Be a "Harsh Grader"

Nugget by Mohnish Pabrai (and Warren Buffett)

👋 Hey friend,

Today’s nugget comes from a powerful lesson that Mohnish Pabrai learned in a conversation with Warren Buffett.

I picked this nugget a few years ago, and it has influenced the way I build relationships and make new friends.

👤 Doers

💡Nugget

First, a bit of context. The insight comes from a speech that Mohnish gave to the students of Dakshana (an NGO he founded in 2007) in December 2023.

One of the students asked him:

"Being a social animal, one has to contact and mingle with all the good and bad people in society. So, my question is: What is to be done for not being influenced and affected negatively by bad people?"

Mohnish replied with the lesson he learned from Buffett 👇

🟠 Mohnish Pabrai:

That’s a great question.

So, there’s a gravitational pull: If we are mixing with people who are worse than us, we will become worse. And if we are mixing with people who are better than us, we’re going to become better.

So obviously if you want to have a lot of success in life you want to be very picky about who you consider your friends, and you need to be kind of what I would call a harsh grader. So one time when I was talking to Warren Buffett, I told him:

“Mr Buffett. How come you are such a good judge of humans? You seem to be able to interact with some humans and you are able to figure out in very short time that someone is good or not.”

He said: “Mohnish, you are mistaken, I am not good at being able to quickly tell if a person is good or bad. I’m not able to do that. If I’m in a dinner party and there are 100 guests at the party, and you gave me five minutes to meet each of the 100 people, what I would be able to tell you is that maybe 3 or 4 people are good. I can probably tell — also in 5 minutes — that maybe 3 or 4 people are not good. So out of 100 people… maybe 8 people I can figure out whether they are good or bad. But the other 92 people, after spending 5 minutes, I have no idea.

So he said: “What I do is I treat the 92 the same as the bad people. So, we have 4 that are good, 4 that are bad, 92 is unknown. We apply a mathematical formula: Unknown is equal to bad. The four people who I know are good I invite them into my inner circle, and the other 96 get excluded.

Now he also said this is very unfair… because many of those 92 people who have been excluded could be good but it’s really mathematical. On planet Earth we have an infinite number of people, 8 billion humans approach infinity, so you can approximate 8 billion with infinity. From that, if I were to ask a second question: how many people on planet Earth are good people? Infinity. A portion of infinity is infinity.

So, there are infinite number of good people, so therefore we don’t need to be fair in this world. We don’t need to be concerned about the 92 who have been unfairly thrown away, because our objective is to do the best we can. There is a very big penalty for including a bad person in the circle, big penalty! There is no penalty for excluding a good person because we have infinite number of good people.

So, here’s where things become difficult. You have some friends, let’s say you have five close friends. If you were to think about ranking them—who is better than you and who is worse than you. You know these five people really well. You know their traits. The traits that we have as humans at the age of 6 will never change.

As an example, I finish high school in 1982. Right at that time there was no internet, there was no Facebook. I lost touch with all my classmates. Then, about 25 years later, everyone showed up on Facebook. So, I was interacting with these people after a 25-year Gap. There was no change! Because we don’t change from age 6.

So, when you have your five friends, and you look at their traits, and you see some trait that bothers you… You need to understand you cannot change the trait. The trait is frozen. So, you have to drop the person. Do you have the guts to drop the bad people from your life? You need to have the guts. So the question is: Are the friends more important or your life journey being optimized? For me, life journey is more important.

…

I don’t want to be with my friends, I want to be with good friends. And so, it’s a choice you have to make… If you choose to be with exceptional people, your life journey will be different. If you marry an exceptional person, the life journey will be also exceptional. So, these choices are not easy choices, and you have to be deliberate, in many ways it’s difficult to make these choices…

- Mohnish Pabrai [Excerpt from his annual session with Dakshana scholars].

"You want to avoid other people who are total rat poison, and there are a lot of them."

- Charlie Munger

"Those misfortunates among us who have been brought down by circumstances beyond their control deserve all the help and sympathy we can give them. But there are others who are not born to misfortune or unhappiness, but who draw it upon themselves by their destructive actions and unsettling effect on others. It would be a great thing if we could raise them up, change their patterns, but more often than not it is their patterns that end up getting inside and changing us. The reason is simple—humans are extremely susceptible to the moods, emotions, and even the ways of thinking of those with whom they spend their time.

Only create associations with positive affinities. Make this a rule of life and you will benefit more than from all the therapy in the world."

- Robert Greene (Book - The 48 Laws of Power)

How I Supercharged My Learning from YouTube Videos 🚀

The Backstory

Two years ago, in November 2023, I discovered Readwise — an app that automatically saves all your Kindle highlights (and more).

I first heard about it from Eric Jorgenson (author of The Almanack of Naval Ravikant). As a Kindle power user, I decided to give it a try — and now, two years later, I honestly don’t know what I’d do without it!

I started using Readwise to revisit ideas from books (repetition is how we learn!), and to search my notes (for example, I can type “success” and instantly see every highlight that mentions it).

But that was just the beginning…

The Reader App

Shortly after, I discovered that the Readwise team had built Reader — an app where you can save any article or YouTube video and make highlights directly on them! These highlights are then saved to both Reader and Readwise!

Personally, this app completely changed the way I use YouTube (since November 2023).

Here’s an example of my “YouTube - Reader” workflow (when I find a nugget in a video) 👇

The Reader app has turned YouTube into a genuine learning tool — where I can highlight great ideas and even write notes on them! And Readwise makes sure all my highlights and notes — from Kindle, YouTube, articles, and even X — live in one searchable, organized place.

Both apps come bundled together, and they offer a 30-day free trial. But I reached out to the Readwise team and we partnered up — so you get 60 days free with my link 👇

✍️ New Essay

I recently wrote an essay (with my friend Brian David Crane) exploring the difference between Scientism and science.

Scientism is a belief system disguised as science. It is used to exert authority and control. But science is the exact opposite: it’s built on skepticism, doubt, and falsifiability.

This essay is an attempt to evaluate and separate this self-serving belief system (Scientism) from the actual practice of science.

👉 If you are curious, click here to read the full piece (for free)

💥 Stuff I Loved

I hope you enjoyed today’s letter!

Talk you soon,

Your nuggets friend Julio :)