During his interview with The Investor’s Podcast, Mohnish Pabrai discussed his investment philosophy—which is raw, reflective, and unmistakably his own.
On the subject of investing, Pabrai draws from the wisdom of Warren Buffett—particularly around opportunity cost. “Buffett has talked about permanent holdings… he’s held American Express for a very long time… when something new comes in, if the mistress is truly attractive, look at the lowest conviction ideas.”
The power of sticking with great businesses is best illustrated by a hypothetical: “Assume Walmart was part of the Nifty50… if you kept it invested for the last 55 years with 98% of the portfolio going to zero, your annualized returns are almost 15% a year… you blew out the S&P 500 with a 98% error rate.” The key takeaway? “You needed to recognize that Walmart was a beautiful wife and no mistress was better.”
Asked what advice he’d give to a 40-year-old, he didn’t hesitate: “It’s all about compounding… your starting capital, the rate of return, and the length of the runway. What we really need is a very long runway.” He points to Buffett as the blueprint: “Warren Buffett bought his first stock at 11… he’s going to be 95 this year. An 84-year runway and counting.”
But even veteran investors make mistakes. “My model… was the dumbest thing… when you own an exceptional business, do not sell it at 90% of intrinsic value… do not sell it when it’s overpriced. You can possibly think about selling it when it’s egregiously overpriced.”
It’s not just markets that demand patience—so does life. “Marcus Aurelius said adversity is a blessing… if I encounter adversity now, I know this will lead to higher highs. I just don’t know how.”
As for money and happiness? “I felt around 33 or 34… incremental spending wouldn’t increase happiness.” He recalls Buffett’s grounded lifestyle: “Buffett’s house… he’s been there for more than 70 years… When Munger passed away he had maybe half a dozen or more homes”. Buffett did have a second home, but after his wife passed, “he had put that house up for sale”.
Philanthropy, too, gets Pabrai’s full scrutiny. “Giving money away is more difficult than making it… my challenge is to be left with $10,000 but to have it given away in a manner that any critical observer would say that was fantastic. Not my friend saying that was fantastic. Someone who’s a critic looks at it and says that was fantastic.”
Staying within one’s circle of competence? It’s sacred. “Warren needs a physical box to remind him that most things he cannot understand.”
And in a final nod to humility in markets, he said it plainly: “Markets can be very overvalued… the next 10 years, a lot of yo-yos will probably beat the S&P.”
You can watch the entire interview here:
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