Collection: Mohnish Pabrai - #74 'How To Be Patient In An All-Time High Market'


Video Link: https://youtu.be/FOMM9rbyemI


In this episode, Mohnish Pabrai was asked how does he cultivate the right temperament when there is potentially multiyear periods where the market is telling him that he is wrong. And how does he build that sort of patient during those periods?


In this episode, you’ll learn:

  • How to be patient when market is at all-time high?

  • The character/temperament of value investors.

  • Mohnish Pabrai's life advice.

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

[Transcript]

(Source: https://youtu.be/7F2IGzES7Uc)

ARVIND NAVARATNAM 00:00

Many value investors right now, you know, you spend a lot of time talking about perhaps another Nifty Fifty situation. And it's hard to disagree with that assessment at all.


But you know, many value investors right now are clearly suffering within that context. And so I'll be curious to hear how do you cultivate the right temperament during these – you know, potentially multiyear periods where the market is telling you, you are wrong.


And how you build that sort of patient and levels and mind during those periods?


MOHNISH PABRAI 00:43

Yeah, that's a good question. Let me just mute you.


And so I think that's a great question and I think that – you know, we seen this before like for example, the Sequoia Fund when they first started, you know, I think for the first 5 years, they lag the indices. And of course, then they did quite well after that.


And in fact, even in the situation we have at Pabrai Fund – we have something similar because we also are lagging our benchmarks over the last 5 years. and I've always told investors that's the period over which they should have judge me.


And you know, I kinda feel strange when I go to them and say to them, now that – yeah, you should judge over 5 years but, you know – and add a but to it – because then that's kind of moving the goalposts. And so it just becomes somewhat difficult.


So what I actually did this year when we had annual meeting, I presented a kind of a summarized version of this to investors just to give a context about one of the reasons why we may not exactly be, you know, hitting it out of the park right now.


And just requested them to be patient and of course, I think we got an exceptionally investors group at Pabrai Fund. So I haven't seen you know, that many of them wanted to leave the seats or anything like that.


So it's worked out but I think – yeah, I think for me personally if I ignore the investors, it's a non-event in the sense that I'm really not concerned with what markets are doing. It's all about inner scorecard as Charlie Munger talks about and it's not worth focusing on the outer scorecard, if you will.


And so there it is – I have to stop sharing so now I can see all of you quite well. So that's very nice. And we actually, we have a few more humans that have shown up which is great. So hopefully, they're not crashing your class Arvind because you know, this is only for your class. (Laughs)


But anyway, I think it's more about Charlie Munger and more about inner scorecard where you basically focus on what we think are most important thing, and not focus so much on how the world look at you, focus on how the reality of what you think the world is all about. And so I always had a natural temperament and tendency to do that.


In fact, you know, like when we had the financial crisis and at that time, Pabrai Fund was down close to 70% in 2008. And of course, the market were down you know, less than 40% like 37-38%. So we did much worse than the market at that time.


And part of it was, you know, dumb errors on my part and part of it was just some of our stuffs got beaten up more than it should have. And you know, my wife never realised that there were such a big change in our net worth or in Pabrai Fund, or you know, 70% being down is a lot.



But quite frankly, you know the way I look at life is very simply which is that if wealth is lost, nothing is lost. And if health is lost, something is lost. And if characters lost then everything is lost.


So right now, this entire presentation is very sophomoric because we're only talking about the first variable. When are we going to – Arvind – have a talk which will focus on health and character instead of just money?


ARVIND NAVARATNAM 05:11

Well, I'm hoping that's the region that we are going to reach, Mohnish.


MOHNISH PABRAI 05:16

Okay. (Laughter) – (Inaudible) – Okay.


ARVIND NAVARATNAM 05:21

And Mohnish you know, we known each other for a long term and I always been a huge admirer of your ability to be level-headed. And (Inaudible) – you know, we were very fortunate to talk to David Einhorn before Thanksgiving. And he had the exact same philosophy.


And it's so wonderful to see that – just the strong character of these great value investors. So other question please, yeah.

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