With William Green, Contributor to Time, Fortune, Forbes, Fast Company, The New Yorker, The Economist, Author of The Great Minds of Investing
William Green And “The Great Minds Of Investing”
Guest and author William Green’s writing has been published widely in top financial news outlets like Forbes, Fortune, Fast Company, The Economist, and in prestigious magazines like Time and The New Yorker. Most recently he has written or edited the profiles in a new, lavishly praised book titled The Great Minds of Investing. Steve came across this book while attending a value-investing conference at the Berkshire Hathaway shareholder meeting this year, was impressed with its striking mix of candid photographs and equally revelatory profiles, and knew right away that he wanted to invite William on to the show. Fortunately for us and, we hope, for you, our listeners, he accepted.
Book Juxtaposes Portrait Photos With Prose Profiles
Never one to shy away from getting down to brass tacks, Steve starts their talk by asking William why, in a world that’s inundated with investing books, why bother adding another one to the flood? Green answers that the book is an unusual one, but humbly admits that he doesn’t know if it qualifies as “important.” Its uniqueness, for Green, lies in its combination of stirring photos of venerable investors by Michael O’Brien with, at times, intimate prose profiles of these men which capture their philosophies of life and business and even, surprisingly, their regrets. The photos provide a piercing, almost uncanny sense of the presence and depth of these phenomenally successful investors, as if you’d been allowed a glimpse into their souls. Green says the goal of his profiles was to provide a very human look at these iconic men without diminishing their brilliance or complexity. He wanted readers to learn from their insights into investing while also learning from their insights into both a life well-lived and the mistakes they’d made.
Authentic Character Portrayals
As an example of this kind of authentic portraiture of a life, Green cites his profile of legendary international investor Jean-Marie Eveillard. He followed up the standard questions about how and why he’d done so well as an investor with a perhaps unexpected question about whether he had any regrets. Eveillard’s response was, as Green calls it, “brutally honest”: he wishes he’d been a better father to his two daughters. Investing was so demanding, such a burden on one’s time and psychology, that he neglected his family. When asked whether he thinks he could have paid more attention to his kids and still enjoyed great success as an investor, he flatly admits that he’s not sure. Life isn’t simple, Eveillard avers. For Green, the profile of Eveillard captures what he and book producer Hendrick Leber wanted to bring to the table: sound advice on how to invest and how to be successful while also looking more deeply and asking what constitutes success. Another investor they profiled, Donald Yacktman, powerfully echoed Eveillard’s point by saying that “no amount of professional success compensates for failure at home.”
Profiles Offer Opportunities For Self-Reflection
Returning to Steve’s initial question, Green says he hopes The Great Minds of Investing is interesting and important to the extent that it provokes readers to contemplate their own lives and how to best live them and asks us what lessons we can take away from these exceptional investors and apply to our own efforts to be successful in a way that balances multiple levels. Steve praises the book’s results, noting that the photos and profiles both worked to show the person separate from their reputation as an icon. He mentions meeting Eveillard, a longtime personal hero, at the Berkshire Hathaway meeting, and describes how impressed he was with Eveillard’s approachability and humility, much as he was portrayed in Green’s book.
Irving Kahn: Consider The Downside
Steve asks William what other memorable answers he heard during his interviews which gave him new insights into what it means to be an investor. Green brings up Irving Kahn, who incidentally passed away in 2015 at the ripe old age of 109 years. Kahn had witnessed an incredible spectrum of history from his birth in 1905 to his entry into Wall Street in 1928 through the Great Depression, multiple wars, and countless peaks and troughs of markets and the economy. Green asked Kahn what single piece of advice he could offer that might have the most impact for aspiring investors. Kahn’s response, deceptively simple, was that considering the downside should be an investor’s number one priority. Before you start thinking about how much money you might make from some stock or investment, think about how much money you might lose. If you reap merely “reasonable” returns from your investments but suffer only minimal losses, you’ll end up being very wealthy, Kahn argued. You’ll beat your gambling associates in the end, and, what’s more, you’ll fix any sleeping problems you might have. Steve jokingly adds that the miracle of compound interest really starts to pay off once you pass 100 years old.
Green explains how Kahn’s advice has been borne out in his own experiences. He admits he’s not immune to the temptation of the lottery ticket mentality where you start salivating over the possibility of scoring big with some stock that’s about to take off, adding that every time he’s allowed himself to get lured into rolling the dice, gotten greedy and in a hurry, he’s paid for it. Kahn’s track record of beating markets over a span of decades lends credence in Green’s mind to his advice about considering the downside. He says that Buffett himself repeats this advice frequently, warning investors that the number one rule of investing is “don’t lose.” Number two is “see number one.”
Successful Investors Show Emotional Resilience And A Tolerance for Pain
Steve turns the conversation to an idea that Green mentioned in a talk he gave at Google, namely that many successful investors shared a common characteristic: long-term emotional toughness and a high tolerance for pain. He asks Green to discuss this in the context of the story of Bill Miller, widely believed to be one of, if not, the greatest fund managers of all time. Miller beat the market for 15 straight years, an unheard of feat, only to get crushed by the market meltdown in 2008 and 2009. After decades of superlative results, one of his funds lost 65% of its value and another 55%. The ensuing massive withdrawals from these funds shrank his asset base nearly 90% from $77 billion to $800 million in a span of months. All of a sudden his reputation went from being a genius to being utterly clueless and inept. Miller responded by gaining 40 pounds and forcing himself to fire 100 employees, finally turning to the ancient Stoic philosophers for consolation. They taught him that attitude was more important than external circumstances and that solace and nobility could be found in withstanding suffering with resilience. He carried on managing his funds, which have undergone a remarkable turnaround in recent years.
John Templeton And The Willingness To Break From The Crowd
Another characteristic common to many successful investors that Green notes is the willingness to be lonely, to be a freethinker and endure the pain of breaking away from the crowd, even when that means going in the opposite direction of conventional wisdom. While everyone crows “buy low, sell high,” in practice, this involves breaking from the consensus view of what’s cheap and what’s expensive. Steve asks Green to talk about this in terms of the great investor John Templeton’s career. Templeton was another one of these outliers who enjoyed 50 to 60 years of astonishing success. Green relates how he went to interview Templeton at his home in the Bahamas some 18 years ago and found himself watching his subject exercise in his pool. Templeton, perhaps not knowing that Green was there, or not caring, went about his exercise routine with abandon, “running” in place in the water as his crazy sun hat flapped about. Green’s overwhelming impression was that Templeton was a guy who couldn’t care less about what other people thought of him. According to Green, he invested in the same way. His major breakthrough came near the peak of WWII after Germany had taken Paris and the world seemed to be going to hell in a hand-basket: he bought a large amount of stock in companies that were bankrupt or nearly so. It was, as Templeton later described it, the moment of “maximum pessimism.” Within 5 years or so, he had quintupled his money. His example shows how much courage, conviction, and willingness to depart from the crowd is sometimes needed to beat average returns and losses.
Index Funds: “An Acceptance Of Mediocrity” Smart Strategy Or Both?
Dovetailing on Templeton’s story, a related lesson that Green offers is that if you don’t have the temperament to go your own way as an investor, it may be wise to join the crowd. He’s talking about index funds, “an acceptance of solid mediocrity.” If you’re ready to admit to yourself and the world that you’re not going to beat average returns, you can “win” by not losing with index funds and, perhaps, end up doing better than 90% of the competition. Green calls this strategy “an important discovery.”
Steve extrapolates on this “passive” strategy, arguing that one of the chief criteria of success is to know oneself and, in this case, it means admitting that you don’t have the temperament to take on risks or to endure much financial pain. Not only that, but capturing the generic returns from a diversified array of assets does end up generating a decent amount of wealth in most cases. Green agrees that index funds are a good “default solution” that “works for almost everyone.” If, on the other hand, you have one of these extraordinary temperaments and some real expertise or an advantage in a certain area, go ahead and roll the dice, Green says, just don’t put all your money into these plays. Green describes this philosophy as “hedging against your own overconfidence,” one in which you ask yourself if you’re really as smart as you think are, at least when it comes to the complexities of financial analysis and the unpredictability of markets. The future is by definition uncertain and any claims to the contrary should be discounted on this principle. Green wraps up the conversation by making a case for the wisdom of accumulating wealth slowly. There is a lot of pressure from financial media, financial services companies, and your own relatives, neighbors, and co-workers to catch up with the people that are getting rich (on paper) in the market, but studying great investors gives lie to the idea of the market as a horse race. To paraphrase Green: “Stick to your knitting. Eschew debt and leverage. Keep a margin of safety. Put away more money each year in a tax-advantaged way. Buy stuff that’s sensible.” These “relatively simple, relatively sane” behaviors, if you stay the course, will add up to significant financial security over decades. Those neighbors who used to send you into paroxysms of rage and jealousy over their bragging about how well they were doing playing the market will, like water, find their own level.
Disclosure: The opinions expressed are those of the interviewee and not necessarily United Capital. Interviewee is not a representative of United Capital. Investing involves risk and investors should carefully consider their own investment objectives and never rely on any single chart, graph or marketing piece to make decisions. Content provided is intended for informational purposes only, is not a recommendation to buy or sell any securities, and should not be considered tax, legal, investment advice. Please contact your tax, legal, financial professional with questions about your specific needs and circumstances. The information contained herein was obtained from sources believed to be reliable, however their accuracy and completeness cannot be guaranteed. All data are driven from publicly available information and has not been independently verified by United Capital.
Steve Pomeranz: I met my next guest at the Latticework Conference in New York City last year. I had never heard of him or read his work, but the more I looked into him, the more interested I became. Now, in May of this year, I attended the Berkshire Hathaway shareholder meeting in Omaha, and on Friday night, or Friday before the meeting, I attended a conference on value investing. In the back of the room, I noticed a large book containing the profiles of the great investors of our time. And my next guest actually wrote the profiles in that book as well, so it was an interesting confluence of events. William Green has written for Time, Fortune, Forbes, Fast Company, The New Yorker, The Economist, and he’s here today to share what he’s learned from his interviews with the unique individuals that have become the greatest investors of our time.
William Green, welcome to the show.
William Green: Hi, Steve, I’m delighted to be here with you.
Steve Pomeranz: So, let’s begin talking about the book. The book is entitled The Great Minds of Investing. And William, there’s a lot of investing books on the market, I guess the question is, why another one?
Why is this one important?
William Green: I think it’s unusual, certainly. Whether it’s important or not, I don’t know. But it’s very unusual, I think, in A, that it’s a combination of photographs and profiles of these guys. So you have these extraordinary photographs taken by Michael O’Brien, who’ll be right up in the face of someone like Warren Buffett or his partner Charlie Munger. So you’re looking in the eyes of these extraordinary people, which gives you this kind of strange perspective on them. You feel almost like you’re looking into their soul. And then, you have these profiles, I wrote 22 of them and edited about 11 of them, which give you another way of looking at these people’s lives. And so what I’m trying to do in the profiles is give you a very human look at these extraordinarily successful people. I’m trying to give a sense of what you can learn about investing from them, but also what you can learn from them about how to live.
So, if I give you one somewhat random example, there’s an extraordinary investor there, Jean-Marie Eveillard, who’s one of the greatest international investors, really over probably three or four decades. And I asked Jean-Marie about his success and how well he’d done, why he’d done so well. And then I said to him, as you look back on your life, do you have any regrets?
And he said to me very brutally honestly, he said, “Yeah, I wish I’d been a better father.” And he said,” I wish I’d focused more on my two daughters when they were growing up.” And he said, “but I was so absorbed with investing, and investing is so hard, and it’s so psychologically demanding, that I kind of neglected my family.”
And I said to him, “Well, if you had paid more attention to your kids, do you think you would have been as successful an investor?” And he said, “I just don’t know, life isn’t simple.” And so for me, that kind of embodies what we were trying to do with the book, to give this sense of how to invest, of how to be successful, but also to look a little more deeply and say, yeah, but what constitutes success?
And there’s another extraordinary investor in the book, Donald Yacktman, who actually was a Mormon bishop at one point and then later managed about $40 billion, and he said to me, “No amount of professional success compensates for failure at home.”
Steve Pomeranz: Yeah, wow.
William Green: So I’d like to think that the book, at some level, is important or unusual or interesting, because it actually makes you think about your life and how to live your life and what the lessons of these extraordinary investors are that we can kind of take into our own lives, so that we live successfully on multiple levels.
Yeah, well, that’s one thing that you do notice with the book. Is that the pictures are really not about the icons but more about the humans, the real people beneath that, and some of the profiles explain that as well. As a matter of fact, when I was in Omaha, I saw Jean-Marie Eveillard and I went up to him and introduced myself. And he’s going to be on the show in the next couple of weeks, and I got his book. And this is one humble gentleman here. I mean, to me he was an icon because I’ve been in the investment business for 35 years. And, I mean, I basically grew up on following Mr. Eveillard and his funds, the First Eagle Funds and SoGen and all of that.
So to meet him in person and then for him to be so just basically human and what you said is so true. What are some of the other sayings or phrases that you came away with from some of the other investors that were meaningful to you and that would help us understand the nature of investing?
William Green: So, one of the most important insights that I got in the book actually came from this extraordinary investor called Irving Kahn. And Irving actually died at the age of 109 in 2015. And you have to bear in mind that this is a man who had absolutely seen everything. I mean, he was born in 1905, starts on Wall Street in 1928, lives through the crash of 1929, through World War II, Vietnam, Gulf War, the financial crisis in 2008, countless recessions and crashes. And so I said to him a few weeks before he passed away, I had the chance to ask him a few questions.
And I said, “So, if you were to share a single piece of financial advice with us, what would it be?” And what Irving said, which I thought was extraordinarily profound, even though it’s very simple, was he said, “Considering the downside is the single most important thing an investor must do.”
And he said, “Before you start thinking about how much you can make on any stock or any investment you buy, you’ve got to think about the downside, what you can lose.” And he said to me, “If you achieve only reasonable returns and you suffer minimal losses, you’re going to become very wealthy.” And he said, “You’re actually going to surpass any of your gambler friends.” And he said to me, it was lovely, he said, “This is also a good way to cure your sleeping problems.”
Steve Pomeranz: [LAUGH] Well, if you’re going to live 109 years, I would tend to agree. The benefits of compounding really work some tremendous magic when you’re over 100 years old for sure.
William Green: Yeah, but I think for all of us, we have this tendency to sort of buy lottery tickets and to think, I’m going to get this big, big score. I’m going to make this venture capital investment, or I’m going to invest in some hot stock that everyone likes. Everyone loves Tesla or everyone loves Amazon. I’m going to roll the dice and I’ll get rich. And in my experience, every time I’ve messed up in my own life as an investor, it’s been because I got greedy and I got in a hurry. And I think when you look at someone like Irving Kahn, he didn’t just do well over one cycle. This is a guy who did well over, what?—1928 to 2015—over 85 years. And that’s an extraordinarily powerful lesson, and I think it’s something Buffett talks about again and again. He’ll say, “Rule number one of investing, don’t lose. Rule number two, don’t forget rule number one.” And it’s-
Steve Pomeranz: William, I want to take you back to this idea about Irving Kahn having experienced all these cycles, and he said, consider the downside. One of the tenets that you mentioned in a talk that you gave to Google as a characteristic to be a very successful investor was the ability to take pain, the emotional resilience that leads to success over many decades. I mean, it’s been said that investing is simple, but it’s not easy, and you told the story of Bill Miller, the great mutual fund manager. Tell us a little bit about, and very,very quickly because there are a lot of other things I want to get to.
William Green: Sure. Well, Miller was, in many ways, the greatest mutual fund manager in history. He famously beat the market 15 years running, which is really like defying gravity. It’s an astonishing thing to do. And then having been right for decades, in 2008, 2009, he just got absolutely crushed. And one of his funds went down 55%, another went down 65%, and his assets under management went down from something like $77 billion to 800 million, so a loss of like 90% in just assets just flooding out.
Just people despaired and thought, suddenly, this genius is an idiot. And to me, it’s just this incredibly powerful reminder that even someone as brilliant as Bill, and he truly is brilliant, can get hammered in the market. And so you need this tremendous resilience. And Bill is wonderfully honest about it.
I mean, he said to me that he’d put on 40 pounds, he had to lay off 100 people, and he said it was very hard. But what he found enormously helpful was, actually, he had studied a lot of philosophy and he turned to Stoic philosophers like Epictetus and Seneca. And a lot of what they talk about is that it’s not really the external events in your life that matter, it’s your attitude towards them. And so he drew tremendous solace from the fact that he could deal with his suffering with a kind of nobility and resilience. And he got back on the horse and the fund that he’s been running has been extraordinarily successful for the last few years.
Steve Pomeranz: One of the other characteristics, and I think this is probably one of the toughest parts of being that successful as an investor, is this willingness to be lonely as you put it, to diverge from the crowd, to be a free thinker and willing to withstand the pain of going the opposite direction. Everybody says buy low, sell high, but it is really one of the hardest things to actually accomplish successfully over time. You tell the story about Templeton and what he did in 1939. Tell us that.
William Green: Yeah. Well, Templeton, again, was one of these investors who had success over 50, 60 years, astonishing, enduring success. And maybe about 17, 18 years ago, I went to interview Templeton in the Bahamas where he had this exquisite house, and I remember kind of watching him exercise. He didn’t realize I was there, but I was watching him exercise in the water. And he, sort of, he would run in the water looking crazy, sort of, with his face slathered in sun cream, wearing this crazy hat with ear flaps. And I just remember thinking, here’s a guy who just doesn’t care what anybody thinks about what he does. And he invested in the same way. So, in the middle of World War II, when Germany has just invaded Paris and the whole world seems to be coming to an end, he buys all of these basically bankrupt stocks or stocks on the verge of bankruptcy. The point of maximum pessimism, as he put it. And over the next five years, I think it was, he quintupled his money. And so this is an example of just how much courage you have to have, how much conviction you have, how capable you need to be of diverging from the crowd if you want to outperform.
And I think one of the lessons for the rest of us, if we don’t have that kind of temperament or that kind of genius, is to say, “all right, well, so if I’m not going to be able to diverge from the crowd like that, maybe I should join the crowd. So maybe I should own an index fund, which is an acceptance in a way of solid mediocrity. It’s like, I’m not going to be the best, I’m not going to be a world beater, but I’m going to win by not losing. I’ll do better than 90% of people.” And that’s an important discovery.
Steve Pomeranz: It’s interesting that you bring that up because, first of all, one of the, I think, chief criteria to be successful is to know yourself, but also to have the humility to say, “you know what, I do not have the temperament to withstand the pain.” And, really, over time, that average person, that investor, should invest in a broad range of industries in order to just capture the generic average returns, and over enough years, you will create a decent amount of wealth, right?
William Green: I think you’re absolutely right. It’s a very good default solution that works for almost everyone. And Howard Marks, who’s one of the greatest investors alive, who manages over $100 billion, said to me that most people should be indexing most of their money. And I think that’s true. I think if you have an extraordinary temperament or you have a particular advantage in a particular area, then, okay, roll the dice with a few things, pick a handful of stocks or pick a fund if you know a lot about funds. I wouldn’t do it with all of your money.
In a way, it’s almost hedging against your own overconfidence. It’s saying, yeah, maybe I’m really smart, but what if I’m not? And I think that’s a really powerful way of looking, of just being realistic, about yourself.
Steve Pomeranz: This idea of the power of humility. I mean, you mentioned Howard Marks, not a household name, but we’ve done episodes or segments on him for the show, and he says the worst thing that you can do is think that you’re master of the universe because, really, the future is extremely uncertain and the only constant is in permanence. And so when the average person is watching CNBC or listening to someone say they’ve got a foolproof system for telling the future and being able to guide your investments that way, to watch out for that because it’s just not possible to foretell the future and to invest as if you can.
William Green: Exactly, I think that one of the wisest ways to think about this is to say, I’d rather get rich slowly, and there’s no shame in that. And we’re often kind of duped into thinking that everyone else is getting rich, and you watch Jim Cramer on TV making out that this is like a horse race, and your neighbor or your brother-in-law tells you how rich they’re getting on Tesla or something. And I think just to keep that noise out and just say no, I’m quietly sticking to my knitting. I’m not going to have any leverage. I’m not going to have a lot of debt. I’m going to have a margin of safety. I’m going to buy stuff that’s sensible, and I’m going to put more money away every year, and I’m going to do it in a tax effective way.
These relatively sane, relatively simple things, if you compound that sensible behavior over 10, 20, 30, 40 years, you’ll end up being extraordinarily rich. And a lot of those people who’ve been boasting to you about how well they’ve been doing rolling the dice will end up, they’ll end up thinking, how the hell did that happen because I was so smart.
Steve Pomeranz: Well, Buffett said it at the conference. He said, there’s nothing worse than your neighbor, who you’re definitely convinced is not as smart as you, making a killing in the market while you’re sitting there doing nothing. There’s nothing more humiliating and frustrating to have someone do that. But those are the kinds of feelings that you have to put aside and put asunder in order to stay the course and stay on track and be successful over time. William Green, we are out of time. What an interesting discussion. I thank you so much for spending your time to be with us.
William Green: I am, Steve. I’m working on a book that, in a way, has grown out of this one, so I’m looking more deeply at some of the themes that came out this book. So, trying to figure out, what can I learn from the world’s best investors, not just about how to get rich, but actually about how to think better and how to live more wisely.
Steve Pomeranz: To find out more about William and to hear this interview again, join the conversation at stevepomeranz.com.
William Green: Thanks so much, Steve.
Steve Pomeranz: Thank you, William, that was terrific.