In this interview with Jonathan Satovski on the Wisdom, Wealth, and Wellness Podcast, Joel Greenblatt discusses a number of topics including patience, discipline, and the behavioral pitfalls that trip up even the smartest investors. The core lesson? “The more you know, the less hard it is to stick with it. The less you know, the more you’re at the mercy of just emotion.”
Greenblatt’s “magic formula”—buying good businesses cheap—sounds simple. So why don’t more people do it? “The only way you can buy something cheap is that people don’t like it,” he explains. Contrarian investing is emotionally grueling because it requires going against the crowd.
Human nature craves validation, and the stock market is a relentless test of conviction. As Greenblatt puts it, “even in periods where the formula did incredibly well, 10-year periods where the formula did very well, there were several three-year plus periods where it did poorly.”
The real kicker? Most investors sabotage themselves by chasing performance. Greenblatt highlights the brutal example of the CGM Focus fund, which returned 18% annually during a flat market decade—yet the average investor lost 11% annually by buying high and selling low. “People follow returns and they put money into funds or put money into the market after it’s done well,” he says.
Greenblatt’s advice for weathering the storms? Know your circle of competence. “You don’t have to be right all the time, but you have to know how to value businesses because that’s what stocks are.”
He leans into margin of safety and emotional self-awareness: “When I buy something and it goes down and I get excited because now I can buy more at a lower price, then I know I really have faith in what I’m buying.”
For those seeking shortcuts, he offers this reminder: “There’s no growth investing. There’s no value investing. There’s investing.” It’s about understanding what you own and why. And if you can’t stomach volatility? “You have no business investing in individual stocks.”
You can watch the entire interview here:
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