Why Mohnish Pabrai started investing? | [C:M.P Ep.3]

In this episode, Mohnish Pabrai tells his story on how and why he got started in investing.

In this episode, you’ll learn:
- Why Mohnish Pabrai started investing?
- How Mohnish Pabrai started his investing journey?
- What compound rate Mohnish Pabrai is compounding at per year?
(https://www.yapss.com/post/collection-mohnish-pabrai-3-pabrai-s-investing-journey)

#MohnishPabrai #IndianSchoolofBusiness

[Transcript]
MOHNISH PABRAI 00:08
In 1994, I was 30 years old and I heard Warren Buffett for the first time. And when I heard of Warren, I had really no knowledge of investments or capital allocation or any of those things.

And what I was lucky about in 1994 was the first biography of Warren Buffett just come out at the time. And so, I could look at this track record that Warren Buffett have from 1950s to 1993, the 44 years track record.

And over the 44 years period, he had compounded money at 31% a year. And if you compound money at 31% a year that I will show you later, if you compound money at 26% a year. It will double every 3 years. 1.26 x 1.26 x 1.26 = 2.

And if you are compounding at 31% a year, you will double your money in little less than 3 years. Maybe, 2 and the half years [inaudible] or something. So, with Warren Buffett for 44 years at compounded at 31%. He was already on the 18th square of the chessboard, when I first heard of – because, it compounded.

And I thought back to the story about the chess and so on and I thought of Warren. And I said "Wow, this guy actually playing out that chessboard story." And that story is very powerful because if you keep doing it and he keeps doing it. He is going to become the wealthiest person on the planet. And he became the wealthiest person on the planet so it works.

And when I was thinking about all these things. Like I said, I never been to business school and really haven't thought much about investments. And a few things kinda stood out for me. You know, basically the investing world hardly anyone followed Warren Buffett and his approach to investing in 1994 or even today. And hardly anyone had the returns that he had. So the investing [inaudible] did not follow Warren's approach to investing and did not have the results Warren Buffett had.

And I thought those two – those two facts are positive fact. I thought that the Buffett approach was the approach to high rate of compounding. And if you didn't follow the approach, you're basically not going to go anywhere. And so I have these thoughts that these things were related.

And so – Buffett's approach look replicable and no one who replicate it. So I said "You know, I like this compounding, I like this 26% or 31% a year and why not I give it a try?"

How many of you have seen the movie 'Forrest Gump'? So we get answers in the extreme front of the room and the extreme back of the room. How many people in black shirts have seen the movie 'Forrest Gump'? Okay, so when you go to IIT. On Youtube download the movie and watch the movie, so you will appreciated it – actually won an Academic Award it's a great movie. And I'm just going to play for you about 1 minute or 2 minutes right now.

FORREST GUMP 04:05
So I never went back to work for Lieutenant Diane though, it did take care of my Bubba Gump money. He got me invested in some kind of fruit company. And so then I got a call from them saying "we don't have to worry about money no more." And I said "that's good one less thing."

MOHNISH PABRAI 04:24
So Forrest Gump is my hero, I like Forrest Gump. And you know, after I decided to do this – trying to do this replication of Warren Buffett's compounding I changed my license plate. And of course, I think I might have mentioned to some of the Dakshana scholars last time. But maybe for the people who are not in black shirts.

What is my license plate mean? Maybe the ISB crowd can take a guess. So that's my real California license plate that Is on my real 6 Series BMW Convertible. So what does the plate mean?

AUDIENCE MEMBER 05:13
Compounding at 26%?

MOHNISH PABRAI 05:16
Yeah, but how do you come out with that? How does that mean that? Yeah, go ahead.

AUDIENCE MEMBER 05:26
Compound like Buffett 26?

MOHNISH PABRAI 05:30
I'm sorry?

AUDIENCE MEMBER 05:31
Compound like Buffett 26.

MOHNISH PABRAI 05:33
No.

AUDIENCE MEMBER 05:35
Compounding at lower bound 26? (Laughs)

MOHNISH PABRAI 05:38
Compounding at?

AUDIENCE MEMBER 05:39
Lower bound 26.

MOHNISH PABRAI 05:40
No, the LB is not lower bound. Anyone else? Yeah.

AUDIENCE MEMBER 05:47
LB means pound.

MOHNISH PABRAI 05:49
Very good.

AUDIENCE MEMBER 05:50
So compound at –

MOHNISH PABRAI 05:51
Were you here last year?

AUDIENCE MEMBER 05:52
Yes.

[DUE TO LIMITED WORDINGS, VISIT BLOG LINK FOR FULL TRANSCRIPT]
MOHNISH PABRAI 05:53

AUDIENCE MEMBER 07:22

MOHNISH PABRAI 07:24

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