Guy Spier: The Power of Honesty in Investing

During their recent episode, Taylor, Carlisle, and Guy Spier discussed The Power of Honesty in Investing. Here’s an excerpt from the episode:

Tobias: You did. I think that you raised that in your most recent letter, where you said that you were interested in balance more than compounding as rapidly as you possibly could. Did you start out in that direction, or did you have a turning point? Did you have a–

Guy: No. I think that’s a series of shifts where– So, I have outside money. That’s a scary thing to say to your investors, because what they want to hear is, “I wake up every day, and all I think about is how to make you money, and on and on and on and on.” And so, it’s scary to say that.

Interestingly enough, this divergence between, in my case, what I knew to be reality. So, the first thing is, maybe that’s not reality. Maybe I’ve got it wrong. Maybe, actually, I am capable of and want to live my life exactly as Warren Buffett lives it, for example. And then, the realization that that’s not my reality, and that it’s possible that what I’m presenting to the world is a divergence between what I actually feel about the way I want to be and the way I am on the outside, and then the desire to close that gap.

I think that probably there is an art to doing that, because first of all, you have to be sure. Often, we are not sure. You get these people who make these huge confessions. I think that life’s better when you make small adjustments between– I don’t know that I’ve made any huge confessions and huge adjustments, but sort of like, “Oh, there’s a misalignment there. The person I’m being in the world is not quite the person that I am in real life. How do I adjust?”

And so, I remember two moments in that path of which the last letter is one of the most recent. But I remember being asked– I know it was a meeting with investors at the Harvard Club, and he said, “Could you tell me about your sell-discipline?” And a big part of me wanted to say, “Oh, well, let me tell you about my sell-discipline. We examine the thesis and we see if–” I had all sorts of stories. I gave a little bit of that, and I said, “Look, there’s valuation, and has the management fundamentally broken trust with me.” I just looked at him and said, “But it’s really, really hard, and an awful lot of time, I don’t know whether I should sell or not.”

I recalled with the investor in a room of about 50 people, a conversation I’d had with my father, where I tried to say to him, “Look, father, I know I bought it at $50, and then it was cheap. But now, the value is somewhere between $75 and $300.”

Jake: Yeah.

Guy: It’s somewhere between– I really don’t know where it is. So, my orientation is to leave it alone. So, that was one shift. That shift, there’s this feeling of they’re all going to say, “Oh, he’s an idiot. He doesn’t know what he’s doing. Anyway, he doesn’t care about our money, so let’s take it away from him.” And then, this realization that actually they didn’t take their money away. “Oh, that feels so much better.” And that kind of feeling that you’re being yourself.

So, another moment that had slipped out of my mind, but maybe it’ll come. Yes. So, a family office. They were based in Athens. They get in touch with me. This is shortly after I’ve moved to Zurich. And they say, “We’d like you to come and give a presentation to us. We might want to invest a large amount of money with you. But could you come out to Athens to give the presentation?” I took a big goblin. I said, “No, I’m not coming out to talk to a bunch of people who want to yank my chain.”

I desperately wanted the big investment, but that’s not the way I want to live my life. I know I won’t be happy. I’ll be prostituting myself to go out to that in that way. And then, what helps me to do what I did in the latter is there is long conversations with William Green, where William really pushes me. And so, there’s been other conversations along the way. So, series of minor adjustments, constantly trying to be– A very interesting aspect of that is the first chapter of my book where I basically told the reader, “I was an avaricious man, willing to lie, or at least be parsimonious with the truth to get ahead.” I wrote that. I remember where I was when I wrote it.

And then, I don’t know when it was later that I realized that I was going to make it a chapter in my book, that I had to make it a chapter. That was perhaps the biggest lay it all out that I’ve done in my life, because I asked myself, “Do you want to–” Some people who’d worked at D.H. Blair, they erased that from the resumes and they pretended nothing happened. They worked as an investment banker. I thought, “I want to do that which is less honest, but I could certainly get away with it, or do I just want to be brutally honest and let the cards fall where they lie?”

I had to face up to the possibility. Actually, Tim Ferriss talks about fear mapping. I realize now, actually, what I did was fear map. I said, “Okay. What happens if people say we’ve read it but we don’t want to invest with you, and in fact, nobody will ever want to invest with you ever again?” I had a plan for what I was going to do. I felt like that was a better life. So, I was okay with doing it.

Jake: If it makes you feel better, Guy– I took some comfort with this, was hearing Charlie Munger at 98 years old say, “Selling is really hard. I’m still trying to figure out how I do that.” [chuckles]

Guy: Yeah. Exactly.

Jake: So, maybe we’re never going to get there, and it’s okay.

Guy: Yeah. No, I’m certainly not going to get there in terms of selling, for example. And that’s not the point. Actually, it was really reassuring to me, to the conversation– We were on a train on the way– My wife and I spent the weekend in Geneva, in Lausanne, where the daughter of a good friend was getting married. And on the way out there, I was speaking to Saurabh. I told him, and I was saying before we went live. I’m making unbelievably slow progress towards a degree in history. We’ll see if I ever get there. And I said, “But I feel, am I between two stalls I’m not sure?” And he gave the Christopher Nolan idea that–

I really actually have to read up more on Chris Nolan, because apparently, he spends a lot of time just exploring and thinking. Saurabh had this idea of exploration with no purpose, and this kind of faith that even when you do exploration with no purpose, there is a purpose. You just don’t know it. I’m just going wherever my mind wanders, because you guys aren’t redirecting me. So, feel free to [Jake laughs] redirect me. But I just recorded something. Well, I just read a book.

Actually, Jake and I, we met– I’d actually seen your book, Jake, and I’d enjoyed it very much. And then, we met in person at an event by Chris Bloomstran. And in one of Chris Bloomstran’s letters, he always gives the books that he’s been reading. One of them was a guy by John and Mary Gribbin called Ice Age. So, those of you just listening in. Jake just nodded. So, maybe Jake’s read it.

Jake: Yeah, Munger recommended it in the 1998 meeting, I think, if I remember right.

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