Ep563: William Green – Be Aware of, and Reduce, Your Particular Flavor of Stupidity

Andrew Stotz 00:02
Hello fellow risk takers and welcome to my worst investment ever stories of loss to keep you winning. In our community. We know that to win in investing, you must take risk but to win big, you've got to reduce it. Ladies and gentlemen, I'm on a mission to help 1 million people reduce risk in their lives to reduce risk in your life, go to my worst investment ever.com today and take the risk reduction assessment I created from the lessons I've learned from more than 500 guests. Fellow risk takers this is your worst podcast host Andrew Stotz from a Stotz Academy, and I'm here with featured guests William Green, William, are you ready to join the mission?

William Green 00:41
I'm excited I'm already thinking I should have read your instructions about how to avoid stupid mistakes. I would have saved myself so much pain and sorrow.

Andrew Stotz 00:50
Isn't that the funny thing about mistakes is that the older we get the Wiser we get, you know, I just needed that.

William Green 00:58
I'm waiting for the wisdom to kick in but I'll do my best faking it. So the next half hour?

Andrew Stotz 01:05
Yeah, I have a feeling you're gonna do pretty well. Well, let me introduce you to the audience. For those people that don't know William, William Green is the author of a book titled richer, wiser, happier how the world's greatest investors win in markets and life. The book is based on hundreds of hours of interviews that he's conducted with many legendary investors over the last quarter of a century, published in 2021. The book has been translated into about 22 languages. William is also the host of the richer, wiser, happier podcast, in which he interviews famous investors like Howard Marks, Joel Greenblatt and Ray Dalio. William has written for many leading publications, including the New Yorker time, fortune, Forbes Barron's, in The Economist, he also edited the European, Middle Eastern, African and Asian editions of Time Magazine, my goodness, William, take a minute and tell us about the value that you bring to this wonderful world.

William Green 02:03
It sounds much more impressive than the actual reality, which is I spend most of my time sitting around reading and thinking. But I, I do think probably most people are so busy working and worrying about stuff and dealing with so many things that if I can, if I can be some sort of conduit, right, God may study things, interview people, read stuff, and try to synthesize what they've taught me, so that I can then share those ideas with other people. That's some sort of good service. So I think that that increasingly is my sense of what I want to do. In my life. It's somehow being a bridge, I think, between these great investors, we're very, very pragmatic thinkers about what works in life and regular investors, regular folks who haven't necessarily had that wealth of experience of what works and doesn't work.

Andrew Stotz 02:58
You know, I, I've been, I started studying finance when I was young. And I really tried to commit to the subject I've read pretty much every book I could find on the topic. And back in 1992, when I moved to Thailand, it was hard to get books here on that matter, I would ship them here, I would go when I travel, I bring back a lot of books. And normally, when I read books, about investing in investors, I feel inspired. But this morning for just a moment, I was making an espresso. And I was thinking to myself, it's a little overwhelming sometimes when you see these guys, these people that you've interviewed, and see they're, you know, kind of quirky habits, or they're serious discipline. And then you just, you know, like you talk in the book about Sir John Templeton, and you know, the just the quirky nature, but that that delivers some, like amazing results. And then I've always thought of myself as yeah, I've always been a kind of above average. And so I've never really, I've always looked below me and said, Yeah, well, I'm doing better than them. But when I look at some of these guys, I just think recently, I just think God, you know, what an average guy I am. And I just was wondering like how you think, as you get to know these guys more and more, you and I are more like our listeners that are observing these people and don't necessarily have all these great trades. How does that, you know, how do you think about that in your own life?

William Green 04:25
Well, one of the biggest lessons of spending hundreds of hours interviewing all of these great investors is the realization that I'm not them. I don't have the temperament that they have. I don't have the intellectual firepower that most of them have. I'm not as calm or patient or rational as they are. And I don't necessarily have the obsessive fascination with sitting around analyzing business models and looking at financial statements in the Like, and that sounds like a kind of depressing realization. But actually, it's incredibly liberating. Because once you, once you're self aware, you can start to say, okay, so why should I be playing this game against people who are much better equipped to win it than I am. And so one of the great revelations for me was, I guess it came, came particularly from Charlie Munger, I guess, who's Buffett's Polymathic teenager. So that 98 year old partner of Berkshire Hathaway, who would talk about just playing games that you can win. And I remember going to a daily journal meeting at one point, he's, he's been chairman for many years, although I think he recently stepped down of this small publishing company, that daily journal, and you'd go to these meetings, and there would be a whole bunch of cult members like me, who had traveled from around the world to listen to Charlie answering questions. And, he would sit there for two or three hours answering questions. And someone was asking him for career advice. And he said, Look, if, if you're five foot three, don't become a basketball player, because you're going to be competing against people who are seven foot nine. And he said, he said, so you want to play games, that you can win because of your talent, and your personality and be that actually fascinate you that totally captivate you. And so I think that, for me, has been a really helpful takeaway, not only in investing, but in life, because then you start to say, well, I don't, I can't really explain why I spent so much time reading weird, esoteric books about, you know, Tibetan Buddhism, or stoicism, or Kabbalah or really everything, and why I don't want to sit around just reading annual reports the whole time. And so, so I have to, so I have to be aware of what my own particular form of craziness is. And then, and then basically take on gains in life that harness my own craziness. And I think that's a really, that's a really helpful revelation. And when, when I see when I see the great investors, they're all in some way, operating in a way that's profoundly true to who they are. And, and that goes really deep. I mean, I had this interview recently with Howard Marks on my podcast, where I spent several days preparing in a way that's kind of maniacal, right. I mean, I'm an obsessive researcher. And so nobody spends several days preparing for I mean, in some cases, I might spend a week or two. And so I'm preparing maniacally, and I'm reading something, or maybe listening to an old interview of his. And I see that he, when he was at high school, he was really fascinated by accounting. And apparently, in his high school, they offered an accounting class. And he really liked the symmetry of the numbers in the different columns. I thought that was a really interesting revelation, that there's something almost sensual about the numbers for him, and the patterns and the symmetry. Whereas for me, there's just a beauty to words that I can't really explain. I just love words. I love stories. And so understanding what your game is what you're suited to when and what you really care about. Like many of the great truths, it's so platitudinous, it's really, uh, you know, you can sit and you're like, oh, yeah, you should play games, you can win. But actually, it's a really helpful filter in life. And, and I don't know, just having the discipline to stay away from games that you're unlikely to win is hugely powerful. So Joe, greenbacks said to me, most people should simply not be buying individual stocks. Because if you don't know how to value a business, and what possible basis, you buying individual stocks, and that, for me is hugely liberating. Because then I can say, Well, I'm not like you, Andrew, where you've taught classes on valuation, I don't really care about valuation. I mean, I like buying cheap stuff, but I'm actually kind of too lazy to sit around analyzing whether something is really at a major discount. And so that's, that's been a very helpful revelation.

Andrew Stotz 09:29
Yeah. And I think that, you know, talking about this, it made me think I'm just taking notes. So as you were talking, I was, you know, okay, play games that we can win, you know, where we have an advantage, let's say, and people that you've interviewed are really true to who they are. And then the other thing you talked about is kind of it's liberating. And I think that for the listeners out there, you know, one of the big lessons just out of that part of our discussion is really be more of who you are, and the more that you are of who you are and true to who you are. are, the better life you're going to live. And I would like them to take that into a final quote out of the book. And I've got a few things I want to talk about as we get prepared for the big question, but it's the last, you know, paragraph of the whole book. And I, you know, I think I, you know, I write as an analyst, I've had to write all my life. But I wouldn't say that I'm a good, I don't I don't weave stories into my writing that well. And so I just wanted to read this. So here you're talking about Vandenberg and I forgot his first name. Arnold Dannenberg Arnold. Yeah. So Vandenberg. So it says, tucked away inside the filing cabinets in his office, he keeps what might just be his most valuable possession, a copious collection of heartfelt letters from many of the people he has helped, including countless friends, clients, random strangers, and his own children. And here's his words, the pleasure you get out of knowing you've made a difference in people's lives. Yeah, I'm already in tears reading this, that some thing that nobody can, that's something that nobody can take away from you. He says, I could lose all my money. And I could still go to these files. And say, well, it's not like I live my life for nothing. Look at the people whose lives have changed. Vandenberg points to his trove of letters and says, That's my bank account. Why did you choose to end it with that statement? Or that story? And you know, and what does that mean to you?

William Green 11:33
Yeah, it has the same visceral impact on me that it has on you, Andrea, it's a very, here's a, here's a very wise person on a Vandenberg, who's gone through so much hardship in his life. This is a guy who was was born on the same street as and Frank, during the Holocaust, went into hiding as a Jew, hidden, hidden with his parents as a, as a very young child, basically, in a in a secret compartment behind a wall in a closet. And then they were too scared. In case the Nazis came and searched the house that they would take them all and they'd be sent to Auschwitz and be killed. And so he was sent off saved by a teenage girl who took him to an orphanage in the countryside, and then hit him. And then his parents did go to outfits, but amazingly survived. So here you have someone who was dealt the worst hand in life. I mean, he was pretty convinced that his mother had sent him away, because she didn't want him because he couldn't understand as a little child, that his parents were trying to save his life. And then they amazingly survive, get out of outfits and come pick them up when he's about six. And he's already so malnourished that he could, he could barely walk. And he wouldn't have survived if it had been a few months later. I mean, they had no food in this orphanage where he was being hidden. And he couldn't even recognize his parents, and he didn't care, he would have just gone with them. Regardless, he just wanted to get out. So you have this guy, malnourished. They thought he had brain damage, because he hadn't had any good nutrition for years at this formative period of his life, felt totally abandoned by his parents later was beaten up a lot by his father, as they had, you know, physical abuse, emotional abuse, war, lost 39 members of his family was full of rage and had his first marriage break up when his wife ran off with another guy. And was so depressed that he said to me, at some point, he would just, he would just want to nap every afternoon, he would use it, sometimes he would just put his head down on his desk and just weep. And so here's a guy who you would say was least likely to succeed, barely made it through high school. And so you know, he had internalized this idea that he was probably stupid and probably brain damaged, and yet has this incredibly successful investment career. By totally turning around his life, getting control of his inner life. He became obsessed with things like hypnosis and self hypnosis and the subconscious mind. And so I wanted to end the book with Arnold partly because he embodies so many important lessons about what actually constitutes a successful and abundant life. So so first of all, he gives you a sense that you've got to get control over your inner life, because if you don't, regardless of how much money you've got, if you're miserable, stressed, full of anger, full of rage, full of resentment, your life is going to be a misery. And so he started this transformation by really learning to abandon his rage, his resentment against the Nazis against the John was against his parents. And he would say to himself over and over again, I'm a loving person. And it's literally like he rewired himself. So that's a very hopeful message for a start, that makes me think, Wait a second. So if I'm, if I'm anxious, or I'm despondent, or I am self loathing or whatever, and I feel like my life is going in the wrong direction. Well, if Arnold could turn his life around, then what can I do if I can get control over my inner landscape. So that's a really important lesson, then you start to understand why he was so professionally successful as an investor and running this business. And you start to understand these lessons about his total dedication, his maniacal focus, he would do things like he started to love playing chess. And he said, I, I gave up chess, because it was taking up too much of my mental bandwidth. So he played golf one time, and he says, I could see this game was going to shackle my mind. So it gives up golf. And so you see the dedication, so you start to get a sense of what it takes to be professionally successful. And then you see this incredible generosity and decency of this guy who, who transformed himself from a rage filled, depressive, into being this incredibly loving, kind, generous. So who's been incredibly charitable, decent, has wonderful family relationships, wonderful friendships, and is always looking for ways to help people. And so in a sense, he gives you a really, it gives you a very powerful taste of what actually constitutes an abundant and successful life. And at a certain point, Arnold decided, I have enough money that I don't have to work for anyone I dislike, I don't have to worry about my bills, I can pay all of my bills. So but and then he said, beyond that, what do I care, I don't need to get immensely rich. And so there was a point where someone tried to buy his investment firm, you know, I'm pretty sure they want to pay him more than $100 million. And it's like, I would rather close my firm than sell it. Because how could I trust these people to treat my clients decently and honorably? So, so when I see someone like Arnold, it gives me a taste of the sort of the sort of the sort of person I would like to become. He gives me a sense of hope, about what can happen if you take control of your inner landscape and your thoughts and your behavior in the way that he does. And it gives you a real sense that money is valuable, because it gives you independence, it means you don't have to work for people you dislike it means you don't have to worry about your bills. But you don't want to start to obsess about it, fixate on it, and think that it's going to solve all of your problems. And what I could see from Arnold is the delight that he took in being able to use his money to help others. And then not only his money, I mean, he hypnotized me when I went to Texas to interview him for a couple of days. Because he thought that the words that I used in talking to myself were too negative, that he should change my inner monologue. And so he starts playing the four seasons, Vivaldi's Four Seasons, they get to this, this, this foam mat, like a yoga mat on his floor of his office. And he lies me down and starts to hypnotize me and has all these affirmations that he's kind of plugging into my brain, so that I'll become more successful and happier in life. So here you have this 80 something year old money manager who's getting such delight out of helping all of these strangers. And I've seen it again and again with him. I have a trampoline outside, but our neighbors use neighbors kids use that on sent to us from Texas, because I

Andrew Stotz 19:04
was gonna ask you are you still using that? Not

William Green 19:07
very often, I'm embarrassed to say but he would be happy at how much I exercise these days. But the fact that he was worried that I was too slow, thoughtful. And so. So he takes such joy in helping other people. And that starts to give you the sense of what's actually going to lead to a happy and abundant life. And so when I was interviewing him, I was in his office in Austin, Texas in Austin. And I remember him saying that line about this is my bank account, when he looked at the letters from all these people he had helped. And I remember thinking at the time, that's the last line of my book, and that was probably four years before I finished writing the book. And there was another thing there was another very moving thing when in those cabinets. He took out this scrapbook that had all the pictures of his son competing as an athlete, as a as a child, and he had hypnotized his son who was like this kind of short kid who became a shotput champion, because Arnold coached him, and would would put him to bed and hypnotize him every night. He even won some competition with his leg in a cast, while injured because Arnold had hypnotized him. And as I was talking about this, he starts to choke up as he's showing these pictures. And what was kind of really beautiful was that the sun actually was the who's a really wonderful person in his own right was the son of Arnold's wife, Eileen, by her first marriage. So he so Arnold had adopted this kid wasn't his own kid, his Arnold, who had gone to an orphanage himself as a boy. And he takes in this little boy who was kind of unconfident and shy as a young child, I think this when he was about five on or became his adopted father, and truly adopt him as his own. And, I mean, I remember his son saying, I'm the only person whose father would tuck him up in bed every night at the age of 18. Because he would hypnotize me before I went to bed, because we're training to do shotput. And so you see this father, this adopted father choking up as he talks about the triumph of his adopted son, who's become this extraordinary athlete, and just the pride and the delight in that. And I said to him, why does this choke out? And he said, Because I remember what he was, like, like, how, how unconfident he was. And Arnold himself had been kind of this broken, malnourished kid from an orphanage. And, and so there's something really beautiful about that. And so, when you see people behave like that, and you see where their happiness comes from, it reorients you, I tell you one other story from Arnold, sorry to go on about this. But it's an extraordinary story. Arnold, when he was very young, when he was probably about 16, I'm guessing 16, or 17. He had no money at all right. And his father was very tough and decided the moment on top limits further at the age of 13. He was a man, and he should be responsible for paying for his own clothes, his own food, his own entertainment, everything. So Arnold, was working full time in various different jobs. At one point in high school, I think it was working four or five hours a day. And in a factory. I mean, you know, he had a much tougher childhood than I do, that's for sure. And I'd say I had this job as a flower salesman. And he was he's an incredibly charming guy, and he's a really good salesman. And so he, he's finally given the best corner to sell on. And so he's got his store with all of his flowers. And he said to me, there's this biblical storm on the day that he has the best corner it I mean, it's just, you know, he's so drained, absolutely drenched, soaked through. And this car stops, you know, he's, he's, he's utterly miserable. He can't believe his bad luck. And this car stops, and this woman looks out and says to him, you need to get out of the rain. And he's like, I can't I've got all of these flowers. And she says, How much are they? And he tells her what, you know, what each of them costing, she's like, No, no, for all of them. And she buys all of the flowers. And she takes him to her home gives him one of her husband's dry shirts or sweaters, and makes him a cup of hot soup to warm him up, just so she does this thing to get them out of the cold, and the rain. And Arnold said to me, when someone touches your heart like that, it changes your life forever. And so you see this guy who had a few people extend kindness to him early on. And here he is 60 something years later, 65 years later, helping countless people and it's really it's important, the reverberation of that, that act of tremendous generosity from that woman. And, and one thing that's very politically incorrect that I'll tell you that I didn't include in the book, but I think he may have told me afterwards is, he said, um, one of the reasons why that had such an impact on him is that she wasn't Jewish. And he said, I didn't realize that non Jewish people could do something so kind. He was this guy who, you know, I mean, he'd survived the Holocaust. And I think Subsequently, he figured out Well Wait, that 17 year old girl who saved my life during the Holocaust, she was from a very devout Christian family and but I think at the time, that time that that woman helped him by buying all of the flowers. He was living in an alien world where, where people wanted to kill Jews. And to have someone take that kindness towards him really changed his life. And so, I see Arnold, Touching Lives left, right and center. And so he's not the he's not the cleverest person in the book, there are people who are much more brilliant, I would say, intellectually. He's not the richest. But he has this extraordinary character, and you look at him, and you think this is the guy I'd really like to emulate. And that's a. So that's why I wanted to end the book with him.

Andrew Stotz 25:39
Yeah. For the listeners out there. And for the viewers, you know, I think that this book is a little bit like when you go hiking, and you go hiking to get to the top of a particular mountain or hill. And when you get to the top of that mountain, you realize, oh, crap, there's another mountain. And when you get to the top of that other mountain, you realize, oh, crap, there's another mountain. And what I can say is that you will start to read this book, because you want to get richer. But in the process of reading this book, you're gonna decide, decide, I want to get wiser, and you're going to see that. But by the end of the book, and I think this is what makes it such a powerful book is that you end it in this way, you know, with this story with this man, but also, just as you progress through, you realize that this book is going to help you, you know, to be happier. And so like the exact order of how you call it Richard, wiser, happier, I believe, is kind of the journey that any reader is going to go through. And I read a lot of investment books. And I felt like, in some ways, I was skeptical when I started reading. And as I started to go through the journey, I started seeing that I think I want to highlight, I think, you know, a couple of other little points here. And I think the first one is if when I first got the book, I thought, okay, it's a new book. So I thought it was new interviews. And then you start talking about Sir John Templeton. And I'm thinking, okay, that can't be that new. And then I realized that interview was a long time ago. And then what I realized, as I start to go through it, I start to see that you're chronicling kind of your journey over a period of time. And, and then you interweaved some parts of yourself in it that I found fascinating. This part that I was looking at is talking about, Sir John Templeton. And you said what I realize now is that Templeton's habits and positive thinking and prayer must have been more enormous, helped enormously in his battle to gain control of his thoughts and emotions. For an investor who specialized in taking unpopular positions. That mental strength was a powerful advantage. And then you add in this paragraph, which I think really endeared me to you in that sense, and I think for the readers, they'll feel this way. You said By contrast, my own mind was hopelessly undirected. And it was easy for me to get swamped by feelings such as fear, doubt, regret, greed, impatience, jealousy and pessimism, all of which complicate the challenge of making rational investment decisions. And just tell me about why you've decided throughout this book to try to really interject your own journey in that.

William Green 28:11
Yeah, I didn't want to make out that I was some sort of genius who'd figured everything out. I'm an irrational, overly emotional, high, highly intelligent, undisciplined, erratic thinker, trying to figure out how to live and how to make my way through the world. And so, I have skin in the game. I'm not, I'm not some wise man coming out and telling you, I figured it all out. Here's how you should live. Here's how you should get rich. I'm groping in the dark. But I happen to have had this incredible good fortune that I, I got to interview all of these extraordinary people early in my career, like Jack Bogle, who founded Vanguard or Peter Lynch, who was, you know, the legendary investor of fidelity or I would go to the Bahamas and spend a day with Sir John Templeton, who was probably the greatest international investor of the 20th century. And then, over the years, I got so much access to extraordinary investors that I ended up doing probably interviews with more than 40 Great Investors for this book specifically. So I would do things like go to India with Mohnish pabrai for five days, and I would share a bunk bed with him. I mean, there's so I had incredible access. So to my advantage is not that I'm so smart and have cracked the code myself. It's that I have access to these extraordinary people. And in a weird degree of trust that I learned over many years, but enables me to, to ask very raw questions. Not only about how to get rich, but about things like the mistakes that they've made, or what they're really proud of when they look back on their life and what they regret and what went wrong. And could they have been as successful as investors, if they hadn't neglected their children, things like that. And one of the things that I find really helpful in interviewing people, is that because I'm fairly candid about my own mistakes and stupidity and confusion, people are pretty candid with me. And I think also, if you're very prepared, and you understand their story, people, people really want to be heard and want to be understood. And if you're captivated, and you're empathetic, you can, you can ask you a very personal questions. And so, so this gave me an opportunity to go deep in their life, so I didn't. So I didn't feel like I had to make myself look really good and really smart. And all knowing I, I wanted to be wanted to be honest. And I also didn't want people to attack me for pretending to be something that I wasn't. And so in the very first paragraph, I say, Look, I am the least likely person to become obsessed with investing. I've never taken an accounting class. I never studied business at school, I was an English literature student at Oxford, I am steeped in books and philosophy and spirituality. I can't count. I mean, there's a wonderfully embarrassing thing in this interview that I did with Mohnish pabrai. On my podcast, where I sent him this just came out last week, I was trying to figure out whether to edit it. And there's a moment where I'm talking about his daughter who's 26. And who designed to help me and I'm like, 53, so I'm, I might say, I'm 27 years, 37 years older than her. So I'm literally I'm displaying my stupidity, live on this podcast and make sure to cut it out. And I'm like, No, that's fine. People can see that I can't count. And so think there's a kind of authenticity. When you're, when you're showing people your mistakes, you're showing them that you're your vulnerability. There's a thing in the epilogue where I write it before I write about on a Vandenberg, where I talk about the fact that in the middle of the financial crisis, I lost my job where I was editing the European Middle Eastern African edition of time. And I say, look, so I was living in London, and I had these two young kids at private school and exorbitant rent in London. And so I know that corrosive fear of Will I be able to take care of my family. And as it happened, things turned out great. And luckily, I had no debt. So I was okay. And I got another really good job. But I, I wanted to admit that I had this kind of terror and fear. Because I also wanted to say, it's not enough to say money doesn't matter. I, when you're when you're, I mean, this was the end of 2008. Right? This is exactly when Lehman Brothers went on that, oh, my stock portfolio was getting creamed. I lost my job in the middle of that crisis. And I'm my kids are really expensive private schools in England. And they had been paid for by Time magazine where I was working. And so suddenly, instead of being on this lash expat package, I'm like, Oh, my God, am I going to be okay? And so I don't want to, I don't want to be some kind of rose tinted philosopher saying to people, oh, money doesn't matter. It's really about just helping other people and being kind of being loving. It's like, yeah, that's going to make a really significant contribution to your life. And you learn that from someone like Arnold. But if you're kinder, and you're more sharing, and you don't obsess about money, you're going to have a happier life. Sure. But you really, actually need to take your money on your financial security seriously, because it's really stressful not to know if you can pay your bills and take care of your family. And so, so I was just trying to be honest about these things and trying to get the nuances. Right. And I tell you another another thing, Andrew, that was a very similar kind of conflict that I worried about when I was writing the book I was hearing, I'm writing about all these famous investors, and I'm saying, Look, you can you can learn from these guys to be a great investor, or to be a more successful investor. And then I'm like, but no, you probably can't. Most of you, people reading this book are not going to become unbelievably successful investors. And I'm not going to lie to you, and lead you like lambs to the slaughter, to tell you that you should play A game that I don't think you can win. And so I know that there are some people who are reading the book who are going to become billionaires who truly are made for this game. And they're going to read about Nick sleep, or Mohnish. Or some of the other great investors in the book. And they're going to be like, Ah, that's a game I can play. I mean, Mani. Mani is read the chapter on Nick's sleep and literally changed the way he invested because of that chapter. So here's a guy who's already a legendary investor. And he's changing his investment style, because of Chapter Six of the book. That's about next week. So I know there's some people who are going to read the book, and become hugely rich because of it. But most of us are not, because we don't have the character and the temperament and the talents and the skill and the and the fanatical drive and focus to become super successful investors. And so I had to say to people, for most of us, it's actually smaller index. And then you're like, we'll got some undermining my own book. And so there's something kind of there's something there's something very uncomfortable about the tension in the book where I'm telling people how to play the game, but I'm also telling them that maybe you shouldn't play the game. Yeah. And that's just honest, and I was worried about it. And then and then it was funny that there was one was one review by a very well known writer, Bethany McLean, in the Washington Post, who was sort of lukewarm initially flattering, like pretty flattering, but she did well poet call me a fanboy of these people. And if I remember rightly, and my mother read this, and she was like, we sort of are a fanboy. I was very offended. And, and, and Bethany McLean, if I remember rightly, said something. Maybe it was her maybe it was another view. It was as if I didn't know that I was saying, it's really hard for you to win this game. And maybe you shouldn't, it was like, it was like the review of sort of exposing this as this revelation. He admits himself, but it's like, no, no, I was making a very conscious decision to try to be honest and authentic to undermine myself because I don't want to be diluting people. And so I think if you're trying to be honest and authentic, and nuanced than to say, this is a difficult game. People, people trust you more. And if you say, Yeah, someone like Templeton is fairly rational, and really good with his emotions. And I'm not people trust you more. And so my default position is to try to be honest about my own flaws and failings. And, and, and in general, I think that's turned out to be a good decision, I'm happy to have done that, rather than to have pretended that I'm something that I'm not,

Andrew Stotz 37:49
yeah, or just completely remove yourself from that from the text and just say, you know, this is a study of these people. And I think that's part of what I enjoyed about it. I want to ask you one more question. I'm gonna tell you an interesting story about the book and some stuff. But um, this question is, when I was like, 23, I had studied finance. And I was definitely interested in numbers. And I wasn't that interested in accounting. But I was interested in numbers, I went to work at Pepsi, I went to work in the factory, and I had learned how to use a computer. So I was making charts and graphs and I was looking at and then somebody said, You need to go to this seminar. And I stumbled into a seminar with a 90 year old man named Dr. W. Edwards, Deming. And, you know, kind of the father of the quality movement are one of the fathers of the quality movement. And there he was 90 years old, I sat right in the front row 500 people in that and I just listen to this guy, he just blew me away. And he really woke me up to so many different things. And in so much, so that I later wrote a book called transform your business with Dr. Demings, 14 points. And, and to this day, I still, you know, am enthralled by the things that he wrote the things that he said, but he gave me a really strong appreciation of understanding statistics. And, and he talks a lot about what he calls special causes and common causes, meaning that, you know, most of the time, we see, you know, pretty random what appears to us to be significant outcomes, but in fact, they're just random outcomes. So don't overreact to these random outcomes. Now, when I teach this topic, what I do is I say to imagine and I'll say for the listeners and the viewers out there, imagine an audience a stadium filled with 10,000 people, and you ask them to flip a coin. And once they flipped a coin, you asked them if they had heads move to one side, and if they had tails move to the other. So now you've just split a room, a group of 10,000 people into two groups of 5000. Then you ask them to flip again, and you say, Look, if you flipped heads consecutively, then Stay standing if you flipped tails consecutively, stay standing. But otherwise, if you just flip heads than tails, sit down. And so basically half of the five 1000s Sit down on both sides. And now, if you do that process 10 times in a row, you're going to end up with 10 people on both sides. And what I like to do when I talk about it is I like to say the heads are good, that's outperformance and tails are bad, that's underperformance. So you're naturally going to get an outcome of 10. People who flip 10 heads, 10 times, and 10. People who flip Tails 10 times now, in real life, it may be five, it may be 15. But generally, we can describe the random possible outcome. Now, nobody would dispute this, because it's, it's just, it's a fair coin, let's just say, and everybody would know that it's random. But as soon as we get into life, we throw all that away. And we don't really realize that there is a lot of randomness. Imagine if we take 1000 People who want to climb Mount Everest, and we basically say, Go, and those 1000 people go up Mount Everest, you know, are all 1000 of them going to get to the top, if someone's going to run up, and there's going to be a rock that's going to fall, they're going to step on the wrong pebble, and they're going to, you know, twist their ankle and they can't get up or whatever that thing happens, but the small number will be up. So my question to us, how do we know that the men that you've interviewed are not just there through randomness, and that we as celebrating as we do success, and describing and defining everything that they've done? But how do we really know that they're just not there? Because somebody had to get there? And this is my question for you. And I don't believe that, you know, there's a perfect answer to that. But I'm just curious, what is your thought about that?

William Green 41:39
You truly don't know. And it's one of the things I worried a lot about in writing the book. And one of the things I was one of one of the terrors that you have in writing a book like this is what happens if someone blows up? What happens if I write about someone who's doing brilliantly, and then they blow up, or they do something terrible and corrupt, or incredibly stupid, and they blow up. And I'm left having celebrated this person as a giant, and they turn out to be a fool. And so you worry about that a lot. You worry, is this just random? And so one, one of the things. So there are a couple of things that I did. One of them is I took on this subject very directly and writing about someone like Howard Marks, who talks about the role that luck has played in his life. And so there's a whole section of the book where Howard, who's a brilliant guy, talks about the fact that in some sense he's really aware of just how random things were. And he's like, look, I'm very smart. I have a very high IQ. But he's like, even my IQ. Isn't that luck? Did I do anything to deserve having a high IQ? He said, I was born. Basically, if I remember, rightly, he was born right at the end of World War Two. So he writes the extraordinary economic growth of the US as a white middle class kid, of Jewish parents who never went to college, but who really valued his education and got an Encyclopedia Britannica. And he said, he didn't. He wasn't really qualified to get into Wharton. He applied to a state school, but got into Wharton. And he said, his life would have been completely different if he hadn't got into Wharton. And then he was a really good artist. And so he's studying finance at Wharton. But he also was studying wanted to study fine art. And he gets into the fine art class. And the professor says, Alright, there are too many people here, I want to know your name. And what you're studying in here, says Marx, studying finance at Wharton. And the guy says, right, you're the first out. And so he gets kicked out of that class. And he can't, can't do what he planned to do. So he goes, kind of randomly to study Japanese Studies and culture. And he comes across this idea of mucho, which is basically the same idea that everything changes that that nothing stays the same. And so you have to accommodate yourself to reality as it is because it's going to be changing. And this becomes the foundational idea that's made him a multi billionaire investor. And so all of those things involved a very heavy dose of luck. And so, so I dealt head on with this question, the fact that the fact that it's not enough, as Howard says, to be really smart, it's not enough to be really driven. You need to be really smart, and you need to be really driven. But you also need to be lucky. And Howard's view is that it makes him happier to think What a lucky guy out there, I've had all of this good fortune. And so, so so. So that's one aspect of dealing with this question of luck is just to be honest about admitting the fact that we got lucky in different ways. I mean, I, I got lucky in, being born in London, two loving parents who really cared about education sent me to Eton and then to Oxford, and then I came to New York and went to Columbia Journalism School, they bankrolled me for the first three years as a writer, I think the first year they gave me, my parents gave me $20,000.15 $1,000, and then $10,000. And they said, after the third year, you're on your, you're responsible. So I had parents who supported me. And who were very loving, I mean, there's, so I can congratulate myself for all of the things that went right. But even the fact that I got into Oxford, boy was there a lot of luck involved in that. I mean, that was hard to get in. And there were some really smart students who didn't get in. And there's a big backlash against kids from eating because they're so privileged. And I had a series of unbelievable teachers from Eton, who, just extraordinary English literature, teachers, who changed my life. And so there are so many ways in which luck has played a part. But at the same time, there are habits and actions and ways of behaving that stack the odds in your favor, to be more successful. And so, so when I think about kind of the grand theory of my book, which is not really very explicitly stated, probably, except possibly in the introduction, it's the fact that there that what you can learn from the greatest investors is how to stack the odds in your favor, in all these different areas of life by behaving more rationally, in all of these surprisingly tangible ways. And if you behave that way, it still doesn't mean the outcome is going to be good. What it means is you've tilted the odds in your favor. And so they're the same. Taleb writes about the concept of the lucky fool. And we've seen that a lot during the era, when the stock market was just soaring, and cryptocurrencies were just soaring. We all knew lucky fools, who had done really stupid stuff. And we're becoming really rich and looked at us like we will morons if we were behaving kind of last recklessly. But one of the things that Talib said that I think I maybe quote in the book is, the fragile breaks with time. And so when you behave stupidly in the short run, you can get away with it, right? You can go, you can go out drinking, and drive your car drunk, go sleep with the neighbor's wife, cheat on your taxes, lie in your expenses, all of these things, and you can get away with it. You do that consistently or regularly over 1015 20 years, and the fragile breaks over time. And so one of the things that the greatest investors do people like Charlie Munger, is they try to avoid what Munger calls standard stupidities? And so you're solving the problem backwards, saying, Let me focus on all of the things that expose me to a potential disaster. And let me reduce the number of standard stupidities that are likely to blow me up. And even that one example of how to behave. It's not an accident, that your life gets more successful if you behave in that rational way. And you consistently unconsciously say, Let me reduce the number of standard stupidities. Let me not drive drunk, I will not have a drive without a seatbelt. Let me

Andrew Stotz 48:54
let me get in. Let me call my son to take me from the station after I've had a few drinks and get back to my town. Exactly. Right.

William Green 49:00
Exactly. So yeah, that's something that somebody thanks for mentioning that I talked about in my entry in the TEDx talk that I gave. That's a very practical application.

Andrew Stotz 49:10
Yeah, it's only your house was only seven minutes away. And you tell the story. How well, what's the downside? If I, you know, get caught if I go to jail if I kill someone, you know, the downside is just so extreme. So why not just call my son and have them come pick me up.

William Green 49:27
And I was having exactly this conversation with a very close relative of mine, not my son yesterday, who was saying to me, I kind of liked the idea of doing LSD, sorry, my dog is barking in the background, and my family showed up. It is so relative of mine was hey, I really liked the idea of maybe doing LSD when I'm at 27 Just one time to see what it's like. And, you know, because, you know, my brain will be in a better state by then I'll have done all of the whatever pruning I've been You know, so you know, probably it won't damage my brain. And it'll be really interesting. And maybe I'll have some sort of revelation in the way that some one like Oliver Sacks was a great neurologist and author had from all of his psychedelic experiments. And I said, think about avoiding situations with limited upside and massive downside. And you have a sensitive system? And are you really sure you want to mess with it? And so again, that's me applying a kind of Ed Thorpe style mentality adsorbed being one of the greatest gamblers of all time, who, who also became one of the greatest hedge fund managers of all time, and just saying, you want to stay in the game, and and the more, the more you avoid things with catastrophic downside, and limited upside, the more likely you are to stay in the game. So I don't think it's an accident. When, when filters like that, if you tilt your favor to become more successful, so yes, there's luck. But so you can be there's so much you can do to tilt the odds in your favor. And that that's what I was trying to explain is actually, you can systematically tilt the odds in your favor in all of these different areas, but it still doesn't mean that the outcome is going to be good.

Andrew Stotz 51:24
Standard stupidities, that's a great one. And, you know, I would say, as I said, at the beginning of this podcast, I'm on a mission to help 1 million people reduce risk in their lives. And the way I'm doing it is just by interviewing people, and getting them to share their stories. Now, being an analyst, I analyzed it, and I found the number one, so I call them six common mistakes, but maybe I should call them six standard stupidities. But the first number one most common way that people most common mistake that people make from this podcast is that they failed to do their research. The second one is that they failed to properly assess and manage risk assess meaning as they go into something, and manage meaning once they're into something. Number three is that they're driven by emotion or flawed thinking. Number four, is that they misplace trust. Number five is that they failed to monitor their investment. And many people just give their money to other people and then expect that it's going to come back. And finally they invested in a startup company. And there's so many stories of people that just lost it all from those. So those are the standard stupidities of this podcast. And my objective ultimately, is to help people to recognize and to not make those mistakes. So it's a good reminder. You know, when you talked about Charlie Munger standard stupidities, and, you know, I went as I was going back through the book, and I was going to the back of the book, where you were writing it reminded me you mentioned, and a dear friend of mine gave this book to me and I, as you said, it's a bit of a hard book. It's Seeking Wisdom by Peter beveling. And you said, it's a bit of a slog to go through and a night now I realize why I stopped, you know, kind of a third of the way through, and it made me pick it up. And it also made me think about sending a message to the friend of mine who sent that to me or gave it to me. But yeah, standard stupidities.

William Green 53:18
You. So, one of the reasons why this is such a powerful idea that comes from manga, is that it's actually, it's actually really hard to be smart. But it's surprisingly easy not to be stupid. And this is, this is surprising, and may not sound logical, but you can identify things that tend to lead to disaster, or failure, or underperformance relatively easily. If you when you're talking to a friend, and they start to tell you, I want to go tell my boss exactly why he's such a schmuck. I want to tell my girlfriend. Exactly why I don't like that behavior. Like no, don't I know it's going to end in tears, right? You can you can, you can hear this stuff. You know, when I remember, someone or someone I knew, who had sort of inherited lots of money would decide to set up a restaurant, and you'd be like, if you just didn't do anything, you'd be better off like the moment you know, it's like, why not just flashed a million dollars down the drain, you know, like it was so clearly not going to work. And so, so what manga does, which is a very, a very wise precaution. It's kind of like having a checklist before you take off in a plane is he goes around collecting all of these examples of disasters of terrible outcomes in people's personal lives, families, investment businesses, and then he says What caused that. And so then he kind of keeps this mental checklist for me, I couldn't keep it mentally. I mean, if I really wanted to do it seriously, I'd have to write all these things down. But manga has about 50 Extra IQ points. So you can do it in his own head. But you're getting in the habit of collecting examples of disasters, and then reverse engineering them saying what caused that. And then, and then just avoiding those things. And so one of the most helpful things you can do is to study all of the things that terrible investors do that, that blow them up. And, and so because I've been sorry, I'm not a great investor, by any means. But I've been watching stupid investors for the last 30 years. Right. So because I, I mean, I first became a financial journalist, I guess, in the late 90s. Right, so I lived through the.com bubble. And I saw people rolling the dice on IPOs in companies that were totally worthless. And it was, and it was interesting, because I saw a guy I knew pretty well, who'd made money for a while on worthless IPOs back then, then buying into cryptocurrencies and telling everyone how amazing they were and how you know, so it was like the same behavior by this incredibly smart, successful guy who also subsequently got, you know, almost jailed. So I mean, you know, guy with consistent, consistently bad judgment over decades. So when you see that kind of behavior repeating, you just say, alright, well, let me avoid that. Let me so I was pretty good at avoiding the.com bubble, partly because I didn't have that much money to invest, because I was relatively young. But also because I was just really weary and skeptical. And so likewise, I was very skeptical about the Kryptos thing, not because I understood this stuff, but also because I just saw the zealotry of people getting carried away. And what do I know, I mean, you know, I truly don't understand this sort of technology. And I may be totally wrong, and people who are much smarter than me understand it infinitely better and will make a fortune, no doubt in certain areas of cryptocurrencies. But for me, I know that one form of standard stupidity is to bet too aggressively on speculative stuff that you don't understand. And so it just didn't go there. So even though I've done plenty of stupid stuff, at least I avoided that standard stupidity. I also know that I don't want to invest money that I can't afford to lose. And so I own three stocks. One of them is Alibaba, which is down 45% of since I bought it. But it doesn't really matter. Because it's a relatively small portion of my money. I don't have to sell it. And so if China, you know, if the Chinese government stops kind of punishing these tech companies to prove who's boss it'll probably do fine over long term, and I'm not in hurry and I don't need to sell and, and losing half my money on it doesn't really matter. And so, so again, that's a standard stupidity because I know I remember from interviewing Bill Ruane, one of the great investors many years ago, said to me, never invest borrowed money. And he just said, you can't make really rational decisions when you invest borrow money, because when it starts to plummet, it's too painful. And so, so it's so Okay, so I picked the wrong stop with Alibaba, at least in the short term. But I didn't. Over concentrate, I didn't bet borrowed money. I didn't. I mean, one of the most important lessons that I learned in avoiding terrible mistakes comes from this guy, Jeffrey Gundlach, who's often called the King of bonds, who said to me, you want to make sure that your mistakes are non fatal. So what he said to me is, you want to say to yourself, if I'm wrong about this investment, what's the consequence? So, so I've been wrong so far about Alibaba and have lost 45% of my money. There's no consequence, right? I mean, it's mildly embarrassing, but it's also mildly instructive in a helpful way. And, you know, it's a good reminder that I shouldn't that, you know, things, things that you don't expect to happen can happen. And, you know, look, a lot of the greatest investors like Charlie Munger, that are very big on Alibaba, and still earn it, and they may turn out to be right but it's a really good reminder that the future is unknowable. None of us has control. And so you want to be humble about your How much you know, and you want to hedge against your own stupidity and ignorance. And so one way that I'm hedging against my own stupidity and ignorance is by only putting a very small portion of my portfolio in individual stocks because I know that I'm not really capable of picking individual stocks. And because I don't care enough, and I don't do the work and so, so I'm outsourcing to other people who are smarter than me. And then I also own a couple of index funds because especially with my wife's money and my kids money, I don't feel like they should pay the price for the fact that I'm probably deluding myself into thinking that I can beat the market. And so again, it's hedging against my own. Likely overconfidence in hubris. Yeah. So, so those are so so it's quite, it's quite likely that we're all suffering from overconfidence, because most people do. And so just knowing that that's a standard stupidity means you need some safeguard against it. And the most obvious safeguard is to diversify. And so this is one of the things that Templeton said to me many years ago, that was incredibly helpful, where he said, You Why should you be so arrogant as to assume that you can pick the one fund manager, the one sector, the one country, the the one currency, be more humble and diversify? And what he said to me all those years ago is, the average investor should own probably five or six funds. Maybe that's too much. I don't know. I mean, maybe you can just own two index funds, you could own an international index fund and a domestic index fund, depending on where you live. But at least to know, that you should diversify. That's an amazing way to counter that standard stupidity. And then another really critical way to counter a standard stupidity is one of the most obvious mistakes investors make again and again, is that their expenses are too high. And that's a totally avoidable mistake. And so one thing that I've done right, despite all of my stupidity, and all of the investment mistakes I've made over the years, is that the costs of my portfolio on the whole are pretty low. So I own one of the three stock founders, Berkshire Hathaway, there's, there's no expense ratio, I mean, it's, it's, it's, it's free, right in terms of the annual expenses. So that's, that's good, and they have the float going for them. I also own to Vanguard Index funds. So what am I paying point one four of a percent or something, and I don't have a tray I very, you know, I might do an entire year without trading a single stock. So what am I brokerage costs $5 a year. So, so Jack Bogle, explain many years ago, that if say, you make, let's say, you invest a million dollars, when you make 10%, a year, over 30 years, I think the figure he said was, it grows to 17 and a half million. Whereas if your expenses were 1.5 percentage points a year, 1.5% a year, it would grow to 11 million, I think it was maybe 11 and a half million. So you gave up $6 million in profits over 30 years, just because of that one and a half percentage points a year, inexpensive. So that's a really obvious standard stupidity that you can avoid. So I think if you know the rules of the game, and you know that things like overtrading, investing in things that you don't understand, chasing after fads, having high expenses, if you know that those things are standard stupidities, at least you can avoid those. And then if you take advantage of things like tax advantaged vehicles like 401k, IRAs, or ISIS, or whatever they are in your country. That's incredibly helpful. And, and then, if you live within your means, and you keep adding to the pot, you're kind of done, you're gonna win the game. Yeah. And so I think the most important way to avoid standard stupidity is actually just understand these fundamental principles that are actually not that complicated. But most people, especially highly intelligent people, they want to make things more complicated, right? So, so we're trying to, we're, we're trying to, you know, do you know, pyrotechnical moves where, whereas, you know, because it's not very exciting to say to someone, live within your means, and invest in your IRA and your 401 K, and then just keep adding to the pot, but actually, that's kind of all you need to do to win the game.

Andrew Stotz 1:04:46
I'm gonna tell you a story. And then I'm gonna ask you the big question of this podcast, but the story is, maybe I don't know. Maybe a year or so ago, I was reaching out to different people through LinkedIn, which is In asking the consider coming on the show. And that was, you know, I always have some interesting discussions with people. And one of the best ones I always highlight was the guys, the guys answer to me was great idea, not my style. So, you know, people don't want to come on and talk about their losses, some people don't want to do them. But one guy, you know, basically, let's just say I had a lot of different conversations and, and then one day, a book arrived at my house, and I put it on my I don't, I don't normally get books, you know, and this one was sign. And I just didn't really know what to do. So I put it next to my bed. But it wasn't a topic that I was at particularly interested in at the time. So it just sat there, I don't know, six months. And then, but I didn't move it into my office where all my books are, I just left it next to my bed. So then, I don't know, it was a couple of months ago, I found your book. And I started reading it, and I was going through it. And you were describing this guy that was like, really interesting guy. And you know, and then you mentioned that even he would send people copies of his book. I thought, wait a minute. And then I looked over on my shelf on my next to my bed. And it was this book. And this book is the education of a value investor by Guy spear. And, and I didn't really understand much about guy. And I thought to myself, I really don't want to read another book on and part of the reason why I didn't read it. I didn't want to read it in the book on value investing. I mean, I pretty much read everyone. Yeah. And so, but when I read this in your book about him, and then I said, Oh, crap, I gotta read this book. And that's a very good book. Yeah, I read the book. And, you know, I would say I highly recommend this one, the education of value investor, because it really is his discussion of his journey. You know, whereas you're talking about, hey, let's, let's learn from these guys. But what can we learn? What are they saying? What have they done, whereas I really feel like he's trying to put into practice, you know, what he's learning. And so it was just kind of a funny way. And it seems like I kind of lost. I've reached out to my web back. And I realized that, you know, that he had asked me for my address and all that. And I just haven't had that. I tried to get him on the show. And I just haven't been able to get them on. I hope I can

William Green 1:07:38
get he's on my podcast in a couple of weeks. And I mean, it's hard to know where to where to go with this. But guy, I mean, I helped him write that book, as you probably know. And he's a very old friend of mine. And, and I was thinking mentioning guy before, when you said to me, why did you include your own story, because one of the things that happened is very early, in my process of working on this book, I think, I have this vague memory of being in an airport with guy, I can't even remember which country it was in. And I showed him the first few paragraphs of my proposal, I think for this book, I think that's what it was. And this must be seven years ago, something like that. Then he said, I hope, I hope you're going to include William Green in this book and say, why do these investors fascinate William Green, which is exactly the white guy taught? And so you said don't hide from that you need to include yourself and explain why what's the fascination? And, and that, in a sense, gave me permission to include myself. Because here I was thinking, Well, what kind of schmuck I am. Why should anyone be interested in my story, and in me when I'm not a great investor, but actually, you, you, it adds something personal and a different layer and complexity to it when you include your own story. And you say, Look, I'm groping for a solution here. There's a wonderful book that I would highly recommend that also had a big influence on me and thinking about this book, which is by I think the author's Bakewell, and it's called Montaigne, yeah, that this is the French philosopher 16th century, I think, French philosopher, and it says Montagnier how to live. And it's a biography of Montana in one question and 20 attempts at an answer. And that for me is really the question is how to live. That's what we're trying to figure out is how do you make your way through this murky world? Where as Howard Marks says, everything changes, Nothing stays the same. The future is unknowable. We have these glitchy brains. They're constantly getting things wrong. We're prone to All of these behavioral defects that people like Danny Kahneman write about, like overconfidence and recency bias and the like. And it's really tempting to throw your hands up in the sky and say, Well, what can I do? I'm helpless. And actually, I think what the greatest investors show you is you're not helpless, that there are ways that you can systematically tilt the odds in your favor. And so, so that's, that's what I'm trying to do is show myself groping through the dark using these investors to help me and I'm trying to give a sense of what I find most important or most valuable from what they teach. So there's a kind of synthesis at the end of each chapter. That's not like bullet points of saying, These are the five most important points it's a takeaways. Yeah, but they all kind of takeaways. I mean, it's sort of me saying, if you really want to understand what Joel Greenblatt's life is about, this is what you need to take away from it, this is the most important thing, or if you really need to learn the lesson from Howard Marks his life, this is the single most important lesson. And so that's me distilling this enormous amount of information from these people, I mean, countless hours of, of interviews with each of these people. And saying, This is what really matters. This, this is so from Charlie Munger, think how many things you could write about with Charlie Munger. But I came to the conclusion that really the single most important thing you could learn from Charlie, is how to be less stupid. And there's a beautiful paradox that because Charlie is one of the smartest people on Earth. So here you have one of the smartest people on earth telling you focus on being less stupid. And here's how you do it. And so that's a very practical lesson.

Andrew Stotz 1:11:55
Be Less like your neighbor,

William Green 1:11:58
your neighbor, yeah. And also, you know, even a practical thing, like, like, there's a guy in that chapter, who, who's now a neurologist, but was a hedge fund manager at the time, who says, Look, we know that one of the preconditions for dumb decisions is to make decisions when you're hungry, angry, lonely, tired, and in pain was stressed. Yeah. So so when you're in a state like that, you need to look at yourself, be physiologically self aware, and say, I'm in no condition to make a major investment decision, I'm in no condition, to make a major choice about whether to blow up this relationship, I quit my job, be rude to my boss, or my girlfriend, or boyfriend or whatever. Let me wait until I have more equilibrium. And then I'll be better off in making a decision. So that's a very tangible, practical example. That stacks the odds in your favor. And what's wonderful is that that guy can Shubin. Stein has used that technique, not only as a hedge fund manager and as a professor of Columbia Business School, but while treating patients in a COVID ward in the midst of the pandemic. And so it's enabled him when he's totally flooded with emotion, dealing with patients on ventilators and having to tell their families that their relative is dying, they can't, they can't see them. He's able to see what state he's in and say, I'm likely to behave in a sub optimal manner, that lets me try to push myself that much harder to be compassionate and kind and decent, and to suspend making really difficult decisions. And so he took this to a point where he would literally say, Look, my, my back is hurting, I have a bad back from a wrestling injury as a teenager. And this PPE equipment that I'm wearing is physically painful. And I'm wearing it all day long. And I'm upset that my patients are dying, I know that I'm likely to make terrible decisions. So that's something where he's very tangibly taking lessons from the great investors about avoiding stupidity, and lessons from behavioral finance, behavioral science, and you're saying, Yeah, I can be a better decision maker if I'm, if I'm aware of my own physiological state. So those are the sort of things that I love where you can actually, you can apply this wisdom, again, to stack the odds in your favor.

Andrew Stotz 1:14:32
It's when I was 17. I went into a drug rehab, and in fact, it was my third drug rehab in Ohio. And it was a long term treatment center because my counselors just felt like I was, you know, pretty lost. And on the day that I went in, they only had 12 seats. It was a farmhouse in Ohio. And on the day that I arrived, the other person, the 12th person was graduating, and he had a toolbox They called it it was just a box with a handle on it, it was an open box. And basically, he had all these things in it. And then he took all the things out of it and put them in a bag. And they had a ceremony. And then he gave me this empty toolbox. And he said, you know, welcome, you know, and I hope that you can fill this toolbox up with the tools that will help you in life. And one of those two, I didn't really understand it, because it wasn't that tangible of a single hammer. Screwdriver, what are we talking about? I don't really fully understood Stan this but seven months later, when I graduated from this place called New Directions. I did the same I had a toolbox filled, filled with tools. And Holt was one of them hungry, angry, lonely, tired, we didn't have the P. And he asked the what was it pain and stress, pain and stress? Yeah. But it was just halt. And what a beautiful, simple, intangible tool that became tangible once you find it. And I left that place. And I've now been 40 years sober and clean and not, you know, or alcohol. But it is a lot of these tangible tools. And I think that, yeah, when it comes to drugs and alcohol, and it's serious, it's deadly. You know, we have to put in place some, you know, some ways of making sure that we don't do stupid things. Now, I just want to, I want to hit on a couple of other quick things. And then the first thing that I want to hit

William Green 1:16:29
thank you for telling me that that's an amazing thing. And just so you know, Ken Shubin Stein, like I mentioned, he was studying, because he's a doctor and a neurologist, but also a hedge fund manager. He was studying the addiction literature. And so he was drawing that idea of full PS from addiction literature. And so one of the one of the weird claims that I make at the start of my book is that the reason you can learn more from great investors about how to live is because because they have skin in the game, and they have to they there's a huge cost if they lose a great benefit if they win this game. It forces them to be very open minded pragmatists. And so they roam through the world, looking for practical tools, and they don't care whether it comes from behavioral finance, economic history, or addiction literature. If it works, they'll borrow it. And so there's something so what I ended up figuring out was, they're like pragmatic philosophers, they, it all it matters is to quote Charlie Munger, Charlie Munger says, I observe what works and doesn't work and why that is such a powerful mindset. So you were given this amazing tool that changed your life at the age of 17. And here's Ken Shubin, Stein taking that tool and saying, how does it apply in the COVID? Ward when I'm treating patients? How does it apply when I'm managing money. And so during the financial crisis, when his hedge fund was going under, during the financial crisis in 2008 2009, and one of the things that he did is he said, well, so I've got to get my diet under control. And I have to exercise and I have to meditate. Because we know that there are, there are basically four things that we know have a powerful impact on the brain. So good nutrition, meditation, sleep, and exercise. So you said I know that I'm in a bad physiological state. So I have to take these four habits really seriously. And so I can't just be mashing up, you know, Oreos, in my vanilla ice cream, which is what he used to do, it is worst way to control his stress. And so that's a very practical learning. And so this, this is why the greatest investors are a worst studying, it's because of that pragmatism.

Andrew Stotz 1:18:53
You mentioned something that I have something I call the valuation masterclass where I teach young people, you know, how to do valuation, and how to be an analyst or how to be a fund manager, from what I've learned, you know, and but one of the things that I see is, and I try to explain to them that the beautiful thing about in Thailand, in particular, people complain that there's less and less financial analysts, you know, there's just that, that, that and what I've found is, I've created a course where I bring these people together and help them to start thinking and using these tools. And what I try to explain to them is that the beautiful thing about being a financial analyst, in my opinion, or as an investor is this if you have your, for the listeners out there, the viewers think about you know, an uncle, a cousin, a friend, that person that has, you know, a crazy crazy, wrong idea. Everybody knows, you know, it doesn't make sense you know that that idea is wrong, and but they can keep that wrong idea for their whole life. Whereas for financial person, ultimately, you have to act on your idea and put money down on it. And the stock market is going to give you feedback. And if your ideas are wrong, and your conclusions and your logics wrong, you're gonna find out. And therefore it puts a whole nother level of pressure of kind of forcing say, okay, yeah, okay, this is what I believe. But that's not the new work. Therefore, I've got to look for another, you know, answer, I've got to look at both sides of this argument, I can't just strengthen my side of this argument, or I'm going to potentially lose a lot of money. And I think that the discipline of putting money behind an idea is what makes the pursuit of being an analyst or fund manager, such a glorious thing, because it is a place where, you know, you are punished. Sometimes you're punished for right thinking, and the market is crazy at times. But over the long run, you are punished for not exploring and learning and trying to see both sides of a story so

William Green 1:21:08
that you just doesn't there's a beautiful, there's a beautiful line from Dr. Johnson, Samuel Johnson, who wrote the dictionary is this great British writer who said that the prospect of hanging concentrates the mind admirably, and I kind of adapt to that in my own mind. And I just kept thinking, you know, the prospect of losing money concentrates the mind admirably. And there's something about think of someone like Bill Miller, right, who I've written about tremendous amount over the years, and who I interviewed on my podcast a few weeks ago, Bill has more than 80% of his personal net worth in two things, which are Amazon and Bitcoin. And as he said, to me, my cost basis is effectively zero, because he bought Bitcoin at $200 a coin, that's when he started, and his average price is about 500. And Amazon, he started buying basically at like about 1999. And he became the largest individual shareholder of Amazon whose surname wasn't Bezos at one point. And so these are huge investments. So when Bill is thinking about whether or not bitcoin is going to endure, and is really a valid technology, or when Bill is thinking about the future destination of Amazon, boy, is he thinking hard about those things. I mean, there's so much money on the line, so much skin in the game, and he's a profoundly brilliant intellect. And so there's something about the possibility of losing massively, but also gaining massively. That just adds to the mind concentrates the mind admirably. And whereas if you're a journalist, or you're an academic with tenure, if you're a Market Strategist at a big brokerage firm pontificating about the future of the market, there's not really any cost to being wrong. Those guys are wrong constantly. And there's no downside, really, they just need to be write randomly, often enough that they can tout their record the few big calls where they got lucky. And so I just think it's better to listen to the great investors than to listen to journalists. And I just see so much stupid journalism, right where I saw something the other day, I think it was in Bloomberg, I'm sorry, about Bloomberg, although I did work there at one point. But it said, saying, maybe it wasn't Bloomberg, who was like, oh, no, I think it was parents, which actually love. It said, why this stock could go up 40% Over the next year, or something like that, and your foot, you don't even know if it's gonna go up, you know, up or down, we have no idea. You're really going to pretend what percentage, it could go up. It's like, it's just dumb. And so, and I actually think Barents is terrific. And there's a lot of great stuff that I've written for parents, so not bad mouthing them. But I just think that delusion that we know what the future holds with any sort of precision is really worth avoiding. And people, people, particularly market strategists, and brokers, you know this better than anyone, analysts, people who pretend to know, either they're fooling you or they're fooling themselves. And so you just want to have tremendous skepticism about predictions, and

Andrew Stotz 1:24:41
especially about the future,

William Green 1:24:43
especially about the future. Yeah.

Andrew Stotz 1:24:47
Let me get on to the three things I want to just to highlight. The first thing I just wanted to mention, was it you did something in your book that I found kind of endearing me to you, which was when you said I think it was about Sir John Templeton, I can't remember which one But you said, I realized I kind of didn't like this guy, you know, and that to admit something, and then later to kind of go back to that and think about that, I just felt like that that was interesting. And that was, again, interjecting your journey. And that brings me also back to guy's book, where at first I was like, This guy's just trying to copy these great guys, you know, and what the whole book eventually becomes. And I guess the reason why it's a butterfly on the is that he's, he's more morphing over time into becoming himself. And that's, I think, the thing that I would say, and then the last last last thing that I wanted to mention, and that is that on page 118 of your book, I think it kind of sums it up. And it just hit me like a ton of bricks, because I also have a private business, which is a coffee business, which managed to survive that 97 crisis. And we have about 100 employees, and we're trying to grow that business all the time. And it's tough. I mean, it's tough, particularly when hotels and coffee shops and restaurants, our main customers are shut down. But we survived the crisis. And we've survived other crisis, and we're trying to grow our business, what are we trying to do, we're trying to grow our top line, we're trying to sell more of our products, which means we're trying to satisfy what our customers want in that business. And if we are, then we're selling more. But the more important thing, as I like to say, you know, revenue is proof of concept. And profit is proof of competence. The question is, can we deliver this value to our clients profitably? So the end result is earnings growth. And that then brings me to will Dan ofs secret sauce. And that's the section that I was wanting to highlight, because he said, what you said, it said it's notoriously difficult to outperform the market with a huge Fund, which I think is a really important part of thing that the typical person reading this may not really realize is that there are plenty of great investors that made a huge amount of money when they had $20 million in that fun. And as it got bigger, it got harder. And but when we met in 2017, dan off had the remarkable distinction of having whipped the s&p five over 500, over 135 10 and 27 years, I was eager to uncover the subtle ingredients of his secret sauce. But he managed to sum up his entire investment philosophy in three words, stocks follow earnings. And I think from my perspective, that turns out to be my biggest takeaway. Right now, from your book, anything that you would add to that?

William Green 1:27:44
Yeah, one of the things. One of the things that I, I, I came to the conclusion, I think, in writing about Joel Greenblatt that what I was trying to identify was things that are approximately true, on average over time. And so it's approximately true, on average over time that stocks follow earnings. But if you pay an enormous amount for those earnings, if you pay an indefensible amount, for a company with great earnings, you're still going to pay a price. You know, it's not, it's probably not going to work out if you pay a ridiculous amount. So valuation does matter. So, so, Dan, office view is that if you want to learn the best companies, you have to pay up for them. And he's willing to do that, but within reason. And so there is a nuance there. Another thing that is approximately true on average over time, is that you want to value a business and buy it for less than it's worth. And that's the essence of Joe Greenblatt's approach. And that's the essence of what Howard Marks does. It's the essence of what Buffett and Munger do. You're valuing businesses and buying them for less net worth. Now, over some periods, you're going to look like a fool for doing that. Because everyone is investing in things like snowflake that were trading at 100 times revenues, and they were getting rich doing it, or they were investing in, you know, Solana and all of these other cryptocurrencies without knowing what they were doing, and they're really just rolling the dice. So they were lucky foods, right? But over time, on average, you're going to do well, if you buy things for less than that worth, and then and then wait. And so I think you want to understand the rules of the game. Before you play the game and Mohnish pabrai said to me, what he realized early on as a hedge fund manager is that he was playing against people who even as professional money, man just didn't know the rules of the game. And he's like, I could see that we're hosed. They would own 200 stocks, they would trade them too much. And they were overpriced. And so they were hosed. And so just understanding these simple rules, and then saying, Am I equipped to apply them is really powerful. And so part of what I'm doing in the book is I'm saying to people, these are the simple rules that have been explained to people like Dan off by people like Dan off manga, Howard Marks, and I don't have the temperament and the skills to apply them, do you. And if you don't, here's this other way to play the game, because there's actually this wonderful default, which is you can buy index funds. Or maybe, or maybe you have a little bit of play money, where you say, Yeah, I'm prepared to gamble, one or 2% of my portfolio of my net worth on cryptocurrencies that I don't understand, and on hot tech stocks, who I don't understand, but let me at least with the bulk of my money with the money that I can't afford to lose, let me apply the rules of the game in a sensible way.

Andrew Stotz 1:31:06
And I wrote a book many years ago about how to how to invest, if you really know nothing about the market, and I wrote it for women, in particular, five women, and they were my five nieces, each of which, when they were 18, I gave them $3,000, which was a, an amount that was the minimum amount that a Vanguard account could be set up with, for launching for investing in one of their funds. And then I basically taught them that your best advantage is your youth in starting now, and investing. And here's $3,000. Let's get it into that account. And let's get you started on that. Because I know that you know, they don't have an interest in picking stocks and valuing stocks. But I also know that even if they decided to go into that, the odds are ultimately stacked against you, if that is your goal, unless you really, really focus in and apply what let's say, summarize by saying, number one, buy good companies at low prices, let's say good companies and good prices, you may not always get them low, but that's a good company is that good prices, and understand that that stocks follow earnings, because it's not, it's one thing to go out and buy a cheap company or a low price company relative to its value. But if it doesn't grow the earnings, like in our coffee business, if we can't deliver the product that people want, and we can't deliver it profitably, then you know, it's not going to be that successful. So that's how I would wrap it up, I've decided that I'm not going to ask you the question of your worst investment ever, because we've pretty much gone through a lot of stuff and so much valuable things. So I do want to ask you the last question, and that is, what is your number one goal for the next 12 months?

William Green 1:32:49
My number one goal for the next 12 months? Well, I will answer very quickly the question that you didn't answer in a way that you didn't ask me, which is just to say, the times I screwed up most was when I was in a hurry. And I invested particularly in private companies that made me feel self important. That made me feel like I had access to something special. And so if there's a lesson there, it's that you want to be aware of your own frailties, and foibles. And so for me, as you can imagine, as someone who has got to write about famous people for all of these years, and really smart people, and gets to hobnob with really clever people who are really rich and really successful. It's very intoxicating, and you start to think, wow, I have access to all of these amazing people, and I know what they're doing. And, and, and so, I mean, one of the biases that people talk about having to be aware of is authority bias, where you listen to someone extraordinary. And you follow what they did and, and part of why I invested in Alibaba is that I'd had a long conversation with people like Charlie Munger and Lew Simpson about it with two of the greatest value investors of the last 50 years. And they had both bought Alibaba very aggressively and I'm like, wait, Harry, I'm chatting to these masters of investing where I really admire you, but I'm not doing the work. And so just to know that I'm extremely vulnerable to authority bias to hearing what people who are smarter than I am and more knowledgeable than I am doing, and then following them into a trade without having done the work. And then I don't know whether they've changed their mind. So I also own a stock that Mohnish pabrai bought during the final during the start of the COVID crisis where he bought 13% of a company. I bought the stock shortly afterwards, I felt incredibly smart I quickly doubled my money. And since then, I've half my money virtually and money sold it my Months ago, because he realized there was a problem in the business. I didn't know that he was selling it. And so, so again, it's so for me, there's a particular vulnerability to thinking that I'm part of the smart money set, and it flatters my ego. And so I'm very vulnerable to my own. My own psychological flaws and frailties, made character flaws. And so I would just encourage your listeners to be self aware, and to not only to be checked, not only to be collecting examples of other people's stupidity, but collect examples of your own stupidity. Because, I mean, I not only invested in one private company that I lost most of my investment, I invested in three private companies over several years. So I repeated the same costly mistake three times. And so when there's something that you do, that's incredibly stupid, look at it and say, not going there again. And, so I remember with one of those private companies going to Guy spear many years ago and saying, You should really take a look, this is really interesting guy, just look at me and say, I don't do private companies, I just have a rule. And I don't buy things that people are trying to sell to me. And so, guy just had a couple of simple filters that kept him out of doing this really stupid thing. Yeah. So sorry, that's answering the question that you didn't want to ask. But I think it's a valuable thing to be aware of your own particular flavor of stupidity. And for me, there's a big aspect of doing things that I'm not really qualified to do. Because I know that people, Well, who do that thing best? And I assume if I fool myself into thinking inside, on the inside, and it's like, yeah, but maybe maybe they change their mind. Exactly. Or, or maybe it's just a really small part of their portfolio. But none of these lessons are easy, because, look, I wrote about Bill Miller, betting on Amazon, when it was at $6, a share. And he bought 15% of the company. And I wrote an eight page story for Fortune about Bill where he talked about the fact that if this turned out to be right, when everybody thought Amazon was going bankrupt, this will be one of the greatest contrarian bets of all time. And it has turned out to be one of the greatest contrarian bets of all time. And so I was smart enough to see that, but it didn't make the investment. And so the exact lesson that I'm saying, I ought to have learned of not following the Masters into something that I don't really understand. If I had made that mistake. On that occasion. I've never had to work again. And so investing is not simple. And even when you learn a really important lesson, it may not apply next time around, and it's just life is not simple.

Andrew Stotz 1:38:06
Yeah. Well, I would just say, you know, for the listeners out there, it's a great example of, you know, when you follow someone because you like what they said, or because you admire them, it's something, you got to remember that you still have to do your own research. And also, that you research is not something that's just done once. It's constantly being done and reevaluating your decision. And that's usually what's missing when people end up following others. And so that's, I think, a great example. And I'm glad that you shared it, I was just a little bit worried about time, so I don't want to keep you going. So I would

William Green 1:38:43
also say, Andrew, that when, even when you find someone that you really admire, hedge against the fact that you're wrong. And so even with friends of mine, who are really brilliant investors, and really honest and honorable people who I've invested with, because I own I think I own three different funds to hedge funds and one mutual fund, even there. And like, this person is one of my best friends. Well, this person is someone I really admire. I really like him. He's really honorable. What if he's a con man? And for what if he gets divorced? Or what if he has a nervous breakdown? Or what if what if he dropped dead? And, you know, God forbid any of these things should happen. But it goes back to that simple lesson by template from Templeton Don't be so arrogant that you assume you have the one fund, the one person the one advisor, the one asset class. So when I saw people saying I can't believe that Bill Miller has 80% of his net worth in Amazon and Bitcoin I have 140% of my net worth in Bitcoin. I would just look at that and I'd be like, you moron. And maybe it will go up 10 times and you'll be a genius and you'll seem really rich, but you're still a moron. And so you're just you have to be humble and hedge against your own stupidity when your own fallibility.

Andrew Stotz 1:40:10
Yep. So let me ask you. So what is your number one goal for the next 12 months? I know you've got things going with the podcast, and I'm sure you've got a lot of other stuff going, what do you want to? If we talk 12 months from now, what do you want to have done?

William Green 1:40:25
Well, there's personal stuff, and there's professional stuff. And one of the things that I'm most excited about is that I'm going on a seven day seven or eight day meditation retreat with a great Tibetan Buddhist meditation teacher called Souq new Rinpoche. And I'm excited about that one, I'm nervous as well. But one of the lessons of the epilogue of my book that I was sort of referring to and talking about Arnold Dannenberg before, is you got to take responsibility for your inner landscape, because you can be as successful as you want the investing game. But if you're not calm, and resilient, emotionally, sooner or later, that's going to get exposed by a pandemic, or a family health issue, or a recession, or a market crash or whatever. And God forbid, I really hope none of these things happen. But they tend to happen. And so what one of the great lessons both from the Stoic philosophers and from investors like Bill Miller, is, you want to focus on controlling things that you can control. And so you can't really control a lot of external circumstances you can to some degree, but you can control internal circumstances to a great degree at your state of mind, your intentions, your mindset. And so I take really seriously this idea of how am I going to have greater equanimity. And so, so I tried to meditate. You know, I study a lot of spiritual parts that I find very, very helpful. And I also, I mean, to a ridiculous degree, I've discovered the most banal thing, which is the extent to which exercise improves my mood, and so much as I dislike exercise. You know, I, I try to do the peloton multiple times a week, you know, meditation, exercise, stuff like that to become more economists to use a pompous word that I rarely get to use. So now I get a start from my English teacher, back in high school. So to be more economists, because I think you want to have a solid foundation. And so the more you take control of your inner landscape, the more the other stuff is likely to go well.

Andrew Stotz 1:42:59
It's a great way of thinking about it. And I think it's a challenge to the listeners to take control of your inner landscape, because only ultimately, you can shape that. So listeners, there you have it, another story of loss to keep you winning. If you haven't yet taken the risk reduction assessment, I challenge you to go to my worst investment ever.com Right now, and start building wealth, the easy way by reducing risk. As we conclude, William, I want to thank you again, for joining our mission. And on behalf of a Stotz Academy, I hereby award you alumni status for turning your worst investment ever into your best teaching moment. Do you have any parting words for the audience?

William Green 1:43:41
I'm just really happy that you gave me this opportunity to talk and I know I know. Usually you already talked for about half an hour and I told you I was Lobos. I'm looking at my clock here. I managed to detain you for about an hour and a half or something. So thank you for your patience and your forbearance in listening to me blather on. hope some of its helpful.

Andrew Stotz 1:44:01
I've enjoyed it immensely. And I'm sure that the audience will too and that's a wrap on another great story to help us create, grow and protect our well fellow risk takers. Let's celebrate that today. We added one more person to our mission to help 1 million people reduce risk in their lives. This is your worst podcast host Andrew Stotz saying I'll see you on the upside.