Others' mistakes

While reading an old interview with Mohnish Pabrai recently, I was struck by something he said about his investment philosophy. Rather than trying to reinvent the wheel, Pabrai has built his entire approach around what he calls “cloning”-- studying and replicating the strategies of successful investors, such as Warren Buffett and Charlie Munger. But what fascinated me more was his emphasis on learning from their mistakes, not just their successes. This insight runs counter to how most of us approach learning about investing. We devour books about legendary stock picks, study case studies of spectacular returns, and seek out stories of investors who turned modest sums into fortunes. We're naturally drawn to success stories because they're inspiring and seem to offer a roadmap to riches. Suggested read: The ugly, the bad and the good Still, there's a fundamental problem with this approach: success stories often contain a dangerous dose of survivorship bias. For every investor who bought Amazon at a rock-bottom price and held on through multiple crashes, thousands bought other technology stocks at similar prices and still lost e1verything. The successful picks get written about extensively; the failures are quietly forgotten. This is where studying mistakes becom