Chapter 133 - The Education of a Value Investor: My Transformative Quest for Wealth, Wisdom, and Enlightenment
Today’s Chapter is based on the book “The Education of a Value Investor: My Transformative Quest for Wealth, Wisdom, and Enlightenment” by Guy Spier.
Guy Spier is a Zurich-based investor and the founder and managing partner of Aquamarine Capital, an investment fund modeled after Warren Buffett’s early partnerships. Spier gained additional recognition for winning a charity lunch with Warren Buffett.
Inner Scorecard
“The big question about how people behave is whether they’ve got an Inner Scorecard or an Outer Scorecard. It helps if you can be satisfied with an Inner Scorecard.”
— Warren Buffett
One of the most profound lessons from Guy Spier’s journey as an investor is the importance of living authentically by adhering to an inner scorecard, a term coined by Warren Buffett that believes in measuring success based on personal values rather than on external validation. As Buffett once said, “Would you prefer to be considered the best lover in the world and know privately that you’re the worst—or would you prefer to know privately that you’re the best lover in the world, but be considered the worst?”
In fact, Spier’s transformation from a Wall Street driven mindset to one aligned with his true self was inspired by Warren Buffett’s philosophy of prioritizing internal standards over societal pressures. This shift allowed Spier to think and invest unconventionally as a value investor. He explains that “Value investors have to be able to go their own way. The entire pursuit of value investing requires you to see where the crowd is wrong so that you can profit from their misperceptions. This requires a shift toward measuring yourself by an “inner scorecard.” To become a good investor, I would need to come to an acceptance of myself as an outsider. The real goal, perhaps, is not acceptance by others, but acceptance of oneself.”
As a matter of fact, Spier learned that success in investing comes from resisting the herd mentality and trusting one’s own judgment. This mindset allowed him to make contrarian investment decisions, profiting from opportunities others overlooked. However, embracing an inner scorecard is not just about financial decisions; it’s about aligning actions with personal values. Spier recounts a pivotal moment during his lunch with Buffett, where this principle was vividly illustrated:
“Early in the conversation, I made a confession: I told Warren how I had changed my fee structure so that he wouldn’t think I was just another greedy, two-and-twenty hedge fund guy. I also mentioned how hard it had been to convince my fund’s lawyers that this unorthodox approach made sense since it was fairer to my shareholders. I’ll never forget Warren’s response: “People will always stop you doing the right thing if it’s unconventional.” I asked if it gets any easier over time to do what’s right. He paused, looked away for a moment, and replied, “A little.” He then went on to explain how crucial it is to adhere to values that you know to your core are right rather than being swayed by external forces such as peer pressure.”
— Guy Spier
Furthermore, Buffett’s advice reinforced Spier’s commitment to authenticity. In fact, Spier’s realization that he couldn’t emulate Buffett’s exact path but could strive to be the best version of himself further underscores this lesson. He mentions that “For me, the lesson was clear. Instead of trying to compete with Buffett, I should focus on the real opportunity, which is to become the best version of Guy Spier that I can be. It reminded me of an old joke that Warren likes to tell: “How do you beat Bobby Fisher?” Answer: “Play him at anything other than chess.” I couldn’t beat Warren at his own game. But I could certainly follow his example.”
This insight emphasizes that authenticity is about embracing one’s unique strengths and limitations. By focusing on his own path, Spier was able to carve out a successful career while staying true to his values. This lesson encourages us to define success on our own terms, fostering resilience and clarity in a world often driven by external validation.
“This became my own goal: not to be Warren Buffett, but to become a more authentic version of myself. As he had taught me, the path to true success is through authenticity.”
— Guy Spier
This focus on authenticity reminds me of a valuable lesson we have learned previously from Michael Jordan. Jordan believed that it is difficult to become the best you can be when you are focused on trying to be the best version of someone else. Without authenticity, you are not going to last long. He explains that “the products, companies and people who stay true to who they are usually end up being around for a long time.”
Furthermore, he elaborates that companies that jump into trends or try to be something other than what or who they are, generally, don’t last very long. He explains that “If you are trying to make your way through a maze, and your decisions come from the inside, from your gut, nine times out of ten you won’t find yourself running into a wall. But if you rush into something, make decisions to appease somebody else, or chase the easy dollar, then you are going to find that wall.”
“I’ve never been worried about anyone’s perception one way or another. I’ve never allowed anyone’s opinion to define me. I’m comfortable with who I am. I trust myself.”
— Michael Jordan
Following one’s instinct may seems scary at first, but as we have learned previously, if you follow your instincts and put in the work necessary, you are bound to encounter success. It is only a a question of when. As Naval Ravikant would say, “great people have great outcomes. You just have to be patient.”
Avoid The Noise
“To understand error in judgment, we must understand both bias and noise.”
— Daniel Kahneman
Guy Spier understood the importance of creating an environment that supports rational decision-making. Recognizing the limitations of human psychology, he adopted strategies to minimize distractions and emotional biases, drawing inspiration from Warren Buffett himself.
Spier mentions that “this is one aspect of what Buffett does that other investors can replicate: we can clone the environment and processes he has created to keep the noise at bay. For me, this has meant not only moving away from Wall Street, but blocking out other types of noise that would otherwise muddy my thinking. For example, I totally ignore market predictions and focus instead on investing in companies that should grow significantly over the long term.”
As such, while Warren Buffett established himself in Omaha, Spier decided to relocate to Zurich in order to distance himself from Wall Street’s frenetic pace. By doing so, Spier created a calmer environment conducive to clear thinking. This physical and mental separation allowed him to focus on long-term investments without being swayed by market noise. As Warren Buffett once said, “I buy on the assumption that they could close the market the next day and not reopen it for five years.”
Similarly, he adopted tangible cues inspired by his mentors in his office. He has a bronze bust of Charlie Munger to serve as a constant reminder of the dangers of cognitive misjudgment and has a box labeled ‘Too Hard’ similar to Warren Buffett as a visual reminder that he should wait patiently until the perfect investment opportunity arrives.
“I positioned a bronze bust of Charlie Munger in my office. I’m not deifying him, but I want to activate his presence in my mind—not least as a cue to remind me of the dangers of those 24 forms of misjudgment that he identified in his talk at Harvard.”
— Guy Spier
Furthermore, Guy Spier started to develop rules in order to prevent him from making irrational decisions. One example of this is his rule to check stock prices on a weekly or quarterly basis to reduce the urge to react impulsively. He explains that “But if I were managing solely my own account, I’d set up a system in which I’d look at the price of my holdings only once a quarter, or possibly even once a year. As things stand, I check the price of my holdings no more than once a week. It’s a wonderful release to see that your portfolio does just fine when you don’t check it.”
This routine helped Spier maintain emotional detachment from market volatility, ensuring decisions were based on fundamental analysis rather than short-term price movements. Additionally, he adopted Mohnish Pabrai’s rule of not trading during market hours to further insulate himself from emotional triggers.
“When it comes to buying and selling stocks, I need to detach myself from the price action of the market, which can stir up my emotions, stimulate my desire to act, and cloud my judgment. So I have a rule, inspired by Mohnish, that I don’t trade stocks while the market is open. Instead, I prefer to wait until trading hours have ended.”
— Guy Spier
Finally, Spier is also a big fan of using checklists in order to avoid common mistakes before making a decision. He explains that “The goal in creating a checklist is to avoid obvious and predictable errors. Before I make the final decision to buy any stock, I turn to my checklist in a last-ditch effort to prevent my unreliable brain from overlooking any potential warning signs that I might have missed. The checklist is the final circuit breaker in my decision-making process.”
By structuring his environment and processes to counteract psychological biases, Spier demonstrates that success in investing—and in life—requires deliberate efforts to mitigate human error. This lesson encourages us to design our surroundings and routines to support clear, rational thinking, whether in financial decisions or other complex endeavors.
This is, in my opinion, a perfect moment to review Charlie Munger’s legendary speech on the psychology of human misjudgment:
Compounding Goodwill
“The business of business is relationships; the business of life is human connection.”
— Robin Sharma
In his book, Guy Spier highlights the power of fostering relationships through genuine goodwill, a practice that compounds value far beyond financial returns. As a matter of fact, he was fascinated by the story of Joe Girard, a record-breaking Chevrolet salesman, who regularly wrote holiday cards to thousands of his former customers with the words ‘I like you’ printed on each card, along with his name. Spier mentions that “this personal expression of goodwill had an unbelievable effect: Girard won a place in the Guinness World Records book by selling 13,001 cars in 15 years.“
Similarly, Spier adopted the habit of writing thank you notes and expressing appreciation to people that enriched his personal life. He explains that “In sending out this cascade of letters, I began to open up to people in a way that I never had before, and I started to see everyone around me as someone I could learn from. As I now understand, this habit of writing letters is an incredibly effective way of compounding goodwill and relationships instead of merely compounding money. Einstein is often said to have called compounding the eighth wonder of the world. But the narrowly financial application of compounding may be the least valuable and least interesting aspect of this phenomenon.”
In fact, it is through sending these letters on a daily basis that he was able to connect with Mohnish Pabrai who later became a great influence and mentor to Spier. Furthermore, it is through Pabrai that Spier got to meet his hero, Warren Buffett, by bidding and winning a charity lunch with the Oracle of Omaha.
“After Mohnish’s annual meeting, I returned home to New York, picked up a fountain pen, and wrote him a short note. Written in my semi-legible scrawl, it said something like: “Dear Mr. Pabrai, Thank you so much for having me as a guest at your partnership meeting. I learned a lot about life and investing, and I also met some great people. Warm regards. Guy Spier.” It was one simple note out of at least a dozen letters that I sent that week. I had no agenda in writing it and expected nothing in return. I mailed it and then forgot about it. But Mohnish later told me that I was the only person who wrote to him after that meeting, and my note clearly stuck in his head.”
— Guy Spier
Furthermore, this should reminds us on the importance of surrounding ourselves with great people. By cultivating relationships with mentors like Buffett and peers like Pabrai, Spier gained access to wisdom and opportunities that enhanced his investing prowess and personal growth. As Spier once said, “Indeed, the best way to learn is to surround yourself with the right people. As Warren told Mohnish and me at our charity lunch: “Hang out with people better than you, and you cannot help but improve.”
While wisdom cannot be learned through books, Spier is a prominent believer that lessons can also be obtained by living examples, hence the importance of building a network of great people. As he explains, “Books are a priceless source of wisdom. But people are the ultimate teachers, and there may be lessons that we can only learn from observing them or being in their presence. In many cases, these lessons are never communicated verbally.”
“As Buffett helped me to understand, nothing is more important than getting better people into your life. To put it another way, relationships are the killer app. Indeed, I’m convinced that this is the single most important way that we can tilt the playing field in our favor to achieve success as investors and in other areas of life.”
— Guy Spier
Beyond the Book
Read "The Inner Scorecard: How Warren Buffett Mastered Life" by Farnam Street
Read "The Checklist Manifesto: How to Get Things Right" by Farnam Street
Read "A Simple Checklist to Improve Decisions" by Farnam Street
Read "The Psychology of Human Misjudgment" by Charlie Munger
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