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HOW the World’s Most Successful INVESTORS Think – #SuccessClues

what’s that believe nation it’s Evan my
one word is believe and I believe in you
and I want to see the great thing that
you have inside you explode up into the
world and see some amazing things coming
from you and so help you on your journey
I’m starting a new series it’s a test
I believe that success leaves clues and
so in this new success clues series
we’re gonna look at how the world’s most
successful investors think and as always
guys as you’re watching if you hear
something that really resonates with you
please leave me down in the comments
but quotes around it to other people can
be inspired and when you write it down
it’s much more likely to stick with
yourself as well
it’s important thing is to decide is to
be able to define which ones you can
come to an intelligent decision on and
which ones are beyond your capacity to
evaluate you don’t have to be right
about thousands and thousands of
thousands of competition you only have
to be right about a company couple I met
bill gates on July 5th 1991 we arrived
Seattle and bill said you’ve got to have
a computer and I said why and he said
well he said you can do your income tax
on it I said I don’t have any income
Berkshire doesn’t pay a dividend yeah he
said well you can keep track of your
portfolio I said I only have one stock I
said I did I mean he says it’s gonna
change everything and I said well will
it change whether people chew gum and he
said well probably not and I said well
we’ll change what kind of gum they’d
show and I said well then I’ll stick to
chewing gum and you stick to computers
how bad I don’t have to understand all
kinds of but there’s all kinds of
business I don’t understand but there’s
thousands of opportunities there I
didn’t understand the Bank of America
you know and and I’ll be able to I’m
able to do that I’m able to understand
some given percentage but Ted Williams
wrote a book called the science of
hitting and in science of hitting he’s
got a diagram shows him at the plate and
he’s got the strike zone divided in the
seventy-seven squares each the size of a
baseball and he says if I only swing it
pitches in my sweet zone which he shows
her and he has what his batting average
would be which is 400 if he had to swing
at low outside pitches but still in the
in the strike zone
his average would be 230 he said the
most important thing in hitting is
waiting for the right pitch now he was
at a disadvantage because if the count
was oh and two or one and two or so on
even if that ball was down where he was
only going about 230 he had to swing at
it in investing there’s no called
strikes people can throw Microsoft that
you know you name any any stock General
Motors and I don’t have to swing and
nobody’s gonna call me out on call
strikes I only get a strike call if I
swing at a pitch and mess so I can wait
there and look at thousands of companies
day after day and only when I see
something I understand and when I like
the price of which is selling then if I
swing if I if I had it fine if I miss it
it’s it’s it’s a strike but it’s an
enormous ly advantageous game and it’s a
terrible mistake to think you have to
have an opinion on everything you only
have to have an opinion on a few things
in fact I’ve told students if when they
got out of school they got a punch card
with 20 punches on it and that’s all the
investment decisions they got to make in
their entire life they would get very
rich because they would think very hard
about each one and you don’t need 20
right decisions to get very rich you
know four or five will probably do it
over time so I don’t worry too much
about the things I don’t understand if
you understand some of these businesses
that are coming along and can spot
things on if you can spot on Amazon for
example I mean it’s a tremendous
accomplishment what Jeff Bezos has done
and I tip my hat to me is a wonderful
businessman he’s a good guy too
but could I have anticipated that he
would be the success and ten others
wouldn’t be I’m not good enough to do
but I go unfortunately I don’t have to
you know I don’t have to form an opinion
on on Amazon and I did I did form an
opinion on the Bank of America and I
form an opinion on coca-cola
I mean coca-cola has been around since
1886 there’s one point eight billion one
point eight billion eight ounce servings
of coca-cola products sold every day now
if you take one penny and get one penny
extra that’s 18 million dollars a day
and 18 million times 365 is 7 billion 3
less 730 billion or there’s 6 billion
570 million dollars so annually 6
billion 570 million dollars from one
penny do you think coca-cola is worth a
penny more than you know Joe’s Cola I
think so so
you know and I’ve got about 127 years of
history that would indicate it so those
are the kind of decisions I like to make
and you may have an entirely different
field of expertise than I would have and
probably much more up to date in terms
of the kind of businesses that we’re
seeing about and you can get very rich
if you just understand the feel of them
and understand their future when you
started how did you learn to invest and
how did your investment strategy change
over time well I learned I learned from
my mistakes in other words my instinct
is you know you go there and you place a
bet I’m who had winners and I’ve had
losers and what I did well every time I
made a mistake
they became painful mistakes but with
time I realized that reflecting on those
mistakes would give me gems what I would
do is I’d say why did I make that
mistake and I would learn from that
mistake and I’d write down a rule so
what was helpful for me is I put that
rule principles these principles I wrote
these principles now those principles
that I wrote down I then put into
algorithms in other words equations and
what I learned by being able to do that
is by if I took my decision criteria
those principles and then I tested them
back through time I gained a perspective
that was fantastic
the markets have been going through
these wild gyrations rights don’t seem
to have a clear sense of what direction
is up how do you interpret that as
somebody who’s spent a lot of time put
on my you know manage the portfolio
trader hat and not so much to try to
manage the portfolio it’s great you know
anytime there’s volatility and any type
time there’s change there’s opportunity
now I say it’s great because I’ve taken
a whole different approach to investing
than most people you know I think buying
holds a caucus I think you know the idea
that you always have to invest your your
cash is not far behind and so I’ve
always been of the attitude that unless
you really have a commitment to
something just keep your money in cash
knowing that at some point in time
there’s gonna be a week or two like
we’ve had but how much time I mean you
got a lot going on in your life how much
time do you have to actively manage your
portfolio through these 500-point
markets we’ll see that’s the whole thing
I don’t have to spend much time until
until it hits the fan right so I don’t
mean I’m not hitting the fan that’s
exactly right and that’s where the
opportunity is like I wouldn’t look at
my portfolio or you know I get I get a
run line one number statement every day
from my bank and you know that tells me
if anything weird happened and I won’t
even look at it but then when everything
starts getting crazy I call it the World
Series of investing you know that’s when
you start digging in and it’s because of
the approach that I take so you know
back in 2006 and 2007 I was writing blog
saying look the stock markets for
suckers you’re getting put you know when
you sit down at the business table you
always look for the sucker and if you
don’t see it it’s you and you’ve got all
these professional people on the other
side of the trades I mean when I started
trading stocks in the early 90s after I
sold my first company you know you could
understand different elements of the
market better than the professionals so
I can understand you know new technology
from Wellfleet and Synoptics and all
these old technology companies better
than the traders today there’s so much
money in these huge hedge funds and that
then they have such professional
research and in-depth research there
really aren’t any advantages for the
traders and so my approach has always
been unless I know something specific
put it in cash
and so and so what are you investing in
what are the areas that well when I
Divya you know what I did when I in
2008-2009 I put everything into MLP s
and M rates though mortgage-backed
security ones that I thought were do
better companies um and I just piled in
and I also piled into Australian bonds
because I thought the economy was good
next to China it was my way of playing
China so you make one-way bets this
isn’t portfolio balancing your dollar
all that asset management you know
diversification that’s for idiots right
because you because you can’t you can’t
diversify enough to know what you’re
doing what I did was I said self self
there’s gonna be a lot of volatility so
I bought put took a little bit of money
and bought out of the money calls on the
on the spider calls I bought on the s
standard & poor’s day SP 500 and I did
the same thing on the diamonds which is
the Dow Jones so I bought those long
we’re not when the stock prices cratered
and then when we had the big not today
but the big run-up before I bought a
bunch of puts knowing that even though I
was paying for a lot of volatility that
I thought there’d be a lot of swings in
the market and so I said you’re just
betting on volatile just bet now how
long is that gonna last in your view no
idea and that’s the whole thing right
people aren’t buying intrinsic value in
companies anymore the whole Warren
Buffett approach works great for Warren
because he can put a three billion
dollars into an investment and take a
whole different approach than John or
Sally dough investor who can’t do
diversification is the only free lunch
and investing and I see this happen so
many times here’s my basic lesson that
I’ve learned that I never very from and
this works trust me it works never more
than 5% of your portfolio in any one
name no matter how great the story is if
it’s the next nor tell if it’s the next
rim who cares
5% Mac’s waiting for me usually it’s two
and a half to three percent I never let
a stock get bigger than that in my
portfolio I sell into the strengths all
the time secondly never ever ever more
than 20% any one sector so if you love
gold you just can’t get past 20% of your
net worth in gold or energy or any other
sector or financial services so good
sectoral diversification is crucial and
finally for me I’m over 60% weighted in
debt now versus equity not government
debt not treasury bonds but corporate
debt remember that a BB or triple B bond
is serviced before they pay the dividend
on a common stock so I like to own write
up the balance sheet so I own a lot of
preface converts senior debt floating
rate notes I love that stuff because
when they get upgraded I get capital
appreciation meanwhile I get a check the
key to life is the check coming in it’s
the cash
if you always always always look at the
free cash flow this will keep you safe
because the only friend you’re gonna
have when you’re old and crusty is not
your dog not your kids it’s the cash in
the bank that’s still gonna love you in
your book you also say when you’re
investing you should have an element of
fear in there you should make the
assumption when you make an investment
there’s some probability you’ll lose it
it’ll go to zero and that’s why you need
to have you know a reserve like a
back-up plan some cash set aside that if
everything blows up you’re okay I find
it extraordinary when people make their
first you know liquidity event and they
have some capital that they blow it all
again that is the biggest mistake you’ve
got to take a nut even if it stays in
cash or it’s a very very liquid safe
security to say
that I don’t touch it goes back to what
my mother taught me spend the interest
never the principal I mean look you know
I make a lot of crazy investments I
don’t touch the principal
in the spring of 2000 I was way over
levered into these two stocks in a
matter of few days I found myself going
from 12 million dollars to the good to
four million dollars to the bat so I was
25 years old I owed four million dollars
I didn’t have anything to show for I
didn’t have a house or a boat or a plane
or anything I could sell paid off I just
I owed it and I came from a middle-class
background neither of my parents had
ever made more than 100 grand in a year
and I was just stuck and I had to make
some choices then about whether I was
gonna quit and you know or try to
declare bankruptcy or whether I’d try
and fight it out and it happened just as
I was graduating law school actually and
so I said well I’m gonna try and fight
this out and I’ll take a sellout job as
a as a corporate lawyer out of Fenwick
and West and I’ll try and grind this out
and so during the day I would do
corporate law stuff at a tech firm and
at night I would do pretty much anything
that somebody would pay me to do short
of giving blood or massages these like
Craigslist for this I did go on
Craigslist I was writing contracts and
business plans and renaming companies
there’s a thing called Elance out there
there’s now like oDesk and rent a coder
and stuff but Elance is the first of
those markets and I was the first lawyer
on Elance and so I was I was writing
terms and conditions for websites some
of which turned out to be adult websites
but they paid cash and and so I even did
a voiceover for a book once yeah who
knew but I actually screamed for a few
hours to make my voice super raspy that
was what they were looking for in the
character so but I just did anything I
could to try and pay off this debt and
it took me from then till till basically
the Google IPO to selling another
company in the Google IPO before I got
back to zero mm-hmm net worth and I’ll
tell you no matter how early you are in
your career the richest you will ever
feel is when you owe zero dollars to
anybody that’s the very first time in
your life when you’ve got choices you
can you could go join the Peace Corps
you go travel the world you could do
anything I actually celebrated by
throwing a BYOB party at my house like
I’m not going in the red to treat all
you guys but that that was a real
pivotal moment in my life um I’ll tell
you I just I never really considered any
other option I never considered moving
back with my parents to Buffalo New York
I never considered declaring bankruptcy
I just kind of always knew I would fight
my way out of it and I think that’s
something that for those of you who are
founders I I’d encourage not everybody
as a founder it’s easy to kind of sign
the paperwork but some of you just
aren’t founders and there’s a time when
you have to admit that to yourself that
it’s cool to have a startup
but you may not be a founder you may not
be the kind of unstable mentally askew
person with the slightly manic
depressive side who is who knows in the
face of insurmountable odds that you’re
gonna win and I don’t mean is convinced
that you can sell people and convince
people of that I mean you know in your
bones that you’re gonna make it out and
I think that’s something that was a
little different about me it was like in
that whole as advisors you’re saying
look just go BK and seven years from now
you can walk away from it I just knew I
would fight my way out of it and I
didn’t have to convince myself or
anybody else
you also have to dare to be great I’ll
tell you one little story one of the
most successful investments we made was
a small company called CERN we’ve just
started to sell product you’re doing
fairly well we had a half a million of
Revenue in 1997 and Cisco came said we’d
like to buy this company for three
hundred million dollars having invested
three or four million dollars for half
the company that’d be a pretty good
and yeah we had one other investment and
I said no deal because I believed in
what we were trying to do April came
along and somebody called me from Cisco
and said we’d like to offer seven
hundred million dollars and we at that
point with subsequent investments owned
about thirty five forty percent of the
company and I said no deal August came
along and won’t go into the details of
story but they offered seven billion
dollars we did take the deal
if you want to make a quick buck you can
do it a lot of different ways you can
cheat somebody you can misrepresent
something you can go manipulate the
political system to get an advantage but
if you want to if you want to be
successful over a long period of time I
believe you need to be to focus first of
all on creating value for others and
that’s an oh that’s I’ve had people well
that’s naive
that’s utopian no it isn’t because why
will the customers want to pay you
anything over a long period unless
you’re creating value for them why would
your your employees want to work for you
if they did they didn’t have any
alternative why do they want to give
their best efforts why do they want to
get excited why would they wake up at
night with ideas if you’re in a
community a plan in a community unless
you’re creating value for that community
why would the community want you there
if you’re polluting and hurting people
and not contributing anything to the
community so long-term success starts
with being dedicated to creating value
for others it’s it’s not how truism it’s
my whole philosophy is is to have a
system of mutual benefit where both
parties gain a society based on win-win
for all of you people out there who want
to be entrepreneurs you gotta have a
thick skin you you almost need some
friendly psychologist training you’re
traipsing around with you to buck you up
from all the setbacks that you have it’s
always great after your Jack Ma but it’s
not so great you know if you file a
chapter and and the difference in that
you know Jack’s attend he almost did go
down several times
it’s that scrambling ability the ability
to take that kind of abuse and rejection
and believe in your basic plan but be
adaptable and just keep going
that the business schools and I think
they’re beginning to change but
particularly in the eighties the
business schools focused on if you could
just turn the page there’s the formula
that tells you how to do it and the
answer is there are no formulas and and
success and failure are our combination
of judgment it’s an external event but
it starts and ends with a simple idea
and your gut but your gut has played a
very key role though in your business in
your in your success I think that I have
been willing to have an opinion and then
execute accordingly
enjoy to donate a Latina Association
there’s a Victoria Cucuy and luma you’re
my good girl mama
take note I go look to attack okay cello
go hard I go chase you look a lot NATO
yo 200 clemens zamora Kamali
it’s a mall or the CLA Chopra move aside
Jung Joo younghoon can the King como the
reason is of a mortal coil her poem was
so subtly among she’d been a modular
monkey allow a modern army apartment
come on your a yin yang dirty me
na young magnet you go home later
yes auntie local the local element is
icy moons over that just either ma over
like a apartment okay good we bought
chocolate oh yeah you want some tea teen
choice i double boiler long fight thank
you guys for watching I hope you enjoyed
I’d love to know what did you think of
this video what do you think of this new
success clues series I’d love to hear
your thoughts please let me know in the
comments below if there was one piece of
actual advice that you’re really gonna
take calm let me know in the comments
this video focusing on investors if
there’s another group or another genre
or another niche that you want to learn
more about let me know in the comments
and maybe we’ll make it in the next
edition of success clues if we keep this
series so let me know thank you guys
again for watching
I believe in you I hope you continue to
believe in yourself and whatever your
one word is much love I’ll see you soon
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