Episode summary
Mohnish Pabrai: Berkshire, Big Mistakes & Letting Winners Run (TIP812)
We Study Billionaires
· · 1 hr 3 min · Hosts: Stig Brodersen · Guests: Mohnish Pabrai
Summary
Mohnish Pabrai argues that Berkshire Hathaway’s next chapter should be judged less by mystique and more by governance, incentives, and operational discipline. He says Greg Abel is likely to run tighter operations than Warren Buffett did, but also that Buffett’s hands-off style helped Berkshire by leaving managers alone. On compensation, Pabrai defends the roughly $25 million level for Greg Abel and Ajit Jain as modest relative to the value they created, while emphasizing that Berkshire has always tried to avoid envy and keep pay aligned with ownership.
The broader investing message is that most ideas fail, and that is normal. Pabrai leans hard on the idea that only a small minority of businesses drive most long-term returns, so investors should stop expecting high hit rates and instead avoid selling great businesses too early. He says this applies inside Berkshire, in the stock market, and in concentrated portfolios: the goal is not to optimize every position, but to let exceptional winners run.
He also makes the case that long-term ownership should favor the best businesses rather than broad diversification for its own sake. He points to Berkshire, Constellation Software, Walmart, and his own portfolio as examples of resilience, arguing that business quality, manager quality, and capital structure matter more than macro predictions. The conversation closes on Pabrai’s friendship with Guy Spier and the importance of inner scorecard thinking, humility, and seeing other people clearly.
Key takeaways
- Pabrai says Greg Abel should be judged on tighter operations, while Buffett’s hands-off style was valuable in a different era.
- He argues that only about 4% of businesses and investments drive most of the returns, so a low hit rate is normal.
- Pabrai says great winners should not be trimmed just because they grow large; the mistake is selling too early.
- He believes the quality of the business and the managers matters more than macro concerns, including in Turkey.
- For very long holding periods, he would diversify across several indices rather than rely on one single forever bet.
Notable quotes
“I think we are going to be seeing tighter operations. Most of the acquisitions Warren did did not work well for Berkshire”
“I would say you could do the S&P one fourth, you could do Berkshire one fourth”
“I think that when you put enough of these things which have great characteristics, you know, the world is a messy place. Things will come from left field”
How the episode opens
00:00:00:01 - 00:00:30:13 Unknown Well, for the last several years, both Greg and a geat have been vice chairman and they both every year gotten exactly the same amount of compensation down to the last dollar. And I think the reason Warren and Charlie did that is to avoid envy. And so Greg has been paid 20 odd million for several years.
And Warren has said about Ajit that many times when he's paid him, he felt he left out a zero. 00:00:30:19 - 00:00:53:11 Unknown A deed is responsible single handedly for creating more than 100 billion, maybe 150 billion in value for both shareholders. So we can never compensate him enough.
I mean, in the sense that if Berkshire paid him something like 30 billion or something, then it might be appropriate. 00:00:53:13 - 00:01:18:23 Unknown Today I'm here with no other than money's Perai. Money is.
Welcome to our annual banter here that will be published over the Berkshire weekend stage. I always look forward to this. It's like the pre-game tailgate party.
And so always a pleasure to be here with you. Wonderful. And so since this is the Berkshire weekend, I wanted to ask you here a few questions about the company.
00:01:19:03 - 00:01:43:13 Unknown Now, Greg Abel has arguably been running the operating businesses since 2018, when he became the vice chairman of non insurance operations. And I think it's safe to say that Greg is more hands on, whereas Buffett was inclined to I think he said delegate almost to the point of application. So which CEO approach would you prefer if you were a Berkshire shareholder?
00:01:43:15 - 00:02:14:23 Unknown Well, you know, Charlie Munger said that Greg is better than Warren in some important ways, and he never went further to describe what those.
From the episode’s captions: roughly the first two minutes, lightly cleaned. Keep watching on YouTube →
Topics
- berkshire hathaway
- value investing
- stock picking
- investment mistakes
- letting winners run
Companies and tickers mentioned
- BRK-B
- BRK-A
- Berkshire Hathaway
Watch the episode
Watch “Mohnish Pabrai: Berkshire, Big Mistakes & Letting Winners Run (TIP812)” on YouTube
Summary, takeaways and quote selection by Octagon. Quotes are short excerpts; the full conversation is in the episode.
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