Once upon a time, there was a young man who got his dream job in the financial services industry, thought he could make it big one day and worked hard at it, then got disillusioned and disgusted by what he saw around, and finally quit to live a life of greater peace and fulfillment, while pursuing his passion in value investing.
If I had not read Guy Spier’s The Education of a Value Investor, and someone told me this story, I would have believed it was mine.
This is truly my story, but Guy has captured this beautifully in his wonderful book, which I completed reading recently.
Of course, Guy gas written about his personal story, but it resonated so much with me that I have kept this book in my must-read book advisory list for any budding value investor.
Of course, there are great differences between me and Guy –
- He studied at Oxford and Harvard while I studied at obscure colleges;
- He won a lunch date with Warren Buffett (jointly with Mohnish Pabrai, at a cost of US$ 650,000), while I continue to dream of a visit to Omaha to meet the Oracle some day;
- He started and ended his career at an investment bank, and I did it with an independent research house.
- He now manages multi-million dollars, while I barely manage to manage my own little savings. 🙂
Anyways, coming back to Guy’s story and his book, as I mentioned, I could relate to a lot of his experiences, thoughts, and lessons. I have pulled out just five of them that have guided me well.
These thoughts not only hold importance in investing but in life as well. In fact, I find Guy’s book amazing because it talks less about value investing rules and more on a value investor’s character development.
In Guy’s own words…
…this book is also about the inner game of investing, and by extension, the inner game of life. As I’ve come to discover, investing is about much more than money. So as your wealth grows, I hope you will also come to realize that the money is largely irrelevant. And what you will want to do with the bulk of your wealth is give it back to society.
So, here are those five meaningful thoughts that Guy writes about in his book, which I believe serve a great learning for most people aspiring to find a greater meaning in life and become better as value investors.
1. Adversity as Great Friend
While talking about the tools he has used to accelerate his inward growth, which he describes as a way to know oneself, Guy found ‘adversity’ as a great tool. He writes…
…fantastic tool for internal growth is the experience of adversity.
If we take responsibility for our mistakes and failures, they offer priceless opportunities to learn about ourselves and how we need to improve.
Adversity may, in fact, be the best teacher of all. The only trouble is that it takes a long time to live through our mistakes and then learn from them, and it’s a painful process.
On coping with adversity, he writes…
One way that I coped with the stress was to apply a strategy I had learned from Tony Robbins: studying heroes of mine who had successfully handled adversity, then imagining that they were by my side so that I could model their attitudes and behavior.
One historical figure I used in this way was the Roman emperor and Stoic philosopher Marcus Aurelius. At night, I read excerpts from his Meditations. He wrote of the need to welcome adversity with gratitude as an opportunity to prove one’s courage, fortitude, and resilience. I found this particularly helpful at a time when I couldn’t allow myself to become fearful.
William Hazlitt wrote – “Prosperity is a great teacher; adversity a greater.” In fact, as I have realized from my personal experiences, a large part of a person’s character is built through adversity.
The world is not a bed of roses for one to think he can be out of wood all his life. Life has its ups and downs, its peaks and valleys. Though it will be great if all our days on earth are on the up-and-up, and completely sunny. Unfortunately, they are not.
This is also true of the stock market where people who have created the maximum wealth have done it through the most trying of times.
In fact, Buffett’s advice of being fearful when others are greedy and being greedy when others are fearful is all about dealing well with adversity.
2. Valuing People
Guy writes about a story of one Ian Jacobs, a Columbia Business School graduate who successfully applied for a job with Warren Buffett. Along with his cover letter, Jacobs enclosed a cheque to compensate Buffett for his time in evaluating this job application. Jacobs’s cheque showed how much he respected the value of Buffett’s time.
Anyways, Guy then writes…
The key, in my experience, is to value people as an end in themselves, not as a means to our own ends. Mohnish (Pabrai) often quotes a beautiful line from the Bible, “I am but dust and ashes.”
Thanks in large part to Mohnish and Warren, I began to realize that I ought to focus more on what others need from me instead of constantly trying to get them to fulfill my own needs. This might sound obvious, but it’s been a huge psychological shift for me, and it’s really changed the way that I live my life.
This is so unlike what happens in the financial services industry where people selfishly work for their own incentives, others be damned! And this is one of the key reasons for my disgust with this industry.
It’s important to see and treat people not as ladders on which one must climb to achieve one’s personal success, but as part of a wonderful ecosystem where one can survive and prosper only when others survive and prosper.
Like here is what Buffett has a key part of his Owner’s Manual…
We will be candid in our reporting to you, emphasizing the pluses and minuses important in appraising business value. Our guideline is to tell you the business facts that we would want to know if our positions were reversed. We owe you no less.
In other words, Buffett treats shareholders and managers in his acquired businesses as he would wish to be treated if the positions were reversed.
This is in fact the Golden Rule or ethic of reciprocity – One should treat others as one would like others to treat oneself.
3. Finding Role Models
Prof. Sanjay Bakshi, in his first interview with me in 2012, talked about the importance of finding role models. He said, “You have to read through the lives of these people and what have they done over the years and how did they learn, and then learn from their experiences vicariously.”
Guy also talks about the criticality for a budding value investor to find his role models early in life…
…there is no more important aspect of our education as investors, businesspeople, and human beings than to find these exceptional role models who can guide us on our own journey.
Books are a priceless source of wisdom. But people are the ultimate teachers, and there may be lessons that we can only learn from observing them or being in their presence. In many cases, these lessons are never communicated verbally. Yet you feel the guiding spirit of that person when you’re with them.
Role models are highly important for us psychologically, helping to guide us through life during our development, to make important decisions that affect the outcome of our lives, and to help us find happiness in later life.
Role models may change your outlook on certain issues, and by that change you entirely.
As far as investing is concerned, I found my role models in Buffett, Munger, and Prof. Bakshi. The idea is to never stop looking, as role models can be great people who left much behind them for you to follow.
4. Being Authentic
In a world where most money managers and investors aspire to be the “next Warren Buffett”, Guy writes…
Instead of trying to compete with Buffett, I should focus on the real opportunity, which is to become the best version of Guy Spier that I can be. It reminded me of an old joke that Warren likes to tell: “How do you beat Bobby Fisher?” Answer: “Play him at anything other than chess.”
I couldn’t beat Warren at his own game. But I could certainly follow his example. What impressed me most about him that day was not just his mental firepower, but the fact that he lived in a way that was totally congruent with his own nature. Nothing seemed to be misaligned. He had evidently spent his life trying to be true to himself.
This became my own goal: not to be Warren Buffett, but to become a more authentic version of myself. As he had taught me, the path to true success is through authenticity.
Authenticity is something no investing book can ever teach you. It’s a daily practice. Now, while it’s difficult to be authentic in a world that discourages imperfection and where everyone else is thinking and acting like others, authenticity can be a great asset for a value investor.
Honestly accepting mistakes and learning from them is one of the ways to cultivate authenticity as an investor. Creating an investment process that suits your temperament – and not one that blindly copies other investors – is another.
The simple idea is that – to succeed in life and in investing, you have to be the real ‘you’. As Oscar Wilde said, “Be yourself; everyone else is already taken.”
5. Real Success in Life
Guy quotes Warren Buffett as saying this to college students…
“When you get to my age, you’ll really measure your success in life by how many of the people you want to have love you actually love you. I know people who have a lot of money, and they get testimonial dinners and they get hospital wings named after them. But the truth is that nobody in the world loves them. If you get to my age in life and nobody thinks well of you, I don’t care how big your bank account is, your life is a disaster. That’s the ultimate test of how you have lived your life.
He continued, “The trouble with love is that you can’t buy it. You can buy sex. You can buy testimonial dinners. You can buy pamphlets that say how wonderful you are. But the only way to get love is to be lovable. It’s very irritating if you have a lot of money. You’d like to think you could write a check: I’ll buy a million dollars’ worth of love. But it doesn’t work that way. The more you give love away, the more you get.” Of all the lessons that Warren has taught me, perhaps this is the most important.
This is one of my biggest takeaways from the book. It’s not that I have never known this. In fact, this is how I live my personal life too. But reading this from someone who has achieved great success by doing things that I believe in is what’s truly refreshing.
Anyways, before I end, let me leave you with one thought that Guy shares about value investing.
He writes that value investing is “pretty hard to beat if your goal in life is to get rich.” He writes…
Sure, there are times when it falls out of favor, when even the greatest practitioners find themselves dismissed as fusty has-beens who have lost their touch. But it’s such a robust and fundamentally sound way to invest that it eventually regains its luster. Irrational exuberance comes and goes. The quest for value endures.
It’s a wonderful book, The Education of a Value Investor.