We Study Billionaires - The Investor’s Podcast Network

TIP579: Big Mistakes by Michael Batnick

Oct 1, 2023

59:24

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Michael Batnick, author of 'Big Mistakes: The Best Investors and Their Worst Investments', discusses significant investment mistakes made by well-known investors. Topics include Benjamin Graham's losses during the Great Depression, Long-Term Capital Management's downfall, stepping outside of one's circle of competence, Warren Buffet's biggest blunder, Bill Ackman's attached short position, Stan Druckenmiller's tech bubble mistake, the dark side of concentrated investing, and Keynes' transition to bottoms-up value investing.

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Quick takeaways

Learning from the mistakes of renowned investors highlights the importance of value investing, avoiding overconfidence, and staying within one's circle of competence.

The collapse of Long-Term Capital Management serves as a reminder of the dangers of relying too heavily on complex models and underestimating unforeseen events.

Sequoia Fund's heavy reliance on Valeant Pharmaceuticals shows the risks of concentration, emphasizing the need for a balance between concentrated bets and diversification.

Deep dives

Learning from the mistakes of others

One of the best ways to become a better investor is by learning from the mistakes of others. By studying the biggest investment mistakes of renowned investors like Benjamin Graham, Jesse Livermore, and John Meriwether, we can gain valuable insights and avoid making similar errors. These mistakes highlight the importance of value investing, the dangers of overconfidence, and the risks of venturing outside one's circle of competence.

Introduction

2min

Psychological Challenges of Investment Failures

14min

The Downfall of Long-Term Capital Management and Lessons in Markets

5min

Sticking to Your Strategy

19min

Investing When No One's Excited, Sponsor Introductions, and Druckenmiller's Investment Approach

4min

Druckenmiller's Successful and Costly Trades

17min

Playing the Long-Term Equity Investing Game and Learning from Mistakes

2min

On today’s episode, Clay Finck reviews Michael Batnick’s book, Big Mistakes: The Best Investors and Their Worst Investments.

One of the best ways to become a better investor is to learn from our own mistakes. The second best (and less costly) way is to study the mistakes of others. If you want to learn from the mistakes of the world’s greatest investors, then this episode was made for you.

IN THIS EPISODE YOU’LL LEARN:

00:00 - Intro.

01:24 - Lessons from Batnick’s book from studying the mistakes of the world’s greatest investors.

02:18 - How Benjamin Graham lost substantial capital during the great depression.

07:14 - How Jesse Livermore taught us to always limit the potential downside.

12:49 - How Long-Term Capital Management went from billions in AUM to zero almost overnight.

16:40 - Michael Steinhardt’s mistake of stepping outside of his circle of competence.

26:24 - What the endowment effect is.

27:20 - Warren Buffett’s biggest blunder.

29:57 - How Bill Ackman became publicly attached to a short position that went against him.

37:32 - How Stan Druckenmiller got suckered into the 1999 tech bubble.

49:21 - The dark side of concentrated investing.

54:50 - How Keynes transitioned from being a macro investor to a bottoms up value investor.

Disclaimer: Slight discrepancies in the timestamps may occur due to podcast platform differences.

BOOKS AND RESOURCES

Join the exclusive TIP Mastermind Community to engage in meaningful stock investing discussions with Stig, Clay, and the other community members.
Michael Batnick’s book, Big Mistakes.
Check out our previous episode: WSB577: Valuation Masterclass w/ Aswath Damodaran or watch the video here.
Follow Clay on Twitter.

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