Mohnish Pabrai explains Warren Buffett's approach: in any group of 100 people, spot 3-4 exceptional ones to keep close and 3-4 toxic ones to avoid. Buffett calls himself a harsh grader. Pabrai adds that surrounding yourself with givers rather than takers creates a gravitational pull that improves you.
He said something about being a harsh grader of people.
Yes.
What does that mean?
Well, I told Warren, I said, Warren, you know, you are, both you and Charlie are such good judges of humans and human nature. Were you always that good at figuring people out? So he says to me, Mohnish, you're mistaken. I am useless at figuring people out. He said, if you put me in a cocktail party with 100 people and you gave me 5 or 10 minutes to meet each person, I could tell you 3 or 4 people are exceptional. And I could tell you 3 or 4 people you want nothing to do with. And the remaining 92, I would have no opinion on because it's not enough time to figure them out. So, but he's, But he also said that, look, what you do in life is those 3 or 4 people who are exceptional, you bring them into your inner circle. And obviously the 3 or 4 people who are, you know, not the great humans, you're not going to have anything to do with them. But the third thing you do is you treat the 92 just like the useless humans. And you exclude— so he says, be a harsh grader. So he says that when you have friendships and when you have people you work with, your peers and all that, he says there's a gravitational pull. If you hang out with people better than you, you're going to get better. If you hang out with people worse than you, you're going to get worse. So he said that one of the things that most humans are not willing to do is loyalties get in the way for them, right? So they may have a friend who's kind of weird or quirky or has ethical issues, but they've had a long friendship. So they'll keep that person going with them. That has detrimental impacts. So basically, I really took that to heart. And I said that I I'm really going to try to see if I can focus on the great relationships, the great people. And that's actually been a journey I've been on now for 16, 17 years. It's been tremendous. It's great. Now, it's unfair, right? Because you're treating the unknown the same as the useless people. But, but that's the way life is. I think that sometimes you have to make these difficult choices, uh, because if you don't do that, then, uh, the impact of that is significantly negative. And one of the things I realized when I started to, uh, get to know Charlie, I got to meet Charlie's friends. So I would play bridge with his friends, I'd meet his friends, and what I realized is His friends were so off the charts. They were so exceptional. I said, wow, this is like a different world, right? And I said, I'm going to take a shortcut. I'm going to make Charlie's friends my friends because he's already done all the work.
He did the filtering.
You can't get a better filter than Charlie Munger, right? And so I worked on building relationships with Charlie's friends and some of his family. And that's been beautiful. I mean, some just great friendships. And I realized that there's such a huge delta in off-the-charts, top 0.1%, top 1% of humans and the rest. And we talked about this. Adam Grant wrote this wonderful book, Give and Take, right? And he categorizes people. People in 3 buckets, right? The givers, the takers, and the matchers, right? Now, the takers you don't want anything to do with. You know, they're just going to like want to extract whatever they can from you. So they're just not people you want to have in your life. The givers are people who are selflessly trying to help the planet, not really concerned about what comes back to them, right? Those are the ones you want to be with. And then the matchers, they're kind of doing math in their heads. Oh, you know, Sean did this for me, so I'm going to do something similar for him. They're kind of— and so even the matchers aren't that great. So what you really want to do is you want to seek out the givers. And more important than that is you want to be a giver. And so the interesting thing that he pointed out in that book is that when you're a giver, the universe conspires to help you. And I found it magical how— and Warren and Charlie are great examples of givers. Everyone's trying to help them in any way they can. And so that's the funny thing is that the matchers who are trying to do this equalization, they end up losing. The best way to get the most is not ask for anything. It'll all come to you. And so these are wonderful models to incorporate.
Yeah, there's even some game theory with that, which is the cost of excluding somebody who might be good or might be great is actually quite low to you, but the cost of accidentally including somebody who might have some toxicity, it's quite costly to you. And so, you know, I think even in investments, he has the good pile and then the too-hard pile.
Warren has a lot of baseball analogies. He says that in investing, there are no called strikes, right? So in baseball, you're at the pitch, 3 strikes, you're out, right? He says, I can let 1,000 balls go by, 1,000 stocks go by and not swing. I only need to swing when 8 moons line up, right? And so—
The fat pitch, right?
The fat pitch, right? And so the thing is that we live in a world with infinite humans. If there are infinite humans, it also implies that there are infinite number of good humans. So basically, making of— excluding a good human from your circle because you can't figure them out, there's no penalty for that, right? Because there's an infinite supply, right? Just to put it— wait for the mathematical way, mathematically. But when you bring in a substandard person, it just— there's so many drains. It's just miserable.
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