Turning $1M Into $1B+: A Masterclass From The Indian Warren Buffett

Episode 586: Shaan Puri sits down with Mohnish Pabrai for a rare interview about value investing. Mohnish is sometimes called the "Indian Warren Buffett" for having turned $1M into over $1B+ through stock investing. In this podcast they talk about how founders can become great investors, how to avoid big mistakes, and lessons learned from Buffett & Munger. Want to see Sam and Shaan’s smiling faces? Head to the MFM YouTube Channel and subscribe - http://tinyurl.com/5n7ftsy5 — Show Notes: (0:00) Intro (1:41) Why entrepreneurs make the best investors (4:130) How Warren Buffett’s pre-paid for his college education (8:45) Becoming Ben Graham’s Protege (12:41) What Buffett learned about branding from See’s Candies (15:45) Buffett’s failed play to be a candy mogul (18:44) Identifying offering gaps (20:22) Getting an MBA at age 14 as the son of an entrepreneur (23:33) The 3 tells of a future millionaire (25:56) Mohnish builds his first product with maxed out credit cards at 24 (27:59) The 168 hour framework (31:13) “Entrepreneurs do not take risks” (32:38) How Richard Branson launches Virgin Atlantic with no money (35:31) How 0.1 percent of the population owns 70 percent of all the motels in America (38:31) The unfair advantage of being a low-cost producer (40:20) How Mohnish turned his first million into $13M in 5 years (43:39) Pabrai Funds grows to $600M in assets in less than 10 years (47:35) What Mohnish knows about fundraising that we don’t (50:26) Pivoting from tech investments in 1999 to value investments (53:13) $2M lunch with Warren Buffett (58:09) Be a harsh grader of people (1:01:53) The Givers, The Takers, and The Matchers (1:04:40) “Heads I win, tails I don’t lose much” (1:09:26) Private markets v public auctions (1:13:35) The #1 trait that makes a great investor (1:15:01) What people of Reddit think of Mohnish Pabrai (1:16:31) Starting capital, annual rate of return, length of runway (1:17:24) The Rule of 72 (1:21:50) Circle the Wagons Philosophy (1:23:35) Losing $3B in one unfortunate event (1:28:49) Be fearful when the world is greedy; Be greedy when the world is fearful (1:29:17) What a value investor thinks of bitcoin (1:30:26) Nick Sleep bets (1:42:30) The Best Of: Capital Allocators — Links: • The Intelligent Investor - https://tinyurl.com/3jmpjrmc • The Dhandho Investor - https://tinyurl.com/53p9bhfv • Mohnish on Twitter - https://twitter.com/MohnishPabrai • Get HubSpot's Free AI-Powered Sales Hub: enhance support, retention, and revenue all in one place https://clickhubspot.com/sym — Check Out Shaan's Stuff: Need to hire? You should use the same service Shaan uses to hire developers, designers, & Virtual Assistants → it’s called Shepherd (tell ‘em Shaan sent you): https://bit.ly/SupportShepherd — Check Out Sam's Stuff: • Hampton - https://www.joinhampton.com/ • Ideation Bootcamp - https://www.ideationbootcamp.co/ • Copy That - https://copythat.com • Hampton Wealth Survey - https://joinhampton.com/wealth My First Million is a HubSpot Original Podcast // Brought to you by The HubSpot Podcast Network // Production by Arie Desormeaux // Editing by Ezra Bakker Trupiano

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:00Mohnish Pabrai?

  An idea is like an asshole. Everyone has one. Okay. Ideas don't mean anything.

• 0:05Shaan Puri?

  This guy is known as the Indian Warren Buffett. He's billionaire investor Mohnish Pabrai. And last month, I went to his house and asked him to teach me everything he knows about investing. How did you make your money?

• 0:16Mohnish Pabrai?

  After taxes, after everything, I got a million dollars. And I, for the first time, had money in the bank. That million became what 13 million. And I said, wow, well done, Mohnish. And so I got 70% a year compounded.

• 0:33Shaan Puri?

  How the hell were you getting these returns?

• 0:35Mohnish Pabrai?

  I'm always looking at what is hated and unloved. The key to moving the needle is inactivity.

• 0:42Shaan Puri?

  Have met and become friends with Charlie Munger and Warren Buffett.

• 0:45Speaker 02

  Good afternoon, Mr. Buffett, and good afternoon, Mr. Munger. My name is Mohnish Pabrai.

• 0:51Shaan Puri?

  How does that happen?

• 0:52Mohnish Pabrai?

  It shouldn't happen. When I look at a CEO, I always try to find out, did they run a lemonade stand when they were 12? Because if they didn't run the lemonade stand when they were 12, they're not going to be that great at business at 30. How stupid can you be? If you know the big picture, you can change the big picture. The most important thing in life is-

• 1:16Shaan Puri?

  Are you a fan of Bitcoin? Are you a believer?

• 1:18Mohnish Pabrai?

  If you put a gun to my head, I would say-

• 1:20Shaan Puri?

  What do you think about Elon Musk?

• 1:21Mohnish Pabrai?

  Elon is not human.

• 1:22Shaan Puri?

  If I said, what's the number one trait that makes a great investor, what comes to mind?

• 1:29Speaker 03

  I feel like I could rule the world. I know I could be what I want to. I put my all in it like my days off.

• 1:38Shaan Puri?

  All right, welcome. Good morning.

• 1:40Mohnish Pabrai?

  Great to be here, Sean.

• 1:41Shaan Puri?

  You are a great investor, but you started as a businessman. I'm a businessman trying to become a great investor. How do those two relate?

• 1:49Mohnish Pabrai?

  In our brains, we actually use the exact same part of the brain in both activities. So Warren Buffett has a great quote. He says, I'm a better investor because I'm a businessman. And I'm a better businessman because I'm an investor. And in his case, a lot of people don't know, but Warren had done a- Lot of different businesses in different areas before he was seventeen. Starting when he was, I think, five or six years old. His very first business was buying, buying cokes from his grandfather's store at, at a nickel a piece and then selling them at a dime a piece.

• 2:31Shaan Puri?

  Right. Buy wholesale, sell retail.

• 2:32Mohnish Pabrai?

  Yeah, so that was one of his first, first ones. And one of the things that a lot of people don't understand about the way our brains work is the human brain actually, when we are born, it is the most underdeveloped organ when we're born because the birth canal is not wide enough. So for the first five years of life, the brain is the fastest growing organ that we have as humans. The neuron connections are growing at an exponential rate. From the age of about eleven to about twenty,

• 3:06Mohnish Pabrai?

  that window is when the brain is set up to specialize. And the neuron connections get cut. So they actually go down quite a bit, but the brain allocates areas to hone in and specialize. So you know, if you think of someone like Michelangelo or Bill Gates or even Warren Buffett, these, these guys started specializing at ten or eleven. And if you start writing code at the age of ten or eleven, for example,

• 3:39Mohnish Pabrai?

  like, like Bill Gates did, by the time he was twenty, the expertise that he had, someone else starting at twenty would not be able to match him even at fifty. So that ten year window is a very critical window in human development. And unfortunately, our education system doesn't recognize that.

• 4:01Shaan Puri?

  And unfortunately, I'm thirty five, so it's too late.

• 4:04Mohnish Pabrai?

  We hope there are some eleven year olds listening, or we hope when you have kids.

• 4:08Shaan Puri?

  Tell your kids, yeah.

• 4:09Mohnish Pabrai?

  You, it's not all, the, the cake's not fully baked yet. So I think the, the thing with Warren was that I think when he was about ten, eleven years old, he was running a bunch of very interesting businesses.

• 4:21Shaan Puri?

  What was he doing? I've never heard these. So, uh, yeah, I like, I didn't know this backstory.

• 4:25Mohnish Pabrai?

  First businesses was he used to go to this racetrack in Omaha called Akzarben, which is Nebraska spelled backwards. And he used to publish racing tips called Stable Boy Selections, basically telling you what, what horses to bet on. And, uh, and then also what he would do is when all the races had been run, he'd collect all the discarded tickets on the ground and he'd go home and go through each one carefully to see if some drunk had thrown out a winning ticket. And, and he'd find a few, he'd find a few, but he was too young to go to the window to collect because under eighteen. So he would give them to his aunt Alice, who would go and collect for him.

• 5:04Mohnish Pabrai?

  Around the age of fourteen or fifteen, um, he had a very good friend in high school called Don Danley. And, and Danley was a tinkerer. He was like very mechanically inclined. So one time I think, uh, Warren went to his home and he saw that, uh, Don's working on a pinball machine in his garage. And, uh, he asked Don what he's doing. He said, oh, I just bought this pinball machine that wasn't working. They gave it away. It paid like fifteen bucks for it and I think I can get it working. And, uh, Warren asked him, uh, how much is it gonna cost? He said, it's gonna cost like three dollars in parts and maybe a couple of hours to get it working. And then Warren says, uh, can you find more machines like this which don't work?

• 5:46Mohnish Pabrai?

  He said, oh yeah, there's a lot of machines you can buy, which people, people don't want them because they don't work, et cetera. So Don and him formed a, a company in their minds, never actually incorporated anything. They called it the Wilson Coin Operated Amusement Company. And, uh, they went to barber shops in DC. And these two boys, you know, kind of, you know, uh, nerdy looking fifteen year olds. They went to the barber and said, look, we work for a Mr. Wilson. And Mr. Wilson did not exist. It was a fictitious character. We work for Mr. Wilson and Mr. Wilson has asked us to present you with a proposition that we can put a pinball machine in the barber shop. And we'll come by once a week and whatever coins are in there, we'll split it fifty fifty with you. Half for you and half for Mr. Wilson.

• 6:30Mohnish Pabrai?

  So the barber said, yeah, put it in the corner, right? And so Warren got Danley busy fixing pinball machines. And the two of them would go on weekends and, you know, get barber shops.

• 6:43Shaan Puri?

  Yeah, every week they're making some money.

• 6:44Mohnish Pabrai?

  And and so I think he had eventually something like forty barber shops with with these machines. And Warren said that the first week he went back to the first barber shop, he thought he died and went to heaven. So there was like five or six dollars in there. And so their take was about like, you know, three dollars on eighteen dollars of capital in one week.

• 7:05Shaan Puri?

  Right.

• 7:06Mohnish Pabrai?

  And and he he just told, don't go as fast as you can.

• 7:10Shaan Puri?

  Danley, what are you doing right now?

• 7:12Mohnish Pabrai?

  Exactly. Warren had all these different resources that he was a senior partner and whoever he was working with was a junior partner. One time, Danley showed him an ad for a Rolls Royce for sale for three hundred dollars, but it didn't run. It was a old beat up rolls and, you know, people is giving away like like junk, right? And he thought he could fix the rolls. So they bought the rolls for three hundred, maybe another fifty bucks in parts and Danley had it running. And then they, you know, spruced it up and they would rent it on weekends for a hundred dollars to weddings. And and then on the weekdays, the two of them would go to school, the high school in the rolls. You know, so so what happened is, and Warren didn't, he didn't know this, but he was specializing

• 7:58Mohnish Pabrai?

  and figuring out business in that window of time, the eleven to twenty, right? And so by the time he was nineteen, eighteen or nineteen, I think he went to college when he was seventeen. By the time he was seventeen and went to college, he had fifteen thousand dollars. And he told his dad, I'm gonna pay for my college myself. And he also told his dad, I don't need an inheritance. Whatever money there is, you're leaving, leave it to my two sisters.

• 8:23Shaan Puri?

  Right.

• 8:23Mohnish Pabrai?

  I'm I'm I'm good.

• 8:24Shaan Puri?

  And fifteen thousand back then is a lot, you know.

• 8:27Mohnish Pabrai?

  Well, it's about ten to one.

• 8:29Shaan Puri?

  So a hundred fifty grand at a seventeen year old.

• 8:30Mohnish Pabrai?

  Yeah, think about seventeen year old, a hundred fifty K, right? And at that time, college was cheap, you know. And and the other thing is that he got interested in investing. His dad was a stockbroker, so he used to go to his dad's office on the weekends. And he says that at the age of eleven, he bought his first stock. And he said, I was wasting my time till then.

• 8:53Mohnish Pabrai?

  And but you know, he didn't really have a philosophy, didn't have an investing philosophy. At nineteen, he read The Intelligent Investor by Ben Graham. And that was transformational. And he thought Ben Graham was this guy who, you know, died and passed away. But then he discovered that Ben Graham was teaching at Columbia. He was a professor at Columbia. So when he finished his undergrad, he applied to Columbia to go to business school there. So he could, uh, he could learn directly from Ben Graham and he joined Columbia MBA program. Must have been twenty or something. And then, of course, after that, uh, Graham hired him and.

• 9:30Shaan Puri?

  Isn't there some story where he tells Graham, like, I'll work for you for free? And Ben Graham says, uh, your price is too high.

• 9:36Mohnish Pabrai?

  That's correct.

• 9:37Shaan Puri?

  So he still ended up convincing him somehow.

• 9:39Mohnish Pabrai?

  So actually Graham, uh, at that time Jews were very heavily discriminated against. There was a lot of antisemitism on Wall Street. So Ben Graham, who was Jewish, wanted to give the few jobs that he had to Jewish kids and, and young Jewish people because they just weren't many opportunities. So he basically told Warren, look, I gotta take care of the community.

• 9:58Shaan Puri?

  Right.

• 9:58Mohnish Pabrai?

  But, but then Warren went back to Omaha and about a few months after that, uh, Graham called him and said, uh, if you want to come to New York, I got something for you. And Warren never asked him what the salary was, what the position was. He just took the next train to New York, uh, with his, uh, with his wife. His experience as a businessman, uh, he was very lucky. It got seared in in that window of time. And both Warren and Charlie, they can crack businesses and business models really fast. So when we, when we start a business, uh, we will spend maybe three or four, five percent of our time on figuring out the strategy, you know, what's going to be the product, service, pricing. Yeah. All the, how are we going to make it work?

• 10:41Shaan Puri?

  Right.

• 10:41Mohnish Pabrai?

  And all the different plans, right? And then ninety five, ninety seven percent is all the blocking and tackling to make it happen.

• 10:47Shaan Puri?

  Right. It's Dan Lee fixing machines.

• 10:49Mohnish Pabrai?

  Yeah, exactly. And so.

• 10:52Mohnish Pabrai?

  In the case of investing, we use the same brain cells that we use in that three to five percent of time. And, and basically, one of the things that attracted me to investing was that basically that three percent becomes eighty percent because we don't need a Danley. We've got public bond companies and all of that. And we just have to pick which businesses we want to own partially and which ones we want to ride and so on. And so I think that I, I always find it strange if I run into investors who haven't been entrepreneurs because I think they're missing a very key part.

• 11:30Shaan Puri?

  Right.

• 11:31Mohnish Pabrai?

  And on the other hand, I find that entrepreneurs are very naturally already set up to be great investors if they make a couple of tweaks. And but what, what ends up happening is that we don't see a lot of entrepreneurs becoming investors. And we also don't see, we, we see a lot of investors who haven't built businesses, met payroll. And so both, both have flaws. So if you had the, the good fortune of having the entrepreneurial experience, then I think looking at the Buffett-Munger frameworks, it's a very easy transition.

• 12:08Shaan Puri?

  Right. It's probably also easier to go business to investor than investor for a long time than suddenly go try to be an entrepreneur.

• 12:13Mohnish Pabrai?

  Well, investor to business, the problem is the window is closed.

• 12:16Shaan Puri?

  Right.

• 12:17Mohnish Pabrai?

  So you'd be, you'd be at a disadvantage to start with. And but yeah, the earlier you start on both endeavors.

• 12:24Shaan Puri?

  Right.

• 12:24Mohnish Pabrai?

  The better off you are.

• 12:25Shaan Puri?

  There's a great, I don't know if you've seen this, but I didn't know, like, I always heard, okay, Warren and Charlie, great investors. I read the shareholder letters and the shareholder letters are often, they're amazing, but they're very like, they're high level and they're philosophical in a way. Then you have, I saw this letter of Warren writing a letter to this, I think the CEO of Sees Candy. I don't know if you've seen this, but it's a, it's a letter and it's, I expected it to be very, again, philosophical, amusing. Instead, he's like brass tacks right away. He's like, I went to the store and I have a few ideas for you. It's a very operational, tactical, I noticed this price point, I noticed this. And I was like, oh, he's, he's a businessman. Like, he's just like. Today, we only think of him as one bucket, but actually, he's got both gears.

• 13:08Mohnish Pabrai?

  Sees is a wonderful, wonderful business. It taught, it taught them a lot. It taught them more than they ever thought they'd learn from a stupid candy business.

• 13:16Shaan Puri?

  Right.

• 13:17Mohnish Pabrai?

  But one of the things Warren did when he first bought Sees is he told, he told the CEO, listen, you've got free rein. Run the business like you've been running and so on and so forth. But on December 26th, I'm going to set the prices for the next year.

• 13:33Shaan Puri?

  Okay.

• 13:33Mohnish Pabrai?

  Okay, so he would sit down with the entire Sees price list and he would bump all the prices by 10 or 15%. And inflation might have been 3%, right? And so he would raise prices significantly above inflation. And what he would observe is volumes went up. So, and then the year after that, he'd again bump it by another 10, 12% and volume still went up. And, and so both him and Charlie were amazed that you could have a business where you're continuously raising prices significantly above the rate of inflation and there's no resistance from the customer base to accepting those prices.

• 14:14Mohnish Pabrai?

  And that's what gave them a huge lesson in brands. And, you know, he was a dyed-in-the-wool hardcore, deep value investor. It was really hard for them. They paid three times book value for Sees. They were choking almost when they paid that amount. So I think they bought Sees for like 25 million. Looking back, they could have paid 200 million and it would have been a good deal. Yeah, and Sees has sent dividends to Berkshire in the billions. I mean, it's been about 50 years since the purchase and billions of dollars have flowed from Sees to Berkshire, which has then been used to buy a whole plethora of other businesses.

• 14:59Mohnish Pabrai?

  And, and if you look at their, their purchase of Coke, for example, they, they put a quarter of the entire book value of Berkshire Hathaway into Coke in 1988.

• 15:12Mohnish Pabrai?

  If they had not bought C's, they would have never bought Coke.

• 15:16Shaan Puri?

  Right.

• 15:16Mohnish Pabrai?

  So the lessons that they learned about branding and the power of brands is what led to the Coke investment, which was a much bigger home run. And they've made many more brand investments since then.

• 15:28Shaan Puri?

  Half the portfolio is in Apple right now, right?

• 15:30Mohnish Pabrai?

  Yeah, so.

• 15:30Shaan Puri?

  One of the best brands in the world.

• 15:32Mohnish Pabrai?

  And, and I think, I think Warren understood this notion of consumer behavior and how powerful brands can be and how powerful habits can be. And, and then he went from there. So yeah, absolutely.

• 15:45Shaan Puri?

  And one of the interesting things about C's is that C's wasn't this fast grower. It wasn't, they bought it and then it, sales exploded. But what I think the, the beauty of C's, if I remember correctly, is that it was, there's no additional capital had to go in. So everything was just free cash flow coming out.

• 15:59Mohnish Pabrai?

  Yeah. So, so C's is very much a California story, right? I mean, it, it was, it was founded in California. Almost all the sales were in California. If you look at C's from the time they bought it till today, about 50 years, the unit volume has gone, gone up on average 2% a year. Okay. California GDP, probably at least in the seventies, eighties, nineties, was going up about at least four or five percent a year. So they were actually, and part of that might have been the, the price increases. Okay. But even with those heavy price increases, they still got the volume going up slightly.

• 16:37Shaan Puri?

  Yeah.

• 16:37Mohnish Pabrai?

  Uh, but when you overlay that, you know, you do 50 years of 10%, that's, that's a very big number, right? And so C's is not cheap today, right? And now Warren was very excited about being the candy mogul of the world. So they tried really hard to send C's everywhere, right? I mean, they would open a store in Chicago and then fall flat on their face. Then they'd open in Arizona and they fall flat on the face. They repeatedly tried over and over and over again to broaden C's and expand it. And by and large, those, uh, those efforts didn't

• 17:16Mohnish Pabrai?

  work. Even today, the bulk of the volumes of C's is in California, right? And, um, and so when the Coke investment came about, uh, they discovered, they, they found something very different than C's. They knew.

• 17:32Mohnish Pabrai?

  Sees doesn't travel well, but they could look at more than a hundred year history of Coke and they knew Coke travels really well. There are two countries in the world where you can't get Coke, North Korea and Cuba. Okay. If they opened up to Coke in either of those two countries and Coke did not advertise at all, sales would take off. It's so embedded in the pop culture. So even in countries and places where they've never done any branding before, you know, people in Pakistan or India or Bangladesh, they're having Indian food with a Coke.

• 18:07Shaan Puri?

  Right.

• 18:07Mohnish Pabrai?

  Right, so it's ubiquitous and that did not exist with Sees candy. It wasn't ubiquitous and Warren understood you can't, you can't consume infinite amounts of candy. You know, there's an aftertaste and all that. Coke, you can actually consume a lot of.

• 18:23Shaan Puri?

  Right, there's no, what does he call it, taste memory?

• 18:25Mohnish Pabrai?

  There's no aftertaste.

• 18:26Shaan Puri?

  Yeah.

• 18:27Mohnish Pabrai?

  Yeah, that's right. So, so I think, like I said, I think they, they move from being hardcore quantitative, deep value guys to actually understanding a lot of nuances of brands and consumer behavior, which was very fundamental to how and why Berkshire did so well.

• 18:44Shaan Puri?

  So you talked about specializing, kind of that eleven to twenty years old ish window.

• 18:50Mohnish Pabrai?

  Yeah.

• 18:51Shaan Puri?

  Today, you've done phenomenally well. You've managed, I don't know, almost a billion dollars or maybe more, who knows? A lot of money and have done incredibly well investing. Did you, did you do that when you were eleven to twenty or were you a late bloomer?

• 19:05Mohnish Pabrai?

  So, no, actually it was just dumb luck. A lot of things in my life have been dumb luck.

• 19:12Mohnish Pabrai?

  So my dad was a quintessential entrepreneur and he was really good. So, you know, a great entrepreneur, one of the first traits you need is you need to be able to identify offering gaps, some product or service that ought to exist, but doesn't, like Starbucks before Starbucks or McDonald's before McDonald's and so on, right? And so my dad was really good at figuring out that, oh, this product should be there, but isn't. And he was really good at identifying these offering gaps. He was also really good at starting businesses from scratch. But his downfall was that he was always very aggressive and he was always over levered. So.

• 19:55Mohnish Pabrai?

  When the businesses were going, he was literally taking every last dime of profit coming in and everything that he could borrow and just pounding into the growth as aggressively as possible. And the negative was that when the first headwinds showed up, the businesses had no staying power. And so they would run into trouble. So my brother and I, I think after we were like maybe nine or 10 years old, we were like his board of directors. Okay. And I remember like when I'm like 10 or 11 years old, my dad, my brother and me would sit down in the evening and we had to figure out how to make the business survive for one more day. So all the walls were caving in. There were everything going bad and there were a lot of moving parts.

• 20:39Mohnish Pabrai?

  And we put our heads together and we tried to figure out how to make it last, right? And then we'd make it pass the one day and the next night, the same thing over, right? And so I finished many MBAs before I was By 12. And I think I was 15 or 16. I was, I don't know why my dad did it, but I'm really grateful he did. He used to take me on sales calls. And you know, who takes 15 year old on a sales call? It just doesn't fit, but my dad didn't care. And that was just incredible for me because I was getting to see, you know, I was in, I finished high school in Dubai. So I was in Dubai from the age of 16 to actually 19. And in, in that window of time, my dad had a gold jewelry business.

• 21:22Mohnish Pabrai?

  And so we used to go, I used to go with him to these, he was manufacturing gold jewelry and he was selling it to these retail merchants, right? And so he's going into cold calling, right? And, and I'm, I'm observing him going into a jewelry store. He doesn't know them. Were you a silent shadow or did you have a role? No, no, I was very silent, but I was, I was soaking it in. And sometimes when he was traveling, my brother and I would run the business. So they were like all these goldsmiths and all that and we'd manage, giving them the gold and taking the jewelry and all that. So basically I didn't, I didn't realize it then. But when, when I went to college, I studied engineering. And then I joined a telecom networking company as a, as a R and D engineer.

• 22:05Mohnish Pabrai?

  And when we were working on these products, I'd ask my boss, so what are you going to sell this for? And who's the customer? And what kind of, like, what are you going to make on it? And my boss would tell me, Those are all questions for marketing and sales. We don't need to care about that. Just design the product.

• 22:21Shaan Puri?

  Right.

• 22:21Mohnish Pabrai?

  He didn't know the answers.

• 22:23Shaan Puri?

  Yeah. That's the poker tell.

• 22:25Mohnish Pabrai?

  He didn't know the answers. He didn't care.

• 22:27Shaan Puri?

  Right.

• 22:27Mohnish Pabrai?

  And I found that all the people I worked with, the engineers, didn't care. I said, how stupid can you be? You know, you don't have the big picture. The big picture is interesting and exciting. If you know the big picture, you can change the big picture, right? And so what I did after two and a half years with the nerds is I switched to international marketing. And that was such a breath of fresh air. It was so great. And my learning again.

• 22:52Shaan Puri?

  Right.

• 22:53Mohnish Pabrai?

  Skyrocketed. And I had a big advantage because I had a very strong engineering background. But I also had all the background for my teen years. And so what I found is that I was able to connect with customers and figure out kind of what they wanted and how to really get the order much better than guys 20 years more experienced than me. Because they hadn't had all these experiences and they didn't, they didn't think like an entrepreneur, right? It was just a, a small subset. And, and later in life, when I heard about Buffett for the first time, I found a lot of commonality, right? I mean, he had a, he had a very different experience in the sense that he was his own entrepreneur.

• 23:33Shaan Puri?

  Right.

• 23:33Mohnish Pabrai?

  But one of the things that's really important is that when I look at a CEO, I always start to find out, did they run a lemonade stand when they were 12? Because if they didn't run the lemonade stand when they were 12, they're not going to be that great at business at 30. Okay, the, the little itty bitty lemonade stand has a lot of lessons.

• 23:53Shaan Puri?

  Right.

• 23:54Mohnish Pabrai?

  And, and so I think when, when we have kids, I think it's really important in that window, they don't need to run lemonade stands, but they really need to be doing what's going to be their calling.

• 24:07Shaan Puri?

  Right.

• 24:08Mohnish Pabrai?

  And, and I think that's what the biggest responsibility of parents is. They need to expose them to more of what they think their passion is.

• 24:16Shaan Puri?

  You know, I've done like maybe 500 plus episodes now of this. And the podcast is named My First Million because when we first started, I would just say, I was fascinated by the many different ways people became. Millionaires. I thought that's cool to hear the stories. That's how the podcast started. And along the way, I noticed three common things of what you were doing in your teens. Cause I used to ask this question. I was like, you know, you're amazing now. If I met you when you were 14, what were you doing? And would I have known that you were going to go on to do things? And most people are very humble. They're like, oh, you wouldn't have known. But then when I say, what were you doing? It's always something that no other 13 or 14 year old is doing. It's like, oh yeah, I used to go to the shop and I found these, you know, these CDs, Rosetta Stone, that I could go sell for three X on eBay. And I made an eBay account or I, you know, I started buying shoes and flipping them.

• 25:00Shaan Puri?

  So it was always like eBay flipping or sneaker flipping is like a super common one. Another one was competitive video games because a lot of the strategy, you know, communication, collaboration. You know, just extreme competitiveness gets built in there. And there's a couple of others, but another one is like a Mormon mission. So Mormons will go and have to sell, you know, Jesus to a bunch of people, get rejected a thousand times in two years. They become incredible salespeople. And so you, you, you see these backgrounds where, oh, you were kind of forged at an early age to, to do this.

• 25:31Mohnish Pabrai?

  Well, we have a common friend, you know, Said Balki, right? And you interviewed him for your podcast. And Said was an entrepreneur at the age of eight or nine. You know, even maybe even earlier than that. He was selling greeting cards. He was making and selling on street corners. You know, and, and then by the time he was 11 or 12, I think he was writing code and

• 25:52Shaan Puri?

  Making websites.

• 25:53Mohnish Pabrai?

  You know, and went from there.

• 25:54Shaan Puri?

  Right. How did you make your money? Give me the highlights of your progression in terms of your own ability to, to generate money and then start to invest it.

• 26:02Mohnish Pabrai?

  I actually never, ever wanted to be an entrepreneur. I never wanted to start a business because I had seen so much turmoil.

• 26:10Shaan Puri?

  Trauma.

• 26:10Mohnish Pabrai?

  In, in my, in my childhood, right? And I remember I was like, um, uh, 24 or 25 years old. And my dad was visiting me. I was living in Chicago. And he tells me it's time to quit and start your own business. And so I said, you know, have you forgotten? Have you forgotten my childhood? And you know, all the ups and downs. He, so my dad just said, oh, that's what makes life great. But he said, look, the company you're in, the business I work for had two thousand people. He said, you're such a tiny cog in such a big wheel. You could drop dead tomorrow. They won't even miss you. Okay, you don't matter.

• 26:51Mohnish Pabrai?

  And what you really want to be doing is figure out something where there's an offering gap. And go for it, right? And, and I was actually getting a little bit frustrated at work because the company had been growing. It was getting more and more bureaucratic. And so I actually started to think about what might be possible. And I didn't have any money, you know, basically I was twenty four, twenty five. So what I did is I came, I came up with some IT services offerings that I thought would be pretty unique. Because at that time, client server computing was just getting going, early nineties. And so I had about thirty thousand dollars in my 401K.

• 27:36Mohnish Pabrai?

  And I said, okay, we'll worry about retirement later and we pay the penalty. I pulled that out. Nice. And I, I, I applied for every credit card I could get my hands on. And so I had seventy thousand available to me in different credit limits in credit cards. And so I said, okay, we've got up to a hundred thousand that we can play with. And the third thing that I did is I basically did both. I was going to my, my job and I had started my company at the same time. Because basically what I would do is like from like six to nine in the morning, I'd work on my business. And then from six PM till midnight, I work on my business again and weekends. But somebody was paying the rent.

• 28:21Mohnish Pabrai?

  I still had a paycheck and all that. And I said, okay, once we have enough revenue, clients, profit, I can quit, right? And, and I always tell, tell people that basically if you think about it, there's a hundred and sixty eight hours in a week. Your employer needs you for forty, right? And if you live close to work or work remote, the commute time is not that much. And if you take out time for eating, sleeping, everything else, you have at least another forty, fifty hours that you can engage on something other than work. And I used to always get great reviews. When I was starting my business, I said, okay, look, the plan is to not get fired. The plan is not to be employee of the year.

• 29:06Shaan Puri?

  Right, I don't need to overshoot.

• 29:07Mohnish Pabrai?

  So I said, I'm going to give them just enough. So I'm just above firing level, you know, where it's not so bad that they call me in and terminate me. I need to be above that, okay? And I did this over nine months. And then I had clients, revenue and all that. And I went into my boss and his boss and I resigned, right? And they, they said, you know, Mohnish, we really couldn't figure out last nine months, like you checked out. I said, exactly. I said, my, my goal was to just do enough. So I didn't get fired. But he said, he said, yeah, we saw a big drop in the old Mohnish and the new Mohnish. And we talked about it. And we actually said, it's not so bad that we would fire him. But there's something off.

• 29:51Shaan Puri?

  Right.

• 29:52Mohnish Pabrai?

  We couldn't, we couldn't figure it out, right? And then, so I explained to them, I was going into a business. My own business was not comparative with theirs.

• 29:58Shaan Puri?

  Yeah.

• 29:58Mohnish Pabrai?

  And so they said, look, when your business fails, not if your business fails, when your business fails, you can come back. We're going to give you more money. We're going to promote you and you're going to do great. So I said, you know, my, my plan was that if I failed, when I was going to my business, if I failed, I said, look, I got my degree. I can look for a job. I can apply for personal bankruptcy, clean everything off and start over, right? I said, this is even better. I don't have to look for a job.

• 30:25Shaan Puri?

  Right.

• 30:26Mohnish Pabrai?

  I get more money, right? And so I actually felt like the, you know, people think there's a, people have a, a, a false mental model. People think entrepreneurs take risk. Entrepreneurs do not take risk. They do everything in their power to minimize risk. If you think about Buffett's pinball machine business, what was the risk those two fourteen year olds, squawny fourteen year olds took? Nothing. Okay, it's fifteen dollars in a pinball machine which they could use themselves.

• 30:57Shaan Puri?

  Worst case scenario.

• 30:57Mohnish Pabrai?

  Three dollars, three dollars in parts. So the second pinball machine will only get bought when the first one's already producing cash.

• 31:05Shaan Puri?

  Right.

• 31:05Mohnish Pabrai?

  Right? And the third one after the second one. So basically, there's no risk, right? If it fails, they sell those machines for more than they bought them.

• 31:13Shaan Puri?

  Entrepreneurs are actually great risk reducers. They start with something that seems risky but may not be.

• 31:17Mohnish Pabrai?

  So that's the other thing that is a commonality between entrepreneurs and value investors, uh, which is why the same brain cells get used. Both are trying to minimize risk. You know, we as value investors want to go low risk, high return. And great entrepreneurs, that's exactly what they're doing. They're going low risk, high return. Nobody is doing high risk, high return. The only, only, so if you look at the United States, probably around a million businesses, more than a million businesses a year get formed in the United States. Venture backed businesses um are less than, much less than even one percent of that pie. Might be in most years, less than one tenth of one percent, right?

• 31:58Mohnish Pabrai?

  So if there was no venture capital and no venture backed businesses, it would make no difference to the landscape. Okay, we'd still have the million businesses being formed. Venture backed businesses are a different animal because they are high risk, high return, right? The, what the VC wants you to do, the VC's got ten bets. He doesn't care whether your bet works or not. He just wants one of those ten to work.

• 32:20Shaan Puri?

  Yeah.

• 32:20Mohnish Pabrai?

  So he wants you to step on the gas as aggressively as possible. If you blow up, you blow up, right? Uh, when you're an entrepreneur who's not venture backed, that is not how you go. You don't put just, you know, foot on the gas. You're very careful about downside protection. So what happened?

• 32:38Shaan Puri?

  Even some of the big, uh, big entrepreneurs, Richard Branson.

• 32:41Mohnish Pabrai?

  Oh, yeah.

• 32:41Shaan Puri?

  I think is the, people see him as this free, you know, risk taker, reckless sort of guy. But you, you've pointed out that that's not true about Richard Branson in this case.

• 32:50Mohnish Pabrai?

  One of those stories I love about Branson is when he had the idea to start uh Virgin Atlantic A- A- Airline, right? The minimum that you need to start.

• 33:03Mohnish Pabrai?

  Transatlantic service is a Boeing seven four seven. Okay, couple hundred million dollars, right? And Branson got Virgin Atlantic off the ground with no money. So what he did is he calls a direct reassistance in the United States, five five five one two one two. In Seattle, two oh six five five five one two one two. Asked for the number for Boeing. Okay, gets the number for Boeing, calls the main switchboard and says, um. I'd like to lease a seven four seven that you guys might have hanging around that you're not using. They hang up on him. Right. Okay, keeps calling them. And finally, the lady at switchboard says, uh. Let me transfer you to someone who can get rid of you properly, right?

• 33:47Mohnish Pabrai?

  So she transferred him to someone who's head of like commercial sales. And so this guy tells him, listen, Mr. Branson. In every country, we have one customer. And you are not the customer in the UK. It's British Airways. And so therefore, there's nothing to talk about. So Richard tells him, listen, I, I, I agree with you, that's fine, but just humor me for a second. Do you have an old Boeing seven four seven lying around that you're not using? And he says, yeah, actually, we do. And if one of your customers, like the one in the UK called you, like British Airways called you, and they wanted a plane. What would you lease it for? So he says, well, I really don't need to have this conversation, but we would lease it for about two hundred thousand a month.

• 34:32Mohnish Pabrai?

  Okay, two or three hundred thousand a month. And Branson was able to convince Boeing to lease him that seven four seven. Because it was sitting and doing nothing. Right. Then when he set up Virgin Atlantic, he said, you get paid for all the future flights in advance. Because people buy tickets. So the plane's gonna fly in April, people already bought tickets in February. Right. So you say, I got cash coming in two months, three months before the plane, plane's gonna fly. And I'm gonna pay for the fuel thirty days after that plane lands. Okay, so he, he had negative working capital and the lease payment is also in arrears, right? So basically, he's, he was able to get Virgin Atlantic off the ground with zero equity.

• 35:18Mohnish Pabrai?

  Right? Now, the way I look at it is that if, if you can start an airline. With no money, you can start any business with no money.

• 35:26Shaan Puri?

  Right.

• 35:26Mohnish Pabrai?

  Okay, you just have to replace capital with creative thinking, right?

• 35:31Shaan Puri?

  How is it possible that point one percent of the population owns almost seventy percent of all the motels in America?

• 35:38Mohnish Pabrai?

  That's right.

• 35:38Shaan Puri?

  This is an incredible story. Can you explain? How is that possible?

• 35:41Mohnish Pabrai?

  In the early seventies, a dictator came to power in Uganda, Idi Amin. And Idi Amin noticed that in Uganda, most of the businesses were controlled by East Asians, Indians, Patels. They control like eighty percent of the economy. And these Patels had come to Uganda. They were brought to Uganda about a hundred years ago to work on the railroad almost as slaves, right? And but because they're natural entrepreneurs, they they went from railroad builders to eventually owning and controlling his whole economy. And he was pissed.

• 36:20Mohnish Pabrai?

  So so Idi Amin said, Africa is for Africans and you guys are not Africans. And these Patels had been in Uganda for three or four generations. That was their home. They were Ugandan citizens, you know, born and raised, right? And what he did is he nationalized all their businesses and he threw them out of the country.

• 36:43Shaan Puri?

  Which just means took their businesses, right?

• 36:44Mohnish Pabrai?

  He just took them. Yeah, he basically confiscated all, not their businesses, homes, everything, confiscated all their assets. And he told them, you've got ninety days to leave the country. So these these Patels in Uganda were stateless. Okay, you're being thrown out. You know, you're a citizen of a country, the country's throwing you out, right? And and they lost all their money. So they they were able to convert a very little, small sliver of their assets into gold. And the United States took some Patels as refugees, the UK took them, Canada took them, India surprisingly refused to take the Patels, refused to recognize the Patels had any right to return to India because they said, you haven't been here for a hundred years.

• 37:28Mohnish Pabrai?

  And and India was at that time dealing with the Bangladesh refugee crisis. So it couldn't deal with anymore. But a small number of Patels, a few thousand of them, came into the United States in the early seventies, the refugees.

• 37:42Mohnish Pabrai?

  They didn't have skills there where they could get great jobs. They didn't have, they spoke English with a funny accent and. They they realized that, look, if we um buy a really small motel, ten, twelve, fourteen room motel, the family can live in one or two rooms. Motels are labor intensive.

• 38:04Shaan Puri?

  Right.

• 38:04Mohnish Pabrai?

  Um, the family can do all the work, you know.

• 38:06Shaan Puri?

  It's a job in a house together.

• 38:07Mohnish Pabrai?

  Yeah, so basically cooking, cleaning, front desk, laundry. And so what what they started doing is they would buy these motels and uh basically fire all the staff and move in into two of the rooms. And because they had no costs, uh they were able to charge nightly rates that were lower that all the neighboring motels. So what would happen is that the Patel owned motel would be running hundred percent occupancy. The other motels couldn't match that rate because they'd lose money.

• 38:40Shaan Puri?

  Right.

• 38:40Mohnish Pabrai?

  Right, because they they had

• 38:41Shaan Puri?

  Staff and

• 38:42Mohnish Pabrai?

  workers comp and staff and all that stuff, right? And what the Patel started to do, and they Patel's are very frugal. They basically were vegetarians. Uh at that time in the U S, if you were vegetarian, you're really hosed. You couldn't really eat out anywhere. So by uh they were forced to just cook themselves, which was cheap, right? So there wasn't much of a grocery bill. And uh what they started doing is as their nephew came of age, for example, they would help him out to buy his own motel. Right? And then the nephew would get it going and then the next one, the next one. And you run this for fifty years and you end up with seventy percent of the motels

• 39:26Mohnish Pabrai?

  in the country under Patel ownership. Not only that, they've actually gone up market now. So a lot of the Hiltons, Marriotts, Westons, if you really look, you'll find it's under Patel ownership. Right? Same same math. They always are very good operators. And then they went into seven eleven, laundromats, Dunkin' Donuts, all of it, you name it. And uh but boss, bottom line was that These were entrepreneurs that were low-cost producers, right? Low-cost producers have an inherent advantage. And I remember when I first, when I first met Charlie, he had, he had read my book and, and we were discussing the Patel's. He says, yeah, you know, I got some friends in the motel business.

• 40:08Mohnish Pabrai?

  I just tell them, don't ever, ever try to compete with a Patel. If you ever find yourself in competition with a Patel, just find another game to play. Just move on. It's not worth it.

• 40:20Shaan Puri?

  So you said you met Charlie. That's got to be kind of a surreal thing for you to have met and become friends with Charlie Munger and Warren Buffett. How does that happen? How does that come about?

• 40:31Mohnish Pabrai?

  It shouldn't happen. You know, I was this squawny kid who grew up in the suburbs of Mumbai. And I accidentally heard of Warren Buffett in the mid nineties. And it was a big aha moment for me. At that time, I was lucky. The first couple of biographies on him had come out. And what I realized is when I read about how Warren was investing, I said, all these, all these models are the same models that an entrepreneur uses. It's the same. This is exactly what I was saying that, you know, a better businessman, because I'm an entrepreneur and vice versa. So I said, you know, but the big advantage he seems to have is that 4% of time of strategy is 80% time for him.

• 41:15Mohnish Pabrai?

  And even in the business I had created, the IT business, which had grown and scaled, I always enjoyed the 4% more. I, I, I was.

• 41:24Shaan Puri?

  Strategy, the figuring out.

• 41:25Mohnish Pabrai?

  I was happy doing sales calls and, you know, building teams and all that. That was, that was great. Do it once. I said, wow, if I go into investing, it would be 80% of my time. Because there's no blocking and tackling. Someone else is doing that. And so me that, for me, that was a big aha moment that I should switch. I was lucky in the, in the mid nineties, someone bought a small portion of my business. After taxes, after everything, I got a million dollars. And I, for the first time, had money in the bank. And I didn't really need the million, right? So I said, okay, what we're gonna do is we're gonna take this million. We're gonna invest in the public markets. And we're gonna find out if we can actually do this.

• 42:06Mohnish Pabrai?

  You know, this, you know, um, an idea is like an asshole. Everyone has one. Okay, ideas don't mean anything, right? So you really have to execute. It's really execution on the idea that has value. You know, entrepreneurs get kinda hung up on, oh, I need to get a patent and all that. One of the things you have to understand is you can go to your most direct competitors. You can tell them all your trade secrets. They will listen to you really carefully and they will not change behavior. Okay, so you don't need patents for anything. You don't, the ideas don't mean anything. It's really the execution. And um, so basically, I, I said, okay, let's take the million. Let's start investing it. Let's figure out what happens. And I was surprised we did really well.

• 42:48Mohnish Pabrai?

  I think that from like ninety five to two thousand, a five year period, that million became what thirteen million. And I said, wow, well done, Mohnish. And uh, so they got seventy percent a year compounded, yeah. And uh, so I was getting, I was doing investing part time while I was running my IT business. I was much more interested in the investing side, losing interest on the business side. Till, till that point when in nineteen ninety nine, I didn't even feel like going into work. I, I said, this is, I, I just wanna just focus on investing. And uh, so I made, I made a couple of big changes then. I uh, looked for and found a CEO to run my company.

• 43:30Mohnish Pabrai?

  And basically, thirteen, fourteen million, I felt was enough to retire, do nothing. You know, I could do investing full time, right? And so my plan was, okay, someone can run the business. Whatever's value is there is, is there, it doesn't matter. I can go off and just now do investing full time. And um, I had a few friends who had basically, I used to just give them stock tips, you know, the mid nineties, I'd find some company and make the investment. After that, I didn't care who bought the stock, right? I mean, I already bought it, right? And so I tell my friends, hey, you know, I found this company. You ought to see if you want to take a, take a flyer on it and buy it and so on. And they did really well on the stock tips, right?

• 44:14Mohnish Pabrai?

  But you know, some guys worth like five million, they would put ten thousand to what I told them. Right. And they would triple their money, wouldn't make any difference, right? So a bunch of these friends came to me and said, look, we don't like this randomness of these stock tips. We don't see you sometimes and you may have sold, we don't know. We want you to manage some money for us. And so they were proposing giving me a hundred thousand dollars each and it would be a million dollars in all, right? And I said, okay, I'll do it. I thought of it as a hobby. I didn't even think about it as a fund, but I want to do it in a format that works for me. So I love the Buffett partnerships where he didn't charge management fees. He only charged performance fees, so. So what's a normal structure and then what did Warren do?

• 44:57Mohnish Pabrai?

  So a normal hedge fund would be a two and twenty structure. They would take two percent of assets to the management fee for breathing. Every year? Every year. Yeah. And then twenty percent of the profits, right? So if a, if a hedge fund, for example, let's say has a billion, billion dollars under management, right? The general partners would take twenty million dollars a year. For breathing. For breathing. And then if, if it went up ten percent, so they would make a hundred million, for example, on the billion. They'd take another twenty million on that. Right. Uh, so basically what would happen is the investor who put up the money on a ten percent return gets a six percent return. Right below the S and P. Right. Right, because of all these frictional costs. So Buffett had run his partnership by saying that there's no management fee.

• 45:43Mohnish Pabrai?

  The first six percent returns go to you and above that I'll take one fourth and you take three fourths. So in the same situation, if, if the fund is up ten percent, in Buffett's case, the first sixty million goes to the investors and the remaining forty million is split. So it becomes ten million to him, thirty million to the investors, right? So it's a, it's a better, it's a half the fee, basically. And you're, you're paying for performance. Right. If he's not up that much, you don't pay anything. So I like that structure and so I told them I want to set up a, a fund. So it's all legal and we will do it with that structure. They really didn't care what structure it was. And so Pabrai funds really started in ninety nine as a hobby with me and

• 46:26Mohnish Pabrai?

  my buddies. And I had thirteen million on the side, which was my main focus. And I said, yeah, there's another million here. It's okay if I find something and buy for both.

• 46:36Shaan Puri?

  Right.

• 46:36Mohnish Pabrai?

  It makes no difference, right? And about a year, a year after that, there was about two and a half million. We were up like seventy percent the first year. And some more money had come in. And I said, you know, why do I treat the fund like a stepchild? Why don't I think of it like a real business? And why don't I basically grow and scale it like a real business? And, and so I started to do that. And Pabrai funds, we had a very good run for the first eight or nine years. I think we were doing like mid thirties a year on average, no down years. And the assets grew. We were at about, I think in two thousand seven, we were at about six hundred million in assets under management. And I had made

• 47:19Mohnish Pabrai?

  a lot of money, you know, the fees and the compounding and all of that.

• 47:23Shaan Puri?

  So in like a ten year period, you turned the million dollars of managed money into about six hundred million of assets of management, including new money.

• 47:29Mohnish Pabrai?

  Yeah, it wasn't all, it wasn't just organic, but, but, but the original money had almost tripled.

• 47:35Shaan Puri?

  Right.

• 47:36Mohnish Pabrai?

  You know, tripled or quadrupled in that period.

• 47:37Shaan Puri?

  I had asked you yesterday when we were hanging out, I said, you know, there's really two questions when you hear this story. Number one, how the hell were you getting these returns? So what, what, what did you know about invest? What was that part? But the second part is, how did you, what did you do on the fundraising side? How'd you get so many, so much more money to come through the door? And you've had a great line about that, about how you get more money to come through the door? Because you didn't strike me as a guy who wanted to be out there fundraising and knocking on doors and trying to raise funds. So how does it happen?

• 48:01Mohnish Pabrai?

  Buffett has a great, great quote. He says that if you are in a rowboat in the middle of the Atlantic, they will swim to you in shark infested waters to invest with you if you have beaten the market, right? They will find you. He says you could be a leper and they will invest with you.

• 48:20Shaan Puri?

  That's what happened.

• 48:21Mohnish Pabrai?

  And also, one of the things that was very difficult for me was that the SEC has a lot of rules and laws around hedge funds. One of those is you cannot solicit to general public.

• 48:33Shaan Puri?

  Right.

• 48:34Mohnish Pabrai?

  So when I was running my IT business, I would call on any CIO and say, hey, you know, would you like to use our services, etc.? I could literally call anyone out of the phone book. When you're running a fund, you can't just get a list of dentists in North Carolina and pound them. That's not legal. You can't do that. So the S E C said you can only talk to people you know. Okay, I said to people I know, I'm gonna run out of my rododex in like five minutes. You know, there's very few people I know. So what I did is I started to meet my investors once a year for an annual meeting where I would give them their results and take their questions and all of that. And I told them, listen,

• 49:13Mohnish Pabrai?

  there was one reason and one reason alone you were put on planet earth. And that is to bring assets to public eye funds. Okay, humans are always looking for a calling. They are looking for some cult leader to follow and be part of cult. So you gave them one. So, yeah, you know, they were wandering in the wilderness. They needed purpose. Okay. So I said, here's what you need to do. You need to go talk to your friends and family because I can't talk to them. The S E C won't let me talk to them. You can talk to them. Okay, you talk to them, you tell them about me, you tell them to contact me. Once they contact me, I can engage with them. Okay. So go out and spread the word. Okay. And send me more of your assets too. Okay.

• 49:57Mohnish Pabrai?

  So basically, what, like I said, I started with a million, a year later, it's two and a half million, two years later, it's 10 million. And it's growing, you know, and part of it was that the annual returns are adding. But part of it was that, so I had eight investors when I started. A year later, they were 17 and two years later, they were 25. So now I had an audience of 25 to proselytize and spread the word, you know. And, and, and of course, the results. Now, the other thing that was happening is that when I started the funds in 1999, we were nine months away from the biggest bubble about to burst that had happened in decades, the dot com bubble, right?

• 50:40Mohnish Pabrai?

  And I, I was able to see the bubble not very much in advance of the rest of the world, maybe just two or three months ahead. I, I knew the internet was transformational, but I also knew that The euphoria was too much. You know, we had pets.com trading at multi-billion dollar valuations with no revenues, right? I mean, there was this comment to have a lot of companies, the people were counting eyeballs. They're not counting dollars and they're not looking at net income. They're not even looking at revenue. They're just looking at eyeballs, right? And so, so I said, okay, this, this is bad news. It will blow. At some point, it's gonna, the bubble's gonna burst. I didn't know when. So I had always been a tech investor

• 51:25Mohnish Pabrai?

  from like the mid nineties and I'd done really well. Tech had had a great run from ninety-five to two thousand. It had just done really well and I'd ridden that coattail. But what I did in ninety-nine, when the fund started and also with my own capital, is I did a one-eighty. I switched completely to classic Ben Graham deep value, you know, what Buffett had started doing in the fifties. And one of the things that was happening in the equity markets at that time was the day the NASDAQ peaked, I think March eighth or March nine, two thousand, was the day that Berkshire hit a multi-year low. And literally, people were pulling money out of their Berkshire stock and buying pets.com, right? And then that goes to zero eventually. And so I said,

• 52:08Mohnish Pabrai?

  okay, basically, there's a lot of basic businesses that had become really cheap because nobody was interested. So I was buying funeral homes at two times earnings and buying steel companies at three times earnings. And so a lot of basic businesses, which are very predictable and doing well, trading really cheap. Right. And, and so public funds did really well. In fact, the NASDAQ imploded. Basically, it hit five thousand in March two thousand. By the time it bottomed out, the next two or three years, it was at twelve hundred, seventy percent drop, you know. And the Dow and the S and P didn't go down as much, but they also went down a lot. And so it was, it was a traumatic

• 52:53Mohnish Pabrai?

  period for investors. It was a great period for me. And, and so it was very easy for me to talk to my investors because I was the only guy making money for them. Okay. If they had like five accounts, they just moved it all to me because everything else was going down. Everything else is red.

• 53:12Mohnish Pabrai?

  So that's how we, we got going. So in two thousand and seven, I, I think my net worth at that time was like eighty-four million. And Warren had been running these charity lunch auctions where once a year you could bid on eBay to have lunch with Warren Buffett and the money would go to the Glide Foundation which was doing, you know, feeding the homeless and all that in San Francisco. So I said, you know, I am using this guy's intellectual property and making all this money off him.

• 53:46Mohnish Pabrai?

  I really have a big tuition bill I need to pay. So I said, the lunch is a great way to do that. I said, I can bid for the lunch and I'll meet Warren, I'll be able to thank him in person and it goes to a cause that he supports. So I thought about it, it's okay, eighty-four million, what's an appropriate tuition bill? I said, two million is good. I think if I gave him two million, I'd feel good about that, right? So I said, okay, I decided in two thousand seven I was gonna bid for that lunch and I decided I would go up to two million dollars. And you can bring up to seven other people to that lunch. So I was gonna take my family, but there still were a couple of seats empty. So I contacted my friend Guy Spear, he lived in Zurich. I said, hey Guy, I'm gonna bid on this lunch, blah, blah.

• 54:30Mohnish Pabrai?

  And I said, do you wanna come in with me? And I said, if you and your wife wanna join us, because there'll be four of us and two of you, you can pay one-third and I'm willing to go up to two million. So Guy says, well, that's too rich for me, I can't pay one-third of two million. He says, I'm good for a quarter million. So I said, okay, whatever the bid ends up at, you're capped at a quarter million, right? And so I bid for it, it settled at six hundred and fifty thousand, much less than what I was willing to pay. And then one-third of that got paid by Guy. And so my only agenda in meeting Warren was to just say, thank you, Warren, right? I didn't have, and of course he was a big fanboy and, you know, meeting him and all that.

• 55:16Mohnish Pabrai?

  Warren's agenda, when he has these lunches, is really different. His agenda is, he wants...

• 55:24Mohnish Pabrai?

  The people who won that lunch to feel like they got a great bargain. Hmm. So he would take all our, what I would call our lemonade, lemon questions and can turn them into lemonade. So he's always is exactly what it does in the Berkshire meetings is he's a great teacher. And so he was trying to uh give as much value as he could in that lunch. And like he told us when we met him, he said, look, I got nothing going on all afternoon. Right? So when you guys are sick and tired of me, you just let me know and I'll leave. Right? We kept asking him questions for three hours and then we were exhausted. And so we said, Warren, we just don't have anything else to ask you, you know? He said, okay, I'll, I'll, I'll take off, no problem.

• 56:06Mohnish Pabrai?

  And uh in that lunch, uh I told him, I said, look, Warren, um my, my wife, then Harina, I said, she's uh a huge fan of yours, but her true love in life is Charlie. Okay. And Warren got competitive. He said, Charlie is a very boring guy. He's a very kind of pessimistic, always says no to everything. I'm the guy who's really interesting. So he said, what I'm gonna do is you guys live in California in L A. I'm gonna set you guys up to meet Charlie for lunch. And then when you meet him for lunch, you're gonna find that he's useless and I'm the guy. So I thought he was joking about that, right? And two days later, I got an email from his assistant to Charlie's assistant copying us. Uh basically saying, hey, I met this wonderful couple in California and they seem to think you're more interesting.

• 56:51Mohnish Pabrai?

  I think they just don't understand. So I want them to meet you so we can set the record straight, right? And so This is really what he was saying. This is exactly what he said in the email, right? Was he joking or was he not? And then I, I, Charlie's assistant sets us up to meet Charlie for lunch. Now, Warren, you can bribe and have lunch with, okay? Charlie, there's no bribing. This, this is great. And so uh we met Charlie, my, my wife and I, we met Charlie in two thousand eight uh at the California Club in L A. And uh I actually found that lunch a lot better than the Buffett lunch. Okay, it was great because I think Charlie is just so direct, you know? And um and I never expected These lunches or any of this to lead to any anything, you know, it's a one and done.

• 57:36Mohnish Pabrai?

  But it led to a friendship with Charlie. He started asking us to come to his place for dinner. And I would meet him like four or five times a year for dinner. And then we started playing bridge together. Usually on Fridays, he would play bridge at the LA Country Club. I'd meet him about once a month or something to play bridge. And that used to be lunch and then about four or five hours of bridge after that. So it was a, it was a, a wonderful, deep friendship for 15 years, which was unexpected, you know, just never expected.

• 58:09Shaan Puri?

  So let's go back to the lunch. You ask him questions for three hours.

• 58:12Mohnish Pabrai?

  Yeah.

• 58:12Shaan Puri?

  What were the interesting questions and answers? I know you've said one that I want to hear you, you explain. Cause I didn't fully, I, I, I've heard the tidbit, but I want to hear the full story, which was, he said something about being a harsh grader of people.

• 58:25Mohnish Pabrai?

  Yes.

• 58:25Shaan Puri?

  What does that mean?

• 58:26Mohnish Pabrai?

  Well, I, I told, I told Warren, I said, Warren, you know, you are, both you and Charlie are such good judges of humans and human nature. Were you always that good at figuring people out? So he says to me, Mohnish, you're mistaken. I am useless at figuring people out. He said, if you put me in a cocktail party with a hundred people and you gave me five or 10 minutes to meet each person, I could tell you three or four people are exceptional. And I could tell you three or four people you want nothing to do with. And the remaining 92, I would have no opinion on because it's not enough time to figure them out. So, but he's, but he also said that, look,

• 59:11Mohnish Pabrai?

  what you do in life is those three or four people who are exceptional, you bring them into your inner circle. And obviously the three or four people who are, you know, not, not the great humans, you're not going to have anything to do with them. But the third thing you do is you treat the 92 just like the useless humans. And you exclude, so he says, be a harsh grader. So he says that when you have friendships and when you have people you work with, your peers and all that, he says there's a gravitational pull. If you hang out with people better than you, you're going to get better. If you hang out with people worse than you, you're going to get worse.

• 59:51Mohnish Pabrai?

  So he said that one of the things that most humans are not willing to do. Is loyalties get in the way for them, right? So they may have a friend who's kind of weird or quirky or has ethical issues. But they've had a long friendship. So they'll keep that person going with them. That has detrimental impacts. So basically, I really took that to heart. And I said that I'm really going to try to see if I can focus on the great relationships, you know, the great people. And that's actually been a journey I've been on now for like, you know, sixteen,

• 1:00:36Mohnish Pabrai?

  seventeen years. It's been tremendous. It's great. Now, it's unfair, right? Because you're treating the unknown the same as the useless people. But that's the way life is. I think that sometimes you have to make these difficult choices. Because if you don't do that, then the impact of that is significantly negative. And one of the things I realized when I started to get to know Charlie, I got to meet Charlie's friends. So I would play bridge with his friends. I'd meet his friends. And what I realized is his friends were so off the charts. They were so exceptional. I said, wow, this is like a different world, right? And I said, I'm going to take a shortcut.

• 1:01:21Mohnish Pabrai?

  I'm going to make Charlie's friends my friends because he's already done all the work. He did the filtering. You can't get a better filter than Charlie Munger, right? And so I worked on building relationships with Charlie's friends and some of his family. And that's been beautiful. I mean, some just great friendships. And, you know, I realized that there's such a huge delta in off the charts, top point one percent, top one percent of humans and the rest. And, you know, we talked about this. Adam Grant wrote this wonderful book, Give and Take, right? And he categorizes people in three buckets, right? The givers, the takers, and the matchers, right?

• 1:02:05Mohnish Pabrai?

  Now, the takers, you don't want anything to do with. You know, they're just going to like, want to extract whatever they can from you. So they're just not people you want to have in your life. The givers are people who are selflessly trying to help the planet, not really concerned about what comes back to them, right? Those are the ones you want to be with. And then the matchers, they're kind of doing math in their heads. Oh, you know, Sean did this for me, so I'm going to do something similar for them. They're kind of, and so even the matchers aren't that great. So what you really want to do is you want to seek out the givers. And more important than that is you want to be a giver.

• 1:02:40Shaan Puri?

  Right.

• 1:02:40Mohnish Pabrai?

  And, uh, and so the, the interesting thing that he pointed out in that book is that when you're a giver, the universe conspires to help you. And I found it magical how, and Warren and Charlie are great examples of givers. Everyone's trying to help them in any way they can. And so that's the, the funny thing is that the matchers who are trying to do this, you know, equalization, they end up losing. The best way to get the most is not ask for anything. It'll all come to you.

• 1:03:11Shaan Puri?

  Right.

• 1:03:11Mohnish Pabrai?

  You know, and so, so these are wonderful models to incorporate.

• 1:03:15Shaan Puri?

  Yeah, there's even some game theory with that, which is the cost of excluding somebody who might be good or might be great is quite, is actually quite low to you. But the cost of accidentally including somebody who might be, have some toxicity, it's quite costly to you. And so, uh, you know, I think even in investments, he has the, the good pile and then the too hard pile.

• 1:03:35Mohnish Pabrai?

  Warren has a lot of baseball analogies. He says that in investing, there are no called strikes, right? So in baseball, uh, you're at the pitch, three strikes, you're out, right? He says, I can let a thousand balls go by, thousand stocks go by and not swing.

• 1:03:47Shaan Puri?

  Right.

• 1:03:48Mohnish Pabrai?

  Right? I, I only need to swing when eight moons line up, right? And so.

• 1:03:54Shaan Puri?

  The fat pitch, right?

• 1:03:55Mohnish Pabrai?

  The fat pitch, right? And so the thing is that we live in a world with infinite humans. If there are infinite humans, it also implies that there are infinite number of good humans. So

• 1:04:09Mohnish Pabrai?

  basically, uh, making of, uh, excluding a good human from your circle because you can't figure them out. There's no penalty for that.

• 1:04:18Shaan Puri?

  Right.

• 1:04:18Mohnish Pabrai?

  Because there's an infinite supply.

• 1:04:20Shaan Puri?

  Right.

• 1:04:20Mohnish Pabrai?

  Just to put it bluntly.

• 1:04:21Shaan Puri?

  Wait for the.

• 1:04:22Mohnish Pabrai?

  In mathematical way, mathematically. But, but when you bring in a substandard person, it just, there's so many drains. It's just negative.

• 1:04:32Shaan Puri?

  I want to hit you with some of your big investing philosophies and give me the kind of the, the punchy version of like, what is that? What does the phrase mean and how you use it? So, um, let's do one, heads I win, tails I don't lose much.

• 1:04:45Mohnish Pabrai?

  Well, I mean, I think this is classically comes from the Patels, right? The Dando philosophy. But but this is this is how we want to do all our bets with people, with stocks, with everything.

• 1:04:59Shaan Puri?

  Asymmetric.

• 1:05:00Mohnish Pabrai?

  Yeah, yeah, basically where we always want to look for things where the the odds are so heavily in our favor. And so in investing, we do get these anomalies where you you take.

• 1:05:14Shaan Puri?

  What's one that you've benefited from or what's an example in your portfolio or your career investing? Where you felt like you you recognize asymmetric upside, your downside was capped, but your upside was high?

• 1:05:25Mohnish Pabrai?

  Well, I mean, I think that if I look at my first business, for example, right? I mean, I I'm taking thirty thousand for my 401k, which I can make up. And at that time, the credit card laws were very different where if you declared personal bankruptcy, you got a clean slate. And actually didn't affect your credit because you couldn't file again for seven more years. So everyone will give you money after you file. Okay, so actually they've changed the laws now. But at that time, what I had, I realized that starting a business has high rates of failure, right? And so I said, how do I minimize the risk on that? And and this is what all entrepreneurs do. And I said, okay, so basically, if this thing blows up, which there's some probability that could happen. I got my job already, they want to take me back.

• 1:06:11Mohnish Pabrai?

  And I I clean up the slate and and I'd also derisked it because the company was already cash flow positive. By the time I quit my job, right? And so there was already a pipeline and such. And so repeatedly, what I've what I've found is even even in investing. I mean, I'll give you an example, like, for example, I think in two thousand three or two thousand four, there was a steel company in Canada. Uh, Ipsco. And um, I noticed that they were trading uh for three times earnings, right? And they, the, the stock was at forty five dollars. They had fifteen dollars a share of cash on their balance sheet. They had no debt.

• 1:06:51Mohnish Pabrai?

  And they had contracts uh over the next couple of years where they had said, uh, earnings for the next two years are going to be fifteen dollars a share each year. Uh, given, uh, because these were, these were, these were not forecasts. These were hard contracts, right? So I said, okay, so the stock's at forty five. If I just buy the stock and hold it for two years, I got forty five dollars cash in the company. Now it was cyclical business. Third year could be zero, could be negative. But I said, I, I own all the plant, equipment, everything for free, right? So my, my, I made the investment. I put ten percent of assets into Ipsco. And I said, all I want to do is I want to see what Mr. Market does with this stock in two years. Just gonna hang out and see what happens.

• 1:07:33Mohnish Pabrai?

  So we make the investment and then a year later, the company announces that we're gonna have one more year of fifteen dollars. Okay, so now you're gonna have sixty versus forty five, right? And by now, the stock has kind of gone up and it's sitting at about ninety dollars, double in one year. So I said, okay, uh, it's still a very cyclical business. Maybe we should take our chips off the table. And while I'm thinking about all that, one day I wake up and the stock's at one fifty five. Some Swedish company came and offered one sixty to buy them. Five minutes later, I sold the company and moved on, right? So what I, what I'm saying is that that's what we're looking for, right? We, and in the equity markets, because these are auction-driven markets, when you look in areas which are hated and unloved,

• 1:08:19Mohnish Pabrai?

  you will find these anomalies.

• 1:08:21Shaan Puri?

  Hmm.

• 1:08:21Mohnish Pabrai?

  Uh, last year, for example, I spent about seven or eight months uh studying the coal industry. Four-letter word, hated and unloved, more than anything else. I mean, uh, a lot of endowments and funds are not even allowed to invest in the coal industry. There's so much hatred for it.

• 1:08:42Shaan Puri?

  So you got excited.

• 1:08:43Mohnish Pabrai?

  The math, the math was like this. If there's a business that is going to exist for fifty years, on average, it's going to produce a billion a year in cash flow. That's going to be distributed to shareholders. Available to buy for less than two billion. Where do I sign? Okay, that was a coal industry. Okay, and so it's like you, you in auctioned out markets. You repeatedly repeatedly run into these things where things, you know, there's companies emerging from bankruptcy. There's things that people just don't like. There's different reasons why things get mispriced.

• 1:09:26Shaan Puri?

  Right, you talked about like private markets versus public auctions and why you think public auctions present more of these dislocations, more of these opportunities.

• 1:09:35Mohnish Pabrai?

  Well, I think, I think that, let me put it this way. Let's say this home of mine was a publicly traded company. Okay, listed on the NYSE, right? Every day its price would change, right? It would be wiggling here and there. And if I look at the average public company on the New York Stock Exchange, the

• 1:09:59Mohnish Pabrai?

  12 month range of the stock might be 70 to 140 in 12 months. If I just throw a dart at any company in the New York Stock Exchange and I just look at the 52 week range on that stock price. It's going to be 60 to 100, 70 to 130.

• 1:10:17Shaan Puri?

  So like a 50% swing.

• 1:10:18Mohnish Pabrai?

  It's a big swing, right? My home, which maybe might go up 4% in a year or in a good year, maybe 3%, would be vacillating in value. It would be sometimes trading 20, 30% more than it's worth and sometimes trading 20, 30% less than it's worth. And if I had a realtor friend and I said to him, listen, can I call you every day and just tell me what my house is worth? The guy would think I was stupid, but I would call him on Monday and say, hey, what's my house worth? He'd say, it's worth 2 million. I said, oh, thank you. I call him the next day. He said, still worth 2 million. Okay, third day, he said, listen idiot, it's 2 million. Okay, and after a month, he would tell me, oh, it's moved to 2 million 30,000.

• 1:11:02Mohnish Pabrai?

  Okay, and then again, he would be at 2 million 30,000 for a while. Okay, it wouldn't move because it's an intelligent buyer facing an intelligent seller. And so you're not typically going to get

• 1:11:16Mohnish Pabrai?

  a company like Ipsco available as the whole company. For the price you can buy some shares.

• 1:11:23Shaan Puri?

  Right.

• 1:11:23Mohnish Pabrai?

  Because the whole company, there's an intelligent guy, the Swedish company paid four times that price to to buy the company, right? And so that's just the nature of so a reason I like the, I've always liked public markets is because there is so much irrationality. And if you're just willing to be patient, you know, in a year, in a year, if I can make two good investments, it's a good year. Okay, so we don't need a lot of activity.

• 1:11:51Shaan Puri?

  Right.

• 1:11:51Mohnish Pabrai?

  We just need to be patient and wait for the times when something weird is causing a mispricing.

• 1:12:00Shaan Puri?

  Right. So let me ask you a few questions. So number one, should, in your opinion, should somebody just buy the index, low cost index fund or actively invest?

• 1:12:13Mohnish Pabrai?

  The index is a really good way to go. The index is too dumb to know that it owns Nvidia. And it's even more dumb, it's even more dumb that it won't, it'll never sell Nvidia. Okay. Or it's owned Apple the last 10 years and never sold it, for example. So I would say for the overwhelming majority of humans, probably more than 99% of humans, you're best off just buying an index. And I think that the the US equity markets and the US financial services industry is so efficient that the frictional costs for owning owning an index through an ETF is, you know, single digit basis points, you know, less than one tenth of one percent, less

• 1:12:58Mohnish Pabrai?

  than point oh five percent of one percent or so on. So it's very, it's very small. And so I think it's very smart to go with indexing. Absolutely.

• 1:13:08Shaan Puri?

  Yeah, for for the vast majority of people.

• 1:13:10Mohnish Pabrai?

  Yeah, for almost everyone.

• 1:13:11Shaan Puri?

  And for whom, who shouldn't do that?

• 1:13:13Mohnish Pabrai?

  Well, if you are, if you have the talent and the patience to figure out what a business is worth and then, you know, have the ability to buy those businesses well below what they're worth and patiently hold them, those sliver of humans that can do that would be better off just doing it that way.

• 1:13:35Shaan Puri?

  If I said, what's the number one trait that makes a great investor? What comes to mind?

• 1:13:40Mohnish Pabrai?

  Patience. If you are a guy who loves to watch paint dry. You know, you paint a wall and just sit there and watch it dry. You will do very well. Uh, did you ever watch Seinfeld?

• 1:13:51Shaan Puri?

  Uh, some episodes, not, not religiously.

• 1:13:53Mohnish Pabrai?

  The thing is that Elaine, Elaine is on a flight uh with her boyfriend. Okay. I forget the name of the boyfriend and I think if you pull up Google, you can probably find this clip. The boyfriend is just staring at the seat back in front of him. Okay. And so Elaine says to him, um, would you like something to read? He keeps looking at the seat back and says, no. Um, do you wanna talk about something? And he says, no, he just, he's just doing nothing. He's just looking at the seat back in front of him, right? By the end of the flight, she's broken up with him.

• 1:14:28Shaan Puri?

  Yeah.

• 1:14:32Mohnish Pabrai?

  He would have made a great investor.

• 1:14:36Shaan Puri?

  That's what you need.

• 1:14:38Mohnish Pabrai?

  You can be, if you can be happy, uh, or like, you know, Pascal, uh, Pascal had a great quote. He says that all man's miseries stem from his inability to sit quietly in a whole, in a room alone and do nothing.

• 1:14:49Shaan Puri?

  Right.

• 1:14:50Mohnish Pabrai?

  Right? And so if you have this ability to watch paint dry, watch the back of an airplane seat for a few hours and just be in a nirvana state, this is the, this is the work you need to be doing.

• 1:15:01Shaan Puri?

  I don't know if you know this, but you have uh fans in a subreddit on Reddit. I don't know if you've ever, have you ever been on?

• 1:15:06Mohnish Pabrai?

  I haven't done much, done much on Reddit, no.

• 1:15:08Shaan Puri?

  So I went, when I was doing my research for this, I'm seeing what do people think about, about you? What questions do people have? And I go and one of the best comments, I thought was such a great compliment. They go, the day I knew that this is my guy I wanna follow. He's on CNBC, he's on a TV show and they're asking for stock picks. So give me a stock pick. And they go around the horn, everybody gives their stock. It's gonna be this, it's gonna be this, it's gonna go up. They go to you and you go, I don't really give public stock tips like this. And they're like, well, you got, you're on TV, you gotta do something. And they're like, the comment was, he refused to just like randomly name a pick or tell people to go buy something. And the TV hosts were like, why are you on TV? And he was like, that's not what I do. And then he just stayed steadfast. And I thought it was such a great compliment, but also so, so big of a contrast from you go watch Kramer or these guys.

• 1:15:53Shaan Puri?

  And it's like, you go on and it's like overstimulation telling you, you gotta do something right now. The opposite of patience, basically, uh, is that, should people avoid that?

• 1:16:02Mohnish Pabrai?

  Yeah, I mean, I I think that it's a big red flag if you're taking stock tips from some guy on TV. I think that's just not gonna end well. You know, the guy on TV is not gonna be there when it's down thirty percent.

• 1:16:12Shaan Puri?

  Right.

• 1:16:13Mohnish Pabrai?

  He's he's all somewhere, not available.

• 1:16:14Shaan Puri?

  Have you seen the reverse Kramer index? Uh, it's not just him, but people just, whatever he said, do the exact opposite and you're up like you're crushing the market. If you just did the exact opposite of this guy.

• 1:16:24Mohnish Pabrai?

  Yeah, so I mean, I think I think that, like I said, I think indexing is a great way to go for most people. I mean, uh, so you know, uh, I wish, I wish, um, in high school or even middle school, uh, compounding was part of the curriculum from an investing point of view. And and you know, just, uh, it's really simple, but but you know, the people, people don't pay attention to the math, you know. There are three variables that, uh, matter with compounding, right? I mean, one is the starting capital you have. The second is the, um, the annualized rate of return you get. And the third is the length of the runway, right? Now, there's something known as the rule of seventy two, which is a kind of mathematical.

• 1:17:07Shaan Puri?

  A very helpful rule, explain it.

• 1:17:08Mohnish Pabrai?

  It's a beautiful.

• 1:17:09Shaan Puri?

  I learned this luckily one teacher in college. She used to be a student, she came back to teach because she's like, I wish we actually taught things that were relevant in the world. So she took it on herself, became a teacher to come back and teach personal finance. And the one thing she did was she's like, you know, compounding is the eighth wonder of the world. And let me just tell you the rule of seventy two, very simple math.

• 1:17:27Mohnish Pabrai?

  So the rule of seventy two is just a mathematical quirk that happens to work. So for example, if I'm getting a seven percent return a year, and I wanna know how long is it gonna take for this money to double? I can take seventy two divide by seven, it's approximately ten.

• 1:17:41Shaan Puri?

  Ten years to double.

• 1:17:42Mohnish Pabrai?

  Ten years, right? Now, if I have a ten percent interest rate that I'm getting, and again, if I do seventy two divide by ten, it's seven years. So you can, you can switch between the years or the interest rate, and it tells you the other one.

• 1:17:54Shaan Puri?

  Right.

• 1:17:54Mohnish Pabrai?

  And and this is, um, the most important thing in life is how long does something take to double? Okay, because that basically leads to everything else. So for example, if you look at someone like Warren Buffett, right? He started, he started his compounding journey when he was like ten or eleven years old. I think he's, he would say it's when he was seven years old.

• 1:18:17Mohnish Pabrai?

  He's going to be ninety four this year. Okay, that's a eighty seven year runway so far, right? Uh, now, the thing is that if you have a really long runway, then a low rate of compounding would still get you a big number. Or if you have a shorter runway and a higher rate would again get you the same result. So it's very important in life. Uh, and that's why I think that I wish to do this in high school is to start that engine early. So for example, let's, let's take a situation of someone who's just finished college, right? At twenty two years old, they got some job, maybe like making like, you know, seventy, eighty thousand a year or something.

• 1:19:02Mohnish Pabrai?

  And they, they put away ten thousand dollars in their 401K, right? They're twenty two years old in an index, right? The index has done ten percent a year. Now, what that means is that ten percent a year means that that ten thousand will double every seven years. So let's take a situation where the person is now sixty four years old, right? Now, they started at twenty two, it's sixty four, so it's forty two years. Forty two years is six doubles, right? I do this to make it easy. Right. Okay, so six doubles, right? That's two to the power of six. Two to the power of six is sixty four.

• 1:19:47Mohnish Pabrai?

  So that ten thousand that the person saved at twenty two is six hundred and forty thousand at sixty four. But that's not all they have. At twenty three, they save eleven thousand. That's again, sitting at some big number and you keep going. And you know, sometimes you see these news articles, there's some guy who's a janitor of some college and he gives four million to the college and lived in a one bedroom apartment, whatever, right?

• 1:20:15Mohnish Pabrai?

  Why are we surprised? Okay, if you actually run the math, he actually didn't even save that much. And he didn't even have that such a great compounding engine. It's not like he found Apple twenty years ago or something. That's not what happened. What what happened was that there was a consistency. And so actually, my uh my pushback to my dad when he was telling me to start a business is I was telling him at that time, I said, look, I got a 401k. I got thirty thousand in the 401k, right? I'm gonna I'm counting with fifteen percent a year. My employer at that time was matching the first two percent. So it was becoming seventeen percent tax free, basically. It's tax deferred and my income's going up over time. So I was, when I first started working, my salary was thirty one thousand, right?

• 1:21:01Mohnish Pabrai?

  So I'm saving forty five hundred a year, right? But if I was still working, my my my pay would have been hundreds of thousands or more. And I'm putting away a lot of money. So by the time I get to retirement, it's like it's game over. You know, lots of extra cash available, no problem. And I never missed the money because it was pre-tax.

• 1:21:22Shaan Puri?

  Right.

• 1:21:22Mohnish Pabrai?

  Taken out, so it's just great. So I think I think I I I wish that uh young people understand that, yeah, listen, you can pursue lottery tickets, you can pursue entrepreneurial dreams, you can do all of that. That's fine, but on the side, keep this going.

• 1:21:39Shaan Puri?

  And start it early.

• 1:21:40Mohnish Pabrai?

  Let it be boring, let it be a stupid index fund, Vanguard and whatever. And and that's it. The uh the tortoise is gonna win the race.

• 1:21:49Shaan Puri?

  Right.

• 1:21:50Mohnish Pabrai?

  You know.

• 1:21:50Shaan Puri?

  What's the circle the wagons philosophy?

• 1:21:53Mohnish Pabrai?

  Well, the circle the wagons philosophy actually came out of uh when I was thinking about Buffett's letter last year to shareholders, the uh twenty twenty three letter. He he pointed out that In fifty eight years of running Berkshire, there were only twelve decisions that he had made that had moved the needle for Berkshire. Berkshire had a tremendous run. They've compounded, I mean, till recently, they were compounding at twenty plus percent a year for fifty eight years. That's, you know, if you're doing, if you're twenty percent a year, you are doubling every three and a half years. Okay. And that means after thirty five years, it's a ten doubles,

• 1:22:33Mohnish Pabrai?

  and fifty eight is another twenty three years. So you've got another, what, one, six, six, so sixteen doubles, two to the power of sixteen. Now, the way to do two to the power of sixteen is two to the power of ten times two to the power of six. Two to the power of ten, round number's one thousand. It's a thousand X, right? And two to the power of six is sixty four. It's sixty four thousand times what you started with. Okay. If you started with a hundred dollars, it's six point four million. Okay. Hundred dollars is six point four million. Okay. So he, he's saying, I would calculate in the last fifty years, fifty eight years, Buffett's made

• 1:23:14Mohnish Pabrai?

  three or four hundred, at least four hundred, different investment decisions. He's saying twelve are the ones that mattered, right? The god of investing has a four percent hit rate. That's the god of investing. That's why we should index. Right. What are the rest of us mere mortals supposed to do? So now, the thing is that the, I was thinking about his twelve bets, right? And I, I, I thought about, okay, which were the twelve? And I think he never mentioned that, but you could guess which one. C's would be one of them. Coke would be another one. Amex, Gillette, Cap Cities, Washington Post, you know, you can come up with the names, you know, Berkshire Hathaway Energy, Ajit Jain, hiring Ajit Jain. Probably the biggest bet for them with paid off, huge for them. Yeah. What's the story with Ajit? There's something about the recruiter for him?

• 1:23:59Mohnish Pabrai?

  So what I realized when I thought about these twelve bets was, it wasn't the buy decision. The buy decision is important. The important thing was they never sold. C's stayed in the stable for fifty years. Coke has been in the stable for forty plus years, right? So it wasn't the buy decision. It was the paint drying decision. Okay. That was the important thing. So when you find yourself in the happy position of a small ownership in a great business.

• 1:24:33Mohnish Pabrai?

  Just find something else to do with your time, play bridge or whatever. Have you considered golf? I have, golf is great. And, and so if you ask Charlie, he would say the single best decision, best investment Berkshire Hathaway ever made was the search fee they paid to hire Ajit Jain. Okay, now Ajit Jain walks into their offices in nineteen eighty six, nineteen eighty five, actually, never having worked in the insurance business, right?

• 1:25:03Mohnish Pabrai?

  From scratch, without them putting up venture capital or anything, the business he's created for them today probably has a value north of a hundred billion. Okay, I mean, it just gets lost in Berkshire, Berkshire is so big. But I'll give you, I'll give you an example of, of a, a discussion I had with Charlie. I think that's maybe two, three months before he passed away. So he was telling me that Aj, you know Berkshire, Berkshire Hathaway writes super catastrophe insurance, like, you know, insurance against hurricanes, earthquakes and so on, right?

• 1:25:45Mohnish Pabrai?

  And many, many years, they, when people are looking for earthquake insurance in Florida, of hurricane insurance in Florida, Ajit will look at the rates being offered and just take a pass. Okay, basically he would find it too competitive, whatever else people are not giving enough, okay?

• 1:26:04Mohnish Pabrai?

  What he did in twenty twenty three, and they mentioned it at the, at the meeting actually, is that

• 1:26:12Mohnish Pabrai?

  he wrote hurricane insurance on Berkshire's behalf, reinsurance with a maximum payout of fifteen billion dollars. So if, if these hurricanes had hit now, basically the math is like this. I just want to explain how, how Ajit's mind works. Berkshire would pay out on a big catastrophe like in earthquake, hurricanes, three to five percent of the total insured loss incurred. So for them to have a fifteen billion payout, you would have to have had an event with insured losses in Florida of three hundred billion. It's beyond Andrew and beyond Katrina.

• 1:26:53Shaan Puri?

  Right.

• 1:26:53Mohnish Pabrai?

  It's beyond all of those, right? So it's it'll be need to be a really big event to for them to have a fifteen billion payout. The premium he collected to write that fifteen billion policy, take a guess, take a guess.

• 1:27:07Shaan Puri?

  Five billion.

• 1:27:08Mohnish Pabrai?

  He collected five billion.

• 1:27:09Shaan Puri?

  Oh.

• 1:27:09Mohnish Pabrai?

  Okay, and.

• 1:27:10Shaan Puri?

  I was sweating that guess.

• 1:27:11Mohnish Pabrai?

  No, but he collected, that's exactly what he collected. How much did he pay out in twenty three?

• 1:27:17Shaan Puri?

  Zero.

• 1:27:18Mohnish Pabrai?

  There was one that came through. My guess would be they might have paid out three, four hundred million.

• 1:27:22Shaan Puri?

  Okay.

• 1:27:22Mohnish Pabrai?

  You know, some.

• 1:27:23Shaan Puri?

  Collect five billion.

• 1:27:24Mohnish Pabrai?

  And and what Charlie said to me is Ajit's done this about six times. Okay, where he's picked the years that he's written these policies because what was happening in most years is the premium offered was two billion. He just took a pass.

• 1:27:39Shaan Puri?

  Right.

• 1:27:40Mohnish Pabrai?

  Right? A lot of all the other insurers wrote that policy. Berkshire took a pass.

• 1:27:45Shaan Puri?

  Right, no call strikes.

• 1:27:45Mohnish Pabrai?

  Right? And and and now, for example, we've had.

• 1:27:51Mohnish Pabrai?

  We had some unusual losses, like, for example, that that ship in Baltimore, right? Now, that's going to end up being about three, three to five billion in losses, right? And it's the biggest maritime loss in global history. It's going to change premiums for ships.

• 1:28:11Shaan Puri?

  Right.

• 1:28:11Mohnish Pabrai?

  In the future, Berkshire will probably be writing when everyone else is saying, I don't want to do that. You know, it's like the cat who sat on a hot stove and doesn't want to sit on any hot or cold stoves ever again, you know?

• 1:28:23Shaan Puri?

  You have a thing over there I saw in your office that says, it's like a placard, it says, trouble is opportunity.

• 1:28:28Mohnish Pabrai?

  Absolutely, that's a that's a.

• 1:28:29Shaan Puri?

  What's the story of that?

• 1:28:30Mohnish Pabrai?

  It's a quote by John Templeton. And I actually, there's a good friend of mine, Prem Watsa, in Canada, they call him Berkshire Hathaway of Canada, Warren Buffett of Canada. And I had seen that that plaque on in his on his desk and somebody sent it to me and so. It's a great quote. I mean, I think that that's what what we are trying to do with investors is we want. We we need to be fearful when the world is greedy and we need to be greedy when the world is fearful. And so basically, when the world is running away from coal.

• 1:29:05Mohnish Pabrai?

  We need to run towards coal.

• 1:29:06Shaan Puri?

  Right.

• 1:29:07Mohnish Pabrai?

  So I'm always looking at what is hated and unloved. Right. And usually you will get a lot of mispricing when something is hated and unloved.

• 1:29:16Shaan Puri?

  Right. Tell me about Bitcoin. Are you a fan of crypto Bitcoin? Are you a believer?

• 1:29:21Mohnish Pabrai?

  Outside my circle of competence. And I would say that if you put a gun to my head, I would say it's going to end badly.

• 1:29:27Shaan Puri?

  Why is that?

• 1:29:29Mohnish Pabrai?

  It's in the eye of the beholder. There is no intrinsic value, as I understand it, to Bitcoin. Now, you can argue that there isn't an intrinsic value to the dollar. Uh, but it has the full faith and credit uh of the US government, which is then backed by the uh hardworking American people. So basically, I think that uh I think that it's uh.

• 1:29:55Mohnish Pabrai?

  For me, it's in the too hard pile, but I think for most people, I would just say, take a pass.

• 1:29:59Shaan Puri?

  Right.

• 1:29:59Mohnish Pabrai?

  Most people who have invested in Bitcoin couldn't really tell you.

• 1:30:06Mohnish Pabrai?

  Why it's or what it's going to be worth and why it should be worth that.

• 1:30:12Shaan Puri?

  Okay, fair enough. So one of the reasons I wanted to fly here is because it's fun to meet these kind of outlier investors or even just hear the stories. And I've heard you tell a couple of stories about guys I've never heard of that um I would love for you to to tell the story because I think most people have never heard of these people. So tell me about um Nick Sleep. Who's Nick Sleep or uh Junjun Wala? Whichever is your favorite. Give me, give me one of the the stories that.

• 1:30:35Mohnish Pabrai?

  Well, I think Nick is a Nick is a wonderful guy and there's a book called uh Richard, Richard Weiser Happier that came out uh two, three years ago. And there's a chapter on him. Nick is very uh he's a recluse. He doesn't do uh interviews and such. I was actually surprised he even talked to the author, but.

• 1:30:51Shaan Puri?

  Right.

• 1:30:51Mohnish Pabrai?

  It's worth reading the the book and uh, you know, him, he he and his partner Zach uh, they would uh come into their office and basically just sit.

• 1:31:03Mohnish Pabrai?

  And read annual report after annual report till they were blue in the face, you know, I mean, they were just and and and they would want to see if they could understand different businesses and that exercise of reading those annual reports led them to the annual report of Amazon, right? And for example, I I've been a customer of Amazon, known Amazon for a long time, etc., familiar with the business, but every time I would take a cursory glance at Amazon, it looked very expensive. On a earnings basis, a P E basis, it looked really expensive. And the reason it looked expensive is they were investing so far ahead of the curve on the growth

• 1:31:44Mohnish Pabrai?

  that what what should have been categorized as CapEx wasn't was just categorized as expenses. So the US government was really funding their growth because there were no taxes being collected. Now, what what Nick and Zach were able to do because they were just sitting in their office with no distractions, reading year after year of Buffett's of Bezos's letters. And the Bezos letters are worth reading. I mean, they're they're very clear. He clearly laid out in those letters what he was up to, right? And that he's basically that that he wasn't, he wasn't completely candid, but he was basically, you could tell that the business had very high returns of capital

• 1:32:26Mohnish Pabrai?

  and he was investing, he was throwing a lot of things against the wall, but basically they were very low risk bets. If any single bet didn't work, it didn't wouldn't sink the company. And so, for example, one of the bets they made was A W S, right, which became a huge and they didn't know it was going to become as big as it is, but but basically they also made a bet on fire, Amazon Fire, which didn't work. But basically, I think what what Nick and Zach realized is that here was a very gifted capital allocator who understood all the different facets of building a team, going after different markets, he actually disrupted multiple industries. And so they had placed a bet on Amazon.

• 1:33:11Mohnish Pabrai?

  And and because Amazon was doing so well.

• 1:33:15Mohnish Pabrai?

  It was becoming a larger and larger portion of their fund. And in the UK, there are more regulations on hedge funds than we have in the US. The UK regulator was telling them that we see this position as very high risk. And you guys need to diversify. So they were getting pressure and they felt that they understood the business so well. So they looked at each other. They were they were managing, I think, two or three billion. They had made hundreds of millions in for each of them. And they said, look, we are independently wealthy. We never thought we'd be here. We're young.

• 1:34:00Mohnish Pabrai?

  Why do we have to listen to some regulator? Right? We could return all the capital to all our investors. And what what Nick said is if I return the capital, I'm going to put everything into three stocks. And these are three stocks. He owned maybe a dozen stocks, but he was going to go into three stocks. The three stocks he was going to put one third each into was one third Berkshire, one third Amazon, one third Costco. Right? And so he said, I'm very comfortable with these three stocks. They're very built to last businesses. And he did that. And what what happened a few years after they hung up their boots is it's really funny. The Amazon still kept, you know, it's a juggernaut. It still kept going.

• 1:34:46Mohnish Pabrai?

  And so it became seventy, eighty percent of the pie. So instead of them being one third each, it was eighty, ten, ten, for example. Right? And Nick decided that, oh, maybe I should take some chips off the table here. And so he cut the Amazon position in half and bought another business, which has not done well.

• 1:35:09Mohnish Pabrai?

  Sideways. And that goes back to Buffett's point of 12 that worked in 58 years is we are not going to, if Warren Buffett has a 4% hit rate, the rest of us are going to have a 2% hit rate. Okay, so, but you also need to get rich just once. So I think that what worked really well for Nick and Zach was they took the Buffett lesson, which is that once you have a great business, just leave it alone. Now, even after he was sloppy and he took chips off the table from 80% or whatever, still done very well. Right. And, and I think one of the things that investors forget is that

• 1:35:50Mohnish Pabrai?

  if you look at the Walton family, none of them are running Walmart. Sam Walton passed away a long time ago. It's been several decades since Sam Walton passed away. The Waltons have, for the most part, kept the Walmart stock. And for most of them, it's almost their entire net worth in a single stock, right? So more concentrated than even Nick Sleepy is, right? And it's not a business that they control. It's not a business that they run. It's not a business that they're on the board of. None of them gives them sleepless nights, right? And so, for example, in 2018, I started visiting Turkey.

• 1:36:35Mohnish Pabrai?

  And I was just looking at things hated and unloved at that time, and I saw that the Turkish markets were screening really cheap. Everyone in the brother was just exiting Turkey. And I have a really good friend of mine in Istanbul, very good investor, kind of classic Ben Graham investor. And I told him, hey, Hyder, I'd love to visit Istanbul and I'd love to, if we could visit all the companies in your portfolio, starting with the company with the, your strongest conviction, biggest position, to the smallest position. And I said, don't take me to see any companies where you don't have money in, okay? He said, well, it should be a blast. So I went in 2018, first time to Istanbul. The blue fish on the brass first was great.

• 1:37:18Mohnish Pabrai?

  And all these different businesses we saw were great, you know, and I didn't really do much work. He told me what places we were going to, but I just said, let me meet the companies first. I went back in 2019 and

• 1:37:32Mohnish Pabrai?

  We're driving to this company and I, like I said, all these Turkish names and companies, I said, I will do the work on the back end. I'm not going to spend time. So as we're driving over, I said, Hi there, remind me, what company are we going to, what's the, what's the Cliff Notes version? He said, okay, he says, uh, this company going to visit, uh, Reisas has a 16 million market cap, 16 million dollar market cap. And he says, uh, liquidation value of the business, if you sold it today is 800 million. So I said, um, is it a fraud? He said, no, I'm, I'm invested in the company. And so I said, you're telling me the company is trading for two, 2% of liquidation value. He said, yeah. I said, why? He said, it's Turkey. You know, everything's cheap.

• 1:38:18Mohnish Pabrai?

  I said, but this is the outlier cheap. Okay. And Reisas basically is a very simple business. They, uh, the largest warehouse operator in Turkey. They rent out all these warehouses. These are 99% leased, inflation indexed, and, um, they lease to Amazon, IKEA, Carrefour, Mercedes, Toyota, like blue chip clients and all of that, right? So I went and, uh, met the father and son who run the company and the founders. And, um, and then after that, I went and visited a bunch of the warehouses and I couldn't find anything wrong with it. Basically, uh, and he was absolutely right. If you just went to any Realtor in Turkey

• 1:39:01Mohnish Pabrai?

  and said, this is their 80 warehouses, uh, give me a value on each one. He would just look at the rent and he would tell you, okay, you know, you're looking at about 70, 80 dollars a square foot for each warehouse. They had 12 million square feet. It was about a billion dollars and there was 200 million debt. So 800 million liquidation value and 16 million market cap. Okay. And so then I thought, okay, this thing probably, uh, trades by appointment and maybe can buy the stock. But Turkey has very high trading volume because they're all gamblers. And, um, so I found that when I, when I started buying the stock, that huge volumes are available. And I, I spent 8 million dollars to get a third of the company. Okay.

• 1:39:46Mohnish Pabrai?

  Now, the way I look at it is that, you know, when you look at, you know, Buffett's letter with the 12 positions, or you look at Nick's leap with Amazon, right?

• 1:39:56Mohnish Pabrai?

  The family that runs the business, they have maybe forty, forty-five percent ownership, right? I'm an outside investor at thirty-three percent. I have no board seat. But the way I look at Reisas is the way the Walton family looks at the Walmart stock, right? I said, and what I've noticed since then, since twenty nineteen, is they have increased the value of that business. So I would say that probably today, the business might be worth one and a half to two billion, somewhere in that range. And I think they'll continue. I've never seen them make any decisions that were stupid.

• 1:40:36Mohnish Pabrai?

  They're very smart about the decisions. It's very well run. So I say, okay, basically, we are done. We will keep that business. I don't care about the stock price. So the sixteen million market cap now is about five hundred million, you know, in four years. And you know, the Turkish lira, which when we were investing, it was five lira to the dollar. Today, it's approaching thirty-three lira to the dollar. Turkish lira has collapsed.

• 1:41:10Mohnish Pabrai?

  In dollars, we are up almost thirty X, right?

• 1:41:16Mohnish Pabrai?

  But the business is worth more, right? And so the thing is that it's exactly what Buffett says is that basically, just leave it alone. And as long as that family and that father and son are running the business, we will just keep our stake and let it keep running. So basically, the idea is that

• 1:41:39Mohnish Pabrai?

  I'm also going to, when I look back, going to find there were a few things that moved the needle big time, and the rest, and the key to moving the needle is inactivity. And so that's what you you've got to be just you've got to be very patient and be very inactive.

• 1:41:56Shaan Puri?

  Right. You talked about Bezos being a capital allocator. Buffett, obviously, capital allocator for Berkshire. And what, you know, who are the other, I guess, like, if I just throw some names at you or some companies at you, like, I'm curious to hear your take on how well they allocate capital because we know how maybe how good their brand is or their product is. But we were talking about this yesterday. There's a transition from you're a product manager where your focus is building product and you're a people manager where you're building an organization. And then you're a money manager and you're now, you know, you're sitting on a hundred billion dollars. You have to figure out some way to invest it. This is like, you know, so tell me Meta or Facebook, what do you think? How do you think they've done with capital allocation?

• 1:42:36Mohnish Pabrai?

  Well, I think I think it was really surprising to see how he did a one eighty. I mean, I think Mark basically moved from being a spendthrift to being a Patel. You know, he, I mean, literally, I just can't, I think it was remarkable to see an entrepreneur pivot that way.

• 1:42:58Shaan Puri?

  Right.

• 1:42:59Mohnish Pabrai?

  So, you know, Meta was a country club, you know, they had all this spending going on in all these areas and he really tightened it up. I mean, I was really, I mean, and it showed up in the numbers. They, I mean, Facebook is a great business, you know, all the different brands they have and different properties they have are tremendous. It is the norm in capitalism that great businesses will be sloppy with how they execute. I think normally it's very rare to find a great business, which is also tightfisted. And Meta wasn't tightfisted, but it is now. And so that was just wonderful to see. So I think, yeah, I think the capital allocation there is excellent now.

• 1:43:42Shaan Puri?

  Right. What do you think about Elon Musk, fellow fellow Texas resident?

• 1:43:48Mohnish Pabrai?

  The United States, this is one of the just beautiful, most beautiful things about the United States is Elon wasn't born here. Okay. And he wasn't educated in his first twenty years of life over here. We, the United States, got a finished product, basically. And he's created tremendous value, tremendous jobs, and disrupted multiple industries. I think Elon is an exceptional allocator of capital. Yeah, terrific, actually.

• 1:44:19Shaan Puri?

  And Tesla gets a lot of, there's a lot of conversation. Is Tesla overvalued? Is it undervalued? Is it, you know, too frothy? I guess, what's your take on, when you look at a business like Tesla? How does your mind analyze a business like Tesla?

• 1:44:31Mohnish Pabrai?

  It would, it goes into the too hard pile. I would, I would, I would, I would say this. I would say that Elon is not human. Okay, he's beyond human. If you just think about all the things he's done, I mean, now that neural net and, and, you know, boring company and, you know, what he's doing at SpaceX and all that. It's, it's just really very remarkable. The execution is off the charts. And I think, I think, like I said, I think he's just unbelievable in terms of what he's been able to accomplish. So I have a lot of respect. I think, I think Elon understands capital allocation really well.

• 1:45:11Mohnish Pabrai?

  And I think all the businesses that he, he gets involved with or he founds, they do so well because he gets so much out of the people, which basically means he gets so much out of the capital, right? I mean, he's, his hiring is so good. The teams that he's building are so exceptional that, I mean, when you're hiring a software engineer, they could be an engineer who's worth 10 million a year, and they could be another guy worth 100,000 a year. And he can tell the difference.

• 1:45:42Shaan Puri?

  Right.

• 1:45:42Mohnish Pabrai?

  And so he's, that's, that's a great skill to have.

• 1:45:44Shaan Puri?

  Yeah, I love that. We'll end with this. We have Charlie, you know, here and he passed away and you were friends with him. What's maybe your favorite story or lesson from, from Charlie Munger?

• 1:45:55Mohnish Pabrai?

  Yeah, I mean, I, I, obviously I miss Charlie. I think he, he was one of a kind. I think he was just a, and I've been thinking last several weeks, several months about so many of the lessons and things. But one of the things Charlie said in one of the last interviews he gave,

• 1:46:14Mohnish Pabrai?

  someone asked him, I think, what would you like on your gravestone? And he said, I tried to be useful. And I think those, those words, I tried to be useful. Encapsulate Charlie really well. If you look at Warren Buffett's tribute to him that he did this year in the letter. Charlie selflessly helped Warren. A lot. I mean, without Charlie Munger, there's no Berkshire Hathaway.

• 1:46:41Mohnish Pabrai?

  Even though you had a Warren Buffett there. And I, twice I went to Charlie when I was facing difficult personal situations, nothing related to investing, right? Extremely helpful to me, on point, I just did exactly what he told me to do. And those issues disappeared, right? And so Charlie always was trying to see, how can I help the world? In all the institutions that he touched, you know, his memorial was at the Harvard Best Lake School in California and LA.

• 1:47:18Mohnish Pabrai?

  Transformed that institution, he was at the board of the Good Samaritan Hospital, transformed the hospital, Berkshire Hathaway transformed. I met so many partners he had in different businesses, always gave them the better deal. And I think in every way possible, he, I think that was just absolutely correct. He selflessly tried to be useful. And, you know, Charlie, I don't think Charlie believed in God. I don't think he believed in religion, right? And I think he didn't believe in legacy. He, I think he believed that when we are gone, we're gone. It's ashes and dust, right?

• 1:47:55Mohnish Pabrai?

  Till one day before he passed away, he was in the hospital, he knew he was dying. He was trying to get one last grant done to a nonprofit. No upside to him, he's dying. Right. Right?

• 1:48:07Mohnish Pabrai?

  Six days, six days before he passed away, he was buying a stock. Okay, you know, a stock we discussed, you know, and I'd send him a write-up on. So I'm just saying that I think Charlie extracted everything he could from his mind and his body. The other thing was that he never complained. Lost sight in one eye, many decades ago, he was almost blind in the other eye.

• 1:48:35Mohnish Pabrai?

  He cared most about reading, right? That was most important to him. And I saw him one time and the second eye was giving him a very serious problem where he could have gone blind. This was maybe 10 years ago in the second eye. Even when he was facing the prospect of complete blindness, he was so stoic. Never said, "Oh, poor me," self pity. His response to me was, "I'm gonna have to learn Braille." You know, that's how he was gonna deal with it, you know? And so I think, yeah, I think it's this great, we have such a big, rich body of work that he left, Poor Charlie's Almanack. And I think a lot to learn from him.

• 1:49:17Shaan Puri?

  Well, thank you for sharing that and thank you for doing this. This is hopefully your, you know, process of sharing some of your wisdom. So, thank you for doing this.

• 1:49:23Mohnish Pabrai?

  It's a pleasure. I really enjoyed the session. Thank you.

• 1:49:27Shaan Puri?

  Okay.

• 1:49:27Mohnish Pabrai?

  All right. Sounds good. Thank you.