Intelligent Money TV

Whitney Tilson joins Intelligent Money to talk about life, investing and finding success. Enjoy this Intelligent Money Moment on Worldly Wisdom. Transcript: When Charlie Munger talked about worldly wisdom, he talked about having a toolkit to build your mental toolkit. One of his favorite sayings was that you do not want to be the “one-legged man in the ass-kicking contest.” Another was, “To a man with a hammer, the world looks like a nail.” His point was that people tend to see things in very narrow ways. Instead, he said you want what he called a latticework. So, he said, you want to study. If you are an engineer, yes, you want to study engineering, but to have worldly wisdom, to understand how the world works and solve complex problems, you need to go beyond that. Investing is a complex problem for sure but so is living a successful life. You want to understand history, philosophy, psychology. He was always talking about how, if you want to understand human behavior, you have to study it. He said he never ceased to be amazed at how self-interest bias determined human actions.

Whitney Tilson joins Intelligent Money to talk about life, investing and finding success. Enjoy this Intelligent Money Moment: Federer, Tennis and Investing. Transcript: (At the 2024 Dartmouth University Commencement speech), Federer talked about even his absolute peak, he won 58% of his points over the course of his best year. That meant that that's not much more than half the time. And so he said, I had to be able to put my failures, my missed shots, the disappointments, the opponent just hit a better shot or I shanked something. You got to be able to put that behind you because no matter how successful you are, you're going to fail close to 42% of the time the opponents won the point. And so having both the mental resilience to deal with a lot of setbacks even when you're successful, and to understand that there's no way to, in any competitive business, there's no way to win all the time mentally accepting that. And we all know tennis players who one bad call or one bad shot would go against them and they would have a complete meltdown and lose the match to someone. They shouldn't have lost the match to that. You can't, if you want to be the top tennis player in the world, or I would argue the top, applying this to investing the top investor in the world, you have to go in understanding that you're going to make mistakes or sometimes you'll make a good investment. The probabilities were in your favor, but something came out of left field. And so in investing, you can make a terrible investment decision, do something completely foolish and reckless and get rewarded for it. I would argue buying Dogecoin or some junk crypto, if you time it right, maybe you get lucky and you make some money and you get out, but don't think that you're smart and that you did the right thing or that you should do this again. Charlie Munger had a funny analogy. He said, if you run through a dynamite factory with an open torch and you happen to get to the other side without blowing yourself to kingdom come, that does not mean it was a good idea. So similarly, you can make money so you can make money and you can do something dumb and make money. Conversely, it's really hard to have done great analysis and found an investment and it should have worked, but something, a low probability event came and undid that investment and you lose money and you're just like, that's really frustrating. But understanding that's probabilities that's going to happen.

Whitney Tilson joins Intelligent Money to talk about life, investing and finding success. Enjoy this Intelligent Money Moment: Mind of a Goldfish. Transcript: That's having sort of the resilience, what I sort of call mind of a goldfish. You lose money, something goes against you. And both on the tennis court and in the investing world, what you can't do is you can't let one thing going against you cause you to become so upset and change your thinking in a way that causes it to snowball on you and get worse. And you might think, well, who would do that? But it happens all the time. Just witness tennis players having a meltdown. One point goes against them, they lose their mind and then they lose multiple points. And the match, you see it happen in investing where somebody, you invest in a stock, bad things happen. The three pillars of your investment thesis have been blown to smithereens. The stock is down 50% and you should get out if the three pillars of your investment thesis have all been blown to smithereens, get out. Now, I'm not saying if a stock is down, you should sell. That depends. Sometimes it's an even better opportunity. If your investment thesis is still intact, you just have the opportunity to buy it cheaper, great, buy more. But if your investment thesis is gone, get out. But what do most people do? They don't want to acknowledge that they made a mistake that their investment thesis is in tatters and they want to at least get back to even before they exit. And so they either don't sell or worse yet double down as things. So they turn a modest loss, a loss on one stock in your portfolio into something that can wipe you out.

Whitney Tilson joins Intelligent Money to talk about life, investing and finding success. Enjoy this Intelligent Money Moment: Trading is Hazardous. Transcript: Every study ever done on individual investor accounts shows the same result. Researchers found that the more trading you do, the lower your returns. In one study, I do not recall if it was Fidelity or Vanguard, researchers looked at millions of accounts, all anonymous, and the pattern was clear. There was a straight-line correlation: the more trading, the lower the returns. The accounts with the highest returns actually belonged to dead people. These were dormant accounts with no trades at all. It is a pretty simple concept. At the extreme, with supercomputers and quant funds, I do believe it is possible to succeed. In fact, some of the greatest investment successes, like Jim Simons and the Medallion Fund, have built extraordinary track records by finding small inefficiencies and making millions of trades a day. But human beings cannot do that.