Page 66 - Morgan Housel - The Psychology of Money_ Timeless Lessons on Wealth, Greed, and Happiness-Harriman House Limited (2020)

He survived. Survival gave him longevity. And longevity—investing
consistently from age 10 to at least age 89—is what made compounding
COBACOBA
work wonders. That single point is what matters most when describing his
success.

To show you what I mean, you have to hear the story of Rick Guerin.

You’ve likely heard of the investing duo of Warren Buffett and Charlie

Munger. But 40 years ago there was a third member of the group, Rick
Guerin.

Warren, Charlie, and Rick made investments together and interviewed
business managers together. Then Rick kind of disappeared, at least relative
to Buffett and Munger’s success. Investor Mohnish Pabrai once asked
Buffett what happened to Rick. Mohnish recalled:

[Warren said] “Charlie and I always knew that we would become incredibly
wealthy. We were not in a hurry to get wealthy; we knew it would happen.
Rick was just as smart as us, but he was in a hurry.”

What happened was that in the 1973–1974 downturn, Rick was levered with
margin loans. And the stock market went down almost 70% in those two
years, so he got margin calls. He sold his Berkshire stock to Warren—
Warren actually said “I bought Rick’s Berkshire stock”—at under $40 a

piece. Rick was forced to sell because he was levered.¹⁸

Charlie, Warren, and Rick were equally skilled at getting wealthy. But
Warren and Charlie had the added skill of staying wealthy. Which, over time,
is the skill that matters most.

Nassim Taleb put it this way: “Having an ‘edge’ and surviving are two
different things: the first requires the second. You need to avoid ruin. At all

costs.”