Mohnish Pabrai, a billionaire investor and friend of Warren Buffett and Charlie Munger, shares his '10 Commandments of Investing' on My First Million. He emphasizes that successful investing is 99% temperament and 1% IQ, with patience being the key differentiator. Pabrai explains why cloning successful models, avoiding Excel, and asking 'Am I bored?' are critical skills for outperforming the market.
Summarized by Podsumo
Pabrai explains that the biggest investing mistake is swapping a well-known holding (the wife) for an unknown, seemingly more attractive option (the mistress). He says you must have an unequivocally higher bar for action—the mistress must be *truly* hotter, not just appear so.
Pabrai highlights how Musk's success at Tesla and SpaceX comes from asking, 'What is the raw material cost of this part?' and ignoring the supplier's markup. He says none of Musk's competitors actually adopt this model, despite knowing it works.
Pabrai details his best investments, including a Turkish warehouse operator trading at 3% of its liquidation value. He explains he ignored currency and inflation risk by focusing on assets (land, steel, cement) that are naturally inflation-indexed, applying the 'thermonuclear event' model to Coke.
Buffett's success came from just 12 of his 300+ investments (4% of his bets). Pabrai says the rest didn't matter—the key is not selling the winners (like Coke and Apple) and letting the 4% compound.
Pabrai argues the most important thing in life is to 'get your music out'—understand your true calling (hardcoded by age 5) rather than following others' expectations. He recommends psychological testing to find alignment, as it leads to better performance and fulfillment.
"If you are even a slightly above average investor and spend less than you earn and do not use leverage, you can't help but get rich over a lifetime."