In a wide-ranging conversation on the Excess Returns podcast, renowned investor Guy Spier shared valuable insights about investing, personal growth, and learning from mistakes.
Here are five key lessons from his discussion that can benefit both professional and individual investors.
1. Learn Early from Your Mistakes
One of Spier’s most emphatic points is that making mistakes early in your career can be beneficial – if you learn from them. He emphasizes that mistakes are inevitable, but the key is extracting maximum value from them. Rather than trying to be perfect, he advocates for being human and developing systems to learn from your errors. This might include writing reviews, developing checklists, and as Charlie Munger suggests, “rubbing your nose in your mistakes” to ensure you don’t repeat them.
2. Align Your Inner and Outer Self
Spier highlighted the importance of authenticity in investing and business. Drawing inspiration from successful investors like Warren Buffett and Charlie Munger, he emphasized how crucial it is to collapse the gap between who you are internally and how you present yourself to the world. This alignment allows investors to make better decisions, change their minds when necessary, and maintain consistent values while adapting their thinking on specific topics. The ability to be the same person in all situations creates resilience and clarity in decision-making.
3. Understanding Your Circle of Competence
One of the most nuanced discussions centered on the concept of circle of competence – knowing what you truly understand and can evaluate effectively. Spier acknowledged the challenge of accurately assessing one’s circle of competence, noting that sometimes you only realize something was outside your circle after taking significant losses. He suggests that instead of viewing your circle of competence as static, it should be dynamic but carefully expanded, always with an eye toward avoiding catastrophic risks that could prevent recovery.
4. The Importance of Having the Right Investors
A critical lesson Spier shared relates to the importance of having aligned investors who truly understand and commit to your investment approach. He noted that “everybody is a long-term investor until they’re not,” highlighting how crucial it is to have structural elements that encourage long-term thinking. Rather than simply asking investors about their time horizon, he advocates for building it into the investment structure itself, similar to how private equity funds often require multi-year commitments.
5. Being Kind to Yourself
Perhaps Spier’s most powerful message was about the importance of self-compassion in investing. In an environment where investors may have faced significant losses in various sectors – from growth stocks to cryptocurrencies to bond portfolios – he emphasizes the importance of being kind to yourself while maintaining the courage to continue taking action. The key is finding the balance between forgiveness for past mistakes and maintaining the bravery to stay engaged in markets, all while ensuring you don’t risk everything on any single decision.
Conclusion
These lessons from Guy Spier go beyond mere investment tactics to encompass broader principles about personal growth, risk management, and maintaining psychological equilibrium in challenging markets. His emphasis on learning from mistakes while being kind to oneself, maintaining authenticity while expanding one’s circle of competence, and ensuring structural alignment with long-term goals provides a framework for both professional and personal development in investing.
What makes these insights particularly valuable is their applicability across different market conditions and investment approaches. Whether managing a fund or handling personal investments, Spier’s guidance about balancing growth with risk management, and combining self-forgiveness with continued learning, offers a pathway to more sustainable long-term success in investing.
The overarching message is that successful investing isn’t just about making the right financial decisions – it’s about creating sustainable practices and mindsets that allow you to remain engaged in markets through both good times and bad, while continuously learning and growing from experience.
These lessons remind us that investing is a marathon, not a sprint, and that sustainable success comes from building the right foundation of knowledge, self-awareness, and psychological resilience. As markets continue to evolve and present new challenges, these fundamental principles become even more important for navigating the complex world of investing.
