Collection: Mohnish Pabrai - #44 'How Early Experience Helped Him As An Investor?'


Video Link: https://youtu.be/h3Hzvck7MO0


In this episode, Mohnish Pabrai was asked how his early experiences before starting Pabrai Funds have helped him as an investor?


In this episode, you’ll learn:

  • The huge advantage by starting early.

  • How early experience helped Mohnish Pabrai?

  • How early experience helped Bill Gates and Warren Buffett?

To check out all Collection: Mohnish Pabrai <click here>

[Transcript]

(Source: https://youtu.be/ot6pzc9ZwfU)

MOHNISH PABRAI 00:08

Yeah, so actually that's a good question.


And you know before I was in the IT industry, you know, when I was growing up, my father was an entrepreneur and he was kind of an entrepreneur on steroids. In the sense that he must have started, bankrupted, sold and grown at least 15 different businesses in 15 different industries over his career.


And the common theme in all his businesses was that they all started with pretty much zero capital. He was bankrupt, personally bankrupt many times in his life and many times I saw him restart with nothing in completely new industries.


And of course from the age of like 13 or so, my brother and I would like his de facto board of directors. So he really doesn't have anyone else to talk to but when these businesses were in serious trouble.


He used to sit down with us with the numbers and we try to figure out how to get past the next day, how to keep the business alive for one more day? And then we get passed the one day and again sit down, and try to figure out how to get past one more day.


And after I was about 16 or 17 years old, many times when he travel, my brother and I used to actually run the operation and such. So I felt like I didn't realize it at that time, but later I started working I realize that I had finished many MBAs before I was 18. And it was just by accident, this is the way it happened.


And so today when I'm running the funds and doing what I do. I think the experience I had during my teenage years was probably the most important in terms of giving me the skills that I use in a business today.


And in fact, you know, the human brain actually is ideally set up to specialize during our teenage years. It is actually optimized to go into a particular field from the age of like, 13 or 14 till about 18 or 19.


And of course what happened in the way, education system in the US and almost anywhere else in the world set up is in that age band, we are forced to become generals. You know, the education system does not encourage specialization during that period.


And when you look at some humans like Bill Gates or Warren Buffett. You know, Warren Buffett bought his first stock when he was 11. And he had run a number of different businesses as a teenager, pretty significant size businesses. And by the time he was 18 or 19, he had you know, made all these stock investments, run all these businesses, you know, probably spent more than 10,000-15,000 hours on them.


And the same as Bill Gates, you know, he used to sneak out of his parents home at night when he was in high school and he would you know, go to the one computer in his – in the high school that he was in, Lakeside. And he would work till about 5 in the morning and then he would sneak back into bed. And you know go back to school the next day and he did that through his teen years. And of course, by the time Gates was 19 or 20, he probably has you know, 15,000 hours of programming experience which hardly anyone – was even 10 years older than him – had at that time.


And it gave him – so the thing is that, you know, it was not only the number of hours of experience that Gates and Buffett, and Leonardo da Vinci or Michelangelo and all these guys had in that time. It's that intense activity took place during that window of time when the brain is specializing.


And so if you try to do the same thing in your twenties or thirties, the brain has past the time that it is optimize for specializing. And so one of the things, I think – And in fact, you know, one of the interesting things I feel like the – When you looked at country like Germany.


You know, it's interesting that Germany does really well even in manufacturing when it has one of the highest labor cost on the planet.


And the reason is that German's school system start segregating kids into different tracks when they're like 11 or 12 years old. And so if you're going to go to a track which is going to be manufacturing locational and that sort of thing.


Then you will besides going to school, you will start working in a factory at the age of 13 or 14. And if you're going to be – going on to become a mathematician or something, then you're going to be, you know, in a different kind of magnet school and that sort of structure.


So they starts segregating the kids so actually German manufacturing, I think its exceptional because those people who are, you know, running those manufacturing shops and managing those started when they were 12 or 13.


And so the country is probably one of the best in the world at, you know, high-end – high tech manufacturing, high precision manufacturing, high value at manufacturing and all of that. And quite frankly, they've been unaffected by low-cost competition in China and such.


And so – to the extent that we can learn, I think the one thing we can learn in terms of the – hopefully in the US system is to maybe try to see if middle school and high school can be changed.


So that in those period of time, we start identifying kids who are clearly showing, you know, direction and where they are likely to be headed. Not everyone will show that, but I think the ones that show that I think the education system needs to be set up to allow that. And so I actually got there by accident because of my dad.


And I think Gates and Buffett, I think also got there by accident because they just had the interest and pursuit it. And I think that they probably had no understanding that their brains were optimized to what they were doing at that age. And so that's a huge advantage.

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