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Collection: Mohnish Pabrai - #116 'Reading Habits of a Value Investor'



So I knew that you mentioned as a value investor you make very infrequent bets and when you do, you know, you really going big. Could you give us a little insight in it what’s your daily life like?

Obviously, you’re not, you know, buying and selling every day. So, do you constantly just think about stuff analysed new companies, you know, what do you do on a daily basis kind of as a value investor?


Well, I mean, I think you would do well as a value investor, if you enjoy reading and enjoy spending time with yourself, those are good traits. And you know, while human contact is good, I enjoyed those things.

So I mean, you know, a few years back I was having dinner with Charlie Munger and he mentioned that he would love to see long histories of General Motors and he said he thought that would be a great class to teach, you know, just the – I said, well you can see long histories of the business in something like Value Line.

So he said no, that’s not what I’m talking about. He’s saying I want a hundred-year history of GM, okay, and I want a hundred years of numbers for GM. So where can I get that? And I wasn’t sure where he can get that.

And so, but recently some kids at Boston University I was talking to them, I was actually doing an analysis of American Express, and they said "Oh yeah, they had annual reports from 1950 on AMEX."

So I just asked them: “Hey, can you get old reports of General Motors?” And they said, “Yeah, we can get all the reports from the beginning.” So they send me a Dropbox file which had every GM annual report, I think from like 1911 onwards. And so I emailed Charlie’s assistant and I said, “Hey, you know, Charlie mentioned this to me a few years ago. I have the reports if he wants some, I’ll send you the link.”

And she said: “He’s very excited to receive them.” Okay, so then I sent her the Dropbox link and then she wrote back, this is just before the Berkshire meeting and then she wrote back saying that I’ve been instructed to finish printing them before we leave for Omaha. Okay, and it was like 24,000 pages, you know, it’s a lot of pages, right? And so she said I’m busy printing.

Okay, and so this was on a Tuesday, I think normally Charlie leaves Omaha on Thursday, and I saw him in Omaha on Friday. So when I saw him on Friday, I said “So did you start reading the GM reports?” And then he goes into his whole thing about, you know, the nature of the company and all the things in the early years and this and that, and he was ploughing through them. And then I met him again after that and you know, so he was picking up insights into GM.

They have no – I don’t think they are looking at making investment GM or anything like that. I think this is pure curiosity to understand how the world works, right?

And so I said, okay, let’s do this myself. I said, let’s start myself reading GM reports from 1911 to see if – what insights can be gleaned because I have never done that, I’ve never picked up the 1919 Coke report, for example.

And so, I started reading the General Motors that I actually got through to the 50s now, I’ve gone through from 1911 to the early 50s. And my God, it was fascinating because I think the thing is that it’s like, you know, that an asteroid coming in, but they don’t know it because it’s like 1928 and everything looks great.

And then, you know the crash comes and then even that crash is nothing because in 1932 – from 1929-1932 really crash – and then even that’s nothing because all through the 30s you’re going through really tough times.

And then like in 1941-42, the company is informed by the US government not to produce any passenger cars. So from 1942 to the end of the war, GM is producing zero cars, they're producing airplanes and all kind of things with the military but no cars.

And then you get to 1946 and the country has not had a single new automobile produced for like four years, you know, so this is just an amazing history.

And then of course, you can see the revenue, then the cash flows and the brands are being built and all the different, you know, they introduced the automatic transmission and all of that.

So I actually gained a lot of appreciation that you get a much deeper richer insight into these businesses with some of that reading, you can also get some of the same insights from reading biographies or autobiographies.

You know, like I’m sure Warren and Charlie read – Goizueta wrote a book, "I'd Like The World To Buy A Coke." And then the previous guy that Coke had, written several books on Coke. So you could go back and look at the history of the company through those biographies in such as well.

So yes, I think that if you can set your life up in a manner which gives you large chunks of time to do reading but reading not from the context of I’m going to make an investment, reading from the context of just getting better at knowing how the world works.

And then I think if you – what I find with Charlie is that, you know, when you look at recently like the Valeant Saga, you know, some of you might be familiar with Valeant and I don’t think Charlie ever read the annual report by Valeant.

I mean he sits on the board of a hospital, but a lot of people sit on hospital boards or access to different aspects of the health care industry, but he had insights about Valeant than a lot of hedge fund guys didn’t have, right?

And they had armies of people doing research on it. And so you get to wisdom, which is different from just being smart, you know, so I think that’s what it gives you a certain wisdom. And if you starting at your age and sounds like you’ve already started which is good. Then you can start building up some advantages over your peers over the years.



[YAPSS Takeaway]

One trait of a good investor is to have a curious mind of how the world works.

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