Joel Greenblatt is arguably one of the best investors in the world. He is a Managing Partner at Gotham Asset Management, an investment firm he founded in 1985. He has spent more than two decades teaching at Columbia Business School, and he’s the author of five books focused on investment strategy, including “You Can be a Stock Market Genius,” “The Little Book that Beats the Market,” as well as his most recent book, called “Common Sense: The Investor’s guide to Equality, Opportunity and Growth.”
In this conversation, we talk about what’s changed and what remained the same in value investing specifically, and more broadly in investing in general. We also talk about how important it is to keep learning, both from wiser, more experienced and often older people, as well as from the next generation. In addition, we touch on the advantage that individual investors have over professional investors, and our ability to think and act with a long-term perspective.
What Is Covered:
- How Joel’s investing philosophy has evolved over the years
- “The Magic Formula”, why it still works, and why it is hard for people to follow it
- The value of a long-term perspective in investing, Joel’s projects in education and charter schools for kids from low-income and minority communities
- How the internet and network effects have changed the world of business, and why we’re seeing some of the best businesses that have ever existed
Key Takeaways and Learnings:
- The importance of accumulating and compounding experience, learning from other people’s mistakes, and reading a lot; one of the biggest elements of investing is recognising an outsized opportunity when you see it, and if you see something great, taking advantage of it.
- The returns are very noisy; you could go one or two years underperforming the market, and then make a lot of money in year three or four that made up for it. People aren’t very patient, especially if they’re blindly just following a formula.
- Individual investors have an advantage, because they don’t have the pressure of their performance being viewed every day, and they can invest and think in private.
- At any time, if you get your stuff together, there’s an ecosystem outside your current system that will let you learn.
Links and Resources Mentioned in This Episode:
- Common Sense: The Investor’s Guide to Equality, Opportunity and Growth, by Joel Greenblatt
- The Little Book that Still Beats the Market, by Joel Greenblatt
- The Big Secret for the Small Investor: A New Route for Long-Term Investment Success, by Joel Greenblatt
- Outliers: A Story of Success, by Malcolm Gladwell
- The Good Ancestor: A Radical Prescription for Long-Term Thinking, by Roman Krznaric
- Poor Charlie’s Almanack: The Wit and Wisdom of Charlie T. Munger
- Cable Cowboy: John Malone and the Rise of the Modern Cable Business, by Mark Robichaux
- William Green: Richer, Wiser and Happier on the OutsideVoices Podcast
- Robert Hagstrom: The Return on Investment of Mental Models on The OutsideVoices Podcast
- Brad Feld: When Big and Small Make Great on The OutsideVoices Podcast