AUDIENCE MEMBER 00:00
My question is. Out of the five strategies you mention require deep research in the business model, and to how much extent you rely on the open data source to the public? And do you have any unique or special channels for information to help you to make the decision?
MOHNISH PABRAI 00:16
Yeah so all my data sources are open because I am a very lazy investor. I never meet management. I never talk to management. I never travel to see any plants or anything. I've never done that for any investments and the results still work out.
So we are not looking for superior information. What we're looking for is superior analytics on commonly known information. So, for example, I mention the boom and bust of the shipping industry, and the gentleman asked me, "Is that going change?"
Well, number one is, it's never going to change because we have humans involved, and humans are housed on the emotions. And the second is that market participants – We have two advantages against market participants. One is we have analytics which can help us because we have some understandings that maybe markets are missing.
And the second is that we have patience. So, most investors don't have multiyear horizons. They want, you know, "I want to buy a stock at 10 and two weeks later I want to sell it at 12. Then I want to buy something else at 12 and sell it at 15, and I want to keep doing that."
Well, good luck. If that worked, they'd be Warren Buffett, because the compounding rate would blow Buffett's compounding rate. But clearly, we still have Warren Buffett in place so therefore that approach doesn't work.
And so if you have the patience and if you have the interest to really dig deep, then what you're going to find is if it's commonly held information or known information, you may come up with insights that others have not. So, you know, this is what Charlie Munger talks about the latticework of mental models. You look at things through a different lens to try to see what can be different.
Like, I would say that when my friend, Guy Spier, uses the mental model saying that if Moody's are the great business in the U.S. what other businesses are like that in the other parts of the world? That's a great model because you may be able to find a business in another part of the world where people have not realized what a great business they have. And that's why these things get to where they are.
And so you know like, for example, all my life, or at least all my investing life, I hated the automobile industry because it's a high CAPEX, it's unionized. You've also got consumer taste and you've got a lot of things which are not good about the business.
But when I studied the business for – I spent about six weeks studying the business and I actually realized that many of my underlying assumptions were wrong. And the reason the auto company had problems were for different reasons than what people think why they have problems.
So I did not have access to any data that is not publicly known, but I just synthesized it from many different sources to come up with some insights, and those insights were helpful. So I think – I think the thing is that – if you are a curious person, and if you are a person who's very deeply interested in business and how business works and understanding different business or industries, then you can do quite well.
1. Different investment time horizons allow investors to look at things in a different lens.
2. Curiosity is important but you need to know how to connect each dots to see a different story.