We Study Billionaires - The Investor’s Podcast Network

TIP579: Big Mistakes by Michael Batnick

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Oct 1, 2023

Dive into the intriguing world of investing blunders as renowned investors share their hardest lessons. Discover how Benjamin Graham lost big during the Great Depression and why Jesse Livermore warns against overconfidence. Explore the dramatic fall of Long-Term Capital Management and the peril of stepping outside one's expertise, highlighted by Michael Steinhardt and Warren Buffett's mistakes. Learn about the dark side of concentrated investments and the emotional rollercoaster that comes with navigating unpredictable markets.

59:24

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ANECDOTE

Graham's Depression Losses

Benjamin Graham, the father of value investing, lost 70% during the Great Depression.
This happened despite his expertise, highlighting that value investing isn't foolproof.

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ADVICE

Livermore's Risk Management

Jesse Livermore made and lost fortunes, demonstrating the danger of heuristics.
Always consider the potential downside of an investment, no matter how small.

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ANECDOTE

LTCM's Collapse

Long-Term Capital Management, filled with brilliant minds, collapsed due to excessive leverage and unforeseen market events.
Their complex models didn't account for the unthinkable.

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The Dangers of Overconfidence in Investing

06:42 • 9min

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The Collapse of Long-Term Capital Management: A Cautionary Tale

15:18 • 5min

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Staying Within Your Circle of Competence

20:46 • 19min

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Understanding Market Cycles and Investor Behavior

39:47 • 5min

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Lessons from a Turbulent Investment Journey

44:38 • 19min

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Big mistakes

The Best Investors and Their Worst Investments

Michael Batnick

Big Mistakes: The Best Investors and Their Worst Investments delves into the failures of some of the most celebrated investors, including Warren Buffett, Bill Ackman, Chris Sacca, Jack Bogle, Mark Twain, and John Maynard Keynes. The book illustrates that investing is inherently challenging, regardless of the amount managed, and that failures are an integral part of the process. It emphasizes the importance of learning from mistakes, both personal and those of others, to develop robust investment strategies. The stories shared in the book provide valuable insights into risk management, the dangers of overconfidence, and the necessity of adapting to changing market conditions. By examining these cautionary tales, readers can gain a deeper understanding of the complexities of investing and how even the most successful investors have learned from their worst mistakes.

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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