Collection: Mohnish Pabrai - #47 'Be Truthful'

Video Link: https://youtu.be/79ooMBy3XWU

In this episode, Mohnish Pabrai shared why is it important to be truthful and why it takes a lifetime to build trust by telling the truth?

In this episode, you’ll learn:

  • The short term pain but long term benefit of being truthful.

  • What would Mohnish Pabrai choose between truth and diplomacy?

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



(Source: https://youtu.be/dnS5xWIxo1I)


In other facet of life – I mean, I think that – there's a big influence another book I read a long time back, I probably read this 15-16 years ago, called 'Power vs. Force.'

It's written by a guy named David Hawkins and he has a kind of controversial – controversial approach but the thesis of his book is that if I lie to you. And in your conscious state, you don't know I'm lying to you. In your subconscious state, you do.

And for most humans, the pipe between the subconscious and conscious are mostly clogged. But it is not fully clogged. So what would happen is that if I'm lying to you, you will get a feeling that you don't have a lot of interest in being around me, but you won't be able to tell why that is.

You know, and a good example is like you know, if you're in a used – if you are talking to a used car deal and he is giving you his pitch on why that Ford Pinto is such a great car. You know, you may not realize or understand what part of what he's telling you is a lie, but you generally get the feeling that you want to get as far away from him as quickly as possible.

And that is because you know, you can tell that there's something that he is saying that are probably not true.

Whereas, if you're hanging around with the Dalai Lama and he's talking, you probably want to increase that type of interaction as much as you can.

And so this – you know, the thesis of the book is basically humans don't particularly care how bad the truth is, but what they care about is that you're telling the truth.

So to give you an example, let's say my wife and I are about to go out to see a movie and have dinner and so on. And let's say she gets dressed and she asked me how the dress looks? And let's say I have a perspective that the dress doesn't look that great.

And so since I read the book, I changed my answers and I encourage to try this Arvind. (Laughter) That – when I'm asked by her, you know, how was the dress looks all this and that. I give an absolutely candid answer, even though I know that in the near term, it may lead to us missing the movie (Laughter) or the entire date getting cancel or various other negative effects.

But the long-term impact to that is, that she has a very high degree of trust that when I'm saying something to her, it is the truth.

And that long term has huge positive impact on both our relationship. So I would say that you know, in 2008 for example, our fund were down like 67% and you know, I very candidly communicate with my investors.

And obviously, first were they got the number which showed them what is going on, but I also clearly told them that it wasn't just the financial crisis that was causing these issues, that there were you know, we took zeros on some investments.

And those zeros were not entirely because there were financial crisis, although they were partially because of that, but a lot of it was my own mistakes. And you know quite frankly our withdrawals and redemption were pretty benign at that period. And you know, investors basically had trust and so I think that it takes a lifetime to build that trust.

It takes a lifetime to, you know, always say the truth.

But I would say that's a very important thing not to say the small lies, because the small lies add up and they erode trust. So as you go through your life, you know, when you run into situation where you have a choice between truth and diplomacy. You should choose the truth even if there's near term pain.

And if you repeatedly choose the truth, then long-term the payback are exponential.

And to some extent, I think that's exactly what Buffett does. You know, Buffett is all about candour, and he always starts with annual reports with the mistakes and with the bad news.

And he always tell his managers, give me the bad news first. And I think that's what – that's the way you want to live your life is you want to give people the bad news first. And you want to be candid about the values.

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