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.

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.

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.

Why Spier quit his high-paying job

Talking about his early days in the investment industry, Spier says although he
had a high-paying job, which was what he always wanted, it required him to
compromise on his morals and ethics. He sensed that the work environment was
corrupting his mind and he wasn’t proud of what he was doing. He felt he had
become an inauthentic person because of which he finally quit his job to find some
mental peace.

“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,” esteemed value investor wrote
in his book, The Education of a Value Investor.

The inner journey

Upon quitting his job, Spier took time off for self-reflection and read some books
like The Intelligent Investor and Buffett: The Making of an American Capitalist,
Page 1 of 6
which completely changed his perspective towards life and investment. These
books helped Spier realise that one can succeed in financial business without
compromising on one’s ethics.

After reading these books he was in awe of Warren Buffett and made him his role
model. Buffett’s value investing philosophy resonated with him, and he started to
model his behaviour on Buffett.

“When your consciousness or mental attitude shifts, remarkable things begin to

happen. That shift is the ultimate business tool and life tool,” he says.

Spier says with this new-found perspective, he started writing notes and sending
gifts to virtually every person he wanted to thank for some reason or the other, be
it for a good meal or a conference invite.

These gestures helped him build relationship with some key people in the
investment industry, which later contributed to his successful investment journey.

“My simple rule was that whenever I met someone, I would try to do something for
them. It might simply be an introduction to someone else or even just a sincere
compliment. What was intriguing to me was the way they reacted. In some cases,
I sensed that they were saying to themselves, ‘That’s nice. I wonder what else this
guy is going to do for me, or what else I can ask him for.’ In other cases, I could
see that they wanted to help me too. These seemingly trivial interactions provided
a barometer of whether people approached the world as givers or takers,” he said
in a presentation at Talks at Google, whose video is now available on YouTube.

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.

Page 2 of 6
Citing his own example, 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.

Charity lunch with the Oracle of Omaha

Talking about the charity lunch, he said although the lunch cost $650,100, it was
a priceless lifetime experience as while interacting with Buffett he learnt to live by
an ‘inner scorecard’ and be at peace with himself. Buffet made him realise that the
path to true success was through authenticity.

“For me, the benefit of meeting Warren Buffett was that it forced me to give up the
idea that I could ever be like him and it freed me up to be myself. And I think there
are a lot of people who really want to be the next Warren Buffett or can't give up
on this idea. So there's this interesting thing that these models of behaviour are
absolutely wonderful until you take it to the extreme and end up being
unproductive. This became my own goal: not to be Warren Buffett, but to become
a more authentic version of myself. As he had taught me, the path to true success
is through authenticity,” says he.

Spier offers certain valuable insights that can help one achieve success in the
investing.

Beware of this dangerous weakness

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’ —the
need for public approval and recognition. 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.

Be cautious of elite education

Page 3 of 6
Spier says elite education can sometimes be a big obstacle in dealing with
problems of the real world. This kind of education teaches skills that simply cannot
be applied to the real world, as theories and economic models created are based
on the assumption that there will be perfect information available, which isn't the
case in reality.

“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.

Tilt the playing field

Spier emphasizes the importance of doing things that can ‘tilt the playing field’ to
an investor's advantage. He says by doing so investors can drive themselves
towards success rather than try to fixate on some goal that may or may not be
attainable.

“Finding rules that tilt the playing field towards ourselves makes us slightly ahead
of others. So ‘thank you’ note is one way of tilting the playing field. Sending out
‘thank you’ notes, creating goodwill, leaving a little bit more on the table in every
interaction that I have leaves people with a positive impression of me willing to help
or willing to do something and that comes in in unexpected times,” he says.

Create the right environment

Spier is of the view that a healthy environment and network can have a massive
influence on investors so they should choose the city where they would like to live
and work, and the people they associate with wisely. Developing daily routines in
a healthy workplace can keep investors focused and enable them to make
consistently sound financial decisions.

Know your limitations

Page 4 of 6
Spier says 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.
This, he says, can be done by creating the right rational environment and
developing an investment process using checklists which can help in avoiding
classic mental mistakes.

“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 he.

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.

He warns investors against falling into this trap and encourages them to accept
their mistakes as this gives them the opportunity to learn from it and begin afresh.

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 a value investor to buy shares of a company
promising high profits in the future for a very low price, says he.

The ultimate prize

Page 5 of 6
Finally, Spier emphasis that if investors can become self-aware, strip away
facades and listen to their inner self, they can become stronger internally and get
better equipped to deal with adversities when they inevitably come.

“The stock market has an uncanny way of finding us out, of exposing weaknesses
as diverse as arrogance, jealousy, fear, anger, self-doubt, greed, dishonesty, and
the need for social approval. To achieve sustainable success, we need to confront
our vulnerabilities, whatever they may be. Otherwise, we are building our success
on a fragile structure that is ultimately liable to fall down," says he.

Spier feels if investors can develop these qualities not only will they become good
investors but also good human beings. “The real reward of this inner
transformation is not just enduring investment success. It’s the gift of becoming the
best person we can be. That, surely, is the ultimate prize,” says he.

Page 6 of 6