Guy Spier's Top Investing Tips and Life Lessons

From one of top hedge fund managers and investor of all times

After listening to a great podcast by The Investor's Podcast Network: The Education of a Value Investor by Guy Spier, I want to share his advice in investing and to living a more fulfilled life. How his major breakthrough was his experience during the financial crisis as a fund manager. You can find the podcast, and other great episodes here: https://www.theinvestorspodcast.com/we-study-billionaires/

Warren Buffet and Charlie Munger have said that the difficulty lies not so much in developing new ideas but escaping the old, says Spier.

Guy Spier is an eminent value investor who manages Aquamarine Investment Funds. He has authored the famous book on investing, titled The Education of a Value Investor. He is also famous for bidding with Mohnish Pabrai for a $650,100 charity lunch with Warren Buffett on June 25, 2008.

Zurich-based value investor Guy Spier says the secret of becoming a successful value investor lies in leading an ethically sound life by making morally correct investment decisions, which in turn would bring financial success.

They are very, very smart people, they understand that many, many games are rigged, but you need to choose what type of person you want to be.

1- Create the right environment.

Our environment is much stronger than our intellect.

“We like to think we change our environment, but the truth is it changes us. So, we have to be extraordinarily careful in choosing the right environment — to work with, and even socialise with the right people. Ideally, we should stick to people who are better than us so that we can become more like them. Our environment is much stronger than our intellect. Remarkably, few investors — either amateur or professional — truly understand this critical point,” the esteemed value investor wrote in his ..

Spier says if investors can surround themselves with people with a positive attitude and work on becoming more self-aware, they inevitably become not just better investors but also better human beings.

2- Compound personal goodwill.

Spier advises investors to appreciate the ‘compounding of personal goodwill’ as investing is not only about earning money. “As wealth grows, the money becomes largely irrelevant. What matters in the end is what we can give back to society,” says he.

Spier revealed how a ‘thank you’ note written to Mohnish Pabrai started a whole new chapter in his life. He became great friends with Mohnish Pabrai and eventually bid for the charity lunch with Warren Buffett.

3- Beware of public recognition and approval.

Spier warns investors to not make the mistake he made during his early days, which was being driven by what Warren Buffett calls ‘the outer scorecard’ —

This, Spier feels, is a dangerous weakness for an investor to have and this can so easily lead one in the wrong direction since the crowd is generally governed by irrational fear and greed rather than by calm analysis.

“When your consciousness or mental attitude shifts to inner growth, remarkable things begin to happen. That shift is the ultimate business tool and life tool,” he says.

4- Be cautious of elite education.

“Elite education focuses too narrowly on rationality, neglecting the power of human instinct and critical thinking. The trouble is, economic theories tend to be based on intellectually elegant assumptions about how the world operates, not on the messy reality in which we actually live,” says he.

5. Know your limitations.

It is essential for investors to know their limitations, which can come from understanding of self, as well as accepting the short-comings of the human mind. Only then can investors think of a process to work around these flaws.

“The goal isn’t to be smarter. It’s to construct an environment in which my brain isn’t subjected to quite such an extreme barrage of distractions and disturbing forces that can exacerbate my irrationality. For me, this has been a life-changing idea,” says Spier.

6. Stay clear of unethical practices.

Spier says many investors get into unethical practices under pressure of falling behind their peers and end up making the mistake of compromising their own standards.

7. Financial crisis is an opportunity to make money.

Spier feels a financial crisis is unpredictable and can hit anytime causing investors to press the panic button. But during these tough times, it is important for investors to keep calm. He advises investors to plan promising investments for the future as there’s always great opportunity to make money during a financial crisis.

During a crisis, many businesses are sold for much less than their intrinsic value which gives a great opportunity to invest.

Guy, like Buffett, looks at stock ownership as a long term commitment. Guy is not just buying a piece of paper or an entry in a broker’s ledger. Guy is committed to finding businesses that he can own for decades. Guy will periodically alter this commitment as certain macroeconomic conditions or fluctuations of a business cycle within an industry, will not yield companies that can be held for decades.

Most importantly, look for games that you can play and win at.

This very likely does not mean falling into the Warren Buffett trap, trying to be the next Buffett. We recognize our limitations, so have wholeheartedly embraced deep value. It is highly recommended to take a long look at our own limitations too.

In these uncertain times, investors need to rely on logic to make decisions, not impulse.

Disclaimer: This article is based on Guy Spier’s book “The Education of a Value Investor” and his presentation at Talks @ Google, whose video is available on YouTube.