Pod Insights BigDeal Go From $10k to $1M in 3 Years With This Strategy | Mohnish Pabrai About this episode My new book Own Or Be Owned is out now! I wrote Own or Be Owned to answer one question: How do you make more money, less miserably? I broke it into the 12 Profit Levers… The 12 levers I've seen determine whether you print cash or hate your life. Check it out:
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The best investors in the world aren't gambling. They're copying. They're patient. And they're finding asymmetric bets where the downside is capped and the upside is unlimited. Mohnish Pabrai is a legendary investor who turned $1 million into $14 million in five years by openly copying Warren Buffett's playbook, and now manages $1.4 billion using the exact same principles that built Berkshire Hathaway. No secret formulas. No complex algorithms. Just discipline, patience, and the willingness to look for weird things that make no sense. In this episode, you'll learn:* Why you don't need original ideas to make money and how shameless cloning beats innovation every time* The 10 bet rule: why concentrating your investments in a few great businesses outperforms diversification by 10x* Why selling too early is the biggest mistake investors make* The downside protection framework: how to structure bets where you can't lose more than 10% but could gain 100x* Why most people fail at investing because they chase what's popular instead of looking for anomalies that make no sense
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(00:00:00) Introduction: Never Sell Your Winners Too Early
(00:00:34) The Laws of Investing: Why Buffett Wrote the Physics of Money
(00:01:04) Spend Less Than You Earn: The Nonlinear Power of Compounding
(00:02:02) The 168 Hour Week: Don't Quit Your Job, Build Your Side Venture
(00:03:46) Entrepreneurs Don't Take Risk: The Upside Without Downside Framework
(00:08:12) Selling Skills and Unique Value Propositions: The Only Two Things That Matter
(00:09:58) Shameless Cloning: Why Original Ideas Are Overrated
(00:15:43) The 650K Lunch: How Warren Buffett Led to a Friendship with Charlie Munger
(00:18:12) From One Million to Fourteen Million in Five Years: The Buffett Approach in Action
(00:23:51) If Wealth Is Lost, Nothing Is Lost: Surviving 2008 and the Character Test
(00:26:08) Finding 100-Bagger Investments: The Turkish Company That Went 100X
(00:27:11) When to Sell: Only When It's Egregiously Overpriced
(00:29:59) Looking for Anomalies: The Mental Model for Total No-Brainers
(00:31:57) The Level 3 Communications Bet: Tripling Money on Fixed Income
(00:36:31) Pokemon Cards and Rembrandts: Understanding Asset Classes and Circular Competence
(00:41:30) The Truth Framework: Why Lying Weakens You and Honesty Creates Strength
(00:47:26) Screening CEOs: The Competitor Question That Reveals Everything
(00:49:35) A Day in the Life: Managing 1.4 Billion with Four People
(00:52:57) Warren's Pinball Business: The Blueprint for Finding Great Business Models
(00:55:58) Ambitious But Lazy: The Filter for Two-by-Four Business Opportunities
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Transcript 10,161 words · 4 speakers
Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.
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0:26 Speaker 01 The key to investing is that when you find yourself in the happy position, don't sell it when it's overpriced. Only possibly sell it when it's egregious.
0:37 Codie Sanchez? My guest is Monish Puppari, the renowned investor who built his fortune by openly copying Warren Buffett. You're going to get the best business models to start if you're brand new. If you want to build real wealth without betting the farm, this is the one to save and listen to twice. It's also very good for you to send your team.
0:54 Speaker 01 My biggest mistakes and greatest learnings have been to become more patient. The laws of investing are like the laws of physics, and I think this Buffett guy wrote the laws of investing. Whether you believe in gravity or not, it's going to affect you. If someone followed Buffett's approach to investing, they would do better than the 98%.
1:15 Codie Sanchez? What is your mental model that you like the best for deciding the next bet you're going to take?
1:20 Speaker 01 Total no bet. So...
1:24 Codie Sanchez? What do you think most people get completely wrong about money?
1:30 Speaker 01 Well, I think the single most important thing is you spend less than you earn. We may live for 80, 90, 100 years, and so the important thing is that when you get started in your career, in your early twenties, that right from the beginning, you're putting something away. And those early dollars being put away have a huge impact because of the nonlinear aspect of compounding. Humans have difficulty getting their arms around the notion of compounding, you know, how money grows over time if you leave it, and so on. And so...
2:13 Speaker 01 Being able to put something aside a little bit all the time is a very good habit.
2:19 Codie Sanchez? Yeah.
2:20 Speaker 01 I started.
2:20 Codie Sanchez? What would you say to somebody that was young, stuck in their job, doesn't think that they could make it? What would you tell that person?
2:28 Speaker 01 One of the things to keep in mind is there are one hundred and sixty eight hours in a week. Your employer wants forty hours. There's still another hundred and twenty eight hours left. And so even when you take out time for eating and sleeping and showering and everything else, you have at least another forty, fifty hours that you could do something else. And so I think it's very important to live close to where you work. So you don't spend a lot of time commuting. And you effectively have enough time for a second venture or second job. And because someone else is already paying your rent and groceries and everything, you don't need the second venture to feed you.
3:11 Speaker 01 And we are now in a knowledge economy. So a lot of things that people will want to do does not need capital. It just needs what's between your ears. It just needs you to be creative, to think about what could be, should be, can be, et cetera. So you come up with an idea. You have the time, forty, fifty hours. You keep your job, do not quit your job. You try your idea. Let's say it doesn't work. No problem. You go back to square one. Think of another idea.
3:48 Codie Sanchez? So do you think a lot of people give bad advice when they tell you to burn the bridges, quit your job, go all in today?
3:54 Speaker 01 Yeah, I don't think you should do that. I think that's a, that's a one way ticket to hell.
4:00 Codie Sanchez? Me too.
4:02 Speaker 01 No, I think we, we want, like I said, we want upside without downside. That's how I invest, right? So the, the way and people think entrepreneurs take risk. Entrepreneurs do not take risk. They do everything in their power to minimize risk. They look at this whole equation and say, how do I crack this without taking risk? Venture backed startups are less than one tenth of one percent, maybe even one hundredth of one percent of the total number of startups in this country. Ninety nine point nine nine percent of the economy is non-venture backed. The Chinese restaurant, the laundromat, the window washing business, whatever, right? None of those companies are venture backed.
4:47 Speaker 01 So that is where most of the American economy get its gets its growth from. And that goes unreported, right? I mean, uh, some of the biggest businesses we have today in the U S and the world were not created uh with venture capital. Ford Motor Company, Walmart, Microsoft. You know, the most of these companies, IKEA, uh, were created on a kitchen table with nothing. And uh, so if you keep your job and you try idea number one and you go all in on that, you got the time and it gets some traction. When it gets enough traction where you're making more money in your job,
5:31 Speaker 01 you just switch, switch roles, you quit and go to the other side. If it doesn't work, um, you go back to square one, idea number two. In my case, it was the third idea that I came up with that got traction. The first two didn't work, but the third idea took off. And, and after, after nine months of doing both, the third idea, which was my I T services company, the first company I went and ran, uh, basically had enough cash flow that was exceeding what I was getting paid.
6:13 Speaker 01 So I switched because I was desperate to work a hundred hours a week, right? And I didn't want to be doing two things, I wanted to do one thing.
6:20 Codie Sanchez? But was that only after that replaced your salary?
6:23 Speaker 01 Yes. After nine months of banging at doors and doing things, I had three clients and those three clients were giving me enough cash flow that it exceeded my salary. And that's when I quit. So effectively, it was risk free because I never went to a situation where I was without cash flow, without a paycheck or any of that. And then very quickly after that, it doubled the salary I was making two or three times what I was making and it just kept going and I, the business was growing so fast that I kept reinvesting and, and all of that. Uh, so that company,
7:03 Speaker 01 I emptied out my 401K. I was twenty five. I had about thirty thousand in my 401K. I took that to zero because I said, if it, if it fails, I can go back and start over, not a problem. And I took every credit card I could get. So I had seventy thousand in unused credit card credit limits available. And as the company started growing, I used every single one of those. In fact, they were all maxed because the company was growing so fast that by the time I got paid from clients, you know, I had to cover that. And then about two years after I started, I met a banker who converted all of
7:45 Speaker 01 that into a line of credit, paid off all my credit cards. And I said, hallelujah.
7:51 Codie Sanchez? So if a young person is listening to this and they're like, I don't have cash right now. I don't know how to start the business. What is the way that you pitch people to give you a credit card, to give you capital? Like, how do you talk people into giving you money?
8:04 Speaker 01 The founder of FedEx, Fred Smith, he had payroll coming on Monday, in the early days of FedEx, and he couldn't make, meet payroll. He knew he couldn't meet it. He went to Vegas, okay, played blackjack, won at blackjack and made payroll on Monday. Okay. And if he had lost at blackjack, which could have happened, that probably should have happened. There's no FedEx, you know, so all these businesses go through these, you know, extreme situations. So bottom line is the number one skill you have to have when you're starting any business is you have to have selling skills. You need selling skills to get clients. You need selling skills to get a
8:47 Speaker 01 banker to give you a loan. You need selling skills to get your friends to give you their credit card. But more important than, I think more important than selling skills.
8:57 Speaker 01 Is unique value propositions. So capitalism is brutal. Anytime there's a company that makes a lot of money, there's one hundred other people thinking about how can I take that business away from them, right? So the nature of capitalism is creative destruction. Someone opens a sushi restaurant, they do really well. There'll be ten other sushi restaurants opening, right? So the important thing that we ever look at is before we embark on a business, we have to really pay attention to
9:37 Speaker 01 how is this unique? And how is this sustainable? So we have to be kind of careful observers of the world around us. And we have to think about how could this world around us be different? And can I participate in making that difference? So we can come up with something where there is some kind of a business idea or some kind of a business that you can come up with that doesn't exist today. But there's a need for it. That's it, you know? Anytime we try something and we fail, we learn.
10:20 Speaker 01 And so the second one's going to get better and the third one's going to get better. You just keep going from there.
10:24 Codie Sanchez? So good. I love this idea that you you have called cloning, basically, where you just, you know, you don't think that there has to be original ideas all the time. In fact, you copy some of the richest, most successful people in the world. Can you talk to me about what is cloning? Do we have to have original ideas to make money?
10:43 Speaker 01 We do not need any original ideas to make money. And I know I'm contradicting myself just said. I remember that when Chipotle first came out, you know, in Chicago in the early two thousands. I used to go to Chipotle. And I loved it, you know, every day lunch was Chipotle, it was great. And from the time I first went to Chipotle till today.
11:07 Speaker 01 It's been twenty five years. Incredibly successful business. No one's called it. So Chipotle's. Chipotle's innovation was he let you, he let you make the taco you wanted. Right? They got all.
11:28 Codie Sanchez? Oh, yeah, I'll a burrito girl, but I'll allow it. Yeah.
11:30 Speaker 01 Yeah, burrito. So you say, okay, I want this. I don't want this. I want this. No, it's extreme customization.
11:37 Codie Sanchez? Yeah.
11:37 Speaker 01 That was one of the big reasons why they succeeded. Okay? And so if you, if you really look around carefully, what you're gonna find is you're gonna find many businesses like Chipotle, where there should be three of them. But only one exists. And there's offering gap after offering gap available. Now, your job is easy. You clone Chipotle.
12:03 Codie Sanchez? Yeah.
12:03 Speaker 01 And you know what happens when you clone? Is there's some things that you're gonna figure out that you could do better than that or different than them. But the core piece, which is that, you know, the customization piece. Make it the same. Okay? And just go from there.
12:19 Codie Sanchez? It's fascinating because it's so true. You know, we have a saying here. I started getting annoyed that people always start at innovate.
12:27 Speaker 01 Mm hmm.
12:27 Codie Sanchez? And I think you should go imitate, iterate, innovate. Like.
12:31 Speaker 01 And you don't even need to do, you don't even need to think about that. What I would, what I would do is make it even simpler. I would say, just be a shameless cloner. Okay? So don't even, don't even say that when I take Chipotle, I'm gonna change anything. It's working.
12:48 Codie Sanchez? Yeah.
12:48 Speaker 01 Okay, it's working great. Why change anything? The change is gonna come automatically because you're different from the founder. Right? You know, the funny thing about Chipotle is the founder was a fine dining chef in Denver.
13:02 Codie Sanchez? Yeah.
13:02 Speaker 01 Right? He wanted to open a fine dining restaurant. And so he opened Chipotle as a stepping store. Saying, I'll open this thing. I'll make some money here and then I can open my fine dining restaurant. So actually, what he did was he brought in fine dining nuances into Chipotle. The food is very fresh and all of that, right? And the funny thing was, that was the idea. That was the idea, that was a scalable idea, not the fine dining restaurant, you know?
13:33 Codie Sanchez? Yeah.
13:33 Speaker 01 So what he actually wanted to do was a very different. But what I'm trying to say is that I think that if you look at the world around you and you look at businesses that you admire.
13:46 Codie Sanchez? Uh huh.
13:47 Speaker 01 And, and even, even simpler than businesses admire. Just make a list of all the products and services that you use. It is very difficult for any company to get even one dollar from you. Very difficult. So the products and services that you're already using means that those are incredible businesses.
14:12 Codie Sanchez? Yeah.
14:13 Speaker 01 And then look at can multiple versions of that exist?
14:18 Codie Sanchez? I'm actually going to send this to my team because it's funny. One of them the other day came to me in one of our businesses. And I said, well, what are our competitors doing? And what does their product stack look like? What does their sales stack look like? If this isn't working for us, go talk, go look at the people who it's working for. And I remember one of the, the leads of the team said to me,
14:39 Codie Sanchez? oh, well, I don't know if I could secret shop that. Is that ethical? And I was like, have you read Sam Walton's book? Like he used to go and lay down on the ground with a tape measure between aisles.
14:50 Speaker 01 Yeah.
14:50 Codie Sanchez? Of all of his competitors.
14:52 Speaker 01 Yeah.
14:52 Codie Sanchez? He knew everything about their business.
14:54 Speaker 01 Yeah.
14:55 Codie Sanchez? And so I think there's some ego and, and I see it a lot in our, in our leadership teams where they want to figure out an innovative way to do it. And I'm like, why would you? You have no context. You haven't wanted this before. You haven't done it before.
15:10 Speaker 01 Yeah.
15:10 Codie Sanchez? So why would you with no data, no Context and no history of winning, just go find a new way to run and use your hands instead of your feet.
15:18 Speaker 01 Yeah.
15:19 Codie Sanchez? That's ridiculous. One thing Mohnish and I keep coming back to in this conversation is that rich people do not usually get rich by taking wild risks. They get rich by finding weird lopsided bet. And that is why I keep talking about buying boring businesses. This is why we built Main Street Millionaire Live. It's a virtual event where you can get with my team to do a live workshop and I will show you how to find the best businesses to buy. How to evaluate them, fund them and spot the things that make a deal either a really good risk or insane. If you have been listening to episodes like this, thinking I get it and I'm interested in investing in businesses, but I don't know where to start. This is where you start. Grab your seat at this link at MSM.live.
16:00 Codie Sanchez? This is the last event we are doing like this for all of 2026. So if you do not jump in now, you can wait another year to learn. Now you took this even so far as to, for instance, I believe you paid like $650,000 to have dinner with Warren Buffett back in the day.
16:18 Speaker 01 Lunch, yeah.
16:19 Codie Sanchez? Lunch.
16:20 Speaker 01 Dinner might be more expensive.
16:22 Codie Sanchez? What would that be? A lot.
16:26 Speaker 01 It was a lunch special.
16:29 Codie Sanchez? Well, here's not a fancy guy.
16:31 Speaker 01 The reason it was a lunch special is a few years later, it went for 26 million.
16:36 Codie Sanchez? You got a deal. You are a value investor.
16:38 Speaker 01 Million.
16:41 Codie Sanchez? Might be your best investment yet. You should have traded that. So what do you learn? Like when you're going into a meeting with Warren Buffett with this mentality you have of like cloning the best ideas, learning from the best. What did you learn?
16:54 Speaker 01 So the lunch was a lot of fun and actually I, I had no, I didn't have many expectations for the lunch. So, um, let me go back a few years before the lunch because then you can understand kind of why, why the lunch happened. When I read about the way Buffett did investing.
17:12 Speaker 01 It made all the sense in the world. Any other open book, he just said, this is how you should invest, right? Then I looked at the way the rest of the world did investing, the mutual funds and fund managers. And they're not following what Buffett is saying. So a mutual fund will have a hundred or hundred and fifty stocks. And Buffett says six, ten at the most, right? So I said, the laws of investing are like the laws of physics. And I think this Buffett guy wrote the laws of investing. And whether you believe in gravity or not, it's going to affect you. Okay?
17:54 Speaker 01 So I said, we have this entire industry of investment management, which is operating without the laws of physics. And then you have this guy who's doing it this way, and nobody else is doing it this way. This is Chipotle with no competitors, right? I looked at all that, I said, you know, I think that if someone followed Buffett's approach to investing, they would do better than the ninety-eight percent. And I also feel that an idea is like an asshole. Everyone has one. So an idea without execution means nothing.
18:39 Speaker 01 It was ninety-four, I had just sold a portion of my business. Uh, and after taxes, everything, I had a million dollars. I didn't need the money. The company was profitable and fine. And for the first time, I had cash in the bank. So I said, I'm gonna take this million. I'm gonna invest it using Buffett's approach. And so from ninety-five to two thousand, the first five years I was doing this, part-time, while I'm running my company, the million became fourteen million. And I was just making investments in public equities. And, you know, doing what Buffett did, you know, basically ten percent bets, ten bets.
19:22 Speaker 01 And it was like sixty, seventy percent a year, it just blew the doors off. And I said, This worked way better than I thought. Well done, Mohnish. Well done. I knew you could do this. And I was losing interest in my I T business. And I was much more interested in the investing business. And so I found a C E O and I transitioned out. And then I had these friends where I used to give them stock tips because I'd already bought something. So they came to me in ninety nine and they said, we want you to manage money for us. Because this stock tip business is very random, right?
20:06 Speaker 01 And so basically, um, I set up a fund really as a hobby. Uh, one million dollars from eight people just to manage that. By the time I got to two thousand seven, I'm managing six hundred million. We haven't had a single down year and we've compounded at like thirty five percent a year before fees. And I was extremely wealthy at that point because I'm getting one fourth of the gains over six percent. And Warren is running these annual charity lunch auctions once a year. Where you get to have lunch with him. And I said, I owe the man a tuition bill.
20:49 Speaker 01 I said, you know, I've taken all his intellectual property. Everything is based on him and he doesn't want anything. He's an open book, but I want to say thank you. So I said, the lunch would be a great way to say thank you. So I said, um, you know, I think at that time I'd made seventy million of Warren. So I said, what's a reasonable amount to pay? If someone made you seventy million? I said, three percent.
21:19 Speaker 01 Three percent is pretty good, right? I don't think it's too much. That's how I come on two million. And so at the lunch, I had no agenda. My only agenda was to look Warren in the eyes and say, thank you so much, right? Warren, on the other hand, has a very different agenda at the lunch. He wants to make sure that whoever won that lunch feels they got a bargain. So he wants to deliver a lot of value, you know, he's just a great guy. He said, I'm free for the whole afternoon. So he says, whenever you guys are tired of me and you want me to go, let me know. But I don't have any place to be. I can be here as long as you want. After about five minutes, you think it was your grandfather. He puts you at ease, you know, the richest guy in the world, whatever.
22:01 Speaker 01 Anytime we would ask him a question, he would convert the question into a a way to teach something. He's just such a great teacher. And and I was really surprised when in the middle of the conversation, I told I told Warren that my wife, she's a fan of yours, but her real love in life is Charlie Munger. One part and Warren got competitive. He said, my my partner Charlie Munger is a very boring guy. Says, he says, I'm gonna set you guys up to have lunch with him. And you can find that lunch with me is way more interesting than lunch with him. So I thought he's just joking, right? And two days after the lunch, I got a message from his assistant to Charlie's assistant and then lunch got set up with Charlie.
22:46 Speaker 01 And I found lunch with Charlie way better than lunch with Warren. Because Charlie is just, you know, just so open. And so that lunch with Charlie led to a friendship with him. Where basically I used to meet him to play bridge with him, meet him once a quarter approximately to have dinner with him at his place. And with Warren also, we became friends, but not like Charlie.
23:15 Codie Sanchez? Yeah.
23:16 Speaker 01 Uh, because Charlie was in L A, I was in California at the time, and so that was easy. So it became buy one lunch, get infinite free.
23:24 Codie Sanchez? You know what's interesting? I've met a lot of investors by now, a lot of really successful ones. You seem really happy as an investor. And to me, investing is very stressful. Like I know in two thousand eight, you had a tough year, like most investors. That was a brutal year where many people, I was at Goldman at the time. Hmm. No, that's wrong. I was at Goldman in like two thousand nine, two thousand ten. But those years were terrible, too. Everybody thinks that two thousand eight is one year. But that was like when Goldman was under, um. We were having the the trials, um, actually, uh, for whether we caused the crisis or not. And um, and I remember knowing a few people who actually killed themselves during that period that meant.
24:07 Speaker 01 Money.
24:07 Codie Sanchez? And I was in New York. And uh, and yet you've gone through these huge losses and huge gains, but seem really happy and steady.
24:16 Speaker 01 Something to keep in mind is if wealth is lost, nothing is lost. If health is lost, something is lost. And if character is lost, everything is lost. I didn't come up with that. Some guy much smarter than me a long time ago came up with that, okay? Life has a way of changing overnight. Both ways. It can go from very good to very bad. And it can go from very bad to very good. You can't resign yourself to the fact that that, oh, I'm down and I'm going to be down forever. Well, if you think you're going to be down forever, you are going to be down forever. But if you just say I can pick myself up and keep going.
24:58 Speaker 01 That's fine.
24:59 Codie Sanchez? What do you think is the most amount of money you've ever made in investing and lost in investing in a year? Like for people to understand the full weight of this.
25:11 Speaker 01 Like, well, we've, we've had, we've had companies we've invested in who have gone bankrupt. So we've had, uh, companies who I've made investments which have gone to zero. Now typically, when we make an investment, we don't do it more than ten percent of our assets. So if I have, you know, ten bets and two bets, for example, went to zero, which would be pretty extreme. It's not the end of the world.
25:35 Codie Sanchez? No.
25:36 Speaker 01 Because you've got the other eight that are so.
25:38 Codie Sanchez? But it could be fifty, a hundred million.
25:41 Speaker 01 Oh yeah, I mean, I mean, I I manage one point four billion currently. So if I'm placing a bet current today, it's a hundred and forty million dollar bet. Right. And the one forty million, uh, there are, I hope it doesn't happen, but there are chances it can go to zero. And there are chances it can become billion, you know. We look very carefully at downside protection, even before we look at the upside, look at the downside. So they're designed not to be, uh, high risk, high reward. They're designed to be low risk and hopefully, uh, moderate to high rewards.
26:17 Codie Sanchez? So what is that? Like, if you have to put dollar nuts on that, so let's say you have a hundred and forty million dollar investment. Well, you've had some huge wins that at least I could find online historically. Like, which companies have you put in ten, twenty, a hundred million dollars and then what have they gotten out for you? Like, what's been the best investment you ever made?
26:34 Speaker 01 In my career, two companies that have become more than hundred baggers, right? They they went up more than a hundred times. Uh, one happened right at the beginning when I started in ninety five, where I put a hundred thousand into a company and it became ten million. That was great. And another one, which also happened at that time, was I put just ten thousand into a company. And it became one point four million, that was a hundred and forty, uh, and then one that's happened more recently, uh, was a company in Turkey where, um, that was just so mispriced, we couldn't, you know, shooting fish in a barrel.
27:12 Speaker 01 Um, where the market cap when we invested in twenty nineteen was fifteen million dollars. And now it's a billion and a half. So it's gone up a hundred X. And, uh, that one, we own about forty percent of that business.
27:30 Codie Sanchez? How do you decide when to sell to take money off the table?
27:33 Speaker 01 Well, so when when we make an investment, I always feel that you learn the business after you own it. Um, you you may think you know it before you invest, but you really get to know it as you live with it, right? And there is, there is no such thing as a risk free investment. The biggest mistake I have made in life is selling too early.
27:59 Codie Sanchez? Really?
28:00 Speaker 01 Yeah, so I used to, for example, I used to own, my funds used to own. One percent of Ferrari at a cost base of ten million dollars. Okay, so in effect.
28:14 Codie Sanchez? What is it today about?
28:16 Speaker 01 It'd be about fifty times that. Okay, so and and the thing is that when I look at a business like Ferrari, it should never be sold. In capitalism, there are very, very few businesses that have long term sustaining enduring modes. And when you end up with a business that is exhibiting those characteristics, you don't want to touch them. My biggest mistakes and greatest learnings have been to become more patient. Like, for example, this this company in Turkey, which has gone up a hundred X.
28:55 Speaker 01 It looks embryonic. It's still undervalued. It's still trading about half of what it's worth. And they could compound for twenty thirty years, forty years. So that's a business we will just hold as long as we can. As long as I don't see secular declines in the business, we understand the business well. We we hold it and it's not our only holding, we have other holdings. So the nature of the way capitalism works is that very few of your investments will end up with giving you most of your wealth. And this is the way the Walton family got wealthy. This is the way the Berkshire Hathaway people got wealthy. This is the way the Coop founders got wealthy.
29:39 Speaker 01 It is by concentrated holdings in particular companies. And so
29:45 Speaker 01 the key, the key to investing is that when you find yourself in the happy position of partial ownership of a great business, don't sell it when it's fully priced. Don't sell it when it's overpriced. Only possibly sell it when it's egregiously overpriced. Like, you can't justify it in any possible way. Then you can look at it.
30:13 Codie Sanchez? What is your mental model that you like the best for deciding the next bet you're gonna take? If you only get ten, you must have very clear models for determining when you wanna add on a risk.
30:25 Speaker 01 Yeah, so what we are looking for is total no brainers. So let's say I own a home in Austin. Okay, and let's say I bought the home for two million dollars, okay? And I go to my realtor after one month of buying the home and say, hey, what's my home worth? They said, oh, Mohnish, it's still worth two million, okay? And let's say I go back after another month. And the guy will say, yeah, still worth two million. And then maybe after a few months, you say, oh, you know, it's two million and fifty thousand, okay? So if you just kept writing down what that house is worth and what a buyer would pay for it,
31:09 Speaker 01 you're gonna see very little change over time. If I look at all the stocks in the New York Stock Exchange and I throw a dart at any one of them, let's say IBM, or Amazon, or whatever, and I just look at the fifty-two week range on their prices, it will be one hundred to two hundred, or eighty to one fifty, it's a wide range. Your house is not going to go from one and a half million to two and a half million or one to two million, it doesn't do that. So auction-driven markets accentuate price movements much more than you would if you were not auction-driven. And because they accentuate price movements,
31:53 Speaker 01 sometimes you get extreme mispricing in both directions. You get extreme overvaluation and you get some extreme undervaluation. So what I'm looking for is anomalies. I'm looking for weird things that make no sense. And because we have so many stocks and so many things going on. You will find weird things. And so when the weird things. I remember like, for example, there was a company uh called Level Three Communications. Level Three built this massive fiber optic network. You know, they were going to be transporting all the internet data everywhere.
32:36 Speaker 01 Massively overbuilt, okay, the data never came. And the company is upside down. So the stock has collapsed, it was a darling, it collapsed. And people are concerned they'll go bankrupt. So they had a lot of debt, right? Now, they had, they had these bonds that they had issued. Where the bonds were trading at eighteen cents on the dollar. So someone paid a dollar for the bond, they're now at eighteen cents. The bonds had a coupon of six percent. Which means if you borrowed at eighteen cents. You were getting paid interest of thirty-three percent a year, right?
33:19 Speaker 01 I looked at the Level Three balance sheet. And I saw that they had enough cash to make the debt payments for at least four or five years. So I said, in three years, I get my money back. And I still have a claim of a dollar because it's a bond, it's not a stock. And they still have money after that, and I think that in three years, the, it's a very high quality business with the people running it. They may sell assets, they may do different things. I said, I don't see how I can lose money there. I don't see if I buy Level Three bonds, so I put ten percent of the fund in Level Three bonds. I didn't know it at the time. Warren made the exact same bet.
34:03 Speaker 01 At the exact same time. For the exact same reasons, okay? What happened is.
34:11 Speaker 01 We went for three years. We clipped the coupons. And after three years, the bonds at sixty cents. I didn't even wait, I sold them. So basically, we tripled our money on what we paid for the asset. Plus, we got the interest in the meanwhile. And that wasn't even a stock investment, it was a fixed income investment. So basically, there's always weird things going on. And we just want to pay attention to that.
34:47 Codie Sanchez? Yeah.
34:47 Speaker 01 And the other thing is that this is not a business of a lot of activity. If I find
34:57 Speaker 01 something like level three once a year, I might only have one or two ideas like that. But that's all I need. I need an idea like that once every two or three years. I don't even need it once a year.
35:08 Codie Sanchez? So part of the game is you really have to just stop yourself from doing too much.
35:13 Speaker 01 My job is to just read and be with Cody at a podcast. That's my job.
35:19 Codie Sanchez? Well, it's funny, I remember when I was at Goldman, Warren invested in Goldman and everybody thought he was crazy. But obviously, and I was a little peon, tiny little, you know, not nothing at that company. But, um, but I remember, you know, the senior people explaining how the deal got done.
35:36 Speaker 01 Yeah.
35:36 Codie Sanchez? And the price that he got it at and the terms and our balance sheet. And just there was so much noise about how, you know, we were something like a countrywide that was doing all of the insurance. You know, of the backing of the mortgages, when in fact Goldman had none of that risk on its balance sheet. So he made like one of the best bets ever.
35:54 Speaker 01 And, and I want to tell you something about what happened then. Warren paid hundred and thirty dollars a share at that time for Goldman Sachs during the financial crisis. The stock went down further. I bought it at sixty five dollars a share. Okay, half of Warren's price. Now, like Ferrari, another stupid thing I did, which is a company like Goldman Sachs should never be sold. So I tripled my money, wet and bollish, I sold.
36:29 Speaker 01 I should never have sold it. It's like a Ferrari. It's like these durable modes. And I made money on Goldman. I made money on Ferrari, but I should have never sold them. So eventually I will learn
36:49 Speaker 01 from these mistakes not to do that.
36:51 Codie Sanchez? Wow, I think you're doing pretty well to date.
36:55 Codie Sanchez? You know, I kind of want to talk about some cultural things happening.
37:00 Speaker 01 Yeah.
37:00 Codie Sanchez? Like, for instance, kids buying Pokemon cards and trading them at crazy valuations today. Do you think that that's a good idea or no?
37:11 Speaker 01 No, not a good idea.
37:13 Codie Sanchez? How do you explain to this younger generation why that's a bad idea? If they go, no, no, but I bought it for fifty bucks and today it's at two fifty. You don't understand it's different today. What would you say to them?
37:24 Speaker 01 Well, let me distinguish. Let me, let me look at two different examples of what you can invest in. So you can buy a Rembrandt and it's a million dollars. Okay. Or you could buy three apartments, which can be rented out, which are also a million dollars. And you make these two investments. The Rembrandt, you say, could be worth two million in the future or three million in the future. The future value of Rembrandt depends on the perceived value by other people in the future in a very subjective way.
38:09 Speaker 01 The future value of the apartment building that you bought will depend on the rents it's generating. So if you bought it in a great place with a great demographic and the neighborhood becomes better.
38:23 Speaker 01 The rents could triple or double in some time and the apartment would be worth two or three million. So if you understand Rembrandt so well, that you have a very high probability of saying this is going to be worth ten million in ten years, go buy the Rembrandt. That's like the Pokemon card. You should always be within your circle of competence. So if you're buying Rembrandt, you're buying Pokemon cards, or you're buying apartment buildings, all of these, you should be knowing them cold. And if you've got the confidence that it's going to be worth more, that's fine. It just may be that you're correct about Pokemon cards because I don't understand them and I'm correct about apartments because I do understand them.
39:07 Codie Sanchez? Why do so many people get caught up in these bubbles? Like, maybe you could say we might be in the AI bubble today. You might be able to say we're in a collectible nostalgia bubble today. Like, what is it about human nature that makes you a bad investor emotionally sometimes?
39:23 Speaker 01 Humans want to invest in things that have recently done well.
39:30 Codie Sanchez? We just have giant recency bias, basically.
39:33 Speaker 01 It's just the nature of people wanting to go to flavor of the day. And, and actually that going to the flavor of the day actually makes it possible for me to do what I'm doing. There is a lemming aspect to human behavior. There is a herd mentality. There is want to buy flavor of the day, want to buy what's popular. All of that is there. And it is those characteristics that allow someone like me to do what I do.
40:05 Codie Sanchez? How do you go against the crowd to invest when everybody else might think you're crazy? Like, have you ever had somebody say, like, this is crazy, don't do this? Why are you investing it? And you did it anyway?
40:18 Speaker 01 Yeah, I mean, I think you're going to have conviction on your ideas. I mean, the thing is that it's the same thing as starting a business. You you want to start some business.
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40:51 Speaker 01 Everyone's going to tell you it's not a work, right? And they may or may not be right, but you feel passionate about it, you go for it. If I've done the work and I understand things and I've got conviction, then I'm going to act based on that. Yeah, absolutely.
41:10 Codie Sanchez? Take it from Anish and I, the most expensive mistakes don't happen because you're dumb or I'm dumb. They happen because we're alone, moving fast and taking guesses. Business owners do this constantly. Boardroom is for business owners doing seven figures at least in revenue and who do not want to make the wrong decisions in isolation. Just like he is going to pay $650,000 to sit down with Warren Buffett to learn from him, I've realized that when I have a third party who gives me advice and I get to steal all their homework, I make way more money. How does it work? In Boardroom, you actually get to sit down with my operating team and partners. You bring the bottlenecks, the issues in your business like cash flow, hiring, sales, marketing,
41:50 Codie Sanchez? and we help you find the next lever to fix with our operating tools, advisors, weekly coaching, quarterly planning, and owners who follow our exact private equity playbook to scale revenue and profits. This is not for people who do not have a business. This is only for people who are already building their business. But if you are that, then you should apply to join Growth Boardroom here. You can go to contrarianthinking.co/growth-boardroom. You also kind of famously said you don't lie. Is that true?
42:22 Speaker 01 Well, we try not to lie. That if if I did not lie at all, um, I would be at a Jesus level. Okay, I'm not at Jesus level yet. Okay, or Buddha level, or Gali level. Uh, so, uh, the whole lies versus truth is a very powerful mental model. There's a book I read a long time back called Power vs. Force, uh, written by a kind of new age guy in Arizona, Dr. David Hawkins. But he had a theory that he said that if I lie to you, and in your conscious state, you don't know I'm lying to you, in your subconscious state, you do.
43:01 Speaker 01 And he said that there's a pipe that goes between the subconscious and the conscious. But for most humans, that pipe is mostly clogged. Okay, so the signal cannot get through. But he says the pipe is not fully clogged. So what happens is that you, uh, in his terms, he said, you either go weak or strong in the presence of a person telling the truth versus telling lies. So if someone is lying to you, you may not know directly that they're lying to you, but you will feel, I don't know, they want to spend time with this person. You know, like the used car salesman, you don't know what part of what he's telling you is a lie,
43:46 Speaker 01 but you know, there's a lot of lies in there, right? So you don't want to be there. Like, that's why people want to shop at home. They don't want to go to the car dealership because it's not a pleasant experience. Uh, they'd rather just go online, buy the car and have it delivered and they'll be done with it, right? And so, so basically, we know, we know at least subconsciously, when people are not being truthful with us. And we see that play out. Humans get strong and love being around the truth. And so we crave that. And so, uh, in leadership and in entrepreneurship or in a selling situation,
44:33 Speaker 01 the more truthful you can be, the better off you are long term.
44:38 Codie Sanchez? You know, it's interesting. We had a leadership meeting yesterday and, um, And the meeting was sort of last minute. And the reason that I held it candidly was because I heard little, little bickerings, you know, little, oh, this person did this and this person did this, but they weren't going to each other and having a conversation. And so I heard it enough times that I just thought, well, we don't have time for this. So I pulled everybody into actually this room where we're sitting. And I said, all right, this is your shot. It's free, but like, if you don't bring it up here, that means it's not a real issue.
45:11 Speaker 01 Yeah.
45:11 Codie Sanchez? So you have to look the person in the face and so don't say generally generalities. You have to say, Cody, you did this blob, you know, so and so you did this. And what's fascinating to watch is how many people will not tell the truth because they'd rather be diplomatic.
45:25 Speaker 01 Yeah.
45:26 Codie Sanchez? And I'm wondering, have you found ways to indoctrinate that culture to get more people to have difficult conversations?
45:35 Speaker 01 Yeah, when you have conflict or whenever, whenever, whenever team members are not being candid. I think that
45:45 Speaker 01 having them speak in a kind of moderated way where one person speaks without interruption. What their perspectives and feelings are and everything. Then the other person speaks and again shares eventually can lead to a better outcome. It may not, may or may not solve the problem, but, but I would just say this, that I don't want to be part of a team. Which has dysfunction like that. So if you have things going on where the people are talking behind the back and all these things going on, you have to fix it.
46:18 Codie Sanchez? Yeah, it's interesting. I've learned, like Elon has this line that I love where he says, running a company is just finding the series of compounded lies inside of your company. And I related to that because I think it's, um, it's truthful and sort of non egoic to say that. And to say, hey, I'm one of the best entrepreneurs in the world. And I still know that whether it's to your point, not complete deceit, but just sort of hiding the truth or not even realizing it or whatever. You know, your job as an investor is sort of to find the truth in a company or not.
46:49 Speaker 01 Yeah.
46:49 Codie Sanchez? And then in when you're running a company, it's probably to find the truth even inside of your own company.
46:53 Speaker 01 Yeah.
46:54 Codie Sanchez? Which was a crazy realization for me to realize the first time I ran a company.
46:57 Speaker 01 Yeah, also, I think when Elon interviews people, he interviews a lot of people. I think he interviewed the first three thousand hires at SpaceX himself. He asked them, one of the questions he asked the engineers is what's the most difficult problem you solved? Right? And he says that when they start answering the question, if they really didn't solve that problem, it's going to become obvious. Because he's smart enough as a as a problem solver to figure it out. So he just goes deeper and deeper into that area with the person. And he says eventually it just reveals itself. Whether they actually solved that difficult problem
47:37 Speaker 01 or whether they heard about it and they think they can, you know, fudge their way through it.
47:43 Codie Sanchez? Now, you you only have ten investments. That's and you hold them for a long time. That is like having a relationship, I would imagine, with a lot of that senior executive team or the CEO team in some way. You know, you could compare it to marriage, you could compare it to dating, you could say that they become partners of yours in some way. How important is it screening the CEO and the founders and the key team? Not just the underlying assets in the balance sheet. And if it is important, and how do you determine whether you want to bet on a person or not?
48:19 Speaker 01 Yeah, so the culture and the nature of the people is very fundamental. And that takes time. Some of it we can get by looking at long histories of the business. Business has been around for a while, you could say one day, say ten years ago, and then what happened? And so definitely, we have to have a good understanding of the people. And we have to be comfortable and confident that we.
48:51 Speaker 01 Can be long term partners. And the the other thing about investing is that it tolerates a high error rate, right? The moats of the companies, the competitive advantage of the company, the nature of the CEO, the nature of his team, many of these things we may or may not have gotten it exactly right. And sometimes they are much better than where you think they are. And sometimes they're much worse, but we definitely try.
49:18 Codie Sanchez? Is there a question that you ask or that you, I know you can't, if they're public CEOs, you can't always, you know, go direct to them to ask questions in the same way. But is there a question that you ask to screen an individual that you find really helpful?
49:34 Speaker 01 Well, one of the, one of the things that which I got from Warren is he says that when you go meet a company, you ask the company's leadership that
49:45 Speaker 01 if I were not investing in your business, which of your competitors would you suggest I should invest in? And which of your competitors do you think I should short or I should never invest in?
50:01 Codie Sanchez? It's a great question, even to ask if you run a company. Like I'm thinking about what would my answer to that question be?
50:07 Speaker 01 Yeah.
50:07 Codie Sanchez? And that also tells me who do I want to go hire from?
50:09 Speaker 01 Exactly.
50:10 Codie Sanchez? Competitors like, you know, which products do we want to launch? Which we kill, what have they already done that we're trying right now that may or may not work?
50:16 Speaker 01 Yeah.
50:16 Codie Sanchez? That's a very, that's a good mental model.
50:19 Speaker 01 Yeah.
50:19 Codie Sanchez? What does the daily life of a billion dollar investor look like? You up at six AM, you have sixteen minutes, coffee breaks, no?
50:27 Speaker 01 I work from home, even though my office is half a mile away. Maybe two or three times a week I speak to some of my team on Zoom. I go to the office maybe once a year or something, very rare. And but I I just decide on a, I don't, I don't have a lot of preconceived.
50:51 Speaker 01 I want to do this and that for the next three months. I'm I leave it very free uh to have the uh flexibility to go into any area I want to go into. So I'm just uh it's it's very, very much see the pants based on what is going on.
51:11 Codie Sanchez? Yeah, you know, it's so interesting. I've, you know, I ran our our biggest asset management company. We've had, we only manage, you know, just a little bit over uh nine figures, but um we it's interesting. My husband is the one who runs our investment portfolio now. And I always joke, I want to come back in my next life as that instead of operating companies. We still are not good enough. You know, I think we're good operators of company. We've grown a lot every year, you know, sort of tripled or or uh a little bit more each year, but it's the leverage there is so different than investing.
51:45 Speaker 01 Mm hmm.
51:46 Codie Sanchez? And so uh I think a lot of times the cool part of you sharing stuff like this is most people don't realize. Like you said, the power of compounding, they don't realize the power of like not taking an action every decision, which you've talked about. They don't realize the power of being patient. And when you have capital, allowing that capital to do the work for you as opposed to you having to do all of it. And so I think it's really, it's a it's a give to share that with people because most people, I mean, how many employees do you have to manage your fund group roughly?
52:14 Speaker 01 They're just uh two people full time.
52:17 Codie Sanchez? Yeah.
52:17 Speaker 01 And they're two part time.
52:19 Codie Sanchez? I mean, it's wild. And then you imagine, you know, if our company does, let's say, you know, shy of nine figures a year here. We'll have a hundred and thirty, you know?
52:30 Speaker 01 Yeah.
52:30 Codie Sanchez? And so the leverage is so different.
52:32 Speaker 01 And also, the other thing is that if if I went from one point four billion to fourteen billion, it might be a couple more people.
52:40 Codie Sanchez? That's wild.
52:41 Speaker 01 You know, it's it's it's not uh going to be ten times the number of people we have, you know, it's just uh going to because that's the beauty of the business. It's a uh the reason I went into this business is because I could just see that the economics are great. It just works great. I'm a single player, single game player. Guy. So I'm not the kind of person who's happy being on a soccer team. I'm probably be happy playing tennis.
53:10 Codie Sanchez? Yeah, that makes sense. So so maybe for somebody listening, explain like sort of wrap it up. If you are looking at business models and deciding, I think a lot of what matters is the game you choose to play. Not just because of who you are, but also whether that is a good game or not. Like, you know, we talk about a silly thing like vending machines. I like vending machines to learn how to do business. It's cheap. There's not a lot of risk. You have an entire business and company with very little CapEx. It's sort of a great, but it's a terrible business at scale, actually, really tough business. How do you think about business models in general? Do you have a mental model to determine if one business model is better than another?
53:49 Speaker 01 Yeah, I mean, I think that a lot of that comes comes naturally. I'll give you an example that I think you might you might find interesting. Is in when when when Buffett was a teenager, he was in Washington DC. His father was a congressman. And he hated being in DC. He wanted to be back in Omaha, but he was he was in DC. And there was a guy in his high school, Don Danley. And one day Warren went to Don's house and he saw Don tinkering with a pinball machine. Okay. And he said, what are you doing? He said, oh, you know, I I got this pinball machine that doesn't work.
54:32 Speaker 01 For like five bucks because people are just giving it away. And I think for another five or seven dollars in parts, I can get it working. Okay. And so Warren says to him, are there a lot of pinball machines that you can get that are not working? So there's. People just have them sitting all over. So what Warren did was he's like sixteen or something fifteen.
54:59 Speaker 01 He tells Dan Lee to fix pinball machines non-stop, like they get twenty, thirty of them, right? And puts them to work fixing those. And then he and Dan Lee go to the barber shops in DC. And they tell the barber that we work for Mr. Wilson, because they're two kids, right? There's no Mr. Wilson. Mr. Wilson is a fictitious character. They say we are, we work for Mr. Wilson and Mr. Wilson has authorized us to make you an offer, which is we'll put the pinball machine in your barber shop for free. And every week we'll come and pull out where our coins are there. And half come to you and half we cater for Mr. Wilson.
55:43 Speaker 01 So the barber said, put the machine in the corner. Like, I mean, there's no downside, right? So those pinball machines, when Warren was leaving DC after high school, he had forty-five barber shops with the pinball machines. And he said the first week he went into the first barber shop, there was five dollars in there. And he gave two and a half to the barber. He thought he died him into heaven because on a ten-dollar investment, in four weeks, they were going to clear the money. And then, you know, the return capital is infinite. So what I'm trying to say is that you talked about the vending machines, right? The vending machine, the entrepreneur is not doing anything unusual.
56:28 Speaker 01 If Warren bought pinball machines at market price and put them in the barber shops, it would be a terrible business, right? Yeah. It became a great business because they flipped it a little bit. So, understanding the economics of a great business is not difficult. In fact, what I would just say, I would say the following, my, my filter. For understanding whether a business is great or not is, does it blow me away? Okay, does it hit me in my head with a two by four? Like when I see Buffett's pinball machine business, you instantly know that's a great business.
57:11 Speaker 01 Right? You know, they're not spending anything on the, on the pinball machine. It's fantastic, right? And the same business, when you buy it at list price and you put it there, you lose your shirt. You're going to be, you're going to be a terrible business. So what we want to do is we want to find the anomalies, right? And so that's exactly how I look at businesses is that is it a pinball business? Is it Buffett's pinball business? And if it is, like level three was like Buffett's pinball business, right? So we look for these weird things and we're looking for weird things that make no sense. And then we find them and we go back to doing what we're doing and look for the next weird thing.
57:54 Codie Sanchez? So good. Not enough people try to take the complex, simplify it.
57:58 Speaker 01 Yeah.
57:59 Codie Sanchez? And just do it a few times.
58:00 Speaker 01 Yeah. So we can make the vending business really good. We just have to get the machines for free.
58:08 Codie Sanchez? That's true. It be the one that can fix them.
58:11 Speaker 01 Yeah.
58:11 Codie Sanchez? Cause you're right. That is the.
58:12 Speaker 01 Yeah.
58:13 Codie Sanchez? That's where the, the best business is in vending, when we had a bunch of them. Cause we had a bunch of laundromats, so you put vending machines in the laundromat. It's not just similar to Warren.
58:20 Speaker 01 Yeah.
58:21 Codie Sanchez? Uh, but the best part of that business ended, ended up being the people who fix the vending machines. Cause they break all the time.
58:27 Speaker 01 Absolutely.
58:28 Codie Sanchez? Yeah. And so, um, and they do the same thing. They then take the vending machines, fix them up, resell them.
58:34 Speaker 01 So I think that's, that's the thing is, is, uh, the business opportunity, the all over. These were, these were kids coming up with this.
58:41 Codie Sanchez? Yeah.
58:41 Speaker 01 Who didn't even have any experience.
58:43 Codie Sanchez? Yeah.
58:44 Speaker 01 You know, and, uh, you know, Warren had so many, you know, he had, he had this other kid. Where, um, he used to sell golf balls on the street corner in Omaha. But he had a, he had a couple of friends who would go dive in the water to get the golf balls out. And Warren never wanted to do it. He, he said, I never want to do any hard work. So he paid those kids to dive and then he sold the golf ball. But again, the golf ball is free. You know, it's free and so you're going to make a lot of money when you do that. So basically, we want to look for these businesses where some part of the equation is different than the mainstream and that just changes it completely.
59:24 Codie Sanchez? Ambitious but lazy. I love it.
59:26 Speaker 01 Yeah.
59:26 Codie Sanchez? This was such a useful conversation. Thank you so much for being here. Where do you like people to follow along?
59:31 Speaker 01 Well, you know, I'm on, I'm on X and LinkedIn, Mohnish Prabhar.
59:35 Codie Sanchez? Okay.
59:36 Speaker 01 Yeah.
59:36 Codie Sanchez? Um, so let's start there.
59:38 Speaker 01 Okay.
59:39 Codie Sanchez? Uh, follow along for the ride, but thank you so much for being here.
59:42 Speaker 01 Always a pleasure, Kudi. Thank you so much.
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