TTU147: How to Craft a Rich Life Beyond Money ft. William Green

All my life I've looked at Sumner Redstone, and I thought, that's what I don't want to be. That's an example of what I don't want to be. He said, even his wives and children didn't like him. Andso, I think that's the other thing is that when you're trying to figure out how to have a rich and successful life, you start by inverting, as Charlie would, and you say, well, all right, let me figure out how to have a terrible life, because it's very easy to identify.

So,you look at people who end up fighting with their spouses, their kids don't love them, or they don't talk to their kids, or whatever, and their partners are suing them. So, I think start by solving the problem backwards and say, well, let me not be like that. Imagine spending an hour with the world's greatest traders. Imagine learning from their experiences, their successes and their failures. Imagine no more.

Welcome to Top Traders Unplugged, the place where you can learn from the best hedge fund managers in the world so you can take your manager due diligence or investment career to the next level. Beforewe begin today's conversation, remember to keep two things in mind. All the discussion we'll have about investment performance is about the past. And past performance does not guarantee or even infer anything about future performance.

Also understand that there is a significant risk of financial loss with all investment strategies. And you need to request and understand the specific risks from the investment manager about their products before you make investment decisions. Here'syour host, veteran hedge fund manager Niels Kaastrup-Larsen.

Hey everyone, and welcome to another edition of Top Traders Unplugged, where today I'm excited to be joined by returning guest William Green, the author of one of the best books I've ever read called Richer, Wiser, Happier. William, welcome back to the show. It's been three years since we last spoke. How have you been? It's been a whirlwind, the last three years.

One of the things I hadn't really expected was that writing… It's such a head wrenching thing because you write a book, in my case, you spent five years just quietly in your man cave, actually in the room that I'm calling you from now, which is the study in my home. And so, you're totally isolated from the world, which probably is the case with most things that we do that are worthwhile, that there's this sort of reduction of complexity.

And then the book comes out, and suddenly you're out in the world talking to lots of people. So, it's been a crazy shift from isolated mode to being a public figure, but it's been an amazing period. So,I'm really, I mean, since I spoke to you last, I think the book is now being translated into something like 26 languages. And so, it's been successful. And that's kind of very cheering because when you write a book, I don't think people realize the amount of terror where you have no idea.

You know you're killing yourself, bashing your head against your computer screen, and you have no idea if it'll resonate with anyone. So,it's been sort of a head spinning and kind of wonderful three years. And at the same time, I have no control over the complexity that's come into my life because of the book. In the book I preach a lot about, you know, having a simpler, calmer life.

And it's like this cosmic joke that my life has just got more and more complex and less streamlined since we last spoke. Yeah, absolutely. One of the things I've noticed, of course, is that you have also been doing your own podcast series over at TIP for the last few years. Any other kind of projects like that you've been doing or has it been…? Yeah, I tell you one other thing. I mean, because the book did well, it has given rise to a lot of different opportunities I hadn't really predicted.

And so, one thing… Well, so, I became an advisor, senior advisor to a big investment firm. So, that's been lovely. I'm about to become a director of another investment firm. Butthen a thing that I never would have predicted, that's been incredible fun, is I launched a thing called the Richer, Wiser, Happier Masterclass, which was basically just for 20 people. And it's very expensive.

Andso, unlike the podcast where, you know, you get hundreds of hours of content for free, the masterclass is sufficiently expensive, and it was sufficiently intimate. It's really just for 20 people who call in once a month and we're meeting in person three times. And so, they're all like CEOs, heads of family offices, fund managers, a couple of people who manage literally like $25 billion, and the like.

Andthat is amazing fun because you go through the chapters one by one, but then that becomes a kind of leap-off point to discuss all of these themes and all the things I've been studying in my life. And they call from about six different countries around the world. Andso, I think that's part of the joy of what technology is bringing us is that we're able… I mean, you and I are having this conversation at the moment where I'm in New York and you're in Denmark. Right?

There's something so beautiful about the fact that it's enabled us to have these kind of weird virtual communities and the like. Ifindit a kind of wondrous thing. I feel like we spend so much time talking about how technology is ruining our lives. And you know, it's ruining our attention spans and it's making us addicted to short-term information and the like. And all of that is true. And AI may eat the world, who knows? I mean, that's way above my pay grade.

But I'm really struck by the wondrousness of the fact that you can have these incredible relationships internationally. And so, that's been a really beautiful thing. And I'm going to do more of that, I think with the Masterclass. Ithoughtit was going to be a one off, but I think I'm actually going to do it again next year.

And I think this idea of trying to build communities around an idea, or a way of approaching capitalism and life, is also really valuable because I think so many of us are yearning for some kind of connection, maybe partly because more of us are working at home. Andso, I paid for a subscription this morning to a friend of mine, Tom Morgan's service, which is called Leading Edge. He's talked very eloquently about building a community around the ideas he's teaching.

So, I just think we're yearning for this, for more connection. Yeah. And also having, actually, a place where we can be more niche in a sense of deep dive into a topic. I think that goes a little bit against most ideas because we want it to be broad so we can have more followers. But actually, more followers doesn't mean, necessarily, that you have better conversations or more in depth conversations. And I think what you're mentioning there is definitely a great way of achieving that.

I have a close friend who has this wonderful phrase that he took from Buddhism which is ‘friends along the path’. And that's become a very powerful idea for me, I think, for your listeners as well, it's worth exploring this idea of building these little groups of friends along the path who studied together, who support each other and in a time where we're so isolated in certain ways.

To have a group that you meet regularly, whether it's a professional group or a personal group, is very powerful. Istartedit by having a book group a few years ago where it was just a group of writers. So, I think between us, we'd written something like 20 books.

And so, there were people like Jason Zweig, who's a columnist at the Wall Street Journal and a great financial writer, and Jon Gertner, who wrote a wonderful book called the Ice at the End of the World, and also a wonderful book called the Idea Factory, about Bell Labs, and a couple of people who'd edited publications like Barron's and Worth. And so, they're really amazing people. Nina Monk, who is another terrific writer.

And that was really fun before our lives got too complicated, and it finally fell apart after a few years. Andthen more recently… So, I think that gave me a sense, because we would just meet to discuss classic literature over dinner. And so, it was a combination of food, wine, friendship, and great books. So, that gave me a taste for this. So, then about 18 months ago, four of us set up a group where we meet every Friday morning over Zoom.

And three of them are very successful fund managers or money managers. And we really mostly discuss this weird combination of Tibetan Buddhism and Judaism (that I study), and life. And we check in and we see how we're doing. So,it's sort of somewhere between a support group and spiritual quest. And at one point, it became clear that we were going to meet for about an hour or two every Friday morning.

I started to think, God, I almost panicked then I thought, wait, how can I, with my ridiculously busy life, commit to that? And actually, it's been the most beautiful thing. Andso, I think for our listeners, particularly as we embark on this new year, right, to think about how can you create these containers where you have real contact, like deep contact with people who you don't necessarily even know that well, but they're people you want to know well.

And I feel like more and more that has become a key to happiness in life. And you see it with people like Charlie Munger, right? Imean,Munger had this weekly lunch that he had at the country club where he played bridge, and they would all meet and play bridge. And Mohnish Pabrai would sometimes get invited because one of the old fogies would be too sick to play. Andhe had this weekly Zoom breakfast that he had with various great investors and executives where he would invite guests.

So, I got invited one time to talk to them. And then he would have a weekly zoom call with his grandkids and great, great grandkids, I think. Andso, I think one of the things that people as smart as Charlie figured out is that it all ultimately comes down to relationships. And so, you have to somehow figure out, while trying to be really successful professionally and financially, not to forget the human part.

AndI don't know about you, but I feel like I was so busy trying to climb, for so many years, and get ahead, that I totally neglected my friendships. And there's limited time. So,either you neglect your health because you just don't have time to be really successful, and exercise, and meditate, and have good friendships, or you neglect your relationships. And I think when I was an editor at Time magazine, it was an incredibly intense experience because it's a weekly magazine.

Andso, I knew that I had to exercise, otherwise I would have dropped dead. So, I had to take care of myself physically. So, I just neglected friendship and family to some extent. So,I think this is, now, as a middle-aged man trying to learn from the most successful lives of these great investors that I've written about over all these years. That's the kind of realignment that I'm exploring. Trying to build community, trying to build friendship.

Also, really optimizing for peace of mind, to an extent that I never really did before. You know, I sort of felt like that could wait. You know, I'm going to be a basket case, but I'm going to be a really successful basket case. And it's like, how sustainable is that? It's like you're borrowing from the future.

Yeah. And so, I think you have to, in some way, figure out like, okay, if I'm going to construct a really successful life, like a really abundant life in a deep sense, you've got to kind of break it down and say, what are the buckets? What are the components of that? Andso, I look at the great investors and I think, well, okay, so there's the professional thing and the financial thing, right? You want to have an impact in the world.

You want to use your talents and feel like, you know, you're being stretched in a way that's interesting and that you're doing something with your skills. But then there are the relationships with friends and family. Thenthere's making some kind of contribution to society, which I see again and again with the great investors I interview that the happiest ones are helping other people in some way. And then there's the physical health thing, and then there's the mental health thing.

You know, that you’ve got to have peace of mind because otherwise (and you must see this with a lot of traders) if you don't have your inner landscape under control, it's going to come bite you in the ass sooner or later. Imean,I remember once going on a trading course, you know, with a psychiatrist who coached traders, and I remember him talking about some trader who had like 16 cups of coffee a day and he was like, the guy is like going insane.

And so, I think in some way you have to have the inner landscape under control to some degree, and then your outer world kind of radiates out from that. Does any of that resonate? Yeah, I mean, you touched on so many things I'd love to just comment on before we even move down to the first topic I had lined up.

Well,first of all, I think there is a lot of research nowadays that says the people who… Let's take aside serious illness that we have no control over, but the people who generally have the longest lives are the ones who have the best social surrounding, and network, and so on, and so forth. And I see that a little bit in my day-to-day life when I see people of certain ages.

Some seem to be doing much better than others, and they often are the ones who are kind of busy, have friends and that they see, and want to still explore things. I think that's absolutely true. Formy own personal experience, I've been very fortunate in the sense that I have a couple of really good friends in the little village that I live in, in Switzerland. And we, we all ended up with dogs in our lives. So, every morning when we're there, we walk for an hour together in the mountains.

Andso, we get a lot of these things come, you know, sort of in one package - the fresh air, the exercise, the conversations and, and all of that. And when I don't do it for a while, if I'm traveling or for whatever reason, you kind of feel that there's something not quite right and you need to, as you say, you need to sort of clear your mind and get it straight again. And I think that's linked to not doing these kind of more healthy things in life that we should be doing every day.

Yeah, you've got something really profound there that I think is worth people dwelling on. And it is almost like a lollapalooza, as Charlie would put it, that you figured out how to combine these things. So, it's the health and the friendship at the same time is so powerful. And I don't know, it's interesting. A hedge fund manager friend of mine literally just wrote to me like half an hour or so ago and said, do you want to come to this mandalas exhibition?

You know, this Tibetan Buddhist mandalas exhibition at the Met on such and such date in January? And it's written to, like, two other hedge fund manager friends and the like. And I think that's such an interesting thing that these guys who are incredibly successful, recognize that there's got to be friendship.

Andthis is a friend of mine who, you know, I sent an invitation to him to a book launch party for the paperback edition of my book, and it didn't get through because he'd unsubscribed from paperless post. So, this is a guy who's ruthless about removing complexity and distraction from his life, and yet here he is arranging with several friends to go see an exhibit at the Met. I think that's really… Oneof the reasons why it's so worth studying great investors is that they're so pragmatic, right?

So, they're not doing this stuff in a sort of super sentimental way. They, like, look at life and they're, as Charlie would say, I observe what works and doesn't work and why. Andso ,they're looking at something and they're saying, well, my life is going to be so much happier if I have some friendship, and if I get some culture, and if I get some fresh air, and if I walk. And so, I don't know, there's a pragmatism to it all.

Theone other thing I would say, a thought that was prompted by what you were saying about your amazing walks in Switzerland is, I once interviewed this guy called Dean Ornish, who's famous because he’s a lifestyle medicine expert. He figured out how to reverse heart disease and various, you know, chronic things like type 2 diabetes. Andwhen I asked him about his research, he wrote a great book called Undo It, that he wrote with his wife. It's really worth reading.

And I'm better at reading it than actually putting into practice, the things he suggested. Andhe basically summed up, in eight words, everything he'd figured out in 45 years of research and of helping tens of thousands of people to reverse their heart disease. And it was something like, eat well, move more, love more. And then there was some phrase that was to do with sort of relaxation that was sort of like breath more, you know, stress less, I think, or stress less.

So, it was to do with meditation, breathing exercises, stuff like that. Itwas really interesting that he could synthesize everything into these four components. And so, one of them clearly was good nutrition, one was clearly good exercise or movement, and one was less stress. Butone was community, right, Love more. And he said to me, all of these things are as important as the rest. There is none, none of those four things is more important than the rest.

And I thought that was really interesting in terms of longevity, that the community has to be a part of it.

You mentioned something else which I might come back to a little bit later because you mentioned about, you know, asking me whether I've come across these traders that are so stressful, etc. etc. But the truth is that, so completely coincidental, although I started my career at a trading floor trading government bonds, I coincidentally ended up in this completely different industry called Systematic Long-Term Trend Following 30 plus years ago.

And what is amazing about that in a sense is that we do remove all of those emotions, the ups and the downs, from the day-to-day, from the stresses of being an investor. Anda good example of that is that the founder of the firm that I work for, Dunn Capital Management, Bill Dunn, you couldn't tell (he's not part of the day-to-day work anymore), but you couldn't tell whether we were up 10% for the month or down 10% of the month.

And I think there is something to it, which obviously is why I have gravitated and stayed with this type of investment strategy. And of course, we can always talk about this, William, at another time. But I think there's a book there because a lot of these funds, actually, including the firm I work for, you know, we have more than 50 years of track record. A lot of them have 30, 40 years of track record.

And there are some lessons to be learned for sure, but not today because we have a different planned agenda. But it is interesting for sure. Well, I think you're also onto something really important which is to be successful as an investor, you have to figure out somehow how you're going to deal with the emotional component, with our own craziness. And so, you guys have figured out this beautiful way of dealing with the emotional component by taking it out, basically. Exactly.

But I think, then, a lot of the great value investors that I tend to focus on, they have another beautiful approach which is basically to exploit other people's craziness. So, they're sitting there quietly waiting for moments of disruption when everyone else is going nuts. Thepeople I write about, the great investors I write about, tend to be a little less emotional than most people.

They're also more knowledgeable, they have more skills, so they can value a business, they can value an asset better than most people. And they've structured their lives so that they can be kind of patient and countercyclical. And so, then when there are these moments of disruption, they can exploit them.

Andso, I think, in some way, the takeaway is that we all have to figure out how to deal with our own craziness, our own susceptibility to these mood swings, or to the waves of fear, and greed, and anxiety, and the like. Because if you don't have a way of dealing with it, it's going to haunt you as an investor. Oh, sure. And the other thing that springs to mind when you talk about the people you interview is they also come across as very disciplined.

Except for the fact that they might be buying when things are falling and will be buying when things are going up, there are so many commonalities in what you described in terms of exactly how we see our industry as well.

Yeah,well, I'm sure we'll get into this, but I want to remind you of something I mentioned last time we spoke, which I'm sure you won't remember, but I feel you represent and you embody a lot of the values that we strive for here at the podcast, which is why it's so great to have you back. I mean, you come across as very generous and authentic and you're also quite humble and vulnerable when you talk about your own personal journey.

And I think that if there's something markets are really good at it is humbling us as investors when things are going really well. AndI actually, I have a feeling that in the coming years, after this huge run-up in stock markets where, essentially, the S&P 500 has made all investors look great and made investing look really easy, that we once again will be reminded that it takes a little bit more than meets the eye to be a successful long-term investor.

So, obviously we're going to try and explore some of that today. Now,if I was going to paint a picture of our conversation, I would describe it as an exploration of the intersection of behavioral finance, personal happiness, and navigating today's uncertain investment landscape. So, I hope that sounds about right to you, William. Yeah, it sounds great to me. It sounds great to me.

Ikeephijacking you and getting you off on different tangents, but on the thing that you mentioned about humility, there was some great investor I interviewed in the last year or two (I can't for the life of me remember which one it was), who said to me something along the lines of, either you're humble as an investor or you're about to be humble. Right. And I think that's true.

Ithinkit's one of these strange areas where you need enough conviction and confidence in your own ability and your own views in order to bet against the crowd or in order to make aggressive bets. And yet, at the same time, you need, paradoxically, the opposite quality almost, which is this humility, to say, yeah, but I may be totally wrong. Andso, I think somehow it's not dissimilar to a journalist, or a writer, where you need the confidence to say, this is what I believe. I think this is true.

And yet, at the same time, have the kind of paranoia and sense of uncertainty that you keep making more calls, you keep checking, you keep looking to see what you might be missing. But I think it's critical, this whole thing of humility. Imean,I wrote about this in the chapter where I talk about Howard Marks, where I coined the phrase Master of the Universe syndrome, where there's this danger that if you're very successful, you start to believe that you're a master of the universe.

Andone of the things that I think Howard has done is he's so deeply aware of his good luck, of the role that luck has played in his life, that it really keeps him humble, because instead of just thinking, “I'm a brilliant guy”. He keeps reminding himself that actually, in many ways, as Buffett would put it, he won the ovarian lottery as someone who was born around World War II, came of age in this incredible bull market after that.

Andalso, Howard once said to me this amazing thing where he talked about how, when he first came out of Wharton, and he felt lucky even to get into Wharton, he didn't feel like he was particularly equipped to get in. He applied for a job at Lehman Brothers, and he said, the one thing I knew was I really wanted to work at Lehman Brothers. Andhe later discovered that the guy who was supposed to call him to tell him that they'd offered him a job got drunk and had a hangover and never called him.

And so, as a result, he didn't end up at Lehman Brothers. And his life would have been so totally different if he'd been at a company that ended up going bankrupt during the financial crisis. I mean, most likely he would have ended up as a partner at Lehman and would have lost a big part of his fortune.

Andso, I think just this awareness of the degree to which luck plays a role even in the most successful lives, probably especially rather than even in the most successful lives is really important because it does keep you from getting too arrogant and starting to believe, you know, God, I'm so smart and I really know what I'm doing.

Now, I mentioned to you, before we pressed record, that I kind of tried to set out the conversation in sort of six different topics or sections that I'd love to hear your thoughts about. And I thought the first one would be sort of how psychology influences investment decisions, and how we deal with biases, and how we eventually overcome these biases.

AndI mean, obviously you spend a lot of time with very successful investors in your career, and you often underscore the need for self-awareness in both investing and in life. And that, of course, aligns well with behavioral finance. How do you see some of these common biases shaping the decisions of these investors that you've come across? Yeah, as you say, you have to start with self-awareness. You have to know what kind of biases and blind spots you're particularly susceptible to.

And so, think of a position like mine where I have access to a lot of really brilliant investors, right? So, there's a real danger of something like authority bias where I listen to someone really smart talk and then I want to buy what they bought. AndI don't necessarily do my due diligence because I'm distracted, and a bit lazy, and doing lots of other things, and I don't really want to sit around analyzing businesses. It's not really what I'm built to do or what I'm interested in doing.

And so just the awareness that I'm susceptible to… It's not just authority bias. It's also a sense of here I am as a sort of outsider, right? I'm an English Jew with a birthmark who's always sort of born to be on the outside. Andthen suddenly I have these famous people who are billionaires and are brilliant and they're including me and they're inviting me into their world and they're sharing their insights with me, right?

So, there's a sense of longing to be approved of and welcomed and accepted. And so even to be aware that that's a particular danger is very helpful. So,I think of something like this conversation that I had with Charlie Munger, after my book came out, where I got this call. Well, I got a message over LinkedIn from a venture capitalist in California saying, would you like to come on this Zoom breakfast with Charlie Munger to discuss your book? And he loves your book.

And Lou Simpson will be there. And,you know, this guy, Mark Nelson, who is a great Australian hedge fund manager, and various other really successful investors and executives. And so, I get on this call, and it ends up lasting a little under two hours. And at one point, I'm asking Charlie about Alibaba. AndCharlie had taken this really big position in Alibaba and Lou Simpson, I asked him about it, and he had just bought it the day before. And I said, why? Explain what you see.

And he's like, well, it's screamingly cheap, and it's a dominant business in an economy that's likely to grow faster than the US. Andso I then, at some point in the following weeks, buy Alibaba, which since then is down something like 57%. And it had already fallen a lot before I bought it. And it was just a beautiful example of something where I didn't really do the work. And I listened to these two legendary investors.

Imean,Charlie literally said on that call, if I had more cash, I'd be all in. So, I have one of the greatest investors of all time basically telling me, I love your book. Your book's fantastic. It's a major contribution, one of the best investment books ever written. And so, I'm feeling absolutely thrilled. Lou Simpson tells me it's a great book, and then they tell me what they're buying. So,there's like this tribal longing.

So, I feel like this sense of allegiance, like these are my people, and they love me. And I always wanted to be loved. And so just to be aware of this kind of lollapalooza of stupid mistakes that I made there by not doing my due diligence, by investing in a country that, what the hell do I know about Chinese technology stocks? I mean, I was so out of my comfort zone and expertise and circle of competence.

Andso, I think you have to look at yourself in a really honest way and say, what am I most vulnerable to? Andso, for me, that sense of wanting to belong, that sense of being loved and approved of, that sense of I'm so important because I have access to the smart money. That is a terrible vulnerability.

Andso, one of the things that came out of that, that was just a very practical workaround is my decision that I'm just not going to buy individual stocks because I don't want to sit around doing the analysis. So, I still own Berkshire Hathaway, which I've owned for many years, which is almost regarded as a fund, with zero expenses, no fee.

And I like having Buffett in my portfolio just sort of partly as a reminder of how to behave and how to live and the alignment of interest is really beautiful. And then I have Alibaba there, still, as a reminder of my own stupidity, and hubris, and self-delusion. And so, it's sort of valuable. It'snot an important component of my portfolio financially, but it's important psychologically to remind myself of my own stupidity.

And so, I think in some ways the key is to have this self-awareness but then to find some very practical workarounds to deal with it. So,I remember Guy Spier, at one point, saying to me that he was very susceptible to being sold on stuff because he wants to be loved, he wants to be liked. And so, he just said I'm not going to buy anything that someone is selling to me because I'll want to please them. And so, it was just a really simple rule.

Andhe said even if it was a friend who was a well-known investor who was trying to sell him on an idea, it wasn't necessarily that they were going to make money off selling him on the idea. There was a psychological benefit for them. They had a psychological incentive for winning him over. And he's like, just to protect myself from that is really valuable. Another way of just protecting yourself is just to decide how long you're going to own stuff for.

So,I just made a decision years ago that I would just own stuff for a minimum of five years. And so, again, it's a way of just saying I know that over the course of my lifetime I shouldn't be impatient and impetuous, and I'll do better if I stay in the market than if I try to trade in and out or if I try to buy this fund and then trade it and get a different fund. And so, I've owned Guy’s fund for something like 24 years. I ‘ve owned another fund for like 14 years.

Andso, it's a very conscious way to try to tilt the odds towards sensible, patient, long term behavior given that I'm emotional and I'm going to have these mood swings. Does any of that make sense? I mean, that makes perfect sense. And I think it's a smart way, in a sense, to overcome, as you've identified, maybe one of your own biases.

Iwascurious whether, when you think about some of the people you've interviewed who have all been incredibly successful, and I was wondering whether there were some common biases that you've observed with them and maybe they dealt with them differently. Forexample, I mentioned earlier this thing about being rules based, for example.

I think when I think about someone, and I don't know Ray Dalio personally, of course, but when I think about him, and the way he writes, and how Bridgewater comes across, it seems more rules based, in a sense, than maybe some of the other people you've spoken to. So, I was just curious whether there were some common threads between them, so to speak, and maybe the way they've dealt with these biases.

Well, I’ll tell you what I think is a common thread is that in some way all of the great investors have harnessed their own particular form of craziness and brilliance. And so, for someone like Ray, who I've interviewed a couple of times on my podcast, he's a very unusual guy, right? I mean, he's a deeply unusual character. I think he's, from what he had explained to me once, he's actually very intuitive. But he takes the intuitions and then turns them into principles and rules.

So, it's not like everything is so rules based that there's no space for intuition. He's figured stuff out in a very human way that then he turns into a principle. Ionceasked him a question that I think was kind of impertinent, where I very intentionally, you know, sometimes as an interviewer you sort of poke someone to see how they'll react.

And so, I think I said something to him about how his whole approach of radical transparency and radical truthfulness, that there was a danger of unkindness in it, and kind of callousness, and cruelty. AndI could see that there was no flicker of emotion on his face when I said that.

Like, he didn't, there was no… You know how sometimes, I had this a couple of weeks ago where my daughter told me something that I had done that she regarded as suboptimal and she was criticizing my behavior in some way. And I could see this moment where I really wanted to defend myself, and I had to sort of say, okay, yeah, I think you're right. AndI had this emotional reaction that I had to kind of be aware of and deal with.

I don't think Dalio had any emotional reaction when I said that to him, because he's trained himself, over so many years, to welcome criticism, to welcome challenges to his view, and to deal with it head on. Andso that's a very distinctive personality, and it's a very distinctive intellectual framework where you welcome people challenging your ideas, and you thrive on that debate and the dialogue.

So, he's taken that personality and that way of seeing things and structured his whole business around it. Thenyou see someone like Bill Miller, who I spent an enormous amount of time interviewing over the years, an amazing investor and a brilliant, brilliant mind.

And Bill is such a free thinker, and so radically independent, and so defiantly contrarian, that when he fell in love with Bitcoin, which he started buying at $200 a coin, and then he told me once that his average price was $500 a coin, when Charlie Munger and Buffett started to say that it was rat poison, even though he loves Munger and Buffett and admires them deeply, that actually excited him. When even the people he admired most criticized his view, it didn't make him less bullish.

It made him more excited in a way. There's something profoundly contrarian about him. Inthe same way that I remember back In, I guess, 2000, 2001, when the tech bubble burst and 911 happened, I was interviewing him for a profile that I wrote of him for Fortune magazine back then. And I remember him saying to me, even the great contrarians like Sir John Templeton and Prince Alwaleed and those guys, they're not buying at the moment.

And he said, when even the great contrarians are rattled, that's a very bullish sign. Andso, Bill has managed to take his personality, the quirkiness of his personality, and find a way to invest that's so deeply aligned with who he is.

And so, I think that the lesson, in some ways, that's practical for the rest of us who aren't Bill Miller and Charlie Munger and Ray Dalio, is that in some way, we have to structure our approach to investing in life so that it's really deeply aligned with who we are, with our own quirks and talents and eccentricities. And so, I don't know. Forme, for example, I do sort of fall in love with the people that I interview, and that I get to know.

Part of my strength as a journalist, or as an interviewer, is I'm deeply empathetic. Naturally, I feel the emotion of the person that I'm interviewing. And so, one of the things that I've had to do as an investor is to invest with a handful of people who I think are deeply honorable and really smart because I'm sort of collecting these people within my portfolio. So, in a way, it's like a collection of friends and allies.

Andso, I'm actually using the fact that I have this kind of empathetic connection to these people. And it makes it very difficult for me to sell and be impatient because I wouldn't want to be disloyal or to hurt them. And so, it's a way of taking my weird personality and harnessing it so that I'll be more patient, so that I'll stay in the market.

So,I think you just have to be aware of your own quirkiness and then find an approach that in some way plays not only to your strengths, but plays to your weaknesses. It plays to your vulnerabilities. Yeah, I agree. And obviously, most people don't have the access that you have, but given the access that you do have, it makes sense to view it like that, in a sense. So, yeah. Iwantto move on to another topic.

It's obviously linked in some ways to the fact that the people you've interviewed have made a lot of money for themselves, but also for their investors. So, it is about wealth.

And I think it’s an interesting topic in many ways, but I actually think, when I was preparing for our conversation, I thought, wow, this is going to be even more impactful for young people, because I think, unfortunately, today a lot of young people are being influenced on what they see in social media, YouTube, where these sort of get-rich-quick schemes have been able to thrive without any kind of regulation imposed, or very little, and also without platforms or financial authorities

intervening. And I think people of a young age today probably equate being rich and wealthy with just the amount of money they have in the bank account. Andso, your work often emphasizes that wealth is more than just the monetary side of things. But I think we also live in a world where we are kind of obsessed with metrics. So, how can we think about, how can we broaden our perspective to include happiness, to include purpose in the definition of wealth today?

Yeah, I think when I wrote the epilogue of my book, I really wanted to say, okay, so, yeah, this is this cohort of people who hit the jackpot financially. What can you learn from them about what actually constitutes a rich life, that goes beyond the money? Because I think all of us know that the money is not going to do it. We have this fantasy that it'll do it to some extent, and to some extent that's true. But we all sense that it's not going to make us happy, ultimately.

And so, I really wanted to unpack the nuance of it because I also didn't want to underestimate the importance of the money. Andso, one of the things that I figured out, just through interviewing so many of these people, is that the great gift of the money really is independence. It's. It's really autonomy. It's the fact that you can decide to go out for a walk with your friends, in a beautiful place in Switzerland, in the morning, with your dogs, and there's nobody to tell you that you can't.

That is so precious. Imean,the fact that this is what someone like Charlie Munger figured out in his life. He just didn't want to be subordinate to anybody, to have anybody telling him what to do. And so, part of what happened to me, as I started to study the great investors, is it redefined what I wanted to optimize for in my own life. So,I started to think, okay, I actually don't really care about being massively rich. It was never what I was optimizing for.

I really like some expensive stuff. I'm quite aesthetically oriented. So, I love beautiful hotels, and I love great food and the like, but not enough to be maniacally driven to pursue it. Iappreciatethat stuff. I really like staying in a beautiful hotel, but I'll spend any amount of money on books. If I think a book could be interesting or might be something I would want to read one day, I'll buy it.

And I always said to my kids, anytime you want to buy any books, just buy whatever books you want. That's fine. I'm never going to hold back on spending on books. Butwhat really I was optimizing for was to live in a way that was true to who I was true to who I am in all of these idiosyncratic ways, which means I want to be able to sit around and read. I don't ever want to work for someone unpleasant again. I've done that.

Andthe ability to walk away from projects that you don't like, that you find tedious, or people who are unkind or unethical or whatever, that is so precious. So that's a really key aspect of a rich life for me. Andso, I think again that gets back to your point about self-awareness that you made before, that you have to really figure out what's a rich life for me and that's going to be very different for different people.

I'm not optimizing for getting a six pack, but it's just not interesting to me. I mean, I’m a little bit tortured by the fact that I'm overweight and stuff. Like I do worry about that, but not enough really to do that much about it. Ican'ttell you the amount of time I think about spiritual practices, and like trying to become a better person, and trying to elevate my consciousness more, and stuff like that. And I fail on this front constantly. But that's really what I'm up to, right?

WhatI really want in life is to become more elevated spiritually and a better person to have more influence in the world. That's not what everyone wants. Andso, I think this question of how to build a really rich life begins with that self-awareness of your own idiosyncrasies. But then it does go back to our discussion earlier about these different buckets, these different components, like just knowing that part of a rich life is your physical and mental well being. Right?

So,I'm very lucky that even though I'm a tubby, middle aged, balding man, you know, my health has been good, thank God, and I have lots of energy. But the mental component is really key. So, for me, part of building a rich life has to involve meditation. You have to find some way of getting peace of mind. Because if your mind is just being royal the whole time, in turmoil internally, no amount of money that you have is going to make you happy.

Rememberthat thing a few years ago where I think it was Boris Berezovsky committed suicide, one of these famous Russian oligarchs. I mean, who knows, I assume it was suicide. But I just remember thinking he probably, even after losing his billions, he probably still was richer than almost all of us. And yet he felt like he had nothing. So much of our wealth and happiness is actually internal. It comes from our state of mind.

Andso, whether you study the Stoics, or the Kabbalists, or the Tibetan Buddhists, or whoever, you start to realize it's all an inside game. So, I think you have to think about, like, how am I investing in that? How am I investing in my relationships? How am I investing in my physical, energetic, emotional well-being? How am I investing my time in sharing with others and lifting other people up?

Andso, once you start to understand these patterns and you look at other people's successful lives and you just realize, oh, it's not just one dimensional. That's nothing. I mean, there are so many super rich people that I've interviewed that I didn't write about, or didn't invite on the podcast, why do you think? Because they're terrible examples of how to live. I mean, there are so many billionaires that you don't want to be.

CharlieMunger said at one point, I asked him about this question, and I said, you know, how do you reconcile the fact that there are all of these kind of… You know, you talk about the benefits of being ethical and having integrity, and there are all of these billionaire tycoons, that we can see, who are so rapacious, and so immoral, and so unethical, and how do you reconcile your views with the fact that they're so successful?

And he started talking about Sumner Redstone, who I've never met and who passed away, who ran Viacom and CBS and all of those things. Andhe said, look, we went to Harvard Law School together. He was a couple of years older than Charlie, I think, or a couple of years before him at law school. And he said, Sumner Redstone ended up making more money than me. And so, he said, you could say that he was more successful.

But he said, all my life I've looked at Sumner Redstone, and I thought, that's what I don't want to be. That's an example of what I don't want to be. He said, even his wives and children didn't like him. Andso, I think that's the other thing is that when you're trying to figure out how to have a rich and successful life, you start by inverting, as Charlie would, and you say, well, all right, let me figure out how to have a terrible life, because it's very easy to identify.

So,you look at people who end up fighting with their spouses, their kids don't love them, or they don't talk to their kids or whatever, and their partners are suing them. So, I think start by solving the problem backwards and say, well, let me not be like that. Yeah, we all need a starting point. And I think it is an important topic. And I don't know if you've come across his work. About a month ago, we had Dr. Daniel Crosby on the podcast, and he's written a couple of books.

I think the latest one is called The Soul of Wealth. Andone of the things that he talked about was that happiness in his work extends far beyond financial metrics and is better framed as the pursuit of meaning, joy, and fulfillment. And he had three key things. And I think it touches very nicely also on what we've spoken about today.

Andhe talked about believing, you know, having a belief system or worldview that helps you make sense of life and the complexities it has; belonging, as we talked about, building strong relationships and serving others; and then becoming, and that is this striving towards personal growth and vision for who we want to be. And I think that ties very nicely into what you just described, actually. Yeah, I like that a lot. And again, these things are very idiosyncratic.

So,I think for our listeners, as you read stuff, whether it's Crosby, or my book, or any of these things, think. Find a few ideas, a few mental models that really resonate for you, and then really make them a core part of who you are. So,think of Charlie saying, take a good idea and take it seriously. So, if Crosby's framework resonates for you, like, really make that central. Think about, you know, how am I going to have that meaning? How am I going to have that sense of belonging?

Forme, one of the things… I spent a lot of time studying Kabbalah, this kind of ancient mystical wisdom that's very, very beautiful and very profound to me and seems very congruent with Tibetan Buddhism and the, like, other things that I study. And there's a beautiful word in a great book written by this guy called Rav Ashlag, where he talks about lishma, which is a Hebrew word that basically he translates as, to give pleasure to your creator. And he said that's kind of the highest level.

Westart off, we behave better because we're like, oh, I don't want to get in trouble with my parents, or I don't want to go to hell, or I don't want my teachers to be mad at me, right? So, it's almost like fear based. Andthen maybe you start to elevate a bit, and you start to think, well, you know, good things will happen to me. We learned from studying Robert Cialdini with reciprocation that if I behave decently, other people will behave decently back to me. And so, it kind of works.

And so, there's an agenda there. Andthen you start to think, well, this is one of the things that Guy Spier found is that when he started to be really, really kind to people, which he really did a lot, always helping people. He just got addicted to the feeling of it. And so, it became kind of great. And so, he just wanted to do more, and more, and more, of being kind to people.

Andthen Rav Ashlag would say, at a certain point, you get, hopefully, to this consciousness where there's no agenda at all. You just want to give pleasure to your creator. Andwe can all disagree about whether there's a creator or not, what a creator looks like, but that idea that you're given these talents and these opportunities and this personality and this context in which you live and these people you can help and you want to use them in a way that's kind of beautiful.

Andso, for me, that idea of just like, how could I operate in a way that would give pleasure to my creator is a very simple but very beautiful framework. And so, I don't know, these things are really deeply idiosyncratic. ButI would just encourage people, when you find one idea like that that resonates for you, really go big on it. Because I think for us, your audience is so full of highly intelligent, cerebral, intellectual people.

And people like that, they're very drawn to complex problems and complex solutions. Because we were congratulated and rewarded for this when we were at school, and as we grew up. It was like, oh, good boy, you got into Oxford. Oh, good boy, you got into Harvard, or Columbia, or whatever. Ithinkso often in life, the answers are actually really, really simple. And they're so simple that we sort of try them out for size and then we move on and look for something more subtle.

Andso, I mean, one of the things that became very powerful for me, from studying David Hawkins a lot, who wrote these books like Power vs Force, that had a big impact on Mohnish Pabrai, who's the subject of the first chapter of my book. He just talked about the power of very simple virtues like kindness, and compassion, and unconditional love. Andso, I started to think, okay, let me just pick, like, one virtue. If I could just be kinder.

That, literally, that's probably enough to make for a successful life; just if you were consistently kind and compassionate. So, I think there's something really interesting about this power of simplicity. And I see this with investing too. Iwriteabout it in the book, where Will Danoff, this legendary investor from Fidelity, who manages now, I think about $300 billion. When I asked him about his secret sauce, he's like, stocks follow earnings. That's it.

Basically, you want to buy great businesses because if a company doubles its earnings over the next five years, all things being equal, the price of the stock will probably double. Andso. over and over again, he's done that. It's led him to Tesla and Google and Microsoft and Berkshire Hathaway. I mean, he's had this amazing run over the last three decades with this really simple principle.

Andso, I think that idea of finding simple ideas with profound power and then making them central to the way you invest and live is really important. Now I want to turn a little bit towards sort of the topic of investing, so to speak, but maybe in a slightly different way, because in many ways, as I mentioned earlier, if you look at the S&P 500, it has made investors look great in the last few years and probably in the last couple of decades, really. And it has made investing look really easy.

ButI sense, at least, that in the last couple of years, in the last few years, we’re starting to live in a slightly different world. It's more uncertain on so many levels, really, from geopolitics to economic turmoil. Now,I started, myself, in this financial industry in 1987, actually just a few weeks before the crash of October. And I think that has made me a more cautious investor, frankly. Just the starting point.

Completelyrandom, of course, but as I said, even as a cautious investor, I would say it feels different. So, I'd love to know if there are any of these sort of lessons from history, from your conversations with these investors about how can investors, or how have these investors kind of thrived, or how do you think about thriving through specifically uncertain times such as the ones we have right now? Yeah, you get so many important points there. One is the danger of recency bias, right?

This assumption that the future is going to look like the recent past, and we tend, all, to fall into this trap, and it's so dangerous. Andso, one of the things that I write about in a chapter called The Resilient Investor is about that period, I guess, right before World War I, when everything seemed kind of great. And then suddenly you have this period where World War I breaks out in 1914 to what, 1918. And then you have the great flu pandemic that kills, what, 50 million people?

Something like that. Then you have the crash of ‘29, you have the Great Depression, and then you have World War II. Andso, you basically have three decades of absolute chaos. And so, I think part of it is to be enough of a student of history that you're just aware that there are always these fault-lines and that you want to set yourself up so that, basically, in more or less all circumstances, you are going to be able to stay in the game.

Andit's difficult because you don't want to be so pessimistic that you don't play the game and just sort of curl up in a ball in the corner, sort of waiting for disaster. But at the same time, just this historical awareness that everything changes, nothing stays the same, everything is in flux, and that all hell can break loose, should teach you to position yourself so that you'll survive if terrible things happen. Andso, in practical terms, what does that mean?

Part of it is just sitting on enough cash that you'll be able to ride through difficult periods. Part of it is not committing to very high recurring costs that you'll be locked into if the tide turns. And so, one of the dangers… Think of the number of companies or individuals or hedge funds that move into gorgeous offices that they construct during the up cycle. And so, not committing yourself to things that are going to be hard to unravel if the tide turns is very, very important.

Andso, understanding your own emotional fragility as well. So, Howard Marks said to me, so many people think they'll be absolutely fine if the stock market halves or goes down by a third, and then they discover how emotionally fragile they are. I know from past experience that I don't sell when the market gets killed. I'm okay with that is a little harder for me to buy, but I don't sell. I don't panic.

Iunderstandwell enough that I don't sell, but part of the reason, structurally, why I've not had to sell in the past is I never had a lot of debt. And so, I've definitely sacrificed some upside by never having much debt, by never using leverage, but I've set myself up to survive. Andthen another thing is to set yourself up to survive emotionally. And so, during the difficult times, your friendships are going to really keep you afloat.

And so, if you are so invested in just maximizing the amount of money you make and maximizing your professional success that you don't invest in your family and your friends, then when the market falls apart or your business falls apart, God forbid, who's there for you? Andso, I think, understanding that there are so many ways in which we're fragile, you know, economically, politically, personally, physically, you know, emotionally. And so, your resilience has to be multidimensional as well.

You've got to think about all of these different things. Toinvest in your peace of mind so that when the storm comes, you are going to be okay is very important. So, you want to build things like a meditation practice and an exercise practice before the storm comes. Andso, I think in practical terms, one of the things you want to do is say to yourself, we don't know ever the timing of when trouble will happen, right? We didn't know that Syria was going to fall.

I wouldn't be shocked if, for example, Iran started to crumble, if the regime in Iran started to crumble. But I wouldn't be surprised if it happened in 20 years or in 6 months. We don't know. And so that's the same with the stock market, right? Andso, I think what you want to do is to say instead, where am I fragile and how can I reduce my fragility?

And so, it's much easier to identify where you're fragile than to identify the timing or the severity of any kind of turn in the tide or any kind of collapse. And so, for me, I'm kind of aware of the fact that I'm not exercising at the moment. That is a source of fragility. AndI'm borrowing from the future because I'm in a very busy time and I'm investing a lot of time in other things, but it's a form of fragility.

Hopefully my relationships are much less fragile than they were three, four, five years ago when I didn't invest in them. I'veused the fact that the last decade has been a great period for investors like us to reduce debt. I mean, I bought my recent car without debt. I have not much debt on my house. You know, that's a very conscious position. It'susing the good times to reduce your fragility and vulnerability. So, I think there are very practical things you can do like that.

It's almost like a thought experiment of thinking, if everything went to hell as it has historically, how vulnerable would I be? And then just very consciously going through your portfolio annual life and seeing where am I fragile and how can I reduce that fragility? I think that makes a lot of sense. I want to go in a slight tangent in one of the directions on this particular topic.

And again, this is based from my memory of your books, but also of other people that I've come across that obviously have been very successful in this type of investment strategy. And it is about fragility in some ways. You kind of alluded to it already with Charlie Munger who said, well, if I had more money, I would have gotten gone all in on Alibaba. And so, it's this balance between diversification or risk management versus conviction and commitment.

Andmaybe not someone like Ray Dalio, but maybe a lot of the other people that I can think of, I seem to recall that they have had very concentrated portfolios, not just for short periods of time, but for fairly long periods of time. And you could say, in a sense, that makes them more fragile in some ways. You could also turn around and say, well, if it's the right companies they have, it makes them stronger, and that's probably what they believe in.

So,how do you see the balance that they kind of are juggling between diversification on one side and conviction on the other side and avoiding being taken out of the game, so to speak. There's a tremendous tension there. And I think it's just something where you have to think about your own circumstances and how you want to play that tension. How concentrated can you handle being? And it is much easier to outperform if you're concentrated.

But as Charlie Munger said to me on that zoom call, what if you're wrong? Youcan be very concentrated and it's a very smart approach. But if you're wrong, I mean, if Alibaba had been a really important part of his portfolio and he was wrong, it could have been a disaster. Alibaba was a very small position in my portfolio. So even though it went horribly wrong, it's kind of irrelevant. It didn't affect my kids’ education or anything like that or the way I live.

Andso, I think one of the questions to ask is something that I got from Gundlach, Jeffrey Gundlach, the king of bonds, who said to me that he's wrong about a third of the time, which is what Templeton said to me as well. And so, Gundlach said to me what he asks himself before he makes any investment decision is what's the consequence if I'm wrong?

And so, I think what you have to do is say, okay, I'm happy to make an aggressive bet on a concentrated portfolio, but what's the consequence if I'm wrong? AndGuy Spier always talks about a person he used to be friendly with who had a one stock portfolio and he was a hedge fund manager who made a bet, I think it was on natural gas. Natural gas prices went against him and he ended up running a bar.

Andyou know, you don't want to be the person who has such conviction in your one stock that you end up running a bar. And there's a great deal of survivor bias where you know, we focus on the people who made the bets that worked out. Andso, I write at length about Nick Sleep and Qais Zaharia, who are incredible. And Nick has ended up basically with a three stock portfolio which is Costco, Amazon and Berkshire. Andso, he looks incredibly smart and he is incredibly smart.

I mean Nick and Zach are amazing but Nick found it hard to find a fourth stock. I mean, he made a bet on Asos that didn't work out so far and I wouldn't be surprised if it does. But you know, it's been really hard for him to find a fourth position. Andso, I think just to remember that this is a really difficult game, and if Munger can be wrong about Alibaba, and Nick Sleep can be wrong about Asos, and maybe it'll turn out that they were totally right in the long term.

I mean I wouldn't be shocked in either case. Youjust need to be aware of the importance of structuring your portfolio and your life to survive your own hubris, self-delusion, bad luck, and that's really what the margin of safety is, right? It's to protect against uncertainty, against bad luck, against misjudgment, misanalysis. Ialwaysthink of this case that Joel Greenblatt talked to me about where, when he first set up his hedge fund, and his main investor was Michael Milken.

And he was a young kid, Joel, I mean, he was in his twenties. And he makes this bet on Florida Cypress Gardens, which is this place that was like an amusement park where you would have sort of Santa skiing on water skis, you know, wearing his, wearing his big white beard. And Joel had these happy memories of going there as a boy to Florida, to this place. And so there was something beautiful about it. Itwas in a takeover deal, and he buys it. He said it was basically a risk free arbitrage deal.

And it was like the first big deal in his hedge fund. And then he wakes up one day and opens the Wall Street Journal and it turns out the, that the Pavilion at Florida Cypress Gardens has literally fallen into a sinkhole. Andhe said it would have been funny except for the fact that I was scared out of my mind and terrified that his fund wasn't going to work out and that Michael Milken was going to yank his money or whatever.

And it's just a reminder that we live in a world where everything can fall into a sinkhole. Andso, it's not a matter of becoming so pessimistic that you don't invest. Because Howard Marks said to me at a certain point, risk avoidance becomes return avoidance, which I thought was very elegant. Imean,you don't want to fall into that trap either. But it's about taking conscious risk. It's not about eschewing risk, avoiding all risk, or being reckless. It's about conscious risk taking.

Yeah, absolutely. Now, I mean, again, we talked about, we live in an uncertain world, but we also live, and you mentioned that earlier in the very early part of our conversation, namely the role of technology. The fact that you and I can sit here, have this conversation. But then, nowadays of course, the words AI come up straight away. And I wonder, just very broadly, how do you think about AI in the world of investing? There'sbeen a lot of hype about it, how it's going to change the world.

I imagine I could be completely wrong. I imagine that, for some of these investors that you have dealt with, probably AI, itself, as a technology may not play a huge role. Of course, companies like Nvidia, like Stan Druckenmiller recently talked about on a podcast about how that came to his attention. Notthat he knew anything about what they did, but it sounded… He buys first and then he studies afterwards, and then he buys some more if he likes it.

But how does AI, do you think, play a role with these type of investors? I had a conversation with Arnold Van Den Berg a couple weeks ago where he called me when I was in London. And he's the guy I end the book with because he's such a great embodiment of what it means to lead a truly rich and successful life. And here's a guy in his 80s and a classic value investor whose firm has now been in business for 50 years, and he is so excited about AI.

He's got a young investor, I think it's Matthew Peterson, who is a very nice guy who I meet sometimes in Switzerland at the Value X events. AndMatthew has been, basically, as I understand it from Arnold, teaching Arnold stuff, how to use AI, as part of the research process to kind of supercharge what they can figure out very quickly about businesses. And I thought that was really interesting that someone like Arnold is so not in denial about the power of this technology. He's harnessing it.

Iuseit the whole time in my research as well. I don't ever write anything with it or anything like that. But I'm constantly in dialogue with it, right? I mean, I'm preparing to interview a guy called Pico Iyer on my podcast, but also at an event in New York. AndI'm very, you know, and he was close to Leonard Cohen, for example, a musician. And I'm like, very consciously asking ChatGPT for more information about Leonard Cohen's teacher and more information about this and that.

So, I think in some way, we have to engage with it in an intelligent way, but at the same time we have no idea really what the ramifications are, and what it's going to mean for our kids, and what it's going to mean for our jobs. Iwasvery struck, recently, by a conversation with a guy. I think it was on Tyler Cowan's podcast, Conversations with Tyler.

I think the guy was an emeritus professor of psychology at Stanford, and he talked about some study that found that AI was more empathetic in meetings with psychology patients than humans. Andthere are these areas like psychology and psychiatry and therapy and writing and music that we've always thought, no, these were such human areas that couldn't be taken over by machines. And they're so vulnerable.

Andso, I think in some way, like Dalio talked to me about the combination of man and machine. I think that as much as this kind of creeps me out, it just makes sense, right? How can you not harness this while also holding your breath and slightly being in fetal position, not knowing what it's going to bring down on us? Yeah, I mean, embrace it in a thoughtful way, I guess.

Theother thing I wanted to ask you about, just sort of jumping around a little bit before we start slowly to wrap up, is so, one of the things that, again, just reflecting on my own career, our industry, I don't think we've ever been very good at telling a great story. Maybe partly because it's a rules-based strategy. There are no great, you know, stories about Apple and why we bought it or whatever it may be. But I think storytelling is incredibly important.

Irememberwhen I got into all of this podcasting stuff, and I started to study some of these old school copywriters. And it was obviously, you know, part of the argument was that we, as human beings, because we were kind of prone to be receptive to storytelling because that's how history was told. And when we were babies, we were told stories by our parents and so on and so forth, so that we have some kind of, I wouldn't call it condition.

Andthis is what attracted me to podcast was the audio part. The fact that we can listen to a conversation and absorb it maybe differently to if we are watching a video. And this is also why I've stayed away from doing YouTube video podcasts and just stay with the audio. I think it has some qualities that I personally really, really like. Butyou as a storyteller, I'd love to know a little bit about sort of how storytelling, how can we use that to maybe demystify complex financial topics?

And I think this is really important, again, to where we are right now in this world. Well, think of the discussion we just had about Joel Greenblatt, right? And about that pavilion falling into a sinkhole. So, you can talk theoretically about uncertainty, and risk, and the fact that we live in a world where anything can happen.

But there's something about the image of a young hedge fund manager starting out, taking money from a multi billionaire like Michael Milken, setting up his fund, investing in this place that he used to visit and thinking of the image of the guy, you know, the Santa on water skis that he used to see as a little boy. And then he invests in it. And then he opens the Wall Street Journal and sees that the Pavilion has fallen into a sinkhole.

Thatstory, like the details, the visual details, the fact that it goes, there's a beginning, a middle, and an end in a sense, the fact that there's a moral to it. It's much more vivid than the theory. And so, I think this is the way we learn. And so, it's very powerful to illustrate themes with stories, right? I'llgive you an example of this. So, I remember Charlie Munger talking about this when I went to the Daily Journal meeting when he was chairman of the Daily Journal.

And people would go from all around the world to go hear this then 93 year old man talk. And so, you know, I mean, this building in California and all these people like Li Liu and Mohnish Pabrai, Whitney Tilson, Francis Chu, and Francois Rochon milling around, coming to see him talk.

Andhe talks for a couple of hours, answers lots of questions, then most people go away and then about 20 of us gather around him and he keeps talking, and he's, and he's eating See’s candy and it's like flying everywhere. And he's talking about some of the great lessons of his career. And one of the things that he talks about is this investment that he made. Imaybe conflating a couple of conversations, but I don't think so.

He talks about an investment that he made where he said, I've read Barron's for 50 years. And he said in 50 years I've only made one investment based on my reading of Barron's. But he said it was basically, it was a car parts company, and it was totally out of favor. And he said he spent about 90 minutes studying it. Andhe makes this investment and he makes $80 million and then he gives the $80 million to Li Lu who turns it into $400 or $500 million.

And so, he said, what are you supposed to learn from that? How do you mimic that? Like,I've spent 50 years reading Barron's and I've got one idea and it's made me half a billion dollars through. And so that story so beautifully illustrates Charlie's point that what you want to be as an investor who is like a spear fisherman who sits patiently by the stream and waits for a fat, juicy salmon to swim by. And then you spear it and then you go back to doing nothing.

And so much of life is based around just a handful of amazing opportunities that come up, and you want to seize them with what he called gumption. Andso, you think about the details of that story, which I didn't tell you very well because I hadn't really thought about it before. It's such a strange insight into his personality, his approach, his patience, his good fortune, the intelligence to do it, the luck.

And then there's a lesson to it about how we should operate in our own lives, and what are the opportunities that'll come along, and what if we miss them? Andso, I just happen to think in stories, and I think it's because I grew up in a household where my mother was an amazing storyteller, and so she would golf, and she'd play golf, and she'd come back, and she'd tell you the story of the person she played golf with.

And so, for me, it all comes from telling stories, listening to stories, reading novels, reading nonfiction books. Andit's like a muscle that you're growing. You just start to think in terms of stories. And it's such a powerful way of conveying lessons about how to live and how to think. And so, in a way, the stories in my book are all just ways of illustrating a principle. I can think of another really good example of this.

There'sa beautiful moment in a footnote in the story, where Bill Miller goes to an event when he's a young investor, I think it was in Phoenix. And he's introduced to another young investor, who's Will Danoff, who's the guy we spoke about before who said stocks follow earnings. And Bill, who's this very garrulous, gregarious, friendly guy, holds out his hand to Will Danoff, and he says, “Hi, Will, I'm Bill.”

AndWill Danoff, who's also a really nice guy, doesn't extend his hand and says, I'm going to beat you, man. I'm going to beat you. And that little story is such an amazing insight into the competitive spirit of these guys. AndWill and Bill became really good friends and are still friends, but just the competitiveness. And so, I often think I came up with this idea when I was in Kloster staying with Guy Spier last year.

And I just remember, you know, we spent about five days talking, and at a certain point, I just thought, best story wins. And. And I thought that was me who had coined that. And then I heard other people saying the same thing. But I think it's a great insight. It's like the best story wins. And so, you want to structure your teaching around stories. It's how people learn. I completely agree.

And I think we have more work to do in our industry to tell a story about something that is maybe less maybe, how should I call it, susceptive to storytelling because it's quant and it's rules, but there's a story in there, for sure. Well, there are very high stakes. This is what I figured out early in my career as a financial writer is that there were very few good storytellers who went into writing about markets.

And I figured, oh, I have a huge competitive advantage here because I'm a storyteller who came out of studying English literature at Oxford. I mean, that was my background. And then I went to Columbia Journalism school. Andso, I thought in terms of stories. And I looked at the markets, which were so full of people who are numbers oriented, and I thought, well, actually, there are huge stakes here.

So, the amount of money, the amount of greed, the amount of fear, the amount of danger, the amount of hubris, the amount of things that go wrong with catastrophic consequences, those are all the makings of great stories. And then even, like the problem solving that you guys have to do. It'sbasically like being code breakers, right? You're looking at the markets, this really complex, mysterious, enigmatic thing, and you're trying to figure out, how do I crack the code?

So, when you think of it in those terms, it's very rich for storytelling. And you know, what's funny about it is actually, and people don't think about this as a story, but I'm sure you're familiar with the Moneyball story, right? Yeah. And of course, the funny part of all of that is that the Red Sox owner John Henry, who features like for 10 seconds in real person, but obviously is played by an actor. He comes from our world.

He made his money from being a systematic trend follower, and then that allowed him to go to the sports, which was probably more his passion, or maybe a passion later in life. But of course, told in a beautiful story by Michael Lewis, of course, in the Moneyball story. Let'sjump around. There are just a couple of things that I wanted to also make sure that I touched on in our conversation, William. And that's maybe the first one here is more like personal reflections on your side.

Imean,it's one thing to interview people, it's one thing to be told how they did it, but then having to turn it into your own practice is a little bit harder. We touched a little bit on some of the things you've done, and I'm very focused. I really want to try and help young people. I think they have a tough time when it comes to the world of investing because of all the bad stuff that's out there I think nowadays.

Butwhat are some of your personal takeaways, besides what you've already shared, that you think might be practical for other people to think about or to study? I think there are a lot of different ways to solve the problem of investing. There are so many pods across the ocean, right? And you have one that's very different from mine, right? Imeanthere's systematic trend following. There's concentrated value investing. There's been more diversified. I mean, there are so many ways to do this.

Ithinkit's very helpful for people to try to solve the problem in a simple way that makes sense to them. And so, the default position for most people should just be to buy index funds. Andit sounds incredibly boring, but Howard Marks said to me, most people should index most of their money. Joel Greenblatt says the same thing. Buffett says the same thing.

Ifyou don't really know what you're doing and you don't really have an appetite for playing this game in a very active way, it makes sense as a default position to do something like the equivalent of a Vanguard International Fund and a Vanguard US Total Stock Market Fund, or buy the similar version from Schwab or Fidelity. One of these low-cost things.

Youhave so much going for you by having extremely low fees, not eating away at your profits, and then just adding to that pot consistently and simultaneously taking advantage of all of these tax advantage vehicles, whether it's in the US 401k plans, or IRAs, or 529s. You know, in Europe, obviously, you have very different things, but these very simple things that we can control are not that difficult to do.

Andso, living within your means and continuing to add to the pot and diversifying at a very low cost is so simple and so powerful that it's almost impossible for most people to bring themselves to do it because it seems too easy. And yet I think even for people who are very sophisticated investors, it makes sense to have a portion of your portfolio in a couple of index funds. Ithinkone of the things is just to decide how intensely involved you want to be.

I mean, do you want to be competing against Will Danoff and Bill Miller when they're so much more driven, and so much more intense, and so much smarter, and so much less emotional than most of us? So,for me, a huge lesson from working on the book and interviewing so many of these great investors was simply the realization that I'm not wired to compete with them, and at the same time they're not wired to compete with me in other areas.

And I'm not saying that to be arrogant, it's like most of them can't write well. Thereare people like Joel Greenblatt and Howard Marks and Nick Sleep who write very well. I think this is one of the great lessons from Charlie Munger and from Ed Thorpe, both of whom I write about at some length in the book, is play games that you're equipped to win.

You figure out what you really care about and what you're really good at and focus on that, Focus on becoming incredibly good at that and adding value to other people. Andthen if you just have your investment pot quietly compounding because you just keep adding to it and you live within your means over 10, 20, 30, 40, 50 years, you'll do great. We don't know what's going to happen in the world. There are possibilities that we won't do great.

But historically, markets go up as companies become more productive. Andthe other thing is, I mean, as a contrarian value investor, even though I own some actively managed funds, I'm kind of glad that I have some money in index funds and that I put my wife and kids money in index funds because there's no way I could have brought myself to invest in Tesla when it was at incredibly high valuations.

There'sno way I could have brought myself to invest in Nvidia when some of the people I interview are saying that it's a bubble and it's going to crash. Andso, by owning index funds, I actually got exposure to Tesla, and Nvidia, and Google, and Alphabet then, and Meta and all these companies that maybe would have been too expensive for me to own.

And so, I think there's so much going for that as an approach, I would have that as a portion of your portfolio, even if you're a sophisticated investor. Looking back at my own career, because I was so young when I got exposed to trend following, I probably, you could say, in hindsight, have neglected the fact that, you know, portfolio construction is very important because I've been solely focused really on the trend following part which, of course, has been a great investment.

But the value of having some of these equity exposures in, obviously, fixed income up until a few years ago, and so on, and so forth… ButI wanted to then maybe round off with a kind of off script question and just something that I find very, very interesting at the moment.

I'd love to just hear your sort of thoughts about it and that is, I was listening to a podcast this morning with Felix Zulauf (I'm sure you're familiar with him), and many other of the people you know have talked about this, I think Howard Marks as well, and it's this concentration of US, I think Felix mentioned that it's 73% now of the world index on a cap weighted basis is US equities. Right? That's very unusual.

Goingback to this, we're living in an uncertain time, but we're also living in unusual times because we've never seen concentration like that. We've never been at a point where demographics might come into play in a reverse order, so to speak. Meaning more and more people going into their age of pension, starting to liquidate their holdings.

Weknow from Mike Green about the challenges about active and passive investments and how they the passive have also been part of the fuel maybe to the equity market. So, I'm just very open to any thoughts that might come to mind when you think about it. We know the future will be different from the past, but is there a chance it could be very different from the past, so to speak?

Well, I think one of the things that makes investing so exquisitely challenging and interesting is that you never really know if it's truly a new paradigm or whether this is, as Ray Dalio would say, just another one of those, just another one like that. I mean is this just another cycle where the US has become massively over invested, and overpriced, and over dominant, and it'll just revert to the mean.

Andthen we'll see another period in which emerging markets outperform for 10, 20 years, or whatever, or has something really changed and the US is so dominant, and there's something about this system. As much as people complain about the US… I mean I grew up in London, and then I moved to New York when I was in my early twenties, then I lived in Hong Kong later for five years, and then I moved back to London, and then I moved back to the US about 11, 12 years ago.

So, I've seen different systems. There's something about the US about the dynamism, about the way capital flows to good ideas here. Look,if you study Buddhism, you know that everything is impermanent, and everything is in a state of flux and that it's not going to remain dominant forever. But there's something very extraordinary about the US that explains why all of these companies like Meta, and Google, and Nvidia, and stuff grew up here.

But the odds are that it's not going to last because nothing lasts. And so, I just think you have to position yourself so you'll be okay either way. SoI, for many years, my default position was always. I mean, it's so unscientific, and I wasn't looking for something sort of optimal in terms of portfolio construction.

I would, in certain accounts, like if I had a retirement account where there were certain options that I didn't want to think through, I would just put 50% in a Vanguard US total stock market fund and 50% in foreign markets. And I didn't buy any bonds because I found bonds too boring. And I figured that stocks had this long term advantage. AndI've probably missed out on a lot of gains by not having just more of my money in the US throughout those years.

And yet at the same time, I don't regret making that decision. I think it was a perfectly rational decision. Andin the same way, I don't regret owning Berkshire, where Buffett is sitting on $325 billion in cash, which is an insurance policy against chaos. So, if there's chaos, he's going to be able to take advantage. Andso, I think you just have to position yourself so that in an extremely uncertain world where anything can happen, you are going to survive.

You are going to get to continue playing the game. And I see this in every area. Youlook in the introduction to my book where I write about Ed Thorpe, one of the great investors of all time, but also an amazing game player who figured out how to win at blackjack and roulette. And he was very conscious in those early days of COVID about literally calculating his own probability of dying. Andhe said, you know, as a guy in his 80s with no comorbidities, who's very careful.

I probably have a 2%, 3%, 4% chance of dying. I think that was if he got Covid. He was very conscious about it. Andso, he put himself in isolation very early and bought supplies before there was a single person reported to have died in the US. So, he was very focused on staying in the game. Andso, I think in a world where anything can happen, position yourself so you'll stay in the game.

If the US goes to hell, if it turns out to be the greatest bubble of our lifetime, the Magnificent Seven, just be positioned so that you're going to be okay, but also position yourself so you take advantage, so that you're exposed to AI and so you're exposed to tech. You're exposed to the US you know, I don't think you want to be super extreme either way, unless you're brilliant.

I mean, if you're Soros and you're Druckenmiller, or something like that… Imean,I remember Bill Miller once saying to me that it's possible that Jim Simons and the guys at Renaissance actually could predict the market because they had so much data that other people didn't, that maybe it was possible for them. But for most of us, it's so random. Imean,we just don't know whether the market's going to go up or down.

You know, we live in a world where Covid can come along and turn all our lives upside down. We live in a world where Syria, after 70 years, the regime can just suddenly collapse. Andso, you want to position yourself to survive uncertainty. And that requires a little bit of humility, but it also, it's a structural thing. It's like actually setting yourself up financially and emotionally, so you'll be okay, more or less, whatever happens. Yeah, I think that's so important. It's very well said.

Beforewe wrap up completely, I know your paperback version of the book is coming out or has just come out. Maybe you can talk a little bit about that or anything else that you want to leave the audience with in terms of thoughts or opportunities. The paperback is coming out on January 7th, and. And so, it's been funny.

My publisher said at one point, a year or so ago, he said, yeah, for your audience of investors, they're not very price sensitive, so we can just keep selling the hardback instead of going to paperback, which I thought was interesting. It's. It's like in this area, if you think, well, there's so much money to be made, and if you think badly, you can really come undone.

Andso, we happen to occupy this kind of niche where if you really study this and you think about how to think better and you really reverse engineer what these successful lives look like. You have such an advantage. And so much of the information and insight and knowledge is just right there waiting for us. It's like this low hanging fruit.

Andso, I feel like for our listeners who are these really smart people who are barraged with good information, and crap information, and noise, and short term stuff, part of the challenge is to be really discerning and really discriminating in what your information diet is. And so, I would just encourage them take a few books.

Imean,obviously I think it's worth taking my book, not because I'm that smart, but because I had access to these amazing people who distilled so much practical, worldly wisdom. So, I would take a few books. Like take this book, but also take something like Poor Charles Almanac, take Howard Mark's book the Most Important Thing, take Fool By Randomness by Nassim Taleb, a few things like that, and read them multiple times and really internalize the most important lessons.

It'snot, I mean, yes, we want to be broad in studying stuff, but I think it's very powerful to take a few books and make them a real part of your thinking. And so, this gets back to Charlie saying, take a simple idea, take a good idea and take it seriously. Ina world where there's so much noise and so much nonsense and so much ephemeral bullshit, how do you actually identify stuff that really matters?

So, yeah, those things like Poor Charles Almanac or Fooled By Randomness, they're very important. Or think about Buffett's letters. Isortof feel like if all you did was just read the last 50 years, or the last 20 years, or whatever, of Buffett's shareholder letters, it would be hard to get a better education in business than that. Or if you just read every single one of Howard Mark's memos on the Oaktree website. And so, I think that's the big challenge.

Find a few ideas, a few thinkers and a few ideas and really understand what they figured out. But then also be aware that these guys are all flawed and imperfect as well. And then you look at the number of famous scientists and thinkers who we look back on now and we realize they were totally wrong. And so, you have to hold these ideas lightly. Youstudy this great wisdom, these enduring principles, and then at the same time you're like, yeah, and they can still be totally wrong.

I could follow Munger my whole life and then the one thing I replicate is Alibaba. Andyou know, so, I think you have to take these good ideas, take these great thinkers, but then hold the ideas lightly and then hedge against your own stupidity, and hubris, and blindness, and bias, so that if you pick the wrong thing to clone and replicate, you're still going to be okay. Yeah, I think that's, that's a great way actually to wrap up our conversation, William.

I'm super grateful for you taking all this time especially as it's over the holidays, so maybe both of us feel it's nice to get away from some of the craziness of the holiday season and just have a conversation about investing. But I certainly really appreciate all of this time. Andto all our listeners, first of all, make sure you go and get a copy of William's book, maybe the new paperback edition when it comes out.

But also, if you want to show appreciation for not just what he's written, but also for the time he puts into sharing wisdom on his own podcast, on this podcast, then do go to whatever platform you listen to your podcast on, and leave a rating and review because it really does show the appreciation to the people who create this type of content. I will, of course, put links to William's work, of course, in the show notes, as we always do, so make sure you go and check it out.

Fromme, Niels Kaastrup-Larsen, thanks so much. I look forward to being back with you in the next episode of Top Traders Unplugged. And in the meantime, take care of yourself and take care of each other. Thanks for listening to Top Traders Unplugged. If you feel you learned something of value from today's episode, the best way to stay updated is to go on over to iTunes and subscribe to the show so that you'll be sure to get all the new episodes as they're released.

We have some amazing guests lined up for you, and to ensure our show continues to grow, please leave us an honest rating and review in iTunes. It only takes a minute and it's the best way to show us you love the podcast. We'll see you next time on Top Traders Unplugged.