing would come up. And that’s how he built his sales with… So anyway, Charlie and Rick Goran got kind of interested in this company and the guy was a scattered brain entrepreneur. He passed away, kind of untimely passed away. And they were interested in acquiring the business. And the business had a lot of debt. So what they did was they pretty much bought off all the bank debt and all the debt on the business. In effect, they actually had control, with the equity was worthless. But the guy had a widow and a mistress. And the widow did not know about the existence of the mistress till he died.

Mohnish Pabrai (00:13:40):
And he made the mistress the executor of his will. And he gave some of the assets to the widow and some to the mistress. And of course the mistress was, I mean, she was a range of emotions, you can imagine. And Charlie and Rick said that what they wanted to do was, they wanted to make a small payment to both the widow and the mistress for the business, even though they didn’t have to. Just to basically have their blessings that it’s okay, you can take it. Right? And the wife was, had absolutely no interest in cooperating on anything to do with the mistress. And so was the mistress. They were like both on daggers drawn and Charlie wants to get this deal done and it’s not happening. Charlie was telling me that he invited the mistress to the California club to have lunch with her.

Mohnish Pabrai (00:14:32):
And he wanted to smooth her feathers and just get her to be cooperative enough to just get this part taken care of. And she was a blonde nurse with a large, rich, large breast. Okay. And she came to his lunch. Now the California club is a very conservative place. And that’s where I met Charlie for the first time, actually at lunch. It’s an ornate dining room with all this etiquette, you wear a jacket and all that stuff, its a private club anyway.

Mohnish Pabrai (00:15:01):
So he invited to lunch. She came straight from work. And so she’s in her nurse’s uniform, which is about three sizes too small for her. Okay. And so she sits down to lunch with Charlie and all the other members who are looking at Charlie think that he’s having lunch with a porn star. So anyway, and Rick and Charlie they’re sitting in front me, this is gone. And [inaudible 00:15:24] and you know, this is the kind of stuff we’re talking about. Anyway, Charlie was able to calm her down, get her okay. Then he met the wife and got them to be just corporate enough to get that deal done. And they both got a little bit of money and they moved on from there. So anyway, these guys, these guys just had a blast on so many deals and [crosstalk 00:15:44] so many things that they were doing.

William Green (00:15:45):
If I’m trying to draw some lessons and morals, stretching myself to draw some lessons and morals from what we’ve just discussed. It seems like part of it from what you were saying before is he’s an absolutely voracious learning machine and that’s not stopped even now at the age of 98, just consuming information on an industrial scale. And then second, there’s a sense in which he’s constructed his life in a way that’s really true to him, his family, his business, his hobbies, his bridge playing his friendships, his partnerships. And there’s a kind of joyfulness to that sense of alignment in his life that he’s done. What he’s loved. Is that a fair observation?

Mohnish Pabrai (00:16:24):
Yeah. I mean, I think that’s very fair. I mean, I think that I’ve tried to tell this to Charlie a number of times. I’ve told Charlie actually, Charlie, without you, there’s no Berkshire Hathaway. And he would always dismiss it. You know, he was very dismissive. So the thing is that he is not looking for credit. I mean, I’ve also told him that I don’t believe Costco would’ve done half as well if he wasn’t on the board. And he’d again, dismissed. The thing is that I think he adds so much value to so many humans and so many businesses and all of that and to humanity, to all of us. And he discounts at all. I think there’s no ego about it. He doesn’t look back. One of the biggest things I’ve learned about both of them, Warren and Charlie, is they don’t look back.

Mohnish Pabrai (00:17:09):
They look forward when I look at them and look at the past what they’ve accomplished. It’s a huge body of work that they’ve accomplished in their lives, but that’s not how Charlie functions. He doesn’t spend time looking back. His, all his energies are focused on the problem at hand. So for example, I would meet him and he was wrestling with the succession at the Daily Journal. Right. And it completely occupied… And he wanted to do it well, wanted to do it correctly. And in the end, I think the way he got it done was incredible. It’s a brilliant solution and an amazing person he brought on board. And I observed all of his trials and tribulations as he was going through that process. And it was just brilliantly done because I think he understood that for example, in that case, he had one silver bullet.

Mohnish Pabrai (00:17:58):
Okay, his only silver was who he hired, who he put in that role. He could not after that. And in fact, the person they put in is the chairman and the CEO. They made the person, the chairman as well. And Munger has moved down to just a board member, right. It’s an enormous amount of trust that they put. But like I said, and he turned down, I know he turned down some very, very good candidates from people he really trusted and admired a lot.

Mohnish Pabrai (00:18:27):
And so just looking at that whole process. So, like I said, they always ended… he always moaned and groaned saying, we’ve got so much money, we can’t find any buy. Or sometimes he tell me, Warren’s not even excited about buying Berkshire stock at current prices and so on. So they just don’t look back. You know, they look at the problems in front of them and they want to do the best job. That’s another great learning for me, is not to kind of rest on our laurels and say, “oh, look, I’ve got [duction 00:18:53], I’ve done this or I’ve done that”. I’d say let’s look forward, let’s keep chopping forward going forward.

William Green (00:18:59):
Do you feel that Charlie is a very different type of investor than Warren? Like, what’s the difference between even something like Alibaba, right? Or Costco that Charlie would own and that Warren wouldn’t look at. Where do they diverge? Do you think in their approach to solving this game, this puzzle?

Mohnish Pabrai (00:19:16):
I think they obviously have a lot of similarities in how they invest. They used to talk a lot in their younger days. I think those conversations have become fewer now because part of it is… they’ve had so much interaction, almost know what the other guy is thinking and such. I think Charlie got to understanding the importance of better businesses, better to buy a good business and a fair price and a fair business, good price. I think he got that understanding well before war. And I think he need to warn more time just because I think it so successful in the traditional [gramian 00:19:51] approach. One of the things that has, I think, a difference between them is when Charlie sees a tremendous business. I mean, they’re both chiefs case, and they’re both not willing to pay up. But one of the areas, for example, where they diverged was Costco, right.

Mohnish Pabrai (00:20:07):
And Charlie tried to have Berkshire take a much larger position in Costco. And Warren’s perspective was it’s too expensive. Right. And Charlie would always say, well, “for some things you pay up”. Right. And so there was some divergence in a view, there. There was also a divergence in BYD. So I remember, I think we may remember… I think Charlie told Warren that Chuanfu Wang is like Thomas Edison, and you should invest with him. And Warren just kind of ignored that. Then he said, well, he’s like Thomas Edison and Henry Ford, both in the same person. And Warren still ignored that. And then Charlie told him, he’s like Thomas Edison, Henry Ford and Bill Gates all in the same person. And at that point, what Charlie said to me is, he went ahead after I made the third comment, putting three people in one person, but he didn’t use his own money.

Mohnish Pabrai (00:21:06):
So what he did was… It’s kind of like these people… Like kids running a lemonade stand the way they talk about it. He said he didn’t use his own money. He went to David Sokol and had mid American energy, used their money to buy the stake in BYD. And so the $250 million that Berkshire Hathaway invested in BYD came from mid America, which I think at that time, Berkshire owned 80% off. Right. And then he put David Sokol on the board of BYD. And so Charlie said to me, “in the end, he didn’t even use his own part of cash, went to another part, somebody else controlled and said, okay, you do it from there”. And of course, Berkshire, would’ve done slightly better. I think now they have like 91% or something of Berkshire Hathaway energy. They’ve done a little bit better. It’s been a major home, right?

William Green (00:21:57):
I mean, it’s made billions of dollars, right BYD for Berkshire.

Mohnish Pabrai (00:21:59):
Well, they bought at eight Hong Kong dollars per share, and it’s at 260 Hong Kong dollars per share right now. And so this is 14 years and more than a 30X.

William Green (00:22:12):
And I think if I’m right in saying the idea originally came from Li Lu.

Mohnish Pabrai (00:22:17):

William Green (00:22:17):
Who invests a portion of Charlie’s fortune and has become a billionaire in his own. Right. And I know that you and Li Lu have become good friends over the years and that you think enormously, highly of him. And I wondered if you could talk a bit about what Charlie saw in Li Lu, because he’s clearly an absolutely extraordinary person. And at the same time, what you think is so remarkable about Li Lu as an investor and a person.

Mohnish Pabrai (00:22:41):
The funny thing is I asked Charlie that exact same question many years ago, and,

William Green (00:22:46):
You’re a journalist at heart Mohnish.

Mohnish Pabrai (00:22:49):
I’ll get to your answer in a second. But one of the things Charlie told me many years ago, he said in the investing business, it’s really important to have somebody to talk to. Just you’re not in an echo chamber and so on. So I said, oh, you mean like you have Warren? He said, it wasn’t always Warren, but I had somebody. And he said, it’s really important that you have somebody to talk to. And the person shouldn’t be someone who reports to you. It should be kind of a peer type relationship. And he told Li Lu and me that he wanted us to get together for lunch once a month. He basically pretty much instructed us that, “I want the two of you to meet once a month for lunch”. And I told Charlie and Li Lu, if Li Lu wants to waste an afternoon or hour of month with me, I’m more than happy to do that.

Mohnish Pabrai (00:23:40):
You know, life is great. What’s wrong. What’s not to like about that. Before Li Lu moved to Seattle, and of course, I’m in Austin now, we used to get together once a month. And we finally settled on going to the same place every time, which works really well for me. And we’d go to, there’s a Din Thai Fung in Arcadia, which is the number one restaurant in Taiwan and really good food. We’d go to Din Thai Fung which used to be a little bit of a zoo, but the food was great. And then later Li Lu got this old Chinese lady as a chef, and he told me that she’s actually better than Din Thai Fung, so we could meet at my place. And so then I’d go to, he’d have an apartment in Pasadena and I’d meet him over there. And that was even better. Anyway, the food was great, but the conversation was really good too.

Mohnish Pabrai (00:24:27):
And, and I remember one time Li Lu told me during the one of these lunches, he said, you should look at, and maybe you should buy a more Pacific. And I said a more what? He said a more Pacific. Okay. He said, it’s a Korean company. And I said, okay. And you know, I went back and I looked at this and everything’s in Korea and I figure out it’s a cosmetics company. And then I also figure out that there’s some of their products you can actually find in Southern California, but I could never really figure the business out. OKay. And I really couldn’t really get my arms around it in terms of like, what was the secret sauce here or whatever. So I eventually just left it alone. And that went up like something like 80X after he told me that. I just watched it like go crazy.

Mohnish Pabrai (00:25:15):
And they had this product, which, this extract from nails, which women would apply on their faces. And it would make them younger, make them look long, younger, the wrinkles kind of go away or whatever. And what AmorePacific had been able to do, was they had been able to convince Chinese women. And I think now Korea is very well known for being kind of the state of the art for Asian women’s skin products and so on. And they had, they had had a massive tail wind from Chinese women clamoring for their products. And they’ve done really well. And I said well, such is life.

Mohnish Pabrai (00:25:49):
And then after a, I think a year or something, he tells me you should buy Maotai. And I said Li Lu, and I use some colorful latch with him. I said you give me these names. Then I go, and I can’t find, figure out head or tail. So I’m not going to do it that way. Please spend the next 20 minutes explaining Maotai to me. He said, why didn’t you ask me that for AmorePacific? I said, okay, we are gradually learning. So then he proceeds to explain Maotai to me, and Maotai is now the most valued liquor company in the world. It’s the most valuable company. So got, basically just has one product, but it’s more valuable than any of the other global liquor players. And [crosstalk 00:26:31]

William Green (00:26:30):
And he was depressed at the time, right? Because there was a corruption scandal and people could no longer give,

Mohnish Pabrai (00:26:36):
Yeah. So,

William Green (00:26:36):
Maotai as a gift.

Mohnish Pabrai (00:26:38):
Yeah. It’s verily, very heavily consumed by government officials who are being wined and dined by people in the private sector and all that. And of course the Maotai is flowing freely. And then it became that if you were out at lunch and you were a government official and there was Maotai on the table, you wouldn’t be seen after that. You pretty much suddenly disappear off the face of the earth. Never to be heard from again. Yeah. So there… When they were cracking down, it became synonymous because the government’s perspective was nothing good is happening if there’s Maotai on the table. One bottle… I don’t know what the prices are now, but when I held the stock, it was over a $1000 or $1,200 for a bottle. And it might be a lot higher by now. And this time I was actually able to understand a business. They actually had English financials and it was pretty straight forward to figure out. And I made the investment and like everything else in my life, I sold too soon.

Mohnish Pabrai (00:27:31):
But anyway, those lunches were really good and Li Lu, and I became great friends. And actually there’s one business that we actually then collaborated on, which was Micro. So that actually went from me to him. I mean the other ones were coming from him to me. And so we had a what interaction and exchange on that. And then he took a position and pulled that for a while.

William Green (00:27:55):
And to go back to that original question? What do you think Charlie saw in him? Because I remember Charlie once saying… I can’t remember whether it was to you or Guy Spier, that it was lucky Li Lu was a force for good, because he’s so unbelievably talented. That if he wanted to rule the world, he, he could be. And if I remember rightly, I’ve met Li Lu a few times, but I’ve never been able to interview him on the record. I only kind of privately or background when I was studying him. I think he was the first person at Columbia University to get a triple major, which he got while sleeping in an apartment in the living room that he shared with about eight people. And this wasn’t even in his first language. I mean he had just come from [crosstalk 00:28:31] Square.

Mohnish Pabrai (00:28:30):
Yeah. It’s not just a, it’s not actually a triple major. It’s three degrees. It’s a MBA, it’s a law degree, and it’s an undergraduate all at the same time. I mean, these are the complete, its not like a bachelor’s degree with three majors. This is well beyond that in a language that’s a foreign language to him. Right. And he did really well in all of them. But when I asked Charlie the question, he said, well, it was a complete, no brainer. And he said, “I just had to look at the track record”. So he said, here was a guy who was on student loan cause he had no money. And on the float of the.

Mohnish Pabrai (00:29:03):
… on student loans. He had no money. And on the float of the student loans, which is he would get the money in January, maybe he has to pay in April or something. He said he would invest the float of the student loans, and when he graduated, he had a million dollars. When Li Lu finished at Columbia with Columbia’s loan money with the stuff he was doing, and then after that, he went into venture capital and he had an incredible record. One of his early investments is a company now that we know as Capital IQ and a lot of what is Capital IQ, a lot of influence from Li Lu and Capital IQ is the closest thing you can get to Bloomberg. It’s an incredible product. We have a subscription, we pay them an arm and a leg and we can’t get around it.

Mohnish Pabrai (00:29:52):
He’s been an incredible investor. I think what Charlie said was it was one of the easiest decisions to figure out that Li Lu was amazing. He said that his track record was incredible. I think the other piece that what Munger and [inaudible 00:30:10] are both extremely good at is their incredible of judges of humans. It was Ron Olson’s wife, she worked for one of these human rights groups, which was protesting things happening in China. They had helped Li Lu when he came to the U.S. because he was active in Tienanmen Square and all of that. There was an event I think, in Santa Barbara or something, that she had hosted and Li Lu had come for that event, and Charlie had gone there as well. That’s where they met for the first time. So it was an accidental meeting.

Mohnish Pabrai (00:30:47):
Then I think once Charlie started to talk to Li Lu and understand how he invested, but I would also say the following, I think that Charlie made Li Lu an even better investor. They would meet once a week for breakfast. And, of course, Li Lu will discuss different investments and whatever with Charlie. I think Charlie’s, what I’ve found with Charlie is sometimes I bring up businesses to him that I’m looking at. He may have never had looked at the business and he’s able to, in about five or 10 seconds. I’ve seen the brain working. It’s amazing how it slices through all the models. He’s done with the business in about 10 seconds. And I’ve been looking at it for weeks and what he comes up with, alluded me. I’ll give you an example.

Mohnish Pabrai (00:31:39):
I’ve always admired this business called Credit Acceptance. And it shows up in some prominent investor portfolio. And Credit Acceptance has done very well for a very long period of time. They’ve compounded a [inaudible 00:31:51] 20% for a very long period of time. They make auto loans to people who have the worst credit histories. You have defaulted a number of times, you’ve not paid your bills a number of times. And the interest rates are very high. The interest rates might be in the 20-odd percent rate or 30-odd percent rate. And also what they’ve done is that the cars, when Credit Acceptance gives you a car, they put a device in the car, which would allow them to stop the car from functioning remotely. They could control remotely to turn off the vehicle. It could not be driven again. When their payment doesn’t show up on time, the car stops working. And then the person calls, and then they say, we didn’t get your payment. The payment arrives, and the car is working again.

Mohnish Pabrai (00:32:43):
Credit Acceptance has also got an interesting model where they work with car dealerships and they make them put skin in the game. They own part of the note on the car. he loan is made partially by the auto dealership and partially by Credit Acceptance. And they’ve been able to work this system where it’s incredibly profitable. Now there’s a side to Credit Acceptance, which is really good, which is these people would not even have a car and they wouldn’t even be able to get to work. But when I brought it to Charlie, he said, we don’t want to own that kind of business. And it took him less than five seconds. He’d never heard of Credit Acceptance before. I spent about, exactly what I told you, about five minutes on the business, and he’d already processed in his head. I think what his perspective was is that one of the filters that he runs through is win, win, win. Everything has to be a win across the board. I think what Charlie saw is that the high interest rates is not, even though you could justify it a hundred different ways, he said, it’s not the kind of business we want to be in. So his bar is as high. And I had been looking at that for several weeks and that particular point never made it through to me. There are lots of high quality investors who own Credit Acceptance. In many cases, it’s their largest position. And it went through their filters. It never went through Charlie’s filters. It’s an amazing brain. To see, so many times I brought up questions to Charlie. I’m facing fork in the road issues at [Dakshana 00:34:22], and I’m torn about what to do. I explain the issue in about five minutes to Charlie. He’s never been to India. He comes up with an answer and it’s always the perfect answer. I said, why didn’t I think of that? Why was I confused about it?

William Green (00:34:35):
I remember also when you decided years ago that you were going to set up an insurance business. And you decided that you were going to clone what Warren and Charlie had done in a [inaudible 00:34:46] chain, and you were going to use the float to become super, super, super rich, as opposed to super rich. And Charlie, if I remember rightly, looked at you and shook his head. Is that right? Was there something that he saw instantly that he saw about you, that you were not wired to run that business as well as you were wired to run Dakshana and to run [Pry 00:35:08] Funds?

Mohnish Pabrai (00:35:10):
I think he made a comment to me many years ago where he said in the very long run insurance will be a small part of Berkshire. It’s a very remarkable statement. If you look at Berkshire today, insurance dominates, they just bought Allegheny and so on. I think he may be, he may be right about that. If you go 20, 30 years out, who knows what the size of the insurance businesses. If you stop writing different lines over time, that float is going to go down and so on. And there are some very elementary things about the insurance business that I missed when I decided to go down that path. I learned in a very expensive way that the Berkshire insurance operation is a completely different operation than anything else. And that insurance is a really tough way to make, make a living. It’s a difficult business.

William Green (00:36:02):
And you…

Mohnish Pabrai (00:36:03):
They make it look simple, but it’s really hard.

William Green (00:36:06):
You eventually sold the business to Francis too. And Francis had played an integral role in building Fairfax as well. And you know Francis and Prem Watsa from Fairfax very well. Was there something that enabled them and Ait Jain at Berkshire to do this stuff that’s a secret source that you didn’t have, and that Charlie could see that it didn’t suit you?

Mohnish Pabrai (00:36:30):
I think insurance inherently is a difficult business. I think even this year at the Berkshire meeting, Warren alluded to that. He said from 1970 to 1986, or 85, until Ait Jain showed up. I think 86 showed up, Ait Jain showed up. He was struggling. He had multiple insurance companies that blew up on him. Really bad, like 140% combined ratios and such. It was pretty ugly. When Warren entered the insurance business, he entered with a great business. National Indemnity created by Jack Greenweed was an incredible insurance company because they were doing excess surplus lines that others were not doing, so they had a lot of margin and profitability because there wasn’t that much competition ensuring taxi cabs and that sort of thing, that most insurers were not willing to do. And he started with a great core. Then when he tried to expand things blew up on him till Ait showed up. Then things started running better.

Mohnish Pabrai (00:37:31):
Even at Fairfax. Fairfax has had a lot of indigestion with insurance. They’ve had a number of businesses that they bought, insurance companies that they bought, that have given them huge problems. Their combined ratios went crazy and the purchase price turned out to be very high and so on, so forth. It’s a difficult business, even for the best of them to run. Geico is unusual and they’ve run well, but even now you can see that on the underwriting side, they’re having issues versus being as good as Progressive and so on because they haven’t invested in the telematics and all of that.

Mohnish Pabrai (00:38:06):
The lesson I got from insurance, they were really two or three lessons that came out. One is that it’s a bizarre business because you sell a product whose real cost you don’t know until five or 10 years from. I decide to sell you a policy, and I don’t know if I’m going to make or lose money on that policy until five years have passed. I’m basing the pricing based on models, but those models can be off and the world can unfold in a different way.

Mohnish Pabrai (00:38:35):
One of the things that happened, which I’m really happy about, is that Francis is a much better operator for insurance than I am. I think the company I sold him has done extremely well under Francis. I don’t think it got done as well under me. But also what happened that gave him massive tailwinds is we had two years of pandemic. And no one went to work and the workers’ comp policies, the premiums already paid. There were no claims because nobody at work. There were no workplace injuries. So they had huge underwriting profits for the last couple of years, which gave them a very nice cushion. That will change now, as people start spending more time at work and so on. But that was a partially a great tailwind, but he also got a great tailwind because he was sitting in treasury bills in March 2000 when the world went upside. March 2020. And then he went to work and bought bonds at crazy prices and did really well as well.

William Green (00:39:30):
Yeah. He called me sometime after that, and he took me through what he had done privately. And it was extraordinary because it, when I was interviewing him for Richer, Wiser, Happier, he had said there was nothing he could find to buy and he was like, I could just sit here doing nothing for 10 years. Then he sat around doing nothing for year, and he looked foolish, because he was sitting on all of this dry gun powder. It was such a beautiful example of that kind of Charlie Munger approach of salmon fishing, where his beautiful image of the spear fisherman waiting by the side of the stream, doing nothing, and then once in a while, a fat juicy salmon swims, a new spirit and here was Francis who looked like this totally outmoded investor, and, in fact, he suddenly spears so many salmon in one fell swoop that it makes him look like a genius again, after 10 years lying fallow.

Mohnish Pabrai (00:40:23):
Yeah. And if you look at Berkshire Hathaway, their core purchase, which is Berkshire Hathaway Textile Mills, turned out to be horrible. All their forays into insurance turned out to be horrible for 15 years. The textile business was horrible for 20 years. They ran it for 20 years before they shut it down. In spite of all of that, we have this amazing business that came out of all of that. I think what Munger told me repeatedly is we could not do what we did then, now. He said, the world is a lot more competitive. Markets are a lot more efficient. We could not do the kinds of stuff… He said, we were finding where we go shooting fish in the barrel when the barrel is empty. He said, we can’t do that stuff now.

Mohnish Pabrai (00:41:09):
The other thing he said that our, which he also said publicly, our record would be a shadow of itself if we were not learning machines. I think what happened is that [inaudible 00:41:20] taught them a lot of lessons. Blue Chip Stamps taught them a lot of lessons. Buffalo News taught them a lot of lessons and diversified retailing taught them a lot of lessons. And even the textile mill and the insurance forest. So the important thing with these guys was they were learning machines and they absorbed. I am happy that I went into the insurance business. It did not work out. I didn’t lose my shirt. I got my money back. If I make a mistake and I get my money back, I’m happy. But I learned a tremendous amount. And I know I won’t go there again. Been there, done that, got the T-shirt.

William Green (00:41:56):
I’m struck with you, Monish, about how many times I’ve seen you do something that you have a very high conviction about and you think this is a fantastic idea and you tell me and other people what brilliant idea it is. And we’re all totally sold on it. Then a few months later you’re like, nope, didn’t work. And you’re very unsentimental about it. And you change. I’ve seen you do it with things like Seritage, that you owned, or Alibaba or this insurance business that you were running. It strikes me as one of your great strengths is, it is strong opinions, lightly held. There’s this willingness to change. Can you talk a bit about that because it seems very fundamental to the way you operate.

Mohnish Pabrai (00:42:34):
Yeah. I think if we go back to John Templeton. He would say that the best analyst would be wrong one out of three times. In fact, he was a mentor to Prem Watsa at Fairfax. And Prem would go to Bahamas once a year to spend time with John Templeton. John Templeton told him, he told Prem that if you are wrong half the time, you’re going to end up with a tremendous track record. One of the things we have to remember about investing is that the error rate, even for the best of us, is going be really high. And this was one of the reasons why Charlie told me to talk to Li Lu. It was one of the reasons why, and, in fact, he said to me recently, he said, I remember one time he told me, he said, so you bought Malta.

Mohnish Pabrai (00:43:18):
I said, yeah. He said, good. Okay. Then recently he said to me, you and Li Lu collaborated on Micron. I said, yeah. He said, the idea came from you. I said, yeah. He said, it’ll do very well. I said, it’s great to have God give that kind of endorsement because I didn’t get that insurance business. I think the thing is that this 50% error rate. We have to be really cognizant of and we have to be humble about it. And so you’re right, I get excited about things. This is the nature of investing is that greed takes over our brains. We look at this company, we look at the upside and the greed takes over. We have to have artificial mechanisms to damp it down. Talking to someone else is a way to damp it down. Having a checklist is another way to damp it down.

Mohnish Pabrai (00:44:12):
Having somebody who has a completely opposite point of view and talking to them is another way to damp it. We need circuit breakers in with all our investment ideas because the animal spirits will run wild because you would see… I, just today in fact, I came across a business that I like. I still have to drill down on it, but at this point I can’t see what would be wrong with it. But I haven’t done the work yet. It’ll be important for me before I do anything with it is to run the checklist. Talk to others and try to get a rounded view. Then see whether I still want to do something with it or not.

Mohnish Pabrai (00:44:53):
I think that there are two things that are important investing. One is that we have to be very cognizant about the fact that this is not brain surgery, where 3% error rate is bad news. You’re going to have a high error rate. The second is that when you are right, you can be really right. You could have a 10 bagger or 20 bagger or something, which would cover a lot of sins. The other thing is to have the humility, to realize when you have been wrong. Seritage is a good example where I thought that I’d looked at it in many ways to Sunday and it was going to work. Then I finally came to the conclusion that no, there was an error, there was an error in my analysis. And that it was going to be some pretty heavy lifting to make it work the way I thought it should.

William Green (00:45:37):
Because it was too difficult to do the redevelopment in different parts of the country?

Mohnish Pabrai (00:45:41):
Yeah. I think it’s, you’ve got 150 Balkan states with 150 rules and laws. And even if I look at a place like Austin, Texas, which has severe housing shortages and severe other real estate issues. The entitlement process and the process for allowing new housing to be created is excruciatingly slow. The wheels of government work very slow and they don’t particularly care that we’ve got these crises and we need more housing and all of that. They’ve got their own set of criteria and conditions that they’re looking at. The redevelopment of the portfolio at Seritage is very complicated. It’s a lot more complicated than I had imagined or expected. I realized that the time it would take them to get their arms around that whole thing and get it done would be really difficult.

Mohnish Pabrai (00:46:34):
And the second thing is, I didn’t think they had the team. The second conclusion I came to, the CEO left and the new team, they had a lot of turnover and the second concern I had was, with a great team, they would find it challenging. With a questionable team, it was not going to happen all. At that point I said that we still had a gain. We bought it so cheap, we still gain. And like Stonetrust, I could sell, and… Stonetrust we have a small gain that’s usually a larger gain. I said, this is awesome. We can get out without a loss, so we want to do that.

William Green (00:47:07):
You very unsentimental when you get to these moments where you think I made a mistake, you… I think you did it with Horsehead as well, where Guy held on… [crosstalk 00:47:16]

Mohnish Pabrai (00:47:16):[crosstalk 00:47:16] I think you’ve talked to people like Howard Marks, and many times when I listen to Howard marks, I think I’m listening to a robot. I don’t mean that in a negative sense. I think he’s so monotone about things. I cannot imagine someone like Howard getting crazily emotional. I don’t have a picture that he’s that kind of guy.

William Green (00:47:40):
Yeah. I [inaudible 00:47:41] same thing with how it is being with the most superior machine. You feel…

Mohnish Pabrai (00:47:46):

William Green (00:47:46):
You feel like he has this really good rational engine, but at the same time, there’s this real paradox, which is that he’s super creative and that a lot of his process is impressionistic and based on gut. None of this stuff is simple. I had a similar conversation with Bill Miller the other day that’ll come out on the podcast soon where he said, I was talking to him about being so unemotional, and he said, I cry quite a lot. I can’t remember whether he said it’s in movies or in music. I think it was.

Mohnish Pabrai (00:48:13):
I would say that when I talk to Charlie about stocks or different subjects, there’s a very high degree of rationality. Extremely high degree rationality. I think rationality is an important trait. I don’t think you can do these things if you’re not going to be objective. I think patience is important in investing. One of the most important skills. Rationality is up there. I think that when we realize, we have to be true to ourselves, when we realize we’ve made a mistake, you cannot lie to yourself. You have to be candid about the fact that you’ve made a mistake. And you have to move on and go from there.

William Green (00:48:52):
On the subject of rationality, before I forget to ask you this, I was giving a talk about a year or so ago on Fire Island. I remember, so there are a lot of money managers living out there, and I was talking about the book and I said something about Charlie and how unemotional he is and how when he bought Wells Fargo at the bottom tick in 2009, he had no fear, no anxiety, nothing about it.

William Green (00:49:13):
I was saying how unemotional he was and how that’s the same with people like Bill Miller and Howard Marks, all of the best investors and Chris Davis, who is close to Charlie and is now on the board of Berkshire and knows them both very well, came up to me afterwards. He’s like, it’s not entirely right. It’s more nuanced than that because, if I remember rightly, he was talking about how when things went horribly wrong for Charlie’s hedge fund, his limited partnership back in the seventies, I guess, during that brutal period around ’73, ’74, he said it was extraordinarily painful for him to be letting down shareholders. Can you talk about that nuance because I feel like I haven’t quite cracked this idea of how unemotional great investors are.

Mohnish Pabrai (00:49:57):
I talked to Charlie about that period and he said that when he wound up his partnership in 74, he distributed all the holdings, in kind, to his partners. He gave them the positions and he told them don’t do anything, keep them. Eventually a lot of those positions got converted into Berkshire stock, and they were big home runs. Blue Chip and different things got diversified, retailing and so on. They all got rolled into Berkshire. So he said in the end, all of them did really well. I think he decided that at that point he did not want to manage money. I think he decided that the end of ’74, that wasn’t a direction he wanted to go in. He made that decision and got everyone to a good end point and moved on.

William Green (00:50:51):
When you judge his lack of emotion, is it, how would you characterize him because he is clearly… I had this expectation before I went to interview him, for example, for the book. I thought, God, he doesn’t suffer fools and he’s brusque and he can be rude. He’s famously rude at times. I remember Bill Miller telling me that he’d walked into him in New York once, he’d run into him, and said, Charlie, hi. And Charlie turns in and says, who the hell are you? Then they end up walking together and chatting for an hour. You told me, no, no he’s this really soft, really sweet guy. So there is something there where he’s a much gentler and softer human being. I’m wondering if in addition to being this hyperrational thinker, there is this soft emotional side or whether there’s a emotional stuntedness that comes with a lot of these great rational machines.

Mohnish Pabrai (00:51:42):
I think both Warren and Charlie have beautiful souls. And those souls are covered with a hard exterior. The reason they’re covered with the hard exterior, so they, I think, they don’t get hurt. They have a lot of people coming at them with all kinds of things. I think this exterior protects them, but I think when you get to their inner circle, the inner circle doesn’t deal with the hard exterior, you’re dealing with a person. That’s why I find that Charlie is a very different person when I’m playing bridge with him or when I’m having dinner with him versus at the Berkshire meeting, for example, on stage and so on. They’re two very different people. He has a very high degree of emotions. I think he’s able to control them. I have had a lot of great input into struggles I had in my personal life from Charlie, where I found that the empathy level was really high.

Mohnish Pabrai (00:52:38):
These were not investment discussions, related to investments or money or any of those things. They were related to human things. When I was having trouble in my marriage and I discussed those things with him, he was amazing. It was incredible. And he was able to see me through and gave me tremendous advice. In the end, I think I’m in a much better place now than I used to be. So Charlie was very helpful. And that came from this really warm, soft person with a very high empathy and high emotional understanding and such, so that was beautiful.

William Green (00:53:17):
It’s interesting to me that you see this quality in him of having this slightly tough, scary exterior, but a gentle interior because I think that’s probably a pretty good description of you as well because you’re always slightly intimidating. And I think the more I’ve got to know you and become friends with you over the years, I think there’s a softness under the bombast and opinion. I suspect you when you see that in him, you’re also seeing it in yourself?

Mohnish Pabrai (00:53:46):
I think one of the things that really was, I think, life altering for me and enhanced my life a lot was my membership in YPO. One of the things that happens YPO, which is young president’s organization, is we get put into these groups of eight to 12, which are forum. The interesting thing about forum is that everything that goes on in forum is confidential and because I cannot even share with my spouse what’s going on, people are willing to open up about things that they would not never open up, even with very good friends. What I found is that in forum magic happens when you open up. Many times, this has happened to me, I’ve been in YPO for 25 years, many times I have a problem and I’ve wrestled with this problem a hundred times, and I can’t find a good solution.

Mohnish Pabrai (00:54:31):
And I say, I’m going to take it to my forum, but I don’t think these guys can help me because I’ve already thought about it. I’m pretty smart, et cetera. I take it to the group, and in about 30 minutes, they’ve solved it. This has happened so many times in my life that I’m stunned. I’m stunned by it. So what I’ve come to realize, which a lot of humans don’t understand, what I realize is that in order for me to get the most value from Charlie, I have to put my cards on the table. The good, the bad, the ugly. I’ve got to put all the cards on the table. I’ve got to have him see the whole picture, and that is not easy for a human being to do. I remember the first time, I think it was 2012 or 2013, when I was having issues in my relationship and I had talked to Li Lu about it.

Mohnish Pabrai (00:55:20):
And he said, you should talk to Charlie about this because he helped me through a few things, but he said… So I met Charlie and I laid my cards on. And I could not have laid my cards out if I didn’t have that very long history with YPO, where I understood that when you lay your cards out, magic happens. I was laying my cards out in front of God, who’s like beyond human. It took him like five minutes. It took him less than five minutes to sort through it and said, okay, this is how you’re going to deal with this. Not only did he tell me how to deal with it, he told me what the outcome would be. He said, listen, this is what you’re going to do, and this is what the outcome’s going to be, and this is where we’re going to ride off into the sunset. It happened exactly the way he said. It was just beautiful.

William Green (00:56:06):
Is that from extraordinary patent recognition or EQ? Where’s that coming from?

Mohnish Pabrai (00:56:13):
The funny thing is Charlie told me he doesn’t read fiction, and I don’t think he sees many movies. I don’t want to go into this because a lot of this is very personal, but he gave me the name of a movie. He said, did you see this movie? I said, yeah. He said, go see it again. And I did. This time I saw it on the context of what he was talking about. It’s like, here’s a guy who was bringing up Hollywood movie to help me with some issue that I’m having. I didn’t think he even has ever watched a movie like that, for example. So I think he’s seen so much, even when he was talking to me about the issues, he brought up his friends who had similar issues and he’s seen so much. ’98, you’ve seen everything under the sun.

Mohnish Pabrai (00:57:01):
He’s got eight kids he’s got grandkids, he’s got daughter-in-laws and son-in-laws and second wife and first wife and all of that. There’s a lot of, and friends and business associates and people who have acted below the belt with them and all of that. They’ve seen all of that. And so what both of them are able to do, Warren and Charlie have been able to do, they’re able to understand humans so well. They’re so good at understanding the human dynamic. If I thought Charlie was a great investor, I thought his ability to help me with my personal problems was off the charts.

William Green (00:57:37):
One thing that strikes me both about Warren and Charlie, that you would have a much keener sense of than I do is I think they’ve both improved tremendously as human beings over the years. They’ve worked on themselves, and I was very struck by that. I’ve mentioned this before, when I went to the Daily Journal meeting, and I saw his kindness in the way that he treated people around him. In the way that he treated these disciples. And even, I remember as he was walking out of our interview and I was…

William Green (00:58:03):
And even I remember as he was walking out of our interview and I was of course, trying to detain him and talk longer and ask him more questions. He said to me, in this kind of plaintiff way, “These people are waiting for me. I can’t keep them waiting.” There was a sense of courtesy and decency and kindness. I would say I actually love for the disciples who’d come to see him. That was really surprising to me, given his reputation for toughness.

Mohnish Pabrai (00:58:26):
I think Li Lu wrote an essay about this. They would meet for breakfast and Li Lu would show up 10 minutes before for breakfast and Munger would already be there. Then he started showing up 15 minutes before, Munger would already be there. Then he started showing up half an hour before, and Charlie was already there. He was wondering, “How much before our stated time?” Then finally Charlie told him, “I come early to read my paper. You don’t need to come early. Leave me alone.” Then they would both arrive early to do their work and then they’d meet for breakfast.

Mohnish Pabrai (00:58:58):
I learned from Charlie that, and I actually made a change in the way I operate, is to show up early. Show up early every… If I have a coffee with someone at 9:00 AM, I’m going to make sure I’m there at 8:45. I think for him, it’s very uncourteous to be late. I think one of his grandkids was telling me that they were all going to take a private jet to Omaha. I think the jet was supposed to takeoff at 8:00 or something. Munger’s plan to get there at 7:15 or something, to the airport. The grandkids tried to explain to him that the jet’s going to wait for us. The jet’s not going anywhere. It’s not a scheduled flight. That didn’t mean anything to Charlie. He was there before any other family member. He just sat there and he’s just waiting.

William Green (00:59:42):
I’ll tell you a story about this actually that involves you, which is, as I think you know, I had this wonderful two-hour Zoom breakfast with Charlie and a few other great investors back in, I think July 2021. Crazily, they’d said the homework was to read my book and they all wanted to discuss the book. I can’t tell you how inadequate I felt as it’s like, “Yeah, I’m going to teach Charlie something about how to invest.” It was Lou Simpson and people like that. I knew that Charlie was going to arrive early because I read that introduction that Li Lu had written too. I think the Chinese edition of Poor Charlie’s Almanack, where I think he talked about Charlie always being early.

William Green (01:00:19):
I signed on five minutes early. As a result, I’m on this call alone at the start before Lou Simpson, all these other guys, Mark Nelson, get on just with Charlie. The very first thing I did actually is I said to him, “Mohnish and I are friends, and he speaks incredibly highly of you. Obviously, I interviewed you for my book, if you remember.” He said to me, he starts waxing lyrical about you. Very specifically, he said, “Mohnish is a very highly ethical person.” He said, “He’s so mathematical and he’s so smart.” He said, “He knows he can make more money by being ethical.”

William Green (01:00:53):
He said to me, “People like Mohnish and me, we actually don’t deserve nearly as much credit for our morality as we deserve, if we were doing it against our own interests.” He’s like, “We’re both actually doing better in business and life because we’re ethical.” I thought it was a really interesting insight into life, and business, and Charlie, and you. I wondered if you could talk about that idea of being ethical as a competitive advantage.

William Green (01:01:18):
Because I think many of us are taught as we are growing up and starting in the business world, or watching succession or billions or whatever, we’re taught that we need to be hard-edged and self-serving and selfish to succeed. Here’s this kind of grand old man of business and investing saying, “No, you should actually be decent and it’s not a zero sum game.” It strikes me as a hugely important insight.

Mohnish Pabrai (01:01:42):
Actually, Charlie’s absolutely right. Probably a huge portion of why I’m so ethical is because of self-interest, and light and self-interest. I think what people don’t realize is most things in life function on trust. They don’t function based on contracts. They function based on trust. If you become very trustworthy, it gives you a massive competitive advantage, a huge leg up in life. The thing is that this trustworthiness doesn’t come overnight, but it’s on a long scale, it’s like truthfulness. You sometimes use small lies, but if you eliminate all lies and the powers of force we’ve talked about, what happens is that the tractor fields come into play. Humans feel they can trust you. Once humans feel they can trust you, the whole universe is at your disposal.

Mohnish Pabrai (01:02:40):
We see that in spades in Berkshire Hathaway. Berkshire Hathaway does all kinds of things where they just say something to someone and people will accept that. They don’t need to have it in writing or anything like that. It’s just, one’s word is enough. How do you get there? Well, you get there by having a consistent life where you have demonstrated repeatedly that you are playing the game very ethically. Playing the long game and looking at things to make sure that business partners and vendors and whoever you deal with is treated extremely well.

Mohnish Pabrai (01:03:19):
Ray Kroc used to say that there were three stools on which McDonald’s stands. He says, “My franchisees, my vendors and my employees.” The franchisees are all entrepreneurs, the owner. He felt he had to make sure that they did really well. The people supplying the french fries and the cups and the plates and all of that at McDonald’s, Ray Kroc wanted to make sure they did really well. He’s not trying to squeeze them for the last penny. He wants them to do well. Because he says that it’s part of my ecosystem. I have taken those lessons to heart.

Mohnish Pabrai (01:03:56):
If I have a relationship with a printer for my business, I want those relationships to go on for decades. I want the printer to do well. I don’t want to be squeezing him every time and get three quotes and take the lowest and all of that. I don’t want to do it that way. I want to make sure that it’s fair and we don’t need to go to multiple quotes. Just run our business on trust. What happens is that when you show trust in a company or a human being, they react really positively.

Mohnish Pabrai (01:04:25):
My baseline when I’m dealing with anyone, my baseline is that the other person is a very high-quality person or a very high-quality company and I can completely trust them. Then I wait to see if they do stuff which violates that trust. If it does violate the trust, we’ll move on. We’ll do something else. I think when you upfront demonstrate the trust, a lot of good things happen. I think this notion of being ethical, running things properly, gives you such a tailwind in life that it’s like Peter Kaufman says, “If crooks knew how much money you could make by not being crooked, they would stop being crooks.” Because basically, you make a whole lot more money by being honest. You make a very little bit of money by being crooked. It’s a bit no brainer to be ethical and honest.

William Green (01:05:17):
Guy has often said to me that you have an extraordinary ability to judge people, whether it’s a CEO of a company you’re investing in, or a friend or a business partner or a prospective investor in your fund or something. I remember you saying to me before that, for example, if you have a lunch with someone and you don’t think they’re going to be good for you, you’ll just cut them out, you get them out of your life. Because you’re taking very much to heart what Warren said to you and Guy at your charity lunch, where he said, “Hang out with people who are better than you and you can’t help but improve.” I was wondering when you’re trying to appraise someone’s integrity, whether they’re a high-quality person or someone you actually want to get out of your life, what are you looking for?

William Green (01:05:58):
What are some of the tells? Because I feel like I’m not very good at this. I tend to look for the best in people. I think Guy looks at people and sees their flaws and is much gentler and more tolerant of their flaws. He’ll see mutual friends of yours and mine, and he’ll see appalling ways in which they behave. He’ll say, “Yeah, they’re a flawed individual.” He’s still okay with associating with them. Whereas you are kind of brutal in saying, “No. Person’s out of my life.” I wonder if you, I’m asking you about 12 different questions there, but if you could talk about, A, what you are looking for? The tell of whether someone is not a person you want to keep in your life. B, why you are so extreme in sifting those people out?

Mohnish Pabrai (01:06:38):
I think that’s a great question. My dad used to say that, “To have a great life, one needs one good wife and one good friend. Less is more.” I find with myself that I don’t need a very large network of best friends or close friends. I find that if I spend time with myself, reading and thinking and doing my thing, I’m very happy. I don’t need a whole lot. When I’m interacting with someone, I just want to make it so that those interactions, when I look back at them, that I enjoyed them and those were good and whatever. The thing is that, I moved to Austin recently. I don’t know very many people here.

Mohnish Pabrai (01:07:25):
What I decided to do is I decided to lower the bar on meeting people. I said, “Look, I don’t know anyone here. When people reach out to me here and there, whatever, I’ll meet them.” I’m going to go through a process to see if I can find, I mean, it’s weird that one of my best friends is in Zurich, thousands of miles away. It’d be kind of nice to have a best friend next door, for example, a little bit easier. I said, “I’m going to meet these people.” I want to see, like you say, I do my grading after I meet them. So far, no one has made the grade, so that’s okay.

Mohnish Pabrai (01:07:59):
They’re not bad people, but I just asked myself a very simple question. I said, “This person I met, do I want to meet them again? Do I want to interact with them some more? What do I want to do here?” The answer just comes back naturally. Is that, in some cases, it comes back that, yes, I definitely want to increase. There’s a wonderful guy in Irvine. He and I used to bike every Saturday together. It was really about the coffee. The whole thing was about the coffee and the baguette. The bike ride were all an excuse for the one hour coffee baguette in the middle.

William Green (01:08:31):
I think he was sitting at our table at dinner in Omaha.

Mohnish Pabrai (01:08:34):
He was, yeah.

William Green (01:08:34):
A lovely guy.

Mohnish Pabrai (01:08:35):
Yeah, he was. The thing is, he was so heartbroken when I was leaving Irvine. He tried so hard to convince me not to leave, because we had such a, and I have not found that in Austin. I genuinely loved the Saturday mornings with him. We got physical work done. We had great coffee and everything was great. I have not been able to replicate that yet in Austin. I miss that. Now, our interactions are over Zoom and so on. It’s not the same. I wish he was in my geography and he wish that I was in his geography. I think that friendships are very important. I’ve seen with Charlie, I met some of Charlie’s very best friends and many of them have become my friends.

Mohnish Pabrai (01:09:21):
It’s very easy to make friends with Charlie’s friends because they’re really high-quality people. It’s just that you meet some of these people there. I say, “Wow, this is, all I want to do is be friends with Charlie’s friends because he’s done all the filtering already.” They’re so high quality. They’re just wonderful people. I’m just so impressed with them. I think that it is really easy to tell once you meet someone, whether it’s someone you really are excited about meeting again or not. I think that my situation’s very simple. I have 22 years and four weeks left before I leave planet Earth. There isn’t much time left.

William Green (01:09:57):
That gets you to 80, does it?

Mohnish Pabrai (01:10:00):
Yeah, 2044. June 11, 2044 is the departure date. It might be 22 years and three weeks or something. Basically, I really don’t want to waste time, other people’s time and my time. I want to have deep relationships where there is a lot of candor and that are people I really enjoy the banter with. I think humor is important. Banter is important. If we have a connection, the banter is there. Charlie and I, we have such a big age difference.

Mohnish Pabrai (01:10:32):
We have so many things that we have banter about. I talked to him about all kinds of things under the sun and it’s a blast. I’m looking for that. I’m always on the quest for, and I recently, for example, recently, I think I met a person, a couple of guys actually, who are really high-quality and I like interacting. They’re not in my geography, but I know that we’ll have a great time together, so that’s wonderful.

William Green (01:10:57):
One of the things that really struck me in hanging out with you in Omaha, which was just a real delight, is a real pleasure, wonderful to be back in humanity again after two years of isolation in my own head, which is a pretty alien territory. It really struck me that I thought you had changed in the time since I first saw you in Omaha several years ago. I remember several, it must have been about 2015, probably when I first was there with you. I remember you walking out at lunch, you had this retinue of people who wanted to be seen with you. There was a kind of swagger and a bombast to you and you were great fun of me. I always loved hanging out with you. You were always funny and charming and tremendous company.

William Green (01:11:37):
This time, I saw you and there was a, you probably had much larger retinues of people coming up to you and wanting to take photos. I would say that it was striking to me that you’d become gentler and softer over the years. There was less of that kind of bombastic exterior. I was wondering if that was something that you’d consciously worked on over the years, becoming a gentler, softer being or whether it was just me looking for a different part of your personality or whether it was getting the crap kicked out of you by life and by divorcing? It seems like you’ve changed quite dramatically over the years.

Mohnish Pabrai (01:12:10):
I don’t think I changed, but I think if you are making that observation, then I’m very happy about that observation. I think if I moved down in that direction, I think that’s a great direction for me to move down. My take in Omaha has always been, and I think I thought about it very deliberately this year. I said, look, there’s all these people who come to Omaha. They are never going to have any time before Charlie. That’s just not going to happen because they’ve already cut back so many events and all that. I said that if they want to get a picture with me or want to have a conversation with me or something, I just say, just like what Warren and Charlie do, they just dedicate the weekend to the shareholder. I say, I am here for humanity.

Mohnish Pabrai (01:12:55):
Anyone who wants to have anything, their pictures, talk, whatever, I am here to serve. I’m here to serve as selflessly as possible. Maybe it was more, and it’s possible it’s become more reinforced. Because between 2015 and now, I’ve had so much interaction with people like Charlie, et cetera, that type of demeanor and that type of approach has become probably more hard-coded. It’s a better way to live. It’s a better way to be low ego and a servant. Basically, trying to serve the people. That’s what I was trying to do.

William Green (01:13:33):
It’s a profound shift and it was very noticeable to me. Someone recently asked me if I thought you were a little melancholy recently. I was watching you in Omaha, it didn’t seem like you were melancholy. It seemed like you were gentler and kinder and softer.

Mohnish Pabrai (01:13:49):
Yeah. I don’t know. I’m actually very happy. I’ve been dealt an amazing hand in life. I have no complaints about the hand I’ve been dealt. Just to have Warren and Charlie as friends, I randomly picked up a book in ’94 when I took a flight from London to Chicago, Peter Lynch’s book. That book basically led to a whole set of people coming into my life who are incredible people to have in my life. If I had not read that book, there’s no way those people, you and I would not be talking, for example. I just look at that random event with that random book that I read and then what that led to.

Mohnish Pabrai (01:14:33):
I feel very, very blessed and I feel very grateful and thankful that this trajectory worked this way. There’s very little I can complain about in life. I think the divorce actually, most people think of divorce in negative terms. Neither of us engaged an attorney. We split like a nine-figure sum between us in 30 minutes. We are still very good friends. We have a group chat with the kids and everyone. Both of us are happy and I’m in a great relationship. I think that Charlie was very helpful to me in making this transition. I think I have no complaints about that at all.

William Green (01:15:19):
It also struck me, I haven’t spent a lot of time with Momachi, your younger daughter. I’ve seen Monsoon a lot over the years, both in Omaha, but also, when we traveled in India for several days. It also struck me that you and Harina, you’d clearly done something right as parents. I mentioned to you, I think when we were having dinner in Omaha, that Monsoon did something that I thought was really striking, which is where I went out during the festivities when everyone’s crowding into the main hall for the annual meeting. I obviously got panicked because I was like, “I haven’t had four vats of coffee yet this morning. I went off to get coffee for me and Guy. I came back in and my bag that was on my seat had been moved and I lost my place and everyone’s sitting down. Monsoon, who’s what? 20 what now?

Mohnish Pabrai (01:16:06):
She’s about 26.

William Green (01:16:06):
26. Looks and sees what’s happening. I’m of course a repressed, polite Englishman, who’s slightly uncomfortable and doesn’t know what to do. She basically moves everyone, so that there’ll be a spot in between Guy and his wife, Laurie, next to you. It was just a remarkable thing. It was like an act of kindness and sensitivity from a young person towards someone who’s, what 20, I have bad math skills, 36 years older than her, something like that. It was just 26, you’re a bad mathematician than I am. It was just a gentle and kind and thoughtful thing. It made me think that again, for somebody in your position where you’re obviously hyper-rational, very good thinker, but there’s also something there where you did something right as parents. I was wondering what you figured out as parents that worked? Because so many of these families are very successful people actually, they’ve wrecked their families.

Mohnish Pabrai (01:17:03):
I would say that I’m incredibly proud of my daughters. They are amazing human beings. Of course, a lot of people would say that about their kids, which is fine. I think that Harina and I feel this quite strongly that they are way better than we were at their age. Monsoon is a very high-empathy person. I think what she did for you doesn’t surprise me at all. I think if she feels that somebody is not in a Nirvana state and it’s in her orbit, she’s going to do a lot. She’s like, I think of her in many ways like a mother hen. She takes care of the whole ecosystem around her. Many times, when I talk to her, she’ll get me up to date with extended family and different things going on because she knows a lot more and keeps me updated with what’s going on and so on. I think she’s got a number of great trades. It’s wonderful.

William Green (01:18:04):
It’s a credit to you.

Mohnish Pabrai (01:18:08):
I think in terms of when we raise kids, it’s just like what happened with me and Charlie. It’s not what we say to them. It’s what they observe. The thing is we think we can tell them this list of things. You know as a father, that doesn’t work, like whatever you’re telling them. I think they really pay attention. It would surprise you how many things. Monsoon brings up things with me, Momachi bring things up with me in their childhood, observations they made, which I don’t even think about. How we act, not just with them, but with anyone that they can see and they see everything, is really important.

Mohnish Pabrai (01:18:48):
I think one of the things that happened with me, which was really surprising in my childhood is, my father was a very stern disciplinary type guy till I was 15 or 16. After I turned 15 or 16, something happened where he suddenly turned around and started treating us like adults. For example, he, he said to me, “Look, you know where my wallet is. Anytime you need any amount of money, just go to my wallet and take it. You don’t need to tell me how much you took and you do not need to tell me how you spent it. I have the utmost confidence that you will spend it very well.”

Mohnish Pabrai (01:19:36):
I used to go on dates and different things and I didn’t have to go. I never had an allowance, because I had an infinite allowance basically, and just go pick money with my dad. Then I’d go take a cab in Dubai and meet my girlfriend, whatever else. It was fun. What I did with my kids is I went a step further. When they turned 14, actually my kids have never had an allowance. They’ve always had money and I never put them on that, you have to do this chore to get this money. All that parenting stuff is alien to me. I never did any of that.

Mohnish Pabrai (01:20:09):
What I did at 14 is I gave them Amex platinum cards. I said, “This has no spending limit, and you can spend on anything you want and you don’t need to tell me or justify to me or anything. You go with your friends, you do whatever, you’ve got this.” All their friends would always complain, “Oh, I don’t have allowance. My allowances is all that.” They really couldn’t understand this whole concept that why are the parents putting you on this kind of leash type thing? We have no leash. I never saw them spend in weird ways. I never saw, I mean, in the case of my dad, he had no visibility into what I was spending. With in the case of them, I can see the statement.

Mohnish Pabrai (01:20:49):
I never saw anything on the statement that I ever had to question them about. Then I think at 15 or 16, I explained to them that there wasn’t going to be an inheritance. Actually, even before that, when they were like 10 or 11 years old, I told them, “Listen, your mother and I are putting, like the US government allows 15,000 a year tax-free to go to anyone you want.” We were putting 30,000 into their account. It used to be 20,000, became 30,000. I said, “Look, when you turn 18, there’ll be a large amount of money in this account. It’ll be more than enough to cover college. If we are not doing well financially, your college is taken care of.” I told them it’s for another purpose. I said, “The real reason I’m putting the money in is that I’m hoping we don’t touch it for college, that we are able to pay for college and I want you to choose professions and careers based on what you love to do, not based on what pays the most money or what your friends think is the most sexy thing to do or whatever. Pursue things that you are passionate about, whether or not they pay anything.” What ended up happening is, they turned 18, we were doing well. We paid for college. That money never got touched.

Mohnish Pabrai (01:22:09):
Even now, Harina and I put 30,000 a year into their account. They have seven figure numbers in both their accounts. In both cases, they have taken unusual career paths and they’ve taken career paths that are very different from their friends. I think what happened is that they got full access to this money at 18, they could have gone and bought Ferraris or drugs or whatever they wanted. None of that happened at 18. Both of them gave me power of attorney to keep managing it, and I kept managing it. They had full access to look at it anytime, write checks against it, do whatever they wanted.

Mohnish Pabrai (01:22:47):
That’s still the case today. I don’t think even $10 got misused in that amount, but what that amount gave them, it gave them freedom. Like my younger daughter, she’s doing her PhD in psychology. She told us, ” I don’t want you to pay for it. I’m going to pay for it. I’m going to take care of everything myself.” She used that part of money as a backup. She went down a path where she knew she could do her thing without having anything, asking us for anything or any of that. The older one, Monsoon, she started a fund and the fund will take some time till it scales up, but she’s got backup.

Mohnish Pabrai (01:23:23):
I was really thrilled. It actually worked out like a fairy tale. I had a little bit of a seed of an idea for my dad that at 15, you treat them as adults. I said, “No, let’s move it to 14 or 13, and let’s actually amp it up where we give them Amexes and all that.” Then I also set up this fund for them and all of that. I mean, we have a beautiful relationship. I think their careers are unfolding really well. They talk to me about their friends. Their friends are miserable in different jobs they have, and they can’t leave those jobs because they are tied into that lifestyle and all this stuff. None of that is an issue for them.

William Green (01:24:01):
When you look back and you think about what you learned from getting really serious about David Hawkins and Power vs. Force, and this idea of building your life on truthfulness and integrity and the like. Do you feel like that set a lot of this stuff up, both the friendship with Warren and Charlie, the kind of partners you’ve got, the kind of children you’ve got? Because it seems like everything is built on trust and truthful and integrity. In some ways, the idea that Hawkins had that these very high levels of virtue and consciousness, the idea that this actually radiates out in every level of your life. I think it’s been born out in some ways. Is it a sort of experiment in Power vs. Force, this whole journey of Mohnish Pabrai?

Mohnish Pabrai (01:24:46):
I would say that what might have started as an experiment, I think the experiment has proved itself a long time ago. It became very obvious to me. It became obvious to me when I was reading the book that, that was going to work because he was giving examples of like Jesus and Mahatma Gandhi, et cetera, that it worked for. We are not at that level. Warren, Buffet’s not at that level, but 40,000 people show up every year. I think with Warren and Charlie, what really surprised me, and it’s really a credit to them that they can see through people.

Mohnish Pabrai (01:25:16):
I think they were genuinely able to see through or they must have seen through, that I’m a good person to hang out with. Charlie is very, he has a, both of them have very high standards, of especially the people that they spend time with. I still am in disbelief about that. Because the range of high-quality people that de they deal with is really high. They get the best of the best coming to them from all over the place. It’s been really good. I think part of it is not just the ethics. I think the ethics is important. It’s also extreme candor. There will be a lot of ethical people, but they may be reserved. Then I think if you’re reserved, you can’t build a deep friendship. You’ve got to be able to bear your soul.

Mohnish Pabrai (01:26:03):
I think that’s been part of it where I have found that with a few people, close people around me, I have learned the power of bearing my soul and I’ve learned the power of candor. I find sometimes that when I am very candid with, it happened the other day with a guy I don’t know so well, but he’s having a lot of struggles with his teenage son. I wasn’t sure if what I would say to him would get received properly or not. I tried it, so I gave him some very direct pointers on what might be a good way to deal with his issues with his son. He immediately became defense. I said, “Okay, this isn’t going to work. The receiver is not ready. The receiver cannot deal with the truth.” I just knew that, that person on so many levels was not going to be able to get to where I wanted to get to.

William Green (01:26:58):
It was interesting to me, because I went deep down the David Hawkins rabbit hole and I ended up reading multiple books…

William Green (01:27:03):
Keep down the David Hawkins rabbit hole, and I ended up reading multiple books of his multiple times. And so ‘Power VS. Force’ had a big impact on me. I think ‘Letting Go’ is also a very important and very practical, and grounded book. But then I got really into the more esoteric stuff like, ‘The eye of the I’ and things like that. I love that stuff because I’m a bit more of a mystic than you are. I think you struggled with this stuff that was less logical and rational. I was interested in that because I feel you took one idea from Hawkins that was immensely powerful about the importance of truthfulness. I think it’s a superpower to be truthful and candid. But I think you missed some of the other stuff that was really profound. And I also thought it was really interesting, I’m not saying this in any way as a criticism, I thought it was interesting.

William Green (01:27:46):
And with it also, it always struck me that you took truthfulness as the virtue you wanted to develop. Because when I read Hawkins, one of the things that struck me above all was actually kindness strikes me as one of the most powerful things he talks about where there’s something where he said, I think the line is, “Simple kindness to one’s self and all that lives is the most transformational force of all.” And I started to think, well, so he’s talking about all of these different virtues, that if you go big on truthfulness, kindness, compassion, stuff like that, it just changes your life because it changes your consciousness. So you’re going to draw different people into your life.

William Green (01:28:20):
So for me, truthfulness is really important although I do still lie and prevaricate and distort stuff, and particularly lie to myself. But kindness kind of became a very clarifying, I’m not saying that I’m kind the whole time. If you talk to my wife, you’d get a good sense of how irritating I can be, an irksome. But that to me was almost the most powerful idea from Hawkins, was if I just used that as my guiding light of trying to become kinder, and not just to other people, but to myself which was hard, that would change my life. So I was just curious how you thought about the other stuff that you’d learned from Hawkins.

Mohnish Pabrai (01:28:57):
Yeah, so in, 1999, I had these two industrial psychologists who basically gave me a bunch of tests, did 3:16 interviews with all kinds of people around me, and they finally gave me what I think of as my owner’s manager.

William Green (01:29:10):
It sounds like somebody’s getting whipped in the background in the room next to you. Is someone doing construction or something there, Mohnish?

Mohnish Pabrai (01:29:16):
Yeah, so actually we’ve got some blinds and shades that are going through. So I’m sorry about that.

William Green (01:29:21):
No, that’s fine. I was just curious. Now I know.

Mohnish Pabrai (01:29:24):
I thought that this mic would not pick up the distance sound.

William Green (01:29:27):
Yeah, it’s a good mic. But yeah, so sorry, keep going.

Mohnish Pabrai (01:29:29):
Sorry about that.

William Green (01:29:29):
So you mentioned these industrial psychologists.

Mohnish Pabrai (01:29:33):
Yeah, so the thing is that I had heard about Warren Buffett about five years before that. And I saw that many of the things that made up of Buffett’s what I thought were Buffett’s temperament and aptitudes, and all of that, seemed to fit well for me. I was trying to mirror a lot of stuff. These two guys said to me that, “Look, here’s the problem.” He said that, “You don’t know who you are, okay? You have no idea.” They said, “We don’t exactly what went on in your childhood. But what we know is the outcome of that you really don’t know is really who you are.” And he said that, “You have a desperate need to know who you are. And so what you’re doing is,” he says, “You are trying on different gloves, and you try on this Buffett glove and it fits, it looks like it fits really well.” And you say, “This is it.” So then I can just look at Buffett and just clone everything about him, and then that’s me.

Mohnish Pabrai (01:30:32):
And now I’m in nirvana state, and they said that doesn’t work. They said, it’s almost for sure that the template that makes up Buffett and the template that makes up Mohnish are not the same. It may be similar on the number of trades, but it’s not the same. So like for example, what I found in, when I heard about Buffett in, 1994 is, I had been playing bridge for six or seven years before I heard about. I love bridge. Even now I play many hours of bridge at work. And I said, “Look, there’s a similarity with bridge. There’s a similarity with analyzing businesses. There’s a similarity with investing. I seem to like all of that. Everything seems to fit.” And they said, “It’s not there.” And they said, “What really needs to happen is that you need to understand who you are and to be true to yourself.”

Mohnish Pabrai (01:31:21):
Part of that owner’s manual helped me look inside to see who I was. I’ve read that, we read that many times. What I’ve realized over the years is that, yes, they were absolutely right. It took me a long time to see this, that Warren Buffett is a very different person, that there may be some areas of similarity, but there are vast areas of differences. And those vast area differences are not easy for me to bridge if I were to try to do that. First of all, it would be a distortion to try to do that because I wouldn’t be true to myself so it wouldn’t even work. I think this notion you bring up about the kindness and so on, is I even when I read Hawkins, I took the stuff that was easy for me, right? I’m always looking for low hanging food. I’m always looking with the shortcuts. And I said, “Okay, this being ethical and truthful, I can do this in my sleep. It’s easy.”

Mohnish Pabrai (01:32:20):
The kindness is the much harder to do. I have learned over the years to become kind and to be kinder. But I think I have a long way to go. I think I have a lot of work to chop over there. Since there’s 22 years and three weeks left, maybe I’ll pick up Hawkins again and give that another whirl, see if I can incorporate.

William Green (01:32:44):
I think you should. I think some of the stuff in there is really profoundly important, and I suspect that Hawkins, if you believe in this stuff, was enlightened, and he’s telling you how things work from the perspective of enlightenment. What’s interesting to me is, when you see someone on one particular path coming up with the same ideas of people on other paths, that has tremendous credibility for me. So when I saw that Hawkins figured out the same things that the catalysts figured out, and the same things that these Tibetan Buddhas figured out, I just look at that and I’m like, “Ah, okay, that’s truth.” And there’s nothing I’ve seen in Hawkins yet. Even in those really esoteric books that I’ve thought, “Nah, that’s not true.” The catalysts see it a totally different way. My default has always been, every time I see someone differ from the catalyst, my default was always like, “No, those guys figured it out.”

William Green (01:33:35):
And then you would look deeper and you’d be like, “Nope, they actually came to exactly the same conclusion.” So I think you can go really deep on the Hawkins stuff, and I’d be interested to see what you come up with as you look at it with a different vantage point now than you had when you first looked at it. But I think what he’s basically saying is, that the more you elevate your consciousness and purify your consciousness, the more you draw good things into your life and good people into your orbit. But you can take any of these virtues and do it. So I think you went 120% on this one virtue of truthfulness. And I think it’s been a really fascinating experiment to see just how powerfully it works.

William Green (01:34:14):
I see it sometimes when I watch you give interviews, and I can see that there’s no gap between your thought and what you say, because you’re not trying to spin and think how to serve yourself. So there’s a removal of distortion in a way when you’re not trying to protect yourself. So there’s something very powerful. I remember once interviewing someone for, ‘The Great Minds Of Investing’ book that I wrote, and I said to you afterwards, “I really didn’t like that guy.” It was some billionaire that I’d been forced to interview. And you said to me, “He’s misaligned. He’s not telling the truth to you or himself.” His career went pretty ugly afterwards, his career and his life. You said, “You smell it. You smell that there’s something wrong there.” That resonates with me. I think we somehow sense whether someone has integrity and truthfulness but it’s not like a zero, 100, or a yes or a no. There’s lots of shades of gray here. But I think the further you move up that scale, the more powerful it is.

Mohnish Pabrai (01:35:16):
Well, I think this may be the biggest take home value for me all month or maybe all year for me. I think that I will dig deeper. I agree with you, I think the kindness variable, is very powerful.

William Green (01:35:30):
Well, think of Warren recently, I think it was in March, right? He wrote you this letter that you very kindly shared with me at that time where he said, I’ll read from it. He said, “Dear, Mohnish, I remain incredibly impressed by what you have done, are doing and will do at Dakshana. It’s simply terrific, far more impressive than what business titans, investment gurus and famous politicians ever accomplished. I’m glad my annual report doesn’t get compared to the Dakshana annual report. It’s an honor even to be quoted in it. With admiration, Warren E. Buffett.” I was thinking about that, why would a 91 year old guy with a fortune of over a $100 billion bother to write that letter to you? What do you think? It’s kindness, right?

Mohnish Pabrai (01:36:07):
I wonder about the same thing. But yeah, I think that thing is that Warren has been reading the Dakshana annual report since the first one came out. Many times I’d get scribbled notes from him saying, “Send me 20 copies for my kids and board members,” or whatever. And sometimes he’d say “You’re getting tremendous bang for the buck. Congratulations.” Or he’d write these chicken scratch notes, and send it back to me, probably one out of three reports or something, right? For him to send that letter, because I know that if I sit down to write a formal letter to someone, there’s a process. I have to get Debbie involved and all of that, and make sure it’s done. Debbie emailed me saying, “Warren wants to send you a letter. What’s the correct address we should use?” Right? So it takes time to do that.

Mohnish Pabrai (01:36:51):
I think that that letter shows a couple of things. One is; the way Warren and Charlie think about themselves is they genuinely think they’re the same as us, even though they’ve accomplished so much and they’ve done so much, they really don’t have an ego about it. So they really think it’s a human to human connection, right? So I think Warren sees that there’s a guy doing some good work, and I can take 10 minutes of my time, and I can encourage him, and maybe that’ll lead to some better work by him in the future. And also the other thing is that I think, for him, the philanthropic side is really important because his whole fortune and everything’s going, and I think he genuinely respects because he has the ‘Gates Foundation.’ He’s got the three kids that are getting money from him.

Mohnish Pabrai (01:37:43):
I think he genuinely appreciated the purity of the way induction operates. I think it’s very hard to find that in a nonprofit. I’ve looked for it because I wanted to just give someone a check. I don’t want to create a nonprofit. So I think he wanted to recognize that this is something someone is doing that is interesting, and maybe my letter will encourage him. I think when he says that, “I’m glad it doesn’t get compared to the Berkshire report,” he’s being facetious. Berkshire report is a gold standard. There’s nothing you can say the Dakshana report is better than the Berkshire report. That’s not the case.

Mohnish Pabrai (01:38:15):
But I think it’s his way of, it’s the same George Forest Reflexology idea. He thinks, and I think it changes the future of Dakshana in a positive way when a letter like that shows up for me. Because what it does for me, it reinforces the mission. I already am on a mission and I’ve got principles I’m following. Once I got the letter, I said, “There is no way I can even deviate. I got to just go keep banging on this, on this path.” I think that led to exactly what he wanted it to do.

William Green (01:38:50):
So when you look back now, is Dakshana the thing you are proudest of? You’ve been extraordinarily successful as an investor, but Dakshana, do you sense that’s going to be your real legacy?

Mohnish Pabrai (01:39:03):
Well, the way I think about it, William, is that I like to play games. You we’ve talked about that. I’m a game player, right? Blackjack and bridge, and Dakshana is a game. Everything’s a game, right? Pabrai Funds is a game and so on. I think as a game player, the other thing which actually resonates me a lot is, look at the future. Don’t look at the past, right? Remember what we talked about with Charlie. Basically my goal is to play these games that I love play. I want to get better at bridge, I want to get better at investing, I want to get better at Dakshana. I want to get better at being a grandfather at some point and so on. So these are games I like to play. I’m not focused on legacy. I’ve never really thought about legacy.

Mohnish Pabrai (01:39:52):
My ex-wife always said that, “Look, when I die, I want to be cremated, and then you just find the nearest toilet and you flush the ashes down the toilet,” which is a little bit alarming to Hindus. Because like in my case, my father and my mother, the ashes were put into the Ganges, which is where the Hindus want to put the ashes, and then they go in the Ganges, and that’s the kosher way of doing it. I actually was telling my kids that when I die, I want to be reunited with my parents. So the only thing I ask is, put me back in that same river. So I want to be with my parents again, right? And so I just said, “That’s the only thing I ask of you,” right?

Mohnish Pabrai (01:40:38):
But my ex-wife has no sentimental, sentimentality. She just said, “This is how I want it done.” I don’t think in terms of legacy after we are gone, one theory is we’re gone. There’s nothing, period. End of story. And another theory is that the soul lives on and all kinds of things and whatever. I am not at all focused on what people think or what people say or whatever happens after I’m gone. What I want to do in the next 22 years and three weeks is, maximize the output from this body and mind. That’s all I’m focused on in a way that makes the world better.

William Green (01:41:19):
Mohnish, I have about six pages more questions, and instead of exhausting you by going to discuss things like, Turkey and China and the like, and Tencent, and all of these things that I still want to discuss, would you come back in a couple of months and we’ll do this again, we’ll focus on different areas. Because I could do a double episode and split it up. But actually I’m really happy to leave it here. We’ve discussed some wonderful stuff. And if you’ll promise to come back, then I’ll let you go now.

Mohnish Pabrai (01:41:47):
Oh yeah, that’s great. No, William, I enjoyed talking to you. But I also think we shouldn’t overstay our welcome with others so less is more. We should do another session.

William Green (01:41:56):
We already failed on that front, Mohnish.

Mohnish Pabrai (01:41:59):
We should do another session, but we should give people some more time.

William Green (01:42:03):

Mohnish Pabrai (01:42:03):
But definitely, I enjoy the sessions, and I think this was a wonderful discussion for being I think. I got a lot out of it.

William Green (01:42:11):
It’s been a great delight for me and you’ve been a great force in my life. You’ve taught me a lot of stuff over the last few years by through cloning and many other things, and it’s been really fun to be on this journey with you. I’m looking forward to the next, how many years, 20?

Mohnish Pabrai (01:42:24):
Twenty two. Twenty two years and three weeks.

William Green (01:42:28):
What’s the origin of this number? Why have you picked this number?

Mohnish Pabrai (01:42:32):
The thing is that most humans, almost all humans, never think about their death. They don’t think about when they’re going to die, and they don’t think about, let’s say planning, okay? I didn’t exercise that part of a YPO retreat where they said to us, “Okay, you are 80 years old and yesterday you died and your best friend is going to deliver a eulogy. So write your eulogy as if you’re your best friend, and deliver it in five minutes to the other members.” So I was 40 years old when I did the exercise. So I had 40 years to make up because I’m trying to extrapolate how many grandkids I have and what’s going on in my life the next 40 years. Then the second part of the exercise after we did all of this is, they said that if something did not make your eulogy in that five minutes, why are you spending time on it? And that was very profound.

Mohnish Pabrai (01:43:26):
So basically it inverted where you look back and say, “What’s important?” That exercise is a couple of things for me. One is, the framing. Once you know that you have a certain amount of time, then it makes a lot of things clear. Like for example, my designer here was telling me that our kitchen should get redone. This home is 16 years old or something. If we have to redo the kitchen, we would probably have to move out for six months or something with all the stuff. And to me it was really simple. I’m not willing to disrupt six months of my life when there’s 22 years left. That ratio makes no sense to me. So I know the kitchen’s not going to get redone. Period. End of story, okay? If by some accident I’m away for six months, which is not planned because of kitchen, maybe we’ll think about it.

Mohnish Pabrai (01:44:15):
It made that decision really easy. If I had not had that kind of framing, I might have said, “Oh yeah, this would be nice to have, and this would be better at whatever else.” But it just made the decision a no brainer. It also made it very clear to me that I won’t move again. I said, ” I have 22 years left. I don’t want to spend time moving. It’s just a waste of time.” So the 22 years makes a lot of things really simple. It also makes it simple when you meet some yo-yo for lunch, that you’re not going to meet them again because there’s only 22 years left. How many yo-yos do you want to tolerate? And I talk to Guy about this, and Guy has an infinite number of tolerance for yo-yos. I’m trying to work on that with him, but I haven’t made much progress yet. So I think the framing, the 22 years makes a lot of decisions easy.

William Green (01:45:02):
It’s very interesting. So it’s very similar to what Nick Sleep is doing with ‘Destination Analysis.’ Nick said to me recently that he’s in the same way that with Nomad, with the hedge fund, he used to think about, “If I’m sitting on a veranda sharing a glass of chilled white wine with a limited partner from the fund in ten years time or 20 years time, will I know that I’ve treated this person equitably and decently?” And so he’s like, “How do I get to that desirable destination? What sort of behavior, what sort of input?” He said to me recently, ” I’m doing the same thing with giving away my money. I’m thinking, in 20 years time, will I look back and think, I gave that money away well.”

William Green (01:45:39):
And he’s thinking, “What are the inputs to get to that point?” He also said a beautiful thing that you’ll approve of which is he said, “The toughest thing is that I’m doing it based entirely on an inner scorecard.” And he said, “But the greatest thing is that I’m doing it entirely based on an inner scorecard. I’m not looking to please anyone else. I’m looking to get to this destination in a way that I can look back and be like, yep. I did that well.”

Mohnish Pabrai (01:46:02):
Yeah. I think you had asked about the legacy and Dakshana and so on, the thing I feel about Dakshana is that it’s actually the outcome of very strong adherence to a few principles, nothing else, that’s it. It’s like four principles and being dogged about. The idea came from somebody else. It’s not my idea. It’s way beyond my pay grade to come up with something like Dakshana. Somebody else had the idea, I just had to clone it, right? So the core of what Dakshana is, is I cannot take credit for it. Somebody else did that. And the other thing is that these principles that I’m following, these are very basic profit principles on giving money away. He’s talked about it from time to time. I just absorbed them, right? What I find magical about Dakshana is that we adhere to these principles and magic happened on the other end. It’s amazing that the way the magic happened.

Mohnish Pabrai (01:46:56):
And because it has such a massive multiplier effect, because when we affect one life, we affect the life of a whole extended family. And we affect the life of a whole extended family forever into the future. We’ve affected the lives of 1000s of families in a very positive way already. I hope in the future, the 1000s turn into millions. I don’t know how we’ll do that, but I hope in some way we make it even stronger, right? So that’s why I want to look forward. I don’t want to look back. Just that. And all of that is a game, at the core of it’s a game. I’m a game player and I just want to play this game the best I can play, and that’s the end of it. I don’t really care what other people think or say.

Mohnish Pabrai (01:47:41):
The inner score card exactly what Nick Sleep says. I couldn’t care less what people say or do about Dakshana. People come up to me, and people write letters all the time and say, “I like Dakshana, but would you please also do this? Or would you please also do that? Or would you do this?” My kindness goes out the window at that point. And my response, which is a very unkind response you might say is, I say that, “Mahatma Gandhi said,” “Be the change you wish to see. Be the change.” And I said, I tell them, “I leave it to you to do that. All the best.” Right? So I say, don’t put a gun on my shoulder and fire it. Go fire that gun yourself so if you feel that Dakshana should do X, Y, Z, you go do X, Y, Z, and take it from there. And I know usually hear back from those people. So who knows what they’re thinking.

William Green (01:48:33):
Yeah, you are playing the right game for you. And part of your superpower over the years I think has been your refusal to diverge from your game. For example, even the fact that one of your principles with Dakshana was, “We’re never going to pay a bribe,” whatever.

Mohnish Pabrai (01:48:46):

William Green (01:48:46):
Once you just decide, this is the way I’m playing the game, it’s like saying, “I’m just going to tell the truth.” It’s so clarifying. It removes so much distortion. So I feel we were talking before about how you were willing to change your mind, but there’s also this incredible stubbornness in just sticking to the right game and the right way to play it for you.

Mohnish Pabrai (01:49:07):
Yeah. Well, some things are not negotiable for Warren Buffett and Charlie Munger. They’re not negotiable for me. And actually our team at Dakshana, I think half of them, would quit if we pay the first bribe, okay? So I think, self interest. I would implode the organization if I did that. Basically another good reason not to pay a bribe is, I’m going to have a lot of a 100 other problems with my hand after that.

William Green (01:49:33):
Yeah. You also got incredibly lucky having the Colonel who I-

Mohnish Pabrai (01:49:36):
Oh, yeah. Like I said, I think the universe conspires to help people.

William Green (01:49:40):

Mohnish Pabrai (01:49:40):
When you’re doing the right thing, the right people show up.

William Green (01:49:43):
Yeah. This is what I suspect Hawkins has right, is that when you get your inner life right, and you start to behave in a particular way, magical things start to happen. And I have no rational basis for this mystical belief, except that I watch it happen. I see it happen to you. I see it happen to Arnold Van Den Berg. I see all of the pieces shifting when people change the way they behave and they think.

Mohnish Pabrai (01:50:10):
That’s correct. Well, William, it was such a pleasure.

William Green (01:50:14):
It’s always a joy. Mohnish, I’m going to enjoy being on this journey with you I hope for the next 22 years and possibly even more. Who knows, it’s going to be fun to watch.

Mohnish Pabrai (01:50:21):
Yeah. I’m hoping it becomes a little more, but then that’s bonus time, which is awesome.

William Green (01:50:24):
Okay. Good. Excellent.

Mohnish Pabrai (01:50:26):
All right.

William Green (01:50:26):
Mohnish, it’s been a great pleasure. Take care. All right. All the best.

Mohnish Pabrai (01:50:29):
Talk to you. All the best. [inaudible 01:50:30]

William Green (01:50:29):

Mohnish Pabrai (01:50:31):
Bye. All right, folks, thank you so much for joining us today. It’s always a blast chatting with Mohnish, and I hope you enjoyed our conversation as much as I did. If you’d like to learn more from him, you may want to check out chapter one of my book, ‘Richer, Wiser, Happier.’ It really distills a lot of the most valuable lessons that Mohnish has shared with me over the years about investing in life. I’d also really encourage you to read, ‘Power VS. Force’ by David Hawkins, which had a life changing effect on Mohnish and me to be honest. If that book resonates with you, you may want to do a deep dive and read some of Hawkin’s other books, including, ‘Letting Go,’ which is one of my personal favorites. I also love some of his more esoteric spiritual books, which have slightly mystifying titles like, ‘The eye of the I.’.

Mohnish Pabrai (01:51:17):
I’ll list some of his books in the show notes for this episode in case you are ready to follow me down this particular rabbit hole. In the meantime, many thanks to all of you who’ve written to me over Twitter with questions and comments. I’m always delighted to hear from you. If you’d like to follow me on Twitter, my tagline is, ‘williamgreen72.’ I’m happy to say that I’ll be back in a couple of weeks for a really special episode with Guy Spier who’s a renowned hedge fund manager, author of, ‘The Education of a Value Investor,’ and a very close friend, not only of mine, but also of Mohnish’s. So until then, stay well, and thanks so much for listening. Take care.

Intro (01:51:55):
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  • Mohnish Pabrai’s website, Chai with Pabrai.
  • Mohnish’s book, The Dhando Investor.
  • Learn more about Mohnish’s Dakshana Foundation.
  • Stig Brodersen’s latest interview with Mohnish about stock investing.
  • William Green’s book, “Richer, Wiser, Happier” – read the reviews of this book.
  • Mohnish explains how “Richer, Wiser, Happier” transformed his investing approach.
  • David Hawkins’ books “Power vs Force,” “Letting Go,” and “The Eye of the I.”
  • William Green’s Twitter.
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