Everyone dreams of being three things in their lives: Richer, Wiser, and Happier. Fortunately, this book can help you follow that path. “Richer, Wiser, Happier” by William Green is an insightful yet exclusive collection of his interaction with some of the most brilliant minds in the world of investing. This book is not about learning ‘how to make money’ but ‘how to improve our thinking and decision-making process’ to become richer, wiser and happier. Read on to learn how you can follow this path.

Clone the great minds

Find out some great investors around and clone them.

Mohnish Pabrai

All great people in the world are continuous learners; learning from their experiences and others’. You need to continuously observe what works and what doesn’t and why. 

For example, you can clone the attitude of Swami Vivekananda, who said, “Take up one idea. Make that one idea your life. Think of it, dream of it, live on that idea. Let the brain, muscles, nerves, every part of your body, be full of that idea and just leave every other idea alone. This is the way to success.”

Investing has little to do with frenetic activities in the market

You don’t have to swing at everything – you can wait for your pitch. The problem, when you are a money manager, is that your fans keep yelling, ‘swing, you bum!‘

Warren Buffett

What happens when you visit your relatives every day? After a while, they stop offering you even tea, forget lunch or dinner. Similarly, think of Mr. Market as a host which you’re better off visiting once in a while (a few times a year or even a decade). 

The book states, “There are no prizes for frenetic activity. Rather, investing is mostly a matter of waiting for these rare moments when the odds of making money vastly outweigh the odds of losing it.” Mohnish says “Place fewer bets, larger bets and infrequent bets.”

Therefore, you need to focus on research and be patient for opportunities and hatching the investments, having made the investment decision. Howard Marks states “Money is not made in buying and selling but sitting on the investments.”

Say ‘no’ to almost everything

The difference between successful people and really successful people is that really successful people say not to almost everything. 

Warren Buffett

The way one becomes remarkable is by focusing their energy and efforts on only a few things. Saying no to most things means saying ‘yes’ to only a few things.

Buffett is a master of this practice. What he’s looking for is a reason to say no, and as soon as he finds that, he’s done. Invest only in a few things, which you understand with clarity and leave the rest.

Investing is a lonely game

It is impossible to produce superior performance unless you do something different from the majority.

Sir John Templeton

Independent thinking, brevity, a conviction in one’s ideas and lack of urge to follow a tribe is the ideal attitude to possess to invest successfully. Unfortunately, most people follow the herd. As John Maynard Keynes stated, “Worldly wisdom teaches that it is better for the reputation to fail conventionally than to succeed unconventionally.” 

But, great minds follow their own unconventional path. They don’t care about what other people think about them.

Manage your emotions

People are crazy and emotional. They buy and sell things in an emotional way, not in a logical way, and that’s the only reason why we have any opportunity.

Joel Greenblatt

Mastering yourself is of supreme importance. We can’t control the circumstances and outcome, but we can definitely control ourselves and our actions. The most enduring advantage in the market is psychological.

Mr. Templeton states “Most people become excessively careless and optimistic when they have big profits, and excessively pessimistic and too cautious when they have big losses. Get away from that emotionalism.”  

Staying in the game is key

Investing is a popularity contest, and the most dangerous thing is to buy something at the peak of its popularity

Howard Marks

Maintain cash to capture the rare opportunities that show up in front of you. Avoid margin plays and debt to the extent possible. Keep your expenses under control. This will ensure that you survive in the most challenging situations. Consistently focus on ‘risk mitigation’, ‘error elimination’ and ‘prudent acts of omission’. In a sense, it’s winning by not losing and never forgetting the value of being the last man standing.

No one can predict the future

Prediction is very difficult, especially about the future

Neils Bohr

Change is the only constant. You can’t predict the future. Be honest with yourself about your limitations and vulnerabilities. But we can prepare ourselves to face it with confidence. This confidence is the product of knowledge, experience and behavioural sturdiness. Be humble and know that you are never immune from forces greater than you.

Almost everything is cyclical

Cycles eventually self-correct. Investors repeatedly make the mistake of overestimating the longevity of the market’s upswings and downturns. They forget that nothing lasts forever

Howard Marks

The book states, “Economy expands and contracts, consumer spending waxes and wanes, corporate profitability rises and falls, the availability of credit eases and tightens, asset valuations soar and sink. Instead of continuing unabated in one direction, all of these phenomena eventually reverse course. Markets swing like a pendulum from one extreme to the other because of the peoples’ behaviour which vacillates between euphoria and despondency, greed and fear, credulousness and scepticism,  complacency and terror.”

The future may be unpredictable but this recurrence process of boom and bust is remarkably predictable. Once you recognise this underline pattern, you can respond appropriately – turning more defensive or aggressive depending upon the current status of the cycle. 

Focus on the things with the longest shelf life, not the ephemeral

In a world that’s increasingly geared towards short-termism and instant gratification, a tremendous advantage can be gained by those who move consistently in the opposite direction. Focus on the things with the longest shelf life, not the ephemeral. Be it life, your activities or businesses.

Nick Sleep and Zakaria

Delayed gratification is an important principle in life. Sacrifice today so that you can have more tomorrow. Choices are essentially between the present and the future, the instant and deferred. One must look long term and have the capacity to suffer in the short term.

Nick and Zakaria thought long term about what they called ‘destination analysis’, aiming to understand where the business can be in 10 years, what would make that happen and what would be the impediments on the way. 

They came up with the model of “scale economics shared.” Amazon and Costco perfectly follow this playbook. As they get bigger, they use their scale to get lower prices and pass those savings onto consumers, fuelling the cycle even further.

Everything compounds over time – good and bad

Compound interest is the eighth wonder of the world. He who understands it, earns it; he who doesn’t, pays it

Albert Einstein

The best investors build habits whose benefits compound over time. Time is the enemy of bad habits and the friend of the good. Directionally correct and moderate efforts produce a cumulative effect, which is stunning. Forget about perfection, instead focus on continuous improvement that can compound over time. This is the aggregation of marginal gains.

Aim to be consistent, not stupid

It is remarkable how much long term advantage people like us have gotten by trying to be consistently not stupid instead of trying to be very intelligent.

Charlie Munger

The habit of actively collecting examples of other peoples’ foolish behaviour is an invaluable antidote to idiocy. Collect stupidities and learn vicariously through the mistakes of others. Inversion is a really powerful thinking habit. One must have great clarity on what not to do.

Devil’s advocate reviews, pre-mortem (opposite of post-mortem) memos, conversations with sceptical people, and checklist approach to investing are the disciplined analytical techniques that can help us systematically to slow down, coupon our minds and consider risks that we might otherwise overlook.

Evolve in the journey

Warren and I are very good at destroying our own best-loved ideas.

Charlie Munger

The book states, “The reluctance to re-examine our views and change our minds is one of the greatest impediments to rational thinking. Instead of keeping an open mind, we tend consciously and unconsciously to prioritise information that reinforces what we believe.”

The way to progress is by questioning your own thought process and beliefs. Look at the evolution of Buffett – he started out by investing in cheap stocks, then moved to buy great businesses at a fair price, then bought whole companies, then ventured into the foreign markets and then invested in tech stocks. It is unbelievable. 

The best opportunities to invest are in the pockets of gloom

When there is a really powerful bias against an asset class, that’s a way to get a bargain.

Howard Marks

Mr. Templeton states “the best way to find bargains is to study whichever assets have performed most dismally in the past few years and then to assess whether the cause of those woes is temporary or permanent.” Also, he would constantly search ‘Where is the outlook worst?’ These pockets of gloom are likely to yield the most enticing bargains since asset prices would reflect the tribe’s pessimism”. World doesn’t come to an end. Remember, this too shall pass.”

To summarize

Life is all ‘inclusion and confusion’, while art is ‘all discrimination and selection’. 

Novelist Henry James

All these great investors reflect some consistent qualities. They are continuous learners, voracious readers, independent thinkers, patient, even-tempered, rational, disciplined and have the ability to ask questions. Integrity, intellectual honesty, travelling, humility, scepticism and prudence are some other qualities of these minds. They emphasize wisdom along with knowledge and follow what philosopher William James stated, ”The art of being wise is the art of knowing what to overlook.” and “To attain knowledge, add things every day. To attain wisdom, subtract things every day.”

Results matter but their means matter a lot more. Therefore, ‘the rich man who is barren of virtues is, in reality, poor’. Ultimately, these great investors use their wealth to help and serve others.

Further Reading 

One Up On The Wall Street – John Rothchild and Peter Lynch

A Short History Of Financial Euphoria – John Kenneth Galbraith 

The Intelligent Investor – Benjamin Graham

Common Stocks And Uncommon Profits – Philip Fisher 

Poor Charlie’s Almanac: The Wit And Wisdom Of Charlie Munger – Charlie Munger