[00:02:33] Stig Brodersen: And perhaps we get to speak about investing at some point in time, who knows? But I wanted to start out talking to you about life and sorry, I’ve been rambling for the first two minutes, Mohnish, so I’ll get right to it here. So the first question is that. You sold a small stake in your business trans tech and it was like a million dollars is after tax and you turn that in, that money to 13 odd million dollars in five years or whatnot.

[00:02:57] Stig Brodersen: And so you became financially independent and I think I heard you say it was age 33. So yeah, very young, you became financially independent. How did that change your relationships, if at all?

[00:03:09] Mohnish Pabrai: I don’t think there was any change in the relationships I can think of. I mean, I think that my friends were the friends and the family was pretty similar and same. And so I think the only change I can think of is that I could pursue a more independent path and I started to think about that. So basically, I think that like Charlie would say, his main driver for the wealth was independence. And the money freed me up to really think about how I wanted to spend my time and what I wanted to do, et cetera.

[00:03:48] Mohnish Pabrai: So for example, one of the things I did at that time was that I fired myself from my company, the IT services company, I was not enjoying running it and basically, looked for, and then hired a CEO to run it. And so basically, I was making changes which were focused on what would give me greatest satisfaction and joy.

[00:04:14] Mohnish Pabrai: And I knew that I wanted to spend more time with investing and I wasn’t even focused much at that time on managing other people’s money. At that time, my focus was just manage my own money and I felt like that was a nice enough pot that I think I thought I could grow over time and would allow me to lead the life I wanted to leave.

[00:04:36] Mohnish Pabrai: So the relationships didn’t change that much, just the way I was spending my time on a day to day basis, went through a lot of change.

[00:04:45] Stig Brodersen: Is it stressful for you by any means to invest other people’s money? I should probably have made a full disclaimer that I’m in a privileged position of having invested with you Mohnish. So I don’t know if I should even ask you this question, but does it add stress to your life to manage money for other people? Cause you are in a very privileged financial position now. And so you could also just invest your own money now and perhaps not have that stress. And so how do you think about that?

[00:05:10] Mohnish Pabrai: I’ve actually never found it stressful, even, I mean, of course, there are times like, for example, during the financial crisis, we were down 65, 67 percent from the peak, I mean, the index was down about 40%. So that was a big drop. We had about 600 million in the management before the financial crisis, and it was down to 200 million.

[00:05:31] Mohnish Pabrai: What bothered me, and I couldn’t really do much about it at that time was, some of the people who came in at the peak and then redeemed at the bottom. And I really couldn’t do much about that. I mean, it was their money and they wanted to do whatever they wanted to do and that was unfortunate because I had no chance to make it back for them.

[00:05:50] Mohnish Pabrai: But that was a small minority, most of the money stayed. And so I think the gyrations to the extent that people start, making decisions, which are counter to their, what I think might be their best long term interests. That’s unfortunate. And I don’t feel stressed about it, but I’m a little sad about it.

[00:06:12] Mohnish Pabrai: Can’t do much about it. But other than that, I’ve never really found managing money to be a stressful situation at all. In fact, what has happened is that it has led to some wonderful new friendships, a wonderful new relationships. And so I’ve been able to interact with folks that I would not have been able to interact with.

[00:06:35] Mohnish Pabrai: And also, it’s made it easier to engage with the businesses that we invest in. So they pay a little bit more attention because we’ve got some size. And so that is a little bit of an advantage. So I think overall, I would say the pluses outweigh the minus.

[00:06:54] Stig Brodersen: I know that you haven’t been shy of telling students not to use Excel.

[00:06:58] Stig Brodersen: And, but you also mentioned that during the financial crisis, you had to climb up from that hole and use Excel because you could, in your Excel sheet, you could see what was the intrinsic value and then you could, look at the tickers and they would, it would tell you something very different. Have you fired up Excel since the great financial crisis?

[00:07:16] Mohnish Pabrai: Actually, I still keep that spreadsheet. I still keep the spreadsheet because I think it’s useful to understand. I mean, we get quoted values on the businesses that we own, but it’s also useful to know what I think might be the underlying value of the businesses that we own.

[00:07:34] Mohnish Pabrai: And so I still have a very similar spreadsheet. And I do update it periodically. It doesn’t take much time. I mean, it’s, we don’t have, we might have one or two new ideas in a year. And so there’s not much movement, but one of the reasons why that was helpful is that we had made an investment a few years back in this Turkish company where, there was such a big gap between price and value.

[00:07:59] Mohnish Pabrai: That it was just kind of useful to understand what the whole thing is worth. And I also needed to, because we have so much concentration in one of the funds with that position, I needed to educate our investors that, hey, listen, if you sell or exit, please understand what you’re selling, right? I mean, you’re selling based on market value.

[00:08:22] Mohnish Pabrai: But intrinsic value may be much different from that. And so I think in the financial crisis, the rope was important to pull me out of a deep well. And now I think it doesn’t, it’s not really a, I’m in, but it’s really a beacon, which it’s kind of like a North star, which tells me how I should think about it.

[00:08:43] Mohnish Pabrai: And like, for example, that particular business, Raysas. In Turkey, we own about a third of that business. And I really think of it like a family business. So I’m not part of the family that founded that business. I’m not the part of the family that runs that business. But I feel like I’m part of an extended family that has ownership of this business and asset.

[00:09:07] Mohnish Pabrai: And I think of it almost like a private position, like, like we own a private business. And my goal with that business is to own it forever. Right. And so as long as the family that owns the business and runs the business, as long as they maintain their ownership, and they are the managers running the business.

[00:09:32] Mohnish Pabrai: We don’t want to make any changes. And so that mindset, I think is important. And I use that mindset. I try to use that mindset in some of our other positions as well, because that’s really the name of the game is that once you have ownership or partial ownership of a truly wonderful business that you acquired at a wonderful price, you’re done. Not much to do. Just watch paint dry.

[00:10:01] Stig Brodersen: Go to Tokyo and have sushi. Like you’ve been known to do, the good things in life. Mohnish, which period of your life have you been happiest and why?

[00:10:13] Mohnish Pabrai: Well, I would say I’ve always been a happy guy in general. I’ve usually tried to set up my life in a manner that I’m professionally very satisfied.

[00:10:27] Mohnish Pabrai: There have been periods in the past when I was professionally unhappy and those were tough periods. But I would say that the current period is as happy as I can remember any period being. So it’d be hard for me to calibrate, but I can clearly think of two or three times in my past that were not great periods where I was out of alignment and I wasn’t in a good place.

[00:10:56] Mohnish Pabrai: Thanks. But, when I look back, and I, if I look back from the time, I was 18, when I started college and so on, and I’m going to be 60 in a few months in the 42 years. There’s just been a few single digit years, maybe two or three single digit years that weren’t great.

[00:11:17] Mohnish Pabrai: But those were the periods where I made changes, where I was not happy with the situation and I took the bull by the horn and it transformed things. So that I haven’t had that type of a, situation in several decades. So it’s been great.

[00:11:34] Stig Brodersen: That must be wonderful and one letter that you refer quite a few times, that’s Buffett’s 2022 letters, where he talks about those 12 decisions that really improve the strike record.

[00:11:43] Stig Brodersen: So because we are this concert and I don’t want to play the greatest hits, I’m not going to ask about the best investments decisions but aside from your decision to sell trans tech, which other decisions have made you the biggest improvement in terms of happiness?

[00:12:00] Mohnish Pabrai: Yeah, that’s a great question. I’ve only had one employer in my life.

[00:12:04] Mohnish Pabrai: I only work for one business, one company that’s coming in Chicago called Tellabs and basically, I had started with them in R and D and engineering. And after about two and a half years, I was quite unhappy with the situation. We didn’t really have great projects and I didn’t have a great manager.

[00:12:24] Mohnish Pabrai: So I was going through a lot of confidence issues and just really, and I was a very young guy at that time, really needed better, better mentors and better managers. And I made a change at that time where I moved from engineering to marketing. And that was a tremendous positive change, really led to a very euphoric period.

[00:12:48] Mohnish Pabrai: Great professional satisfaction. Wonderful and so basically, I can, and then another period obviously was when I made the transition from trans tech. So they’ve only been like two or three of these periods in my life. where I was hitting a low point and the actions, I took to get out of that low point led to new highs and led to great highs.

[00:13:15] Mohnish Pabrai: And so I’m one of the reasons why I think the happiness equation has worked as well as it has is because I’m always asking myself the question, are you happy? Are you content? Are you satisfied? What would you like to change? What would you like to do different? And for example, one of the changes I’ve made in the last few years is I try to kick the tires a lot more on the businesses that we own.

[00:13:43] Mohnish Pabrai: So, I’ve been spending more time visiting the plants or the coal mines or the coal terminals or, the warehouses, different things related to the different businesses that we own. And I’ve really enjoyed that. It’s helped me understand those businesses a lot better. But also, I regret that I should have done more of that earlier.

[00:14:09] Mohnish Pabrai: I was a lot more of an armchair investor earlier. And that’s a comfortable place to be, but you can miss a lot when you’re an armchair investor. And so basically it really helps you understand business better when you’re in the field and you’re meeting the different people who are doing different things in the business and so on.

[00:14:32] Mohnish Pabrai: So I think that’s an area I’m trying to expand. Yeah. In my life, it leads to more travel and things, but there’s a huge payoff as well, which is great.

[00:14:44] Stig Brodersen: You mentioned the happiness equation just before, and I wanted to talk a bit more about that. So if I say that we have two mental models, so one is you’ll figure out what makes you happy, and then you do more of that and then you have the other mental model, which is you have some things that, that makes you unhappy, and then you invert, which one would you choose? And do you have other mental models in terms of optimizing for happiness?

[00:15:07] Mohnish Pabrai: Well, I don’t think it’s one or the other. I think you have to do both. So one of the things a lot of humans do is they drift through life.

[00:15:16] Mohnish Pabrai: So, you have a friend, he or she has some shortcomings. And sometimes loyalty overrides rationality, and that can have a negative effect, right? So it’s easy to be in a status quo, but I think to really kind of first of all, grow as a person and to have a higher degree of happiness and higher degree of satisfaction, you have to take the bull by the horns.

[00:15:47] Mohnish Pabrai: So you have to be deliberate in expanding the relationships that are very healthy, reach out to. Grow them and de-emphasize the ones which don’t get you there, right? And so those types of actions, a lot of humans are not willing to take, right? Because loyalties get in the way or other things get in the way.

[00:16:09] Mohnish Pabrai: So I’m always trying to do that. I’m trying to, like when I moved to Austin, I started meeting people at my home and not much, maybe like a couple of times a month. I can only handle so much with humans, so a couple of times a month, I’m happy to step out of my cave and I’d meet someone I hadn’t known or met for an hour or so.

[00:16:35] Mohnish Pabrai: And I tried to pick them based on possibilities that there was something that was possible that, people reach out to me, they’d like to meet me, et cetera. And of course I can’t meet all of them, but in some cases there’s something intriguing about. The person or the background or something and I say, okay, let’s take a flyer and let’s meet the person.

[00:16:55] Mohnish Pabrai: Right? And most of the people I meet that way, they’ve been wonderful to meet most of them. It still doesn’t result in anything. It’s a one and done, right? Because there’s just not enough there. And of course I already have so many relationships and friendships that there isn’t that much room to keep, adding an infinite number.

[00:17:18] Mohnish Pabrai: I’m much more better with happier, with fewer relationships, but deeper relationships. My dad used to say that if you have one good wife and one good friend, there is nothing else you need in life, right? And so that was the, that’s always the focus. But these afternoons of chai with Pabrai have been really wonderful and they have led to Some new wonderful friendships.

[00:17:47] Mohnish Pabrai: It’s just a small number. The ratio is small, but I’m okay with that. In fact, I actually feel happy when I meet someone and I’ve arrived at the conclusion that we probably will not have. a deep friendship here, because I feel like, okay, we explored something and that’s good. It’s good to explore and check one off the list and keep the exploring going.

[00:18:14] Stig Brodersen: Well, the rumors has it that the Assam Tea are very good. That’s what I’m told.

[00:18:19] Mohnish Pabrai: If you find yourself in Austin, Stig. We will have Assam tea.

[00:18:24] Stig Brodersen: I love that and I am also worried because it leads me into the next question, not about the Assam tea, but I am a bit worried because you said on that interview that at that point in time, I think it was like 34 ish people who have come to your home and you said one person, make the cut.

[00:18:41] Stig Brodersen: And so we’ve previously also talked about how to live a life of not telling lies. And so. I would imagine that more than one of those people who you had in your home might have felt that you are great buddies now. Perhaps you let one pass the filter, but perhaps the other person now felt that you are the best friends.

[00:19:00] Stig Brodersen: And so how do you, let’s say another person reached out to you after not, and this is not an unsolicited email. This is one person being in your home, getting the best Assam tea and then saying, hey, my news cannot pop by next Tuesday. How do you say no to that person?

[00:19:18] Mohnish Pabrai: One of the things I learned from Warren is you have to be really good at saying no, and you have to be really direct.

[00:19:29] Mohnish Pabrai: So I have, I’ve always tried to be candid with everyone and, one person came recently and nice person, but also part of it is that so I should just caveat this, that I may or may not fully understand that person after one meeting, right? So I’m making a judgment call, right? And the judgment call I’m making is based on Buffett principles.

[00:19:59] Mohnish Pabrai: And so when I had lunch with Warren, I told myself, Warren, Charlie and you are such fantastic. Judges of humans. Were you always a great judge of humans or is this something that you picked up over the years? So he says to me, well, first of all, Charlie is a lot better than me, but I just want to correct you Mohnish that I am not a great judge of humans.

[00:20:23] Mohnish Pabrai: So he said, if you put me in a cocktail party with a hundred people and you gave me five or 10 minutes with each person, I could tell you that three or four people are exceptional. and wonderful. And I could also tell you three or four people are folks that you want to have nothing to do with. And the other 92 or so, I really wouldn’t have an opinion on, right?

[00:20:44] Mohnish Pabrai: Because it’s not enough time to form an opinion. But then he said that the three or 4 percent who aren’t great and the 92%, which are unknown, he puts them both in the same bucket, which is harsh, but it’s what you got to do. Right. And so he says that I’ll try to have a relationship with the three or four great people and ignore the rest.

[00:21:10] Mohnish Pabrai: Right? So that is an unfair system because in that 92 percent are probably many good people. It just didn’t come through in that short period of time. And that’s the same thing with my Assam teas. So in the one hour, I am not going to be able to precisely nail down where everyone stands and what actually are the realities of, something that could be a great relationship or not.

[00:21:39] Mohnish Pabrai: But just like in investing, there are no call strikes because there are an infinite number of humans on this planet. And because there are an infinite number of future Assam teas. Basically, you can set a high bar and there isn’t much of a price you pay. for not recognizing a great individual. But there is definitely a huge negative price to be paid for letting someone in that may not be the right person to let into the inner circle, if you will.

[00:22:15] Mohnish Pabrai: So basically, it’s an unfair system. It’s a bad system, Stig. But it is the system that Warren uses. And who am I to try to improve on that system? And so basically what I look for is when I meet somebody, I reflect back after the tea. I say, okay, what do I think? And what’s going on? The most recent chai with paparazzi I had, that person asked me to come to his place.

[00:22:47] Mohnish Pabrai: He lives very close to my home. And he said, I was happy with the Assam tea, but I’m really a fan of Darjeeling tea. And so he says, I make a great cup of Darjeeling tea. And would you come to my home so that we can have Darjeeling tea? And I like the guy, so it’s not just one stick. It’s more than one.

[00:23:09] Mohnish Pabrai: I liked the guy. And I said, yeah, so there will be a Darjeeling tea happening, even though I didn’t tell him this, but you know, Darjeeling is not my favorite, but you know, it’s okay. If the company is good, we can deal with mediocre tea.

[00:23:24] Mohnish Pabrai: And can I go back and then ask, whenever you say that you are a harsh grader, and whenever you say you want to be direct, of course you also want to be kind, but like, do you literally say it was great meeting you or don’t you even say it wasn’t great meeting you if it wasn’t great meeting and then just saying, well, I’ve enjoyed these meetings. I’m not lying when I’m telling them, I’m not.

[00:23:42] Mohnish Pabrai: I have not enjoyed meeting these people because it’s been, they go through a lot of filtering process before they show up and I learn from everyone, so they’re wonderful people, but so I’m very direct with them.

[00:23:53] Mohnish Pabrai: Like, there was a person who came a few days back and They were interested in going to dinner with my girlfriend and his wife, like the four of us together. Now, that adds more layers of complexity. Okay. Because she’s going to ask me a bunch of questions, who, what, where, what are we doing here? What’s going on?

[00:24:17] Mohnish Pabrai: Right and to me, it was obvious. I didn’t even, I didn’t even ask her. It was obvious to me that’s not going to be in the cards and so I just told the person, I’m sorry, things are too busy, we can’t do it. All the best and then he had a very gracious response, so it was fine. I think what you find is that when you’re direct with people, it’s not like they are sad. I think they appreciate the candor.

[00:24:45] Stig Brodersen: Because most of us come up with bad excuses and then, we have to remember what we lied about last time and we paint ourselves into a corner, but not just that.

[00:24:55] Mohnish Pabrai: Yeah. You remember the book Power Versus Force, we’ve talked about it. You have to choose truth over diplomacy and I think when you choose truth over diplomacy and you play that long game, you come out ahead. So it’s a disservice if I am not candid. I think it’s just a big negative if I’m not candid. So I try to be as candid while not trying to be abrasive.

[00:25:25] Stig Brodersen: Shifting gears here a bit. I want to talk about Bridge. I know that was a, no pun intended, but a weird bridge to my next question. So, you teamed up with Dr. Jack Skeen. We talked about that. This was in 1999 ish and he gave you this owner’s manual and you learned that you like to play games.

[00:25:41] Stig Brodersen: You like a single play games in particular and so with that in mind, I’ve learned that you’re also really into playing bridge, and I can’t help but ask you, I don’t know if this is an either or, but why are you so much into bridge and not a game like Hold Em’ Poker?

[00:25:56] Mohnish Pabrai: Yeah, I mean, I think, it’s funny Warren Buffett, he’s a very good bridge player, he plays with a former world champion as his partner.

[00:26:04] Mohnish Pabrai: A few years back, maybe it was maybe a decade or more, maybe two decades ago, he was invited to some poker tournament and he actually studied up a bit, tried to understand how to play poker. Poker is a very different game and he did very terribly in poker. And He went back to his bridge, I have played poker a few times and I’ve never really gotten enough into the game to study it in depth.

[00:26:31] Mohnish Pabrai: I mean, you can, it’s also a game of probabilities and things, and you can, you would know what to do better if you had a lay of what cards are left and what’s going on and all of that. But the thing is poker has, Elements of luck and elements of skill. Clearly the elements of skill are very significant because we do end up with some world champions.

[00:26:57] Mohnish Pabrai: who have a repetitive streak of getting to the last final table and so on. So there is, what I’m saying, skill is significant, but there is clearly a luck element in poker and bridge has zero luck element. It’s purely. a skill based game. And so that has more appeal to me. It’s also, I think, difficult to play poker without some money at stake, right?

[00:27:26] Mohnish Pabrai: It’s kind of intertwined with the money. Now, when I used to play bridge with Charlie, that was social bridge. We paid, we played for money, it was small stakes. But if I lost a hundred dollars or 150 dollars. Charlie was very delighted to collect that from me. Okay. He was like, truly like twinkled in his eye.

[00:27:47] Mohnish Pabrai: Mohnish’s 125 coming to me, and likewise, when I took money from Charlie, there was some very special about that. Right. So the small stakes worked with social bridge. And it was okay. I am okay with social bridge, but I really enjoyed duplicate bridge. Duplicate bridge is the one which is purely skill based.

[00:28:11] Mohnish Pabrai: There’s really no money in the picture. We do it for points. Points really have no value other than psychological value. And that’s fine. So yeah, so I think, we try on different gloves and some gloves fit well and work and some gloves don’t fit well and don’t work. I have, I’ve played poker dozens and dozens of times, right?

[00:28:34] Mohnish Pabrai: With many times in social situations with very good friends and all of that. It’s just never gotten to the point that I wanted to do it all the time. Bridge, I’m playing At least, four to six hours a week of bridge and Warren is playing even more than that. I think Warren is probably playing more than 10, 15 hours a week of bridge.

[00:28:56] Stig Brodersen: That’s interesting. I was, I went to a bowling school where you could choose Bridge as an elective. And so, and it was a great experience. I, you go there, you go to a tournament and there was someone like with oxygen tanks and you kind of think I got them, but then you just wipe the floor with you because there’s so much better than you.

[00:29:13] Stig Brodersen: And you’re like, yeah. So it definitely makes you humble. But it’s kind of interesting cause I don’t, I’m not saying I was ever a good bridge player, perhaps I was slightly better Poker player but I think in terms of investing, Poker has been helpful because you really learn how to control your emotions and to lose money, which I would say you probably don’t do to the same extent in bridge, or at least not the type of bridge that I’ve been playing and so it was very interesting to hear your take on how you just saw the two games and Bridge was just perhaps just more fun and you didn’t see it as a segue into investing by any means. So thank you for sharing it, Mohnish.

[00:29:49] Mohnish Pabrai: Well, I think Bridge is more directly tied to probabilities. Because there’s no luck element in investing also, there’s really, I mean, luck may come into play in the sense that you may, accidentally end up with a great manager or something that you didn’t understand at the outset, but you know, the probabilities dominate, right? We try to ascribe probabilities to different things. So it kind of works okay.

[00:30:17] Stig Brodersen: So I’m going to take the liberty here and define a principle as something that’s timeless and something that’s similar across all cultures. If we use that. definition, which principles do you live by and why do you live by those principles?

[00:30:35] Mohnish Pabrai: Well, I mean, I think that there are some principles that are very front and center, right? I mean, and a lot of these become intertwined with mental models. So for example, like we talked about power versus force and the importance of truth and the importance of candor, right?

[00:30:53] Mohnish Pabrai: So I think that becomes a very core principle. I think integrity, honesty, trust, basically, again, these are attributes that will make the world your oyster.

[00:31:11] Mohnish Pabrai: So it’s a huge advantage to be trustable and being trustable is a long game. It’s an infinite game. It doesn’t happen overnight and you have to be willing to play that long game to build a trust. We have a high school intern at Pabrai Funds who would help us with, the mailings and different things, sending books to Stig and so on.

[00:31:39] Mohnish Pabrai: And what my assistant told me is that He would say, I’m going to be there on Tuesday at three o’clock, to work on stuff. And then he would not show up, right? Or he’d say, I’m coming Wednesday at this time, wouldn’t show up. Now, she said, when he does show up, his performance is exceptional. When he says he’s going to show up, it’s a 60 percent probability that he’s actually going to show up.

[00:32:08] Mohnish Pabrai: And so I told her, I never talked to him, but I told her, look, Munger says that one of the most important traits. Is reliability, right? And I said that, unfortunately, this young person doesn’t recognize how important it is to be reliable. He can easily tell us I’m not available this week. We’d be fine with it.

[00:32:34] Mohnish Pabrai: And, but why lead someone on, right? And Charlie says that one of the best educational institutes on the planet is McDonald’s. Because McDonald’s hires very young people. And one of the most important traits they learn at McDonald’s is reliability. Now, they’re not like us in the sense that you show you, you tell your boss at McDonald’s, you’re going to show up at 3 p.m. and you don’t show up by the second or third time you do that.

[00:33:05] Mohnish Pabrai: You don’t have a job. Even the second time you do that, you won’t have a job, right? Reliability is extremely important for McDonald’s because they will not be able to service their customers otherwise. And so the people, the young people who work there get that work ethic, which is great.

[00:33:22] Mohnish Pabrai: And I think that’s why Charlie thinks that they do such a great job. So I think that these are for the most part, the principles that carry the most weight are the most basic principles, trust, reliability, integrity, honesty, truthfulness. hard work, diligence, fairness, people like to treat, be treated fairly.

[00:33:48] Mohnish Pabrai: If there are people working for you, they really want to see that things are fair. And so these are just basic principles that you have to live by. If you don’t do those, then in the end, you’ll be the loser.

[00:34:03] Stig Brodersen: Why do so few people live by those seemingly simple, but perhaps not easy rules?

[00:34:11] Mohnish Pabrai: Because it’s the payoffs don’t come immediately. So trust is something that pays off after decades, right? Just think about Warren and Charlie. How old were they when the world started to trust them, right? I mean, even outside the U.S. he wasn’t very well known. Buffett wasn’t very well known till maybe 15 years ago or 20 years ago and so it’s a lifetime of doing something that eventually leads to that type of an outcome.

[00:34:49] Mohnish Pabrai: And so a lot of people are looking for shortcuts. They don’t want to play the long game. I mean, a used car dealer is just focused on, hey, let me take this sucker for the maximum I can. And who cares about the next one? He’s not going to buy another car for so many years and he might never ever show up here again.

[00:35:09] Mohnish Pabrai: Right? So it’s a very transactional one off relationship, but shallows in life. And people cannot see that because like I said, you have to connect the dots. And this type of like reliability and trustworthiness. really gets built over a long period of time. It’s not overnight. You don’t actually get to see the results of that relatively quickly.

[00:35:36] Mohnish Pabrai: That’s why people don’t do it because they want to see X equals Y. If I do X, then Y happens. But here there is no XY relationship. That’s visible until a long time later. I mean, we are seeing right now, for example, at Boeing, a situation where Boeing used to be an engineer led company. And after they were, they merged with McDonnell Douglas.

[00:36:01] Mohnish Pabrai: The bean counters took over and the bean counters focused on, hey, can we increase earnings 10, 15 percent a year? And they must be fat. We can cut. And so for example, if you look at something like the 737 aircraft, which is their workhorse, basically they wanted, there was a demand for 737s. With more capacity and really, quite frankly, that airplane with that fuselage cannot grow infinitely because also to have more capacity, you need bigger engines.

[00:36:37] Mohnish Pabrai: What they did, they put these massive engines. On the old 737 flu sludge, if you really look at like the max, the engines are huge. And then they extended the few sludge. And so they basically told the engineering groups that, yes, we know you are telling us that we should go to square one and design a new airplane.

[00:36:58] Mohnish Pabrai: But that’s like, eight years, 10 years, and several billion dollars. Can we just modify this? Right. And so they forced the modifications. And then we had the two crashes. And then we had, plane is still a kluge. You know what I’m saying? The max is a bean counter. That’s what happens when you have bean counters running engineering.

[00:37:21] Mohnish Pabrai: Okay. So, they started not playing the long game, right? They played the short game. And now there’s a come to Jesus at Boeing. And it’s terrible because quite frankly, we only have two aircraft manufacturers in the world, and we need Boeing to be a high quality, great engineer driven company, which builds great airplanes and plays the long game.

[00:37:47] Mohnish Pabrai: People are very willing to let Boeing make a lot of money, no problem, but please play the long game. So we see even businesses like Boeing, which are such great businesses, suddenly decide let’s cut corners.

[00:38:02] Stig Brodersen: Terrible. Yeah. Mohnish, I want to read books the way that you do. And what I mean by that, I remember we had a conversation a few years back and you said that if you don’t find a book interesting, you just like a stock, if it’s like too much debt, whatever, like you just stop reading it.

[00:38:18] Stig Brodersen: And I’m practicing that. It’s surprisingly difficult for me not to read a book from A to Z, but I am practicing that. Yeah. I wanted to ask a bit into your reading habits. Do you take notes in your books or do you put them into a document or how do you process the information you read from books?

[00:38:36] Mohnish Pabrai: I want to give you some information, Stig, that I have never given in any interview ever.

[00:38:44] Mohnish Pabrai: So, basically, since I was in kindergarten, all the way to finishing my undergrad and even, taking grad classes and so on. I never ever took notes. In any classroom, when professor or teacher was teaching, everyone around me is taking notes. I’m just focused on listening to the person or watching what’s going on.

[00:39:10] Mohnish Pabrai: I never ever took notes and, what I would do is, okay, when there’s a test that’s going to happen or whatever, I’d go to the textbook and see, okay, we have chapter three and chapter six on the test. I’d read up on those and, we’d get ready for the test, right? Sometimes what would happen is the professor’s not teaching from the book at all.

[00:39:35] Mohnish Pabrai: Okay and I’m saying, oh, what he talked about. I’m like screwed. Okay. No, not as a test. And I’m like, in a scrambling trying to figure out, I call my friends, whatever, and say, hey, what are we supposed to prepare here? And what are we supposed to read here? And whatever but I never changed that habit.

[00:39:57] Mohnish Pabrai: Somehow that habit has stayed with me and I graduated near the top of my class in my undergrad. I did well and so I made it to 60 years in life without taking notes. And even when I’m reading books, I mean, if I didn’t take notes in class, I’m not going to take notes when I’m reading a book. It’s not going to happen, Stig.

[00:40:21] Mohnish Pabrai: So I’ve never taken any notes anywhere. And I want to also touch on two different data points that you brought up. So Bill Gates has a situation, which is like Stig. If he starts a book, he has to finish it. Has to. He’s obsessive compulsive. Okay? Charlie is not like that. I was not like that at all. And I remember I was talking to Tracy Britt and Tracy said that Warren studied Lehman Brothers during the crisis.

[00:40:57] Mohnish Pabrai: I think he was looking at whether he should make an investment there or not, et cetera. And so he read their annual reports and different things. And she said, I got the hard pages that he read. And I looked through all the pages for his notes. And she said there was almost nothing. There were like a couple of places where there was something underlined or something, but they would have been like less than five words of notes on, in all those 10 Ks that he read for Lehman Brothers. So there was really no record. She said, I was trying to figure out how he’s thinking about it. Right? And basically there was no record. Whatever he was thinking was in his head and nothing was really kind of put down on paper. And some time, I think one time Berkshire did some acquisition and the SEC was questioning.

[00:41:54] Mohnish Pabrai: There was some insider stuff. questioning some stuff. So they sent Berkshire a request saying, we want to see all the staff notes for this acquisition. And Munger sent them a response which said, yes, sir. There are no staff. There is no staff and there are no notes. Warm regards. Okay. And that was the end of that.

[00:42:20] Stig Brodersen: Mohnish we, on this train ride that we are on together here, I am still going to ask you a bit investing related, but they’re going to be a little bit different than perhaps what you’re used to. So no, no secret that you have a great track record, but you’ve been. Handily beating the S&P 500 for two, more than two decades now, I’m seeing myself off to ask you, and I don’t know if this is going to come across rude or perhaps even the opposite.

[00:42:48] Stig Brodersen: If you started pop rock funds over a thousand times, do you think your current track record would be better or worse than what it is now? If we subtract Good and bad luck and please feel free to challenge that premise and say that it’s already been evened out good and bad luck for now.

[00:43:06] Mohnish Pabrai: Well, so first of all, I should just preface and say that I started investing in the 94, 95 timeframe from then till about 2018. Look at any period, looking back for till 2018, one year, five years, 10 years life, whatever. I beat the S and P all the different funds I managed. We are behind the S& P from 2018 till now in most of the funds.

[00:43:35] Mohnish Pabrai: But we’ve also turned a corner, I think from 2020 onwards, we are again, beating the S& P. So we have to go a little bit longer period, a few more years, and then I think we’ll again be back to beating it over all periods. It’s a difficult question to answer. I mean, when you, if you run simulations, because also what has happened over the years is that I’ve learned a few things along the way, right?

[00:44:03] Mohnish Pabrai: And I’ve changed some approaches along the way. And so I really don’t know what the answer would be. I would think that in most of those scenarios, we should do well, we should end up with a decent record, but it’s hard to say, I think until we actually, because, at the end of the day, it’s the individual names. And it’s a sliver of those names that lead to the outcomes.

[00:44:28] Stig Brodersen: Yeah. And that’s why I can’t help but ask that question. In a game like poker, if you play enough hands and hundreds of thousands of hands, you can [ Crosstalk]

[00:44:36] Mohnish Pabrai: Yeah, the luck element goes away.

[00:44:37] Stig Brodersen: The luck element goes away. Then, if I look at your, as an investor, I get the letters from you and I can see different, track records for the three funds that you have.

[00:44:46] Stig Brodersen: And there were more or less started at the same time, not exactly, but roughly, and the results are quite different. And so, and you were, presumably as good an investor whenever you invest with those three funds. And for whatever reason, for example, raises is a bigger position in one of your funds than the other funds, which I’m personally very happy about.

[00:45:08] Stig Brodersen: But like, and so, so you do get, different results, which is why I wanted to ask you about, like, what if we ran it a thousand times? And I don’t even know how to ask that question the best possible way, because whenever you said you saw the dot com bubble, but that was also because you had made some investments, some private investments.

[00:45:27] Stig Brodersen: So you saw what was coming and I’m like, is that bad luck? Or is that good luck that you actually knew that going into it? Can we even put that into a simulation? It can be even do the same time period. Like, how do you think about luck whenever it comes to your own track record?

[00:45:42] Mohnish Pabrai: Well, it was a huge advantage for Pabrai fans that I had a front row seat on.

[00:45:49] Mohnish Pabrai: I basically could see what was going to happen maybe three months ahead of what others could see. Not a lot, but like, three, four months. And so I completely sidestepped the bubble and did really well. And so part of that, I think is luck. Just, the experience I had or the, what I observed, we did not have the same situation in the financial crisis.

[00:46:16] Mohnish Pabrai: So when we had the financial crisis at that time, I really couldn’t see it. I didn’t see it ahead of time and we paid the price. We had some investments go to zero and we had a lot of things get marked down. So it’s not perfect. Doesn’t, can’t always have a crystal ball seeing what we’re doing.

[00:46:37] Mohnish Pabrai: And like Charlie says, we’re old too soon and wise too late. I wish I had some of the insights I have now. 20 or 30 years ago, but it is what it is. So we just, we, take it as a goal. I don’t spend any time thinking about it the way you’re suggesting. I think my focus is, okay, we have a certain reality of positions. We own assets. We manage opportunities available and then we do the best we can with all of that.

[00:47:09] Stig Brodersen: You’ve got all these wonderful stories about Charlie and how you remember him. And one of the things that you mentioned in other interviews is that he’s so good at looking forward, not thinking about everything that’s been in the past, but it’s just wonderful.

[00:47:22] Stig Brodersen: So I kind of feel bad about asking you this very theoretical question, but again I’m not here playing the greatest hit. So let’s say that let’s say I’m the genie coming out of this bottle here, money’s, and I’m going to, I don’t know. I was about to say I was going to grant you a wish, but actually I’m not going to.

[00:47:38] Stig Brodersen: I’m going to tell you Mohnish that I have an account here and there’s a 20 percent interest rate. In perpetuity, if you put money into that account, but the price is that you can never invest your own money so you can take your own money and put in this account, you get 20 percent like a clockwork and this is not John, like this is not Bernie Madoff, any kind of thing.

[00:48:01] Stig Brodersen: This is the real deal. This is stick being the genie here. So you get 20 percent but you cannot play the game of investing. Would you ever take that bet? Not even bet, I would say, would you ever do that knowing that you don’t need the money from that 20 percent compounding, but you perhaps love to play the game?

[00:48:17] Mohnish Pabrai: Yeah, actually, that’s a great question. I do very much enjoy the game. But that would be a very tempting offer. I’d have to think about I mean, in the sense that I mean, basically, It’s all or none, right? You’re suggesting it’s all or none, right? I would say that I might, I probably take it and go all in on bridge.

[00:48:37] Mohnish Pabrai: I remember there was a, it’s really funny. There was a, there’s a guy who invested in my fund a long time back, maybe more than 20 years ago. And he said that one day he had opened Barron’s or something. And there was some article on Berkshire. This is going back, into the early two thousands. And he saw that the stock is like 70, 000 and he said, no company, this was his thinking is a smart guy.

[00:49:05] Mohnish Pabrai: Okay. He says, no company on the planet is worth 70,000 per share. Okay. He didn’t know anything about Berkshire, nothing about Warren Buffett, and he shorted the stock. Okay. Much to his detriment. Okay, he met me a few years after getting burnt on that chart and then he actually said to me, he said, in the early eighties, he said, I had noticed that the U.S. treasuries were playing 18 percent.

[00:49:36] Mohnish Pabrai: Pretty close to what you said. Okay, you could have bought 30 year U.S. treasuries. In 1980 or 1981, and for 30 years, the US government would pay you 18% a year on that bet. Okay? And he said to me, Mohnish, not only the short Berkshire, I didn’t take that bet. Okay? That 18% be, no. Most people didn’t take that bet. Okay?

[00:50:07] Mohnish Pabrai: And then he said to me, I just want God to gimme one more chance. He said to me, give me one more chance of 18 percent U.S. treasuries and I will put everything in. I promise God I’ll put everything in and I’ll never invest in anything again. So exactly what you were saying is what this guy was saying to me, which would have been smart for him to do.

[00:50:33] Mohnish Pabrai: And that would have been one hell of an investment from 1980 to 2010 to get 18 percent compounded It would be, it would have been unbelievable with no volatility.

[00:50:46] Stig Brodersen: So I wanted to preface this question by saying, I wanted to ask you about giving away money without talking about Dakshana, which I don’t know if it’s even a fair premise.

[00:50:57] Stig Brodersen: So the way, if we’re good at accumulating capital, we should probably be accumulating capital instead of spending too much time give me the way giving away money is very difficult. How do you, I mean, it’s very difficult because you don’t have that positive feedback loop in terms of figuring out if it’s right or wrong.

[00:51:16] Stig Brodersen: And I’ll just should make all kinds of disclaimers that you probably figured it out with Dakshana. Assume that you’re better at accumulating money than giving money away and you want to help society, but you take so much more joy in giving money away than accumulating more capital. Whenever you are financial independent, whatever you want to call it, how would you think about how to allocate your time?

[00:51:39] Mohnish Pabrai: Well, I actually did not want to spend time giving money away. I knew that I didn’t want, I didn’t believe in large inheritances. And if you don’t believe in large inheritances, then you’re going to end up with a lot of money. Then you only have one choice, which is to give it away. There’s nothing else you can do.

[00:51:57] Mohnish Pabrai: And so my focus in like 2006, 2007, when I was trying to figure this out was to find a non-profit that I could just write checks to I didn’t actually want to do the work. It’s very painful to do the work the first few years at Dakshana took an incredible amount of time and effort to get it off the ground there were a lot of challenges in the early days and so I was forced to do it because the model I wanted to follow was the guy who had that model didn’t want to scale.

[00:52:35] Mohnish Pabrai: So I said, okay, then we just cloned it because we have no other choice. Today, I actually know of one or two nonprofits. that do a really good job and so if I were facing that situation today, I would look to them as assuming they could absorb the amount I was looking at and I think that’d be great.

[00:52:56] Mohnish Pabrai: So my natural inclination was to not be building a Dakshana or anything like that. Now, in hindsight, what has happened is Dakshana blew away the most optimistic goals I had for it by quite a distance. It just really, the ball got hit way out of the park and I never expected that. I actually expected to fail at doing something in India when I’m not there, et cetera.

[00:53:25] Mohnish Pabrai: So Dakshana has enriched my life in a way. that I really could not have forecast. It was definitely in 2007 when I was starting it, none of these things were on the radar. None of these things were even possibilities. It’s, it went beyond those possibilities. It’s such an outlier. And so now when I look back, I say, wow, Mohnish, you are really lucky because you actually ended up with something like Dakshana.

[00:53:57] Mohnish Pabrai: And the people I met as a result, the scholars who become such good friends and all of this stuff that’s happening. And I know that the real miracles of Dakshana will come about in the next few decades. And I’m hoping that I have a nice long life because there’s so much joy in all of those stories and miracles that are happening every day.

[00:54:26] Mohnish Pabrai: So it’s been really, you can just say that my middle name is Forrest Gump. Okay. I just, stumbled into this, stumbled into a lot of things. So just like stumbled into a friendship with Charlie and playing bridge with him and taking money off him and all that and stumbled into some relationship with Warren.

[00:54:47] Mohnish Pabrai: So there’s been so much stumbling, but also, I would say that you take some actions so that then luck can do its part. If you don’t take the actions, luck can’t do its part, right? So from a very selfless point of view. I wanted to just thank Warren Buffett for all the things I learned from him, right?

[00:55:11] Mohnish Pabrai: So the lunch I bid for, there was no ulterior motive. The only motivation was to see him eye to eye and say, thank you so much, Warren. And I was giving, I was willing to give Warren at that time up to 2 million for that lunch. We got it for much less but I felt like giving up two or three percent of my net worth at that time was very worthwhile in terms of a low tuition bill, right?

[00:55:36] Mohnish Pabrai: Now, that was all the thought that was paid. It added so many dimensions to my life. Friendship with Charlie, it was not buy one, get one free. It was buy one, get infinite lunches free. This is great. So I think the, what I’ve learned is I think the universe, if you are a good person, working hard, putting yourself in the right place, doing the right actions, the universe conspires to help you in way in very magical ways.

[00:56:09] Mohnish Pabrai: I truly believe that. And I think. As long as you are playing the long game, playing the infinite game and trying to do the right thing, things have a way of working out in a wonderful way.

[00:56:23] Stig Brodersen: So, I wanted to tie a few things together here on that note, Mohnish. So, in Chapter 6 of William Green’s wonderful book, Richer, Wiser, Happier.

[00:56:32] Stig Brodersen: I should mention Chapter 1 might be even better, because that’s with you, Mohnish. But chapter six, that’s with Nick and Zak and they talk about, this thing about, handing someone a loaded gun and then you can only treat the other person really well and I found that to be such a wonderful framework.

[00:56:46] Stig Brodersen: And so I, start gifting William’s book away to different people and one of the things I’ve, and this might just be my own bias or this circle to run in, but the wealthier and more value investing focused. People I spoke with, they were like, it makes a lot of sense. I also have a friends in third world countries.

[00:57:06] Stig Brodersen: And they said to me that it was the stupidest thing I’ve ever said and I’ve said a lot of stupid things and they basically came back to me and said, well, it’s wonderful and beautiful to have all of these principles, whatever you want to call it, if you can afford to have them. And so I wanted to go back to, and Grant has this wonderful framework of givers, takers, and matchers.

[00:57:27] Stig Brodersen: Which a lot of our listeners might be familiar with, and I heard you talk about d that and the idea behind, you’re not going to tell anyone, like give 10% or 5% of whatever you make by getting this, getting help from d that in terms of, paying back to the school and have others, you say give.

[00:57:43] Stig Brodersen: And if you are giver, beautiful things can come back to you. And so I’ve been trying in a very small scale to set up at das Foundation and whenever I do. I, and I come up with these beautiful principles and I read your annual letters from Dustin and it all sounds good and people basically tell me it’s a very bad way of running any kind of nonprofit and so how would you give a rebuttal to that? Because it clearly worked for you, Mohnish.

[00:58:08] Mohnish Pabrai: I would say that, like Charlie said, that we talked about McDonald’s and reliability. I think that if you want to. Get ahead in life, do well in life and have a disproportional advantage in life. You want to be a giver.

[00:58:26] Mohnish Pabrai: You want to be reliable and being a giver doesn’t require you to be wealthy. We have so many poor scholars and students at Dakshana who give their time to us. They volunteer for us. They don’t have anything else to give but their time and they’re very excited to give their time. And so what I’m saying is you don’t need to be wealthy to be a giver.

[00:58:49] Mohnish Pabrai: Okay. You can give within your means. It doesn’t need to be anything related to money, right? The other traits, reliability, truthfulness, integrity. High empathy, caring for people, et cetera, play the long game. And in the end, the universe will conspire to help you in a manner that will blow you away.

[00:59:13] Mohnish Pabrai: So these, the skeptics, I just think the skeptics don’t know the way the world works. And you can see so many examples in history. It will be difficult to come up with examples of people who are very reliable, who are very honest, who are very hardworking. Who had very high integrity and did terribly. That’d be very difficult to come up with examples of people like that.

[00:59:40] Stig Brodersen: What a wonderful way of ending a train ride. Anything you want to add here before we, we round off the interview?

[00:59:48] Mohnish Pabrai: Some of my best memories in childhood were train rides in India and William Green and I had a wonderful, two wonderful train rides and he was in India with me. He actually got, he was drinking from a fire hydrant. There were so many things going on. It was like, full Technicolor going on. So I would just say that if you get a chance to visit India, try to take an overnight train journey. And I think you will love that experience.

[01:00:21] Mohnish Pabrai: The Indian government has set up a number of trains, the Rajdhani Express, the Durontos, and these go all over the country. And you can catch a train at seven or eight o’clock at night. And it pulls into the, your destination at, 10 or 11 o’clock in the morning. So you don’t really use a lose much and you’ve got a free hotel stay for the night. I think that’s a wonderful experience to broaden your horizons.

[01:00:45] Stig Brodersen: So as I’m letting Mohnish go, I want to address one thing that many of our listeners might resonate with. I’ve been going to the meetings in Omaha many times, and it’s always a wonderful experience to meet fellow value investors. Of course, getting there.

[01:01:03] Stig Brodersen: Well, at least in my case, isn’t always too easy. It roughly takes me 24 hours door to door, but it’s a pilgrimage that’s worth the trip to do at least once, if not multiple times. I’d also say that as I’ve gotten a bit older, have more obligations. It’s become a little harder to do the trip, but again, I also know it’s a bad excuse.

[01:01:24] Stig Brodersen: If you really want to go and if you really want to do something, you typically find a way. Now this year I’m not going. And aside from the usual bad excuses like family and travel time and whatnot, it’s something different for me this time. As an introvert, I find it overwhelming to be in Omaha during the events.

[01:01:45] Stig Brodersen: I would go out and, have a fantastic time for, I don’t know, two, three hours and be super excited about being around 40,000 kindred spirits. But then after that, I would need to go back to my hotel for a few hours, at least to recharge before we go out again, meet up with the listeners for our events, have fun.

[01:02:04] Stig Brodersen: But in turn, also, I could probably only do that for a few hours and then go back to my hotel to recharge because it’s just so overwhelming. I get a bit of anxiety around, too many people. And if you can resonate with any of that, perhaps you want to join Clay, Kyle, and me at the TIP Mastermind Community.

[01:02:22] Stig Brodersen: And you can probably best think of that as being in Omaha online. Now we do have in person events and in Omaha in New York and from 2025 also in London, but all of that is for much smaller groups and it will be facilitated in a way that might be a little easier for introverts to navigate. But the best way to think about this is to get the best from the community.

[01:02:47] Stig Brodersen: Around the Berkshire meaning from the comfort of your own home, when it works for your schedule, and again, as an introvert, it’s something that suits my temperament quite well. And I should also say for the record, if you’re not introverted, that you’re also more than welcome. We have weekly calls and sometimes multiple times a week, you can participate in any of them.

[01:03:07] Stig Brodersen: If it doesn’t work for you, you can watch the recording. Everything would be uploaded afterwards. Let me just give you an example. The last three calls I hosted was one about what I learned from Mohnish over the years. We have one study group about the Berkshire Hathaway stock. And then we recently had a call about philanthropy where I outlined and discussed how I wanted to give away the money I made through TIP and through my investments.

[01:03:29] Stig Brodersen: And so if any of that sounds interesting. Yeah, I’ll make sure to link to how to apply to the community in the show notes. We call it the TIP Mastermind Community and you can also just Google that and it will take you right to the application page. And so with that said, thank you for listening to this episode.

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