In this interview with Meb Faber, Mohnish Pabrai discussed the power of high conviction bets. Here’s an excerpt from the interview:
Pabrai: Well there’s several that come to mind. The first one that comes to mind would be investing in a place like Turkey. I’ve been going there for about five years and I’ve talked to a lot of smart investors about what I think were total no-brainer investments, they can’t get past the country.
I can’t even get to the company.
The second thing which took me also a long time to figure out. I realized actually this year when Buffett’s letter came out is, even Warren Buffett has only made most of his money on about four percent of the bets that he’s made.
It’s one out of twenty five bets that has moved the needle for him, and this is Warren Buffett, doesn’t make mistakes, and is so particular, and so careful.
And so investing is a kind of very unusual art where it can tolerate a very high error rate but in order for it to work with a very high error rate you have to have held the ones that you truly had high conviction and truly understood for a very long time.
You can watch the entire discussion here:
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