Text/CxEric
In a recent interview with William Green, Paberley talked about his past with Munger and Li Lu. William Green couldn’t help asking: Li Lu is obviously an extraordinary person, but can you tell me, Munger What did you see in Li Lu?
“It’s interesting that I asked Munger this question many years ago — what did you see in Li Lu?
Munger’s response was that it was a total no-brainer, “I just looked at his track record”.
(“I just had to look at the track record“)
Paberley+William explained that Li Lu’s record at the time was:
1. Living in a foreign country and carrying heavy debts;
2. Use student loans to invest, not only pay off the loan when you graduate, but also make a lot of money;
3. Sleep in the living room of an 8-person apartment and graduate with three degrees;
4. Enter the venture capital field after graduation and invest in Capital IQ.
Just by looking at Li Lu’s record, Munger was able to identify Li Lu’s extraordinary talent long before Li Lu’s actual astonishing investment performance.
01
If you’re familiar with Poor Charlie’s Book, you’ll know that this is Munger’s consistent claim: Look at a person’s past record and you can understand the other person very well.
He even gave more exaggerated advice: the interview impression is not reliable, you just look at the past records.
When chairing an academic recruiting committee, Munger tried to convince other committee members, “Stop interviewing job candidates and just hire someone whose written application is much better than other job applicants.”
Naturally, the unusual approach was met with opposition, with some saying Munger “did not respect the normal procedures of academia”.
Munger disagreed, arguing that he was the one who respects academics, because academic research has shown that the predictive value of interview impressions is low, and that most employers overestimate the conclusions of interview impressions.
Munger explained, “People are very likely to be overly influenced by face-to-face impressions, which by definition include active participation. If the person can speak well, then he may encounter great danger.”
So how to solve/mitigate this problem? Munger said the correct response to avoid this kind of stupidity is:
“Don’t put too much emphasis on face-to-face impressions, and focus on the applicant’s past record.”
The correct antidote to this sort of folly is to underweigh face to-face impressions and overweigh the applicant’s past record.
02
Munger’s words can be extended to be understood as:
When making decisions, the weight of thinking about subjective impressions should be reduced, and the weight of thinking about past records should be increased.
The principle is very simple, the accuracy of people’s subjective impression is very low, it is easily affected by psychological bias, and there are often cases of “love the house and the black”, “hate the house and the black”, and it is easy for people to “follow their feelings” and make bad decisions. .
In contrast, the past record of a person or a company, whether it is historical performance or development history, is more objective and more difficult to embellish – although it is often more boring.
This principle is very practical for value investors. Think about it, how many people every year are attracted by glamorous CEOs, dazzling PowerPoint presentations, garish annual reports, and then plunge headlong into weird companies?
There was once a company in A-shares that had certain characteristics that puzzled me:
1. Their PPT is really good-looking – later I found out that it really cost a lot of money;
2. Their CEOs are really good at speaking, their paintings are first-class, and their words must be subversive;
3. Their “terms” are cool and dazzling, but people don’t understand them.
Such a company can attract the recognition of many individual investors. I have met a full-time investor who told me vividly that in the future, it will build a whole ecosystem covering travel, entertainment, and mobile Internet:
“How much do you think you should give? At least more than Apple.”
He really believed what was on the PPT.
At this point, investors should consider Munger’s advice: Don’t focus too much on impressions, but on track records
——Go to the annual report, don’t read the advertisement;
– Go check what the company has done, don’t trust what the company says;
– Don’t be infatuated with the charismatic CEO, don’t be fooled by the dazzling PPT.
03
I think Confucius would also agree with Munger.
In the Analects there is an article:
The Master said: “In the beginning I was a man, listening to his words and believing his actions; now I am a man, listening to his words and observing his actions. It is about giving and changing.”
The general idea is that Confucius had a student who could speak well. Confucius once spoke highly of him, but some of this disciple’s later behavior disappointed Confucius.
So Confucius said with emotion:
“In the past, when I listened to his words, I believed in his actions. Now, when I listened to his words, I still have to look at his actions. This has changed because of the slaughter.”
Confucius resolutely revised his principle of knowing people after having a “dang” once. He no longer believed in a person’s words, but also examined his behavior after listening to it.
Therefore, Confucius and Munger should be able to reach a consensus here: listen to their words and observe their actions – if the two conflict, you should give more weight to “action”, and don’t believe too much in the reference value of “words”.
Words are his words, his impressions of you;
OK, it’s what he did, it’s the record he left behind.
Words are unreliable, because subjective impressions are easy to be misled – but there are smart people who are good at it;
The line is more reliable because it is recorded more objectively—documentation, sometimes boring, but better than attribution.
“Don’t listen to what he has to say, look at what he has done before.”
04
Don’t pay too much attention to the person’s face-to-face impression, but pay more attention to the other person’s past record.
This is somewhat contrary to common practice in the investment community. In the investment world, many people are keen to meet the CEO of the company. In their opinion, by having a face-to-face chat, they can either set up some unknown secrets or enhance their understanding of the company through the “feeling of meeting”.
But there are also some investor practices that are more in line with “Mungerism”. For example, Guy Speer has an investment principle:
Don’t talk to management.
Guy said, in his experience, “close contact with management is more likely to hurt my ROI. The problem is that senior management, especially CEOs, tend to be very good salespeople. No matter how the business is doing, they always have a way of making the audience feel like the company’s future is looking bright.”
“This ability to win over audiences — including board members and shareholders — is perhaps their most important gift for climbing to the top of the corporate food chain. But that gift of speaking doesn’t necessarily make them a reliable source of information.”
Guy’s point is not to criticize the bad intentions of public company management, but because – “Their work, goals and skills lead them to emphasize the positive, downplay any corporate problems, and treat troubles as temporary problems, or problems. Presenting corporate information in a way that can be solved.”
“They are not malicious in the slightest, but they may distort information subconsciously.”
Guy even believes that if there is a company, he has to meet the CEO to buy with confidence—a serious warning sign instead.
“I would rather study the company’s annual report in a detached and objective way, and observe indirectly through other public information and news reports, rather than risk breaking into their twisted positions and meet them directly one-on-one.”
Guy expresses this rule as:
“Be careful with CEOs and other senior management, no matter how charismatic, persuasive, or gracious they seem.”
Sounds unconventional, right? But I don’t think Munger would object to this approach.
Interestingly, there are also investors in A shares who have also refined similar views, and they spread quickly like a joke:
“Listen to the secretary of the board of directors and lose half of it, and listen to the chairman’s full loss.”
05
Let’s sort out Munger’s point for a third time:
1. Your subjective impression is not very reliable, it is affected by psychological bias from time to time;
2. Past records are a more reliable basis for decision-making;
3. If you can master the past record of the “other”, including the growth, choice, success and failure of the other, you can better understand the other, know whether the other is suitable for a certain role, and what achievements can be achieved in the future.
The “other party” here can be a person or a company.
At this point, a thought arises in my heart: if this point of view is correct, can this “other” also be – yourself?
As far as logic is concerned, if we can use “records” to evaluate others, we should also use this to understand ourselves, so as to maintain logical consistency.
Besides, we also have 100% of our past records.
So, my bold inference is that our past records are more revealing of who we are and the path we are on than the subjective impressions we construct.
Want to meet someone? Here’s an honest look at “this person”‘s track record:
How did TA grow to what it is today?
What failures did TA suffer; what successes did TA achieve?
What is TA good at and what is the success rate? TA is not good at doing things, what is the worst record?
When faced with setbacks, how does TA react; when faced with achievements, how does TA choose to deal with it?
What makes him most proud; what makes him most ashamed?
Above, all TAs can be replaced with “I” without violation.
This is not surprising, because the ancient art of observing people has already concluded: when observing people, observe yourself first.
A person’s past record is stronger than the “self-image” he builds;
A person’s past record, he describes more than the “subjective impression” described: Who am I?
Of course, this is a slightly heavy and cruel approach. After all, few people can easily smile all the way when facing their true self.
06
Of all the records, the part about “choice” is the most important.
The principle is very simple, because no one can choose their own “initial parameters”, and no one can control the “random variables” of the environment. The only thing we can decide is the “choice” in the process.
This is the same when looking at others, the company, and yourself.
Choice is a better description of who we are and the path we are on.
“Smart” is just an initial parameter, and whether to study hard or not is more of your personal choice.
Prosperity and adversity are just a random variable of the environment, no one knows how it will unfold, but it is your personal choice whether to be proud in good times and discouraged in adversity.
Initial parameters cannot tell who you are, and environment variables cannot tell who you are.
Just as the first hand cannot reveal the end, just as luck cannot guarantee your future.
After all, “we all make our own choices”
end
When I shared the above point of view with a friend, the friend said: Isn’t this a kind of “past determinism”?
I said, in a sense it is, in a sense it is not.
Say it is, because the track record does a good job of revealing what we are inside, how capable we are, and why we are here.
Therefore, as long as we look at our past records, we can know our strengths and weaknesses, strengths and weaknesses, know what situations we are brave and good at fighting in, and know that we will be at a loss when facing things, and we can also know that we have come this way. What is the way.
For example.
If your investment record in the past ten or twenty years is very poor, you should not deceive yourself. Your investment ability and investment system are okay, but you should have the courage to admit it and look for the possibility of change.
If you used to play games in your spare time or after school, you shouldn’t lie to yourself, you are a person who loves reading, but you should rediscover your interests and hobbies.
If you always choose short-term incentives unconsciously when you encounter long-term/short-term choices in the past, then next time you encounter a similar situation, you should be careful and careful, instead of letting yourself “follow your feelings”.
If you’ve been heading south for years, you’re expected to hit the south wall, isn’t it normal?
If you have always avoided challenges before, I guess you will still avoid it next time, isn’t there a high probability?
By reviewing records, we can understand our own characteristics.
Just like by recognizing footprints, we can know if we are walking straight.
The bad news is that our past records explain the present and reveal our future.
The good news is that we are writing new records every day.
Want to fix your record, change your path?
We can’t get our hands on the track record,
But you can start with today’s record.
Yes, past records are written on paper,
But the pen to write the record is in your hand.
After all, “every day we write records.”
— END —
This topic has 70 discussions in Snowball, click to view.
Snowball is an investor’s social network, and smart investors are here.
Click to download Snowball mobile client http://xueqiu.com/xz ]]>
This article is reproduced from: http://xueqiu.com/4373567778/227420877
This site is for inclusion only, and the copyright belongs to the original author.