“You have to have a level of savings in your asset allocation that doesn’t make sense. You have to have a level of conservatism that seems like it’s a little bit too much. That’s the only time that you know that you are prepared for risks that you cannot envision.”
Morgan Housel
500-plus Words from the Tim Ferriss Podcast: Morgan Housel — The Psychology of Money, Picking the Right Game, and the $6 Million Janitor (#576)
Tim Ferriss: Who are some investors you respect the hell out of, but would never try to emulate? Are there any people who come to mind?
Morgan Housel: Definitely Buffett and Munger for one, just them in general. Here’s the twist on this. I’m not sure there’s any investor who I admire that I would try to emulate. And I think the reason that is, is because I admire them because they have a really unique skill and by definition, most people including myself don’t have that skill. Another thing is that a lot of people who are really successful at investing were successful in one era, but maybe not necessarily this era, so you can really admire what they did and how they thought and the risks that they took in that time, but it would never work today.
Benjamin Graham, the great investor who wrote the book The Intelligent Investor, he’s like the godfather of investing. If you tried to put Benjamin Graham’s techniques to work today, you would fail so incredibly hard, so miserably. If you were putting together the actual formulas that he laid out in his book, you would fail miserably. There’s really not anyone that I would really try to emulate. I’m a fairly passive investor. And John Bogle, who started Vanguard, I think is probably the most admirable because it was so selfless what he did.
A lot of people don’t even know this, Vanguard is owned by the people who own Vanguard Mutual. There’s no Vanguard shareholders. There’s no profits. There’s no dividends that are played to the owners. Vanguard was made for the benefit of the people who own the ETFs, the people who own the mutual funds and John Bogle did not make that much money for himself because of that. And you could almost think that Vanguard’s low fees, all of that is — the amount that you saved in fees is money that could have gone to John Bogle and John Bogle’s estate that didn’t.
He’s like this undercover philanthropist of finance that I really admire just because there’s so few other people like that. And I think someone like James Simons, who we mentioned earlier. I think in every field, there’s only one person who’s claimed a fame, who’s competitive advantage is I’m smarter than everyone else. In tech, for 20 or 30 years, that person was Bill Gates, and I think in finance for the last 20 or 30 years, that person has been James Simons.
The only person in the field who can say, if you ask them the question, “What is your competitive advantage?” They can say, “I’m just smarter than everyone else.” Only one person can say that, and it’s James Simons. If you look at what Renaissance Technology has done and just the results that they’ve accumulated and the consistency of what they’ve done, it’s like LeBron James times Michael Jordan times Tiger Woods to the power of Mikaela Shiffrin. It’s just such a different universe compared to what anyone else has done that it’s just, it’s astounding to watch.
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