Mohnish Pabrai's Talk at Google on Entrenched Biases

Fund manager Mohnish Pabrai recently gave a talk at Google on how intensive stock research can be injurious to financial health. 

The video's description is "how the plethora of deeply entrenched biases and flawed evolutionary brain wiring makes us prone to make plenty of mistakes when picking stocks.  Specifically, the more time we spend analyzing a given business, the more likely we are to like it and invest in it. 

But if we don't spend time studying a business, how are we expected to understand its prospects and likely future?  This strong commitment bias is an important reason why most investment managers have trouble beating the index. 

Mohnish will lay out the origins of this bias problem and a few hacks to get around it."

Embedded below is the video of Mohnish Pabrai's latest talk at Google:



For more from this investor, we've posted Pabrai's talk on value investing as well.

For other investor talks at Google, we've posted many of those presentations and you can scroll through that link.

Chuck Akre's Talk at Google: Three-Legged Stool Investment Construct

Chuck Akre of Akre Capital Management recently had a talk at Google about investing entitled "The Peregrinations of an English Major Trying to Solve the Investment Puzzle."

If you're unfamiliar with Akre, he focuses on finding long-term compounders and runs a somewhat concentrated portfolio.  Here's notes from his talk:


Chuck Akre's Talk at Google

- Reads voraciously to this day.  Cited one of the very first books he liked: The Money Masters.  Also noted that 100:1 in the Stock Market is the book he took the idea of compounding from.  Said he read The Intelligent Investor as well as business biographies.

- What makes a great investment?  "Rate of return is the bottom line of all investing."

- Looks at free cashflow return and focuses on valuation as the key to compounding; buy it right.

- How do they identify investments that will generate above average returns?  "We like to fish in the pond of high return businesses."  Asks: what kind of returns on capital?  What are the net margins?  Thinks an 'average' business returns high single digits.  Cites Mastercard (MA) and Visa (V) with 30% margins.  "What is it about the essence of that business that allows them to earn returns that cause them to have a big bullseye on their back?"

- Three-legged stool:  Their investment construct that lets them think in simple terms.  First leg is the quality of a business: a high return business.  Second leg is operations: want management to have skill and integrity (a demonstrated record) and treat investors as partners.  Third leg is reinvestment: would love the company to put cash back into the business if there's great opportunity.  Cited the book Dear Chairman (which we've reviewed here).

- "I have never been able to learn from other people's mistakes.  I have to make my own."

- Wants to be an investor in a business rather than a speculator in shares.

- His goal is to compound capital at an above average rate while incurring a below average level of risk.  Volatility is only a risk in the short run.

- Akre's separately managed accounts over 27 years have compounded at 12.7% versus S&P at 9.4%.  Also has a partnership that's done 15.25% versus S&P 9.2% and mutual funds that have done 13.2% annual.

- Mastercard: originally purchased in 2010 at around $22 with regulatory worries around Durbin amendment.  Business has fantastic returns, had a low valuation (13-14x at the time).  "Their returns are so high they can't possibly find a place to reinvest their money, so our compounding is diminished modestly because of that."

- Moody's (MCO): Bought in January 2012 at $39.  Any company that wants debt has to get a rating on it and it's basically an oligopoly: MCO, S&P (SPGI), and Fitch.

- Enstar (ESGR): Been involved for 10 years.  They buy insurance that's in run-off.  Paid 3 times book when he bought shares. 

- Quotes Einstein: "You should make everything simple as possible but no simpler."  "We cannot solve our problems with the same thinking we use to create them."  "The only source of knowledge is experience."  "Imagination is more important than knowledge."  That last quote is what's on the front of Akre's book:

- Two of his best investments (100 baggers): Berkshire Hathaway (BRK.A) and American Tower (AMT).  "Most of the time you can buy these businesses at reasonable valuations... sometimes you can buy them at a steal."

- On selling: "The most difficult thing to do in our business is not sell, if you're a long-term investor."

- Bought Visa (V) because they have concentration limits in their funds and were bumping into that with their stake in MA.  Did the same with SBA Communications (SBAC) as it relates to their AMT position.  Gaining more exposure to the themes via competitors since individual position limits kicked in.

Embedded below is video of Chuck Akre's talk at Google:



We've covered many other investor talks at Google, including:

- Howard Marks' talk at Google

- Michael Mauboussin's talk at Google

- Jim Grant's talk at Google

Joel Greenblatt's Talk at Google

Joel Greenblatt is the founder of Gotham Capital and also author of the book The Little Book That Beats the Market.  He recently gave a talk at Google and here are the takeaways:


Joel Greenblatt's Talk at Google

- He thinks the vast majority of investors should index rather than pick stocks.  That said, he doesn't index and Warren Buffett doesn't either.

- Greenblatt said people are still crazy (human behavior) and the market has wild rides (50% drops in recessions, tripling in value afterwards, etc).  So there's an opportunity.  The key is obviously to buy when valuations are below average and sell when they're above average.

- He tells his MBA students at Columbia Business School: "If they do good valuation work, I guarantee the market will agree with them... I just don't know when."

- "Stocks are ownership shares in businesses."  Looks at how relatively cheap they are compared to other businesses, to history, etc.  Measure in absolute and relative value.

- Emphasizes being patient; market oscillates back and forth over the years.  Time horizons are shrinking so we're playing time arbitrage. 

- "Almost never have I bottom-ticked a stock."  That means most of the time he'll be down on a stock at some point.  There's two reasons why: he's either wrong or just needs more time for the thesis to play out.

- Greenblatt also wrote a book called The Big Secret that he joked is still a secret since no one read it.  But he's also authored a wildly popular investing book with a cheesy title: You Can Be a Stock Market Genius

- "To beat the market you have to do something different."

- Runs 100% net long but it's typically achieved via 170% long and 70% short.  They determined the leverage amount based on returns.

- The market's been cheaper 83% of the time based on current valuations.  Based on this, market could see 3-5% returns over the next year and then 8-10% over the next two.  Not a prediction though he said.

- "Stock investing is figuring out what a business is worth and paying less."

- Harped on the importance of compound interest tables.  Start investing as early as possible.

- Thinks there's still a lot of groupthink going on.  If you're good at taking 'unfair bets' in obscure places that other people aren't looking, you can do well.  But eventually you'll have too much money to play in that arena anymore to have it move the needle.

- On Apple (AAPL): "I think it's cheap relative to other choices right now."

- "Your job is to be cold and calculating, and unemotional.  Unfortunately, people are human.  That's good news for us, but the stats are against you."

- "The last man standing is patience.  We call it time arbitrage.  That's in really short supply.  It's not getting better, things are moving faster... and less patience." 

- For more from this investor, we've also posted up Greenblatt's interview with Consuelo Mack

Embedded below is the video of Joel Greenblatt's talk at Google:



We've also posted a bunch of other investor talks at Google, including:

- Howard Marks' talk at Google

- Michael Mauboussin's talk at Google

- Jim Grant's talk at Google

Jim Grant's Talk at Google

Jim Grant of Grant's Interest Rate Observer recently held a talk at Google.  His presentation focused on his book entitled, The Forgotten Depression of 1921: The Crash That Cured Itself.

He looks at high unemployment, a collapse in commodity prices, surge in bankruptcies and a sharp decline in stock prices.  His talk recreates the scene and deconstructs the situation.

Grant talks about how all of his Wall Street brethren spend every heartbeat focused on accumulating as much money as possible, but very few of them think much about the actual thing they're constantly amassing.

Embedded below is Jim Grant's talk at Google:



You can pick up a copy of James Grant's book here.


For other investors' presentations at Google, we've also highlighted Howard Marks' talk, as well as Michael Maubboussin's talk at Google.

Mauboussin's Talk at Google: The Success Equation: Untangling Skill & Luck

This week, we're posting up the various "Talks at Google" that focus on investing.  These typically feature authors of well known investment books.  Next up is Michael Mauboussin who talked about his book The Success Equation: Untangling Skill and Luck in Business, Sports and Investing.

Mauboussin is well known for his work on the more psychological/behavioral aspects of investing.  We've previously featured his talk about developing an investment process.

His talk touches on the concepts of the roles luck and skill play in success and failure and how you can provide a framework to analyze their contributions.

Embedded below is the video of Mauboussin's talk at Google:



Be sure to check out Mauboussin's book The Success Equation as well as his past work, Think Twice: Harnessing the Power of Counterintuition.

Jason Zweig's Talk at Google: The Intelligent Investor & The Devil's Financial Dictionary

This week, we're posting up the various "Talks at Google" that focus on investing.  These typically feature authors of well known investment books.  Next up is Jason Zweig who talked about The Intelligent Investor and his latest book, The Devil's Financial Dictionary.

The latter basically sums up his learnings across three decades as an investment journalist.  Yale professor Robert Shiller said of the book: "This is the most amusing presentation of the principles of finance that I have ever seen."

Embedded below is the video of Jason Zweig's Talk at Google:



If you haven't read his newest book yet, check it out: The Devil's Financial Dictionary.  And don't forget the instant classic as well: The Intelligent Investor.

Howard Marks' Talk at Google: The Most Important Thing

This week, we're posting up the various "Talks at Google" that focus on investing.  These typically feature authors of well known investment books.  Next up is Oaktree Capital's Howard Marks.  He is the author of The Most Important Thing: Uncommon Sense for the Thoughtful Investor.

Marks often shares wisdom in periodic memos that we always post on the site (you can scroll through his past letters here).  His thoughts are widely read (even by the likes of Warren Buffett) as they constantly feature enlightenment on various investing topics.

He is known for his belief of investing as part psychology and part finance.    In this talk he shares his wisdom as well as origins and inspirations for the book.

Embedded below is the video of Howard Marks' Talk at Google:



You can read Howard Marks' book The Most Important Thing here.

William Thorndike's Talk at Google: The Outsiders

This week, we're posting up the various "Talks at Google" that focus on investing.  These typically feature authors of well known investment books.  Next up is William Thorndike who talks about his popular book, The Outsiders: Eight Unconventional CEOs and Their Radically Rational Blueprint for Success.

This book was recommended by Warren Buffett in his 2012 annual letter. The Outsiders basically looks at 8 CEO's that have excelled at capital allocation and shareholder value creation.

The book almost has a cult-like following in that investors have latched onto the fact that management is a critical part of any investment.  As such, investors are always trying to find the next 'Outsider.'  This book has also been referenced in numerous hedge fund letters over the years.

In his talk, Thorndike talked about certain CEOs who might potentially fit the mold in today's markets.

- Jeff Bezos (Amazon.com ~ AMZN): Though he admits to not studying the company too terribly in-depth, he believes Bezos is probably the best CEO example in tech given his 5-10 year focus on per share value.

- Nick Howley (TransDigm Group ~ TDG): Specialized aircraft components roll-up.

- Rales Brothers (Colfax ~ CFX): This is a re-up of the playbook they ran at Danaher, but with more cyclical businesses to start.

- Mark Leonard (Constellation Software ~ CSU.TO): Software

- Mike Pearson (Valeant Pharmaceuticals): He said it was still 'early days' in assessing this one, but obviously this one has kind of blown up.  It should be noted that Thorndike's talk was published on October 2015.

- ArchRe

- Mini Berkshire insurance companies: WhiteMountain, Allegheny, Fairfax, Markel

- NVR: Homebuilder


Embedded below is the video of William Thorndike's Talk at Google:



If you haven't already, be sure to pickup a copy of The Outsiders.

William Green's Talk at Google: Lessons From the Great Minds of Investing

This week, we're taking a look at some "Talks at Google" that focus on investing and feature authors of popular books on the subject.  Previously in one of our "What We're Reading" posts, we featured William Green's book, The Great Minds of Investing.

If you haven't already, we'd recommend checking it out.  Green has had the chance to interview many well known investors such as Seth Klarman, Howard Marks, Joel Greenblatt, Tom Russo, Mohnish Pabrai, and many more.

But also worth your time is this: the author recently had a talk at Google about Lessons From the Great Minds of Investing.  The video of his talk is embedded below:



And you can read William Green's book The Great Minds of Investing here.