TTU119: The Secret to becoming Richer, Wiser, Happier ft. William Green

Niels
Hey everyone, and welcome to another edition of Top Traders Unplugged, where today I’m joined by William Green, the author of one of the best books that I have ever read called Richer, Wiser, Happier; which really is a fitting title for what the book is all about.
So, first off, William, thanks so much for joining me today. I really am looking forward to our conversation.
How are you doing? How are things where you are?

William
I am great. I’m happy to be here with you. As I said to you before, I’m a little sleepy because I have a twenty year old guitar playing, mandolin playing, singing daughter who is home from college and managed to wake me up in the night. So, it’s a contest between the coffee and my sleepiness, but I’m delighted to be here with you. Thanks for having me.

Niels
Fantastic, excellent.
Now, I said that your book is one of the best that I have ever read but, as I shared with you earlier, I actually did not read it. Instead I got the audio book and I listened to it this summer, driving from Switzerland to Denmark, which takes about twelve hours – about the same length as the audio book. So, I highly appreciate that you made this journey so much more enjoyable for me and our golden retriever.

William
Ah, thank you, I like the audio book. The audio book is recorded by a guy called Raphael Corkhill, who I met for lunch in New York City a few months ago, and became friends with. It was kind of lovely. He’s an old Newtonian, so, he and I went to the same school but he’s much younger and better looking than I am. So, he acts in movies and he’s multi-lingual. He has the very chiselled, unusual face. So, he often plays Russian gangsters. I think he speaks Russian, and he looks like a bit of a gangster but then he has this extremely posh English accent. So, it’s one of the pleasures, unexpectedly, of this book is that I’ve actually become friends with the narrator.

Niels
Yes, absolutely, that’s wonderful.
I would like to start out by saying that one of the reasons that I’m so excited about having you on the podcast is that from listening to your book and from hearing you speak on other platforms, I feel that you represent and embody a lot of values that we strive for on this podcast.
You come across very generous and authentic and you’re also quite humble and vulnerable when you talk about your personal journey. I’m curious to know if you agree with my impression and how you became who you are today with these qualities (if I can call them that).

William
Yeah, that’s kind of you to say. I don’t know if I’m particularly humble. I think probably, like many writers, there’s a strange combination of characteristics where there is some aspect of arrogance to a writer because you’re saying that people should be interested in what I say.
There’s also this tremendous insecurity and vulnerability, I think, often with writers because I think you have to be worried about being wrong and always to be questioning yourself and always to be thinking, “Yeah, but what if I’ve missed the truth about this person I’m writing about? Maybe I need to do an extra call. Maybe I need to fact check more. Maybe…”

So, there’s this strange combination of arrogance and vulnerability and I think, often in professions, when you look at high performers in different professions (not to say I’m a particularly higher performer but you know what I mean), high performers in various professions, I think, tend to have these slightly contradictory traits that don’t naturally go together but come together in some magical chemical way that creates something unexpected. So, yeah, maybe there’s humility but there’s also arrogance, and pride, and ego, and all of those flaws.
So, for me, it’s a constant battle, a struggle to try to improve. So, If I’ve managed to fool you from my various interviews and the like into thinking that I’m humble that’s a good sign. Maybe you’re picking up on something that I aspire to be, one day.

Niels
You never know.
Now, one other thing that I was thinking about in listening to your book and preparing for our conversation today is also, as a writer (and I’m not a writer), and in this space of investing, there’s no shortage of books being written on investing. I was just curious, how did you find your voice when you wanted to get into this particular topic, but you also wanted to make it different and to make it your own, make it unique? What kind of process did that take in terms of getting to how you write today?

William
It was a very long process for me, this book. I wrote it over about four or five years and it was based on interviews that I’ve done over the last twenty-five years. So, I had ruminated on all of these interviews for many years. Then, when I started to write this book, I kind of went crazy and interviewed more than forty people for the book. In some cases I would spend two days, five days, with the person that I was writing about. So, it was pretty intense.
So, I was all in. I had written stuff before. I had written for magazines a lot and I had edited magazines and I had ghost written books and I had collaborated on books. This one was, in some ways, my big break (but that sounds sort of facile – silly), but this one felt like the stakes were the highest they had ever been. This was the first time where I was really flying solo, doing my own thing. So, I had total possession over the project. I wanted it to be really true to who I am. I’m pretty idiosyncratic and so I have these strange interests in things like philosophy and spirituality and literature and the like. I see them as being very connected to investing.

So, one of the stresses internally, and probably externally, was is anyone going to be interested in these things that actually interest me? It seems pretty strange to write about morality and ethics and how to deal with uncertainty and the fact that everything is changing and yet we have to make decisions about an unknowable future. For me, to look at that through a Buddhist lens and say, “This is really interesting because the Buddhists have been talking for thousands of years about the fact that everything changes and that’s related to the market.”
So, that was kind of scary because I was bringing in all this other stuff that I’m deeply interested in and that, on the whole, Wall Street wouldn’t be interested in. So, there’s a point, for example, where I’m writing about Nick Sleep and Qais Zakaria, who are these two legendary investors. But when I say legendary, they were also almost unknown because they were so off the radar. They were obsessed with Zen and the Art of Motorcycle Maintenance. So that, for me, is a perfect example of something where I can go deep on these fairly philosophical questions and say, “Look, it’s related to investing.” But, as I said kind of jokingly in the book, most Wall Street investors are not interested in mystical mumbo jumbo about motorcycles, which is what that book is about.
So, I was writing about these things that were very true to me but until the book comes out you have no idea if they will resonate. So, it’s kind of a terrifying experience writing a book. If it’s really true to your own craziness. What has been kind of wonderful about the reception of this book has been the things that I was taking the biggest risk on I think have turned out to be the things that resonated most deeply.

There’s a tremendous pressure to conform whether you’re writing, investing, doing anything. The terror of not conforming and being true to yourself is so extreme and yet that, I think, is where the real prize lies. So, for me, when I look back on the whole experience, the great satisfaction (in retrospect) is that I took this gamble of trying to be true to myself.

I’m not saying that in a self congratulatory way, I’m actually saying it in a way that I think if your listeners think intensely about this question of how to be true to yourself, it sounds like such a platitude, but it’s so incredibly important. What’s tricky about it is that we don’t even really know what our self is. So, you’re trying to be true to something that is pretty illusive. It comes into focus during the process of writing a book, or setting up a fund, or building a business. Then you look back and you’re like, “Oh, that’s what I did! That’s what I’m like!”
So, when I look at someone like Nick Sleep, for example (who I’ve become friends with as well since writing the book), I can see that he’s just obsessed with this idea of quality that comes from Persig. When I look back I’m like, “Oh, that’s why Nick’s story resonated so deeply with me,” because I’m obsessed with quality as well. When I see his ornery ability to go his own way and defy expectations, and Zak as well; just tremendous outsiders doing things their way. I’m like, “Oh that’s what I’ve been obsessed with doing all these years is doing things my own way.”

I can see, when I look back on my career, just how frustrating it was to be in all of these institutions where I was trying to be loved and approved and be great and be admired and fill this deep sort of psychic hole so that people would be like, “Yes! You’re fantastic!” It never quite worked. Then, when you break free, when you’re like, “Ah, fuck it, I’m just going to try to be true to myself.” That’s so powerful and it’s so scary but I’m pretty sure that’s the best course for me, at least.
So, both for investing and for writing there is this inner journey that I think is absolutely key. Maybe that’s why the book has resonated with a lot of people is that they sense that it is an inner journey. It’s an inner journey for me and it’s an inner journey for the investors that I’m writing about. They’re not just making money. That is the game. That’s the outer part of the game. But it’s also a pursuit of truth. You’re searching for truth as an investor and your searching for truth as a writer. That’s incredibly illusive and enigmatic. Both of these things, writing and investing, are a quest for truth in a very murky and uncertain and changing world where we don’t really know much.

Niels
Yeah, I completely agree. I think that a lot of successful people have gone through that same process and realized that just by being themselves, even though it’s incredibly hard and, of course, you have to be very vulnerable when you are, but that is actually how they get their breakthrough.
This is great, William, because I think that’s exactly what I took away from the book as well.

William
Can I just mention, Niels, because you said something really important, there is a beautiful phrase from Josh Waitskin, who I admire a lot, who wrote this great book The Art of Learning and who has been an athlete and a chess champion and a coach to hedge fund managers. He talks (I think I stole this phrase once from an interview that he did with Tim Ferris) about “unobstructed self expression”. That’s a really beautiful and important concept. What you’re looking for, at the highest levels of any profession, I think, is unobstructed self expression.
So, your craziness, and your eccentricity, and your weird skills have to somehow be part of your success. You can’t play somebody else’s game and really reach the highest level, I think. You feel misaligned in some way. So, there is this element of the inner journey where you’re looking to get to a point where you’re like, “Oh, that’s who I am!” To structure your business or your fund or your writing career or whatever it is in a way that’s truly aligned with who you are in an unobstructed way is a very profoundly important thing.
It’s difficult because it changes as well. Who you are changes, your circumstances change, so, it’s not a static thing where it’s like, “Great! I figured it out!” It’s constantly changing and so you’re always slightly uneasy.

I do think that’s the goal. When I look at a lot of the great investors that I’ve written about, they strike me as being pretty aligned with who they are. There is a degree of unobstructed self expression, whether it’s a Mohnish Pabrai, or a Joel Greenblatt, or an Ed Thorp. These are people who are, I think, true to themselves. I think that when you’re feeling misaligned in your own life you kind of know it and you’re like, “Yeah, this just doesn’t quite feel right.” That’s actually a pretty helpful feeling because it pushes you. It’s so uncomfortable that it pushes you to say, “Nah, this isn’t working. What am I going to do to change things up so I actually am more aligned with who I am.”

Niels
Yeah, cool.
I’m going to stay with the process before we dive into the book, although we are going to talk about your latest book which is Richer, Wiser, Happier, of course. As I said before, I encourage everyone to get a copy of it and maybe an extra one for someone that you care about.
I want to start at a slightly different place. I can only imagine that, with so many years of interacting with the world’s lead investors, spending countless hours (days even), over many decades in their company, you could have written a much longer book. To get a glimpse into how your mind works, perhaps you could start out by talking a little bit about maybe some of the people, maybe some of the stories that you did not put into the book, and how you decide whether to include something or whether to leave it out.

William
Yeah, there was a lot of pain involved in leaving certain things out because if you get deeply inside someone’s head and deeply inside someone’s life, who you have been interviewing either over years or over days or over many hours, you feel slightly guilty. There’s almost this sense of betrayal not writing about them at length. To some degree it was just impossible because I take so long over everything; I’m so obsessive about both the reporting and the writing that I simply couldn’t go deep on everything. So, that was kind of painful.
So, at a certain point I just, for example with someone like Bill Miller who I have spent, probably, ninety hours or so interviewing over the last twenty something years and who was the most successful mutual fund manager of his generation and has an extraordinary history and an incredible mind. I write about him in multiple places and he’s in the epilogue of the book, which is kind of a very important position to be in. So, he plays an important role but I wish I had written an entire chapter about him.
At a certain point I just thought that I have so much, that if I really go and write a big chapter about Bill, it’s going to take me five months and my editor is going to kill me because I’m already two years late on this book and I just can’t do it and I’m going to save some stuff for the next book. That was how I justified it emotionally to myself. It is kind of torture to have amazing material and not be able to use it.

On the other hand, what I really was doing when I was writing this book, was saying, “I’m not going to save anything for another book. I’m going to do this as if this is the last thing that I ever do. I’m going to put my heart and soul into it.” So in a way it’s like a psychological trick that you’re playing on yourself to say, “Well, I will do another book and I’ll be able to do more on this subject, this subject, and this subject.” So, people also like Jeff Gundblach, who is the king of bonds who I spent probably three hours or so doing this amazing interview. I give him like one sentence, or two sentences in the book. So, I had to also say, “OK, I’ll come back to that. He’s a very, very interesting guy; curious guy.”

Partly what I kept doing, because there was so much time I spent on my own working on this book. So, you’re really thinking deeply. It’s like this strange, monastic life where you’re just constantly thinking about what you’re writing and the people that you’re writing about. So, partly what I kept doing is saying, “What’s the eye of the eye of the bull’s eye here?”

So, if I had, say, thirty hours of interviews with someone, it’s hundreds of pages of notes. Then books by them or about them or all of their shareholder letters, or just enormous amounts of material. You would look at this stuff and it’s pretty overwhelming. My mind is pretty scattered. So, I would write these enormous outlines where I’m trying to figure out, this goes here, this goes here, but then you’re thinking, “OK, what’s the eye of the eye of the bull’s eye?” If I’m writing about, say, Charlie Munger, what’s the single most important thing that people need to know about Munger? What’s the single most important thing that people need to know about Sir John Templeton?

So that, for me, was a very useful organizing principle or strategy: that sense of just going for the true essence of something. Otherwise it just becomes overwhelming.

I did that with pretty much every chapter. Every chapter has, probably, an anchor character in it who is the main character. Then there are often other characters who I am working in. Sometimes I write about someone like Michael Price, who is one of the great value investors of all time – again, a paragraph; or Peter Lynch who I interviewed twenty years ago; or Jeff Vinik who I interviewed who was, I think when he was about thirty-three, managing the Fidelity Magellan Fund, which is the biggest mutual fund in the world. I had an amazing interview with him many years ago, and I’m just taking a few paragraphs and all I’m doing is saying, “Look, it connects to what I’m writing about with Will Danoff, who is now, probably, one of the giants of Fidelity.
So, when I was looking back I’d be saying, “God, this is crazy!” I have interviews of the last twenty years with Peter Lynch, who was the giant from Fidelity talking about what he learned from his boss who was the founder of Fidelity, Ned Johnson. Then I have the next generation, Jeff Vinik, who ran the Magellan Fund who was a giant of that generation; then I have Will Danoff and Joel Tillinghast who are the giants of the last twenty or thirty years.

So I would have, what is that, four generations of Fidelity giants. You’d have to think, “What could I actually include?” So, that sifting process is torture. I wonder if it’s the same with an investor where you have to say, “Well yeah, there are thirty-seven hundred stocks, or whatever, in the U.S. and I only need to own ten of them, or five of them, or twenty-five of them, or something. So, there’s always this sifting process; always this process of getting to the essence and kind of purifying.

I had a discussion with a friend of mine a few weeks ago, a very good hedge fund manager called Josh Tarasoff, and we were talking about Alibaba, and he’s half Chinese, and I was saying, “Do you own any Chinese stocks?” He was like, “No, no.” He said that at a certain point he said that he had owned Alibaba a few years ago and he said that at a certain point he was in this group of people that were discussing Chinese stocks and he realized that this is really difficult and I only need to own ten, or maybe twelve stocks. I don’t need this.
So, I thought that was a really interesting piece of self discipline to be able to stick with the thing that for him was the eye of the eye of the bull’s eye. I think this sifting process of concentrating on the really important things; the essential things in any area of your life, is really critical.

Niels
Yeah, I completely agree.
Now, the book, of course, it is a tribute to some of the greatest investors of all time. Many of them we know and many of them we associate with having the best track records out there. We will certainly dig into some of those characters. What really caught my attention was your own selection of a role model who is not famous and he doesn’t have a billion dollars to his name, but rather someone who was born in Amsterdam, I think, just before World War II was starting. So, what is (to use your own phrase), what is the essence of Arnold Van Den Berg? Why did you choose him as your role model?

William
Yeah, when I started work on the book I had interviewed Arnold for a previous book that I had written: The Great Minds of Investing, where I didn’t have full control and I had become kind of mesmerized by him. We talked a lot. When I wrote my book proposal, which I sent to Scribner, which is a famous old imprint of Simon and Schuster, and it’s where people like Hemmingway and F. Scott Fitzgerald wrote, I know that Arnold was going to be a key character.
He and Mohnish Pabrai were the very first people I went to interview when I was working on the book. So, I arranged to go and spend two and a half days, I think, with Arnold Van Den Berg in Texas. My editor, when he responded to my book proposal, one of the comments that he made was, “I don’t understand why Arnold Van Den Berg is in the book.”

So, one of my challenges was, “I’m going to make clear why Arnold is such a key character, and I’m going to end the book with Arnold because he is so important. He embodies something that is so important.” So, that challenge from my editor, in a way, was very helpful because it forced me to think through why I admire Arnold – what’s important about him.

I think the reason that Arnold is so important is that he embodies what actually constitutes a successful and an abundant and rich life. So, if I’m writing a book about wealth and wisdom and happiness, and I’m writing about a bunch of people who made hundreds of millions or billions of dollars but they’re not very admirable, in some cases, then that’s going to leave the reader a little cold. They may not know it because they may have gone to read the book just because they want to get rich, but I’m trying to say, “No, no, no, no, richness goes much deeper than just making money.” Here’s a guy who embodies real wealth.

Part of what is extraordinary about Arnold is that he started in such an unlikely circumstance where everything was stacked against him building this extraordinarily successful life. He was born in 1939 on, basically, the same street as Anne Frank, in Amsterdam.
He was a Jewish kid placed in hiding for the first couple of years of his life, by his parents, who were terrified that that Nazis would come in and search and find him and his brother, Sigmund, and they’d all get taken to Auschwitz and killed. The kids would typically be the first to be killed.

He started under the worst possible circumstances. So, that already is interesting because here we are, we’ve all comparatively had pretty easy lives and yet we complain a lot about how miserable we are and how difficult everything is. Arnold takes this terrible hand that he is dealt, early on, and somehow turns it into a winning hand.

So, I wanted to tell the story of just how dramatic that transformation was. So, I went deep into his early years talking about how his parents, basically, took this gamble where they said, “We need to put him in hiding, not just in the house, because if the house is searched we’re all toast.” So, they contact the Dutch Underground and it goes that a total strange, a seventeen year old girl who I name in the book, took him (at risk of her own life and her parent’s lives) across the country to an orphanage in the countryside where he was hidden for the next four years.

He basically spends four years in this orphanage where he’s virtually starving. So, they thought he probably had malnutrition because he ate so poorly in these critical years of his life and it may have damaged his brain. By the time his parents, who were sent to Auschwitz but who miraculously managed to survive, by the time they came to pick him up, when he was six, he didn’t recognize them and he couldn’t really walk. He was mostly just shuffling around on his knees. He said his father was terrified to pick him up because he was just skin and bones. His father thought he would break. His father wasn’t even sure it was him. It was about as bad as it could get.

He had told me a story, recently, where, if I remember rightly, his father sung a song, or he sung a song to his father and they realized, “Oh, that was the song we used to sing.” That was how they were like, “Oh, OK, we got the right person. It’s the right family.”
So, you have this terrible childhood. He assumed that his mother actually didn’t want him and that was why he was sent away. He didn’t realize that his parents were saving his life. So, there’s a sense of abandonment, malnutrition, he was separated from his brother, Sigmund, who was raised by a couple who hid him on their farm. So, he was away from his brother.

The orphanage, even though they saved his life, was a tough place. I remember him telling me at one point (I don’t think this is in the book) that he took some water, I think from the well, because he was really thirsty and they hadn’t given him enough. One of the nuns (I think it was) hit him incredibly hard in the face. He must have been five or six or something and I think many years later she came to visit the family in Los Angeles and she had taken care of him and he refused to see her. She came to visit them, I guess, years after the holocaust.
So, it was tough; it was intense. You like these clean stories where everyone behaves well and the orphanage that takes care of you, they’re all wonderful and saintly. No, they’re humans too and they were struggling and they didn’t have enough food.
So, then he goes to Los Angeles to this very difficult neighborhood, like East Los Angeles. He’s a poor kid. His Mom dresses him in lederhosen on his first day at this rough school and he just gets beaten up on his very first day. So, he becomes this really tough kid; this street-wise kid who was a real fighter, but initially was so weak and so malnourished. He said that when you’re like that you’re just prey. People just prey on you.

I was really fascinated by the odds against him of a successful life. He heard very early on his mother talking to a psychologist, because his parents were worried about him, and he overheard the psychologist say, “Well, maybe his brain is damaged. Maybe that is why he’s doing so badly at school because he just couldn’t eat during these really formative years.”

He grew up thinking he was stupid. Then he barely gets out of high school. He showed me his high school transcripts and he said, “Look, I had two classes of shop, and I had acapella and I’ve got such a bad voice that the teacher told me just to mouth the words rather than sing them because I would wreck the whole chorus.” So, he has true humility. He’s telling you everything that you shouldn’t say when you’re trying to impress an interviewer who is writing about you.
You get this picture of this guy who didn’t really stand a chance and then he marries his high school sweetheart and she runs off with another man. So, he’s totally broken hearted, he’s depressed, he’s full of rage against the Nazis, he’s full of rage against his parents because, again, these stories are not simple.

So, his father, who is a very honorable, very noble, very truthful man who survived Auschwitz and had a great sense of ethics was also violent and used to hit him. At a certain point Arnold hit him back and his father was just sort of sitting in the living room, I think with his head in his hands, kind of choked up, and he was like, “I can’t believe you would hit your own father.” And Arnold was like, “Yeah, not only did I hit you, next time I’m going to hit you first.” That was when his father stopped hitting him.
Likewise, he had a terrible relationship with his mother who was an extraordinary character; incredible personality, but difficult and would literally spray him and his friends with her hose because she disapproved of his tough friends who used to back him up in fights that they got into, but he’s still friends with those guys, in his 80s.

So, I was really fascinated by this story because if you think about many of the great investors, they were handed their success (to some degree). They went to Wharton, or Columbia Business School, or Harvard Business School, or whatever; they were bright; maybe they had loving parents; maybe they had a brother who was smarter than them of something and they had a chip on their shoulder, or whatever, something that drove them (who knows). But they weren’t as broken, fundamentally.

Here is Arnold, who had nothing going for him, and was a psychological mess, full of rage, full of resentment, full of depression, and yet turned it around. That, to me, is an astonishing success because what you’re doing is you’re taking the worst possibly hand and playing it brilliantly. So, I wanted to tell that story because it’s a way of saying to people, “Everything, really, is about consciousness. It’s about how you take control of your own mind; of your own inner landscape.” What Arnold did is he took control of his mind.
So, he would very consciously do things like, when he was full of rage and anger he would say, “No, I’m a loving person.” He would say it to himself over, and over again. “No, I’m a loving person.”

So, this gets to a really important theme that I wanted to make a central theme of the book (even though maybe it would seem crazy in an investing book), which is to say, you can be as rich as you want, and as successful as you want, but if you don’t master your inner landscape then it’s all worthless. So, if you’re unbelievably successful but your depressed, or you’re angry, or you’re full of hate, or you’re full of envy, your life can be hell.
So, there’s a big strain in the book of thinking about this inner landscape, whether I’m writing about Sir John Templeton; or Bill Miller and his use of stoicism to get through really difficult periods in his life; or Arnold Van Den Berg using self hypnosis, affirmations, studying all these different spiritual paths. That to me is really critical because I was trying to explain that if you want a rich life don’t just focus on the outer stuff. There’s got to be more to this game. There’s got to be this inner triumph.

One of the things that became very noticeable, as I explained how Arnold has transformed his life, was that part of it is that he is very sharing; that he gets out of his own head and is taking care of other people. I was having a conversation with Nick Sleep a couple weeks ago, who does an enormous amount of philanthropy and he was saying much the same thing because he’s very involved in helping people with depression or who are suicidal. He’s one of the philanthropists that is involved with and helping those people. He was talking to me about the importance of getting out of your own head when you’re miserable, and helping other people. That, weirdly, is the path to your own salvation. I see that with Arnold.

I see part of Arnold’s happiness is that what he’s focused on the whole time is helping other people. So, I wanted, also, to give that sense of what the recipe is for a rich and successful life and that a key part of it is that, yeah, “A” you’ve got to get control of your thoughts and emotions (which Arnold did brilliantly), but “B”, there’s got to be this element of service; of something beyond your own ego. That, to me, is a really profound truth in life.

There’s a beautiful teaching in Kabbalah which is this sort of ancient form of wisdom that I’ve studied for, perhaps, the last thirteen years or so. They talk about how we naturally have what the Kabbalahists would call “the desire to receive for the self alone.” It’s me, me, me; how am I going to make money for me; how am I going to get a bigger house; how am I going to get my new kitchen; how am I going to get a Tesla (or whatever)?”

What the Kabbalahists say is that you take this desire to receive for the self alone and your trajectory, over the course of your lifetime, is to transform that desire into the desire to receive for the sake of sharing. So, you still want all those blessings: you still want a nice house, you still want financial independence, you still want a beautiful family, and good relationships, and health, and all of those things; but it’s to share.

That’s such a profoundly important lesson, to me. In some ways Arnold became a way for me to kind of explore that theme. I think there’s nothing more important. That’s our journey is to transform the desire for the self alone into the desire to receive for the sake of sharing.
It sounds like a platitude but I think, like most true things, they’re pretty simple. When I see someone like Arnold, who is now in his 80s, I’m like, “Oh, he did it. He actually transformed his selfishness, his rage, his depression, his self doubt, into being loving, kind, sharing, decent, honest.” When you see it, up close, you feel it. You’re like, “I want to be more like that.”

So, it’s a very long winded answer to your question, but I think you want to find a role model, in life, who embodies the best of what you want to be. It’s not just the money, Arnold (I talked to him a few weeks ago), he was gearing up to celebrate his 50th wedding anniversary with his wife, who he loves.

He works with his son, Scott, and I see their interactions. I see how much Scott and he love each other. One of the things that was so moving to me when I was working on the book was that I was sitting in Arnold’s office, in Austin, where we spent a couple of days together, and he starts going through all of these old clipping folders that he’s got of old articles about Scott, who is now president of their investment firm. There are these pictures from when Scott was a kid. He was a little, vulnerable kid who then became a shot-put champion. He became a shot-put champion because Arnold hypnotized him, and coached him, and transformed his mind. He took this little, vulnerable, weak kid (physically and emotionally), and transformed him. I remember Scott saying to me, “Yeah, I’m the only person whose Dad used to tuck him in at night, when he was 18.” Because he (Arnold) would hypnotize him at night, before he went to bed.

As Arnold is looking at these old clippings about Scott, he really starts choking up, and I could see from all these years back, just how much pride and joy he took in this kid. What was really extraordinary, that I really don’t talk about often, is that Scott was the child from previous marriage of his mother’s. So, Arnold, who had been raised in an orphanage, takes in this kid who wasn’t biologically his kid and loved him so much.
To see that relationship. That was a relationship by choice. It wasn’t biology. They love each other because of the way Arnold behaved to Scott. There is something very deep and profound and moving there. This is not to say that Arnold is a perfect human being, or whatever. I’m sure he has his flaws, but I spent a lot of time with him.

That’s a very powerful role model in life to see that and to think, how do you build a relationship with your kid so that decades later they’ll want to work with you; they’ll look at you with that sort of love? You want to ponder on that, I think, how do you get to that result, where, at 83 (82, maybe 81, something like that) you look back and you have those relationships; so many people admire you and have been helped by you?
So, that’s why I ended the book with him. He’s not intellectually brilliant. He’s smart but he’s not intellectually brilliant. He’s not the richest person in the book. He doesn’t have his private plane. he doesn’t have his yacht, but there’s deep, deep success there.

Niels
Yeah, I think that’s lovely. I appreciate you taking time to go into that level of depth. It doesn’t just talk about the fact that you chose him but I think it also goes (just to give people a glimpse) that this a book that is much more than about investing, and we’ll come to that.
Now, of course we can’t talk about all the characters in your book.

I’ve chosen a couple of ones that I wanted to go into in a little bit more depth, then you can bring up anyone you want, of course. Just something that, again, appeals to me not for the obvious reasons, perhaps, but in your chapter six you write about an unconventional investment partnership where the rewards fall to those who resist the lure of instant gratification.
Because I think this is so much at odds with how the investment world functions, today, but it’s really very close to how my journey within this kind of long-term trend following operates. I would love if you could talk about Nick Sleep and Qais Zakaria and then Nomad Fund and just sort of their story and some of the things that you’ve taken away from that.

William
Yeah, Nick and Zak are these very, very unconventional people who were total outsiders within the investing world. As I write in that chapter, Zak, whose family had fled from Iraq with nothing (I think they had a Volvo that someone had given them along the way), they were taken in, in the UK, by (I think) a Catholic charity who helped them. They really had nothing but had been quite powerful in Iraq. His father had been successful and then they’d been purged.

So, he was a total outsider who wanted to become a meteorologist and his parents thought it was stupid for him to be a meteorologist. So, he never intended to become an investor. Nick studied geography and geology at Edinburgh University and wanted to be a landscape architect and got a job as a landscape architect and got laid off. So, he was like, “God, what do I do?” He wanted to stay in Edinburgh because he and his wife had bought an apartment there. So, he was looking around and thinking, “What does Edinburgh do that it’s good at? Well, there’s IT, so I could get a job in IT, and there’s investing.” So, he reads an obscure book about unit trusts and the like and he’s like, “Oh, that sounds interesting. It’s an intellectual pursuit – a search for truth, that could be interesting.”
They both started off not coming from the traditional route, not getting MBAs, not being interested in finance, not really caring that much about money. Then, it was much more about the search for truth for what makes for a great business, for example? What’s the best business model?

They were almost like philosophers within the world of investing. So, they set up this fund, Nomad, together. I describe it as this very high-minded, experiment that most people wouldn’t care about except for the fact that in thirteen years they beat the market by, I think, 804 percentage points. So, it’s this stunning success.

I was trying to explain, in the chapter, here is what they did that nobody knows about because they never gave any interviews. They wouldn’t talk to people because they had no interest in self promotion. They had no interest in marketing. They had no interest in gathering assets, and they had closed the fund, for years, by the time I wrote about them and had sent back all the money.
They retired at the age of 45, have given back something like 3.5 billion dollars (that sort of thing), at the moment where they could have become astoundingly rich, they were like, “No, we’re done. We’ve solved the puzzle of how to invest and now let’s solve the puzzle of how to give the money back to society in a way that creates a maximum amount of good.”

So, for me, again, was a real risk to write about a legendary, but in some ways unknown duo who had closed their fund and had never given interviews. So, they were kind of cult figures. So, people like Bill Miller had talked to me about them because Bill had invested his own money with them. Mohnish Pabrai, who is a key character in the book, when I asked him who I should write about, said, “Well, Nick would be an amazing person to interview but he’ll never do it because he’s too private.”
So, I gradually became friends, over many interviews I guess, with Nick. Then Zak, who was even more enigmatic finally came and spent, I think, half a day with me and Nick in their office on the King’s Road in London. So, it’s really an unknown story. Nobody had told this story. I was like, “Really? I’m going to write eleven thousand words about these people that nobody knows.

Partly what happened to me is that, this was during… There was a really nasty Supreme Court battle, here in the U.S. It was really ugly and really polarizing. Everyone, both sides, were full of hatred and anger and resentment. I looked at Nick and Zak and was like, “They embody, in so many ways, everything that I admire that’s the opposite of what is going on in the political situation at the moment.” So, in a way, I felt kind of impotent politically and socially but I can write about these two guys who I think are really admirable.
So, what was wonderful about them is that they were conducting this very high minded experiment where they said, “How do we create a fund that’s not really about the money at all. It’s not really about trying to gouge our shareholders, trying to maximize our earnings. It’s going to be an exploration of the concept of quality.” Which is something that they took from Zen and the Art of Motorcycle Maintenance for which the subtitle of the book is: an inquiry into values (if I remember rightly).
So, they said, “What constitutes quality in the investing business?” That principal runs through everything that they did. So, you think of the way that they structured it in terms of fees. They decided, “OK, so we’ll basically not charge an annual management fee. We’ll have a minuscule annual management fee that just covers our costs, and we’ll get a percentage of the profits, and we’ll have a 6% annual hurdle (I think it was 6%).” So, if they didn’t perform they wouldn’t make anything. Then, at a certain point, they were like, “No, we’ll change that.” But instead of changing it to be better for them, they changed it to be worse for them.

So, they put their incentive fee in a holding bucket and they say, “Well, if we underperform after we earn the incentive fee it will go back to the investors. So, at some point during the financial crisis (I don’t write about this in the book), if I remember rightly, they said to me, “Yeah, we were going to be working for years for free. We might never get back the money.” And they were like, “We kind of liked that. That was kind of great.”
There was something really profoundly contrarian and outsidery about them; that they actually enjoyed the intellectual experiment of running a fund that was not about the money. They had the same approach, the same obsession with quality when it came to looking at businesses. So, they said, “What really constitutes a high quality business?”

So, they look at all of these different business models and they end up deciding that there is one that is better than all of the others. What they concluded is that they describe it as “a scaled economy shared.” This, to me, was a real revelation when I was writing this chapter. I was like, “Ah, that’s what it’s all about”.

Mohnish Pabrai once said to me (he read an early draft of the book), he said the three most important words in the book: scaled economy shared. Mohnish is the star of the first chapter of the book and he actually changed the way that he invested after reading this chapter on Nick and Zak. It’s an extraordinary thing because he realized that he had been doing it wrong and that there is stuff that they understood.

So, the scale economy shared model, in many ways, is embodied by Costco, where Costco was always criticized by Wall Street because their margins were really low, they weren’t maximizing their profits. What they were doing is that they were giving an incredible deal to their customers. I think they would mark things up by 14%, or something like that. They would never go above that.

So, as they became more and more efficient and got these economies of scale because they became bigger and more successful, instead of using that success and profitability to line their own pockets they would share those economies of scale with their customers and give them a better and better deal. There is something really profound about that.

If you think of what we were talking about before, with Arnold Van Den Berg, that he embodied this capitalistic principle that you transform the desire to receive for the self alone into the desire to receive for the sake of sharing, in a sense a company like Costco was also tapping into this principle. They were like, “The more we receive, the more we’re going to share.”

So, to me, this is a really beautiful example of the way that these principles run through different areas of life. So, you can see, actually, that instead of Costco’s size becoming an anchor, and it becoming mediocre as it became bigger, it’s size became a really powerful asset because it built in this aspect of sharing; of giving back the gains of its scale to its customers.

So, then when Amazon came along, Nick and Zak look at Amazon and they see Amazon Prime and they say, “Oh, wait a second.” So, Amazon Prime is going to give you free delivery of your stuff and they’re going to keep adding these other things. They kept adding free storage of your photos, free TV, free movies. [Nick and Zak] were like, “Oh, this is Costco on speed.”

So they saw, very early, (around 2004, 2005, I think) when Amazon was at around $30 a share, that Amazon had the same characteristic of scale economies shared as Costco where as it grew bigger it had these tremendous economies of scale. Instead of keeping all the profits for itself, as Wall Street would want, they kept giving a better and better deal to their customers: so, faster delivery, free delivery. So again, I think, Amazon tapped into this idea of scale economies shared rather than just scale economies.
So, once they had figured out this was the best model, the best business model of all, they just loaded their portfolio with companies that operated this way. So, when they quit the business at 45, I think at the end they probably had about 10 stocks in their portfolio (but Amazon had grown to about 40% of the portfolio and had maybe gone up tenfold by then) and a lot of their investors had quit along the way because they were appalled at this company that was sort of out of favor a lot of the time, like in 2008, 2009 when it was getting crushed. They were like, “Really? You’re going to put more than 20% in this one stock?”

They just had the courage of their convictions to keep betting on quality. After they quit the business I interviewed Nick about his portfolio and basically he had almost everything just in three stocks which was Amazon, Costco, and Berkshire Hathaway. Berkshire Hathaway, also, if you look at something like Geico, within it, is a scale economy shared model.
So, there are also aspects of the culture of that they love because it’s so long-term. It’s not looking just to please Wall Street in the short term. When I talked to Nick again, recently, those are still the three biggest stocks in his portfolio. So, something like Costco, he has probably owned for more than eighteen years, Amazon for more than sixteen years.

There’s something very profound about this approach to life; this obsession with quality; this obsession with things that endure because sharing is built into them. Companies like Costco and Amazon embody deferred gratification in some way because they weren’t trying to screw their customers in the short-term by maximizing their own profits. So, much to Wall Street’s irritation they were like, “No, no, we’re investing for the long-term in things that will pay off many years from now.”
Nick and Zak were doing the same thing in the way that they approached investing. They were saying, “We’re not going to gouge our clients. We’re going to set it up so that when we…” They very consciously thought about this. They said, “If we were sitting on a porch at the age of eighty, or seventy-five, or whatever, with a former client of our hedge fund and we were having a glass of wine, would we look back and think, ‘Wow, we really treated you in a fair and equitable way.'”
When I talked to Nick a couple of weeks ago, he was saying to me that he thinks in exactly the same way about the philanthropy that he is doing. He said, “I want to look back in twenty years and think, ‘Did I do that right? Did I give away the money in a wise, far sighted, long-term way that created maximum benefit for society in the long term?'”

So, to me, this gets at one of the most important mental model themes in life where you just say, “OK, so, how do I build my life around differed gratification?” This has to be a master principle in a world where most people are being really short-term and are focusing on short-term pleasures. It becomes an enormous competitive advantage if you can shift to differed gratification. This runs through every area of life.

So, for me, I’m kind of gluttonous and I’m addicted to sugar at the moment, and chocolate, and I can see that it’s these instant hits of energy that you want. That’s not differed gratification and at the same time I try not to eat in the morning because it’s pushing myself through fasting to just delay a bit. So, there’s this battle within myself over food, which I’m not very good at controlling, to try to differ gratification. It’s very easy for me to differ gratification with alcohol, drugs, things like that. I like wine but it’s not a challenge for me not to drink.
Exercise, again, a perfect example of differed gratification. How do you push yourself to be in discomfort or pain, now, because it will benefit you over the long term? Again, grudgingly, I force myself to get on a Pelaton bike in my basement, next to my washing machine and dryer. So, it’s called the “Tour de Laundry Room” in our family. So, again, it’s an exercise in differed gratification.

Think about saving, think about investing, think about living within your means, these are all forms of differed gratification where you’re sacrificing the pleasure now for a greater pleasure down the road. So, that was the topic that, when I think of the eye of the eye of the bull’s eye, when I think about Nick and Zak, “Oh, it’s a story about differed gratification.”

It’s this idiosyncratic partnership where everything is built on saying, “When I look back at the end of my life will I think, ‘I did that right.'” Whereas most of us are thinking, “Give me the extra peanut butter cup and chocolate chip cookie.” Nick said (very eloquently) that most of the things that we get wrong in life, most of the mistakes that we make are because we’re chasing after the short-term hit of energy.

So, once you understand a principal like that, if you deeply internalize it you can actually build your life around it. So, at least now, even though I’m failing constantly on the food front, at least I know that’s the battle. One of the things that fascinates me, because I read in a fairly diverse and scattered way, is that this question of differed gratification goes back thousands of years. So, if you look at the book of Genesis you have Esau (if I remember rightly) selling his birthright for a bowl of lentil soup. That’s a perfect image of taking something that is really valuable and giving it away for something that is kind of worthless, that you need in that moment. If they had had chocolate then instead of lentil soup he would have gone for chocolate.
So, I think we’re replaying that test again and again in our own lives. Once you become aware of it, you know what the game is and at least you’re not flying blind anymore.

Niels
It’s so powerful. It’s an incredible chapter and some of the other things that I took away from it; some of the small anecdotal stories that I think are, again, so at odds with how we do things. I think they had put their Bloomberg terminal in a place where they had to stand so that they wouldn’t spend too much time in front of it. Today, of course, people have like sixteen screens on their desk to just sit and stare at all day.
It’s just a wonderful chapter.

You mentioned earlier that there are some people who feature in your book as main characters and then there are a few people who get some mentions. From memory, here, I think the next person that I wanted to ask you about in a little bit more detail (I know we have already spent more than an hour talking about these things), Guy Spier, he also comes across (from what I have read and also what I have heard you talk about) as a really fascinating individual who also does things that you would normally not necessarily expect from someone in this world but it kind of goes to some of the same values. So, if you don’t mind, tell a little bit about Guy Spier and just whatever you pick from his story.

William
Guy is an old friend of mine. We were at Oxford together but I don’t really remember him well from Oxford. He was a couple of years above me. I think I slightly resented him because he was kind of good looking and charming and, I don’t know, I think anyone who looked better than me and was dating beautiful women I was like, “I dislike this guy on principle.”

Then we met in New York a few years later and became close friends and I have been an investor in his fund, the Aquamarine Fund, for more than twenty years. I helped him work on his memoir The Educational of a Value Investor. I still help him, more be it, much less than in the past on his annual shareholder letter which partly just gives me an excuse to spend time with him.

So, I have observed Guy very closely for more than twenty years and, in a sense, the thing that made us close, I think, was working on his book because I was more or less living with him in Zurich. At the time I was just moving, I think, from London to New York and my son was still at boarding school in England. So, I would go to Zurich on maybe a Sunday night and then would spend a few days with Guy, and then I would go back to London and I would maybe see my son. It was a bit crazy. I was doing this for week after week and we were sprinting to finish his book.

Sometimes, when you’re in the trenches with someone, at a very high stress moment, you see them really deeply and that relationship is where you build a bond that is pretty unbreakable, hopefully. I think Guy was at a vulnerable stage there because he was coming up against this really intense book deadline. He wasn’t finished with the book and he’d worked on a manuscript, previously, with another writer. He was not born to write. He is very, very clever, and he speaks beautifully, but writing was harder for him. So, I came in when he was struggling and he was kind of almost broken at that point by just the intensity of having to write a book on deadline, while managing a hedge fund.

I think part of the closeness that we got is because I kind of picked him up at a vulnerable moment and helped drag him over the finish line. One of the reasons why it was so memorable for me… I was going through a lot as well. I had been living in London for years and I had been running the European, Middle Eastern, and African editions of Time as the editor and then I got laid off and then I went to work at this other job as a journalist that I kind of hated. So, I kind of quit and started writing books and was ghost writing books. Then I was like, “This isn’t working living in London. I’m going to go to New York,” and I went back to live in New York which is where my wife and kids had grown up.

So, it was this kind of weirdly tumultuous period for me where everything in my life was in transition and Guy is in this really intense period where he’s trying to meet this deadline and write the last few chapters of the book.
We end up spending a lot of time together in his house in Zurich and elsewhere as well. He would put me up in a hotel where we would work together, we even did some of it in Greenwich Connecticut. We stayed in a beautiful hotel together there. So, it was a very intense and personal experience.

One of the most memorable things, for me, was that I could see that Guy wasn’t looking to promote himself in a conventional sense. He was exploring all of the ways in which he had made mistakes and had screwed up, and had been tempted by the greedier casino aspect of Wall Street where people would say to him, “You’ve got to raise more assets, and you’ve got to have a bigger fund, and why aren’t you as famous as Bill Ackman when you were at Harvard Business School together?”

Guy would write incredibly honestly about things like feeling jealous of Bill Ackman and people don’t usually do that when they’re writing books about themselves. Usually you would write about how brilliant you are and how wise you are and here is Guy saying, “Yeah, I was jealous of this guy and I got…” He writes very honestly about this experience, early in his career, where he went to work at a firm, D.H. Blair, that he realize was kind of like the firm in the Wolf of Wall Street. He totally tarnished his reputation. Guy had come top of his class in economics at Oxford and was a brilliant guy and suddenly finds himself persona non grata because he seems unethical if he’s gone to work for this firm.

So, he talks very honestly about then discovering Buffet and realizing that, “Oh, there’s this other way to do things that’s honest and honorable and long-term and ethical.” So, in a sense, it’s a story about going from darkness to light. There was a beautiful moment, while we were working on the book, where we would often sit at his dining room table, and I’m kind of nuts so I would have the Zohar, which is this kind of ancient aramaic text, and we’d read a bit of it and then we’d chat about it and then we’d be drinking lots of Cappuccino from his superb Marzocco machine that he’d imported especially from Florence, I think, then we’d be like, “OK, let’s work.”

So, we would get into these deep discussions because we had been primed by the fact that we were talking about these spiritual issues, for example, and what life was about. I was going through this tumultuous period and he was in an intense period himself. That’s reflected in what we were writing because it’s very raw, and it’s very honest.

There was a beautiful moment where we walked into the kitchen, next to that dining room, to get yet more Cappuccino and yet more Lindt chocolate and he was really excited by what we were doing and he said, “I don’t care if this book destroys my reputation, I just want to give an honest accounting of who I am.” I thought, what an extraordinary thing that is, to have somebody who is so committed to telling the truth, about who they are, that they are prepared to take the reputational risk. That had a huge impact on me.
So, to go back to almost the very start of our conversation where you were talking about things like humility and candor and trying to be honest and stuff like that, that’s partly because I saw Guy over the years, and I thought, “Oh, so wait, so you can actually be truthful? You don’t need to be spinning? You can actually expose your dirty underwear in public and say, ‘Yeah, this is who I am.'”

There’s something extraordinarily liberating about trying not to lie and spin. I could see it. I interviewed Ray Dalio a week or so ago and one of my feelings, as I was interviewing him, is, “Oh, that’s what it’s like to be obsessed with radical truthfulness and radical transparency.” That there’s not this delay where he’s thinking about how to lie and how to spin, and I see that with Guy as well. Guy, he’s just going to tell you what he thinks. I see it with Mohnish Pabrai, who is a very close friend of Guy’s and kind of an important figure in my book, that they are telling the truth. You see it with Arnold as well.

Arnold would say to me, when I was writing about him for the Great Minds of Investing, he said, “I don’t think you should include me in this book.” I was like, “Why not?” He was like,” Because my returns have not been good for the last few years. I’m having a terrible period and I’m out of favor, and I’ve made these mistakes and I don’t think I should be in the book.” So, think of the power that comes from these people who are actually prepared to tell you the truth; tell you the thing that they should be concealing if it were just out of self interest.
Again, there’s a deep truth here where, just as we were talking before about the importance of transforming the desire to receive the self alone into the desire to receive for the sake of sharing or the importance of differing gratification in a world where everyone else, or most people, are going for instant gratification. There is another deep truth there where you are like, “Oh, if you’re truthful and your candid it’s very, very powerful.”

This is something that I saw from Mohnish Pabrai, as well, because Mohnish (who I write about in that first chapter of the book) is a great fan of this book Power vs Force by David Hawkins which, again, is about truthfulness at one level. It’s about certain types of behavior that make you either go strong or weak. So, being truthful, being candid, not lying, not spinning, makes you more powerful. Whereas, I think we tend to be so fearful that we’re inclined to spin. I had this yesterday where I had made a mistake of something and I was saying, “What do I do? Do I hide it? Do I spin it?” And I wrote to the person I was dealing with and I was like, “I made this mistake.”

It’s really uncomfortable. You really don’t want to do it. But actually it’s incredibly liberating because then I don’t have to think, “So, what was the lie? What was the thing I concealed that I have to remember that I concealed?”
This is a long winded answer to your question but, again, when you think about what I am talking about with Guy, we haven’t mentioned anything about his skill as an investor. What we’ve talked about (and he is a very smart investor), but what we’ve really talked about is his behavior and his candor and things like integrity.

So, if you’re trying to figure out who you want to reverse engineer and be more like (who you want to pick as heroes), you want to look at these characteristics and think, “Well, what’s really impressive about Guy Spier?” It’s not really the fact that he came top of his class in economics at Oxford. I mean, that’s impressive, and he’s very bright. But I’m bright; you’re bright; a lot of us are bright. You don’t even need to be that bright, but to be candid and truthful, and have integrity. I see, also, with Guy, again, someone who is incredibly sharing, who spends his whole times trying to figure out how to help other people.

So that, for me, has been a big part of my journey over the last twenty years (twenty-five years, really), has been to look at the great investors that I have been interviewing and studying and think, “OK, they can teach you how to get rich, but how do you live in a wiser way?” When you hang out for five days with someone like Mohnish Pabrai, in India (which I did for this book), what do you learn about actually how to live? When you spend hundreds of hours with Guy Spier over twenty-something years, what do you actually learn about how you want to operate in life?

I’ll give you another example of Guy that’s a very small example. I once went to Israel with him and we rented to this beautiful house and he was there with his three kids and his wife, Lory (who is lovely), and some friends of hers from Mexico, and my friend Ken Shubin Stein who is a very good fund manager and now Neurologist, and I was there with my wife. There was a moment very early in the trip where, I think, Guy’s wife Lory, who had basically given the nicest room in the house to her close friends who had come from Mexico (I think it was).
So, Guy is renting this beautiful palatial home and he’s in a room with his three kids while I was in the most beautiful room. It was a gorgeous house. I just thought that was really interesting that he appreciated the fact that his wife had the sense to put them in the shittiest room with the three kids. I thought that was really interesting. He didn’t take credit like he had done it, it was fantastic. [He shared], “I was about to take this room and Lory was like, ‘No, no, no, Guy, we’re in this room,'” and he wasn’t annoyed by the fact that I was in a nicer room and was having peace and quiet with my wife, and that this other couple was in a beautiful room. He liked it. I think that’s very interesting.

So, these are very small examples, but when you see something like that it’s a tell. It’s like, “Oh, that’s interesting.” So, things like that, or that moment where he said, “I don’t care if this ruins my reputation, I just want to give an honest accounting of myself.” When you see things like that you don’t forget it. It has a big affect on you because it gives you a sense of what really matters and what you want to clone from other people in the deepest sense of it.

So, I hope part of what people get from these conversation like our one, Niels, and from the book itself is that they look at these characters and they say, “OK, yeah, I want to be richer; yeah, I want financial independence; yeah, I want to be financially secure, but what’s the inner aspect of a successful life and a successful investment career. If I’m so focused on the outer stuff of just getting rich, and just getting the nicer car and stuff like that, (I don’t know, I don’t want to be judgemental and pious and sanctimonious about it) but I think it’s a stunted life.
Part of what I’m doing is I’m writing about the people who I think are operating on many different levels. They have got the external aspect of investing down; they’re thinking very intelligently about how to make money; but they also are thinking very deeply about this inner game of what constitutes an actually successful and abundant life.

I think, if you are shallow and you just want the external stuff, good on you. Maybe you don’t need to think about all of these things but, for me, the deeper stuff is actually the more important. That’s not to say that the money isn’t important because I think that independence, that ability to structure your life in a way that is true to who you are and not to have to worry about money is hugely important. You don’t want to fall into the trap of worshipping the money and think that’s what is going to make you happy.
I think, ultimately, when I look at a lot of these investors that I write about, what makes them happy, I see how happy Guy is helping other people. There was a moment where I think I first got the contract to write this book (five, six years ago, probably, seven years or something like that), I told him about it and he was like, “I think I’m happier than if something great happened to me.” I could see how giddy he was about my book deal. That’s something that the Buddhists talk about, empathetic joy – it’s a very high level thing to actually get pleasure from other people’s good fortune.

Niels
Good fortune, yeah.

William
Yeah, and when you see something like that you’re like, “Oh, that’s what I’m supposed to be shifting towards. So yeah, just look for these clues in the book about what really makes these people successful.
So, when you look at someone like Nick and Zak, for example, I talk about the fact that it’s a relationship built on kindness. So, Nick said to me that good behavior has a longer shelf life than bad behavior. So, he and Zak have always been kind to each other and fair with each other. So, when they were discussing setting up the company, Nick (who was kind of the Alpha dog) and had been really successful and had already been working as a money manager while Zak had been an institutional sales guy at Deutsche Bank and hated it. Nick was like, “Let’s do it 50/50. We’ll just split the business 50/50.” Zak was like, “No, I want you to have 51% of it so if we ever have a conflict about something, you’ll make the decision.”

Nick said to me, “When someone hands you a loaded revolver, and says, “Here, shoot me if you like. Now can you behave badly?” (But many people would behave badly.) They decided that was the way they would operate. It was really striking to me that years after the fund closed, when I went to interview them, they still shared that office on the King’s Road. So, if they had been screwing each other and taking advantage of each other maybe one of them would have gotten richer, but they wouldn’t, then, be sharing the same office all of these years later and still be friends.

So, when you look back on (hopefully) a long life, and you think, “Well, so, I manage money in an equitable way. I treated my partner well. I have good relationships with my family, and I have given money away in a way that helps society in a long-term, thoughtful way.” That’s a successful life. Those are not incidental side issues. That’s like a key part of the game. So, for me, the whole book, the whole project has been a kind of exploration of questions like that: of what do I actually want to learn from someone like Nick Sleep, or Zak, or Sir John Templeton, or Mohnish Pabrai or Guy Spier?

So yeah, I’ve probably become a better investor by studying all of these people but I hope that I’m kind of on the path to becoming a better person because of it; because I can see what works. I think that what’s beautiful about studying great investors is that because they are such pragmatists, because they’re obsessed (as Munger would say) with… He talks about what works and what doesn’t work and why.

So, because they are pragmatists who are obsessed with what works, it’s not like writing about Mother Theresa, where you’re like, “Yeah, I’m never going to be Mother Theresa.” You are writing about people who are great pragmatists, who are in the mud dealing with running a business, investing money, trying to outwit the crowd and yet they are really obsessed with these questions of morality, ethics, how to behave well, what constitutes an abundant life, how to become more resilient, how to deal with an unknowable future.
So, they are a great filter for looking at all of these issues because they’re practical. They’re not just floating off into the ether reading philosophical and spiritual books. They are saying, “This works. Behave like this and it works better. Behave ethically with your partner and it actually works better. Don’t screw your suppliers (as Charlie Munger would say).” He was like, “My approach to life is not a zero sum game. I want everyone to benefit.”
So, they become an incredibly helpful model, I think, for how to operate in life.

Niels
Yeah, I mean absolutely. It’s fascinating.
I had a few more people that I wanted to touch on but I think we’re going to be running out of time for that. I do want to share with the audience (so when they get the book and they dive in), but some of the things that stood out to me, again, coming from kind of the quant side of the investment world. I found, also, the chapter with Joel Greenblatt and this whole concept of simplicity is the ultimate sophistication even though it’s an old quote. But in my world that is the essence of what we do in keeping it simple.
As you said earlier, finding the thing that worked is probably less than a percent of the work that we do to get to distil to that level. I often say that it’s like trial and terror when you do research because you need to find all the things that don’t work before you find the things that work.

Someone like that, of course you’ve mentioned Mohnish a few times – a fascinating chapter, fascinating lessons that you take away from him. Another one that just stands out, again, in my world is, of course, Howard Marks, because this trend following is built on knowing what you don’t know and the fact that history changes, everything is (yeah) uncertain in many ways. So, again, people should just go and find some of those nuggets in your book. But I do want to ask you a few final questions as we start to wind down.
This is a book (and I think this is pretty clear now from our conversation), it’s a book not only for investors and all journey, but it’s actually also a book that I hope my kids would read too because it’s a way to figure out how to live a fulfilling life, so to speak. It’s a book about not just about how to make money, for sure.

My final two questions are a little bit selfish, in a way, because as we’ve talked about, I come from this world of systematic trend following. I have, and am currently working with one of the pioneers, but there are few more pioneers who have tremendous success and fascinating stories across four or five decades, in some cases. I’m just curious whether you have ever… because the type of investors that you’re describing are, I wouldn’t say they’re all value investors, they’re not necessarily value investors, but they are obviously not quant as such based investors, but have you ever come across some of these other types of stories? You’ve interviewed; you’ve had access to so many people, so I’m just curious about that.

William
Yeah, as I was saying I was interviewing Dalio a week or so ago, who is very much about men and machine. How do you combine man and machine, harness enormous amounts of computer power and how do you systematize; how do you take ideas that (I would say) to some degree he intuits ideas, and then he systematizes them into principles.

I worried about this when I was writing the book that maybe I wasn’t paying enough attention to that whole quant side. There was someone I interviewed at some length about her firm which has a very heavy combination of fundamental analysis and use of computers with a lot of PhD computer geeks there. I ended up just not writing about it. I didn’t go deep on that for various reasons. It’s something that I need to explore more, in a future book I think.
There is something kind of profound going on there. There’s a tension, I think, between the type of investing that I tend to write about which is very much based on smart individuals who understand some fundamental principles and then have extraordinary temperamental ability to go against the crowd and to be less emotional and more rational which I think is kind of beautiful and appeals to me temperamentally.

There’s a tension between that approach and the sort of brute power of harnessing machines, being very systematic, eliminating emotion because it’s the computer doing stuff. I haven’t really gotten my head around this to really think deeply about the implications of that and whether the type of investing that I’m writing about is going the way of the dinosaur and the Dodo.

Niels
It’s interesting that you say that. I think if you did, if you do go down that path at some point, I think what you’ll find is, of course, that on one side (and I think this has been one of the challenges for us in our world, is that we don’t have, to some extent, the same stories, the same narrative to talk about), but I think, actually, what you would find is that there is a lot of commonality between some of those principles that we just put into a computer because we can. Actually, the way some of these investors, that you have described so eloquently, what they do, just from themselves (so to speak), within themselves they are not probably impulsive, erratic people. They are probably quite internally aligned and rules based in many ways. So, that’s one thing.

My final question for you, William, if I’m trying to kind of distil down to, again, combining my own experience and the stories that we have talked about: treating people fair, don’t overcharge on management fees, if your clients make money you should make money. These are a lot of the things that I have certainly experienced in my career and the firm that I work for but there is one thing that, I think maybe above all, binds a lot of these successful investors together but is something that is so hard for me and for us to kind of get new investors or potential investors to buy into and that is this how you become a long-term investor in a short-term world.

There are probably other things, but I do think this long-termism is something that goes across all of the people that you write about, or at least that’s how I remember your book. So, I’m fascinated by how you can get people, even if you can demonstrate and show them, “Look at this forty-five year track record you should really just don’t worry about the next two, three, five, ten, fifteen years. But it’s so hard to get people to buy into that.

William
I think it’s very difficult. It’s difficult for us emotionally, temperamentally, to be long-term. We’re all looking for that instant hit of energy from Esau’s bowl of lentil soup that would now be pop corn or some sugar charged thing, or my twelfth cup of coffee of the day. So, I think our wiring, chemically, pushes us to be short-term. Then there are a lot of pressures socially to be short-term.

So, think of how it messes with your head when you hear that your neighbor or your idiot cousin, or whoever it is has just made twenty-five times his money on BitCoin or Tesla, or stuff, and you’ve been quietly and patiently trying to make your ten percent a year or twelve percent a year or whatever it is and trying to survive and not get knocked out of the game. So, there’s a lot of psychological pressure from seeing people hit the jackpot and not focusing on the people who thought they were buying Tesla but in fact were buying Pets.com.
So, we’re focusing on the survivors. When I talk to you about Nick Sleep and Qais Zakaria and they literally have most of their money in three stocks and it’s Amazon, Costco, and Berkshire. There are plenty of people who put all their money in three stocks and have lost and wrecked their careers. So, it’s very easy to get knocked off course by jealousy, envy, our own yearning to jump on band wagons that are speeding along and everyone else is kind of giddily shouting from on top of the band wagon, “Look how well we’re doing!”

So, I think part of what you need is this ability to say, “Yeah, that’s not the game I’m playing.” To actually have the courage and the self awareness and the patience and the understanding of your game, to step back and say, “Yeah, great, I wish you well. Good luck. I hope your BitCoin goes up another tenfold but I’m not doing that; or maybe I’m doing it with 2% of my portfolio or 1% or it’s part of my play portfolio or it’s part of my anti-inflation portfolio along with a bit of gold and my home and a couple of works of art or whatever; a bit of timber or whatever.” It’s not that you’ll find someone who is putting 100% of their money in it, or 200% of their money in it. You’re like, “Really? Maybe you’ll do fantastic and maybe you’ll become a billionaire, or maybe you’ll be ruined.”

So, the ability to understand the rules of the game, to understand the importance of survival; of staying in the game over many decades; not getting knocked out of the game, and to understand all of the pressures on you internally and externally that get you to screw up and be impetuous and impulsive and irrational. Just understanding those things is really important because then you can say, yeah, I wish you all well but this is what I’m doing. At the same time you have to be self aware and humble enough to say, “What I’m doing may be wrong because the game may have changed.” You can’t just say, “I’m not doing BitCoin and Tesla and all of these other things because you guys are idiots.” You have to say that there is something that has fundamentally changed, here, are we in a different world where actually the way that I invest no longer is valid or the principle is the same as ever.

So, you need the courage of your convictions to stay stable and long-term and centered and focused and disciplined but also the humility to question yourself and say, “Yeah, what if I’m wrong and how do I protect against my own blind spots and how do I make myself a continuous learning machine like Buffet so that I continue to update my model?” If Buffet weren’t doing that he wouldn’t have bought Apple late in his career and made the most successful investment of his career because he had always said, “No, I don’t buy tech.” He wouldn’t have bought into railroads.

In a way it gets back, Niels, to what I was saying at the start of our conversation that often you need these contradictory traits. So, as a writer maybe you need the arrogance to say, “Yeah, I’m going to tell people the meaning of life and what these characters are all about and what works in life and what doesn’t,” but also the paranoia and the vulnerability and neurosis to say, “But what if I’m wrong and how do I keep checking?”
Likewise, for an investor, to have the courage of your convictions to say, “This is the game I’m playing,” but also the humility to say, “And if I’m wrong, will I survive? What are the consequences and how do I keep updating my knowledge and my learning and keep an open mind.” So those, in a sense, are contradictory traits.

So it goes like, there’s a beautiful like from a quote from F. Scott Fitzgerald, where he talks about how the sign of a first rate, intelligence (and I’m gobbing this quote) but, “The sign of a good intelligence is this ability to hold contradictory ideas in your mind; two contradictory ideas in your mind at once while still managing to operate well.” So, I think that’s helpful.

This is one of the reasons why investing is so difficult is because there are all of these pressures to get knocked off course and because the game is changing because nothing stays the same. I was quoting something to my daughter the other day, there’s a guy called Iain McGillchrist, who is very brilliant Scottish neuro scientist and author. He was doing a podcast interview and someone was telling him why there is going to be no afterlife and why all these people are stupid and McGillchrist said, “It behoves us to be more humble.” He was basically saying to this guy, “You don’t know shit.” It behoves us to be more humble. He was saying that we don’t even understand what matter really is. When really go deep into understanding things like matter and consciousness we realize that we don’t understand anything.

Our knowledge is so small. So, it behoves us to be humble, to say, “Yeah, I think this is how the game works; yeah, I think this is what I should do; yeah, I think I should be long-term but what if I’m wrong and how do I hedge against my own incompetence and my own blind spots and my own arrogance and all of that.” So, it’s a hard game but this is what makes it fun is the fact that it’s nuanced and endlessly complex and changing and that it’s both an outer game and an inner game. So, this is why we can talk for so long about it.

Niels
Absolutely.
Your right, we could definitely continue but I want to be respectful of your time.

William, this has really been amazing. We’re going to wrap up this conversation. I really can’t thank you enough for being on the podcast for essentially condensing what you have learned over decades in the presence of some of these extraordinary people [and sharing that]with me and with my audience. It has been incredibly interesting to learn about your journey and the lessons that you have taken away from some of these people.

To all of you listening today, I hope that you were able to take something from today’s conversation onto your own investment journey and if you did, please share these episodes with your friends and colleagues and send us a comment to let us know what topics you want us to bring up in the upcoming conversations with industry leaders in the world of finance and investing. You can, of course, find links to William’s work on the show notes page so please make sure to check that out.

By the way, I should say that now, for people who are listening on Spotify, you can now give ratings and reviews on Spotify. So, if you have a few extra minutes we would be grateful for one of those.
From me, Niels Kaastrup-Larsen, thanks for listening and I look forward to being back with you on the next episode of Top Traders Unplugged. In the meantime, take care of yourself and take care of each other.