From visiting then 85-year-old Sir John Templeton in the Bahamas to spending a week with hedge fund manager Mohnish Pabrai in India, Green has spent hundreds of hours speaking with normally inaccessible investors and documenting firsthand how they think, act, and make decisions.
Along the way, he discovered that a small subset of investors are not only good at making money over long periods of time but also keen on accumulating insights and virtues that help them stay wiser and happier.
In his new book "Richer, Wiser, Happier," Green distills and synthesizes everything that he has learned from these successful investors into nine key lessons about how to win in markets and life.
In an interview, he broke down three of the lessons that he took away from getting inside the brilliant minds of Warren Buffett's partner Charlie Munger, international investing pioneer Sir John Templeton, and hedge fund manager Mohnish Pabrai.
Reducing stupidity with Charlie Munger
In 2017, Green traveled 3000 miles for a 10-minute interview with Munger right before he was due to speak at the annual meeting of the Daily Journal Corporation.
The billionaire vice-chairman of Berkshire Hathaway is known for his sharp mind, acerbic exterior, and bluntness, but Green discovered something rather counterintuitive about Munger's wisdom after studying him for decades.
"What became clear to me about Munger is that you have this guy who's legendarily clever, and yet he focuses an enormous amount of time and energy on trying to be less stupid," Green told Insider.
He explains that Munger's strategy is to systematically reduce his capacity for "foolish thinking, idiotic behavior, unoriginal error, and standard stupidities" by collecting cautionary tales of people doing stupid things.
While it sounds weirdly simple, the act of coming up with a potential disaster caused by foolish behavior and then trying to invert that error takes a lot of mental power.
"Think about all of the ways in which investors sabotage themselves, it's really extraordinary just how many stupid things we do," Green said. "For example, when you trade frequently and generate high transaction costs and taxes, you are eroding your returns. When you buy stocks that you don't really understand, when you chase whatever is the hottest in the market, those are examples of what Munger would call standard stupidities."
But what's most critical to Munger's success is perhaps his willingness to collect examples of his own "idiocy."
Green recalls attending the 2017 Berkshire Hathaway annual meeting where Munger admitted to the two costliest mistakes that he and Buffett have made — not buying Google and missing out on Walmart "when it was a total cinch."
Straying from the crowd with Sir John Templeton
In the age of cryptocurrencies and high-growth tech stocks, Templeton seemed like a faraway myth.
However, not too long ago, the legendary founder of Templeton Growth fund made what many considered to be one of the greatest financial trades of all time by shorting the dot-com bubble.
As Green chronicled in his book, at the peak of the internet boom, Templeton, already in his eighties, picked out 84 of the "most egregiously overvalued" internet stocks, which had all tripled from their initial public offering prices.
He placed a $2.2 million bet against each of them and waited for the IPO lockup period, which prohibits company insiders from selling their shares, to end.
"Templeton's short-selling strategy worked like a dream," Green wrote. "When the dot-com bubble burst in March 2020, he earned a profit of more than $90 million in months."
This was not the first time that Templeton had won big by going against the herd. At the onset of World War II in 1939, Templeton bought a basket of 104 stocks that had been weighed down by the Great Depression and were trading at $1 or less.
He borrowed $10,000 (equivalent to $183,000 today) from his ex-boss for the trade and held these much-hated stocks until the spring of 1942 when the US economy finally revived. By sticking it through those war-torn years, Templeton made roughly five times his money.
In Green's view, Templeton's wager was "one of the boldest and most prescient investments in history — a triumph of both intellect and character," but it also spoke to his willingness to be brave, independent, and even lonely.
"Most people have the tribal gene where they seek the safety of numbers when there's a panic or when the market is soaring," Green said. "Templeton's theory is that there are certain people who have non-tribal genes where they just don't care about belonging to the tribe. I would say that certainly describes most of the great investors that I've encountered."
Turning one million into one billion by cloning Warren Buffett
There is no investment strategy that fits all people.
While Templeton made history as a non-tribal investor, Mohnish Pabrai succeeded by "shamelessly" borrowing from the best ideas of Buffett, Munger, and the father of value investing, Ben Graham.
Pabrai's investing journey started in 1994 when he picked up Peter Lynch's book "One Up On Wall Street" while trying to kill time in Heathrow Airport. Before long, he had the idea of starting a "30-year game" to turn his then savings of $1 million into $1 billion.
He started by devouring all the available materials about Buffett, including decades of his letters to shareholders. He made the pilgrimage to Berkshire's annual meeting each year and committed to investing with "extreme patience and extreme selectivity."
He even switched to Buffett's lifestyle, which means saying no to almost anything that distracts him from reading and contemplation. Pabrai also cloned Buffett's partnership model, charitable spirit, and his principle of living by his own inner scorecard instead of worrying about how other people think of him.
Pabrai's cloning strategy has obviously worked. From 2000 to 2018, his flagship hedge fund returned 1,204% compared to the S&P 500's 159% during the same period, according to Green.
Ultimately, the hedge fund manager's strategy could be summed up as: "Take a simple idea and take it seriously."
"Of all the lessons, that last one might be the most important," Green wrote. "Too often, we encounter a powerful principle or habit and we contemplate it, take it for a quick spin, and then forget about it. Pabrai becomes consumed by it. He lives by it. That's a habit I have to clone."
