While doing my MBA during 2001-03, I was a very energetic guy…like most MBAs usually are.
So whether it was completing my assignments on time, making clean presentations, participating in extra-curricular activities, and spending time studying for the exams…I was full of energy and drive to do something in life…
…something that earns me a good name and money, and that can make my parents proud.
This is usually the dream that a small town boy harbours while working hard to achieve his goals of a good education, and then a good career. In that way, I was no different.
So I was energetic, and also thought that I possessed a reasonable amount of intelligence to achieve whatever I wanted to achieve in life.
It was here that I came across this snippet from a lecture that Warren Buffett gave at the University of Florida School of Business in 1998.
I had no idea about Warren Buffett then, except that he was one of the richest men in the world. And in following my dreams of a nice career with a nice starting salary, I was excited to read something that a ‘rich man’ said.
Before I started to read this piece, I had no clue on how it would change my life. Now, as I look back in hindsight, I am thankful that I came across this early on in my life, and before I started out in my career.
Here is what Buffett spoke when asked about his advice to students…
I would like to talk for just one minute to the students about your future when you leave here. Because you will learn a tremendous amount about investments, you all have the ability to do well; you all have the IQ to do well. You all have the energy and initiative to do well or you wouldn’t be here.
Most of you will succeed in meeting your aspirations. But in determining whether you succeed there is more to it than intellect and energy.
I would like to talk just a second about that. In fact, there was a guy, Pete Kiewit in Omaha (where Buffett lives), who used to say, he looked for three things in hiring people: integrity, intelligence and energy.
He said if the person did not have the first two, the latter two would kill him, because if they don’t have integrity, you want them dumb and lazy.
We want to talk about the first two because we know you have the last two. You are all second-year MBA students, so you have gotten to know your classmates.
Think for a moment that I granted you the right–you can buy 10% of one of your classmate’s earnings for the rest of their lifetime. You can’t pick someone with a rich father; you have to pick someone who is going to do it on his or her own merit. And I gave you an hour to think about it.
Will you give them an IQ test and pick the one with the highest IQ? I doubt it. Will you pick the one with the best grades? The most energetic?
You will start looking for qualitative factors, in addition to (the quantitative) because everyone has enough brains and energy.
You would probably pick the one you responded the best to, the one who has the leadership qualities, the one who is able to get other people to carry out their interests.
That would be the person who is generous, honest and who gave credit to other people for their own ideas. All types of qualities. Whomever you admire the most in the class.
Then I would throw in a hooker. In addition to this person you had to go short one of your classmates.
That is more fun. Who do I want to go short? You wouldn’t pick the person with the lowest IQ, you would think about the person who turned you off, the person who is egotistical, who is greedy, who cuts corners, who is slightly dishonest.
As you look at those qualities on the left and right hand side, there is one interesting thing about them, it is not the ability to throw a football 60 yards, it is not the ability the run the 100 yard dash in 9.3 seconds, it is not being the best looking person in the class, they are all qualities that if you really want to have the ones on the left hand side, you can have them.
They are qualities of behavior, temperament, character that are achievable, they are not forbidden to anybody in this group. And if you look at the qualities on the right hand side the ones that turn you off in other people, there is not a quality there that you have to have.
You can get rid of it. You can get rid of it a lot easier at your age than at my age, because most behaviors are habitual. The chains of habit are too light to be felt until they are too heavy to be broken. There is no question about it.
I see people with these self-destructive behavior patterns at my age or even twenty years younger and they really are entrapped by them.
They go around and do things that turn off other people right and left. They don’t need to be that way but by a certain point they get so they can hardly change it.
But at your age you can have any habits, any patterns of behavior that you wish. It is simply a question of which you decide.
If you did this…Ben Graham looked around at the people he admired and Ben Franklin did this before him.
Ben Graham did this in his low teens and he looked around at the people he admired and he said, “I want to be admired, so why don’t I behave like them?” And he found out that there was nothing impossible about behaving like them.
Similarly he did the same thing on the reverse side in terms of getting rid of those qualities. I would suggest is that if you write those qualities down and think about them a while and make them habitual, you will be the one you want to buy 10% of when you are all through.
And the beauty of it is that you already own 100% of yourself and you are stuck with it. So you might as well be that person, that somebody else.
Amazing advice isn’t it?
I receive a lot of queries from students who read my blog posts, or whom I meet during lectures. They all want to know how to achieve their goals in life.
Since I have not reached a stage where I can count my advice as really worthwhile, I direct them to this piece that I read of Buffett 10 years back.
I have never found a better advice for students. I was lucky to get this when I was young. Most students out there never get it, and that’s why you see a world full of young crooks (and most of them end up in the financial services industry) who practice bad behavior…
…just because they have the intelligence and energy, and just because they have never known of this animal called “integrity”.
What really is “integrity”?
Wikipedia defines integrity as…
…a concept of consistency of actions, values, methods, measures, principles, expectations, and outcomes. In ethics, integrity is regarded as the honesty and truthfulness or accuracy of one’s actions.
One man I’ve known to have a great amount of integrity is Dean Karnazes, whom Time magazine has named as one of the “Top 100 Most Influential People in the World.” He is supposedly one of the fittest men on the planet.
As his website would tell you, Dean has pushed his body and mind to inconceivable limits. Among his many accomplishments, he has run 350 continuous miles, foregoing sleep for three nights. He’s run across Death Valley in 120 degree temperatures, and he’s run a marathon to the South Pole in negative 40 degrees.
On ten different occasions, he’s run a 200-mile relay race solo, racing alongside teams of twelve.
What Dean has effectively done over the years is preach and live a message of eating right and exercising (remember, this is the process which is more important than the outcome, which is running the marathon).
Of whatever number of years I’ve read and known him, I never saw him stray from that lifestyle. And as a result of his consistency, millions of people who follow him are living healthier and with more vitality.
Just imagine the number of people who would have followed Dean’s example if it was only hypocrisy (the opposite of integrity)?
What if a follower came across a video of him promoting a cigarette or alcohol brand…like many so-called celebrities do?
His message would have lost all of its integrity. Thankfully though, this has not been the case and Dean continues to inspire millions of people from his message and example.
Though I still can’t run a couple of kilometers without ambling in short breaks, I started running and cycling more than I’d ever done after reading about Dean’s pursuits!
Integrity in investing
“How can integrity be brought into the subject of investing?” you might wonder.
Unfortunately, most investors I’ve met over the years have never had the opportunity to fully understand what it means to invest with integrity.
This isn’t to say that the majority of investors are hypocrites or bad people. Instead, what it means is that most investors do not invest consistently with how they believe the world of investing works.
As a result, there is a deep disconnect between how people believe sensible investing works and how they actually invest their money.
So whatever people read and like of what Warren Buffett says and what Prof. Sanjay Bakshi suggests are the sensible ways to invest, the idea is lost when it comes to actually putting things into practice.
I’m sure some readers of Prof. Bakshi’s recent interview with Safal Niveshak would have gone ahead and bought the stock of IL&FS Investment Managers, which he had talked about as a good business but not available at the right price then.
This is what he said, “…there is a price at which the stock of this company becomes terribly attractive. And you can work it out.”
I’m sure some readers would have taken serious note of the first part – “there is a price at which the stock of this company becomes terribly attractive” – but failed to take note of the second part – “and you can work it out.”
How can I say this? I can say this because I have seen investors react like this in the past!
“If Prof. Bakshi has talked about this stock, it must be a buy at any price!” must have been the thinking of people who’ve bought that stock after reading about it in the interview.
Some others would have said, “At Rs 26 a share, I won’t lose much money anyways! So let me take a chance and buy it. Who will do the hard work of working out the intrinsic value?”
What is more, these readers would have loved the lessons Prof. Bakshi shared in the interview but would have given in to the laziness that a thought of “hard work” brings in!
That’s what “investing without integrity” is all about!
Why is integrity so important in investing?
Imagine the stress and the lack of peace in having your life’s savings invested in or with someone who you don’t fully believe?
What if that person – whom you don’t fully believe – is you…yourself?
If you are an investor who is suffering, the cause is most likely a breakdown between your core beliefs and your practice of investing money.
So what is the solution?
Simply put integrity back into your investing. It’s not hard to do!
This does not mean that you will not make any mistakes in the future. It simply means that you will make fewer mistakes, and you will get over them very quickly.
What do you say?