William Green is a journalist and over the years he has been able to interview and reflect on the people he has interviewed. He wrote a book called Lessons from Great Minds of Investing and on the tour, he stopped at Google Talks on Investing for a lecture. He focuses on what attributes the leaders in the investing world have and possibly you can learn from them. He uses 4 categories

1. Willingness to be Lonely
2. The Power of Humility
3. The Ability to take Pain
4. The Key to Happiness

The secret to success is the ability to stack the odds in your favor.

1. Willingness to be Lonely

The great investors love independence and freedom to do what they want to do, they are the mavericks of the industry. They understand even though the papers say the world is going to end, the world is not likely to end soon. To be successful is to find opportunities where most of the crowd (the other players) do not see. This will mean patience for everyone else is seeing something else and you are inverting what the crowd does not see. By exercising patience you jump at the a great opportunity.

2. Power of Humility

Always ask what if I am wrong? why does the crowd not see? maybe you are too far ahead of the crowd – will it catch up to your way of thinking? If you are going against the crowd you have to built in a margin of safety that you can last until the crowd catches up to your way of thinking. You maybe right in the future so try to be less stupid rather than more stupid.

3. The Ability to take Pain

The best investors have lost money on their way to the top; not everything they buy goes up in price. To be a great investor you will go through the cycles and life is a pendulum. You will need to take caution when things go well. When you lose money where do yo get your emotional balance to come back and do it again?

4. Key to Happiness

There is a myth that as soon as you accumulate enough money, you quit the rat race. Great investors have great wealth, why are they still doing investing? The reason is they love doing it and they are constantly learning. Perhaps if all jobs were like that the myth would go away.

Other comments in the Google Talk were:

Investing is asking yourself what if I am wrong? Do I have an overconcentration on what the crowd does not see? The 3 questions to ask is doubt? doubt? and doubt?  Talk to those on the other side – who see something else? what do they see?

If you can avoid the drastic downtowns and have reasonable returns you will do well.

In the world of hedge funds – much of the time is spent trying to be prepared for when something significant happens and then you know what to do with the event. If you learnt from your mistakes you will say I am doing this because ….

Linking to dividend paying stocks, as a small investor, you are not taking the risks and leverage the hedge funds take. The reality is if you avoid losing money and have reasonable returns over the years you wealth will increase. Much of hedge funds is inverting the crowds, trying to see what they are not seeing and building a large position to take advantage of the mismatch. If you stick to well established companies who have consistently raised the dividends, it may not be headline news but it will build your wealth over time.

There are more questions than answers, till the next time – to raising questions.