How the Greatest Investors Win in Markets and Life | William Green | TEDxBerkshires

[Music] [Applause] my fascination with investing began when i was in my 20s my brother andrew and i had sold an apartment that we owned in london and i had to figure out what to do with this relatively modest windfall i started studying the stock market and i quickly became obsessed i wanted to become financially independent but i didn't much fancy the idea of spending my life in an office taking orders from an annoying boss and when i discovered the stock market i thought this is spectacular i can get rich without getting my hands dirty there was something almost magical about the idea that you could make money just by using your mind there was only one problem i had no idea what i was doing i knew nothing about business or economics i have no mathematical skills at all if i'm lucky i can count to about eight with a calculator but i had one tremendous advantage which is that i was a journalist writing for magazines like forbes and fortune which meant that i could actually interview all of these legendary investors who did know what they were doing over the last 25 years i've spent hundreds of hours interviewing more than 50 of the world's greatest investors including many billionaires i got to do things like travel to the bahamas to spend a day with sir john templeton an 86 year old billionaire who was probably the greatest international stock picker of the 20th century in the days after 9 11 when the world seemed to be falling apart i got to spend several days with bill miller who was the most famous mutual fund manager of his generation the stock market was crashing but miller was relaxed and cheerful i stood beside him watching while he bet hundreds of millions of dollars on beaten down stocks that everybody else was desperate to sell i remember saying to him you've got to be so ballsy to do what you do and i said yeah but i've also got to be right so i became captivated by this tiny elite of great investors who defied gravity by beating the market over many years i wanted to understand what insights principles character traits and habits enabled them to win and could i become more like them the greatest investors have taught me not only to invest better but to think better and possibly even to live better they taught me that it's all about simplicity subtraction and not being a fool let me tell you what i mean one of the most famous investors i've interviewed is called joel greenblatt his investment returns are the stuff of legend his hedge fund returned about 40 a year over 20 years at that rate one million dollars turns into 836 million dollars i think you'll agree it's a pretty nifty trick a few years ago i'm sitting on greenbat's patio in the shade in the hamptons and we're sipping iced tea and i'm gazing out at his magnificent view of the atlantic ocean and greenblatt is looking sun-tanned and relaxed he's wearing jeans and loafers with no socks and i say to him what's the secret of investing and he says william it's incredibly simple and it all comes down to this it says figure out what a business is worth and then buy it for much less that's it i'm looking at him and i'm thinking this is so cool here's this guy who's cracked the code of how to beat the market he's distilled all of the complexity of investing into one simple principle i don't need to waste my time trying to figure out whether stock market is going to rise or fall i just need to value a business and then buy it stock for much less than it's worth but then i started to worry the fact that this is simple doesn't mean that it's easy and when i started to think about this honestly i had a really unsettling realization i thought well i don't actually know how to value a business i'm not even that interested in valuing businesses so i shouldn't be buying individual company stocks because this is not a game that i'm equipped to win and if there's one thing i've learned from the greatest investors it's that you don't want to play games that you're not equipped to win the more i started thinking about simplicity the more i realized that it's a huge advantage to have a few simple robust deeply held beliefs a simple set of guiding principles why because we live in an extremely confusing world and these simple principles can help us to they can guide us through the fog so we don't get too confused i began to realize that the ability to keep things simple is actually a superpower it's one of the secrets of success both in investing and life then i started to get excited because i realized everywhere i looked i found more examples of simplicity going back thousands of years for example i remember studying the old testament and learning that it contains 613 commandments and i thought who can remember so many rules let alone obey them all that's when i realized well this is why we needed a top 10 list the 10 commandments but if you actually try to list the ten commandments how many of them would you get right thou shalt not kill uh thou shalt not steal thou shalt not covet thy neighbor's wife the last time i tried this i got three out of ten right but i graded myself dishonestly and gave myself six out of ten and i was wondering does that actually violate one of the ten commandments and then i thought i don't know i can't remember but then i realized i remembered that there was a great sage 2000 years ago who taught the most simple and timeless thing of all the sage's name was hillel and he said he was asked to teach the entire old testament in the time that he was standing on one leg and he replied do not do to your neighbor what is hateful to you all the rest is commentary and you know what the the old testament actually sums this idea up in just three hebrew words which translates as and you shall love your neighbor as yourself simple right you bet over the years i saw that many of the greatest investors have this ability to simplify the game of investing but what i also discovered is that they lead surprisingly simple lives i remember spending a couple of days with a famous investor named tom gainer at his office in virginia and it felt really like being in a extremely peaceful library at one point dana said to me how many times have you heard my phone ring and i thought actually i haven't heard the phone ring more than once in the entire day how come well gainer had actually consciously removed all of these distractions that could break his focus another time i i was with an investor named laura garrett's and she's one of america's leading investors in foreign markets and i said to her how do you structure your time we're sitting there eating sushi in a restaurant in new york and she says well every friday is a creative day and i don't schedule anything at all on fridays and she basically she just goes to sit by a stream near her home in utah and she reads a book she writes in her journal as a way of synthesizing her thoughts and gareth has traveled to about 75 countries but she told me one of her favorite places on earth is a tiny tiny island just off the coast of australia where there are only eight houses and she often retreats there with a stack of books and she said you actually have to get your groceries taken over there with you on a boat at the start of this trip and she said to me there's no internet access her telephone her cell phone rarely works when she's there but she said that's just fine because her disconnection from the noise and the hubbub and the mayhem and the frenetic pace of modern life is actually part of her competitive advantage it frees her up so that she can think so that she can concentrate on the simple essence of her work which is to analyze companies and to think about countries and stocks and what the future holds what i started to realize is that all of the greatest investors have this obsession with with reducing mental clutter so that they can focus on what's most important to them and what they're best at and one way that you could describe this is actually the art of subtraction and this idea of the art of subtraction has had a profound impact on my own life like all of us i'm constantly bombarded by emails and phone calls and twitter notifications and zoom meetings and all these other guilt-inducing reminders that i should constantly be doing more and whenever i'm feeling scattered or stressed or overwhelmed i remind myself of what i've learned from gainer and garrett's which is i don't need to do more i actually need to do less i try to unclotted my schedule i think about the few simple priorities that really will make a difference in my life writing reading meditation spending time with my family exercise that's it pretty much everything else is peripheral i'm always thinking i'm always asking how can i reduce complexity how can i simplify my life what can i subtract there's one other very simple idea that's changed the way i think and live and it comes from charlie munger who has been warren buffett's partner for over 40 years manga is one half of the most successful investment team that ever lived and i was so excited to meet him that i actually traveled 3 000 miles to los angeles for a 10 minute interview mungo was 93 years old and he looked frail in this dark baggy suit but his mind was as beautiful as ever i'm sitting there almost knee-to-knee with this legendary icon and he's peering at me through these spectacles and he explains in this deep croaky voice that what you really want to do in life is focus on one thing focus relentlessly on this one thing don't be a fool manga is one of the smartest people on earth but he told me that he spent an inordinate amount of time focusing on actually reducing what he calls standard stupidities and idiotic behavior what do you explain to me is that it's very difficult to be smart but it's actually surprisingly easy to be non-idiotic and it gives you a tremendous advantage if you work systematically and consistently to reduce your own stupidity over the course of your lifetime but how manga tends to collect many examples of disasters and then he asked himself what idiotic actions caused this terrible outcome once he's identified these idiotic actions these foolish actions he says well let me not do that this habit of of thinking first about what not to do turns out to be an incredibly helpful strategy when it comes to investing if you want to be a successful investor the first thing you want to do is say well how could i be a terrible investor thanks to manga this is a method that i've used really consistently over several years for example we recently had a family dinner and my daughter madeline says dad shouldn't you be buying bitcoin and there's a part of me that's thinking yeah everyone's getting rich overnight and cryptocurrencies are surging and i want a piece of the action but then i remind myself well one thing that terrible investors do all of the time is they buy overheated assets that they don't actually understand just because they can't bear to miss out on the action will bitcoin continue to surge is it a fad i don't know i have no idea but i do know that betting gambling wildly and without any knowledge on whatever's hottest today tends to be a standard stupidity it's a fantastic way of getting yourself in trouble and knowing that i have a simple rule i'm not going to do it as manga told me once you actually focus on systematically reducing standard stupidities in this way it's an incredibly helpful way of just keeping yourself out of trouble but it turns out that this is a wonderful strategy not only investing but actually in life manga told me that if you want to have a happy life you should start by looking at all of the idiotic behavior that is likely to guarantee that you'll have a miserable life and then don't do that to give you an example manga has this list of standard stupidities of idiotic behavior that gets in trouble where he says okay so don't become addicted to drugs and alcohol you should be more reliable if you want to if you want to have a terrible life be unreliable harbor grudges harbor resentment seek revenge and then he said also indulge in envy which he describes as the dumbest of the seven deadly sins because it's not even fun and i started to realize that actually this is an incredibly helpful strategy in my own life and i really wanted to adopt it and so recently i was having dinner in new york city with a great investor named matthew mclennan and we drank two bottles of superb wine and i live about 45 minutes outside new york city so i take the train home and my car is sitting there waiting for me at the train station and it's about a seven minute drive back to my house and it's almost midnight i'm tired and i want to go to bed but i'm thinking am i drunk i'm thinking well i don't think i'm drunk i don't feel drunk but what's the downside if i'm wrong what happens if i'm stopped and i lose my driver's license what happens if i hurt someone then i ask myself what would munga do and the answer is pretty obvious this is an idiotic bet the downside is just catastrophic so it's something i just shouldn't do i shouldn't drive so i call my son henry and he comes to pick me up and i leave my train my car at the train station what i've learned from the greatest investors is that nothing is more important than simply avoiding catastrophe because if you want to succeed both in markets and in life the first rule is that you have to survive you have to stay in the game over the last 25 years i've spent an inordinate amount of time interviewing the greatest investors and when i started out i thought well i had this fantasy that i was going to become fabulously rich but after interviewing all of these super rich investors the truth is that i gradually realized well the money is not that important after all these are people who've hit the jackpot financially they're billionaires who own private planes and palatial homes and whatever other toys and baubles you can imagine and the truth is those toys and baubles do give them some pleasure but probably not as much as you would expect sure the money gives them financial independence which is very valuable and they don't have to worry about paying their bills which is also wonderful but what gradually dawned on me through all these interviews over all of these years is that what really matters most in terms of their day-to-day happiness is the most obvious thing of all it's the quality of their relationships i remember interviewing a legendary investor named ed thorpe and i asked him what makes for a truly abundant life and thought told me who you spend your time with is probably the single most important thing in life and i have to tell you there's something wonderfully reassuring about this for me because what i realized is i don't need to fantasize about becoming fantastically rich i don't need to dream that the money is somehow going to make me happy i have to focus on building joyful relationships with my family and friends by trying to spend more time with them and trying despite all of my flaws to become more loving and kinder i'm pretty convinced that's the greatest investment of all

Channel: TEDx Talks

Views: 54,470

Keywords: Business, Decision making, English, Happiness, Investment, Life, Money, TEDxTalks

Id: zV5QUlUlzrk

Length: 17min 42sec (1062 seconds)

Published: Wed Oct 27 2021