Even The World's Greatest Investors Have Made Horrible Mistakes

Joe Weisenthal (0:10)

Hello, and welcome to another episode of the Odd Lots Podcast. I'm Joe Weisenthal.

Tracy Alloway (0:16)

And I'm Tracy Alloway.

Joe Weisenthal (0:18)

Tracy, we talk a lot. I don't know, I guess, if we talk a lot on this particular podcast, but I would say financial media is very into great investments and legendary investors and how they got there and how basically a whole industry devoted to, you know, how people became rich and successful. Wouldn't you say that?

Tracy Alloway (0:41)

Yeah. Well, you have to have role models if you're trying to do something, right? And definitely investors tend to lionize certain people. I mean, Warren Buffett is probably the most famous investor that springs to mind. And every year you get people who go down to Omaha and it turns into sort of a Warren Buffett fest, I would say.

Joe Weisenthal (1:02)

Right. And then not only do we sort of lionize these people, but also throughout the year at any given time, if they make a call, you have people who want to jump on that call. Like if Warren Buffett adds a new position to his portfolio, then of course you'll get a typically you see buying of that stock the next day because people think, well, if Warren Buffett is invested in it or any one of these other gurus, so to speak, is invested in it, then you get people trying to follow on and think that their riches and genius will spread to them.

Tracy Alloway (1:36)

Yeah, lots of followers for sure. You even have some people now who've basically made a business out of following financial gurus and it's called copy trading. So you have followers of followers. It's followers all the way down.

Joe Weisenthal (1:50)

But the one thing we don't talk about as much is the fact that all these people are human, and in fact, a lot of them have made some pretty huge mistakes in their career.

Tracy Alloway (1:59)

Warren Buffett's made mistakes?

Joe Weisenthal (2:01)

No, I don't know if Warren Buffett has actually ever made a mistake. It's possible that he is bad at 1000 But most investors, even the really great ones, I believe, have made a couple of mistakes here and there.

Tracy Alloway (2:13)

Right. And you're absolutely correct that we don't hear that much about those mistakes, maybe for obvious reasons. But I'm guessing there are probably a lot of lessons you could learn about investing from actually talking about what went wrong.

Joe Weisenthal (2:27)

There are definitely lessons you could learn.

And we're going to learn some of those lessons today. And I think just for you and I's sake, I think we should redouble our effort to point out mistakes, because you and I are in the position to always be reporting on people's calls and people's position changes and their forecasts and stuff like that. And we should just, as a sort of note to each other, remind each other to go back and look and see who got it wrong the year before, just to keep everyone more honest.

Tracy Alloway (2:54)

No, you're absolutely right.

Especially on the sell side, we have a whole industry of people who are supposed to be making calls and a lot of those are incorrect. And you're absolutely right that we don't do enough to point those out. I gotta admit Joe, I have a few investing mistakes of my own that I'm pretty embarrassed, but maybe we'll talk about them during this episode.

Joe Weisenthal (3:15)

I'm really curious about them now.

Tracy Alloway (3:17)

No, they're so embarrassing.

Joe Weisenthal (3:19)

All right, we definitely have to bring them up. All right, well, maybe we could avoid our mistakes or maybe we can avoid making investing mistakes if we learn about the big mistakes that famous investors have made. And to this end, our guest today is Michael Batnick. He is the Director of Research at Ritholtz Wealth Management. And he has a new book out that came out this year entitled Big Mistakes, The Best Investors and Their Worst Investments. So this should be really fun because we're gonna talk about great investors and their colossal errors.

Thank you.

Michael Batnick (4:21)

Thanks for having me. Why did you write this book about famous investors screwing up? Well, the best advice I got on writing a book was, write something that you would want to read. And this definitely fit that bill. So, there are a bazillion how-to books. So, I wanted to take the opposite side, and maybe that's the wrong way of putting it, because this is not a how-not-to book. This is just a book on, to your point, we do lionize these best investors, but they are human too, and investing is really hard. And I don't care what style you're doing, how big a dollar pool you're managing, it is really hard.