Analysis and Discussion with Featured Guest Mohnish Pabrai of Pabrai Investment Funds: Stocks More Affected By Micro Factors than Macro Economy; Entrepeneurs Are Good at Handling Uncertainty - High Uncertainty, Low Risk

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erformer. it is down about 3% on the session as well. i wanted to ask our guest here, mohnish pabrai, your thoughts on seeing consumer staples in discretionary selling off today, gasoline at $3 a gallon -- sort of your thoughts on the consumer and housing thing. is this a group that you would be a buyer into right now? >> well, it is not a meaningful enough data point for us to do anything with. these are -- this is the noise level. i think we are generally interested in things that the world is totally uninterested in. i do not think we are at those points at best buy and home depot and so on yet. >> that is supposedly what makes you so successful, is that you go on -- you go after copy you go after companies that are unloved. you have just written a book that talks about the ways that create wealth. that is actually what it means. how do people create wealth? what are some of these strategies you are using? >> i am a better investor because i' m a businessman, and i am a better businessman because i am in vester. -- because i -- i am a better businessman because i am an investor. if you apply that same framework to running a business, even a small gas station or a mcdonald' s franchise, it is exactly the same. let' s say a neighborhood gas station came on sale and it was offered to you at $1 million. the question you would ask is, how much gas does it produce? how is that cash flow going to change of the next 10 years? in about five or 10 years, how much can i sell it for? how is the population going to change? > they seem like pretty basic questions. >> but you would not be asking, what will interest rates do in the next three years? you would not even really care that much about oil prices unless it goes through pretty dramatic changes. so the micro factors in most businesses, the macro factors. if i am a gas station owner, what affects me is if another one opens across the street or not, not what opec does. so when you own stocks, you ought to think of them as pieces of businesses that you own and ask the same question. if it is going to cost me 100 billion to buy it, does it produce cash flow every year and how will that change? >> in describing this, it sounds an awful lot like an entrepreneur. when you started, is that when you started to adopt? did you find anything exceptional out the way that entrepreneurs approach businesses? >> yes, i think a lot of aspects that entrepreneurs proceed from can apply to the stock market. there is a concession that entrepreneurs are risk takers. in reality, entrepreneurs avoid risk. they try to minimize risk. they tried to do everything to absolutely minimize the downside. but they are also humans who are very comfortable with uncertainty. they want to make sure that the downside is protected. in the book i talk about the patels, and it -- an immigrant group of refugees that came to the u.s. they now own 50% of all the motels in the country. they did that by taking a very low-risk, high-uncertainty approach to business bid he same thing -- approach to business. the same thing with richard branson. >> how do you apply that to picking stocks? there has to be sort of a security built into the stock? >> yes. the way it applies to picking stocks is that the first thing is returning of capital is more important than return on capital. the return off capital is more important than the return on capital. >> all right, mohnish, hang on just a second because we are going to talk more about this. we are going to take a break.