Ever since Mohnish Pabrai started he has beat the stock market by triple digit returns. Panrai doesn’t have anything surprising or mind blowing secret strategy. In fact, he reveals that he is only doing what is suppose to be obvious, which is to clone other super-investors like Warren Buffett and Charlie Munger. In his interview, Pabrai discussed a range of topics to help explain his way of thinking and methods for achieving such strong performance.
Pabrai was an an engineering student in his undergraduate but he has a deep interest in business to the point that He took a lot of classes in the business school. He was outperforming business majors in my accounting and finance classes, and after a few classes, one of his professors even advised that he should major in finance instead of engineering. However, in his twenties, his impression was that business was easier than engineering. Business courses came easily to him, and he wanted to stay with the challenging engineering classes. About 10 years later as an engineer running an IT company, he found out about Warren Buffett quite randomly while reading a book by Peter Lynch. His decision to sell his company and to start investment partnerships was not driven by greed for money; it was because He realized it was his true calling. Life is a very random journey, and the lesson he have learned is that we must be a little adventurous and willing to take risks when new interests arise. The first part of his career was not a waste of time. He is a better investor because He is a businessman. He also said that he was good at business courses back in college because his father had a small business and growing up he was exposed to the business operations. Most great business leaders have had significant experiences related to business growing up. This is because the human brain is set up to develop the most during adolescence.
Before Pabrai started his investment funds, the only models he was aware of were those of Warren Buffett and Charlie Munger. He cloned them because their models made a lot of sense to me. There are several aspects to the way Warren and Charlie run their business. One of the rules that they hold is that they have no analysts and even today, Buffett does not have analysts. This might seem odd for a huge company like Berkshire Hathaway. It is easy to assume that this decision was based on keeping costs low and focusing more on performance. However it is actually advantageous to not have an investment team because having analysts means you are missing out on learning about the businesses you are investing in. Buffett has said previously that no part of the investment process should be outsourced.
Another advice that Pabrai got from them is that it is very important for an investor to have people to talk to. Talking to people is beneficial if you can identify the right people to share ideas and discuss decisions because everyone has blind spots, and others can sometimes catch yours.