Asking a Billionaire Investor How to Turn $10,000 into $1M ft. Mohnish Pabrai

**Shaan Puri** (0:00)
How would I take 10K and turn it into a million?

**Mohnish Pabrai** (0:02)
What we're looking for is something that hits you in the head with like a two by four. We don't need to know many things about many things. We need to know a lot about a little.

**Shaan Puri** (0:14)
Why do you think most people don't do that?

**Mohnish Pabrai** (0:15)
Buffett always says, the most important question to ask is, and then what?

**Shaan Puri** (0:21)
Does he use Excel?

**Mohnish Pabrai** (0:23)
Warren wouldn't be caught dead using Excel.

**Shaan Puri** (0:25)
Okay.

**Mohnish Pabrai** (0:26)
Usually, the best idea is when you finally figure that out, they're very simple. You should be able to explain your thesis of a stock in about four or five sentences to a 10-year-old.

**Shaan Puri** (0:35)
Where do you even know where to look?

**Mohnish Pabrai** (0:38)
I'm going to lay it out for you. It's going to be so easy. All someone has to do is.

**Shaan Puri** (0:54)
Okay, here we go. Mohnish, welcome back. Round two.

**Mohnish Pabrai** (0:57)
Shaan, it's always a pleasure.

**Shaan Puri** (0:59)
So let's play a game. You're my coach. You're my investing coach, let's say. And I have $10,000. And I want to turn it into a million, right? Podcast called My First Million. I want to go from 10K to a million. So that's 100X. How would I take 10K and turn it into a million?

**Mohnish Pabrai** (1:14)
The thing about investing is that opportunities are not going to show up just because you have the cash. So I would make some tweaks to your thinking first about the 10K. So I would say, okay, the 10K is a good starting point. But what I also want you to do separately from that is have a day job. Yeah. Okay. And I want you to spend less than your earning. And I want you to take the 10K. And I also want you to take your annual savings. Maybe that's five, 10,000 a year or whatever it is. And normally, I would say put it into an index, right? The index, the S&P is overheated. We can't go there right now. Circa 2025, we cannot go into the S&P. Okay. Okay. Maybe 2035 we can, but not 2025 So what I would do is I would treat Berkshire Hathaway as the index. So I would just say the default currently is you put it, dollar cost average into Berkshire class B shares. Okay. And you keep doing that day in, day out. And if we did that, the math is really simple. Even if we were doing 10 percent a year, which I think is pretty reasonable for Berkshire, rule of 72, we would double every seven years. Life is all about doubles. Okay. Let's say we had a 20-something guy with 10,000, and you go for 50 years or 49 years, it's seven doubles. Right. Okay. Seven doubles is 128
Okay. It's 128 times your money. I gave you more than 100X.

**Shaan Puri** (2:53)
Right.

**Mohnish Pabrai** (2:54)
I gave you 128X in 49 years.

**Shaan Puri** (2:57)
Without having to be a genius.

**Mohnish Pabrai** (2:59)
Without doing anything. Right. So this is just plan B. Right. Where we put the 10,000 in, it becomes more than a million, 1.3 million, and with no taxes paid. Right. There's no dividend, there's no taxes, there's nothing. And we haven't even gone to plan A yet, right? This is just sitting there. Now, the other thing is that every once in a while, there'll be opportunities that show up. And what we're looking for is something that hits you in the head with like a two by four. So the best investments are ones that make no sense. You cannot make sense of the numbers. It's too good to be true. It's just weird and all of those things. So when these kind of unusual things come together where things don't make sense, that's when we want to dive in.

**Shaan Puri** (3:48)
Give me an example of a great investment is one that doesn't make any sense. The numbers just seem wrong to you in the moment.

**Mohnish Pabrai** (3:55)
Well, I'll give you one example where it was a moneymaker for me, but I didn't make even 3% of the money I should have. I mean, it was like it was given to me on a platter and I blew it. I still made money.

**Shaan Puri** (4:12)
Right.

**Mohnish Pabrai** (4:13)
But usually the best idea is when you finally figure that out, they're very simple. So in the year, I think this was like around 2001 or 2002, I had encountered this shipping company called Frontline. And Frontline was a company that owned a fleet of about 75 VLCCs, very large crude carriers. These are giant ships that transport crude from like Saudi Arabia to the US and they're this huge. The entire global fleet at that time was 300 ships, 300 VLCCs. Seventy-five of them were owned by Frontline, 25% of the market. The guy who ran and was the founder of Frontline, John Fredrickson, had put the entire fleet on the spot market. So there are two ways he could have dealt with his fleet. He could have done time charters, kind of one year, three year deals where he's guaranteed cash flows per day and all that, or be a gambler, put it on the spot market and play it, whatever the price today is, I'll take it. So he had put it on the spot market, the entire fleet. Now these VLCCs, they have a cost with the cruise and all of that of around $15,000 per day to break even. And at that time we had like the Iraq War and different things going on. So oil demand fell a lot and there wasn't enough need for VLCCs. So the shipping rates collapsed to the point they went to $7,000 per day. Okay, so now you have front line losing $8,000 per day times 75 ships. Okay, and they're levered. Okay, and so basically the stock got taken out back and shot.