Forget diamond hands — this author says old-school investors can teach you real secrets to wealth and happinessView transcript
Legendary stock and bond market investors of past generations didn’t “YOLO” their way into success — they relied on carefully planned strategies, expansive knowledge, and philosophical insights that worked as well in trading pits as they did in the rest of life. Or at least, that’s the impression one might gather from William Green’s new book, Richer, Wiser, Happier.
The veteran financial journalist drew on interviews with more than 50 of the world’s best investors, including Warren Buffett’s second-in-command Charlie Munger (who is 97), Oaktree Capital Management co-founder Howard Marks, and the founder of world's largest mutual fund issuer The Vanguard Group, Jack Bogle (who died in January 2019 at 89). Others included Joel Greenblatt, who grew a tiny $7 million hedge fund into $5.6 billion investment firm Gotham Asset Management.
Green’s book “is going to be a classic, and for generations, will define what it means to be a better investor and a better human,” Aquamarine Capital CEO Guy Spier proclaims on a promotional website for the work.
Sounds like a tall order. But Green, who has long covered titans of finance for publications including Bloomberg, Forbes and Time Magazine, explains that there really is an awful lot that can be learned from great investors about universally important things like analyzing risk and maximizing happiness. Perhaps unsurprisingly, none of those lessons involve chasing meme stocks, crowd-sourcing short-squeezes, or other tactics that have grown massively popular in recent months on Reddit investment forums.
We sat down with Green and he explained more about interesting tidbits he gathered while writing the book, and what else multimillionaire and billionaire investors can teach us about living a more rewarding life.
This transcript has been edited for length and clarity.
Are the rich really happy? What can wealthy investors teach us about happiness?00:00:00
Business of Business: So the title of your book, it's kind of interesting. You were including, I guess, a lot of perspective from very wealthy billionaire, multi millionaire investors. But the one thing I wondered, are billionaires ever really happy?
WG: Hmm. It depends who you ask and which of them you interview. I'm not really claiming that becoming extremely wealthy is a recipe for happiness. As we know, these people tend to be full of full of angst and stress, and they have lots of lawsuits and, and broken marriages and the like. So it would be a wrong to claim that there's a direct link between wealth and happiness. But I think that the small subset of great investors that I write about, have what John Maynard Keynes called "worldly wisdom." And they're extraordinary thinkers.
As Charlie Munger, Warren Buffett's partner, who I interviewed for the book says, "I observe what works and what doesn't work and why." And so I think they've become an extraordinarily helpful filter, to think about not just what works in markets, but actually about broader questions like, how do you deal with the fact that the future is unknowable? And yet, we have to make decisions about the future? Or what sort of habits help us to be productive to have balanced lives to be successful? Or how do you deal with pain of failure and setbacks, which is a really integral part of any money managers life.
"If you interview all of these people who've hit the jackpot financially, and have yachts and planes and palatial homes, what do you actually discover the money gives them and what doesn't it give them? And what you discover is that the single most important thing it gives them actually, is independence.”
So I think, rather than claiming that they have the key to happiness and embody happiness themselves, I think they give you a lot of clues about what makes for a happy life and including, what does the money actually do for you, which is the subject of the epilogue of my book. If you interview all of these people who've hit the jackpot financially, and have yachts and planes and palatial homes, what do you actually discover the money gives them and what doesn't it give them? And what you discover is that the single most important thing it gives them actually, is independence. It's It's the ability to live in a way that's deeply aligned with who they are. And I don't think you have to be a billionaire to live in a way that that deeply aligned with who you are. But it's pretty helpful if if you have a really unpleasant boss, or you have work that you don't like, to be able to say, "I'm sorry, I'm gone, I'm going to do something but deeply aligned with who I who I am. And I don't care how much you're paying me."
That is an interesting perspective. Another question, I kind of wanted to get out of the way, when we talk about the success of these incredibly successful investors. Are any of them really self made? Or do they have what sort of, you know, I'm sure some amount of wealth to start with?
I think in most cases, the the investors I've written about a self made, there are definitely some who were handed tremendous advantages. They were sent to Harvard Business School, or Wharton or the like. But a lot of them came from pretty modest circumstances. And I think probably early on, to some degree, the money was a motivation, that they wanted to become financially independent. If If you look at people like Buffett and Munger, they definitely wanted to be financially independent, not not to be subject to some some annoying boss telling them what to do.
But I think ultimately, all of these great investors ended up being obsessed with the game. It's fascinating when you see just how many of the great investors actually played things like poker and, and all of these games, blackjack, whatever it is any any game of probabilities. I remember interviewing Peter Lynch, many years ago, it was the, you know, the famous hedge fund manager from Fidelity. And he said, "Instead of reading books, you do much better actually just to play poker." And he used to play poker when he was in the army, for example, John Templeton, who was probably the greatest global stock picker of the 20th century, I interviewed in probably about 20 years ago at his home in the Bahamas. And he had actually funded a lot of his college education with his winnings from poker, even though he was a very pious and religious and kind of moralistic guy in some ways, which turned me off at the time.
I was kind of fascinated by the fact that he told me while he was at Yale, his father basically basically wrote him and said, "Look, I can't afford to pay even a single dollar for your education anymore." And so this is during the Great Depression. So Templeton basically got a bunch of different jobs, made money have his poker winnings, and still somehow managed to come first in his class at Yale. So there's, there's a, there's a good example of someone who really was in it for the game in some ways, you know, he lived, he lived a nice life if he I mean, his house in the Bahamas was pretty beautiful. But I think that that ability to play games is kind of it's pretty consistent. It's not surprising that Buffett and Munger are playing bridge the whole time.
Motivation for great investors is pursuit of independence00:05:36
Is there are there anything else any other aspects of this that that readers would come away with and feeling very surprised about?
I think one of the most striking things for me again and again, is to see how unemotional the best investors are. So for example, you look at someone like Howard Marks, who is a multi-billionaire manager [Oaktree Capital manages about $153 billion]. And there was a period, for example, during the financial crisis, where there was a 15-week period where I think for every week, every single week, he was investing about $500 million to $600 million in busted investments that everybody else was desperate to sell. And I asked him if it was difficult emotionally. And he's like, "No, no, I don't remember it being difficult at all." And he has this kind of slightly flat effect, where he's like, "no, everything's fine." And, and I said to him, "So you were always just really unemotional." And he said, "Yeah, yeah." And I knew that he'd been married a couple of times. So I said, 'well, is this a problem in your relationships?" And he's like, "Oh, yeah, in my first marriage, it was a real problem." But he said "more recently, it's not been a problem at all, I've got better at it."
"They're not caught up in the mood of the market. If you think of most of us when the market is surging, we tend to get carried away and complacent. And when it's plunging, we tend to sort of bury our head in our hands and panic a bit and curl up in fetal position.”
And I find that kind of consistent with most of the great investors that they're not caught up in the mood of the market. If you think of most of us when the market is surging, we tend to get carried away and complacent. And when it's plunging, we tend to sort of bury our head in our hands and panic a bit and curl up in fetal position in the corner of the room crying. And these guys, they're just sort of dispassionately analyzing the odds. And they're saying, "Oh, this is extremely cheap. Let me buy now." And so there was a, there's a very interesting Canadian investor who said to me that most people are tribal. And, and he said, then there are certain people in the population who are non tribal, who don't feel a need to kind of hide in the herd. He's an art collector, as well as a money manager. And he pointed out that it's not just the greatest investors who tend to be non tribal, but also actually writers and artists tend to be non tribal.
And I think that's actually one reason why I'm so drawn to writing about the greatest investors is, as a writer, I think I'm pretty non tribal, you're always on the outside, kind of looking at what's happening, writing about interesting people, rather than you're both inside and outside the crowd. You're watching the action, you're part of the action, but you're sort of detached from it. And I think I think when you look at people like monger or Howard Marks, they're just non tribal, they've constructed lives that are very, very independent. And, and, and I think if there's one thing I'm sort of jealous off, when I look at a lot of these people, it's the the fact that they're that. Wealth enables them just to kind of disconnect from the things that most people have to do.
So someone like Bill Miller, who was the greatest mutual fund manager of his generation, and famously beat the market for 15 years in a row. I remember him saying to me, "I haven't flown on a commercial flight in 20 years." And there was a certain point where someone asked him to give a keynote speech at some big fancy event. And he just wrote to them and he said, "I've thrown away my tuxedo, and I'm never buying another one." And so I think in some ways, the greatest investors, like the best writers have this kind of independent streak, but we can't afford to indulge it in the way that the greatest investors can where they can just say, "No, I'm not flying. I'm not flying on on some horrible plane, I have to sit like this and be totally uncomfortable."
Interesting. What has one thing that is interesting that you're you're discussing here is this independence and this kind of eccentricity, you know, that can be portrayed either positively or negatively. And sometimes it's just a matter of degree. How Why do you think that these people, the greatest investors that you're talking about, how Why are they viewed positively whereas, you know, perhaps some others who may have similar qualities or not?
Yeah, it may be that people idolize money in a ridiculous way that they assume somehow that if someone has become wildly rich, they have some superior characteristics. And I think that's kind of naive. You want you want to look at these people in The whole and say, "Well, yeah, but what's happening to their relationships? What's happening to their kids? Are they decent people to spend your time with?" And, and I've, I've tended in a very idiosyncratic way to write about investors that I actually admire, like personally. And there were a few occasions when I started to write about some multi billionaire I'd interview, I just sort of thought, "I can't face it, I just don't like this person." And I think just the ability to make vast quantities of money. It's a, it's a good game, I mean, if you if you have an ability to decode the market and crack that code, great. But that only takes you so far.
And so I'm fascinated, for example, I read a great length about these two guys in London who had astonishing performance. They set up a hedge fund that beat the market by something like 800 percentage points over 13 years. And they they racked up about $3.5 billion assets. And then at the ripe old age of 45, they retired, and returned billions of dollars to the investors in their funds, and decided, "Well, we're going to spend the second half of our lives giving away the money in a way that creates the maximum good for society." And so in the same way that they used that their brilliant minds to crack the code of how to make money, they're now using their brilliant minds to crack the code of how to give it away in order to have a huge social impact.
And so I'm fascinated by people like that, who, yeah, they're great game players, but they're also giving you an indication of how to live your life, what what makes for an abundant life, what what actually constitutes a successful life. And I think it would be naive just to assume that, because they they won this particular game, of of picking, picking mispriced stocks, that there was somehow morally superior, I think, I think what makes them really admirable, are things like the way they treated each other the way they treated their shareholders, which was incredibly honorable. I mean, they kept, they kept doing things like changing their fee structure, to make it less attractive for themselves, and more attractive for their shareholders. And so that's really interesting to me, because it, it becomes this kind of exploration of what actually constitutes an honorable, well-lived life.
What business lessons can regular people take from this book00:12:50
Absolutely. Are there any lessons that readers can take from your book that they can apply, you know, to their own financial lives?
There are tons of lessons. One of one of the most valuable to me was from studying someone like Joel Greenblatt who has this extraordinary record, he set up a hedge fund when he was about 27, that over the next 20 years, average 40% a year, which means you turn a million dollars into $836 million. And so I spent a lot of time with Joel. And I was interviewing him at his house in the Hamptons, and I'm like, "Okay, so what's the secret? Well, yeah, how did you decode the market and win this game?" And he said, "Well, it's incredibly simple." He said, "All you're doing it all comes down to this, you figure out what a business is worth. And then you buy it for much less. And that's it."
And so you think about that, and and there's a really beautiful simplicity to it, that the whole game is played by people like Buffett, Munger, Joel Greenblatt, Howard Marks, is to value assets, and then buy them at a discount. But then you think about what actually it takes to execute that the concept of principle itself is absolute simplicity.
But then you start to think about and you think, Well, can I actually value a business? Do I know how to value businesses? am I interested in valuing businesses? And for someone like me, I start thinking, Well, no, I'm a writer. I'm not. I don't have any accounting knowledge. I'm not interested in spending my time looking through the account statements of a company and figuring out whether whether they're lying, whether they're hyping stuff, or whether it's truthful. And so for me, one of the great lessons is to look at the greatest investors and say, well, they're different than I am. They have knowledge and an expertise that I don't have, that they're less emotional than I am. I'm much more fearful and much more more anxious than they are. So then I say, "Well, one of the one of the reasons that greatest investors succeed is that they say you should only play games you can win."
So I start to think, well, picking individual stocks is not really a game I'm equipped to win, so I shouldn't play it. And so there's a really important practical takeaway for our viewers here, which is, you have to have the self knowledge to say, well, do I have these analytical skills? Do I have the the ability to analyze and value a stock? Do I have the temperament to buy it for less, which usually means that it looks awful in the near term, and everyone else hates it? And I don't really so I very rarely to buy an individual stock.
The default position for most people, according to Howard Marks, or Joel Greenblatt, is that most people should index most of their money. And so for me, in counter intuitively, spending all of this time with the greatest investors, has led me to, to do less myself and to say, Alright, well, I should hedge against my own incompetence and fallibility and stupidity and helplessness by only a couple of index funds, so that's a good start. And then let me invest with a couple of a couple of money managers, active money managers, who I believe have a temperament that gives them an advantage and an analytical ability that gives them an advantage.
So that self awareness, I think is actually critical Just as I wouldn't compete in in the Olympics, high bar or high beam or whatever it is, because you know, I am 20 pounds overweight, and I can, you know, barely touch my toes. Actually, I can't even touch my toes. So why would I do gymnastics? It's not a game, I can win. So why would I do that any more than I would do sort of eye surgery on myself. So why should I assume that I should pick individual stocks? So so i think i think that's a really valuable takeaway. I outsource the job to someone who's better suited to win the game.
And yet, this sounds so obvious. But then you look at all of these people who've just set up their account with Robinhood, they're just momentum players. They're just buying whatever is hot, there's no, there's no knowledge there. There's they're not they're not reading through the IPO statements and saying, "Yeah, this looks really scummy. This looks really immoral, or low grade" or no, "there really is something that they've tapped into that that is going to work out." It's just kind of speculating blindly. And so so that for me, just knowing my own limitations, is a really important starting point, because it tells me what not to do.
I was going to ask you about that. You touched on it briefly. What do you think these investors would think of the the meme stock generation and the Reddit people and the crypto people?
Yeah, I was just thinking about this because I was reading an article in the Wall Street Journal about Cathie Wood and Ark and how, you know, she is she is doubling down on on Bitcoin and Tesla. And I keep thinking of something Howard Marks said to me, where he said look on on the whole, when things or people are very successful, it brings in hubris, and, and we tend to overestimate ourselves and overestimate companies. And I remember him talking about this with the FAANG stocks and saying to me, you know, "Will these trees go grow to the sky?"
I don't know, usually things stop growing at a certain point, they stopped growing to the sky. And maybe I'm wrong. And these are the first perpetual motion machines, but but I'm not prepared to bet on it. And Buffett often says, there are certain things where he just puts them in what he calls his "too hard" pile. And when I look at things like Bitcoin, Tesla, stuff like that, yeah, maybe they're fine. I don't know I but, but I know that to use a phrase from Charlie Munger, that it's a standard stupidity, to bet on things that are really hot, and that you don't necessarily understand. So I'm personally not going to do it.
"I know from Charlie Munger, that my life and my portfolio are going to be more successful if I reduce what he calls standard stupidity. And so, so betting on things just because they're flying is a pretty predictably standard stupid thing to do.”
Because I know from Charlie Munger, that my life and my portfolio are going to be more successful if I reduce what he calls standard stupidity. And so, so betting on things just because they're flying is a pretty predictably standard stupid thing to do. Then again, I interviewed Bill Miller recently. He's, he's just made an enormous amount of money on Bitcoin and his he's one of the most brilliant guys I've ever interviewed. I remember him saying to me back in, I think 2001, he had bought 15% of Amazon. But almost everybody thought Amazon was going bankrupt, and all his peers thought he was a moron. And he's like, "yeah, if if they're right, I'll lose 100% of my money. And if I'm wrong, I'll make 50 times my money." And here we are. All these years later, he told me that he's he's personally, the single largest individual shareholder in Amazon, whose name is not Bezos, other than Bezos, and his ex-wife now. And so his ability to go against the crowd with Amazon made him spectacularly rich.
And here again with Bitcoin, or his peers like Buffett and Munger, who he admires tremendously say Bitcoin is rat poison. And his Bill Miller, who I think he told me, his average purchase price was something like #200 to $300 a Bitcoin. And here we are at [$49,795]. Now, so this is part of what makes investing so fascinating is you look at you look at Bill Miller's that on Bitcoin or you look at Cathie Wood and Tesla, and you're like, "I don't know, this is complicated," and really smart people disagree.
But I think on the whole, you're better off focusing on things that are undervalued. I think that's a funny temperamentally, that's a smart strategy. And it means you miss out on certain high flying things, but but that suits my temperament. I'd rather not be rolling the dice on Tesla when it's soaring. And that means you you miss out on some really glorious things.