ARVIND NAVARATNAM 00:00
How you developed the insights to build your circle of competence and to make those big bets that led to your success.
MOHNISH PABRAI 00:12
Yeah, I mean I think that the thing is that – the first question to ask yourself is “what are you passionate about?”
You know, if you are willing to work at something, where the amount you get paid is irrelevant and you truly enjoy that work. Then, you are getting close to answering that question correctly.
And so, if you are pursuing a career as an investment manager and investment analyst, and you would do this job, if it pays the same as a school teacher, for example. Then, you are picking the right calling because you should not be picking this calling because it pays well. You should be picking this calling because it is what you believe you're wired for and what you love doing.
So, the first question to ask yourself is what do you love doing?
And in my case, you know – I think this is a – I’ve asked myself this question repeatedly. In fact, one of the things that I had gone through in ‘99 time frame was a – and part of this group called YPO.
We had done a kind of an exercise, where we had a couple of industrial psychologists who spent some time doing a 360° analysis. So they called and interviewed our spouses, our friends, in my case, people who worked for me. If the kids are old enough, they will talk to the kids. Then they conduct a bunch of tests on us. [Inaudible] And then what they gave us at the end of all that was blueprint of who we were.
And what happened with most humans is that – we had a map, kind of this is what we are on the inside. And then we kind of act this way on the outside because we believe the world expects us to act this way. But our internal wiring is – this is who we are and we act this way.
So if you get an incongruence between, who you are internally and who you are acting like externally, you would not go far in life. What you have to do is to get things in perfect alignments – like this. Where your internal wiring is exactly the way you are externally.
And so, at that time I had gone through this testing, I was just about to start Pabrai Funds. And I was running a company which had about 170 people, an IT company that I founded. And the psychologists basically said that they couldn’t even understand how I was able to run that company because it was so far away from what my preferences and my competence and wiring was, if you will.
And then they looked at Pabrai Funds and they looked at kind of the way it would be and the size where there would be no people and all that. And they said this is perfect for what your internal wiring is.
So, their belief system was that between our genetics and the experience in the first 5 years of life, who we are as people is hardcoded. And that is not gonna change for the rest of your life. So, whatever wiring and kind of inside map you have – is fixed.
The problem is that most humans don’t know what that map is because we don’t come with the owner’s manual. But, at the age of 34, I received the owner’s manual – a 20 paged document, for the first time, someone gave me an owner’s manual. It was invaluable. It was one of the best things I ever did. The best $2,000 I ever spent.
And that – so, one of these two psychologists, when Pabrai Funds was starting, he wasn’t a very wealthy man, but he invested – he was one of the original investors who invested. And I asked him, you know, why did you want to invest in this?
He said, “ Mohnish, I cracked your brain open. I know exactly what’s in there. This is the right place to put the money. You know – I know this bet won’t fail." And of course, we did quite well with that.
So, the first question is, if investing puts you into an alignment like this, which is not an easy thing to figure out. You know, you can understand what some of these kinds of things are in your owners’ manual with how you feel after doing certain tasks. If you feel energized and excited about doing something, then you are in the right place.
Like you know, the shipping company – this weekend, if my wife told me we have to go to some party, I would prefer looking at the shipping company to go into a party. You know, it would just be more fun.
And so, you can answer that question which are your likes and dislikes. So that is the first thing you have to make sure that you are playing in center court of what you are wired to do. And figuring out what you are wired to do is not the easiest thing in the world.
But, it can be done and you can – Myers-Briggs might help you, that's a poor man's version. But I think going to an industrial psychologist, like the one I went to. And they have tools to figure this out for you. And I think it should be required for every human. I think every human should have an owner’s manual. It will help a lot.
The second part about the adversity and the valleys. They had been a few valleys. And you know, the thing is that there is a movie that came out a while back. I think it was the best picture of the year, 'Life is Beautiful.'
Did you guys see that movie? Raise your hand if you seen that movie. A couple of souls have seen the movie and a couple of souls think they may have seen it. Well, it might be useful to see it. It’s in some parts funny but I think it got some great life lessons.
So there are two movies – you know, books are so boring but movies are more fun to see. So I would like to recommend a couple of movies to you.
The first one is 'Jiro Dreams of Sushi.' How many of you have seen that movie, Jiro Dreams of Sushi? We got a few people that have seen it. That’s great.
So that's – you know, Jiro, who is my hero is exactly like this (aligned). He is doing – he didn’t go to an industrial psychologist but he is dead on doing what he loves to do. And it is a great movie.
In fact, I have my first trip to Japan coming up next March. And is a restaurant where they serve sushi. And I think we are going to make reservations a month in advance. So I am looking forward to meeting Jiro and eating his sushi in a few months. It will be great. And so that’s a great movie.
The second one is 'Life is Beautiful,' which is also a good movie to see. But you know the thing is that when I was – which the Life Is Beautiful will kind of – anytime you feel that you are in a valley or life is useless, put on that movie. It will give you some perspective and such.
And I saw my parents go through multiple bankruptcies in my childhood. And my parents were very poor financial planners so when things – they were kind of like these [Inaudible]. When times were going well, we live really well. And when times were rough, we didn’t have money for groceries, we didn’t have money for rent. It was absolutely rock bottom.
And so when the business – my dad was a, you know, serial entrepreneur. So when the businesses went bankrupt, and every few years in some regularity, they would go bankrupt. It would have a direct personal impact. Because just you know, the basics were gone.
And but through each of those bankruptcies, I never saw my parents ever get depressed. In fact, with my mother I never ever saw that. In fact, she – what I learned – one of the greatest things I learned from my mom was just the way she looks at life, just how resilient she was and resilient she still is – which is great.
My dad would sometimes get down because there was so much he was dealing with. And – but one time just to give you a quick story, I know Arvind thinks I am taking up so much time with my stories. But just a quick story.
You know, one time, my dad was bankrupted. It was nothing going on, he's almost – there is hardly any money and every Sunday he had this priest, this Hindu priest show up at our house. And this Hindu priest claimed to be an astrologer who could predict the future. And he would, you know, look at all these signs of when my father was born, and Mars was in this position, and all these other stuff. And say what is going to happen.
And then my dad would pay him and then he will come back the next week again. And you know, he will get all these markings on his head and he got the Southern robes. And my dad was an engineer and you know, he wasn’t a religious guy.
So after I was like about 11 years old and got some courage, I told him, you gotta know that this guy is full of shit. Not in quite these many words, but in a more diplomatic language so I won’t get slapped or something. And I said why did you have this guy, you know, he's taking money when money is very scarce. We don’t have any money.
So he – my dad said to me, “ I know he is full of shit, but I try not to think about that.” So he says that “I am at the bottom of a well.” And I need a rope to climb out of the well. And he is my rope because when I pay him and he gives me the future. He knows if he presents a bleak future, he won’t be called back the next week. And so, because he is going to give me a somewhat positive forecast about the future. I get some energy to kind of start climbing up that rope and try to get out of the well. So my dad says I am paying him because he is my rope. So, my dad figured out a way to find a rope right?
So one of the things, you know, there are different – I would say there are different ways and different kinds of ropes that you can use. So it is a given that part of the human condition is that we are going to have great times and we going to have lousy times. And we are going to be, you know, down and out at times. And we will be riding various waves at times. That’s gonna happen to all of us and the key is to understand that when you are down and out – just like the shipping rates have collapsed, that is a temporary condition.
And the second thing to realize is, and this is a – you know, I am not religious but there is a Hindu philosophy that “There is no suffering in this world." It's a Buddhist philosophy actually. There is actually no suffering in this world and there is a reaction to events that humans have which causes suffering.
So even if a person has cancer and even if they are terminal and they are gonna die in a month. At the particular moment that you asked them – So let's say they get a shot of morphine, they feel pretty good. So are they suffering at that moment? No, they are not suffering. 5 minutes later, are they suffering? No, they are not suffering. Now, if they think about the end terminal result, they will start suffering.
So, we have control over whether we suffer or not. The event does not cause the suffering. It is our reaction to the event that's going to lead to suffering. So if you can control the reaction and that’s why like when you see the movie 'Life is Beautiful,' he's controlling the reaction. So, we have the power within us to control the reaction. And once, you can understand how to control the reaction, then suffering becomes quite irrelevant.
And so, you know, the highs and lows. Yes, we had a few lows, while I'm running Pabrai Funds, but, you know, there is another saying, you know, if wealth is lost, nothing is lost. If health is lost, something is lost. If a character is lost, everything is lost. So, anything happening with Pabrai Funds is only related to wealth. And so basically, that is irrelevant. So, it doesn’t mean much.
And so far in life, I thankfully I haven’t had the health or character issues that are meaningful so that is good and I hope that continues. Sorry for the long discourse and getting away from value investing, Arvind. But, you made me do it. (Laughter)
ARVIND NAVARATNAM 14:43
Mohnish, that was great. Other questions?
The poor's man version of personality test: https://www.16personalities.com/
1. Align your internal and external wirings.
2. It is how we react to certain events/things that causes suffering. Learn and control it.