Summary

The best investors are worth studying as they are practical philosophers, those seeking worldly wisdom. Their influence and practices can help us become better thinkers and decision makers. The purpose of this book is to share ideas worth cloning

Key Takeaways

Studying investing is not only about learning how to make money, but learning how to think and make decisions

Learning how to think by probability will do you more good than any book on investing. A dispassionate analysis of the facts and probabilities is one of the best mental habits you could build. They key lies in understanding how to optimize the odds for success

Game selection is key. If you don’t have an edge, don’t play. There are many ways to make money, but they all require an edge

Pabrai - clone the best ideas and habits of the giants

People have a bug in their DNA where they feel shameful stealing the best ideas of others. DON'T!

Clone the best ideas but be open to personalizing it to your personality and context

Whenever you come across a principle that is correct but that most of humanity doesn’t understand or isn’t willing to follow, make the most of it! It’s an enormous competitive advantage

Templeton - to get different results, you must act differently than the crowd

You have to have the inner calm, willingness, and disregard of what other people think. You have to be ok with being lonely, different, and misunderstood for long periods of time. These investors favor winning and being right than sticking with the crowd

Beware your own emotions and aim to take advantage of others’

Beware your own ignorance, diversify broadly, have great patience, study the abysmally performing companies and industries, don’t chase fads, focus on value and not outlook

Mastering yourself is of supreme importance

Howard Marks

The future is ever changing and it is your job as an investor to prepare as well as you can, knowing what you and do not know, making the best decision possible. Be humble and know that you are never immune from forces greater than you

Marks is a master in risk, cyclicality, probabilities, playing the odds, seeking ideas in unloved areas

Understand how big of a role luck plays in your success

The question to ask is “how cheap is this asset given what I think it’s value is?” Don’t worry if it’s sexy or not, just look at value

Everything that is important about investing is counterintuitive and everything that is obvious is wrong

Beware the pendulum of history. Know your history but don’t expect it to exactly repeat. Never rely on things that cannot last. Be ready for change, for it will come

Structure your life, portfolio, and relationships to be robust. Don’t maximize. Be ready for change. Adapt and evolve

See reality as it is and adapt to it. Don’t fight it. If things are frothy, pare back. When there is opportunity, seize it

Jean Marie Eveillard

Eveillard was equipped to outperform over the long haul, avoiding all tech stocks in the late ‘90s. He underperformed for years, lost most of his investors, but didn’t budge. He was eventually proved right, seen as a sage, and funds rushed back. This takes great fortitude and the right temperament to go against the crowd. However, he was structurally fragile. Investors redeemed at horrible times, forcing him to sell when he least wanted to. He was also pressured by internal stakeholders at his mutual fund

Don’t be in a rush to get rich. The key is safety, capping your losses. The gains will take care of themselves. This is resilient wealth creation

It is all about surviving the dips. That’s the first step, even better is the ability to take advantage of them

Joel Greenblatt - simplicity is the master key

Figure out what it is worth, and pay less for it

Stocks follow earnings (eventually)

Take a simple idea and take it seriously

Seek to reduce the complex to its essence. Only true understanding allows for this to happen

Don’t make your biggest investments in the companies that can make the most, but in those you are most confident to not lose

Cheap + good business is the holy grail

For most people, the ideal strategy is not the one day of the highest returns, but the one you are most likely to stick with in bad times

Nick Sleep and Qais Zakaria

These two ran Nomad for 13 years and had wildly successful returns in a very concentrated portfolio

They used what they call destination analysis, aiming to understand where a company is, where it can go in 10 years, and what would help it get there or veer it off course. This type of inversion or reverse engineering is wildly helpful in all areas of life. Where do you want to be at the end of your life and what can you do today to help you get there?

They also took a simple idea seriously. They intensively researched companies they thought would do well over 5-10 years and spent all their time reading annual reports and talking to companies

They came up with the model of "scale economics shared." Amazon and Costco perfectly follow this playbook. As they get bigger, they use their scale to get lower prices and pass those savings onto consumers, fueling the cycle even further.

Make quality the pursuit - in your investing, decision making, and life. Nomad wasn’t about raking in money, but a metaphysical experiment to see if pursuing quality would work. It did.

Focus on the things with the longest shelf life, not the ephemeral

Must look long term and have the capacity to suffer. This is another principle that applies far beyond investing. Sacrifice today so that you can have more tomorrow

Tom Gaynor - The best investors build habits that compound over time

Seek small marginal gains that are relentlessly followed. Time is the enemy of bad habits, the friend of the good

Don’t let perfect be the enemy of the good. A good enough habit you follow is far superior than the perfect habit you don’t

Directionally correct, moderate efforts demonstrably work

Find good things that last and stay the course. Don’t be caught up in the frenzy and fads

The name of the game is longevity, not perfect maximization

You don’t have to be extreme to get extreme results

Gaynor considers himself a node in a massive neural network. He cultivated relationships and has many people helping him and rooting for him to succeed - the compounding of goodwill

Forget about perfection, instead focus on continuous improvement that can compound over time. This is the aggregation of marginal gains

Write down good habits as well as a list of things to not do

Charlie Munger - aim to be consistently not stupid

Inversion is a really powerful thinking habit. Before trying to help, first ask how you might harm. Must have great clarity on what not to do

Collect stupidities and learn vicariously through the mistakes of others

Rub your nose in your mistakes and learn from them

Rely on first principles, don’t try to be perfect, be patient, adopt some guidelines and restraints to handicap massive mistakes

Gain self awareness and beware psychological biases, hubris, the desire to get rich quick

Learn to destroy your best loved ideas

Pre-mortems and devils advocate reviews are excellent ways to mitigate your biases

Be aware of your emotions and physical state before making a decision. A question as simple as “are you hungry or tired?” Can help your decision making

Expect your portfolio to hit 50% drawdowns at some point. The point is to be ready and to be able to act rationally on the hard times. You have to instill good habits before you need them

Be proud not only of your results, but also how you’ve attained them

Life is a series of opportunities to learn how to behave well in difficult circumstances

Nothing is more essential than simply surviving​

Build up wealth to be independent, to live the life you want without having to compromise or answer to others

Arnold Van Den Berg - survived the holocaust as a child and this had a tremendous impact on his view on life

Being rich consists of money, happiness, and peace of mind. Use your wealth to help and serve others

What I got out of it

Really enjoyable book with some tangible takeaways for your life, investing, and relationships. Love his approach of highlighting eminent investors he admires and helping the reader understand how it can apply outside of the field of finance