During his interview with the Cambridge Investment Banking Society (CIBS) at the University of Cambridge, Mohnish Pabrai shared key insights into the power of patience and simplicity in investing.
Investing is often thought of as a complex, high-stakes game requiring intricate calculations and deep financial knowledge. But in reality, as Mohnish Pabrai aptly puts it, success in investing boils down to two fundamental traits: “patience and extreme patience.” If one is not willing to “watch paint dry,” then public market investing may not be the right path. This sentiment underscores a critical truth—great investments take time to materialize, and resisting the urge to act prematurely is often the key to substantial returns.
The necessity of patience is particularly evident in cases of deeply undervalued assets. As Pabrai highlights, “Even our Reysas investing, which was so extremely undervalued, did nothing for a couple of years.” This kind of market inefficiency can persist far longer than one might expect, testing even the most disciplined investor. However, as history has shown, patience is usually rewarded when conviction is well-placed.
Beyond patience, Pabrai emphasizes another crucial ingredient for investing success: simplicity. “You should be able to have the thesis of your investment in three or four sentences,” he advises. The reasoning behind an investment should be so clear and straightforward that even a child could understand it. Complexity often leads to doubt, and doubt can erode confidence when markets turn volatile. As he warns, “If you don’t have extreme clarity and extreme simplicity in your thesis, then when the stock drops 50%—which a lot of stocks will do after you buy them—you would not have the patience to hold it.”
Simplicity not only strengthens conviction but also fortifies an investor against emotional reactions. In discussing his investment in Turkey’s Reysas, Pabrai explains that his confidence stems from understanding the “liquidation value” of the business. “It’s easy to hold the stock if it’s below liquidation value.” When the fundamental thesis is indisputable, external noise—market fluctuations, negative sentiment, or even steep price drops—becomes irrelevant.
This approach separates successful investors from the rest. Those who can remain patient and stick to a well-reasoned, simple thesis will find it easier to endure the inevitable volatility. Investing, at its core, is not about constant action but about making a few well-researched, high-conviction bets and allowing time to do its work.
Pabrai’s wisdom serves as a reminder that the most effective investing strategies are not necessarily the most complicated. Patience and simplicity—two traits that, when mastered, can lead to enduring success in the markets. As investors, the challenge is to embrace these principles and resist the temptation to overcomplicate what should be a straightforward process.
You can find the entire interview here:
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