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Mohnish Pabrai: Build you own safety checklist

In this session with the CFA Institute in UK, Mohnish Pabrai discusses the importance of learning from investment mistakes, both personal and those of renowned investors like Warren Buffett and Charlie Munger. He highlights the inevitability of errors in predicting the future and the value of studying past mistakes to avoid repeating them.

By converting these lessons into checklist questions, akin to aviation safety protocols, Mohnish developed a systematic approach to assess potential investments.

 

Charlie used to say to me that you want to learn from your mistakes, but you don’t want to learn too much. Investing is a business where if you have a 50% error rate, 40% error rate, that’s par for the course.

So, it is a business where there’s going to be a large error rate because we’re trying to project into the future. Anytime you’re trying to project into the future, it’s fraught with uncertainties.

So, you’re going to have a lot of errors, and I think it’s a useful exercise to look at the things that have not worked and why they have not worked. It’s also a much richer data set if you can look at the investment mistakes of the greats because your own mistakes will take a long time to build a record. But if you were to look at Berkshire Hathaway or other investors you admire, we’ve got several decades of history, and so that can accelerate the learning, right?

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