How the Greatest Investors Win in Markets and Life: William Green (Transcript)

Here is the full transcript of William Green’s talk titled “How the Greatest Investors Win in Markets and Life” at TEDxBerkshires conference.

In this TEDx talk, William Green, author of Richer, Wiser, Happier: How the World’s Greatest Investors Win in Markets and Life, delves into the wisdom he gathered from interviewing over 50 of the world’s greatest investors. He emphasizes the importance of simplicity and reduction in both investing strategies and life, advocating for focusing on what truly matters.

Green highlights the value of learning from mistakes and avoiding ‘standard stupidities’ as key to success in investing, a lesson he learned from Charlie Munger. He also discusses how great investors often lead surprisingly simple lives, focusing on eliminating distractions and mental clutter. Green shares personal anecdotes, such as a family discussion on Bitcoin and a responsible decision after a night out, to illustrate the practical application of these principles.

He concludes that true wealth and happiness come not from financial success but from the quality of relationships and living a life aligned with simple, clear principles. Overall, Green’s talk is a blend of investment wisdom and life philosophy, demonstrating how strategies used by successful investors can also lead to a fulfilling life.

Listen to the audio version here:

TRANSCRIPT:

Early Beginnings in Investing

My fascination with investing began when I was in my twenties. My brother, Andrew, and I had sold an apartment that we owned in London, and I had to figure out what to do with this relatively modest windfall. I started studying the stock market and I quickly became obsessed. I wanted to become financially independent, but I didn’t much fancy the idea of spending my life in an office taking orders from an annoying boss.

And when I discovered the stock market, I thought, “This is spectacular.

I can get rich without getting my hands dirty.” There was something magical about the idea that you could make money just by using your mind. There was only one problem.

Challenges and Learning

I had no idea what I was doing. I knew nothing about business or economics. I have no mathematical skills at all. If I’m lucky, I can count to about eight with a calculator. But I had one tremendous advantage, which is that I was a journalist writing for magazines like Forbes and Fortune. Which meant that I could actually interview all of these legendary investors who did know what they were doing.

Over the last twenty-five years, I spent hundreds of hours interviewing more than 50 of the world’s greatest investors, including many billionaires. I got to do things like travel to the Bahamas to spend a day with Sir John Templeton, an eighty-six-year-old billionaire who was probably the greatest international stock picker of the 20th century.

Insights from Legendary Investors

In the days after 9-11, when the world seemed to be falling apart, I got to spend several days with Bill Miller, who was the most famous mutual fund manager of his generation. The stock market was crashing, but Miller was relaxed and cheerful. I stood beside him, watching while he bet hundreds of millions of dollars on beaten-down stocks that everybody else was desperate to sell. I remember saying to him, “You’ve got to be so ballsy to do what you do.” And he said, “Yeah, but I’ve also got to be right.”

So I became captivated by this tiny elite of great investors who defied gravity by beating the market over many years. I wanted to understand what insights, principles, character traits, and habits enabled them to win. And could I become more like them? The greatest investors have taught me not only to invest better, but to think better and possibly even to live better.

Simplicity in Investing

They taught me that it’s all about simplicity, subtraction, and not being a fool. Let me tell you what I mean. One of the most famous investors I’ve interviewed is called Joel Greenblatt. His investment returns are the stuff of legend. His hedge funds return about 40 percent a year over 20 years. At that rate, one million dollars turns into eight hundred and thirty-six million dollars. I think you’ll agree it’s a pretty nifty trick.

A few years ago, I’m sitting on Greenblatt’s patio in the shade in the Hamptons, and we’re sipping iced tea and I’m gazing out at his magnificent view of the Atlantic Ocean. And Greenblatt is looking sun-tanned and relaxed. He’s wearing jeans and loafers with no socks. And I say to him, “What’s the secret of investing?” And he says, “William, it’s incredibly simple and it all comes down to this: Figure out what a business is worth and then buy it for much less. That’s it.”

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I’m looking at him and I’m thinking, “This is so cool. Here’s this guy who’s cracked the code on how to beat the market.” He’s distilled all of the complexity of investing into one simple principle. I don’t need to waste my time trying to figure out where the stock market is going to rise or fall. I just need to value a business and then buy its stock for much less than it’s worth. But then I started to worry.

Realization and Adaptation

The fact that this is simple doesn’t mean that it’s easy. And when I started to think about this, honestly, I had a really unsettling realization. I thought, “Well, I don’t actually know how to value a business. I’m not even that interested in valuing businesses.”

So I shouldn’t be buying individual company stocks because this is not a game that I’m equipped to win. And if there’s one thing I’ve learned from the greatest investors, it’s that you don’t want to play games that you’re not equipped to win.

The more I started thinking about simplicity, the more I realized that it’s a huge advantage to have a few simple, robust, deeply held beliefs, a simple set of guiding principles. Why? Because we live in an extremely confusing world and these simple principles can help us to guide us through the fog so we don’t get too confused. I began to realize that the ability to keep things simple is actually a superpower. It’s one of the secrets of success, both in investing and in life.

Lessons from History

Then I started to get excited because I realized everywhere I looked, I found more examples of simplicity going back thousands of years. For example, I remember studying the Old Testament and learning that it contains 613 commandments. I thought, “Who can remember so many rules, let alone obey them all?” That’s when I realized, well, this is why we needed a top ten list, the Ten Commandments.

But if you actually try to list the Ten Commandments, how many of them would you get right? “Thou shalt not kill, thou shalt not steal, thou shalt not covet thy neighbor’s wife.” The last time I tried this, I got three out of ten right, but I graded myself dishonestly and gave myself six out of ten. And I was wondering, does that actually violate one of the Ten Commandments? And then I thought, “I don’t know, I can’t remember.”

Simplicity in Wisdom

But then I realized, I remembered that there was a great sage 2,000 years ago who taught the most simple and timeless thing of all. The sage’s name was Hillel, and he was asked to teach the entire Old Testament in the time that he was standing on one leg. And he replied, “Do not do to your neighbor what is hateful to you. All the rest is commentary.”

And you know what? The Old Testament actually sums this idea up in just three Hebrew words, which translates as, “And you shall love your neighbor as yourself.” Simple, right? You bet.

Learning from Great Investors

Over the years, I saw that many of the greatest investors have this ability to simplify the game of investing. But what I also discovered is that they lead surprisingly simple lives. I remember spending a couple of days with a famous investor named Tom Gayner at his office in Virginia, and it felt really like being in an extremely peaceful library. At one point, Gayner said to me, “How many times have you heard my phone ring?”

And I thought, actually, I haven’t heard the phone ring more than once in the entire day. How come? Well, Gayner had actually consciously removed all of these distractions that could break his focus.

Another time, I was with an investor named Laura Garrett, and she’s one of America’s leading investors in foreign markets.

The Power of Simplicity

And I said to her, “Have you stuck to your time?” We’re sitting there eating sushi in a restaurant in New York. And she says, “Well, every Friday is a creative day, and I don’t schedule anything at all on Fridays.” And she basically just goes to sit by a stream near her home in Utah, and she reads a book, she writes in her journal as a way of synthesizing her thoughts.

Garrett has traveled to about 75 countries, but she told me one of her favorite places on earth is a tiny, tiny island just off the coast of Australia, where there are only eight houses. And she often retreats there with a stack of books, and she said, “You actually have to get your groceries taken over there with you on a boat at the start of this trip.”

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And she said to me, “There’s no internet access, her telephone, her cell phone rarely works when she’s there. But that’s just fine because her disconnection from the noise and hubbub and the mayhem and the frenetic pace of modern life is actually part of her competitive advantage.”

It frees her up so that she can think so that she can concentrate on the simple essence of her work, which is to analyze companies and to think about countries and stocks and what the future holds.

The Art of Subtraction

What I started to realize is that all of the greatest investors have this obsession with reducing mental clutter, so that they can focus on what’s most important to them and what they’re best at. And one way that you could describe this is actually the art of subtraction. And this idea of the art of subtraction has had a profound impact on my own life.

Like all of us, I’m constantly bombarded by emails and phone calls and Twitter notifications and Zoom meetings, and all these other guilt-inducing reminders that I should constantly be doing more. And whenever I’m feeling scattered or stressed or overwhelmed, I remind myself of what I’ve learned from Gayner and Garrett, which is, I don’t need to do more, I actually need to do less.

I try to unclutter my schedule. I think about the few simple priorities that really will make a difference in my life. Writing, reading, meditation, spending time with my family, exercise, that’s it. Pretty much everything else is peripheral. I’m always thinking, always asking, “How can I reduce complexity? How can I simplify my life?”

Munger’s Wisdom

What can I subtract? There’s one other very simple idea that’s changed the way I think and live. And it comes from Charlie Munger, who has been Warren Buffett’s partner for over 40 years. Munger is one half of the most successful investment team that ever lived.

And I was so excited to meet him that I actually traveled 3,000 miles to Los Angeles for a 10-minute interview. Munger was 93 years old, and he looked frail in this dark, baggy suit, but his mind was as beautiful as ever. I’m sitting there almost knee-to-knee with this legendary icon, and he’s peering at me through these spectacles. And he explains in this deep, croaky voice that what you really want to do in life is focus on one thing, focus relentlessly on this one thing: “Don’t be a fool.”

Munger is one of the smartest people on earth, but he told me that he spent an inordinate amount of time focusing on actually reducing what he calls standard stupidities and idiotic behavior. What he explained to me is that it’s very difficult to be smart, but it’s actually surprisingly easy to be non-idiotic. And it gives you a tremendous advantage if you work systematically and consistently to reduce your own stupidity over the course of your lifetime.

Avoiding Standard Stupidities

But how? Munger tends to collect many examples of disasters, and then he asks himself, “What idiotic actions caused this terrible outcome?” Once he’s identified these idiotic actions, these foolish actions, he says, “Well, let me not do that.” This habit of thinking first about what not to do turns out to be an incredibly helpful strategy when it comes to investing.

If you want to be a successful investor, the first thing you want to do is say, “Well, how could I be a terrible investor?” Thanks to Munger, this is a method that I’ve used really consistently over several years. For example, we recently had a family dinner, and my daughter Madeline says, “Dad, shouldn’t you be buying Bitcoin?” And there’s a part of me that’s thinking, “Yeah, everyone’s getting rich overnight, and cryptocurrencies are surging, and I want a piece of the action.”

But then I remind myself, “Well, one thing that terrible investors do all of the time is they buy overheated assets that they don’t actually understand just because they can’t bear to miss out on the action.” Will Bitcoin continue to surge? Is it a fad? I don’t know.

Applying Munger’s Strategy in Life

I have no idea. But I do know that betting, gambling wildly and without any knowledge on whatever’s hottest today tends to be a standard stupidity. It’s a fantastic way of getting yourself in trouble. And knowing that, I have a simple rule: I’m not going to do it. As Munger told me, once you actually focus on systematically reducing standard stupidities in this way, it’s an incredibly helpful way of just keeping yourself out of trouble.

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But it turns out that this is a wonderful strategy, not only investing, but actually in life. Munger told me that if you want to have a happy life, you should start by looking at all of the idiotic behavior that is likely to guarantee that you’ll have a miserable life. And then don’t do that.

To give you an example, Munger has this list of standard stupidities of idiotic behavior that gets people in trouble when he says, “OK, so don’t become addicted to drugs and alcohol. You should be more reliable. If you want to have a terrible life, be unreliable, harbor grudges, harbor resentment, seek revenge.”

And then he said, also indulge in envy, which he describes as the dumbest of the seven deadly sins, because it’s not even fun. And I started to realize that actually, this is an incredibly helpful strategy in my own life, and I really wanted to adopt it. And so recently I was having dinner in New York City with a great investor named Matthew McLennan, and we drank two bottles of superb wine. And I live about 45 minutes outside New York City.

A Lesson in Caution and Responsibility

So I take the train home and my car is sitting there waiting for me at the train station. And it’s about a seven-minute drive back to my house, and it’s almost midnight. I’m tired. I want to go to bed. But I’m thinking, “Am I drunk?” I’m thinking, “Well, I don’t think I’m drunk. I don’t feel drunk. But what’s the downside if I’m wrong?”

What happens if I’m stopped and I lose my driver’s license? What happens if I hurt someone? Then I asked myself, “What would Munger do?” And the answer is pretty obvious. This is an idiotic bet. The downside is just catastrophic. So it’s something I just shouldn’t do. I shouldn’t drive.

So I call my son, Henry, and he comes to pick me up. And I leave my car at the train station. What I’ve learned from the greatest investors is that nothing is more important than simply avoiding catastrophe. Because if you want to succeed, both in markets and in life, the first rule is that you have to survive.

Realizations from Interviews with Investors

You have to stay in the game. Over the last 25 years, I’ve spent an inordinate amount of time interviewing the greatest investors. And when I started out, I thought, well, I had this fantasy that I was going to become fabulously rich. But after interviewing all of these super rich investors, the truth is that I gradually realized, well, the money is not that important after all.

These are the people who hit the jackpot financially. They’re billionaires who own private planes and palatial homes and whatever other toys and baubles you can imagine. And the truth is, those toys and baubles do give them some pleasure, but probably not as much as you would expect.

The True Wealth of Relationships

Sure, the money gives them financial independence, which is very valuable. And they don’t have to worry about paying their bills, which is also wonderful. But what gradually dawned on me through all these interviews over all of these years is that what really matters most in terms of their day-to-day happiness is the most obvious thing of all. It’s the quality of their relationships. I remember interviewing a legendary investor named Ed Thorp, and I asked him, “What makes for a truly abundant life?”

And Thorp told me, “Who you spend your time with is probably the single most important thing in life.” And I have to tell you, there’s something wonderfully reassuring about this for me, because what I realized is I don’t need to fantasize about becoming fantastically rich. I don’t need to dream that the money is somehow going to make me happy. I have to focus on building joyful relationships with my family and friends by trying to spend more time with them and trying, despite all of my flaws, to become more loving and kinder.

I’m pretty convinced that’s the greatest investment of all.