The education of a value investor by Guy Spier

One of my top ten favorite reads of all time is Guy Spier’s self written the education of a value investor. When I had first gotten the book, I had expected it to be about value investing and how I could make some money. It turns out it is more about Guy’s life lessons and takeaways that he has learned. This ended up being even better, providing little nuggets about a good life overall, which is so much more meaningful than making good money. Guy Spier runs the aquamarine fund, and thinks in the same vein as other value investors such as Warren Buffett, Charlie Munger, Mohnish Pabrai, etc. After reading the book twice, I could feel a personal transformation in his character, going from young, ambitious, greedy, self-centered, to mature, humble, serving others rather than himself, valuing who he is more than what he has. The book and the person have inspired me to become wiser and a better person.

Intro

-a lot of value investors don’t invest in tech as they don’t know what the future will be, especially in technology

-“if someone try to sell you something, don’t buy it”

-don’t take sales calls or auctions, do them quietly rationally

-conserve your energy for things that count

-surround yourself with givers, not takers. To figure that out you have to give and be able to filter people properly.

-who you choose as heroes and mentors is one of the most important decisions of life

-youth greed can lead to enlightenment

Chapter 1

-arrogant and picked a job with a bad boss and didn’t leave; worried what others thought about him than what he thought of himself. 18 months at shady pushing IPO of bad companies at DH Blair and Co, which was forced to close.

-we don’t change our environment, it changes us. Bad environments should be avoided. Additionally, same with people. Socialize with the right people, avoid people who drag us down.

-Warren Buffett saves him through the Intelligent investor, his personal mentor also

-Investment banking is a dog eat dog world, fueled by greed and envy. Therefore, not a healthy environment to be a part of

Chapter 2 — the perils of an elite education

-making investments on the outer scorecard, the crowd, news is not the right strategy

-became a close-minded high achiever at Oxford and later Harvard

-pay attention to your gut when it gives you a very positive or negative feeling. Those moments, such as your path or who to marry, should not be ignored and need to be met with courageous action when the opportunities present itself

-have to become independent, contrarian, to stop competing with others. High education leads to close-mindedness

-was initially so arrogant he dismissed Warren Buffett. 4 years later, when the student is ready, the teacher appeared again

-Once you fall off a moral cliff, it’s hard to return

-higher education leads to intellectual arrogance that one can only learn from those similar to themselves

Chapter 3 — the fire walk

-learn value investing and meet those people in it. Mrs B, Rose Blumpkin who had integrity, candid, simple principles to stick to, Warren Buffett, those with kindness he noticed. Couldn’t get a job due to the stain on his resume, yet his dad, who successfully started an Aquamarine chemicals company, gave him $1 million to invest, alongside friends and relatives who started chipping in when he had success with most of his parent’s wealth

Chapter 4 — the New York vortex

-fell to envy, the green monster

-investing exposes your weakness to emotions, envy, greed, lust for power or social status, which causes incorrect decisions. Buying top top as a hedge fund star, to keep up with the Joneses. Being in New York messed with him. Bill Ackman uncovered a huge mistake of his by buying a conventional loan business that was government backed. He later sold and shorted, but isn’t interested in shorting anymore.

Chapter 5 — meeting a master

-sales job of writing letters to everyone ended up making him a better person for it

-can take five years for a change in behavior to take effect

-sending thank you letters led to Mohnish Pabrai responding to him (only one who wrote the letter). Went to dinner with him, did not have a set agenda of questions or to dominate the conversation. Mohnish was extremely authentic. He was the same person everywhere. Small simple actions over time create reputations and relational advantages in a long life

-Mohnish’s generosity returned: covering the additional amount on the auction for Buffett’s lunch

Chapter 6 — lunch with Warren

-Buffett’s penetrating judge of character

-the presence of the amazing make you change for the better, based on presence alone

-Buffett warm candour, spoke with admiration of Susan Buffett of her kindness, and knew, at age 18 even to marry her. She took terminally AIDS patients into her home and allowed them her own bedroom before death

-Buffett does not listen to investment pitches and keeps his phone off. Does his own research and blocks out noise in the form of news and otherwise useless information

-be an authentic version of yourself

Chapter 7 — the financial crisis

-down 50% in 2008 but kept buying and did not sell, much to the amazement of those around him. By figuring out himself and his inner scorecard by then, he could comfortably buy as prices went down

Chapter 8

-companies must adapt or they will be extinct

-hard to be rational and contrarian

-to overcome the shortcomings of the brain, do not rely on yourself. Instead, follow principles and checklists. One for investing is to block out outside noise and restrict consumption of news, analysis, economic predictions

-Zurich, Switzerland; egalitarian, well kept, high standard of living, away from the noise. Additionally, far away from acquaintances so as to meet only people with genuine connections

-we have limited system 2 willpower, so use it wisely on only stuff that matters

-the rich investors are all away from the noise — 10 minutes walk from home, to separate home and work

-intentional setup of the office to be productive and clutter free

Chapter 9 — learning to tap dance

-you cannot invest well if your non-investing life is not well

-expanded his life to become more well-rounded after his 20s and 30s, including exercise

-investing is like bridge; you have to be able to make decisions based on incomplete information, otherwise opportunities will get too expensive in a hurry

-use an investing strategy that leads to the highest long term reward scenarios while minimizing risk, not necessarily ultra high reward

-first jobs after graduating are usually the most irrelevant

-a more playful attitude, treating investing as a game

Chapter 10 — investing tools

-check stock prices infrequently

-if someone try to sell you something, don’t buy it

-don’t talk to management

-gather research in right order- start with the most objective (annual financials), books of research of the companies, quarterly, and lastly, news, YouTube and equity research published by firms, as they all have incentive

-discuss investment ideas with the egoless, successful, with skin in the game, who are on the buy-side with no axe to grind

-keep the market at a distance

-buy a stock and not sell for two years, particularly if it drops

-don’t talk about current investments; you get unsolicited advice or bad advice and worst of all, confuse yourself in the process and become biased

Chapter 11 — an investor’s checklist

-when your mind is preoccupied or life has difficulty, it’s tough to think clearly and make good decisions. E.g. a contentious divorce

-is the company providing a win-win for the entire ecosystem or are some being taken advantage of?

-do not overpay, even if it is a good company

-happiness and lightness of heart comes from being a giver, as you don’t have the strains of winning

Chapter 12 — doing business the Buffett- Pabrai way

-make sure your social group has the best possible people. Show me your friends and I will show you your future. They affect you in every way, including indirectly (if your friends are lazy or overweight, you probably are too). Having friends, for the right reasons. The most important thing is bringing the right people into your life, by far the most important aspect of life.

-Pabrai way; focus first on creating a real relationship, then looking for ways to give. No strings, no pressure, no explanation

-by giving you will surround yourself with good people who wish you well, compounding goodwill. Especially in the long run

-you want to be around people who wish you well and want to find ways to help and thank you, rather than those who are trying to gain from you

-do you want to be around those who view life as a zero-sum game or as an absolute positive game?

-books offer wisdom, people offer teachers

-Warren is an astute judge of character

-Warren can survey a room filled with one hundred people, and easily identify 10 people to do business with, 10 to avoid, and 80 not sure. A critical article, and a charismatic leader, should have been enough to be in the not sure category

-invest time and energy into people you’re sure about who cherish you, and forget about the rest

-On the job market, those who don’t get snapped up fast also tend to get better at disguising their flaws, which become harder and harder to discern. Instead, observe people in candid moments where their guard is let down, this is where someone’s true character shines through. As Buffett said, for hiring, start with integrity, then intelligence and energy.

-If people are opaque and not transparent, I.e. not an open book, don’t deal with these kinds. Leave mysterious obfuscators alone. Deal with open books. Those who are trying to play games are usually hiding something.

-in his impressionable youth he had a lot of friends who were obscure about who they really were

-Mohnish would make his own time seem not busy, contrary to others who try to make themselves seem important or busy. Don’t be a burden to others in anyway or intrusive, and don’t act as a priority

-do not solicit others

-Ian Jacobs applied for a job with Warren Buffett and added a cheque for the time it took to read his resume and cover letter. Wow.

-value people as an end in themselves, not as a means to our own ends

-instead of trying to fulfill your own needs from others, try to see what needs of others you can fulfill

-agenda-driven approaches to life is selfish; happens a lot in networking

-by being a giver, you first attract a lot of takers, and get upset about it. But by observing people more closely, you become a better judge of who is a giver and who is a taker. Then you end up attracting better people to your life.

Chapter 13 — the quest for true value

-value investing may fall out of favour from time to time but overall it has stood the test of time

-bad investors will be exposed from their negative emotions eating their investment decision

-investing is about becoming the best person we can be

Disclaimer

This is not Financial Advice. This article is meant only for educational and perhaps entertainment purposes.

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