Gaining Above-Average Returns: The Shameless Cloner’s Playbook

In an age that praises originality and disruption, there are some successful investors who are refreshingly and daringly unconventional.  In a recent interview, a very successful investor, Mohnish Pabrai, shared stories, philosophies, and mental models that have shaped his investment career. The takeaway is clear: success doesn’t always come from having a unique idea. Sometimes, it comes from recognizing brilliance in plain sight and having the humility to recognize it and say: “That works, I’ll copy that.” He has made a career, and a fortune, by doing what most people shy away from: copying.  Cloning is like breathing, he says. It’s fundamental.

There’s a natural human desire to be the originator, the innovator. Pabrai believes the aversion most people have to cloning is rooted in ego. But in business and investing, he argues, originality is overrated. He points to one true business rockstar: Sam Walton, the founder of Walmart. Walton was the ultimate cloner. “There is no human in history who has been inside more retail stores, not named Walmart, than Sam Walton,” Pabrai says. Walton would stop his family during vacations just to visit competitors’ stores and take notes. In one amusing story, paramedics in Brazil were called when they saw an old man lying on the floor of a store, only to discover it was Sam Walton measuring aisle widths with his body. He didn’t have a tape measure, but he knew his height, and that was enough. It was a small detail, but in retail, square footage efficiency matters. Too wide and you're wasting money; too narrow and customers are uncomfortable. That level of curiosity and obsession with detail, even if borrowed, gave Walmart an enduring edge, and a durable competitive advantage.

Walton’s cloning extended beyond just store layout. He was relentless in learning from others. For Sam Walton, the company’s truck drivers were a source of strategic intelligence. Walton would meet them at 5 a.m., coffee and donuts in hand, and ask, “What are you seeing out there?” Their candid insights on waste, product placement, and customer experience were gold — gathered for the price of a $10 breakfast run.

Pabrai draws a direct line from Walton’s playbook to other great cloners. Bill Gates, for instance, built Microsoft by adopting and adapting winning software ideas. Word came from WordPerfect. Excel from Lotus. Windows from Apple. Even Bing, Pabrai jokes, stands for “But It’s Not Google.” It’s not about theft, it’s about rapid learning. Gates didn’t copy blindly; he improved, iterated, and executed with speed and precision. That’s cloning with judgment.

Pabrai has modeled his own investing style in the same way. He isn’t out searching for the next hidden gem in total darkness, he’s watching the world’s best investors and operators, studying their moves, and diving deep only when the idea sits within his circle of competence. Berkshire Hathaway’s investment in Apple, for example, didn’t originate from Warren Buffett directly, he believes, it came from one of his lieutenants. But Buffett recognized the brilliance and scaled it by investing billions. “Cloning gives you a huge edge,” Pabrai says. “You’re not reinventing the wheel, you’re just finding the best wheel already out there.”

His own philanthropic work through the Dakshana Foundation follows the same model. Pabrai openly admits he didn't create the blueprint; he saw a model that worked and scaled it. The genius wasn’t in creating something new, it was in recognizing something exceptional and applying it where it could make the most difference. “I’m not that smart,” he says, “but I can tell when something is great.”

Of course, cloning is just one piece of the puzzle. Another critical insight from Pabrai’s philosophy is the power of compounders; companies that can grow value over decades, often unnoticed. Spotting them, however, takes time. You really only understand a business after you own it, he explains. While some business giants like Google or MasterCard reveal their greatness early, many take years to reveal their true compounding power. The key, Pabrai insists, is patience.

He recalls a famous market phenomenon from the 1970s known as the Nifty-Fifty. These were blue-chip companies like McDonald’s, Coke, Xerox, Kodak, Polaroid, and others, and some bought them with little regard for valuation, under the assumption they would grow forever. When the market crashed in 1973-74, nearly all of them tanked. But what if just one of them, Walmart, made up 2% of your portfolio while the other 98% went to zero? You’d still have beaten the S&P 500 over the next 50 years. Investing is incredibly forgiving, Pabrai explains. You can be wrong most of the time and still come out ahead if you hold onto your winners.

Which leads to a mistake he confesses he’s made repeatedly: selling too soon. He once bought into Fiat Chrysler when its market cap was just $5 or $6 billion. That stake included a chunk of Ferrari, which alone is worth over $90 billion. Had he held on, his firm’s stake would have ballooned into $900 million. Instead, thinking Ferrari was “expensive,” he sold. ”Really dumb,” he admits. And it wasn’t the only time. Another trip to the pie counter, Charlie Munger’s metaphor for golden opportunities, was a shipping company called Frontline. He sold after a quick double. It went on to be at 70x in just three years.

Not all was lost, however. In Turkey, Pabrai quietly built a position in a company called Reysas. At the time, Turkey was in economic and political turmoil. Everyone else was exiting. Pabrai went in, acquiring a third of the company for $8 million. Six years later, it’s worth over a billion, and he still believes it’s undervalued. “They don’t even have an investor deck,” he says. “I’m still learning from them every time I go to Turkey” But what he has learned, he says, is this: If you find a great business with great economics and competent management, hold on. Don’t mess with it. Don’t try to optimize it. Let it ride.

This idea also ties into another core principle of his success as an investor: concentration. Pabrai points out that almost every successful investor or entrepreneur ends up extremely concentrated, not diversified. The Walton family still holds a large chunk of Walmart. Buffett and Munger’s fortunes are largely in Berkshire. Even Steve Ballmer, often during his time as Microsoft’s CEO, became wealthier than Bill Gates just by holding onto his Microsoft stock. He understood Microsoft and stuck with it.

Then there’s the concept of share cannibals: companies that buy back their own shares diligently. Pabrai loves them, but with caveats. The business must be excellent, and the buybacks must be done at good valuations. Walmart is a shining example. Despite selling some shares for charitable causes, the Walton family’s stake in Walmart has increased over the years because the company bought back so much stock. That’s tax-efficient compounding at work. “Pay attention to the cannibals,” Munger used to say. But Pabrai warns: not all buybacks are good. Eddie Lampert’s buybacks of Sears stock, for example, destroyed billions. You have to get both pieces right, he says. Outstanding business and smart buybacks.

In the end, Pabrai’s philosophy is refreshingly grounded. Clone smartly. Own businesses long enough to understand them. Hold onto the great ones. Concentrate when conviction is high. And let time do the heavy lifting. As he says, “You don’t need to be extraordinary to get extraordinary results. You just need to avoid stupidity and stay in the game.”

That’s the shameless cloner’s playbook. And by the look of Pabrai’s long track record, it really works.