The financial world buzzes with promises of overnight riches, but few strategies withstand the test of time. When Mohnish Pabrai sold his IT consulting firm for $20 million in 1999, he didn’t chase get-rich-quick schemes. Instead, he quietly launched an investment fund focused on principles borrowed from Warren Buffett—yet refined through his own disciplined lens. Today, his Pabrai Investment Fund has delivered over 700% returns since 2000, dwarfing the market’s 50% growth. This isn’t luck; it’s evidence that value investing isn’t about cloning Buffett’s portfolio but mastering his mindset.

Pabrai’s early triumph with Satyam Computers—a 140x return in five years—wasn’t accidental. He spotted an undervalued gem long before others, then sold just before the dot-com crash. His secret? Rejecting the “30 days to riches” fantasy. “Why risk a short-term bet with unlimited downside when compounding works silently over decades?” he argues. Unlike day traders gambling on volatility, Pabrai treats investing like tending a garden: you plant seeds (undervalued stocks), weed out risks (through rigorous fundamental analysis), and wait. His “Yellowstone Factor” metaphor—naming resilience after the supervolcano-prone national park—captures this: even sturdy businesses face earthquakes, so always demand a “margin of safety” (buying below intrinsic value).

The myth that Pabrai “copies Buffett” crumbles under scrutiny. Yes, he studies Buffett’s holdings like Coca-Cola, but he hunts for similar opportunities others overlook—like the Patels who conquered America’s motel industry by targeting distressed properties with cash-flow potential. Pabrai calls this “Heads I Win, Tails I Don’t Lose Much” investing: asymmetric bets where losses are capped but gains explode. When he invested in Micron Technology, he didn’t just mimic Buffett; he verified its pricing power, low-cost structure, and cyclical resilience. Crucially, he avoids retail traps. “Rarely do individuals spot true market gaps,” he notes. Most fail by chasing noise—like crypto fads—while ignoring signals: shareholder letters, unscripted earnings calls, and proxy statements revealing management integrity.

This brings us to passive income, often misunderstood as “set-and-forget” wealth. Pabrai flips the script: true passive income stems from active selection. His “Dhandho” framework (Gujarati for “endeavor”) teaches that motel-owning Patels didn’t get rich by accident. They leveraged cultural networks to buy cheap assets, then scaled by reinvesting profits—no complex algorithms needed. Similarly, Pabrai’s fund compounds by holding winners like Alibaba for years, not flipping stocks. “Building passive income isn’t simpler than you think,” he clarifies. “It’s simpler if you do the hard work first: understanding businesses so deeply that holding them feels effortless.”

The lesson for ordinary investors? Forget turning $1,000 into $10,000 in a month. Focus on eliminating catastrophic risks. Start small: read one annual report weekly. Note how management discusses failures (a sign of honesty). Track a single industry’s margins for six months. As Pabrai proved with his early $1 million stake, patience isn’t passive—it’s strategic aggression against time. When the market panics, value investors feast on discarded opportunities. And when AI hype drowns out fundamentals, they remember: moats matter more than megatrends. Apple may innovate relentlessly, but without pricing power and loyal customers, even giants stumble.

Pabrai’s journey—from Buffett admirer to a guru who’s outperformed him in key stretches—reveals a humbling truth. Wealth isn’t built by replicating stock picks but by adopting a philosophy: know what you don’t know, circle your wagons around high-conviction ideas, and let compounding work while others chase mirages. As he’d say, the fastest path to riches isn’t a sprint. It’s a walk, taken one deliberate step at a time.