Finance Legend Paul Cabot Asks if You've Ever Been Drunk

“First, you’ve got to get all the facts, and then you’ve got to face the facts.”
— Paul Cabot

Paul Cabot was revered in the Boston investment community. John Train called him the dean of institutional investors, and his recored was extraordinary. Among his many accomplishments was managing Harvard’s endowment for 17 years, during which time it grew fivefold, from $200 million to $1 billion. That figure doesn’t even include additional capital contributions.

Cabot was already successful as a young man, when he was asked to join the board of stuffy J.P. Morgan. He walked into one board meeting with a black eye and a gash on his forehead. A fellow director, assuming decorum, asked if it had happened in a fox hunt.

Cabot bellowed across the table: “Christ, no! Haven’t any of you bastards ever been drunk?”

Cabot was brash but methodical. He described two keys to his success at investing: realism and care.

Ask Cabot for the secret to investing and he always gave the same answer, just in different words: Be thorough. Be honest. Be realistic. Don’t buy pipe dreams. Cabot was an early innovator of fundamental stock analysis and probably the first fund manager to regularly interview company management.

He believed there was no way to be a realist unless you’d lived enough to know how slippery the world could be.

I've only got confidence in older men, who've been through depressions, recessions, wars, and all the rest of it.
— Paul Cabot

To be fair, Cabot only arrived at his preference for experience later in life, and despite the fact that he himself obtained great success as a very young man. So, rather than take it as a bit of anti-youth discrimination, I consider it an expression of his desire to avoid the downside risk that comes from rashness.

For more on Paul Cabot and other greats, we recommend reading Passion for Reality: The Extraordinary Life of the Investing Pioneer Paul Cabot.

There's also an enjoyable, brief profile of Cabot in The Money Masters of Our Time by John Train.

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