Jim Rogers on learning from mistakes and loving his critics

I always held a deep fascination for Jim Rogers.

This turned out to be a breezy and enjoyable conversation, where he answers pretty much to the point.

This is part of a series where I attempt to understand the behavioural traits and mindset of money managers and investors. At the end of this (slightly edited) transcript, I have listed the 20 individuals interviewed for this series.

JIM ROGERS is a best selling author, legendary investor and George Soros' former business partner.

Watch Video

You have seen so many market upheavals, either due to a financial crisis due to a trade war or any factor. How has your understanding of what risk is evolved over the years? How has your relationship with risk changed?

In the beginning I thought that I was smarter than the market. And for a while, I was. But then the market showed me. No, no, we're smarter than you. Whenever I got cocky and thought I knew what I was doing, the market came along and said, Listen, Mr Rogers, you think you're smart, but we'll show you. They always showed me that they knew more than I did.

I eventually started learning how it all worked. I learned about risk. I learned that things could go wrong, no matter how smart I was.

I once shorted 6 stocks. They all went bankrupt within 2 years, but I lost everything first, because the market went up a lot. I was right about all the stocks because I was sure that they would go bankrupt, and they eventually did. But what I didn't know much about was that there are a lot of people in the market with their emotions and their knowledge and their thoughts. They might make mistakes, and their mistakes could cause me money.

So it's not just your risk. It is not just my risk I have to learn about, but also about everybody else. There are a few billion people in the world, and they all think differently and have different emotions, and we have to take that into consideration, whether we like it or not.

And I still make a lot of mistakes. Oh, I make plenty of mistakes.

How has your relationship with loss evolved? Are you comfortable now making mistakes or does it irk you?

I still don't like making mistakes. I'm not a holy man. I'm not a priest. No, I don't like making mistakes.

I try to make fewer. Maybe it's because I try to wait until I know more. Also because I have a lot more experience. My knowledge base has increased. All that helps.

You kept changing your mind about investing in India. So are you very open to changing your mind about a lot of things, or are you very rigid in your convictions?

Well, I hope I am open to change my mind about everything.

You say that I changed my mind about India. I'm not sure what that means. So I’ll just set the record straight.

There have been certain times in my life when I've been skeptical of India and negative on India. There have also been times in my life when I've been very optimistic about India. But that's true of every place in the world.

And right now, are you positive or negative on India?

I have no longs or shorts in India.

And I tell people all over the world, if you can only visit one country in your life, it should be India. Unbelievable. The food, the man-made sights, the natural sights, the beautiful women.

There are so many smart people, but it has the worst bureaucracy in the world too. Indians learned bureaucracy from the English, and then they took it and made it even better. Indians can do many things better than the rest of us, and they can certainly copy English bureaucracy and make it worse.

Right now, I'm mainly not investing very much anywhere, because I expect some bad times to come in the US, and therefore the world. Sometime in the next few months. I'm not yet selling short because I'm not that pessimistic. But I see the signs that that this long bull market, and it's the longest in American history, is coming to an end. But it's not enough of an end yet that I'm selling short anywhere.

When you were in your thirties, you attended this Manhattan dinner, where everybody shared their stock picks, and you were scorned because you were investing in defence stocks when nobody was. You have always got a lot of criticism. Even now, people take a jibe at you, “Oh, Jim is again predicting the next bear market.” How has your relationship with criticism evolved? Does it bother you still? Or is it water off a duck’s back?

Well, I have learned the more critics, the more criticism, the better. And the more likely I am to be right. And I hope you have learned that too. If you haven't, you will learn that most of the time when a lot of people are criticizing you, saying you're wrong, you're probably right. You're on the right path. So when I get a lot of criticism it usually encourages me.

Was that also the case when you were very young? For example, that dinner in your thirties?

No, no, of course not.

When I was first went to Wall Street I didn't know anything.  I knew I was in New York. I knew something bad happened in 1929, but I didn't know anything else. I didn't know there was a difference in stocks and bonds. I was totally ignorant.

But I learned. But of course, when older people or more experienced people said something, I thought they knew what they were talking about. It affected me when I was criticized.

I eventually learned, of course, they didn't know any more than I did, and I shouldn't worry about it. But in the beginning, it certainly worried me more than it does now.

By all standards, you've been extremely successful. How has that changed your relationship with money? The way you approach money and the way you invest money.

Well, yes, I have been successful enough that I can pay my bills, and I like being able to pay my bills.

I know that money is complicated, and I hope I can teach my children that they should save and invest and be careful of their spending. And that money is not easy. Money doesn't fall out of the sky. Money doesn't grow on trees. Going into debt is usually not a good thing unless you know a lot about what you're doing.

But what about your relationship with money? Do you feel now you can take much more risk than you did when you were young, or vice versa?

Well, I know now that I shouldn't take risk. I know that taking risk is not a wise thing to do that I should be careful and be sure of what I'm doing.

Everybody says that I take a huge risk all the time. I'm investing in Uzbekistan right now, for instance. Many people can't find Uzbekistan on a map, so they think that must be a huge risk. But I don't like taking risk. So I try to be careful about what I do before I do it. I do my research. I try to be knowledgeable about what I'm investing in. All this reduces the risk. I still make mistakes.

After you make an investment, what are the factors that bother you about it? The information that comes subsequent to you putting down your money.

The market is the thing that worries me the most. Market action is what worries me the most after I make an investment. If I buy something at 20, and it goes to 15, then it worries me a lot. And even if it goes up, it worries me because I know it might be doing something, because people don't understand. Market action is what worries me the most, positive or negative.

Can you share an investment bias or cognitive bias that you have successfully overcome as an investor, at least to a large extent?

I cannot think of anything.

There's no industry or company or country that I would not invest in if things were right. There is no prejudice that is so strong that I could not change my mind.

I didn't invest in Uzbekistan for decades. For all of my life, I did not want to have anything to do with most of the former Soviet States. But now, I think things are changing in Uzbekistan, so I've started investing there.

Let me reframe my question. How do you ensure that you are not locked in the echo chamber of your mind? That you're open to admitting being completely wrong.

Well, I've been completely wrong many times.

You want to hear about my first wife? Oh, my gosh! Was I wrong about her? And by the way, I ran into a few years later, and at the time I'd been unhappy, but I said, “Thank goodness. I am so glad that I'm not still married to her.” Even that gigantic mistake, turned into a good learning experience.

I can’t think of any strong prejudices that are a permanent rule. I usually don't like to buy stocks that are very expensive. If you showed me a company selling at 50 times earnings, I don't think I would do much to pursue it unless I pursued it as a possible stock to sell short.

Is there any investing principle that you didn't believe in when you started off, that you fervently believe in right now?

When I started off, I thought people knew what they were doing. I thought all the people with experience and education knew what they were doing as investors. I now know that most of us don't know what we're doing when we invest, and that a lot of it is based on emotion, hearsay, rumours, hot tips.

One of the first things you should learn is to not listen to hot tips. No matter where you are or who you are. Don't listen to hot tips. These are things that I have learned, and I hope I've learned them well.

Did you ever listen to a hot tip and burn your fingers?

Yes, yes.

If Joe or Sally or somebody who was experienced in a high position, said x, I thought they knew what they were talking about, or they wouldn't say anything. I have subsequently learned that many people will talk whether they know what they're talking about or not.

Can you name me an investor you would love to spend time with?

No.

No? You won’t name, or you don't know an investor you would love to spend time with?

No. I have learned that when I listen to other people I usually make a mistake, for whatever reason. I'm sure it's some flaw in my character.

If Joe told me blah blah blah about x, and I listened, and I invested, I would lose money. Nearly always. There's something in my psyche that if I hear it from somewhere else I'll probably make a mistake.

But you could also make a mistake if you just keep listening to yourself. 

Absolutely. I know about my mistakes. I've been making them for decades.

May be part of the reason has been because I accept what Sally said and instead of doing a lot of research myself, I assumed that Sally has done her research, and maybe she hasn't. So I guess what I'm saying is that I need to do a lot of research myself to be sure of what I'm doing.

Would you say that you've been a very lucky person? How do you view luck?

If I'd been lucky, I'd be really rich. I wish I'd been lucky. Oh, my gosh!

I have found that when I make a mistake I'd like to say it's bad luck, but it's always that I haven't done enough work.

In 1981, I shorted oil. Selling short is when you think something is going to go down in price. I sold it on short on a Friday afternoon, because prices had been going through the roof. That weekend Iran and Iraq went to war. The price of oil went through the roof. I got killed. Now, you would say, that's bad luck.

No. That’s not bad luck. Somebody knew. Two big armies don’t go to war unless there has been some preparation. Some had done enough research to know there was a lot going on. I had not. Maybe it was impossible, cause armies tried to be secret. I lost money. I'd love to say that's bad luck. But I know that I was cocky and didn't do enough homework.

When you talk of doing your homework, does gut feel or instinct come into play? Or is it just pure numbers?

I wish it were that easy. I wish there were a chapter 3 that I could look it up and find the answer on page 37. No. No. A huge amount goes into making a successful decision. It's not just numbers. You have to understand everything.

When I make a mistake, I find that there was something else I forgot about or didn't think about. Well, I just told you about the war. I knew that the price for was too high. Then I found out that it was because Iran and Iraq were going to war. I have found that when I make a mistake there is always something I did not think about, or I got lazy or sloppy and just didn't do enough research.

What is a trait you see in another person that instantly repulses you, that you want to keep your distance?

I'm trying to teach my children to be curious, to always ask questions, to look under the rocks to find out what's really going on. Most people, if they see something on the internet or on the TV, they think it's accurate. I'm trying to teach my children to ask question after question after question and double check everything. And I'm not talking about just investments. I'm talking about life. You have to double check everything. Ask questions. Be skeptical.

Especially when we're young, we're cocky and think we know everything. As we older get older, we get lazier.

Do you ever regret moving to Asia, or was that one of the best decisions you made?

As far as I'm concerned, it's a very good decision. I moved here because I wanted my children to speak mandarin in their lifetime. Mandarin is going to be an extremely important language. They are still teenagers, but it's already very important in their lifetime. I thought I could see that coming, and so it was very important to me that I prepare them for the 21^st century. And so far I think that I've done the right thing.

You've authored a fair number of books. What drives you to be a writer?

Well, I never expected to be a writer. I never planned to be a writer.

I drove around the world on my motorcycle, and the night I got back I was at a big dinner in New York. At the table the guy to my left was the editor of a major magazine. When he enquired as to why he had not seen me in a while, I told him that I just returned after driving around the world on my motorcycle for two years. He asked me a few questions and decided that he wanted to publish my story.

We did a big story; around 8 or 10 pages in his magazine. The book publisher read it, and called me and suggested we do a book. It turned into a book. It was a lot of fun and was successful. So when I occasionally do something right, I now try to do a book.

What are some of the authors that you like, or the books that that have really inspired you, or you despised. That evoked a lot of emotion in you, hate or love.

The Intelligent Investor. It was about the best way to invest, to buy things that are cheap, where the fundamentals are right etc.

The Money Game. By a journalist under the pen name Adam Smith. It was full of stories about investors, their mistakes, and their triumphs.

Both very influential and interesting to me.

What if your daughters, as young women, were going to make an investment you knew was going to blow up. And they really wanted to bet their money on it. How would you convince them not to do so? Would you let them make a mistake?

Well, that's an extremely interesting and good point. It hasn't come up yet, but if and when I see my children trying to make a mistake, I hope I will let them make the mistake but I'll try to make sure that it's not a big mistake. It's not too expensive a mistake.

I learn a lot from my mistakes. Mistakes teach me much more than successes. I told you before about how I once lost everything and got wiped out, even though I was right. But I learned from the mistake.

Mistakes usually teach people. I wish I were smart enough that I didn't have to learn that way. But I'm not.

Would you be able to recollect a mistake that you really learned from? That really hit home.

My first wife. I thought it was a horrible tragedy when we split. I was in horrible pain. But now I think my goodness. What a good lesson! What a spectacular lesson that was for me.

And it is for everybody. We all have failed relationships. It can be a good learning experience.

As far as investing is concerned, usually when I make a mistake, it's because I did not do enough research. I always find out later what I didn't do. I wish I found out before I made the mistake. But the mistakes always teach me something I didn't do.

Do you feel that the world your children are inheriting is a much more fearful place to be?

If you go back and read history, it's always been a horribly fearful, disastrous place to be.

If we were sitting here in 1910 or 1912, the world was great. The 19^th century had been a century of great prosperity, expansion and international trade. The German and the royal families took vacations together and married each other. What a wonderful time in history to live!

In 1914, WWI broke out. Everybody said that it will be over soon. After some months they were all wondering how they got into a war and how to get out of this disaster. And it was too late. It's not that easy to get out of a gigantic war. This is something that was inconceivable two or three years before.

Then it was inconceivable to the world that something like that could have happened again. And again it did.

If you look at history, no matter which year you pick, years later the world had changed completely. No matter what people thought in 1900, then look at 1915. No matter what people thought in 1920, then look at 1935. So whatever we think here in 2023 is going to be totally wrong in 2038.

Any reason you're not on social media?

I'm too lazy, I guess. I don't find it interesting. What would I do?

You could answer your critics and troll others.

I love my critics. The best answer to my critics is, just wait, and the market will show who is right and who was wrong. The best answer is just time, and time will show us who was right and who was wrong. So far I've been wrong less than I've been right.

Individuals interviewed by Larissa Fernand for this series:

1. Prashant Jain
2. Sankaran Naren
3. Nilesh Shah
4. Vetri Subramaniam
5. Anand Radhakrishnan
6. Devina Mehra
7. Saurabh Mukherjea
8. Raunak Onkar
9. Samir Arora
10. Kenneth Andrade
11. Rajeev Thakkar
12. Aswath Damodaran
13. Ian Cassel
14. Vishal Khandelwal
15. Sanjay Bakshi
16. Ramesh Damani
17. Jim Rogers
18. Ben Carlson
19. Mohnish Pabrai
20. Christine Benz