TIP719: Investing and Life Lessons w/ Mohnish Pabrai

Summary

Episode Summary: TIP719 – Investing and Life Lessons with Mohnish Pabrai

Release Date: May 4, 2025

Introduction

In episode TIP719 of We Study Billionaires from The Investor’s Podcast Network, hosts Stig Brodersen and Mohnish Pabrai engage in an insightful conversation about investing strategies, life lessons, and philanthropy. This episode delves deep into Pabrai's investment philosophies, his approach to building and managing wealth, and the significant role of giving back.

Investment Frameworks: Relationships as Portfolios

The discussion opens with an analogy comparing personal relationships to stock portfolios. Pabrai emphasizes the importance of nurturing long-term relationships while remaining open to new, valuable connections.

Mohnish Pabrai [03:00]: “The best things in life come from compounding. We want to circle the wagons of our current friendships but also be open to new, wonderful relationships.”

Pabrai illustrates this with a historical example of the Nifty 50 stocks from the early 1970s, highlighting the significance of holding onto high-conviction investments even when the market is volatile.

Manish Pabrai [05:00]: “If you kept your Walmart shares while everything else went to zero, your annualized returns would be almost 15% a year, outperforming the S&P 500 with a 98% error rate.”

Compounding and Long-Term Investing

Pabrai underscores the power of compounding, emphasizing three key variables: starting capital, rate of return, and the length of the investment horizon, or "runway."

Manish Pabrai [10:52]: “It's all about compounding. You need a very long runway to see significant growth in your investments.”

He reflects on his own experiences, acknowledging past flawed investment models and stressing the importance of holding onto exceptional businesses beyond their intrinsic value, rather than selling prematurely.

Manish Pabrai [15:51]: “Do not sell exceptional businesses at 90% of intrinsic value. Only consider selling when they're egregiously overpriced.”

Life Lessons and Happiness

Transitioning from investing, the conversation shifts to personal fulfillment and the relationship between wealth and happiness. Pabrai shares his realization that beyond a certain point, additional wealth does not significantly enhance happiness.

Manish Pabrai [26:04]: “After around 33 or 34, incremental spending does not increase happiness. There are very few things money can do to make me happier, and many things it can make me unhappy.”

He draws parallels with Warren Buffett and Charlie Munger, illustrating how both have maintained simple lifestyles despite immense wealth, finding contentment in stability and minimalism.

Philanthropy and Dakshana: Giving Back

A significant portion of the episode focuses on Pabrai’s philanthropic efforts through Dakshana, an organization aimed at providing quality education to underprivileged students in India. He discusses the challenges of identifying genuine need and maintaining the integrity of admissions.

Manish Pabrai [41:33]: “We run Dakshana like a business, focusing on metrics like brilliance and socioeconomic status to ensure we support truly deserving students.”

Pabrai elaborates on the rigorous admission process, including in-person interviews and home visits, to prevent misuse and ensure that scholarships reach those who genuinely need them.

Manish Pabrai [45:51]: “We have a small percentage that defrauds us each year, but our goal is to reduce that number consistently.”

He also touches on the difficulties of scaling philanthropic efforts and ensuring that large sums are distributed effectively without diluting the impact.

Manish Pabrai [56:35]: “As the numbers grow, giving away money becomes more difficult than making it. Ensuring that the money is given away in a manner critics would admire is a significant challenge.”

Execution as a Moat: Rethinking Competitive Advantages

Pabrai challenges the conventional wisdom around business moats, arguing that enduring competitive advantages are rare in capitalism. He suggests that execution can serve as a de facto moat, as businesses that consistently outperform through superior execution are the exceptions rather than the rule.

Manish Pabrai [60:55]: “Execution in itself can be a moat. Most businesses don’t have enduring moats, making true competitive advantages rare.”

He cites examples like ASML and Nvidia, where technological advancements create lasting moats, but emphasizes that these are more the exception than the norm.

Skill vs. Luck in Investing: Evaluating Track Records

The conversation then delves into assessing investment managers' track records to distinguish skill from luck. Pabrai advocates for long-term performance analysis, suggesting that a minimum of 10 to 20 years of consistent outperformance against benchmarks like the S&P 500 indicates genuine skill.

Manish Pabrai [70:56]: “You need a track record of more than 10 years, preferably 20, to confidently attribute performance to skill rather than luck.”

He highlights the challenges in evaluating performance, especially against high-performing markets, and the importance of context in understanding investment outcomes.

Manish Pabrai [73:47]: “Selecting an investment manager is one of the most difficult things to do. Long-term, consistent outperformance is key to proving skill.”

Conclusion

Wrapping up, Pabrai reflects on the metaphorical "restaurant" experience of the podcast, appreciating the opportunity to share his insights and experiences. He reiterates the importance of maintaining simplicity in both investing and philanthropy, focusing on what truly matters rather than getting bogged down by complexities.

Manish Pabrai [74:03]: “I very much enjoyed the conversations today. It was fantastic, and we got to sample a bunch of new dishes.”

The episode concludes with a nod to Berkshire Hathaway’s annual meeting, encouraging listeners to engage with the We Study Billionaires community and continue learning about value investing and philanthropic endeavors.

Notable Quotes

• Mohnish Pabrai [03:00]: “The best things in life come from compounding. We want to circle the wagons of our current friendships but also be open to new, wonderful relationships.”

• Manish Pabrai [10:52]: “It's all about compounding. You need a very long runway to see significant growth in your investments.”

• Manish Pabrai [26:04]: “After around 33 or 34, incremental spending does not increase happiness. There are very few things money can do to make me happier, and many things it can make me unhappy.”

• Manish Pabrai [41:33]: “We run Dakshana like a business, focusing on metrics like brilliance and socioeconomic status to ensure we support truly deserving students.”

• Manish Pabrai [60:55]: “Execution in itself can be a moat. Most businesses don’t have enduring moats, making true competitive advantages rare.”

• Manish Pabrai [70:56]: “You need a track record of more than 10 years, preferably 20, to confidently attribute performance to skill rather than luck.”

Final Thoughts

This episode offers a profound exploration of Mohnish Pabrai's approach to investing, the significance of long-term compounding, and the philosophical underpinnings of his philanthropic efforts. Listeners gain valuable insights into balancing wealth accumulation with purposeful giving, all while maintaining a grounded and humble approach to both life and business.

Transcript

[Stig Broderson]

You're listening to tip.

[Mohnish Pabrai]

Since 2014, we have interviewed the best investors. Still, it's a special occasion when we welcome Manish Pabrai once a year, who's playing in his own league. In this episode, Manish is enriching us with his framework on how to play the game of accumulating capital, how to give it away, and the life lessons learned along the way. If you, like me, have watched hundreds of videos with Manish, you're in for a different type of conversation with quite a few untold stories. Full Disclaimer I'm invested in PY funds and with that said, let's go.

[Stig Broderson]

Since 2014 and through more than 180 million downloads, we've studied the financial markets and read the books that influence self made billionaires the most. We keep you informed and prepared for the unexpected. Now for your host, Stig Broderson.

[Mohnish Pabrai]

Foreign welcome to the Investors Podcast. I'm your host, Dick Broderson. And perhaps whenever you tune into this, you might be in Omaha, Perhaps you're walking from the annual meeting and you're going to the old market. Perhaps you're hanging out in the lobby at the Marriott downtown, the Capital District, just to let serendipity happen. It's the Woodstock of capitalism. And who could ask for a better guess than you? Mohnish, thank you for making time here prior to this special weekend.

[Manish Pabrai]

Stig. I always like our pre game tailgate party every year. So that's great.

[Mohnish Pabrai]

I was just telling my wife here before we hit record, it really feels like Berkshire and she's like, what do you mean? What do you mean? You're sitting at home, it doesn't feel like Berkshire at all. It's like, yeah, but around this time every year I'm going to speak with Mohnes. We're going to pretend it's Berkshire weekend because that's whenever this is going to be published and it, it feels like Berkshire.

[Manish Pabrai]

Absolutely.

[Mohnish Pabrai]

So whenever I go to a restaurant, I go there with the intention of trying out the new dishes and I always end up with the favorites and it always makes you think of Buffett. He talks about this opportunity cost by not getting a cheeseburger because you know what you're getting. But if you try something new. So okay, it's not too elegant of a segue, but I'm going to go there anyway, so please forgive me money here. So I had the pleasure of over the years I think I've gone through 100 if not 200 of your videos. It's been absolutely wonderful and so it's very, very difficult. If you do 200 videos and you do Q&As with students and whatever that you do, you very often get the same questions. And all that is perfectly fine. But I wanted to give myself this ridiculous challenge that I'm probably going to fail in. That is, I want to give you a new set of questions. I want to try those new tasty dishes there at the restaurant. So that's going to be the premise. And I'm not sure, yes, pun intended, if they will be tasteful. So, Manus, are you ready to go?

[Manish Pabrai]

Yeah, that sounds great to me. Give it a shot.

[Mohnish Pabrai]

All right, let's see here how it goes. So the first question is, I'm going to make this comparison of relationships, friendships with stocks in the portfolio. And so we know that the best things in life comes from compounding. And so we want to circle the wagons of our current friendships. But you probably, perhaps also want to be open to new, wonderful relationships. So assuming that you agree with that premise, how do you think about attracting the right people into your life and investing in these compounding relationships, circling the wagons, but then also start new friendships?

[Manish Pabrai]

Well, that's easier said than done. So it's a challenge in the sense that if we were to do it, let's say, the way Munger would recommend, we'd be looking at opportunity, cost and what we own versus what might be possible to bring into the portfolio. One of the things to keep in mind is the mistress always appears to look better than the wife, but she may actually not be better. Appearances can be deceiving. So we have to keep in mind that is this mistress really better or is the newness what is making it better? And that's a challenge. And I think one way to think about it is Buffet has talked about the permanent holdings. I mean, he talks about some companies that he would not want to sell. Clearly, Apple was not one of them. But he has held American Express for a very long time. He's held Coca Cola for a very long time. And the wholly owned businesses have all been held for a very long time. So I think that when I look at my portfolio, there is clearly, I would say, a hierarchy in the sense that if I look at the portfolio I have today, I like everything. If I didn't like it, I would have made a change. But I like everything now. When something new comes in, new mistress shows up. Now, if the mistress is truly attractive, then we can take a look at the lowest conviction ideas. And I think one should not be playing a game of 19 versus 20. Like the wife's a 19, the mistress is a 20. That's probably not a good game because you can be off on that. But if something in the portfolio is a six and a half out of 10 and the new kid on the block is nine and a half out of 10, then yeah, that should be a good candidate for considering a change. Now you have tax issues and other things, but you can think about it in those terms. But I think that's what makes investing very hard. So if we go back to the early 1970s, right, and the early 1970s, there was this concept, late 60s, early 70s, there was this concept of the nifty 50. And basically the idea was you bought these 50 happening blue chip stocks 2% into each one, and you didn't really care what the valuations were or anything. You just bought them all and you kept them. Ignore all the noise. Now what happened in 73, 74 is that was a crash in slow motion. It was a pretty big market correction. When you look at the peak of 73 to the bottom of 74, the Nifty 50 got taken out back and shot. It was a bloodbath. And by 1975 nobody would admit they were invested in the Nifty 50. Now there is some controversy whether Walmart was part of that nifty 50 or not. Some people think that Walmart had its IPO in 1970. Some people think that Walmart was one of the nifty 50. Now just to make my case easier, we're going to assume Walmart was part of the Nifty 50. So let's say you invested in the Nifty 50, you put $100,000 into the Nifty 50 and 2000 of the $100,000 went into Walmart. One of 50 bets. Now let's also assume that the all the other 49 holdings go to zero. Now there were some real losers in there like Xerox and Polaroid and Kodak and IBM, etc. Which actually IBM didn't go to zero, but some of the other guys did go to zero. But there was also ADP and Coke and Amex and Disney and all of these companies in there. I'm taking everything to zero except Walmart. So you have $2,000 that you put in. If you kept it invested for the last 55 years with 98% of the portfolio going to zero, your annualized returns are almost 15% a year. And you blew out the S&P 500 with a 98% error. Rate. Okay? Now, to do that, one is you needed to recognize that Walmart was a beautiful wife, and no mistress was better than this beautiful wife. And you had to hang on to it, okay? And of course, in 1975, when the bloodbath took place, everybody exited everything. Now, I also want to point out that when Walmart went public, Sam Waldron already transferred shares to his kids. When Walmart was a private company, he actually paid almost no estate tax because the shares were transferred and it was worth almost nothing. It has been 55 years since the Walmart IPO, and it has been 33 years since Sam Walton died. The Walton family today owns 46% of Walmart. 55 years after the IPO, there were a lot of helpers that came to the Walton family saying, you should diversify and you should do this and you should do that and all these things. And they told them all to get lost. They paid no taxes. They had no frictional costs. They had huge dividends. And there's a very strong message there. And this is not some outlier example. We've seen a lot of studies where most of the returns in the stock market come from a very small sliver of companies. Even Warren Buffett has a 3% or 4% hit rate. So most of the time, when we encounter a mistress, we're going to be disappointed. Okay? So we got to keep that in mind.

[Mohnish Pabrai]

It's wise words I get tempted to say, and if I sound wise, it's wisdom born out of pain. And then I'm sort of like, but wife is just next door. It's going to sound terrible. East Johnson, hear me? Anyways, it takes me here to the next question, because I've heard you being asked quite a few times from students, like, what kind of advice would you give to someone who starts with little money or who is 20 or 25? I'm sort of like, I would be curious to hear, because I just turned 40, and I know last year you turned 60. If we look away from the whole wife and mistress thing, if we can, which advice would you give to yourself, age 40 and 50, whenever it comes to life? And why would they be different?

[Manish Pabrai]

Stig? It's all about compounding. And there are three variables with compounding your starting capital, the rate of return, and the length of the Runway. Now, what we really need is a very long Runway. A long Runway is a marvelous thing. Warren Buffett bought his first stock when he was 11 years old. He said, you know, he was wasting his time until then, okay? But he bought his first stock when he's 11 years old, he's going to be 95 this year. Okay, so 84 year Runway and counting, which is great. So one of the things that I had assumed when I was 40 years old is that I was going to be leaving planet Earth on June 11, 2044, when I was 80, one day short of my 80th birthday. And then recently I went to God Google and I asked God Google, when am I leaving? And of course, when you ask God Google, you're going to get an answer. And Godgoogle said, you're going to be leaving on June 11, 2054. So I got 10 more years. 10 more years is a beautiful thing. Not because I like my fellow humans, but because I like a long Runway. And so as we talk Today, I have 29 years and three months and a few days left. Okay. Which is great. It's incredible. So my 40 year self, I really wouldn't have a lot of. Well, the one big piece of learning that I've had in the last 20 or 21 years that I wish my 40 year old self had was that I did not appreciate I had a flawed model of investing. And it stuns me that I had this flawed model of investing for almost my entire investing career. It only dawned on me in the last few years that the way I'm doing things is quite stupid. So my model when I was 40 and even when I was in my 50s, early 50s, was that you try to buy a business for half or less than it's worth and when it gets valued at 90% or more of intrinsic value, it's time to move on, bring in the next mistress. And that sounds rational, but it's the dumbest thing. And the reason it's the dumbest thing is we don't know what intrinsic value is. We may have a guess at it, but the great businesses surprise to the upside and they really kind of blow your mind in terms of what they are actually able to do. I mean, Warren Buffett was having difficulty playing 25 million for See's Candy. Basically, the dividends that they have received in the last few decades is approaching 3 billion more than 100x of what they invested. They still have the business, which is doing very well, but the dividends have been more than 100x and they would have never guessed that in their wildest dreams that it's going to give us 2 and a half, 3 billion in dividends and counting. So we are never able to really appreciate how great some good businesses can be. We also may not fully. We definitely will not be able to understand which businesses are the great ones till after we've owned them for a while. So basically the advice to my 40 year old would be that, listen, idiot, you're going to get some companies in the portfolio that are truly exceptional. You will know that they are exceptional. I don't need to go into the past to tell you which ones are going to be exceptional. You will know, just change your framework, which is that when you own an exceptional business, a fraction of an exceptional business, do not sell it at 90% of intrinsic value. Do not sell it when it's fully priced. Do not sell it when it's overpriced. You can possibly think about selling it when it's egregiously overpriced. And when you figure out the difference between overpriced and egregiously overpriced, call me collect. The call me collect stigma. The 30 somethings just missed that. They don't know what that phrase means.

[Mohnish Pabrai]

Yeah, you're absolutely right. I remember in the early days I was traveling. I don't think I had a cell phone. I don't think really anyone had a cell phone other than some high flyers. But then you would go into a convenience store and you'll get a phone card and then you would plug that card into a phone booth and then you could call people. I mean, in my case, I couldn't ask anyone to do call collect, so I had to use a phone card. I didn't have as many friends as you, so.

[Manish Pabrai]

There'S a friend of mine, I'm just to digress for a second, there's a friend of mine in Chicago. And when he had his first son, he was Die Hard Buffett Munger fan. When he had his first son, he named him Charlie Warren. His first name was Charlie, middle name was Warren, last name is Oberman. Charlie Warren Oberman. And I remember when Charlie Warren Oberman was born. And when Charlie Warren Oberman turned 20, he contacted me and I said, Charlie Warren, do you know? Do you know? I know your whole life story. So anyway, when Charlie Warren was born, his dad sent a picture of his to Warren and Charlie. And Warren sent him a note back saying that Charlie Warren has a stalk tip. His first stalk. Call me collect.

[Mohnish Pabrai]

That's just a beautiful story.

[Manish Pabrai]

It's true.

[Mohnish Pabrai]

Well, Manus, I want to talk a bit about. I'm inclined to say the good old days. I don't know if they were the good old days. So please forgive me if I'm taking that in vain. But you and your brother used to help your father with his businesses, and you previously talked about how it's honed your skill and how you're grateful about all the things that you learned because you were his board of directors, you and your brother. I'd be curious to hear how is your relationship with your brother today and how much is nature and nurture regarding business investing success? And I know this is a personal question. I know nothing about your brother. So please take this any kind of direction whenever it comes to nature and nurture that you want to.

[Manish Pabrai]

My brother and I are very close in age, so there are three of us. I have a sister and a brother, and my sister's four years younger than me and my brother is 15 months older than me. So I'm kind of in the middle. We grew up together. We went to the same college, same major, and we've obviously had a very parallel lives. And of course, I moved away from my computer engineering roots and he stayed closer to those roots. So I moved away into investing. And he's expert in network security and HIPAA and all these things. But, you know, we both became entrepreneurs and we both did quite well, so it worked out. So the. I think, I think we both got similar lessons from those early days in our, in our teen years, which was very lucky, where we were basically exposed, you know, like drinking from a fire hydrant. We were exposed to business very early in life, and not just exposed to business, but, you know, like, you know, initiation by fire, you know, so, so it was, I didn't realize at the time, but it was a great gift. It was a wonderful gift.

[Mohnish Pabrai]

Well, that's the thing with, with most, you know, things in life. It doesn't always appear to be a gem because it's, it's typically packed into something that's. They're always nice. So thank you for sharing.

[Manish Pabrai]

Well, one of the things that I had read about with Marcus Aurelius with his Stoic philosophy is that adversity is a blessing. To encounter adversity and overcome it is a great blessing. And now that's a quote. But when I look back in my life and I look back at all the difficult times in my life, it were those difficulties that led to the greater growth and higher highs. And we cannot tell this when we are going through these painful periods. And you know, Munger said, Munger said that no one is immune. Everyone's going to have reverses in life. We are not going to be able to have a life without reverses. And the good news is when there's a reverse, we should be excited. So now what happens is I'm almost like an observer. If I encounter adversity now, I know that I don't know how it's going to help me. I don't know how I'm going to get out of it in the middle of it. Obviously there are a lot of challenges, but I have the confidence to know that this is a beautiful thing. I should be grateful. And I know this will lead to higher highs. I just don't know how. So play the cards and life will work out.

[Mohnish Pabrai]

Let's take a quick break and hear from today's sponsors.

[Stig Broderson]

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[Mohnish Pabrai]

All right, back to the show. That's such a wonderful, healthy, healthy mindset. Thank you for sharing that Anish. It really makes me think of this thing where you mentioned Munger and how he talks about how you should always learn from your mistakes but sometimes don't learn too much meaning don't let it limit you. Just quickly to this point here about nature and nurture. I think we probably all seen examples of nature and nurture in some both of them and I had the pleasure of running into one of your daughters last year in clusters and I was with guys event. I was like oh, so both nature and nurture is a play here. It's like boom, here we are. Okay, I'm going to shift gears here a bit and talk about money. I guess you can say we talked about money for some time but I've been wondering about this. I don't know if you ever heard this idea of can a penny make you wealthy? No. But then at some point, if you're a billionaire, it's really a stack of pennies. And at some point in time, one penny must have made you feel wealthy. Anyways, when was the time where you felt like an extra dollar wouldn't increase your happiness and you can make up that dollar to whatever kind of amount you want? Basically, I'm asking, when did you feel like any additional cash would make any difference in your life quality?

[Manish Pabrai]

When I was, I think, around 33 or 34 years old, that I wouldn't be able to consume the wealth I had at that point. And I knew right then that incremental spending at that point would not increase happiness. So I was aware of the fact that after 33 or 34, that basically there was going to be very strong likelihood of extra wealth. But trying to come up with some way to spend it or even spend part of it would not have increased happiness. Even now, I always look at how can I make myself happier? It's a constant I'm very, very happy with. And if there are things that money can do that could make me happier, I'd be the first to execute on. Right? So. But there are very few things at this point. I mean, when you get past a certain base level, it's not going to increase happiness. I mean, I really appreciate that. Buffett and Munger had many conversations between themselves about their homes. Right. Munger built his home in the 1960s. I visited that house many times for having meals with him. He raised his kids over there. And he'd been living in that home for like six decades. Very happy. It's a ranch home. You would pass it. You would not even look at it twice. It wouldn't stand out in any way. And we've seen Buffett's house as well. He's been there for more than 70 years. And so both of these individuals talked to each other, noticed that they had friends who were obviously much less wealthy than them, who were buying big mansions and whatever else, and they just didn't see that doing any of that was going to make them happier. In fact, I subscribe. Munger and Buffett are a little bit different in the sense that when Munger passed away, he had maybe half a dozen or more homes. I mean, I know there was one in Newport Beach. There might be a couple in Hawaii. There was at least two or three in Santa Barbara. And then he had his home in la, and so on so he had at least half a dozen homes. And of course, in Minnesota, where he went fishing and so on. He would tell me that Warren had a second home in Laguna beach, which his wife wanted to go for the Christmas holidays and all that. And he said that before Susie's ashes had turned cold, he had put that house up for sale. Okay, so he had one second home, which his wife wanted, and he was happy to do that for her. He used to start writing the annual letter from the Laguna home when he went there in December, but he didn't need it. I look at my friend Guy, for example, who has many homes, and to me, that's a headache. I think if I had a second home, not only would it not make me happier, it would actually make me unhappy, because we just add burdens. My books would get split into two different places. I don't want the books getting split in two different places. I want one place, and I would have to have two setups. And then I'm spending time traveling between these two setups for what? On a daily basis, I eat two meals. I eat brunch and I eat dinner. The brunch I eat every day is the exact same brunch I eat every day when I'm in Austin. And I've been having that same brunch for several years. No desire to change it. Any change would make it worse, would make me unhappier. So I'm happy with no travel. I'm happy with one home. There's very few things that money can do that can make you happier. And there's many things money can do that can make you unhappy.

[Mohnish Pabrai]

That's wonderful. Thank you for bringing that up, Manish. I sort of suspected you would say that, or so I hope you would say that because it's a wonderful, wonderful segue into the next thing here. So I'm going to give you an unreasonable premise here. Please feel free to challenge it. But here we go. I would make the argument that you could make significantly more money than you do now if you really wanted to, doing things you didn't want to do. I don't really know how, but let's say you would take some endowment money or something, and they would want to redeem at any point in time, or you couldn't invest in this and that sector, whatever, it doesn't really matter. And perhaps that's completely off. But I'm pretty sure you could make more money than you do now by doing things you don't want to do. So, assuming that's correct, if we added another, I don't know, let's say we added $100 million to your net worth and we just, you know, we just learned it's not going to make a difference, $1 is not going to make a difference. $100 million is not going to make a difference. Then I'm going to ask you, you could give that money away. But then I'm also going to give you the premise that if you give away $100 million or $200 million, you probably don't get extra benefit utility out of giving because you still help a ton whenever you do that. So assuming those crazy premises are right, how do you think about this? Do you feel you have a responsibility to do things you don't want to do for money that doesn't make you any happier so you can give away that money and improve other people's lives? I know that was crazy long. Christian.

[Manish Pabrai]

Yeah, I mean, I think that for me it's a total no brainer that I would never want to do something that would reduce my joy and happiness in life by even one iota. So if I'm going to do something which makes me, you know, there's more travel, there's more human interaction, the life is more frantic and all that, it wouldn't be of much interest now. So I would end up with more money to give away. Now. The giving away money for me has never been about any legacy or anyone patting me on the back or in any way feeling good. I was not looking, I still am not looking for any kind of reward of any kind from that activity. It's actually was designed and it was, this is how I conceived it almost two decades ago and it's how it is today is I like playing games and I like playing math games and dakshana, you know, and I tell this to the students when I meet them. I said, I'm so sorry to disappoint you, but you're part of a math game in my head. You know, I'm not actually doing this because I, I have some great love to make your life better. I know that your life is becoming a lot better, which is wonderful. But for me it's really more about the cold calculus of the game. That is what is most exciting. So the game I'm playing is that I have a compounding engine that is hopefully increasing wealth for the next 29 years and months, so on, and I have an engine which is trying to give that wealth away. Now if we are able to compound at, let's say a 15% rate return. Right. So life is all about doubles. It would double every five years. So approximately six doubles. Six doubles is 64x right? So that's a significant amount of money multiplication, plus I'm getting fees on other people's money and all that. So it'd be more than that. You know, there's some taxes, but probably will still end up being more so. To me, the great challenge, and I don't know whether I'll be able to meet this challenge and I'll be disappointed if I didn't meet the challenge, but it's a really tough challenge, is one day before I die, June 10, 2054, I want to have $10,000 left on maybe even $505,000 left. That'd be even better. Okay, now if a day before I die, there's 3 billion left, I have failed. I lost the game. And now the difficulty with this challenge is I don't want to give the money to Red Cross because the Red Cross is, with due respect, suboptimal. So for me, the challenge is to be left with 10,000, but to have it given away in a manner that any critical observer would say, that was fantastic. Not my friend saying, that was fantastic. Someone who's a critic looks at it and says, that was fantastic. He may have had other flaws, but this was fantastic. Okay, so that's what I'm looking for, an objective observer saying, now that was cool. Now to me it's extremely challenging because as the numbers get larger, giving money away is more difficult than making it. And I have a lot of respect for Chuck Freeney, the book, the Billionaire who Wasn't, which is a great book. And Chuck Freni died with very little money. Rented apartment in San Francisco. Awesome. But that journey is not an easy journey, but it's a fun journey. It's a really fun game for me. So this is like, you know, from my point of view is like three dimensional test chess for the next 29 years where I know the compounding end is pretty autopilot. That part I have no concerns about. It's the other side. Because for example, the current program that we run at Dakshana where we're spending about $3 million a year, once we are spending about 7 million a year, we cannot spend any more money in that endeavor. We run out of seats and brains and all of that. So what If I had 100 million a year to give away, which hopefully will happen at some point. Well, that program can only take 7 million. I don't know today what I would do with the other 93 million. And if the other 93 million doesn't go into endeavors that make the critics say, that was awesome, that's terrible. So that's the challenge. That's the whole focus of this life, is playing this game.

[Mohnish Pabrai]

You know, Manish, whenever I see you on these calls with some of the scholars from Daxana, I can tell that you moved and they tell you that they met you and they've seen you, and it's just beautiful, wonderful moment. And then you tell them that they're a part of the game that you're playing. And I could just see, like, the panic in their eyes and they're like, where is this dude going with this?

[Manish Pabrai]

You know, I like to have fun with them. One time I went with a friend of mine, young guy from the US To Dakshina campus, and he looks like Mark Zuckerberg, okay? He. He looks very similar to Mark Zuckerberg. And we decided before we went on the campus that I'm going to call him Zuck, okay? And I'm going to just say, oh, this is my friend Mark Zuckerberg. You know, I call him Zuck. And he founded a company you might have heard of, Facebook. And he's going to hang out with us, okay? So I say this in the class and, you know, it reminded me. It reminded me. It was so funny. The thing is, one time, Bill Gates was in some very rural village in India with Melinda Gates. And they go into the hut of a very, very poor old lady in that village. So it's Melinda Gates, Bill Gates, and this old lady in this small hut, she doesn't have much. She's very poor. And there were a lot of reporters, et cetera, but they were not allowed to come in the hut while the Gates were having the interaction. Then the Gates left, okay? And then the reporters went in to talk to this lady and they said, do you know who that was? He says, oh, no, some foreigners came. You know, the lady says, some foreigners came. So the reporter said, yeah, but you know, that that was the richest person in the world. And the lady said, all foreigners are rich. Okay? Now, she was right, because in her life experience, she had never met a white person who was not significantly wealthier than her. And for her, the calibration difference between the reporter, who was white and Bill Gates, who was white, was meaningless, right? So when I was in the Dakshina scholars telling them, this is Zuck, what I saw in their faces was the same thing that I would have seen in the face of the lady. They said all of Mohnish's friends are happening. What's unusual about that? They just took it in stride.

[Mohnish Pabrai]

That's a fantastic story. Thank you for sharing that with us. Manish, I think it's so beautiful that you're saying that you're not looking for a reward with everything you do and with Dakshana and it's a game. So I have this segment here about Dakshana because I kind of feel we should talk a bit about it. And I selflessly, together with some members here at tip, we are in the very early innings of starting a school holding underprivileged scholars into the Filipino version of the iit. And so whenever we say IIT, we are referring to the Indian Institute of Technology, which is not a random place, I should say. You just mentioned Bill Gates before, just to elevate it. He said that if you could only hire for one place, it would be IIT and not whatever kind of Ivy League school. So very, very prestigious. And our business model, if you can call it that, for an NGO has been very simple. We have a wonderful board. And I said to them, I have no idea how to do this. So here's a link to all the letters that Manish wrote to Jacksonville foundation. And we're just going to do the same just in the Philippines. And then they sort of look at me the same way that the student scholarship and then how do we do that? So anyways, I sort of tried to break it down and said after reading the letters, I kind of feel like let's try to break it down into three sections. So we want to make sure we have the best possible education. Then we want to make sure that we identify the scholars with the most potential. And then we also want to make sure that they're below the poverty line. And what we found is that identifying scholars below the poverty line might not sound like a hard task, but I would say it's probably the hardest nut to crack.

[Manish Pabrai]

It's very difficult. It's not easy.

[Mohnish Pabrai]

It's not easy because there's such a strong incentive for the scholars family to misreport their socioeconomic status. Could you please paint some color around this and how you have solved that Dakshana?

[Manish Pabrai]

Well, it's a constant battle. So one of the issues that Dakshana faces is the quality of our coaching services that we offer to our scholars to get them ready for IIT is better than the private sector offers. Okay. So if you are a middle class family or a rich family and you had A choice. You would want your son or daughter trained at Dakshana. Okay? Now, when we offer that level of quality in what we are giving, it means that everyone's trying to crash the gate, okay? And some people are very direct with us. Like, you know, I'll get messages saying, I'm Happy to donate $50,000 to Dakshana if you will take my kid, okay, just one seat. You know, take the kid for one seat. I'll give you 50,000, okay? And 50,000 is a lot more than it would cost them to get coaching somewhere else. They're putting a value which is above what the private sector charges right? Now. Obviously, this creates a lot of incentives. And the other thing, what Dakshina has tried to do is we really want to go to the bottom of society. And my definition of bottom, many other nonprofits in India find is too extreme. But we are really looking for absolutely nothing families at the bottom, right? And so what we have done is that for our main campus, where we take kids after they finish high school, we actually have in person interviews, okay? So when we do the in person interviews, and I should not say this because now they're going to watch this video and then they're going to know how to beat the system. So, Stig, make sure it doesn't play in India, okay? I'm banking on that. So when we do the interviews, the questions we ask are not relevant, okay? What we are looking at is what shoes is the person wearing? Okay? What phone does he have? So we ask them, can I see your phone? And if that phone is more than a $30 phone, we know we've got an issue, okay? We look at the languages that the parents speak. If they speak English, that's a red flag, okay? Even if they speak Hindi, which is the national language, and they're not from the northern region of India, that's also a red flag. So we're usually trying to see that most of the parents have only one language they speak. We look at the education level of the parents. We look at things like, is there television in the home? Okay? Now, one of the things that we do is we do the interviews, but we have so many alums now who want to volunteer and help us that we send them in some cases where we get to boundary cases where we are saying it's all there, but we're not sure. And the litmus stress when we're not sure is to visit the home. And visiting the home is very painful and very expensive because it's the middle of nowhere. But the alums are used to traveling cheap throughout India and whatever they got student fairs and all that, they don't mind going. So we will find an alum who's somewhat close by. But then, you know, what happens is every year we do an analysis of what we think was a percentage that defrauded us. There is a percentage that gets through, you know, that people are too smart, you know, that they get through. But it's a very small number. It's small single digit percentage. And what our goal every year is to reduce that. I mean, we've had situations where we've done all this stuff, we've done all the analysis and then when the person is coming to the campus for the first time, he's being dropped off in an SUV with some very well dressed relatives and we know we got taken.

[Mohnish Pabrai]

You know, I'm so happy that you bring up the example of the suv. Whenever I'm speaking with the board, I'm saying you have to look at page 13 here from the 2011 report. That's where all the gold is. And it talks about how you would sometimes do home visits. And then you were talking about an SUV with a family that reported less than $60. And I was sort of like going this way because I spoke with a board about it and one of the things that we talked about was home visits. And then it came up. So we are not as far as having alumni. So that was a really, really good. Because then we run into the problem that some of the areas where you would send some of the staff would probably be dangerous, to be frank, because it's very poor and depending on how you appear, it might not be safe for you to be there. So that's part of it. But then I thought going away from that, I thought about it as we have bad debt here on tip, which I shouldn't say, but we have some advertisers that don't pay and to some extent that's part of the business model. It's like you have bad debt, you don't know who it is and you're trying to minimize it. But if you want to make sure that everyone prepays and you can do it metaphorically, what that would mean for an ngo, it would be more expensive for you to go that route and have zero bad debt. But then you lose out a ton. So I would imagine, how do you think about that? Is that bad debt that you. At the time it was 5% to 8%. I would imagine that it's less now. But is that Bad debt you have where some just. And that's just the way it is.

[Manish Pabrai]

Yeah. I think on the one hand, if we go extreme on that, we'll be excluding deserving people, which is not good. And so there is a balance, There's a balance we have to do. So it's like in any business, if you're a retailer, you have annual shrink, inventory shrinks and you're running a business, you're going to have some bad debts. I mean, the thing is you can have policies that reduce that and so on. That's why Walmart came up with a greeter. Right. The greeter would drop the shrink a lot. I mean, at the end of the day, what we've always tried to do with Dakshina is we run it like a business. We run it the way you run your business. Right. So this metric of what percentage of kids are we supporting that we shouldn't have supported is a very important metric and we try to get accurate statistics on that. And all I'm trying to do is that next year is slightly better than this year on all fronts. That's the only objective at Dakshana is that we try to do a slightly better job on 20 different variables next year than we did this year. And if we keep doing that, it ends up becoming world class.

[Mohnish Pabrai]

Let's take a quick break and hear from today's sponsors.

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[Mohnish Pabrai]

All right, back to the show. So whenever I'm speaking with a team I would basically copy that from you, clone that from you. I should say manus and then say it's so much. It's so hard to give away money and so easy to make it because of the feedback loop. And then they sort of like look at you and you're like sort of like an arrogant foreigner. Like why are you saying it's so easy to make? But you know it's like yes you know where I'm going to go with this? Like in capitalism, there's a feedback loop. If you don't make money, you know you've done something wrong. And so what I said to the team is that we have one KPI I've cloned this year from Dakshana, so equivalent to iit. That number needs to be as high as possible. That is the single metric we are looking at. Then whenever you do that, let's say you would, for example, give bonuses if it's at certain level, then you run into the issue that you have people who then have incentive to admit students. That probably doesn't come from below the poverty line, but there's a probably higher probability that they're going to pass. How do you navigate that in your organization? Do they get bonuses based on different metrics? Is it because it's different metrics throughout the organization or how do you handle that?

[Manish Pabrai]

Well, yeah, I mean, that's a really important thing. So incentives are a very big part of Dakshana. Our teams are very well incented, even though they have joined. Many of them are joined because of the calling and the purpose. But there's a separation of church and state. So the faculty, which is really focused on teaching the kids, has no control over who we admit. And the people who are focused on who we admit are not compensated directly based on the results. So we've kind of separated those two. And even within those groups, I'm looking at it, our CEO's looking at it. So when we do selections, when we do selections, though, a large, a large amount of our success depends on our selections. You know, we have to make sure we've got the brilliance. We have to make sure we are below the poverty line and really deserving kids. And there we have tried to make sure that the incentives are in alignment. And then on the other side, when we care about the results, those guys had nothing to do with who we picked. So they just purely focused on the results.

[Mohnish Pabrai]

Fantastic. Thank you for sharing. So I should obviously say I would encourage everyone to read the wonderful letters, even if you're not interested in philanthropy. They're just interesting to learn about the business model of giving away money. So one of the things I really like in the letters is that you're not shy about really attacking the. The toughest problems. And I think that whenever I speak to people about our organization and what we want to do, there is this natural tendency to focus on getting the best teachers, like, say, yeah, it's all good. That with the party line and the most deserving. But let's figure out how to get the best teachers. And by and large, it's probably the easiest problem to solve because to some extent you can throw money at it, whereas it's a little bit trickier with the others. And running an organization that's giving away money, I think you really have to face those decisions head on. And you want to make sure that you're not falling prey to this idea of the path of least resistance. What is easiest to solve instead of folks and what's tough to solve. One of the problems that we've been looking at is should we, for example, target specifically students that come from abusive homes? And one way to do that is to build housing and then get them out and so on and so forth. And I don't want to drone too much on that and bum everyone out whenever I say that. But whenever you do that, there's just incredible amount of problems you run into. And then if it's housing, then bribes that are not even seen as bribes, but more like local property transfer tax. And there are tons of stuff going on. And so I guess my question to you is, have you identified problems where you've just said, this is just too hard. It's wonderful if we can solve it, but we just don't want. It's just too hard. We want to do hard things, but not things that are this hard. And how do you figure that out within your organization?

[Manish Pabrai]

Yeah. So I think, Stig, you have to be realistic. It's not just difficult, it's impossible to optimize for more than one variable. So when we are trying to do selections, for example, we only have two things. We're looking at where we're looking at the brilliance and we're looking at the socioeconomic status of the family. We have a couple other things, like we give some preference to girls, we give preference to disabled and so on. But we basically don't get into a lot of stuff beyond that because if we start going into things like, like you said, abusive households and all of that, that's going to become a very complicated problem. We find a lot of issues in the homes of the families where the kids have come from, but we wouldn't have known that at the beginning. It comes out in dribs and drabs over time. So I would say that that would be a really difficult thing to add to your plate. I would not go there. I think that if you're going to try to work with abused kids, don't try to work with Brilliant. Abuse kids. Just work with abuse kids with whatever you need to do to help them. Because I think now you're trying to put too many variables into the same thing. It becomes really hard. So it's important to keep things as simple as possible. It's important to make sure everyone understands that game plan. They're not going to understand the game plan if it becomes complicated and then it works. One of the things that has really helped Dakshina, you were talking about, you know, hiring teachers, etc, is our oldest alums are now early 30s, 33, 34 years old. And something like more than half the folks we hire now are our alums. So more and more of our alums are making up the faculty. More of more of our alums are making up a lot of our management team all the way. Except the CEO. When I go one level below the CEO at Dakshina, it's all alarms. And for these individuals, it's not about the paycheck. It's very clear to me when I meet them that their passions for Dakshana vastly exceed mine. They're not stupid like me playing some game. Okay? They actually deeply care about the mission. So they have a purity I don't have. It's beautiful to see, actually. It's amazing to see.

[Mohnish Pabrai]

Wonderful. Okay. Perhaps someone out there is thinking, it's Berkshire weekend. We started on such a high note. We haven't almost not talked about investing. So thank you. Thank you for your generous and candid responses. Thank you. I just really, for selfish reasons, I wanted to ask those questions. And thank you, Manish. I'll now transition into something about investing. So years ago on this show, you recommended Peter Thiel's wonderful talk, competition is for Losers. And that talk was just such an eye opener for me. And I went from thinking that companies have a moat or thinking most companies have a moat, which I probably mainly thought because I don't know, management told me or other bulls on value Investors club told me or whatever. Of course, that's a terrible process. So I sort of turned the table and I was thinking, okay, let's just assume that companies don't have any mode. And really the way to see if they have a mode is if the DOJ are sort of like pulling into court and they keep on saying, oh, we don't have a mode. Poor me, I'm Amazon. We have such a small sliver of global retail. Whatever you would say, that's whenever you know they have a mode. And so anyways, I read Rose Greenwell's wonderful book Competition demystified. And I did that after going through that talk. And he also talks about that most companies don't have a moat, but execution in itself can be a moat. There's this story that you sometimes talk about with those two gas stations and then one owner goes out, does a little extra and the other doesn't. But I'm sort of curious to hear if we can bring that up to a level. And talking about how do you, how do you look at execution being the mode and how do you evaluate from the outside if a company has an execution mode?

[Manish Pabrai]

Yeah, so the evidence tells us, going back to the beginning of our conversation where I said if you just held your Walmart shares and everything else went to zero, you did really well. And we look at Buffett's example where 3, 4% of what he invested in has truly moved the needle. The rest hasn't done that much. So what those two pieces of data tell you is that enduring moats are few and far between. It's just the nature of capitalism that everything gets competed away. Now if you are someone like ASML or you're someone like Nvidia, those are some motes that are going to stay for some time because you got a head start and ASML may stay forever. I mean that's like blackmagic act. So it is really anomalies in capitalism that lead to moats. It's very difficult to actually conceive of a business and then start a business saying, I'm going to have XYZ moat and actually be successful at doing that. Even when we look at a business like Coca Cola or we look at a business like American Express, these started moatless. There were no moats. The founders had no idea what a moat is and they kind of stumbled along and in some cases their original business model died and a new business model emerged accidentally. And they made it so almost impossible to start out with the idea that I'm going to create a moat and moats are very rare. So I would say that approach businesses and their moats with very jaundiced eyes.

[Mohnish Pabrai]

Thank you. So I'm a bit on the fence of asking you this question, Mohnish, because I kind of feel like I'm going to paint myself into a corner. You often get this question about your circle of competence and your graceless respond. You know, if you ask that question, then you probably don't know enough. And I kind of like feel I still have a question about circle of competence. It's just, ah, how do I ask it without Shooting it down. Anyways, whenever it comes to regulation, it sets a black box for so many of us. And it's really interesting to hear you talk about different regulation whenever it comes to different businesses and how you identify it and so on and so forth. How do we, assuming that we don't have a circle of competence whenever it comes to regulation, which we probably don't, by asking this question, how do we train that? As laypeople, no degree in law or anything like that. As lay people, how do we train that regulation? Figuring out the impact of a business angle.

[Manish Pabrai]

Yeah, I mean, I think one has to approach. One has to approach circle of competence with a lot of humility. So when you say, okay, there's this business, it can be impacted by regulations, changes in regulations, how do I handicap that? Right. And the answer is it may be that that question leads to being putting that business in the too hard pile. So I think what humans have difficulty with. A lot of humans have difficulty with giving up. They don't want to give up. Like you're saying, okay, I like this business. I've seen this business. I spent some time on the business, but I don't understand this part of it, and how do I get to understanding that part? And I think Buffett and Munger's answer would be that 99% of businesses need to go in the two heart. So basically, that's where people have difficulty, where they're not willing to easily give up. I think it was in 2014 or something, thereabouts. I used to go with Guy Sphere every year to Omaha on Thursday because I had asked Buffett's assistant, Debbie, if she would go to lunch with us. And she said, I'd love to go to lunch with you guys. I mean, I actually love Debbie, you know. And so she said, but when you come for the annual meeting, Friday is like a zoo at the office, all these celebrities coming. I can't. But she said, if you come on Thursday, I can go come to lunch with you guys on Thursday. So Guy and I, you know, we're general leisure. We have nothing going on. Okay, so we can go on Thursday, we can go on Monday. We don't care. Okay. So we started going to Omaha Thursday morning, and then we'd go meet Debbie for lunch. And one year, I think it was in 2014, by the way, the lunches was Debbie, which we had for several years, blew away the lunch with Warren. It was so much fun. And I used to always tell Debbie, I start the conversation with Debbie like that. I said, debbie, between us girls, can we talk? Can we really talk? She said, mohnish, what do you want to know? Anything you want to know, I'm going to tell you, okay? And then we would talk about all kinds of things. It was just great. So one year in 2014, when we went to have lunch with Debbie and we come to the 14th floor of Kiewit Plaza, the elevator opens, and Warren is standing there. So I thought, okay, he's maybe going in the elevator somewhere. But it turned out he was standing in the lobby of the elevator to greet us. Okay, Fortune 10 CEO coming to the elevator for meeting 2yo yos who he doesn't have an appointment. Okay. So I start talking to Warren, and I think he'll take the elevator down. And then he says, you guys want a tour of headquarters? I said, warren, if you want to waste your time with a couple of yo yos, we are all game, okay? And so he said, let me give you a tour. So he's showing us all the memorabilia in the office. And he showed up the letter he sent to Long Term Capital Management when he was trying to buy that business. And then the first shares of Burlington Northern and his Coke machine, his Coke fountain. He has got his private Coke fountain. And he was like, showing how it works and all that. And then finally, he takes us to his private office to show us his office. Right? Private office. And I noticed that on his desk, there's a box which says too hard. And I heard about this right here, there's a box which says too hard. And the box was empty. So I said, warren, the too hard pile. Everything's supposed to go in the too hard pile. You have all these piles of papers. Nothing's in the too hard pile. What's going on? He said, oh, that's just an illusion, Mohnish. It takes a bunch of papers and dumps it in the too hard pile. See, it's completely full now, and we're going to put more in it so it's even more full. But a guy like Warren needs to have a box on his desk. And if you go to God Google and say, buffet too hard picture, it'll show a picture of him in his office with the too hard pile box. God. Google will show you whatever you want so you can see that box. And so someone as disciplined as Ward needs a physical box to remind him that most things he cannot understand. This is a very high IQ guy. This is a guy who's a child prodigy and all of that. He still has the humility to understand that 99% of stuff I'm not going to understand. So this regulation question, the moment you encounter something like that, be very comfortable with saying no very fast to almost everything. There should be 10 companies in the world that you understand and there should be 10,000 that you have no clue about.

[Mohnish Pabrai]

And then I should say, well, I'm in that lucky situation that being an investor in power funds, I don't even need to understand it. But I did give myself the challenge to read up on the 10Ks the other day and I was thinking, I don't understand this, but to refine. But I hope you do. I hope you do, Mohnish. And it sort of takes me to my next question here. I've had a lot of people because I do talk about different stocks. I invested. I'm not as smart as you. I can't own 10 stocks. I only have five stocks because I only feel I understand five companies apparently, at least at a reasonable valuation. And so I like to say to people that monies is over diversified. Whenever they tell me minus is so concentrated, I was like, yeah, but even like for my. And then you of course can say that, let's say in one of your funds raises is just what, 60%? It's a massive part of it. Right. So I'm probably the only one of your investors who feel like you're not too concentrated. But anyways, you can quote me on that. I hope I don't speak out of school whenever I mention that, but it sort of takes me to the question. So I get asked by a ton of people. So why apparently you have this podcast, you sit around, you're a bit of a yo yo. You just sit at reading in 10Ks, you don't really understand too many, so you only invest in 5. Why do you also invest with Mohnish? And so one of the things I tell them is that I have to be humble. I only have a track record that's from 2014, so I don't even know if I'm any good. It's like you should probably play this thing here about money's talks about Walmart and how important it is to have one winner and what that means. And so one of the things I say to tell people is that it gave me a lot of comfort investing with you because you set up the first fund, what, 1999, and then the two others shortly after. And so I was kind of thinking at least two decades. That's sort of like, that's a good time of saying you have a long Runway. But then at the same time, you also have a long track record because we want to have our cake and eat it too. But I guess my question is, how long should a track record be and how much should it outperform before you can say with a 90% certainty, 95% certainty that it's skill and not luck?

[Manish Pabrai]

Yeah, that's a great question. I would say you need plenty of time. You need more than 10 years and preferably something like 20 years.

[Mohnish Pabrai]

Simple as that. How do you think in terms of over performance? And I know it's, I know it's sort of unreasonable question because it's tough to come up with an equation. Just call, collect me whenever you have the equation. Mohnish. But of course, there's a difference between have you beaten the S&P 500 or whatever kind of index for 0.1% or 5% or 10. We all know what Buffett did in your early days of the Buffett partnership. So how do you. I know that I'm teeing it up for you in a terrible way, but how much outperformance would you need to see over, let's say, 20 years before we can say, ooh, this is skill. This is not 0.1%. This is truly skill?

[Manish Pabrai]

Well, I would just like to point out something that when Ted Wechsler was being hired by Berkshire Hathaway, I think he joined in 2010, thereabouts, I think around then and maybe a little bit later, but in the 2007-2009 time period, he was down more than 70%. So they hired a guy who, when they looked at the recent past, before they hired him, it looked horrible. The numbers looked horrible. He was 30 points behind the S and P in those years, but they still hired him because they looked kind of past. They looked at the longer term record and went with that. I think the thing is that when we look at someone like, let's say Steve Ballmer, there have been three CEOs at Microsoft. And I talked to some Microsoft investors who hate the period of owning the stock when Steve Ballmer was CEO. But it really wasn't fully Steve Ballmer's fault. He came in when the stock was ridiculously overvalued and he left when it was ridiculously undervalued. And then Satya comes in with an undervalued company and he hits it out of the park. He created a lot of value, but his starting point was a value stock. And so we can get a lot of distortions. Even looking at 10 year periods because of this notion, because markets can be very overvalued. So I would say that anyone when they're compared to the S and P in the last decade is going to not be looking great because the S and P is coming off an incredible 10 years. But the next 10 years, a lot of yo yos will probably beat the S and P because it's so elevated. So I think the selection of an investment manager is one of the most difficult things to do. Very, very hard to do.

[Mohnish Pabrai]

All right, well, Manish, thank you for being with me on this metaphorical restaurant. Trying all of these new dishes here. I don't know if it was tasteful or not, but any concluding remarks?

[Manish Pabrai]

I very much enjoyed the conversations today. It was fantastic. Well, and we got to sample a bunch of new dishes.

[Mohnish Pabrai]

We did, we did.

[Manish Pabrai]

We mixed it up with some of the oldest gold, but we got some new dishes in there too.

[Mohnish Pabrai]

All right, as I'm letting monies go, I want to wish you a happy Berkshire weekend. If you're listening to this after the Woodstock of capitalism or you just couldn't make it this year, we have our own version of a virtual Year Round Berkshire here on the Investors Podcast. So if you're a kindred spirit in value investing, in philanthropy, and want to hang out with me and the Verdict Group online, you are welcome to join our waitlist for the TIP Mastermind community. We have a link in our Show Notes for more information. My co host, Clay Fink will contact you with more details of the next steps in the process and how to submit an application.

[Stig Broderson]

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[Mohnish Pabrai]

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[Stig Broderson]

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[Mohnish Pabrai]

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[Stig Broderson]

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