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Pabrai & Spiers at Stanford Graduate School of Business


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Guy Spier and Mohnish will be speaking to MBA students at The Stanford Graduate School of Business in a joint session on Monday, March 16 from 12:15 to 1:15 PM (Room C106, 655 Knight Way, Stanford, CA). 

 

If you'd like to attend, please drop a note to nickii_karen@pabraifunds.com.  They have very limited seats for non-Stanford students.  First come; First served!

 

And then they are on to TED 2015 in Vancouver!!!  Cheers!

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Guest notorious546

Guy Spier and Mohnish will be speaking to MBA students at The Stanford Graduate School of Business in a joint session on Monday, March 16 from 12:15 to 1:15 PM (Room C106, 655 Knight Way, Stanford, CA). 

 

If you'd like to attend, please drop a note to nickii_karen@pabraifunds.com.  They have very limited seats for non-Stanford students.  First come; First served!

 

And then they are on to TED 2015 in Vancouver!!!  Cheers!

 

are they speaking at ted or just attending? i can't seem to find them on speaker list.

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Just came back after attending the talk. There was professional video recording. If not on youtube, it should be on the Stanford website.

 

At the end, I asked Mohnish how much time does he spend on a company researching before putting the money. He said it depends on the time. At the 2009 time period, when things were cheap, he just needed only a day. At present, he spend couple of weeks researching the company before buying. That was kind of unexpected. I guess he probably misheard the question.

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Nice talk.  Guy spoke first for about 20 minutes, Mohnish did not.  Then they opened up for questions from students.  They were mostly giving worldly advice as opposed to specifics of stock selection or selection methodology, etc.  They clearly are good friends and banter back and forth.

 

From Guy, "If had learned the lessons that Monish had already ten years earlier, I would be managing a billion" with a head nod in Mohnish's direction.

 

It would not surprise me if they wound up in some kind of alliance, like Munger and Buffett, but that is idle speculation. 

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I remember in one of the video, Mohnish mentioning that Guy and him discussing all their investments to each other for peer review. Also you could see a major portfolio overlap.

 

Guy's strategy is more of what worked in the USA (costco, Moody's etc.), try it on other countries.

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My summary tweet:

 

 

 

Great talk on life and investing by Pabrai and Spier. Advice: marry up, be a giver, cut out the noise and use checklists!

 

@Nick_Henderson

 

My not so short summary on one response to a student question: "How to gather capital base when you are just starting out in the investment business"

 

Guy: Life is hard, you need lots of luck and things to line up...

Mohnish: Guy, you are totally wrong. It is actually very easy (class laughter). Let me show you. (To the student) What will your salary be when you graduate?

Student: huh.. (class broke out in laughter).

Mohnish: OK OK, what is the median salary of a Stanford MBA

Professor: 150K

Mohnish: Is 150K good enough for you?

Student: No, not really. Why are you asking me this hard question and putting me on the spot?

Mohnish: Well, you asked the hard question and we need to resolve this now (more laughter). How about 200K?

Student: Getting there but not quite

Mohnish: How about 300K?

Student: Closer but not there yet

Mohnish: 350K?

Student: OK, I'll take that but need to take off 50% for taxes (He was wrong here, the marginal tax rate is 50% - effective tax rate won't be 50%, but whatever).

Mohnish: OK, so you'll end with 175K a year. What will be your living expenses? (Student again squeamish, class in laughter). OK, let's say you live on 100K. Don't spend one more penny than that. Forget the BMWs. Who needs that? That anyway won't make you happy. What makes you happy is another class altogether and we won't go there yet. (I am thinking to myself the student is thinking Mohnish is nuts - all these MBA grads joined Stanford they will be living this fancy life with the BMWs and Teslas). The remaining 75K you just save. Max out your company matching 401K, IRA, Roth IRA and whatever other vehicle you have. Put it all in an index fund. How old are you?

Student: 27

Mohnish: Do it till you are 37. How much do you expect to make at 37?

Student: $2 - $5 million? (I am thinking wtf. This guy really has his head in the sand).

Mohnish: Great. At that point, I let you raise your lifestyle to 200K a year (class laughter). Also, I recommend that you marry up (more laughter).

. Your life expectancy is about 50 - 60 years more. If you just do this, you can't help but get super wealthy.

Guy: If you compound at 15%, you double every 5 years. If you compound at 11%, you compound every 7 years. Let's say you compound at 11%

Mohnish: Guy, can you do the math and tell me how much "capital" (emphasis his) our student here will have gathered (more laughter)

Student: No offense, I get the point but that is not the question. I have already taken up so much time, but let me clarify my question (I am thinking this guy is really over his head. The class is super large and there are so many people waiting to get their questions answered). You are assuming I go get another job and save up money like you are saying to invest on the side. But how does one go about into the investment business full-time and gather capital?

Mohnish: Very easy. You have a brokerage account?

Student: No (wow - this guy does not have a brokerage account, but he has all these ambitious goals. This is what a Stanford MBA does to you? Gives you an entitlement mentality?)

Mohnish: TODAY I want you to start an account. Go to www.tdameritrade.com and open an account (more laughter as he spells out the URL). Put it whatever money you have. $10,000, $100,000.. $1,000 whatever. Don't buy groceries from this account and start investing this money. 1.5 years later when you graduate, you will have a track record. Then you approach three kinds of people - Friends, Family and Fools. (very loud laughter). All three should be willing to hand you their hard earned dollars if you have a decent track record and you have this great Stanford MBA grad certificate. Let me give you one more secret from Guy and me. Investing doesn't really take that much time. I suggest you also get a day job. It's free money, take it. Believe me, that's what you want to do. You will have three things going - your day job, your savings, and the investing on the side.

Student: OK, I get the point, let's move on to the next question.

Mohnish: Have I resolved your concern?

..

 

 

It showed to me that MBA doesn't really give you wisdom or even prepare you as an investor. In fact, it is quite easy to fall trap into an entitlement mentality. Basis tenets of being frugal can go such a long way that sometimes sophisticated MBA students don't get it. This was super fun imho.

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Thanks to the invite link, I attended as well (as you can guess from my name, it was in the neighborhood...).

 

At the risk of revealing the greedy/mercenary aspects of my personality, I found the presentation somewhat surprising.  Stanford isn't known as an "investment" school, so my take was that the kids (yes, I'm old and cynical  ;) ) were looking for something more tangible.  I get the pay-it-forward theme that Mr. Spier is promoting, but it wasn't until Mr. Prabai started answering questions that the talk became relevant.

 

For example, in answering one question about how to raise funds, he (Pabrai) went through the math of saving from one's job in order to fund an account that can ultimately be audited for performance.  Once the numbers are OK from both a return and time perspective, then go after "friends, family and fools."

 

The flip side of the talk is that since these grads (or Harvard or wherever) will be masters of the universe, it's better to get them thinking about charity/philanthropy now.  I just sense that's not where this audience is at this point in their lives.

 

Also based on the presentations, I'd rather have money with Mr. Pabrai than Mr. Spier.  I found Mr. Spier's tortured soul confession somewhat distracting.

 

One man's opinion.

 

PS:  I haven't read Spier's book, so I recognize an hour talk isn't his body of work.

 

PPS:  Mr. Pabrai's purple shoes were spectacular.

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My summary tweet:

 

 

 

Great talk on life and investing by Pabrai and Spier. Advice: marry up, be a giver, cut out the noise and use checklists!

 

@Nick_Henderson

 

My not so short summary on one response to a student question: "How to gather capital base when you are just starting out in the investment business"

 

Guy: Life is hard, you need lots of luck and things to line up...

Mohnish: Guy, you are totally wrong. It is actually very easy (class laughter). Let me show you. (To the student) What will your salary be when you graduate?

Student: huh.. (class broke out in laughter).

Mohnish: OK OK, what is the median salary of a Stanford MBA

Professor: 150K

Mohnish: Is 150K good enough for you?

Student: No, not really. Why are you asking me this hard question and putting me on the spot?

Mohnish: Well, you asked the hard question and we need to resolve this now (more laughter). How about 200K?

Student: Getting there but not quite

Mohnish: How about 300K?

Student: Closer but not there yet

Mohnish: 350K?

Student: OK, I'll take that but need to take off 50% for taxes (He was wrong here, the marginal tax rate is 50% - effective tax rate won't be 50%, but whatever).

Mohnish: OK, so you'll end with 175K a year. What will be your living expenses? (Student again squeamish, class in laughter). OK, let's say you live on 100K. Don't spend one more penny than that. Forget the BMWs. Who needs that? That anyway won't make you happy. What makes you happy is another class altogether and we won't go there yet. (I am thinking to myself the student is thinking Mohnish is nuts - all these MBA grads joined Stanford they will be living this fancy life with the BMWs and Teslas). The remaining 75K you just save. Max out your company matching 401K, IRA, Roth IRA and whatever other vehicle you have. Put it all in an index fund. How old are you?

Student: 27

Mohnish: Do it till you are 37. How much do you expect to make at 37?

Student: $2 - $5 million? (I am thinking wtf. This guy really has his head in the sand).

Mohnish: Great. At that point, I let you raise your lifestyle to 200K a year (class laughter). Also, I recommend that you marry up (more laughter).

. Your life expectancy is about 50 - 60 years more. If you just do this, you can't help but get super wealthy.

Guy: If you compound at 15%, you double every 5 years. If you compound at 11%, you compound every 7 years. Let's say you compound at 11%

Mohnish: Guy, can you do the math and tell me how much "capital" (emphasis his) our student here will have gathered (more laughter)

Student: No offense, I get the point but that is not the question. I have already taken up so much time, but let me clarify my question (I am thinking this guy is really over his head. The class is super large and there are so many people waiting to get their questions answered). You are assuming I go get another job and save up money like you are saying to invest on the side. But how does one go about into the investment business full-time and gather capital?

Mohnish: Very easy. You have a brokerage account?

Student: No (wow - this guy does not have a brokerage account, but he has all these ambitious goals. This is what a Stanford MBA does to you? Gives you an entitlement mentality?)

Mohnish: TODAY I want you to start an account. Go to www.tdameritrade.com and open an account (more laughter as he spells out the URL). Put it whatever money you have. $10,000, $100,000.. $1,000 whatever. Don't buy groceries from this account and start investing this money. 1.5 years later when you graduate, you will have a track record. Then you approach three kinds of people - Friends, Family and Fools. (very loud laughter). All three should be willing to hand you their hard earned dollars if you have a decent track record and you have this great Stanford MBA grad certificate. Let me give you one more secret from Guy and me. Investing doesn't really take that much time. I suggest you also get a day job. It's free money, take it. Believe me, that's what you want to do. You will have three things going - your day job, your savings, and the investing on the side.

Student: OK, I get the point, let's move on to the next question.

Mohnish: Have I resolved your concern?

..

 

 

It showed to me that MBA doesn't really give you wisdom or even prepare you as an investor. In fact, it is quite easy to fall trap into an entitlement mentality. Basis tenets of being frugal can go such a long way that sometimes sophisticated MBA students don't get it. This was super fun imho.

 

Sounds like this particular individual is "special" on a number of levels, but the entitlement mentality is not limited to Stanford MBAs.

 

I've fielded a number of calls from classmates from business school (and random people who find me on the Internet) who seemed utterly convinced that I knew a secret phrase to say to people to raise large amounts of capital (if one exists, which I doubt, I surely don't have it), and that I was merely holding out on them -- maybe if they kept me talking long enough, it would spill out.

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My summary tweet:

 

 

 

Great talk on life and investing by Pabrai and Spier. Advice: marry up, be a giver, cut out the noise and use checklists!

 

@Nick_Henderson

 

My not so short summary on one response to a student question: "How to gather capital base when you are just starting out in the investment business"

 

Guy: Life is hard, you need lots of luck and things to line up...

Mohnish: Guy, you are totally wrong. It is actually very easy (class laughter). Let me show you. (To the student) What will your salary be when you graduate?

Student: huh.. (class broke out in laughter).

Mohnish: OK OK, what is the median salary of a Stanford MBA

Professor: 150K

Mohnish: Is 150K good enough for you?

Student: No, not really. Why are you asking me this hard question and putting me on the spot?

Mohnish: Well, you asked the hard question and we need to resolve this now (more laughter). How about 200K?

Student: Getting there but not quite

Mohnish: How about 300K?

Student: Closer but not there yet

Mohnish: 350K?

Student: OK, I'll take that but need to take off 50% for taxes (He was wrong here, the marginal tax rate is 50% - effective tax rate won't be 50%, but whatever).

Mohnish: OK, so you'll end with 175K a year. What will be your living expenses? (Student again squeamish, class in laughter). OK, let's say you live on 100K. Don't spend one more penny than that. Forget the BMWs. Who needs that? That anyway won't make you happy. What makes you happy is another class altogether and we won't go there yet. (I am thinking to myself the student is thinking Mohnish is nuts - all these MBA grads joined Stanford they will be living this fancy life with the BMWs and Teslas). The remaining 75K you just save. Max out your company matching 401K, IRA, Roth IRA and whatever other vehicle you have. Put it all in an index fund. How old are you?

Student: 27

Mohnish: Do it till you are 37. How much do you expect to make at 37?

Student: $2 - $5 million? (I am thinking wtf. This guy really has his head in the sand).

Mohnish: Great. At that point, I let you raise your lifestyle to 200K a year (class laughter). Also, I recommend that you marry up (more laughter).

. Your life expectancy is about 50 - 60 years more. If you just do this, you can't help but get super wealthy.

Guy: If you compound at 15%, you double every 5 years. If you compound at 11%, you compound every 7 years. Let's say you compound at 11%

Mohnish: Guy, can you do the math and tell me how much "capital" (emphasis his) our student here will have gathered (more laughter)

Student: No offense, I get the point but that is not the question. I have already taken up so much time, but let me clarify my question (I am thinking this guy is really over his head. The class is super large and there are so many people waiting to get their questions answered). You are assuming I go get another job and save up money like you are saying to invest on the side. But how does one go about into the investment business full-time and gather capital?

Mohnish: Very easy. You have a brokerage account?

Student: No (wow - this guy does not have a brokerage account, but he has all these ambitious goals. This is what a Stanford MBA does to you? Gives you an entitlement mentality?)

Mohnish: TODAY I want you to start an account. Go to www.tdameritrade.com and open an account (more laughter as he spells out the URL). Put it whatever money you have. $10,000, $100,000.. $1,000 whatever. Don't buy groceries from this account and start investing this money. 1.5 years later when you graduate, you will have a track record. Then you approach three kinds of people - Friends, Family and Fools. (very loud laughter). All three should be willing to hand you their hard earned dollars if you have a decent track record and you have this great Stanford MBA grad certificate. Let me give you one more secret from Guy and me. Investing doesn't really take that much time. I suggest you also get a day job. It's free money, take it. Believe me, that's what you want to do. You will have three things going - your day job, your savings, and the investing on the side.

Student: OK, I get the point, let's move on to the next question.

Mohnish: Have I resolved your concern?

..

 

 

It showed to me that MBA doesn't really give you wisdom or even prepare you as an investor. In fact, it is quite easy to fall trap into an entitlement mentality. Basis tenets of being frugal can go such a long way that sometimes sophisticated MBA students don't get it. This was super fun imho.

 

Sounds like this particular individual is "special" on a number of levels, but the entitlement mentality is not limited to Stanford MBAs.

 

I've fielded a number of calls from classmates from business school (and random people who find me on the Internet) who seemed utterly convinced that I knew a secret phrase to say to people to raise large amounts of capital (if one exists, which I doubt, I surely don't have it), and that I was merely holding out on them -- maybe if they kept me talking long enough, it would spill out.

 

 

What you said about raising money is so true.  There seems to be a general perception that opening a fund automatically means that money will just flow into the door.  What people don't see is that it takes time and a track record to get people interested.  I think the key to the whole business is just staying around long enough.  I once told a friend that if you put up good numbers over a decade, I can guarantee you that you will make a lot of money.  I think I lost him at the decade part. 

 

 

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Thanks to the invite link, I attended as well (as you can guess from my name, it was in the neighborhood...).

 

At the risk of revealing the greedy/mercenary aspects of my personality, I found the presentation somewhat surprising.  Stanford isn't known as an "investment" school, so my take was that the kids (yes, I'm old and cynical  ;) ) were looking for something more tangible.  I get the pay-it-forward theme that Mr. Spier is promoting, but it wasn't until Mr. Prabai started answering questions that the talk became relevant.

 

For example, in answering one question about how to raise funds, he (Pabrai) went through the math of saving from one's job in order to fund an account that can ultimately be audited for performance.  Once the numbers are OK from both a return and time perspective, then go after "friends, family and fools."

 

The flip side of the talk is that since these grads (or Harvard or wherever) will be masters of the universe, it's better to get them thinking about charity/philanthropy now.  I just sense that's not where this audience is at this point in their lives.

 

Also based on the presentations, I'd rather have money with Mr. Pabrai than Mr. Spier.  I found Mr. Spier's tortured soul confession somewhat distracting.

 

One man's opinion.

 

PS:  I haven't read Spier's book, so I recognize an hour talk isn't his body of work.

 

PPS:  Mr. Pabrai's purple shoes were spectacular.

 

Menlo,

 

There is a teacher named Jack McDonald that teaches at Stanford who has a following. (http://www.tilsonfunds.com/JackMcDonald.pdf)

 

Has anyone taken a class from Jack McDonald? 

 

Best,

 

AtlCDore

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Spot on, AltCDore.

 

I basicaly tell people to start early, raise as much money as you can, try to stay alive for as long as possible and maybe something good will happen to you. It's no different than any other startup.

 

I'm going to be the one to disagree here.  If you put up great numbers in a cave no one will know.  Also great numbers only attract investors who want high returns.

 

Marketing is highly underrated.  I've learned this myself in my own business.  If you have a great story but no one knows the story isn't great.  You need to tell others what's happening, why the product is worth purchasing etc.

 

If the storyline proposed above is true then why are there dozens (hundreds?) of startup fund managers who raise a lot of money without a track record?  And why are there hundreds of struggling fund managers who have great returns but no funds?

 

If you're competing against everyone else on returns there is no edge.  There is no market differentiation.  As a manager you need to segment the market, find a niche and sell to those investors in that niche.

 

You want to sell something differentiated to your customers, this is how you get sticky customers.  Maybe you have a different investment approach, or look at stocks differently.  Sell that process or angle.  Maybe you provide exposure to a sector that doesn't get much exposure, sell that.  Don't sell returns though.

 

Look at Buffett and Watsa, they are both doing something different.  The funds have performed well, but it's the process, how they look at stocks, the connections they have.  It's these reasons that investors stick with them even when results are bad.  And better investors are defending them in down years.  That's what you want, you want customers who will defend you in a down year because they believe in your process and product.

 

I know my opinion probably isn't popular with the ramen-eating fund manager crowd but I think most businesses could really help themselves with more marketing.  Tell your story!

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Oh, I actually agree with you, Nate.

 

I didn't meant that all you do is wait for something good to happen to you. Merely that you try and stay alive so that whatever it is you do has a chance to work.

 

I'd also say that a lot of startup fund managers who raise a lot of money without a track record do so because of "pedigree." Tiger Cubs, former Managing Directors of Goldman Sachs, etc. The struggling managers with great returns are probably a result of a lack of effective marketing, but I'm not sure that I'd lump the "pedigree" people with effective marketing -- to me that's more like having gone to Andover or Exeter so that you have a bunch of rich friends -- some marketing was required to get them into the fund, but a large part of it was just being in the "right place" -- if that makes sense.

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Spot on, AltCDore.

 

I basicaly tell people to start early, raise as much money as you can, try to stay alive for as long as possible and maybe something good will happen to you. It's no different than any other startup.

 

I'm going to be the one to disagree here.  If you put up great numbers in a cave no one will know.  Also great numbers only attract investors who want high returns.

 

Marketing is highly underrated.  I've learned this myself in my own business.  If you have a great story but no one knows the story isn't great.  You need to tell others what's happening, why the product is worth purchasing etc.

 

If the storyline proposed above is true then why are there dozens (hundreds?) of startup fund managers who raise a lot of money without a track record?  And why are there hundreds of struggling fund managers who have great returns but no funds?

 

If you're competing against everyone else on returns there is no edge.  There is no market differentiation.  As a manager you need to segment the market, find a niche and sell to those investors in that niche.

 

You want to sell something differentiated to your customers, this is how you get sticky customers.  Maybe you have a different investment approach, or look at stocks differently.  Sell that process or angle.  Maybe you provide exposure to a sector that doesn't get much exposure, sell that.  Don't sell returns though.

 

Look at Buffett and Watsa, they are both doing something different.  The funds have performed well, but it's the process, how they look at stocks, the connections they have.  It's these reasons that investors stick with them even when results are bad.  And better investors are defending them in down years.  That's what you want, you want customers who will defend you in a down year because they believe in your process and product.

 

I know my opinion probably isn't popular with the ramen-eating fund manager crowd but I think most businesses could really help themselves with more marketing.  Tell your story!

 

oddball,

 

I don't think you are in disagreement.  Marketing is a very important piece.  I agree with you that guys who sit at home generating great numbers are not going to raise much money if no one knows about them. 

 

The business breaks down into being able to raise institutional money and money from wealthy people.  Two completely different business models.  For the vast majority of people who are on this site, they are going to raise money from friends and family.  Must build a track record and through marketing, will get friends and others to invest and that grows as you generate returns and get to know more people.  It's all important.  Can live very well managing $25-$50mm fund. 

 

My point is that you need to stay around long enough to get to that inflection point.  I think too many think that money flows in the door once you announce you are running a fund.  Per the Stanford MBA, he thinks he can open a fund and he'll be flying charter in about 5 years.  Maybe the hedge fund model today is the dot.com of the late 90's.  Everyone thinks they are going to make a fortune right away.

 

Best,

 

AtlCDore

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For the vast majority of people who are on this site, they are going to raise money from friends and family.

 

I always found the attitude of raising and managing family/friends' money amazing.

 

There is a saying to never do business with a friend, since soon you either won't have business or you won't have friend or both.

 

At least if your anonymous clients are not happy, you can tell them to go and screw themselves.  ;D And they will only take their money when they leave. Family and friends on the other hand can leave you with a decades of hurt feelings and other crap.

 

Oh well, shows why I am not in marketing and I don't manage other people's money.  ;)

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