Sunday, April 8, 2018

The education of a value investor: Guy Spier

Gyan on Treadmill dated 05-Apr-2018

I had heard about Guy Spier while reviewing the book 'Dhandho Investor' written by him and Mohnish Pabrai. You can read my review of the book here

This is a part of the 'Author Talks' series of Google Talks. Guy Spier is a Value Investor and has written the book 'The education of a value investor'

This is a unique talk. If I expected full on maths, analytics, number crunching and investing strategies and PE Ratios, I was in for a surprise.

A pleasant surprise, if I may. 

This presentation is more about author's evolution as a human being and a successful value investor. Being laced with life lessons, this book is right in my territory. I am not even sure if blog post will fall into a label of 'Investment Wisdom' and be a part of this blog on Finance and Investing, or it should be a part of my blog 'Grow Together' which deals with personal growth and life lessons...

Guess, I will post in both.

This is a short presentation, with some high quality wisdom.

(You can watch the presentation here. )

So off we go.

Guy graduated from Harvard Business School. After graduation, he worked as an Investment Banker in a Wall Street firm, working on deals. As a young graduate, he wanted to make a lot of money. Gordon Gekko was his hero. He quickly found that in order to make lots of money,  he was asked to play on the borderline between legal and illegal. He found that he has to compromise morality to make money in wall street.

After 18 months of working in that firm, disgusted with what was happening in the financial industry, he left the company. Later he discovered Anthony Robbins which changed his life. He talks about 'Technology of success in life' and until you find that, you will not be successful in life. He comes back again and again to this theme in different times in this presentation.

There are three ideas that this presentation focus on. They are:

1. Compounding of goodwill
2. Power of authenticity
3. The idea of resonance

Some time in his life, he decided to write 'Thank You' notes to people whom he came across who helped him in any way. This was his way of compounding goodwill over time. Inspired by 'Hare Krishna' people handing out flowers at airports, Guy started giving gifts to random people and as mentioned before sending Thank You notes. He started with sending 3 notes a day for five days a week, and has so far done more than 30000 thank you notes. This helped him meet some very good people who helped him. One of them was Mohnish Pabrai, with whom Guy eventually partnered.

He talks about the concept of resonant frequency. Every successful people he knows, according to Guy, has found a way to match his frequency with the frequency of the universe. You cannot achieve lasting success without this frequency matching. Once that frequency matches, crazy, awesome things begin to happen.

Authenticity refers to integrity. You are inside, what you are outside. Once you achieve authenticity as well as resonant frequency, there is no force in the universe that can stop you. He quotes Mahatma Gandhi who said, 'be the change you want to be'.

Authenticity also means accepting yourself for what you are. A person who do not have all the answers, a person who may (will) commit mistakes etc. Once you accept that you are not a rational individual, you can factor that in your decision making by creating tools like checklists, to do lists etc. 

Sometime early in his career, Guy identified what Antony Robbins calls 'Matching and Mirroring'. He had just discovered Warren Buffett. Guy wanted to become like Buffett. He thought as to what Buffett would do in the situation Guy was in, working in a stifling environment. He decided that Buffett would quit the job. It took him almost 10 more months before he quit his job. 

His rule for self improvement is to identify a person whom you respect and ask what would that person have done under the given circumstances and do at least a fraction of that, still you can be very successful.

Guy always wanted to meet Warren Buffett, which he did at the time of launching his book. The upside of meeting Buffett was that he finally realized that he cannot be like Buffett and that freed him to become what he really was.

Traditional models and ideas of success follow a set of steps. First is to identify a goal and then strive to achieve it. Guy has a counter-intuitive approach. Instead of trying to achieve a goal, he is always trying to 'tilt the playing field in his direction'. Sending a thank you note, delivering more than what you are asked for are all ways of 'tilting the playing field'. It makes people want to help him.

He also has some suggestions for finding a better investment process. As everything with (this) Guy, some of these are counter-intuitive. Some of them are:
  1. Stop checking the stock price
  2. If someone tries to sell you something, do not buy it
  3. Don't talk to management
  4. Gather investment research in the right order
  5. Discuss investment ideas only with people who have no axe to grind
  6. Never buy or sell stocks when market is open
  7. If a stock tumbles after you buy it, do not sell it for two years.
  8. Don't talk about your current investments.

Finally, here is his secrets of success.
  1. Give first, then evaluate
  2. Show Empathy
  3. Be vulnerable
  4. Learn how to write thank you notes. 
  5. Get around people better than you, and then you can only improve.

Identify people into three groups, takers, matchers and givers. Takers take whatever you give. Matchers do stuff that match what you did and givers give more than they take. Always spend time with Givers.

Towards the end, he makes a very powerful statement. 'Whenever I have looked for answers outside of myself, I have not found it. I have always found answers inside me'. 

Let us close with a tinge of humour. He poses a hypothetical question. What would you like to be? A person whom world thinks is great in bed, but whose wife knows that you are terrible, or a guy world thinks is terrible in bed, but whose wife knows you are good in bed. 

Who life would you like to live?

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