Podcast notes – Mohnish Pabrai (Investor, Charlie Munger disciple) with William Green

Guest: Mohnish Pabrai
Host: William Green (Investors Podcast Network)

Won charity auction lunch in 2008 w/ Warren Buffett
Warren introduced him to Charlie Munger

2009 lunch w/ Charlie at California Club
Studied Mohnish’s US portfolio – led him to sell his Sears position

Became bridge partners w/ him and Rick Guerin when one of their group dropped out

Charlie uses the f-word a lot – which surprised Mohnish

Charlie’s an assembly line, devouring books and readings – reads 500 books a year – skims a lot
Broad interests – global warming, American history

Charlie doesn’t look back, entirely focused on problem at hand

Charlie and Buffett don’t talk as much as they used to – partly due to how long they’ve been together

Charlie understood earlier than Buffett about buying a good company even if it’s not undervalued / cheap (as opposed to Buffett’s more Graham-like investment approach)

One difference was Costco – Charlie wanted to take a bigger stake, Warren thought it was too expensive

Another difference was BYD – it took Charlie a long time to convince Warren because of his confidence in the founder

Charlie introduced Mohnish to Li Lu, wanted Mohnish to have a good partner / someone equal to talk to
Had regular lunches in Arcadia and Pasadena

Li Lu recommended Amore Pacific (Korean cosmetics) but Mohnish couldn’t understand it, but it went up 80x
Korea as state of art for Asian beauty products

Li Lu then recommended Maotai – most valuable liquor company in world
$1000/bottle

Mohnish recommended Micron to Li Lu

Charlie thought Li Lu was incredible person, 3 Columbia degrees at same time (law, MBA, and undergrad) – English was his second language

Li Lu invested float of his student loans and made $1M by the time he graduated!

Charlie met Li Lu at an event commemorating Tiananmen Square
Had weekly breakfast for awhile

Charlie will understand a business in 10 seconds that Mohnish has been studying for weeks

One of Charlie’s filters is “win win win” – everything must be win across the board

Mohnish tried copying Berkshire’s strategy in India – buy an insurance company, use the float for investment

Insurance is a difficult business to be in, Warren mentioned it this year at Berkshire meeting
Geico is unusual in being well run, but encountering problems now too
Bizarre business – sell product but don’t know real cost until 5 years later – models are often wrong

Berkshire’s core textile mill business and insurance businesses turned out not great – but investment portfolio more than made up for it

John Templeton: Best analysts are wrong 1/3 times

“Greed takes over” – important to have checklists and hear opposing viewpoints and partners to talk to help damp this down, damp down the animal spirits

Investment isn’t brain surgery – you’re gonna have a high error rate
Have humility to realize when you’re wrong, must be candid about it, and move on

Howard Marks – talks like a robot – doesn’t seem to get emotional – yet he’s super creative and based on gut
Bill Miller says he cries a lot

Charlie had a very tough period in 1970s, failed partnership, wound it down – a lot of the money was rolled into Berkshire
Decided in 1974 he no longer wanted to manage money

Warren and Charlie – beautiful souls with hard exterior

Value of his YPO membership – 8-12 member groups (Forum) – everything is confidential

Charlie gave Mohnish advice on his struggling marriage / divorce – predicted everything that happened
Recommended a movie to him that was quite accurate

Charlie has 8 kids
He and Warren understand people so well, people dynamics

“Show up early” – big lesson from Charlie, very uncourteous to be late
Li Lu would show up 10 mins early for breakfast w/ Charlie, but he was already there, then 15 mins, then 30 mins – eventually Charlie told him he came early to read his paper!

Charlie emphasized value of being ethical as a competitive advantage
“Enlightened self interest”
“Most things in life function on trust”
If you become trustworthy, you have a massive leg up in life, your reputation
You get there by having a consistent life, demonstrate repeatedly that you play ethically, are long-term, treat everyone around you well

McDonald’s said they had 3 stools that they rely on – franchisees, vendors, and employees

Stopped 3/5 of way

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