In 2007, Mohnish Pabrai paid $650,100 to have lunch with billionaire investor Warren Buffett. During the meal, Pabrai asked Buffet about Buffett’s former business partner, Rick Guerin.
Guerin, a once prolific investor, had worked on several big deals with Warren Buffet and his partner Charlie Munger. But in the 1980s, Guerin all but vanished from public view.
In his conversation with Pabrai, Buffet said:
Charlie and I always knew that we would become incredibly wealthy. We were not in a hurry to get wealthy; we knew it would happen. Rick was just as smart as us, but he was in a hurry. [1]
Guerin suffered a 62 percent cumulative loss in the bear market of 1973 and 1974, and in turn, was left with little choice but to sell his Berkshire Hathaway stock to Buffett. Had Guerin held on, he would have made a fortune.
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Guerin’s downfall serves as more than a cautionary tale on impatience with results. Rather, it serves as a reminder that it’s not what we do on our road to success but what we don’t do that matters.
You can work out five times a week, but you won’t gain muscle if you drink to excess on the weekends. The index fund you dollar cost average into won’t mean much if you don’t have the discipline to brave the inevitable storms that come with investing.
To paraphrase writer Morgan Housel, getting what we want is not about making good decisions. It’s about consistently not screwing up. Make mistakes, by all means, but learn from them. They’re costly. Much better to be less wrong, more often. [2]
Footnotes
[1] I want to acknowledge Morgan Housel for putting me onto Rick Guerin in his book, The Psychology of Wealth.
[2] I previously wrote about being less wrong in Words Into Works 7 | Being Less Wrong.
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